Zalando sales growth slows, launches membership scheme

[BERLIN] Zalando, Europe's biggest online-only fashion retailer, said capacity issues at new warehouses and the timing of public holidays held back sales in the second quarter, marking a slowdown from its previous breakneck pace.

The company, which has expanded rapidly and now delivers 1,500 brands in 15 countries, also said it launched a membership scheme seen as helping it fight a rising threat from rival online retailers such as Amazon.

Co-chief executive Rubin Ritter told Reuters that growth in the quarter was dented by public holidays and Easter as well as by new warehouses that are ramping up to operate at full capacity.

Zalando shares fell 5.4 per cent in early trade in Frankfurt.

Zalando reported preliminary second-quarter sales rose 19-21 per cent to 1.091 billion to 1.109 billion euros (S$1.72-1.74 billion), compared with average analyst forecasts for 1.1 billion, according to Thomson Reuters SmartEstimates.

That marks a slowdown from the 23 per cent rise in the previous quarter and is below the 20-25 percent growth target that Zalando targets over the medium term.

But Mr Ritter said the company had come within the target range for the first half, with 21-22 per cent growth, and reiterated that Zalando expects to meet the target for the full year.

Adjusted earnings before interest and taxation (EBIT) were 80-86 million euros, compared with average analyst forecasts for 85 million, to give a margin of 7.3-7.8 per cent, above Zalando's target range for 5-6 percent.

Zalando announced a new service for 19 euros per year that will entitle members to faster delivery, pick-up of returns on demand and personal fashion advice.

The "Zet" programme will start in four German cities but Mr Ritter said he expects it to be rolled out to other countries.

Zalando's shares were hit last month after Amazon launched a test programme called Prime Wardrobe to allow members of its shopping club to order three or more items without paying for them up front, with a week to decide which to keep.

REUTERS