Zalando expects to return to growth, improve profitability

By Linda Pasquini and Chiara Holzhaeuser

(Reuters) -German online fashion retailer Zalando said on Wednesday it expects to return to growth and improve profitability in 2024, after reporting a full-year decline in sales, in line with its own forecast range.

It forecast gross merchandise value (GMV), a key revenue metric measuring the value of all goods sold, and revenue to both grow between 0% and 5% in the current year.

This compares to a decline of 1.1% to 14.6 billion euros ($16.0 billion) in GMV and a 1.9% drop to 10.1 billion euros in revenues in 2023.

The decline in sales was stronger in the region comprising Germany, Switzerland and Austria than in the other European countries, the company said.

Zalando, a multi-brand platform that sells clothes, shoes, and accessories, is facing weakening demand after a growth boom during the COVID-19 pandemic, as consumers grappling with inflation and high interest rates cut unnecessary spending and turn to cheaper options offered by low-priced fast fashion competitors like China-based Shein.

The company said it targets a compound annual growth rate of 5-10% for both GMV and revenue through 2028, as it defined its strategies for both its fashion and lifestyle business and its infrastructure business ahead of its Capital Markets Day on Wednesday.

It aims to reach a margin on adjusted earnings before interest and taxes (EBIT) of 6%-8% by the same year, it said.

For the current year, it expects adjusted EBIT to be between 380 million euros and 450 million euros, up from 350 million euros in 2023.

"Our financial discipline meant that we were able to deliver on another quarter of improved profitability," Chief Financial Officer Sandra Dembeck said in a statement.

Shares in Zalando were up 1.7% in Lang & Schwarz premarket indications.

($1 = 0.9153 euros)

(Reporting by Linda Pasquini and Chiara Holzhaeuser; Editing by Bartosz Dabrowski and Michael Perry)