Coronavirus Tailwinds Unwind for Zalando in Q1 but Long-Term Potential Intact; Shares Attractive

We don’t expect to materially change our EUR 59 fair value estimate for Zalando after it reported a weak first quarter as the benefits it enjoyed from coronavirus lockdowns unwind. The company kept its guidance for the full year (16%-23% growth in gross merchandize value, or GMV, 12%-19% growth in revenue and EUR 430 million to EUR 510 million in adjusted operating profit) but expects to reach its lower end, which is in line with our expectations for GMV and revenue but somewhat below our profit forecast. After the selloff over the past year (shares trading close to 2020 lows), we believe shares look attractive as our long-term thesis for increased e-commerce penetration of European apparel (to 50% from 30% in 2021) and scaling of profitability remains intact.