Source: Company reports

Zalando, a Germany-based online apparel and footwear fashion retailer, reported a 2015 revenue increase of 33.6%, to €3.0 billion, which was slightly below the consensus estimate. The company commented that the revenue growth was the result of its continued focus on improving the customer proposition by enhancing customer satisfaction. For example, the company is providing easier and faster delivery and returns and deepening its relationship with partner brands, which is instrumental to increasing its offering. By the end of the year, over 1,500 labels and 150,000 fashion items were represented in the Zalando shop. Net income increased by 157.9%, to €121.5 million, beating the consensus estimate of €73.8 million. Diluted EPS was €0.48, an increase of 139.0% versus 2014, and ahead of the consensus estimate of €0.29. The increases in net income and EPS resulted from higher revenues and gross margins, as well as from the capitalization of deferred tax assets. Zalando reported an increase of 44.3% in EBIT, to €89.6 million, below the consensus estimate of €98.6 million. The company commented that the year-over-year growth in EBIT was achieved despite investments in improving the customer proposition. Investments included the enhancement of platform strategy, technology and fulfillment. During the year, Zalando launched additional platform products, such as Zalon, a shopping advice service; set up two new logistics centers (in Lahr, Germany, and Stradella, Italy), which will become fully operational in 2016; and opened two new tech hubs (in Dublin and Helsinki). By the end of the fiscal year, about 1,000 people were employed in Zalando’s technology operations alone.

PROGRESS IN MOBILE

During 2015, Zalando’s mobile traffic increased by 60%. The company’s app recorded 16 million downloads during the year, an increase of 128.5% versus 2014. During 2015, mobile become the main way through which consumers accessed Zalando’s e-commerce platform, with the share of mobile visits reaching 57.1%, an increase of 14.8 percentage points versus 2014.

SALES BY GEOGRAPHY

The DACH region, which includes Germany, Austria and Switzerland, comprised 53% of the company’s total sales at the end of 2015, and saw revenue increase by 28%, to €1.6 billion during the year. Still, the company is rapidly expanding in the rest of Europe, where revenue grew by 40.5%, to €1.2 billion, during the same period.

4Q15 RESULTS

During 4Q15, group revenue increased by 30.5%, to €868.5 million, below the consensus estimate of €869.5 million. EBIT increased by 9.3%, to €71.8 million, beating the consensus estimate of €68.6 million.

GUIDANCE

In 2016, Zalando plans to continue investing in its business in order to increase its market share, while at the same time maintaining profitability. The company expects that about €200 million in capex will be needed in 2016. Zalando predicts revenue growth of about 20%–25%, to €3.6–€3.7 billion, and an adjusted EBIT margin of 3.0%–4.5% for 2016. These forecasts are in line with 2016 consensus estimates for revenues of €3.7 billion—a 25.8% increase over 2015—and an EBIT margin of 4.3%.