The Berlin-based online fashion retailer Zalando increased its profit disproportionately to its revenue and gross merchandise volume (GMV) in the second quarter of 2024 while improving its margins. The DAX-listed company also reaffirmed its targets for the full year.
From April to June, adjusted operating profit before interest and taxes (adjusted EBIT) rose to 171.6 million euros, compared with 145 million euros in the same period last year. The corresponding margin improved to 6.5 percent from the previous 5.7 percent. After taxes, Zalando earned 95.7 million euros, a significant increase compared to 57 million euros in the previous year.
The revenue increased by 3.4 percent to 2.64 billion euros, while the GMV rose by 2.8 percent to 3.84 billion euros. Analysts had expected a revenue decline to 2.56 billion euros. The company benefited from major sporting events such as the European Football Championship as well as from savings and improved logistics costs.
For the full year, Zalando continues to aim for an adjusted EBIT between 380 and 450 million euros. Growth in GMV (Gross Merchandise Volume) and revenue is expected to be between 0 and 5 percent.
Surprisingly, Zalando also announced its expansion to China. A new location in Shenzhen is expected to open up new sales channels through social media. "Social commerce" refers to the sale of items with the help of influencers.
Additionally, Zalando wants to further expand its partnership with the AI company OpenAI to utilize generative AI in online shopping. Initial results show that visual content and videos increase the interaction rate and purchase probability.
Simultaneously, Chief Financial Officer Sandra Dembeck announced that she will not extend her contract. She has been leading the finance department since March 2022. Analysts view her departure critically, as it occurs amidst the announcement of a long-term strategy.
On the stock market, Zalando's share initially reacted positively and rose by around 5.5 percent, but later in the day gave up the gains and closed with a loss of 1.91 percent at 21.58 euros.
Analysts express mixed reactions to quarterly results. While profits pleasantly surprised, unchanged annual targets and Dembeck's departure dampened the overall picture. For the full year, Zalando expects stable revenues and GMV at last year's level in the worst-case scenario, but also sees growth potential of up to five percent.
Analyst Georgina Johanan from JPMorgan expects continued momentum that could accelerate further in the third quarter, depending on developments in September. Adjusted operating profit (EBIT) is expected to rise to 380 to 450 million euros, up from just under 350 million the previous year.
