April business makes Zalando confident again
Zalando is seeing a return of consumer confidence following a slump at the start of the coronavirus pandemic. «On a year-over-year basis, we saw growth again in the first two weeks of April,» board member Rubin Ritter told reporters on Thursday. This recovery has been faster than expected. As a result, the company is looking ahead to the current quarter with confidence.
In the first quarter, however, the coronavirus pandemic wrecked the Berlin-based company's balance sheet. "It was the worst quarter since our IPO," said Ritter and announced a savings program worth 350 million euros. Europe's largest online fashion retailer, which is active in 17 countries, does not want to lay off any employees.
Weaker growth in the first quarter
According to preliminary figures, turnover in the first quarter climbed by a maximum of 11.6% to 1.54 billion euros. Growth was still strong in January and February and then collapsed in March as a result of the lockdown. Customers had kept their money together. In addition, there was a lack of occasions such as weddings or work events for which new clothes had to be bought. Shoes were also sold less, said Ritter, while leisure and sports fashion continued to be in demand.
In the same quarter of the previous year, growth of around 15 percent was achieved. Zalando's adjusted operating result (EBIT) slipped into the red and is now forecasting a loss of between 90 and 110 million euros. This includes extraordinary write-downs of 40 million euros on inventory. Zalando plans to publish the exact figures on May 7. Due to the uncertainties caused by the coronavirus crisis, the company, which now has 32 million customers, had already cut its forecast for the year at the end of March.
Company wants to save money
To cushion the fall in demand, Zalando is implementing the biggest cost-cutting package in the company's history. Marketing and general costs are to be reduced by 250 million euros and investments by 100 million euros. Nevertheless, the company, which is listed on the MDax mid-cap index, intends to stick to its original plans and expand its luxury segment and include second-hand goods in its range.
Investments are also being made in expanding the platform to include additional fashion brands and retailers. "It's a critical time," said Ritter. Seasonal clothing has to be sold now and that is almost only possible online at the moment. "The brands are looking for demand and we can give it to them." Many discussions are being held, said Ritter, leaving it open as to whether new brands have already signed up to the platform. (SDA)
