News Flash

European firm Zalando's EBIT jumps 87% in Q2 FY23

03 Aug '23

3 min read

Pic: Mike Mareen / Shutterstock.com

Insights

Fashion e-retailer Zalando saw an 87 per cent rise in Q2 FY23 EBIT to €144.8 million, driven by larger average basket sizes.
GMV and revenue fell by 1.8 per cent and 2.5 per cent respectively.
Lounge by Zalando contributed to a 16 per cent revenue rise in off-price.
Number of active customers increased to 50.5 million in Q2 FY23 from 49.3 million in Q2 FY22.

European e-commerce fashion giant Zalando has reported an 87 per cent surge in adjusted earnings before interest and tax (EBIT) to €144.8 million in the second quarter (Q2) of fiscal 2023 (FY23), compared with the same period last year. This impressive growth in profitability is attributed to enhanced order economics, with larger average basket sizes leading to lower fulfilment costs, and a more targeted marketing approach. Together, these factors resulted in a 2.7 percentage point improvement in the adjusted EBIT margin, reaching 5.7 per cent.

Despite the positive surge in profitability, Zalando faced a challenging market environment with gross merchandise volume (GMV) decreasing by 1.8 per cent to €3.7 billion and revenues dropping 2.5 per cent to €2.6 billion in Q2 FY23 compared with the same period last year, the company said in a press release.

However, Zalando's online shopping club, Lounge by Zalando, that provides customers with limited-time offers and discounts on premium brands, reported substantial growth. This success contributed to a 16 per cent increase in revenues in the off-price segment.

The fashion e-commerce giant also saw positive trends in its partner business. The share of fashion store GMV from partner business rose nearly 7 percentage points, and the share of items dispatched by Zalando Fulfillment Solutions grew by 3 percentage points compared with Q2 FY22.

Further bolstering its customer experience, Zalando launched a new artificial intelligence tool last month that offers size recommendations for selected garments based on customers' unique body measurements. The tool is currently available to customers in Germany, Austria, and Switzerland. Users provide two photos of themselves wearing tight clothing, which Zalando then uses to predict their body measurements and recommend the best fit.

“We are investing in areas such as storytelling and technology that will boost future growth,” said Robert Gentz, Co-CEO of Zalando. “New brands such as Lululemon and Lancome will excite our customers and help make Zalando even more a destination of choice. Our new size and fit tool will make the shopping experience even better. This tool is a step change solution in the industry that will help customers find the perfect fit before delivery. This is truly exciting as it shows how one of the core challenges in fashion e-commerce can be solved at scale.”

The company's key performance indicators reveal that the number of active customers has increased to 50.5 million in Q2 FY23 from 49.3 million in the same period last year. However, the number of orders decreased to 63.2 million from 67.8 million, while the average orders per active customer also dipped slightly to 5.0 from 5.2. The average basket size saw a minor increase, growing to €58.1 from €55.9.

Fibre2Fashion News Desk (DP)

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