By Mia Shanley
STOCKHOLM, April 24 The co-founder of German
online retailer Zalando said on Wednesday the firm will focus
this year on getting its core markets to profitability amid
mounting speculation the fashion site could be ready for a
listing as early as 2014.
Online retailers have been giving their brick-and-mortar
rivals in Europe a run for their money, taking advantage of what
has been a slow shift by high street shops to the Internet.
Zalando has been extending its lead over British rival ASOS
Plc as Europe's largest online fashion site, expanding
from shoes to clothes and now selling over 1,000 brands. It
doubled 2012 net sales to 1.2 billion euros ($1.6 billion).
But the growth-oriented fashion site, founded in 2008, is
still loss-making as it spends to boost brand awareness to get
its name out on television shows like Germany's Next Top Model.
ASOS, which mostly targets young women, had sales of 538
million pounds ($870 million) in the year through August.
Pre-tax profit was 40 million pounds.
Zalando co-founder Robert Gentz said margins were
stabilising and that the firm was working to get its core DACH
region - Germany, Austria and Switzerland - to profitability.
"The DACH area broke even last year and is working on a
profitable path for this year," he told Reuters at an investor
day for Zalando's biggest owner, Swedish investment firm
Kinnevik holds a 35 percent stake, of which 26 percent is
held directly and 9 percent indirectly through venture capital
firm Rocket Internet.
Kinnevik, which has been raising its exposure to e-commerce,
last year bought an additional 10 percent of Zalando at a price
that valued the total company at 2.8 billion euros.
Despite Zalando not being profitable, there has been much
speculation amongst bankers and in the media about a possible
listing of the firm as early as next year.
Banks have started to contact Zalando in the hope of winning
any mandate, banking sources have told Reuters.
Gentz said there were currently no IPO plans in the works
and that the focus would be on building up its presence in its
14 existing European markets.
That may mean more investments in the year ahead.
"It seems Zalando follows a similar approach to Amazon -
they focus more on growing sales rather than profits for now,"
said Christodoulos Chaviaras, a Barclays analyst.
So while some may hope for an IPO which, a float may be a
ways off. Based on Kinnevik's investment, it would be Western
Europe's biggest tech offering since German internet service
provider T-Online listed in 2000.
"Zalando has great potential to become a successful IPO
candidate, but in a first step the company must show it can make
money," said one banker.
Zalando offers a free, but what analysts say is a costly,
return policy in all markets. Gentz said an average of 50
percent of goods were returned, but that it was well worked into
its business models.
Zalando has no plans to launch in new countries this year
and said it is backing off in Britain where competition has been
"We've launched a UK website, but we do not focus on that
market because it is an extremely different market from
continental Europe," Gentz said. "As long as we do not see very
good (performance) in UK, we would not focus that much on
getting that market. It is quite hard to compete if you are a
new entrant coming from continental Europe."