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After the change of forecast: the Zalando stock collapses

Status: 06/24/2022 10:53

The recent cut in forecasts triggered a sell-off in Zalando. Shares of the online fashion retailer temporarily slipped below the issue price at the IPO eight years ago.

After cutting the annual goals of online fashion retailer Zalando, the share of the DAX company has come under severe pressure. The newspaper fell by 18 percent in the morning to € 20.94 and thus below the issue price of € 21.50 at the IPO in 2014. More recently, the minus was around 11.5%. .

Zalando fears a prolonged decline in demand due to the recent clouded economic outlook. As a result, the company, which was still one of the big winners during the corona pandemic, is now cutting its annual targets and expects, at best, small sales growth in 2022.

Worse than feared prospects

The times when the online fashion retailer was able to convince with double-digit growth rates seem over for now. High inflation, fears of a recession and the gloomy mood of many consumers are currently driving the DAX group into stagnation. Zalando now wants to curb costs.

While analysts weren’t surprised at the drop, they were surprised at the scale. A retailer said Zalando’s new outlook is far worse than feared. Similarly, analysts at JPMorgan said the magnitude of the forecast cut was larger than expected and said they still could not recommend entering the industry despite the sell-off.

In the first quarter, Zalando had already felt the effects of the resurgence of brick and mortar retail after the lifting of the krone restrictions, deteriorating consumer sentiment and rising costs. The environment further deteriorated in the second quarter and consumer sentiment fell, according to a statement last night.

The value of the stock market went from 28 billion to six billion euros

Thus continues the strong downward trend of the Zalando stock. The boom of Corso Corona had been history for a while. During the peak phase of the pandemic, Zalando had long benefited from burgeoning online commerce. In the summer of last year, the price hit a record € 105.90, meaning the company was worth nearly € 28 billion at the time. They are now just under six billion euros.

The company is struggling with declining customer shopping desire. Last night, Zalando announced that at best sales in 2022 should only increase by three percent to € 10.7 billion. However, revenues could also stagnate at € 10.4 billion after the board of directors predicted growth of up to 19 percent in early May. At the time, the Management Board had already adjusted the forecast to the lower limit of the original outlook.

Current challenges may now last longer and be more intense than expected, he said. Zalando also cut its earnings forecasts massively. Earnings before interest and taxes (EBIT), adjusted for special effects, are expected to fall between 180 and 260 million euros in 2022, after the 468.4 million euros of the previous year. So far, management has set a target for this year in the lower end of the € 430 million to € 510 million range.

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