The cautious outlook excludes a potential impact from the Russian-Ukraine conflict

Zalando published its FY21 results which were in line with its previous guidance and market expectations. The group is well on track to achieve its GMV goal of more than €30bn by 2025, but it confirmed that the significant acceleration in growth and temporary return rate benefit driven by the pandemic will continue to normalise. The updated guidance for FY22 was slightly below our expectations, and the group said the Russia-Ukraine conflict may delay its East European expansion.

Margin retreats to the pre-pandemic level

Despite the continued strong top-line momentum, the delayed start of the winter season, gradually normalising consumer behaviour after the pandemic and the highly competitive post-lockdown promotional environment have all dragged down the group’s profitability. Operating margin was 0.4% (vs. 6.4% in Q3 20 /0.4% in Q3 19). The group has maintained its FY 21 guidance. Zalando said that it is well-prepared for the year-end holiday shopping season despite the industry-wide supply-chain challenges,

The gradually normalising trading environment

Zalando has experienced a softer Q2 21 after the incredibly strong Q1 21. On the back of the continued good momentum in the top line, adjusted EBIT slid 13% from last year. In addition to the resumed marketing spending, we believe that the pandemic-led lower return rate has started to normalise, and we believe this normalisation will continue to affect the profitability for the rest of the year. Also, the maintained guidance for FY21 has cooled down the the market’s current enthusiasm.

Strongest growth since the IPO

Zalando experienced the strongest growth ever since its IPO in 2014 during the first quarter. It continued to benefit from the pandemic-led surge in consumer demand and the accelerated growth in the partner business. The group has raised its expectations for FY 21 on the back of the strong start to the year. The group now expects the top line to increase 26-31% to €10.1-10.5bn and adjusted EBIT to reach €400-475m, both ahead of the current consensus and our expectations.

Brighter outlook after a strong start to the year

The unprecedented pandemic has unquestionably accelerated the industry transformation from offline to online. Benefiting from the surge in sofa shopping, Zalando has experienced an exceptional FY20 and a strong start to FY21. The solid momentum has not only led the group to upgrade its forecasts for FY21 but also enhanced its confidence for the long-term outlook. Zalando targets to triple GMV to €30bn by 2025 and expects to reach 10% of the total European fashion market in the long term.

Encouraging FY20 outlook

The group has sent a strong encouraging sign by updating its FY20 outlook. The group is expecting its revenue to grow by 10-20%, and adjusted EBIT to reach €100-€200m for FY20, both are largely above the market’s current expectations. The worldwide spread of COVID-19 has not only massively hit the fashion retail industry, but also accelerated the industry transformation from offline to online, and Zalando has been well prepared.

Zalando beats estimates in H1 and raises its guidance

Zalando has beaten estimates in H1 and raised its full-year guidance. Sales were up 20.1% at CER in Q2 and GMV up 23.7%. Guidance for the adjusted EBIT is now at the upper half of the range of €175-225m. Capex was maintained at €300m.

A mixed quarter: slowing down growth and jumping adjusted EBIT

Group revenue was up 15.2% and GMV edged up 23.1%. The number of active customers increased by 14.1% and the average orders per active customer was up 11.5%. The adjusted EBIT jumped to €6.4m while the operating profit was down 21% to €-18.4m. Guidance was maintained.

Zalando fulfills the low end of guidance, but only just

Zalando accelerated in Q4 (+24.6%) and closed the year with a 20% sales growth. The adjusted EBIT margin dropped 160bp to 3.2% and adjusted EBIT was down 19.4% to €173.4m. Operating profit dropped 36.5% to reach €119.2m vs. €125m estimated.

Expansion at the expense of margins

Business Zalando came into existence in 2008 and over its decade of life, it became the leading European online platform for fashion-related goods and one of the top 10 fastest-growing retailers worldwide. The platform offers an extensive selection of fashion and beauty products to 17 markets in Europe. The company has gained a market share of around 1.1% of the overall European fashion retail market and 8% of the online fashion sector. Its customer base has expanded rapidly to reach 25.1m acti

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Soft growth patch

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