Deutsche Bank has issued a preview for online fashion retailer Zalando's second-quarter results, forecasting a 25% jump in sales to €3.54 billion. But beneath the top-line strength, the bank warns that margin pressure and an ongoing probe by German regulator BaFin could keep a lid on the stock's near-term upside.
In a note published Monday, Deutsche Bank analysts projected second-quarter earnings before interest and taxes (EBIT) of €205 million. That figure sits below the €210–220 million range that the broader analyst consensus had been expecting. While the difference may seem small, such near-term misses often trigger faster estimate cuts than longer-term model adjustments, as investors reassess the company's profit trajectory.
Deutsche Bank also estimated that underlying gross merchandise volume (GMV)—the total value of goods sold on Zalando's platform—rose about 6% in the quarter, similar to the first quarter's pace. The bank noted that a softer April gave way to stronger trends in May and June, though a recent heatwave may have dampened demand for certain apparel categories. Online shopping, however, tends to hold up better than physical retail during such weather events.
Regulatory cloud and margin questions
Adding to the uncertainty, Zalando is facing a probe by BaFin, Germany's financial regulator, which has spooked investors since the stock rallied in May. The nature of the probe has not been fully detailed, but regulatory scrutiny can weigh on sentiment and create a 'risk premium' that investors demand for holding the stock.
Deutsche Bank raised its revenue forecasts for 2026 through 2028 by 0.5%, now expecting €13.93 billion, €14.82 billion, and €15.74 billion respectively. It also lifted earnings-per-share assumptions for 2027 and 2028 while leaving 2026 unchanged. Yet the bank kept its price target at €35, signaling that it wants clearer evidence that Zalando can protect its margins and that the regulatory uncertainty will not linger.
When an analyst raises long-term forecasts but holds the price target steady, it can act like a soft ceiling on the stock's valuation. Better growth is acknowledged, but it is not rewarded with a higher multiple until near-term execution looks cleaner. That dynamic puts extra weight on the actual EBIT number when Zalando reports.
What it means for investors
For everyday investors, the key takeaway is that the market's reaction to Zalando's results may hinge more on the profit margin than on the headline sales growth. If the company delivers EBIT in line with Deutsche Bank's €205 million view—or worse, below it—the stock could face pressure as analysts trim their profit estimates for the coming quarters. Conversely, if margins hold up and management sounds confident about the outlook, it could lower the 'risk premium' investors apply for uncertainty, making it easier for the stock to trade above that €35 reference point.
Zalando operates in a competitive online fashion space, where players like ASOS and Boohoo have also faced margin challenges. The broader economic backdrop, including inflation and shifting consumer spending patterns, continues to influence demand for discretionary items like clothing. Investors will be watching not just the numbers but also any commentary on customer behavior, inventory levels, and the regulatory situation.
Deutsche Bank's note comes amid a mixed period for European retail stocks. While some companies have benefited from resilient consumer spending, others have warned of cautious shoppers. The bank's decision to lift long-term revenue forecasts suggests confidence in Zalando's platform and market position, but the unchanged price target reflects a wait-and-see approach on profitability and regulatory clarity.
For context, Deutsche Bank itself has been in the news recently for selling its India retail and wealth business to Kotak Mahindra, a move that streamlines its global operations. But its coverage of Zalando remains focused on the e-commerce sector's fundamentals.
As the second-quarter reporting season unfolds, investors will compare Zalando's results against those of other retailers. The company's ability to balance growth with margin discipline will be crucial in determining whether the stock can break out of its current range or remain tethered by the BaFin probe and profit concerns.
