Zalando targets logistics as mobile fashion sales grow

Reuters News
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Posted: Mar 01, 2016 4:58 AM

By Emma Thomasson

BERLIN (Reuters) - Europe's biggest dedicated online fashion retailer Zalando <ZALG.DE> will invest more in logistics this year in its pursuit of market share and expects sales to rise by as much as a quarter.

Zalando on Tuesday forecast about 200 million euros ($217 million) of capital expenditure in 2016, up from 70 million last year, mostly for building out existing distribution centers and speeding up planning for a fourth large warehouse.

Launched in Berlin in 2008, Zalando serves customers in 15 European markets with more than 1,500 brands, with big names such as Gap, Banana Republic and Topshop added in the last year.

Zalando is outpacing Britain's ASOS <ASOS.L>, which is encroaching on the German company's home turf by building a giant warehouse outside Berlin. ASOS reported European Union sales rose 29 percent in September to December.

The firm expects sales in 2016 to rise at the upper end of the 20-25 percentage rate it targets for the medium term, while it is aiming for a margin on adjusted earnings before interest and tax (EBIT) of 3.0 to 4.5 percent.

After Zalando exceeded the target in 2015 with a 33.6 percent growth rate, analysts forecast a rise of 25.4 percent for 2016 and an EBIT margin of 4.5 percent, according to Thomson Reuters SmartEstimates.

Zalando's shares, which jumped last month when it announced preliminary results, initially fell but then turned positive to rise 1.3 percent by 0946 GMT (04:46 EST), compared to a 1.4 percent firmer European retail index <.SXRP>.

Zalando is benefiting from a shift in online shopping to mobile devices from computers, which is encouraging customers to use apps which allow them to buy multiple fashion brands rather than visiting sites for individual labels.

Zalando said 59.9 percent of site visits came from mobile in the last quarter of 2015, up from 47.9 percent a year ago.

Management board member Rubin Ritter told a conference call that Zalando was focusing on growing market share, while preserving "solid" profitability.

Zalando hopes to eventually take 5 percent of the fragmented European fashion market from about 1 percent now, Ritter said, adding he was not worried about moves by Amazon <AMZN.O> to expand into fashion as Zalando has more expertise in the market.

"We don't have to be overly concerned about what the competition is doing," he said.

Zalando is exploring ways to speed up delivery, including the use of Uber-style networks of freelance drivers, but Ritter said it did not currently plan to invest in its own fleet.

Zalando also said that Lothar Lanz, former Axel Springer <SPRGn.DE> finance chief, would become its chairman on May 31, replacing Cristina Stenbeck of major investor Kinnevik <KINVb.ST>, which said it remained committed to Zalando.

($1 = 0.9202 euros)

(Editing by Maria Sheahan and Alexander Smith)