Zalando doubles sales to €1bn, breaks even for the first time in home region

Zalando
Zalando

Zalando

Rocket Internet’s online fashion retailer Zalando doubled its sales to €1 billion last year – and, while the Berlin-headquartered company still made a loss overall, it managed to break even for the first time ever in its home region.

Zalando, founded in 2008 in Germany, sells shoes and clothing online in 14 European markets. It expanded into seven of those markets last year.

The online giant’s preliminary financial results, released today in tandem with the results of main investor AB Kinnevik (KINNF:US), show revenue up from €510m in 2011 to €1.15bn in 2012. The company claims it’s the fastest European company ever to reach €1bn in net annual sales.

Just as important is Zalando’s move from red to black in the DACH region (Germany, Austria and Switzerland). The DACH region brought in a majority of sales last year, with about 50 per cent of overall sales still in Germany:

Zalando’s growth in sales – excerpt from AB Kinnevik results presentation Q4 2012

Zalando growth in sales to 2012

Fast growth comes at a cost – while the company’s EBIT margin (a measure of profitability) improved from -12 per cent of sales in 2011 to -8 per cent in 2012, operating losses as a lump sum still increased from €60m in 2011 to €90m last year. 

“Setup costs are taken into account and part of our strategy for all market entries. The important part is that we see a positive margin trend in all regions as customers are loyal and efficiency is improved,” Zalando Managing Director Rubin Ritter said.

“The fact that we reached breakeven in our core region already in our fourth year proves the success of our business model and has encouraged us to invest even faster into building leadership in the international markets.”

About half of the goods purchased on Zalando are returned – pretty normal for the online fashion industry but, with Zalando’s free shipping policy, still a tricky part of the balance sheet. The company is planning on opening another logistics centre this year. 

The overall tone of today’s release suggest the company will focus on strengthening and growing existing markets this year, which fits well with rumours the company is actively preparing for an IPO (something Ritter has so far denied).

Zalando is already well set-up for cash this year. The company raised funds from new investors DST Global, JP Morgan and Quadrant Capital last year, and existing investor AB Kinnevik bought another 10 per cent at a valuation of €2.8bn in October.

The company also raised €40.7m of debt financing from German banks last year, in part to pay for one of its new logistic centres in Germany.

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