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Zalando SE Call Transcript 2020
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Call Transcript
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Zalando Q2/2020 Earnings Call
August 11th, 2020
1
Strong H1/2020 performance underlines our continued progress with regards to both our strategy and our financial targets
Continued progress on our strategic agenda to become the Starting Point for Fashion supported by an accelerated offline to online shift driving record numbers of new customers and partners to our platform
Strong financial performance in H1/20 with GMV growth of 25% and adjusted EBIT of 113m EUR, driven by faster than expected demand recovery and underlying changes in customer behavior
Successful placement of 1bn EUR in Convertible Bonds allowing us to further accelerate our growth strategy and to invest through-cycle with even more conviction
Upgrade of our FY2020 guidance as we are back on track to deliver strong and profitable growth for the full year
Business Update Q2/2020
We continue to progress on our strategic priorities to become the Starting Point for Fashion
Strong new customer growth and healthy repurchase behavior drive growth of our Active Customer base
New customer growth
Added more than 3m new customers in Q2/20
Increasing share of first-time online shoppers as well as male shoppers
- New customers show higher engagement and repurchase rates than in the past
- Qualitative customer surveys indicate strong willingness to shop at Zalando again in the future
We have successfully accelerated our platform business in Q2 by helping our partners to grow their digital business along with us and…
New partner integration & range extensions of existing partners
… our next generation of data-driven partner tooling Zalando Direct will enable them to maximize the sales opportunity on our platform
(illustrative sales performance)
Financial Update Q2/2020
Strong H1/20 topline momentum at the upper end of our mid-term guidance corridor of 20-25%
1) H1/20 (H1/19) contains -€217.4m (-€211.4m) reconciliation of internal revenues; Q2/20 (Q2/19) contains -€127.8m (-€81.7m) reconciliation of internal revenues
Key customer metrics continue to show positive trends
1) Defined as GMV divided by the number of orders
2) Defined as GMV divided by the number of active customers
Solid level of profitability in H1/20 despite challenging Q1 trading driven by strong Q2 results
1) H1/20 (H1/19) contains -€0.7m (€0.6m) reconciliation of internal EBIT; Q2/20 (Q2/19) contains -€0.7m (€0.1m) reconciliation of internal EBIT
2) Excluding equity-settled share-based compensation (SBC) in H1/20 of -27.9€m , H1/19 of -21.5 €m, Q2/20 of -13.5 €m, Q2/19 of -9.7€m; and non-operating one-off effects in H1/19 of -13.1€m
3) Other segments includes various emerging businesses; private label offering zLabels no longer presented as separate unit since Q2/19
Strong profitability in Q2 mainly driven by lower return rates, scale effects and savings program
| Costs and margins (in % of revenue, unadjusted) |
H1 | Q2 | |||||
|---|---|---|---|---|---|---|---|
| 2019 | 2020 | Delta | 2019 | 2020 | Delta | ||
| Cost of sales | (57.0%) | (59.5%) | 2.5pp | (54.3%) | (55.6%) | 1.3pp | |
| Gross profit | 43.0% | 40.5% | (2.5pp) | 45.7% | 44.4% | (1.3pp) | Business mix effects |
| Fulfillment costs | (28.0%) | (27.3%) | (0.6pp) | (27.3%) | (25.4%) | (1.9pp) | High utilization & lower return rate |
| Marketing costs | (7.6%) | (6.4%) | (1.2pp) | (8.2%) | (5.2%) | (3.0pp) | Marketing cost Savings |
| Administrative expenses & Other | (4.9%) | (4.3%) | (0.6pp) | (4.4%) | (4.0%) | (0.4pp) | Overhead cost savings |
| EBIT | 2.5% | 2.4% | (0.1pp) | 5.8% | 9.7% | 4.0pp | |
| Adj. EBIT1 | 3.6% | 3.2% | (0.5pp) | 6.4% | 10.4% | 4.0pp |
1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects
Net working capital back in negative territory and Capex in line with 2020 savings plan
13
Liquidity position further strengthened by Q2 business performance and successful placement of €1bn Convertible Bonds, enabling continued through cycle growth investments
(1) Both FY/19 and H1/20 liquidity include investments into short-term deposits with maturity of more than 3 and less than 12 months of €25m, respectively.
(2) Includes sales and investments in fixed and intangible assets (-€85.1m), payments for acquisitions (+€0.0m) and change in restricted cash (+€0.0m)
(3) Includes financing cash flow (+€361.8m) and effect of exchange rate on cash and cash equivalents (-€0.8m).
(4) Proforma including Convertible Bond August 2020
Outlook
GMV growth in the range of 20 – 25%, and Revenue growth of 15 – 20%
Adj. EBIT1in the range of €250 – 300m
Negative net working capital and €230 – 280m in Capex2
1) Excluding equity-settled share-based payment expense ("SBC") of ~€50m, restructuring costs and non-operating one-time effects for FY/20
2) Excludes M&A transactions
Issued share capital
| SHARE INFORMATION (AS OF JUN 30, 2020) |
Type of Shares | Ordinary bearer shares with no-par value (Stückaktien) | |
|---|---|---|---|
| Stock Exchange | Frankfurt Stock Exchange | ||
| Market Segment | Regulated Market (Prime Standard) | ||
| Index Listings | MDAX | ||
| Total Number of Shares Outstanding | 254,121,532 | ||
| Issued Share Capital | €254,121,532 |
STOCK OPTION PROGRAMS MGMT BOARD (AS OF JUN 30, 2020) STOCK OPTION PROGRAMS SENIOR MGMT (AS OF JUN 30, 2020)
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20111 | 1,346,400 | 5.65 |
| SOP 20131 | 8,866,158 | 15.56 |
| VSOP 2017 | 290.000 | 42.24 |
| LTI 2018² | 5,250,000 | 47.44 |
| VSOP 2018 | 250,000 | 29.84 |
| LTI 2019 | 715,500 | 15.71 |
| Total | 16,178,348 | 25.46 |
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20141 | 1,066,990 | 22.53 |
| EIP1 | 3,628,749 | 35.31 |
| VSOP 2017 | 499,166 | 42.24 |
| ZOP | 835.848 | 20.32 |
| Total | 6,030,753 | 31.48 |
1) Settled with new shares
2) Only to 43% dilutive / to be settled with new shares, remaining backed by treasury shares
Upcoming events
| Date | Event | All events are virtual |
|---|---|---|
| Thursday, August 13 | Bank of America Fireside Chat with our CFO |
|
| Thursday, September 3 | Commerzbank Corporate Conference, Frankfurt | |
| Wednesday/Thursday, September 9-10 | Goldman Sachs 27th Annual Global Retail Conference, New York |
|
| Monday/Tuesday, September 21-22 | Berenberg / Goldman Sachs German Corporate Conference, Munich | |
| Wednesday/Thursday, September 23-24 | Baader Investment Conference, Munich |
|
| Wednesday, November 4 | Q3/2020 Results |
Zalando Investor Relations Team
Patrick Kofler Head of IR
Junior Manager IR
Nils Pöppinghaus Manager IR
Jan Edelmann Manager IR
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 forward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements.
Our actual results may differ materially and adversely from any forward-looking statements discussed on this call due to a number of factors, including without limitation, risks from macroeconomic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / conditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and changes in competition levels.
