Zalando SE rose more than 10 percent in early trading after Europe’s largest online fashion retailer held its full-year forecast steady and appeared to be getting a grip on managing the worst inflation in decades and volatile consumer demand.
The German retailer now expects improved profitability and a return to growth in the second half of the year, according to a statement Thursday.
The brighter outlook comes after Zalando negatively surprised the market in June, when it warned profit would be far below its previous guidance and forecast a new earnings range.
The new forecast was for adjusted earnings as high as €260 million ($264.7 million), almost half the previous expected peak. Zalando blamed macroeconomic challenges that are likely to be “longer-lasting and more intense than previously anticipated.”
Zalando said performance had started to improve in the second quarter with the number of active customers rising and growth in its shopper loyalty program. It has introduced a minimum online purchase value in all 25 markets it operates in, which has improved the “order economics,” cut costs and improved the efficiency of its European logistics market, the company said.
Boohoo Group Plc and Asos Plc shares also rose in early trading Thursday.
Zalando’s results are reassuring as there had been some expectations the company could cut its outlook again, RBC analyst Sherri Malek said in a note.
While online retailers boomed during lockdown when people had no choice but to use the internet to shop that growth has since slowed as normal shopping patterns return. Consumer demand is also volatile as rising inflation across the euro zone, which is at an all-time high, hits consumer confidence.
Zalando sells a mix of its own brand and third-party apparel. The retailer has been aggressively expanding in the past few years. Last year, when online sales were booming, it set out a plan to corner a 10th of Europe’s fashion market estimated to be worth 450 billion euros in the long term.
By Deirdre Hipwell
First-quarter sales fell by 1.5 percent, to €2.2 billion ($2.33 billion), after posting a 46.8 percent increase in the same quarter last year thanks to the coronavirus pandemic.