Revenues from the online sale of clothing, footwear and fashion accessories are growing in the United States but are lagging behind in other parts of the world. According to Statista, the 2022 figure in the US stood at around 205 billion dollars, a value that it could rise to nearly $300 billion by 2025. Yet, the online fashion market has also had to face a series of complex challenges in the last two years: from the pandemic to the struggling supply chain, up to inflation at its highest levels.
In particular, during the first half of 2022 fashion retailers in the EMEA region (Europe, Middle East and Africa) they were the ones most in difficulty, with a 15% decrease in GMV (Gross Merchandise Value) of 23% in terms of total orders between the first and second quarters. Regardless of the reason behind the current tensions in the market, the room for growth is still very high.
Possible boost to online sales with the reopening of China
After a difficult 2022, 2023 could bring very different perspectives for the e-commerce sector, especially thanks to the return of the Chinese consumer who has been practically absent from the world scene in the last three years due to the pandemic. The data suggests that the most resilient segment in 2022 was luxury beauty, which takes place 50% online and which has recovered sharply, although it suffered in the second quarter due to logistics disruptions. In the third quarter, as soon as the economy reopened and online demand could be met, the online luxury beauty market recovered.
It may not be a recovery that will take a long time and in fact consumers have already started spending their excess savings. This may be the same dynamic we have observed in the United States, where all of 2021 and most of 2022 was characterized by a recovery phase, with companies steadily recorded better-than-expected sales and improved earnings forecasts, accordingly, with some delay. India, Southeast Asia and emerging African countries will also play a major role, but not to the extent that China will.
The market has not yet fully priced in the extent of the recovery that can come from this key consumer group, so shares in e-commerce giants such as Zalando, Farfetch and eBay they may continue to react positively as these earnings upgrades are priced in.
Cash Collect on e-commerce with an initial fixed coupon of 20 euros
Based on the above, the clothing, footwear and accessories e-commerce sector can have great potential and therefore be a sound investment theme. In the new series of Maxi Cash Collect recently issued by BNP Paribas we also find the certificate with ISIN NLBNPIT1NIZ4 on the basket made up of the following three titles: Zalando, Farfetch and eBay. A product that will pay a maxi initial premium of 20 euros, with a valuation date of 5 June 2023. For this issue, the maxi coupon payment takes place regardless of the performance of the three underlyings.
Subsequently, until the expiry date (March 3, 2026), the certificate pays a quarterly premium of 1.40 euros (5.60% per annum) if, on each interim valuation date, the value of all the shares making up the basket is greater than or equal to the barrier (40% of the respective initial value) and will continue its life up to the valuation date next one. All conditional rewards have a memory effect.
From the sixth month (September 2023), if Zalando, Farfetch and eBay quote above the initial value on the quarterly valuation dates, the certificate, in addition to the payment of the premium (1.40 euro) with memory effect, will also repay the nominal value in advance (100 euros). Furthermore, the certificate has a Quanto option which makes it immune to exchange rate fluctuations between the euro and the US dollar (the currency of the underlying securities Farfetch and eBay).
Important upsides for stocks in the basket
The consensus gathered by Bloomberg on the three stocks in the basket, which we report in the table above, it is basically positive. Almost all analysts recommend buying (buy) on Zalando and Farfetch with a small minority suggesting selling (sell). On eBay, on the other hand, there is a prevalence of analysts who say they keep shares in their portfolio (hold) rather than those with a buy opinion. Furthermore, the 12-month average target price indicates that these stocks currently appear under-priced and from which analysts expect significant upsides.
This makes the underlyings of the basket suitable for strategies with investment certificates such as Cash Collect, i.e. for those who have one lateral or moderately bullish view of a certain sector (in this case the e-commerce sector) in the medium and long term.
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