Zalando Grows Q3 Revenue by More Than $200 Million

Zalando Grows Q3 Revenue by More Than $200 Million

Zalando SE, Europe’s leading online fashion retailer, almost reached its 2014 revenue levels after only nine months of 2015 and now expects to reach close to EUR 3 billion in revenue for the full year 2015.

Group revenue in the third quarter 2015 grew by 42.2 per cent to EUR 713.1 million, adding more than EUR 200 million in incremental revenue compared to the prior year period (Q3 2014: EUR 501.4 million). Zalando’s focus on the customer remained the key driver of growth, with customer satisfaction hitting an all-time high in the third quarter. Zalando introduced additional brands to extend the depth of its product range and further improved customer convenience, for example through faster delivery and easier returns. The evolving mobile offering plus successful brand building campaigns also helped to increase customer engagement.

“Our accelerated growth is driven by very strong customer metrics, so we are clearly making the right investments,” said Rubin Ritter, co-CEO of Zalando. “We are confident that we will deliver a unique combination of fast growth and clear profitability for the full year, which is also the right path for us going forward.”

Continued tech hiring and associated platform initiatives, plus the expansion of the fulfillment network will support Zalando’s growth trajectory going forward. Initial work around its new fulfillment center in Lahr and the full build-out of its facility in Mönchengladbach have started and are on track.

Strong customer KPIs drive revenue growth

The number of active customers grew further to a total of 17.2 million (Q3 2014: 14.1 million) in the third quarter, or by 800,000 additional active customers compared to the second quarter of 2015. Zalando registered 394 million site visits in the third quarter of 2015 (Q3 2014: 322 million visits), with 58.8 per cent of visits coming from mobile devices (Q3 2014: 43.3 per cent). The Zalando app was downloaded in total around 14 million times by the end of the third quarter of 2015. Headcount rose further from 9,079 at the end of the second quarter to 9,444 at the end of the third quarter.

Fast growth coupled with profitability in the first nine months

Group revenue grew in the third quarter of 2015 to EUR 713.1 million (Q3 2014: EUR 501.4 million), putting total revenue for the first nine months of 2015 at EUR 2.1 billion (9M 2014: EUR 1.5 billion). In the DACH segment, revenue grew by 34.4 per cent to EUR 371.2 million in the third quarter to represent nine month revenue of EUR 1.1 billion (9M 2014: EUR 870.5 million). In the Rest of Europe segment, revenue grew by 52.1 per cent to EUR 300.8 million in the third quarter, putting nine month revenue at EUR 851.1 million (9M 2014: EUR 597.1 million). In the Other segment, revenue grew by 50.3 per cent in the third quarter to EUR 41.1 million to put nine month revenue at EUR 109.2 million (9M 2014: EUR 80.9 million).

The adjusted EBIT for the first nine months of 2015 increased by EUR 19.5 million to EUR 35.7 million, corresponding to an adjusted EBIT margin of 1.7 per cent (9M 2014: EUR 16.2 million, 1.0 per cent). For the seasonally weaker third quarter, in contrast, the adjusted EBIT decreased to EUR -23.5 million (Q3 2014: EUR 3.8 million). Gross margin remained at third quarter 2014 level, but fulfillment and marketing costs were higher: Fulfillment costs were impacted to secure a first-class customer experience even with fast-growing volumes and rose due to continued investments into the customer proposition and technology as well as lower than expected debt collection rates related to fraud cases in the first half of 2015. Marketing costs increased due to a fall/winter season switch in September 2015, compared with a late switch in October 2014, as well as strategic marketing investments into app downloads.

In the first nine months of 2015, adjusted EBIT in the DACH region was at EUR 44.0 million, representing a margin of 3.9 per cent (9M 2014: EUR 38.2 million, 4.4 per cent). Adjusted EBIT in the Rest of Europe segment was at EUR -15.1 million or a margin of -1.8 per cent (9M 2014: EUR -27.8 million, -4.6 per cent). The Other segment recorded an adjusted EBIT of EUR 6.8 million or a margin of 6.3 per cent (9M 2014: EUR 5.8 million, 7.1 per cent).

Zalando offers an assortment of over 1,500 international apparel, footwear and accessories brands as well as free delivery and returns. It tailors its assortments to the distinct preferences of customers in each of the 15 European markets its serves: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Poland and the United Kingdom.