Zalando Prioritizes Profitability Despite Revenue Dip

Online fashion giant Zalando reported mixed results for the first quarter of 2024. While revenue dipped slightly to €2.2 billion compared to €2.3 billion in Q1 2023, the company witnessed a significant improvement in profitability.

Shifting Focus, Improved Margins

This trend aligns with Zalando’s strategic shift announced in 2023. The company is prioritizing profitability and supporting other e-commerce businesses by opening access to its logistics infrastructure, software, and fulfillment services. This focus on platform development is reflected in the onboarding of five new partners for ZEOS multi-channel fulfillment in Q1, bringing the total to 27 merchants.

Profitability on the Rise

Despite the revenue decline, Zalando’s adjusted EBIT (Earnings Before Interest and Taxes) nearly doubled to €28.3 million in Q1 2024, signifying a margin of 1.3%. This improvement is attributed to lower fulfillment costs and efficient inventory management, leading to a better gross margin.

Customer Base and Order Activity

Zalando’s active customer base witnessed a slight decline from 51.2 million to 49.5 million in the past year. Order volume also dipped from 56.7 million to 55.2 million. However, the average basket size increased from €57.3 to €60.4, suggesting customers are spending slightly more per purchase.

Positive Outlook Despite Challenges

“We are returning to growth,” declared Dr. Sandra Dembeck, Zalando CFO. “The positive response from customers and partners in Q1 demonstrates the strength of our strategy. We are seeing increased interest in our offerings, and both B2C and B2B sectors are contributing to this progress.”

While Zalando remains in the red with a net loss of €8.9 million for Q1 2024 (compared to €38.5 million loss in Q1 2023), the overall trend indicates a move towards profitability. The company projects GMV and revenue growth between 0% and 5% for the remainder of 2024, with a focus on margin improvement. They anticipate adjusted EBIT to reach between €380 million and €450 million by year-end.

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