Zalando to Slow Expansion to Focus on Current Businesses

Zalando GmbH, a German clothing and shoes online retailer, plans to enter fewer European markets this year to focus on growth at existing businesses.

Zalando doesn’t have “concrete plans” to begin operating in new countries “over the next months,” co-Chief Executive Officer Rubin Ritter said today in interview from the retailer’s Berlin headquarters. Zalando will look at opportunities in eastern Europe in the second half of the year though no decision has been made yet, he said.

“We will not open as many markets as we did last year,” Ritter said. “We’re going to grow fast in 2013. Not so much by opening new markets but mainly by growing in the markets we have launched over the last years.”

Zalando, founded by David Schneider and Robert Gentz in 2008, sells designer clothing from labels including Calvin Klein and Escada as well as Max Factor and Agnes b. makeup. The company, which says it’s the leading online fashion retailer in Europe, offers more than 1,500 brands, which also include sports, high-street and home-textile suppliers, and has offices in Paris, Milan, London and Stockholm.

Revenue more than doubled last year to 1.15 billion euros ($1.53 billion) as demand increased in Germany and the company entered seven countries, Zalando said today in a statement.

Markets where Zalando started operating in 2012 included Finland, Denmark, Norway and Spain. Sales will rise this year and in 2014 as the online retail business grows in Europe, said Ritter, who manages Zalando jointly with Schneider and Gentz. He declined to specify a target.

Growth Costs

Earnings before interest and taxes reached break-even in Germany, Austria and Switzerland, the company said. The company posted a group Ebit margin of minus 8 percent of sales last year, narrowing from minus 12 percent in 2011, because of the cost of opening business in additional countries.

“We plan to keep improving our margins,” Ritter said. “Set-up costs were high in 2012. It was a very good investment, but obviously it was a big investment.”

Zalando is looking at niche categories, though it doesn’t plan to enter any new major product areas, Ritter said.

“In terms of assortment, we are already in most of the categories that we envision to do, although not all of them have completely developed,” Ritter said. “Home textile is a very young category. Our target is to do everything around fashion and lifestyle products. We’re not going to do fridges and TVs.”

DST Global LP, JPMorgan Chase & Co. and Quadrant Capital bought stakes in Zalando last year, while existing Swedish shareholder Investment AB Kinnevik increased its stake to become the largest owner.

The retailer isn’t for sale, and its shareholders are “very happy” with their investment, Ritter said.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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