Zalando, the online clothing retailer, is “at the start of the inflection point”, according to Deutsche Bank, which was impressed by the German company posting strong profits and upping full-year guidance when it reported second-quarter results on Thursday.
Delivering around €15 million in underlying profits for the period, Zalando raised the midpoint of its full-year earnings guidance, resulting in the German bank upping its share price target by €1 to €37.
Management's outlook for the medium term has also been encouraging, predicting a return to double-digit percentage growth in gross merchandise volumes (GMV), the bank added.
A return to positive GMV growth in July and an increase in marketing spend are signs of a turning point at the retailer, having previously experienced a subdued market over the last year, Deutsche Bank said.
Looking ahead, Zalando maintains a positive outlook for the second half of this year and into 2024, anticipating further expansion of profits, primarily driven by improved gross margins and lower fulfilment costs, rather than relying on reduced marketing spending.
Zalando shares, which Deutsche Bank rates a ‘buy’, are up close to 20% in the last month, having opened on Friday at just under €31.