Zalando SE, which has emerged as a leading online fashion retailer across Western Europe, reported sales in the third quarter rose 17.1 percent and increased its full-year adjusted EBIT margin guidance to 5 to 6 percent.
Third Quarter Highlights
- Q3 revenues €835 million (+17.1 percent), adjusted EBIT margin 2.3 percent
- Q3 adjusted EBIT reached €19.5 million against a loss of €23.5 million a year ago.
- 9 months revenues €2.547 billion (+21.9 percent), adjusted EBIT margin 4.7 percent
- Revenue guidance reconfirmed; profitability guidance for full year 2016 raised to adjusted EBIT margin of 5 to 6 percent
Zalando said it saw increased profitability across all major operating cost lines, including cost of sales, fulfillment and marketing. At the same time, the company continued to invest into its customer proposition, including mobile, brand, assortment and convenience. Combined with strong working capital management and significant CapEx of €116 million, this resulted in a positive nine-month free cash flow of €66 million.
“It’s amazing to see that two years after our IPO, Zalando continues to go from strength to strength,” said Rubin Ritter, co-CEO. “We have built a strong platform for ongoing progress and an exciting 2017.”
Zalando continued to improve its mobile offering in the third quarter, and its Android app recently won the Editor’s Choice award from Google Play. Mobile traffic share increased to 67 percent, while the share of mobile orders surpassed 50 percent.
The Bread&Butter fashion event attracted more than 20,000 visitors, showcasing Zalando’s ongoing investments into brand visibility and reach. During the event, Zalando gathered more than 800 million impressions across all media and social media channels. Gigi Hadid presented Tommy Hilfiger’s Tommy X Gigi collection, which she co-created, and Marni’s exclusive shoe collection for Zalando was introduced, currently available at Zalando. Further popular brands were added to the assortment in the past quarter, increasing the number of available items on the Zalando stores to approximately 200,000.
The operational backbone of Zalando’s platform is evolving, supporting its development to provide the best fulfillment experience for fashion in Europe. After the successful launch of the Italian satellite warehouse, which now fulfills 70 percent of Italian orders, Zalando will start operations at another satellite warehouse close to Paris, France, in the first quarter of 2017. Zalando further announced the construction of another large-scale fulfillment center close to Szczecin, Poland. It will cover 130,000 meters and is expected to start manual operations in autumn 2017.
Employee numbers increased strongly to approximately 11,200 as of September 30, 2016, up from approximately 10,000 employees as of December 31, 2015 – primarily driven by headcount in Technology and Operations. Zalando’s tech team continued to grow, with approximately 1,600 members at its headquarters in Berlin and across six further locations by the end of the third quarter.
Zalando reiterates its growth ambition for the next few years of 20 to 25 percent. For 2016, Zalando expects revenue growth to come in towards the higher end of the 20 to 25 percent growth corridor, and increases full-year adjusted EBIT margin guidance for 2016 to 5 to 6 percent.