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Zalando: 'we focus less on margin expansion'

(CercleFinance.com) - Shares of German online fashion retailer Zalando fell almost 10% at the beginning of November after the group issued a margin outlook that disappointed investors.
However, this disappointment was soon forgotten, with the shares now having fully erased these losses, reaching new all-time peaks. Birgit Haderer, Zalando's SVP Finance, details the Berlin-based company's current momentum exclusively for Cercle Finance.

Cercle Finance: You recently warned that the group's full-year adjusted EBIT margin would be slightly below 5%, prompting analysts to say that you are trading short-term profitability to capture as "much growth as possible." Has top-line growth become your number one priority?

Birgit Haderer: Since Zalando's IPO in 2014, we have had followed a clear strategy which has been to improve our profitably. We now aim to outperform the online market by two to three time, further expanding our leading market share. This translates into annual revenue growth of 20-25% over the next few years. Regarding profitability, as long as we are growing so heavily, we will focus less on margin expansion. We believe it is the value maximising strategy for our business to invest and grow, as market leadership and scale are key success factors in our industry.

CF: You are also ramping up your capital expenditure. What are the main targeted areas at the moment? Logistics, software, technology infrastructure?

BH: To facilitate our future growth, we need to build the infrastructure today. Our investments are focused on the expansion and automation of our logistics network, improving convenience of delivery and return options and in-house developed software.

CF: Zalando recently said that it plans to enter the beauty segment (make-up, skin care and fragrances) in 2018. Do you plan to expand into other product categories in the future?

BH: We are currently focused on preparing the company to launch the beauty category in our shop in the spring of 2018. Beyond beauty, we are continually thinking about which categories could complement our current product range and strengthen our position as a one-stop destination for fashion and lifestyle.

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