Company Reports

Zalando reported rather solid revenue growth in the second quarter at 7.3%, while operating margin remained largely flat. Lowering the upper range of 2025 guidance to 4%-7% growth in pro forma gross merchandise value (4%-9% prior) and flat margin development in the quarter sent shares 5% lower.

Zalando is the leading European pure-play e-commerce fashion platform. We believe that through its wide reach (50 million active customers or over 10% of the addressable population in markets where it is present and over 7,000 brands represented), it benefits from traces of network, cost, and intangible asset advantage. Although we don’t think these advantages are currently strong enough to warrant a moat, we think the intangible asset advantage should strengthen over time as more customer traffic data is accumulated and better analytics allow for improved conversion rates and customer loyalty.

Zalando saw an acceleration in gross merchandise value growth of 6.5% for the first quarter of 2025 and a solid 7.9% increase in revenue, outpacing the FactSet-compiled consensus estimate by 2%. The share price jumped by nearly 5% at the market open on May 6.

We are maintaining our fair value estimate for no-moat Zalando as the company reported 2024 revenue and profits in line with previously announced figures and guided for revenue acceleration in the years to come (in line with our expectations) but with stronger profitability progression. The shares look attractive after their recent price decline.

We are maintaining our fair value estimate for Zalando, as the company pre-announced fourth-quarter results that will be higher than its guidance.

We are increasing our fair value estimate for no-moat Zalando to EUR 42.70 per share from EUR 41 per share as we incorporate its planned acquisition of competitor About You into our forecasts. We still see shares as attractive with about 30% upside to our fair value estimate, despite an almost 60% share price rally year to date, and significant outperformance of the broader European market and all stocks under our European apparel coverage. Shares are now trading in 4-star territory.

Zalando is the leading European pure-play e-commerce fashion platform. We believe that through its wide reach (almost 50 million active customers or over 10% of the addressable population in markets where it is present and over 7,000 brands represented), it benefits from traces of network, cost, and intangible asset advantage. Although we don’t think these advantages are currently strong enough to warrant a moat, we think the intangible asset advantage should strengthen over time as more customer traffic data is accumulated and better analytics allow for improved conversion rates and customer loyalty.

We are maintaining our fair value estimate of EUR 41 per share for no-moat Zalando on the back of solid third-quarter results.

We are retaining our fair value estimate for no-moat Zalando after the company upgraded its full-year outlook on stronger-than-expected third-quarter demand.

We are maintaining our fair value estimate of EUR 41 per share for no-moat Zalando as the company delivered improving revenue and solid margin development in the second quarter. We see shares as deeply undervalued at current levels with almost 100% upside to our fair value estimate.

We maintain our fair value estimate for no-moat Zalando as the firm reported sluggish growth still, but improved profitability and ramped up marketing spending in the first quarter. We still see shares as undervalued with almost 60% upside to our fair value estimate.

Zalando is the leading European pure-play e-commerce fashion platform. We believe that through its wide reach (almost 50 million active customers or over 10% of the addressable population in markets where it is present and over 7,000 brands represented), it benefits from traces of network, cost, and intangible asset advantage. Although we don’t think these advantages are currently strong enough to warrant a moat, we think the intangible asset advantage should strengthen over time as more customer traffic data is accumulated and better analytics allow for improved conversion rates and customer loyalty.

We are maintaining our fair value estimate of EUR 53 for no-moat Zalando, with the company reporting full-year results above our expectations. Management provided an updated midterm strategy, and we think shares remain attractively priced. Zalando, as the most-scaled player with a strong balance sheet and room to invest, could emerge stronger in the current general online apparel market tumult.

Zalando is the leading European pure-play e-commerce fashion platform. We believe that through its wide reach (over 50 million active customers or over 10% of the addressable population in markets where it is present and over 7,000 brands represented), it benefits from traces of network, cost, and intangible asset advantage. Although we don’t think these advantages are currently strong enough to warrant a moat, we think the intangible asset advantage should strengthen over time as more customer traffic data is accumulated and better analytics allow for improved conversion rates and customer loyalty.

We are maintaining our fair value estimate for no-moat Zalando as the company reported declines in third-quarter gross merchandise value and revenue in the low single digits but a strong improvement in adjusted EBIT. The company lowered its full year GMV and revenue guidance (to negative 2% to 1% and to negative 3% to negative 0.5%, respectively, from 1%-7% and negative 1% to 4%). Our forecast calls for a 0.5% revenue decline in 2023. The company maintained operating profit guidance despite weaker growth on strong cost controls. Zalando attributed weakness in the third quarter partially to adverse weather conditions (slow start of autumn in Europe), which was also mentioned by peers, like H&M. We see Zalando shares as undervalued, and it is our preferred name in European online apparel thanks to its scale (more than 10% of the addressable European population in active customers) and financial resources (EUR 1.9 billion in cash and equivalents).

We are maintaining our fair value estimate for no-moat Zalando as the company reported still-sluggish sales but strong improvement in profitability in the second quarter. For the full year, management slightly increased its outlook for EBIT but expects to be toward the lower end of guidance on gross merchandise value and revenue, both of which are already similar to our forecasts. We continue to view the shares as materially undervalued, trading in 5-star territory with over 70% upside to our fair value estimate. We believe Zalando is well positioned to invest countercyclically and take market share in a more challenging demand environment.

Zalando is the leading European pure-play e-commerce fashion platform. We believe that through its wide reach (over 50 million active customers or over 10% of the addressable population in markets where it is present and over 7,000 brands represented), it benefits from traces of network, cost, and intangible asset advantage. Although we don’t think these advantages are currently strong enough to warrant a moat, we think the intangible asset advantage should strengthen over time as more customer traffic data is accumulated and better analytics allow for improved conversion rates and customer loyalty, granting Zalando a positive moat trend.

We expect to reduce our fair value estimate for no-moat Zalando by a mid- to high-single-digit percentage to account for lower growth in 2023 and after continued weakness in quarterly sales figures. We still see shares as materially undervalued at current levels as we expect the online apparel industry to return to high-single-digit growth and Zalando to return to low-teens growth.

We don’t expect to make a material change to our EUR 65 fair value estimate for no-moat Zalando as we incorporate full-year 2022 results into our models. Despite more than doubling from last year’s lows, shares still present value, trading in 5-star territory at an almost 40% discount to our fair value estimate.

We are maintaining our fair value estimate of EUR 65 for no-moat Zalando as the company reported third-quarter revenue and stuck to the lower range of its prior full-year guidance. Its guidance implies gross merchandize value growth closer to 3%-7% versus 4% in our models, revenue growth of 0%-3% versus negative 0.8% in our models, and adjusted EBIT in the range of EUR 180 million-EUR 260 million versus EUR 220 million in our models. Since our assumptions were already mostly closer to the bottom range of the guidance, we don’t expect to significantly adjust our forecasts. Zalando is our top pick in the European online apparel segment and remains deeply undervalued.