Zalando, a fashion-oriented retailer that is making a big push into the sports apparel and footwear market with its marketplace, reported a 20.1 percent increase in revenues to €1,597.3 million for the second quarter of this year. Including its marketplace, the gross merchandise volume (GMV) rose by 23.7 percent to €2,036.0 million.
The adjusted Ebit margin declined by 0.8 percentage points to 5.8 percent as compared to the year-earlier period, due to an increase of 1.7 percentage points in the marketing budget, but the adjusted Ebitda went up by 34.8 percent to €143.3 million.
At 28.2 million, the number of active customers was up by 15.2 percent. Their average individual orders increased by 9.2 percent, although the average basket size declined by 2.6 percent to €56.9.
Online retailing is not doing well everywhere, however. Asos saw its share price drop by 22 percent after it published a lower-than-expected guidance for the full year 2019, attributed to problems with the upgrade of its warehouse system that limited the availability of products to shoppers in the U.S. and Europe. According to the local media, the U.K.-based online retailer is contemplating 100 job cuts at its head office in London in reaction to slumping results.
Asos said that its pre-tax profit is now expected to reach about £30 to £35 million (€33-39m-$37-43m) in 2019 – much lower than analysts' expectations and well below last year's pre-tax profit of £102 million. This comes after the company issued several profit warnings in the past seven months.
Asos has undertaken a major overhaul of its warehousing and technology capabilities, moving from a U.K.-focused to a global-centric model to boost its international development. The company factored £50.5 million (€56.6m-$63.1m) in transition and restructuring costs for the year. The management said in a conference call that this transition has been “bumpier” and taken a lot longer than anticipated.
Revenues grew by 12 percent to £919.8 million (€1.0bn-$1.1bn) for the four months to June 30, 2019. On a constant-currency basis, they improved by 11 percent. The management said that the U.K. and Rest of World territories, which are serviced by the company's existing automated distribution center in Barnsley, continued to trade well.
However, the growth in the U.S. and European Union was lower than anticipated, with sales impacted by operational challenges from the ongoing warehouse transformation programs in Berlin and Atlanta. The speed of the ramp-up has fallen behind expectations. As a result, despite a positive momentum in the number of visits to its websites, sales have been held back by product availability issues. Visits to the company's European website jumped by 19 percent but the growth in orders was limited at 11 percent.
Asos seems to be feeling the pinch of Brexit. Its sales in the U.K. and Ireland jumped by 16 percent in constant currencies to £334.1 million (€374.1m-$417.2m), but in the rest of the EU, they advanced by 3 percent in constant currencies to £269.0 million (€301.4m-$336.0m). In the U.S., they improved by 6 percent to £121.4 million (€136.1m-$151.6m), and in the Rest of the World, they gained 16 percent to £169.5 million (€190.0m-$211.7m), in both pounds and constant currencies.
Moving forward, Asos now expects the temporary lack of stock availability in Europe and the U.S. to continue to impact growth levels for the remainder of the financial year. As a result, it now forecasts sales growth for this financial year to be broadly in line with year-to-date performance.
It also expects to complete the automation of the Euro Hub in Berlin by the end of September and to expand the range available in the U.S. by the end of year.