Zalando expects full-year gross merchandise volume (GMV) to rise by 20-25 percent and revenues by 15-20 percent, with adjusted Ebit reaching €250-300 million, as the German online fashion retailer benefited from the impact of the Covid-19 pandemic. The previous guidance, published on May 6 in an attempt to estimate the impact of the health crisis, was for GMV and revenue growth of 10-20 percent and an adjusted Ebit of €100-200 million.
The improved guidance comes after the company posted “exceptionally strong and profitable” growth in the second quarter. According to preliminary figures, Zalando saw GMV grow by 32-34 percent to €2.67-2.71 billion in the second quarter, and revenues rise by 26-28 percent to €2.01-2.05 billion. The company expects an adjusted Ebit in the range of €200-220 million in the quarter, up from €101.7 million a year earlier. As of June 30, cash and cash equivalents stood at €1.38 billion.
The company estimates that growth in GMV and revenues was partly the result of pent-up demand from the first quarter, which led to strong sell-through across spring/summer merchandise. At the same time, it saw a decrease in the average return rate, which helped improve profitability. This was mainly driven by a shift in the category mix, which saw a higher demand for sports, beauty and kids items, and a large increase in new customers.
Due to the pandemic, which prompted customers to increasingly rely on digital services, Zalando has seen the number of new customers grow significantly over the past months. In the second quarter, more than three million new customers shopped with the retailer. Furthermore, the company’s flash sales business, Zalando Lounge, saw record levels of traffic and revenue growth in the past quarter.
The company will continue to invest in its European logistics network and technology infrastructure and maintained its capital expenditure guidance of €230-280 million for the full year. It also expects a negative net working capital for 2020.
Zalando saw its partner program grow as brands and retailers increased their online activities and connected more stock to its platform, in order to reach customers across Europe. Between April and June, around 180 new partners joined, consequently GMV generated through the partner program grew more than doubled year-over-year. Zalando announced that Arket, which is part of the H&M group, will be available with its men’s, women’s and children’s collections on its platform from Aug. 21.