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UPDATE 3-Zalando talks to banks on possible multi-billion dollar float-sources
February 14, 2014 / 4:00 PM / 4 years ago

UPDATE 3-Zalando talks to banks on possible multi-billion dollar float-sources

* Co says no decision yet on possible float

* Investor Kinnevik’s figures value business at over $5 bln

* Zalando says FY sales up 52 pct to 1.76 bln euros

* Pace slows to 36 pct in fourth quarter

* Co says mild winter forces discounting of seasonal ranges (Recasts with financial sources on possible IPO)

By Emma Thomasson

BERLIN, Feb 14 (Reuters) - Europe’s biggest online fashion retailer Zalando, long seen as a possible flotation candidate, is talking to bankers about a possible listing, sources said, confirming impetus behind a plan that could value the company at more than $5 billion.

Speaking after Zalando had reported slowing sales growth in the second half of 2013 as a mild winter led to high levels of discounting, financial sources said the company is looking for banks to advise on a stock market flotation later this year.

But Rubin Ritter, a member of the management board of lossmaking Zalando, told Reuters an initial public offering (IPO) - which could be western Europe’s biggest technology offering since Germany’s T-Online in 2000 - was a possibility, not an immediate priority.

“An IPO could be an interesting option going forward but right now there is no decision on this topic,” Ritter said.

Among the favourite banks for a role in a flotation are JPMorgan, Goldman Sachs and Morgan Stanley , seen as specialists in technology-related listings, but banking sources said Zalando would have to move quickly if it wanted to organise a listing before the summer holidays.

The Berlin-based retailer, whose rivals include Britain-based ASOS Plc, started selling shoes in Germany five years ago and now ships 1,500 different brands to customers in 15 countries.

Zalando’s biggest investor, Swedish firm Kinnevik , said it valued its 36 percent stake in Zalando at 12.14 billion Swedish crowns ($1.9 billion), suggesting the whole company is worth more than $5 billion.

Kinnevik shares, which have almost doubled in the last year due to its investments in fast-growing e-commerce, were down 8.6 percent after the Zalando figures showed a slowdown in sales in the most recent quarter.

Sales rose 52 percent to 1.76 billion euros ($2.4 billion) in 2013 as a whole, with the seven new markets it entered in summer 2012 helping drive first-half growth of over 70 percent. The pace however slowed to 42 percent in the third quarter and 36 percent in the fourth.

ASOS shares, which had jumped 144 percent in a year, slipped after it said retail sales growth slowed to 38 percent in the four months to Dec. 31, compared with 47 percent in the fourth quarter of its 2012-13 year.

ONLINE GROWTH

Yet underlying trends may still favour internet-oriented sellers.

Market research firm Mintel estimates online sales made up about 9.9 percent of Europe’s clothing and footwear spending in 2013, or about 38 billion euros, up from 8.6 percent in 2012.

“We expect growth in online sales of clothing and footwear to outperform the overall e-commerce market in 2014,” said Mintel retail analyst John Mercer.

However, pure online retailers like ASOS and Zalando are facing increasing competition as established brands like H&M and Inditex expand their e-commerce offerings.

Data last month showed Zalando saw a sharp slowdown in the growth of visitors to its website in December, but Ritter said that did not fully reflect booming use of mobile devices, which now account for over 35 percent of Zalando website visits.

“Our traffic is still growing quite considerably so we have 100 million visits per month, which makes us the most-visited fashion website outside China,” he said.

Zalando said it was breaking even in its core markets of Germany, Austria and Switzerland, where it made more than 1 billion euros of sales in 2013.

Its operating margin improved by 0.5 percentage points from minus 7.2 percent in 2012, but Ritter said that was less than hoped due to the late start of the summer and a mild winter that forced fashion retailers to discount seasonal styles.

Ritter declined to say when the business might turn a profit, but said Zalando, which has advertised heavily to win market share, would spend less on marketing as a percentage of sales and keep expanding higher-margin private-label brands, although it has no immediate plans to move into new countries.

Zalando, which changed its structure in December to one typically used by German listed companies, said Kinnevik Chairwoman Cristina Stenbeck will take over as chair of its supervisory board from Kinnevik Chief Executive Mia Brunell, who is stepping down from the Swedish group.

Also joining the board is Lothar Lanz, chief financial officer of German publisher Axel Springer, which is preparing its own listing of its online classified advertising unit. ($1 = 0.6030 British pounds) ($1 = 0.7317 euros) ($1 = 6.4650 Swedish crowns) (Additional reporting by Mia Shanley in Stockholm and Alexander Huebner in Frankfurt; Editing by Erica Billingham and David Holmes)

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