Zalando lowers guidance amid falling consumer confidence

Zalando has warned on its profits for the financial year FY22, with revenues now expected to grow 0%-3% to €10.4bn (£8.9bn) – €10.7bn (£9.1bn), as macroeconomic conditions have further deteriorated.

Zalando said it no longer assumes a rebound of consumer confidence in the short-term, following a further fall in the EU consumer confidence index in June. The company now expects Gross Merchandise Volume (GMV) to grow 3%-7% to €14.8bn (£12.7bn) – €15.3bn (£13.1bn).

Adjusted EBIT is also expected to be €180m (£154.5m) – €260m (£223.24m) in the same period, and capital expenditure is expected to be in the range of €350m (£300.52m) -€400m (£343.4m).

Meanwhile, the second quarter (Q2) is reportedly profitable but weaker than expected. However, Zalando still expects Q2 GMV growth, revenue growth and adjusted EBIT to be “significantly” below analyst estimates.

Company-compiled median analyst estimates as of 31 May 2022 were 5.0% GMV growth, 1.5% revenue growth, and a €104m (£892.9m) adjusted EBIT.

The company’s previous outlook, from early May, pointed to the lower end of full year guidance based on anticipated challenges but also early signs of a potential recovery.

However, Zalando said it now expects macroeconomic challenges to be longer lasting and more intense than previously anticipated.

Zalando added that the revised full year outlook implies an acceleration of growth and a significant improvement in profitability in Q2, based on an ongoing company wide effort to adjust the offer to changing customer demand and to drive efficiencies across all cost lines.

First key efficiency measures were reportedly successfully implemented in Q2, including reducing the marketing investments to increase return on investments, adjusting logistics infrastructure investments to drive utilisation, as well as the introduction of a Minimum Order Value (MOV) in additional 15 markets.

Robert Gentz, co-CEO, said: “While this new environment is creating a negative impact on our financial performance, our strategy and long term goals are unchanged. Our vision remains to be the starting point for fashion in Europe.

“There are many untapped opportunities in the fashion market that we can capture and are committed to change the industry for the better. By driving efficiencies across the company and selectively investing through-cycle, we will be even better positioned long-term to execute against our strategy.”