Zalando saw its share price go up after it announced that it expects to post a positive adjusted operating profit (Ebit) in the single-digit million range for the first quarter of this year, in contrast with market expectations of negative Ebit of €10 million. It expects to report an increase in sales and gross merchandising value (GMV) close to the 15.2 percent and 23.0 percent levels projected by analysts.
Meanwhile, its big British rival, Asos, reported disappointing results for the first half of its financial year through the end of February. While sales went up by 14 percent to £1,314 million (€1,516.1m-$1,712.8m), with a 12 percent increase on a currency-neutral basis, pre-tax profits fell by 87 percent to £4 million (€4.6m-$5.2m), although the retail gross margin went up by 0.4 percentage points.
Average selling prices and the average basket declined slightly. Furthermore, a change in customer navigation processes, with the release of 200 local web experiences, caused an unusual drop in visits to its websites and in search engine rankings. Asos said that this was the right thing to do and that it is seeing early signs of a recovery. It also pointed out that the number of active customers increased by 16 percent during the period.
In the latest period, Asos adopted 190 new brands and stopped selling 280 others. Like at Zalando, which instead prefers to push its marketplace to reduce its inventories, private label items are falling behind branded products at Asos. The two categories saw their sales increase by 5 percent and 18 percent, respectively. The company's own high-margin private label, Asos Design, still represented 36 percent of revenues. Asos noted a certain weakness in sales of men's tailored clothing, shoes and other accessories.
Weakness in the French and German markets for Asos caused its sales in the European Union to increase by only 10 percent in local currencies. They went up by only 4 percent in the U.S., where a new warehouse in Atlanta went into operation in February.
The picture was rosier in the U.K., where the company booked an overall sales increase of 16 percent to £481.5 million (€555.6m-$627.7m), in spite of the uncertainty surrounding Brexit. Orders went up by 20 percent. Traffic rose by 4 percent and conversion increased by 0.7 percentage points.
Meanwhile, Asos has announced a change in its product return policy, which can be a major factor of profitability for any e-tailer. To crack down on so-called “serial returners,” it has warned that it will take action if it notices any unusual return patterns. On the other hand, it has extended the time for returning unwanted items from 28 days to a maximum of 45 days, but instead of a normal refund, those who return merchandise after 28 days will get an Asos gift voucher for the amount that they have spent.