Zalando, the European fashion e-commerce heavyweight, has recorded a remarkable 72 per cent surge in adjusted earnings before interest and taxes (EBIT) to €23.2 million in the third quarter (Q3) of fiscal 2023 (FY23), up from €13.5 million in the same period last year. Despite the robust earnings growth, the company witnessed a slight contraction in Group gross merchandise volume (GMV) and revenue, reporting figures of €3,202.2 million and €2,274.9 million, respectively.

In a challenging economic landscape marked by declining consumer sentiment, Zalando's Group GMV saw a 2.4 per cent decline compared to a 7.0 per cent growth in the previous year. Similarly, Group revenue dipped by 3.2 per cent, a stark contrast to the 2.9 per cent growth reported in Q3 FY22, the company said in a media release.

The Fashion Store remained a significant revenue driver, generating €1,852.2 million, with the DACH region contributing €807.3 million, and the Rest of Europe accounting for €1,044.9 million. Offprice revenue experienced an uptick, reaching €393.8 million, while other revenue segments amounted to €91.9 million.

The Fashion Store's adjusted EBIT stood at €19.5 million, a significant recovery from a loss of €3.0 million in the prior year. The DACH region's contribution was notably strong at €48.4 million, overshadowing a loss of €28.9 million in the Rest of Europe segment. Offprice and other segments contributed €2.8 million and €5.7 million to the adjusted EBIT, respectively.

Zalando's net working capital showed a negative balance of €11.6 million, reflecting a stark change from the positive €121.6 million in Q3 2022. The company's capital expenditure was recorded at -€70.4 million. Notably, net income improved, with losses narrowing to -€8.2 million from -€35.4 million a year ago.

The adjusted group EBIT margin also saw improvement, rising to 1.0 per cent from 0.6 per cent in the corresponding quarter of the previous year. This financial resilience underscores Zalando's strategic initiatives and cost management in a period marked by economic uncertainties, the release added.

Zalando has reaffirmed its full-year guidance for adjusted EBIT, maintaining its forecast of €300 million to €350 million for 2023. However, the company has revised its projections for GMV and revenue. It now anticipates GMV to range between a 2 per cent decline and a 1 per cent increase, with revenue expected to fall between 3 per cent and 0.5 per cent in 2023. Previously, Zalando had predicted that GMV and revenue would align with the lower half of its guidance ranges, which were 1 per cent to 7 per cent for GMV and -1 per cent to 4 per cent for revenue. To put this in perspective, in 2022, GMV was €14.8 billion, revenue stood at €10.3 billion, and adjusted EBIT was €184.6 million.

“Storytelling, logistics and technology are key to boost our future growth. Our healthy balance sheet gives us the financial flexibility to make these strategic investments,” said Dr. Sandra Dembeck, Zalando CFO. “On top of that, our financial discipline meant that we were able to deliver on another quarter of improved profitability.”

Fibre2Fashion News Desk (KD)

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