The largest online apparel retailer in Europe, Zalando (ZALG.DE), said on Wednesday that it had posted lower-than-expected third-quarter revenue and now expects 2023 sales to drop due to ongoing pressure on demand.
Zalando, a multi-brand online marketplace that offers apparel, footwear, accessories, and cosmetics, has suffered from a decline in online sales following the COVID-19 outbreak. This trend has also damaged other online-only businesses like ASOS and Boohoo.
Zalando had previously predicted a 1% loss in sales at most, but now it expects it to fall by between 0.5% and 3% in 2023. Sales during the third quarter of 2.275 billion euros ($2.41 billion) were down 3.2% from the same quarter the previous year and fell short of experts’ projections.
According to Zalando, September’s exceptionally mild weather hurt sales of fall and winter clothing, aggravating the effects of low consumer confidence. The worst-performing area for Zalando’s sales, comprising over half its total, was Germany, Austria, and Switzerland, where sales decreased 5.6% during the quarter.
As per the e-commerce industry group BEVH, one of the worst segments for online retailers in Germany during the third quarter was apparel.
Zalando is attempting to expand its premium brand offering by launching a new “boutique-style” area for designer labels in response to Shein and other new competitors posing a more significant threat at lower price points.
Zalando held to its operational profit forecast for the year while stating that it is focused on increasing profitability. Because of decreased logistics costs, group profits before interest and tax (EBIT) grew to 23.2 million euros in the third quarter from 13.5 million euros in the same period last year.
Zalando’s average basket size grew to 58.9 euros from 56.2 euros a year earlier, indicating that customers are purchasing more expensive products even while the total number of purchases decreased.
The value of Zalando’s shares has decreased by 33% since January 1. With consumers returning to shops and placing fewer online clothing orders after being released from pandemic restrictions, the company’s market value has decreased throughout the last two years.
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