Zalando Se Ord

Good morning, everyone. Welcome to our annual press conference. It will take you through our full year results and tell you what we have stored for the future. My name is Simon Thiel and I lead the Corporate Affairs Department. Thank you very much for joining us.

I'm Patrick Kofler and I lead the Investor Relations Department. For this event, we've brought together the press, investors and analysts.

It's great to have you all here. We'll start our conference with a pre-recorded presentation by our co-CEOs, Robert Gantz and David Schröder. They will walk you through how we're executing our strategy to become the leading pan-European fashion and lifestyle e-commerce ecosystem. At 9.45 Berlin time, following the presentation, we will open the virtual floor to a live Q&A session for journalists with Robert and David.

For our investors and analysts, I'll be hosting a live Q&A session at 10.45 Berlin time together with Robert, David and our Vice President Finance, Roland Loh. The Q&A system will be open within the next few moments and you can begin submitting your questions. If you like to ask your questions, please click the button on the right-hand side of your screen. You also have the possibility to ask questions during the live Q&A. The recording of the speech will be available later on our Investor Relations section of our website.

And now, let's go over to our Zalando Live studios, where we bring entertainment to life for our customers. David and Robert, the floor is yours.

A big hello from Berlin and thank you for joining us today. Good morning and welcome everyone. We are excited to be here today to share our achievements in 2024 and to take you through our ambitions and plans for the future.

Last year was a really exciting year for Zalando and most importantly we delivered on our strategy and our financial targets. We also navigated a pretty challenging market environment We've successfully adapted to evolving customer needs and we continue to invest in our platform and services. Looking forward, we're very excited about what this year has in store for us, for our customers and our partners.

Today, Robert and I are going to take you through our strategic and key financial highlights. We'll dive into the exciting developments in our B2C and B2B growth pillars. And we'll give you an outlook on what lies ahead. At the end of our presentation, we are also going to talk about our plan to team up with About You. We believe this will be an important step forward for Zalando and will help us to serve our customers and our partners even better.

When we talked to you last March, we outlined a clear strategic path for Zalando and explained to you how we are building the leading pan-European ecosystem for fashion and lifestyle e-commerce. and now we are very focused on executing that vision and making the right investments to capture future growth. Before we start, though, to reflect on last year and look forward to the year ahead, I'd like to take a few moments to remind you of our strategy. Our updated strategy shifts us from a platform to an ecosystem. That's how we capture a larger share of the market. So in B2C, we want to become the go-to destination for quality fashion and lifestyle. That means we go beyond fashion and expand into more areas of lifestyle. It also means going beyond pure transactions and creating ways to inspire and entertain our customers even before the moment of the purchase. And while we can capture a meaningful market share with our consumer business, we can add a whole new dimension by building a very strong B2B business. So far, for our partners, we've built a platform that enables them to connect their inventory and drive their business on Zalando. It's a really good platform, but still a closed system. We expanded this by offering solutions that allow them to run their e-commerce on and also off Zalando. We let them leverage all the capabilities we've built up over the last 15 years. And this shift to an ecosystem will drive strong growth and margin expansion through 2028. First of all, we have one great piece of news to share. 2024 marks the first year since the pandemic where e-commerce penetration in Europe is back to its long-term growth trend. And more and more customers are shopping online and as a result remain very bullish about the long-term opportunity. We operate in a massive 450 billion euro market where our offering meets the needs of more and more customers. So last year, we set ourselves some tough targets, and I'm really proud that we not only achieved, but actually exceeded them. And this wouldn't have been possible without the energy, the dedication, and the hard work of all Zalano teams, and I can't thank them enough. So now, let's look at the numbers. GMV and revenue were both in the upper half of our updated guidance. GMV grew by 4.5% to €15.3 billion. and revenue grew by 4.2% to €10.6 billion. I think these results show that even in a rather muted macroeconomic environment, there are pockets of growth and we know how to find them. It is also supported by more positive signals in the consumer sentiment. In terms of profitability, we exceeded our updated adjusted EBIT guidance by more than €30 million with an adjusted EBIT of €511 million. That's a margin of 4.8%. Coming from 3.5% in 2023, that's a significant step towards our 6-8% adjusted EBIT margin target in 2028. And David, I will now walk you through our 2024 numbers in more detail.

Thanks, Robert. Let's start by taking a closer look at our B2C growth vector. B2C delivered accelerated growth of both GMV and revenue with significantly improved profitability. We grew GMV by 4.5% to 15.3 billion and revenue by 3.8% to 9.7 billion euros. We've also experienced growth acceleration throughout the year, achieving over 6% GMV growth and revenue growth in the second half. Also, our adjusted EBIT came in at 489 million euros. That's 178 million more than last year, yielding a margin of over 5%. Our acceleration in GMV was driven by a return to active customer growth. By year end, we served 51.8 million active customers, an increase of more than 2 million customers, marking a new all-time high. Spend per customer remained flat at around 295 euros, with order frequency and basket size developments offsetting each other. Now, let's look at the development of our customer cohorts. Overall, our customer base is moving in the right direction, towards a healthier and higher value customer base. There are three key takeaways from the numbers we are reporting today. First, we've been particularly successful in acquiring new customers. This resulted in a year-over-year increase in spend of our new customer cohort. Second, our focus on profitable growth as well as some ongoing macro impacts continue to be reflected in the spending dynamics of our older customer cohorts. Third, and as you can see on the chart, our focus on driving customer lifetime value helped us to further increase the profit contribution per customer across our cohorts. These developments make us confident that we will continue to deliver sustainable and profitable long-term growth for our B2C business. Let's move to the gross margin development in our B2C business. As planned, we've made a significant step forward in strengthening our B2C gross margin with an increase of more than 200 basis points year-on-year to 43.5%. Our retail business, which is characterized by full inventory ownership, drove the majority of the increase via improved inventory management as reflected in strong inventory sell-through and historically low overstock levels. The improvement in our B2C gross margin was a key contributor to the increase in our bottom line margin. Overall, we feel that our B2C business is in really good shape and we're looking forward to the year ahead. Let's now move on to our second growth factor, the B2B business. We recorded revenues of 953 million euros in 2024. That's an 11.5% increase on the previous year and significantly ahead of group revenue growth. Growth was largely driven by ZEOS fulfillment, including Zalando fulfillment solutions as well as multi-channel fulfillment. Our adjusted EBIT of 23 million euros with a margin of 2.4% came in below last year's profitability level. The temporarily lower profitability was driven by our front-loaded overhead and infrastructure investments into future growth across ZEOS fulfillment and software. As part of our ecosystem strategy, we also aim to enable a more sustainable fashion and lifestyle industry at scale and have set ourselves a clear ambition. We want to get to net zero in our own operations and private labels by 2040 and across our entire value chain by 2050. On our path to net zero and in pursuit of our near-term targets for 2025, we've made really good progress. Since 2017, we've reduced the absolute emissions of our own operations by 82%. Since 2018, we've also reduced the emission intensity from private labels by 48%. We think this is pretty remarkable progress, but we are equally convinced that more needs to be achieved by us and the industry. We are thus working hard on developing and scaling solutions that support businesses across the industry and drive positive change at the same time. With that, let me hand it back to Robert.

Thanks, David. Okay, let's move on and focus on our B2C business and our plans for this year. Our message is pretty simple. We're delivering on our three strategic pillars that will drive growth of our B2C platform. And let me quickly recap what these pillars actually are. So first, differentiation through quality. It's absolutely fundamental to our approach in all areas, and that makes us unique. Next, lifestyle expansion. We know our customers have broader needs in fashion and lifestyle. They play sports, they have families, and many of them actually use this as a beauty product. This means they have more needs than we're currently serving, and it's a huge opportunity for us. And finally, inspiration and entertainment. This is about expanding the customer experience beyond just rent actions. We want to inspire and entertain our customers through lifestyle content integrations and have all customers using Zalando more frequently. Okay, now let's dive deeper into our plans with each of these growth pillars, starting now with quality. We want to be the quality leader in fashion and lifestyle e-commerce in Europe. And so we continued in 2024 to execute against that ambition. That's our North Star, and our plan consists of four elements. One, a highly relevant assortment and content. And we elevated our assortment with new brand additions last year, such as Versace, Diana von Furstenberg and On Running. Two, a tailored digital experience. So, for example, we had about 300,000 customers that have already used our body measurement option for the size and fit. 3. More sustainable and inclusive choices. So we are expanding our sustainable and adaptive fashion offerings only last year with 117 new adaptive styles launched. 4. A localized and personalized convenience experience. So for example we have made our payment options broader and more flexible. This has removed the big friction point and was a big success in Germany and now we have expanded it to 8 more markets. The differentiation through quality is very dear to brands as it provides them with a trusted environment where they can expand their brand equity and ultimately a great place for them to advertise their story and products through ZMS. And this is as well very dear to our customers, which they ultimately award with their loyalty. This actually leads me to our next topic. So we've upgraded our loyalty program last year. Now it's a program that rewards all our customers for their loyalty through engagement and purchases. So how does it work? Customers are rewarded with points for their spend and engagement on our platform. They collect these points and can unlock three different levels and each level comes with an increasing number of benefits. Engaged and happy customers translate into increased order frequency and more loyalty. Since the upgrade, we've already close to 10% of our customer base participating in our loyalty program. And that's great news. First, we're already impacting our loyalty at a big scale through that program. And second, there's so much more potential now for us. So 90% of our customers are not yet participating. So we're very excited about the future.

But please take a look for yourself.

So there's a lot of exciting topics coming this year to drive growth as a quality destination in fashion and lifestyle e-commerce. One core initiative is that we are rolling out the new loyalty program and make it available in most of our markets in 2025, so we can have a bigger part of our customer base participating in the program. Another exciting initiative is that we bring the Zalando platform into some of the remaining European markets that we are not yet in. So we launched this year in Portugal, Greece and in Bulgaria. Last example to mention here is that we focus this year on further enriching our product detail pages. So displaying richer product details we are collecting. Visually enriching through 3D images and videos. and integrating more content formats. And this is very exciting because we see that customers really appreciate the more details and investments with better conversions. And it's something very unique only we can execute given our scale across so many thousands of brands and our focus on fashion and lifestyle. So there are a lot of exciting things we're executing for this year for our growth. Now let's talk about the second pillar, the lifestyle expansion. We know that our customers have a wide range of needs across different aspects of their lifestyle. And catering to these needs is a huge opportunity for us. But expanding deeper into lifestyle areas means a lot more than just offering more items. We said last year that we want to serve more of our customers across more of our distinct so-called propositions. So propositions are holistic experiences we build that serve different parts of the entire lifestyle wallet of our customers, like fashion, like sports, beauty, etc. And as you can see, we are making progress. The number of customers that buy different propositions on Zalando is increasing. We are becoming more and more a holistic solution of the lifestyle wallet of our customers. Let's take a closer look at two of these propositions starting with beauty to show how we are driving in progress. We launched BEAUTY in 2018. And since then we've gained valuable insights from customer feedback, successful brand partnerships and our collaboration with Sephora. And we've applied these learnings to develop our beauty offering even further and develop many beauty-specific customer experiences. And we see great traction here both from our customers and as well from the new brands' partnerships. In 2024, it has been driving strong double-digit growth And we're excited to welcome even more high-quality brands to our platform in 2025. So brands like Dyson, Armani, and GHD. So for 2025, I'm confident we'll look forward to another year of strong growth in beauty. This is great for our ZMS, as the beauty proposition has a very high share of ZMS adoptions for brands. So, let me talk about our latest example of a new proposition, which is sports. We know that sports are increasingly important in our customers' lives both as a lifestyle choice and as a means of social connection. It's also a huge and fast-growing online segment. Our strategy is showing good results with consistent customer growth and double-digit GMB growth in sports in 2024. For 2025, we now go deeper into sub-segments of sports where we invest into dedicated experiences to further cement our sports competence for customers and for brands. So in running, in outdoors, in fitness and in football. These are very important segments of sports and building credibility and competence here is important to be the leader. So in running, we've already last year made great progress. by offering the most elevated running assortment in the market, then elevating premium products through storytelling and showcasing innovation, expanding in live stream and editorial content to provide expert advice, and launching UX features to enhance the decision-making process. And the results are staggering. 70% of our running shoe assortment now sells at a price point above 100 euros. That's an amazing result to prove our sport competence as a platform. So we're very satisfied with the progress and excited about what's to come this year.

Please look for yourself. Bye.

So growth through lifestyle expansion means first, going deeper in the propositions as just explained with beauty and sports to capture a higher share of our customers. And second, by bringing more of our propositions into more of our markets. So in 2025, we roll out more of our propositions into more European markets. This year, we roll out beauty to Spain and Finland. There will be 30 markets in total for beauty. And Launchpad Zalando will also expand into five more markets, so bringing it to a total of 22. So in summary, we're executing many exciting initiatives in the lifestyle pillar of our B2C business. Now let's move to our third pillar, inspiration and entertainment. We want the Zalando experience to be even more inspiring and entertaining, to connect with consumers on a deeper and more emotional level. This is an area where we test and iterate a lot to assess the impact of newly introduced experiences. So lastly, we continue to improve one of our large-scale experiments, the stories on Zalando. And here we integrate high-quality curated content with our e-commerce experience. Since the launch in late 2023, we've published over 500 stories, featuring over 700 bands and 7,000 products. So it's really a great way to elevate even the most exciting assortment. So we get access to the most seeked-after products of the brands. We're able to participate and even co-create product types. And it has elevated the way of how we partner with brands. And many customers love these launches. So let's take a quick look back at our journey last year. Next to Stories, we also launched and iterated many other content engagement formats last year, based on social content formats such as talent profiles, live shopping or boards, and based on generated AI, such as our assistant, the transporter or auto builder. We learned a lot and got exciting feedback and encouraging customer signals. In 2025 now, we're bringing these engagement formats into a personalized discovery feed into the Zalando mobile app. And this is going to be an exciting and a very different way to access your fashion and lifestyle universe and see what's new and what's interesting for you today. So here's a quick glimpse at what we have planned for this year. Thank you.

Let's now turn to B2B. As a reminder, in our B2B business, our aim is to become the operating system for fashion in Europe, unlocking digital business opportunities for brands and retailers. Last year, we built a strong foundation for logistics, and we are now in a great position to further scale and advance our ZEOS offering with a particular focus on logistics and software solutions in 2025. So let's first talk about logistics. In our logistics offering, we made significant progress in 2024. We now serve 12 markets as we launched three new markets for our merchants. Switzerland, Poland and Spain. Beyond that, our merchants can now sell on 10 different channels, including nine marketplaces that collectively cover 85% of the total marketplace volume in Europe. We also gave merchants more control over their fulfillment operations as we launched and expanded logistics functionalities in ZEOS 1. our central control panel. Since our ultimate goal is to unlock digital business opportunities for brands and retailers, let's take a look at how this actually worked in the case of Pepper Jeans. We've spoken about Pepper Jeans before, but I'd like to give you an update as it shows how we've moved forward. Pepper is one of our earliest CEO's clients. For those that don't know them, they specialize in high-quality denim jeans and are present in over 60 countries worldwide. When Peppa joined Zalando, they initially used to dropship all items sold on Zalando from their own warehouse in Spain. After experiencing some limitations with this model, Peppa Jeans switched to Zalando fulfillment solutions for most items ordered on Zalando. Then they extended their contract to multi-channel fulfillment to fulfill items sold outside the Zalando platform on About You. And finally, they decided to leverage ZEOS to fulfill orders for their own website, PeppaJeans.com, across Europe. As a result, their item sold increased by more than nine times since they started with us at the end of 2019. And we are now aiming to replicate this success with more brands and retailers that are interested to join our ecosystem to benefit from our solutions. We are thus excited to launch our new partnership with Next in 2025. With 5.8 billion pounds total sales reported in 2024, they are a leading UK-based retailer, growing their international business significantly. Together with Next, we've designed and are in the process of building a set of new fulfillment features that in the future all ZEOS merchants will be able to benefit from. We'll introduce advanced fulfillment capabilities, like virtual bonded warehousing, offer enhanced onboarding and inventory management capabilities, and expand our services to 10 additional European markets to support Next in all the continental European markets they are already trading in. All these innovations will further increase the value that ZEOS can unlock for NEXT, as well as other brands and retailers, and will make our pan-European multi-channel logistics offering even more unique and compelling. Now let's move on to our ZEOS software solutions. 2024 marked a pivotal year as we began building our software ecosystem. To support merchants across all online channels, we focused on three key areas. First, we expanded our marketplace connectivity by working with marketplace integrators, most notably TradeByte and Rhythm. Second, we strengthened our support for the most important channel of our merchants, i.e. their own e-com, by forging new ecosystem partnerships with leading shop systems. And third, we launched powerful steering and optimization tools that help our merchants to grow their digital business based on rich and unique data insights. Overall, our ecosystem helps merchants to select and combine the solutions they need to drive their digital business forward. For this coming year, our priorities in software are clear. We'll continue to build out our software ecosystem through strategic partnerships with leading sales channels, integrators, and shop systems. And we'll build out our steering and optimization tooling and launch even more powerful tools across CEOs and TradeByte. With our great progress across CEO's logistics and software, we are fully on track to deliver on our B2B strategy and to cover a larger share of the European fashion and lifestyle market in the years to come. Let me hand it back to you, Robert.

Thanks, David. Now let's move to our outlook. First I talk about our three plans and second about our financial outlook. You've now heard a lot about how we are organically building the leading ecosystem of fashion and lifestyle e-commerce. On December 11th, we announced our intention to make a voluntary public tender offer for 100% of About You's share capital. And so far, more than 90% of About You's shares in total excluding treasury shares, have been secured. So this deal plays perfectly into our strategy, allowing us to accelerate even more. So in B2C, About Use Addition will enable us to execute a dual brand strategy with two distinct and separate experiences to service customers and partners better. As just laid out by David in B2B, we continue to expand our offering across sales. So the transaction unlocks significant value and longer-term synergies are expected to be around €100 million per year on an adjusted EBIT basis. We are currently awaiting approval from regulatory authorities to finalize the transaction. A closing is anticipated for summer 2025 with full consolidation following day after. In our strategy update from March last year, we reaffirmed our strong confidence in our growth potential in the European fashion market. aiming to capture a larger share of this €450 billion market. With regard to profitability, we are confirming our long-term target margin profile. And also taking about UN2 consideration, subject to regulatory approvals, we continue to target a 10-30% adjusted EBIT margin for the combined group and across both B2C and B2B growth areas. Now let me talk about our mid-term targets for 2028. Looking ahead, we're excited by the value creation opportunities ahead of us, having laid the strategic groundwork last year. Our mid-term guidance for the combined group, including About You, until 2028, reflects our ambition to return to strong growth and to continue margin expansion. The GMV and revenue cragger of 5-10% represent a clear path to outperform the online segment and continue to gain market share. At the upper end, with double-digit growth, we will outperform the online segment by a factor of 2. At the same time, we push towards an adjusted EBIT margin in the corridor of 6-8% in 2028, along with strong free cash flow throughout the period. With that, let's have a look to our guidance for 2025. In 2025, we will focus on accelerating growth while continuing to drive further improvements in adjusted EBIT and investing in future growth opportunities in line with our midterm guidance. Our guidance is based on Zalando's standalone performance and doesn't include any financial impact from the anticipated about-you consolidation. For the 2025 fiscal year, we expect GMV and revenue growth of 4% to 9% year-on-year on group level. We expect to achieve this growth through a combination of factors. In B2C, by continuing to grow our active customer base and increasing share of wallet through new customer acquisitions, enhanced loyalty and lifestyle expansion. And in B2B, by further scaling our zeroes fulfillment solutions. Regarding segment level performance, please note the following two points. One, our growing B2B business, including ZFS and multi-channel fulfillment, generates additional revenues not reflected in the GMV figures, which are exclusively driven by our B2C business. And two, we project that B2B segment revenue growth will significantly outpace B2C revenue growth. Furthermore, we will continue to improve profitability. We aim to further increase adjusted EBIT to a level between 530 and 590 million euros. At the midpoint, this guidance range implies an adjusted EBIT margin of around 5%. Starting from 3.5% in 2023, we delivered a 4.8% margin in 2024. This means we made a big step forward towards our 6-8% corridor for 2028. In 2025, we are now expecting a more moderate adjusted EBIT improvement. This is driven by our continued growth investments in particular, the expansion of our loyalty program and our investments into inspiration and entertainment. And the ongoing build-out of our pan-European logistics network will lead to an increase in fixed costs. Our strategic investments set us up for our continued success in the long term. CapEx is expected in the range of 180 to 280 million euros as we continue to invest in our infrastructure as well as in the technology. The networking capital will remain in negative territory. Let's close this presentation with the key takeaways of today. So firstly, our ecosystem strategy is progressing very well. We're making great progress and we achieved our 2024 financial targets. Secondly, in 2025, we have exciting plans to further advance our strategy across our B2C and B2B growth vectors. The plans about your acquisition place perfectly into our strategy. And thirdly, our long-term opportunity is huge. We aim to further accelerate our growth organically and via the acquisition of About You. And this yields an attractive financial profile at scale.

Thank you very much. We will now move to Q&A. Welcome, everyone, here back in Berlin to our studios.

With me today are Robert, David, and Roland, our VP Finance. You've seen our presentation. We are now happy to answer your questions in the next couple of minutes. Before we start into questions, one last housekeeping, and also you're seeing that we are only not progressing our strategy, but also progressing with the setup here. We're not only allowing text message this time, but we also give you the chance to answer and ask questions through video. One remarks here, or two remarks here. Firstly, it's only MS Teams is working. And secondly, please limit yourself on two questions. With that said, let's go directly into our Q&A. We have the first question from Jürgen Kolb, Kepler Schiffer. He is asking, your revenue and GMB guidance of 4% to 9% appears to be quite a range. What are the underlying assumptions for the low and the high point? David, over to you to give a bit more color on that one.

yeah no i mean as you've read and heard this morning many times uh probably our big goal for 2025 is acceleration acceleration in terms of execution of our strategy but also acceleration of our growth and that's what you see reflected in our guidance we did the guidance has i would say the typical five point range that we've also used many times in the past um And what it reflects is obviously the range of expectations and scenarios that we currently see. As we've already shared last year, we think our growth will be mainly driven by two factors. One is general market developments, where for the first time in 2024, we've seen online segment growth again. And that's obviously something that we will continue to benefit from also going forward. And then the second important ingredient that's obviously the key focus for ourselves is our strategic initiatives that we've talked about this morning, things like the rollout of the loyalty program or expansion into further lifestyle areas. our work on inspiration entertainment, but also our key initiatives in B2B and logistics and software and all these contributing to our top line performance and obviously if the market momentum continues to be positive or even further improve and if all our strategic initiatives come to bear and bring their whole potential throughout the year, then we'll be at the upper end of our guidance. And if the opposite is true, then you will obviously see us more towards the lower end. So that's how you can think about the guidance range.

Cool. Thanks, David. We are now moving to a video question coming from Anne Critchlow from Barenburg. Anne, over to you.

I need to take my questions. I've got two, please. I wonder if you could comment on the GMV trend in Q1 to date as compared to Q4. And then secondly, the marketing costs reached 10% of revenues in Q4. How do you expect this to trend going into 2025 and also over the medium term?

Thank you. Thanks, Anne. Yeah, so let me maybe then start with what we're seeing in Q1 so far. I think, broadly speaking, the year started very much how it ended. So similar positive momentum as in Q4. The first two months, as usual, of Q1 have been more dominated by sales of fall-winter products. But as the weather has now returned in many parts of Europe, we are seeing also the spring-summer season start and we expect it to gain more traction in the coming weeks.

On marketing outlook 2025? A couple of words, David.

Yeah. So as we already communicated with our pre-release earlier this year, we took the advantage and also the opportunities that we saw in Q4 to continue with our ROI-based investments. We saw good opportunities for those investments, and that's why we ramped up our marketing. Keep in mind, we also... had a more larger rebranding campaign that we actually rolled out to showcase our new brand. And we are very happy with the results that we've seen as a result, not just in terms of sales growth development, but obviously especially in terms of the development of our customer base and key customer metrics. I think, though, that the elevated marketing cost level that we've seen in Q4 is not necessarily the new normal for what we aim for this year. We'll keep our principle on investing in our AI-based way, and I think we'll also stick to the guidance that we provided to you in the past where we said that somewhere in the higher single digits, that's probably where our marketing costs will continue to trend forward.

Okay, there's another question more or less directly linked to that one. Jürgen again asks, can you provide any color on 2025 expectation for also cross-margin and fulfillment costs to really go through our P&L? Perhaps a couple of words on that one, David, as well.

Well, I mean, if you look at our adjusted EBIT guidance, I think the first thing to realize is, of course, that we made a big step from 2023 to 2024. We reported 3.5% margin in 2023. We now took that up by a big step to 4.8%. percent last year. And that's great because it already gets us quite close and within reach of the six to eight percent that we are aiming for to generate in 2028. What you see reflected in our guidance for this year, of course, is that we want to continue to drive growth, and that's why we also invest in key areas of our strategy. And that's why the step that we anticipate for this year is of a smaller nature, and that obviously also means automatically that on a cross-line level there are no major shifts, right, this year. We expect to obviously continue our work on driving efficiencies in OPEX, and we'll also stay focused on the gross margin, but I think you shouldn't expect major shifts compared to 2024, as the margin that we are guiding towards at the midpoint is also not very different from 2024.

thanks david moving over to the video this time luke from morgan stanley hey luke

Good morning, everyone. I've got just two questions. My first is on the loyalty program. I think you said that 10% of customers are now on that program. How quickly can that scale through the course of this year, do you feel? And then second question, just to be clear on the Q1 performance, just in terms of getting to the top end of your guidance, is it right to assume that Q1 has started quite strongly? Sorry, I missed the commentary you were mentioning on the previous call in the waiting room.

So, yes, we are close to about 10% of our customer base is now participating in the loyalty program. And it's progressing very well. I think there's two vectors how it will now increase. I think the one is actually like that we are bringing now the loyalty program to more countries and actually make thereby more customers there. make it to more customers available across our markets. So we will scale it to 16 countries in the course of this year. So there's a lot of execution power now on this year. And the other vector is within the countries to actually market the loyalty program more broadly. So I think we will see, I think in accelerated speed now, even to the traction that we have so far, how this loyalty program will continue to expand.

Cool. Perhaps just sneaking in, we didn't forget Luke's second question, but there's another question from Ashton also on ZMS. It's like the quantum to which this may impact our operating profit in 2025. So how can we get the feed-forward change you're expecting from the underlying profitability? You may remember that we mentioned financial impact in Q3 last year. So perhaps David, you can give a glimpse on that one, what we shared before, to give an idea to Ashton what's all about.

Yeah, so I mean, our view on the loyalty program hasn't changed since we talked about it in Q3. So especially as the program gains more and more traction, we expect very positive impact on our financials. First, it's going to impact our customer metrics. It's going to drive spending per customer and also frequency. And as you can imagine, the more we can nurture that organic engagement that customers have with our platform, the more beneficial this will also be for our bottom line results because in the end it will also be reflected in lower marketing spendings to engage with customers. And so that's the, let's say, ultimate goal of this program. What we've talked about is that as we roll it out and launch it in more and more markets, there will be, in a way, a temporary accounting effect related to how the program is treated in terms of revenue deferral, and that will lead to a mid-double-digit million amount, as we've communicated already in Q3, so no change there. Cool, thanks.

And it's fully baked into our guidance, of course, as you would assume. Nice add-on. Coming back to Luke's question on, like, current trading.

Yeah, maybe I can just then clarify a bit the first or second sentence that I said earlier. I think I started by saying the start of the year was very similar to actually how the year ended for us. As you see from the numbers we reported this morning, Q4 showed 4.8% growth. And so I think that's probably also a good indicator as much as we can give it right now, given that we still have the spring-summer season start in a way just happening now of what to expect from us in this first quarter.

Before moving into ZMS, I would move on on Slido. Roland, there's a question on our Q4 difference between revenue and GMV. So maybe you are able to explain the gap between revenue growth and GMV growth in Q4, asked by Adam from Deutsche Bank.

Yeah, sure. So, throughout the quarters we generally see a deviation between GMB and revenue growth and this also moves between the quarters. Specifically to Q4, we saw more revenue growth than we saw in GMV. We had a very strong wholesale quarter in Q4, so that helped on the revenue growth. In addition, we saw B2B outpacing B2C growth, so all of that contributes to revenue. And we also saw strong double-digit growth in our ZMS business, so this also contributed to the revenue growth being higher than GMV, specifically in Q4.

There's a follow-up from Richard, not only Q4, but also looking into 2025. Do we expect a narrowing of the gap between GME and revenue growth in either Q1 and full year 2025?

Yeah, if I would compare it to Q4-24, we certainly expect a narrowing. So you've also seen our outlook for the year, where both for GMV and revenue, we have a guidance range of 4 to 9. So again, we'll still have differences between the quarter, but it will be narrower than what we saw in Q4-24. Cool. Super. Thanks.

One more follow-up on our Q1 current trading comment. Paul from HSBC is asking, you have delivered a Q1 GMV growth similar to before. As said, David, is this on a reported or on a calendar-adjusted basis, keeping in mind that last year had that leap year impact?

Oh, now it's getting very technical already. So, yes, last year, obviously, in February, we had this one extra day. However, at the same time, we also had Easter in March already. Now it's in April. And we think, broadly speaking, that we'll let each other out. And so what I said earlier really applies to the numbers that we expect to report. But let's also keep in mind the years just started, we communicated our full year guidance, and that's what we are mainly focused on delivering. As you know us, we are not focused on individual quarters as much.

Thanks, yeah. I hope we now have covered all the current trading questions. With that said, William from Bernstein, over to you with your two questions.

Hi, good morning. Thanks for taking the question. So I suppose if we extend from the QM question, we think about the building blocks to predominantly active customer growth and a little bit of AOV, how do you expect those levers to play out into 2025? And I suppose what I'm trying to understand is you did your 4.8% in Q1 on the easiest comp of the year. How do we accelerate from there? And then the second question is obviously last year was a bit of a focus on wholesale or 1P and improving the margin there. What's your view on the balance between those two parts of the business into 2025? Is it a 1P year or is it a 3P year? Thanks.

Robert, would you mind starting?

Yeah, maybe. I mean, like, you know, if I look at all the exciting initiatives that we have for this year, like Rollout of Loyalty Program, like, you know, the initiatives that we – that we do on rolling out more propositions to more countries, especially on beauty, the initiatives that we do like on content integration and product detail pages, like on the quality side of the customer experience, I would probably see that I think we will expect both of the key drivers, both the active customer and as well the GMB per active customer contributing to the growth. So in which share I think I wouldn't really comment at this stage, but I think that both of these I will see actually contributing to this growth corridor. What was the second part of it? There was...

Building blocks on our retail and partner program business. How do you see that evolving in 2025? So William meant that 2024 was very strong in retail business. How do we view that in 2025?

Yeah, I think – I would say I think as well the retail business continues to be very strong as well in 2025, so we will see an increase in retail business, but we as well expect an increase in the partner business in 2025.

Cool. Thanks, Robert. Speaking with you, ZMS. So we also mentioned ZMS throughout the presentation. Ashton from Redburn is asking, could you discuss the brokers you have made in ZMS in 2024? And how do you expect the adoption of this product to evolve in full year 2025 and beyond?

So, 24 was a good year for ZMS. So, we've seen, again, double-digit growth in ZMS. And 24, like, beyond now 200 million in revenues that we do now. 25, we'll continue to see double-digit growth in ZMS. So, and, I mean, in the future... I think there is a lot of great potential that will bring us even more towards the 3% to 4% corridor that we actually want the ZMS to go towards in the midterm. So there will be, like, what I call the key initiatives there. So, first of all, the adoption of the self-service tools, where we see actually very good traction, combined actually with more – with more tool set and insights of how we actually help partners to understand where actually, yeah, good, our eye-based opportunities lie for them to display their products and tell their brand stories. Another important building block will be of how we actually help partners to, yeah, run after ideas for the uncovered opportunities, how they can actually expand their business outside of DACH. So we still have like a, like a strong focus in terms of ZMS penetration within DACH from our partners, and I think that's an opportunity to move outside of DACH. And I think the third important building block, like in 25, but it's all beyond this, is going to be like new and enhanced products for ZMS that we offer to partners, especially now as we go into more content-based inspiration entertainment features, all of these features and all of this experience will have as well like an organic way of how partners can engage with consumers on the platform, but as well will be covered as well in organic ways, so where they can actually buy as well through ZMS more exposure to consumers. So building these products on a mid-funnel basis will as well be I think a third element of growth for ZMS in the future.

Thanks. Moving on to ZEOS. David, you talked a lot about ZEOS and how we evolved in 2024. Richard from RBC is asking, how many brands like Next, definitely something we have announced last year, will have a single inventory view of their own stock and stock held by Zalando?

Well, we think actually that one stock pool proposition, which is essentially this idea of bringing all your stock into one infrastructure to serve multiple channels, not just one channel, is really an exciting part of our value proposition and also a pretty unique part of our value proposition. It's also, for example, one of the key questions that we got from partners immediately following our uh announcement of uh the attention to acquire about you because obviously that just makes this one stock pool idea even more compelling i mean where do you want the stock to sit you typically want it to sit also where it's closest to your most important channels right and i think that's where for many of our partners zelando already is an important channel together with about you it's going to be an even more important channel and it's great to see that um great brands and retailers such as next see this opportunity and I personally feel based on the interest that we keep getting that's not going to remain a Individual case, but it will is it's essentially showing us what the true potential of this proposition can be also for many other brands in Europe and also globally

Cool, thanks. Moving back to Robert, I got another question on Slido regarding the trade conflict between U.S. and China, probably not only China. Following the increased tariffs, it's been asking on Chinese goods. Chinese companies now increasingly flood the European market. Are we worried about this and how does Zalando plan to deal with that situation? I think that's the first question. And secondly, yeah, no, I think let's get started with it. How do we think about it?

Yeah, I mean, first of all, I think the recent trade conflict discussions I mean, like in the core of Zalem, we don't really see how it affects us because we're European-based. We're only active in the European markets. And as well, our supply chains mostly actually are based throughout – of the ones of our partners that are mostly based with Asia. So it's an immediate effect that we don't really see it affecting our business. When it comes to these, I mean, to development that Ben mentioned of, like, you know, Chinese companies being here in Europe or, like, having offering their products directly from Europe, from manufacturers into the European market. So I think for us, it's like our focus is quality e-commerce, quality lifestyle e-commerce. We work with brands. We tell their stories in our platform. So it's a different focus that we have. So it's telling the stories of brands, of 7,000 different brands. It's a quality lifestyle e-commerce that is actually offered to millions of European customers. I appreciate it. So it's not really our focus. That being said, as a European-based company, I think we welcome generally the recent commentary from the European Commission that these developments in e-commerce are increasingly on the radar, where loopholes are exploited, where product safety standards are not met, and that this is actually something critical that needs to be solved. And I think as a European citizen and company, I think we welcome that there is more focus now on these topics. Cool, super.

There's another question sticking with you, Robert. Ben from Stiefel is asking on TikTok shops. There's lots of noise on TikTok shop launch in several continental European markets. Can you provide an assessment on that competitor? And what is Zalando's TikTok strategy? He thinks we are already on TikTok shop in the U.K., which I can confirm. Is that the way forward?

Yeah. I mean, we are, I think, generally, I think, very curious about it because I think the live streaming is, I mean, it's a big area of consumer interaction consumption in China. It's nascent, or like not yet big or adopted so far. in the Western economies. So, and we're very curious on it. So therefore we as well cooperate with, or we integrate with TikTok in the UK, where we actually drive a lot of learnings as well, how this works, how it's actually adopted, how it will become. And I think figure out as well, like if it scales at once, if it scales of what's actually all right way of engaging with such an ecosystem. So, yeah, we're curious. Cool.

Super. I would now move on to a video question. It's coming from . Please ask your questions.

Hey, morning, everyone. Thank you so much for taking my questions. And apologies if some of these were asked while we were in the waiting room. But I have two questions. The first one is on capacity. So can you please give us an idea of, you know, after the Paris warehouse going live and also with Frankfurt on the way, I mean, where are we in terms of capacity in terms of Euro GMB basis? And can you also give us some color of – how much of that is an absolute capacity increase versus a productivity increase that may come from things like automation or better user labor, et cetera. So that's the first question. And the second question somewhat related to that is on Next, your partnership with Next was something that you called out in the presentation. So what are some of the capability enhancements that you have done to your logistics network because of that partnership and what basically are the learnings from that that puts you in a very, very strong position to then offer that to some of the other partners. Thank you.

Sure, yeah, happy to take your questions. I mean, on the capacity side, as we, I think, already communicated last year, we are in a good position that the capacity that we have and also that's coming online in the next one or two years with both Paris and Frankfurt ramping up is sufficient to cover our growth plan until 2028. And to be very clear, also the combined capacity that we see for Zalando and about you is definitely sufficient to cover our combined growth trajectory in the years to come as soon as this transaction closes. And that's true both for the B2C side but also for the B2B side. And that's also the key reason why, for example, you don't see a big uptake in our CapEx spending because we have this capacity. It's coming online as we need it essentially. And we leverage that capacity to drive our growth both in B2C and B2B. And now coming to your next question on NEXT and how it can potentially propel us forward. I mean, of course, NEXT is a great reference case for us. We've also seen that there's quite a bit of interest and outreach following that news also from other brands and retailers. But what has also always been true essentially for all of Zalando from other partnerships that we've created over the years We typically also learn a lot from our big partnerships, and it makes us better. And I think the same is true for Next. So I think Next helped us understand what also the important requirements are for very large customers to use our infrastructure. And that's why, as we now prepare for the rollout of Next, which is happening throughout the year, We are investing into building additional capabilities, capabilities that will support Next, but also will essentially be available for all the other merchants on Xeos and make our proposition even stronger. To name a few examples, we're talking about advanced fulfillment capabilities, giving Next and also other merchants the chance to optimize customs setups with a virtual bonded warehouse. which we think is a very innovative solution that will further contribute to the usp that we offer to serve really all the markets from one stock pool and optimize customs spending at the same time we are talking about improved onboarding and inventory management essentially making it even faster and easier to onboard any article irrespective of how it's coded And then last but not least, we are also taking this as an opportunity to now expand ZEOS into 10 additional markets, markets that NEX is already serving but where so far ZEOS wasn't present. And that's obviously also going to mean that we can then at the end of this year truly say we can cover all of Europe for you. And I think that's an important proposition for many merchants, both large and small.

Super, thanks. There's another question through Slido from Jordina from JP Morgan. Robert, can you please provide an update on the progress of the CFO appointment?

Yeah. Yes, so we are, this was about this candidacy screening and we're interviewing as well with candidates for that role. No news yet to share. I think when there's news to share, we will do a course. I think in time being, like, you know, we are in this interim period, we're very happy that, I mean, David has done this work. this role as CFO very successfully as well in the past, so that he is now an interim covering next to his co-CEO role as well for the CFO role. I think it's a very good setup as well.

Wonderful. Yeah, then the next question from Stefan is on balance sheet refinancing. So a perfect fit for David. Could you highlight the balance sheet refinancing going forward with a changing European interest rate 10 years to 3% to 4%? Stefan is also mentioning that we have a bond outstanding 400 million in the tranche maturing in August this year. So any insights you are able to give here, David?

Well, I think first of all, I think we just reported this morning that we have a very healthy cash balance and a strong balance sheet around 2.6 billion in cash. We will use that cash to now pay for the transaction as we've communicated in December. And we'll also obviously use it to repay the convertible once it becomes due this summer. The first tranche of two, second one will only become two in 2027. That will leave us with still a strong and healthy amount of cash on the balance sheet. And there are no further plans on financing for this year.

Cool. Super. Thanks. We talked about you shortly in our presentation. Richard from RBC is asking, what about use integration costs and synergies do you intend to include this year?

Well, I mean, what we can definitely confirm is that we see strong value creation potential with this transaction. As we've communicated, we aim for generating 100 million per year in terms of synergies on an EBIT basis in the longer term. Everything that we've also seen in the last few years, Months make us very confident that this is achievable. As you can imagine, we've now started joint value creation planning together with About You, but it's still obviously in the planning stage. We can only execute once the transaction is closed. But so far, we're very happy with how the planning is progressing. And after closing the transaction, we'll also be happy to update you more on the impact for this year. As you can imagine, that will also depend on the timing of the actual closing because, yeah, depending on how many months of the joint group we have this year, the numbers might slightly change.

Super, thanks. We're moving on to the video again. We'll have Mia from Exxon BNB Paribas. Mia, hello.

Good morning. Maybe just on the chart you showed in your results about the cohort development, it shows that 2022, 2023, those cohorts actually saw a GMB decline year-on-year, and 2024, obviously, increased. What makes you confident that the 2024 cohort will not see a decline in 2025? And then maybe previously you've talked about being quite happy with a 50 million active customer base and rather focusing on maximizing the share of wallet. Why the change for this now?

Yeah, so I mean, if you look at our cohort trends, I think there are Some developments in there that you've always seen in our cohort charts, also pre-COVID, right? And that's the general development that in the first year of every new cohort. So, for example, in 2024, for the 2023 cohort, you'll see some first-year charts. And that's just due to the reality that, unfortunately, we cannot retain 100% of the customers that we newly acquired in a given calendar year. That has always been true. And so I guess what we are primarily happy about is that the amount of new customers that we are able to acquire has increased, and we are convinced that a significant share of these customers customers we acquired in 2024 will also then continue to shop with us in 2025 and contribute to our growth journey because what we have also seen in the past is the longer the lifetime of these customers on our platform, the more these customers spend. And that's also what our strategy is very much geared towards, right, making sure that we provide a high-quality experience and also increase the share of wallet with customers over time, as we've tried to explain this morning. What you also see in our cohort development, of course, is that we are really focused, as we said, on driving. profitable growth and maximizing customer lifetime value. And so some of the changes that we've made, for example, on improving our order economics through introducing minimum order values and so on, they obviously are also reflected in these cohort developments. But we think long term it's going to just lead to a more sustainable and healthy customer base. And that's why we are happy with the developments that we see. With regards to active customer development in general, yes, as we said last year, we have a clear focus on driving customer spending and GMV per customer. But we are equally happy to see a continued growth in the active customer base. It's, I guess, more a question of how much of each. And as we've said last year, especially if we think about the longer time horizon until 2028, We expect it to be more driven by increasing spending of customers than by active customer growth, but both drivers are important.

Super. We have another question to you, Robert. Adam from Deutsche Bank is asking, on sports and beauty, are there any big brands you're looking to have on the website, and is there any reason why they don't want to join and sell via Zalando?

Yeah, so I think in sports it's not really a question about the big brands. I think in sports it's more a question around competency, around the sub-worlds in sports, like we're talking about running and football and outdoor. And I think here it's actually very much about the competency that actually they are looking for in a partner to be able to, you know, advise customers and be, like, you know, be a competent, yeah, partner and intermediary between brands and customers. I think here we are, so we're very happy with what I showed in the charts, like, the share of customers of more expensive running shoes that we're actually able to sell, what we actually see now in such a sub-segment as running, that we are able to, you know, through advice and through our competency, to advise us for customers to as well go for, like, you know, running shoes that are actually, like, good investments as well, so for customers. So that's, I think, more the sports side. It's more like, you know, sub-segment by sub-segment, being competent in there, and then running as well these shoes not niche, but I think we're these authenticator brands that are really helpful and important for these sub-segments to actually have to really be the one-stop shop as well for customers in these sub-segments. For beauty, I think it's a little bit of a different topic because in beauty there's many, many brands that we don't yet have, but we're actually making very good progress here on that front. as both the proposition for customers gets better, a lot of interesting features are launched, and we also get a more and more credible destination for both for brands and for customers, where they actually expand all their beauty areas. So here it's actually about a bigger acquisition piece of a brand still.

Okay, thanks. You talked a bit longer about also our plans of ZMS, and Rocco from Arete is asking, would you also aim to roll out ZMS to partner sites on the B2B side at some point, knowing that there are 1P data you have across Zalando and then also hopefully from some onwards from about you? So kind of creating additional touch points with the brands here beyond logistics and software and the like.

Yeah, I mean, I think within our ZMS proposition, we already do, to some extent, off-page advertising opportunities. We're in large, as well, campaigns. Outside of the Zalando site, obviously, here, the gross margin is not as high as when it's on-page. But we do it and actually offer it as a service. And, I mean, we will know, like, in Xerox, I think that we can, as well, expand it. But at the moment, it's not really a focus of ours. Our focus in ZMS really lies on the on-page piece.

Cool. Super. Thanks. We have another question coming from the video. So Sarah from Barclays, the floor is yours.

Great. Thank you for taking my question. Just a couple from me. So firstly, I'd like just a follow-up on the loyalty scheme. Thank you for the color that 10% of active customers are now using it. But I was just curious as to whether you could provide some color about based on your early market, so France, Austria, and I suppose to some extent Germany, what are you seeing in terms of customer behavior and what kind of gives you confidence that throughout 2025 that loyalty scheme will provide that kind of increased customer engagement to offset the loss of subscription fees for this year? And then my second question on Q1, just if you could give some color on what you're seeing in terms of promotional activity and discounting and what your expectations for gross margin is for Q1. Thank you.

So, Q1 is on David.

Okay, so let's start with Q1. I think, as I said earlier, we've seen the usual seasonal pattern, right? Q1 typically starts with a fall-winter end-of-season sale. To us, it felt like a, I would say, pretty normal end-of-season sale in terms of promotional activities. It's probably also a sign that Zalando, but also others in the industry, have been quite prudent in the inventory management and also successful with the sell-through. And therefore, we've seen a rather normal promotional environment for spring, summer season. Obviously, it's still super early. There's no promotions at the start of the season. It's probably something that we can comment on more in our next call once we also get a read on the mid-season sales that are typically happening around April timeframe.

Then the second question or her first question was on loyalty program. So what gives us confidence? What kind of first insights are we able to share with our first launches last year gives us confidence that this will help loyalty to drive us?

Yeah, so, I mean, why we're very confident on it is that – With this loyalty scheme, the program that we're now running, we're rewarding customers, like the broad set of customers, because actually sign-up is for free, and you can just actually sign up actually to participate in the program. And all of the customers, not only those ones that actually pay, are rewarded for both engagements. So we call it like missions. So if you actually visit more often, if you fill out like a, like a size profile, so you're actually earning points. And as well for the purchase, you as well earn points. And so it actually can affect the customer base much more broadly than actually only the signed up or the paid program that we were running previously. And I think what gives us very much confidence is that all the, like, you know, when you roll out such a program, you have certain assumptions about what kind of behaviors customers will actually do and how you are able to affect it. And most of these assumptions that we have had in the early testing, they were either fulfilled or actually over-fulfilled. So we actually saw a lot of very positive surprise. When it comes to the overall rollout, we now see that early signs, and I say early because it's not at a huge scale yet, because it's developing now, it's ramping up now, that the early stages of the increased engagement that we see is actually positive. So therefore, I'm personally very pumped that this will be a major tool for us to affect as well loyalty and GMB spend as well retention and engagement on the platform in a big scale in the following years. Super, thanks.

Sticking with loyalty, Roland, there are some financial questions related to that, one coming from Georgina regarding the loyalty and the provision building up. Can you explain how this is expected to be phased throughout the year? That's the first one, and I think also can take the second one from Adam on the financial cost of the loyalty program. Which line of the PML will it be visible? I think these are two quick ones.

Yeah, so let me start with the second one. When the loyalty program creates frequency and retention, that helps us in GMV. So that effect is fully reflected in our GMV guidance for the year with 429. If we think about specific P&L lines, as people sign up for the loyalty program and they qualify for tiers, they earn certain benefits. And for these benefits that they earn but have not yet used, we defer a portion of our revenue up to the moment that they utilize these benefits. And that is what is creating the provision. So in terms of phasing throughout the quarters, as we are launching more and more markets and more and more of our customers are signing up in 2025, we would expect that phasing to be rather small in Q1 and then it will scale up as we go through the quarters. Now, as we get to later in the year, obviously also more customers will be using those benefits. So a portion of the revenue that we deferred early in 2025, we will then recognize. In aggregate, we still expect for 2025 the impact to be in the mid-double-digit million euros as a one-time non-recurring revenue effect. So also to Adam's question on where do we see it in the P&L, it's a revenue deferral, so you will also see the effect in gross margin.

Super. Thanks, Roland. Yeah, looking at time and ramping up, we talked a bit about you and not only used the video but also text question into Slido. David, how confident are we that we might be able to secure the remaining 10% of about you as we shared today that we already have secured more than 90%?

Well, I mean, first of all, we are happy that we achieved this important milestone of getting beyond 90% of voting shares secured. I think it also shows the strong support that we have for the transaction, not just from the major shareholders that we already announced in December, but also now a significant share of the free float shareholders. And, yeah, the tender period is still running until midnight tonight, so we are also obviously looking forward to even more people tendering their shares, and then we'll take it from there.

Cool, super. I think there are no more questions left. I also don't see anyone on the screen waiting. As always, the IR team is happy to answer all of your questions in the course of today or over the next teams. We also will travel with the management over the next couple of weeks. So happy to see all of you. With that said, yeah, thank you very much for joining us today, for listening in to it. And, yeah, thanks for Berlin and thanks from Berlin. And happy Thursday, everyone. And take care and see you soon. Bye-bye.