Zalando’s 2022 Earnings Beat Estimates in Profitability Push

Agatha Cantrill, Bloomberg News

The logo of Zalando SE at the online retailer's headquarters in Berlin, Germany, on Thursday, Feb. 9, 2023. Berlin’s new tech recruits are being told to take any apartment they can get as the city's housing crunch means startups in Berlin have lost an important edge, putting them on similar footing to rivals in London, Paris and Silicon Valley. Photographer: Krisztian Bocsi/Bloomberg , Bloomberg

(Bloomberg) -- Zalando SE’s 2022 earnings beat analyst estimates as the German online fashion retailer’s new focus on profitability boosted the results. Shares rose as much as 6%.

The Berlin-based e-commerce platform reported adjusted earnings before interest and taxes of €184.6 million ($197 million) last year, it said in a statement Tuesday. That compares to the average estimates of €158.1 million among analysts surveyed by Bloomberg.

The company, which sells a mix of its own-brand and third-party apparel, has been taking steps to improve its margins as online retailers struggle with inflation and rising rates. Zalando in February announced job cuts, joining a growing number of tech firms to resort to lay offs.

“The challenges of 2022 demanded us to be laser-focused on profitable growth and we acted quickly and decisively with measures that improved margins such as the introduction of minimum order values,” Chief Financial Officer Sandra Dembeck said in the statement.

Adjusted EBIT this year is seen in the range of €280 million to €350 million, Zalando said. That compares with analyst estimates of €279 million adjusted operating income. The guidance is the first indication of how its efforts to control costs may impact earnings in 2023.

Zalando has focused more on profitability as high inflation and people returning to stores following the Covid-19 pandemic hurt online retail sales. Its UK rival Asos Plc also recently announced a plan to cut costs and streamline its business, prioritizing profitability over growth.

What Bloomberg Intelligence Says:

Zalando’s 2022 16% Ebit beat with new 2023 guidance of €280-€350 million, 13% ahead of consensus at midpoint, suggests profit upgrades. The implied margin recovery to 2.6-3.1% brings the e-tailer closer to its mid-term target corridor of 3-6% and underlines its winning marketplace strategy. The balance sheet provides ample liquidity to invest through the e-commerce slowdown and come out stronger.

Tatiana Lisitsina, BI analyst

Key Insights

Gross merchandise value, which is a measure of how much customers spend on the platform, grew 3% to €14.8 billion.
GMV is expected to grow between 1% and 7% this year. Revenue is seen in a range of -1% to 4% compared with 2022.
Zalando’s annual revenue fell 0.1% to €10.34 billion, compared to analyst estimates of €10.36 billion.
The average basket size was €56.70 in 2022, down 10 cents from a year earlier.
The number of active customers in 2022 grew 6% to more than 51 million.

Market Insights

Of 32 analysts surveyed by Bloomberg, 19 rate the stock as Buy, 11 Hold, 2 Sell
Shares rose as much as 6% to €41.47 in Frankfurt Tuesday. They have gained 25% so far this year, compared to a 22% increase in the Stoxx 600 Retail Index.

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