Zalando cuts outlook again as shares see 20% drop

Zalando cuts outlook again as shares see 20% drop

Emma Thomasson

Zalando, Europe’s biggest online only fashion retailer, has cut its 2018 outlook for a second time in as many months, saying a long, hot summer had taken its toll and wiping as much as 20% off the value of its shares.

Co-chief executive Rubin Ritter said a delayed start to autumn meant selling fewer higher-priced cold-weather garments and more discounting.

He noted that German fashion sales were down 17% last week, year-on-year, according to industry publication Textilwirtschaft.

Zalando said higher fulfilment costs were another factor that weighed on profitability.

“We don’t know when the season will start and when fall/winter will actually kick in. This is a problem for the entire industry,” Mr Ritter said, noting it was set to be a balmy 28C degrees Celsius in Berlin yesterday.

Zalando has begun selling beauty products online and is also investing heavily in logistics and technology as competition heats up, both from e-commerce players like Amazon and big chains like H&M.

H&M, the world’s second-biggest fashion retailer, reported on Monday that its sales bounced back in the third quarter, helped by a new logistics system, as a revamp to meet growing online and budget competition was paying off.

British rival ASOS also missed analysts’ forecasts for sales growth in its latest trading period, saying it had reined in marketing efforts as it focused on ramping up warehousing space in Germany and the US.

The hot summer had already prompted Zalando, launched in Berlin in 2008, to trim its outlook in early August, when it said that the traditional discounting at the end of the summer season would likely be more pronounced than usual due to the weather.

Zalando said it now expects revenue growth around the low end of its 20%-25% target corridor, compared with a previous forecast for a figure in the lower half of the range.

It sees adjusted earnings before interest and tax (EBIT) between €150m and €190m, compared with the previous guidance at the low end of a €220m to €270m range.

For the third quarter, it expects revenue growth and adjusted EBIT to be significantly below analyst consensus for 19.8% and minus €2m, respectively.

Zalando’s shares, which already tumbled last month, fell as much as 20% — their lowest level in over two years.

Reuters

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