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Zalando warehouse and marketing investments mean full-year margins miss expectations

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German online retailer Zalando has said investments in additional warehousing and marketing will mean full-year profit margins will be lower than expected.

EBIT margin expectations for the full year have been lowered to 3-4%, compared to an earlier forecast of 4.5%.

But, sales for the year will be higher than originally forecast, with full-year revenue guidance increased to 33-35% growth from earlier forecasts of 28-31%.

Preliminary third-quarter sales rose to between €707-717m, the company said, a 41-43% increase on the €501m reported in the same period of last year.

It said it expects to report losses before interest and taxes of €18-32m, compared to a profit of €4m in the same period of the prior year.

It said fulfilment costs rose as it worked to secure “first class customer experience even at fast-growing volumes, plus significant technology investments to further drive Zalando’s mobile and platform strategies”. Meanwhile, marketing costs rose, driven by increased investments into app downloads plus an earlier fall-winter season start campaign compared to last year.

Management board member Rubin Ritter said: “The results are in line with our strategy to invest into long-term growth. In the third quarter we saw unique growth opportunities to significantly beat our growth targets and tapped into these with full conviction. We remain committed to our profitable growth path, but are willing to trade in some profitability to accelerate our growth and gain market share.”

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