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Beauty products gloss over Zalando earnings squeeze

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European online fashion retailer Zalando saw a loss outside of its core markets weigh on first-quarter profitability on Tuesday, but said the launch of beauty products in Germany had made a promising start.

[BERLIN] European online fashion retailer Zalando saw a loss outside of its core markets weigh on first-quarter profitability on Tuesday, but said the launch of beauty products in Germany had made a promising start.

Co-Chief Executive Rubin Ritter said a delayed start to the spring/summer season due to cold weather put pressure on the industry, but added that the launch of the sale of 4,000 beauty products from 130 cosmetic and skin care brands had gone well.

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"We see a great opportunity to complement our assortment and strengthen our position as a one-stop destination for fashion and lifestyle," he said in a statement.

Zalando reported sales rose 22 per cent to 1.196 billion euros (S$1.91 billion), slightly ahead of average analyst forecasts for 1.18 billion.

However, adjusted earnings before interest and taxation (EBIT) fell to 0.4 million euros, behind forecasts for 11.5 million, with the core German, Austria and Switzerland region compensating for a loss in the rest of Europe.

Zalando's shares were hit in March when it said heavy investment would hit profitability this year as it builds new warehouses and automates existing ones as well as increases the personalisation of its website.

It's shares were up 2.6 per cent in early trading on Tuesday.

British rival ASOS said last month it would also have to step up spending on technology and logistics to help maintain its lead in the online fashion pack, with the extra costs taking a toll on its elevated share price.

Zalando kept its forecast for around 20 to 25 per cent reported sales growth for the year unchanged, along with its target of an adjusted EBIT of between 220 million and 270 million euros.

REUTERS