The online-only retailer released its preliminary Q1 revenue and says it intends to spend money to counter slowing customer growth.

(Bloomberg)—Zalando SE forecast first-quarter operating profit will miss analysts’ expectations amid intensifying competition between European retailers and Amazon.com Inc. for a bigger share of Europe’s e-commerce market.

Revenue in the first quarter increased 22%-24% to 971 million to 987 million euros ($1.04 billion to $1.06 billion) from 796.1 million in Q1 2016, Zalando said Wednesday in releasing preliminary first-quarter 2017 results. Full financial figures for Q1 will be released May 9.

Shares of the German online-only fashion retailer, No. 7 in the Internet Retailer 2016 Europe 500, fell as much as 5.8% Wednesday after its forecast for 10 million euros to 30 million euros in adjusted operating profit fell short of the consensus analyst estimate of 32.7 million euros.

Online incursions by retailers such as Inditex SA’s Zara (No. 50 in the Europe 500) and Hennes & Mauritz AB (No. 77) are increasing competition in the 46 billion-euro ($49 billion) European e-commerce market, where the biggest players are still dwarfed by Amazon (No. 1).

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Zalando has a 1% share of the market and said last month that profit margins may shrink this year as it spends on countering slowing customer growth. Zalando will struggle to maintain sales growth above 2% in coming years, according to Bryan, Garnier & Co. analysts Antoine Parison and Cedric Rossi.

“We believe that online retailers are definitely caught between a rock (what does Zalando do that cannot be replicated by Amazon?) and a hard place (traditional retailers),” the analysts wrote in a note to clients.

Shares of rival ASOS Plc (No. 22) earlier this month posted their biggest drop in five months on concerns the retailer’s growth may increasingly come at higher costs.

“We have said that revenue growth and aggressively gaining market share and getting more customers in Europe remain our priorities,” co-CEO Rubin Ritter said in an interview. “Profit is clearly positive and will be at about last year’s level. We are satisfied with our margin. Customers always expect discounts at the start of the year, but we did not discount goods unduly.”

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