Zalando cuts 2023 sales forecast as demand stays weak

Europe's biggest online fashion retailer Zalando ZALG.DE sees continued pressure on demand for the rest of the year and now expects 2023 sales to decline, the company said on Wednesday as it reported weaker than expected third-quarter revenue.

Zalando, a multi-brand platform that sells clothes, shoes, accessories, and beauty products, has been hurt by a pullback in online shopping after a COVID-19 pandemic-era boom, a trend that has also bruised other online-only retailers like ASOS and Boohoo.

Zalando now expects 2023 revenue to fall by between 0.5% and 3%, having previously guided to a 1% decline at worst. Third-quarter sales of 2.275 billion euros ($2.41 billion) missed analysts' estimates and were down 3.2% from the same quarter last year.

An unusually warm September weighed on sales of autumn and winter clothes, Zalando said, exacerbating the impact of weak consumer sentiment. The Germany, Austria, and Switzerland region, which accounts for nearly half of Zalando's sales,was the worst-performing, with sales down 5.6% over the quarter.

Apparel was one of the weakest segments for online retailers in Germany in the third quarter, according to ecommerce industry association BEVH.

Faced with tougher competition at lower price points from Shein and other new rivals, Zalando is trying to grow its luxury brand offering, rolling out a new “boutique-style” space for designer brands.

Zalando, which says it is focused on growing profits, stuck to its operating profit outlook for the year. Group earnings before interest and tax (EBIT) in the third quarter increased to 23.2 million euros from 13.5 million euros a year ago because of lower logistics costs.

While the overallnumber of orders fell, Zalando's average basket size increased to 58.9 euros from 56.2 euros a year ago in a sign shoppers are buying bigger-ticket items.

Zalando shares have lost a third of their value since Jan. 1. The company's market value has dropped over the past two years as shoppers, freed from pandemic restrictions, returned to stores and ordered fewer clothes online.