Zalando SE (ZAL) Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Zalando Q2 Earnings Call. The conference will be recorded. [Operator Instructions] So thank you very much, and let me now turn the floor over to your host, Patrick Kofler, Director, Investor Relations.

Good morning, and welcome to our Q2 2026 earnings call. Today, I'm joined by our co-CEO, Robert Gentz; and our CFO, Anna Dimitrova. Robert will start with the strategic overview and our key business highlights before handing over to Anna, who will walk you through the financial developments of the quarter and the outlook. Both will be available for questions afterwards. As usual, this call is being recorded. The live webcast as well as the replay of the call will be available on our Investor Relations web page later today. As usual, during the Q&A session, we kindly ask you to limit your questions to 2 each, allowing for an efficient discussion. Now over to you, Robert. The floor is yours.

Thank you, Patrick. Hello, everyone, and thank you for joining today's call. We carried last year's momentum straight into 2026. By successfully executing our strategy and hitting major milestones, we achieved further progress throughout the first half of 2026. This progress is reflected across 3 core areas of our business. First, through our multi-app approach, where we're driving platform distribution, customer frequency and monetization depth. Second, through our advanced technology platform, which successfully powers both our B2C and B2B operations. And third, through scaling our AI capabilities, which continue to drive significant efficiency and growth across the business. European fashion represents a massive EUR 500 billion addressable market. We're relentlessly focused on our strategic execution to expand our coverage and capture a larger share of this huge opportunity. Our solid Q2 performance confirms that we are on track to meet our full year targets, serving as another successful step towards our midterm goals. On next page, I will share 5 key highlights that illustrate our overall progress in H1. Number one, we've delivered solid profitability in H1, even as top line growth fell a little short of our ambition, driven by softer demand, mainly in the sneakers category. At group level, we delivered double-digit growth. Reported GMV grew 21% and group revenue is up more than 22% compared to H1 last year. And we increased adjusted EBIT by 16% year-on-year to EUR 270 million bringing our adjusted EBIT margin to 4.2%. On a pro forma basis, comparing like-for-like with ABOUT YOU in both periods, group GMV growth was mid-single digits. And we continue to benefit from a structural shift of fashion spend online, which remains a steady tailwind for our business. Number two, in H1, we have also advanced our AI capabilities, bringing further traction to both our B2C and B2B business. AI is already delivering measurable benefits to both efficiency and growth. And I'll come back to some of our most exciting developments later in the call. Number three, in B2C, GMV grew across all 3 of our consumer apps, ABOUT YOU, Lounge and Zalando. In our core apps, Zalando, we're doubling down on our lifestyle opportunity with upgraded customer journeys in sports, an exciting new preowned luxury fashion partnership and the launch of a dedicated Home & Living category. Furthermore, the Partner Business remains a central engine to drive growth. In H1, we have seen strong double-digit GMV growth of 13.4%. Number four, in B2B, we see accelerated strong double-digit growth, driven by the scaling of the Partner Business and large-scale merchant collaborations. B2B revenue grew almost 26% on a reported basis. Additionally, ZEOS achieved successful go lives such as Max & Spencer, while SCAYLE secured major enterprise client wins, including Wortmann Group, one of Europe's largest true retailers. Number five, we're refining our 2026 growth guidance to the lower half of the original 12% to 17% range for GMV and revenue following our H1 performance. Adjusted EBIT is narrowed to EUR 680 million to EUR 720 million. We're narrowing our profit expectations despite a refined top line range, which shows the strength and quality of our earnings. We're excited with how our teams executed on the strategic priorities that will drive the business forward and remain confident in a strong H2 performance. Let me now elaborate on the progress of our business. In March, we shared that our B2C and B2B segments are powered by unified data and infrastructure engine that is increasingly enhanced by AI. This engine is constantly improving through growing consumer app engagement and brand integrations as we drive platform distribution and usage. The more customers and brands use our platform, the smarter our systems get. We've invested into data to run our business over 15 years, but putting AI to work right now is helping us operate much more efficiently and grow faster. Let me share with you some of the many new developments from the past few months now. AI-generated content is transforming how fashion and lifestyle brands operate and connect with consumers. Building on our success using AI for product onboarding and discovery that we talked about, we have launched SCAYLE Studios, a scalable B2B solution. SCAYLE Studios is a new SaaS platform that replaces traditional photo shoots with AI-generated content. This significantly reduces the time to market by 95% and reduces visual content costs by over 90%. We generate revenue through a flexible token-based subscription model that grows alongside our customer needs. In just 2.5 months, after launch, over 100 brands, including S Oliver and Betty Barclays have joined the platform, resulting in an annual revenue run rate exceeding EUR 1 million. And this early success proves that our position as a data and technology expert in the lifestyle industry, combined with our access to over 7,000 potential brands allows us to scale innovative AI solutions very rapidly. Let's talk about an example of our customer-facing AI, the Zalando Assistant. We're making steady progress towards our goal of building a true lifestyle AI assistant with 3 major milestones last quarter. First, we integrated web search. Now our assistant combines live data like current fashion trends, events or weather with our product catalog allowing us to connect real-time moments and directly to those items that we sell. Second, we added customer care. Customers can now resolve order issues directly within the chat. In fact, 15% of conversations, which contain simple inquiries like where is my order are already being handled on the spot. Third, we introduced visual discovery. Customers can now snap a photo of an item they like in real life, and our visual AI will instantly find that product or similar alternatives in our catalog. And these updates are gaining serious momentum. Between January and June, we saw a 63% increase in high-value interactions. And even more importantly, our retention metrics are growing. Customers consistently coming back to the use of the assistance for inspiration or for support. It's clear on our innovation pipeline is working, and I'm incredibly proud of the progress that we've made. Regarding our B2C strategy, I share how we are driving monetization by expanding our lifestyle universe within the Zalando app, specifically through new experiences, partnerships and category launches. So here are 3 examples from last quarter. First, unique category-specific experiences. In sports, we launched specialized hubs like fan homes and the boot room for football fans. We also enabled customized jerseys with favorite players names which nearly doubled our German football jersey sales compared to the Euro 2024. Second, new partnerships in pre-owned. We joined forces with the Vestiaire Collective to bring pre-owned luxury to 14 markets, giving millions of customers access to over 50 designer brands. And third, in new lifestyle category. We're rolling out our Home & Living category across all markets, debuting today with a high-caliber portfolio of premium home and lifestyle brands. We have plans in place to expand this to over 50 partners and 25,000 products. Let us now transition to our second growth engine, our B2B operating system. We're speeding up our B2B growth. Our strategy is clear. We're making Zalando's proven logistics, software and services available as a leading B2B operating system for fashion and lifestyle brands across Europe whether it is sell on or off our platform. You can see our growth momentum through our scaling Partner Business, major enterprise go-lives and key wins. On the logistics side, we announced a large-scale strategic partnership with British retailer Marks & Spencer last November. We successfully launched this collaboration today, and it will be rolling out to 22 markets over the next few months. After a successful go-live with NEXT last September, we've now expanded that collaboration to the ABOUT YOU marketplace. We're also pleased that HUGO BOSS has chosen ZEOS to handle fulfillment for the Zalando marketplace business. On the software side, it's great to see new go lives for merchants like Ochsner Sports, Bogner and ICE. Additionally, SCAYLE has secured key wins across DACH and the U.K. In that, we won the Wortmann Group, one of Europe's largest shoe retailers, along with roastmarket and Bike Component. In the U.K., music retailer HMV choose the SCAYLE e-commerce platform to power their online shops. These wins show that our B2B solutions are highly adaptable, easy to scale internationally and trusted by major enterprise clients. Now I'll hand it over to Anna for the financial performance.

Thank you, Robert, and good morning, everyone. Let me walk you through our financial performance. As a reminder, our reported figures include ABOUT YOU and where useful, I will refer to pro forma growth, which assumes ABOUT YOU was consolidated in the prior year period for a like-for-like comparison. In Q2, we sustained our profitable growth trajectory. Group GMV increased on a pro forma basis by 4.4% to EUR 4.9 billion. This growth was primarily driven by double-digit growth of the Partner Business and ABOUT YOU. As we have told you for many years, we see GMV growth as the key top line KPI for our business. And it is defined as the value of all merchandise sold by Zalando and by our partners to our customers. Group revenue growth was up 1.1% on a pro forma basis. B2B and ABOUT YOU performed strongly. Our Partner Business is accelerating faster than expected. In the short term, this creates more competition on our platform, including for our retail business, but increases the attractiveness of our assortment to our customers. On the long term, this supports our goal of increasing partner share to 40% to 50% of B2C GMV. We also observed softer demand, especially in the sneaker category across both business models. The difference of GMV and revenue growth is mainly a result of the strong Partner Business growth where selling prices are fully reflected in the GMV metric, while revenue is limited to the commission earned. Our focus on driving profitability is demonstrated in the increase of adjusted EBIT. Adjusted EBIT reached EUR 205 million, up 10% year-on-year. Group adjusted EBIT margin decreased by 0.5 percentage points to 6% as a result of the dilution from the consolidation of ABOUT YOU. We have already delivered more than EUR 20 million of synergies in the first half ahead of our own plan, which gives us confidence in reaching our EUR 40 million target for the full year. Zalando stand-alone adjusted EBIT margin improved year-on-year by 0.1 percentage points from 6.5% to 6.6% on the back of strong adjusted EBIT margin progression in B2B and despite a tough onetime comparison base. ABOUT YOU generated another quarter of positive adjusted EBIT. Looking at H1, our financial performance translates into 21% GMV growth and 22.2% revenue growth on a reported basis. We delivered EUR 207 million -- EUR 270 million adjusted EBIT, up 16.1% year-on-year. Based on our H1 results, we remain on track to achieve the midpoint of our narrowed adjusted EBIT guidance for 2026. Now let's move to B2C. Q2 was a quarter of solid financial performance and accelerated momentum in our shift towards a platform-led business model. GMV has shown solid growth across all 3 consumer apps on a reported basis and on a pro forma basis. As in Q1, both ABOUT YOU and Lounge by Zalando were leading in terms of growth. Growth in Zalando was driven by the continued acceleration of our Partner Business. Furthermore, we saw particularly strong growth across lifestyle categories, such as sports and beauty. GMV was up 20.7% on a reported basis, pro forma GMV was up 4.4%. Revenue reached EUR 3.1 billion, supported by ABOUT YOU, but down on 0.6% on a pro forma basis. This development is primarily a reflection of our strategic shift towards a platform-led model, coupled with the softer demand, especially in the sneaker category. On back of the continued acceleration of our Partner Business, the share at Zalando stand-alone rose by 3.2 percentage points to 36.9%. The inclusion of ABOUT YOU, however, diluted the overall group share of the Partner Business to 31.9%. Turning to our high-margin retail business -- Retail Media business, we maintained strong momentum across Zalando and ABOUT YOU, driving notable growth. Consequently, Retail Media revenues increased strongly by almost 40% to 2% of B2C GMV. In summary, our B2C business kept growing while we actively managed the shift to our platform model. That shift tempers revenue in the short term but strengthens the business for the long term. Moving on to customer metrics. The top line performance within the B2C segment was principally driven by a combination of growing active customer base and increased customer spending. First, we increased our active customer base. We reached 62.5 million customers on a last 12-month basis, up 18.3% driven primarily by the inclusion of ABOUT YOU as well as the expansion of Zalando stand-alone customer base. By the end of Q2, 6 million customers are using both platforms, Zalando as well as ABOUT YOU. Although these customers represent only about 10% of our user base, they drive a disproportionate high share performance with both order frequency and GMV contribution running twice as high as the overall average. Second, we continue to increase our share of wallet as existing customers are spending more on our platform. Average spend per customer rose by 2.9% to EUR 307. This increase was mainly driven by a larger average basket size. Overall, we continue to attract more customers to our consumer apps and increase our share of wallet. Now on to B2C profitability. The B2C gross profit margin stands at 43.2%. The decline of 0.4 percentage points compared to the previous year was as expected, driven by the inclusion of ABOUT YOU, which diluted the group B2C margin by 0.9 percentage points. On a Zalando stand-alone basis, B2C gross margin was up 0.5 percentage points. The higher gross margin was driven by the strong growth of our partner in Retail Media businesses, partially offset by the cost of clearing all the stock in Lounge. We delivered EUR 164.1 million in B2C adjusted EBIT compared to EUR 173.7 million a year ago. This modest decline was driven by: a, a favorable one-off in the Q2 2025 baseline; b, a negative one-off this quarter relating to a strike among a last mile logistic provider in Belgium; and c, a temporary increase in fulfillment costs as a result of the reshaping of our logistics network. The adjusted EBIT margin reached 5.3%, down from 6.7% in the prior year period, while the B2C segment benefited from ABOUT YOU synergies, this could not fully offset the impact of ABOUT YOU lower margin profile. The Zalando B2C stand-alone margin was down by 0.7 percentage points to 6%, as underlying gross margin improvements were outweighed by the aforementioned temporary headwinds. As we have explained before, we are significantly reshaping our logistic network. While this was, as expected, a headwind to our financials in the first half of 2026, this reshaping is one of the building blocks towards achieving our 2028 margin targets. This project is developing according to plan, and we anticipate some improvement in the second half of 2026, beginning with an improved fulfillment cost ratio followed by the further structural gains in '27 and '28. Now shifting the focus to B2B where double-digit revenue growth translates into a steep increase in profitability. B2B revenue reached EUR 335 million, up 27.6% on a reported basis and 21.1% pro forma. So significantly above group level. Zalando Fulfillment Solutions maintained its strong double-digit growth by successfully keeping pace with the scaling of the Partner Business. Multichannel fulfillment experienced a very strong acceleration in growth, particularly due to the key collaborations with partners like British retailer NEXT. And the inclusion of SCAYLE led to an increase of the software revenues, which are operating at higher margins. The strong B2B revenue growth translated into higher profits and significant margin expansion. B2B gross margin expanded by 7.1 percentage points to 20.6%. And B2B adjusted EBIT more than tripled and reached EUR 41 million, up from EUR 11 million a year ago with adjusted EBIT margin rising to 12.2% from 4.3%. There were 3 drivers behind this improvement. First, we unlocked operational efficiencies and achieved greater scale with sales fulfillment driven by strong volume growth on the back of the Partner Business acceleration. Second, the margin expanded, thanks to the inclusion of SCAYLE, which contributes higher margin software revenues. And third, the margin this quarter also benefited from temporary effects. These were phasing related and will even out over 2026 overall. Q2 was an exceptionally strong quarter, but we expect B2B to continue contributing to the adjusted EBIT group target in the second half of 2026. So now let me walk you to the group P&L. Our group gross margin remained stable at 40.9%. This reflects a 0.5 percentage point increase in Zalando B2C gross margin, the adverse impact from the ABOUT YOU B2C inclusion and a 0.2 percentage point increase from B2B. A closer look at the cost lines, excluding adjustments, gives further insights. First, fulfillment costs rose by 0.7 percentage points. In addition to the inclusion of ABOUT YOU, the reshaping of our logistics network and the ramp-up of Paris and Giessen has led to temporary higher cost as planned, while a strike at the last mile logistic provider in Belgium added some unexpected costs. Those temporary adverse impacts were partially offset by synergies and favorable order economics. Furthermore, the year-over-year comparison was affected by a favorable base effect in Q2 2025. We expect this ratio to decline year-on-year in H2 driven by efficiencies and our network reshaping. Second, marketing cost rose by 0.5 percentage points, driven by the consolidation of ABOUT YOU, which currently runs at higher marketing intensity. Zalando marketing spend was stable and additional 0.4 percentage points then from marketing adjustments, specifically purchase price allocations for the amortization of acquired brands and customer relationships resulting from the ABOUT YOU acquisition. Third, admin costs decreased by 0.4 percentage points, reaching 4%. The improvement was driven by the inclusion of ABOUT YOU. And four, other operating income and expenses decreased 0.2 percentage points. On an unadjusted basis, they increased by 0.5 percentage points reflecting restructuring expenses, mainly relating to costs associated with the closure of our fulfillment center in airport as well as other organizational efficiency measures specifically at our headquarters in Berlin, in our studios and outlets. As usual, these one-off costs are reported outside of adjusted EBIT. Overall, our adjusted EBIT margin reached 6% compared to 6.5% a year ago, a step down we expected, driven entirely by the first time consolidation of ABOUT YOU, which runs at a lower margin today. Excluding that impact, the underlying Zalando margin was slightly up. Looking ahead, we expect the ABOUT YOU contribution to improve synergies built towards our EUR 40 million target this year. In Q2 2026, EBIT total adjustment amounted to EUR 93.7 million. As a reminder, at our full year and Q1 cost, we guided to around EUR 300 million of total adjustments for 2026. We now expect to come in above that level and are targeting around EUR 380 million for 2026. The EUR 80 million increase is mostly made of noncash write-downs reflecting accelerated closures. Let me turn to our balance sheet and cash flow development. We continue to operate with a negative working capital position. At the end of Q2, we had a negative working capital position of EUR 494 million, a EUR 386 million improvement compared to EUR 108 million in Q2 '25. On a reported basis, total inventories are 24.8% higher year-on-year, but this simply reflects the inclusion of ABOUT YOU rather than any change in our underlying inventory position. Inventory, excluding ABOUT YOU increased 3.9%, so broadly similar to Q1. We continue to remain disciplined in buying. So the pace at which we sell to our inventory was essentially unchanged year-on-year. We made good progress gearing all the stock, particularly in Lounge and our full year inventory is expected to land with healthy levels. Our teams are actively managing our autumn/winter buy to maintain this lean discipline trajectory. As guided, we continue to see strong GMV growth in our Partner Business, which also leads to higher trade payables. Now to our cash position, which remains solid. Our cash and cash equivalents ended the quarter at around EUR 1.4 billion, up from EUR 1.3 billion at the end of the first quarter. This remains aligned with our capital allocation framework under which we aim to maintain a liquidity buffer at around 10% of last 12 months revenue over time. Cash levels may fluctuate around this reference level due to normal seasonal patterns. And in addition, we have access to EUR 1.25 billion of revolving credit and ancillary facilities, providing further flexibility to manage seasonal liquidity requirements. Let me walk you through the movements during the quarter. We generated strong operating cash flow of EUR 473 million, an increase year-on-year, mainly characterized by the increase of trade payables on the back of a growing Partner Business. CapEx was EUR 55 million, reflecting the ongoing ramp-up of our fulfillment centers in Germany, Poland and Sweden, continued investment in internally developed software and the inclusion of ABOUT YOU. And a further EUR 45 million related to lease liabilities, reflecting the first-time inclusion of ABOUT YOU. We returned EUR 235 million to shareholders under the EUR 300 million share buyback program we announced in March. Altogether, this delivered strong free cash flow of around EUR 418 million in the quarter. And it is exactly this cash generation driven by disciplined CapEx and efficient working capital that gives us the flexibility to keep investing in the business while returning capital to shareholders. This concludes our financial performance review. Let's now move to our outlook. Our full year growth guidance now reflects a first half that fell a little short of our ambition. We ended H1 with 5% pro forma GMV growth. Consequently, we have refined our outlook and now expect full year growth in the lower half of our original ranges. This is in line with market expectations. Specifically, on a reported basis, we now expect GMV and revenue growth in the lower half of our previous 12% to 17% range. And our adjusted EBIT guidance is narrowed to EUR 680 million to EUR 720 million, and we have increased confidence in hitting the midpoint of that range. This confidence is based on: one, H2 benefits from our logistics network reshaping; two, significant operational efficiencies; three, synergy delivery; and four, disciplined autumn/winter inventory buy. The fact that we can narrow our profitability guidance while refining the top line to the lower half speaks to the quality of our earnings, the continued mix shift towards a higher-margin Partner Business and Retail Media, the scaling of our B2B segment and the disciplined cost management and AI-driven efficiency gains. Our focus is, as always, executing our strategy, investing in the immense opportunities ahead and delivering strong, high-quality financial performance in 2026. And with that, I hand it back to Robert for the key takeaways.

Thank you. Before we jump into Q&A, let me just wrap up with the key takeaways of today. We refined our full year outlook and are confident in delivering a strong H2 performance. We advanced our AI capabilities gaining traction in both our B2C and B2B segments. In B2C, we delivered solid growth across our team of consumer apps and B2B delivering strong double-digit growth and significant margin expansion. And the integration of ABOUT YOU is progressing very well. Thank you very much. And now let's open up for the Q&A.

[Operator Instructions] So the first question comes from Monique Pollard from Citi. We follow on with the next one from Frederick Wild from Jefferies.

They're both, I'm afraid about the impact from sneakers on the business. So first of all, could you help us quantify the impact you saw in Q2? Just maybe help us with what percentage of sales of sneakers and how much is the growth of that business slowed just so we can get some sense of magnitude. The second question, please, is because this is maybe slowing a bit more than you expected, should we be worried about more markdowns coming into half 2, about a bit more excess inventory? Or do you feel it's well managed? I guess the other way of asking about that is how quickly can you change your assortment within a season?

Thank you, Frederick, for the questions. Let me start with the sneaker performance. What we see is a broad-based softness in the sneaker market. You have seen that after countless successful number of releases into -- in the past years, it seems now that the market has been a bit overstretched so that we see, especially in the lifestyle category of the demand. And this has been as well called out in recent earnings and market commentary from different sports brands. Obviously, we could have decided as well to push more products into the market with increasing marketing intensity or discounts, but we consciously decided to drive profitable growth in the quarter. In terms of the magnitude, our sneaker business is low double digit of the total business in terms of GMV. And so in terms of would this dynamic change going forward, we don't expect a short-term change in dynamics. But for sure, we expect in future to see another sneaker cycle coming. I think important is to call out that the sneaker category is characterized by classically strong in-season buying. This means that we can adapt our budgets during the quarter, reflecting price points, particular brands or product categories. And this is based on size reminders of customers and as well wish lists. And this is how we will manage as well the assortment. And now this is a good segue to your second question, if you should be worried for markdowns in the second quarter and if we can adjust the assortment. As I said, yes, we can do this. I would not be betting now on a sneaker turnaround for the H2 performance. We are very confident that we can achieve our ambition in top line in H2, given the actions which we were taking and as well, given the good development and contribution of our strategic initiatives. For instance, the Plus program or the discovery feed or the improvement in search and ranking.

Next question comes from Richard Chamberlain from RBC.

Two questions from me, please. I guess, both for Anna, I think. So first of all, can you just say what your expectations for the ABOUT YOU synergies are now for the second half? And maybe just give some color on where those are coming from? And then second, Anna, would you mind just explaining what's happening with the trade payables line? Just explain the decrease in the first half and how you expect that line to evolve in the second half?

Thank you, Richard, for your questions. Let me start with the synergy development. I'm very pleased with the work of the team toward the traction, which we see in our synergy delivery now with more than EUR 20 million we have as well have more than half of our target. And this year, the synergies are coming mainly from commercial negotiations from logistics synergies in terms of packaging and transport and as well procurement in terms of marketing and content synergies. So we are very confident to reach our EUR 40 million target for the year, and we are keeping it for now. In terms of trade payables, trade payables are a function of the acceleration of the Partner Business. And this is what you're seeing in the numbers. And on the back of accelerating business in the future, we will see similar developments.

Next question comes from Monique Pollard from Citi.

The first question I had was just on the B2B growth. Wondering if you can give us some understanding of how that should progress through the second half with the key wins and the go-lives that you've got in the pipeline, presumably, you have some level of oversight there. And then the second question I have is on the inventory levels and how to think about those inventory levels given the growth in the Partner Business in the B2C. So should we expect inventory to start coming down, reducing slightly over the next few quarters if that Partner Business obviously is going to grow as a proportion of the B2C?

Monique, thank you for the questions. Let me start with B2B. We are very pleased with the accelerating growth in B2B. And we expect similar strong growth in the second quarter. This is driven by the increase and -- increasing growth in ZEOS on the back of higher volume to the Partner Business and as well of a strong pipeline in multichannel fulfillment. And secondly, your question on inventories. And the result speaks for themselves. I'm here as well pleased with the work of the team and with a different very disciplined approach regarding inventory, you have seen coming down as well year-over-year and quarter-over-quarter. And we plan to manage inventory carefully as well going forward. And we are aligning our buy with the growth of the Partner Business and target for the year as well inventory levels, which will decrease year-over-year.

Next question comes from Yashraj Rajani from UBS.

I have 2 questions, please. So the first one is probably just a clarification on pro forma revenue in the second quarter, please. I'm not sure I quite understand what's driving the gap. Is it fair to assume that given the strength in your Retail Media business, it's probably a weighted average commissions that are coming down year-on-year, which is what is sort of driving that gap? Or is that probably the wrong interpretation and it's something else? So that's the first one. And then the second one is, if I just look at your 2028 guidance for 7% margin, based on your guidance for 2026, it's probably a 2 percentage point step-up. So can you talk us through your thinking around what is the phasing of the evolution that do you expect 100 basis points improvement in '27 and '28 each? Or do you think 7% is completely out of the picture, and we probably get to the lower half of that?

Thank you, Yashraj, for the questions. Let me start with your question on pro forma revenue development and what is driving it on a group basis. You saw that the revenue growth is 1.1%, which is driven by the growth in B2B ABOUT YOU and obviously as well Zalando Retail Media. What is driving the revenue decline is on the one side the softer development in the sneaker category as I called out. And on the other side, the very strong growing Partner Business, which puts and create more competition on the platform, including the retail business. And this basically the strategic shift tempers revenues on the short term. On the long term, it's very favorable because it brings more assortment to the platform, which is more attractive for the customers and for the partners. And this will support further platform monetization, which we will see in increasing media business, in increasing B2B business and obviously as well increasing partner revenues. So you had a question on commissions. Commissions vary, as you know, dependent on different factors like price points for products, partner categories and the usage of ZMS. But I hear the decline is, as I said before, driven by the softer retail business. So now moving to a broader question, more midterm question about our confidence in the midterm target and as well in reaching our 2026 guidance range. So let me start with 2026. I'm very confident that we can hit the midpoint of the guidance range on the back of high-quality earnings of the synergies coming in of the operational efficiencies. So this makes me confident. In terms for 2027 and 2028, I shared with you already in the 2025 call in March, the building blocks of reaching the midpoint of the guidance range. First, we are confident that we can deliver our midterm gross margin ambition of around 40%, driven by a high-quality Partner and Retail Media Business, driven by underlying improvement in the B2C on ABOUT YOU margin and obviously, the growth of our B2B segment. Secondly, I have full confidence in the synergy delivery, which is an important building block towards the midpoint of the guidance. Now we saw commercial and procurement synergies coming in. The synergies from the consolidation of our logistics network and as well the payment platform is still to come. Yes. We are doing this and executing on that one as we speak. And the third building block of reaching our midpoint of the midterm guidance are OpEx efficiencies on the one hand side fulfillment, what I already as well mentioned in the presentation, the project of reshaping the network is on plan, and we will see first financial benefit already in the second half of '26 and then more structural impacts in '27 and '28. So effort will be visible already in '27. And in addition to that, efficiencies driven by our restructuring efforts. So you heard that we have put forward a couple of those plans like restructuring efforts in the headquarter in Berlin, closing the studios and as well 2 outlets, everything will contribute to reaching the midpoint of the midterm guidance.

Next question comes from Andrew Ross from Barclays.

I wanted to ask you a short-term one about Q3. It would be helpful to get any color as to what you've seen in July today, appreciating, but it's a light month. But any sense for the keen GMV growth may have accelerated so far and what your expectations would be for Q3 would be helpful. And then as a follow-up to that, maybe you can give us in terms of how to think about the EBIT split implied in your guidance between Q3 and Q4, clearly, Q4 is the big quarter. It would be helpful to get an understanding of how much is baked into that.

Thank you, Andrew, for the question. On current trading, obviously, I will not comment on July, but what I can tell you is that in Q3, we expect to remain in the mid-single-digit range. And as you know, the final outcome will always depend on the seasonal transition in September. Regarding adjusted EBIT, you know as well that we are not guiding quarter by quarter, our adjusted EBIT, but you are aware and you said that Q3 is the smaller -- the seasonally smaller quarter. In terms of progression, we expect continuous progress towards achieving the full year guidance range of EUR 680 million to EUR 720 million.