3Q16 RESULTS
German-based online fashion retailer Zalando reported 3Q16 year-over-year revenue growth of 17.1% to €834.8 million, slightly below the consensus estimate of €844.3 million. The company achieved strong revenue growth during the quarter ended September 30, despite a sluggish European fashion market.
Revenues in the Germany, Austria and Switzerland division increased 9.7% to €407.1 million and the Rest of Europe region posted year-over-year sales growth of 24.3% to 374.0 million.
The gross margin expanded 80bps year over year to 41.4% and SG&A margin declined 480bps to 39.1%. The company reported 3Q16 adjusted EBIT of €19.5 million, corresponding to an adjusted EBIT margin of 2.3%. This marks a clear year-over-year improvement, as Zalando reported an adjusted EBIT decline of €23.5 million and EBIT margin of (3.3)% in 3Q15. Diluted EPS increased to €0.02 in 3Q16 from € (0.12) in 3Q15.
Adjusted EBIT margin in the Germany, Austria and Switzerland region increased from (0.8)% in 3Q15 to 10.2% in Q316. The adjusted EBIT margin in the Rest of Europe region also improved from (7.2)% in 3Q15 to (4.8)% in 3Q16.
KEY PERFORMANCE INDICATORS
Active customers in 3Q16 increased by 11.6% year over year to 19.2 million. The number of orders increased 18.8% year over year to 16.4 million in 3Q16. Average basket size declined slightly from €63.30 in 3Q15 to €62.80 in 3Q16.
9M16 RESULTS
Zalando reported strong 9M16 revenues of €2,547.4 million, up 21.9% year over year. Adjusted EBIT for 9M16 came in at €120.7million, corresponding to an adjusted EBIT margin of 4.7%, and representing margin expansion of 300bps from 1.7% in 9M15.
Gross margin for 9M16 contracted by 100bps to 43.8% and SG&A margin contracted by 410bps to 39.0%. 9M16 EPS increased 243% year over year to €0.24.
GUIDANCE
Reflecting strong 9M16 results, Zalando reiterated its FY16 guidance to deliver revenue growth at the upper end of its 20.0-25.0% estimated range. Following clear profitability improvements, the company expects adjusted EBIT margin to fall between 5.0% and 6.0%.
FY16 revenue consensus estimates stand at €3,668.0 million, implying annual year-over-year growth of 24%. Consensus expects operating profit of €195.4 million, implying an adjusted FY16 EBIT margin of 5.3%. FY16 EPS is forecast at €0.56, up 16.7% year over year.
