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Zalando SE Earnings Release 2022
499_ip_2022-08-04_cb696d7b-13a2-4ab3-bd50-92d882c5a9f1.pdf
Earnings Release
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Zalando Q2/2022 Earnings Call
August 4th, 2022 Robert Gentz (Co-CEO) Dr. Sandra Dembeck (CFO)
We continue to grow our active customer base and deepen customer relationships, but also observe a contraction in spending as the market environment has further deteriorated
- 1) Jan 2020 to June 2022, source: European commission, EU-27, black line represents long-term average
- 2 2) Jan 2020 to June 2022, source: Global Supply Chain Pressure Index, New York Fed, black line represents long-term average 3) Year-over-year GMV growth Zalando Group
For H2/22, we expect return to growth and improved profitability,
as we are no longer lapping pandemic peaks and our efficiency measures take full effect
Group GMV year-over-year growth
Capitalizing on the learnings of the past months, we are successfully executing our action plan to adapt our business to the new environment and to emerge stronger
Key measures to drive efficiency across cost lines successfully implemented in the second quarter
| Action | H2/22 Impact | Example |
|---|---|---|
| Adjust offer to meet changing demand |
● Reduced wholesale order volume for fall/winter season to reflect revised growth expectations and to tighten inventory control ● Full effect will materialize in 2023 with the start of the spring/summer season |
|
| Improve order economics |
● Implemented MOV1 in 15 additional markets with MOV now live across all Zalando markets, incentivizing higher basket sizes and increasing small basket profitability ● Positive impact from MOV and other efficiency measures in logistics are expected to offset cost inflation in fulfillment costs |
|
| Drive cost efficiency across the business |
● Adjusted expenditures in both performance and brand marketing to the lower growth environment to ensure attractive ROI2 , reducing payback periods from 720 to 360 days ● Paced our overhead investments, targeting flat headcount development until year end |
We remain focused on our long term opportunities and thus continue to selectively invest through the cycle across the core dimensions of our strategy
We join forces with Highsnobiety to combine content and commerce for a truly inspirational experience in a multi-brand environment
Leading culture magazine, creative agency and consultancy and the global pioneer of the new luxury culture Leading fashion platform re-inventing the online shopping experience with best-in-class e-commerce knowhow and operational capabilities Highsnobiety is bolstering Zalando's storytelling and curation capabilities to create an exciting and engaging online environment for both consumers and brands
Financial Update Q2/2022
8
GMV & Revenue
Q2 slowdown in demand driven by deteriorating consumer sentiment, accelerated inflation and selected supply shortages
9 1) H1/22 contains EUR (367)m | H1/21 (333)m | H1/20 (217)m reconciliation of internal revenues. 2) Q2/22 contains EUR (212)m | Q2/21 EUR (185)m | Q2/20 EUR (128)m reconciliation of internal revenues 3) Other segments including various emerging businesses, Zalon is reported in Fashion Store unit since Q1/22
Increase in active customer offset by reduced spending per customer
Q2 adjusted EBIT significantly below the levels of previous years
11 1) H1/22 contains EUR 2.1m | H1/21 contains EUR 3.2m | H1/20 contains EUR (0.7)m reconciliation of internal EBIT 2) Q2/22 contains EUR (0.6)m | Q2/21 contains EUR 1.8m | Q2/20 contains EUR (0.7)m reconciliation of internal EBIT 3) Excluding equity-settled share-based compensation in H1/22 of EUR (32.7)m | Q2/22 of EUR (16.4)m | H1/21 of EUR (26.0)m | Q2/21 of EUR (11.3)m | H1/20 of (27.9)m | Q2/20 of (13.5)m; and non-operating one-off effects in Q2/21 & H1/21 +13.6€m
77
3.0%
2,3
61
184
6.7%
Q2 adjusted EBIT margin decreased driven by overstock clearance and cost deleverage
| Costs and margins (in % of revenue) |
H1/20 | H1/21 | H1/22 | YoY ∆ | Q2/20 | Q2/21 | Q2/22 | YoY ∆ | • Prolonged sales period |
|---|---|---|---|---|---|---|---|---|---|
| Gross profit | 40.5 % | 42.7 % | 40.0 % | (2.7)pp | 44.4 % | 44.2 % | 41.0 % | (3.2)pp | • Price investment to reduce overstock levels |
| Fulfillment costs | (27.3) % | (24.8) % | (27.6) % | (2.8)pp | (25.4) % | (24.2) % | (26.0) % | (1.8)pp | • Unfavourable order economics |
| Marketing costs | (6.4) % | (8.9) % | (7.8) % | 1.1pp | (5.2) % | (9.8) % | (8.0) % | 1.8pp | • Convenience investment |
| Administrative expenses & Other | (4.3) % | (3.7) % | (4.7) % | (1.0)pp | (4.0) % | (3.4) % | (4.7) % | (1.3)pp | • Reduced brand and performance marketing |
| EBIT | 2.4 % | 5.3 % | (0.1) % | (5.5)pp | 9.8 % | 6.8 % | 2.3 % | (4.5)pp | • Cost deleverage • Investment in capabilities |
| Adj. EBIT 1 | 3.2 % | 5.6 % | 0.5 % | (5.1)pp | 10.4 % | 6.7 % | 3.0 % | (3.8)pp |
Net Working Capital & Capex
Increase in Net Working Capital as a result of higher inventory levels, CAPEX in line with plan
Cash position
Cash position remained at 1.6 EUR billion in Q2
14 1) Includes sales and investments in fixed and intangible assets of EUR (74.5)m, payments for acquisitions of EUR (5.5)m and change in restricted cash of EUR 2.5m 2) Includes financing cash flow of EUR (28.4)m and effect of exchange rate on cash and cash equivalents of EUR 5.9m.
Outlook
15
Outlook
Confirmation of updated FY/2022 outlook
$$3\% - 7\%$$
GMV growth
0% - 3%
Revenue growth
EUR 180 - 260m Adj. EBIT1
EUR 350 - 400m Capex2 and neutral net working capital
16 1) Excludes equity-settled share-based payment expense (ࣚSBCࣛ (of EUR ~65m, restructuring costs and non-operating one-time effects for FY/22 2) Excludes M&A transactions
Key takeaways
- 01 For H2/22, we expect return to growth and improved profitability, as we are no longer lapping pandemic peaks and our efficiency measures take full effect
- 02 We have a clear action plan that we are successfully executing to adapt our business to the new environment and to improve performance
- 03 We remain focused on our long term opportunities and thus continue to selectively invest through the cycle across the core dimensions of our strategy
Q&A
18
Issued share capital
Share information
(as of Jun 30, 2022)
| Type of shares | Ordinary bearer shares with no-par value (Stückaktien) |
|---|---|
| Stock exchange | Frankfurt Stock Exchange |
| Market segment | Regulated Market (Prime Standard) |
| Index listings | DAX |
| Total number of shares outstanding | 262,454,846 |
| Issued capital | EUR 262,454,846 |
Stock options programs Management Board (as of Jun 30, 2022) Stock options programs Senior Management (as of Jun 30, 2022)
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| LTI 2018 2 | 4,296,949 | 47.44 |
| VSOP 2018 | 140,000 | 29.84 |
| LTI 2019 | 364,942 | 19.99 |
| LTI 2021/2022 | 236,417 | 48.53 |
| ZOP | 5,398 | 1.00 |
| Total | 5,043,706 | 44.97 |
| Program | # Options outstanding | Weighted average exercise price (EUR) |
|---|---|---|
| SOP 2014 1 | 647,698 | 23.65 |
| EIP 1 | 2,738,295 | 37.40 |
| VSOP 2017 | 30,000 | 50.00 |
| ZOP | 1,919,726 | 39.57 |
| Total | 5,335,719 | 36.58 |
1) Settled with new shares
19
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
Dorothee Schultz Manager ESG IR
Nils Pöppinghaus Senior Manager IR
Ignacio Azpitarte Garay Junior Manager IR
Team Contact
T: +49 3020 9681 584 Zalando SE Tamara-Danz-Straße 1 10243 Berlin
[email protected] https://corporate.zalando.com/en
Disclaimer
21
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.