German online fashion retailer Zalando anticipates a return to growth this year, with plans to open up its logistics business to more players, raising hopes of a performance boost and lifting its shares.
The company’s stock surged by up to 18.5% following the announcement late Tuesday that it would initiate a share buyback program of up to 100 million euros ($109 million), commencing from March 13th.
On Wednesday, Zalando projected a growth in gross merchandise value (GMV), a crucial metric gauging the total value of goods sold, ranging between 0% and 5% for the current year. This comes after a 1.1% decrease to 14.6 billion euros in 2023.
The company announced its aim for a compound annual growth rate of 5-10% for both GMV and revenue up to 2028. This update coincided with the refinement of strategies for its fashion/lifestyle business and infrastructure business (B2B) in preparation for Capital Markets Day on Wednesday.
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In the B2B realm, Zalando is extending its logistics network, software, and services to facilitate e-commerce transactions for brands and retailers, irrespective of whether they occur on its platform.
By doing so, “Zalando seems to be reckoning that the historical growth story relying on even-increasing online fashion penetration is now close to the glass ceiling,” said Bryan, Garnier & Co analyst Clement Genelot.
“In other words, the growth potential has been reduced. Hence the shift towards a logistician business to address the over-capacity issue in its existing fulfilment network.”
Zalando anticipates revenue growth of 0% to 5% for the current year, following a 1.9% decline to 10.1 billion euros in 2023.
“The wider range reflects the continued uncertainty we see in the market,” finance chief Sandra Dembeck told reporters.
Zalando, a multi-brand platform specializing in clothing, footwear, and accessories, is encountering a slowdown in demand following a surge in growth during the pandemic. This decline is attributed to consumers, dealing with inflation and high interest rates, reducing their spending and opting for more affordable alternatives provided by fast-fashion competitors such as Shein, a China-based company.
At 0823 GMT on Wednesday, its shares surged by 15% to 22 euros.
The company anticipates adjusted earnings before interest and tax to range between 380 million and 450 million euros for the current year, marking an increase from 350 million euros in 2023.
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