Japan's Zozo cuts outlook, blames failed measurement-taking Zozosuit (updated)
31/01/2019 10:08
* Sees full-year operating profit Y26.5 bln vs previous Y40
bln
* CEO says people ordered Zozosuit, did not use it to buy
clothes
* CEO says will ditch "high risk, high return" strategy
(Adds CEO comments, other details)
By Ritsuko Ando
TOKYO, Jan 31 (Reuters) - Japanese fashion e-commerce
website Zozo Inc 3092.T slashed its annual profit outlook and
dividend on Thursday, blaming a failed and costly experiment
with a skin-tight bodysuit for taking measurements.
Zozo, with a nearly 50 percent share of Japan's e-commerce
market for mid- to high-end fashion, had tried to branch out by
launching its own private brand and a made-to-measure service.
But last quarter it scrapped the Zozosuit, a polka dot
bodysuit it distributed for free that allowed users to upload
body measurements, amid complaints over distribution delays.
The bodysuit, along with billionaire CEO Yusaku Maezawa's
plans for a lunar flyby as the first private passenger on Elon
Musk's SpaceX mission, had helped spread the company's name
globally. Its end has cast a shadow on Zozo's strategy.
"It was a year of trial and error. We have caused our
investors great concern," an unusually contrite Maezawa told an
analyst conference, adding he would now ditch his "high risk,
high return" strategy for lower risk and medium returns.
Many people ordered the bodysuit but did not use it to buy
clothes as expected, he said. Some did not even upload their
measurements, he added, leaving the company saddled with the
huge cost of distributing the suits without seeing returns.
The made-to-measure service also struggled to keep up with
the orders that came in, with some customers waiting for five
months for suits to be delivered, he added.
"By distributing the 'Zozosuit' for free so that people
could take measurements, we were hoping to create demand for the
Zozotown business, including the private brand. But the impact
did not have the scale that we had hoped for," the company said
in a statement earlier in the day.
The company now expects a full-year operating profit of 26.5
billion yen ($244 million), down around 19 percent from a year
earlier. It previously forecast a rise to 40 billion yen.
Investors have recently turned wary about the company's
outlook, particularly after apparel company Onward Holdings Co
8016.T pulled its brands off the shopping website due
to friction over discounts that Zozo implemented.
Maezawa said 42 of 1,250 shops on its platform had halted
sales due to objections about Zozo's discounting strategy.
The company's shares have halved in the past six months.
Zozo said it now expects to pay a year-end dividend of 10
yen per share instead of an initial forecast of 22 yen.
($1 = 108.5700 yen)
(Reporting by Ritsuko Ando; Editing by Himani Sarkar)
((Ritsuko.Ando@reuters.com; +81 3 6441 1743; Reuters Messaging:
ritsuko.ando.thomsonreuters.com@reuters.net))