Zalando Se Ord

Welcome to the Zalando Q2 earnings call. The conference will be recorded. At this time all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation, so please dial in to state your question. So thank you very much and let me now turn the floor over to your host Patrick Kofler, Director Investor Relations.

Good morning and welcome to our Q2 2026 earnings call. Today I'm joined by our Co-CEO Robert Gentz and our CFO Anna Dimitrova. Robert will start with a strategic overview and our key business highlights before handing over to Anna, who will walk you through the financial developments of the quarter and the outlook. Both will be available for questions afterwards. As usual, this call is being recorded. The live webcast as well as the replay of the call will be available on our Investor Relations webpage later today. As usual, during the Q&A session, we kindly ask you to limit your questions to two each, allowing for an efficient discussion. Now, over to you, Robert. The floor is yours.

Thank you, Patrick. Hello, everyone, and thank you for joining today's call. We carried last year's momentum straight into 2026. By successfully executing our strategy and hitting major milestones, we achieved further progress throughout the first half of 2026. This progress is reflected across three core areas of our business. First, through our multi-app approach, where we're driving a platform distribution customer frequency and monetization depth. Second, through our advanced technology platform, which successfully powers both our B2C and B2B operations. and third, through scaling our AI capabilities, which continue to drive significant efficiency and growth across the business. European fashion represents a massive 500 billion euros addressable market. We are relentlessly focused on our strategic execution to expand our coverage and capture a larger share of this huge opportunity. Our solid Q2 performance confirms that we are on track to meet our full year targets, serving as another successful step towards our mid-term goals. On the next page, I will share five key highlights that illustrate our overall progress in H1. Number one, we've delivered solid profitability in H1, even as top line growth fell a little short of our ambition, driven by softer demand, mainly in the sneakers category. At group level, we delivered double digit growth. Reported GMV grew 21%, and group revenue is up more than 22% compared to H1 last year. and we increased adjusted EBIT by 16% year on year to 270 million euros, bringing our adjusted EBIT margin to 4.2%. On a performer basis, comparing like for like with about you in both periods, group GMV growth was mid single digits. And we continue to benefit from a structural shift of fashion spend online, which remains a steady tailwind for our business. Number two, in H1, we have also advanced our AI capabilities, bringing further traction to both our B2C and B2B business. AI is already delivering measurable benefits to both efficiency and growth. And I come back to some of our most exciting developments later in the call. Number three, in B2C, GMV grew across all three of our consumer apps, About You, Lounge, and Zalando. In our core apps, Zalando, we're doubling down on our lifestyle opportunity with upgraded customer journeys in sports, an exciting new pre-owned luxury fashion partnership, and the launch of a dedicated home and living category. Furthermore, the partner business remains a central engine to drive growth. In H1, we've seen strong double-digit GMV growth of 13.4%. Number four, in B2B, we see accelerated strong double-digit growth driven by the scaling of the partner business and large-scale merchant collaborations. B2B revenue grew almost 26% on a reported basis. Additionally, ZEOS achieved successful go-lives, such as Max & Spencer, while scale secured major enterprise client wins, including Wortmann Group, one of Europe's largest shoe retailers. Number five, we're refining our 2026 growth guidance to the lower half of the original 12 to 17% range for GMB and revenue following our H1 performance. Adjusted EBIT is narrowed to 680 to 720 million euros. We're narrowing our profit expectations despite a refined top line range which shows the strengths and quality of our earnings. We're excited with how our teams executed on the strategic priorities that will drive the business forward and remain confident in a strong H2O performance. Let me now elaborate on the progress of our business. In March, we shared that our B2C and B2B segments are powered by unified data and infrastructure engine that is increasingly enhanced by AI. This engine is constantly improving through growing consumer app engagement and brand integrations as we drive platform distribution and usage. The more customers and brands use our platform, the smarter our systems get. We've invested into data to run our business over 15 years, but putting AI to work right now is helping us operate much more efficiently and grow faster. Let me share with you some of the many new developments from the past few months now. AI generated content is transforming how fashion and lifestyle brands operate and connect with consumers. Building on our success using AI for product onboarding and discovery that we talked about, we have launched Scale Studios, a scalable B2B solution. Scale Studios is a new SaaS platform that replaces traditional photoshoots with AI generated content. This significantly reduces the time to market by 95% and reduces visual content costs by over 90%. We generate revenue through a flexible, token-based subscription model that grows alongside our customer needs. In just two and a half months after launch, over 100 brands, including S.Oliver and Betty Barclays, have joined the platform, resulting in an annual revenue run rate exceeding €1 million. and this early success proves that our position as a data and technology expert in the lifestyle industry combined with our access to over 7,000 potential brands allows us to scale innovative AI solutions very rapidly. Let's talk about an example of our customer-facing AI, the Zalando Assistant. We're making steady progress towards our goal of building a true lifestyle AI assistant. We had three major milestones last quarter. First, we integrate a web search. Now our assistant combines live data like current fashion trends, events, or weather with our product catalog, allowing us to connect real-time moments directly to these items that we sell. Second, we added customer care. Customers can now resolve order issues directly within the chat. In fact, 15% of conversations which contain simple inquiries like, where's my order, are already being handled on the spot. Third, we introduced visual discovery. Customers can now snap a photo of an item they like in real life, and our visual AI will instantly find that product or similar alternatives in our catalog. And these updates are gaining serious momentum. Between January and June, we saw a 63% increase in high value interactions. And even more importantly, our retention metrics are growing. Customers are consistently coming back to the use of the assistance for inspiration or for support. It's clear our innovation pipeline is working and I'm incredibly proud of the progress that we've made. Regarding our B2C strategy, I share how we're driving monetization by expanding our lifestyle universe within the Zalando app. Specifically through new experiences, partnerships and category launches. So here are three examples from last quarter. First unique category-specific experiences. In sports, we launched specialized hubs like fan homes and a boot room for football fans. We also enabled customized jerseys with favorite players' names, which nearly doubled our German football jersey sales compared to the Euro 2024. Second, new partnerships in pre-order. We joined forces with Le Ser Collective to bring pre-owned luxury to 14 markets, giving millions of customers access to over 50 designer brands. And third, a new lifestyle category. We're rolling out now our home and living category across all markets, debuting today with a high caliber portfolio of premium home and lifestyle brands. We have plans in place to expand this to over 50 partners and 25,000 products. Let us now transition to our second growth engine, our B2B operating system. We're speeding up our B2B growth. Our strategy is clear. We're making Zalando's proven logistics, software, and services available as a leading B2B operating system for fashion and lifestyle brands across Europe, whether they sell on or off our platform. You can see our growth momentum through our scaling partner business, major enterprise go-lives and key wins. On the logistics side, we announced a large-scale strategic partnership with British retailer Marks & Spencer last November. We successfully launched this collaboration today and it will be rolling out to 22 markets over the next few months. After a successful go-live with NEXT last September, we have now expanded the collaboration to the About You marketplace. We are also pleased that YouGoBoss has chosen ZEOS to handle fulfillment for the Zalando marketplace business. On the software side, it's great to see new go-lives for merchants like Ochsner Sports, Biogena and ICE. Additionally, scale has secured key wins across DACH and the UK. In DACH, we won the Wortmann Group, one of Europe's largest shoe retailers, along with Roastmarking and BiComponent. In the UK, music retailer HMV chose the scale e-commerce platform to power their online shop. These wins show that our B2B solutions are highly adaptable, easy to scale internationally and trusted by major enterprise clients. Now I hand it over to Anna for the financial performance.

Thank you, Robert, and good morning, everyone. Let me walk you through our financial performance. As a reminder, our reported figures include About You. And where useful, I will refer to Performa Growth, which assumes About You was consolidated in the prior year period for a like-for-like comparison. In Put You 2, we sustained our profitable growth trajectory. Group GMV increased on a pro forma basis by 4.4% to 4.9 billion euro. This growth was primarily driven by double digit growth of the partner business and about you. 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. Group revenue growth was up 1.1% on a performer basis. B2B and About You performed strongly. Our partner business is accelerating faster than expected. In the short term, this creates more competition on our platform, including for our retail business, but increases the attractiveness of our assortment to our customers. On the long term, this supports our goal of increasing partner share to 40-50% of B2C GMV. We also observed softer demand, especially in the sneaker category, across both business models. The difference of GMV and revenue growth is mainly a result of the strong partner business growth, where selling prices are fully reflected in the GMV metric, while revenue is limited to the commission earned. Our focus on driving profitability is demonstrated in the increase of adjusted EBIT. Adjusted EBIT reached €205 million, up 10% year-on-year. Group adjusted EBIT margin decreased by 0.5 percentage points to 6% as a result of the dilution from the consolidation of About You. We have already delivered more than €20 million of synergies in the first half ahead of our own plan, which gives us confidence in reaching our €40 million target for the full year. Zalando's standalone adjusted EBIT margin improved year-on-year by 0.1 percentage points from 6.5% to 6.6% on the back of strong adjusted EBIT margin progression in B2B and despite a tough one-time comparison base. About You generated another quarter of positive adjusted EBIT. Looking at H1, our financial performance translates into 21% GMV growth and 22.2% revenue growth on a reported basis. We delivered 270 million adjusted EBIT, up 16.1% year-on-year. Based on our H1 results, we remain on track to achieve the midpoint of our narrowed adjusted EBIT guidance for 2026. Now, let's move to B2C. Q2 was a quarter of solid financial performance and accelerated momentum in our shift towards a platform-led business model. GMV has shown solid growth across all three consumer apps on a reported basis and on a performer basis. As in Q1, both About You and Launch by Zalando were leading in terms of growth. Growth in Zalando was driven by the continued acceleration of our partner business. Furthermore, we saw particularly strong growth across lifestyle categories such as sports and beauty. GMV was up 20.7% on a reported basis. Performer GMV was up 4.4%. Revenue reached 3.1 billion euros, supported by About You, but down on 0.6% on a performer basis. This development is primarily a reflection of our strategic shift towards a platform-led model, coupled with the softer demand, especially in the sneaker category. On the back of the continued acceleration of our partner business, the share at Zalando standalone rose by 3.2 percentage points to 36.9%. The inclusion of About You, however, diluted the overall group share of the partner business to 31.9%. Turning to our high margin retail business, retail media business, we maintained strong momentum across Alando and About You, driving notable growth. Consequently, retail media revenues increased strongly by almost 40% to 2% of B2C GMV. In summary, our B2C business kept growing while we actively managed the shift to our platform model. That shift tempers revenue in the short term but strengthens the business for the long term. Moving on to customer metrics. The top-line performance within the B2C segment was principally driven by a combination of growing active customer base and increased customer spending. First, we increased our active customer base. We reached 62.5 million customers on a last 12-month basis, up 18.3%. Driven primarily by the inclusion of About You, as well as the expansion of Zalando's standalone customer base. By the end of Q2, 6 million customers are using both platforms, Zalando as well as About You. Although these customers represent only about 10% of our user base, they drive a disproportionate high share of performance, with both order frequency and GMV contribution running twice as high as the overall average. Second, we continue to increase our share of wallet, as existing customers are spending more on our platform. Average spend per customer rose by 2.9% to €307. This increase was mainly driven by larger average basket size. Overall, we continue to attract more customers to our consumer apps and increase our share of wallet. Now on to B2C profitability. The B2C gross profit margin stands at 43.2%. The decline of 0.4 percentage points compared to the previous year was as expected driven by the inclusion of About You, which diluted the group B2C margin by 0.9 percentage points. On a Zalando standalone basis, B2C gross margin was up 0.5 percentage points. The higher gross margin was driven by the strong growth of our partner in retail media businesses, partially offset by the cost of clearing older stock in launch. We delivered €164.1 million in B2C adjusted EBIT compared to €173.7 million a year ago. This modest decline was driven by a favorable one-off in the Q2 2025 baseline, b a negative one-off this quarter relating to a strike among a last mile logistic provider in Belgium, and c a temporary increase in fulfillment cost as a result of the reshaping of our logistic network. The adjusted EBIT margin reached 5.3% down from 6.7% in the prior year period. While the B2C segment benefited from About You synergies, this could not fully offset the impact of About You lower margin profile. The Zalando B2C standalone margin was down by 0.7 percentage points to 6%, as underlying gross margin improvements were outweighed by the aforementioned temporary headwinds. As we have explained before, we are significantly reshaping our logistic network. While this was, as expected, a headwind to our financials in the first half of 2026, This reshaping is one of the building blocks towards achieving our 2028 margin targets. This project is developing according to plan and we anticipate some improvements in the second half of 2026, beginning with an improved fulfillment cost ratio, followed by the further structural gains in 2027 and 2028. Now, shifting the focus to B2B, where double-digit revenue growth translates into a steep increase in profitability. B2B revenue reached €335 million, up 27.6% on a reported basis and 21.1% per former. So, significantly above group level. Zalando Fulfillment Solutions 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 Next. And the inclusion of scale led to an increase of the software revenues, which are operating at higher margins. The strong B2B revenue growth translated into higher profits and significant margin expansion. B2B gross margin expanded by 7.1 percentage points to 20.6%. And B2B adjusted EBIT more than tripled and reached €41 million, up from €11 million a year ago, with adjusted EBIT margin rising to 12.2% from 4.3%. There were three drivers behind this improvement. First, we unlocked operational efficiencies and achieved greater scale with sales fulfillment driven by strong volume growth on the back of the partner business acceleration. Second, the margin expanded thanks to the inclusion of scale, which contributes higher margin software revenues. And third, the margin this quarter also benefited from temporary effects. These were phasing related and will even out over 2026 overall. Q2 was an exceptionally strong quarter, but we expect B2B to continue contributing to the adjusted EBIT Group target in the second half of 2026. So now let me walk you through the Group P&L. Our group gross margin remains stable at 40.9%. This reflects the 0.5 percentage point increase in the Lando B2C gross margin, the adverse impact from the About You B2C inclusion, and a 0.2 percentage point increase from B2B. A closer look at the cost lines, excluding adjustments, gives further insights. First, fulfillment costs. rose by 0.7 percentage points. In addition to the inclusion of About You, the reshaping of our logistic network and the ramp-up of Paris and Gießen has led to temporary higher costs as planned, while a strike at the last mile logistic provider in Belgium added some unexpected costs. Those temporary adverse impacts were partially offset by synergies and Favorable Order Economics. Furthermore, the year-over-year comparison was affected by a favorable base effect in Q2 2025. We expect this ratio to decline year-on-year in H2, driven by efficiencies and our network reshaping. Second, marketing cost rose by 0.5 percentage points driven by the consolidation of About You, which currently runs at higher marketing intensity. The Lando marketing spend was stable. And additional 0.4 percentage points stem from marketing adjustment, specifically purchase price allocations for the amortization of acquired brands and customer relationships resulting from the About You acquisition. Third, admin costs decreased by 0.4 percentage points, reaching 4%. The improvement was driven by the inclusion of About You. and for other operating income and expenses decreased 0.2 percentage points. On an unadjusted basis, they increased by 0.5 percentage points reflecting restructuring expenses mainly relating to costs associated with the closure of our fulfillment center in Erfurt as well as other organizational efficiency measures. specifically at our headquarters in Berlin in our studios and outlets as usual this one of course are reported outside of adjusted EBIT overall our adjusted EBIT margin reached six percent compared to 6.5 a year ago a step down we expected driven entirely by the first time consolidation of about you which runs at a lower margin today Excluding that impact, the underlying Zalando margin was slightly up. Looking ahead, we expect the BAUTU contribution to improve as synergies build towards our 40 million euro target this year. In Q2 2026 EBIT total adjustment amounted to 93.7 million euro. As a reminder at our full year end Q1 course we guided to around 300 million of total adjustments for 2026. We now expect to come in above that level and are targeting around €380 million for 2026. The €80 million increase is mostly made of non-cash write-downs reflecting accelerated closures. Let me turn to our balance sheet and cash flow development. We continue to operate with a negative working capital position. At the end of Q2, we had a negative working capital position of €494 million, a €386 million improvement compared to €108 million in Q2 2025. On a reported basis, total inventories are 24.8% higher year on year, but this simply reflects the inclusion of About You rather than any change in our underlying inventory position. Inventory excluding about you increased 3.9%, so broadly similar to Q1. We continue to remain disciplined in buying, so the pace at which we sell through our inventory was essentially unchanged year on year. We made good progress clearing all the stock, particularly in launch, and our full year inventory is expected to land with healthy levels. Our teams are actively managing our autumn-winter buy, to maintain this lean discipline trajectory. As guided, we continue to see strong GMV growth in our partner business, which also leads to higher trade variables. Now to our cash position, which remains solid. Our cash and cash equivalents ended the quarter at around €1.4 billion, up from €1.3 billion at the end of the first quarter. This remains aligned with our capital allocation framework, under which we aim to maintain a liquidity buffer at around 10%. percent of last 12 months revenue over time cash levels may fluctuate around this reference level due to normal seasonal patterns and in addition we have access to 1.25 billion euro of revolving credit and ancillary facilities providing further flexibility to measure to manage seasonal liquidity requirements Let me walk you through the movements during the quarter. We generated strong operating cash flow of 473 million euro, an increase year on year, mainly characterized by the increase of trade parallels and the back of a growing partner business. CAPEX was 55 million euro. Reflecting the ongoing ramp-up of our fulfillment centers in Germany, Poland and Sweden, continued investment in internally developed software and the inclusion of About You. and a further €45 million related to lease liabilities, reflecting the first-time inclusion of About You. We returned €235 million to shareholders under the €300 million share buyback programme we announced in March. Altogether, this delivered strong free cash flow of around €418 million in the quarter. and it is exactly this cash generation driven by disciplined capex and efficient working capital that gives us the flexibility to keep investing in the business while returning capital to shareholders. This concludes our financial performance review. Let's now move to our outlook. Our full year growth guidance now reflects a first half that fell a little short of our ambition. We ended H1 with 5% per former GMV growth. Consequently, we have refined our outlook and now expect full-year growth in the lower half of our original ranges. This is in line with market expectations. Specifically, on a reported basis, we now expect GMV and revenue growth in the lower half of our previous 12-17% range. and our adjusted EBIT guidance is narrowed to 680 to 720 million euro and we have increased confidence in hitting the midpoint of that range. This confidence is based on one, H2 benefits from our logistic network reshaping, two, significant operational efficiencies, three, synergy delivery and four, disciplined autumn-winter inventory buy. The fact that we can narrow our profitability guidance while refining the top line to the lower half speaks to the quality of our earnings, the continued mix shift toward a higher margin partner business and retail media, the scaling of our B2B segment and the disciplined cost management and AI-driven efficiency gains. Our focus is, as always, executing our strategy, investing in the immense opportunities ahead and delivering a strong, high quality financial performance in 2026. And with that, I hand it back to Robert for the key takeaways.

Thank you. Before we jump into Q&A, let me just wrap up with the key takeaways of today. We refined our fully outlook and are confident in delivering a strong Azure performance. We advanced our AI capabilities, gaining traction in both our B2C and B2B segments. In B2C, we delivered solid growth across our team of consumer apps, and in B2B, delivering strong double-digit growth and a significant margin expansion. And the integration of About You is progressing very well. Thank you very much and now let's open up for the Q&A.

Ladies and gentlemen, if you have joined by telephone and like to ask a question, please press star nine and pound key on your telephone keypad. If you would like to withdraw your question, press star three and pound key. Allowing for an efficient discussion, please limit your question to two per person. So. The first question comes from Monique Pollard from City. Oh, my apologies, it looks like we lost your connection. Could you please raise your hand again, Miss Pollard, and dial in again to register your question? We follow on with the next one from Frederick Wild from Jefferies. The stage is yours.

Good morning, everyone. Thank you so much for taking my questions. They're both, I'm afraid, about the impact from sneakers on the business. So first of all, could you help us quantify the impact you saw in Q2? Just maybe help us with what percentage of sales of sneakers and how much did the growth of that business slow, just so we can get some sense of the magnitude. The second question, please, is because this is maybe slowing a bit more than you expected, Should we be worried about more markdowns coming in half two about a bit more excess inventory or do you feel it's well managed? I guess the other way of asking about that is how quickly can you change your assortment within a season? Thank you so much.

Thank you Frederick for the questions and good morning. Let me start with the sneaker performance. What we see is a broad-based softness in the sneaker market. You have seen that after countless successful number of releases in the past years, It seems now that the market has been a bit overstretched so that we see especially in the lifestyle categories of the demand and this has been as well called out in recent earnings and market commentary from different sport brands. obviously we could have decided as well to push more products into the market with increasing marketing intensity or discounts but we consciously decided to drive profitable growth in the quarter in terms of a magnitude our sneaker business is low double digit of the total business in terms of GNV and so in terms of would this dynamic change going forward we don't expect a short-term change in dynamics but for sure we expect in future to see another sneaker cycle coming. I think important is to call out that the sneaker category is characterized by classically strong in-season buying. this means that we can adapt our budgets during the quarter reflecting price points particular brands or product categories and this is based on size reminders of customers and as well wish lists and this is how we will manage as well the assortment And now this is a good segue to your second question, if you should be worried for markdowns in the second quarter and if we can adjust the assortments. As I said, yes, we can do this. I would not be betting now on a sneaker turnaround for the H2 performers. We are very confident that we can achieve our ambition in top line in H2 given the actions which we were taking and as well given the good development and contribution of our strategic initiatives for instance the PLUS program or the discovery feed or the improvement in search and ranking.

Next question comes from Richard Chamberlain from RBC. The stage is yours.

Thanks. Morning, everybody. Two questions from me, please. I guess both for Anna, I think. So first of all, can you just say what your expectations for the about you synergies are now for the second half and maybe just give some color on where those are? are coming from. And then second, Anna, would you mind just explaining what's happening with the trade payables line? Just explain the decrease in the first half and how you expect that line to evolve in the second half. Thank you.

Thank you, Richard, for your questions. Let me start with the synergy development. I'm very pleased with the work of the team and with the traction which we see in our synergy delivery. Now, with more than 20 million, we have more than half of our targets. and this year the synergies are coming mainly from commercial negotiations from logistic synergies in terms of packaging and transport and as well procurement in terms of marketing and content synergies so we are very confident to reach our 40 million target for the year and we are keeping it for now In terms of trade payables, trade payables are a function of the acceleration of the partner business and this is what you are seeing in the numbers and on the back of accelerating business in the future we will see similar developments.

The next question comes from Monique Pollard from City.

Thank you for taking my questions. The first question I had was just on the B2B growth. Wondering if you can give us some understanding of how that should progress through the second half with the key wins and the go-lives that you've got in the pipeline. Presumably you have some level of oversight there. and then the second question I have is on the inventory levels and how to think about those inventory levels given the growth in the partner business in the B2C. So should we expect inventory to start coming down or reducing slightly over the next few quarters if that partner business obviously is going to grow as a proportion of the B2C? Thank you.

Good morning Monique and thank you for the questions. Let me start with B2B. We are very pleased with the accelerating growth in B2B and we expect similar strong growth in the second quarter. This is driven by the increase and increasing growth in ZEOS on the back of higher volume through the partner business and as well of a strong pipeline in multi-channel fulfillment. Secondly, your question on inventories and the result speaks for themselves. I'm here as well pleased with the work of the team and with the different very disciplined approach regarding inventory you have seen coming in down as well year over year and quarter over quarter. and we plan to manage inventory carefully as well going forward and we are aligning our buy with the growth of the partner business and target for the year as well inventory, health inventory levels which will decrease year over year.

Next question comes from Yashraj Rajani from UBS.

Thank you for taking my questions. I have two questions, please. So the first one is probably just a clarification on pro forma revenue in the second quarter, please. I'm not sure I quite understand what's driving the gap. Is it fair to assume that given the strength in your retail media business, It's probably your weighted average commissions that are coming down year on year, which is what is sort of driving that gap, or is that probably the wrong interpretation and it's something else? So that's the first one. And then the second one is, if I just look at your 2028 guidance for 7% margin, based on your guidance for 2026, it's probably a two percentage point step up. So can you talk us through your thinking around what is the phasing of the evolution there? Do you expect 100 basis points improvement in 27 and 28 each? Or do you think 7% is completely out of the picture and we probably get to the lower half of that? Thank you.

Thank you Yashrat for the questions. Let me start with your question on performer revenue development and what is driving it on a group basis. You saw that the revenue growth is 1.1% which is driven by the growth in B2B about you and obviously as well Zalando Retail Media. What is driving the revenue decline is on the one side the software development in the sneaker category as I called out and on the other side the very strong growing partner business which puts and creates more competition on the platform. including the retail business and this basically the strategic shift tempers the revenues on the short term on the long term is very favorable because it brings more assortment to the platform which is more attractive for the customers and for the partners and this will support further platform monetization which we will see in increasing media business, in increasing B2B business and obviously as well increasing partner revenues. So you had a question on commissions. Commissions vary, as you know, depending on different factors like price points for products, partner categories and the usage of ZMS. But I hear the decline is, as I said before, driven by the software retail business. So now moving to a broader question, more midterm question about our confidence in the midterm target and as well in reaching our 2026 guidance range. So let me start with 2026. I'm very confident that we can hit the midpoint of the guidance range on the back of high quality earnings. of the synergies coming in of the operational efficiencies so this makes me confident in terms of for 2027 and 2028 i shared with you already in the 2025 call in march the building blocks of reaching the midpoint of the guidance range First, we are confident that we can deliver our mid-term gross margin ambition of around 40%, driven by a high-quality partner in retail media business, driven by underlying improvement in The B2C and About You margin and obviously the growth of our B2B segment. Secondly, I have full confidence in the synergy delivery, which is an important building block towards the midpoint of the guidance. Now we saw commercial and procurement synergies coming in. the synergies from the consolidation of our logistic network and as well the payment platform is still to come yeah we are doing this and executing on that one as we speak and the third building block of reaching our midpoint of the mid-term guidance OPEX efficiencies on the one-head site fulfillment what I already as well mentioned in the presentation the project of reshaping the network is on plan and we will see first financial benefits already in the second half of 26 and then more structural impacts in 27 and 28 so effort will be visible already in 27 and in addition to that efficiencies driven by our restructuring efforts so you heard that we have pulled forward a couple of those plans like restructuring efforts in the headquarter in Berlin closing the studios and as well to outlets everything will contribute to reaching the mid point of the midterm guidance next question comes from Andrew Ross from Barclays the line is open great morning all I wanted to ask you a short term one about Q3 would be helpful to get any color as to what you've seen in July today appreciating that it's a

a light month but any sense for the clean GMV growth may have accelerated so far and what your expectations would be for Q3 would be helpful and then as a follow-up to that anything you can give us in terms of how to think about the EBIT split implied in your guidance between Q3 and Q4 Q4 is the big quarter it would be helpful to get an understanding of how much is baked into that thank you

Thank you Andrew for the question on current trading. Obviously I will not comment on July but what I can tell you is that in Q3 we expect to remain in the mid single digit range and as you know the final outcome will always depend on the seasonal transition in September. Regarding adjusted EBIT, you know as well that we are not guiding quarter by quarter our adjusted EBIT, but you are aware and you said it that Q3 is the smaller, the seasonally smaller quarter. In terms of progression, we expect continuous progress towards achieving the full year guidance range of 680 to 720.

Next question comes from Georgina Johanan from JP Morgan. The stage is yours.

Thank you for taking my questions. just two questions and also a clarification please just on the clarification just what you were saying about inventories because I appreciate core inventories are up only I think about four percent year on year at the end of the first half but given that the wholesale business is going backwards in terms of GMB proactively I would have expected as Monique said for the inventory position to be to be going backwards so were you saying that by the end of the year that inventory position you're planning for that to be down year on year um that was just a clarification please and then um first question was on Q3 is there anything in particular that we should think about being sort of supportive initiatives and drivers around GMB so perhaps more actively um progressing like running shoe brands or something like that given that I think there's a bit of a switch going on there and then my second question was just can we get an update on scales progress in the US how the relationship with Levi's is is going so far and any updates on sort of future potential wins in that region please thank you very much

Thank you George for the questions. Let me start with inventory. So in Q2 we saw decrease in old stock inventory driven by our efforts to clear that old stock and at the same time We had intakes for the new season and this is why you see a plus 3.9% growth. So this is good news because we have more fresh stock and as well to the end of the year we plan year over year to decrease our inventory. The second question around Q3 and our confidence in the mid single digit range and what is it built around is we continue to see the shift from offline to online as a tailwind for our growth. We continue to expect a growing partner business and as well we continue to execute actions in order to strengthen the retail business. This was what I was mentioning before that we have the flexibility to use in-season budgets in order to adjust our assortment. and in the second half of the year we will see as well the impact of our strategic initiatives which we have launched a couple of quarters ago and this is for instance PLUS where we already reached 20.5 million customers but as well the development of our discovery feed. And the third question I will pass over to Robert.

Thank you, Georgina, for the question on scale. So, I mean, North America, yes, as we commented on, is a key strategic growth market for scale, as it kind of represents 50% of the global volume in the software as a service market. And so we've set up like a... a New York based sales team and this is actively actually building brand awareness and engaging with key partners following actually the great traction that we have now with the device here. I mean as we don't really comment on ongoing customer discussions we see though like a very strong pipeline and we're very optimistic that we can share and announce further customers in the US in the upcoming quarters.

The next question comes from Adam Cotrain from Deutsche Bank. The stage is yours.

Good morning, guys. A couple of questions, please. Firstly, looking at the B2C business and profitability, correct me if I'm wrong here, but your partner program is generally EBIT accretive compared to wholesale. The lounge is margin accretive. about you is now profitable. Given all of these points, your partner program growing faster and retail media growing strongly, why did the B2C EBIT move backwards given all of those positive drivers? I'm just trying to work out exactly what's going on in the cost base that made that happen. And secondly, this question might be related, but thinking about the volume throughput, You talked about the higher basket size, 2% or so. Is that really price mix rather than volume? So what I'm thinking about is the GMV growth from part of the program is 14%, but not all of this will be going through the ZFS. So I'm just wondering whether there is actual decline in volumes going through your fulfillment centers year over year, which maybe accounts for some of the deleverage on the B2C EBIT. And then finally, just a small one, you mentioned a phasing effect in B2B. Can you just explain what that phasing effect relates to and what level of, what quantum it is? Thanks.

Good morning, Adam, and thank you for your questions. Indeed, let me elaborate on the year-over-year development of the B2C adjusted EBIT. So this is the functions of puts and takes. Let me start with the positive, which you also mentioned. So this is the continued mix shift towards a high margin partner business and retail media business. Secondly, we saw as well positive other economics, then the synergies contributing and our discipline cost management as well. So on the negative side, though, we saw the B2C profitability impacted by those temporary cost headwinds from the reshaping of the logistic network, which I already called out in Q1 and this includes the ramp up of the sites in Gießen and Paris and so those are temporary impacts which will turn into tailwinds in the next in the half year two and furthermore we had in the quarter a non-recurring negative one-off impact from the strike among a logistic provider in Belgium and to remind ourselves last year in Q2 we had a positive one of the Norwegian custom reimbursement which we called out back then it was a low double digit number and bottom line all this one-time and temporary adverse effects are outweighing the positive operational improvements and this is basically what characterizes the year-over-year B2C adjusted EBIT development Then you had a question if volumes are going down and if the utilization of the network is going down. No, not at all. It is not going down. It's more these temporary expenses which I was mentioning before and as well we see very good traction in partners adopting ZFS. On B2B, I mentioned that the adjusted EBIT in B2B was supported by a temporary one-off, which is a phasing and will even out throughout 2026. it's commercially sensitive this is why I will not disclose it here I think what I would like actually to add because you asked as well about the B2C adjusted EBIT development so those temporary one-off is in the same absolute amount like the negative one-off from the Belgium strike so on a group level they are neutral and it's below 10 million euros

Next question comes from Andreas Riemann from OdoBHF. The stage is yours.

Good morning, thanks for taking my two questions. First one on sneakers again, so if customers reduce the spending on sneakers, do they buy other types of shoes, i.e. do you see other positive trends emerging in footwear? And the second one, we focus a lot on B2C and B2B, but can you actually speak about the fashion business in the countries, in what markets? Are you growing fast? In what markets are you gaining share? Or in what regions in Europe do you see a more challenging business? These would be my two questions. Thanks.

Thank you Andreas for your two questions. Let me take sneakers. Yes, I said sneakers, I didn't say footwear. We see developments in different categories, especially in sandals, in pumps. And this is the beauty of the partner business because partners can react quickly. according to those real-time insights of customer demand. So the softness is focused on sneakers. Robert?

Yeah, I mean, on the on the on the on the country specific, I mean, we don't disclose them like very, very specific, but I think what I can comment on is, I mean, overall, the countries are developing quite similar. I think what we see, though, I think is a strong attraction actually in the in the Eastern European markets where we actually see stronger, stronger growth than in the other markets.

Oh, the next question comes from Anna. Richelieu from Berenberg. You can speak now.

Thanks for taking my questions. The first one is about consumers and whether they're still particularly price sensitive and still in bargain hunting mode, or is it becoming any easier for you to inspire them to buy at full price? And then my second question is whether you still expect the second half gross margin to be up year on year? Thank you.

Thank you, Anne. So we view the environment as unchanged and the consumer is remaining price sensitive, incautious. Nothing has changed here. As on the second question about the gross margin, so as I said as well on the question regarding the midterm outlook, We are very confident that we will reach our mid-term targets for the gross margin and for this year we have some positive developments as for example the About You Inclusion is lapping. Synergies will flow through. We see as well good development of the partner business, underlying improvement of the retail business. On the other side, the growth of the B2B business is dilutive for the group margin as they operate on the lower margin. And as well, we need to balance all the positive drivers against Market realities, but our goal remains to continuously improve the gross margin.

We have a last question again from Rajani from UBS.

Taking a follow up from me, please. So thank you, Anna. I think your clarifications on the pro forma revenue were very helpful. Maybe just a quick follow up on that is if we actually look at your renewed guidance on revenue in the second half, that does imply a big step up versus where you're exiting Q2. So just based on your earlier comments, are you then expecting a resurgence in the wholesale slash retail business or is it just more of an accounting slash cleaner base because of which there's actually that step up? Thank you.

um yeah thank you for this question is an important one um the refinement of the guidance implies at the midpoint that we will have an acceleration of the top line growth in h2 compared to h1 and this acceleration how it is materializing obviously depends on the effectiveness of the measures which we are taking and those measures imply as well a strengthening of our retail performance no accounting measures it's a real growth yeah

So this was the last question, so I'll hand over again to the company for some closing words.

So thank you everyone for joining today. It is important to take away that we are progressing very well and executing our strategy and delivering on our financial performance. Q2 was another quarter of profitable growth with high quality earnings, a very good progress on synergy delivery, on the B2B growth and a very strong progress in expanding our platform model. We are looking with confidence into the second half and we are very much excited to create impact for our customers, for our partners and for Zalando. Thank you very much and speak soon again.