Zalando Raises Full-Year Sales Forecast as It Spends to Grow

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Zalando SE raised its full-year revenue forecast as the German online apparel retailer hires more staff and builds warehouses to spur growth.

Sales this year will rise as much as 31 percent, Zalando said in a statement Thursday. That’s up from previous guidance for 20 percent to 25 percent growth. The stock surged as much as 10 percent, the most since April.

Zalando is accelerating European expansion three weeks after lowering profit guidance for the second quarter. The Berlin-based company said Thursday it’s building a shipping center in Germany to come online late next year, expanding another German warehouse, and opening a fulfillment center in Italy. It’s also gone on a hiring binge, adding about 1,500 employees in the first half to reach more than 9,079 in total.

“This is a robust statement from Zalando after the negative surprise of the second-quarter margin hit,” Exane BNP Paribas analyst Graham Renwick said in a note to clients.

The stock rose 7.7 percent to 33.07 euros as of 12:13 a.m. in Frankfurt. Second-quarter sales were 733 million euros ($815 million), in line with the company’s July 21 forecast.

Cheating Customers

But Zalando’s quest for customers has hit some glitches too. The company’s profit fell after it took an 18.5 million-euro charge in the second quarter for fraudulent purchases on its site in the first quarter, the company said.

Abuse of a bill-me-later invoicing plan was to blame. The company gets more than half its sales in Germany, Austria and Switzerland, and it lets customers there pay by money transfer after they get their parcels.

The first quarter was marked by a rash of purchases for which people never paid. Managing board member Rubin Ritter likened the activity to “stealing something” from a shop during a conference call with investors. The company tightened credit rules in the second quarter.

“We saw an unexpected wave of systematic fraud,” he said. “We are not very satisfied.”

Second-quarter adjusted earnings before interest and taxes were 30.2 million euros, falling from 35.1 million euros a year earlier. Zalando said on July 21 that earnings would be 22 million euros to 37 million euros.

Ritter also said fair weather in Europe this summer has helped sales.

“Zalando continues to benefit from the general change in consumers’ shopping habits to shop more online,” Volker Bosse, an analyst at Baader Bank, said in a note to clients. “This means that Zalando was able to even accelerate its already good top-line momentum” while the total German fashion retail market declined.

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