Zalando (ETR:ZAL) executives used the company’s Q&A session to expand on how management is approaching “agentic commerce,” retail media monetization, logistics efficiency, and the integration of About You, while also discussing an updated capital allocation framework and expectations for one-off costs.
Agentic commerce: referral rankings, product roadmap, and channel expectations
Co-CEO Robert said Zalando’s comments about being a leading brand referenced by chatbots are based on external studies and management’s own testing of “the most kind of relevant chatbots” across its markets. He said that, for fashion and lifestyle queries, Zalando typically appears “1, 2, or 3,” and is “usually … the leading platform” in many countries.
On the company’s plans to scale agentic commerce, Robert described three layers:
- In-app agentic experiences: Combining Zalando’s proprietary data (including “billions of transaction data” and behavioral data) with agentic interfaces. He said Zalando is “doubling down” on building a larger in-house team and is also partnering “with one of the most ambitious AI labs, for Europe.” He noted that “shoppability” has been integrated into the assistant and that, upon user consent, the assistant will be able to access purchase history.
- External agentic channels: He described ChatGPT- and Gemini-like experiences as an “incremental channel” that could make online shopping more accessible to less technical consumers, potentially helping shift some of fashion’s “70% offline share” toward online. He said Zalando aims to be “the first and the best,” citing that it is “one of only two companies” Google works with on the Universal Commerce Protocol (UCP).
- B2B opportunity: He said brands may want help integrating with agentic commerce outside Zalando, with Zalando supporting them through ZEOS and Tradebyte, including what he called a technical and logistics consolidation layer.
ZMS and retail media: management reiterates long-term monetization ambitions
Addressing questions about retail media and whether brands might shift budgets toward agentic commerce, Robert outlined three drivers of Zalando Marketing Services (ZMS): overall traffic, the penetration of advertising within that traffic, and Zalando’s attractiveness to brands.
He said overall traffic is stable, while “quality traffic” is growing, specifically logged-in users where the company knows more about the audience. On penetration, he cited an advertising revenue-to-GMV ratio of 1.8% and compared it with industry benchmarks such as Amazon at around 8%. Robert said Zalando’s target of 3%-4% is “a no-brainer,” adding that the company may not pursue all tactics required to reach higher levels like 8%.
New CFO Anna Dimitrova also said retail media is accelerating at both Zalando and About You and has a “structurally higher margin,” benefiting gross margin. She added that AI is increasing throughput and volume, and said the EBIT contribution depends on the mix of on-site versus off-site retail media. Looking forward, she said management expects retail media to keep contributing and “structurally improving our margin.”
Capital allocation: balance sheet threshold, buybacks, and M&A discipline
Dimitrova said Zalando updated its capital allocation framework to reflect expectations for higher cash generation. She outlined priorities that include maintaining a strong balance sheet—citing a cash threshold of 10% of last-12-months revenue—along with investments in organic growth and selective M&A evaluated under a “very strict investor appraisal framework” intended to exceed the cost of capital.
On shareholder returns, she said the company prefers share buybacks and will execute them opportunistically for flexibility on timing and size. She also said management believes the share price is undervalued, describing the buyback as a way to signal confidence while maintaining flexibility for potential M&A.
Asked how the company decides when shares are undervalued, Dimitrova pointed to external views, management’s confidence in achieving midterm targets, and ongoing progress on topline growth initiatives, efficiencies, synergies, and logistics execution. She said decisions will continue to be made within the framework and on an opportunistic basis.
Logistics network utilization and cost sensitivity
Co-CEO David discussed fulfillment network utilization, noting that the metric is in flux as Zalando ramps up two newer highly automated sites in Paris and Frankfurt, while also planning to exit four sites, including one larger, more manual site in Germany. He said current capacity utilization is between 60% and 70%, and the company’s target is 85% to 90%, which he said supports customer service and cost efficiency. He linked logistics efficiency efforts to midterm guidance of 6%-8%, noting that OpEx contribution is significant and that logistics is a meaningful part of that.
On the potential impact of higher energy costs, David said fulfillment and logistics spending totals more than EUR 2 billion per year, but only a fraction is impacted by energy. Even in an adverse scenario, he said the impact would be in the “low double-digit EUR million” range, calling it “not a big impact,” while suggesting demand trends are the larger uncertainty. He added that the company had not seen negative demand impact so far and described “very strong trading,” especially with the spring/summer season start.
About You integration, app portfolio strategy, gross margin drivers, and one-off costs
On About You, David said the standalone business has accelerated to double-digit growth and has “significantly improved profitability,” reaching breakeven in the second half of last year “for the first time ever.” He also said Zalando has accelerated synergy delivery and is now confident it can reach EUR 100 million of annual EBIT synergies one year earlier, in 2028. He attributed momentum to continued marketplace rollout, the addition of brands and sellers, and the launch of the About You Coins loyalty program, which he said is showing results similar to Zalando’s loyalty efforts.
Asked whether About You’s strategy might change post-acquisition, David framed the combined approach as a “team of apps” (Zalando main app, Zalando Lounge, and About You). He said overlapping customers—those using two or three apps—show the highest GMV and typically the highest customer lifetime value. He described Zalando as serving customers focused on brands and brand-driven content, About You as focused on trends with influencer-driven discovery and gamification, and Lounge as daily campaign-driven engagement.
On gross margin, Dimitrova said 2026 B2C gross margin should see positive effects from accelerating partner business and retail media, offset by dilution from including About You and by developments in retail gross margin. She said retail gross margin is influenced by mix, highlighting that Lounge is growing double-digit but has structurally lower gross margin than the fashion store. She also said the first half would reflect gross margin impact from reducing inventory levels built last year, which she called a consequence of a very successful partner business. Looking ahead, she said the company intends to reduce inventory and adjust buying budgets to improve underlying retail gross margin.
Discussing a gross margin decline more pronounced in Q4, Dimitrova cited a small impact from accelerating ZEOS in B2B, dilution from About You, positive contributions from partner business and ZMS, and dilution from retail gross margin. She also pointed to strong Lounge performance and a “conscious decision to be promotional” in the Zalando fashion store. David elaborated that in Q4 management saw price-sensitive consumer behavior around key events like Singles’ Day and Cyber Week, and that ROI favored discounts over increased performance marketing, leading the company to dial performance marketing down and discount rates up.
Dimitrova also addressed one-off and restructuring-related costs. She said the company had EUR 203 million of one-off adjustments last year and expects around EUR 300 million in 2026, a step-up of about EUR 100 million. She cited roughly EUR 100 million tied to logistics restructuring/optimization and another roughly EUR 100 million from purchase price allocation and integration costs, adding that 2026 would be the peak year for integration costs through 2028.
On free cash flow, Dimitrova said expectations through the midterm plan imply free cash flow “on a similar level as before the acquisition of About You.”
About Zalando (ETR:ZAL)
Zalando SE operates an online platform for fashion and lifestyle products. The company operates through Fashion Store and Offprice segments. It provides shoes, apparel, accessories, and beauty products with free delivery and returns, as well as various payment options. The company also sells its products through Lounge by Zalando; and brick-and-mortar outlet stores. It operates in Germany, Austria, Switzerland, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, Hungary, France, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
