Zalando : Q3 2023 Earnings Call Presentation

Zalando Q3/23 Earnings Call

November 2, 2023

Dr. Sandra Dembeck (CFO)

Zalando Q3/23

Executive summary

01

02

03

04

9M performance reflects our continued focus on profitable growth

Significant y-o-y improvement in adj. EBIT of over EUR 120m to EUR 167m with flat GMV growth despite continued challenging market environment

Continued strong growth of Partner Business driven by record-high ZFS adoption

9M Partner business share up +6pp to to 39% fueled by increased adoption of Zalando Fulfillment Solutions (Zalando-fulfilled partner business up +4pp to 64%)

Launch of new discovery experience 'Stories on Zalando'

'Stories on Zalando' allows customers to discover carefully curated inspirational content around new trends, fashion personalities and exclusive brand collaborations

Revised topline and confirmed adjusted EBIT outlook for full year 2023

Confirming full-year guidance for adjusted EBIT, revising outlook for GMV and revenue on expectation of continued pressure on demand for the rest of year

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Zalando Q3/23

Stories on Zalando

New inspiration experience 'Stories on Zalando' offers customers a new way of discovering fashion trends and perspectives on opinions

Inspiration environment offering an expertly-curated viewon new trends, fashion personalities and exclusive brand collaborations

Customers get the inspiration and information they need to make confident and better-informedfashion choices

Social-first, inclusive and participatory environment, empowering our customers to discover and shape their own style identity - and have fun while they're at it.

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Zalando Q3/23

Group performance

Delivering profitability improvement in an ongoing challenging market environment

Group GMV1	Group revenue	Group adjusted EBIT
(in EUR m)	(in EUR m)	(in EUR m, margin in % of revenues)
						Adj.
						EBIT
						margin	1.0%
						0.6%
(2.4)%	(3.2)%

Q3

3,280	3,202	2,349	2,275		23
		14

				Adj.
	(0.4)%		(1.3)%	EBIT	0.5%	2.4%
				margin
9M	10,175	7,177	7,087			167
10,220
					39
2022	2023	2022	2023		2022	2023

4 1 Gross Merchandise Volume after Returns (GMV): dynamically reported

Zalando Q3/23

Customer metrics

Flat active customer development driven by lower new customer acquisition; increase in basket sizes outweighed the decline in order frequency

Active customers

(L12M1 in millions)

(0.2%)

	50.2		50.1

Q3/22

Q3/23

• 1 L12M = last twelve months
  2 Defined as GMV divided by the number of orders
  3 Defined as GMV divided by the number of active customers

Average orders per active customer

(L12M1 in #)

Average basket size after returns2

(L12M1 in EUR)

GMV per active customer3

(L12M1 in EUR)

(3.2)%

5.25.0

4.8%

56.258.9

1.5%

290.2294.5

Q3/22Q3/23

Zalando Q3/23

Segment revenue

Fashion Store development characterized by delayed fall/winter season start while Offprice continues to grow

Revenue1 (EUR m) - % growth yoy

Fashion Store

	GMV
(4.4)%	(3.7)%
1,937	1,852
Q3/22	Q3/23

Fashion Store - DACH			Offprice
			GMV
	(5.6)%		(5.6)%
				4.4%

855	807	377	394

Fashion Store - Rest of Europe	All other segments

	(3.4)%	GMV
	(2.0)%
			(12.1)%
1,082	1,045	104	92
Q3/22	Q3/23	Q3/22	Q3/23

• 1 Q3/23 contains EUR (63)m | Q3/22 EUR (69)m reconciliation of internal revenues. Q3/22 Fashion Store revenues restated. All other segments include Highsnobiety

Zalando Q3/23

Segment adjusted EBIT

Strong margin improvement in Fashion Store driven by DACH segment

Adjusted EBIT1 (EUR m) - margin in % of revenue
Fashion Store	Fashion Store - DACH		Offprice
(0.2)%	1.1%	1.7%	6.0%	2.3%	0.7%

48	8	3
14

	19		Fashion Store - Rest of Europe	All other segments
					(1.6)%	(2.8)%	7.2%	6.3%
	(3)

1. (29)

76

Q3/22

Q3/23

Q3/22

Q3/23

Q3/22

Q3/23

• 1 Q3/23 contains EUR (4.8)m | Q3/22 contains EUR 0.5m reconciliation of internal EBIT. All other segments include Highsnobiety from Q3/22 onwards

Zalando Q3/23

Group P&L

Increase in profitability as a results of further improvements in fulfillment cost while pressures on gross margin continue

Costs and margins	YTD/22	YTD/23	YoY ∆	Q3/22	Q3/23	YoY ∆
(in % of revenue)
Gross profit	39.7%	38.5%	(1.2)pp	39.1%	36.7%	(2.4)pp
Fulfillment costs	(27.7)%	(25.2)%	2.5pp	(27.9)%	(24.9)%	2.9pp
Marketing costs	(7.6)%	(7.0)%	0.6pp	(7.2)%	(7.0)%	0.1pp
Administrative expenses & Other	(4.6)%	(5.6)%	(1.1)pp	(4.4)%	(5.6)%	(1.2)pp
EBIT	(0.2)%	0.6%	0.8pp	(0.3)%	(0.8)%	(0.5)pp
Adjusted EBIT 1	0.5%	2.4%	1.8pp	0.6%	1.0%	0.4pp

Continued promotional market environment further aggravated by a delayed start to the F/W season

Improved order economics and scaling of our partner business

Increase in non-personnel cost and impairment for lease assets for office buildings

• 1 Excluding equity-settledshare-based payment expense ("SBC"), restructuring costs, non-operatingone-time effects and acquisition-related expenses

Zalando Q3/23

Net working capital

Improved net working capital position as a result of lower inventories

Net working capital (end of Q3)

	(in EUR m and % of annualized revenue)				EUR m	Q3/22	Q3/23	YoY ∆
		1.3%									Reduced wholesale buy
						Inventories	2,164	1,938	(10.4)%
	122
						Trade receivables	726	825	13.6%
							Trade payables	2,768	2,774	0.2%
					(0.1)%
		(12)
					Net working capital	122	(12)
	Q3/22		Q3/23

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Zalando Q3/23

Cash position

Cash and cash equivalents remain strong at EUR ~1.9 billion

in EUR m

2,076

1,549.4

(81)

Seasonal net working capital changes as we received inventory for the autumn winter season

(71)(21)

t/o EUR 70m CAPEX, primarily
consisting of investments in
logistics infrastructure relating to
fulfillment centers	1,902

Q3/22 Cash & cash	Q2/23 Cash & cash	Operating cash flow	Investing cash flow1 Financing cash flow and	Q3/23 Cash & cash
equivalents	equivalents		other2	equivalents

10 1 Includes sales from fixed assets 3.5m, investments in fixed assets (50.9)m and intangible assets of EUR (19.5)m, payments for acquisitions of EUR (4.4)m and change in restricted cash of EUR 0.0m

• Includes financing cash flow of EUR (29.7)m and effect of exchange rate on cash and cash equivalents of EUR 8.3m