Zalando increases its outlook for 2020 after a strong third quarter. The online platform now expects to sell at least a quarter more this year, after a 20% increase in sales in the past quarter.
Fewer returns, much more profit
The third quarter was exceptionally good at Zalando, both in terms of revenue growth and profitability. Although the figures for the last three months are not yet fully available – the fashion marketplace will announce them on 4 November – the German company already forecasts a turnover of between 1.83 and 1.87 billion euros. That would be 20-23% more than a year earlier.
The shoe and clothing retailer is expected to have sold 2.43 to 2.48 billion euros worth of goods (gross volume), representing an increase of 28% to 31%. Adjusted, EBIT will then be between 100 and 130 million euros, which represents an enormous growth compared with 6.3 million euros last year.
According to Zalando, the growth is due to his new platform strategy, but also, of course, to the increased demand for e-commerce in times of corona. Moreover, the retailer has noticed that people are returning fewer orders, a trend that the platform is pleased to see continuing. After all, the high return costs have been a major headache for the company for years.
Stock not depreciated after all
Another windfall is that it was able to reverse its write-off on the stock. In March, Zalando, like other fashion players, feared that the pandemic would leave them with large unsold stocks, but the recovery was quicker and smoother than the ‘pure player’ dared to dream at the time and the write-off proved unnecessary.
As a result, the company from Berlin is now increasing its prospects for the entire financial year 2020. Zalando is now assuming a gross volume growth of 25 to 27%, rather than the fork of 20 to 25% that the company originally counted on. Turnover growth of 20-22% will also be higher than the 15 to 20% projected in the 15 July forecast. EBIT is even forecast to be significantly higher, due to the reversal of the depreciation charge: it is expected to rise from 250-300 million euros to 375-425 million.
Earlier this week, Zalando announced the launch of Brand Homes, virtual shop environments in the app and on the site where partner brands can do content marketing.