Zalando Says Quarter Was Profitable on Mobile Application

Zalando SE, Europe’s largest online-only shoe and fashion retailer, broke into profit in the second quarter as it pared sales and marketing costs before a possible initial public offering.

The six-year-old German company didn’t quantify the earnings in a preliminary statement of results today and said it still won’t reach breakeven for the year as a whole.

Zalando, which sells items such as blouses and sandals to Adidas AG German soccer jerseys, emerged from the Berlin-based Samwer brothers’ Rocket Internet incubator. Rocket copies the business models of successful U.S. Internet companies and quickly spins up versions in Europe, Africa and Asia. Zalando is preparing for an IPO as early as this year, people familiar with the matter have said, while the Samwers are girding for an IPO of Rocket.

Second-quarter revenue at Zalando was in a range of 520 million euros ($703 million) to 560 million euros, the company said. A year ago, sales were 437 million euros, meaning growth slowed sequentially from 35 percent in the first quarter.

“We really come from hypergrowth, and we’re now transitioning the company to a more sustainable growth path, a profitable growth path,” Rubin Ritter, a management board member, said in a phone interview. Sales rose about 24 percent in the most recent quarter, which is probably a “really ideal growth level,” Ritter said.

The Berlin-based company will “take a significant step toward,” though not reach, a breakeven level for the full year, Zalando said in its statement.

Detailed figures will be released at the end of August.

Mobile Commerce

Zalando’s owners include Sweden’s Investment AB Kinnevik, Russian billionaire Yuri Miller’s DST Global LP, JPMorgan Chase & Co. and Quadrant Capital.

Mobile commerce is becoming increasingly important for the company, which has introduced a mobile shopping app across all its markets, Ritter said on a conference call with reporters. More than 40 percent of traffic originates on smartphones and tablets, and many customers, especially in the German-speaking and Scandinavian countries, may initiate a transaction while traveling by train, then finish it on a desktop PC.

“It’s completely clear that mobile generates not just traffic, but also sales,” Ritter said.

To contact the reporter on this story: Aaron Ricadela in Frankfurt at aricadela@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Paul Jarvis, Tom Lavell

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