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

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

It's the time of year when temperatures in Europe oscillate wildly, making it hard to figure out if you need that winter coat. Zalando SE investors are equally unsure about which way the wind is blowing.

Not-So-Fast Fashion
Zalando shares are little changed this year
Source: Bloomberg

The European fashion retailer tried to reassure investors on Thursday that annual sales will grow by close to 25 percent and by a similar amount in coming years. That didn't stop the stock falling by as much as 5 percent.

Losing Zip?
Zalando's sales growth has been losing momentum
Source: Bloomberg

Take a longer-view and Zalando's revenue growth looks like it's on a downward trajectory. For investors, the question is whether that's a reflection of its bigger scale -- or tougher competition from the likes of Amazon. It looks like the latter.

Analysts at UBS gave voice to that critique recently when they cut Zalando to sell from buy. They argue Zalando has more to lose from Amazon's encroachment into fashion than rivals Asos and higher-end focused Yoox Net-a-Porter Group.

That was based on a survey of more than 1,000 German consumers for UBS, in which 78 percent said they had shopped for fashion at Amazon in the past year, compared with 40 percent at Zalando. It was a similar picture in the U.K.

UBS has a strong point. Amazon initially struggled to find its feet in clothing. Many shoppers see it more as a general store for everything from books to pet food. But lately it has indicated it is getting serious: recently, the company started its first European advertising campaign for its fashion offering.

Zalando, which only went public in 2014, is especially vulnerable because it sells fewer own-label garments than Asos and Boohoo.com. These are items that a brand designs and produces itself, so can't be easily replicated by rivals such as Amazon.  

Zalando argues that because it offers customers an edited choice of what’s hot for the current season, it has some protection from Amazon. It also points out that Amazon's offering is more needs-based, with more clothing staples and items from past collections.

But that argument assumes customers won't shop around and Amazon's offering won't change in future. Then there are the traditional rivals like Inditex and Hennes & Mauritz who are no longer content to leave online shopping to the newcomers.

All that increased competition is a threat to Zalando's margins. The retailer expects to increase its Ebit margin to between 5 and 6 percent this year. At the top end, that would be slightly more than Asos and Net a Porter. But it looks vulnerable.

Investors are cautious. Zalando shares have only risen 5 percent this year while Asos is up 56 percent and boohoo.com is up threefold. Zalando's enterprise value is a still only 1.8 times revenue -- less than Asos's multiple of 2.2 and boohoo.com's 4.1, according to Bloomberg data.

If the Shoe Fits
Zalando's enterprise value to next year sales does not signal it being overvalued to peers.
Source: Bloomberg

The market is right to be wary. In fashion, the weather can change quickly.

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

To contact the authors of this story:
Andrea Felsted in London at afelsted@bloomberg.net
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net