As we had previously indicated, the shutdown of many brick-and-mortar stores because of the coronavirus epidemic doesn’t necessarily imply a boost in the sales of pure online retailers. As Zalando announced on March 30, it is now projecting significantly less revenues, a smaller gross merchandise volume (GMV) and a lower profit for the first quarter.
The Berlin-based online retailer thus expects a quarterly result below the analysts’ consensus of March 11. Analysts had expected the company’s revenues to grow by 19 percent and the GMV to increase by 22.8 percent. For the adjusted operating profit (EBIT) they had budgeted a loss of €28 million.
Reason for the correction is a lower level of discretionary expenditures by European consumers as a result of the measures taken by European governments against the spread of the coronavirus since March 9. In 2019, as previously reported, Zalando’s revenues rose by 20.3 percent to €6.5 million, the GMV jumped by 23.6 percent to €8.2 million and net earnings reached €99.7 million, up from €51.2 million in 2018.
Previously, Zalando expected its GMV to grow by 20-25 percent in 2020, its revenues to grow by 15-20 percent and the adjusted operating profit to €225 to €275 million. Due to the current situation, Zalando assumes that this forecast will not be achieved. The company’s board will issue a new analysis as soon as the further course of the corona pandemic can be more reliably estimated.
Zalando is anticipating a drop in GMV in spite of efforts to push its marketplace as an alternative to physical retailing by brands and multi-brand stores. It is reducing the fees for onboarding on its Connected Retail program in Germany and the Netherlands through May 31. The only condition is that the retailers must allow DHL in Germany and PostNL in the Netherlands to pick up the orders at their stores in one way or another, and handle possible product returns. Until recently, more than 1,500 brick-and-mortar stores in the two countries were using the platform as a complement to their own operations.
