Zalando today announced the close of a €40.7million debt-financing deal with Commerzbank, Sparkasse Mittelthüringen and German government-owned development bank KfW Bankengruppe.
It’s no surprise the fast-growing online fashion retailer needs extra cash. In 2011, Zalando reported an operating loss despite €510m turnover, citing “strong growth and geographical expansion” – into 14 European markets so far, most recently Poland and Norway.
The new funds will go to cover both day-to-day operational costs and infrastructure projects, including the extension to Zalando’s 78,000m2 logistics centre at Erfurt (in Thuringia, where state bank Sparkasse Mittelthüringen operates). The company is also due to start work on a new 75,000m2 logistics centre at Mönchengladbach, near Germany’s Dutch border.
It might surprise that Zalando has chosen to raise the extra cash it needs through debt- rather than equity-financing, which has been the norm so far, most recently from JP Morgan as part of the US financial firm’s wider multi-million investment in Rocket Internet.
That either means Zalando is running short on its ability to attract other investors or that it is keen not to dilute the holdings of its existing shareholders (or, as VentureVillage’s sister publication Gründerszene points out, that it wants to boost rate of return on equity, possibly ahead of an IPO). Those shareholders include Rocket Internet (at about 45 per cent based on April 20 2012 figures), Holtzbrinck Ventures, Tengelmann Ventures, Swedish investment bank Kinnevik, Yuri Milner’s DST Global and JP Morgan, with the latter now sitting on about a one per cent stake.
Zalando’s CFO Jan Kember said in a release that the company’s finances are now “solid and well-balanced” and the banks’ show of confidence should be taken as a positive sign.
The company’s executives, in a rare interview in February, responding to speculation Zalando is heading for a stock market listing, didn’t rule out an eventual IPO but said it wasn’t actively being considered.
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