ZOZO ((JP:3092)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for ZOZO painted a mixed picture of the company’s financial performance. Despite achieving strong growth in Gross Merchandise Value (GMV) and recording a high operating profit, the company faced challenges from weather impacts and rising costs. While successful promotions and an increase in active members are bright spots, concerns were raised over declining operating margins and logistics challenges.
Gross Merchandise Value (GMV) Growth
ZOZO reported a 5.1% year-on-year increase in GMV, reaching JPY 427.1 billion. Notably, GMV excluding other GMV rose by 7.4% to JPY 399.4 billion, indicating robust underlying growth.
Record High Operating Profit
The company achieved a record high operating profit of JPY 45.6 billion, marking a 2.4% increase year-on-year. This performance reflects a 76.2% achievement rate against the company plan for the third quarter.
Promotional Success
ZOZO’s promotional activities, including Black Friday sales, were deemed successful, contributing to higher than expected GMV. However, the direct impact on GMV was noted to be limited.
Increase in Active Members
The number of active members on ZOZO’s platforms grew by 220,000, bringing the total to 10.73 million, reflecting the company’s ability to attract and retain customers.
Growth in Yahoo! Shopping
Yahoo! Shopping showed strong performance, with active promotions helping to achieve higher than planned GMV, contributing positively to the overall sales figures.
Operating Profit Margin Decline
Despite the increase in operating profit, the operating profit margin decreased by 0.6 points year-on-year to 11.4%, highlighting efficiency challenges.
Warm Winter Impact
An unseasonably warm winter negatively impacted ZOZO’s sales of outerwear and other winter apparel, resulting in lower than planned GMV for ZOZOTOWN.
Inventory and Logistics Challenges
The company faced increased inventory supply and logistics challenges due to the warm winter, leading to increased logistics-related expenses and decreased operating efficiency.
Advertising and Promotional Expenses
Increased expenses in advertising and promotions, including new logistics space, impacted operating profit negatively, with a 3.8% year-on-year decrease.
Average Retail Price Decline
The average retail price decreased by 1.7% year-on-year, attributed to the warm winter and increased markdown ratios.
Yamato Transport Price Hike
The anticipated price hike from Yamato Transport is expected to increase shipping costs, adding to the company’s financial challenges.
Forward-Looking Guidance
ZOZO’s forward-looking guidance emphasizes a continued focus on maintaining GMV growth amidst challenging market conditions. The company plans to navigate the impacts of abnormal weather and rising logistics costs through effective promotions and strategic adjustments. While the operating profit margin has decreased, the company remains committed to improving efficiency and profitability.
In conclusion, ZOZO’s earnings call highlighted a mixed bag of outcomes, with strong GMV and profit growth overshadowed by challenges such as weather impacts and rising costs. Despite these hurdles, successful promotions and a growing customer base provide a positive outlook for future performance. Investors will be keen to see how the company addresses these challenges in the coming quarters.
