Zalando Faces Profit Drop as Physical Stores Reopen
BERLIN (Reuters) -German online fashion retailer Zalando reported a slump in quarterly profit on Wednesday as it offered discounts to try to keep customers shopping online after physical stores reopened following the easing of coronavirus lockdowns.
Europe’s biggest fashion e-commerce player said its third-quarter adjusted operating profit fell to 9.8 million euros ($11.35 million) from 118 million a year ago, while sales rose 23% to 2.3 billion euros, slightly ahead of analysts’ average estimate of 2.24 billion.
Zalando said its operating profit was in line with the number it posted in the third quarter of 2019, before the pandemic helped the company post exceptional results.
It said there was a “fierce promotional environment” in many European markets, adding that unusually warm weather in the period had kept a lid on demand for full-price fall/winter items and increased sales of discounted spring/summer fasion.
Zalando spent more on marketing on the period, also due to its recent launch in six new markets in eastern Europe.
Zalando shares dropped 1.7% in early Frankfurt trading at 0615 GMT.
“Despite growing inflation and supply chain uncertainties, we remain confident to achieve our upgraded full-year outlook,” finance chief David Schroeder said in a statement.
Zalando reiterated it expects full-year sales to grow 26%-31% to 10.1 billion-10.5 billion euros and forecast adjusted earnings before interest and taxation to reach the upper half of its guided 400 million-475 million euros range.
British rival ASOS warned last month that supply chain pressures and consumers returning to pre-pandemic behaviour could reduce 2022 profit by over 40%.
($1 = 0.8636 euros)
(Reporting by Emma Thomasson; Editing by Riham Alkousaa and Ramakrishnan M. and Louise Heavens)
