Europe’s biggest online fashion retailer Zalando 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 smaller online-only retailers like ASOS and Boohoo, Reuters reported.
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 revenue 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.
Gross merchandise volume – a measure of sales on the platform by Zalando and its partners – fell by 2.4% from a year ago. The company lowered its 2023 forecast for gross merchandise volume to between -2% and 1%, down from an outlook for the lower half of the 1% to 7% range.
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. Gross margin for the third quarter fell, however, to 36.7% from 39.1% a year ago due to discounting.
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.