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Zalando to tap designer labels, vintage to boost sales

By Emma Thomasson
FILE PHOTO: The logo of fashion retailer Zalando is pictured at the new headquarters in Berlin

By Emma Thomasson

BERLIN (Reuters) - Zalando plans to offer more premium and luxury ranges and move into the vintage clothing market as the online fashion retailer predicted slower sales growth in 2020 after a strong final quarter to 2019.

After a decade of rapid expansion to become Europe's biggest online-only fashion group, the Berlin-based company's sales growth has moderated, prompting it to expand into new areas like cosmetics and more items for men.

Zalando now plans to double its premium and luxury product ranges by the end of 2023, noting it had recently added high-end brands like Moschino Couture and Alberta Ferretti.

"It is lucrative, it's increasingly digital and it's growing," Lena-Sophie Roeper, Zalando buying director of premium and luxury, said, referring to high-end products. She also said younger shoppers were increasingly mixing high and low-end fashion as well as vintage.

Co-Chief Executive Rubin Ritter said selling more premium products should help boost Zalando's average basket value, a metric which has been under pressure as consumers shop more frequently on their smartphones but spend less each time.

In 2019, Zalando already registered 20 million searches for luxury brands it does not currently carry, Ritter said.

Major online luxury fashion players include Farfetch, which listed in 2018, Richemont's Yoox Net-A-Porter, and MyTheresa, which plans to list in New York this year.

Zalando also wants to tap shoppers' growing appetite for second-hand or vintage clothes due to rising environmental consciousness. The retailer will offer curated pre-owned fashion from the third quarter of 2020, also buying items from its customers and allowing them to sell to each other.

Ritter said some customers were telling the company they only wanted to buy pre-owned items in future. "It can be an integral part of our business model," he said.

Zalando cancelled a news conference planned for Thursday as a precautionary measure due to the coronavirus but Ritter told a call with reporters the business was not currently impacted.

Zalando forecast sales growth of 15-20% for 2020, down from 20.3% in 2019, but hopes gross merchandise volume (GMV) - sales made on by itself or its partners - will grow 20-25%, not taking account of any negative impact from the coronavirus.

Finance chief David Schroeder said Zalando could benefit if people avoid stores and shop online. He said the company was not worried about supply disruptions as most of its spring/summer stock was already in its warehouses.

Zalando's shares were down 7% by 1001 GMT, making them the biggest faller on the German mid-cap index.

Fourth-quarter sales rose 19.5% to 2 billion euros ($2.17 billion), while adjusted earnings before interest and taxation came in at 110.4 million euros, both ahead of average analyst forecasts after a strong "cyber" week around Black Friday.

Zalando's British rival ASOS had beat forecasts for sales over Christmas, reporting a 20% rise in retail sales to 1.075 billion pounds in the four months to Dec. 31.

Zalando's profitability has been squeezed by heavy investment in warehouses and faster delivery, but it has predicted a longer-term recovery in margins as it offers brands more logistics and marketing services - rather than just being an online seller.

Around 40% of items sold under its partner programme with brands were shipped by its transport service in the fourth quarter, and Schroeder said he expects to reach more than 50% this year.

($1 = 0.9201 euros)


(Editing by Riham Alkousaa/Maju Samuel/Jane Merriman)