Zalando in the Pivotal Point Check: Online fashion retailer surprises with jump in profits in 2023 and sees new opportunities for growth in the medium term!

Last year, Zalando had to contend with customers paying closer attention to their spending as a result of inflation. Due to the dampened buying mood, the gross merchandise value fell by 1.1% to 14.6 billion euros. Group sales fell by just under 2% to 10.1 billion euros. Thanks to cost savings, including in logistics, profit adjusted for non-recurring items (EBIT) jumped significantly from almost €185 million to around €350 million . In terms of operating profit, Zalando reached the upper end of its own target range. The online retailer thus far exceeded the average analyst estimates, which had not expected a figure of this magnitude until next year. Zalando's bottom line for 2023 was €83 million after €16.8 million in the previous year.

The online fashion retailer sees new growth opportunities in the medium term. The gross merchandise volume (GMV) and revenue are expected to increase by an average of 5-10% per year until 2028, as the company announced on Wednesday, March 13, 2024. In 2028, Zalando is then aiming for a profit margin (EBIT margin) adjusted for special effects of 6-8%, which is significantly higher than recently. However, the consumer slump is likely to continue in the current year. In the worst-case scenario, revenue and gross merchandise value could remain at the previous year's level, while management aims to increase adjusted operating profit to €380-450 million by further improving profitability.

In the past year 2023, Zalando was still clearly struggling with consumer restraint in Europe and the difficult economic conditions. The number of customers stood at 49.6 million at the end of the Second quarter, marking the second consecutive quarter of decline. In the meantime, Zalando has made progress in terms of profitability. In the meantime, the job reduction program has also been completed. Zalando wants to expand its luxury range and sell more logistics services to other retailers. In addition, new offerings supported by artificial intelligence are intended to increase customer loyalty. A pilot project with an AI-based chatbot is already underway. The bot uses ChatGPT to advise customers on their choices.

Zalando is valued at €5.79 billion  on the stock exchange. Revenue is expected to reach €10.48 billion in 2024, rising to €12.45 billion by 2026. Earnings per share are expected to be €0.85 in 2024. This is expected to increase to €1.65 by 2026. The P/E ratio for 2026 is therefore 13.15. Experts do not expect online fashion retail to pick up until the second half of the year at the earliest. In chart terms, the share has taken the first step with its upward leap. The price range around €25 represents the next relevant hurdle.

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