BERLIN, MAY 6, 2020 // Zalando SE expects to grow its business at double-digit rates in a fashion market that is expected to show significant negative growth in 2020. Despite the challenging trading environment due to the coronavirus, Europe’s leading online platform for fashion and lifestyle aims to grow its Gross Merchandise Volume (GMV) by 10-20%, and its revenue in the same range but below GMV due to the fast growth of the platform business. The company expects to be clearly profitable with an adjusted EBIT between 100 million and 200 million euros and plans investments between 230 and 280 million euros.
Growth will be driven by the accelerated consumer shift from offline to online, and Zalando’s ability to invest independent of demand fluctuations and a challenging environment, as well as its accelerated platform transition. The Partner Program share of GMV grew 4.4 percentage points year-over-year in the first quarter. In times where offline sales are affected over-proportionally by governmental restrictions across Europe, brands are transferring more of their business online to reach their customers. In the past three weeks, 50 new partners joined the Partner Program, among them Vaude, American Eagle Outfitters, and Next Group brand Lipsy London.
“We are confident that we will grow double-digit and at a clear profit in 2020. This will allow our partners to grow and gain market share in a challenging economic environment by building their business on Zalando. Many of them have significantly increased their activities on our platform in the past weeks, and we will continue to make it easier for them to reach customers across Europe,” says Rubin Ritter, co-CEO.
Zalando offers immediate support to its brand partners, especially small to mid-size fashion brands, as well as brick-and-mortar retailers by providing them easier and faster access to the company’s almost 32 million active customers. In April, brick-and-mortar retailers in Germany and the Netherlands shipped almost 350,000 items to Zalando customers. As a result of the increased demand of shops to digitize their assortment, and to access online customers, the company will offer its successful Connected Retail program to brick-and-mortar retailers in Spain, Sweden, and Poland in the third quarter.
In the first quarter of 2020, Zalando grew its GMV by 13.9% to 2 billion euros and its revenue by 10.6% to 1.5 billion euros (Q1 2019: GMV 1.7 billion euros, revenues 1.4 billion euros). Growth was especially pronounced in the Offprice segment, which grew its revenue by 35% year-over-year. Due to lower customer demand in March following the lockdown measures and an exceptional inventory write-down of 40 million euros as a result of the revised sales expectations for the current season, Zalando recorded an adjusted EBIT of minus98.6 million euros in the first quarter, or a margin of minus 6.5% (Q1 2019: 6.4 million euros). In April, customer demand started to recover and GMV grew double-digit compared to last year.
The company’s clear customer focus has again led to a positive development of its reach despite challenging circumstances: the number of active customers grew by 17% to almost 32 million (Q1 2019: 27.2 million) who on average ordered 4.7 times with Zalando over the last 12 months (Q1 2019: 4.5). Also, the number of new customers has increased significantly, a trend that continued throughout April: 39% more new customers came to Zalando than in April 2019.
“As a company, we quickly found answers to the challenges in March. We are now seeing a significantly more positive development in the first weeks of the second quarter. These recent developments are testament to the resilience of our business model and the agility of our team, and generally make us confident for the full year,” says CFO David Schröder.
In the first months of 2020, Zalando saw significant growth of strategically relevant categories like fashion for kids, sports clothes and accessories, as well as beauty products. The beauty category more than tripled year-over-year, with customers looking to bring the spa to their home with items such as scented candles, and skin and nail care products.
Additionally, Zalando saw more customers shopping for more sustainable fashion. In March, almost 30% of customers bought more sustainable fashion. Already, more sustainable fashion makes up around 10% of Zalando’s GMV, bringing the company closer to its goal of growing this share to 20% by 2023. Currently, customers find almost 35,000 more sustainable fashion items in the Zalando shop.
Notes to Media and Capital Markets
As a consequence of the spread of the coronavirus across Europe, Zalando will host its Annual General Meeting virtually this year. The event will take place on June 23, 2020, at 10 a.m. CET.
The earnings presentation for analysts and investors is available on the Zalando Investor Relations website. Zalando will report the results for the second quarter of 2020 on August 11, 2020.