Source: Company reports/Fung Global Retail & Technology

FY16 Results

German-based online fashion retailer Zalando, reported FY16 revenue growth of 23.0% year over year to €3,639.0 million. Sales were driven by growth in the number of active customers and the number of orders, up 11% and 25.1% year over year, respectively. FY16 gross margin contracted by 90 bps year over year to 44.2%. However, with the meaningful progress the company made in cost control, the SG&A margin declined by 310 bps, leading to operating margin expansion of 230 bps year over year to 5.9%. The company reported FY16 adjusted EBIT of €216.3 million.

4Q16 Results

Zalando reported very strong 4Q16 revenues of €1,091.6 million, up 25.7% year over year. The adjusted EBIT margin expanded by 50 bps year over year to 8.8% during the quarter.

FY17 Guidance

Zalando issued FY17 guidance to deliver year-over-year revenue growth in the 20.0%–25.0% range, in line with FY16. The company expects the FY17 adjusted EBIT margin to fall between 5.0% and 6.0%. Analysts expect Zalando to generate FY17 revenues of €4,442.5 million, up 22.1% year over year. The consensus forecast for FY17 EBIT is €273.9 million, implying an EBIT margin of 6.2%. Analysts expect normalized EPS of €0.75.