Expansion and “generous payment terms” dent Zalando’s profits in Q2

Zalando’s revenue keeps growing, although less than expected due to the Europe’s largest e-tailer’s ambitious plans for expansion and their “generous payment terms” to lure shoppers. However, the German online retailer saw its second-quarter sales up by over a 33 percent.

Zalando SE (ZAL.XE) said Tuesday that revenue in the second-quarter grew between 33 percent and 35 percent year-on-year, supported by continued investment across markets. Thus, revenue increased to a bracket of 727 – 730 million euros, compared with the 546 million euro reported last year, according to preliminary calculations.

Zalando explained that decline in margin was a result of “a temporary increase in payment costs”

Adjusted earnings before interest and taxes are expected to come in at between 22 million and 37 million euros, hinting a dip from last year’s same quarter’s 35 million euros. EBIT margin also declined to 3 – 5 percent, falling short from the 6.4 percent noted in the year-ago period.

An ambitious plan of expansion also had something to do with the smaller profit. It is worth of remembering that Rubin Ritter, a member of the management board, said in March the group would continue to focus on growth rather than profitability this year. With this aim, Zalando plans to boost total staff from 7,500 to about 10,000 by the end of the year, highlights the ‘FT’.

On the back of the news, the stock traded 4.9 percent lower at 31.79 euros as of 9:21 a.m. in Frankfurt, the biggest intraday decline in almost a month. The stock is still up 25 percent this year, giving a market value of 7.9 billion euros, recalls Bloomberg.

According to Reuters’ data, Zalando shares listed in Frankfurt last October at 21.50 euros and have risen almost a third this year, outperforming the European retail index.

The company will publish complete second-quarter results as well as any potential adjustment to full-year guidance on August, 13.