Zalando expects return to growth in H2 after weak Q2

BERLIN (Reuters) – Online fashion retailer Zalando on Thursday reported a 58% drop in second-quarter operating profit and lower sales but said it expected to return to growth and improved profitability in the second half of the year.

Zalando’s gross merchandise volume was flat at 3.8 billion euros ($3.86 billion) in the quarter compared with the same period last year, while sales fell by 4% to 2.6 billion euros.

Adjusted operating profit (EBIT) dropped to 77.4 million euros from 184.1 million but marked a rebound from a first quarter loss of 52 million euros.

The company cited lower consumer confidence, inflation and supply bottlenecks hitting demand after the coronavirus pandemic helped it record a bumper year in 2021.

“Life is becoming more expensive and consumers are reluctant to consume. We feel that,” co-CEO Robert Gentz said on Thursday.

Europe’s largest fashion online retailer said the number of its active customers grew by 11% on the year to over 49 million euros, while the membership of its loyalty program, Zalando Plus, rose by 164% in the quarter to more than 1.5 million.

To cut costs, the company said it had reduced marketing spending, introduced a minimum order value and was improving efficiency across its European logistics network.

“We are focused on efficiency and margin improvement measures that will help us strengthen our profitability in the second half of the year,” Chief Financial Officer Sandra Dembeck said in a statement.

Zalando confirmed guidance lowered in June, forecasting a sales increase between 0% and 3% and an adjusted EBIT of 180 million to 260 million euros.

Shares in Zalando were indicated to rise by 1.7% at Lang & Schwarz in pre-market trade.

($1 = 0.9841 euros)

(Reporting by Riham Alkousaa and Nadine Schimroszik; editing by Maria Sheahan and Jason Neely)

tagreuters.com2022binary_LYNXMPEI7307I-VIEWIMAGE