Good morning and welcome to our Q1 2026 earnings call. Today I'm joined by our Co-CEO Robert Gantz and our CEO Nadimitrova. Robert will kick us off with a business update before handing over to Anna to walk you through the financial development of the quarter. Finally, Robert will discuss our outlook. Both will be available for questions afterward. As usual during the Q&A session, we kindly ask you to limit your questions to two, allowing for an efficient discussion. This call is being recorded and both the live webcast and a replay will be available on our Invest Relations web page later today. Robert, over to you for the first slide.
Thank you, Patrick. Hello and thank you for joining today's call. We've achieved significant milestones over the past year and we continue to do so in Q1. We've successfully executed our strategy and met our financial goals. And we've made substantial progress again in the first few months of 2026. Progress across our team of apps to drive our platform's distribution, custom frequency and monetization depth. Progress as well with advancing our technology platform, which powers our B2C and B2B businesses. And progress with our AI capabilities to drive efficiency and growth for our business. Our addressable market is huge with 500 billion euro in European fashion. So we relentlessly work on our strategy execution to achieve a larger coverage of it. Our Q1 performance was strong. It confirms that we are well on track with our full year targets and it's yet another step towards our mission goals. There are five key highlights that demonstrate our overall progress in Q1, which I will show you now on the next page. number one we've delivered a strong financial performance in Q1 at group level we delivered strong double-digit growth reported GMV grew nearly 22% and group revenue is up nearly 24% compared to Q1 last year and we increased adjusted EBIT by 39% year-on-year to 65 million euro that brings our adjusted EBIT margin to 2.2% number two as well in Q1 we have advanced our AI capabilities, bringing further traction to both our B2C and B2B business. We continue to be impressed by what benefits AI can bring to both the efficiency and growth of our business. And I'll come back to some of our most exciting developments later in the course. Number three, in B2C we delivered strong growth in Q1 across our team of consumer apps. We had a strong start into the spring-summer season. And about you and Lounge, achieved even double-digit growth rates of GMVs. In our core, Absolando, our loyalty program Zone Plus is a central engine to drive growth. We now have, what, 18.5 million members. We recently launched new exciting benefits by adding food delivery subscription Vault Plus as a partner benefit for our members. Number four in B2B we recorded continuous strong double digit growth. We launched ZEOS with the first ZFS partner in Norway and we added two new sales channels. This expansion means we now serve a total of 26 markets and 20 sales channels via ZEOS. And number five in summary we're well on track to meet our full year targets. Despite the ongoing geopolitical instability and economic volatility in our markets we confirm our 2026 targets. So overall I'm very happy with the performance of our team in the quarter. Now we will first talk about the progress on the AI developments before Anna dives into the financial performance. So in March during our full year updates we highlighted how our B2C and B2B segments are driven by shared data in infrastructure engine that is now supercharged by AI. This engine is constantly getting better every day and every second. This continuous improvement is fueled by the growing engagement of consumers using our apps, and as brands increasingly integrate with our ecosystem. We strategically drive the distribution and the usage frequency of our platforms across consumers and merchants. The result of this expanding scale is an accumulation of more high-quality data, which in turn continuously refines and improves our solutions. And AI is a powerful catalyst for both growth and efficiency, and we've successfully used data and algorithms to drive our business for over 15 years now. Yet in recent years and months, a DI capability of scale, and the positive impact on our business has been accelerating. Let me give you a few examples of what we saw now in the recent months. So firstly, we're making great progress to evolve our AI-based system from a chat tool into a true lifestyle companion at the forefront of agente commerce the key reason milestone last quarter was the upgrade to provide advice beyond fashion we now cover sport and very recently as well beauty advice so ask the assistant for highly specific advice for example for hydrating Korean skincare or running shoes for overpronation and the assistance can now point you into very helpful directions numbers wise and impressive 10 million customers last quarter have interacted with our AI assistants and this is up from six million in the whole of 2025. So secondly we now see how AI enhances the efficiency of our logistics backbone. We're proceeding with the rollout of AI powered robots across our European fulfillment network and already today two million items funds are being autonomously handled by our growing fleet of warehouse robots and now based on the early success of through optimization and model training We are rolling this impressive technology out across our network. This will improve throughput, scalability, and efficiency of our entire fulfillment operations across Europe. And thirdly, we recently achieved impressive speed and quality increase in our partner article onboarding through AI. We introduced a computer vision solution that automatically detects and corrects image backgrounds of articles. We also correct about 6,000 articles pictures daily and enrich missing material composition information through AI. As a result, up to 85% of articles are now ready to go online in less than three days. This is an impressive accomplishment in both speed and quality, and it reduces organizational coordination costs between us and the partners. Another great win-win through AI. Those are the three examples which demonstrate our continuous traction of applying AI in our business, and I'm very much looking forward to sharing many more these examples with you in the future. Now I'd like to hand over to Anna for the financial performance.
Thank you Robert and good morning everyone. As Robert already highlighted, we delivered strong financial performance in Q1. The reported increases in GMV and revenue are driven by solid underlying growth in Zalando and the inclusion of About You. On a performer basis, we achieved strong GMV growth. GMV increased by 6% to 4.3 billion euros. This growth was primarily driven by double-digit growth of our partner business, of About You, and launched by Zalando. As we have told you for many years, we see GMV growth as the key top-line KPIs for our business, and it is defined as the value of all merchandise sold by Zalando and by our partners to our customers. Revenue growth was a solid 3.4%, reaching 3 billion euros, driven by both B2C and B2B. It was lower than the GMV growth because our partner business grew faster than Zalando Retail, and we don't account for those sales for our partner business, but only include the commissions we earn on these sales as revenues. Our focus on driving profitability is reflected in the increase of adjusted EBIT. On a reported basis, adjusted EBIT reached 65 million euros, up 39% year-on-year. We have already delivered synergies of 10 million euros in Q1, which contributed to this result. We are firmly on track to achieve 40 million euros in synergies this year. In terms of profitability, group adjusted EBIT margin increased by 0.3 percentage points to 2.2% despite the dilution from the consolidation of About You. Zalando stand-alone adjusted EBIT margin improved year-on-year by 0.6 percentage points from 1.9% to 2.5%. About you, generated positive adjusted EBIT after Synergy, which is very significant progress, and the first time in its history it generated positive adjusted EBIT in the first quarter. Our Q1 results demonstrate continued progress towards accelerating our financial performance across our entire business. Let me first focus on the strong top-line performance of our B2C business. GMV saw strong growth across all three consumer apps on a reported basis and on a performer basis. Just like in Q4, both About You and Launch by Zalando achieved double-digit growth rates. Growth in Zalando was driven by the acceleration of our partner business. Furthermore, we saw a successful start to the spring-summer season, with particularly strong growth across several lifestyle categories, like sports, kids and family, and beauty. Performer revenue saw a moderate 2.1 increase to 2.7 billion euro, reflecting the strategic shift in our business mix. This was driven by partner growth significantly outperforming retail across both Zalando and About You. A result of existing partners deepening their platform presence to expanded product assortments. The partner business share at Zalando standalone is 36.6% up 2.2 percentage point. However, the inclusion of About You diluted the overall group share to 31.8%. As we scale the partner business towards a target of 40 to 50 percent of total gmv by 2028 we expect gmv growth to consistently outpace revenue growth in b2c over the coming years additionally significant growth in our high margin retail media business across zalando and about you contributed to the revenue growth in b2c as a result retail media revenues increased 1.7 percent of b2c gmv in summary our b2c business continues to expand based on our multi-up approach and increasing distribution frequency and depth the strong top line performance of the b2c segment was supported by generally stronger customer metrics. The increase in GMB was driven by the combination of more active customers and higher customer spending. First, we saw strong growth in active customers. This was primarily driven by the inclusion of About You, but was supplemented by solid growth within the standalone customer bases of both Zalando and About You. By the end of Q1, the number of active customers reached a new high of 62.3 million customers, an increase of close to 10 million customers year on year. As in previous quarters, close to 6 million customers currently use both Zalando and About You. Moving to the right, at the same time, 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 305 euros. This increase was driven by a larger average basket size, while the average number of orders per active customer remains stable. Overall, we continue to attract more customers to our consumer apps and increase our sharefall. The top-line growth contributed to an overall increase in gross profit of 22.5% to more than 1.1 billion euros. This translated into a B2C gross margin of 41.5%, which is 0.6 percentage points lower than in Q1 2025. The development was driven by the consolidation of about U with lower gross margin and had a negative impact of 1.1 percentage points. In Zalando B2C, we were able to grow the gross margin by 0.5 percentage points, mainly thanks to a very healthy and well-executed inventory clearing process. Through the strategic use of launch and data-driven discounting, we were able to move all the stock at improved margins. This was a big win for the past three months. We told you last quarter that we had elevated inventory to clear. We delivered that clearance, and in spite of that effort, reported a 0.5 percentage point increase in Zalando B2C gross margin. B2C adjusted EBIT for the quarter was 38 million euros. This represents 0.5 percentage point margin drop from the previous year to 1.4%. This margin softening was mainly a result of dilution following the consolidation of about The Lando B2C standalone adjusted EBIT margin remained broadly stable as the improved gross margin was offset by an increase in fulfillment cost driven by the consolidation of our network and ramp up of our new logistic sites. Moving to B2B, in B2B also we continued to accelerate our financial performance. In the first quarter of 2026, we grew B2B revenues by nearly 24%. On a performer basis, the B2B business grew by 16.6% compared to the previous year. So well above group revenue growth. Zill's fulfillment, which includes both Zalando fulfillment solutions and multi-channel fulfillment, drove our B2B expansion. ZFS maintained in 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. The inclusion of scale led to an increase of software revenues. This strong B2B revenue growth translated into higher profits and significant margin expansion. Our gross profit margin expanded by 5.8 percentage points to 18.2 percent. This very strong growth in B2B gross margin directly translated into adjusted EBIT increasing by more than four times to 26 million and the margins tripling to 8.6 percent. This improvement was driven by three factors. First, we realized efficiency gains and increased scale within zero fulfillment as we bring on more and more large scale merchants onto the platform. For example, we are now bringing on Max and Spencer shortly without incremental investments in the platform. Second, the margin expanded that stands to the inclusion of scale, which contributes higher-margin software revenue. And thirdly, our margin benefited from a favorable one-off provision release of 4 million euros. Without this release, the B2B margin would have been 7.4%. Our strong growth in the B2B business has enabled us to achieve a solid overall increase in the group's adjusted EBIT. Overall, our adjusted EBIT margin improved from 1.9% to 2.2% in Q126, whereas Q125. This is mostly driven by a stable gross margin and operating efficiencies in admin costs. Gross margin on a group level remains stable. Fulfillment cost increased by 0.6 percentage points due to the consolidation of about you and temporary transition costs from consolidating our network and ramping up our new logistics sites. While the majority of our long-term fulfillment savings will come from network optimization, we are complementing these structural moves with AI-powered automation. Marketing costs slightly rose by 0.1 percentage points, driven by the consolidation of about you. Admin cost decreased by 0.8 percentage points, which reflects enhanced operational efficiency. Other operating expenses increased due to a 97 million euro restructuring charge for the reshaping of our logistics network we announced in January this year, as well as other restructuring measures to further boost operating leverage. Those one-off costs are as usual reported outside of adjusted EBIT. In Q1 26 EBIT total adjustments amounted to 144.5 million euros. We anticipate the total adjustments for the 2026 financial year of approximately 300 million euros as communicated during our full year call with the remaining amount distributed relatively evenly over the next three quarters let me now turn to our balance sheet and cash flow development we continue to operate with negative working capital at the end of q1 we have negative working capital of 240 million new compared to negative working capital of 670 million years at the end of 25 As we guided you on the full-year earnings call in March, we settled in Q1 high-volume partner payouts from peak seasons trading, and our payables have returned to a more normalized level this quarter. But a major win this quarter was the development of our inventory. Solange's standalone inventory growth slowed from 12% in Q4.25 to 2% in Q1.26. This reflects our effective effort to clear the extra inventory accumulated during Q4. We have aligned our buying plans in return with the significant growth momentum of the partner business and expect inventory to trend in line with B2C revenue growth going forward. On a reported basis in Q1, the inclusion of About You drove 22.5% increase in our total inventory. Our cash and cash equivalents remain solid and ended the quarter at around 1.3 billion euros. This level aligns well with our capital allocation framework to hold a liquidity buffer of 10% of last 12 months' revenue. This figure is about 600 million euros lower than our cash flow position three months ago. As most of you know, Q1 typically sees a cash outflow, and this was slightly more elevated this year. because of payables to our partners, who experienced a great cyber-increusement business. In terms of CapEx, we continue to invest in our data and infrastructure engine. CapEx spent in Q1 mainly relates to investment in the ramp-up of fulfillment centers in Germany, France, and Sweden, decreasing spending on tech investments and the inclusion of about you. Furthermore, our share buyback is progressing at pace, leading to a cash outflow of 62 million euros. At the end of March, we still have around 240 million euros remaining to complete the program. This concludes the financial update for Q1. Now, let's move to the outlook on page 14, and for that I will hand it back to Robert.
Thank you Anna. So overall our business performs strongly in Q1 and we're proud of our team's achievements. We're the strong start of the spring summer season and consumer demand persists despite a volatile geopolitical and subdued environment. And we have many times proven in the past our resilience and our ability to navigate these situations so we reiterate our guidance for the financial year 2026 as we provided in March and our focus is as always executing our strategy investing into the immense opportunities it has and delivering a strong financial performance in 2026 so this concludes our presentation for today and before we jump into Q&A let me just wrap up with the key takeaways of today we're happy with the team performance that we have delivered in Q1 We advanced our AI capabilities, gaining traction in both our B2C and B2B segments. In B2C, we delivered strong growth across our team of consumer apps. And in B2B, we recorded continuous strong double-digit growth. And we remain well on track to meet our full-end targets. Thank you, and now let's open up for the Q&A.
Operator
Our first question comes from Monique, Polart, and Siri. Please go ahead.
Good morning. Thank you for taking my questions. The first question that I had was just on the performance costs. Just hoping you could help us to understand the timeline of the ramp up for the performance costs, so how long that would be expected to be a drag on Zalando kind of standalone EBIT margins for. And the second question I had was on the B2B gross margin. So obviously, a very strong progression in the B2B gross margin this quarter, year on year. Anna, you've called out, obviously, the benefit from scale. But just also trying to understand where the B2B gross margin could go in a steady state, please.
Good morning, Monique, and thank you for your questions. Let me start with the question on the fulfillment cost development. As we have told you in the past, we're running a program of consolidating our logistic network and utilizing the capacity. For this, we are ramping up more modern centers and ramping down centers, which we have announced that we will close. So this reshuffling is planned to be executed in H1. So this is what you can expect. And then, obviously, this is a very big lever for us to achieve our mid-term guidance in 2028, as we will see the benefits from this consolidation starting in 2027 and then in 2028 coming to the full impact. So let me move to the second question on our B2B margin. and indeed we are very pleased with the development of the B2B margin and we have here two structural effects one is the increasing scale and efficiency in our sales business where we saw an improvement in the margin and secondly as we grow our software business they come with structurally a better margin which as well supports the margin developments. So the 18%, 17%, 80% which you have seen in Q1 is as well what we expect going forward.
Operator
The next question comes from Mia Strauss with BNP Paribas. Please go ahead.
Hi, good morning. Just two for me. Maybe if you could maybe give a bit more color in terms of current trading and how you exited the quarter. I understand that you haven't really seen an impact from the Middle East, but just more broadly, I guess, how do you feel you're positioned now versus back in 2022 where we saw the higher inflation? And then secondly, I just wanted to, in the context of the gross margin, obviously the Q1 was broadly stable, and I think you're still expecting Q2 some inventory clearance.
How should we think about the gross margin for Q2 and then into the second half of the year? yeah um thank you mia uh let me start with the gross margin and then robert and myself will ask we answer the current trading and uh the differences to 2022 um yes uh indeed um gross margin in the first quarter was stable and you have seen uh seen the moving parts the dilution of about you was fully offset by our b2b and b2c gross margin and indeed in b2c the lando we could improve the margin which was on the higher end of our expectations and this was driven by a very effective and very well executed clearance of the stock um as i told you So in the March earnings call, we are focusing on healthy inventory management and clearing of the inventory during the first half of the year. So you can expect Q2 to be slightly below the previous year. And then in H2, we will improve the gross margin going forward. So I'm just reiterating what I said in the earnings call. in March. And now, regarding current trading, indeed, consumer demand persists in today's environment. And as before, the European consumer continues to be price sensitive and to be cautious, but no more.
So since the start of the Middle East conflicts and we, you know, we measure and we have not seen any measurable impact but that said we continue to closely monitor the situation as the conflict evolves and Robert maybe your memory from 2022 yeah yeah I mean you know as Anna said like you know the consumer demand persists in today's environment and I guess the I guess the difference I think that we see towards 2022, I think in 2022, there was actually an observable big difference in how consumers actually reacted towards the situation and became actually from one day to the other much more price sensitive and caution. We saw that very much in 2022 in our numbers. What we see now is actually, like Anna said, just a continuation of the same price sensitivity and cautious behavior as we've seen in the past. But yeah, it persists and there's no to date measurable big impact that we actually see.
Operator
The next question comes from Anne Critslow with Berberk. Please go ahead.
Thanks for taking my question. I've got two, please. The first is on inventory. So if we look at it in a sort of inventory to revenues way, it still looks quite high. So I wondered if you had a target figure in mind that one day you'd like to get to for inventories to revenues. And then the second question is about rest of Europe. I wondered if you could comment on profitability in rest of Europe compared to the Duk region and also on countries such as Spain. So whether you have a sense of, you know, when you might reach profitability in those types of countries.
Good morning, Anne, and thank you for the questions. On inventory, so I'm very pleased with the progress which we made in inventory. As you recall, we closed the year with an inventory of 12% year over year. And now we are down to 1.9%, which is much more healthy because it's much more aligned with the stop line growth and we have aligned our buying plans going forward with the growth of the partner business and respectively with the development of the wholesale business and you can expect that there will be in sync we are looking at a GMB here when we as well make our plans for inventory and not at revenue code as you have noticed as well that the revenue code is impacted by the strategic shift to a higher proportion of the partner business and of the partner business outgrowing the retail business. And this is why the right KPI to look here at is the GMV growth. And we are very well on track. And in regards to your question on the rest of Europe, as you know, We don't break down and we don't report countries and as well don't disclose the EBIT margin. But you can be assured that we are having plans for each country and we are driving efficiencies in growth country. but by country, respecting as well the very specific demand situation, competitive situation, and playing with our team of apps with About You, Zalando, and Zalando Lounge.
Operator
The next question comes from Jürgen Kopp with Kepler Suvro. Please go ahead.
Thank you very much indeed. Two ones, first of all, coming back on the current trading, I was wondering if you could share maybe some thoughts on what you're seeing from your vendors in terms of prices. Obviously, spring is probably, summer is obviously done, but what you're seeing in terms of prices for fall, winter this year, but also then going into spring 2027, that's the first one. And secondly, you talked about the AI capabilities and your strong performance there. With the new customers that you're gaining with your AI technology, Maybe some thoughts on how they are trending. Is there a difference in terms of churn? Are they more loyal maybe? What are you seeing there in their activities? Maybe just more details from that angle.
Thank you very much. good morning thank you for the question I'm taking the current reading question so you're asking about the buying conditions and if we see input prices going up as you rightly say we already stocked up for summer spring 26 and as well autumn winter we have negotiated and And we have pre-ordered part of it, as you know, we do pre-orders and then re-orders. And the season, the buying season for Spring-Summer 27 is still ahead of us. And obviously, as always, we have a very strong relationship with our partners, and we will find here a solution which is benefiting as well for the partners as for us. So, yeah, we will see it's still early, but be assured that we are preparing as well so that we can mitigate some potential inflationary impacts on the land up. And the second question.
The second question, on more color, on customer behaviors, like customer acquisition, so there is like in the newer cohorts of customer acquisitions, there is actually no significant difference in any kind of behaviors or patterns than to the cohorts that we've seen in the past. I think one interesting maybe observation to share, Jung, is in the Zalando app, I think one of the good, I think, traction that we see is actually that, I mean, as we have driven like the AI-based feed there that actually surfaces like kind of like, you know, inspiring content that we actually see that this actually now brings, I think, a little bit more engagement into the app. So we see actually some good kind of tractions in terms of like more visits actually in the Zolando app, which is as well driven by some of the AI-driven investments in content inspiration.
Operator
Our next question comes from Georgina Yohanan with J.B. Morgan. Please go ahead.
Oh, hi. I have two questions, please. The first one was I understand that the partner program and lounge really outperformed and we're up double digit presumably that's on a pro forma basis just to understand does that mean that the wholesale business is now actually going backwards and if that's x lounge of course and if that's the case then does that have implications for your buying margin going forward um yeah just to understand that better, please. And then secondly, just coming back to the gross margin development, which I think was really impressive in the context of the elevated inventory. Are you saying that your drag on the gross margin year on year was actually lower from discounting, i overall you had lower discounting in q1 than you did in q1 25 and and just to understand therefore why we should expect the q2 gross margin to be to be down it just seems um slightly counterintuitive thank you so good morning george and thank you for uh for your question um questions so first let me address the question on um the partner business in the court of lounge and wholesale in the Zalando app and indeed that the wholesale business in the
Zalando app is flat and as you know we are optimizing for the group we are optimizing for Zalando and we're not optimizing wholesale or partner business and this is completely in line with our strategy because we would like to expand our platform reach and to call the partner business obviously it's just less risks with inventory but as well we can call the engagement with our partners which is not only using our marketplace but as well increasing the little media spend and as well using our logistic services so exactly on strategy. So now moving to the question, what could be the impact on our buying conditions? No, there is no impact. Two reasons for that. The wholesale business is still big, yeah? So we are targeting 40-50% partner business, and we still have a big proportion, which is wholesale, which is great, because then we have two legs to walk on. And as well, we have about you, yeah, which as well, again, increases the volume, and we have already gone through the cycle of negotiation which we already shared with you and which is video visible in synergies so now to the question on the gross margins there were two parts of the question the first one is what made it different compared to last year was it discounting driven and the second is what could we expect in Q2 and you're saying that it feels counterintuitive and so we usually compare year over year the quarters rather than Q4 to Q1 as you know Q4 is a quarter which is very promotional we have a lot of campaigns we have single day we have cyber we have Christmas people are spending more so and it's discounting heavy and as we told you in the last earnings call is that we optimize with our data-driven algorithms discounting performance marketing can listen as well and our loyalty program so that we get the best cross margin given not only the demand side but as well the the stock so this is different in q1 in q1 we don't have that much promotional environment as in q4 and as well is the start of the season where you see as well more black prices as we kick off so now moving to the second part of the second question why I am expecting the Q2 margin to go down again we have here the dilution of about you as you know it laps in July and we still are focusing on the inventory clearance so we would really to have here clean table and as we are committing for the buying budget for a spring summer season 27 so that we have a good starting basis and this is why my base assumption is that we will have a lower margin in q2 the next question comes from yes raijani with ubs please go ahead hi uh thank you for taking my questions i've got uh two please
the first one is just a follow-up on the current trading question so uh you know obviously i know you don't comment on on months but just given we have very different weather comps from last year uh can you remind us that you know from may and june do do the comps actually get tougher or do they get easier and just given we are halfway through uh q2 already uh can you confirm that you know based on your middle east comments can you confirm that there is no deterioration from the five to six percent gmv growth run rate that you're seeing so far so that's the first question and uh as far as the second question is concerned it's uh on marketing costs so the very slight negative development year on year on an underlying basis uh can you tell us that uh you know is this a function of higher customer acquisition costs because of ai and do you think that customer acquisition costs incrementally are getting tougher because of uh of ai agents or do you think incrementally they should get better and it should be favorable in the second half thank you thank you for your questions on current trading so as i told you we see consumer demand persisting in today's environment so i can't speak for may may in june because it still needs to
happen and we are closely monitoring but what we see today and without reflecting any potential it impact of a prolonged crisis we confirm our guidance and in Q2 we expect performer GMV growth to remain in the mid single digit range on the marketing cost question so the increase in marketing calls is driven by the inclusion of about you so indeed in Zalando we spend less in performance marketing as you know we are preparing for a very exciting event starting in June with football yeah so but underlying we didn't spend more for new customers we really double down on clearing the inventory so no deterioration of the metrics there the next question comes from Richard Chamberlain with RBC please go ahead yeah thank you good morning um maybe i could just ask a couple more on costs if that's all right just looking at page 10 of the presentation um you touched on marketing
costs can you can you also just explain about the restructuring costs um i think it was close to 100 million in the quarter are we done now on restructuring costs are you expecting more of those in q2 and for the rest of the year and then the other one is on the acquisition related expenses, I guess, relating to about you. Can you give a bit more color on that and also your expectation on that line for the balance of the year as well?
Thank you, Richard. So let me start with the adjustments and the restructuring costs. So as I said, we are expecting $300 million in total, adjustments for the year, $144 we booked in q1 of which the majority was tied to the restructuring of the logistics network and as well overhead restructuring which is well announced in June for example a content studio so we made big progress with AI so this is how you see it as well in the overhead cost we stick to the number and the numbers consists as I shared with you as well so we have to share base payments which is a bit more than one third and then we have the restructuring cost and then we have purchase price allocation which is customer relations and equity from which is no cat non-cash and then we have the integration cost and I guided you as well that for the whole period we have planned mid digit million number for integration calls and the biggest proportion will be due this year yeah so this is what you can expect no no new news yeah we just want to talk here
Operator
The next question comes from Adam Cochrane with Deutsche Bank. Please go ahead.
Good morning. Two questions from me. The first question is, in terms of how you treated inventory and markdown promotions differently in 1Q compared to 4Q, am I right in understanding that most of the difference in that is because of different market conditions? So 4Q being a more promotional market across the industry, you just have to participate. Or is there any change in the way that you did things in 1Q? And added to that, is there any element of the inventory that was written down or provided in Q4 so that you didn't have to do the same in 1Q? and then when you sell it on zolando lounge it's already been written down so you don't have the same impact uh in than you did in fourth quarter um and in terms of the second question it does appear like you're balancing sort of revenue growth and gross margin a bit more carefully in the first quarter how are you thinking about the pro forma revenue growth so the plus 2.1 percent in B to C looking into into sort Q2 and the second half based on on your
outlook I'm assuming that you are expecting an acceleration of that as the year progresses what exactly are you basing that on an improvement in consumer confidence customer behavior or is it more Zalando specific initiatives thanks thank you Adam let me start with the inventory question and the consumer environment so usually as i said q4 is different than q1 in terms of promotional activity because we have cyber and we have a lot of campaigns uh going on uh and in q1 you have the start of the spring and summer season so um this is what is different this is the nature of the seasonality of our business what we have done is we use more broadly lounge um in clearing the old stock and And indeed, as you say, if we have very old stock, it has written off. And obviously, when it is sold on launch, then you have a favorable impact. So exactly as you said. On revenue growth, in Q1 this year, we had 2.1% revenue growth in consumer, which was mainly driven by the partner business outgrowing the Zalando retail business. Last year, it was exactly the other way around. So the wholesale business was growing faster than the partner business. So this is what you're seeing as the impact. and about you has a much stronger retail business growth partner business is still very small proportion and going forward we are sticking to our guidance yeah and this is actually indeed why we're giving you a range and the range is quite broad because we can see positives from the consumer environment but we don't control it yeah so what we double down is what we execute how we execute and Robert was talking a lot about that how we leverage AI as well to make to increase the customer experience to make our proposition more attractive but as well to reduce return rates which as well has an impact of the top line. So what I'm saying is that we stick to our guidance and we don't reflect here any potential adverse impact of a prolonged conflict in the Middle East.
Operator
And our last question for today's call comes from Andreas Riemann with Odon. Please go ahead.
A few questions actually around scale. um so what's the underlying growth of the scale business at present and as of when do you expect levels to to be included in your numbers and a bit broader did you already renew contracts of scale customers and did the commissions change when you renewed those contracts so a bit more insight on scale would be appreciated yeah um hello andreas um happy to talk you to scale we're very happy to have um scale in our portfolio because this complements obviously uh our logistic and software offers um so we um will at levice uh still not in the numbers um so we'll come later on as we are uh onboarding so it will be in h2 uh then in terms of the take rates no the take rate is the same so we haven't seen their reduction on the take rate and as you know we don't disclose revenue growth of scale but underlying the revenue growth is around 9% for the quarter ladies and gentlemen that was
the last question i would now like to the conference back over to the management for any closing remarks thanks everyone for joining today's earnings call session if there are any further questions don't hesitate to contact us and handing over to anna to wrap it up for today's message thank you everyone for joining um it is important that you take away that we are progressing very well in the executing of our strategy and delivering on our financial performance.
We have done so in 2025 and Q1. In 2026 is a further proof point that we deliver. And we are excited about the future and how we can leverage the power of AI, the power of our teams, and the power of our tech platform, and to create more value for our customers, for the partners and for the company. Thank you very much and speak to you soon.
