What's Happening?
Zalando SE, a Berlin-based online fashion retailer, has reported a significant increase in its third-quarter revenue for the 2025 financial year, largely due to its acquisition of competitor About You.
The acquisition, completed in July, contributed to a 26.5% rise in group revenue, reaching 3.02 billion euros from July to September. On a pro-forma basis, which includes About You's figures from the previous year, revenue increased by 7.5%. The Gross Merchandise Volume (GMV) also saw a substantial growth of 21.6%, amounting to 4.21 billion euros. The number of active customers rose to 61.4 million, driven by the merger and strong new customer acquisition. Despite the positive revenue growth, the reported earnings before interest and taxes (EBIT) fell from 69.5 million euros to 49.1 million euros due to higher share-based compensation, acquisition-related expenses, and restructuring costs. Net profit attributable to shareholders decreased from 44.3 million euros to 14.8 million euros.
Why It's Important?
The acquisition of About You by Zalando highlights the competitive dynamics in the online fashion retail industry, where consolidation is a strategy to enhance market share and customer base. This move allows Zalando to leverage About You's customer base and operational synergies, potentially leading to increased profitability in the long term. The growth in revenue and GMV indicates a successful integration of the two companies, which could set a precedent for future mergers and acquisitions in the sector. However, the decline in EBIT and net profit underscores the challenges of managing acquisition-related costs and restructuring expenses. This development is significant for stakeholders, including investors and competitors, as it reflects the ongoing shifts in the fashion retail landscape and the importance of strategic acquisitions for growth.
What's Next?
Looking forward, Zalando has announced a new five-year strategic partnership with the German Football Association (DFB), aiming to strengthen its sports business and enhance customer experience. The company has also initiated a share buyback program, planning to acquire up to 5.5 million shares for up to 100 million euros, which will be used for share-based compensation programs. Management has maintained its annual forecasts, expecting group revenue and GMV to increase by four to seven percent on a pro-forma basis for 2025, with an adjusted EBIT target between 550 million and 600 million euros. These strategic moves indicate Zalando's focus on expanding its market presence and optimizing shareholder value.
