Analysts at Liberum Capital think Zalando SE's model remains robust, with multiple drivers supporting long-term growth, and they do not believe the likes of UK-listed rivals ASOS PLC (LSE:ASC) and Boohoo Group PLC (AIM:BOO) can compete effectively against it across Europe.
The analysts noted that the Germany-based company now has over 50 million active customers but that still only represents around 10% of the total population in its current markets, as against a 21% population penetration already achieved in its top five markets.
They said: "There is huge scope for growth coming from new categories, driving platform participation, and, with over 100m population untapped, provides confidence in the long-term growth aims."
The Liberum analysts pointed out that Zalando saw its revenue growth improve to +7% in its third quarter from a flat position in the first half.
They noted: "The group has taken decisive steps to improve profitability with the introduction of delivery fees above a minimum order, margins are benefiting from the greater mix from partner brands, marketing and cost efficiencies are flowing through and the group is definitely taking share in tough market conditions."
The analysts said: "Zalando’s mix of a wholesale and commission-based model strikes the right balance for online fashion and lifestyle retail, attracting consumers with a vast breadth of options while still limiting Zalando’s stock."
They noted that Zalando shares have declined by around 68% over the last 12 months, and think this presents "a buying opportunity for long-term investors to get in at 0.5x Forward EV/Sales for very strong growth 10% sales CAGR and 10% EBIT CAGR over 2021-25".