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Zalando posts profits rise and raises full year outlook

Gaelle Walker
04 November 2020

Zalando has posted strong profit growth in the third quarter of 2020, driven by the increased consumer demand for online shopping exacerbated by the Coronavirus crisis.

The online fashion retailer, which has now raised its outlook for the 2020 financial year, posted Gross Merchandise Volume (GMV) growth of 29.9% and revenue up 21.6%, taking them to €2.5bn and €1.8bn respectively.

Adjusted earnings before interest and taxes (EBIT) were €118m.2m up from €6.3m on the same period last year, with a margin of 6.4%, driven by improved cost of sales and efficiency gains in fulfilment, Zalando said.

The company also attributed its profitable growth to the positive performance of its Partner Program and Zalando Lounge, while the release of inventory valuation allowances to the tune of €35m, as a result of the “strong sell-through in the spring/summer season,” also created a “positive one-time effect on profitability,” it said.

Commenting on the results, Zalando chief financial officer David Schröder said: “As the second coronavirus wave is starting more forcefully than anticipated, we are much better prepared than earlier in the year.  

“Our starting point for Fashion strategy continues to enable us to turn the accelerated consumer demand shift towards digital offerings into business opportunities for Zalando and its partners.

“We will continue to invest to drive strong growth beyond 2020 following our key strategic priorities: growing our active customer base, deepening customer relationships and driving our platform transition.”

The company now expects GMV to grow by up to 27%, revenues to grow by 22% and an adjusted EBIT of €375m-€425m.

It has also granted all 14,000 of its employees a one-time bonus of €500 and will waive all commissions for partners using the Connected Retail program until the end of the first quarter 2021, offering early pay-outs to partners to support their liquidity position.

Co-chief executive officer David Schneider added: “Across Europe, a new round of lockdown restrictions has been put in place to curb the spread of Coronavirus during the commercially most relevant time of the year for many brands and retailers.

“More than ever it is important for us to tackle this as a team, work even closer together and come out of the pandemic stronger together.”

Connected Retail has become “part of the solution for many brick-and-mortar stores during the lockdowns,” with about 2,000 active stores now connected and plans are afoot to triple the size of connected stores in 2021, Zalando added.

Zalando expanded Connected Retail to Denmark, Finland and Norway on 1 November, with Austria, Switzerland, France, Italy and Belgium to follow next year.

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