Growth of e-retailer Zalando slows due to late summer

Reuters

By Emma Thomasson

BERLIN (Reuters) - Zalando, Europe's biggest online fashion retailer, saw its growth rate slow in the second quarter due to the late arrival of the summer, with sales up 70 percent to 437 million euros (372 million pounds) against 74 percent in the first three months.

Berlin-based Zalando, which celebrated its fifth birthday last month with a fashion campaign fronted by Israeli supermodel Bar Rafaeli, said sales for the first half rose 72 percent to 809 million euros.

"The summer season was not easy. Discounts were high as summer came late," Managing Director Rubin Ritter told Reuters. "As we have not expanded into new markets recently, the relative growth rate will naturally decrease."

Zalando, which offers 1,500 brands, has been extending its lead over British rival ASOS (LSE:ASC), which focuses on young fashion, doubling net sales to 1.2 billion euros last year, although it made a pre-tax loss of around 80 million.

ASOS said on Wednesday it plans to step up investment to support its rapid sales growth as it met forecasts with a 23 percent rise in full-year profit.

Online sales of clothes and shoes have exploded in recent years to become the most popular e-commerce category in most of Europe, with market research firm Mintel predicting the market will grow 14 percent in 2013 to about 38 billion euros.

The world's two biggest fashion retailers, Zara-owner Inditex (MCE:ITX) and Hennes & Mauritz (HMb.ST), have been relatively slow to embrace e-commerce, but are now expanding fast, with Zara recently launching in Russia and H&M in the United States.

FUTURE OPTION

Zalando, whose biggest investor is Swedish investment firm Kinnevik (STO:KINV B), is seen as a prime candidate to float on the stock market, although Ritter said Zalando was focusing for now on improving performance in core markets.

"It is not in the pipeline but it is an option for the future that we want the company to be prepared for," he said.

Kinnevik, which reported its own nine-month results on Wednesday, put a book value of 11.249 billion Swedish crowns ($1.8 billion) on its 36 percent stake in Zalando, valuing the whole company at 3.56 billion euros ($4.9 billion).

Zalando said earlier this month that the Ontario Teachers' Pension Plan (OTPP) had bought a 2 percent stake in the firm, while Danish fashion magnate Anders Holch Povslen took a 10 percent stake in August.

Ritter said Zalando had plenty of interest from other investors, but declined to comment on a report in Germany's Der Spiegel magazine this week that a big U.S. pension fund was poised to take a 2 percent stake.

Mintel analyst John Mercer predicts Zalando could overtake Amazon (NSQ:AMZN) in the clothing and footwear category in Europe in 2013, benefiting from its larger number of dedicated national websites compared with Amazon and ASOS.

"We think Amazon and ASOS need to ramp up their coverage in terms of dedicated national websites in Europe," Mercer said.

(Editing by Peter Dinkloh and David Holmes)

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