Online fashion store Zalando revised its revenue forecast after it reported higher traffic on its website on Thursday.
The company cited efforts to deliver a high-quality fashion experience for users and faster delivery options. The fashion retailer delivers to 17 European countries.
Zalando’s stock jumped 12% during early morning sessions.
News of the retailer’s shares increasing strengthened the position of other fashion players. It lifted stocks of H&M and more. Next and Puma extended their rallies on Wednesday after reporting strong quarterly-results.
As Europe’s largest solely-online fashion store, Zalando has been attempting to offset a limited profitability by investing heavily in logistics, speeding up delivery. That has concurred with deteriorating average order size as customers shop more through their mobile devices, buying less each time.
The fashion retailer has been taking necessary steps to strengthen average order size. It added beauty products to its range, making size suggestions to decrease the likelihood of returns, testing a minimum order value.
According to Zalando, it also expects margins to be on the receiving end of an escalating support from a move to expand its partner program.
Said program allows the fashion giant to charge similar labels a commission to sell stock through the platform, more feasible than buying and selling them itself.
David Schroeder, Finance Chief of Zalando, said the company managed to counter the decline in average online size to 56.40 euros in Q2, supported by the introduction of minimum order values in a number of countries. France will be next to join the scheme.
Moreover, Schroeder added that customers ordering autumn and winter garments higher in value helped average basket size.
Zalando’s Higher Customer-Base
Zalando’s active customer-base flew 15% to 28.3 million in the quarter. Site visits shot through more than a third to almost 1 billion. Around 84% of the data comprised of users browsing the site via mobile devices.
The fashion giant increased its number of parcels delivered, doubling it on the same day from previous quarter’s position. Although Germany is Zalando’s most significant market, according to the online retailer, it is already testing same-day deliveries in the Zurich region.
“Today’s update will only serve to underline why other online fashion retailers may be finding life so hard on the continent,” said Liberum analysts Wayne Brown and Adam Tomlinson.
Last month, Zalando’s British rival ASOS issued its third profit projections since December.
It explained that problems at warehouses in the United States and Germany had limited product availability, harming sales and as a result, raising costs.
The adjusted earnings before interest and tax (EBIT) of the fashion retailer jumped 8% to 102 million euros ($112.7 million) on sales that soared 20.1% to 1.567 billion euros.
Analysts expectations of EBIT and sales were at 95 million and 1.6 billion euros, respectively.
Zalando revised its projection for adjusted EBIT, raising it to the “upper half” of the 175 million and 225 million euro-range targeted previously.
It added that expectations for a revenue growth wading near the low end of 20%–25% range are now in line, although it was quite optimistic about it.