Zalando. The starting point for fashion - Roadshow presentation - Zalando Corporate
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Zalando.
The starting point for fashion.
Roadshow presentation
1 August 2019
Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q2 2019 results
We see clear progress on our journey to build the starting point for fashion
Visits to fashion destinations
Unaided brand awareness Site visits & direct traffic
in Europe
(relative to following competitor1) (in # m; in %) (average # of monthly unique visitors 20182)
1.4x
Nordics
2.5x Zalando
Inditex
#1
in Europe
H&M
2.3x 2.5x
DACH Asos
Other
~70% ~90% Adidas
1.8x Nike
Southern Europe
2014 ’15 ’16 ’17 2018
(1) Brand Monitor Q4/18; simple average of relative positions across markets.
3 (2) Comscore data as of Dec 2018.
Our customer base is growing, engaging more with us
and happier than ever with our service
Active Customers Order Frequency Customer Satisfaction
(# m) (# per customer, LTM) (Group NPS)
2.0x 1.6x
26.4 4.4
+14pts
2.7
13.1
2014-2018
2013 2018 2013 2018
4
We have grown into Europe’s leading online destination for fashion
GMV Revenues
(in € bn) (in € bn) 17
countries
>3x 3.0x
>1,000m
6.6 visits last quarter
5.4
>80%
mobile traffic
1.8
>26m
active customers
2013 2018 2013 2018
5
Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q2 2019 results
The platform strategy is one key lever towards being the starting point
• Direct access to European
digital consumer
Starting Point • Leverage Zalando capabilities
(tech, data, logistics)
Platform
Strategy
• Offer desirable and • Platform adds scale to Zalando
comprehensive assortment
• Less inventory risk – while
• High availability improving customer offering
(50% of PP volume incremental)
7
ZFS leveraging our European logistic network to enable PP success
7. SZCZECIN (Gryfino)
1. ERFURT
Start in 2012
Start in 2017 Create the capacity for future growth:
12 warehouses allow > 14bn GMV
8. OLSZTYNEK
2. BRIESELANG 6 Start in 2019
Start in 2011 Get closer to our customers:
We will deliver 30% of orders
9. LODZ (Gluchow)
3. MÖNCHENGLADBACH
Start in 2013
Start in 2019 on the next day by 20201
7 8
2
9
3
4. LAHR 12 1 10. VERONA (Nogarole Rocca) Scale a differentiating asset which
Start in 2020
Start in 2016
4
we can open up to brand partners
5
11. MILANO (Stradella)
5. PARIS 11 10
Start in 2016
(Moissy-Cramayel)
Start in 2016
12. ROTTERDAM (Bleiswijk)
6. STOCKHOLM Start in 2021
Start in 2018
8 (1) 3pm cutoff time
Connecting brands to consumers with Zalando Marketing Services
Brands Zalando Marketing Services Consumers
Influencer Products (Collabary)
Consumer Insights
Media Products
No. of campaigns
>37m female unique visitors
>750 m visits per quarter
>26 m active customers
2016 2017 2018
9
Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q2 2019 results
Facing an immense market opportunity, our number one priority
is to capture market share
We are targeting a massive opportunity …with low online share compared to other
in 5-10 years1… categories
Total Consumer
fashion
Fashion
40% Electronics2
>450bn
30%
Online
>25% fashion
20%
>5% 10%
15% 20% 36% 45%
0%
2018 2023 2018 2023
(1) Source: Company estimates and Euromonitor International, February 2019. Values based on actuals and estimates; fixed exchange rates.
Fashion data incl. apparel and footwear, bags and luggage, jewelry and watches. Data for Europe (excluding Russia) inclusive of sales tax
11 (2) Source: United States online penetration, Statista, last update 2018-10We aim to achieve a scale of 20bn EUR GMV by 2023/24
Growth Ambition 2023/24 Business Model Mix 2023/24
In €bn GMV In €bn
~20
~20
Partner
program
~40%
13
~10
~8.2
6.6 Wholesale ~60%
2018 2019 2020 … 2023/24 GMV Revenue
CAGR1 +20-25% +15-20%
12 (1) 5-year CAGR (2018-2023): high end of range, 6-year CAGR (2018-2024): low end of rangePlatform model to drive higher long term profitability at scale
Target Margin (growth in line with / slightly above online market)
Partner Group margin Key assumptions:
In % of revenue Wholesale1
Program impact 2
• PP share ~50% of GMV
Gross margin • ZFS share ~75% of PP items
• ZMS revenue 3-4% of GMV
Fulfillment costs
• Operating leverage and fixed cost
regression
Marketing costs
• Cash Flow: WC neutral and
CapEx slightly above D&A
Admin expense
Adj. EBIT margin 6-8% 20-25% 10-13%
(1) Wholesale includes Offprice and Private label
13 (2) Trend vs. 2018 cost linesFinancial profile during transition to platform model
Transition phase 2019 - 2021 Years following Target model
• Growth in line with / slightly
Continued high GMV growth of 20-25%
Growth above online market
for the next 5 years
• Margins between 2-4%, driven • Margins start to increase • Target margin of 10-13%
by growth investments and as platform transition
Profitability platform transition progresses (e.g. impact
of ZMS)
• Cash Flow negative • Target margin leading to a
• NWC neutral strong cash generation
Cash • Capex of 4-5% of revenue,
driven by logistics and
technology investments
14Platform model drives superior financial model maximizing shareholder value
1 Our vision is to become the starting point for fashion, the destination that consumers
gravitate to for all their fashion needs.
2 The most important building block on that journey is to transition our business towards
a true platform business, with the PP, ZFS and ZMS as the most important elements.
3 Our strategy will result in an attractive financial profile, characterized by an
attractive double-digit margin profile and strong cash generation at scale.
15Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q2 2019 results
Outstanding customer growth
resulting in profitable growth in Q2/19 and raised full-year profit outlook
Starting point strategy: Strongest ever Q2 active customer growth and fastest site visit growth since 2013
Financial performance: Profitable growth continued with GMV +23.7% and yoy higher adj. EBIT of €102m
Profit outlook: Adj. EBIT now expected in upper half of initial €175-225m range
Customer proposition: Expansion of fulfillment network and broadening of our assortment range
Platform transition: ZFS is already a great success – and we are taking it even further
17Enabling our partner to tap into our growing European fulfillment network,
Zalando Fulfillment Solutions (ZFS) is already a great success…
Share of Partner program items Total ZFS shipped items Total signed ZFS partners
+200% +400% +300%
>100
90% 90% 90%
25
a year today a year today a year today
ago ago ago
18…and we are taking it even further by adding three key new features this year
ZFS and Switzerland ZFS and Offprice integration ZFS and multi-channel fulfillment
Key benefits Key benefits Key benefits
Adding Switzerland as first market Increasing stock flexibility and Superior customer offering and less
with customs limiting inventory risk for partners by inventory risk for partners by offering
shifting remaining stock to Zalando Zalando fulfillment for transactions in
Lounge at the end of the season alternative channels
In pilot mode Pilot in Q4/19 Pilot in H2/19
19On the assortment side we are focusing our efforts on three strategic dimensions
to offer our customers even more choice
Assortment expansion through
Push into high price premium Focus on Sustainable Fashion
Partner Program & Connected Retail
All prices from high to low: Added several New brands including Ecoalf, Mud Jeans,
new high price premium brands Girlfriend Collective, and Stripe + Stare will
15 new high profile beauty brands through launch soon on Zalando
PREMIUM
beauty retailer FeelUnique like Button
London, Nuxe, and Lierac
SUSTAINABILITY
sustainable fashion assortment:
Added German KATAG group to our
more than 15,000 items and over 240
Connected Retail Program which will add
Phillip Lim brands.
50 offline stores to the Zalando Platform
20Continued strong market outperformance in Q2/19
Group (H1) Group (Q2) Fashion Store – DACH (Q2)
Fashion Store
GMV: GMV:
Offprice +23.3% +23.7%
Other2 732
626
(in €m 2,9761 1,5971
and %)
2,5261 1,3301
Q2/18 Q2/19
Fashion Store – Rest of Europe (Q2)
2,747 1,478
2,327 1,233
746
608
235 293 115 156
201 148 101 45
H1/18 H1/19 Q2/18 Q2/19 Q2/18 Q2/19
(1) H1/19 (H1/18) contains -€211m (-€237m) reconciliation of internal revenues; Q2/19 (Q2/18): -€82m (-€119m)
21 (2) All other segments including various emerging businesses; private label offering zLabels no longer presented as separate unit since Q2/19Strongest ever Q2 active customer growth and fastest site visit growth since 2013
Active customers Average orders per active customer
4.6 All-time
(in #m) (LTM in #) 4.2
high
Traffic
+34%
Q2/18 Q2/19
28.3
Average basket size after returns1
24.6
(LTM in €) 58.4 56.9
Q2/18 Q2/19
GMV per active customer2
All-time
(LTM in €) high
244 260
Q2/18 Q2/19 Q2/18 Q2/19
(1) Defined as GMV divided by the number of orders
22 (2) Defined as GMV divided by the number of active customersAdj. EBIT of €102m in Q2/19 – notably above prior year
Adj. EBIT: Group (H1)1 Group (Q2)1 Fashion Store – DACH (Q2)
Fashion Store 9.6% 9.2%
Offprice
60 68
Other 3.7% 3.6% 7.1% 6.4%
(in €m
and %) 1082
1022 Q2/18 Q2/19
942
942
Fashion Store – Rest of Europe (Q2)
112
92
104
92 5.3% 4.8%
32 36
16 11
8 7
-16 -15 -7 -9 Q2/18 Q2/19
H1/18 H1/19 Q2/18 Q2/19
(1) Excluding equity-settled share-based payment expense (“SBC”), restructuring costs and non-operating one-time effects of €34.5m in H1/19 (H1/18: €22.3m); Q2/19: €9.7m (Q2/18: €6.7m)
23 (2) H1/19 (H1/18) contains €1m (€2m) reconciliation of internal adj. EBIT; Q2/19 (Q2/18): €0m (€2m)Stable gross margin development and healthy fulfillment cost improvement
Costs and margins1
(in % of revenue) H1 Q2
2018 2019 Delta 2018 2019 Delta
Cost of sales (57.1%) (56.6%) (0.5pp) (54.2%) (54.2%) 0.0pp
Gross profit 42.9% 43.4% 0.5pp 45.8% 45.8% 0.0pp
Higher warehouse
utilization and attractive
Fulfillment costs (28.2%) (27.9%) (0.3pp) (28.2%) (27.3%) (0.9pp) product mix
Marketing costs (6.6%) (7.6%) (1.0pp) (6.4%) (8.1%) (1.7pp) Both higher spend
for personalized and
Administrative brand marketing
(4.4%) (4.3%) (0.1pp) (4.2%) (4.0%) (0.2pp)
expenses & Other
Adj. EBIT 3.7% 3.6% (0.1pp) 7.1% 6.4% (0.7pp)
24 (1) Excluding equity-settled share-based payment expense (“SBC”), restructuring costs and non-operating one-time effectsCapex spend back-end loaded in 2019
Net working capital (end of Q2) Capital expenditure1
(in % of annualized revenue) Intangibles
PP&E
(in €m)
€16m (€79m)
109
97
22%
31% 67
0.2 17% 55
31%
-1.2
Q2/18 Q2/19 H1/18 H1/19 Q2/18 Q2/19
25 (1) Excluding payments for acquisitions of €1.7m in H1/19 (H1/18: €4.5m); Q2/19: €1.7m (Q2/18: €0.0m)Profitability outlook raised – Adj. EBIT expected in upper half of initial €175-225m range
GMV growth in 20 – 25% range; revenue growth around the low end of this range
Adj. EBIT1 in upper half of initial €175 – 225m range
Slightly negative working capital and around €300m capex2
(1) Excluding equity-settled share-based payment expense (“SBC”), restructuring costs and non-operating one-time effects of ~€60m for FY/19E
26 (2) Excludes M&A transactionsAppendix Management Board The Zalando share Zalando Investor Relations Team
Management Board
Robert Gentz David Schneider Rubin Ritter Jim Freeman David Schröder
Co-CEO Co-CEO Co-CEO CTO CFO
• Marketing / Sales • Fashion Offer • Strategy • Product • Finance
• Human Resources (Assortment) • Technology • Operations
28The Zalando share
Shareholder structure Share information
Ordinary bearer shares
Type of Shares
with no-par value (Stückaktien)
Kinnevik AB Stock Exchange Frankfurt Stock Exchange
~31%
Market Segment Regulated Market (Prime Standard)
Index Listings MDAX
Total Number of
Free Float 251,705,353
Shares Outstanding
~59%
Anders Holch Povlsen Issued Share Capital €251,705,353
~10%
29 As of August 9, 2019.Zalando Investor Relations Team
Patrick Kofler – Team Lead IR Dorothee Schultz – Junior Manager IR
Patrick.Kofler@zalando.de Dorothee.Schultz@zalando.de
Team Contact
T: +49 3020 9681 584
Zalando Tamara-Danz-Straße 1
10243 Berlin
investor.relations@zalando.de
https://corporate.zalando.com/en
Nils Pöppinghaus – Manager IR Jan Edelmann – Manager IR
Nils.Poeppinghaus@zalando.de Jan.Edelmann@zalando.de
30Upcoming events Date Event Tuesday-Wednesday, September 3 - 4 Roadshow USA: Los Angeles, San Francisco Thursday, September 5 Goldman Sachs Annual Global Retailing Conference, New York Tuesday, September 24 Berenberg / Goldman Sachs German Corporate Conference, Munich Wednesday, September 25 + 26 Baader Investment Conference, Munich Thursday, October 31 Q3/19 Results Wednesday, November 13 + 14 Morgan Stanley TMT Conference, Barcelona 31
Disclaimer Certain statements in this communication may constitute forward looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties. You should not rely on these fo rward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may diff er materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroecon omic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / conditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and changes in competition levels. 33
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