Online fashion retailer Zalando is heading for its worst day of trading in more than a year after the company reported slowing revenue and profit growth as it works to fight off rising competition from Amazon.
Shares in the Berlin-based group were down 7.7 per cent at publication time, putting them on track for their biggest one-day drop since last June.
The company said on Tuesday it expects to report first-half revenues of around €2.1bn, representing year on year growth of between 21 per cent and 22 per cent.
While investors in most companies would be pleased with strong sales growth, the increase marked a slowdown compared to the first quarter, and is at the lower end of Zalando’s medium-term target growth rate of 20 to 25 per cent.
Profit margins were also weaker, falling from 8.8 per cent in the first half of last year to between 7.3 per cent and 7.8 per cent on an earnings before interest and tax basis.
Zalando is one of Europe’s most successful homegrown technology groups but has been investing heavily to fend off competition from Amazon, which has been expanding its own fashion arm.
In an attempt to maintain its position as the continent’s largest online fashion retailer, Zalando today took a leaf out of Amazon’s book, announcing the launch of a premium membership service akin to Amazon Prime.
Zalando Zet will offer services including faster delivery, personal fashion advice or early access to sales. The scheme will initially be rolled out in four German cities, with customers able to test the service for free for three months before being able to join for €19 per year.
Rubin Ritter, Zalando co-chief executive, said:
We are pleased with the performance in the first half of 2017 and continue to invest in order to meet our ambitious growth targets for the full year and beyond.
Our investments, for example in our fulfillment capabilities and the launch of our membership programme Zalando Zet, are the cornerstones for future growth.