Online retailer Zalando reports first profit as eyes IPO

BERLIN, Germany - Zalando, Europe's biggest online fashion retailer, reported first-half sales rose 29.5 percent and it made its first-ever profit, laying the groundwork for an expected imminent initial public offering.

Zalando, which competes with Britain's ASOS, said first-half sales came in at 1.047 billion euros (0.83 billion pounds), while earnings before interest and tax (EBIT) swung to 12 million euros compared with an operating loss a year ago of 72 million.

Zalando, which is holding its first media presentation later on Thursday, is set to announce plans in the first half of September to list a stake of around 15 percent that could value the company at some 6 billion euros, sources have told Reuters.

Rubin Ritter, a member of Zalando's management board, declined to comment on the listing plans on Thursday.

The Berlin-based company, which began selling shoes in 2008, now ships 1,500 brands to customers in 15 countries, gaining widespread visibility for its "scream for joy" ads showing delighted customers tearing open Zalando packages.

Zalando said its operating margin was 1.2 percent in the first half of the year, compared with a negative 8.9 percent a year ago, driven by its core Germany, Austria and Switzerland region which made a margin of 4.6 percent.

The group said the shift to profitability was due to efficiency gains across the board, including in logistics, marketing and range selection.

"Achieving a positive EBIT margin in the first half is a great success for Zalando," Ritter said in a statement, adding that the first half of the year was traditionally weaker than the second half due to higher prices for winter garments.

Sales growth slowed to 25 percent in the second quarter from 35 percent in the first quarter, but Ritter said Zalando was still growing faster than the broader e-commerce market.

"We are still relatively small given that the European fashion market is worth 420 billion euros and we only have a half a percentage point market share," he told Reuters. "Winning market share and profitability are not in opposition."

Ritter said Zalando could eventually expand to more markets in eastern Europe although it does not have any immediate plans.