Q3 2022 MYT Netherlands Parent BV Earnings Call
Revenues from the third into the fourth quarter.
But unfortunately there.
Additional and totally unexpected external shocks in the third quarter we.
We saw in March a strong rise of Covid infections in Asia shutting down public life.
Even more tragic and totally unexpected was the outbreak of war in the Ukraine at the end of February .
This had a temporary negative impact on consumer sentiment in Europe .
Despite all this <unk> delivered very solid results and continued prop.
Profitability in the third quarter fiscal year 2022.
I want to leave you today with three key messages, allowing you to have a clear view on the strength and health of our business.
First the fundamental drivers for continuous growth for our business remain all in place, namely the shift of luxury consumers to online shopping as well as untapped geographic and category growth potential for our business.
All of this supports our belief.
In the long term growth trajectory of 22% to 25% annually.
Second despite the challenges in the third quarter, we have produced excellent results and kpis, demonstrating our customer excellence, which is driving customer loyalty and sector leading profitability.
Third.
The first weeks of the fourth quarter fuel our confidence to remain the best partner of choice for luxury designer brands to engage with our high value multi brand customers.
And for a speedy passing of the external shocks and therefore, we have full confidence to deliver a solid fiscal year at the low end of our guidance.
Let me now comment in more detail on these three key messages for today.
In the third quarter, we grew our gross merchandise value by 13, 2% compared to Q3 of fiscal year 2021.
Continued growth momentum.
Compared to extra ordinary strong growth in Q3 fiscal year 'twenty, one as evidenced by the consistent high two year growth rate in <unk> of 67%.
Third quarter fiscal year 2022 over Q3 of this year 2020.
We had a very good number of new customers in the third quarter with over 110.
First time buyers shopping results.
We combined the growth once again was the strong gross margin. So our growth was driven by consumer demand not by promotional intensity, which we have seen breakout in some markets with some players recently.
Again, I would like to remind everyone that luxury is still lagging in online penetration.
It is estimated by Bain and I'll take them up.
Still only 30% of personal luxury goods spend will be online by 2025.
This would be nevertheless, global online market of your 110 billion.
Which at least 30% over $33 billion is estimated to be captured by multi brand fashion platforms of which we believe we have.
Clear leader.
The long term growth potential and our continued long term guidance of 22% to 25% annual <unk> growth is of course also supported by regional expansion and category expansion. In addition to share of wallet penetration of customers.
United States showed again, the highest growth for mitral Riva was 41, 6% of growth in <unk> compared.
Compared to Q3 of fiscal year 2021.
The us accounted for 16, 4% of our business in the third quarter compared to 13, 1% in the third quarter of fiscal year 2021.
We continue to see strong demand of luxury consumers, particularly from states like Florida, or Texas logically, we have therefore focused our activities in these states in the third quarter with high impact customer events, such as the physical pop up and dinner and.
And collaborations as bulk in Palm Beach and shopping lunch.
Hosted by our local brand ambassador for Us in Dallas.
People are spending their disposable dollars on unique and special pieces and our dressing up.
We saw it clearly at our <unk>.
Recent party in Miami hosted together with domain eco donation to celebrate the upcoming launch of our exclusive capsule collection of Deutsche in Gabon are only available at Mitel itself.
While mainland China was of course impacted by the unfortunate return of Covid outbreaks. We grew again by over 25, 9% in <unk> compared to Q3 of fiscal year 2021.
We continue to pursue our long term aspiration of being the best destination for luxury multi brand wardrobe shopping in China.
As part of this strategy, we launched our flagship store on JD Dot com in the middle of March.
This is not just to generate short term revenue growth, but rather longer term customer lenders and trust.
We believe that J D. Dot com provides a good environment for this approach also evidenced by the recent announcements of brands such as Newsy tone give our sheet wherever you are and where.
<unk> to open a presence on JV dot com.
From a category perspective, we see continued success with our.
New categories of kits wear and mens wear.
The third quarter, our kitchenware business grew by 21, 9% in <unk> compared to Q3.
Our fiscal year 2021.
<unk> accounted for three 4% of our total business, making us a global leader in luxury hit Swift.
In the third quarter. We also launched a very successful beauty pop up with French plant based skincare brand Sisney rich.
Which was accompanied by a 360 degree marketing campaign.
The campaign included a video featuring three generations of the founding family.
Digital beauty sessions and high caliber lunch hosted by Christine Bonanno during Paris fashion week.
Please see our investor presentation for more details on the assisted campaign.
In addition, I'm delighted to announce our entry into a full range of luxury lifestyle products as a new additional category in may of 2022.
All of the above gives us full confidence to deliver multi year annual growth of 22% to 25% for our business. Despite the challenges in the third quarter. We have produced excellent results and kpis, demonstrating our customer excellence, which is driving customer loyalty and sector.
Leading profitability.
Based on our excellent relationships with brand partners, we were again able to produce impactful digital content and campaigns that created visibility to our unique high value multi brand customer base that cannot be easily reached bimodal brand offering.
Examples from the third quarter include the launch.
Of the highly anticipated the waiver spirited away collection exclusively available on my Teresa.
Which almost sold out within.
12 hours.
The launch of the exclusive Montclair renewable collection only available my Teresa.
The launch of exclusive menswear shoe styles in collaboration with <unk>.
And the highly anticipated launch of the manual blahnik.
Birkenstock collaboration.
And many more.
Please see our investor presentation for more details on our brand collaborations and third quarter.
With our impactful campaigns, we were able to excite our existing and develop new customers. We expanded our LTM active customer number by 21, 6% year over year to 755000.
It is again noteworthy that we kept our customer acquisition cost fairly stable compared to extra ordinary low cost in the third quarter of fiscal year 2021.
One main driver of the profitability of our business are strong underlying customer Kpis. We had again very positive repurchase rates in Q3 of fiscal year 2022 for customer cohorts first acquired a year ago.
Please see our investor presentation for more details on this.
The average order value increased in the third quarter of fiscal year 2022, and the average spend per customer grew by four 4% for fiscal year to date 22 in the third quarter compared to Q3 fiscal year to date 2021.
All of this drove profitable revenues from existing customers.
Particular focus of our business.
Our top customers as they drive the almost 100% revenue retention from year two onwards for newly acquired customer cohorts on top customer base grew by 33, 3% fiscal year to date 22 in the third quarter to.
To engage and satisfy top customers, we have again grown our team of personal shoppers around the world.
And particularly in the U S.
This allowed us to organize intimate top customer events around the world just in the third quarter fiscal year 2022, we held events in the Middle East Paris, Dallas Palm Beach, London, Dublin, Edinburgh, Zurich, and New York.
Another special service, we offer to our best customers is the exclusive resale service in partnership with Mr Air quality.
We continue to see strong traction with this service of our customers sold three of items with a value of over.
850000 in the third quarter of fiscal year 2022.
We are quite proud as a business to be so actively involved in advancing circularity and our industry.
In March we expanded the service to the United Kingdom and as of Summer. We will also introduce the same service to our U S customers.
We achieved high customer satisfaction as measured internally with our net promoter score of 77, 7% in the third quarter of fiscal year 2022.
Not as high as last year due to continued global shipping delays driven by workforce shortages due to COVID-19.
The quality of execution and health of our business is well captured our ability to grow the business globally was a strong gross margin and sector leading profitability.
Martin will talk about our bottom line results in the third quarter in a few minutes.
Third.
The first weeks of the fourth quarter fuel our confidence to remain the best partner of choice for luxury designer brands to engage with our high value multi brand customers and for a speedy passing of the external shocks.
Just over the last four weeks, we have launched our prelaunch collections only available mitel, there that with brands such as Daimler man.
Nancy the Rioja to 2021 winner of the <unk> price lease for Norton Deutsche in Gabon and push.
Put your prelaunch is noteworthy as it marks the arrival of our new creative director this prestigious fashion dolls.
Owned by the <unk> group and <unk>.
Served as the exclusive global partner to launch the collection with a 360 degree marketing campaign, including a weekend to experience and copy to celebrate the launch.
All of the mentioned exclusive merchandise.
Only sharper glib mitel is that deliver long awaited newness and comes on top of it.
Mainly in spring summer deliveries as of mid April .
This forms and unprecedented cadence of launch campaigns that will continue well into July .
As mentioned above we will also launch in mid May and new category on Mitel laser.
Renting a full range of luxury lifestyle product.
The ongoing development of the war in Ukraine, as well as the Covid situation, particularly in Asia makes it impossible to predict the macroeconomic environment for the coming months.
But the luxury sector has consistently proven in the past to be the most resilient consumer sector of all.
We believe we are the best partner of choice for luxury designer brands to engage with our high value multi brand customers, we have full confidence to deliver a solid fourth fiscal year at the low end of our guidance.
With all of the above it should come as no surprise that we are overall very satisfied with our performance in the third quarter fiscal year 2022, despite clear challenges.
We believe that our results demonstrates.
The fundamental strengths of our business model.
Levering profitable growth.
We see ourselves as one of the few winners in the clearly consolidating luxury e-commerce space. The combination of best brand partnerships and best high value wardrobe building customer base gives us full confidence to continue achieving outstanding results in the future.
And now I hand over to Martin to discuss the financial results in detail.
Thank you Michael.
We'll now review the financial results for the fiscal third quarter January to March 2022.
We will provide additional detail on some of the key topics previously mentioned.
Unless otherwise stated all numbers refer to euro.
<unk> during the quarter was $186 6 million, a 13, 2% increase from $164 8 million in the prior year quarter.
This compares to our previous year quarter that grew plus 47%. So the Q3 of fiscal year 2020.
Our quarterly two year growth rate was at a strong 67% in.
In line with the two year growth rates of preceding quarters between 65% and 68%.
We showed a strong performance before the start of the unpredictable external events outlined by Michael.
Our GMB growth from July to December 2021, whether it's 28%.
As a reminder, <unk> is one of our key value driver as it shows the depth and growth of our customer relationships.
So despite the external factors.
Had a tough comparable from previous year.
We delivered a strong <unk> due to a robust new customer growth and strong existing customer cohort performance.
Customer engagement and retention continue to track very well as our active customers to shop with us in the last 12 months grew by 21, 6% to 755000.
On a two year basis.
LTM active customers grew by 63%.
The robust two year growth rates and active customers and higher retention speaks to our unique positioning attracting a highly valuable multi brand customer.
And our ability to deliver excellent service.
Yes.
During the third quarter net sales increased by $4 7 million or two 9% year over year to $169 5 million.
Due to the one time effect of.
<unk> selected brands switching from the wholesale model to our curated platform model.
The net sales increase is lower than our <unk> growth in the quarter.
The difference in growth rates between <unk> and net sales.
It's purely a one time financial accounting effect from brands switching from the wholesale model to be curated platform model.
So the CPM brands, we can only book the platform fees as net sales.
As planned in the third quarter, we Havent totaled six brands, who have started shifting from wholesale to CPM.
Well those brands switching we now report the platform fee is net sales and not the <unk> of net sales.
12 months after the full transition of those spreads.
This one time effect will be over and net sales will grow in line with GM vehicles.
As mentioned before.
We once again saw significant growth in many regions of the world in the third quarter, except for Europe , which was impacted by the Ukraine War.
The U S remains a top growth region with 42% GMB growth for <unk>.
The prior year quarter mainland China grew by 26%.
Our total orders shipped in the last 12 months increased by 23.
1% to $1 7 million.
Gross profit.
$82 8 million increased by $10 4 million or 14, 4% year over year.
Even stronger than our GMB growth.
The gross profit margin.
48, 8%.
Improved by 490 basis points.
Compared to the prior year period of 43, 9%.
Driven by our growing share of CPM revenues.
A higher share of countries with prepaid duties charged to the customer for example in the U S.
In these countries our prepaid custom duties are reflected in the prices.
Out of the 490 basis points increase.
290 basis points originated from the CPM effects.
And 200 basis points from the highest share of GDP countries.
The underlying merchandise gross margin remained stable.
Reflecting the ongoing focus on full price.
Fully consistent with the high end position of my Teresa.
Our consistently strong gross profit margin reflects the unique high end positioning of <unk>.
Shipping and payment costs grew by $5 9 million to $25 1 million driven.
Driven by an increase in total order ships.
As a percentage of GMB.
Shipping and payment costs in this quarter increased to 13, 5% from 11, 7% in the prior year quarter.
This increase of 180 basis points.
It's mostly driven by an increasing share of countries where.
Where we pay all the customs duty for the customer such as the U S.
As mentioned before the <unk>.
Payment of these theories is reflected on our prices and therefore increase our gross profit margin in respective countries and the same amount.
If you exclude the GDP costs.
The shipping and payment cost ratio in relation to <unk>.
Stable.
At eight 8% versus eight 7% in the previous year quarter.
Despite increasing internationalization and cost pressure on logistics.
We were able to keep this ratio stable.
During the third quarter marketing expenses increased to $23 3 million compared to $22 1 million in the prior year quarter.
Primarily due to the increase of number of customers acquired.
As a percentage of GMB.
Marketing expenses decreased to 12, 5% from 13, 4%.
We were again able to attract new customers.
At a competitive cost.
<unk> had a strong existing customer cohort performance.
And given the external factors in the quarter.
We aligned our marketing activities accordingly.
Adjusted selling general and administrative expenses grew by $4 1 million or 23% to $24 3 million.
Adjusted SG&A expenses as a percentage of GMB.
Increased modestly to 13% from 12, 3%.
Due to the short term less strong topline growth.
Driven by multiple unprecedented external factors in the quarter.
Around 80% of our SG&A expenses are personal expenses.
As we provide most services in house and have built a core competencies ourselves along the value chain.
Personal expenses increased with the number of Ftes, especially in our warehouse shipping and customer care activities.
And are in line with expected GMB growth.
Adjusted EBITDA was $10 2 million as compared to $11 1 million in the prior year quarter.
The adjusted EBITDA margin.
Was it 6% compared to six 8% in the previous year quarter.
And this is quite remarkable.
Despite the external factors affecting topline in the quarter at a very short notice.
The strong 6% adjusted EBITDA margin shows the resilience of our business model.
We continue to deliver industry, leading performance on top and bottom line.
Depreciation and amortization expenses were relatively stable at $2 3 million compared to the prior year period at $2 million.
The resilient profitability of our business model is also visible on operating income level.
For the third quarter of fiscal 2022, <unk> reported an adjusted operating income of $8 million.
Impaired to the $9 1 million in the previous year quarter.
Despite the top line effects, our adjusted operating income or EBIT margin in this quarter is at four 7% only 80% 80 basis points lower than in the previous year quarter.
Adjusted net income in this quarter was $5 6 million as compared to $4 5 million in the prior year period.
Also on adjusted net income level.
We have generated a multiyear track record of continued and resilient performance.
We continue to focus on delivering profitable growth, which.
Which is clearly visible in a very simple and transparent P&L.
EBITDA adjusted EBITDA adjusted operating income and adjusted net income are non <unk> measures.
Moving to the cash flow statement.
During the nine months ended March 31.
For the two operating activities generated $22 9 million.
Positive operating cash flow.
Driven by a decrease in owned inventories due to brand switching to CPM.
Which means the deliveries were in our warehouse.
But not in our balance sheet.
Wholesale and CPM combined inventory at the end of this quarter increased in line with our expected <unk> growth in the next quarters.
In the quarter, we had again, a net increase in cash and cash equivalents.
With a strong cash flow from operating activities.
And after taxes, Capex and finance cash and cash equivalents increased by $16 8 million during the nine months ended March 31 2022.
The positive operating and free cash flow.
The scores that mitral visa operates a superior capital light model.
We ended the quarter in a strong financial position with.
With cash and cash equivalents of $93 5 million.
And total unused availability under the revolving credit facilities of $60 million.
As of March 31, 2022.
Given our solid cash position, we reduced our committed revolving credit lines from $90 million to $60 million.
To reduce interest expenses.
Given our Q3 results, but increasing performance visible in the first weeks of Q4.
We expect to achieve our full fiscal year guidance.
At the low end of the given ranges.
Our fiscal year 'twenty two will end in June 2002.
Our guidance for fiscal year 'twenty, two was <unk> <unk> in the range of $755 million to $775 million, representing 23% to 26% growth.
Net sales guidance in the range of $700 million to $720 million, representing 14% to 18% growth.
Gross profit.
At $350 million to $365 million.
Presenting 22% to 27% growth.
And finally, adjusted EBITDA in the range of $64 million to $71 million.
And then adjusted EBITDA margin of 9% to 10%.
This is our maintained guidance for fiscal year 'twenty two.
And now with the fiscal year coming to an end.
We expect to achieve our guidance at the low ends of the given ranges.
We are very satisfied with our performance during the third quarter. Despite the external shocks.
We see an increasing performance over the last weeks.
We are very proud.
The targets and overall performance level for the full fiscal year on top and bottom line that.
That is very strong and unparalleled in the industry.
We confirm our guidance.
Positive free cash flow for.
For the full fiscal year 2022.
And therefore targeting positive operating and free cash flow conversion.
To finish let.
Let me talk a bit about about our medium and long term targets.
As laid out in our Investor presentation, we target annual GMB and net sales growth of 22% to 25% medium term.
We expect to double the <unk> achieved in fiscal year 'twenty, one already in fiscal year 'twenty four.
Adjusted EBITDA will also grow 22% to 25% per year in the medium term with a stable adjusted EBITDA margin around 9% to 10%.
The long term.
And with a higher share of existing customers in our <unk>, we will be able to reduce our current 13% marketing basket of GMB.
Potentially.
And position ourselves for higher adjusted EBITDA profitability level longer term.
I will now turn the call back over to Michael.
Including remarks.
Thank you Martha.
We are overall very pleased with the third quarter earnings results as we continue to grow profitably.
We see ourselves perfectly positioned to take advantage of the ongoing shift to online and luxury spent.
<unk> consolidation and distribution platforms and the global expansion opportunities.
We are confident that <unk> offers high value consumers the best multi brand digital shopping experience.
And with that I'd like to ask the operator to open up for your questions.
Thank you for our Q&A, if you'd like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind, please press thoughtful about too.
Wanted to ask your question. Please ensure your financial needs directly.
Ask you please limit yourself to one question and one follow up.
Our first question today comes from Matthew Boss from Jpmorgan. Your line is open.
Thanks, and congrats on a nice quarter.
So Michael your two year GMB growth this quarter matched the second quarter came in high 100 basis points above your target model. That's despite exposure to both eastern Europe , and China I guess, what have you seen that gives you confidence in the.
Continued resiliency of your customer in the luxury category and then can you just elaborate on regional performance that you've seen in the past few weeks that drives your view for the speedy passing of the external shocks.
Sure and thank you Matt.
What are the observations I mean number one of course, we have a privilege chunk already knowing how the first weeks of the fourth quarter arent developing.
And when you look through our numbers the U S continued a very strong trajectory also mainland China. Despite.
Despite the quite harsh lockdowns that of course, then for the <unk>.
March into April .
It was really in Europe and in the regional breakout that is in the Q3 that can also be observed.
We are strong in Europe that defines of course also the opportunity in other geographies, but at the moment. This is where most of our business.
At the end of February when the business broke out there was a scenario amongst in these regions and while our customers are what I would say quite resilient to inflation to recession.
At the top of the pyramid in terms of wealth and income.
That did.
Them into a scare but.
Shift back to vacationing the shift back to growing out that continued in the U. S is also coming back in Europe and that gives us confidence the second level of confidence is what.
What Martin explained we have a business model that can adapt Canada.
Can adapt to even seven shifts in demand.
Still produced a profitable two we have a very high share of variable costs.
And.
Four weeks, we're actually enough to react to that and it was more reaction. So we are <unk>.
And we don't need more of these test scenarios, but we are very confident in our business model and demand.
Tenuous to come back as the world hopefully.
Permanently comes back to normal.
That's great and then a follow up for Martin on the profitability side for gross margin could you just speak to the stability of the underlying merchandise margin that you continue to see as you continue to grow market share any change to full price selling but just any dynamics internal or external.
In the competitive landscape to consider as we build out the fourth quarter gross margin and go forward.
Yes, Thanks, Matt.
As Michael said I mean, our focus is.
It's really on full price selling so we target for a customer that that values. The unique positioning of my Teresa and not.
A discount driven proposition and therefore also in this quarter the underlying.
Merchandise gross margin was very stable.
Despite the challenges so we stay true on a focus on full price.
And that stability, we will not give up and the stability continued in Q4, and obviously will lead us through fiscal year 'twenty three and further on.
Inherent element in our value proposition.
That's great color best of luck.
Our next question comes from Michael Binetti from Credit Suisse. Your line is open.
Hey, guys. Thanks for taking my questions here and I appreciate all the detail.
A couple a couple for you to help us look ahead.
Can you help us understand how much you made some comment that the U S. GMB trend is continuing in the fourth quarter.
I think you said it was about 42% GMT.
<unk> growth in the U S. In the third quarter is that about the right level that what you are speaking to the year on a year over year basis.
And then it looks like.
As you broke down the gross margin in the third quarter, the big influences, where the percent of Av.
Sales to our CPM I guess to total GMB shall.
Should we expect should we expect that same impact to gross margin in the fourth quarter that you pointed to them since that seems to be the most influential driver.
Thanks, Mark I'll take the top line question Jamie question on margin can comment on the on the <unk>.
Gross margin protection, yes.
42% was referring to Q3 and in terms of Q4 performance as I mentioned one of the main issues in Q3 was obviously in Europe , and we see that.
Passing based also in the first weeks of trading. So we believe we can come back to our.
Global growth level more evenly across the geographies and that drives our confidence to deliver strong Q4 and the cheap.
Guidance at the lower range. So that's the commentary on <unk> and Martin maybe you can take them.
Margin question gross margin question.
Yes, Hi, Michael.
Definitely the underlying forces for an increased gross profit margin are also valid in Q4.
The magnitude, obviously theres a lot of financial Iff's effects in there. In addition, but the two callouts that we had the growing share of CPM revenues and the higher share of countries, where we deliver.
Duties paid will also affect the gross profit margin of Q4. So those two drivers will also be driving the gross profit margin up in Q4.
<unk>.
For the magnitude I mean, the 490 basis point was quite strong in Q3.
But it will be a significant increase yes.
Okay, and then I wonder if I could add one.
You noted that lower marketing expense as a percent of GMB was an opportunity longer term.
What is it you were pretty specific that you see that in the longer term what is it that influences the timing of achieving that.
Wonder how much progress you think you could make on that in fiscal 'twenty three for example.
Thanks, Michael that's a very good question because it is very specific and we can keep answer it quite specifically this is driven by the share of business from existing customers versus share of business from new customers.
Online marketing spend which accounts for the majority of our marketing spend is really to acquire new customers to bring them onto the platform. We have been many other leavers.
And vehicles to retain them to drive loyalty so as more of the business is from existing customers because of the high cohort retention naturally every year.
The share of existing businesses increases, but also of course as we drive.
Wallet penetration as we drive category sales to existing customers and needs to drive total revenue from new customer increases becomes Miss this.
Not the attention we want to drive.
Revenues from new customers as hard as we can but existing business will slowly get bigger and bigger and therefore the share of the online spend for new customers will be there.
Diluted and that is really driving this.
Okay. Thanks, a lot guys.
Our next question comes from Oliver Chen from Cowen Your line is open.
Hey, Thank you for the yeah. Thanks Jonna on for Oliver just curious on the active customer growth was at a slower than expected. We are lapping difficult comparisons from last year, but just wanted to get your thoughts around how you're thinking about active customer growth going forward.
And any color around China will be helpful. I know you are seeing more positive trends, but any additional color will be helpful. Thank you very much.
Yes, let me start with the second one.
This is where predictions are very tough at the moment.
Zero tolerance policy of the Chinese government of course requires quite harsh lockdowns and we've seen that post in Shenzhen, Shanghai, and Beijing and under this logic public life really shuts down.
Of course, China is a vast market.
Markets like Beijing, Shanghai are a big driver for fashion sales so.
We are absolutely optimistic on the future of the Chinese market, particularly for us as we focus on wardrobe building because we see the Chinese consumer is more and more maturing and the share of just quote unquote buying accessories bags and shoes versus also buying wardrobe is going our way.
But short term it is almost impossible, how the spread of Covid and the necessity for.
Sort of strict lockdowns develops so it remains to be seen short term, but it takes nothing away from the medium to long term and again Q3, which we saw good growth in mainland China. Despite these challenges.
On the on.
On the more general question of active customer growth, yes, I mean, the two year growth rate is showing shows good momentum in an.
And active customer growth, but we would have seen an even better number if we did not face the challenges in <unk>.
Europe , so clearly with less headwind.
We could and will produce.
Even better active customer growth, but the very strong results.
Business from our existing customers, particularly our top customers shows that we always can rely on our existing customer base and then we.
We will have to.
With us sometimes these headwinds driven by external factors.
We will continue to grow it because this is the market share gain that we can clearly see against some not so strong competitors at the moment.
Yes.
Yes.
Got it and just one follow up how are you thinking about the return rate.
We continue to see a rebound in social events in the U S and expect that to tick up.
In the fourth quarter and Dan. Thank you so much.
Sorry did you speak about the return to two social LIFO, specifically return rate I'm, sorry, I didn't let me turn to the business.
Yes.
I think the U S was leading the way out of the out of the pandemic, we have seen the strong trend in the U S for some quarters now.
And we continue to see even in Q3.
Right the challenges some wells good business and.
It's a good business in the sense constant expansion.
Strong local competitors, but our unique positioning and we.
We see as we see everywhere else when we dropped capsules when we drop exclusive.
Which we cant buy anywhere else except for Mitel laser.
This is how we get these customers that are constantly looking for newness and are willing to spend as long as it is a special item and particularly in the U S is enormous.
Willingness and ability to spend as long as yours, you're assured that this is a unique piece.
So the return to us if you ask for that.
And there wasn't article.
We recently put out I mean, everything you Miss in Barneys Mitel Theres a hazard.
Yeah.
Hello.
Yeah.
Our next question comes from Kunal <unk> from UBS. Your line is open. Please go ahead.
Alright, Thanks for taking my questions a couple if I could one on <unk> can you talk about your retrans in the in the third quarter and how you expect it to trend in the fourth and then I think there is there has been a number of questions on gross margins.
Especially with regard to the value through to get to the low end of the guide on the gross margin side, we probably need to Martin.
<unk> a significant decline in like.
The benefit that Youre seeing from the CPM model.
Is it the CPM model or the underlying one Pete.
Where we should see a decline on a Q on Q basis.
Thanks.
I think Martin you should take the question on the gross margin versus gross profit I think that's very important to clarify.
Yes, we can start with that Kunal.
No decline in the underlying gross margin profitability.
Considered in Q4, and therefore in the overall full fiscal year, so as we guide towards the lower end.
And.
At the end.
At the lower end of our ranges the profitability is exactly as we guided and we upgraded our guidance in Q and Q2, so the logic of the CPM being.
Yeah.
Once again, a very comparable profitable profitable stays exactly the same so the CPM and when we have it now for a couple of quarters.
Shows the exact results as we as we plan to so there's no surprise.
In the CPM and.
The gross profit.
In absolute terms and cross profit margin.
It is in line with our overall guidance look we always have.
And also maybe on the <unk>.
You saw that we now enter in Q3 LTM grew.
It's now at 617.
Euros LTM versus the 588.
In the in the previous year and that shows again, our our focus on on full price.
And also our strong existing customer cohort behavior.
As Michael outlined the strong growth in top customers of 33%.
To date.
As also then reflected in the high <unk> and that is in line with the last quarter with a.
<unk> strength and growth in <unk>.
Thank you.
Our next question comes from Jeff Roy tremendous from Bank of America. Your line is open.
Hey, Thank you very much for taking my questions.
Three of them. So just the first one going back to your guidance for the full year, So if you're doing 23% Gms growth.
It means that Q4 has to reaccelerate to something like 25% from 13 in Q3 so.
I suppose there is an element of the comp base, which is a little bit easier but.
Are you seeing underlying performance getting better.
In all regions I said I think you said the U S was still very good.
In Europe .
Reaching after after Q3.
So thats.
Question.
Then the second one is on the CPM I was wondering if you could give us an update on how much it is.
As a percentage of G M V and where you see that number going in for your 2023.
And then the last thing is on your comments on either new category. The two starting from lifestyle. If you could give us any insights into what types of product that would be exactly like things like.
And why exactly youre going after new categories. Thank you very much.
Thank you very much let me take questions one and three so.
Yes, Youre absolutely right mathematically we are looking at an acceleration in Q4 and the first weeks of Q4 give us exactly that confidence.
So an acceleration from where we were in Q3 so.
Absolutely right.
In Q3.
Sorry question.
Why are we going there our intention and also all of the desire from our customer is that we serve them as best as we can and all there let's call them luxury needs. This is why we started the resale service, which was their collective. This is why at the pop up level, we have looked at beauty, particularly skincare.
And this is where we got a lot of comment and requests from customers to expand.
Fashion offer that we have people that like to wear beautiful things tend to also like to live with beautiful things into lifestyle products.
There is as always there are certain elements that regardless of the category. We take along so number one curation of editing also lifestyle products as an enormous offer out there and we serve our customers with this added through multi brand number two we we focus on the high end. So this.
Is not to sell products with.
Item value of $50, but of course this is to focus on the high end and so we're looking at our product ranges.
This range is in terms of products from 215 to 1500 so.
Totally taking the mitral visa.
Qualities bring them to an adjacent category, which has many fashion brands, but we will also carry brands that today are not on our website to really serve this lifestyle product category.
We're looking forward to it because it's all based on <unk>.
<unk> customer demand that we have encountered in our research and in our <unk>.
Customer focus groups.
Martin you take question two.
Yeah sure and maybe it also in addition to Jeffrey on your question one mathematically the lower end of our first full fiscal year guided range will lead Q4 at a 22, 7% increase in Q4 <unk>.
Yeah, the CPM sure as always.
We were we're not giving the share of the CPM model in our GMB because then.
You could back out the platform fee and this is very sensitive information.
And so we.
We are seeing that.
Positive effects of the CPM in our business model now offering both models to brands, we will see that an increasing share in fiscal fiscal year 'twenty three.
As we said last time.
Think about we have about half of the brands.
But that will switch.
And therefore, our fiscal year 'twenty three will also be in transition year, and then fiscal year 'twenty. Four then the growth will will continue.
Alright, Thank you very much.
Our next question comes from <unk> Sinha from Society Generale. Your line is open.
Hi, Thanks for taking my question a couple of questions from my side. So.
We saw that in Q3, you had some supply chain challenges because of better.
Revenue growth slowed down but.
Now that it's fixed can we expect.
The more like a surprise in Q4 and if Thats. The case, then baidu right at the lower end of your target.
<unk>.
The second question is on CPM. So I know that you don't give precise data, but initially when you had introduced the model the target was less than 20% for FY 'twenty two so.
Nick.
Any hint on whether you're tracking that or is it like we're behind that thank you.
So I think on the first question just to be precise.
What we saw in Q3 and what we discussed last time was a shift of deliveries of delay stemming back to production issues in Europe in November .
In December .
But then of course fundamental external shocks that drove it and so we are clearly looking at acceleration as Martin just described.
That acceleration drives our confidence in delivering the guidance at the low end of the range in terms of CPM, maybe Martin you want to.
Take that.
Yes, the CPM Theres no change of enough from what we set in the last quarter. So we see great traction from from the branch shifting to CPM and also great.
Great satisfaction on their side, so it's a clear win win model.
And.
The overall target of.
Well below 20% of the full fiscal year, we will we will continue to target and we will see see that so theres no no change in the CPM traction will change the CPM ramp up because it's a well tuned process, where both sides have to work on the supply chain integration on the.
So everything is.
Is as expected so there is no change.
Alright, and just to be clear Lake in terms of the Capex is from the partner side not from Mitel itself Heidrick.
I mean, the work is needed on both sides, we do most of the work, but we opex.
So the brands, we have now six brands life with CPN all the we needed.
Needed for that.
Is fully reflected in our P&L.
Okay. Thanks.
Thanks.
We have a follow up question from Michael Binetti from Credit Suisse. Please go ahead.
Hey, guys. Most of my questions have been answered I apologize for jumping back in but.
On that on that point.
Since the CPM model does influence the profitability on the different lines. So so much would you mind just updating us on.
The six brands that you have in today, you said about I think you said about half of the one that in total wants to be on the CPM model as it is.
Next round of brands at the same magnitude as the ones in the model already today. So that we can try to think about rolling forward some of those profitability metrics.
Yes, happy and happy to address it yes roughly.
Again, we estimate.
How many brands will in the end.
Joined the CPM model, but roughly half of what we believe at the moment.
But those that started now are bigger ones. So you can expect that the additional volumes that will.
We'll come on to this to the CPA model will be will be not of the size that we have seen so far.
And then I think you said in the prepared remarks that you.
Yes.
Growth was driven by consumer demand not promotional intensity, which you have seen break out in some markets with some players recently would you would you mind just fine tuning what youre seeing.
With that contemplate.
We have seen some quite.
Aggressive pricing.
In Korea.
Over the last couple of weeks.
And we have seen some early starts or sale in the U S.
Which compare to the pandemic.
Face of the market is there any.
For those two examples I quoted coming back to some of the characteristics that we saw before the pandemic. So this is nothing we are not used to this.
What we have to deal with the pandemic Luckily or Fortunately.
Created a pause on some of these tactics, but we see that it has slowly it seems at least that are slowly coming back for some players.
Has that has that impacted the underlying assumption you've made for promotional levels in fourth quarters, you've seen the competitive set changed at all.
No I mean, we observe this but us.
Does not change our.
Stance on promotional intensity.
Our margin stability is now I think.
<unk> 50 year on product margin so rigs.
Regardless of the environment, we continue to.
Drive, our business and particularly drive on our customer base with <unk>.
Exclusive merchandise with special products and this will not be changed.
Okay. Thanks, a lot guys.
Thank you.
We have no further questions for today's call is now concluded I would like to thank you for your participation you may now disconnect your lines.
Thank you.
Yeah.
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