Zalando SE — Earnings Release 2014

Nov 26, 2014

EUROPE'S LEADING ONLINE FASHION DESTINATION

Q3 Earnings Call 26 November 2014

Results highlights and business update

CLEAR FOCUS ON EXECUTION

(1) Excluding equity-settled stock based compensation costs ("SBC") of €6.4m in Q3 2014.

(2) Includes operating cash flow (€98m) and investing cash flow (-€18m).

ZALANDO – THE ONLINE PLATFORM FOR INTERNATIONAL TOP BRANDS

Topshop & Topman setting new trends

• Started in Sep-14; top 5 brand now
• Access to broad Topshop assortment
• Adding freshness & fashion credibility

GAP: soon available on Zalando

• Starting spring 2015
• Access to GAP's global assortment
• Casual identity serves as a perfect fit

IMPROVING OUR SHOPPING EXPERIENCE

Facelift of shop websites

• Introduction of new, full face model presentation format for apparel
• MyFeed via News&Style/Inspiration

100 DAY RETURNS POLICY	FREE DELIVERY & RETURNS	FREE HELPLINE: 0800 472 5995
WOMEN MEN KIDS	zalando	☆ Ω Wish List My Bag Login $\vee$
Clothing Shoes Sports	Bags & Accessories Brands A-Z SALE Inspire Me Premium	Q Search Zalando
CHUNKY KNITS GO GRUNGE WEAR SHOES STONE GREY	EDITORY ×	COSY AND COMFORTABLE Stay on trend and keep warm in chunky knits SHOP NOW ) Welland The Microsoft

Express delivery roll-out across all markets

• Finalized by early November¹
• Started with single-item orders, now available for multi-item orders

Financial update Q3 and 9M 2014

CONTINUED STRONG REVENUE GROWTH ABOVE MARKET

(1) Segment "Others" includes revenues from "Zalando Lounge, as well as the other two outlet stores in Berlin and Frankfurt.

POSITIVE DEVELOPMENTS OF UNDERLYING CUSTOMER KPIs DRIVE REVENUE GROWTH

a a a Average orders per active customer (in #) Average basket size¹ (in €) GMV² per active customer (LTM in €) 2.7 2.8 Q3/13 Q3/14 61 64 Q3/13 Q3/14 162 181 Q3/13 Q3/14

(1) Defined as the transactional revenue (incl. VAT and transactional volume of Partner Program) after cancellations or returns divided by the number of orders.

(2) GMV = gross merchandise volume.

MOBILE PLATFORM CONTINUES TO GROW RAPIDLY

(1) Mobile is defined as tablets, mobile site and apps.

(2) App downloads per end of Q3 2014.

OPERATING LEVERAGE DRIVES (FIRST EVER) Q3 BREAK–EVEN

(1) Excluding equity-settled stock based compensation costs ("SBC") of €6.4m in Q3 2014 and €15.2m for 2014 YTD, respectively.

(2) Note: EBIT margin inclusive of ~€3m of IPO related expenses.

Costs and margins (Q3 and YTD)

(excl. SBC in percent of revenue¹ )

		YTD		Q3
	2013	2014	Delta	2013	2014	Delta
Cost of sales	(60.8%)	(58.2%)	(2.7pp)	(62.5%)	(59.3%)	(3.1pp)
Gross profit	39.2%	41.8%	2.7pp	37.5%	40.7%	3.1pp
Fulfillment costs	(25.7%)	(23.2%)	(2.5pp)	(23.5%)	(22.7%)	(0.8pp)
Marketing costs	(17.9%)	(12.8%)	(5.1pp)	(19.4%)	(11.4%)	(8.0pp)
Administrative expenses & Other	(5.7%)	(4.7%)	(0.9pp)	(7.0%)	(5.8%)	(1.1pp)
EBIT	(10.1%)	1.0%	11.1pp	(12.4%)	0.8%	13.1pp

(1) Excluding equity-settled stock based compensation costs ("SBC").

FOCUS ON CAPITAL EFFICIENCY

Net working capital (end of Q3) Capital expenditures (YTD & Q3)

Intangibles PP&E

STRONG CASH FLOW DEVELOPMENT

Cash flow development (Q3 & YTD)

(in €m)

(1) Includes non-cash expenses (SBC related), D&A, changes in provisions and in other assets / liabilities.

(2) Includes cash paid for investments in property, plant and equipment, cash paid for investments in intangible assets and change in restricted cash.

ZALANDO CONFIRMS POSITIVE OUTLOOK FOR FY2014

LIQUIDITY

Pro forma liquidity Considerations (in €m)

• IPO at the Frankfurt stock exchange (Prime Standard) on October 1, 2014
• All primary transaction with 24,476,223 newly issued shares, priced at €21.50 per share
• Q3 2014 P&L includes ~€4 million³ of IPO related costs; remaining costs booked against shareholders' equity
• Entered into a five year €200 million revolving credit facility on July 30, 2014

(1) Includes proceeds from base transaction (24.5 million new shares at EUR 21.50/share, less discount provided to Zalando employees), less base transaction fee paid to underwriting banks (1.5% of base transaction).

(2) Undrawn as per end of Q3 2014.

(3) Includes ~€3m of IPO related costs and ~€1m SBC costs related to the employee share program.

INCOME STATEMENT

€m	FY/13	Q1/14	Q2/14	Q3/14	YTD/2014
Revenue	1,762.0	500.7	546.4	501.4	1,548.5
% growth	52.1%	34.6%	25.1%	24.2%	27.7%
Cost of Sales	(1,047.0)	(311.3)	(293.6)	(299.1)	(903.9)
Gross Profit	715.1	189.4	252.8	202.3	644.5
% margin	40.6%	37.8%	46.3%	40.3%	41.6%
Selling and Distribution Costs	(733.5)	(192.0)	(199.4)	(173.9)	(565.3)
Administrative Expenses	(105.1)	(28.8)	(24.6)	(30.2)	(83.7)
Other Operating Income	12.5	4.2	3.6	1.4	9.2
Other Operating Expenses	(2.9)	(0.8)	(0.9)	(2.1)	(3.8)
EBIT	(113.9)	(27.9)	31.5	(2.6)	1.0
% margin	(6.5%)	(5.6%)	5.8%	(0.5%)	0.1%
Net Financial Result	(3.3)	(0.8)	(0.8)	0.8	(0.8)
EBT	(117.3)	(28.7)	30.7	(1.8)	0.2
% margin	(6.7%)	(5.7%)	5.6%	(0.4%)	0.0%
Income and Other Tax	0.7	(0.2)	(1.6)	1.3	(0.6)
Net Income	(116.6)	(28.9)	29.0	(0.5)	(0.4)
% margin	(6.6%)	(5.8%)	5.3%	(0.1%)	(0.0%)
Depreciation & Amortization	14.9	5.5	6.9	7.1	19.4
EBITDA	(99.0)	(22.4)	38.4	4.5	20.5
% margin	(5.6%)	(4.5%)	7.0%	0.9%	1.3%
Equity-Settled Share Based Compensation (SBC)	5.3	5.1	3.7	6.4	15.2
Adj. EBIT (adj. for SBC)	(108.6)	(22.8)	35.1	3.8	16.2
% margin	(6.2%)	(4.5%)	6.4%	0.8%	1.0%
Adj. EBITDA (adj. for SBC)	(93.7)	(17.3)	42.0	10.9	35.7
% margin	(5.3%)	(3.5%)	7.7%	2.2%	2.3%

SHARE BASED COMPENSATION

€m	FY/13	Q1/14	Q2/14	Q3/14	YTD/2014
Per Income Statement Line Item
Cost of Sales	0.5	0.8	0.9	1.6	3.3
Selling and Distribution Costs	2.1	2.2	1.8	3.2	7.3
Administrative Expenses	2.7	2.1	0.9	1.6	4.7
Share Based Compensation	5.3	5.1	3.7	6.4	15.2
As % of revenue	FY/13	Q1/14	Q2/14	Q3/14	YTD/2014
Per Income Statement Line Item
Cost of Sales	0.0%	0.2%	0.2%	0.3%	0.2%
Selling and Distribution Costs	0.1%	0.4%	0.3%	0.6%	0.5%
Administrative Expenses	0.2%	0.4%	0.2%	0.3%	0.3%

SEGMENTS

€ m	FY/13	Q1/14	Q2/14	Q3/14	YTD/2014
Revenue	1,762.0	500.7	546.4	501.4	1,548.5
DACH Rest of Europe Other	1,056.1 630.2 75.7	283.9 193.2 23.5	310.3 206.1 30.0	276.3 197.8 27.3	870.5 597.1 80.9
As % of total	100.0%	100.0%	100.0%	100.0%	100.0%
DACH Rest of Europe Other	59.9% 35.8% 4.3%	56.7% 38.6% 4.7%	56.8% 37.7% 5.5%	55.1% 39.4% 5.4%	56.2% 38.6% 5.2%
EBIT	(113.9)	(27.9)	31.5	(2.6)	1.0
DACH Rest of Europe Other	5.3 (100.8) (18.4)	(3.1) (23.5) (1.3)	25.5 2.2 3.8	7.5 (11.7) 1.6	29.9 (33.0) 4.1
% margin	(6.5%)	(5.6%)	5.8%	(0.5%)	0.1%
DACH Rest of Europe Other	0.5% (16.0%) (24.3%)	(1.1%) (12.2%) (5.5%)	8.2% 1.0% 12.8%	2.7% (5.9%) 6.0%	3.4% (5.5%) 5.1%
EBIT (excl. SBC)	(108.6)	(22.8)	35.1	3.8	16.2
DACH Rest of Europe Other	8.2 (99.1) (17.8)	(0.2) (21.8) (0.7)	27.5 3.4 4.2	10.9 (9.4) 2.3	38.2 (27.8) 5.8
% margin	(6.2%)	(4.5%)	6.4%	0.8%	1.0%
DACH Rest of Europe Other	0.8% (15.7%) (23.5%)	(0.1%) (11.3%) (3.1%)	8.9% 1.7% 14.0%	3.9% (4.7%) 8.4%	4.4% (4.6%) 7.1%

BALANCE SHEET

€m	Q4/13 YTD	Q2/14 YTD	Q3/14 YTD
Total Non-Current Assets	176.1	190.1	188.0
Thereof: Property, Plant and Equipment	105.7	116.6	112.1
Other Financial Assets	48.1	49.0	48.9
Other Non-Current Assets	22.3	24.5	27.0
Total Current Assets	895.7	842.2	1,572.7
Thereof: Inventories	332.5	279.4	419.7
Trade and Other Receivables	87.2	115.7	103.5
Other Assets	58.7	59.8	582.6
Cash and Cash Equivalents	417.2	387.3	466.8
Total Assets	1,071.7	1,032.3	1,760.8
Total Equity	546.5	556.0	1,076.9
Thereof: Issued Capital	0.1	0.2	244.8
Capital Reserves	833.3	842.0	1,119.0
Retained earnings	(0.3)	0.3	0.1
Accumulated Loss	(286.6)	(286.4)	(287.0)
Total Non-Current Liabilities	29.2	26.2	26.7
Thereof: Financial Liabilities	17.0	17.2	16.4
Other Non-Current Liabilities	12.2	8.9	10.3
Total Current Liabilities	496.0	450.1	657.1
Thereof: Trade Payables and Similar Obligations	410.0	334.6	543.2
Other Current Liabilities	86.0	115.5	113.9
Total Equity & Liabilities	1,071.7	1,032.3	1,760.8

CASH FLOW STATEMENT

€m	Q4/13 YTD	Q2/14 YTD	Q3/14 YTD	Q3/14
Net Income	(116.6)	0.2	(0.4)	(0.5)
Non-Cash Expenses1	2.0	7.5	13.7	6.2
Depreciation	14.9	12.3	19.4	7.1
Change in Provisions	0.0	0.1	0.7	0.6
Change in Inventories and Receivables	(122.7)	24.7	(103.5)	(128.2)
Change in Trade Liabilities	101.5	(68.8)	143.9	212.6
Change in Other Assets/Other Liabilities	40.8	26.1	26.1	0.0
Cash Flow from Operating Activities	(80.2)	2.1	99.9	97.9
Payments for Investments in Fixed and Intangible Assets	(73.8)	(31.6)	(49.2)	(17.6)
Change in Restricted Cash	(16.4)	(0.6)	(0.5)	0.1
Cash Flow from Investing Activities	(90.2)	(32.2)	(49.7)	(17.5)
Payments Received from Capital Increases	199.3	0.0	0.0	(0.0)
Cash Received from Loans	9.1	1.9	1.9	(0.0)
Cash Repayments of Loans	(3.2)	(1.6)	(2.4)	(0.8)
Cash Flow from Financing Activities	205.2	0.3	(0.5)	(0.8)
Change in Cash and Cash Equivalents	34.9	(29.9)	49.7	79.5

KPI DEVELOPMENT

	2011	Q1/12	Q2/12	Q3/12	Q4/12	2012	Q1/13	Q2/13	Q3/13	Q4/13	2013	Q1/14	Q2/14	Q3/14
Site Visits (m)1	324.6	133.4	159.3	195.8	249.8	738.3	274.5	294.4	291.0		357.0 1,217.0	331.8	322.7	321.7
Mobile Visit Share (in % of Site Visits)2	4.6%			9.3% 10.7% 13.5% 16.2%			13.0% 21.3% 24.9% 28.2% 31.6%					26.8% 36.2% 40.7%		43.3%
Active Customers (m) 3	4.8	5.7	6.7	7.8	9.2	9.2	10.3	11.6	12.3	13.1	13.1	13.5	13.7	14.1
Number of Orders (m) 4	11.0	4.3	5.3	5.8	7.4	23.0	7.8	9.3	8.2	9.8	35.1	9.7	10.4	9.7
Average Order per Active Customer	2.29x	2.36x	2.41x	2.47x	2.50x	2.50x	2.56x	2.62x	2.67x	2.68x	2.68x	2.74x	2.77x	2.81x
Average Basket Size (in €) 5	58.1	61.5	57.5	61.3	66.9	62.3	60.5	58.4	60.7	69.3	62.5	63.9	65.7	64.4
Fulfillment Cost Ratio (in % of revenue) 6	26%	26%	28%	25%	24%	26%	28%	26%	24%	20%	24%	24%	23%	23%
Marketing Cost Ratio (in % of revenue) 7	27%	23%	25%	24%	20%	23%	17%	18%	19%	17%	18%	14%	13%	11%

(1) Site Visits defined as the number of series of page requests from the same uniquely identified client at Zalando, including website, m.site and apps in the measurement period. A visit is considered ended when no requests have been recorded in more than 30 minutes.

(2) Mobile is defined as tablets, mobile site and apps.

• (3) Active Customers defined as the number of customers placing at least one order in the last twelve months in the measurement period irrespective of cancellations or returns.
• (4) Number of Orders defined as the number of customer orders placed in the measurement period irrespective of cancellations or returns. An order is counted on the day the customer places the order. Orders placed and orders delivered may differ due to orders that are in transit at the end of the measurement period or have been cancelled.
• (5) Average Basket Size defined as the gross merchandise volume (including VAT) after cancellations or returns customers spend in proportion to delivered orders in the measurement period.
• (6) Fulfillment Cost Ratio defined as fulfillment cost as a proportion of revenue in the measurement period. Fulfillment costs mainly include logistics, content creation, service and payment expenses, as well as allocated overhead. costs. Fulfillment costs therefore comprises all selling and distribution costs, except for marketing costs. All numbers shown excluding equity-settled SBC costs.
• (7) Marketing Cost Ratio defined as Marketing cost as a proportion of revenue in the measurement period. Marketing cost mainly consists of advertising expenses including search engine marketing, television, online display and other marketing channels as well as allocated overhead cost. All numbers shown excluding equity-settled SBC costs.

SHAREHOLDER STRUCTURE

Shareholder	Ownership
Verdere S.à r.l. (Kinnevik)	32.04%
Global Founders GmbH	15.03%
Anders Holch Povlsen	9.43%
Yuri Milner (DST Europe)	7.10%
HV Holtzbrinck Ventures Holding GmbH	6.88%
Tengelmann Verwaltungs- und Beteiligungs GmbH	5.06%
Len Blavatnik	3.22%
Other shareholders	11.24%
Public free float	10.00%

Capital increase through IPO

• Prior to the IPO, the share capital of Zalando was €220,286,000 divided into 220,286,000 registered shares with no-par value
• 24,476,223 new shares were issued in connection with the IPO
• Company's outstanding share capital now amounts to €244,762,223 and is divided into 244,762,223 ordinary bearer shares with no-par value

Stock option programs (as of 1-Nov-14)

Program	# options granted	Strike price
Various	2,062,610	1.00
Stock Option Program 2011	3,085,500	5.65
Stock Option Program 2013	9,817,500	15.63
Stock Option Program 2014	5,310,800	17.72
Total	20,276,410

FINANCIAL CALENDAR 2015

	March 2015					May 2015						August 2015					November 2015
M	T	W	T	F	M	T	W	T	F	M	T	W	T	F	M	T	W	T	F
2	3	4	5	6					1	3	4	5	6	7	2	3	4	5	6
9	10	11	12	13	4	5	6	7	8	10	11	12	13	14	9	10	11	12	13
16	17	18	19	20	11	12	13	14	15	17	18	19	20	21	16	17	18	19	20
23	24	25	26	27	18	19	20	21	22	24	25	26	27	28	23	24	25	26	27
30	31				25	26	27	28	29	31					30

Date	Action
Thursday, 5 March	Full-Year Results 2014
Tuesday, 12 May	Q1/2015 Results
Thursday, 13 August	Q2/2015 Results
Thursday, 12 November	Q3/2015 Results

DISCLAIMER

These materials do not constitute an offer of securities for sale or a solicitation of an offer to purchase securities of Zalando SE (together with its subsidiaries, the "Company") in any jurisdiction. The distribution of this presentation may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which the Company operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes," "expects," "predicts," "intends," "projects," "plans," "estimates," "aims," "foresees," "anticipates," "targets," and similar expressions. The forward-looking statements contained in this presentation, including assumptions, opinions and views of the Company or cited from third party sources, are solely opinions and forecasts which are uncertain and subject to risks. Actual events may differ significantly from any anticipated development due to a number of factors, including without limitation, changes in general economic conditions, in particular economic conditions in Germany, changes affecting interest rate levels, changes in competition levels, changes in laws and regulations, environmental damages, the potential impact of legal proceedings and actions and the Group's ability to achieve operational synergies from past or future acquisitions. The Company does not guarantee that the assumptions underlying the forward-looking statements in this presentation are free from errors nor does it accept any responsibility for the future accuracy of the opinions expressed in this presentation or any obligation to update the statements in this presentation to reflect subsequent events. The forward-looking statements in this presentation are made only as of the date hereof. Neither the delivery of this presentation nor any further discussions of the Company with any of the recipients thereof shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. Consequently, the Companydoes not undertake any obligation to review, update or confirm investors' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of the presentation.

This presentation contains summary information only and does not purport to be comprehensive and is not intended to be (and should not be used as) the basis of any analysis or other evaluation. In addition, the information in this presentation is subject to change. No representation or warranty (express or implied) is made as to, and no reliance should be placed on, any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein.