Zalando's Q3 profits rise on strong B2B growth

(Sharecast News) - Shares in online fashion retailer Zalando reversed early losses on Tuesday after the German outfit reported higher third-quarter revenues and adjusted profits, driven by strong growth in its business-to-business operations. The stock was up 1.9% at €27.51 in Frankfurt by 0919 GMT, having fallen nearly 5% earlier in the session.

Group revenue increased 5.1% to €3.17bn in the three months to September, from €3.02bn a year earlier, while gross merchandise volume (GMV) rose 7.5% to €4.54bn.

B2B revenues jumped 27.9% to €354.4m, while adjusted EBIT more than doubled to €42.2m from €19.6m, lifting the division's operating margin to 11.9% from 7.1%.

In contrast, consumer revenues rose 2.8% to €2.83bn, although adjusted EBIT declined 15.9% to €64.4m.

Adjusted earnings before interest and tax (EBIT) grew 10.6% to €106.5m, supported by lower fulfilment costs, synergies from the integration of ABOUT YOU and strong growth in the B2B division. The adjusted operating margin improved to 3.4% from 3.2%.

However, gross margins declined by 90 basis points to 38.7%, reflecting targeted investments in customer pricing and the changing business mix. Zalando also swung to a net loss of €18m from a €12.5m profit a year earlier.

Chief financial officer Anna Dimitrova said: "One year in, the ABOUT YOU integration is progressing well and we kept our momentum in delivering synergies."

She added: "At the same time, our shift to a platform business model is accelerating, with our partner business and retail media growing at a double-digit rate and B2B revenue up almost 28%."

Zalando also announced the launch of Zalando Extended, an AI-powered service allowing customers to purchase products from other online retailers through its platform, with automated checkout planned from 2027.

The company reaffirmed its full-year outlook, expecting GMV and revenue growth in the lower half of its 12% to 17% range and adjusted EBIT of €680m to €720m.