Zalando Reports Strong Q3 Results for 2024, Raises Year-End Expectations

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Zalando Reports Strong Q3 Results for 2024, Raises Year-End Expectations

Zalando SE (ZAL.DE) reported strong financial results for the third quarter of 2024. The company recorded significant growth in gross merchandise volume (GMV) and revenue, alongside an improvement in adjusted EBIT margin. Zalando experienced a substantial increase in its active customer base and emphasized its commitment to enhancing logistics and customer experience by opening a new distribution center in Paris. Zalando's strong cash position and upgraded year-end guidance reflect the company's positive performance and strategic initiatives.

Key Points

  • Zalando's GMV for Q3 2024 increased by 7.8% year-over-year to €3.5 billion, while revenues rose by 5% to €2.4 billion.
  • Q3 adjusted EBIT climbed to €93 million, achieving a margin of 3.9%.
  • The active customer base increased by 0.5 million, surpassing 50 million.
  • B2C segment revenue grew by 4.3%, while B2B segment revenue recorded double-digit growth at 11.1%.
  • Year-end expectations have been raised to 3%-5% GMV growth and 2%-5% revenue growth, with adjusted EBIT expected at €440 million.
  • A new distribution center was opened near Paris to enhance logistics, with more expansion planned.
  • The cash position remains robust at approximately €2.4 billion.

Company Outlook

  • Zalando targets a compound annual growth rate (CAGR) of 5% to 10% by 2028.
  • The adjusted EBIT margin is expected to be between 6% and 8% by 2028.
  • The company's ecosystem strategy is anticipated to ensure consistent growth by 2025.

Negative Aspects

  • Negative net working capital was reported due to improved inventory management in Q3 2023.
  • Capital expenditures for 2024 have been revised to approximately €200 million.

Positive Aspects

  • Inventory levels decreased by 2.3% year-over-year, reflecting effective management.
  • The expansion of the ZEOS platform and integration with ASOS aims to capture additional market share.
  • Plans to enhance customer loyalty through the Plus loyalty program and the Zalando Fashion Assistant.

Shortcomings

  • The opening of the Frankfurt distribution center has been postponed to 2026, but this allows for the deferral of costs.

Q&A Highlights

  • Marketing expenses have risen to approximately 9% of revenue, with normalization expected by 2025.
  • Customer loyalty initiatives are gaining momentum, with 1 million users of the Zalando Fashion Assistant.
  • The company strategically targets a 45% B2C gross margin.
  • ZMS is growing at double-digit rates and is expected to represent 3%-4% of B2C GMV by 2028.

Zalando SE's third-quarter performance demonstrates its ability to navigate current market conditions effectively, with strategic initiatives being implemented to sustain growth. The expansion of its logistics network and focus on customer loyalty and experience will strengthen the company's position in the European market. With a strong cash reserve and an upgraded outlook, Zalando is well-positioned for the upcoming financial periods.