Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zalando SE (ZLDSF, Financial) achieved a 2.4% GMV growth in the first half of 2024, marking a significant recovery from negative growth in 2023.
- The company reported a year-over-year improvement in adjusted EBIT to EUR 200 million with an adjusted EBIT margin of 4.1%.
- Zalando SE (ZLDSF) successfully executed its ecosystem strategy, expanding its customer base by 300,000 in Q2 2024.
- The company saw strong growth in its sports and beauty propositions, with the strongest June in its history for sports sales.
- Zalando SE (ZLDSF) continued to innovate with AI-driven content experiences, leading to higher customer engagement and lower return rates.
Negative Points
- The CFO, Sandra Dembeck, announced she will not extend her contract, which may lead to uncertainties in financial leadership.
- Despite growth, the company still faces a volatile market environment, which could impact future performance.
- The company had to significantly increase its marketing spend to drive growth, which may affect profitability.
- Fulfillment costs are expected to rise due to the ramp-up of new warehouses in Paris and Frankfurt, potentially impacting margins.
- The active customer base showed a negative trend over the last 12 months, although it is now pivoting back to growth.
Q & A Highlights
Q: When discussing the sequential improvement expected in sales and GMV in the second half of the year, is this based on online penetration, consumer sentiment, or internal measures? Has this already started in July?
A: It's a mix of both improved consumer sentiment and the impact of strategic initiatives, particularly in lifestyle expansion. We saw strong results in sports, beauty, and designer categories in Q2, and this trend continued into July. (Sandra Dembeck, CFO)
Q: Regarding the AI-generated content, does the uplift in engagement apply across the board, or is it specific to certain products?
A: We are testing various content production methods, including AI-generated images. Early results show a significant uplift in engagement, but the exact impact at scale is still being evaluated. (Robert Gentz, Co-CEO)
Q: What metrics are driving the improvement in consumer sentiment, and is there a difference between Germany and international regions? Also, is the increased marketing spend focused on reactivating or acquiring new customers?
A: The improvement is partly due to better consumer sentiment and the effectiveness of our strategic measures. Germany has returned to growth, influenced by both sentiment and our initiatives. The increased marketing spend targets both new customer acquisition and reactivation, with a focus on performance and brand marketing. (Sandra Dembeck, CFO)
Q: Given the 2.4% GMV growth in H1, why is the full-year guidance still 0% to 5%?
A: The second half is crucial, especially September. We face macro uncertainties, so we find it prudent to stick to the current guidance range. (Robert Gentz, Co-CEO)
Q: Can you provide an update on the customer payback period for marketing expenses?
A: The payback period for performance marketing remains at 1.5 years. We are diversifying into more channels like Snapchat and TikTok. The bigger increase is in brand marketing, which is a longer-term investment. (Robert Gentz, Co-CEO)
Q: How has trading been throughout the months, and what are your expectations for July?
A: We saw acceleration towards the end of Q2, particularly in June. July results make us confident about further acceleration in Q3, but September remains crucial. (Sandra Dembeck, CFO)
Q: What are your expectations for Zactima in the second half of the year?
A: After a challenging Q1, Zactima returned to growth in Q2. We expect continued growth in H2 and further acceleration in the coming years. (Robert Gentz, Co-CEO)
Q: Can you elaborate on the AI feature rollout and its geographic reach?
A: The Xenon system is available in Austria, Germany, Ireland, and the UK, in both English and German. We are seeing increased engagement and are working to improve these experiences further. (Robert Gentz, Co-CEO)
Q: What is the outlook for gross margin and fulfillment costs for the rest of the year and into 2025?
A: Gross margin expansion will continue but will be less pronounced in H2. Fulfillment cost leverage will continue into 2025, but the extent of leverage will depend on fixed costs from new warehouses. (Sandra Dembeck, CFO)
Q: How much of B2C growth is coming from wholesale versus the partner program? Are there any supply disruptions from Bangladesh?
A: Both wholesale and the partner program are contributing to growth. We are in direct contact with partners to mitigate any potential supply disruptions from Bangladesh, and currently, there are no significant impacts. (Sandra Dembeck, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
