Zalando expects double-digit growth in 2020 despite COVID-19 crisis

Zalando

Berlin-based online retailer Zalando is anticipating double-digit growth this year despite the current trading environment being affected by the coronavirus pandemic, with the fashion market as a whole expected to show negative growth in 2020.

Europe’s leading online platform for fashion and lifestyle aims to grow its gross merchandise volume (GMV) by 10-20%, and its revenue in the same range but below GMV due to the fast growth of the business. The company expects to be clearly profitable with an adjusted EBIT between €100 million and €200 million and plans investments between €230 and €280 million.

Zalando co-CEO, Rubin Ritter, says: “We are confident that we will grow double-digit and at a clear profit in 2020. This will allow our partners to grow and gain market share in a challenging economic environment by building their business on Zalando. Many of them have significantly increased their activities on our platform in the past weeks, and we will continue to make it easier for them to reach customers across Europe.”

Growth will be driven by the accelerated consumer shift from offline to online, and Zalando’s ability to invest independent of demand fluctuations and a challenging environment, as well as its accelerated platform transition.

The Partner Program share of GMV grew 4.4 percentage points year-over-year in the first quarter. In times where offline sales are affected over-proportionally by governmental restrictions across Europe, brands are transferring more of their business online to reach their customers. In the past three weeks, 50 new partners joined the Partner Program, among them Vaude, American Eagle Outfitters, and Next Group brand Lipsy London.

Zalando CFO, David Schröder, comments: “As a company, we quickly found answers to the challenges in March. We are now seeing a significantly more positive development in the first weeks of the second quarter. These recent developments are testament to the resilience of our business model and the agility of our team, and generally make us confident for the full year.”

In the first quarter of 2020, Zalando grew its GMV by 13.9% to €2 billion and its revenue by 10.6% to €1.5 billion, compared against Q1 2019, which saw GMV €1.7 billion and revenues of €1.4 billion. Growth was especially pronounced in the off-price segment, which grew its revenue by 35% year-over-year.

The company’s clear customer focus has again led to a positive development of its reach despite challenging circumstances. The number of active customers grew by 17% to almost 32 million, compared to Q1 2019 which saw 27.2 million, who on average ordered 4.7 times with Zalando over the last 12 months.

The number of new customers has increased significantly – a trend that continued throughout April – with 39% more new customers shopping with Zalando than in April 2019. 

Additionally, Zalando saw more customers shopping for more sustainable fashion. In March, almost 30% of customers bought more sustainable fashion. Already, more sustainable fashion makes up around 10% of Zalando’s GMV, bringing the company closer to its goal of growing this share to 20% by 2023.