Europe’s biggest online fashion retailer Zalando sees continued pressure on demand for the rest of the year and now expects 2023 sales to decline, the company said on Wednesday as it reported weaker than expected third-quarter revenue.
Zalando, a multi-brand platform that sells clothes, shoes, accessories, and beauty products, has been hurt by a pullback in online shopping after a Covid-19 pandemic-era boom, a trend that has also bruised other online-only retailers like ASOS and Boohoo.
Zalando now expects 2023 revenue to fall by between 0.5 percent and 3 percent, having previously guided to a 1 percent decline at worst and a 4 percent gain at best. Third-quarter sales of €2.275 billion ($2.41 billion) missed analysts’ estimates and were down 3.2 percent from the same quarter last year.
An unusually warm September weighed on sales of autumn and winter clothes, Zalando said, exacerbating the impact of weak consumer sentiment. The Germany, Austria, and Switzerland region was the worst-performing, with sales down 5.6 percent over the quarter.
Apparel has been one of the weakest segments for online retailers in Germany, according to e-commerce industry association BEVH. Online apparel sales fell 17.5 percent in the third quarter compared to the same period last year, BEVH said in a report published last month.
Faced with tougher competition at lower price points from Shein and other new rivals, Zalando is trying to grow its luxury brand offering, rolling out a new “boutique-style” space for designer brands.
While the number of orders fell, Zalando’s average basket size increased to €58.9 from €56.2 a year ago, in a sign shoppers are buying bigger-ticket items.
Zalando shares have lost a third of their value since Jan. 1. The company’s market value has dropped over the past two years as shoppers, freed from pandemic restrictions, returned to stores and ordered fewer clothes online.
By Helen Reid; Editor: Christian Schmollinger
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Its second-quarter adjusted earnings before interest and tax (EBIT) grew 87 percent, to €144.8 million ($158.24 million), compared with the same quarter last year, said the company.