Online retailer Zalando makes first-ever profit in second quarter

Reuters
German Chancellor Merkel looks at the mobile online shopping application Zalando at the Samsung booth during the CeBIT technology fair in Hanover
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German Chancellor Angela Merkel looks at the mobile online shopping application Zalando at the Samsung booth during the CeBIT technology fair in Hanover March 10, 2014. REUTERS/Fabrizio Bensch

By Mia Shanley and Harro Ten Wolde

STOCKHOLM/FRANKFURT (Reuters) - Zalando, Europe's biggest specialist online fashion retailer, has achieved its first-ever profitable quarter, it said on Friday, giving it greater momentum for a possible stock market listing this year.

Zalando, whose sales surpass rivals such as Britain's ASOS Plc, said progress towards break-even in the first quarter had accelerated, leading to a profitable second quarter.

"You see very clearly in the first half that we are on track to getting there," Rubin Ritter, a member of Zalando's management board, told Reuters, though he gave no precise figures.

He declined to forecast if the company, which sells brands such as Jack & Jones and Diesel, would be profitable in 2015 as a whole, but said the company was making significant progress and gaining market share.

The Berlin-based company, which began selling shoes in Germany in 2008 and now ships 1,500 different brands to customers in 15 countries, is considering a stock market flotation in October, people familiar with the transaction have told Reuters.

Zalando's trading update helped lift shares in Swedish investment firm Kinnevik, which has a 36 percent stake in the company. Kinnevik shares were up 6 percent by 1021 GMT (11:21 a.m. BST), outperforming a Stockholm blue-chip bourse which was 0.5 percent higher.

Zalando, whose German website features everything from Crocs and stilettos to summer dresses and leather jackets, said the successful international rollout of its mobile app had helped lift mobile traffic in the quarter, while its regular customer base was spending more than before.

Purchases via mobile devices now make up 41 percent its traffic.

Figures from Kinnevik value the company at $4.9 billion (2.8 billion pound), but some analysts have suggested it could be worth as much as $9 billion.

NATURAL EVOLUTION

Zalando has said a listing is a possibility but Ritter declined to comment on reports that it could be planned for October.

Lorenzo Grabau, CEO of Kinnevik, which reported quarterly earnings on Friday, told Reuters a listing would be a "natural evolution" for any of its assets but would not comment on whether Zalando could go public this year.Sources have said Zalando would probably only list a stake of between 10 and 15 percent, raising less than 1 billion euros ($1.4 billion), partly because some of the company's investors would not want to divest their holdings.

Zalando also reported second-quarter sales of between 520 million euros and 560 million, representing 28 percent growth at the top end compared with 35 percent in the first quarter.

Ritter said the company was moving from a phase of "hyper- growth" to more "sustainable growth."

"We are still growing significantly above 20 percent and obviously it's going to continue to be our ambition to grow significantly faster than the market - but not at 50 percent," he said.

Over the short to medium term, he said the company aimed for a similar growth rate as it had in the second quarter.

Zalando has no plans to expand into new markets this year but Ritter said there were plenty of places where Zalando could eventually grow.

"I think there are interesting opportunities in eastern Europe," Ritter said. "Some are also left in western Europe, like Ireland. There also might be interesting opportunities outside Europe at some point."

Kinnevik has broadened its shareholder base in the past year, attracting more overseas investors seeking to gain exposure to its e-commerce portfolio.

It said on Friday that marketplaces and e-commerce investments now made up almost 40 percent of its overall portfolio, while its telecoms investments had shrunk to 50 percent.

Grabau said this shift would likely continue due to the fast pace of growth in its e-commerce businesses. Kinnevik also plans to make further investments in e-commerce and in digital financial services, in the second half of the year.

($1 = 0.7396 Euros)

($1 = 6.8317 Swedish Crowns)

($1 = 0.5849 British Pounds)

(Additional reporting by Kirsti Knolle; Editing by Jane Merriman and David Holmes)

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