Zulily Inc (NASDAQ:ZU) is a disruptor, according to Goldman Sachs analysts. Because of the recent pullback in the company’s shares, they see an entry opportunity for investors. In fact, they think Zulily will be in the same league as Amazon.com, Inc. (NASDAQ:AMZN) and Old Navy, Inc.

Zulily

Zulily upgraded to Buy

In a report dated June 25, 2014, analyst Taposh Bari and the rest of the team at Goldman Sachs said Zulily Inc (NASDAQ:ZU) is in hyper growth mode right now. They said the company’s on track to pass $1 billion in sales this year, and it’s only the fifth year the company has been in business. If Zulily can pull it off, it will join Amazon.com, Inc. (NASDAQ:AMZN) and Old Navy, Inc. as being one of the fastest retailers to hit that milestone.

The Goldman Sachs team thinks both Internet and retail investors should sit up and take notice of Zulily Inc (NASDAQ:ZU), so they have upgraded it to Buy and set a price target of $50 per share.

Zulily threatens the kids apparel industry

The analysts say there’s a very real “immediate threat” to kids’ apparel. They note that last year, kids’ apparel made up 43% of Zulily Inc (NASDAQ:ZU)’s sales or $300 million. The company has a little more than a 1% share of the $25 billion clothing segment. However, traditional retailers still dominate Zulilly’s kids’ apparel business. They include mass retailers, department stores and off-price channels in the list of those beating Zulily.

Bari and the rest of the Goldman Sachs team believes that Zulily Inc (NASDAQ:ZU)’s kids segment will keep growing at rates above the rest of the industry. However, they believe that the company’s apparel mix will incrementally shift toward non-kids. They note that Zulily has been aggressively pushing into other categories, including toys, home and women’s clothing.

They believe Zulily Inc (NASDAQ:ZU)’s inventory model is disruptive because it enables “agile merchandising and a strong mobile presence.” The analysts say Zulily’s product breadth, as well as its slow delivery times and niche brands should mitigate the risk to the rest of the kids’ retail industry though.

Tags: