Zalando Lowers 2017 Forecast After Weak October

BERLIN, Germany — German online fashion retailer Zalando warned on Tuesday that its full-year operating profit margin would be lower than expected after trading in October was weaker than forecast.

Shares in Zalando, which dipped last month when it reported preliminary figures, were down 4.3 percent in early trading.

Zalando, which has seen its profitability dented by heavy investments in logistics and technology as Amazon makes a big push into fashion, said construction would start this month on a second fulfilment hub in Poland.

Zalando said third-quarter sales rose 29 percent to €1.075 billion ($1.25 billion). Adjusted earnings before interest and taxation (EBIT) came in at €0.4 million ($0.46 million), missing average analyst expectations for €2.3 million ($2.66 million).

Zalando continues to expect full-year revenue growth in the upper half of a 20 to 25 percent range, but forecast its adjusted EBIT margin would come in slightly below 5 percent, under its previous forecast at the lower end of a 5 to 6 percent range.

Zalando sales were weak in October due to unseasonably warm weather, co-chief executive Rubin Ritter told a conference call for journalists.

British rival ASOS last month raised its sales growth forecast for the financial year from September 1 to 25 to 30 percent, from a previous 20 to 25 percent, and said it expected a stable operating profit margin of 4 percent.

Zalando said it had 22.2 million active customers at the end of the quarter, a rise on 15.7 percent since the same period last year and the strongest growth since the second quarter of 2015.

It said investment would continue through the fourth quarter and beyond after new logistic sites started up in Sweden and Poland, reiterating that it expects about €250 million ($289 million) in capital expenditure in 2017, including acquisitions.

By Emma Thomasson; editors: by Maria Sheahan and Keith Weir.