Zalando SE Q1 2025 Earnings: A Strategic Shift to Growth and Profitability

Zalando SE, Europe’s leading online fashion platform, delivered a strong opening quarter in 2025, showcasing accelerating growth and improving profitability amid a challenging macroeconomic backdrop. The company’s Q1 results, released on May 6, 2025, highlighted a strategic focus on customer loyalty, B2B expansion, and ecosystem-building—key drivers that position it for sustained momentum in the year ahead.

Financial Highlights: Growth and Margin Expansion

Zalando’s Q1 results demonstrated resilience in a slow-growth environment. Gross Merchandise Volume (GMV) rose 6.5% year-over-year to €3.496 billion, outpacing the 1.8% growth recorded in Q1 2024. Revenue increased 7.9% to €2.419 billion, driven by both its B2C and B2B segments.

Profitability improved significantly, with adjusted EBIT jumping to €46.7 million (up from €28.3 million in Q1 2024), translating to a margin of 1.9%—a 0.7 percentage-point expansion year-over-year. This was fueled by better B2C gross margins and cost efficiencies, with the B2C segment’s gross margin rising to 39.1% from 38.2% in Q1 2024.

Customer Growth and Engagement

Zalando’s customer base hit a record 52.4 million active users (L12M), up 5.9% year-over-year, reflecting the success of its loyalty program and content-driven strategies. The Zalando Plus initiative, now live in 13 markets, has enrolled over 15% of customers in those regions, with early data showing increased order frequency and wallet share.

Meanwhile, the B2B segment’s ZEOS platform continued to gain traction, posting 11.6% revenue growth to €240 million. A landmark partnership with TikTok Shop—designating ZEOS as its preferred logistics partner in Germany, France, and Italy—hints at future opportunities in social commerce.

Strategic Momentum: Acquisitions and Ecosystem Plays

The proposed €3.1 billion acquisition of ABOUT YOU—a key rival in the German market—is progressing smoothly, with 91.5% of shares tendered as of Q1. Regulatory approvals have been secured, and closing is expected by summer 2025. While the deal’s impact is excluded from 2025 guidance, it promises to expand Zalando’s customer base and strengthen its position in fast-fashion and lifestyle categories.

Zalando also emphasized its “pan-European fashion ecosystem” vision, leveraging its logistics network, software platforms, and brand partnerships. New collaborations, such as becoming the exclusive European partner for Diane von Fürstenberg (DVF) and launching LVMH’s Marc Jacobs, underscore its ability to attract premium brands seeking a digital-first presence.

2025 Guidance: Caution Amid Confidence

Despite macroeconomic headwinds—geopolitical risks, supply chain pressures, and consumer caution—Zalando reaffirmed its 2025 guidance:
- GMV and Revenue Growth: 4–9% year-over-year.
- Adjusted EBIT: €530–590 million, up from €473 million in 2024.
- CAPEX: €180–280 million, focused on logistics and tech infrastructure.

Risks and Challenges

Management acknowledged risks, including inflationary pressures, supply chain disruptions, and regulatory scrutiny in the EU’s digital markets. However, Zalando’s cash reserves—€2.3 billion as of Q1—provide a buffer, while its ZEOS expansion and Zalando Plus initiatives offer secular growth tailwinds.

Conclusion: A Strong Foundation for Long-Term Value

Zalando’s Q1 results reflect a strategic pivot toward sustainable growth and profitability, with its B2C and B2B engines firing in tandem. The 6.5% GMV growth, 7.9% revenue expansion, and margin improvements validate its ecosystem model. While short-term stock volatility (evident in the post-earnings dip) may test investor nerves, the company’s strong liquidity, strategic acquisitions, and innovation in loyalty and B2B services position it well to capitalize on Europe’s evolving retail landscape.

With adjusted EBIT margins on track to hit 2.3–2.7% for 2025 (up from 1.9% in Q1), and its ZEOS-TikTok partnership unlocking new revenue streams, Zalando is building a moat in a fragmented market. For investors, the stock’s current valuation—trading at ~10x 2025E EV/EBITDA—suggests a reasonable entry point, provided the company executes on its ambitious targets.

In sum, Zalando’s Q1 performance is more than a quarterly win; it’s a blueprint for how a digitally native retailer can thrive by blending customer intimacy, operational excellence, and strategic scale.