Zalando blames microeconomic environment for flatlining revenues but profit surges

Online retailer Zalando has reported stable revenues of £4.14 billion (€‎4.8 billion) in the first half of 2023 compared to €‎4.8 billion the year prior, thanks to "continued efficiency measures and improved order economics".

Gross profit sat at £1.63 billion (€‎1.89 billion) compared to £1.66 billion (€1.93 billion) the year prior.

The company commented: "While lower energy prices are helping to lower headline inflation, core inflation is proving persistent, and the impact of higher interest rates is increasingly being felt across the economy."

As a result of its continued focus on cost efficiency, Zalando generated an improved adjusted EBIT of £124 million (€144 million) in H1 2023, compared to £22 million (€25.6 million) the year prior.

The company’s gross margin in H1 declined by 0.6% to 39.3%, due to the ongoing promotional market and the fast-growing Lounge by Zalando business.

The increase relates to an increase in share-based compensation and the inclusion of Highsnobiety, which was not part of the Zalando group in H1 2022.

Earlier this year, Zalando began reassessing its brand portfolio to focus on profitable growth and simplifying the organisation to become "more innovative and faster".

At the time, the retailer said it would continue to "invest in strategic areas to entice customers and help partners grow their business through the platform and direct sales outside the platform". It also plans to improve the curation and local relevance of its assortment.

Looking ahead, the company expects disposable income to grow in the second quarter as inflation subsides and wages rise. As a result, "private consumption is expected to rebound also in the second half of the year".

For the full year 2023, the company refined its guidance range and now expects adjusted EBIT of £258 million - £301 million (€300 million – €350 million).