Zalando plunges to Q1 loss and warns full-year profits and sales will be hit

Zalando plunges to loss in its first quarter
// Zalando revenue fell 1.5% in its first quarter and it made a 50 million euro loss as consumers hit with rising costs became more cautious
// The fashion retailer has warned that full year sales and profits will now come in at the lower end of expectations

European online fashion giant Zalando has warned that its full-year sales and profits will be at the lower end of expectations as it plunged to a loss in its first quarter.

The retailer said that rising inflation and increasing costs had led to a more cautious consumer and hindered growth in its first quarter.

Gross merchandise value (GMV) sales remained flat, up 1% to 3.2 billion euros over the quarter, while total sales were down 1.5%, the business’ first-ever sales decline. Zalando made a 51.8 million euro loss during the quarter.

Zalando now expects sales to hit the lower end of its 12% to 19% range and adjusted EBIT to fall at the lower end of its 430 to 510 million euro range.

Zalando co-chief executive Robert Gentz said: “Our business fundamentals are strong, and we are taking steps to improve our results. 

“We are managing Zalando for the long term and have always used our business agility and adaptability to successfully respond to short-term challenges and consumer demand to emerge better and stronger.”

He said he remained confident that Zalando would hit its target of achieving 30 billion GMV by 2025.

READ MORE: Zalando expects slower sales growth in 2022 as pandemic subsides

Zalando said it was managing short-term challenges by “refining its offering to adjust to the changing spending patterns of its customers”, making its operation more cost efficient and investing in best-in-class customer experience and ecommerce.

Zalando chief financial officer Dr Sandra Dembeck said: “We are flexible and well-equipped to steer Zalando through this volatile market environment. This includes making the necessary adjustments to improve our performance.

“At the same time we are continuing to invest through the cycle to drive long term value. We are expanding our logistics network and advancing our platform to better serve our customers and partners, enable sustainable future growth and set us up for long-term success.”

Despite the lacklustre performance, Zalando’s active customers increased by 5.2% in the first quarter to nearly 49 million.

The retailer’s partner business, where brands can use Zalando’s marketing and logistics services, saw strong growth over the period and accounts for almost a third (32%) of fashion GMV.

Zalando is continuing to invest in faster delivery times and is adding additional fulfilment centres in Germany, Poland and France.

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