Zalando SE’s Earnings Call Highlights Growth and Strategy

Zalando SE Unsponsored ADR ((ZLNDY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Zalando SE’s recent earnings call revealed a generally positive sentiment, reflecting strong financial results for 2024. The company reported notable growth in revenue and Gross Merchandise Volume (GMV), alongside strategic acquisitions and expansions in both B2C and B2B segments. Despite facing challenges such as flat customer spending and increased marketing costs, the overall outlook remains optimistic, with the positive aspects outweighing the negatives.

Strong Financial Performance in 2024

Zalando demonstrated robust financial performance in 2024, with GMV increasing by 4.5% to EUR 15.3 billion and revenue growing by 4.2% to EUR 10.6 billion. The company’s adjusted EBIT surpassed expectations by over EUR 30 million, reaching EUR 511 million with a margin of 4.8%. This performance underscores Zalando’s effective financial management and strategic execution.

B2C and B2B Growth

The company experienced significant growth in its B2C and B2B segments. B2C GMV and revenue saw substantial increases, with improved profitability. Meanwhile, B2B revenues rose by 11.5% to EUR 953 million, driven by the success of ZEOS fulfillment services, highlighting the strength of Zalando’s diversified business model.

Customer Base Expansion

Zalando’s active customer base expanded to 51.8 million, with GMV growth exceeding 6% in the latter half of the year. The company successfully attracted new customers, demonstrating its effective marketing and customer acquisition strategies.

Sustainability Progress

Zalando made significant strides in sustainability, reducing absolute emissions from its operations by 82% since 2017 and emission intensity from private labels by 48% since 2018. These efforts reflect the company’s commitment to environmental responsibility.

Strategic Acquisition of ABOUT YOU

The acquisition of ABOUT YOU was a major strategic move for Zalando, securing over 90% of the company’s shares. This acquisition is expected to unlock EUR 100 million per year in synergies on an adjusted EBIT basis, enhancing Zalando’s competitive edge.

Temporary Lower Profitability in B2B

Despite overall growth, the B2B segment experienced temporary lower profitability, with an adjusted EBIT of EUR 23 million and a margin of 2.4%. This was attributed to front-loaded overhead and infrastructure investments, which are expected to support future growth.

Flat Spend Per Customer

Customer spending remained flat at approximately EUR 295, as order frequency and basket size developments balanced each other out. This indicates a stable customer spending pattern, despite market fluctuations.

Increased Marketing Costs

Marketing expenses rose to 10% of revenues in Q4, driven by ROI-based investments and a significant rebranding campaign. These costs reflect Zalando’s commitment to maintaining its market presence and brand strength.

Forward-Looking Guidance

Looking ahead, Zalando provided detailed guidance for 2025, anticipating GMV and revenue growth between 4% and 9%. The company aims to expand its B2C and B2B growth pillars, enhance its loyalty program, and pursue its ecosystem strategy. Additionally, Zalando targets a 6% to 8% adjusted EBIT margin by 2028, leveraging synergies from the ABOUT YOU acquisition.

In summary, Zalando SE’s earnings call highlighted a strong financial performance in 2024, driven by strategic acquisitions and expansions. Despite some challenges, the company’s forward-looking guidance suggests continued growth and profitability, reinforcing its position as a leader in the e-commerce sector.