What Zalando expects:
A weaker consumer mood, inflationary pressure and still isolated delivery bottlenecks have hit the online retailer considerably. Zalando had to accept a drop in sales and profits in the second quarter. In the course of the difficult economic environment, there is also changing buying behavior: customers either shop in the premium segment, which is still relatively unimpressed by the crisis, or turn to inexpensive products. The middle price segment is the loser.
Zalando has therefore recently adjusted its offer accordingly. The company expanded the premium segment by acquiring a majority stake in Highsnobiety, an online shop and fashion blog. In order to improve profitability, Zalando introduced a minimum order value in 15 markets, which now applies in all 25 Zalando markets. The company also reduced its marketing and logistics expenses.
In the second half of the year, Zalando intends to return to the path of growth. In addition to the measures introduced, the online retailer also benefits from a technical effect. The basis for comparison in the third and fourth quarters is therefore a lower hurdle than in the second quarter. Because last year, from the summer onwards, the restrictions in brick-and-mortar retail were gradually lifted, which steered Zalando’s previously massive growth back to more normal paths.
For the second half of the year, Zalando announced growth in gross merchandise volume of 6 to 13 percent at the beginning of August, and the company has 154 to 234 million euros on the slip for adjusted EBIT. The fourth quarter in particular, with its Christmas business, is traditionally strong.
Zalando had already lowered the forecast at the end of June. In terms of sales, the company believes that stagnation at 10.4 billion euros is possible in 2022, and in the best-case scenario a small plus of three percent could result. Last year, thanks to the online boom, Zalando exceeded the 10 billion mark in sales for the first time. In previous years, the company regularly spoiled investors with robust double-digit percentage growth.
Zalando also massively slashed the earnings forecast. EBIT adjusted for special effects is likely to fall from EUR 468.4 million in the previous year to between EUR 180 and 260 million.
What analysts expect:
Clement Genelot from the investment house Bryan Garnier expects the online retailer to have a better third quarter again. However, this will probably be overshadowed by further risks that threaten into the coming year. The expert is pessimistic about the future. After the weak first half of the year, Warburg analyst Jörg Frey is also expecting a comparatively pleasing third quarter despite the worsening economic prospects. But he too was not very confident about 2023.
The pressure on the cost of living is likely to be more noticeable for fashion companies in 2023 and 2024, RBC analyst Richard Chamberlain also estimates in an industry study. Further price reductions should follow the headwind from the exchange rates.
Analyst Christian Salis from Hauck Aufhäuser Investment Banking also expects the economy to continue to suffer. In the long term, however, the company is on the right track. Zalando dominates the European online fashion market and has a robust balance sheet.
In a consensus compiled by the Bloomberg news agency, analysts expect sales of almost EUR 2.4 billion for the third quarter, after almost EUR 2.3 billion in the previous year. The adjusted operating result (EBIT) is likely to be in the red at minus 1.2 million euros, after a profit of 9.8 million euros in the previous year.
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