Aug 11, 2016
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Zalando says UK market remains attractive after Brexit vote

Aug 11, 2016

Zalando, Europe's biggest pure online fashion retailer, sees opportunities to grow in Britain despite the country's vote to leave the European Union as it encroaches on the territory of rivals like Asos.


Founded in Berlin in 2008, Zalando makes more than half its sales in its core markets of Germany, Austria and Switzerland. It launched in Britain in 2011, but has so far not made the same big marketing drive there that has helped sales soar elsewhere.

Managing board member Rubin Ritter said Britain's vote in June to leave the EU had not changed Zalando's strategy in the country and he sees opportunities to grow faster there, especially now that the German company has added more UK-based brands.

"We still see the UK as a very attractive potential market," Ritter told journalists during a conference call. "British customers continue to buy fashion."

Ritter said last month the fall in the pound since the Brexit vote dented the value of sales there, although Britain accounts for a "very small" portion of the group's total.

Ritter made the comments after Zalando reported second-quarter adjusted earnings before interest and taxation (EBIT) almost tripled to 80.9 million euros (69.6 million pounds) on revenue up 25 percent to 916 million euros. That compared to analyst consensus for 78 million and 918 million respectively.

Revenue growth slowed in Germany, Austria and Switzerland to 14.7 percent from 32.5 percent a year ago, but the adjusted EBIT margin for the region quadrupled to 13.9 percent, while it was a steady 4.1 percent for the rest of its business.

The main driver of the jump in profitability was increased efficiency in marketing spending and in fulfilment operations due to higher utilisation of its warehouses, Ritter said.


Zalando's shares had come under pressure this year as investors expressed fears it is more exposed to Amazon's foray into fashion than ASOS which has a more targeted clientele, but they jumped last month after strong preliminary figures.

The stock was up another 2.3 percent at 0735 GMT to a seven-month high, outperforming a flat European retail index and a 0.4 percent rise for ASOS.

Zalando had also raised its guidance for the full year adjusted EBIT margin to 4.0-5.5 percent from 3.0 to 4.5 percent and reiterated a forecast for full-year sales to grow at the upper end of a 20 to 25 percent range.

Asos and smaller British online fashion retailer Boohoo.com Plc have both raised their full-year sales growth forecasts due to robust demand through the summer and spring.


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