Zalando earnings alert sends shares below 2014 listing price

Zalando shares fell nearly a fifth on Friday after Europe’s largest online fashion retailer cut its full-year outlook as consumers cut spending amid deepening recession fears.

The Berlin-based company warned that revenue may not increase at all this year after a much weaker-than-expected second quarter. Zalando growth forecast is 12 to 19 percent.

In a dire warning issued after markets closed on Thursday, Zalando said “management now expects macroeconomic problems to be longer and more intense than previously expected.” The group added that its hopes for “restoring consumer confidence in the short term” have not materialized.

The recognition of Zalando, which was among the beneficiaries as the pandemic forced more shoppers to shop online over the past two years, is one of the clearest signs of loss. higher inflation takes over consumers.

While Zalando still looks to be profitable, its predicament stands in stark contrast to the prosperous backdrop it has been in since its Frankfurt listing in 2014.

Since listing in Frankfurt, Zalando has trumpeted a 25% year-over-year revenue growth. Last year, thanks to the pandemic, his income grew by 30%.

However, even before Thursday’s warning, Zalando’s shares were under pressure, making it the worst performer in Germany’s Dax 40 blue-chip index, as investors expected pandemic buying habits might not last.

Friday’s drop takes the group’s shares below their 2014 IPO price of €21.50. After peaking at €26.4 billion in July 2021, its market capitalization has collapsed to around €6 billion. Shares fell 17% to 21.10 euros on Friday before rebounding slightly and falling 15%.

Zalando Stock Line Chart Drops Sharply, Showing Unfashionable

The bleak outlook for Zalando has also hit UK-listed fashion retailers Asos and Boohoo, which have already been hit by a combination of a return to pre-pandemic shopping habits, higher costs and shrinking consumers.

Asos shares fell 4.5% and Boohoo shares fell 3.6% in early trading in London. Like Zalando, the companies have also had to face increased competition, especially from China’s Shein.

Zalando expects operating income of only €180 million to €260 million for the year, well below its forecast earlier this year. However, this forecast is based on a “significant increase in profitability in the second half of 2022,” the company said, adding that it has embarked on a cost-cutting plan. In the second quarter, the company slashed marketing spending, slashed investments in infrastructure, and introduced minimum order volumes in 15 countries.

Deutsche Bank analysts said the company’s new guidance suggests that its full-year earnings will be about 90% lower than previously expected.

Analysts remain positive on Zalando long-term, warning investors against “throwing the baby out” as Zalando was “a quality asset with realistic earnings expectations at a low valuation.”

“While this new environment is having a negative impact on our financial performance, our strategy and long-term goals have not changed,” the co-CEO said. Robert Gentz.

Reporting by Jonathan Ely in London