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How do fashion e-commerce stores work? The Zalando case

If one thinks of the widespread use of Zalando parcels in Swiss post offices, the sudden drop in prices that Zalando has behind him is astonishing. But the example also shows that the number of packages sent is not synonymous with economic success – certainly not with success on the stock market. In the fall, Zalando disappointed investors with corporate results that were below expectations. Until December, the stock price came in at 21 euros. A booth that was last reached shortly after the IPO in 2014.

Zalando shares since the IPO on 1 October 2014

Is the counter-movement of recent trading days now a sign that Europe’s largest online fashion retailer is out of the woods? Probably not. On the one hand, the Zalando rally was triggered by takeover rumors. A startup expert said in the German “Handelsblatt”, Zalando was a takeover candidate: An interesting business model and on the stock market relatively cheap.

Then it went with the Zalando share in a few days from 23 to almost 28 euros. As possible buyers already Amazon, H & M or Alibaba were called. For the Chinese online giant Alibaba, the takeover on the way to further expansion in Europe could be especially worthwhile. Such speculations are not new, but always attract investors. Even though Zalando managers have already stressed that they want to remain independent.

Rumors alone will not be enough

On the other hand, Zalando could well have slipped back into the red in 2018. In the third quarter, the Group posted a bottom line loss of just under 42 million euros. The trend towards less lush orders continued. On average, Zalando customers spend less money per order. To reduce the number of returns, the size recommendations should be improved.

The rapid sales growth of recent years is offset by profitability, which leaves much to be desired. But the Berlin-based company is still committed to putting volume above profit. For 2018, Zalando expects revenue growth at the lower end of the target range of 20 to 25 percent. Details will be available at the results presentation on February 28th.

And what does the analyst community expect? According to Bloomberg data, 18 out of 38 financial analysts currently recommend Zalando stock for sale, 16 for hold and four for sale. Above all, the average price target of around 37 euros is astonishing. Compared to the current share price of 26.30 euros (as of January 14, 2019), this is an upside potential of almost 39 percent.

Interested investors should also be aware that rumors alone will not support the Zalando share in the future. Zalando is repeatedly referred to as the German flagship startup. But in a timely manner, the numbers must be exemplary.


Also published on Medium.

Published inE-commerce

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