Zalando wants market share over profit
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Zalando wants market share over profit

Online fashion retailer Zalando released first quarter earnings for 2017 on Tuesday, and said that it is prioritizing market share over profit growth. The company said sales rose by 23.1% for the three months, meeting its own guidance of a 20% to 25% expansion. However, a slew of rising costs saw earnings after adjustment fail to live up to analysts’ expectations.

Zalando’s share price is up by 11% so far this year

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SOURCE: Yahoo Finance

The company saw a capital expenditure of €78 million in the first quarter, which was spent on new warehouses and better customer service. The company considers the latter of these to be a crucial element of its business. Offerings like same-day delivery and easier returns are meant to differentiate it from other, less premium, online retailers. Over the rest of the year, Zalando expects to increase this expenditure to about €200 million, as opposed to €181.7 million in 2016.

According to Bloomberg Gadfly columnist Andrea Felsted, this expenditure – though it may bother some investors – is not being wasted. Writing about the results, she said:

“Zalando says it is building the infrastructure for the fashion industry in a digital age. This is more than just a soundbite. To convince big brands to join its platform, it must have slick customer service. There are signs its efforts are paying off, with Inditex's lingerie and athleisure brand Oysho the latest to sign up.”

Disclosure

Dominion holds Zalando in its Global Trends Ecommerce Fund.


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