As expected, the Berlin online fashion retailer Zalando SE closed the 2022 financial year with meager figures. On Tuesday, the company announced that sales fell just short of the previous year’s level. At the same time, the e-commerce specialist had to report a slump in profits. After all, Zalando was able to meet its forecasts, which had already been lowered last June in view of the weakening buying mood.
In the past financial year, group sales amounted to around 10.3 billion euros. It was thus slightly below the level of 2021 (-0.1 percent). Total gross merchandise volume (GMV), which also includes sales from partner brands on the Zalando platform, grew by 3.2 percent to EUR 14.8 billion. The company also highlighted that it was able to increase the number of its active customers by six percent to 51.2 million.
“Economic headwinds” weigh on demand
The “tailwind for the e-commerce industry” as a result of the Covid 19 pandemic in the previous two years had turned “into an economic headwind” in 2022, Zalando admitted in a statement. “As consumers started shopping in stores again after the pandemic, e-commerce demand fell more than originally expected. Although it remained at a higher level than before the pandemic,” the company said. The “generally weaker mood to buy” also led to “increased inventories in the entire fashion market”.
Weak demand also weighed on earnings. Earnings before interest and taxes (EBIT), adjusted for special effects, shrank by 60.6 percent year-on-year to EUR 184.6 million. The net profit even slipped by 92.8 percent and only reached a height of 16.8 million euros. Overall, the results were at the lower end of the forecast range, as announced in November.
After austerity measures: In 2023, the operating profit is expected to rise sharply again
Given the recent development, the company now wants to focus on “ensuring profitable growth in 2023 and beyond.” Zalando will “continue to work on increasing the margin and simplifying the organizational structures,” according to a statement. For this purpose, an extensive savings program was launched a few weeks ago, as part of which the e-commerce specialist will “reduce several hundred overhead roles in many of its teams”.
For 2023, Zalando is now aiming for a significant improvement in earnings. The management forecast an EBIT adjusted for special effects in the range of 280 to 350 million euros. Because “consumer: internal demand is difficult to predict in the current environment”, the company otherwise only expects manageable growth: GMV is to be increased by one to seven percent compared to 2022, and sales are expected to develop between -1 and +4 percent .