The end of the pandemic marked a sharp halt to a meteoric expansion sequence, which MarketScreener had foreseen, as we warned in early 2024 that the expectations of Zalando's management - who, at the end of 2021, were aiming for a volume of goods sold via its platform of €30bn by 2025 - seemed untenable.
To its credit, this volume had grown at an annualized rate of 25% between 2014 and 2021, so it was tempting to extrapolate the trend. But by the end of 2024, Zalando had only achieved half of this over-ambitious target, with a volume of goods sold of €15bn; while all performance indicators - number of users, average basket, frequency of purchase, etc. - had also ceased to grow: they also stopped growing.
MarketScreener's warning was, however, accompanied by heartfelt congratulations for the realistic and rigorous management consistently demonstrated by Zalando's management team. This achievement is all the more noteworthy given that the competitive environment in which the German group operates remains fierce, with Amazon dominating the market and Vinted unstoppably gaining ground.
In this respect, Zalando's operating profit is to be commended, doubling over the twelve months to 2024, thanks to an increase in fees charged to brands and merchants using its platform. However, this increase was clearly well absorbed by these customers, even if it may have contributed to slowing growth.
Cash flow generation is returning to normal after the distortions caused by the pandemic. Broadly speaking, our analysts calculate a cash profit - or free cash flow - of around €200m over 2024, half of which will be used to buy back shares and the other half to reduce the group's debt and buy back convertible bonds.
