May 6, 2021
E-tail giant Zalando swung to a profit in Q1 and is expecting general merchandise value
growth of up to 36% this financial year after a stellar start to 2021 in which GMV grew as much as 55.6% to €3.2 billion.
It said on Thursday that it saw “exceptional” new customer growth (actually its strongest since 2013) in the first three months of the year, reaching 41.8 million active customers. And “continued elevated growth levels” are being seen in Q2. It means the he German company is gearing up for a future of ongoing explosive growth and said it would expand it European logistics network with five fulfilment centres by 2023, taking its total to 15.
Its results come after other e-tail mega-names such as ASOS and Boohoo have also reported powerful results that illustrate just how strongly consumers have embraced e-commerce during the pandemic.
Looking closer at Zalando’s statement, that outlook deserves to be considered in more detail. It updated this to GMV of between +31% and +36%, or a value of €14 billion to €14.6 billion for the year. And it expects revenues to grow 26% to 31% to reach between €10.1 billion and €10.5 billion. That would mean adjusted EBIT of between €400 million and €475 million in the period. All of those figures are significantly higher than its earlier guidance.
Now, a look at the past quarter. Top-line growth came in at “an exceptionally high rate”, with GMV surging, as mentioned, to almost €3.2 billion while revenues grew 46.8% year-on-year to €2.2 billion. Growth was fuelled by “a continued rise in consumer demand for online offerings and an outstanding growth in our partner business”. And it achieved adjusted EBIT of €93.3 million — a big change from an adjusted EBIT loss of €98.6 million a year earlier. That meant a margin of 4.2% (compared to -6.5% previously), “which was mainly driven by a strong sell-through and a continued lower return rate”. Net income was €34.5 million, much better than the net loss of €86.4 million this time last year.
That came as average basket size rose 2.7%, average orders per active customer rose 3.7% and the number of orders surged 51.1%.
CFO David Schröder said: “In the first quarter of 2021, Zalando delivered the strongest growth ever since going public in 2014. We see our platform business unfolding at increasing speed, creating benefits for customers and partners alike and allowing us to make fast strides on our journey towards being the Starting Point for Fashion.”
As mentioned, it’s expecting ongoing expansion and those new fulfilment centres will be crucial for this. Two centres in Rotterdam and Madrid are close to completion and will go live this year. Construction works on three new centres in France, Germany, and Poland will kick off in the next 12 months.
Of course, the company is aware that a big chunk of growth in the last year has come as physical stores have been shut and customers have had to go online. But its annual guidance and fulfilment centre plans suggest it believes that the online habit is now firmly established, even as consumers return to shopping face to face.