The second half of the year should definitely be better – even if the slump in consumption and the poor prospects for online retail continue. As Zalando recently explained in the first half of the year, consumer spending is continuing to decline due to ongoing inflation. This results in a sustained shift in purchasing behavior towards the lower price ranges.
Zalando has still managed to earn more operationally in the past few months thanks to cost controls. And recently, management adopted a more optimistic tone again. CFO Sandra Dembeck was positive about the third quarter in August: Although it was still very early, “July was a better month for us than the second quarter.” The board is hoping for a better second half of the year. However, the warm September may have slowed things down. Competitors had already reported weaker development here.
Co-chief executive Robert Gentz also confirmed the medium-term goals in the summer. “Our goal is to return to double-digit growth rates,” he said in an analyst conference at the time. “The e-commerce rally will come again in the future.” However, the manager left it open whether this would be the case next year or later.
The group management had already become somewhat more optimistic about the operating profit development for the current year, although hardly any increases in sales are expected. Adjusted earnings before interest and taxes (EBIT) are now expected to reach 300 to 350 million euros in 2023, after the lower end of the range was previously 280 million euros. This means that the operating result would be significantly higher than in 2022, but still below the value two years ago. In 2022, after a strong Corona year, profits fell by more than half to 184.6 million euros.
As a result of the ongoing slump in consumption, management expects that only the lower half of the targeted growth in gross merchandise volume (GMV) of 1 to 7 percent will be achieved. Sales are likely to either almost stagnate or even decline slightly compared to the previous year.
Zalando can currently only achieve profit increases with the help of further cost-cutting measures. “In a temporarily challenging environment in retail, we want to sustainably increase efficiency in the areas of logistics and marketing,” said CFO Dembeck at the half-year mark.
This is what the analysts expect
The analysts listed on Bloomberg expect an average turnover of 2.29 billion euros for the third quarter, compared to 2.35 billion a year earlier. The adjusted operating profit is estimated at 18.63 million euros after 13.5 million in the previous year. The bottom line is that analysts expect losses of 7.2 million euros. In the same period last year, however, the loss was significantly higher at more than 35 million euros.
Yashraj Rajani from the major Swiss bank UBS writes of weaker sales in September shortly before the quarterly figures. However, since these are due to the warm weather, the probability of a forecast reduction in gross merchandise volume is low. Competitors have already indicated that customers will probably be able to make up for their purchases as soon as it gets cooler.
Stifel analyst Benjamin Kohnke expects Zalando to confirm its forecast for the current year, albeit at the lower end of the range. He does not expect a turnaround in the third quarter. After Zalando’s positive statements about the third quarter in the first half of the year, developments probably continued to be better in August, said Kohnke. However, the warm weather in September may have wiped out the gains. He therefore assumes that growth in sales and gross merchandise volume will remain negative in the third quarter. (dpa)