Zalando SE — Earnings Release 2018

May 8, 2018

Q1/2018 Earnings Call

EUROPE'S LEADING ONLINE FASHION DESTINATION

May 8, 2018

H I G H L I G H T S A N D B U S I N E S S U P D A T E

H I G H L I G H T S Q 1 / 2 0 1 8

IMPORTANT CUSTOMER KPI'S HITTING ALL-TIME HIGHS

BEAUTY CATEGORY SUCCESSFULLY LAUNCHED

GUIDANCE CONFIRMED: CONFIDENT FOR STRONG GROWTH IN 2018

+22% STRONG TOPLINE PERFORMANCE ACROSS ALL SEGMENTS

>4.000 SKUs INITIAL FOCUS ON COLOR COSMETICS AND SKIN CARE

B E A U T Y C A T E G O R Y S U C C E S S F U L L Y L A U N C H E D

#130 BRANDS AND MANY MORE TO

OF BEAUTY ORDERS ARE MIXED BASKET

AND INSPIRING CONTENT AND ADVICE

F I N A N C I A L U P D A T E Q 1 / 2 0 1 8

S T R O N G T O P L I N E P E R F O R M A N C E A C R O S S A L L S E G M E N T S

(1) Q1/18 contains -€118m (Q1/17: -€86m) reconciliation of internal revenues.

(2) Segment "Other" including "Offprice", private label offering zLabels and various emerging businesses.

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

I M P O R T A N T C U S T O M E R K P I ' S H I T T I N G A L L - T I M E H I G H S

A D J . E B I T I N B O T H S E G M E N T S A R O U N D B R E A K E V E N

(1) Excluding equity-settled share-based compensation costs ("SBC") and effects from business transactions that do not recur regularly of €15.6m in Q1/18 (Q1/17: €5.4m). (2) Q1/18 contains €0.4m (Q1/17: €0m) reconciliation of internal adj. EBIT.

(1) Excluding equity-settled share-based compensation costs ("SBC") and effects from business transactions that do not recur regular ly of €15.6m in Q1/18 (Q1/17: €5.4m). (2) Changes resulting from new segment structure. Prior year figures not restated.

L A T E S T A R T T O S P R I N G / S U M M E R S E A S O N A N D C O N T I N U E D I N V E S T M E N T S I M P A C T I N G A D J . E B I T

COSTS AND MARGINS1

(in % of annualized revenue)

C A P E X S P E N D BACK - E N D L O A D E D I N 2 0 1 8

NET WORKING CAPITAL (END OF Q1) CAPITAL EXPENDITURE¹

O U T L O O K

O U T L O O K F O R 2 0 1 8 C O N F I R M E D : C O N F I D E N T F O R S T R O N G G R O W T H I N 2018

• (1) Excluding equity-settled share-based compensation costs ("SBC") and effects from business transactions that do not recur regular ly of ~€35m for FY/18E.
• (2) Implies adj. EBIT margin of ~4-5%.
• (3) Excludes investments into M&A.
• 12

L I Q U I D I T Y R E M A I N S O N S O L I D L E V E L

• (1) Both Q4/17 and Q1/18 liquidity include investments into short-term deposits with maturity of more than 3 and less than 12 months of -€40m and -€20m respectively.
• (2) Includes investments in fixed and intangible assets and payments for acquisitions and change in restricted cash.
• 14 (3) Includes financing cash flow (-€33.6m) and effect of exchange rate on cash and cash equivalents (-€1.2m).

CASH FLOW DEVELOPMENT

REVENUE

N E W S E G M E N T S T R U C T U R E B A S E D O N S A L E S - C H A N N E L V I E W

I N T E R S E G M E N T

E X T E R N A L

• New segment structure since Jan 18 based on sales-channel perspective
• Highlights responsibility and increases speed within the individual sales channels
• Revenue and profitability generated with external business partners as well as internal transactions between segments will be reported
• Segment reporting has been supplemented by a reconciliation column to reconcile the segment figures (including internal and external transactions) to the consolidated group figures (showing only external transactions)

(in €m)

in Other segment

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 (3.1% share1) Total Number of Shares Outstanding 247,979,558 Issued Share Capital €247,979,558

SHARE INFORMATION

I S S U E D S H A R E C A P I T A L

As of 31-Mar-2018

SHARE STOCK OPTION PROGRAMS

As of 31-Mar-2018

EMPLOYEE INCENTIVE PLAN

As of 31-Mar-2018

Program	# Options outstanding	Weighted average exercise price (EUR)	Program	# Options outstanding	Weighted average exercise price (EUR)
Various	58,240	1.00	EIP 2016	819,624	24.71
SOP 2011	1,262,250	5.65	EIP 2017	1,081,440	36.65
SOP 2013	9,817,500	15.63	EIP 2018	204,712	41.01
SOP 2014	6,161,295	19.58	Total	2,105,776	32.43
Total	17,299,285

I N C O M E S T A T E M E N T

€m	FY/14	FY/15	FY/16	FY/17	Q1/17	Q1/18
Revenue	2,214.0	2,958.2	3,639.0	4,489.0	980.2	1,196.0
% growth	25.7%	33.6%	23.0%	23.4%	23.1%	22.0%
Cost of Sales	(1,255.3)	(1,624.0)	(2,029.6)	(2,529.6)	(574.8)	(722.0)
Gross Profit	958.7	1,334.1	1,609.4	1,959.4	405.4	474.0
% margin	43.3%	45.1%	44.2%	43.6%	41.4%	39.6%
Selling and Distribution Costs	(793.8)	(1,118.9)	(1,223.7)	(1,530.8)	(339.2)	(429.7)
Administrative Expenses	(109.1)	(129.0)	(191.3)	(242.9)	(52.8)	(61.1)
Other Operating Income	12.2	10.2	16.7	11.8	2.7	2.7
Other Operating Expenses	(5.8)	(7.0)	(4.1)	(9.9)	(1.1)	(1.1)
EBIT	62.1	89.6	207.0	187.6	14.9	(15.2)
% margin	2.8%	3.0%	5.7%	4.2%	1.5%	(1.3%)
Net Financial Result	(4.5)	(3.0)	(14.1)	(12.4)	(3.6)	(3.4)
EBT	57.7	86.6	192.9	175.2	11.3	-18.6
% margin	2.6%	2.9%	5.3%	3.9%	1.2%	(1.6%)
Income and Other Tax	(10.5)	34.9	(72.5)	(73.6)	(6.2)	3.5
Net Income	47.2	121.5	120.5	101.6	5.1	(15.1)
% margin	2.1%	4.1%	3.3%	2.3%	0.5%	(1.3%)
Depreciation & Amortization	25.8	34.2	48.2	58.7	12.6	17.9
EBITDA	88.0	123.8	255.2	246.4	27.5	2.7
% margin	4.0%	4.2%	7.0%	5.5%	2.8%	0.2%
Share Based Compensation (SBC)	19.8	17.9	19.9	27.5	5.4	4.7
Adj. EBIT1	82.0	107.5	216.3	215.1	20.3	0.4
% margin	3.7%	3.6%	5.9%	4.8%	2.1%	0.0%
Adj. EBITDA1	107.8	141.7	264.5	273.8	32.8	18.3
% margin	4.9%	4.8%	7.3%	6.1%	3.4%	1.5%

$\epsilon$ m	FY/14
Revenue	2,214.0
% growth	25.7%
Cost of Sales	(1,255.3)
Gross Profit	958.7
% margin	43.3%
Selling and Distribution Costs	(793.8)
Administrative Expenses	(109.1)
Other Operating Income	12.2
Other Operating Expenses	(5.8)
EBIT	62.1
% margin	2.8%
Net Financial Result	(4.5)
EBT	57.7
% margin	2.6%
Income and Other Tax	(10.5)
Net Income	47.2
% margin	2.1%
Depreciation & Amortization	25.8
EBITDA	88.0
% margin	4.0%
Share Based Compensation (SBC)	19.8
Adj. EBIT 1	82.0
% margin	3.7%
Adj. EBITDA 1	107.8
% margin	4.9%

17 (1) Excluding equity-settled share-based compensation costs ("SBC") and effects from business transactions that do not recur regular ly of €15.6m in Q1/18 (Q1/17: €5.4m). (2) Prior year figures not re-stated for shifts between cost lines as a result of new segment structure as of Jan 18.

S H A R E B A S E D C O M P E N S A T I O N

Per Income Statement Line Item
Per Income Statement Line Item

€m	FY/14	FY/15	FY/16	FY/17	Q1/17	Q1/18
Per Income Statement Line Item
Cost of Sales	4.4	4.5	5.0	6.9	1.3	0.6
Selling and Distribution Costs	9.6	9.0	9.9	13.7	2.7	1.3
Administrative Expenses	5.8	4.5	5.0	6.9	1.3	2.7
Share Based Compensation	19.8	17.9	19.9	27.5	5.4	4.7
As % of revenue	FY/14	FY/15	FY/16	FY/17	Q1/17	Q1/18
Per Income Statement Line Item
Cost of Sales	0.2%	0.2%	0.1%	0.2%	0.1%	0.1%
Selling and Distribution Costs	0.4%	0.3%	0.3%	0.3%	0.3%	0.1%
Administrative Expenses	0.3%	0.2%	0.1%	0.2%	0.1%	0.2%
Share Based Compensation	0.9%	0.6%	0.5%	0.6%	0.6%	0.4%

S E G M E N T S ¹

€m	FY/14	FY/15	FY/16	Reported FY/17	Restated FY/17	Restated Q1/17	Q1/18
Revenue	2,214.0	2,958.2	3,639.0	4,489.0	4,489.0	980.2	1,196.0
Fashion Store					4,150.5	908.8	1,093.9
thereof DACH	1,234.0	1,580.1	1,813.8	2,145.6	2,150.0	475.0	552.0
thereof Rest of Europe	862.6	1,211.6	1,570.2	1,973.6	2,000.5	433.8	541.9
Other	117.4	166.5	255.1	369.9	690.6	156.7	220.2
Reconciliation					(352.0)	-85.4	(118.1)
As % of total	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Fashion Store					92.5%	92.7%	91.5%
Fashion Store – DACH	55.7%	53.4%	49.8%	47.8%	47.9%	48.4%	46.2%
Fashion Store – Rest of Europe	39.0%	41.0%	43.1%	44.0%	44.6%	44.3%	45.3%
Other	5.3%	5.6%	7.0%	8.2%	15.4%	16.0%	18.4%
Reconciliation					(7.8%)	(8.7%)	(9.8%)
Adjusted EBIT	82.0	107.5	216.3	215.1	215.1	20.3	0.4
Fashion Store					213.7	16.4	(0.2)
thereof DACH	83.0	101.9	226.3	188.5	193.5	36.4	16.6
thereof Rest of Europe	(11.6)	(3.3)	(3.3)	21.6	20.3	(20.1)	(16.8)
Other	10.5	8.9	(6.7)	5.0	1.4	3.9	0.2
Reconciliation					0.0	0.0	0.4
% adjusted margin	3.7%	3.6%	5.9%	4.8%	4.8%	2.1%	0.0%
Fashion Store					5.1%	1.8%	(0.0%)
Fashion Store – DACH	6.7%	6.4%	12.5%	8.8%	9.0%	7.7%	3.0%
Fashion Store – Rest of Europe	(1.3%)	(0.3%)	(0.2%)	1.1%	1.0%	(4.6%)	(3.1%)
Other	9.0%	5.3%	(2.6%)	1.3%	0.2%	2.5%	0.1%
Reconciliation					0.0%	0.0%	0.3%

B A L A N C E S H E E T

€m Q1/17

€m	Q1/17	Q1/17 (% of total assets)	Q1/18	Q1/18 (% of total assets)
Total Non-Current Assets	456.6	17.0%	588.9	19.5%
Thereof: Property, Plant and Equipment	300.3	11.2%	377.0	12.5%
Other Financial Assets	43.8	1.6%	20.1	0.7%
Non-Financial Assets	2.8	0.1%	3.3	0.1%
Other Non-Current Assets	109.7	4.1%	188.5	6.2%
Total Current Assets	2,230.5	83.0%	2,435.3	80.5%
Thereof: Inventories	718.7	26.7%	891.0	29.5%
Trade and Other Receivables	231.4	8.6%	294.8	9.7%
Other Assets1	330.5	12.3%	321.0	10.6%
Cash and Cash Equivalents1	949.9	35.3%	928.5	30.7%
Total Assets	2,687.0	100.0%	3,024.2	100%
Total Equity	1,415.1	52.7%	1,499.5	49.6%
Thereof: Issued Capital	247.2	9.2%	247.0	8.2%
Capital Reserves	1,166.4	43.4%	1,152.4	38.1%
Retained earnings	(5.3)	(0.2%)	10.4	0.3%
Accumulated Loss	6.8	0.3%	89.7	3.0%
Minority Interests	-	-	(0.1)	(0.0%)
Total Non-Current Liabilities	29.5	1.1%	64.3	2.1%
Thereof: Financial Liabilities	10.5	0.4%	7.7	0.2%
Other Non-Current Liabilities	19.0	0.7%	56.6	1.9%
Total Current Liabilities	1,242.5	46.2%	1,460.5	48.3%
Thereof: Trade Payables and Similar Obligations	1,047.9	39.0%	1,220.6	40.4%
Other Current Liabilities	194.6	7.2%	239.9	7.9%
Total Equity & Liabilities	2,687.0	100.0%	3,024.2	100%
Net Working Capital	(97.7)	(3.6%)	(34.8)	(1.2%)

C A S H F L O W S T A T E M E N T

$\epsilon$ m	FY201
Net Income	47.
Non-Cash Expenses from Share-Based Payments	19.
Cash Settlement of Claims from Share-Based Payments	$\mathbf{0}$ .
Depreciation	25.
Income Taxes	10.
Income Taxes Paid, Less Refunds	$\mathbf{0}$ .
Change in Provisions	$\mathbf 1$ .
Other Non-Cash Income	(0.2)
Change in Inventories and Receivables	(68.7
Change in Trade Liabilities	94.
Change in Other Assets/Other Liabilities	44.
Cash Flow from Operating Activities	174.
Payments for Investments in Fixed and Intangible Assets	(51.7
Payments for Acquisitions	0.
Cash Paid for Investments in Term Deposits	0.
Change in Restricted Cash	(0.8)
Cash Flow from Investing Activities	(51.9)
Payments Received from Capital Increases	510.
Cash Received from Loans	3.
Repurchase of treasury shares	$\mathbf{0}$ .
Cash Repayments of Loans	(3.2)
Cash Flow from Financing Activities	510.
Change in Cash & Cash Equivalents	633.
Effects of Exchange Rate on Cash & Cash Equivalents	0.

€m	FY2014	FY2015	FY/16	FY/17	Q1/17	Q1/18
Net Income	47.2	121.5	120.5	101.6	5.1	(15.1)
Non-Cash Expenses from Share-Based Payments	19.8	17.9	19.9	27.5	5.4	4.7
Cash Settlement of Claims from Share-Based Payments	0.0	(2.3)	0.0	0.0	0.0	0.0
Depreciation	25.8	34.2	48.2	58.7	12.6	17.9
Income Taxes	10.5	(34.9)	72.5	73.6	6.2	(3.5)
Income Taxes Paid, Less Refunds	0.0	(0.0)	(33.8)	(49.4)	(3.9)	(10.4)
Change in Provisions	1.0	(0.5)	0.1	(1.5)	(0.1)	0.1
Other Non-Cash Income	(0.2)	(1.0)	1.2	6.5	0.7	1.0
Change in Inventories and Receivables	(68.7)	(154.2)	(147.4)	(251.0)	(157.2)	(128.2)
Change in Trade Liabilities	94.9	154.9	264.3	198.4	126.5	92.4
Change in Other Assets/Other Liabilities	44.6	(16.2)	(69.7)	29.2	(11.9)	(34.8)
Cash Flow from Operating Activities	174.9	119.4	275.8	193.7	(16.7)	(75.9)
Payments for Investments in Fixed and Intangible Assets	(51.1)	(60.0)	(181.7)	(243.9)	(77.8)	(41.8)
Payments for Acquisitions	0.0	(16.8)	(30.4)	(34.9)	0.0	(4.5)
Cash Paid for Investments in Term Deposits	0.0	(155.0)	(65.0)	180.0	70.0	20.0
Change in Restricted Cash	(0.8)	35.3	0.0	10.4	0.4	0.0
Cash Flow from Investing Activities	(51.9)	(196.5)	(277.1)	(88.3)	(7.4)	(26.3)
Payments Received from Capital Increases	510.1	6.4	1.1	3.9	0.0	0.0
Cash Received from Loans	3.9	0.0	(0.7)	0.0	0.0	0.0
Repurchase of treasury shares	0.0	(1.7)	0.0	(11.3)	0.0	(33.2)
Cash Repayments of Loans	(3.2)	(3.2)	(3.2)	(3.2)	(0.8)	(0.4)
Cash Flow from Financing Activities	510.8	1.5	(2.9)	(10.6)	(0.8)	(33.6)
Change in Cash & Cash Equivalents	633.8	(75.7)	(4.1)	94.8	(25.0)	(135.9)
Effects of Exchange Rate on Cash & Cash Equivalents	0.0	0.9	0.5	(1.9)	2.2	(1.2)

K P I D E V E L O P M E N T

	2015
Site Visits (m) 1	1,656.4
Mobile Visit Share (in % of Site Visits) 2	57.1%
Active Customers (m) 3	17.9
Number of Orders (m) 4	55.3
Average Order per Active Customer	3.08x
Average Basket Size (in $\epsilon$ ) 5	67.8
Fulfillment Cost Ratio (in % of revenue) 6	25.8%
Marketing Cost Ratio (in % of revenue) 7	11.7%

	2015	2016	Q1/17	Q2/17	Q3/17	Q4/17	2017	Q1/18
Site Visits (m)1	1,656.4	1,991.6	617.6	595.2	615.6	735.1	2,563.5	713.5
Mobile Visit Share (in % of Site Visits)2	57.1%	65.6%	68.8%	69.7%	71.8%	72.1%	70.7%	76.6%
Active Customers (m) 3	17.9	19.9	20.4	21.2	22.2	23.1	23.1	23.9
Number of Orders (m) 4	55.3	69.2	19.9	22.2	22.5	25.8	90.5	25.4
Average Order per Active Customer	3.08x	3.48x	3.60x	3.69x	3.80x	3.92x	3.92x	4.02x
Average Basket Size (in €) 5	67.8	66.6	63.0	64.5	62.0	67.8	64.5	60.3
Fulfillment Cost Ratio (in % of revenue) 6	25.8%	23.2%	24.9%	26.8%	27.0%	24.9%	25.9%	28.1%
Marketing Cost Ratio (in % of revenue) 7	11.7%	10.2%	9.4%	7.3%	8.4%	7.0%	7.9%	6.9%

• (1) Site Visits defined as the number of series of page requests from the same uniquely identified client at Zalando, including w ebsite, 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 p eriod 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 r eturns. 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 peri od or have been cancelled.
• (5) Average Basket Size defined as the transactional revenue (incl. VAT and transactional volume of Partner Program) after cancel lations or returns divided by the number of orders.
• expenses, as well as allocated overhead. costs. Fulfillment costs therefore comprises all selling and distribution costs, exc ept 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 co nsists of advertising expenses including search engine marketing, television, online display and other marketing channels as well as allocated overhead cost. All numbers shown excl uding equity-settled SBC costs.

(6) Fulfillment Cost Ratio defined as fulfillment cost as a proportion of revenue in the measurement period. Fulfillment costs ma inly include logistics, content creation, service and payment

F I N A N C I A L C A L E N D A R 2 0 1 8

		May 2018					June 2018					August 2018
M	T	W	T	F	M	T	W	T	F
	1	2	3	4					1
7	8	9	10	11	4	5	6	7	8
14	15	16	17	18	11	12	13	14	15
21	22	23	24	25	18	19	20	21	22
28	29	30	31		25	26	27	28	29
Date						Action
	Wednesday, May 9							Frankfurt: Roadshow
	Wednesday, May 16							Edinburgh: Roadshow
	Wednesday, May 16					London:					JPM Morgan Global Consumer and	Retail Conference
	Thursday, May 17										London: Citi Internet and eCommerce Day
	Wednesday, May 23						Berlin: AGM
	Monday & Tuesday, June 4 & 5						Berlin: Capital		Markets Day
	Thursday & Friday, June 7 & 8						Berlin: dbAccess	-				German, Swiss & Austrian Conference
	Tuesday, 7-August					Q2/2018		Results
	Tuesday, 6-November					Q3/2018		Results

		August 2018
M	T	W	T	F
		1	2	3
6	7	8	9	10
13	14	15	16	17
20	21	22	23	24
27	28	29	30	31

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 differ materiall y and adversely from any forwardlooking 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 / c onditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and chang es in competition levels.

D I S C L A I M E R