The never ending pain in e-commerce
We recently wrote about the guidance cut from Asos driven by the cost of living crisis causing higher recall rates than normal. Yesterday after the market close, Zalando issued a guidance cut indicating that Q2 revenue growth would be significantly below analyst estimates and that revenue growth for the fiscal year is now expected to be 0-3% down from previously 12-19% suggesting an unanticipated decline in consumer activity driven by weakening macroeconomic conditions also reflected in consumer confidence. Zalando is also revising down its fiscal year EBIT guidance range to €180-260mn significantly below estimates of €361mn. Zalando shares are down 13% in today’s trading session hitting the lowest levels since late 2014 just after its IPO. In its first quarter, Zalando swung back into negative free cash flow on a 12-month trailing basis.
E-commerce is hit hard from elevated logistics costs and higher wage pressures from a tight labour market, but being a retailer is also extremely difficult because you are controlling the entire value chain and thus the room for maneuvering is small. If we look across of theme baskets, e-commerce is now close to being the worst theme basket over the past year only marginally surpassed by the crypto & blockchain theme. With expectations being rock-bottom the question is increasingly when we hit the floor in e-commerce stocks.