Summer and returns see Zalando loss rise tenfold

Despite a rising turnover, online fashion shop Zalando saw its overall loss reach 55.7 million euros for the third quarter. The hot summer and too many returns were quite costly for the German company.

Long summer, rising costs

The increase in loss is not a big surprise: the company had already issued a profit warning back in September. Turnover did rise by 12 % to 1.2 billion euro in the third quarter, but it remained well below the 1.4 billion euro that was expected by analysts. Zalando cites the long, hot summer as the most important cause of the weak results. As a result, many consumers postponed buying winter clothes and demand receded.

Dealing with many returned items caused additional costs: returning purchased goods is free for customers, but it is quite expensive for Zalando. About half of all the purchased goods were returned, but many of those goods were lost due to bad processing. The lower average retail price of the products put further pressure on the profit margin: in the third quarter an average order was worth 57.5 euros, while it was 62 euros in the same period last year. All these reasons pushed losses down to 55.7 million euros.

Positive signs for the company are big rises in the number of visitors (728.7 million, +18 %), the number of active customers (25.1 million, +13 %) and the number of orders (27.7 million, +23 %).

Prognosis

Despite the bad results Zalando remains hopeful for the rest of the year: the company is counting on a strong fourth quarter and is still expecting a turnover growth of 20 to 25% for 2018 as well as an EBIT of between 150 and 190 million euros. Co-CEO Rubin Ritter also repeated his earlier goal of doubling turnover to 10 billion euros by 2020.