A visual from Zalando's spring 2017 campaign

BERLIN Meeting upwardly revised targets, sales at Zalando surged 23 percent in 2016 while operative earnings more than doubled and the adjusted earnings before interest and taxes margin increased to 5.9 percent. Net earnings were broadly flat, primarily due to a tax loss carried forward.

Sales hit 3.64 billion euros, or $4.03 billion. Adjusted group EBIT reached 216.3 million euros, or $239.4 million, compared to 107.5 million euros, or $116 million, in the previous 12-month period. Net income was flat at 120.5 million euros, or $133.4 million, compared with 121.5 million euros, or $134.6 million, in 2016.

All dollar figures are converted at an average exchange rate for the periods to which they refer.

Zalando also said it has agreed to acquire Munich-based Kickz AG, a leading multichannel basketball retailer. “They have strong competence in streetwear and basketball,” Ritter said. “Our strategy is to work with partners in these niche areas, and one way is to acquire such partners.” The deal is subject to merger control clearance and is expected to close in the first half. Financial details were not disclosed.

In the current year, the Berlin-based e-commerce giant is forecasting ongoing growth, with revenues set to increase by 20 to 25 percent, and an adjusted EBIT margin of 5 to 6 percent. Zalando said the guidance is in line with the multiyear strategy originally laid out in its IPO documents from 2014.

In a conference call on Wednesday, co-chief executive officer Rubin Ritter said: “It’s evident we can be very happy and proud of our performance. We have doubled the company since 2013, and in 2016, we have been able to significantly increase our profitability, performing beyond our targets.”

The company attributed the EBIT gain to improved operating costs and said it reflected strong cost management and general efficiency improvements.

Zalando said it would continue to invest heavily in long-term infrastructure and performance. Last year’s capital expenditure, excluding mergers and acquisitions, came in at 181.7 million euros, or $201.1 million. For 2017, the company expects to spend 200 million euros, or $212 million, primarily in the same areas as last year, namely infrastructure, increased automation and in-house developed software.

“Strong growth requires non-stop investment,” Ritter said. “Our goal is to make Zalando the best online fashion destination in Europe. We are investing in improving the on-site experience on both the web and via app, and investing in our brands to make the experience even better. This attracts more and more suppliers,” he noted, adding that Zalando was rolling out services, such as Zalando Media Solutions, for its brand partners. Further investments in fulfillment infrastructure are also planned, with warehouses in France and Sweden — as well as a logistics center in Poland — in development.

Active in 15 European markets, Zalando grew site visits in 2016 20.2 percent to 1.99 billion, with mobile visits now making up 65.6 percent, up from 57.1 percent the year previously. Last year, Zalando took 69.2 million orders, a gain of 25.2 percent, though the average basket size in euros declined 1.8 percent to 66.6 euros, or $73.7 million.

Asked about this development, Ritter suggested the basket size decline “could be related to continued growth in lower price merchandise, but I think it is all still positive for us if we can get an increase in order frequency,” which was achieved last year.

Zalando has been steadily building its workforce, which grew by 2,000 to 11,998 this year, with 5,400 based in Berlin. The company said it plans to create more than 2,000 new jobs this year, with about half of them based in the German capital.

load comments
blog comments powered by Disqus