One pair of pool sliders doesn’t make a summer. The same goes for the unexpected good news at Zalando SE.

The German online fashion retailer on Tuesday reported a profit for the first quarter. It didn’t give a figure, except to say earnings before interest and tax were in the single-digit millions of euros. That defies expectations for a 10 million-euro ($11.3 million) loss, according to the consensus of analysts surveyed by the company.

Zalando didn’t give an explanation for its surprisingly good performance. But the first quarter of this year compares with a period in 2018, when arctic temperatures in Europe weighed on sales. What’s more, the difference between the forecast profit and the expected loss isn’t that big. It only takes some costs to turn out less than expected to bolster earnings.

Still, investors took comfort, with the shares rising as much as 12 percent. It’s a marked shift from last autumn, when Zalando and its British rival, Asos Plc, had issued profit warnings. Considering Tuesday’s report alongside signs of optimism from Asos last week, it could appear that the worst is over for these online clothing retailers.

However, investors would do well to pay attention to the pitfalls ahead.

Zalando has set aggressive growth targets. It aims to triple to the value of goods sold on its website by the company and its partner brands to 20 billion euros by 2023-2024, about the same as Hennes & Mauritz AB’s current annual turnover. It aims to elevate its profitability at the same time.

The logic is that it can leverage its website and distribution infrastructure to sell third-party brands, which pay it a commission.

This could be an expensive proposition. Internet shoppers demand increasingly slick websites and ever faster delivery. Zalando’s capital expenditure, which it expects to be about 300 million euros this year, reflects these costs.

True, Zalando seems to have a clear run at the online clothing market right now. It has a well-designed website with plenty of attractive stock, and faces little real competition in Europe. Buy that surely will not last. Inc., has yet to crack fashion, but it would be foolish to discount it. And many retailers are building their own online capabilities. Next Plc is assembling a business that bears some similarity to Zalando’s – its Label arm aims to make the most of its online delivery capabilities, and extensive store network, to sell third-party brands. 

Meanwhile, its decision to cut back on its own designs, and concentrate on selling other companies’ labels, looks misguided. Having the same products as other retailers makes it much easier for shoppers to compare prices.

Shares in Zalando have risen more than 80 percent since the start of this year. On an enterprise value to forward sales basis, they trade on a premium to Asos. That’s deserved, given the U.K. company’s challenges.

But even after this year’s gains they continue to lag Boohoo Group Plc. To close the gap, as well as banish broader doubts about Zalando’s business model, the group must show that its unexpected profit is more than a fashion fad.

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To contact the editor responsible for this story: Jennifer Ryan at

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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