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Zalando SE Call Transcript 2019
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Call Transcript
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Zalando. The Starting Point for Fashion.
Q2 / 2019 Earnings Call
August 1, 2019
Highlights and Business Update
Outstanding customer growth
resulting in profitable growth in Q2/19 and raised full-year profit outlook
Starting point strategy: Strongest ever Q2 active customer growth and fastest site visit growth since 2013
Financial performance: Profitable growth continued with GMV +23.7% and yoy higher adj. EBIT of €102m
Profit outlook: Adj. EBIT now expected in upper half of initial €175-225m range
Customer proposition: Expansion of fulfillment network and broadening of our assortment range
Platform transition: ZFS is already a great success – and we are taking it even further
Expansion of European fulfillment network will enable us to meet and exceed local customer expectations
New fulfillment center in the Netherlands
Create the capacity for future growth:
12 warehouses can fulfill ~€14bn GMV
Get closer to our customers: Lead time to BENELUX and France will further improve
Leverage state of the art technology:
Next generation of automation will reduce lead times and drive both labor productivity and cost efficiency
Enabling our partner to tap into our growing European fulfillment network, Zalando Fulfillment Solutions (ZFS) is already a great success…
…and we are taking it even further by adding three key new features this year
ZFS and Switzerland
ZFS and Offprice integration
Increasing stock flexibility and limiting inventory risk for partners by shifting remaining stock to Zalando Lounge at the end of the season
In pilot mode Pilot in Q4/19 Pilot in H2/19
ZFS and multi-channel fulfillment
Key benefits
Superior customer offering and less inventory risk for partners by offering Zalando fulfillment for transactions in alternative channels
On the assortment side we are focusing our efforts on three strategic dimensions to offer our customers even more choice
Push into high price premium Focus on Sustainable Fashion Assortment expansion through Partner Program & Connected Retail
15 new high profile beauty brands through beauty retailer FeelUnique like Button London, Nuxe, and Lierac
All prices from high to low: Added several new high price premium brands
Phillip Lim
New brands including Ecoalf, Mud Jeans, Girlfriend Collective, and Stripe + Stare will launch soon on Zalando
sustainable fashion assortment: more than 15,000 items and over 240 brands.
Financial Update Q2 / 2019
Continued strong market outperformance in Q2/19
9 (1) H1/19 (H1/18) contains -€211m (-€237m) reconciliation of internal revenues; Q2/19 (Q2/18): -€82m (-€119m)
(2) All other segments including various emerging businesses; private label offering zLabels no longer presented as separate unit since Q2/19
Strongest ever Q2 active customer growth and fastest site visit growth since 2013
All-time high
All-time high
(1) Defined as GMV divided by the number of orders
10 (2) Defined as GMV divided by the number of active customers
Adj. EBIT of €102m in Q2/19 – notably above prior year
(1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects of €34.5m in H1/19 (H1/18: €22.3m); Q2/19: €9.7m (Q2/18: €6.7m)
11 (2) H1/19 (H1/18) contains €1m (€2m) reconciliation of internal adj. EBIT; Q2/19 (Q2/18): €0m (€2m)
Stable gross margin development and healthy fulfillment cost improvement
Costs and margins1
Capex spend back-end loaded in 2019
Profitability outlook raised – Adj. EBIT expected in upper half of initial €175-225m range
GMV growth in 20 – 25% range; revenue growth around the low end of this range
Adj. EBIT1 in upper half of initial €175 – 225m range
Slightly negative working capital and around €300m capex2
(1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects of ~€60m for FY/19E
15 (2) Excludes M&A transactions
Liquidity position
(1) Both Q1/19 and Q2/19 liquidity include investments into short-term deposits with maturity of more than 3 and less than 12 months of -€25m, respectively
(2) Includes investments in fixed and intangible assets and payments for acquisitions
17 (3) Includes financing cash flow (-€3.5m) and effect of exchange rate on cash and cash equivalents (+€1.6m)
Issued share capital
SHARE INFORMATION (AS OF JUN 30, 2019)
| Issued Share Capital | €251,705,353 |
|---|---|
| Total Number of Shares Outstanding | 251,705,353 |
| Index Listings | MDAX |
| Market Segment | Regulated Market (Prime Standard) |
| Stock Exchange | Frankfurt Stock Exchange |
| Type of Shares | Ordinary bearer shares with no-par value (Stückaktien) |
STOCK OPTION PROGRAMS MGMT BOARD (AS OF JUN 30, 2019) STOCK OPTION PROGRAMS SENIOR MGMT (AS OF JUN 30, 2019)
| Program | # Options outstanding |
Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20111 | 1,346,400 | 5.65 |
| SOP 20131 | 9,275,200 | 15.56 |
| LTI 2018² | 5,250,000 | 47.44 |
| LTI 2019 | 784,000 | 15.71 |
| Total | 16,655,600 | 24.81 |
| Program | # Options outstanding |
Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20141 | 3,258,794 | 20.50 |
| EIP1 | 3,645,996 | 35.30 |
| VSOP 2017 | 749,166 | 42.24 |
| VSOP 2018 | 500,000 | 29.84 |
| Total | 8,153,956 | 29.69 |
Upcoming events
| Date | Event |
|---|---|
| Tuesday, August 6 | Roadshow Frankfurt |
| Wednesday, August 7 + 8 | Roadshow London |
| Thursday, August 29 | Commerzbank Sector Conference, Frankfurt |
| Tuesday-Wednesday, September 3 - 4 |
Roadshow USA: Los Angeles, San Francisco |
| Thursday, September 5 | Goldman Sachs Annual Global Retailing Conference, New York |
| Tuesday, September 24 | Berenberg / Goldman Sachs German Corporate Conference, Munich |
| Wednesday, September 25 + 26 | Baader Investment Conference, Munich |
| Thursday, October 31 | Q3/19 Results |
Zalando Investor Relations Team
Patrick Kofler – Team Lead IR [email protected]
Nils Pöppinghaus – Manager IR [email protected]
Dorothee Schultz – Junior Manager IR [email protected]
Jan Edelmann – Manager IR [email protected]
Team Contact T: +49 3020 9681 584 Zalando Tamara-Danz-Straße 1 10243 Berlin [email protected] https://corporate.zalando.com/en
Disclaimer
Certain statements in this communication may constitute forward looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties. You should not rely on these fo rward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may diff er materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroecon omic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / conditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and changes in competition levels.
