At Zalando, Growth Slows as Lockdown Shopping Boom Ebbs

Zalando, one of Europe’s largest online fashion retailers, reported revenues in the third quarter of

Zalando, one of Europe’s largest online fashion retailers, reported revenues in the third quarter of 2.28 billion euros, a 23 percent gain compared to the same period in 2020 and a slowdown from earlier in the year.

For the first half of this year Zalando had averaged revenue growth of 40.5 percent. The slowdown this quarter brings the company back to more normal levels. For all of last year, revenue grew 23.1 percent. The slowdown comes mostly as a result of the fact that brick-and-mortar stores are open again in Europe.

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The company’s results were slightly better then expected by market analysts.

“We are pleased to see our strong performance continue in the third quarter, the first quarter with economies fully reopened,” the company’s chief financial officer, David Schröder, said in a statement.

Zalando primarily measures its success via gross merchandise value, or GMV. This accounts for how much stock the platform has moved, as opposed to income from services like logistics and marketing. GMV is always higher than revenues.

For Q3, Zalando saw growth of 25.3 percent in GMV to 3.08 billion euros, also reflecting more usual levels of growth. While in 2020, the platform’s GMV grew 30.4 percent over the whole year, in 2019, GMV only increased by 24.3 percent.

At the same time, the company acknowledged that its costs were also rising. Zalando’s adjusted group EBIT – earnings before interest and taxes – were 9.8 million euros. This represents a margin of 0.4 percent of revenues.

That’s a huge difference compared to the same quarter last year when EBIT was 118.2 million euros and represented 6.4 percent of revenue. But, as the company’s statement conceded, the number is also “very much in line with the third quarter of 2019 … the last third quarter recorded before the pandemic.”

In Q3 2019, EBIT was 6.3 million euros and also represented 0.4 percent of Zalando’s revenues.

Other key indicators for Zalando are the numbers of site visits, active customers and orders, all of which continued to rise over Q3.

The number of active customers – that is, shoppers who use the platform at least once a year – rose 30.1 percent to 46.3 million. Before the pandemic, at the same time in 2019, Zalando only had 29.5 million active customers.

Site visits, the overwhelming majority of which come via mobile phone, continued to rocket up, increasing 91 percent to 1.7 billion in the third quarter compared to the previous year. This is almost double the number of visits the company was getting pre-pandemic, in 2019, when it recorded 1 billion site visits in Q3.

Zalando also recorded an all-time high in how much customers were spending per purchase and how many times they were buying via the site. The average basket size rose to 57.5 euros, from 57.2 euros per purchase at the same time last year. Average orders also peaked at 5.1 orders per active customer.

Despite the slowdown, Zalando did not change its forecast for the full year. It had raised expectations in the first quarter and is holding firm to predictions of revenue growth between 26 and 31 percent for the year, with a target of 10.1 billion to 10.5 billion euros and an EBIT close to 475 million euros. It also forecast GMV would grow 31 to 36 percent to hit between 14 billion and 14.6 billion euros.