Zalando is favoured ahead of Asos and boohoo by analysts at the Royal Bank of Canada (TSX:RY).
Asos’ price target was slashed to 590p from 950p, while boohoo’s target remained unchanged at 35p. Zalando’s target price was also unchanged at €50.
The broker has greater confidence in the European online retailer's ability to strike a balance between a competitive proposition and margin improvement.
“Given the flexibility provided by its platform business, we also view Zalando as best positioned to capture demand when this returns,” RBC said.
Profits will be driven by head office cost control and fulfilment cost efficiencies, and Zalando “appears to be leading its peers on the fulfilment side.”
Margins across the board should be supported by more disciplined buying and improved stock profile, while the UK-based retailers should benefit from normalising inbound freight and material costs, RBC said.
Top-line growth for online players remains tough given ongoing market challenges, with RBC predicting a 3% decline in sales on average in 2023.