Zalando is just one example of many online fashion retailers and former Corona winners who are now struggling with a radical change in buying behavior. However, the Berlin group is a particularly prominent example of how close rise and fall can be. Last summer Zalando was still worth 28 billion euros on the stock exchange, on Friday it was only a fraction of that: almost six billion euros.
The reason: In view of inflation, the Ukraine war and gloomy prospects, consumers are reluctant to buy. This affects many companies and products, including Zalando. The business of Europe’s largest online fashion retailer is also doing worse because people are able to go to stores again after long months of the pandemic. Zalando has already felt this in the past few months. Customers bought less and returned more. The group therefore announced on Thursday evening after the market closed that it would be cutting its annual targets. On Friday morning, the share price then fell by up to 18 percent at times. It was the biggest price drop in almost eight years. It has been slowly going downhill for a year now, after the share reached a high of 105 euros.
The announcement didn’t come as a surprise. Competitors from abroad such as Asos and Boohoo had already corrected their forecasts in the past week. The main reason for the slump on the stock exchange was that Zalando, contrary to previous estimates, announced that it was no longer expecting a trend reversal in purchasing behavior for the rest of this year. And that the reluctance hit the retailer harder than expected. Co-CEO Robert Gentz emphasized that the current situation does not change the company’s basic strategy and long-term goals.
Expressed in numbers, this means: Zalando now expects a profit of 180 to 260 million euros for the year as a whole. This is well below the forecast from May, when Zalando was still targeting EUR 430 to 510 million.
The bad news put a damper on the share price of another major German online fashion retailer, Otto Group’s About You. And the shares of online companies with other business models also came under pressure, such as those of the food delivery service Delivery Hero and Hello Fresh.
Zalando wants to get off the defensive again by restructuring the range and, above all, saving costs. It has already reduced marketing expenses and cut planned investments in the expansion of logistics. In addition, Zalando is introducing a minimum order value in 15 other markets.