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After several difficult years and despite slightly declining sales (minus 1.1%), the online store Zalando achieved a profit of 83 million euros in 2023. The mountain of cash on which the company sits must finance new growth.
Zalando, the originally German online store that today serves 25 European markets, has had negative perceptions in recent years. If it could benefit from the many store closures during the corona pandemic, 2023 would be the year in which consumers kept their fingers crossed due to inflation. That translated into the company’s direction. While Zalando’s share was still worth about 100 euros in 2021, today it is still about 18 euros.
The purchasing power crisis of 2023 gave many players in the fashion sector a difficult year. Zalando saw its sales decline by just under 1.1 percent in 2023. Yet Zalando did not compromise on profitability. If the online store made a profit of 16.8 million euros in 2022, this increased fivefold last year to 83 million euros. The profit margin doubled from 1.8% to 3.5%. This means that the company is sitting on a mountain of cash, with a total cash position of at least two billion euros.
The company now wants to use that money to boost growth again, it was heard during the presentation of the new annual figures. “Both revenues and sales volume will grow,” said CFO Sandra Dembeck. Zalando also has higher ambitions in terms of operating profit margin for 2024 than in 2023: it wants to reach between 6 and 8 percent this year.
The company wants to invest in the online platform itself and in the efficiency of the department stores. According to the webshop, there is still work to be done to allow customers to buy clothing at full price. Zalando makes it very easy for its customers to benefit from discounts. Zalando also wants to focus on providing more services to other fashion companies (B2B).
Allegation of greenwashing
Zalando is making itself more popular with shareholders with the new objectives. The share jumped by 15% after the presentation of the annual figures, to 22 euros.
In February, Zalando came under controversy because the European Commission ruled that our online store placed false claims about sustainability on its products. “The environmental characteristics must be supported by hard evidence, otherwise icons are misleading,” Europe said. Zalando promises adjustments, in consultation with the Commission.
With almost 50 million users, Zalando maintains its dominant position in online fashion sales within Europe. It is followed closely by Amazon, which is larger than Zalando in total due to the sale of household items, but is less strong in lifestyle and beauty. The Chinese Shein is also emerging strongly, but attracts an audience that looks less for trendy brands and more for budget-friendly opportunities.
