The analyst conference of Zalando ($ZAL (-1,43%) ) began with a presentation by co-CEOs Robert Gentz and David Schröder.
Robert Gentz emphasized that Zalando had achieved its strategy and financial targets last year, despite a challenging market. He emphasized the adaptation to customer needs and the investments in the platform. Gentz pointed out that Zalando is transforming from a platform to an ecosystem in order to gain a larger market share. In the B2C area, Zalando wants to become the first port of call for high-quality fashion and lifestyle, while strong growth is targeted in the B2B area. David Schröder added that Zalando plans to merge with ABOUT YOU, which is an important step forward.
Gentz mentioned that 2024 is the first year since the pandemic in which e-commerce penetration in Europe returns to its long-term growth trend. He was optimistic about the long-term opportunities in a EUR 450 billion market. The GMV increased by 4.5 % to EUR 15.3 billion and sales by 4.2 % to EUR 10.6 billion. The adjusted EBIT exceeded expectations by more than EUR 30 million and reached EUR 511 million, which corresponds to a margin of 4.8 %.
At the end of the year, 51.8 million active customers were served, an all-time high. Spending per customer remained stable at around EUR 295. The gross margin in the B2C business rose by more than 200 basis points to 43.5%.
Sales of EUR 953 million were achieved in the B2B business, an increase of 11.5 % compared to the previous year. The adjusted EBIT amounted to EUR 23 millionwith a margin of 2.4 %. Schröder emphasized the goal of promoting a more sustainable fashion and lifestyle industry and achieving net-zero emissions in its own operations and private labels by 2040.
Robert Gentz addressed the three strategic pillars for the B2C business: Differentiation through quality, lifestyle expansion and inspiration and entertainment. Zalando aims to be the quality leader in European e-commerce for fashion and lifestyle. The company expanded its range to include new brands such as Versace and On Running. The loyalty program has been improved and rewards customers for commitment and purchases. To date, almost 10% of customers participate in this program.
Gentz mentioned the expansion into new markets such as Portugal, Greece and Bulgaria. Zalando plans to enrich the product detail pages to improve conversions. In the area of lifestyle expansion beauty and sport are highlighted as important growth areas. Beauty recorded strong, double-digit growthand new brands such as Armani are being added to the range. In the sports segment, the focus is on sub-segments such as running, outdoor, fitness and soccer. Zalando plans to deepen its offering in these areas in order to strengthen its credibility and expertise.
In the area of inspiration and entertainment, Zalando is testing various formats, including Stories on Zalando. A personalized discovery feed in the Zalando mobile app is planned for 2025.
David Schröder explained the progress made in the B2B area, where Zalando wants to become the operating system for fashion in Europe. In the logistics area, Zalando now serves 12 markets and enables retailers to sell on 10 different channels. He cited Pepe Jeans as an example of the success of ZEOS solutions. Zalando has started a new partnership with NEXT to develop advanced fulfillment capabilities. In the software area, Zalando is working on strategic partnerships with leading sales channels, integrators and store systems.
Robert Gentz addressed the outlook and mentioned the planned acquisition of ABOUT YOU. More than 90% of the shares of ABOUT YOU have already been secured. This takeover will enable Zalando to pursue a dual-brand strategy and expand its B2B offering. In the long term, synergies of around EUR 100 million per year on an EBIT basis are expected. An adjusted EBIT margin of 10% to 13% is targeted for 2028. GMV and sales growth of 4% to 9% is expected for 2025, as well as a further improvement in adjusted EBIT to EUR 530 to 590 million.
In the subsequent Q&A session, the analysts addressed the following topics:
Anne Critchlow from Berenberg asked about the GMV trend in the first quarter compared to the fourth quarter and marketing costs. David Schröder replied that the start of the year showed similar positive momentum to the fourth quarter. Marketing costs of 10% of sales in the fourth quarter are not expected to be the new normal level for 2025. Zalando plans to continue to manage its investments based on ROI and expects marketing costs to be in the higher single-digit range.
Jürgen Kolb asked about the expectations for the gross margin and fulfillment costs in 2025. David Schröder explained that Zalando has made a big step in 2024 towards an adjusted EBIT margin of 6% to 8% in 2028. A smaller step is expected for 2025, with the focus remaining on efficiency improvements and the gross margin.
Luke Holbrook from Morgan Stanley asked about the progress of the loyalty programin which 10% of customers are currently participating. Robert GentzCo-CEO, replied that the program will be expanded to 16 countries this year and marketed more strongly, which will lead to accelerated expansion. Holbrook also asked about performance in the first quarter.
David Schröder clarified that the start of the year was similar to the end of the year, with growth in the fourth quarter amounting to 4.8%.
Another analyst asked about the impact of ZMS (Zalando Marketing Services) on the operating result in 2025. David Schröder replied that the loyalty program will have a positive impact on customer numbers and spend per customer, which will translate into lower marketing spend in the long term. However, there will be a temporary accounting effect in the mid double-digit million range in connection with deferred revenue.
An analyst from Bernstein asked about the drivers for the growth of 4 % to 9 % in 2025. Robert Gentz explained that both active customers and GMV per active customer will contribute to growth. The retail business will remain strong, but an increase in the partner business is also expected. With regard to ZMS, Robert Gentz said that the company will achieve double-digit growth in 2024. double-digit growth and expects the same for 202515 . In the long term, Zalando is aiming for a corridor of 3% to 4% for ZMS. David Schröder emphasized the one-stock-pool strategy in which the entire inventory is pooled in one infrastructure to serve multiple channels. The acquisition of ABOUT YOU makes this concept even more attractive.
Another analyst from Stifel inquired about the effects of the trade conflict between the USA and China. Robert Gentz replied that Zalando does not see any immediate impact due to its European base and its mainly Asia-based supply chains. With regard to Chinese companies operating in Europe, Zalando's focus is on high-quality e-commerce with branded products.
He also asked about TikTok stores. Robert Gentz replied that Zalando is curiously watching this and cooperating with TikTok in the UK to learn.
An analyst from UBS asked about the capacities following the commissioning of the warehouse in Paris and the construction of the warehouse in Frankfurt. David Schröder replied that the capacities are sufficient to cover the growth plan until 2028. The partnership with NEXT helps Zalando to understand the requirements of large customers and to develop additional capabilities.
An analyst from RBC asked about the integration costs and synergies of ABOUT YOU. David Schröder replied that Zalando is aiming for long-term synergies of 100 million euros per year on an EBIT basis.
An analyst from Deutsche Bank asked about major brands in the sports and beauty sectorsthat Zalando would like to have on its website. Robert Gentz replied that in the sports sector it is more about expertise in certain sports, while in the beauty sector it is about attracting new brands.
In summary, Zalando is successfully driving forward its ecosystem strategy and has achieved its financial targets for 2024. There are exciting plans for 2025 to further develop the strategy in the areas of B2C and B2B. The planned acquisition of ABOUT YOU fits perfectly into this strategy and offers additional growth opportunities.
I am curious to see how the share will continue after the recent recovery.
