Zalando still loss-making but sales and site traffic surge

European e-tail giant Zalando benefited from surging traffic to its sites in the first quarter, rising customer satisfaction, and more brands realising they need to be working with it, which all translated into a healthy sales boom and customers ordering more often.

The result was gross merchandise volume (GMV) up 23.1% to €1.8 billion and revenues up a pleasing 15.2% to €1.4 billion. Why was GMV up so much more than the revenue that the company actually sees flowing into its own coffers? Zalando said it was “due to the strong development of the Partner Program and revenue recognition effects.”

Meanwhile, its profit on an Ebit basis reached €6.4 million with an improved gross margin. But it was still loss-making with a net loss of €17.6 million, wider than the €15.1 million of a year earlier.

The sales rise came as it saw 14.1% active customer growth to 27.2 million and a 29.5% traffic uplift to 924 million site visits. Customers ordered more frequently than before, and “customer satisfaction hit an all-time high.”

And the company said that it will “further strengthen this positive development by deepening customer relationships with Zalando Plus,” which is available for all Zalando customers in Germany. A pilot project is live in Switzerland, with France and Italy to follow within the next 12 months.

Co-CEO Rubin Ritter said that the firm’s “clear customer focus has paid off in the first quarter, as we made further headway to build the starting point for fashion in Europe.”

As mentioned, its Partner Program had a good quarter, “driven by brands intensifying their usage as well as by new partners joining,” such as Calzedonia, Intimissimi and Margarete Steiff. In Q1, about 30% of all Partner Program orders were fulfilled through Zalando Fulfillment Solutions (ZFS). 

The company added that it has a newly acquired e-money licence and will further strengthen and expand Zalando Payments Solutions (ZPS) “by improving payment transactions on the Zalando platform.”

CFO David Schröder said the firm is “happy with our financial results, which show a strong focus on growth and are in line with our annual guidance. We will continue to invest in areas of our business that have high added value for our customers.”

The e-tailer also confirmed its full-year guidance of GMV growth between 20% and 25%, revenue growth at the low end of this range, an adjusted EBIT between €175 million and €225 million and capital expenditure of around €300 million.