Zalando SE

XETRA:ZAL

Earnings Call Transcript 2021-Q4

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Good

morning,

and

a

warm

welcome

to

Zalando's

Full

Year

publication

of

our

Results

2021.

My

name

is

Patrick

Kofler

and

I'm

heading

the IR

office

here

at

Zalando.

I

will

be

your

host

today.

Thank

you

for

joining

us

remotely.

It's

great

to

have

you

here,

even

if

only

virtually.

I

am

often

asked

why

we

have

a

co-CEO

structure.

Here's

one

of

the

reasons.

As

Robert,

our

co-CEO,

is

quarantined

after

being

exposed,

the

other

co-CEO,

David

can

step

in

easily.

Therefore,

we'll

kick

off

our

full

year

publication

with

our

co-CEOs

David

Schneider

and

COO

David

Schröder.

They

will

give

you

an

update

of

our

growth

ambitions

and

our

plan

for

next

year.

After

that,

we

have

a

dedicated

performance

deep

dive

on

our

recent

results

presented

by

our

COO,

David

Schröder.

For

the

Q&A

session,

we'll

be

back

here

live

together

with

both

Davids

on

stage

and

Robert

virtually

as

well.

A

couple

of

housekeeping

rules

before

we

actually

kick

this

off.

To

ensure

the

health

and

safety

of

our

team,

the

presentation

has

been

pre-recorded.

All

the

participants

on

site

have

tested

negative

to

the

coronavirus.

We

also

observe

the

necessary

hygiene

rules. If

you want

to ask a question, please click the

button, Ask

a Question on

the

right

side of

your screen. When you click on

it, you can easily

type in your

question.

The

question

section

is

open

in

the

next few

seconds.

And with this, David, the floor

is yours.

[David Schneider, Co-Chief Executive Officer, Zalando SE]

Welcome and thank you for

watching. Today, it is David and myself who will lead you through the 2021 results, but I can

speak

for

all

of

us

that

2021

was

an

outstanding

year

and

we

have

a

lot

of

exciting

initiatives

coming

up

and

we

will

talk

about

what

to

expect

in

2022.

So,

yes,

2021

was

a

truly

remarkable

year

and

an

important

step

on

our

journey

to

be

the

starting

point

for

fashion.

So

we

expanded

our

footprint

to

23

markets.

Last

year

alone

we

launched

six

new

markets

in

Eastern

Europe.

In

2021, we

reached

more

than

48

million

active

customers.

That

is

25%

increase

from

2020

and

that

also

means

we

expanded

our

customer

base

with

10 million

new

customers

which

is

great,

but

an

even

more

important

part

of

our

strategy

is

to

deepen

customer

relationship

and

create

loyalty

and

it

is also

something

we

really

see

paying

off.

To

give

you

an

example,

60%

of

our

overall

GMV

now

comes

from

active

customers

who

have spent

more

than

€500

a

year

with

us.

Our

customers

now

buy

on

average

five

times

a

year.

This

strong

tractions

in

customer

loyalty

has

translated

into

a

strong

financial

performance.

We

delivered

stellar

growth

momentum

and

an

acceleration

compared

to

2020.

Our

group

GMV

grew

to

€14.3

billion,

that's

got

quite

an

outstanding

34%

growth

year-on-year

and

maybe

let's

also

put

this

in

absolute

numbers.

We

added

€3.7

billion

in

GMV

in

one

year

and

as

we

have

also

strong

momentum

in our

Partner

Program,

revenues

didn't

grow

as

much

as

the

GMV.

But

I'm

also

proud

that

we

exceeded

€10 billion

in

net

revenues,

which

I

think

is

quite

an

amazing

milestones

and

like

the

13th

year

after

founding

Zalando.

Thanks

to

that

strong

momentum, we

were

able

to

deliver

a

healthy

level

of

profitability

with

more

than

€468

million

in

adjusted

EBIT

which

is

a

margin

of

4.5%

of

revenues.

Yeah.

That

was

a

great

result

and

there

was

a

lot

of

hard

work

behind

these

results.

So,

I

also

want

to take

the

opportunity

to

deeply

thank

all

our

employees

for

the

great

collaboration

for

the

focus

and for

all

the

commitment

everybody

put

in.

For

us,

being

the

starting

point

for

fashion

means

we

want

Zalando

to

be

the

destination

where

everyone

gravitates

to

for

all

their

fashion

needs

and

wants.

You

don't

need

to

go

anywhere

else

for

fashion,

because

we

have

it

all

in

fashion,

lifestyle and

beauty.

All

we

can

find,

it's in

for

you,

be

it

in

our

warehouse

network,

in

our

partners

e-com

warehouses

or

even

in

stores.

And

through

us,

you

can

get

it

in

the

most

convenient

way.

And

there's

no

way

to

get

it

faster,

easier

or

better.

And

on

top,

the

digital

experience

is

great.

It's

tailored

and

personalized

to

you.

So

if

you're

looking

for

something,

we

offer

the

easiest

place

to

find

it.

If

you

want

to

be

inspired

and

entertained,

Zalando is

the

best

place

for

that

too.

We're

not

there

yet

in

all

these

dimensions,

but

I

think

our

progress

is

amazing.

Yeah.

And

every

day

our

team

is

working

hard

to

live

up

to

these

promises

for

our

customers.

To

achieve

our

starting

point

ambition,

we

are

focused

on

three

strategic

pillars

and

have

set

ourselves

ambitious

goals

for

2025.

So

first,

we

aim

to

create

deep

customer

relationships

at

scale

to

play

an

important

part

in

our

customers'

lives.

Second,

we

transition

towards

a

true

platform

business,

or,

let's

rather

say

a

true

fashion

platform,

bringing

together

customers

and

partners

in

a

way

that

really

creates

unique

experiences

and

strong

benefits

for

all.

And

third,

we

use

our

scale

to

become

more

sustainable

and

drive

positive

impact

for

our people

and

the

planet.

And

this

is

not

only

the

right

thing

to

do,

but

also

strongly

in

line

with

long-term

interests

of

our

customers

and

partners.

The

strong

progress on

all

these

dimensions

last

year,

puts

us

in

a

very

good

position

to

reach

our

2025

goals,

which

are

over

€30 billion

GMV,

our

partner

business

share

of

more

than

50%

and

to

grow

in

a

more

sustainable

way,

working

towards

our

net

positive

target.

Let

me

maybe begin

with

our

first

strategic

dimensions

to

create

deep

customer

relationships

at

scale.

In

our

journey,

we

learn

that

just

selling

different

categories

to

our

customers

is

not

ideal.

Customers'

needs

and

wants

are

so

different

that

ultimately

we

cannot

just

add

new

categories

of

merchandise.

Instead,

we

build

distinct

customer

propositions.

If

you're

interested

in the

latest

beauty

trends

or

if

you

prepare

for

an

outdoor

adventure,

you

want

to have

an

experience

that

really

caters

to

your

needs

in

that

moment.

And

to

us,

a

proposition

means

a

tailored

experience

and

a

commitment.

So

only

when

you

commit

to

deeply

understanding

the

needs

and

wants

of

customers,

be

it

in

fashion

or

in

beauty

or

in

sports

or

in

pre-owned,

then

you

can

drive

innovation

in

the

experience

and

earn

deep

customer

relationships.

Our

core

proposition

is

fashion.

That's

where

we

started

and

that's

the

biggest

propositions

we

are

known

for

and

loved

for

by

our

customers.

About

90%

of

our

active

customers

buy

fashion

with

us.

And

if

you look

at

the

past

few

years,

there's

been

a

huge

development. We

have

an

ever-growing

selection

and

access

to

the

most

relevant

plans

and

stories.

We

drive

innovation

and

understanding

customer

styles

and

sizes

to

really

make

the

right

recommendations.

We

add

inspiration

and

entertainment,

which

I

think

becomes

more

relevant

in

future

and

one

of

the

highest

priorities we

have

to

work

on,

because

really

no

single

platform

has

figured

out

how

to

combine

a

transactional

e-com

experience

with

the

content-driven

inspirational

experience.

There's

either

the

content

experiences

that

are

not

great

in

enabling

a

customer

to

buy

something

or

there

is

an

e-com

experience,

where

customers

are

not

really

inspired

or

entertained.

And

that's

probably

the

biggest

frontier

in

fashion

commerce.

And

we're

very

committed

to

make

bigger

steps

in

this

journey

throughout

the

year.

Let's

take

a

look.

[Video Presentation]

(00:08:54-00:10:49)

But

let's

also

have

a

look

at

our

other propositions.

Last

year,

we

talked

a

lot

about

beauty

and

how

we

want

to

win

in

the

beauty

space.

That

it

requires

a

proposition and

in-depth

innovation

of

the

experience. Yeah,

we've

made

great

progress here.

Beauty

grow

over a 100%

year-on-year.

We

increased

our

selection

to

over

25,000 products

from 400

brands,

added

great

beauty

houses

like Estée Lauder,

L'Oréal

or

Coty,

and

of

course,

also

through

our partnership

with Sephora.

We're

on

a

strong

path

with beauty

and

are

happy

with

how

customer

or

customer

base

has

adopted

our

beauty

proposition. But

for

us,

it's

not

only about

beauty

itself, we have

developed

a repeatable

playbook, a

playbook

of

how

we

can

broaden

our

customer

proposition

offerings.

Then

dive

deep in

the

innovation

of

the

experience

and

help our

customers

to

cross

connect

across

all

these

propositions.

In

this playbook,

we

can

use

to

build

our

further

propositions, yeah,

and

open

more

doors

for

customers

to

connect. And

talk

about

connecting,

connecting

this

proposition

is

a

critical

part

of

our

strategy

to

achieve

deeper relationships.

Well,

we

want

to

dive

deep

in

the

innovation

of

each

propositions.

Ultimately,

we

want

to

make

sure

that one

plus one

is

more

than

two.

There's

a

lot

of

value for

customers

to

engage

in

all

our

propositions

in

order

to

get

the

most

out

of Zalando. And

Zalando

Plus,

our

membership

program is

our

ultimate

tool

as

a

[ph]



meta (00:12:32)

proposition

that

unlocks

value.

Plus,

for

an

annual

fee, you

get

the

best out

of

Zalando,

even faster

shipments and

early

access

to

exclusive product

lines.

And

we

just

passed the

mark

of

more than

1

million members,

that's

an amazing

milestones three

years after

we

launched

Plus.

And

there

is

now

more

to

come

with

Plus.

While

the

first million

members

took

us three

years,

the

second million

we forecast

to

achieve in

this year.

In

2022,

we

will

double down

in

making

Zalando

Plus

the loyalty

program

in

fashion.

After

expanding

the

program

to

the

Netherlands, France

and

Italy

in

2021,

we

will

double the

number

of

new

markets

by

the

end

of 2023.

We'll

add

more

benefits

and

improve

existing

ones

in

the

area

of

convenience

and

assortment.

For

example,

we

will

give

Zalando Plus

members early

access

to sales

events.

So,

Plus

is

the

ultimate

sign

of

deep

relationships

for

our

customers.

Yeah. A plus

member

visits

Zalando twice as

often

and

spends

three

times

more

than

a

non-Plus

customer.

We

just

talked

a

lot

about

how

we

aim

to

create

these great

experiences, be

it

for

fashion

or

for

beauty

or

for

designer,

customers

want

more

choice. They

seek

inspiration. And

they want

to

be

entertained. And

our

partner brands

deliver

a

great deal

of

this. They

add

to

a

limitless

choice

to

a

strong

brand

stories

and

even, all

the

hot

drops

people

used to

line-up

for

in

the

streets. Building

our

customer experiences

also

means

building

a destination

where

brands

want

to be.

Only

if

our partners

see

a

big

value

add

of Zalando

for

their own

strategy,

they

will invest

with all

these

assets.

There

are

two

main

components

that

create

strong

value

for

partners.

Number

one

is

a

multi-brand

environment

for

millions of

customers.

And

number

two

capabilities for

e-commerce

at

scale. We'll

explain how

we

invest

into

these

areas in

a

way that

no

individual brand

could.

And

how this

actually creates

strong win

win

win

situation for

customers, partners

and

Zalando.

So,

let's

start with

the

multi-brand

environment.

So why

do

we

mention

multi-brand

so

often,

because

that

is

how

customers

shop fashion.

Zalando customers

shop

on

average

18

different

brands

throughout

their

order

history.

And even

within

one

order,

50%

shop

more

than

one

brand.

As

a

fashion

inspiration

starts

in

the

vast majority

of

all

customers journeys

without

a concrete

product

or

brand

in

mind,

and

being

the

starting

point

means

that

customers

come

to

us

before

they decide

what

they

buy.

And

this concept

is very

important

for

our partners,

because

they

know they

can

only

cover

like

a

smaller

fraction

of

the

inspiration

part

themselves and

they

need to

be

where the

customers

really engage.

So,

we

will

build

the

place

where

they

can engage

with

the

relevant

audience.

And I

think

our

growing brand

portfolio

is

a

good

indicator of

how

relevant

we

are

for

brands, launching

brands

like

Sephora

or

Apple

watches

show

how

we

create

stories

that

elevate

brand equity

and customer

engagement.

We

have

scaled

our

assortment

with

driving

really

like

a

flawless

choice across

5,800

brands,

meaning

we were

able

to

increase

the

assortment

of

our

most

relevant

brands

by

over

75%.

And

it's

not

only

about

a

wide

assortment,

it's

also

about

showcasing

the

brand's

DNA

and

presenting

the

best

range

of

products.

And

that's

why

we

have

introduced

Dedicated

Brand

Homes.

These

allow

our

customers

to

follow

the

brands

they

love.

In

turn,

brands

can

engage

with

customers

in

a

meaningful

way

and

build

deeper

relationships

and

deep

learnings

for

themselves.

Already,

14

million

Zalando

customers

have

become

brand

fans

over

the

past

years.

And

last

but

not least

our

shared

values

across

topics

like

inclusivity

or

talking about

genderless

or

sustainability

unlock

impactful

collaborations. As

all

of

these

topics

are

very

much

top

of

mind

for

our

customers

and

together

with

our

partners

we

aim

to

drive

further

engagement

across

these

trends.

Investments

and

innovation

in

these

areas

in

a

multi-brand

environment

creates

a

strong

value

add

for

brands

as

it

helps

them

to

connect

to

their

target

audience,

and

it

helps

them

in

their

own

strategy.

The

more

brands

invest

into

the

Zalando

experience,

the

better

our

customer

propositions

get.

The

second

big

value

add

for

our

partners

our

capabilities

that

enable

digital

business.

So

we

solve

three

major

challenges

for

them.

First,

they

have

to

be

online

where the

customer

is,

and

we

able

them

to

go

direct-to-consumer

in

the

multi-brand

environment.

Our

Partner

Program

and

Connected

Retail

are

our

way

to

put

them

out

there.

And

you

also

see

that

the

strong

brands

place

more

and more

bets

on

direct-to-consumer.

And

I

think

it's

a

very

strong

signal

that

they

consider

not

only

like

their

own

website

as

direct-to-consumer,

but

also

selling

through

our

platform.

And

by

now,

30%

of

our

GMV

comes

from

this

model.

As

a

second

step,

partners

can

leverage

our

infrastructure

to

reach

customers

in

all

of

our

markets.

Zalando

Fulfillment

Solutions

is

a

great

lever

for

brands

to

boost

their

reach

without

having

to

invest

in

their

own

infrastructure.

We

strive

for

75%

of

Partner

Program

items

shipped

by ZFS

by

2025. And

today,

we're

already

at

55%,

so

we're

on

a

very

good

track.

And

then,

thirdly,

we

enable

partners

to

speak

to

their

audience

and

leverage

our

data

and

reach

to

drive

their

sales;

and

not only

sales

but

also

to

position

their

brand.

Our

long-term

target

is

that

3%

to

4%

of

our

GMV

comes

from

the

Zalando

Marketing

Services.

And we

reached

2%

in

the

fourth

quarter

of

2021,

which

I

think

is already

like

a

good

proof

point

that

more

and

more

partners

are

adopting

our

marketing

services.

Let's

dive

one

level

deeper

into

our

logistics

capabilities,

as

these

are

clearly

needed

for

any

direct-to-consumer

approach.

And

we

have

built

a

highly

relevant

network.

So

our

Partner

Program

business

is

a

strong

indicator

of

how

brands

engage

with

a

direct-to-consumer

possibilities.

Our

partner

business

grew

at

an

impressive

rate

of

over

75%.

That's

more

than 3

times

faster

than

our

retail

business.

Then

Zalando

Fulfillment

Solutions at

the

same

time

grew

even

stronger.

The

item

volume

sold

by

partners

but

shipped

by

Zalando

more

than

doubled

year-over-year.

And

one

of

the

reasons

for

partners

to

utilize

ZFS

is

the

immediate

international

footprint.

We

offer

all

of

euros

in

a

box

to

partners,

which

most

cannot

cover

with

their

own

footprint

or

with

like

a

logistics

provider.

This

is

reflected

in

the

strong

growth

rate

of

our

Partner

Programs

in

markets

other

than

Germany.

For

example,

in

Switzerland

we

went

up

10 percentage

points

yet

to

partner

business

share

of

25%.

In

Belgium,

we

reached

33%

or

in

Spain,

we

more

than

doubled

its

share

to

19%.

And

I

think

Spain

is

also

a

good

example

of

how

Connected

Retail

adds

a

lot

of

value

to

local

customers.

Connected

Retail

means

connecting

inventory

of

local

brick

and

mortar

stores

and

shipping

it

directly

from

the

stores

to

customers.

We

have

now

more

than

7,000

stores

connected

in

our

network.

If

we're

successful

enabling

partner

business

success

on

Zalando,

yeah, and

on

the

Zalando

platform,

we

can

also

enable

our partners

to

leverage

our

logistic

backbone

to

drive

the

success

of

their

direct-to-consumer

business

across

all

channels.

So,

we

will

start

by

opening

up

Zalando

Fulfillment

Solutions

with

channels

beyond

Zalando.

And

therefore,

we

enable

multichannel

fulfillment

for

our

partners.

And

by

doing

this

we

will

offer

brands

and

retailers

the

opportunity

to

outsource

e-commerce

logistics

to

Zalando.

Some

of

our

partners

have

actively

asked

for

assets

to

fulfill

beyond

our

platform

because

they

face

challenges

in

their

own

approach.

For

example,

if

they

serve

Zalando

customers

and

then

at

the

same

time

their

own

e-com

and

several

other

channels

that

usually

leads

to

splitting

up

inventories

and

that

again

leads

to

bad

order

economics.

I

can

tell

you

partners

don't

like

fragmented

inventory.

And

another

reason

shipping

cross

border

and

integrating

like

the

right

providers

is quite

complex,

and

usually

many

brands

and

providers

cannot

ship

to

like

all

the

markets

we're

talking

about.

Then,

at

the

same

time,

customers'

expectations

around

convenience

are getting

higher

and

higher.

And

then

also

investment,

what's

becoming

more

sustainable

and

then

your

own

operations

are

needed

and

in

demand

by

customers.

We

have

built

a

large

and

flexible

networks

that

will

tackle

all

of

these

challenges.

We

can

offer

partners

flexible

expansion

to

reach

all

markets

and

tap

into

our

constantly

improving

convenience

offer.

And

then

also

we're

consolidating

orders –

we

improve

order

economics

and we

also

reduce

the

carbon

footprint,

which

is

a

nice

segue

to

the

third

element

of

our

strategy. And

we

aim

to

build

a

sustainable

platform

to

win

the

hearts

and

minds

of

our

customers.

Our

ambition

is

to

be

a

net

positive

company

in

the

long

run,

and

that

means

that

we

give

back

more

to

society

and

the

environment

than

we

take.

And

that's

a

high

ambition.

To

achieve it,

we

have

to

work

on

solutions

together

with

our

partners

and

invest

in

innovative

technologies.

Only

then

we

can

really

unlock

opportunities

that

will

help

both

Zalando

and

the

industry

to

evolve. And

we

believe

that

with

our

platform,

we

are

in

the

right

position

to

do

so

because

we can

engage

with

more

than

5,800

brands

and

on

the

other

hand,

48

million

customers.

And

we

drive

our

efforts

forward

in

three

areas:

our

planet,

products,

and

people.

And

we're

very

confident

in

our

efforts

and

believe

we're

on

the

right

path.

Nevertheless,

there

are

significant

challenges

to

solve

and

solutions

to

scale.

Let's

dive

into

two

examples.

So

my

first

example

is

our

more

sustainable

assortment.

Our

commitment

is

to

generate

25%

of

our

GMV

with

more

sustainable

products

by

2023.

And

I

think

we've

made

quite

some

good

progress

so

far.

We're

proud

to

offer

our

customers

what

we

believe

is

the

biggest

sustainable

assortment

in

Europe

with

now

more

than

140,000

products,

and

that

compares

to

around

80,000 last

year.

Maybe

also

to

put

it

a

bit

in

perspective,

our

sustainability

assortment

is

now

as

large

as

our

entire

assortment

in

our

IPO

year.

And

the

sale

of

these

products

accounted

for

21.6%

of

our

gross

merchandise

volume

overall

which

is

already

getting

close

to

our

25%

target.

And

also

from

customers we

get

very

good

feedback.

We

see

strong

interest

in

these

products.

For

example,

if

we

look

at

conversion

rates

or

on

more

sustainable

products

versus

similar

standard

products.

And

in order

for

this

progress

to

be

meaningful,

we

need

to

overcome

three

key

challenges.

The

first

is

the

lack

of

a

common

definition

for

sustainability

for

fashion

products.

And

the

second

challenge

is

tracing

all

this

information

across

the

value

chain,

starting

from

the

field

to

the

product.

Then,

the

third

challenge

is

around

customers

understanding

of

these

standards.

We

know

from

our

research

that

they

find

sustainability

to

be

quite

complex.

It's

complex

to

understand.

It

is

also

complex

to

act

on

it.

And

that's

why

we

have

a

team

fully

dedicated

on

building

a

better

digital

experience

that

allows

customers

to

engage

with

sustainability

in

a

better

way.

My

second

example

is

more

sustainable

packaging.

When

it

comes

to

packaging,

of

course,

our

first

priority

is

to

ensure

the

products

reach

our

customers

safely

and

undamaged.

But

at

the

same

time,

we

aim

to

reduce

our

packaging

volumes

to

a

minimum

and

specifically

eliminate

single-use

plastic.

To

do

this,

we

focus

on

two

key

elements

in

our

packaging

design.

And

number one,

89%

of

our

packaging

materials

contains

recycled

input.

And

then,

99%

is

recyclable

so

that

our

customers

can

dispose

of

the

packaging

responsibly.

Our

main

achievement

last

year

was

to

switch

to

paper

shipping

bags

across

Zalando,

which

we'll

actually

complete

in

the

next

few

months.

But

one

long-term

challenge

in

the

industry

remains,

polybags.

This is

a

massive

challenge,

and

industry

is –

basically

every

single

product

is

wrapped

in a

polybag.

So

what

we'll

do

is,

together

with

our

partners,

we're

testing

new

materials

and

reusable

options

to

tackle

this.

But

we

have

also have

to

be

honest

that

there

is

a

long

way

to

go.

So

this

would

be

one

of

our

key

focus

areas

going

forward.

That

was

just

a

snapshot

of

all

our

efforts

we're

driving.

I

have

to

say

that

it's

very

motivating

to

see

how

passionate

all

teams

are

working

on

ideas

and

how

to

–

how

deeply

ingrained

sustainability

already

is

in

all

of

our

projects.

And

we

have

talked

a

lot

about

growth,

but

it's

important

for

us

to

not

grow

just

for

the

sake

of

growing.

And

we want to

leverage

all

of

our

customer

reach,

our

capabilities

and

our

relationships

in

the

industry

to

enable

and

then

drive

some

structural

changes.

With

that,

I

would

like

to

hand

over

to

David,

who

can

give

you

an

overview

of

how

the

sustainable

growth

looks

like

in

numbers.

[David Schröder, Chief Financial Officer, Zalando SE]

Over

the

past

24

months,

we've

experienced

an

exceptional

operational

and

financial

performance

acceleration.

As

a

result

of

this

acceleration,

which

was

particularly

pronounced

in

the

first

half

of

2021

with

GMV

growth

reaching

46%

year-over-year,

we

are

well

on

track

to

reach

our

mid-term

growth

ambition.

As

European

consumers

and

economies

are

gradually

returning

back

to

a

new

normal,

we've

seen

our

growth

rates

starting

to

normalize

since

summer

2021.

That

said,

we

are

confidently

looking

ahead

towards

our

2025

GMV

target

of

more

than

€30 billion,

as

we

continue

to

grow

from

a

significantly

higher

base.

The

opportunity

ahead

of

us

remains

immense.

We

are operating

in

a

large

market

that

is

projected

to

grow

to

€450 billion

over

the

next

few

years.

And

although

we

have

achieved

a

lot

over

the

past

decade

Zalando's

market,

share

is

still

only

at

around

3%.

The

COVID-19

pandemic

has

accelerated

change

in

the

fashion

industry

that

has

long

been

in

progress

and

has

blurred

the

boundaries

between

offline

and

online

as

consumers

and

brands

are

increasingly

going

digital.

And

our

strong

platform

strategy

perfectly

positions

us

to

take

advantage

of

this

opportunity

making

us

confident

that

we

can

serve

more

than

10%

of

the

total

fashion

market

in

the

long

term.

To

capture

this

opportunity,

our

number

one

priority

remains

to

deliver

continued

strong

growth.

Hence,

we

continue

to

invest

through

the

cycle

to

create

long-term

value

for

customers,

partners

and

shareholders.

For

2022,

we

do

expect

a

more

volatile

market

environment

driven

by

three

key

factors,

weakening

consumer

sentiment,

continued

supply

chain

disruptions,

and

rising

inflation

concerns.

While

we

will

not

be

able

to

fully

isolate

ourselves

from

these

temporary

market

developments,

we

are

confident

that

just

like

in

the

past

our

strong

platform

business

model,

our

agile

business

steering

approach,

and

our

continued

efficiency

improvements

will

allow

us

to

successfully

navigate

through

this

volatile

market

environment

and

to

continue

to

grow

faster

than

the

European

online

fashion

segment.

Looking

ahead

at

2022,

we

does

expect

to

grow

GMV

by

16%

to

23%

and

to

add

€2

billion to

€3

billion

additional

GMV.

On

a

two-year

CAGR

for

the

years

2021

and

2022,

our

GMV

outlook

implies

a

growth

range

of

25%

to

28%,

ahead

of

our

mid-term

target

growth

corridor

of

20%

to

25%.

In

line

with

our

platform

transition

and

increasing

share

of

the

Partner

Program,

we

expect

revenue

growth

to

trail

GMV

growth,

resulting

in

revenue

growth

of

12%

to

19%.

Similar

to

last

year

this

growth

will

not

be

evenly

distributed

across

quarters.

Due

to

baseline

effects

we

expect

lower-than-usual

year-over-year

growth

for

the

first

half

and

a

re-acceleration

in

the

second

half.

Looking

at

profitability,

we

expect

an

adjusted

EBIT

of

€430

million

to

€510

million,

implying

a

margin

of

3.7%

to

4.1%,

which

is

well

in

line

with

our

mid-term

guidance.

To

fund

our

continued

investments

into

our

logistics

infrastructure

and

our

technology

platform

and

thereby

enable

our

2025

growth

ambition,

we

plan

capital

expenditure

of

€400 million

to

€500

million.

And

now

back

to

you,

David,

for

some

final

remarks.

[David Schneider, Co-Chief Executive Officer, Zalando SE]

Yeah.

We

have

a

very

strong

team

in

place

to

advance

our

strategic

agenda

to

scale

the

business

and

of

course,

to

continue

to

deliver

results.

Robert

and

I

are

very

happy

that

Sandra

has

joined

our

management

board

today

as

CFO,

and

David

will

assume

a

newly

created

role

as

Chief

Operating

Officer,

focusing

on

building

and

scaling

unique

capabilities

and

enabling

the

company's

growth.

Jim

transitioned

last

year

from

CTO

into

newly

Credit

Chief

Business

and

Product

Officer

role,

yeah,

developing,

marketing

and

growing

our

consumer

offerings.

And

Astrid

joined

us

last

April

as

Chief

People

Officer.

We

are

all

excited

about

the

strong

progress

we

have

made

in

2021

and

further

strengthening

our

position

as

the

starting

point

for

fashion.

In

2021

the

company

grew

significantly

faster

than

expected

and

putting

us

on

track

to

achieve

our

mid-term

growth

ambition

and

reach

more

than

€30

billion GMV

by

2025.

And

Zalando continues

to

focus

on

strategic

initiatives

that

will

drive

future

growth.

We're

laser-focused

on

execution

and

in

a

strong

position

to

continue

to

deliver

long-term

growth.

Yeah,

thanks

to

the

whole

team

for

this

outstanding

achievement.

And

yeah,

now

let's

hear

what

David

has

to

say

and

jump

to

our

performance

deep

dive.

[David Schröder, Chief Financial Officer, Zalando SE]

Welcome

to

our

performance

deep

dive

session.

Today's

keynote

highlighted

a

strong

progress

we

are

making

towards

our

vision

to

be

the

starting

point

for

fashion.

Providing

further

insights

into

our

key

strategic

priorities

and

initiatives

for

2022

and

reiterating

our

2025

ambition.

Building

on

that,

I

will

now

provide

you

with

more

details

regarding

the

development

of

key

strategic,

operational

and

financial

performance

indicators

for

Q4

and

full

year

2021;

as

well

as

additional

information

regarding

our

outlook

for

2022.

Starting

with

our

strategic

priorities

to

grow

our

active

customer

base

and

to

further

deepen

our

customer

relationships,

we

see

great

progress

when

looking

at

key

metrics.

During

2021,

we

were

able

to

grow

our

active

customer

base

to

48.5

million

customers,

supported

by

strong

new

customer

acquisition

throughout

the

year.

We

also

saw

a

continued

decrease

in

new

customer

churn,

with

churn

reaching

an

all-time

low

over

the

course

of

2021.

Customer

order

frequency

reached

a

new

all-time

high

of

5.2

orders

per

active

customer

over

the

past

12

months.

Average

basket

size

showed

a

slight

year-over-year

decrease

of

1.3%,

mainly

driven

by

a

lower

average

item

value

compared

to

the

prior

year.

As

a

result

of

increasing

order

frequency

and

broadly

stable

basket

size,

GMV

per

active

customer

grew

by

more

than

7.1%

over

the

last

12

months

to

now

almost

€300,

representing

the

strongest

year-on-year

increase

since

2017.

While

we

are

very

happy

with

the

progress

achieved

in

2021,

we

expect

our

customer

metrics

to

normalize

over

the

coming

quarters

as

the

return

to

normal

continues.

When

looking

at

customer

development

over

a

longer

time

horizon,

we

see

consistently

positive

trends

and

the

evolution

of

our

customer

cohorts.

These

trends

are

well

reflected

in

this

cohort

chart,

which

we

update

and

share

with

you

on

an

annual

basis.

It

shows

the

total

GMV

per

cohort

and

order

year.

The

light

gray

bar

at

the

bottom

shows

the

GMV

from

cohorts

we

had

acquired

before

2016.

Staggered

on

top

of

that,

you

see

the

GMV

contribution

of

cohorts

we

acquired

in

the

years

thereafter.

During

2021,

we

saw

more

than

10 million

new

customers

join

our

platform

to

shop

fashion,

beauty

and

lifestyle

products.

The

2021

cohort

delivered

almost

25%

more

GMV

in

the

first

year

than

the

cohort

acquired

in

2020.

But

it

is

not

only

the

newly

acquired

customers

that

contribute

to

Zalando's

growth.

When

we

look

at

the

development

of

older

cohorts,

we

see

consistent

growth

and

an

increase

of

annual

GMV

contribution

for

each

cohort

from

the

second

year

onwards

following

some

initial

churn

in

the

first

year.

It

might

be

interesting

to

note

that

in

2021,

Zalando's

GMV

would

have

grown

at

a

double-digit

rate,

even

if

we

had

not

acquired

a

single

new

customer.

Let

me

now

provide

a

bit

more

context

regarding

the

exceptionally

large

customer

cohorts

acquired

during

2020

and

2021.

This

period

has

been

strongly

influenced

by

the

evolution

of

the

global

pandemic

and

resulting

governmental

restrictions

and

changes

in

customer

behavior,

causing

an

acceleration

in

the

structural

consumer

demand

shift

from

offline

to

online.

As

a

consequence,

more

consumers

than

ever

before

have

shifted

to

Zalando

for

their

fashion

and

lifestyle

needs.

Our

new

customer

growth

accelerated

significantly

from

2019

to

2020

and

remained

at

an

elevated

level

in

2021.

When

looking

at

the

quality

of

these

customer

cohorts

in

more

detail,

we

see

that

they

show

very

similar

or

even

slightly

better

characteristics

compared

to

previously

acquired

cohorts,

as

indicated

by

their

engagement,

their

reorder

behavior

and

their

spend

with

us.

This

observation

also

holds

true

beyond

the

peak

periods

of

the

pandemic,

as

proven

by

the

continued

strong

developments

in

the

second

half

of

2021,

when

European

consumers

and

economies

saw

a

gradual

return

to

normal.

Let's

now

turn

to

our

second

strategic

priority,

enabling

our

partners'

direct-to-consumer

business,

which

is

at

the

core

of

our

platform

transition.

In

2021,

we

recorded

exceptional

growth

across

our

entire

portfolio

of

partner-facing

platform

services.

Our

partner

business,

consisting

of

the

Partner

Program

and

Connected

Retail,

which

aims

to

connect

our

partners

directly

with

European

consumers,

has

grown

by

more

than

75%

in

2021,

resulting

in

a

partner GMV

share

of

30%

in

Q4.

Zalando

Fulfillment

Solutions

which

allow

our

partners

to

leverage

our

European

logistics

network

to

increase

their

customer

reach

and

satisfaction,

while

at

the

same

time

reducing

complexity

and

cost,

have

grown

even

faster

than

our

core

offering

over

the

course

of

the

last

year.

The

number

of

items

shipped

via

ZFS

increased

by

more

than

100%

year-over-year,

representing

a

55%

share

of

all

Partner

Program

items

shipped

in

Q4.

Last

but

not

least,

Zalando

Marketing

Services,

which

enable

our

partners

to

increase

their

visibility

of

the

offering

and

to

build

their

brand

on

Zalando,

also

recorded

very

strong

growth

of

more

than

90%

in

2021. ZMS

revenues

reached

2%

of

Fashion

Store

GMV

in

Q4,

putting

us

well

on

track

to

achieve

our

long-term

ambition

of

3%

to

4%

of

GMV.

Our

third

strategic

dimension

is

focused

on

people

and

planet,

and

on

delivering

the

ambitious

goals

we

set

out

in

our

do.MORE

sustainability,

as

well

as

our

do.BETTER

diversity

and

inclusion

strategies.

As

a part

of

our

Zalando

principle

[indiscernible]



(00:39:04)

transparency,

we

report

annually

on

the

progress

made

in

both

areas.

While

you

will

find

a

great

level

of

detail

in

the

relevant

sustainability

and

D&I

progress

reports

available

on

our

website,

I

would

hereby

like

to

highlight

that

we

made

continuous

and

strong

progress

towards

reaching

our

sustainability

goals,

which

is

also

being

recognized

externally.

As

a

part of

our

do.MORE strategy

and next

to drastically

reducing our

own emissions,

we

aim

for

our partners

accounting

for

90%

of

supply

related

emissions

to

set

science-based

emission

reduction

targets

by

2025.

By

the

end

of

2021,

we

are

pleased

to

say

that

partners

accounting

for

around

51%

of

supply-related

emissions

had

[audio gap]



(00:39:48) compared

to

34%

in

2020.

The

second

example

shown

here

concerns

our

sustainable

packaging

targets.

With

our

switch

from

plastic

to

paper

shipping

bags,

we

reduced

the

use

of

plastic

shipping

bags

to

37%

at

the

end

of

2021

and

aim

for

0%

by

2023.

Thirdly,

we

expanded

our

portfolio

of

more

sustainable

products

to

more

than

140,000

products,

compared

with

around

80,000

a

year

earlier.

The

sale

of

these

products

accounted

for

almost

22%

of

our

GMV.

These

are

just

three

examples,

but

they

clearly

demonstrate

that

we

are

making

quantifiable

progress

and

leveraging

our

position

to

drive

positive

change

in

the

industry.

This

concludes

our

wrap

up

on

the

strategic

progress

we

made

over

the

course

of

the

year.

Let's

now

turn

to

our

financials,

starting

with

top-line

performance.

We

are

pleased

to

report

that

2021

saw

exceptional

top-line

performance

with

GMV

growth

of

34.1%

and

revenue

growth

of

29.7%,

with

full

year

revenues

surpassing

the

€10 billion

mark.

Both

GMV

growth

and

revenue

growth

are

in

the

upper

half

of

our

financial

guidance

for

2021.

For

the

fourth

quarter,

GMV

growth

reached

24.1%

year-over-year,

with

revenue

growing

20.5%

year-over-year,

well

in

line

with

our

mid-term

target

growth

corridor

of

20%

to

25%

and

representing

a

two-year

CAGR

of

more

than

30%.

Looking

at

both

full-year

2021

and

Q4

developments,

partner

GMV

growth

again

exceeded

overall

GMV

growth

significantly.

This

also

explains,

to

a

large

degree,

the

gap

between

GMV

and

revenue

growth.

Let's

now

take

a

brief

look

at

the

developments

of

each

of

our

three

segments.

In

2021

Fashion

Store

GMV

grew

by

32.6%.

Within

Fashion

Store,

the

growth

rates

for

the

DACH-region

and

the

Rest

of

Europe

region

were

on

a

similar

high

level

in

2021,

driven

by

a

significant

growth

acceleration

in

the

DACH-region

by

8

percentage

points

to

33.3%

GMV

growth,

whereas

Rest

of

Europe

GMV

growth

remained

strong

and

fairly

stable

at

31.9%.

Our

Offprice

segment

continued

on

its

strong

growth

trajectory,

recording

around

50%

GMV

growth

for

Q4,

as

well

as

full-year

2021,

which

is

remarkable,

particularly

in

light

of

an

increasingly

challenging

supply

situation.

The

other

business

segment

followed

the

positive

trend,

driven

by

a

strong

performance

from

Zalando

Marketing

Services,

which

benefited

from

continued

high

demand

of

our

brand

partners

for

our

advertising

products,

resulting

in

revenue

growth

of

around

95%

for

2021.

In

the

fourth

quarter

alone,

ZMS

grew

53%

year-over-year.

Besides

using

ZMS

to

drive

sales

on

the

platform

by

increasing

visibility

for

certain

products,

our

partners

also

increased

their investments

in

branding

campaigns

to

build

their

brand

equity

on

Zalando.

Let

me

conclude

the

discussion

of

top-line

growth

by

looking

at

our

multi-year

growth

performance

since

the

beginning

of

the

pandemic.

It

is

very

notable

that

our

two-year

GMV

CAGR

exceeded

our

mid-term

GMV

growth

ambition

of

20%

to

25%

CAGR

in

every

single

quarter

since

Q2

2020

and

exceeded

30%

for

three

consecutive

quarters

from

Q4

2020

to

Q2

2021,

before

starting

to

normalize

again,

which

we

expect

to

continue

in

2022.

Let's

now

turn

to

profitability.

We

recorded

an

adjusted

EBIT

of

€468

million

in

2021,

representing

a

4.5%

margin

on

the

back

of

strong

top-line

momentum

and

a

continued,

yet

temporary

return

rate

benefit.

Q4

profitability

came

in

slightly

above

pre-pandemic

levels,

yet

remained

below

last

year's

level.

When

looking

at

the

regional

profit

distribution

in

our

core

Fashion

Store

segment,

we

can

see

that

our

more

mature

markets

in

the

DACH-region

delivered

strong,

absolute

as

well

as

relative

profitability

for

the

full-year

2021,

also

supported

by

a

higher

partner

business

share.

The

fully

adjusted

EBIT

margin

of

8.7%

for

DACH

Fashion

Store

is

in

line

with

2020.

Rest

of

Europe

profitability

came

in

slightly

negative

and

decreased

year-over-year,

driven

by

continued

and

deliberate

over

proportional

investments

into

customer

acquisition

and

customer

experience

to

drive

growth

and

market

share

gains

in

Rest

of

Europe,

particularly

also

in

the

six

new

markets

in

Central

and

Eastern

Europe,

which

we

launched

and

ramp

up

over

the

course

of

2021.

Offprice

saw

a

more

normalized

adjusted

EBIT

margin

of

7.2%

for

the

full

year,

compared

to

9%

in

2020.

However,

the

segment

delivered

a

strong

Q4

performance,

increasing

the

adjusted

EBIT

margin

slightly

to

13.1%.

Our

other

business

turned

breakeven

for

the

first

time

over

an

entire

business

year.

Let

me

now

give

you

more

detail

on

our

cost

line

developments

that

drove

profitability

in

2021.

For

2021

overall,

gross

margin

decreased

by

0.7

percentage

points

compared

to

last

year's

level,

mainly

as

a

result

of

increased

discounts

to

offer

our

customers'

competitive

prices

in

a

highly

promotional

market

environment,

particularly

in

the

second

half

of

the

year,

as

well

as

continued

business

mix

changes

in

terms

of

category

mix

and

country

mix.

Our

fulfillment

cost

ratio

improved

for

the

full

year

compared

to

2020,

as

a

result

of

a

higher

level

of

utilization

and

efficiency

across

our

European

logistics

network,

and

improved

order

economics

benefiting

from

a

lower

return

rate.

The

year-over-year

deterioration

in

the

fourth

quarter

fulfillment

cost

ratio

is

due

to

deliberate

investments

into

our

convenience

proposition

to

further

deepen

customer

relationships

and

to

drive

customer

lifetime

value.

As

for

example,

by

extending

our

long

distance

shipping

offer,

expanding

and

scaling

our

premium

service

offering

for

Zalando

Plus,

by

our

ongoing

efforts

to

offer

more

sustainable

packaging.

In

2021,

our

marketing

cost

ratio

increased

year-over-year

as

we

remained

focused

on

customer

acquisition

and

engagement

investments,

supported

by

our

[ph]



AI (00:46:19)

based

marketing

approach

and

ran

major

launch

campaigns

across

our

six

new

markets.

In

the

fourth

quarter

of

the

year,

we

reduced

our

marketing

costs

in

absolute

and

in

relative

terms

compared

to

prior

year,

mainly

due

to

lower

brand

marketing

investments.

Last

but

not

least,

our

admin

costs

continued

the

positive

trend

observed

throughout

the

year,

driven

by

increasing

economies

of

scale

and

continuous

efficiency

improvements.

As

a

result,

our

adjusted

EBIT

margin

decreased

by

0.8

percentage

points

year-over-year

to

4.5%

in

2021.

Excluding

the

temporary

positive

impact

from

lower

return

rates,

the

pro

forma

2021

margin

would

have

been

3.4%

in

2021,

compared

to

3.8%

in

2020.

Since

we

continue

to

expect

a

normalization

of

return

rates

over

time

and

given

the

significant

impact

of

returns

on

our operating

margins,

we

believe

this

pro

forma

measure

provides

you

with

a

better

view

of

our

underlying

profitability

development.

Turning

to

cash-related

items,

we

recorded

a

sizable

decrease

in

our

net

working

capital

position

year-over-year.

The

main

driver

behind

this

development

is

a

relatively

stronger

increase

in

trade

payables

than

in inventories

and

receivables,

as

a

result

of

the

strong

growth

momentum

in

our

partner

business.

Reflecting

our

continued

investment

into

our

technology

and

infrastructure

to

enable

our

growth

trajectory,

capital

expenditure

significantly

increased

year-over-year,

both

for

the

full

year

and

the

fourth

quarter.

Mainly

due

to

the

strong

decrease

in

net working

capital

and

due

to

our

strong

operating

cash

flow,

we

recorded

a

positive

free

cash

flow

of

€283

million

for

2021,

broadly

in

line

with

the

previous

year

despite

higher

capital

expenditure.

Our

cash

balance

amounted

to

around

€2.3

billion

at

the

end

of

Q4.

Let

me

close

this

presentation

by

providing

you

with

more

information

regarding

our

2022

outlook.

Over

the

past

24

months,

we

have

experienced

an

exceptional

operational

and

financial

performance

acceleration.

As

European

consumers

and

economies

are

gradually

returning

back

to

a

new

normal,

we've

seen

our

growth

rates

starting

to

normalize

as

well.

Looking

ahead

at

2022,

we

expect

to

grow

GMV

by

16%

to

23%

and

to

add

€2

billion

to €3

billion

additional

GMV.

On

a

two-year

CAGR

for

the

years

2021

and

2022,

our

GMV

outlook

implies

a

growth

range

of

25%

to

28%,

ahead

of

our

mid-term

target

growth

corridor

of

20%

to

25%.

In

line

with

our

platform

transition

strategy

and

increasing

share

of

the

Partner

Program,

we

expect

revenue

growth

to

trail

GMV

growth,

resulting

in

revenue

growth

of 12%

to

19%.

Similar

to

last

year,

this

growth

will

not

be

evenly

distributed

across

quarters.

As

we

are

lapping

exceptionally

strong

performance

of

46%

GMV

growth

in

the

first

half

of

2021,

we

expect

lower

than

usual

year-over-year

growth

for

Q1

and

Q2.

With

easing

baseline

effects

in

the

final

six

months

of

the

year,

we

expect

our

growth

to

reaccelerate

significantly,

implying

a

comparatively

stable

two-year

CAGR

for

the

entire

year.

Looking

at

profitability,

we

expect

an

adjusted

EBIT

of

€430

million

to

€510

million,

implying

a

margin

of

3.7%

to

4.1%,

which

is

well

in

line

with

our

midterm

guidance

issued

last

year

at

our

Capital

Markets

Day

to

start

2022

in

the

lower

half

of

our

3%

to

6%

corridor.

Compared

to

2021,

this

implies

a

slight

margin

decrease

as

the

prior

year

benefited

significantly

from

temporarily

lower

return

rates,

which

we

continue

to

expect

to

normalize

over

time.

For

cash

related

items,

we

expect

negative

net working

capital

and

capital

expenditure

of

€400 million

to

€500

million

to

fund

our

continued

investments

into

our

logistics

infrastructure

and

our

technology

platform,

which

are

among

the

key

enablers

of

our

2025

growth

ambition.

Next

to

the

continued

execution

of

our

strategy

and

our

through-cycle

investments

to

drive

long-term

value

creation,

our

2022

guidance

also

reflects

our

exceptionally

strong

growth

in

2021,

as

well

as

a

more

volatile

market

environment,

driven

by

three

key

factors:

first,

weakening

consumer

sentiment

linked

to

the

economic

outlook

and

current

geopolitical

tensions,

as

well

as

a

wait-and-see

approach

as

the

pandemic

continues

to

evolve;

second,

continued

supply

chain

disruptions

causing

supply

shortages

in

certain

areas,

particularly

in

sneakers,

footwear

and

sports;

and

third,

rising

inflation

concerns, which

might

have a

further

dampening

effect

on

consumer

demand in

general and

discretionary spending

in

particular.

While

these

same factors

have

been affecting

our performance

year-to-date,

uncertainty

remains

with regards

to

the

duration and

magnitude

of

the

impact

these

temporary

market

developments

will

have

on

our

business

throughout

the

rest

of

the

year.

To

reflect

this

higher

than

usual

degree

of

uncertainty,

we've

chosen

to

broaden

our

guidance

ranges

for

2022.

In

addition,

this

slide

provides

you

with

more

transparency

on

potential

performance

scenarios

and

how

the

different

macroeconomic

factors

might

result

in

us

moving

towards

the

low

or

the

high

end

of

our

guidance.

While

we

will

not

be

able

to

fully

isolate

ourselves

from

these

temporary

market

developments,

we

are

confident

that

just

like

in

the

past,

our

platform

business

model

will

prove

to

be

resilient

and

will

enable

us

to

respond

to

these

short-term

challenges.

Our

strong

brand

relationships

will

help

us

to

secure

access

to

stock,

while

our

platform

model

will

allow

us

to

dynamically

adjust

our

offer,

our

stock

levels

and

our

logistics

capacities

to

various

demand

scenarios.

Furthermore,

we

will

rely

on

an

agile

business

steering

approach,

as

well

as

continued

efficiency

improvements

to

deliver

strong

performance

and

to

continue

to

outgrow

the

European

online

fashion

segment.

Let

me

close

this

presentation

by

reiterating

that

we

are

truly

excited

about

the

immense

growth

opportunity

ahead

of

us.

We

remain

laser

focused

on

our

long-term

vision

to

be

the

starting

point

for

fashion

and

on

our

2025

ambition

to

build

a

sustainable

platform

business

with

more

than

€30

billion

in

GMV,

maximizing

long-term

value

for

our

customers,

our

partners

and

our

shareholders.

That

concludes

our

deep-dive

session.

Let's

now

jump

into

Q&A.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Good

morning

and

welcome

to

our

Q&A

session

today.

With

me

are our

Co-CEO,

David

Schneider;

and

our

COO,

David

Schröder,

virtually

also

our

Co-CEOs,

Robert

is

there.

Before

we

begin,

David

would

like

to

deep

dive

and

to

share

a

few

words

with

you.

[David Schneider, Co-Chief Executive Officer, Zalando SE]

Yeah.

Usually,

the

publication

of

the

annual

report

and

our

end

of

year

financials

is

a

special

moment

for

us.

However,

this

year,

honestly,

it's

a

bit

hard

for

us

to

stand

here

as

if

it's

business

as

usual,

as

we

watched

the

war

in

Ukraine

unfold.

Our

hearts

and

minds

are

with

the

Ukrainian

people

and

of

course,

all

our

employees,

their

families

and

friends

who

are

directly

or

indirectly

affected.

Our

priority

is

to

help

them

as

much

as

we

can.

We're

supporting

our

impacted

employees

and

their

families

with

counseling,

visas

and

travel

support,

but

we're

also

committed

to

helping

out

those

impacted

however

we

can

through

financial

and

in-kind

donations,

volunteering,

and

support

for

refugees.

We

truly hope

that

the

path

to

peace

can

be

found

quickly.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks,

David.

Under

these

circumstances,

it's

indeed

difficult

to

think

about

[ph]



much

else (00:54:50)

at

the

moment.

However,

there

are

things

we

cannot

postpone,

such

as

the

financial

reporting,

and

we

want

to

give

you

the

opportunity

to

share

questions

with

us.

Directly

linked

to

that,

David,

can

you

comment

on

the

impact

you

are

seeing

from

that

situation,

David

just

described

on

our

business

directly

as

well

as

indirectly?

[David Schröder, Chief Financial Officer, Zalando SE]

Sure,

I

can.

I

mean,

first

of

all,

it's

important

to

understand

that

there's

no

direct

impact

since

we

don't

have

operations

there.

We

have

a

private

label

supplier

working

with

a

local

factory

in

the

western

Ukraine.

But

otherwise,

there's

no

Zalando

business

footprint

over

there

and

therefore

there's

also

no

direct

impact

on

the

business.

What

we've

seen,

however,

unfold

over

the

past

couple

of

days

in

particular,

is

a

significant

indirect

impact,

especially

when

it

comes

to

our

business

in

Central

and

Eastern

Europe.

We

operate

in

8

eastern

European

countries

out

of

the

23

markets

we

serve

overall.

In

these

markets,

we

have

definitely

seen

that

consumer

sentiment

was

affected

quite

significantly

over

the

past

few

days,

which

I

think

is

understandable,

because

people

probably

have

different

things

on

their

mind

at

the

moment

than

shopping

fashion.

And

that's

why,

we'll

continue

to

closely

monitor

the

situation

and

obviously

adjust

our

business

steering

accordingly.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

David,

switching

a

little bit

and

trying

to

switch

gears

a

bit

towards

you,

Robert.

There

has

been

two

years

of

big

acceleration

of

e-commerce

adoption.

Do

you

see

another

decade

of

growth

for

Zalando?

[Robert Gentz]

Yeah,

yeah.

I

think

certainly,

I

see

another

decade

of

growth

for

Zalando.

So,

[ph]



it's not

like (00:56:48)

our

mid-term

ambition

is to

achieve

more

than

€30 billion

by

2025.

So,

that's

more

than

double

as

much

as

we

have

done

like

in

2021. On

long-term,

we

see

ourselves

in

a

position

to

serve

more

than

10%

of

the

European

fashion

market,

and

we're

very

convinced,

working

very

hard

in –

on

this

growth

path

and

yeah,

and

I

think

that's

where

we're

going.

And

I

guess

the

last

three

years,

they

have

suddenly

accelerated

the

shift

towards

online

and

prepared

us

well

ahead

on

this

path

– on

this

growth

path.

And

as

a

company,

we

use

these

tailwinds

very

wisely

and

did

a

great

job

in

our

customer

proposition

work,

market

expansion

and

that's

what

drove

customer

loyalty,

as

we

have

shared

with

the

Zalando Plus

milestone

that

we've

hit.

So –

yeah,

and

as

David

said,

like

2022

will

certainly

or

very

likely

be

a year

with

more

volatility

than

usual

[indiscernible]



(00:57:45) these

technical

baseline

effects

from

prior

year.

Yet,

I'm

very,

very

confident

that

with

our

great

team,

the

proven

platform

model,

our

– and

our

knowledge

of

how

to

agile

way to

steer

our

business.

We're

very

well

positioned

to

navigate

it

well.

And

our

strategy

is

strong,

our

team

is

strong. And

yeah,

and

I'm

very

convinced

on

our

long

term. So,

our

next

step is

€20 million,

€30

billion

by

2025,

and

that's

very

much

our

focus.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks,

Robert.

And

going

exactly

into

that

direction,

there's

a

question

coming

from

Charlie

Muir-Sands

from

Exane

on

deepening

customer

relationship

and

what's

the

causing

effect

of

our

Zalando

Plus

members

spending

3

times

more?

Are

they

signing

up

to

Plus

because

they

already

have

the

– are

our

highest

spending

customer

or

is

there

a

strong

sales

uplift

after

they

sign

up?

[Robert Gentz]

Yeah.

I

think

it's

a

– that's

a

great

question. It's

something

that

obviously

we

are

very

– which

is

very

well

researched

and

understood

at Zalando.

So,

there,

what

is actually

correlation

effect,

what's the

causality

effect,

I

can

tell

you

there's

a

big

causality

effect,

so

which

is

what

makes

sense.

If

you

have

this

customer,

if

you

actually

commit

to

paying

like

on

an

annual

membership

for

service,

yes,

I want

to

use

this

more.

So,

there's

the

causality

effect

that

actually

drives

more

frequency

of

visits that

drives

more

frequency

of

sales.

And

this

is

what

we

see

now.

And

that

is why

we're

always

so

focused

and

–

on

driving

our

Plus

membership

program

into

more

success,

because

of

this

causality,

because

the

causality

that's

driving

deep

relationships.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Well,

thanks

a

lot.

Yeah,

going

away

from

deepening

to

more

current

topics

on

the

GMV

guidance

we

published

today,

David,

could

you

talk

us

through

the

assumption

that

you

get

to

the

higher

and

lower

of

the

range

here?

[David Schröder, Chief Financial Officer, Zalando SE]

Sure.

So,

first

of

all,

let

me

repeat

that

we,

as

Robert

said,

expect

to

continue

our

journey

in

2022

and

continue

to

deliver

strong

growth

in

terms

of

GMV

that

will

be

between

16%

and

23%.

And

I

think

that

is

basically

reflecting

three

things.

First

of

all,

it's

reflecting

a

very

strong

foundation.

We have

by

no

more

than

48

million

active

customers,

partnerships

with

more

than

5,800

brands.

Numbers

that

have

significantly

increased

over

the

past

two

years

as

consumer

demand

shifts

accelerated

towards

online

and

also

brands

focused

even

more

on

digital

channels.

And

I

think

that

sets

us

up

for

now,

continuing

to

drive

strong

performance

of

the

business

going

forward.

The

second

thing

that

we

obviously

need

to

consider

is

the

very

strong

baseline

of

last

year,

particularly

in

the

first

half.

So,

for

those

of

you

remember,

we,

for

example,

reported

56%

growth

in

GMV

in

Q1

last

year.

We

also

reported

46%

in

GMV

growth

for

the

full

first

half,

and

that

obviously

means

when

we

now

lap

these high

baselines

in

the

first

half

that

our

growth

will

be

rather

lower

in

the

first

half

and

higher

in

the

second

half

of

the

year,

because

in

the

second

half

of

last

year,

we

saw

things

normalize

and

therefore

also

are

up

against

more

normal

baselines.

And

then,

the

third

fact

that

I

think

Robert

also

mentioned

and

we

discussed

quite

a

bit

also

in

the

keynote

and

the

performance

deep

dive

today

is

that

we

expect

a

more

volatile

market

environment,

primarily

driven

by

weakening

consumer

sentiment,

by

continued

supply

chain

challenges

and

also

by

rising

inflation

concerns.

We

expect

that

most

of

these

will

be

more

pronounced

in

the

first

half

and

probably

gradually

improve

or

even

fade

away

in

the

second

half,

and

that

is

obviously

also

reflected

in

the

guidance

range.

And

quite

frankly,

it's

also

the

reason

why

the

guidance

range

is

a

bit

wider

than

usual.

And

so,

the

best

way

to

think

about

the

lower

end

and

the

higher

end,

I

think

this

year

is

to

say,

if

these

effects

fade

away

quickly,

then

we

will see

our

growth

rates

move

more

towards

the

higher

end.

The

longer

those

effects

persist,

the

more

likely

it

becomes

that

we'll

tend

towards

the

lower

end.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah.

Thanks

for

that.

And

full

year

picture

also,

always

a

recurring

question

is

like,

when

looking

into

the

current

trading,

do

you

have

already

first

comments

you

can

share

here

that

would

be

highly

appreciated.

[David Schröder, Chief Financial Officer, Zalando SE]

Yeah,

I

think

coming

back

to

what

I

just

said,

I

think

there

are

certainly

almost

the

same

effects

to

take

into

account

for

Q1

that

we

just

talked

about

for

the

full

year.

So,

for

Q1

in

particular,

I

think

we

have

a

super

strong

baseline

with

55%

or

56%

GMV

growth

even

last

year.

That,

for

sure,

will

mean

lower

growth

in

Q1

this

year

on

a

year-over-year

basis.

At

least,

on

the

second

effects

or

more

volatile

market

environments,

as

I

just

explained,

we

also

expect

those

effects

to

be

more

pronounced

in

Q1

and

Q2

and

therefore

also

leading

to

lower

growth

rates

for

Q1

and

the

first

half.

And

then,

last

but

not

least,

as

we

briefly

mentioned

in

the

beginning,

we've

seen

some

early

indirect

negative

impact

from

the

war

in

the

Ukraine,

and

that

will

most

likely

also

have

an

impact

on

Q1.

What

does

it

mean

overall?

Overall,

I

think

it

means

that

for

Q1,

we

should

expect

to

see

our

GMV

growth

be

in

line

with

the

two-year

CAGR

that

we

project

for

the

full

year.

So,

for

the

full

year,

we

told

you

today

in

our

presentation

that

we

aim

for

a

two-year

GMV

CAGR

of

between

25%

and

28%,

which

is

above

our

mid-term

GMV

growth

corridor

of

20%

to

25%.

So,

still

continue

to

expect

very

strong

growth

and

we

expect

to

land

in

the

same

two-year

CAGR

range

for

Q1.

When

we

then

briefly

turn

to

profitability,

I

think

there,

you

should

probably

have

in

mind

the

typical

seasonality

for

our

business

outside

of

maybe

corona

times,

which

is

that

Q1

and

Q3

are

typically

a

bit

softer,

have a

breakeven

or

even

slightly

negative,

whereas

Q2

and

Q4

are

most

profitable

quarters,

because

they

also

have

the

highest

share

of

full

price

sales.

And

then,

obviously,

there

are

some

additional

negative

impact

to

be

expected

this

time

due

to

the

short-term

developments

that

I

just

called

out.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

On

the

short-term

developments

and

looking

into

your

eyes,

David,

is

like

supply

chain

inventory

shortages.

So

can

you

quantify

the

impact

on

sales

we

are

seeing

for

this

quarter,

or

the

upcoming

quarters

perhaps

any

color

you

can

give

here?

[David Schneider, Co-Chief Executive Officer, Zalando SE]

Of

course,

there

is

an

effect

which

is

real

due

to

COVID

in

the

supply

chain

and

also

due

to

transport.

Many

of

our

brand

partners

have

also

commented

on

the

challenges.

So

we

see

them

in

certain

areas,

especially

when

it

comes

to

sneakers,

footwear,

sportswear

where

it's most

prevalent.

So,

therefore

this

season,

spring-summer

2022,

we

do

see

the

effects,

although

the

effects

are

less

than

we

expected

them

to

be

last

year.

And

we

also

see

improvements,

and

we

also

expect

it

to

improve

throughout

the

year.

We'll

have

to

monitor

closely

like

what

happens

to

fall

winter

2022.

But

that

said,

I

think

also

as

a

platform,

we're

very

well-positioned

as

we

work

with, yeah,

close

to

6,000

brands.

And

I

think

we

can

balance

because

in

our

assortment

we

are

broad,

we

can

have

the

full

range.

We

can

work

through

wholesale,

through

Partner

Program,

through

Connected

Retail

in

order

to

create,

like,

access

for

customers.

And

then

on

top,

of

course,

we're

also

very

close

dialogue

with

our

core

brands

to

monitor

what's

happening

and

to

be

able

to

react,

if

necessary.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah.

Thanks

a

lot.

Moving

away

from

current

trading

and

looking

more

into

the

future

into

our

platform

strategy,

perhaps

to

you,

David.

When

we're

looking

to

our

Partner

Program

in

more

detail,

can

you

discuss

the

drop-through

of

the

2022

EBIT

margins

will

be

slightly

up

on

2019,

despite

the

Partner

Program

contribution

of

more

than

€1

billion

in

2021?

Why

aren't

we

seeing

that

on

a

gross

margin

or

even

in

EBIT

level

yet?

[David Schröder, Chief Financial Officer, Zalando SE]

Yeah.

Let

me

take

this

opportunity

to

maybe

take

a

broader

look

at

the

progress

of

the

platform

transition,

right.

So

as

David

and

I

mentioned

in

the

presentations

today,

we

see

continued

strong

progress

on

our

way

to

become

a

platform

business.

We

see

Partner

Program

and

Connected

Retail

growing

by

more

than

75%

year-over-year

and

ZFS

and

ZMS

are

key

enabling

services

growing

even

faster.

And

I

think

that's,

obviously,

a

key

proof

point

that

we

are moving

in

the

right

direction

and

we

also

are

well

on

track

to

reach

our

2025

targets

that

relate

to

the

platform.

I

think

what

is

also

actually

great

news

for

us

that

for

2021

for

the

first

time,

our

non-merchandise

revenue

exceeded

€1

billion

and

I

think

that

is,

in

a

way,

the

result

of

the

progress

we're

making

with

our

platform

business.

I

think

it's

also

important

to

consider

though,

that

it's

one

out

of

more

than €10

billion

by

now, right.

So

it's

the

business

or

the

P&L,

and

especially

the

revenue

line

is

still

dominated

by

our

wholesale

business

model.

And

I

think

that's

one

key

explanation

why

you

don't

really

see

the

progress

of

the

platform

transition

as

much

in

the

P&L

as

you

will

see

it

in

future

years,

and

as

we

have

also

talked

about

it

when

we

think

about

our

long

term

target

margin.

That

being

said,

I

think

obviously

we

remain

committed,

both

to

our

long-term

model,

where

we

project

20%

to

25%

target

margin

for

the

partner

business,

and

also

to

our

mid-term

margin

ambition

to

move

closer

to

6%

by

2025.

And

that

will

be

largely

driven

by

our

continued

progress

with

the

platform.

To

just

maybe

talk

about

one

last

key

item

that

I

wanted

to

mention,

when

we

look

at

the

profitability

development

or

also

profit

contribution

of

our

platform

business

year-over-year,

and

also

as

it

stands

for

2021,

there

are

two

key

messages.

First

of

all,

it

is

already

highly

accretive

to

the

group

margin.

And

second

of

all,

the

profitability

has

increased

year-over-year,

and

therefore,

we

are

definitely

also

on

track

to

reach

our

long-term

margin

targets

for

that

part

of

our

business.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks,

David.

Going

more

into

the

Partner

Program

and

there's

a

question

coming

from

Miriam

from

Morgan

Stanley.

What

explains

the

difference

in

our

Partner

Program

share

we

are

seeing

across

different

markets?

Is

it

simply

scale

or

maturity?

And

how

does

this

trajectory

of

our

Partner

Program

in

newer

markets

compare

to

our

home

market

here

in

Germany?

[David Schneider, Co-Chief Executive Officer, Zalando SE]

I

mean,

first

to

note

that

Zalando,

of

course,

also

the

Zalando

penetration

looks

different

across

different

markets.

So

I

think

there

is also

like

the

Zalando

maturity

in

certain

markets

that

play

a

role.

Then

our

partners

now,

of

course,

they

also

have

to

develop

the

capabilities

to

ship

internationally,

which

is

usually

a

challenge

to

actually

have,

like,

the

right providers

and all

the

connections

and

place

you

need,

which

is

also

exactly

a

reason

why

we

offer

ZFS.

And

then

believe

very

much

in

our own

logistic

networks

to

actually

help

partners

get

there

because

that

is

actually,

this

offers

like

all

our

European

markets

to

partners

quite

immediately.

We

also

see

a

strong

traction.

And

you

see

also

like

if

you

solve

these

challenges

for

partners,

how

it

then

develops

very

quickly.

I

mean,

if

we

look

at,

for

example,

Switzerland,

how

it

develops

once

you

overcome

like

the

hurdle

for

partners

and

offer

them,

through

ZFS,

like,

an

easy

way

in.

That

you

also

see

like

the

Partner

Program

share

developing

very

quickly.

And

I

think

in

future,

so

we

see

markets

that

will

develop

fairly

quickly

on

the

Partner

Program

share.

We

also

see

a

big

lever

to

actually

offer

really

relevant

assortment

locally.

For

example,

in

Spain,

we

even can

utilize

like

the

Connected

Retail

proposition

to

which

we

get

access

to

locally

relevant

assortment

and

offer

that

locally

to

customers.

So

I

think

it's

a

big

lever

also

for

us

to

be

even

more

relevant

in the

specific

markets.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah.

I

think

that

was

a

good

hint. And

also

somebody

already

assumed

some

kind

of

a

question

here.

We

are

also

providing

more

logistic

services

for

our

brand

partners.

What

kind

of

additional

service

can

we

exactly

give

to

these

Connected

Retail

partners?

What

is

here

in

our

minds

and

what

are

we

able

to

share

here

already?

Not

sure.

David?

[David Schröder, Chief Financial Officer, Zalando SE]

Yeah.

Happy

to

jump

in

here.

So

obviously,

the

type

of

logistics

service

that

enables

connected

retailers

is

a

bit

different

from

the

type

of

logistics

service

that

we've

built

for

our

brands,

because

those

stores

essentially

are

small

fulfillment

centers.

That's

the

whole

beauty

of

the

model,

and

therefore,

they

don't

require

as

much

help

with

warehousing

as

our

brand

partners

do

when

they

use

ZFS,

but

they

definitely

can

benefit

from

our

capability

in

the

area

of

shipping

and

returns.

And

that's

why

we

are,

especially

for

2022,

now

we're

very much

focused

in

making

sure

that

we

can

support

them

with

more

efficient,

more

convenient

and

also

more

economical

returns

handling,

which

we

think

will

make

the

model

much

more

attractive

for

many

of

them,

given

that

the

cost

to

serve

can

be

dramatically

reduced.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks.

Sticking

with

logistics

also

kind

of

an

evergreen

here,

when

we

talk

about

our

logistic

platform

to

grow

our

GMV

by

€4

billion

per

year,

we

also

need

to

add

three

to

four

new

distribution

centers

every

year. But

apparently,

some

outsiders

don't

seem

that

we

are

on

track,

on

pace

here.

So

perhaps

you

can

comment

on,

are

we

getting

enough

throughput

via

our

existing

network?

[David Schröder, Chief Financial Officer, Zalando SE]

So,

I

think

our

existing

network

is

well

set

up

to

support

current

business

volumes

and

also,

obviously,

the

growth

for

the

year

to

come.

Please

don't

forget

we

just

at

the

end

of

last

year

took

online

a

completely

new

facility,

the

biggest

so

far

close

to

Rotterdam

and

the Netherlands,

which

gives

us

ample

of room

for

growth.

And

we

are,

obviously,

continuing

our

ambitious

network

buildout

program,

which

aims

to

add

more

than

seven

additional

warehouses

by

2025.

Several

projects

are

underway

in

France,

in

Germany

and

in

Poland.

All

those

have

been

announced

last

year

and

we

are

working

on

a

few

more

that

will

be

announced

soon.

So

from

our

perspective,

our

network

build

out

is

well

on

track

and

even

so

well

on

track

that

we

announced

today

that

we

also

now

feel

comfortable

to

open

up

our

network

to

support

our

brand

partners

also

across

more

channels

than

just

Zalando.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah,

exactly.

Also

another

question

exactly

on

that

last

sentence

by

David

to

you,

David

Schneider.

Could

you

talk

a

little bit

more

about

the

outsourcing

of

the

logistic

to

brand

partners

and

how

this

will

be

chart

for,

will

it

be

the

same

way

as

Zalando

Fulfillment

Services,

(sic) [Zalando Fulfillment Solutions] (01:15:14) so, as

a

cost

plus

model?

And

what

is

the

level

of

adoption

that

could

be

here.

So

perhaps

any

thoughts

you

can

share

here?

[David Schneider, Co-Chief Executive Officer, Zalando SE]

I

mean,

we've

–

also

like

in

the

past

years,

we've

been

in

a

lot

of

discussion

with

our

brands.

How

can

we

how

can

we

actually

open

up

our

capabilities

more

and

more

now,

yeah. And

to

close our

work

together,

I

mean,

we

know

brands

invest

into

the

direct-to-consumer

approach.

And

of

course,

they

ship

not

only

like

through

Zalando,

but

also

through

their

own

income

and

other

channels.

So

what

we

see

is

that

–

by

opening

our

capabilities

as

we

have

really

the

best

network

for

fashion,

for

fashion

logistics,

why

not

open

that

up

and

actually

help

brands

to

really

also

go

more

direct

to

consumer.

Because

I

think

that's

how

we

want

to position

ourselves

with

brands

to

enable

their digital

business

and

be

part

of

their really

digital

strategy

and

not

creating

any

barriers.

And

I

think

there is

like

very

clear

wins,

I

mean,

for

partners.

Again, it

gives

them

access

to,

like,

all

our

markets

all

over

Europe.

I

think, obviously,

in

combination

with,

like,

having

Zalando

as

a

strong

channel

for

them

that

also

creates,

like,

being

able

to

consolidate

parcels.

Yeah.

I

think

also

a

lot

of

economic

benefits

that

are

in

there.

Yeah.

And

of

course,

they

can

make

use

of

like

all

these

convenience

investments

in

innovation,

also

from

the

sustainability

angle.

All

these

investments

will

go, yeah,

across

Europe

across

all

brands,

they

can

make

use

of

that.

At

the

same

time,

I

think

we

also have

the

benefits,

yeah,

or

our

customers

have

the

benefits

as

we

tap

into

better

availability,

stronger

inventory

pools,

and

again,

I

think

also

the

strong

benefits

for

partners.

We

do

not

have

to

split

inventories

in

that

sense,

which

makes,

of

course,

a

big

effect.

And

you

can

say

that

brands

do

not

like

to

fragment

their

inventory.

Yeah.

So,

we

believe

that

this

strong

win

win

win,

yeah.

And

that's

again,

our

partners

win

and

I

think

for

customers,

we

have

a

strong

benefit.

And

I

think

for

us,

of

course,

it's

also

interesting

to

build

out

like

really

this

infrastructure,

and

which,

of

course,

is

also

like

a

great

business

model

to

build

on

for

us

in

future.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah.

Thanks

for that.

There's

also

financially

related,

just

coming

another

warehouse

question

on

from

Adam

from

Deutsche

Bank.

Perhaps,

David,

you

can

comment

broadly

on

that

like

what

is

the

return

on

capital

for

spending

CapEx

on

a

new

distribution

center

and

fulfilling

the

logistics

for

partners. Is

this is

only

available

if

they

sell

enough

product

via

Zalando

and

perhaps

any

thoughts

you

may

share

here?

[David Schröder, Chief Financial Officer, Zalando SE]

Yeah.

Sure. So,

obviously,

when

we

evaluate

these

projects

and

take

decision

on

such

a

large

CapEx

spending,

we

take

a

very

close

look

at

the

business

sketch

for

each

of

these

locations.

And

although

I,

obviously,

cannot

go

into

a

lot

of

detail

here,

what

I

can

confirm

is

that

all

these

projects

come

with

a

very

attractive

and

high

NPV,

and

they

also

come

with

a

super-fast

payback,

for example,

in the

automation

technology, which

is

really

the

bulk

of

the

CapEx

investment

that

we

are

talking

about

here

which

typically

pays

itself

in

just

three

to

four

years,

whereas

we

can

use

the

facility

for

much

longer,

and

I

think

that

gives

you

an

indication

of,

yeah,

the

return

on

capital

for

such

projects.

And

for

sure,

as

we've

mentioned

today,

this

offer

will

not

be

limited

to

partners

selling

on

Zalando.

It

will

also

be

open

for

partners

to

use

for

other

channels.

Obviously,

we

would

expect

most

partners

to

find

it

very

useful

that

they

can

also

tap

into

the

large

customer

base

that

we

can

offer

at

Zalando,

but

it's

not

a

prerequisite

as

such.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Cool.

Thanks

a

lot.

A

little

bit

related

to

logistics,

but

also

evergreen

here

at

Zalando

is

like

return

rates.

Now,

we

have

been

seeing

a

big

benefit

over

last

two

years.

Perhaps,

David,

you

can

comment

on

like,

does

the

2022

guidance

include

a

continued

benefit

from

lower

return

rates?

So

that's

the

first

one.

And

then

perhaps

also

a

little

bit

comment

on

the

marketing

spend

as

a

percentage

of

sales

given

that

more

volatile

consumer

demand

environment

you

also

flagged

and

others

are

also

seeing

you.

[David Schröder, Chief Financial Officer, Zalando SE]

Sure.

So,

in

terms

of

return

rates,

we

definitely

assume

an

ongoing

normalization

and

therefore

only

a

minor

or

smaller

impact

on

2022.

Overall,

we

actually

expect

our

fulfillment

cost

ratio

to

increase

in

2022,

driven

by the

normalization

of

return

rates,

but

also

by

our

continued

investments

to

drive

convenience

for

Plus

members

and

also

to

make

our

operations

and

services

more

and

more

sustainable,

for

example,

in

the

area

of

sustainable

packaging.

When

we

think

about

our

marketing

expenses

for

this

year,

we

assume

a

rather

flat

development

year-over-year.

But

as

we

have

repeatedly

stressed

today,

we

are

still

a

business

in

a

very

agile

manner.

And

as

you

know,

if

you

follow

us

for

a

while

now,

we

are

steering

marketing

primarily

based

on ROI.

And

so

we

are

not

sticking

to

a

pre-determined

budget,

but

we

will rather

adjust

our

spending

according

to

the

opportunities

that

we

see

in

the

market.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks.

[indiscernible]



(01:21:15)

moving

away

a little

bit

from

logistics,

going

more

into

also

our

longer

term,

there's

a

question

on

ZMS

and

Robert,

I

think

you

are

the

right

one

to

answer

that

one,

it's

like,

can

you

expand

and

explain

a

bit

further

what

roles

ZMS and

other

Zalando

data

services,

data

[ph]



monetization

(01:21:35) in

general

will

play

in

our

starting

point

for

fashion

strategy?

[Robert Gentz]

Yeah.

Sure.

So

like,

as

our

platform

proposition

towards

customers is

kind

of

expanding

and

we

want

eventually

like

every

fashion

item

to

be

available

on

our

propositions.

There

is

[ph]



as well

like,

a

question,

like,

how –

what's

(01:21:54) actually

the

most

effective

way

that

actually

brands

can

as well engage

with

customers

as

well

on

Zalando

and

how

can

actually

tell

their

stories,

especially

in

the

environments

[ph]



like

where

it is

(01:22:07), I

think,

a

lot

of

offer

available

and

this is

really

where

the

ZMS

service

actually

helps

our

brand

partners

to

tell

their

story,

tell

their

brand

and

as

well

shed

more

light

on

specific

articles

that

they

want,

like,

customers to

more

engage

with.

So

this

is

the

purpose

of

ZMS.

And

as

we

have

highlighted in

our

long-term

work,

we

assume

this

would

be

like

in

the

area

of

our

3%

to

4%

of

the GMV,

will be

like

the

ZMS

in terms

of

our

platform

proposition

and

we

are

– yeah,

and

we

are

very,

very

happy

so

far

with

the

developments

of

how

[ph]



ZMS (01:22:48)

business

actually –

yeah,

[ph]

is

assumed

by (01:22:51)

the

brand

partners.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks,

Robert.

Then

there's

also

another

question

coming

from

Christian

from

Hauck & Aufhäuser.

David,

given

your

comfortable

net

cash

position,

how

do

you

think

about

inorganic

growth

and

where

would

you

see

possibilities

for

acquisition

[indiscernible]



(01:23:11)

and

beauty

or

tech?

[David Schröder, Chief Financial Officer, Zalando SE]

Well,

first

of

all,

I

think

it's

great

to

have

that

comfortable

cash

position

as

you

call

it,

because

[ph]



and then (01:23:22)

really

enables

us

to

take

that

true

cycle

long-term

view

on

the

business,

right,

and

to

make

sure

that

we

can

actually

make

all

the

necessary

investments

that

allow

us

to

achieve

our

mid-term

ambition

of

€30

billion

GMV in

2025

and

also

our

long-term

ambition

of

serving

more

than

10%

of

the

total

European

fashion

market.

Apart

from

that,

you'll

see

us

mainly

investing

into our

own

infrastructure

and

in

our

capabilities,

obviously,

also

our

technology

platform

as

part

of

these

capabilities.

Yes,

we

are

most

likely

continue

to

also

look

at

inorganic

opportunities,

but

primarily

those

that

help

us

advance

when

it

comes

to

building,

scaling

and

innovating

our

capabilities.

So,

for

example,

the

last

acquisition

that

we

did

was

around

Size

and

Fit,

and

I

think

you

should

expect

us

to

do

similar

acquisitions

in

the

future

when

they

can

help

us

accelerate

our

journey

towards

being

the

starting

point

of

fashion.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Okay,

thanks.

Before

coming

back

a

little

bit

to

our

current

and

2022

outlook,

perhaps

another

more

strategic

question

sticking

with

you,

David,

on

a

second

is

like

our

financial

capabilities

and

probably

mainly

referring

here

to

our

Zalando

payments

offering.

Do

you

see

any

potential

to

include

this

as

a

service

to

brands

as

part

of

the

Partner

Program

over

time?

[David Schröder, Chief Financial Officer, Zalando SE]

Well,

the

thing

is,

all

the

brands

and

also

connected

retailers

that

participate

in

our

platform

use

our

payments

service

by

default,

right.

So

it

is

actually

part

of

our

Partner

Program

and

Connected

Retail

offer

and

part

of

the

reason

why

brands

and

connected

retailers

pay

a

commission

to

us.

So,

part

of

that

commission

is

a

payment

services

related.

But

I

think

it's

still

a

good

question,

because

we

definitely

see

that

we've

built

a

very

strong

payments

capability.

We

process,

yeah,

more

than

€20

billion

transaction

volume

through

our

internal

payment

systems,

and

we've

also

built

a

very

strong

buy

now

pay

later

offering,

which

actually

accounts

for

more

than

two-thirds

of

their

payment

volume. It's

the

most

popular

payment

method

for

our

customers

and

many

of

our

markets,

and

it's

also

something

that

has

obviously

helped

us

to

drive

both

customer

satisfaction

and

also

conversion.

And

therefore,

we

definitely

are

evaluating

different

opportunities

on

how

we

can

leverage

this

strong

capability,

particularly

in

the

area

of

buy

now,

pay

later,

and

also

find

ways

to

offer

that

to

partners

also

outside

of

Zalando.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Okay,

thanks

a

lot,

David.

And

looking

into

a

little

bit

more

to

the

brands

itself,

there

was

also

a

question

again

from

Charlie,

from

Exane

PNB.

Would

you

also

consider

helping

brands

with

their

e-commerce

technology

as

well

as

the

logistics?

[indiscernible]

[David Schneider, Co-Chief Executive Officer, Zalando SE]

01:26:33)

beyond

logistics,

I

think,

logistics

and

I

think

it's

a

very

strong

and

clear

value-add

for our

partners.

And

that's

why

we

want

to open

that

up

and

then

really

enable

brands

not

only

for

our

channel

also

across

like

different

touchpoints,

but

like

marketing,

for

example,

is

also

a

good

example.

With

ZMS,

I

think

we're

also

developing

capabilities

that

really

help

brands

to

engage

with

their

audience,

yeah,

target

like

the

right

audience

and

help

them

position

to

message

and

their

brand

in

the

right

audience.

And

I

think

we

can

actually

build

on

that,

because

part

of

that

is

also

like

strong

customer

insights,

yeah,

and

really

help

brands

using

those

insights

being

in

product

development,

but

also

in

the

messaging

towards

customers.

So,

I

think

building

on

that,

yes,

I

think

there

are

like

ways

to

support

brands

overall

in

their

digital

strategy.

And

I

think

it

also

gets

more

and

more

holistic

how

we

can

actually

help

them

through

our

capabilities,

yeah,

and

not

only

on

Zalando,

but

also

beyond

that.

Yeah.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Yeah.

David,

you

stated

in

your

presentation

earlier

today

as

the

pre-recording

on

the

customer

metrics

and

how

they

have

developed

and

what

nice

positive

impact

we

have

seen

is,

there's

a

question

from

Jürgen

from

Kepler

Cheuvreux

asking,

can

you

provide

some

additional

details

where

you

expect

to

see

the

biggest

changes

with

regard

to

our

customer

metrics

in

2022?

[David Schröder, Chief Financial Officer, Zalando SE]

Sure.

So

I

think

if

we

look

back

at

the

past

24

months

that

have

driven

some

exceptional

developments

for

the

business

overall,

but

also

for

our

key

customer

metrics,

I

think

from

me,

the

two

that

stand

out,

in

particular,

are

the

one

around

our

active

customer

growth

and

particularly

the

acceleration

in

new

customer

growth

that

I've

also

focused

on

in

my

performance

deep

dive

today.

And

the

second

key

thing

to

highlight

would

probably

be

the

basket

size

development,

which

obviously

benefited

significantly

from

the

lower

return

rate

that

we've

already

talked

about

today.

And

so

these

are

probably

also

the

two

key

metrics,

where

I

would

expect

a

normalization.

So

in

the

active

customers,

we

would

expect

our

new

customer

growth

to

return

to,

let's

say,

pre-pandemic

levels.

And

on

the

basket

size,

we

would

expect

to

see

the

normalization

of

the

return

rate

lead

to

a

decrease

in

the

basket

size

for

this

year.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks.

The

last

question, David

is

going

to

[indiscernible]



(01:29:19)

on

competitive

on

pricing.

Adam

from

Deutsche

Bank

is

asking,

Zalando

was

more

competitive

on

pricing

in

the

second

half

of

2021,

but

now

– but

looks

to

set

to

increase

prices

in

2022.

Does

this

suggest

you

will

be

a

price

taker

rather

than

a

price

setter?

Any

color

you

may

give

here

would

be

helpful?

[David Schneider, Co-Chief Executive Officer, Zalando SE]

Maybe

to

answer

it

first

from

a

strategic

angle.

For

us,

price

is

not

our

main

differentiator.

And so,

it's

not

our

goal

to

lead

on

price.

For

us,

it's

a

lot

more

important

to

reinvest

into

experience

and

engage

with

customers

through

that

experience

and

through

a

great

assortment

access

providing

like

anything

that

is

relevant

for

customers

telling,

like

all

the

great

like brand

stories

and

engage

with

like

content,

it's

about

creating

like

experiences

on

our

propositions,

be

it

like

for

fashion

or

for

beauty

or

for

designer

or

for

pre-owned. Yeah,

so

that's

important. And

then,

also

convincing

through

a great

convenience

experience,

then

linking

everything

through

like

our

Plus,

so

I

could

be

talking

about

that

for

a

while,

but

I

think

those

components

are

for

us

far

more

important

and

in future

we

are

thinking

further

around

like

how

to

engage

with

customers

in

even

better

way

and

then

also

entertain

them

more.

Concretely,

to

like

price

developments,

and

yes

we

do

see

price

increases

in

the

market

and

we're

like

also

in

close

discussions

with

our

brand

partners.

So,

it

looks

like

we

have

price

increases

in

like

mid

to

high-single

digit

area,

which

I

think

we

have

like

over

the

past

decade,

we

haven't

experienced

such

a

shift

in

pricing.

So,

that

is

something

I

think,

that

we

will

see

and

where

we

also

see

like

prices

adapting

and

where

we are

also

closely

monitor

like

what

is

like

the

customer

reaction,

how

do

they

also

shift

like

in

different

price

buckets.

But

I

think

also

across

like

our

platform

as

we

have

a

very

broad

assortment

and

work

with

almost

6,000

partners.

I

think

we

also

have

to

leeway

to

also

adapt

to

that

and

offer

what

is

most

relevant

for

customers.

[Patrick Kofler, Head-Investor Relations, Zalando SE]

Thanks.

Yeah,

that

concludes

today's

Q&A

session

with

the

both

Davids

here

on

stage

and

Robert

virtually.

Thanks

everyone

for

attending

today's

full

year

publication.

As

always, we

will

be

on

the

road

to

discuss

our

results

in

the

next

couple

of

days. We

will

also

host

an

analyst

roundtable

in

the

week,

and

if

there

are

any

remaining

questions

do

not

hesitate

to

contact

us.

In the

meantime,

stay

well

and

yeah,

get

well

through

these

times

and

hope

to

see

you

soon.

Thanks,

everyone.

Bye-bye.