BERLIN — Zalando reported sales advanced more than 41 percent in the third quarter, while heavy investments pushed adjusted earnings before interest and taxes (EBIT) into the red for the July to August period.
According to preliminary figures released Wednesday, sales reached 707 million to 713 million euros, or $786.3 million to $793 million in the quarter.
Dollar figures are converted from euros at average exchange rates for the periods in question.
While investments in the online retailer’s customer experience drove revenue growth in the quarter, higher fulfillment and marketing costs negatively impacted profitability. Zalando is expecting an adjusted operating loss of between 18 million and 32 million euros, or $20 million to $35.6 million, compared to an adjusted EBIT of 4 million euros, or $5.3 million, for the quarter a year previously. .
Zalando said fulfillment costs were primarily related to improving the customer experience, as well as significant technology investments to further drive mobile and platform strategies. Stepped up investments in app downloads plus an earlier start to the fall-winter campaign pushed up the marketing cost ratio year-on year, the company added.
Board member Rubin Ritter emphasized the quarterly results are in line with Zalando’s strategy to invest in long-term growth, and added Zalando is “willing to grade in some profitability to accelerate our growth and gain market share.”
Based on Zalando’s performance in the first nine months, with sales gaining about 35 percent to 2.08 billion to 2.09 billion euros, or $2.32 billion to $2.33 billion, the company is revising its revenue growth guidance to 33 to 35 percent for the full year, up from its first revision of 28 to 31 percent and initial guidance of a 20 to 25 percent growth corridor.
As a result of additional investments, however, Zalando has lowered its guidance for adjusted EBIT margin to 3 to 4 percent for the year, down from 4.5 percent. Adjusted EBIT for the first nine months is expected to come in at 27 million to 41 million euros, or $30.1 million to $45.7 million, a margin of about 1.6 percent.
Final third-quarter figures are to be published on Nov. 12.