By  on August 28, 2014

BERLIN — Zalando SE, Germany’s most successful — and controversial — e-commerce start-up, is seriously growing up and an impending initial public offering may be part of its maturation plans.

A game changer that first rattled the German shoe industry and then the entire retail market with its free delivery and unlimited free return policy, Zalando went online in Germany in October 2008. On offer was a small but carefully selected shoe assortment of fewer than 50 labels, which the Berlin-based team packed themselves in the office cellar for daily shipment.

In less than six years, Zalando has burgeoned into Europe’s largest specialist footwear and fashion e-tailer, with women’s and men’s fashion now outpacing footwear since 2013. The assortment offers over 150,000 products from more than 1,500 brands in 15 European markets. The company employs 3,000 people in Berlin and another 4,000 in its three custom-designed and self-operated fulfillment centers in Germany. The site drew 332 million visitors in the first quarter of this year, while its mobile app, introduced in 2013 and now available in all markets, had more than 3.8 million downloads by the end of the second quarter of 2014.

Sales look to near, if not beat, 2 billion euros, or $2.64 billion at current exchange, in 2014, following sales of 1.762 billion euros, or $2.34 billion at average exchange, in 2013.

More significantly, however, breakeven is in sight. Zalando posted its first-ever profit in the second quarter of 2014. Management board member Rubin Ritter said Zalando is “firmly holding to its goal of taking a decisive step in the direction of EBIT [earnings before interest and taxes] breakeven on the group level [as of 2013, Zalando was already profitable in its core markets of Germany, Austria and Switzerland], even when we don’t entirely reach breakeven” in 2014.

Zalando reported first-half sales rose 29.5 percent and it made its first-ever profit. Sales came in at 1.05 billion euros ($1.38 billion), while earnings before interest and tax (EBIT) swung to 12 million euros compared with an operating loss a year ago of 72 million.

The group said the shift to profitability was due to efficiency gains across the board, including in logistics, marketing and range selection.

Sales growth slowed to 25 percent in the second quarter from 35 percent in the first quarter, but Ritter noted said Zalando was still growing faster than the broader e-commerce market.

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