Zalando overcomes challenging 2018, has big growth plans, mobile surges

By

Sandra Halliday

Published
Feb 28, 2019

Zalando has big, very big, ambitions with a target of €20 billion in gross merchandise value (GMV) within five years and an aim to be the “starting point” for fashion shoppers.

That news was buried deep in the firm’s latest results announcement but that’s no surprise, as there was plenty of upbeat news further up the report, the pan-European retailer having apparently beaten off most of the numerous challenges it faced during 2018.

The company met its 2018 targets and also had a strong end to the year with double-digit sales gains in the crucial Christmas quarter, while customer numbers rose strongly (by the biggest quarterly amount in half a decade).

So let’s look at the figures. GMV was up 21.1% to €6.64 billion last year, which really underscores just how ambitious that €20 billon target is, while annual group revenue rose 20% to €5.388 billion from €4.489 billion.

And in Q4, business accelerated with an almost-25% GMV rise to €2.05 billion from €1.63 billion as 1.3 million new active customers during the period took the number up to 26.4 million. Q4 group revenue was up 24.6% to €1.66 billion from €1.33 billion.

But it wasn’t all good news. The company saw a total of 116.2 million orders last year yet this translated into adjusted group profit before interest and tax (Ebit) falling to €173.4 million from €215.1 million, although Q4 Ebit rose to €117.8 million from €112.6 million. Clearly, the challenging year meant price issues and that sent the adjusted group Ebit margin down to 3.2% for the year (from 4.8%) and 7.1% for the quarter (from 8.4%).

"2018 had its challenges, but we focused our efforts in the fourth quarter to pull off a strong finish to the year,” said co-chief executive Rubin Ritter said. “Our performance in the fourth quarter gives us confidence that our long-term growth plans are well on track."

The company has plenty planned for this year that should help drive it forward. It said it’s targeting revenue growth at "the low end" of its 20% to 25% range. This should be helped by its rollout to more countries of the membership programme Zalando Plus. 

And it plans to continue to scale its “successful” Partner Program that lets brands sell directly to customers via its platform to add to the volume of business going through the platform. In 2018 more than 250 partners integrated with the Partner Program and it accounted for about 10% of Zalando's GMV, with plans for it to reach 40% by 2023/24. 

We should also expect the company to put even more efforts into its mobile operations after last year saw these accelerating fast. For 2018, mobile visits represented 79.3% of the total, up from 70.7% in 2017. And in Q4, they were even higher, hitting 81.6% and up from 72.1% a year earlier.