Europe’s largest online fashion retailer bets sales slump is just a blip

Europe’s biggest online fashion retailer, Zalando, is betting the current slump in internet shopping is just a blow and can avoid the kind of massive job cuts undertaken by its rivals, co-founder and co-chief executive Robert Gentz ​​told the Financial Times.

Consumer technology groups including Amazon, Klarna and Shopify have cut thousands of jobs this year as the online shopping bonanza that began in the first two years of the pandemic has come to a halt.

Berlin-based Zalando was also badly hit, with revenues falling in the first half of its 14-year history, as it suffered €668m in cash outflows and generated €7m in operating losses. .

However, the group is adamant that they can avoid the massive cuts. “Our plan is to keep employment steady by the end of this year,” Gentz ​​said. Since the end of 2019, its workforce has increased by a quarter to reach more than 17,000 employees.

“But we’ve become much more cautious about hiring,” Gentz ​​said.

Gentz ​​describes the market turmoil as a temporary anomaly that won’t have a lasting impact on the retailer.

Zalando was listed in Frankfurt in 2014, but its share price has fallen 68% in the past year, leaving the group with a market capitalization of less than 8 billion euros. “Two years of enormous growth are behind us. When I think of the fashion industry, my [optimism] hasn’t changed at all,” Gentz ​​said.

He said revenue was still 60% higher than in 2019, the last year unaffected by the pandemic. He noted that just over 3% of all clothing purchases in Europe are handled by Zalando, which counts 10% of the European population as active customers.

Gentz ​​is confident that Zalando’s market share can more than triple in the long term. “What has changed a bit is the trajectory to get there.”

He acknowledged that Zalando initially struggled to grasp the scale of the crisis in consumer confidence triggered by the war in Ukraine and soaring inflation, but said the group had gone into control mode. damages. “We just have to play a little more defensively,” he said – not an easy change for a company that has grown around 25% every year since 2014.

Zalando has been able to offset the shipping and packaging cost inflation it has faced so far, Gentz ​​said, adding that the company is focused on profitability. It has reduced its marketing expenses and postponed the construction of new logistics centers. It also reduced free shipping offers to limit small loss orders.

He also argued that the 29% drop in net cash this year, to 1.6 billion euros, was due to temporary factors such as a rise in inventory triggered by the sudden drop in demand.

This contrasts with late last year, when gummed up global supply chains hampered the industry.

The flight from higher stocks will stop in the second half of this year, Gentz ​​said, while deferred investments will also help preserve cash. “Money is not a problem for us.”

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