European fashion retailer Zalando, considered the continent’s largest online-only apparel company, on Tuesday blamed unseasonably warm weather for its weak winterwear sales and as a key factor contributing to the slowest sales growth in its 10-year history.
While third-quarter sales still rose 12 percent, to 1.2 billion euros ($1.37 billion), the results were far below the 20 percent to 25 percent annual growth analysts expected.
Zalando reported a quarterly adjusted loss before interest and taxation of 39 million euros ($44.6 million), citing mounting fulfillment costs and troubles with returns, in addition to the slow sales.
In announcing the company’s third quarter results Tuesday, co-CEO Rubin Ritter said Zalando has resolved some of its issues with returns—roughly half of its sales are returned—with more returned goods now being resold, in contrast to fewer returns being refurbished for resale in the past.
To reduce the number of returns, Ritter said the company is working on things like making size recommendations for shoppers.
Zalando has also seen a 7 percent drop in average order size to 57.50 euros ($65.73), which has impacted profitability. The company is working to increase order sizes, by adding things like beauty products in the hopes consumers will purchase them together with their apparel. To increase the profitability of smaller orders, Ritter said Zalando is also experimenting with requiring minimum order amounts. The company currently is testing a 25 euro ($29) minimum order requirement in Italy.
Higher transportation costs and investments in logistics also affected profitability at Zalando. According to Ritter, the company is exploring ways to improve the efficiency of its logistics network and intends to centralize it warehouse operation to process shipments of garments from brands before they’re shipped to regional distribution centers for delivery to end customers.