Zalando: revenue up 28.7% despite weak October
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Zalando: revenue up 28.7% despite weak October

German fashion retailer Zalando reported third quarter earnings this week that demonstrated a strong underlying business – even if there were a few points that investors didn’t celebrate. The company said that a “weaker than expected October” hadn’t held it back – revenue came in at £945 million for the quarter, a rise of 28.7% year on year. This revenue is a direct reflection of Zalando’s platform performing as one would hope: the company’s user base grew 15.7% from the year-ago quarter, and the average orders per customer were up 12.1% over the same period. Gross profit came in at £385.69 million.

Zalando’s share price has risen by 13% so far this year

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SOURCE: Yahoo Finance

However, investors were less-than thrilled by the company’s earnings, which fell from £11.17 million a year ago to £5.19 million this year. The cause of this 50%-odd drop is a rise in fulfillment cost ratio and a gross margin that dropped 0.4%. Taken together with guidance for its Earnings Before Interest and Taxes (EBIT) dropping to “slightly below 5%” this factor caused the share price to drop after reporting.

Nonetheless, Zalando’s business is fundamentally strong, and the company expects revenue to hit the upper end of its guidance (+20% - 25%). Co-chief executive Rubin Ritter said: “The very strong revenue growth in the third quarter underlines our growth focus and shows that our investments already pay off. For the fourth quarter as well as the coming years, we continue to focus on growth with the goal to double our business by 2020 and remain willing to further invest to reach this ambition.”

Disclosure

Dominion holds Zalando in its Global Trends Ecommerce Fund.


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