Zalando First-Quarter Earnings Drop on Technology Spending

  • Shares decline as much as 4.9% as Ebit margin narrows
  • Stock has lost almost a quarter of its value this year

Zalando SE, the German online apparel retailer, reported a decline in first-quarter earnings as investments to grow the business weighed on profitability.

Earnings before interest and taxes and adjusted for some items fell 31 percent to 20.2 million euros ($23 million) and the profit margin on that basis was 2.5 percent, Zalando said in a statement Thursday. Zalando’s earlier guidance was for Ebit of 12 million euros to 28 million euros. The stock fell as much as 4.9 percent.

“The statement reveals a slowdown in its core market” of Germany, Austria and Switzerland, wrote George Mensah, an analyst at Shore Capital Markets. “The material increase in its staff headcount and expansion in its logistics base may highlight why margin was weaker.”

Zalando, which sells products like Nike sneakers and Armani trenchcoats, has seen its margins narrow from 4.5 percent a year ago as it adds employees and spends more on technology and marketing. Zalando aims to make more acquisitions this year after buying Tradebyte Software GmbH this month, Managing Director Rubin Ritter said on a call with reporters.

Sales rose 24 percent to 796 million euros. The company had forecast a range of 788 million euros to 801 million euros. Zalando maintained its full-year forecasts.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE