Zalando Se Ord

Ladies and gentlemen, welcome to the publication of the Q1 Results 2026 conference call. I am George, the course call operator. I would like to remind you that all participants will be little or remote and the conference has been recorded. The presentation will be followed by Q&A session. You can register for questions at any time by pressing star N1 on your telephone. For operator assistance, please press star N0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Patrick Coffler, Director, Investor Relations. Please go ahead, sir.

Good morning and welcome to our Q1 2026 earnings call. Today, I'm joined by our CEO, Robert Gantz, and our CFO, Nadimitrova. Robert will kick us off with a business update before handing over to Anna to walk you through the financial development of the quarter. Finally, Robert will discuss our outlook. Both will be available for question afterward. As usual during the Q&A session, we kindly ask you to limit your questions to two, allowing for an efficient discussion. This call is being recorded in both the live webcast and the replay will be available on our Investor Relations webpage later today. Robert, over to you for the first live.

Thank you, Patrick. Hello, and thank you for joining today's call. We've achieved significant milestones over the past year, and we continue to do so in Q1. We've successfully executed our strategy and met our financial goals. And we've made substantial progress again in the first few months of 2026. Progress across our team of apps to drive our platform's distribution, custom frequency, and monetization apps. Progress as well with advancing our technology platform, which powers our B2C and B2B businesses. and progress with our AI capabilities to drive efficiency and growth for our business. Our addressable market is huge, with €500 billion in European session, so we relentlessly worked on our strategy execution to achieve a larger coverage of it. Our C1 performance was strong, it confirms that we are well on track with our full-year targets, and it is yet another step towards our mission goals. There are five key highlights that demonstrate our overall progress in Q1, which I will show you now on the next page. Number one, we've delivered a strong financial performance in Q1. At group level, we delivered strong double-digit growth. Reported GMV grew nearly 22%, and group revenue is up nearly 24% compared to Q1 last year. And we increased adjusted EBIT by 39% year-on-year, to 65 million Euro. That brings our adjusted EBIT margin to 2.2%. Number two, as well as Q1, we have advanced our AI capabilities, bringing further traction to both our B2C and B2B business. We continue to be impressed by what benefits AI can bring to both efficiency and growth of our business. And I come back to some of our most exciting developments later in the course. Number three, in B2C we delivered strong growth in Q1 across our team of consumer apps. We had a strong start into the spring-summer season. And about due and launch, achieved even double digital growth rates of GMBs. In our core app, Zalando, our loyalty program is a central engine to drive growth. We now have more than 18.5 million members. We recently launched new exciting benefits by adding food delivery subscription VaultPlus as a partner benefit for our members. Number four. In B2B we recorded continuous strong double digit growth. We have launched ZEOS with the first ZSF partner in Norway and we added two new sales channels. This expansion means we now serve a total of 26 markets and 20 sales channels via ZEOS. And number five. In summary, we're well on track to meet our whole year targets. Despite the ongoing geopolitical instability and economic volatility in our market, we confirm our 2026 target. Overall, I'm very happy with the performance of our team in the quarter. Now, we will first talk about the progress on the AI developments before Anna slides into the financial performance. So in March, during our full year updates, we highlighted how our B2C and B2B signals are driven by a shared data and infrastructure engine that is now supercharged by AI. This engine is constantly getting better every day and every second. This continuous improvement is fueled by the growing engagement of consumers using our apps and is going to increasingly integrate with our ecosystem. We strategically drive the distribution and the usage frequency of our platforms across consumers and merchants. The result of this expanding scale is an accumulation of more high-quality data, which in turn continuously refines and improves our solutions. AI is a powerful catalyst for both growth and efficiency. It will successfully use data and algorithms to drive our business for over 15 years now. Yet in recent years and months, AI has released their scale, and the positive impact on our business has been accelerating. Let me give you a few examples of what we saw now in the recent months. So firstly, we're making great progress to evolve our AI-based system from a chat tool into a true lifestyle companion at the forefront of agenda comments. A key reason I saw last quarter was the upgrades to provide advice beyond fashion. We now cover sport and, very recently, as well, beauty advice. So ask the assistant for highly specific advice, for example, for hydrating, care and skin care, or running shoes for over-pronation, and the assistant can now point you into very helpful directions. Numbers-wise, an impressive 10 million customers last quarter have interacted with our AI assistants. And this is up from 6 million in the whole of 2025. So secondly, we now see how AI enhances the efficiency of our logistics backbone. We're proceeding with the rollout of AI-powered robots across our European fulfillment network. And already today, 2 million items a month are being autonomously handled by our growing fleet of warehouse robots. And now, based on the early success of flow optimization and model training, we're rolling this impressive technology out across our network. This will improve throughput, scalability, and efficiency of our entire fulfillment operations across Europe. And thirdly, we recently achieved impressive speed and quality increase in our partner article onboarding through AI. We introduced a computer vision solution that automatically detects and corrects image backgrounds of articles. We also correct about 6,000 articles' pictures daily and enrich missing material composition information through AI. As a result, up to 85% of articles are now ready to go online in less than three days. And this is an impressive accomplishment in both speed and quality. And it reduces organizational coordination costs between us and the partners. So not a great win-win for AI. Those are the three examples which demonstrate our continuous traction of applying AI in our business. And I'm very much looking forward to sharing many more of these examples with you in the future. Now I'd like to hand over to Anna for the financial performance.

Thank you, Robert, and good morning, everyone. As Robert already highlighted, we delivered strong financial performance in Q1. The reported increases in GMV and revenue are driven by solid underlying growth in Zalando and the inclusion of About You. On a performer basis, we achieved strong GMV growth. GMV increased by 6% to 4.3 billion euros. This growth was primarily driven by double-digit growth of our partner business, of About You, and launched by Zalando. As we have told you for many years, we see GMV growth as the key top-line KPI for our business, and it is defined as the value of all merchandise sold by Zalando and by our partners to our customers. Revenue growth was a solid 3.4%, reaching 3 billion euros, driven by both B2C and B2B. It was lower than the GMV growth because our partner business grew faster than Talando Retail, and we don't account for those sales for our partner business, but only include the commissions we earn on these sales as revenues. Our focus on driving profitability is reflected in the increase of adjusted EBIT. On a reported basis, adjusted EBIT reached 65 million euros, up 39% year on year. We have already delivered synergies of 10 million euros in Q1, which contributed to this result. We are firmly on track to achieve 40 million euros in synergies this year. In terms of profitability, Group-adjusted EBIT margin increased by 0.3 percentage points to 2.2% despite the dilution from the consolidation of About You. Zalando standalone-adjusted EBIT margin improved year-on-year by 0.6 percentage points from 1.9% to 2.5%. About You generated positive-adjusted EBIT after synergy, which is very significant progress and the first time in its history it generated positive adjusted EBIT in the first quarter. Our Q1 results demonstrate continuous progress towards accelerating our financial performance across our entire business. Let me first focus on the strong top-line performance of our B2C business. GMV saw strong growth across all three consumer apps, on a reported basis and on a performer basis. Just like in Q2-24, both About You and Launch by Zalando achieved double-digit growth rates. Growth in Zalando was driven by the acceleration of our partner business. Furthermore, we saw a successful start to the spring-summer season, with particularly strong growth across several lifestyle categories like sports, kids and family, and beauty. Performer revenue saw moderate 2.1 increase to 2.7 billion euro, reflecting the strategic shift in our business mix. This was driven by partner growth significantly outperforming retail across both Zalando and About You. A result of existing partners deepening their platform presence through expanded product assortments. The partner business share of Zalando Standalone is 36.6% up 2.2% each point. However, the inclusion of About You diluted the overall group share to 31.8%. As we scale the partner business towards a target of 40-50% of total GMV by 2028, we expect GMV growth to consistently outpace revenue growth in B2C, over the coming years. Additionally, significant growth in our high-margin retail media business across Thalando and about you contributed to the revenue growth in B2C. As a result, retail media revenues increased to 1.7% of B2C GMV. In summary, our B2C business continues to expand based on our multi-up approach and increasing distribution, frequency, and depth. The strong top-line performance of the B2C segment was supported by generally stronger customer metrics. The increase in GMB was driven by the combination of more active customers and higher customer spending. First, we saw strong growth in active customers. This was primarily driven by the inclusion of About You, but was supplemented by solid growth within the standalone customer bases of both Zalando and About You. By the end of Q1, the number of active customers reached a new high of 62.3 million customers, an increase of close to 10 million customers year-on-year. As in previous quarters, close to 6 million customers currently use both Zalando and About You. Moving to the right, At the same time, we continue to increase our share of wallets, as existing customers are spending more on our platform. Average spend per customer rose by 2.9% to 305 euros. This increase was driven by a larger average basket size, while the average number of orders per active customer remains stable. Overall, we continue to attract more customers to our consumer apps and increase our share of wallets. The top-line growth contributed to an overall increase in gross profit of 22.5% to more than 1.1 billion euros. This translated into a B2C gross margin of 41.5%, which is 0.6 percentage points lower than in Q1 2025. The development was driven by the consolidation of About You with lower gross margin and had a negative impact of 1.1 percentage points. In Zalando B2C, we were able to grow the gross margin by 0.5 percentage points, mainly thanks to a very healthy and well-executed inventory clearing process. Through the strategic use of launch and data-driven discounting, we were able to move all the stock at improved margins. This was a big win for the past three months. We told you last quarter that we had elevated inventory to clear. We delivered that clearance and, in spite of that effort, reported a 0.5 percentage point increase in the length of B2C cross-margin. B2C adjusted EBIT for the quarter was €38 million. This represents a 0.5 percentage point margin drop from the previous year to 1.4%. This margin softening was mainly a result of dilution following the consolidation of about-use. The longer B2C standalone adjusted EBIT margin remained broadly stable as the improved gross margin was offset by an increase in fulfillment costs driven by the consolidation of our network and ramp-up of our new logistics sites. Moving to B2B. In B2B also, we continued to accelerate our financial performance. In the first quarter of 2026, we grew B2B revenues by nearly 24%. On a performer basis, the B2B business grew by 16.6% compared to the previous year, the well above group revenue growth. Zero Fulfillment, which includes both Zalando Fulfillment Solutions and Multi-Channel Fulfillment, drove our B2B expansion. ZFS maintained its strong double-digit growth by successfully keeping pace with the scaling of the partner business. Multi-Channel Fulfillment experienced a very strong acceleration in growth, particularly due to the key collaborations with partners like British Retailer Nexus. The inclusion of scale led to an increase of software revenues. This strong B2B revenue growth translated into higher profits and significant margin expansion. Our gross profit margin expanded by 5.8 percentage points to 18.2%. This very strong growth in B2B gross margin directly translated into adjusted EBIT increasing by more than 4 times to 26 million, and the margins tripling to 8.6%. This improvement was driven by three factors. First, we realized efficiency gains and increased scale within zero fulfillment as we bring on more and more large-scale merchants onto the platform. For example, we are now bringing on Max & Spencer shortly without incremental investments in the platform. Second, The margin expanded thanks to the inclusion of scale, which contributes higher margin software revenues. And thirdly, our margin benefited this quarter from a favorable one-off provision release of €4 million. Without this release, the B2B margin would have been 7.4%. Our strong growth in the B2B business has enabled us to achieve a solid overall increase in the group's adjusted EBIT. Overall, Our adjusted EBIT margin improved from 1.9% to 2.2% in Q126 versus Q125. This is mostly driven by a stable gross margin and operating efficiencies in admin costs. Gross margin on a group level remains stable. Fulfillment costs increased by 0.6% each point. due to the consolidation of About You and temporary transition costs from consolidating our network and ramping up our new logistics sites. While the majority of our long-term fulfillment savings will come from network optimization, we are complementing this structural move with AI-powered automation. Marketing costs slightly rose by 0.1 percentage points driven by the consolidation of About You. Admin costs decreased by 0.8 percentage points, which reflects enhanced operational efficiency. Other operating expenses increased due to a €97 million restructuring charge for the reshaping of our logistics network we announced in January this year, as well as other restructuring measures to further boost operating leverage. Those one-off costs are, as usual, reported outside of adjusted EBIT. In Q1-26, EBIT total adjustments amounted to 144.5 million euros. We anticipate the total adjustments for the 2026 financial year of approximately 300 million euros as communicated during our full-year call, with the remaining amount distributed relatively evenly over the next three quarters. Let me now turn to our balance sheet and cash flow developments. We continue to operate with negative working capital. At the end of Q1, we had negative working capital of 240 million euros, compared to negative working capital of 670 million euros at the end of 2025. As we guided you on the full-year earnings goal in March, we settled in Q1 high-volume partner payouts from peak seasons trading, and our payables have returned to a more normalized level this quarter. But a major win this quarter was the development of our inventory. Zalando's standalone inventory growth slowed from 12% in Q4'25 to 2% in Q1'6. This reflects our effective efforts to clear the extra inventory accumulated during Q4. We have aligned our buying plans in retail with the significant growth momentum of the partner business. and expect inventory to trend in line with B2C revenue growth going forward. On a broader basis, in C1, the inclusion of About You drove 22.5% increase in our total inventory. Our cash and cash equivalents remained solid and ended the quarter at around 1.3 billion euros. This level aligns well with our capital allocation framework to hold a liquidity buffer of 10% of last 12 months' revenue. This figure is about 600 million euros lower than our cash flow position three months ago. As most of you know, 2050 sees a cash outflow, and this was slightly more elevated this year because of payables to our partners, who experienced a great cyber-increase in business. In terms of CAPEX, we continue to invest in our data and infrastructure engine. CAPEX spending Q1 mainly relates to investment in the ramp-up of fulfillment centers in Germany, France and Sweden, increasing spending on debt investment and the inclusion of policies. Furthermore, our share buyback is progressing at pace, leading to a cash outflow of €62 million. At the end of March, we still had around 240 million euros remaining to complete the program. This concludes the financial update for Q1. Now, let's move to the outlook on page 14, and for that, I will hand it back to Robert.

Thank you, Anna. So, overall, our business performed strongly in Q1, and we are proud of our students' achievements. We had a strong start of the spring summer season, and consumer demand persisted. despite a volatile geopolitical and substitute environment. And we have many times proven in the past our resilience and our ability to navigate these situations. So we reiterate our guidance for the financial year 2026, as we provided in March. And our focus is, as always, executing our strategy, investing into the immense opportunities we have, and delivering a strong financial performance in 2026. So this concludes our presentation for today. And before we jump into Q&A, let me just wrap up with the key takeaways of today. We're happy with the team performance that we have delivered in Q1. We advanced our AI capabilities, gaining traction in both our B2C and B2B segments. In B2C, we delivered strong growth across our team of consumer apps. And in B2B, we recorded continuous strong double-digit growth. And we remain well on track to meet our full-length targets. Thank you now. Let's open up for the Q&A.

We will now start the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. In the interest of time, please limit yourself to two questions. Our first question comes from Monique Pollard and Siri. Please go ahead.

Good morning. Thank you for taking my questions. The first question that I had was just on the performance cast. Just hoping you could help us to understand the timeline of the ramp up for the fulfillment costs. So how long that would be expected to be a drag on Zalando kind of standalone EBIT margins for. And the second question I had was on the B2B gross margin. So obviously a very strong progression in the B2B gross margin this quarter, year on year. Anna, you've called out, obviously, the benefit from scale, but just also trying to understand where the B2B gross margin could go in a steady state, please.

Good morning, Monique, and thank you for your question. Let me start with the question on the fulfillment cost development. As we have told you in the past, we're running a program of consolidating our logistic network and utilizing the capacity. For this, we are ramping up more modern centers and ramping down centers which we have announced that we will close. So this reshuffling is planned to be executed in H1. So this is what you can expect. And then, obviously, this is a very big lever for us to achieve our midterm guidance in 2028, as we will see the benefits from this consolidation starting in 2027 and then 2028 coming through. the full impact. So let me move to the second question on our B2B margin, and indeed, we are very pleased with the development of the B2B margin, and we have here two structural effects. One is the increasing scale and efficiency in our sales business, where we saw an improvement in the margin, and secondly, as we grow our software business, they come with structurally better which as well supports the margin development. So the 18%, 17, 18% which you have seen in Q1 is as well what we expect going forward.

Thank you.

The next question comes from Mia Strauss with BNP Paribas. Please go ahead.

Hi, good morning. Just here for me. Maybe I should maybe give a bit more color in terms of current trading and how you've exited the quarter. I understand that you haven't really seen an impact from the Middle East, but just more broadly, I guess, how do you feel you're positioned now versus back in, you know, 2022 where we saw the higher inflation? And then secondly, I just wanted to, in the context of the gross margin, obviously the Q1 was broadly stable. And I think you're still expecting, you know, Q2 some inventory clearance. How should we think about the gross margin for Q2 and then into the second half of the year?

Yeah. Thank you, Mia. Let me start with the gross margin, and then Robert and myself will answer the current trading. the differences to 2022. Yes, indeed, gross margin in the first quarter was stable and you have seen the moving parts. The dilution of About You was fully offset by our B2B and B2C gross margin and indeed in B2C Zalando, We could improve the margin, which was on the higher end of our expectations, and this was driven by a very effective and very well-executed clearance of the stock. As I told you, in the March earnings call, we are focusing on healthy inventory management and clearing of the inventory during the first half of the year. So you can expect Q2 to be slightly below the previous year. And then in H2, we will improve the gross margin going forward. So I'm just reiterating what I said in the earnings call in March. And now regarding current trading, indeed, consumer demand persists in today's environment. And as before, the European consumer continues to be pressed sensitive and to be cautious, but no more. So since the start of the Middle East conflicts and we, you know, we measure and we have not seen any measurable impact, but that said, we continue to closely monitor the situation as the conflict evolves. And Robert, maybe your memory from 2022? Yeah.

As Anna said, the consumer demand persists in today's environment and I guess the difference I think that we see towards 2022, I think in 2022 there was actually like an observable big difference in how consumers actually reacted to a situation. and became actually from one day to the other like much more price sensitive and cautious, and we saw that very much in 2022 in our numbers. What we see now is actually, like as Anna said, just a continuation of the same price sensitivity and cautious behavior as we've seen in the past. But yeah, it persists and there's kind of no today kind of measurable impact that we actually see.

The next question comes from . Please go ahead.

Thanks for taking my question. I've got two, please. The first is on inventory. So if we look at it in a sort of inventory to revenues way, it still looks quite high. So I wondered if you had a target figure in mind that one day you'd like to get to for inventories to revenues. And then the second question is about rest of Europe. I wondered if you could comment on profitability in rest of Europe compared to the back region. and also on countries such as Spain, so whether you have a sense of when you might reach profitability in those types of countries. Thank you.

Good morning, Anne, and thank you for the questions. On inventory, so I'm very pleased with the progress which we made in inventory. As you recall, we closed the year with an inventory of 12% year over year, and now we are down to 1.9%, which is much more healthy because it's much more aligned with the stop-line growth. And we have aligned our buying plans going forward with the growth of the partner business and respectively with the development of the wholesale business. And you can expect that there will be in sync. We are looking at GMV here when we as well make our plans for inventory and not as revenue growth. As you have noticed as well that the revenue growth is impacted by the strategic shift to a higher proportion of the partner business and of the partner business outgrowing the retail business, and this is why the right KPI to look here at is the GMV growth, and we are very well on track. And in regards to your question on the rest of Europe, as you know, we don't break down and we don't report countries and as well don't disclose the EBIT margin. But you can be assured that we are having plans. for each country, and we are driving efficiencies in growth country by country, respecting as well the very specific demand situation, competitive situation, and playing with our team of apps with About You, Zalando, and Zalando Lounge.

The next question comes from Jurgen Kolb with Capital Subro. Please go ahead.

Thank you very much indeed. Two ones. First of all, coming back on the current trading, I was wondering if you could share maybe some thoughts on what you're seeing from your vendors in terms of prices. Obviously, spring is probably, summer is obviously is done, but what you're seeing in terms of prices for fall, winter this year, but also then going into spring 2027. That's the first one. And secondly, you talked about the AI capabilities and your strong performance there. With the new customers that you're gaining with your AI technology, maybe some thoughts on how they are trending. Is there a difference in terms of churn? Are they more loyal maybe? What are you seeing there in their activities? Maybe just more details from that angle. Thank you very much.

Good morning, Jorgen, and thank you for the question. I'm taking the current trading question. So you're asking about the buying conditions and if we see input prices going up. As you rightly say, we already are stocked up. For summer, spring 26, and as well autumn, winter, we have negotiated and just pre-ordered part of it. As you know, we do pre-orders and then re-orders. And the season, the buying season for spring, summer 27 is still ahead of us. And obviously, as always, we have a very strong relationship with our partners, and we will find here a solution which is benefiting as well for the partners as for us. So, yeah, we will see. It's still early, but be assured that we are preparing as well so that we can mitigate some issues. potential inflationary impacts on the landlord. And the second question.

Yeah, the second question, I mean, on more color, on customer behaviors, like, I mean, or customer acquisition. So there is, like, in the newer cohorts of customer acquisitions, there is actually no significant difference in any kind of behaviors or patterns than to the cohorts that we've seen in the past. I think one interesting observation to share with you is in the Zalando app, I think one of the good treasures that we see is actually that, as we have proven, the AI-based feeds that actually serve as inspiring content that we as well see that is actually now brings, I think, a little bit more engagement into the app, so we see actually some good kind of corrections in terms of more visits actually in the Zalando app, which is as well driven by some of the AI-driven investments in content inspiration.

Our next question comes from Georgina Johanan with J.P. Morgan. Please go ahead.

Oh, hi. I have two questions, please. The first one was, I understand that the partner program and lounge, you know, really outperformed and were up double digit. Presumably that's on a pro forma basis. Just to understand, does that mean that the wholesale business is now actually going backwards? And is that X lounge, of course? And if that's the case, then does that have implications for your buying margin going forward? Yeah, just trying to sound that better, please. And then secondly, just coming back to the gross margin development, which I think was really impressive in the context of the elevated inventory, are you saying that you're Your drag on the gross margin year on year was actually lower from discounting. Overall, you had lower discounting in Q1 than you did in Q1-25. And just to understand, therefore, why we should expect the Q2 gross margin to be down, it just seems slightly counterintuitive. Thank you.

Thanks. Good morning, George, and thank you for your questions. So first let me address the question on the partner business and the code of lounge and wholesale in the Zalando app. And indeed, the wholesale business in the Zalando app is faxed. And as you know, we are optimizing for the group. We are optimizing for Zalando, and we're not optimizing wholesale or partner business. And this is completely in line with our strategy because we would like to expand our platform reach and to grow the partner business. Obviously, it has less risks with inventory, but as well we can grow the engagement with our partners, which is not only using our marketplace, but as well increasing the retail media spend and as well using our logistic services. So exactly on strategy. So now moving to the question, what could be the impact on our buying conditions? No, there is no impact. Two reasons for that. The wholesale business is still big, yeah? So we are targeting 40%, 50% partner business, and we still have a big proportion, which is great because then we have two legs to walk on. And as well, we have about two, which again increases the volume. And we have already gone through the cycle of negotiation, which we already shared with you and which is visible in Synergy. So now to the question on the gross margins, there were two parts of the question. The first one is what made it different compared to last year? Was it discounting driven? And the second is what would be the effect in Q2? And you're saying that it feels counterintuitive. So we usually compare year-over-year the quarters rather than Q4 to Q1. As you know, Q4 is a quarter which is very promotional. We have a lot of campaigns. We have single day. We have cyber. We have Christmas. People are spending more, and it's discounting heavy. And as we told you in the last earnings call is that we optimize with our data-driven algorithms, discounting performance marketing consistently as well, our loyalty program so that we get the best gross margin given not only the demand side but as well the stock. So this is different in Q1. In Q1, we don't have that much promotional environment as in Q4. And as well, it's the start of the season, where you see as well more black prices as we kick off. So now, moving to the second part of the second question, why I am expecting the Q2 margin to go down again. We have here the dilution of about Q. As you know, it lapsed. in July and we still are focusing on the inventory clearance so we would be really to have here a clean table and as we are committing for the buying budget for spring summer season 27 so that we have a good starting basis and this is why my base assumption is that we will have a lower margin in Q2

The next question comes from . Please go ahead.

Hi. Thank you for taking my questions. I've got two, please. The first one is just a follow up on the current trading question. So, you know, obviously, I know you don't comment on months, but just given we have very different weather comps from last year, can you remind us that, you know, from May and June, do the comps actually get tougher or do they get easier? And just given we are halfway through Q2 already, can you confirm that know based on your middle east comments can you confirm that there is no deterioration from the five to six percent gmv growth run rate that you're seeing so far so that's the first question and uh as far as the second question is concerned it's uh on marketing costs so very slight negative development year on year or an underlying basis Can you tell us that, you know, is this a function of higher customer acquisition costs because of AI? And do you think that customer acquisition costs incrementally are getting tougher because of AI agents? Or do you think incrementally they should get better and it should be favorable in the second half? Thank you.

Thank you, Aja, for your questions on current trading. So, as I told you, we see consumer demand persisting in today's environment. So, I can't speak for May and June because it still needs to happen and we are closely monitoring. But what we see today and without reflecting any potential impact of a prolonged crisis, we confirm our and in Q2, we expect performer GMV growth to remain in the mid-single-digit range. On the marketing cost question, so the increase in marketing costs is driven by the inclusion of About You. So in this, in Zalando, we spend less in performance marketing. As you know, we are now preparing for a very exciting event starting in June with Foosball. Yeah. But underlying, we didn't spend more for new customers. We really doubled down on clearing the inventory, so no deterioration of the metrics there.

The next question comes from Richard Chamberlain with RBC. Please go ahead.

Yeah, thank you. Good morning. Maybe I could just ask a couple more on costs, if that's all right, just looking at page 10 of the presentation. You touched on marketing costs. Can you also just explain about the restructuring costs? I think it was close to $100 million in the quarter. Are we done now on restructuring costs, or are you expecting more of those in Q2 and for the rest of the year? And then the other one is on the acquisition-related expenses, I guess relating to about you. Can you give a bit more colour on that and also your expectation on that line for the balance of the year as well? Thank you.

Thank you, Richard. So let me start with the adjustments and the restructuring costs. So as I said, We are expecting $300 million in total adjustments for the year, $144. We booked in Q1, of which the majority was tied to restructuring of the logistics network and as well overhead restructuring, which we as well announced in June, for example, a content studio. So we made big progress with AI. So this is how you see it as well in the overhead cost. We stick to the number, and the number consists, as I shared with you as well, so we have share-based payment, which is a bit more than a third, and then we have the restructuring cost, and then we have purchase price allocation. which is a customer-relational brand equity, which is non-cash. And then we have the integration cost. And I guided you as well that for the whole period, we have planned mid-digit million number for integration cost, and the biggest proportion will be due this year. Yeah. So this is what you can expect. No new news. We just want to talk here.

The next question comes from Adam Cochrane with Deutsche Bank. Please go ahead.

Good morning. Two questions from me. The first question is in terms of the how you treated inventory and markdown to their promotions differently in 1Q compared to 4Q. Am I right in understanding that most of the difference in that is because of different market conditions, so 4Q being a more promotional market across the industry, you just have to participate, or is there any change in the way that you did things in 1Q? And added to that, Is there any element of the inventory that was written down or provided in Q4 so that you didn't have to do the same in one queue? And then when you sell it on Zalando Lounge, it's already been written down. So you don't have the same impact than you did in the first quarter. And in terms of the second question, it does appear like you're balancing revenue growth and gross margin a bit more carefully in the first quarter. How are you thinking about the pro forma revenue growth? So the plus 2.1% in B2C, looking into Q2 and the second half, based on your outlook, I'm assuming you are expecting an acceleration of that as the year progresses. What exactly are you basing that on? An improvement in consumer confidence, customer behavior, or is it more Zalando-specific initiatives? Thanks.

Thank you, Adam. Let me start with the inventory question and the consumer environment. So usually, as I said, Q4 is different than Q1 in terms of promotional activity because we have cyber and we have a lot of campaigns going on. And in Q1, you have the start of the spring and summer season. So this is what is different. This is the nature of the seasonality of our business. What we have done is we used more broadly lounge in clearing the old stock. And indeed, as you say, if we have very old stock, it has written off. And obviously, when it is sold on lounge, then you have a favorable impact. So exactly that. You said on revenue growth in Q1 this year, we had 2.1% revenue growth in consumer, which was mainly driven by the partner business outgrowing the Zalando retail business. Last year, it was exactly the other way around. So the wholesale business was growing faster than the partner business. So this is what you're seeing as the impact. And about you, there's a much stronger retail business growth. Partner business is still a very small proportion. And going forward, we are sticking to our guidance. And this is Actually, indeed, why we're giving you range, and the range is quite broad, because we can see positives from the consumer environment, but we don't control it. So what we double down is what we execute, how we execute, and Robert was talking a lot about that, how we leverage AI. as well to increase the customer experience, make our proposition more attractive, but as well to reduce return rates, which as well has an impact of the top line. So what I'm saying is that we stick to our guidance and we don't reflect here any potential adverse impact of a prolonged conflict in the middle.

And our last question for today's call comes from Andreas Riemann with HODO. Please go ahead.

Yes, good morning. A few questions actually around scale. So what's the underlying growth of the scale business at present? And as of when do you expect letters to be included in your numbers? And a bit broader, did you already renew contracts of scale customers? And did the commissions change when you renewed those contracts? So a bit more insight on scale would be appreciated.

Yeah. Hello, Andreas. I'm happy to talk to you to scale. We're very happy to have scale in our portfolio because this complements, obviously, our logistic software offers. So we will... Levis is still not in the numbers. So we'll come later on as we are onboarding. So it will be in H2. Then in terms of the take rate, no, the take rate is the same. So we haven't seen the reduction on the take rate. And as you know, we don't disclose revenue growth of scale, but underlying the revenue growth is around 9% for the core half.

Ladies and gentlemen, that was the last question. I would now like to end the conference. I'll cover to the management for any closing remarks.

Thanks, everyone, for joining today's earnings call session. If there are any further questions, don't hesitate to contact us and handing over to Anna to wrap it up for today's meeting.

Thank you everyone for joining. It is important that you take away that we are progressing very well in the executing of our strategy and delivering on our financial performance. We have done so in 2025 and Q1. in 2026 is the further proof point that we deliver. And we are excited about the future and how we can leverage the power of AI, the power of our teams, and the power of our tech platform and to create more value for our customers, for the partners, and for the company. Thank you very much and speak to you soon.

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