Zalando said it would continue to focus on market share gains this year, after the German online retailer raised its turnover above the €4 billion mark in 2017 but investments put pressure on its margins.
Zalando made it clear last year that it was raising investment in infrastructure and technology, at a time when Amazon started to move more forcefully into the sportswear market. Rubin Ritter, the German group's co-chief executive, said in a statement around Zalando's preliminary results for 2017 last week that the projected share gains would be facilitated through continued investments.
Zalando reported that its performance in 2017 was in line with its guidance. Sales reached between €4,478 million and €4,500 million, amounting to growth of 23.1 percent to 23.7 percent. The adjusted operating profit (Ebit) for the year is anticipated to come in at €209 million to €222 million, equivalent to an operating profit margin of 4.7 percent to 4.9 percent. This is a decline compared with the margin of 5.9 percent in 2016, and far short of a longer-term target to reach an operating margin of 10 percent.
Zalanda said it ended the year with a strong quarter despite the unseasonably warm weather that put pressure on sales in October. The group's turnover jumped by between 21.2 percent and 23.2 percent for the last three months of 2017, to reach from €1,323 million to €1,345 million. Its adjusted operating profit should land at €107 million to €120 million, amounting to an operating margin of 8.1 percent to 8.9 percent. This compares with a margin of 8.8 percent for the same quarter in 2016.
Ritter told Reuters that Zalando was not expecting to raise its margins in 2018, as it continues to spend on faster delivery, personalization of its apps and website, and the launch of beauty products later this year. The full results for 2017 will be published on March 1.
Separately, Zalando announced that it would open two more outlets this year, in Leipzig and in Hamburg. Just like its previous outlets in Berlin, Frankfurt and Cologne, the two extra outlets will be established in central city locations. The Leipzig store should open at the start of the summer on Burgstrasse, while the Hamburg store has been planned around the end of the summer near Grosse Bleichen.
Spreading over more than 1,000 square meters, the stores should offer about 20,000 products from 500 brands, with discounts of up to 70 percent. The offering consists of products that may no longer be offered online, because they are only in stock in a few sizes, or have small defects such as a missing button. The retailer indicated that it was likely to open more of such outlets, as the growth of the company almost inevitably generates more leftover products.
Work has also started for a new Zalando campus in Berlin in the Friedrichshain-Kreuzberg area. The complex should be ready around the fall and about 2,500 employees will move into the offices around the start of next year. Covering about 42,000 square meters on seven floors, the location will include office space as well as a showroom, an auditorium and other facilities. Within walking distance of the complex, the online retailer's roughly 6,000 employees in the German capital will spread across three other office locations.
