Beating forecasts, Zalando reported higher profits for the third quarter ended Sept. 30, thanks to higher efficiencies in inventory management and other processes, although the growth of its turnover slowed down to 17.1 percent year-on-year from the 25 percent rate enjoyed in the previous quarter. It generated an adjusted Ebit margin of 2.3 percent on sales of €835 million for the period against a loss in the same quarter a year ago.
The slowdown took place in the core market of Germany, Switzerland and Austria, where Zalando's sales grew by only 9.7 percent during the period. The management blamed an unseasonably warm weather until mid-September and noted that the company had scored a very strong 34.4 percent increase in the area in the corresponding quarter of 2015. It dismissed speculation that it was losing market share to Amazon, indicating that Zalando addresses a more fashionable customer with a curated shopping experience.
Neverthless, the three German-speaking countries, where Zalando was still losing money a year ago, delivered an operating profit of €41.4 million for the quarter, or a margin of more than 10 percent on sales of €407 million.
In the rest of Europe, sales jumped by 25 percent to €374 million and operating losses declined to €17.9 million from €21.7 million.
The 7-year-old e-tailer confirmed a recent forecast that that it will reach an adjusted Ebit margin of between five and six percent this year on a sales increase of between 20 and 25 percent, thanks in part to good marketing. It has launched a new campaign for the current season, running under the “This is now” scrip and featuring four celebrities. It is looking forward to the Black Friday sale on Nov. 25 and the Christmas selling season.
The forecast was backed by the most recent projections for online sales in Germany. The Institut für Handlesforschung (IFH) in Cologne says they will grow by 11.3 percent across all sectors this year, reaching €52.3 billion. In 2015, they rose by 12 percent, representing 9.9 percent of the total retail trade, with a share of 16.9 percent for all kinds of fast-moving consumer goods.
In fashion and accessories, sales over the internet increased by 11.3 percent in 2015 to €11.9 billion, representing 21 percent of the market. BEVH, the German federation of online retailers, said that footwear sales on the web grew by 15 percent to €3.28 billion.