Europe’s largest online fashion retailer Zalando plans to continue investing heavily in technology and logistics this year to maintain its rapid growth, and is also buying a niche basketball e-retailer.
The Berlin-based company confirmed yesterday that it will expand its logistics footprint this year with 20,000-30,000 sqm warehouses in France and Sweden as well as a 130,000 sqm logistics centre in Poland. The small satellite warehouse near Paris has already opened while a location is being sought for a small warehouse to open later this year to serve the Scandinavian market.
The 130,000 sqm large international fulfilment centre scheduled to open later this year near Stettin in Poland will complement the company’s existing large Germany-based warehouses. The location will be operated by logistics service provider Fiege, and will supply all 15 markets of the Zalando logistic network, but especially customers in Poland, Germany and the Nordics. Zalando is investing €150 million in the facility, according to Polish media.
Zalando currently serves some 20 million active customers in 15 European markets through a logistics network with four strategically located large fulfilment centres in Germany, along with a satellite warehouse near Milan and the new Paris warehouse for local customer needs. The company aims to expand its logistics network so it can offer next-day deliveries to 75% of the European population by 2020.
“Strong growth requires nonstop investment. We are proud to have significantly progressed in expanding our business profitably,” said co-CEO Rubin Ritter. “As we build the technology and operating system to transform the European fashion industry, we will further invest into a unique and flawless consumer experience and a stronger supplier proposition to continue to drive growth ahead of the market. At the same time, we plan to expand our team by creating more than 2,000 new jobs this year.”
In parallel, the German company has increased the size of its technology team from 1,000 in 2015 to more than 1,600.
Announcing its full 2016 results, Zalando said it expects to continue outperforming the fashion retail market again in 2017 and grow revenues in a range of 20-25%, following a strong 2016 performance when it gained market share in every single quarter.
Driven by a systematic focus on consumers and suppliers, as well as further investments into the company’s infrastructure, 2016 revenues grew by 23% to €3,639 million. The adjusted EBIT margin increased to 5.9%, which corresponds to an adjusted EBIT of €216.3 million. For 2017, Zalando expects an adjusted EBIT margin in the range of 5.0-6.0%.
In 2016, about 20 million customers (+11%) shopped at Zalando, increasingly using mobile devices, enjoying a wider and deeper assortment and an even better service proposition for delivery and returns. The company also enables brand partners to scale their businesses via its wholesale services, the partner program as well as Zalando’s fulfillment and digital services, such as Zalando Media Solutions.
The improvement in Zalando’s profitability was due to improved operating costs, which reflected strong cost management and general efficiency improvements.
Capital expenditure in 2016 was at €181.7 million, excluding M&A, reflecting investments primarily into infrastructure, increased automation and in-house developed software. Zalando expects capital expenditure of €200 million also in 2017, primarily in the same areas.
Earlier this week Zalando has agreed to acquire the retail business of Munich-based KICKZ AG (“KICKZ”), the leading multi-channel basketball retailer. KICKZ is a specialist in basketball and lifestyle with a strong online presence in Europe and the US, as well as a handful of retail stores in major German cities like Munich and Berlin.
With the addition of KICKZ, Zalando will further strengthen its sports and lifestyle segment, especially in the area of basketball. The transaction is subject to merger control clearance by German and Austrian competition authorities, and is expected to close in the first half of 2017. All parties have agreed not to disclose financial details.
