Zalando confirms the forecasts despite the difficult economic context

(new: conference call statements, analysts and share price)

t-online currently 03.11.2022

Due to a difficult economic environment with high inflation and a poor consumer climate for the current year, online fashion retailer Zalando is a bit more pessimistic. When third-quarter figures were unveiled Thursday, the company confirmed its forecast for the current year. But Zalando now expects to reach the lower end of the target range. Management prioritizes security of profitability.

“Consumer sentiment has hit a new low and inflation is still high,” said CFO Sandra Dembeck. It was unclear how consumer spending would develop in the fourth quarter. In Zalando, the last quarter is traditionally considered the strongest, with its countryside days and Christmas activities. Due to poor consumer sentiment, the online retailer significantly reduced its original targets at the end of June.

In a conference call, Dembeck announced that there was great uncertainty about how big customer demand would actually be at the end of the year. To garner as much demand as possible, Zalando wants to present itself well in the Christmas business and also on campaign days such as Black Friday. However, due to the generally high stock levels in the market, the manager fears high discount pressure and growing competition. It is important for the group to ensure its profitability.

This is also the priority for next year. Although co-boss Robert Gentz ​​expects low consumer demand to continue into 2023, profitability is expected to progress. This must be achieved, for example, through cost savings, efficiency gains and a reduction in marketing.

These statements were received with relief on the stock exchange. A positive trend prevailed in the late morning after the stock traded on the Dax initially fluctuated strongly. The paper grew more than five percent and took over the Dax. However, the share had come under severe pressure the day before with a drop of 6%. In addition, the year-to-date loss is still around two-thirds. This made Zalando the biggest loser in the Dax so far in the 2022 trading year.

Meanwhile, DZ Bank analyst Thomas Maul was little surprised by the pessimistic statements about annual targets. He pointed out that the market expectation for adjusted profit before interest and taxes (Adjusted EBIT) this year of € 184 million is already at the lower end of the band announced by the company. “We and the capital market expected Zalando to target only the lower end of the previously announced target ranges.”

Zalando also announced that at the lower end of the three to seven percent range, gross merchandise volume is expected to increase between EUR 14.8 billion and EUR 15.3 billion in 2022. The company sees sales stagnate or, at best, increase by three percent to € 10.7 billion. Management also assumes that adjusted operating profit (EBIT) will only be at the lower end of the forecast range of EUR 180 to 260 million.

After two poor previous quarters, Zalando is back on the growth path in the third quarter. The number of active customers has increased and has exceeded the 50 million euro mark for the first time. The size of the trolley, on the other hand, lagged behind the previous year. Sales increased nearly three percent to 2.35 billion euros. Adjusted EBIT improved from € 9.8 million to € 13.5 million. Introducing a minimum order value would have a positive effect, he said. However, the group significantly increased its loss in the bottom line, from € 8.4 million to € 35.4 million.

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