Zalando confirmed its guidance for 2022, but cautioned that revenues and profits would be more subdued amid “declining consumer sentiment.”
It also acknowledged that it looks “less likely” it will attain its oft-stated ambition of 30 billion euros of gross merchandise volume, or GMV, by 2025.
“Our goal remains the same, though the trajectory to get there has changed,” co-chief executive officer Robert Gentz said during a brisk conference call on Thursday to discuss Zalando’s third-quarter results. “Headwinds for growth are getting stronger.”
Revenues in the third quarter improved 2.9 percent to 2.35 billion euros, while gross merchandise volume, or GMV, rose 7.1 percent to 3.28 billion euros. Adjusted EBIT grew 38 percent to 13.5 million euros.
RBC analyst Sherri Malek noted the numbers came in a “touch above” expectations.
Zalando recently introduced a minimum order value to encourage customers to increase the size of their basket or pay a delivery fee. “As a result, orders below the minimum order value are now profitable,” the company said.
It noted that it “captured further marketing efficiencies in the third quarter,” allowing it to trim costs by almost 100 million euros so far this year.
“With consumer confidence at new lows and ongoing inflation, it was a prudent decision to start early with decisive action and measures to support profitability,” commented Sandra Dembeck, Zalando’s chief financial officer. “Although it’s not crystal clear how consumer spending will play out in the final quarter, we are working hard to execute and deliver on our strategic priorities and financial outlook.”
Zalando still expects GMV to grow 3 to 7 percent to 14.8 billion to 15.3 billion euros, and revenues to come in somewhere between flat and 3 percent growth to 10.4 billion to 10.7 billion euros, but at “the lower end of these ranges.”
RBC noted that its estimates beyond next year are below consensus “as we expect a lower growth environment amidst inflation and as profitability is prioritized.”
Gentz touted that Zalando’s number of active customers increased by 8 percent in the third quarter, exceeding 50 million for the first time, while membership in its loyalty program tripled to 1.8 million.
Pressed for prospects on Black Friday/Cyber Monday and the holiday period, Dembeck skirted any precise forecast, citing “uncertainty around consumer demand.”
Gentz touted efforts to “inspire customers” with new content generated in partnership with Highsnobiety, the media brand Zalando acquired last June, and enlisted as a strategic and creative consultant.
Among initiatives being rolled out are video shopping and early access to releases from buzzy brands like Salomon.
Dembeck warned that fulfillment costs would continue to increase as Zalando seeks to speed deliveries and improve convenience.