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MarketScreener Homepage  >  Equities  >  NASDAQ OMX STOCKHOLM  >  Hennes & Mauritz    HM B   SE0000106270

HENNES & MAURITZ

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Zalando seeks to counter return problems, smaller orders as sales slow

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11/06/2018 | 05:34am EDT
A Zalando label lies on an item of clothing in a showroom of the fashion retailer Zalando in Berlin

BERLIN (Reuters) - Zalando, Europe's biggest online only fashion retailer, is working to counteract a fall in average order size and to ensure more returned goods are resold after it reported the slowest sales growth since it was launched a decade ago.

Facing rising competition from e-commerce players like Amazon.com and chains like H&M, Zalando cut its 2018 outlook for a second time in as many months in October due to the unusually long, hot summer, sending its shares tumbling.

Shares in Zalando, which have fallen by a quarter in the last year, were 6.4 percent lower at 32.19 euros by 1014 GMT, making them the biggest decliners on the German MDAX index <.MDAXI>.

"Weaker sales growth versus consensus and continued deterioration in basket economics will disappoint," said UBS analyst Andrew Hughes, who rates Zalando "sell".

Third-quarter sales rose 12 percent to 1.2 billion euros ($1.37 billion), missing average analyst forecasts for 1.22 billion euros, and well below the 20 to 25 percent annual growth it has targeted for years.

In contrast, British rival ASOS last month met its full-year sales growth forecasts and reported a 28 percent rise in pretax profit, flagging years of double-digit sales growth to come and propelling its shares higher.

Zalando reported a quarterly adjusted loss before interest and taxation of 39 million euros, which it blamed on a slow start to sales of colder weather clothing, as well as rising fulfilment costs and problems with how it handles returns.

RETURNS

About half of the products Zalando sells are returned, with most of them processed and resold.

Previous changes to the handling of returned goods that needed to be ironed or repaired resulted in fewer of them being refurbished, an issue that has since been resolved, co-CEO Rubin Ritter told journalists.

Zalando said profitability was also hit by a 7 percent fall in average order size to 57.50 euros, despite efforts to bolster orders by adding beauty products to its range in the hope that customers would add a lipstick when they buy a dress.

The company is taking steps to try to increase the profitability of smaller orders, including making size recommendations to reduce the likelihood of returns, and trialling a minimum order value of 25 euros in Italy, Ritter said.

He does not yet know if Zalando will extend that to other markets, as some analysts have recommended.

Higher transport costs and investments in logistics also weighed, although Zalando trimmed its expectation for capital expenditure for 2018 to 300 million euros, from a previous 350 million, as projects are spread over a longer period of time.

Ritter said Zalando planned a new centralised warehouse to process shipments of garments from brands before they are sent to regional centres for delivery to customers, as it seeks to increase the efficiency of its logistics network.

(Reporting by Emma Thomasson; Editing by Maria Sheahan and Kirsten Donovan)

By Emma Thomasson

Stocks mentioned in the article
ChangeLast1st jan.
AMAZON.COM -0.28% 1817.46 Delayed Quote.21.01%
ASOS PLC -2.44% 2719 Delayed Quote.19.41%
HENNES & MAURITZ 0.70% 187.2 Delayed Quote.47.52%
MDAX -0.04% 25947.86 Delayed Quote.20.20%
VALUE8 N.V. -0.72% 5.54 Delayed Quote.16.88%
ZALANDO -0.56% 40.77 Delayed Quote.81.68%
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Financials (SEK)
Sales 2019 232 B
EBIT 2019 16 399 M
Net income 2019 12 826 M
Debt 2019 10 708 M
Yield 2019 5,04%
P/E ratio 2019 24,1x
P/E ratio 2020 22,4x
EV / Sales2019 1,38x
EV / Sales2020 1,34x
Capitalization 310 B
Chart HENNES & MAURITZ
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Technical analysis trends HENNES & MAURITZ
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TrendsBullishBullishBullish
Income Statement Evolution
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Buy
Mean consensus UNDERPERFORM
Number of Analysts 24
Average target price 154,83  SEK
Last Close Price 187,20  SEK
Spread / Highest target 17,5%
Spread / Average Target -17,3%
Spread / Lowest Target -59,9%
EPS Revisions
Managers
NameTitle
Karl-Johan Persson Chief Executive Officer
Stefan Persson Chairman
Jyrki Tervonen Chief Financial Officer
Morten Halvorsen Head-Information Technology
Anders Gunnar Dahlvig Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
HENNES & MAURITZ47.52%31 811
INDITEX - INDUSTRIA DE DISEÑO TEXTIL19.28%91 776
KERING12.04%63 739
FAST RETAILING CO LTD20.63%61 185
ROSS STORES29.98%39 118
ZALANDO82.71%11 221