Zozo withdraws from Europe and the U.S. while hopes for profit to recover later this year

New York – Japanese online fashion retailer Zozo Inc. said it expects its profit to recover in the current fiscal year, after booking its first-ever annual earnings fall. The earnings report left the industry debating the finances of the company running Zozotown online mall.

To date, Zozo has managed to capture almost half of Japan’s online sales of mid- to high-end clothes by setting up a website catering to fashion-forward, higher-income customers, highlights Reuters.

But it failed to anticipate some transformation pitfalls. For example, the retailer launched a made-to-measure service using a bodysuit that allowed users to upload measurements online. Many ordered the bodysuit yet never used it to buy clothes. Zozo had to bear the huge cost of distributing the suits without seeing returns, struggling as well to cope with orders. As a result, some customers had to wait several months for delivery.

The failure of the bodysuit triggers Zozo’s exit from Europe and the U.S.

“We started this with the belief that it’s not good enough to have just three sizes of S, M or L. But as you know, it did not go as we had hoped,” CEO Yusaku Maezawa told analysts. In November, Zozo said it would wind up the Zozosuit project.

Disagreements with some of the fashion brands stocked on the Zozotown website also contributed to the company's first-ever annual drop in earnings.

The company also announced the closure its European and US operations, writing off at least 2.7 billion yen (18.7 million pounds). Suza Burger, chief executive of Zozo Germany, said in a statement that her time at the company had been an "exciting journey for me and my entire team." "We were overwhelmed with the enthusiasm and support we have received by our customers and media for the concept of Zozo," she said, as reported the BBC.

Additionally, the fashion retailer is discontinuing its service in Asia Pacific and the Middle East.

Zozo's operating profit for 2018-19 fell 21.5 percent from the previous year, to 25.7 billion yen (178 million pounds). On the upside, the fashion group expects its profits to recover in 2019-20. The company argued during the presentation of its financial results that Japanese consumers were just beginning to buy clothes online, what will help lift sales It forecast a 24.7 percent rise in operating profit to 32 billion yen for the current financial year.

Shares of Zozo have nearly halved in the past year on fears that its popularity may be waning, and that its cash position looked weak.

photo: zozo bodysuit. credits: inc.