German online fashion retailer Zalando said on Wednesday it expects a return to growth this year and will open up its logistics business to more companies, raising hopes of improved performance and sending its shares higher.
Shares jumped 18.5 percent after the company said late Tuesday it would begin a share buyback program worth up to 100 million euros ($109 million) from March 13.
Zalando said on Wednesday that gross merchandise value (GMV), a key measure of the value of all goods sold, is expected to fall 1.1% to 14.6 billion euros in 2023, but it expects growth of 0-5% this year.
Ahead of its Capital Markets Day on Wednesday, the company updated its strategies for both its Fashion & Lifestyle and Infrastructure (B2B) businesses, announcing it is targeting compound annual growth rates of GMV and revenue of 5-10 percent through 2028.
In the B2B space, Zalando is rolling out its logistics network, software and services to help brands and retailers with their e-commerce transactions, whether or not they take place on its own platform.
“In doing so, Zalando appears to be acknowledging that its growth story so far, which has relied on ever-increasing online fashion penetration, is now approaching a glass ceiling,” said Clement Genero, an analyst at Bryan Garnier & Co.
“In other words, the potential for growth has decreased. So we’ve shifted towards the logistics business to address the issue of overcapacity in our existing fulfillment network.”
Zalando also expects revenue growth of 0-5% this year, following a 1.9% decline in 2023 to 10.1 billion euros.
“The wider range reflects the continued uncertainty we are seeing in the market,” Chief Financial Officer Sandra Dembeck told reporters.
Zalando, a multi-brand platform selling clothing, shoes and accessories, is facing weakening demand after rapid growth during the pandemic as consumers struggling with inflation and high interest rates cut spending and turn to cheaper options offered by China-based fast-fashion rival Shein.
The company’s shares were up 15 percent to 22 euros as of 8:23 a.m.
The company expects adjusted earnings before interest and taxes to rise to between 380 million and 450 million euros this year from 350 million euros in 2023.
Written by Linda Pasquini and Chiara Holzhauser, edited by Michael Perry and Mark Potter
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