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Berenberg ups Zalando to 'buy' on promising execution of new strategy, shares rise

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** ZalandoZALG.DE shares rise 4.3% in early Frankfurt trade after Berenberg raises the German online retailer to "buy" from "hold", citing "signs of positive execution in the newly outlined strategy and improving end-market dynamics" as well as undemanding valuation

** The broker says Zalando's new strategy is showing signs of promise, with client base expansion in its business-to-business service and strong growth in the newly targeted segments of its core business

** It ups price target to 29.70 euros from 25.20, a nearly 22% increase compared to Zalando's Thursday close of 24.43 euros

** "We are encouraged by what the company achieved in Q1," Berenberg says, as increased basket sizes offset declines in average orders per customer, helping growth

** It adds that further cost discipline has led to margin expansion, which is also encouraging

** It now estimates adjusted EBIT at Zalando to reach 430 million euros in 2024, 4% ahead of the mid-point of guidance, and raises adjusted EBIT margin forecast by 40bp to 4.2%

** "Our improved margin forecast highlights our anticipation for a further improvement in fulfilment costs and gross margin expansion," it concludes

Reporting by Linda Pasquini


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