Zalando closed 2022 with a collapse of its profit of 81%

Zalando closed the financial year 2022 with a collapse of its net profit of 92.8%up to 16.8 million euros, compared to 234.5 million euros in 2021. This is the first drop in the history of the marketplace German. This downward trend has been maintained since the beginning of the year. Until the third quarter, Zalando accumulated a loss of 69 million. However, the marketplace was able to save 2022 after a strong last quarter in which it earned 99 million euros.

Between January and December, as reported Zalando in a release, revenues totaled 10,344.8 million euros, 0.1% less than in the previous year; Meanwhile he gross merchandise volume (GMV) it increased 3.2% annually, to 14,797.9 million. In the annual context, the ebitda it fell 40% to 393.4 million; adjusted ebitda 29.4%, up to 497 million, and gross profit 6.3% up to 4,005.5 million. The margin also suffered with a drop of 2.6 percentage points.

Yeah increased the number of active users. Zalando closed last year with 51.2 million active customers, 5.7% more compared to the 48.5 million of the previous year. The number of orders also grew by 3.5% to reach 261.1 million orders. However, the size of each basket fell slightly to 56.7 euros compared to 56.8 euros in 2021.

“The fact that we have been able to continue to grow our customer base in the current economic environment shows that our core strategy is working”stated Robert Gentz, co-CEO of Zalando. “We want our customers to love Zalando and that is why we are deepening our relationships with them. Understanding their needs and tastes is crucial»the executive asserted.

Following the publication of Zalando’s results, Pippa Stephens, GlobalData Apparel Analystalso offered his point of view: “The return to physical stores coupled with a drop in consumer confidence led Zalando to experience a slowdown in fiscal 2022, with its total revenue falling marginally after years of impressive growth. Its profits suffered further as high operating costs caused adjusted EBIT to fall.”. “Zalando’s DACH ((Germany, Austria and Switzerland) region saw the biggest decline, with fashion revenue falling by 3.9%, due to it being more established in these countries and consumer confidence is particularly weak in its home market of Germany. The rest of Europe saw modest growth of 1.8%, although this performance is also disappointing given its expansion into new markets such as Croatia, Estonia and Latvia.”declared the analyst of GlobalData.

strategic priorities

The company will continue to invest in strategic priorities, driving customer focus around the sought-after brands and assortment on the platform and helping partners drive their direct-to-consumer business outside of Zalando. In the fourth quarter, the proportion of partners who contributed to Fashion Store GMV was 36%, six percentage points more than in the same period of the previous year. By your side, Zalando Fulfillment Solutions submitted 58% of partner articles, up three percentage points compared to 2021.

on your side, Sandra Dembeck, financial director of the German companynoted that the challenges of 2022 required the company to focus on profitable growth, leading to the adoption of measures to improve margins, such as the introduction of minimum order values: “Our healthy balance sheet allows us to continue to invest in our strategic priorities, whether it’s driving customer excitement around relevant brands and assortment or helping partners grow their direct-to-consumer business through a variety of channels.”.

In this regard, to ensure profitable growth in 2023 and beyond, the marketplace it will continue to work to improve its margin, simplify the organization and invest selectively throughout the cycle to take advantage of growth opportunities. The company began a program last February to reduce complexity and embrace simplicity, pragmatism and frugality, including cutting hundreds of jobs.

To win and retain customer service, the company explained that it is improving relevance and curating its assortment. Furthermore, to increase customer loyalty, Zalando is encouraging customers to shop in the different fashion and lifestyle categories such as Fashion, Beauty, Designer and Lounge by Zalando. “There is a lot of growth potential within our existing customer base. On top of that, we see further opportunities to increase penetration in our markets, where we have huge potential ahead.”said in this sense David Schneider, co-CEO of Zalando. Another long-term growth opportunity for Zalando is producing its e-commerce infrastructure to enable other digital businesses across Europe.

At this point, in the words of the analyst stephens, “Zalando has been heavily focused on driving customer loyalty and basket sizes through promoting its loyalty program, introducing minimum order values ​​and improving its marketing to encourage shoppers to buy. in multiple categories, such as fashion and beauty. While it achieved 6% growth in its number of active clients in 2022, it has faced a increasing competition in Europe of others like ASOS and about youwho have offers of similar products». In his opinion, “Zalando must better differentiate itself from these rivals to drive growth through exclusive brands and products, pop-up stores in key cities, and more innovative collaborations with influencers and celebrities”.

Outlook 2023

With a view to the current financial year, the ambition of Zalando continues to outperform the growth of the online fashion segment, including a GMV increase of between 1% and 7%, while revenue is expected to be in the range of -1% to 4% compared to the year 2022.

Similarly, Zalando hopes that Adjusted EBIT is between €280 million and €350 million in 2023up from 184.6 million in the prior year, and is confident of approaching the upper end of its adjusted EBIT margin target of 3-6% by 2025 and achieving double-digit margins in the long term. “Our long-term ambition remains unchanged”pointed Gentzwhich ensured that “we remain confident that we will return to double-digit GMV growth in the medium term, further executing on our vision and strategy, and eventually serving 10% of the €450bn European fashion market”.

Spanish market

Regarding the market of our country, Riccardo Vola, general director for Italy and Spain of Zalandopointed out that, despite the fact that 2022 was a difficult year for both the world and the fashion industry, “Zalando achieved many important milestones”.

«From a local perspective, 2022 was the year in which we celebrated our 10th anniversary in the Spanish market and the year in which we reached the first position as the most relevant online platform in Spain»highlighted the manager, for whom both events have shown that investment and strategic focus on Spain as a key market “they were correct decisions”.

“Looking ahead, we will continue to focus on achieving our goal of being the starting point for fashion in Spain, the place where Spanish customers go first when thinking about fashion and lifestyle”concluded fly.

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