This story was updated Aug. 6 at 3:10 p.m. EST
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BERLIN — German online fashion retailer Zalando saw growth for the first time in nine quarters, the company reported on Tuesday morning.
Zalando ’s revenues rose 3.4 percent over the second quarter to bring in 2.64 billion euros. This meant that for the first half of the year, the German company’s revenues increased 1.5 percent to 4.88 billion euros.
The e-commerce giant also achieved significant improvements in its profitability during Q2.
Zalando’s adjusted group EBIT — earnings before interest and taxes, or operating profit —rose 18 percent, climbing to 171.6 million euros from 144.8 million euros over the same period last year. The figure was above market expectations.
“This is a great achievement after negative growth in 2023, and in an ongoing volatile market environment in 2024,” Zalando co-chief executive officer Robert Gentz told journalists at an online press conference. It shows that the company’s turnaround strategy is delivering, he argued.
Market analysts from the likes of JPMorgan, Hauck Aufhaeuser Bank and Warburg Research agreed, praising “strong numbers” and a “solid interim report.” On Tuesday morning, Zalando share prices rose slightly as a result on the German stockmarket.
A number of other key financial indicators at Zalando also improved over the second quarter.
Gross merchandise value, or GMV, which measures how much inventory the platform has moved and which is usually higher than the company’s revenues, was also positive. In the second quarter, Zalando shifted 3.84 billion euros worth of product, an increase of 2.8 percent. That equals sales of 7.13 billion euros worth of product over the first half of this year, 2.4 percent more compared to last year.
In March this year, Zalando laid out what its calls its new “eco-system strategy.” It wants to move from being a simple platform for fashion sales to a dual focus on consumer shopping and business-to-business activities.
The latter includes fulfilment and logistics services, getting brick-and-mortar retailers to use Zalando’s platform to sell, or having big brands set up their own online shops-within-a-shop at Zalando. The business-to-business activities are much smaller than the multi-billion-euro consumer-facing trade but they recorded double digit growth over the first half of this year, rising 11.8 percent to 449 million euros.
On the customer-facing side, the new strategy has seen Zalando try to become more of a lifestyle destination, pushing products from categories like beauty, sportswear, premium and luxury, as well as streamlining logistics and ratcheting up inspirational magazine-style content to entice shoppers in. Zalando also plans to use more artificial intelligence to enhance the consumer experience, executives said.
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All this is meant to help Zalando differentiate itself from online retailers like China’s Shein, who focus on fast fashion and lower prices.
The results of changes on the platform so far have been “astonishing” Gentz said. “Product with elevated content pages have, like for like, 10 percent higher engagement than standard [product shots],” he explained. “For video content, the impact is even greater. Customers are three times more likely to buy the product while having significantly lower return rates.”
Zalando executives also credited a marketing focus called “Summer of Sports” for driving sales during Q2. The company launched sports-related campaigns in larger European cities and enlisted brand ambassadors, including well known soccer players, to promote the site. Zalando also created its own sportswear range for the first time, featuring 14 styles.
That paid off, Zalando’s chief financial officer Sandra Dembeck noted, with “the strongest June in the history of Zalando” for sports-related sales.
“We saw double digit growth in sports,” she continued. But this went beyond events like the UEFA football tournament over summer, she noted. “We also had very strong performance in running. All the brands we onboarded through the end of last year and this year drove the very good performance in Q2,” she said, referring to premium athletics companies like On Running, Hoka and Lululemon.
Some of Zalando’s other key indicators looked more static. The e-commerce specialist had slightly fewer active customers and average orders per customer in the second quarter. These fell 1.3 percent to 49.8 million and 3.2 percent to 4.9 orders per customer, respectively.
The total number of orders rose 0.3 percent to 63.4 million in the second quarter. The value of each customers’ basket, or spend, rose 4.6 percent to 60.8 euros.
On the back of its Q2 results and the level of business it was already seeing in the third quarter, the Zalando executives confirmed both guidance for the year and long-term targets for 2028. The company has previously said it wants to grow revenues and GMV between 5 and 10 percent every year until then.
“At beginning of 2024 we set ourselves the ambition to return to growth,” Gentz stated. “The first half results show progress and we expect further acceleration in the second half of the year, so consequently we remain confident,” he said.
Zalando predicts both revenue and GMV to increase in the low single digits over the year, with the highest expected growth at 5 percent, and EBIT somewhere between 380 million and 450 million euros.
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