Zalando on Track for Profitable 2014 After Strong Q3 2014

• Q3 group revenue growth at 24 per cent, above market average
• First ever Q3 group EBIT breakeven driven by improved operating efficiency
• Focus on capital efficiency led to strong free cash flow of EUR 80 million in Q3
• Zalando expects slight group EBIT profit for full-year 2014

Berlin, November 26, 2014 – Zalando SE, Europe’s leading online platform for fashion, is on track for a profitable full year after a third quarter marked by continued above-market growth and strong gains in profitability and capital efficiency. Group revenues grew by 24.2 per cent to EUR 501 million in the third quarter (Q3 2013: EUR 404 million). Growth in Zalando’s international markets was particularly strong with revenues in the Rest of Europe segment growing by 39.9 per cent to EUR 198 million (Q3 2013: EUR 141 million). The DACH segment continued to lead the group’s profitability with an adjusted EBIT margin of 3.9 per cent (Q3 2013: -4.3 per cent), excluding stock based compensation. Overall, Zalando achieved an adjusted EBIT margin of 0.8 per cent (Q3 2013: -12.4 per cent) in the third quarter, marking the first ever group EBIT breakeven in a third quarter. This development was driven by improvements along all cost lines, including cost of sales, fulfillment, marketing and administration. In addition, efficient working capital management led to a strong free cash flow of EUR 80 million.

“Zalando’s revenue growth continued to outpace the overall online fashion industry, which faced a difficult start to the fall/winter season due to unseasonably mild weather,” said Rubin Ritter, Member of the Zalando Management Board. “Reviewing our successful development in the third quarter we expect to reach slight group EBIT profitability for the full year.”

Zalando has put a strong focus on execution during the third quarter, marked by the launch of the successful collaboration with Topshop and the rollout of express delivery across all the company’s markets, offering an even more convenient delivery option for Zalando’s customers. Zalando continues to focus on execution in the fourth quarter and lately announced the cooperation with GAP starting in spring/summer 2015, becoming the first multibrand online shop to offer GAP fashion to continental Europe.

Zalando also benefited from significant growth in mobile traffic as the company continues to adapt quickly to the changing behavior of its customers. Its share of mobile traffic in the third quarter reached 43 per cent, with 5.1 million app downloads by the end of the third quarter. The number of active customers grew by 15 per cent from 12.3 million to 14.1 million, and gross merchandise volume per active customer grew by 12 per cent. In total, Zalando websites registered 322 million visits in the third quarter.

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Table 1: Zalando Group – Revenues and adjusted EBIT (EUR million)

1 DACH segment is comprised of Germany, Austria, and Switzerland.
2 Rest of Europe segment includes all other countries in which we presently operate.
3 All other sales channels are grouped into the segment “Other”, which includes Zalando Lounge and our Zalando Outlet stores in Berlin and Frankfurt.
4 Adjusted to exclude equity-settled stock based compensation costs.

ABOUT ZALANDO
Zalando (https://corporate.zalando.com) is a leading pure-play online fashion destination in Europe for women, men and children. We offer our customers a one-stop, convenient shopping experience with an extensive selection of fashion articles including shoes, apparel and accessories, with free delivery and returns. Our assortment of over 1,500 international brands ranges from popular global brands, fast fashion and local brands, and is complemented by our private label products. Our localized offering addresses the distinct preferences of our customers in each of the 15 European markets we serve: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland, Poland and the United Kingdom. Our logistics network with three centrally located fulfillment centers in Germany allows us to efficiently serve our customers throughout Europe. We believe that our integration of fashion, operations and online technology give us the capability to deliver a compelling value proposition to both our customers and fashion brand partners.
Zalando’s websites attract more than 100 million visits per month with 43% coming from mobile devices during the third quarter 2014, resulting in 14.1 million active customers by the end of the quarter. After six years of operations, our business has grown to €2.1 billion in revenue for the twelve-month period ended September 30, 2014.