BERLIN — It appears to be the year of the e-tailer initial public offering.
As Alibaba prepares for what is expected to be one of the biggest IPOs in history this fall in New York, German e-commerce giant Zalando on Wednesday said it is aiming to list on the Prime Standard of the Frankfurt Stock Exchange this year.
Ending months of speculation, Zalando said it anticipates floating between 10 and 11 percent of its equity. Industry observers suggested the IPO could raise 750 million euros, or $984 million at current exchange, in a move that would value the company at least 4.5 billion euros, or $5.9 billion.
The offer is expected to consist solely of new shares from a capital increase, with existing major shareholders retaining their stakes. These include Swedish financial investor Kinnevik, Rocket Internet’s Samwer brothers (via European Founders Fund), Anders Holch Povlsen, DST Global, Holtzbrinck Ventures and Tengelmann Ventures.
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Kinnevik, with a 36 percent stake, invested in Zalando in 2010 and in the last four years has made cash investments of 5.5 billion Swedish kroner, or $784.3 million, to become the company’s largest shareholder. “We look forward to continuing to work with Zalando’s founders and management team, and to support their future growth ambitions after the listing” commented Kinnevik chief executive officer Lorenzo Grabau.
Founded in 2008 with a small footwear assortment, Zalando has been on an aggressive growth path, and is now Europe’s largest specialist footwear and fashion e-tailer. Sales look to hit or surpass 2 billion euros, or $2.6 billion, in 2014, and in the second quarter of 2014, Zalando posted its first operating profit.
Second-quarter sales gained 20 percent to 546 million euros, or $748.8 million. In the first half of the year, Zalando revenues grew 29.4 percent to reach 1.05 billion euros, or $1.44 billion. Dollar figures are converted from the euro at an average exchange rate for the period to which they refer.
Rubin Ritter, a member of Zalando’s management board and the e-tailer’s finance chief, said, “Listing our shares on the stock market is the logical next step in Zalando’s evolution as it, in combination with raising additional capital, provides us with more flexibility to pursue our long-term growth ambitions independent of market conditions and economic cycles.”
Prior to the IPO announcement, Zalando cofounder and management board member David Schneider told WWD the company was already in a position to double in size thanks to heavy investments in infrastructure and its three custom-designed and self-operated logistic centers.
Zalando offers over 150,000 products from more than 1,500 brands, including a dozen private labels, in 15 European markets. As of 2013, fashion outpaced footwear sales. The company employs a workforce of 3,000 in Berlin and another 4,000 in its three fulfillment centers in Germany. The site drew more than 300 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. Highly original and often irreverent advertising has made Zalando one of Germany’s best-known names, and the newest ad made its debut last week.
A game changer that first shook up the German footwear and then entire retail scene with its free delivery and free return policy, Zalando looks to keep reshaping the online shopping experience through ongoing innovations such as a photo search function currently being tested on its German iOS app.
Noting the opportunities in Europe “are still great,” Schneider said he saw a chance for Zalando to accelerate more, though not necessarily in new markets. In August, he told WWD, “We’ve said let’s focus on the markets we’re already in and improve the customer experience.”