Zalando reported its revenue dropped 0.6% to €2.24bn in the three months to 31 March 2024 (Q1) from €2.26bn.

Its adjusted earnings before interest and tax (adjusted EBIT) increased to €28.3m in the quarter, representing a margin of 1.3% and its business-to-consumer (B2C) revenue saw the strongest growth from its beauty, sports, kids and family propositions as well as ‘Lounge by Zalando’.

The retailer's business-to-business (B2B) category added more multi-channel fulfilment partners and grew its revenue by 13%.

Zalando's CFO Dr. Sandra Dembeck said: “As we are executing our ecosystem strategy, we are excited by the positive response from customers and partners in the first quarter. We are returning to growth.”

She continued: "B2C customers are showing increased interest in our quality assortment, digital tools, propositions and inspiring content. B2B customers are signing up for our unique offering. Both of our growth vectors are strong and contributing to results, demonstrating the strength of our plans.”

Zalando's key Q1 results

• Zalando’s sales slipped 0.6% to €2.2bn in Q1 2024 compared to Q1 2023
• Group adjusted EBIT was €28.3m from -€0.7m in the same period last year
• Net loss for the period was -€8.9m compared to -€38.5m.

Zalando's initiatives are paying off

GlobalData apparel analyst Louise Deglise-Favre explained Zalando has seen an improvement on Q4 FY2023 when its sales dipped 3.5%, while its adjusted EBIT was back in the black at €28.3m, compared to prior year’s loss of €0.7m, driven by improved margins and lower fulfilment costs.

She said: "Zalando is continuing to improve its proposition through more clearly defined product segmentations and engaging marketing, but remains relatively cautious regarding its full-year results, confirming it expects its sales to rise between 0 and 5%."

Deglise-Favre noted B2C sales dropped 1.9%, while its gross merchandise value (GMV) rose 1.3% and was driven by a rise of sales through its Partner Program, which is a marketplace that gives brands more control over their presence on Zalando’s platform.

She highlighted: "Zalando remains committed to improving the consumer experience, rolling out its 'size-advice-with-body-measurements' feature in Spain, France and Italy to mitigate return-causing fit issues.

"After becoming a distributor of Swiss running brand On in 22 markets in February 2024, Zalando plans to expand its sportswear offering further this year, aiming to introduce additional brands, and launch a private-label adaptive sportswear collection to improve its inclusivity."

Deglise-Favre believes that, despite Zalando’s many customer-centric initiatives not translating into B2C sales growth yet, they do allow it to stand out from its online pureplay competitors and future-proof its proposition.

Zalando 2024 outlook

Zalando has reiterated its full year 2024 outlook with both GMV and revenue growth expected in a range of 0% - 5%. Adjusted EBIT between €380m and €450m and a capex guidance of between €250m to €350m with net working capital negative.

In March Zalando reported its group revenue declined 1.9% for fiscal year 2023 (FY23), however it said it hoped its new pan-European strategy would expand its share of the European fashion market moving forward.