German online retailer Zalando slumps 14% on weak outlook, recession fears

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By Mauro Orru


Shares of German online retailer Zalando SE plunged in Friday morning trading a day after the company reported a weaker-than-expected second quarter, which led it to cut forecasts for the year as consumers are shopping less amid rising inflation and growing recession risks.

Consumer confidence in the eurozone declined in June because of the increasing cost of living and a slowdown in the economy. The U.S. and European economies slowed sharply as surging prices of energy and food weakened demand for other goods and services, business surveys showed. Russia’s war in Ukraine has hit growth as high inflation spread across the globe.

At 0750 GMT, Zalando shares traded 14% lower at EUR21.95.

Zalando said it had a profitable but weaker-than-expected second quarter, with sales and earnings coming in well below analysts’ forecasts.

The company downgraded its forecasts for the year as it “no longer assumes a rebound of consumer confidence in the short term.”

It said it now expects sales to grow up to 3%, compared with previous forecasts between 12% and 19%. Gross merchandise volume–a closely watched metric tracking sales performance–should rise by 3% to 7%, and no longer toward the lower end of between 16% and 23%. Adjusted earnings before interest and taxes–a key measure of profitability–should come in between 180 million euros ($189.4 million) and EUR260 million, well below previous forecasts between EUR430 million and EUR510 million.

Deutsche Bank analysts wrote in a note to clients that Zalando’s “significant” and yet “realistic” guidance cuts would help traders reassess the investment case for online retailers that have enjoyed a banner two years as homebound consumers turned to online shopping at the height of the pandemic.

“At this stage the evidence points towards this largely being an online issue due to stores reopening, but the direction of travel is pointing quickly towards a likely cliff edge for the European consumer,” Deutsche Bank analysts said.


Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94


This article was originally published by Marketwatch.com. Read the original article here.

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