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Zalando slashes guidance again due to summer heat wave

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By Reuters
Zalando slashes guidance again due to summer heat wave
A Zalando logo is seen printed on a wall in a showroom of the fashion retailer Zalando in Berlin, October 14, 2014. REUTERS/Hannibal Hanschke/File Photo   -   Copyright  Hannibal Hanschke(Reuters)

BERLIN (Reuters) – Zalando <ZALG.DE>, Europe’s biggest pure online fashion retailer, cut its 2018 guidance for a second time in as many months, saying the unusually hot summer and a delayed switch to the fall/winter season weighed on revenue growth and earnings.

Zalando said higher discounts on summer stocks and higher fulfilment costs were weighing on profitability.

Shares in the group were indicated to open 10 percent lower in pre-market trade.

The firm recently started selling beauty products online and is also investing heavily in logistics and technology as competition heats up, both from e-commerce players like Amazon <AMZN.O> and big chains like H&M <HMb.ST>.

H&M, the world’s second-biggest fashion retailer, reported on Monday that its sales bounced back in the third quarter, helped by a new logistics system, as a revamp to meet growing online and budget competition was paying off.

Zalando now expects revenue growth around the low end of its 20 percent to 25 percent target corridor, compared with a previous forecast for a figure in the lower half of the range, it said late on Monday.

It now sees adjusted earnings before interest and tax (EBIT) between 150 million euros and 190 million euros ($175 million-$222 million), compared with the previous guidance at the low end of a 220 million euros (£195 million) to 270 million euros range.

The hot summer had already prompted Zalando, launched in Berlin in 2008, to trim its outlook on Aug. 7, when it said that the traditional discounting at the end of the summer season would likely be more pronounced than usual due to the weather.

For the third quarter, which ends on Sept. 30, it expects revenue growth and adjusted EBIT to be significantly below analyst consensus for 19.8 percent and minus 2 million euros, respectively.

Co-CEO Rubin Ritter said Zalando’s growth prospects remained intact: “Despite the challenging market environment, we continue to invest in growth and remain committed to our target of doubling the business by 2020.”

Zalando is due to publish full third-quarter financial results on Nov. 6.

(Reporting by Maria Sheahan and Christoph Steitz; Editing by Subhranshu Sahu)