Zalando Revenue Surges -- Update

By Chase Gummer 

FRANKFURT--Online retailer Zalando SE said third-quarter revenue surged 24%, boosted by growth in non-German speaking parts of Europe and as cost improvements help put the company on track to be profitable by the end of the year.

The Berlin-based company, which listed on the Frankfurt stock exchange on Oct, 1, said revenue rose to EUR501 million ($624.78 million) in the third quarter from EUR404 million a year earlier. Revenue in non-German speaking markets jumped 40%, while revenue in its core markets of Germany, Switzerland and Austria rose 14%.

Zalando also said it reached its first ever break-even on its group earnings before interest and taxes margin in the third quarter, climbing into positive territory at 0.8% against a loss of 12.4% a year earlier, driven by cost improvements and returning customers.

Management board member Rubin Ritter said his company was looking forward to a slightly profitable year and hitting its execution targets, despite unseasonably mild weather.

Many analysts were expecting a weak seasonal quarter, with two months of summer clearance and only one month at full price.

Adjusted EBIT reached EUR4 million compared with a loss of EUR30 million a year earlier.

The company didn't provide net profit figures in its quarterly release, its first official report since listing.

Founded in 2008, the company has grown quickly to become the largest purely e-commerce fashion retailer in Europe, with custom online stores for all 15 European countries in which it is active.

Focusing on clothing, footware and accessories, Zalando sells a wide range of global, local and fast-fashion brands as well as its own in-house labels.

Zalando has closed a series of high-profile deals with fashion labels this year, including one with the U.K.'s Topshop and sister label Topman, both of which are sold in the Zalando store in select countries.

This week, U.S. retailer Gap Inc. announced it would also begin selling its clothes on the Zalando website starting in May of next year, hoping to make inroads into markets such as Germany, where it has no physical stores.

Mr. Ritter of Zalando said Topshop had become one of its best-selling brands at Zalando and that he also expects the Gap brand to perform well.

Most analysts expect the company to make an operating profit by the end of 2014.

The company's shares disappointed during their stock market debut in October, falling more than 13% in the opening days of trading from the initial issue price of EUR21.50. Zalando shares surged in early trading in Frankfurt on Wednesday. By midmorning they were up over 9% at EUR22.02.

Neetha Mahadevan contributed to this article.

Write to Chase Gummer at [e-mail]

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