Zalando will axe up to 5 per cent of its workforce as the economic slowdown forces Europe’s largest online fashion retailer to abandon a promise to avoid significant job cuts.
The Berlin-based company on Tuesday told staff that it would “remove several hundred overhead roles” over the coming months, saying that “the pandemic tailwinds have faded since 2022 and the macroeconomic environment has become more challenging”.
In a note to staff, Zalando did not disclose how many of its 17,000-strong workforce would leave and that discussions with the workers’ council had only just begun. The cuts will include those at “senior leadership level” while the retailer’s logistics centres, customer care and its handful of brick and mortar stores will be spared.
Zalando was one of the big winners as pandemic lockdowns forced more consumers online, but the end of that boom has hit the retailer’s sales growth and hammered its share price.
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The planned job cuts come just two weeks before the release of the group’s full-year results, which analysts expect to show that sales were flat at €10.4 billion and operating profit more than halved to just €187 million.
The group alarmed investors last June with a profit warning that sent shares briefly below its 2014 initial public offering price.
In August, Robert Gentz, co-founder and co-chief executive, said the group “just need to play a bit more defensively”, adding that a hiring freeze would be enough to stabilise its operations.
However, on Tuesday, Mr Gentz and David Schneider, his co-founder and co-chief executive, told employees that “we are not where we need to be and, as a result, we must take even more decisive action”. Both acknowledged that they were responsible for the current problems: “As founders and co-CEOs, this is on us.”
“Instead of a big company with a big company structure and mindset, we need to be a big company with a small company structure and mindset,” they said, admitting that the group had become too bloated. “We have added a degree of complexity to our organization that impacted our ability to act fast,” they added.
The decision to retrench further – Zalando had already scaled back its marketing budget and investment plans for new logistics centres – comes after the company enjoyed stellar growth in recent years.
Since early 2019, the group’s workforce has ballooned by a quarter while sales surged 60 per cent.
Shares in Zalando have staged a recovery over the past six months to hit about €40, but still trade well below the peak of €104.65 reached in 2021. – Copyright The Financial Times Limited 2023
