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Zalando Reports 18.5% Jump in Q2 Operating Profit

The logo of fashion retailer Zalando is pictured at the new headquarters in Berlin, Germany, April 10, 2019. (Reuters)
The logo of fashion retailer Zalando is pictured at the new headquarters in Berlin, Germany, April 10, 2019. (Reuters)
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Zalando Reports 18.5% Jump in Q2 Operating Profit

The logo of fashion retailer Zalando is pictured at the new headquarters in Berlin, Germany, April 10, 2019. (Reuters)
The logo of fashion retailer Zalando is pictured at the new headquarters in Berlin, Germany, April 10, 2019. (Reuters)

Online fashion marketplace Zalando reported an 18.5% rise in its operating profit for the second quarter on Tuesday, helped by inventory management and lower order fulfilment costs, as its sports, designer and beauty segments drove growth.

Zalando has focused on higher-priced brands and the growing sportswear category, along with scaling up its partner business, as it faces competition from fast-fashion retailers with cheaper offerings such as Shein.

Quarterly adjusted earnings before interest and tax (EBIT) rose to 171.6 million euros ($187.9 million) from 144.8 million in the same period last year, Zalando said.

Its qross merchandise volume (GMV) - a key revenue metric measuring the total value of all goods sold - rose 2.8% on the year to 3.8 billion euros in the second quarter, while revenue was up 3.4% at 2.6 billion euros.

Zalando also said Chief Financial Officer Sandra Dembeck had decided not to renew her contract beyond the current term ending on Feb. 28, 2025.

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Hugo Boss May Push Back 2025 Targets as Luxury Sector Falters

The Hugo Boss logo is seen at one of the brand's stores in Hong Kong. CREDIT: BUDRUL CHUKRUT/AP
The Hugo Boss logo is seen at one of the brand's stores in Hong Kong. CREDIT: BUDRUL CHUKRUT/AP
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Hugo Boss May Push Back 2025 Targets as Luxury Sector Falters

The Hugo Boss logo is seen at one of the brand's stores in Hong Kong. CREDIT: BUDRUL CHUKRUT/AP
The Hugo Boss logo is seen at one of the brand's stores in Hong Kong. CREDIT: BUDRUL CHUKRUT/AP

Hugo Boss may push back key sales and profit targets beyond 2025 when it reports its second-quarter results on Thursday, as investors watch for updates on trading and cost-cutting plans.
Shares in the company fell as much as 10% in July as it cut its full-year sales and earnings forecasts, citing weakening global consumer demand, especially in China and Britain, said Reuters.
It warned in March that its target of reaching 5 billion euros ($5.4 billion) in annual revenues in 2025 might be delayed, but said it still expected its margin on earnings before interest and taxes (EBIT) to reach at least 12% next year.
"Besides comments on current trading, which will be closely watched by investors, we would not rule out an update on Hugo Boss' mid-term targets," said Felix Jonathan Dennl, analyst at Metzler Capital Markets in Frankfurt.
Some analysts, including Dennl, expect Hugo Boss to hit its mid-term sales target two to three years later than originally forecast, and to reach its mid-term EBIT margin goal after 2028.
"If Hugo Boss can't provide more visibility, the revenue and EBIT targets should be in doubt," Alexander Zienkowicz, senior analyst at Mwb Research said.
In an average of estimates last updated ahead of the company's preliminary results in mid-July, analysts had forecast sales of 4.65 billion euros and an operating profit of 519 million for 2025, corresponding to an EBIT margin of 11%.
Cost cuts are also going to be in focus, said Joerg Philipp Frey, analyst at Warburg Research. He highlighted the company's 21% jump in marketing spend and higher brick-and-mortar retail expenses in the second quarter from a year earlier, in contrast with its quarterly sales decline.
The upmarket fashion brand has been on an expansion drive, increasing marketing spend and opening 102 new points of sale, including own stores, "shop-in-shops" and outlets, in 2023. It is trying to stem a slowdown in sales growth which has contributed to the company's shares almost halving in value this year.
"To lift the share price, it will be important for Hugo Boss to demonstrate effective management of the issues at hand and a credible path to recovery," Zienkowicz said.
The luxury sector is grappling with weaker sales and pressure on margins as inflation-hit shoppers hold off from splashing out on designer fashion. A property slump and job insecurity in China has exacerbated the problem.
Earnings from luxury companies this quarter have demonstrated the strains that the sector is under with both LVMH and rival Kering falling short of forecasts.