Zalando and ASOS are back in fashion as online clothes sales recover
European online fashion retailers Zalando and ASOS are growing strongly and generating greater parcel volumes as consumers spend more on clothes again, according to their latest financial results.
Online sales of clothes and shoes slumped in Germany, the UK and other European markets in early spring as consumers focused spending on essential goods amid strict COVID-19 lockdown restrictions in many countries.
But fashion e-commerce is now making a comeback as consumers broaden their spending again. In Germany, for example, online purchases of clothes grew by 15% and shoes by 4.5% between April and June, according to e-commerce association Bevh. In the UK, online purchases of clothes recovered in June and July, according to diverse media reports.
Zalando improves profits on double-digit revenue growth
Germany-based Zalando appears to be profiting strongly from this demand trend, according to its results for the April – June 2020 quarter.
Its revenues increased by 27% to just over €2 billion as orders increased by 29% to 46.5 million and the customer base expanded by 20% to 34 million active customers across Europe. Adjusted operating profits doubled to €212 million. Half-year revenues were up by nearly 20% to more than €3.5 billion despite a dramatic demand slump in March and profits improved slightly to €113 million.
CFO David Schröder said: "In the past months we have proven the strength and agility of Zalando in many ways, no matter how challenging the environment. We have come out of the first wave of this pandemic stronger than we went into it as a result of our strategic clarity, our strong partnerships and an extraordinary team effort. Many of our partners have intensified their business on our platform in the last months, and we have managed to successfully grow together.”
Notably, the company signed up 180 new brands to its partner programme, which offers marketing and fulfilment services, in the second quarter, doubling GMV through the programme.
This was accompanied by a high demand for services, such as Zalando Fulfillment Solutions (ZFS). The volume of items shipped through ZFS grew 180%, as partners looked for efficient ways to reach consumers across Europe as an answer to the accelerated shift towards online. Zalando Fulfillment Solutions uses the company’s network of 11 fulfilment centres with deliveries by more than 30 local carriers in 13 different countries.
Further investments into services for brands and retailers
Looking ahead, Zalando plans to double down on its platform transition in the second half of the year. Key initiatives include the acceleration of the partner program, as well as the Connected Retail program which allows brick-and-mortar retailers to easily scale their digital business, and which has proven highly successful during the first wave of the coronavirus pandemic.
In terms of full-year financial results, Zalando expects GMV growth of 20-25% and revenue growth of 15-20%, an adjusted EBIT of €250-300 million and investments between €230-280 million.
ASOS sales speed up
Meanwhile, British rival ASOS yesterday cheered investors by raising its guidance for this financial year after delivering “a strong operational performance” and year-on-year improvements in profitability “as a result of a focus on trading dynamically and managing the business rigorously”.
The fast fashion company now expects revenues to rise between 17% and 19% with pre-tax profits in the region of £130m-£150m in the year ending August 2020, which will be “significantly ahead of market expectations”. In particular, the company’s returns rates have fallen significantly since April due to changes in buying patterns, easing cost pressures.
Last month, ASOS reported a 10% rise in revenues to just over £1 billion in the four months from March to June, with a 15% rise in international sales outweighing a 1% drop in the UK. In April, 80 new boutiques launched on its marketplace, which sells products from over 800 international brands. The company had 23 million active customers as of June 30 this year, up from 19.9 million at the same time last year.
Looking forward, however, the British firm said the consumer and economic outlook remains uncertain and it is “unclear how long the current favourable shopping behaviour will persist”.
“The second half has been a period of tremendous change for ASOS, we have made real progress and shown resilience through the period and are exiting the year in a strong position. We have a robust balance sheet, with a differentiated product offer and global infrastructure to leverage. Against this backdrop we have increased confidence that ASOS will continue to progress as one of the few truly global leaders in fashion retail,” the company declared.
