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Zalando SE — Call Transcript 2021
May 6, 2021
499_ip_2021-05-06_c702636c-21c6-49ab-867d-f99385ba943c.pdf
Call Transcript
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Zalando Q1/2021 Earnings Call
May 6th, 2021 David Schröder, CFO
2021 is off to a great start as we delivered exceptional growth and made fast strides on our journey towards being the Starting Point for Fashion
Growing our Customer Base: Surpassed 40m active customers in Q1, driven by exceptional new customer growth.
Building Great Customer Experiences: Expanded pre-owned fashion experience internationally, enabled more sustainable choices and enhanced our Plus program.
Expanding our European Logistics Network: Adding 5 new fulfillment centers to our network by 2023 to serve our customers even better and to enable continued strong growth.
Exceptional Q1 financial performance: Delivered GMV growth of +55.6% YoY and strong profitability with adj. EBIT margin of 4.2%.
Upgraded full-year 2021 outlook: GMV growth of 31-36%, Revenue growth of 26-31% and adj. EBIT of 400-475m EUR.
Business Update Q1 2021
We continue to innovate the way we engage with our customers by launching a number of exciting new experiences
Launched New Value Based Browsing Experience
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Leather Working Group (Gold) The leather sourced in this product comes from environmentally responsible leather manufacturers, audited and certified via the Leather Working Group protocol. In this case, the audited tannery has achieved the highest "Gold" award. |
| Positive Impact Choosing items that meet this criteria is a small but meaningful way to support causes you care |
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Enhanced Experience for our Zalando Plus Customers
- More customers can now enjoy the most convenient Pre-owned fashion experience in Europe
- Enables customers to trade in and buy Pre-owned fashion with the same seamless Zalando experience
- Customers are now able to filter our vast selection by different sustainability causes
- New experience allows customers to make more informed choices based on values they care about
- Plus customers get early access to limited product launches ahead of everyone else
- Provides brands with an exciting new tool to target our best customers with their most exciting offers
To serve our customers even better, we will expand our European logistics network by adding five new fulfillment centers by 2023
Financial Update Q1 2021
In Q1, we delivered the strongest topline performance since IPO, fueled by a strong momentum in Germany on the back of an outstanding performance of our Partner Business
1) Q1/21 (Q1/20) contains -€148.0m (-€89.6m) reconciliation. Fashion Store DACH contains -€68.9m (-€43.7m) and Fashion Store RoE contains -€65.6m (-€37.6m).
2) Other segments includes various emerging businesses
All our key customer metrics showed significant improvements
1) Defined as GMV divided by the number of orders, dynamically reported
2) Defined as GMV divided by the number of active customers; rounding differences may occur, dynamically reported
We delivered exceptional profitability in Q1 on the back of strong topline momentum and continued tailwind from lower return rate
1) Q1/21 (Q1/20) contains €1.4m (€0.0m) reconciliation
2) Excluding share-based compensation (SBC) in Q1/21 (Q1/20 ) of 14.8 €m (14.5€m)
3) Other segment includes various emerging businesses
The increase in profitability was primarily driven by healthy gross margin improvement and lower return rates
| Costs and margins | Q1 | ||||
|---|---|---|---|---|---|
| (in % of revenue) | 2019 | 2020 | 2021 | YoY Delta | |
| Cost of sales | (60.1%) | (64.7%) | (59.2%) | (5.5pp) | Strong sell-through and one-off inventory 000 |
| Gross profit | 39.9% | 35.3% | 40.8% | 5.5pp | write-down in Q1/20 |
| Fulfillment costs | (28.7%) | (29.9%) | (25.5%) | (4.4pp) | Lower return rates and high network utilization |
| Marketing costs | (7.0%) | (8.1%) | (7.7%) | (0.4pp) | |
| Administrative expenses & Other |
(5.4%) | (4.7%) | (4.0%) | (0.7pp) | |
| EBIT | (1.3)% | (7.4%) | 3.5% | 10.9pp | |
| Adj. EBIT1 | 0.5% | (6.5%) | 4.2% | 10.7pp |
1) Excluding equity-settled share-based payment expense ("SBC"), restructuring costs and non-operating one-time effects
Net working capital increased as a result of strong inventory inbound
1) Excluding payments for acquisitions
Outlook
Upgraded FY/21 Outlook
1) Excluding equity-settled share-based payment expense ("SBC") of ~€65m vs previously communicated ~€57m, restructuring costs and non-operating one-time effects for FY/21
2) Excludes M&A transactions
Liquidity position
1) Includes sales and investments in fixed and intangible assets (-€39.8m), payments for acquisitions (€0.0m) and change in restricted cash (+€0.0m)
2) Includes financing cash flow (-€378.1m) and effect of exchange rate on cash and cash equivalents (-9.4m)
Overview of Kinnevik's Distribution of Zalando Shares
Upcoming events
| Date | Event | |
|---|---|---|
| Friday, May 7-12 | Roadshow different locations | All events are virtual |
| Tuesday, May 11 | Fireside Chat with our CFO David Schröder (Bernstein) | |
| Wednesday, May 19 | Annual General Meeting, Berlin | |
| Friday, May 20 | Morgan Stanley Virtual Internet Field Trip | |
| Monday, June 7 | Deutsche Bank Global Consumer Conference, Paris | |
| Tuesday, June 8 | Berenberg Innovation Conference, London | |
| Tue - Wed, June 8-9 |
Erste Bank Conference, Warsaw | |
| Tuesday, June 15 | Barclays Internet Conference, London | |
| Wed-Thu. June 16-17 | dbAccess Berlin Conference 2021, Berlin | |
| Friday, June 18 | Goldman Sachs Inaugural Digital Economy Conference, London | |
| Thursday, July 1 | Unicredit Convertible Bond Conference | |
| Thursday, August 5 | Q2/2021 Results |
Issued share capital
| (AS OF MAR 31, 2021) | Stock Exchange | Frankfurt Stock Exchange |
|---|---|---|
| Market Segment | Regulated Market (Prime Standard) | |
| Index Listings | MDAX | |
| Total Number of Shares Outstanding | 260,939,349 | |
| Issued Share Capital | €260,939,349 |
STOCK OPTION PROGRAMS MGMT BOARD (AS OF MAR 31, 2021) STOCK OPTION PROGRAMS SENIOR MGMT (AS OF MAR 31, 2021)
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20131 | 1,157,475 | 1.00 |
| LTI 2018² | 5,223,983 | 47.44 |
| VSOP 2018 | 245,974 | 29.84 |
| LTI 2019 | 682,533 | 17.79 |
| Total | 7,309,965 | 36.73 |
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| SOP 20141 | 775,788 | 23.23 |
| EIP1 | 3,113,420 | 37.01 |
| VSOP 2017 | 60,000 | 50.00 |
| ZOP | 1,300,319 | 27.83 |
| Total | 5,249,527 | 29.42 |
1) Settled with new shares
2) Only to 43% dilutive / to be settled with new shares, remaining backed by treasury shares
Zalando Investor Relations Team
Patrick Kofler Head of IR
Junior Manager IR
Nils Pöppinghaus Senior 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.