Zalando lowers profit guidance but expects return to growth in second half

Zalando lowers profit guidance but expects return to growth in second half
Summary Companies Gross merchandise volume flat at 3.8 bln euros Sales down 4% to 2.6 bln euros Adjusted operating profit 77.4 mln euros, down 58% Shares indicated 1.7% higher in pre-market BERLIN, Aug 4 (Reuters) - Online fashion retailer Zalando (ZALG.DE) on Thursday reported a 58% drop in second-quarter operating profit and lower sales but said it expected to return to growth and improved profitability in the second half of the year. Zalando's gross merchandise volume was flat at 3.8 billion euros ($3.86 billion) in the quarter compared with the same period last year, while sales fell by 4% to 2.6 billion euros. Advertisement · Scroll to continue Report an ad Adjusted operating profit (EBIT) dropped to 77.4 million euros from 184.1 million but marked a rebound from a first quarter loss of 52 million euros. The company cited lower consumer confidence, inflation and supply bottlenecks hitting demand after the coronavirus pandemic helped it record a bumper year in 2021. "Life is becoming more expensive and consumers are reluctant to consume. We feel that," co-CEO Robert Gentz said on Thursday. Advertisement · Scroll to continue Europe's largest fashion online retailer said the number of its active customers grew by 11% on the year.
// Zalando reveals a 58% drop in second-quarter operating profit but says it expects to post improved profitability and a return to growth in the second half of the year
// Revenue fell by 4% to €2.6 billion mainly due to the transition of the business to a platform model

Zalando has said it expects to post improved profitability and a return to growth in the second half of the year after its number of active customers grew by 11% to over 49 million in its second quarter.

However, the online fashion retailer revealed a 58% drop in second-quarter operating profit and lower than expected sales amid a challenging macroeconomic environment and supply chain challenges.

The company’s gross merchandise volume was flat in the quarter at €3.8 billion after trading was impacted by lower consumer confidence and inflationary pressures.

Zalando cited headwinds from external factors such as lower consumer confidence, inflationary pressures and selected supply shortages impacting availability.


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Meanwhile revenue fell by 4% to €2.6 billion mainly due to the transition of the business to a platform model. The business reported an adjusted EBIT of €77.4 million in the period resulting in a margin of 3%.

Zalando also confirmed that guidance lowered in June, forecasting a sales increase between 0% and 3% and an adjusted EBIT of €180 million to €260 million in the same period

To cut costs, the company said it had reduced marketing spending, introduced a minimum order value and was improving efficiency across its European logistics network.

Co-chief executive Robert Gentz said: “We have demonstrated our agility as a team, showing that we can react quickly to adapt to the current environment while also making the experience of our customers even more inspiring and engaging.

“We continue to grow our customer base and are fully focused on our strategy and making selective investments across our business to ensure our long-term growth.”

The retailer will report the results for the third quarter 2022 on 3 November 2022.

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