Zalando. The starting point for fashion - Roadshow presentation - Zalando Corporate Website
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Zalando.
The starting point for fashion.
Roadshow presentation
1 January 2020
Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q3 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.
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
>85%
mobile traffic
1.8
>29m
active customers
2013 2018 2013 2018
4
Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q3 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)
6
We are building Europe’s leading fashion data platform to improve the customer
experience, power the fashion ecosystem and maximize business value
For our customers For our partners For ourselves
Improving the customer experience Enabling business opportunities through customer Scaling efficiently and maximizing value by
through personalization and inspiration: insights: leveraging the power of big data and AI:
• Catalogue and search optimization • Detailed customer & competitive insights • Demand forecasting
• Product recommendation • Data driven marketing & merchandising • ROI based performance marketing
• Algorithmic outfit creation • Targeted brand & performance marketing (ZMS) • Pricing & inventory management
• Size recommendation • Inventory management (ZFS) • Deferred payment risk management
• Personalized service offering • Targeted and testable product & content • Logistics network optimization
development
Unique data infrastructure and state of the art governance allow all Zalando teams to drive data based value creation
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
We offer a broad range of payment methods and logistic partners
to satisfy local customer preferences
Payment Methods Countries Logistic partners
INVOICE
PREPAYMENT
22 different payment methods Our presence in 17 countries 25 domestic carrier integrations, 2
requires localization express carrier, 14 same day
destinations
9
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
>1000 m visits per quarter
>29 m active customers
2016 2017 2018
10Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q3 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
12 (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 GMV1 In €bn
~20
~20
Partner
program
~40%
13
~10
~8.2
6.6 Wholesale ~60%
2018 2019 2020 … 2023/24 GMV Revenue
CAGR2 +20-25% +15-20%
(1) GMV (Gross Merchandise Volume) incl. VAT
13 (2) 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
degression
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
14 (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
15Investment Highlights - The Starting Point for Fashion
Our vision is to become the starting point for fashion, the destination that consumers
1 gravitate to for all their fashion needs.
2 The number 1 priority is to focus on growth with 20-25% topline CAGR
to achieve a scale of 20bn EUR GMV by 2023/24.
3 The most important building block on that journey is to transition our business towards
a true platform business.
4 At scale our strategy will result in an attractive financial profile, characterized by
double-digit margin profile and strong cash generation.
5 To become the starting point we aim to invest our economic surplus in our customer experience
across assortment, digital experience and convenience to drive customer satisfaction and retention.
16Agenda Our vision: The starting point for fashion Platform as key lever to become the starting point Our business model of the future Q3 2019 results
Strong financial performance
driven by outstanding traffic and active customer growth
Starting point strategy: Site visits >1bn for the first time and continued outstanding active customer growth
Strong financial performance: GMV +24.6%, revenue +26.7%, adj. EBIT €6.3m
Outlook confirmed: GMV growth of 20% to 25%, revenue growth around 20%, adj. EBIT between €200-225m
Platform transition: Continued strong adoption of our platform services ZFS and ZMS
Sustainability: Becoming a sustainable fashion platform with a net positive impact for people and planet
18We continue to deliver against our starting point strategy as we broaden
our customer base and create deeper customer relationships…
Active Customer Site Visits
Growth YoY, % Growth YoY, %
29.5m Traffic
YTD YTD
AC >1bn
Starting Point
for Fashion
17% 34%
16% 28%
13% 19%
2017 2018 2019 2017 2018 2019
19...and continue to capture market share across Europe
based on a highly localized and customer centric approach
GERMANY
Strengthening our market leadership position by
creating deeper customer relationships with Zalando SWEDEN
Plus - Plus customers already drive 10% share of GMV Continuing on our strong growth trajectory on the back of
in DE after only 2 quarters. investments into local assortment and local warehouse.
SPAIN
Developing less mature online fashion market by increasing
brand awareness, investing in customer acquisition and
driving convenience improvements resulting in significant
growth acceleration. CZECH REPUBLIC
Fastest growing country on the back of strong customer
proposition and investments in customer acquisition, paving the
way towards market leadership (e.g. in CZ acquired 1% of
population in July).
20 Online Fashion market share rankings in terms of GMV FY2018 (Source: Euromonitor)do.MORE Strategy 2023:
Becoming a sustainable fashion platform with a net positive impact for people and planet
CARBON OPTIMIZED APPLY PRINCIPLES
NEUTRALITY PACKAGING OF CIRCULARITY
Of our operations, Minimize waste and And extend the life of
all deliveries keep materials in use; at least 50m fashion
and returns eliminate single-use products
plastics
MORE SUSTAINABLE INCREASED ETHICAL UPSKILLING
FASHION STANDARDS Our employees
Generate 20% We will work receive skilling
of GMV by more only with chances that
sustainable partners who match future
products align with them work needs
21All regions contributed to strong revenue development
Revenue: Group (YTD) Group (Q3) Fashion Store – DACH (Q3)
Fashion Store
GMV: GMV:
Offprice +23.5% +24.6%
Other2 667
542
(in €m 4,4971 1,5211
and %)
3,7261 1,2001
Q3/18 Q3/19
Fashion Store – Rest of Europe (Q3)
4,144 1,398
3,429 1,102
731
559
348 453 113 160
312 190 111 42
YTD/18 YTD/19 Q3/18 Q3/19 Q3/18 Q3/19
(1) YTD/19 (YTD/18) contains -€291m (-€362m) reconciliation of internal revenues; Q3/19 (Q3/18): -€79.4m (-€125.1m)
22 (2) All other segments including various emerging businesses; private label offering zLabels no longer presented as separate unit since Q2/19Growth in Active Customers further accelerated
Active customers Average orders per active customer
4.3 4.6 All-time
(in #m) (LTM in #) high
Traffic
+37.3%
Q3/18 Q3/19
29.5
Average basket size after returns1
25.1 57.7
(LTM in €) 56.6
Q3/18 Q3/19
GMV per active customer2
All-time
(LTM in €) high
248 262
Q3/18 Q3/19 Q3/18 Q3/19
(1) Defined as GMV divided by the number of orders
23 (2) Defined as GMV divided by the number of active customersHealthy gross margin improvement due to reversal allowance of defective returns in
Q3/18 and good trading environment
Costs and margins1
(in % of revenue) YTD Q3
2018 2019 Delta 2018 2019 Delta
Cost of sales (58.2%) (57.4%) (0.8pp) (60.4%) (58.9%) (1.6pp)
Gross profit 41.8% 42.6% 0.8pp 39.6% 41.1% 1.6pp
Higher warehouse
Fulfillment costs (28.8%) (28.1%) (0.6pp) (30.0%) (28.6%) (1.4pp)
utilization
Marketing costs (7.1%) (7.8%) (0.7pp) (8.0%) (8.0%) (0.1pp)
Administrative
(4.5%) (4.2%) (0.4pp) (4.8%) (4.0%) (0.7pp)
expenses & Other
Adj. EBIT 1.5% 2.5% 1.1pp (3.2%) 0.4% 3.7pp
24 (1) Excluding equity-settled share-based payment expense (“SBC”), restructuring costs and non-operating one-time effectsFY 2019 outlook confirmed
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
25 (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
27The Zalando Share
Shareholder structure Share information
Ordinary bearer shares
Type of Shares
with no-par value (Stückaktien)
Kinnevik AB Stock Exchange Frankfurt Stock Exchange
~26%
Market Segment Regulated Market (Prime Standard)
Index Listings MDAX
Baillie Gifford & Co
~12% Total Number of
Free Float 252,848,768
Shares Outstanding
~62%
Anders Holch Povlsen Issued Share Capital €252,848,768
~10%
28 As of November 29, 2019.Zalando Investor Relations Team
Patrick Kofler – Head of 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
29Upcoming Events
Date Event
Tuesday, January 14 German Investment Seminar Commerzbank, New York
Thursday, January 16 German Corporate Day Baader Bank, Toronto
Tuesday, January 21 GCC KeplerChevreux, Frankfurt
Wednesday, February 5 15th HSBC ESG Conference
Thursday, February 27 FY/2019 Results
Thursday, May 7 Q1/2020 Results
Wednesday, May 20 Annual General Meeting, Berlin
Tuesday, August 11 Q2/2020 Results
Wednesday, November 4 Q3/2020 Results
30Disclaimer 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 forward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may differ materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroeconomic 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. 31
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