Zalando Regains IPO Price as Online Retailer Nears Profitability

BERLIN, Germany — Zalando SE traded above its initial public offering price for the first time since last month's stock market debut after Europe's largest online fashion retailer forecast it will end the year "slightly profitable."

Shares in the Berlin-based company rose as much as 11 percent to 22.36 euros. Since an intraday gain of 14 percent disappeared on the first day of trading, they have consistently traded below the 21.50-euro IPO price amid waning investor enthusiasm for e-commerce stocks.

Profitability is a significant landmark for a company that was founded six years ago by the billionaire Samwer brothers and has grown to be valued at about 5.4 billion euros ($6.7 billion). Zalando also said today that revenue will grow by as much as 25 percent in 2014, providing more cause for optimism.

“As many online businesses have proved, fast growth in this channel and the expansion into new markets makes it hard to achieve profitability, therefore Zalando being able to produce a positive Ebit margin is good news,” Maureen Hinton, an analyst at researcher Conlumino in London, said by e-mail. “That said, it will have to keep a very tight control on costs to sustain margin growth.”

The company’s third-quarter performance was better than expected, according to Juergen Kolb, an analyst at Kepler Cheuvreux in Frankfurt. Sales rose 24 percent to 501.4 million euros and the loss before interest and taxes narrowed to 2.56 million euros from 50.9 million euros a year earlier.

Revenue growth outpaced the overall online fashion industry, which faced a tough start to the fall/winter season due to unseasonably mild weather, Rubin Ritter, a member of the Zalando management board, said in a statement.

The shares gained as much as 2.29 euros to 22.36 euros in Frankfurt and were up 9.6 percent at 22 euros as of 10:46 a.m.

The retailer said this week it will start selling Gap Inc. clothes in Europe, beginning summer 2015. Topshop, introduced during the third quarter, is now one of Zalando's best-selling brands, Ritter said on a conference call.

By Katarina Gustafsson; editors: Celeste Perri, Paul Jarvis, Thomas Mulier.