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Zalando Revises 2025 Outlook Amid Inventory and Growth Concerns

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Zalando, Germany’s largest online fashion marketplace, has adjusted its 2025 guidance following the acquisition of rival About You. While the updated forecast reflects higher expected sales, analysts and investors expressed concern over growing inventories, heavier discounting, and signs of weaker consumer sentiment—factors that could weigh on second-half performance.

After initially gaining, Zalando’s shares fell 5.6% to their lowest level in almost a year, bringing year-to-date losses to around 25%. Deutsche Bank analyst Adam Cochrane noted that the stock’s appeal as a revenue growth play is now in question, with less potential for earnings to exceed expectations.

The company now expects 2025 gross merchandise volume (GMV) of €17.2–€17.6 billion ($19.91–$20.38 billion), representing 12–15% growth from last year’s figures for the combined group. This is a sharp increase from its previous forecast of 4–9% growth, largely due to the inclusion of About You, acquired in July for €1.13 billion.

Second-quarter GMV rose 5% year-on-year to €4.06 billion, but gross margin slipped by 80 basis points due to increased discounting. Analysts flagged that earnings quality was weaker than hoped and pointed to a 15% year-on-year inventory rise to €1.66 billion by June 30, raising the risk of more markdowns ahead.

Co-CEO Robert Gentz acknowledged weaker consumer sentiment but remained optimistic about a strong second half. Interim CFO David Schroeder said the third quarter had started well, with mid-single-digit growth expected to continue.

Zalando is also expanding its European logistics network, opening it to partners in an effort to boost growth amid rising competition from fast-fashion rivals like Shein. The company forecasts 2025 adjusted EBIT of €550–€600 million for the combined group, up from its prior estimate of €530–€590 million excluding About You. Gentz added that while U.S. tariffs would not directly affect operations, they could dampen consumer sentiment in the long term.

France Fines Shein €40 Million for Misleading Discounts on Fast Fashion Platform

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France’s antitrust regulator has fined fast-fashion giant Shein €40 million ($47.17 million) for deceptive commercial practices related to misleading discounts offered on its platform. The penalty follows a nearly year-long investigation into how Shein presented pricing on its French website.

According to the Directorate General for Competition, Consumer Affairs and Fraud Control (DGCCRF), Shein’s European sales handler, Infinite Style E-Commerce Co Ltd (ISEL), failed to comply with French pricing laws that require any advertised discount to reflect the lowest price offered over the prior 30 days. Instead, Shein often disregarded prior discounts and, in some cases, even increased prices before applying supposed markdowns.

The investigation, which analyzed thousands of products listed between October 1, 2022, and August 31, 2023, found that:

  • 57% of the “discounts” did not actually reduce the price,

  • 19% offered smaller savings than advertised,

  • 11% were actually price increases disguised as deals.

The regulator concluded that Shein had misled consumers about the authenticity of its promotional offers, violating both consumer trust and legal standards.

In response, Shein stated that it was notified of the violations in March 2023 and took corrective action within two months. The company emphasized that “all identified issues were addressed more than a year ago” and reaffirmed its commitment to full compliance with French regulations.

This fine adds to growing scrutiny of Shein across Europe and other markets, where regulators are focusing not just on pricing practices but also on environmental impact and labor transparency.

Shein Faces EU Complaint Over ‘Dark Patterns’ in Online Sales Tactics

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Pan-European consumer group BEUC has filed a formal complaint with the European Commission against fast-fashion giant Shein, accusing the online retailer of using manipulative design techniques—commonly known as “dark patterns”—to push consumers into buying more on its app and website.

According to BEUC’s report, Shein employs a variety of aggressive tactics, including pop-ups that warn users they may lose discounts if they leave the app, countdown timers that pressure customers to complete purchases quickly, and infinite scrolling that keeps shoppers continuously engaged. BEUC argues that these techniques encourage overconsumption and may violate EU consumer protection laws.

The organization also highlighted the excessive notifications sent by the Shein app, with one example showing a single phone receiving 12 push notifications in one day. BEUC Director General Agustin Reyna stated, “For fast fashion you need to have volume, you need to have mass consumption, and these dark patterns are designed to stimulate mass consumption.”

Reyna added that a satisfactory resolution would require Shein to remove these manipulative features, though he questioned whether the company has sufficient incentive to alter practices that drive sales volume.

Shein Responds, Tensions Remain

In response, Shein said it is cooperating with EU regulators: “We are already working constructively with national consumer authorities and the EU Commission to demonstrate our commitment to complying with EU laws and regulations.” The company also expressed frustration that BEUC had declined its request for a meeting.

Shein’s success in Europe has been fueled by its highly engaging app experience, which incorporates gamification elements. For instance, its “Puppy Keep” game allows users to care for a virtual dog and earn reward points redeemable for free items. These points accumulate through daily log-ins, frequent scrolling, and purchases—further driving customer engagement and sales.

Broader Industry Under Scrutiny

BEUC’s complaint extends beyond Shein, calling on European consumer protection authorities to investigate similar practices across the broader fast-fashion industry. “Dark patterns are widely used by mass-market clothing retailers,” BEUC noted, urging regulators to expand their inquiry.

A total of 25 BEUC member organizations from 21 countries, including France, Germany, and Spain, have joined the complaint filed with the European Commission and the EU consumer protection network.

This latest action follows a separate warning issued by the European Commission last month, which notified Shein that some of its practices breach EU consumer law. The Commission warned that Shein faces potential fines if it fails to address these concerns.

Increasing Regulatory Pressure

In addition to consumer protection concerns, Shein is also under investigation by EU tech regulators for its compliance with online content rules as part of the bloc’s broader push to tighten oversight on major digital platforms.

Shein’s rival Temu, another rapidly growing discount platform, has also been targeted by BEUC for similar dark pattern practices.