German online fashion retailer Zalando on Tuesday reported a higher profit margin for the third quarter thanks to stronger consumer demand, as it focuses on pricier brands to fend off fierce competition in the mass market.
Zalando has also been scaling up its logistics business, through which it sells its platform and network to other retailers and brands, as it pursues new growth drivers.
Quarterly revenue from its online fashion platform rose 4.3% to 2.2 billion euros ($2.4 billion), and revenue from its logistics business, which added British retailer ASOS as a customer, grew 11% on the year to 239.7 million euros.
Zalando's operating profit margin increased by 2.9 percentage points to 3.9%, and the average order value on its platform was 61.1 euros ($66.50) in the third quarter, up from 58.8 euros a year ago.
Bryan Garnier analyst Clement Genelot said Zalando benefited from a rainy September in Europe that helped boost sales of autumn/winter garments across the sector.
"Zalando will have to prove its ability to continue to accelerate growth, beyond temporary weather-related tailwinds, in the coming quarters to please investors," he said.
Zalando confirmed its growth and profit outlook for the year, which it hiked in early October. It expects gross merchandise volume - a key revenue metric for the total value of all goods sold on the platform - to grow between 3% and 5% this year, and revenue to increase between 2% and 4%.
Zalando's shares were up 2.8% in pre-market trading. The stock, up 30% since Jan. 1, has had a bumpy few years, surging during the pandemic when online shopping boomed and falling rapidly after COVID restrictions eased.
