Cost of living crisis takes toll on online fashion giant Zalando
SHARES in Europe’s largest online fashion retailer hit an eight-year low after it slashed profit forecasts as fears of recession mount.
Zalando, whose customers are typically women aged 25 to 45, said revenues may not increase at all this year having previously targeted double-digit growth.
It also said profits would only be around half what it expected a month ago.
Shares in the Berlin company, which is among the most popular online clothing retailers in the UK and brings in revenues of more than £8bn a year, fell as much as 18pc in Frankfurt before clawing back most of their losses. In a bleak update as the cost of living crisis hits spending in the UK and Europe, the retailer said that ‘ macro- economic conditions have further deteriorated’ and will be ‘ longer lasting and more intense than previously anticipated’.
It said hopes of a ‘rebound in consumer confidence in the short-term’ have been dashed.
Since listing in Frankfurt in 2014, the company has seen sales rise by around 25pc a year.
The company was among those that cashed in during the pandemic lockdowns as customers turned to the internet.
While the end of Covid restrictions has taken its toll, as it has on British rivals including Asos and Boohoo, the cost of living crisis is biting hard as consumers rein in spending in the face of high prices.
Earlier this month Boohoo recorded its first decline in UK sales, while Asos slashed its sales guidance and profit. Peter Garnry, head of equity strategy at Saxo, said Zalando was ‘facing severe headwinds from weaker consumer confidence’, adding: ‘This is basically a repeat of the recent guidance cut from Asos in the UK.’
Inflation has soared around the world and is now at a 40-year high of 9.1pc in the UK – hitting households in the pocket.
Research group GfK said consumer confidence in Britain has fallen to its lowest level since records began nearly 50 years ago.
The hit taken by household and corporate budgets has fuelled fears of recession.