Welcome to our Q&A session. Thanks for joining, and welcome again to everyone. With me here in our studio in Berlin, I have our co-CEOs, Robert and David, as well as our new CFO, Anna Dimitrova. We have approximately 45 minutes, and we will try to answer as many questions as possible. As usual, IR cares for you also after that meeting and is able to answer any remaining question.
Now, without further ado, let's get started. One last housekeeping rule before we actually start. If you want to ask a question, please click the button Ask via Text on the right side of the screen. When you click on it, you can ask your question in writing. You can also ask a question via the video by clicking on the button Ask via Video. Please limit your questions to two per participant.
With that, let me start off with the first question. Agentic is in everyone's mind. Robert, I have a question from Andreas Riemann, Oddo BHF.
Agentic commerce, you stated, you are number one on the referred brands via chatbot. Can you be more precise, please? You're number one within the EU fashion category. What chatbots are included here? Linked to that, how has share of organic traffic developed over the last few quarters?
Yeah. I mean, there's a couple of external studies out there. That's what we are sort of referring to. I think what you ultimately care for is when you have conversations with the most kind of relevant chatbots in the various countries that we're active in, and you ask like, you know, "Where would you actually buy a certain brand?
Where you would buy fashion, where you buy sports, and what kind of picks does actually the various chatbot actually do? When you actually do it by yourself, like, you know, in the most relevant markets that we're in most of the queries that you can actually imagine, Zalando is actually in the categories of fashion lifestyle. Zalando is one, two, or three. It's usually it's the brand, so in the brand, and then it's actually the leading platform, which in most of these countries is Zalando. That's why I think like in most of these countries, we're the most referred chatbot as well optimized for these engines, yeah.
I mean, the traffic is growing a lot, yeah, but it's still like at a very low single percentage points of organic traffic. It's not yet very materially, but it's strongly growing, which is exciting.
Cool. Super. Thanks. There's another question coming from Jürgen Kolb, Kepler Cheuvreux, also in terms of agentic commerce.
What are your next plans, scaling in-house or teaming up with any or all large language model or both?
I think it has three layers. I think like the most exciting one is what we do actually when we combine like our own source of data with agentic experience. What we do actually on Zalando. Own sources of data, which is like, you know, the billions of transaction data, the behavioral data, and how we really can create experiences, agentic experiences, with the fanciness of our data and an agentic kind of flow. We talked about that. That's like what we do, for example, with the assistant now. We're actually building.
We're really doubling down on building like a stronger, like, a bigger in-house team, and as well, partnering here with one of the most ambitious AI labs, for Europe. We have integrated shoppability now into the assistant. We soon, upon users' consent, will as well allow that the assistant then can access the purchase history. Our goal is actually now to build this towards like a truly lifestyle AI, that I think would be like quite amazing achievement when we pull it off. That's in-house. That's this part. That's the most exciting one.
When it comes to the agentic channel, where kind of ChatGPT and others kind of are building towards more agentic interfaces, we really see this as an incremental channel. Because I mean, if you think about it, like it's a very intuitive way of how they engage with users. It's like you have users or they're not more technical, like, you know, older people and so on. It really help to get like the 70% offline share of fashion retail a bit more towards online. We really plan to be like the first and the best in it, yeah.
We're the first, as we have outlined, we are one of only two companies that actually have that Google now works with on the UCP, the Universal Commerce Protocol. We're the best because of like, you know, all the referral choices are already the number one in there. That's really, I think, our game, to be the first and the best in this and really capture the incremental growth coming from it. Then the third aspect of it is the B2B opportunity in it, yeah. As some of the brands might as well, like, want to integrate with the agentic commerce channel outside of Zalando.
We help them through ZEOS, we help them through Tradebyte, to integrate in order for them to actually get better unit economics. We help as well, which is a big advantage, we help the large language models to have like a technical and logistics consolidation layer because, like, you know, otherwise there's a lot of kind of coordination costs otherwise. That's the third opportunity that we are very focused on.
Thanks a lot, Robert. In that regard, also, there's lots of questions and already two are going into the direction of agentic commerce and how does it work with ZMS. Adam from Deutsche Bank, as well as Mia from Exane, is asking, we reconfirmed our 3%-4% GMV target, but what is our view on do we expect brands to meaningfully shift their marketing budget to agentic commerce? Also then lastly, would this impact then also our midterm targets? Any light you can share here?
Yeah. I mean, ZMS has had a great run. I think the success of ZMS basically depends on three things, yeah? One is overall traffic of Zalando, yeah? The second one is like the penetration of the traffic, like what's the actual intensity of marketing in the traffic. The third one is the overall attractiveness of Zalando as a platform towards brands, yeah? Maybe starting with one, like the traffic. What we see, the traffic of Zalando is stable, but actually the quality traffic is actually growing, yeah?
The logged-in users, the ones who actually really know a lot about like the audience. That one's actually growing, yeah? In terms of the penetration of the traffic, if you calculate the advertising revenues divided by the GMV, we're at 1.8%, yeah? We see actually industry benchmarks that you actually can get to, like Amazon is probably at 8%, yeah? I mean, we're talking about 3%-4%, yeah? We might not get to 8% because we might forgo some of the tactics that you actually need to get to 8%. Getting from 1.8% to 3%-4%, even at the same traffic, I mean, is for me like a no-brainer, huh? That we can actually get there.
Cool. Then in terms of the attractiveness of the platform, I mean, the attractiveness of the platform very much depends on what kind of insights the brand can actually get from platform. I mean, here we actually invest so much now to actually like with data insights for the brands. We invest in, as I shared in presentation, with a full funnel offering where they can actually build audience-based product where they can tell their brand story and do the transaction at the same time, which is pretty unique in the entire marketplace. The attractiveness of the platform actually goes up. I mean, bottom line, 3%-4% for me is actually a no-brainer that we should be able to get to this.
Cool. Super. Now we're moving on to video. Freddy, here you are. Thanks for dialing in via video. Yeah, the floor is yours. Please limit yourself to two questions. Yeah, with that, over to you. Can you hear me, Freddy?
Hello.
Yes. We can hear you now.
Oh, hi. Hi, all. Sorry about that. First of all, congratulations on the results, and thank you for all the clarity you've given us over the AI impact on your business. First of all, my question is, you outlined many ways that AI is gonna help you engage customers and grow your top line. Can we think about this as actually you think your market share gains within that e-commerce environment should be higher than they have historically been, enabled by that data moat? Shall I leave it there or shall I go for my second question as well?
Yeah, go ahead for the second question as well.
Fantastic. When we think about your comments on the new capital allocation framework, obviously M&A is still in there, and you say you've got still a very high ROI hurdle to get there. Does where the shares currently sit, the multiple the business currently sits on, influence where you think the sort of return on investment you have to get from M&A versus doing another buyback? Thank you.
Cool. Super. Let me start with the second question on the capital allocation framework. Anna, would you take that question? On the channels, hand it over to Robert again.
Yeah, sure. Good morning, Frederick. Nice meeting you. Thank you for the question. We introduced today or updated our capital allocation framework to reflect as well that the business going forward will generate more cash. With all decisions which we do around capital allocation, we always will on a regular basis apply this. First, obviously, it's important to have a strong balance sheet where we very clearly outline how we are going to do so in terms of the 10% of cash threshold of our last 12 months' revenue. Second is the topic which you are asking for, our decisions around organic growth and as well selective M&A, where for both we evaluate them on our very strict investor appraisal framework.
As you said, we are very strict as well that we exceed the cost of capital, and this is how we evaluate this to fuel growth, to fuel efficiencies, as well to complement our strategy. The return of cash to shareholders, where we are very clear that we prefer share buybacks than other instruments. I think the important point is that we are saying we will do share buyback opportunistically because this gives us more flexibility in terms of the timing, in terms of the size, and the criteria is how we decide upon it. Now we believe it's the right thing to do because as well we are very confident in the future of the company and our share price is undervalued.
This gives us a flexibility as well when we have an opportunity, even in inorganic spaces as M&A, to go for it.
Super. Thanks. Over to you, Robert. The question on, like, do you think that agentic and the incremental channel will help the penetration towards online even to accelerate?
I think like my view is that it will help. I mean, how I'd argue that is that I mean, chatbot interfaces or like conversation interfaces are a very intuitive way of how to engage with consumers, yes. So you have, I think, like non-technical people that can easily interact with these interfaces because they just use natural language. I think the more you actually can create agentic experiences, agentic commerce experiences in that that will as well help to have non-technical people to more as well adopt online. So that's I think my belief.
I mean, like in Europe we're still talking in fashion lifestyle about like a 70% offline share and only 30% online share, yeah. I think it will certainly help to convert more of these offline sets towards online. I think how it will happen. I think it will happen on the one hand as an incremental channel with ChatGPT and Gemini and those ones adopting agentic flows with commerce. As well, it will happen as we leverage Zalando, with Zalando's very unique data pool, with own agentic experience, yeah, and are able to create like an end-to-end experience for fashion lifestyle that at the moment we cannot yet create.
We can actually have this conversational interface based on the very unique data trove and really solve questions in another way that was not possible like three, four, five years ago, yeah. I think this is probably really helping to actually drive online penetration in the future. That's my personal belief, yes.
Cool, thanks. Moving back to our slide of question, and thanks Freddy again for asking the questions. Moving on to David. There's a question again from Mia on capital utilization in our fulfillment network. Firstly she wants to know what is it at the moment, and what level do you aim to reach here?
Yeah. Maybe before I get started, I think it's important to understand that utilization is obviously a bit of a moving picture, given that we are still in the process of ramping up our two newest sites, highly automated, and with the latest robotics and AI technology in Paris and in Frankfurt. So that is adding new capacity. At the same time, and you've seen that, beginning of this year, we've announced our plans to exit four sites. Most of them smaller sites, but also one larger site in Germany, more manual, in nature. We are making sure that we have the right capacity for our growth plans going forward, and we elevate the efficiency of the entire network. Now let me get back to the specific question.
Capacity utilization, given that we are still undergoing this ramp up and the exits haven't happened yet, we are currently at a level between 60%-70% utilization. Our target level of utilization is more 85%-90%, which we think is allowing us to both provide great customer service, but also achieve a high level of cost efficiency, and that is also reflected in our mid-term guidance of 6%-8%, where, as Anna outlined in her financial deep dive earlier today, OpEx contribution is significant to help us get to that target, and a significant part is also coming from logistics.
Switching slightly the topic, but sticking with you, David, About You. Mia, again from Exane, is asking what have been the key changes to About You since the acquisition.
Yeah. I mean, first of all, if we look at the standalone business of About You, I think what we can see also, thanks to Anna's deep dive, very transparent for you. The business has accelerated its growth rate, which is great. Double-digit growth at About You. The business has also significantly improved profitability, reached breakeven in the second half of last year for the first time ever actually. Together we also accelerated our synergy delivery, which now makes us very confident to reach our goal of EUR 100 million EBIT synergies per annum already one year earlier, so in 2028. If you look at the underlying business, I think what's fueling the success of About You is that, yeah, the model is really resonating well with consumers.
They are continuing to roll out their marketplace model, bringing on even more brands and sellers to the platform, and they also launched their loyalty program, About You Coins, which is showing some of the same great results that we've shared earlier today for the Zalando platform.
Super. Thanks. Just sticking to About You before we move into another video question. Jürgen Kolb is asking, in terms of About You, from your integration knowledge and customer behavior, are there any plans to potentially adjust About You strategy, or is it a rather going concern and keep both proposition and positionings of Zalando and About You as independent as, and different as currently? Perhaps you can also briefly answer that one.
Yeah, sure. I mean, as Robert outlined in the keynote, we think, really think about this as a team of apps, right? The Zalando main app, the Zalando Lounge app, and then the About You app. We think together these apps help us to attract even more customers and to serve these customers across many more occasions. That's also, by the way, why we see that the overlapping customers, i.e. those that shop with two or three of these apps, they actually show the highest GMV spent, and also typically the highest customer lifetime value. We think Zalando is well positioned to keep attracting customers and serving customers that are primarily looking for brands. The great assortment these brands bring, but also the great stories and content these brands bring, with About You.
We are primarily serving the latest trends and making sure that that is well connected with an influencer-driven discovery and also gamification. With Lounge, obviously, we have daily campaigns that really engage with customers because they want to see what's new on a daily basis. Yeah, millions of people wake up every day checking that out at 7:00 A.M. in the morning. I think that really shows the power this team of apps has for us.
Super. Thanks a lot. With that said, I would move over to Luke on the video. Hey, Luke, can you hear us?
Good morning, everyone.
Yeah. Hi. Good morning.
Yeah. Good morning, everyone. Yeah, thanks for the detailed presentation and the extra detail and granularity that you've given today. I've got just two then. The first is on retail media, and I appreciate you've given some color around how AI is helping you produce more content with the brands, but your cost base hasn't seen the same uplift. So how should we think about that in terms of either EBIT or EBIT margin progression in retail media? And then the second question was just more on your cohort chart that you indicated. I think if I read the chart correctly, it looked like existing cohorts you were seeing kind of orders naturally decline each year as you get some churn.
I'm just thinking, if I read that chart correctly, how we think about that new customers that come through the platform, each year, where we are in terms of who is joining the platform, and just the longevity of that. Thank you.
Thanks, Luke. Perhaps starting off with retail media. Perhaps, Anna, you can give a bit of an idea on like especially EBIT development of retail media, and then I would give the floor to David.
Okay. Good morning, Luke. Thank you for the question. Let me share with you how we think about retail media. We are very pleased that we see an acceleration in retail media in both Zalando and About You. Because retail media has a structurally higher margin, obviously then our as well our gross margin benefits out of it. AI is helping to increase the throughput and as well to increase the volume which we can play on the platform. The gross margin or the EBIT contribution of retail media is very much a function how much is on-site and how much is off-site. Looking forward, we expect that retail media will keep contributing on and structurally improving our margin.
Thanks. Moving on to the cohort.
Yeah, on the cohorts, I mean, just as a reminder, right? I mean, if we look at the B2C side of our business, obviously the North Star metric is ultimately customer lifetime value, and that is driven by both the amount of spending customers have on the platform, but also obviously how we monetize that spending through and the engagement through profit contribution coming from either transactions or retail media, right? When you look at our cohort chart, I think what you see is we are able to develop the spending of customers, and especially in the last year, I think with further improvements in NPS, with the rollout of the loyalty program, we've seen that especially our existing customer cohorts develop very nicely in spending.
At the same time, we also kept an eye on profit contribution and leveraged customer segmentation to make sure that also especially the profit contribution from these cohorts keeps increasing. When we think about new customer acquisition, we still see what we saw in the past, right? There is typically a dip, especially first year, in the first year of acquisition, but then we are thereafter, especially in year three, four, able to meaningfully increase that spend again through the many levers that we have, including our loyalty efforts and also obviously our lifestyle expansion.
Cool. Super. Thanks again, Luke, for the question. Moving back to Slido and moving on to Anna. A recurring topic in our calls have been the gross margin. Jürgen Kolb is asking a bit of an outlook or what are your thoughts, especially of the retail gross margin in 2026, and what are the building blocks? As a side note, any indications about current trading effects?
Yeah. Thank you, Jürgen, for the question. Let me share with you how I think about the B2C gross margin for 2026 and then zoom in on the retail gross margin. The B2C gross margin, we see some positive impacts for 2026 as we accelerate the partner business and accelerate the retail media business. We will, which are high-margin businesses, structurally benefit in the B2C gross margin. On the other side, we will have dilution by About You, by the inclusion of About You, and as well the current developments in the retail gross margin. I'm zooming in now to the retail gross margin. Underlying, we see an improvement. Obviously, the retail gross margin is very much influenced by the business mix.
Lounge is very much appreciated by the customers and is growing double-digit and has a structurally lower gross margin compared to Zalando fashion store. As I outlined in my keynote, we will now in H1 particularly see the impact on the gross margin for the reduction of the inventory levels, which we have built throughout last year. This is the consequence of a very successful partner business. Now I will be working on it. Looking into the future, what you can expect, obviously, you can expect that I and my team focus on the gross margin and as well on capturing efficiencies and synergies.
For the gross margin in particular, we will reduce the inventory and especially as well adjust our buying budgets going forward so that we can see as well an underlying improvement of the retail gross margin. Now as well covering the question about the current trading.
Mm-hmm.
Jürgen, we had a very solid start into the quarter, and particularly, we saw very good momentum, as we moved into the spring, and summer season 2026. We haven't seen, for now, any impact on the demand and the business performance from the conflict in the Middle East.
Cool. Super. Thanks. There's a quick follow-up from Mia on the gross margin.
Okay.
What gross margin impact should we expect for the loyalty program in 2026?
Marginal. I don't think we should even talk about it. It just washes out as we have communicated previously.
Cool. Super. There was another question on the inventory, but this was.
Mm-hmm.
You already were able to answer in your question beforehand. Adam, I think your question is herewith answered. There's another follow-up on the gross margin from Georgina. Especially in Q4, we talked about 170 basis points decline in the gross margin. Can you give a bit of light and shed some light into that development as well then?
Yeah. Sure. Thank you, Georgina, for the question. We see it as well on the gross margin for the full year, and then more pronounced in Q4. On the gross margin as a top line for the group, obviously, we have a small impact from the acceleration of ZEOS in B2B. We have a dilutive impact from About You, and then we have on the B2C margin positive, again, contribution from partner business and ZMS, and then a dilution from the retail gross margin. Zooming in into the retail gross margin and giving you here the building blocks, again, very successful Lounge performance, which is structurally lower margin, and as well a conscious decision to be promotional in Zalando, our fashion store.
This was a decision to increase the promotional activity and not to increase performance marketing. As you know, those decisions at Zalando are taken very much with an ROI focus. It was the better decision here to reduce performance marketing and increase the promotional activity.
Cool. Moving on again a bit to the agentic space. Robert, there's a follow-up question from Georgina. Is SCAYLE now agentic ready? For example, can it already support instant checkout in the U.S.? Should ChatGPT continue to pursue it?
I would probably pass it on to
Yeah, I'm happy to answer that.
Udo today.
Yeah. As you heard from Robert before, I mean, we are ourselves partnering with Google to be one of their first partners in Europe, but also SCAYLE is currently integrating with Google's Universal Commerce Protocol to enable merchants both in Europe and the U.S. That is happening as we speak. That same can obviously also apply to other protocols and agents. As we understood, ChatGPT has, for now, abandoned its checkout functionality. If that comes back, we obviously are ready to participate.
Okay. Super. One more thing before we move on to a video question again. Philip is asking a bit on, can you elaborate a bit on the user behavior and economics of direct channel versus the ZEOS and the agent e-commerce? Any first indication we are seeing? Any glimpse you are able to share here, Robert?
Yeah. I mean, I think high level, what I can share, I mean, the bulk of the traffic of Zalando is direct traffic. It's more than 70% of the traffic is direct. That's like, you know, directly opening the app. I mean, within this traffic, I think you have, probably like, you know, half of them that actually go into, like, the shopping mode. Already now, which I think we're very, very proud of, we actually see that, half of this traffic is actually already engaging with the feed experience, yeah. As a result of the engagement, the feed experience that we have, they engage with the content, they engage with inspiration.
As a lot of them, we already see that there's a significant actually uplift now in frequency of usage. This is actually the thing that we're actually doubling down on. We invest a lot into AI to actually bring this frequency of traffic using these content platforms that are in the feed actually upwards. When it comes to the agentic commerce referral traffic that we actually get, I mean, this is much more specific already because, I mean, there's. As you can imagine, there has been done some research, I think, in the agentic commerce interfaces, and then they are referred to Zalando, and then there's like a higher conversion likelihood in this. It's high-quality traffic, but a high-quality traffic in terms of conversion.
It's not a high-quality traffic that we actually like and that we actually then drive a frequency afterwards, but like really, a really high converting traffic.
Cool. With that, we would move over to the video. Yashraj Rajani, can you hear us? Yes. I can at least see you.
Yes, I can.
Yeah. Cool.
Good morning, everyone. Thank you very much for taking my question, Patrick. I guess I want to discuss a little bit about the announcement you made with Levi's this morning, and with SCAYLE. Can you please first comment on the current size of Levi's online sales? In that context, can you seize the opportunity to remind us how the SCAYLE economics work for Zalando, and therefore, how we should think about the Levi's contribution in 2026, but also over the next couple of years as we head into the end of the strategic plan?
As a follow-up discussing about scale, can you talk about the pipeline of projects or deals that we could expect tentatively in 2026 or beyond? Yeah, sure. I mean, we are super excited obviously about working together with Levi's for their global direct-to-consumer business. I think it's a testament to the great partnerships we build. It's a testament to the, yeah, borderless reach of our technology platform that doesn't just work well in Europe, but also in the U.S. I think it really also shows that we can tap into new large opportunities for our software business with the U.S. obviously being the largest software market in the world. I hope you understand that I'm not able to comment on Levi's numbers here. That's what you would need to ask them about.
We respect confidentiality of course, with all our partners. I'm happy to share that, for scale, right? Therefore also for Zalando, it's a multimillion EUR business opportunity in terms of revenue and in terms of profit. 'Cause the nice thing, as you know, with scale is that, it operates at a very high gross margin, around 85%. That obviously makes it a very attractive business for us to scale, and to also contribute, to our margin targets going forward. It doesn't impact the group revenue so much because in a way it's tiny, right, compared to the overall B2C business, especially.
It can have a meaningful impact on our profits going forward, and that's fully reflected in our midterm guidance, 6%-8% for the future and also our guidance for this year. Yeah, overall, we are super glad to have the B2B segment now as a second growth engine for the business. Double-digit growth, accelerating growth as well as we reported in Q4 and also, yeah, doubling our margin year over year, which I think shows the power that this business can have for us. In terms of pipeline, we are working on a few more deals, both in Europe and in the U.S. and we'll, as always, as we've done in the past, announce them as they come.
Yeah, you can definitely expect more announcements to happen over the course of the year. Cool. Super. Thanks a lot. Going back to Anna, Adam from Deutsche Bank wants to know how do we decide when shares are undervalued for a buyback? Is there a criteria we are willing to share?
Yep. Thank you, Adam, for the question. Yeah, listen, I think if we just look as well at what the sales side says, and where we stand today, obviously you are saying as well that we undervalue, but as well, we have a very strong confidence in our midterm plan in reaching our midterm targets. I did my due diligence as well, and I see that we have taken decisions which will bring the top line growth and which will bring as well the efficiencies. We are seeing as well the synergies flowing in. We as well executing on our logistics networks. I can maybe name more of them.
With this share buyback, we sending a very strong message that we have a firm conviction in the future of the company. We definitely mean that the shares are undervalued. What does this mean for the future and what criteria do we apply? We will, on a regular basis, evaluate our capital allocation and go to the very structured framework which we have shared with you, decide upon the cash which we need to operate the business and to navigate through seasonalities and volatility, decide what investments do we need organically and inorganically to grow the business, and on a opportunistic basis, decide on a share buyback.
Cool. Super. Switching topic, but staying with finance.
Yep.
Free cash flow. We generated roughly EUR 700 million before M&A in 2025. What would be your average free cash flow until 2028, after leases is asked by Andreas Riemann from ODDO BHF.
Yeah, thank you, Andreas, for the question. So again, our expectation is based on our midterm guidance and our plan, which we are very much on the way of achieving. How you should think about the free cash flow is that we will be on a similar level as before the acquisition of About You.
A question a bit going into fulfillment cost line. Marco Baresi is asking, in a scenario of persistent higher energy costs, what is the cost impact for Zalando and shipping and logistics cost? Perhaps, David, you are able to shed some light into it there. Yeah. Well, I mean, our fulfillment cost line is, and especially also logistics, right, is arguably one of the larger ones in the business. Roughly speaking, more than EUR 2 billion in spend per year. Only a fraction of that is impacted by energy costs. There, even in an adverse scenario, we are talking a low double-digit EUR million impact. That tells you that overall it's really not a big impact for us.
I think the probably more interesting question is how will consumer demand develop? As we've said, so far we haven't seen any impact. Rather the opposite. Very strong trading, especially with our spring summer season start. That's probably where the uncertainty sits. It's not so much on the cost side.
Cool. I have one more question from Will on return rates, Robert. Will want to know, can you talk us a bit more about the return rates for Zalando and About You in terms of percentages? And do we have a target or where you wish to get this over the coming years? And any information or drop-through in return rates at group level? Any light you can shed on that one.
I mean, maybe like first of all, two general comments about return rates. Return rates, like the return proposition for us, for Zalando was always, as a group, is always something where we, where I think it's actually important for consumers actually to enable them that returns are easy because we actually see as well in data that easy return, easy returns is actually increasing the CLV because customers can really take a buying decision at home and don't take that digitally. That's increased satisfaction, increases the CLV, increase engagement, loyalty, everything. That being said, I think it is very clear that there's not one person on earth that actually really loves returns. There's who loves a good.
We actually work very hard to help to prevent unnecessary returns. The biggest lever of that is the size-related returns. With the size-related returns, we actually make significant progress with. I mean, I shared like that 8% of the shared size-related returns now have been prevented, like statistically proven actually by, actually, the use of AI in our last year. There's actually significant improvement. When it comes to the two apps, we see, I mean, we see similar return rates across like Zalando and About You. What we as well see on both of these apps is actually that return rates actually are reducing at the moment. They're going slightly down.
I mean, this is to a big extent as well, like, you know, the result of our work. We as well help with different processes to further prevent some unnecessary returns when we see actually high returning items and so on. We do that in a way that on one hand it increases the customer lifetime value, but on the other hand, as well increases the profit pool for partners because this is as well what they care for in order to actually offer, as well, like, you know, a lot of selection on the platform because returns as well don't help them to actually have good profit pool. That's why we're working on it.
We don't have like a very specific target in mind, but our target is to gradually decrease return rates over time by not destroying any customer value.
Wonderful. Thanks, Robert. We have another question from Monique Pollard from Citi. I can already see you. Can you also hear me?
Yes. Yeah.
Okay, wonderful.
I can hear you. Wonderful. It was just a question, if I can, on the gross margin and also the approach to sort of performance marketing versus the utilization of promotion. You mentioned that in the Q4, you know, you did some promotions, and that was partly a decision to spend money there versus the performance marketing. As I'm thinking into 2026, what I'm trying to understand is, in the first half when you said, you know, you've got a bit of extra clearance, is part of that as well a decision to allocate money to promotions away from performance marketing, or is that more about excess inventory?
If you've got excess inventory, you know, what are the particular areas of the business that have this kind of over inventory problem that needs to be cleared during the first half, please?
Hello, Monique, and thank you for the question. I will ask here for help from David for Q4 because I wasn't there. Yeah. I think it's proper that he answers the question, and then I can talk about 2026, how we approach the future.
Okay.
Yeah. Let me start with Q4. I mean, first of all, as Anna said, right, we are taking very much our AI-based approach to our commercial decisions, and we look at the different levers that we have to generate demand. One lever is marketing, one lever is discounts, promotional activities, campaigns. I think another, by the way, a new exciting lever is loyalty, right? Where we can also engage with customers and also ideally not just generate quarterly sales, but also longer lasting relationships and CLVs. Yeah, we obviously try to optimize our investments in the full toolbox. As it happened in Q4, I think we saw price sensitive consumers, right, looking for deals, especially around the key commercial campaigns, Singles' Day, Cyber Week, and so on.
That's what we obviously took advantage of. Secondly, we saw that the ROI on these discount investments seemed more favorable compared to spending more on performance marketing. That's why year-over-year, we dialed performance marketing down and discount rates slightly up. Yeah, to really achieve the best possible commercial result, both in terms of top line, but also in terms of bottom line. That's something we'll continue to do also in the future, right? It's not like a one-off. It's really how we operate in a very data-driven way to maximize the value of the business. Maybe as one last point, it doesn't just take into account the elasticity of demand in terms of how does it react, how do consumers react to discounts or to marketing.
It also obviously takes into account our stock position, right? With the question, how do we get the highest absolute gross profit from a given inventory position? That's all being optimized in real time to yield the best results.
Yeah, exactly this we will continue doing in 2026 in terms of where do we see the inventory. We see it in our lounge, and we see it in sports and kids and family. This is actually where we increase the inventory in order as well to the risk if you want to have it like this for the growth of the partner business. We will now apply all the toolbox so that at the end, we can balance between reducing the inventory and improving the cost margin.
Super. Thanks a lot.
Super. Can I ask one follow-up, question, if that's okay?
Yeah. Because it's you, huh?
Because it's you.
Go ahead.
It was just on restructuring costs, Anna Dimitrova, whether you could provide any guidance for us on any restructuring or one-time costs relating to About You and the logistics network, for this year, please?
Sure. Last year you have seen we had EUR 203 million of one-off adjustments, and how you should think about 2026. We expect around EUR 300 million, so a step up of EUR 100 million. Next to the one-third is share buybacks, then we have around EUR 100 million with the restructuring of the logistics or the optimization of the logistics network, and then another EUR 100 million, which is stemming from purchase price allocation and from integration costs. We guided that for integration costs for the whole period till 2028. We expect mid double-digit million amount and 2026 will be the peak.
Cool. Super.
Very good. Thank you.
Thanks, Monique.
Welcome.
We have, yeah, we come to the end of our session, so thanks everyone for participating. I would now hand it over back to David, perhaps to summarize the three key takeaways of today, before I give a small closing remarks. Over to you, David.
Yeah, sure. Thanks for joining us today. I hope you enjoyed all the exciting news that we shared. I think for us, it's really important that you take away that we are making super strong progress on our strategy and our financial performance as showcased by our 2025 results, both in terms of financial achievements but also strategic achievements. I think you heard that we are off to a good start in 2026 and have set our goal really on further accelerating our performance once again, both in terms of strategy and financials.
Last but not least, you heard us very excited about the long-term future of the business, where we leverage the full power of our team, but also the power of AI technology and the unique data we have and the full technology platform that we've built to drive even more impact with customers and partners and more value for the business.
Super. Thanks, David. Thanks, Anna. Thanks, Robert. That is it for now. Thank you so much for your interest today, and we hope to speak to all of you soon. We are on the road also over the next few weeks and available obviously also over the phone. So if there are any further questions, do not hesitate to reach out to the IR team and looking forward to seeing you all. With that said, thanks everyone, and thanks from Berlin. Bye-bye.