In releasing excellent results for the third quarter, Zalando announced the introduction of its Connected Retail program in Denmark, Finland and Norway on Nov. 1. As it did for a few months after its launch in Germany and the Netherlands, it is waiving all commissions for all partners using the Connected Retail program until the end of the first quarter of 2021 and that it will offer early pay-outs to support their liquidity position as part of its solution to the coronavirus pandemic.
Zalando’s marketplace for retailers will be expanded to Austria, Switzerland, France, Italy and Belgium in the course of 2021. After a major boost during the retail lockdowns in the spring, the platform was introduced in Spain, Sweden and Poland in July. Some 2,000 brick-and-mortar stores in Europe have joined the Connected Retail program so far and Zalando says now that it expects to triple the size of the network in 2021.
Thanks in part to this and other solutions on its marketplace, Zalando raised its gross merchandise volume (GMV) by 29.9 percent to €2.45 billion in the third quarter, while its net revenues advanced by 21.6 percent to €1.85 billion. The German-based e-tailer continued to benefit from accelerated consumer shift toward digital purchases and the “strong performance “of its Partner Program and Lounge services.
Profitability improved markedly. The adjusted operating income (Ebit) totalled €118.2 million, up from €6.3 million a year earlier, thus widening the Ebit margin to 6.4 percent from 0.4 percent, thanks to improved cost of sales and efficiency gains in fulfillment. Zalando noted that “exceptionally strong” sell-through in the spring/summer season enabled inventory valuation allowances of €35 million, providing a positive one-time effect on profitability. The bottom line showed a €58.5 million profit compared with a €13.6 million loss in the year-ago period.
In the quarter, the number of active customers rose by 20.7 percent year-over-year to 35.6 million customers and the number of orders by 26.7 percent to 44.0 million. The average basket size increased by 2.4 percent to €57.2.
The new measures being enacted to counter the second wave of the coronavirus outbreak at a critical juncture for the retail sector have made the management more optimistic about its performance in the fourth quarter. Zalando raised its outlook for the full year. It now expects GMV to grow by 25 to 27 percent, revenues to grow by 20 to 22 percent, leading to adjusted Ebit of €375 to 425 million.
The company announced a one-time bonus of €500 to all its 14,000 employees for their “exceptional commitment and contribution.”
