Letter to shareholders 2022

Dear shareholders,

We made 2022 a year of progress. We advanced on our Starting Point for Fashion strategy as we continued to deepen our relationships with more customers and partners, expanded into new markets, created a more equitable and sustainable fashion platform for the future and invested in our talents and capabilities to capture future growth opportunities.

To achieve this we had to demonstrate our resilience, agility and winning spirit as we saw economic tailwinds subside and headwinds increase. As consumers went back to in-store shopping post the pandemic, the adoption of e-commerce reversed more than initially expected. A bigger than anticipated rise in inflation hurt consumer sentiment. Supply chain bottlenecks at the beginning of the year were followed by elevated inventory levels across the market in the second half.

As we faced these challenges, we acted decisively. The challenges demanded a greater focus on the profitability of our growth. We adapted to the new environment by adjusting order volumes, driving efficiencies in marketing and improving order economics. It required a strong focus on execution, execution, execution.

In 2022, we reached a significant milestone – we are now serving more than 50 million active customers. We also expanded into two new markets – Hungary and Romania, which brought our coverage to 25 markets for our Fashion Store, 17 markets for our shopping club Lounge and 6 markets for our Zalando Plus membership. We posted gross merchandise volume of EUR 14.8bn, revenue of EUR 10.3bn, and adjusted earnings before interest and taxes of EUR 184.6m, delivering on our revised outlook for the year.

To help earn and retain the attention of our customers through excitement and engagement on our platform, Zalando acquired a majority stake in Highsnobiety. This global pioneer and authority on the new luxury culture now acts as a strategic and creative driving force of Zalando. The collaboration heralds a multi-year transformational shift in how we release, elevate, and provide context around our most exciting brands and assortment.

Showing our technology leadership, we again proved our ability to process peak loads of data and orders with high precision. Orders hit an all-time high in seven markets during Cyber Week. The company processed a peak of more than 7,000 orders per minute on Black Friday, showing its reliability at scale.

As we aim to offer a truly diverse assortment for underrepresented groups by providing product and thoughtful experiences in every category we launched in October our first adaptive fashion collections – clothing and footwear that cater to the needs of people living with permanent or temporary impairments. Designed in-house, the range consists of more than 140 styles across five of our private labels. The styles include seated clothes fit for wheelchair use, sensory-friendly styles for skin sensitivities, styles with easy closures and styles fit for prosthetics or bandages.

Looking forward, 2023 is a special year. September marks our 15th birthday – a milestone for a homegrown European technology company that shipped its first pair of shoes out of a Berlin flat and has since become a leading platform for fashion and lifestyle. We believe that the European fashion market opportunity remains significant and will continue to selectively invest and build strategic partnerships to achieve our longer-term Starting Point for Fashion strategy.

We will sharpen our focus on emerging areas such as Designer that generate high customer value. We will also expand our service offerings to other businesses, creating value for partners and a new growth vector for Zalando: We are offering our partners multi-channel fulfillment, handling not only orders received via Zalando, but also via other platforms and the partners’ own online shops. This offering is live after we onboarded the first pilot partner last October.

Although 2023 is likely to be another year of macroeconomic uncertainty, we will be actively steering to stay focused on profitable growth and invest through the cycle to capture future growth.

We started a program that will remove several hundred overhead roles across many of our teams. Over the last few years, some parts of our company have expanded too much and we have added a degree of complexity that impacted our ability to act fast. We want to be an entrepreneurial company that embraces simplicity, pragmatism and frugality. Those principles will drive innovation and equip us to invest into our strategic priorities and shape the future of European e-commerce.

The decision to let go of some of our colleagues has been difficult because we are proud of our employees from over 140 nations. We know that our achievements are only possible thanks to their engagement and passion for their work.

Finally, we thank you, our shareholders, for your ongoing trust and engagement in Zalando.

We will continue to focus on what matters – inspiring, engaging and delivering for the customer.

Berlin, March 6, 2023

Robert Gentz, David Schneider, Jim Freeman, David Schröder, Dr. Astrid Arndt, Dr. Sandra Dembeck