Q4 2022 Inter Parfums Inc Earnings Call
Speaker 1: The.
Speaker 1: The.
Speaker 1: I.
Speaker 1: The.
Speaker 1: Re.
Speaker 2: Greetings and welcome to the interparforms. 2022 fourth quarter and year-end conference call and webcast.
Speaker 2: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
Speaker 2: If anyone wants to require a operator assistant during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karen Daly, Interprefume's Investor Relations Representative and Vice President at the Equity Group.
Speaker 2: Thank you, you may begin.
Speaker 3: Thank you, Doug. On behalf of the company, I would like to note that this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results.
Speaker 3: These factors may be found in the company's filings with the Securities and Exchange Commission under the headings, forward-looking statements, and risk factors in their most recent annual report on Form 10-K .
Speaker 3: Forward-looking statements speak only as of the date on which they are made, and Interplace and Sync undertakes no obligation to update the information discussed.
Speaker 3: It is now my pleasure to turn the call over to Mr. Jean-Mazar, Chairman and Chief Executive Officer of Interpurfoo. Jean, you may begin.
Speaker 4: Thank you, Karen. Good morning, everyone, and thank you for participating in today's call.
Speaker 4: I will start the ball rolling and later we will hear from Michel Atwood. Our CFO was being reversed now for six months.
Speaker 4: For anyone new to Interparfait, keep in mind that when we refer to our European-based operations, we are talking about our 72% owned friendship series called Interparfait S.A.
Speaker 4: And when we will be sure to our US based operation, we are talking about our holy own domestic subsidiaries.
Speaker 4: 2022 will always be remembered as the year we topped 1 billion net sales.
Speaker 4: In 2022, our sales reached 1 billion and 87 million dollars to be exact.
Speaker 4: resulting in diluted IPPF of $3.7% record your mass by a 24% increase in that cell and a 38% increase in Ernie's per share.
Speaker 4: 2022 will also be remembered as the year the Nakaran and DTNY fragrances joined our portfolio as the first full year producing and selling seragamo fragrances.
Speaker 4: And also the first full year that our Italian office was operational. And finally, the year in which we entered into a licensed agreement with Black OST.
Speaker 4: But it wasn't easy selling.
Speaker 4: 2022 was also a year of rampant inflation.
Speaker 4: Serging dollar
Speaker 4: Hold ups in transportations, components shortages and other supply chain halux, along with China lockdown and of course.
Speaker 4: a war in Eastern Europe .
Speaker 4: Let's move on to business by religion.
Speaker 4: First, I want to focus on North America, our largest market.
Speaker 4: You may recall that for several reasons, through the first nine months of 2022,
Speaker 4: sells wear up by only 4% in North America.
Speaker 4: As we reported earlier this year, we had logistic difficulties coming from a chance in shipping software.
Speaker 4: which delayed shittiness.
Speaker 4: Plus, in 2021, in the recall, many US customers pressed us to deliver their holiday shipments in the third quarter, fearing supply chain problems.
Speaker 4: Those two factors were the many reasons why North American sales rose 140% for the first nine months of 2021. But that feed flop in 2022 when a large amount of holiday gives set.
Speaker 4: initialis scheduled for delivery in the third quarter didn't get shipped until the fourth quarter making for a huge fourth quarter comeback.
Speaker 4: We booked 147 million dollars in sales in the final quarter resulting in a 22% increase in 2022 North American sales for the full year.
Speaker 4: Now for the rest of the world, sales in Western Europe and Asia rose 28% and 19% respectively.
Speaker 4: Central and South America grew sales by 24% and the middle is by 44%.
Speaker 4: Even Eastern Europe achieved modest sales growth of 6% despite the conflict in Ukraine and sanctions on Russia.
Speaker 4: What is notable about this term Europe is that through the first nine months of the year, cells were bound 16%, so to be 6% head at the end is a good term of events.
Speaker 4: With the exception of China, our travel retail business has shown remarkable resiliency. As we have stated over the course of 2022, the strength of the dollar minimized the accomplishments
Speaker 4: of our European operation, which grew sales in US dollars by 12%, but grew 20% in constantOLM issue
Speaker 4: For Mont Blanc, we launched a new flanker called Legend Red, which contributed to a 15% sales increase in dollars, but 22% increase in constant currency.
Speaker 4: Jimmy Chu welcomed the I Want You Forever pillar and Man Aqua both flankers which combined with Legacy Sands produced a 23% increase in sales in dollars but a 29% increase in constant currency.
Speaker 4: Coach fragrance sales were up 18% in dollars and 22% in constant currency.
Speaker 4: As we introduced a new men's fragrance family called Open Road and Wild Roars for Women.
Speaker 4: Our Montclair duo was on the market for a full year while in 2002-21 the program debuted in a limited number of our plates late in the year.
Speaker 4: Among our other new product launches was product for fragrance for Busharon, Colte Saint-Gullier, Sparkle for Kate Spade, and business goal for Roshas.
Speaker 4: Now let's discuss US operations which achieved sales growth of 58% in 2022 and we have doubled ourselves versus 2019 pre-COVID.
Speaker 4: In the US, we launched Omo for Men and the Sister Sense for the Bella Vita fragrance family for guests, which pure grown sales growth by 24%.
Speaker 4: With the introduction of alibi and continued cells of brunt feveries, Oscar de la rantabra cells rose also by 24%
Speaker 4: and other ambient features, and largely authentic and away pillars with new flankers growing sales by 28%
Speaker 4: And Hollister welcomed Kenyan and Wave brand extensions to grow the brand's fragrance franchise by 16%.
Speaker 4: As we have said, newer brands such as Ferragamo were included for all of 2022.
Speaker 4: but only in the final quarter of 2021. Donna, Karen and Vicky were consolidated starting in July of 2022.
Speaker 4: It now appears very clearly that the combination of the Nakharan and the Kenwai franchise will emerge as our second largest grant within the US operation.
Speaker 4: Starting this year, we have taken over production from the former licensee, the same order, and have been able to build inventory and gain better control over the supply chain, which in 2022 limited sales and shipping.
Speaker 4: As our guideline implies, 2023 should be an even better year with new products and brand extensions.
Speaker 4: and willing throughout the year. 2023, not unlike 2022, will be dominated by brand extension for all our major emissions brands, following an exceptional new product launch schedule in 2021.
Speaker 4: which included many that were delayed from 2020. As I have said on previous calls, the advantage of flankers and extensions for successful pillars is that we can leverage the design elements, packaging components, photography labels, as well as advertising and promotional materials across all members of the fragrance family.
Speaker 4: And the big news we are now in December was the signing of the 15 year exclusive fragrance , album extensions confirmation package on the
Speaker 4: Perhaps the most widely recognized sports fashion brand globally.
Speaker 4: Effective January 1, 2024, we will take over the Bronze Legacy Fragrance Collection for Men and Women.
Speaker 4: and our plan calls for something new to hit the market that year.
Speaker 4: For generations, the instantly identified crocodile logo has adorned sportswear, eyewear, leather goods, home goods, watches and of course fragrance.
Speaker 4: In fact, I recently read that when Lacoste was founded in 1933, it was the first brand to feature a logo on its clothing.
Speaker 4: La cost should rank among our largest bun.
Speaker 4: having generated 2022 sales of over 100 million dollars. As I say on every conference call, our search for additional brands both established and rising star remains a priority for the company.
Speaker 4: Another piece of good news.
Speaker 4: In the Richmond, the owners of Mont Blanc, our largest brand, we've said, approaching $200 million, has agreed to extend our second license for December 31, 2013.
Speaker 4: adding five years to our partnership.
Speaker 4: So, with a seven-year window, we are better able to plan new product launches, promotion and advertising, and distribution plan well into the future.
Speaker 4: While our new ERP system is hardly a fun topic, we are also looking at the new ERP system
Speaker 4: It is virtually important to our future. It is absolutely, virtually, vitally important to our future. I will admit that we have grew our own system faster and we could replace it, but it was worth for the wait.
Speaker 4: With components, suppliers, fillers and customers across the globe, it was quite a task to keep track of inventory real-time.
Speaker 4: Today, authorized personnel can easily access from any secure device, anywhere in the world, whatever they need, from the quantities and location of goods to the status of existing folders.
Speaker 4: They can reserve goods, but in the sale and we have implemented EDI for certain large customers.
Speaker 4: The major portion of the ERP system has been deployed with additional modules in the works, including more vendor portals.
Speaker 4: This was a big investment, a big headache along the way and many problems since the solve, but the payoff even visibly in the game will be very rewarding.
Speaker 4: I don't have to tell you that the growth of the fragrance industry has been extraordinary over the past two years.
Speaker 4: and we see no sign of the slowdown. Of all the key beauty categories,
Speaker 4: Freglance is your fastest growing.
Speaker 4: far up facing hair care, makeup and skincare.
Speaker 4: as a pure play in fragrance with a diverse, well-balanced and well-recognized portfolio of brands.
Speaker 4: plus an exceptional staff who are well positioned to continue to gain market share.
Speaker 4: We now have four brands, themselves ranging from 100 to 200 million and they have been growing in New Zealand by double digits.
Speaker 4: Overall, our mid-sized plants are performing exceptionally well as well.
Speaker 4: Among the trends working in our feather and for most of our peers is the popularity of higher concentration products and higher price luxury brands.
Speaker 4: In addition, while perfume has always been and continues to be a popular gift for Mother's Day, Christmas and Valentine's Day, in recent years more shoppers are buying fragrance for themselves.
Speaker 4: They are building fragrance war gloves and they are indulging in brands that may be out of which price wise in clothing and jewelry.
Speaker 4: Into the pandemic, fragrance buyers have grown exponentially and when consumers start taking interest in a category, they typically stay.
Speaker 4: While our 2023 guidance barely factors in China, perhaps kicking in late in the year, the opportunity over time is enormous.
Speaker 4: I've read estimates that only 3% of the Chinese population is wearing fragrance.
Speaker 4: but those that do are young, high-end shoppers.
Speaker 4: During business in China has a host of challenges beyond COVID-related restriction.
Speaker 4: China's weaker economy and traditional traffic. For example, it can take 8 to 12 months to be granted today a health registration on a new fragrance product.
Speaker 4: That said, if a Chinese retail and online market opens faster, and if Chinese travel retail becomes more robust, we will need to revisit the subject of guidance. But for now, we are rightfully conservative, cautious, and comfortable with our estimated.
Speaker 4: Similarly, as the year progresses, the year of the year progresses, and the year of the
Speaker 4: We will have better visibility as to orders and cells that may once again cause forgigants adjustments.
Speaker 4: Now I will turn the call over to Michel for a more detailed financial vision. Michel?
Speaker 5: Thank you Jean and good morning everyone. I am delighted to be on today's conference call. My second since joining into Parfat in September , as Jean pointed out six months ago. I am delighted to be on today's conference call.
Speaker 5: Before moving on to our financial results, I will again address the subject of foreign currency exchange rates, specifically the strength of the dollar against the Euro throughout 2022.
Speaker 5: Over 50% of our net sales of our European operations are denominated in US dollars, although almost all its costs are incurred in Europe .
Speaker 5: That has a negative effect on our sales, but boosts our gross margin.
Speaker 5: For the fourth quarter of 2022 and full year, net sales reflect a negative 10% and 7% foreign exchange impact versus comparable periods in 2021. We also expect that these headlines will also impact quarter one of 2023.
Speaker 5: As we reported in the final quarter of 2022, net sales were 311 million, a 47% increase from the 211 million in 2021. But as comparable foreign exchange rates, forest quarter sales actually increased 57% from the same period in 2021.
Speaker 5: For the full year, 2022 net sales rose to $1 billion, $87 million, up 24% from the $880 million in 2021.
Speaker 5: While at comparable foreign exchange rates, net sales increased 30% from 2021. I will again point out that our US operations were reported sales growth was 58%. Removing newly added brands like for like 2022 sales rose 24%.
Speaker 5: with basically new grounds adding 38% for the year.
Speaker 5: For European-based operations, the 2022 gross margin was 68.2% up from 66.6% one year earlier, with the increase attributable to several key factors.
Speaker 5: First, the net sales of our US-based distribution subsidiary increased 16% in 2022 as compared to 2022 of 2021, leading to favorable mix.
Speaker 5: Also, as I just noted, our goods margin is benefited from the strong dollar.
Speaker 5: Finally, we enacted modest pricing increases last year, and all these inputs combined more than offset higher costs of materials and transportation.
Speaker 5: For US operations, gross margin rose to 54.7% from 53.1% in 21%.
Speaker 5: The scale benefits coming from our significant growth combined with pricing actions and favorable channel and brand mix, especially with our newer designer brands, have enabled us to more than offset the impacts of inflation.
Speaker 5: and thus expand gross margins by about 160 basis points in 2022.
Speaker 5: Moving on to S-GNA expenses.
Speaker 5: For European operations, 2022 as DNA expenses increased 9% from 2021 and represented 48.2% of sales down from 49.4% in 2021 as we were able to leverage our scale.
Speaker 5: For US operations, SG&A expenses increased 70% from 2021 and represented 39.1% of net sales compared to 36.5% in 2021.
Speaker 5: With regard to both European and US operations, increased promotion and advertising expenditures were key contributors to the rise in SQNA as we invested to continue to build our brands.
Speaker 5: Additionally, in 2022, the US-based operations increased expenses related to staffing as we built the organization and infrastructure to support our new grants and future growth.
Speaker 5: As Jean mentioned earlier, US operations grew sales by 58% in 2022 and doubled versus 2019 which was pre-COVID. So quite a large and significant change over the last 3 years for this organization.
Speaker 5: Well, it would seem very cavalier to complain about upside surprises and sales.
Speaker 5: But that's pretty much what has happened over the past two years. Already we've raised guidance for 2023 twice since our initial attempt in November .
Speaker 5: The issue is non-monist or consumerism, but rather visibility.
Speaker 5: So when we say our goal has spent 21% of net sales on promotion and advertising, we need it. And we have done it back in the pre-COVID years.
Speaker 5: In 2022, promotion and advertising aggregated to $212 million, which came to about 19.5% of net sales. A doubt amount, 40% was spent in the final quarter of the year.
Speaker 5: As in past years, we do a big spend in quarterfords, stimulate holiday itself through to diminish inventory in stores and push stores into stocking up in quarter one of the following year.
Speaker 5: In 2021, we spent $171 million on promotion and advertising, which likewise totaled 19.5% of net sales.
Speaker 5: So, strong spending but not necessarily in line with our long term goals.
Speaker 5: As you read in our release yesterday and our 10K, an evaluation of Russia's fashion trademark value was conducted by an independent expert who concluded that the brand value was 11.3 million at the end of 2022.
Speaker 5: This resulted in a $6.8 million impairment chart in the fourth quarter of 2022.
Speaker 5: So at the end of the day, our 2022 operating margin was 17.9% up from 16.8% in 2021, both of which are in our high-team sweet spot.
Speaker 5: Below the operating line, due to the size of those swings in currency rates during 2022, we went from recognizing a gain of $2.3 million on foreign currency in 2021 to a loss of 1.9 million in 2022. On a consolidated basis, our effective income tax was down.
Speaker 5: was 22% down from 27% in 2021 with both the US and European-based operations charged to lower tax rates.
Speaker 5: In Europe , the lower rate was primarily because of the lower corporate tax rate in France.
Speaker 5: And in the US, the rate declined because we recognized a one-time tax benefit of $2.5 million associated with the 2021 Ferragamo acquisition, which we had discussed already in quarter three.
Speaker 5: Overall, when we count to one-time games and losses for the year, which include impairments, one-time games and losses and other income expense and tax gains in Italy, they broadly neutralize themselves on an Accordax basis.
Speaker 5: A few other financial points worth mentioning. We closed the years with very favorable working capital of $443 million including approximately $256 million in cash, cash equivalents and short-term investments and a working capital ratio of 2.3 to 1. So a very strong balance sheet.
Speaker 5: for our funds as the acquisition of the costs of the cost trademark.
Speaker 5: With regards to accounts receivable, I think you would agree that the 24% increase from year-end 2021 is quite acceptable in light of the record fourth quarter sales levels.
Speaker 5: We haven't had any real problems in terms of collections as days sales outstanding with 64 days, up slightly from 2021 to 61 days.
Speaker 5: But down significantly for the 86 days we had in 2020. In Venturi levels are up 46% from year end 2021, and I know it was up to Jean that percentage would be larger.
Speaker 5: To repeat a point maze in our last call, we have no qualms about tearing higher inventory levels in an environment where shortages are about and transportation is often unreliable.
Speaker 5: It is better to carry more inventory than lose the sale due to a lack of goods. Our inventory doesn't go stale due to color, size, or precision protecting us from any risk of absolute absence.
Speaker 5: For the foreseeable future will continue to maintain over-sufficiency in inventory of components and finish goods.
Speaker 5: Inventory days on hand increased to 231 days in 2022 as compared to 208 days in 2021. Turning to the outlook for the new year, we see more growth ahead, but as you can see from our guidance, the growth-based vision for net sales should exceed data earnings.
Speaker 5: And that is attributable to our commitment to the 21% of net sales invested in promotion and advertising. With addition of more up-scale designer brands, our gross margin particularly for US-based brands should continue to grow.
Speaker 5: And for European operations, the average Euro dollar exchange rate has moderated. And we don't look for that to be a gross margin catalyst in 2023. Lastly, as you've probably also seen in our press release, we are pleased to increase our annual dividend by 25% from $2 a share to $2 and 50 a share.
Speaker 5: which further demonstrates our confidence and our prospects for our business for both the near and the long term. Our strong financial position enables us to continue to invest in growth opportunities within our portfolio and enlarge our brand portfolio while continuing to reward our shareholders.
Speaker 2: Now, please open the line for questions. Thank you. Ladies and gentlemen, at this time we will begin up to you a question and answer session. If you'd like to ask a question, you may press star one on your telephone keypad.
Speaker 2: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Linda Bolton-Warser with DA Davidson. Please receive with your question.
Yes, hello. Congratulations. I remember when you were much smaller than a billion dollars, so congrats on reaching that. Thank you..
So, can you maybe just update us on what you're seeing in China since the market has reopened? Are you seeing an uptick in store traffic? And also, SB Water had mentioned some excess inventory in the Hainan region. I guess that's in travel retail. Are you experiencing data or is that more of a skincare situation?
and a lot of traffic in the stores. But I have some reservations of when China is going to be open. It's quite slow. And on the top of that, I think, was sitting in my remarks.
They have been some changes in the importation of fragrances and cosmetics in China and becoming more and more complicated and the number of the process. So any new products that we want to sell in China?
registration of KUTEC anywhere from 6 to 12 months.
So that's why we are quite conservative in our business in China. If we see at the end of the first quarter or the beginning of the second quarter and see the open up faster, of course we will let you know. But right now, now gen quip and the McDonald's is facing zero today.
Especially in the last 30 to 45 days it has been quite slow. Now, Hainan, yes, is reopened. We don't have issues of inventory, per se. That's what I can tell you now.
Okay, thank you. And then- Thank you, thank you. Can I ask you, is there any way to quantify how much in sales shifted from the third quarter to the fourth quarter?
Okay, thank you. And then um... Thank you, thank you very much. Can I ask you a certain way to quantify how much in sales shifted from the third quarter to the fourth quarter? Yeah, we said it was about $10 billion.
Ten million? Yes. Okay. In quarter three. Okay. And then what are you seeing in terms of the component shortages? Is that improving at all or is it still a challenge? It has been a challenge and it is still a challenge.
especially for certain category of plastic and certain metal pieces that are difficult to get. But as you know, we have taken the decision to multiply the source.
We are buying from the US, we are buying, we are buying also our own, in Europe . Still very tight, we can't buy very very much. Just to be good at ID.
we have to place our orders for Glass one year in advance. So for instance, now all our orders for Glass have been placed for this year. You can imagine the difficulty to react in case of when you need more or when you need less.
But like Michel said, we think it's better to have more inventory than less. So we are taking some positions on inventory that will enable us to...
to beat our own projection, even the market continues to go. Michel, you want to add something? Yeah, no, no, I was hoping specific to say, I mean, yes, the other thing we're seeing is we're also seeing some significant inflation on glass products, particularly the stuff that's purchased in Europe .
due to the higher increases in energy. As you know, glass is a lot of sand and energy. So we have been diversifying also our supply base to evaluate new markets where energy is less of an issue.
Okay, he varies one good news. If I may, the cost of transportation is going down at a very, very fast rate. We used to pay a container from Ejat to America, 25,000 dollars for a four-leaf-foot container.
ago, now the price is less than three-car than. So the cost of transportation is going down, cost of energy is not going up. So we should see, we could see the light at the end of the adoption fast.
Okay, thank you. Thank you. Our next question comes from the line of Korean Wolfmire with Piper Sandler. Hey, good morning and congrats on a really good quarter and thank you for taking the question. So first, could you just comment a bit on what you're seeing with your retail person?
You ask us about the inventory at our retailers in the US.
Yeah, yeah, the inventory positions of your retail partners in the United States. Yeah, yeah. What I can tell you that Christmas was very strong, or the cell phone was very, very good. So, so, the inventory at the store level is quite low.
That's why we have to replenish quite some in the first quarter. There is no piling up of inventory at USV teller. At the contrary, I should be in more mercenaries right now. Michel.
Yeah, I think if you look at the US market, grew about 12% last year. We obviously grew ahead. What we found is I think December was, you know, it's all relative, right? I mean to what we've had. I think December was at 10% versus the year of average of 12. So maybe a little bit of a, you know, I would say. If you're not met with your patient, you're going to have a little, maybe a little bit getting him to a eligible person to take a role.
slow down. I still have a very high number, but our inventory levels in trade are actually quite love, is what we're finding, all our gift sets have sold through, and we're actually entering in 2023 in a pretty good position.
Very helpful. Thank you. And then can you just touch a little bit more on the planned increase in marketing spend that you mentioned? Is that going to be kind of pretty balanced across the year or are we going to see it maybe hit a little bit heavier towards the back half kick at the start of the block?
How should we be thinking about the Kate and of that marketing? Thank you.
Yeah, I mean, on marketing spending, I mean, at the end of the day, what you want to do, there's two parts of, there's two parts related to your marketing spending. There's the ongoing building of the brand, the overall equity, but in most cases, what you really want to do is you want to be advertising at a moment when the shoppers are in the stores buying your products, which are going to be doing your key consumption periods. The largest one obviously being Christmas.
So as you know, as we run up towards Christmas, it's always a very big quarter. Typically 50% of our spending happens in that quarter. And we expect that that will be very much the same. And I would say during the rest of the year, it's...
is more equally spread even though we generally do spend a lot during Mother's Day, Father's Day, so maybe in quarter two.
Awesome. Thank you. Thank you. Our next question comes in the line of Ashley Helgant with Jeffries. Please receive a few of your questions.
Hi, this is Goodne on for Ashley. I was just wondering if you could talk about expectations around durability of demand and then just any differences by region in trends that you would call out. You are a beauty of demand across the region.
The demand is not slowing down.
what we see in the US department stores, in European perfume movies, and what we see from NPD.
These continued growth of this category. The stories are giving more space to fragrance in Europe , in the US, in the Middle East, in Egypt.
We are recruiting new customers. And I would like to tell you that we see that one day it's going to slow down. But right now it's still very, very strong.
If you look at the world today, you've got three groups. You've got Europe where typically fragrance penetration has always been very high, about 50%. What we're seeing there is continued strong demand.
of the category and people, you know, more increasingly there's usage habits as opposed to basically more penetration. So a lot of the growth there is coming form, you know, I would say increased usage and pre-emization. If you look at the US, the US historically has had a much lower level of penetration and then the US for relief.
when consumers enter these categories they build up their knowledge, they get more premium, they increase their usage. So that could be a strong pipeline of growth for us going forward. Obviously the question is when does that penetration slow down? Does it eventually get to the European levels in which case the market could still double.
or will that eventually slow down, but that is a pretty sizable building block. The other thing we're also seeing in the US is more and more people are increasing their usage. We're seeing heavier and heavier usages, people using it at different moments during the day, so also an increase in usage.
And the last piece is really China and Asia generally the China in particular where penetration is very, very low. Where we are seeing, you know, as we said at the beginning of the call.
young affluent people entering the category, more premium, looking for more premium brands, more aspirational brands. And that offers obviously a huge growth opportunity and building luck going forward. That's super helpful. Thank you so so much.
Our next question comes from the line of Hamid Koursan with BWS Financial. Please proceed with your question.
I just want to add spend, given the demand dynamics that you're experiencing, do you need to spend 21% of your sales? I love this question.
Thank you for asking Ahmed. I think so to answer, do we need to spend absolutely because
The spend of advertising, the spend on marketing our brand is our insurance.
for the future. This will guarantee repeat sales going forward.
So yes, I think it's very important to continue to spend.
Not only my advertising but also in the point of sale, also training.
beauty advisor behind the counter. All this that makes 21% is distinctly, I want to say, a good spend for a shoot for a present and for the future. This is why we are able to grow faster than the market.
I would just maybe build on that.
It really depends if your focus is on driving card term profits or growing your business sustainably. If your goal is to deliver a card term profits, then yes, you could reduce. But if your goal is to drive long-term, shorter return, which is really ultimately our goal, you need to maintain the right level of spending.
This is a category, remember, there's a lot of innovation. So when you innovate, you need to communicate that innovation. You need to drive trial with sampling. You need to educate the people in the stores so they can talk about the product. You need to get those products in the hands of the consumers. So there is a significant amount of activity.
which is what we've seen. But it also means that you have to be on your toes because competition is a standing still. Understood. So given that you didn't spend as much as you would like in the 22, are you doing some sort of like a catch-up process here in the first half of 23?
or do you feel comfortable with the kind of ads when the UF planned out? Yeah, I think it's more a philosophy, right? You know, this isn't just about equity. It's about having the advertising at the right moment. It's about share of voice versus market share and versus the market share that you're trying to achieve. So we're looking for ROI.
The idea is to advertise when nobody is in the store which is kind of what's happening right now in January . Obviously, it's always a shorter month. So you don't start advertising in January just because you didn't advertise in December . But what it means is that as we do our long-term planning, we are planning for more spending. And so we wanted to make sure that that was clear as we were guiding.
for 2023 that we weren't looking to expat our margins at this point in time, we're focusing really on going our top line. Okay, and then just the housekeeping on the script you were saying about having better control of the supply chain shipments was that related to DKNY and what kind of difference have you seen so far?
with that comment that you just made. I'm not sure I understood the question. Jean had said it, this script earlier on. Sorry. I will have to go over it again. I will answer if you don't mind.
Medard for closing remarks. I'm going to let Michel do the closing remarks, but I can say thank you to everyone for listening. Michel is going to tell you that we are going to participate in a conference soon.
Remarks. No, I'm going. I'm going to let inicshe do closing box, but I can say thank you to everyone for listening. michelally is going to tell you that we going, I am sure, to participate two certain conference soonyes.
Yes, thanks, Jolly. So, yes, we will be participating in the D.A. Division Conference in New York on 21st of March, you know, one of the thank Linda for inviting us. Hope we'll be able to meet you all or somebody at least at that time. I want to thank you all for having joined us.
join the meeting this morning. If you have any questions, please contact Karen Galey. The equity group will be happy to tell. I wanted to just close this call by thanking the IP US team who has been working relentlessly on fixing some of our startup issues related to our ERP. It's been a huge effort. We've made tremendous progress and I think in a great place now. I want to recognize those heroes that are on the call today.
that have put in long hours to get us back on track. So I wanted to thank them as well in this call. And so everybody is still well, also in state safe. And thanks again for your time today. Ladies and gentlemen, this does include today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.
that have put in long hours to get us back on track. So I wanted to thank them as well in this call. And so everybody is staying well, also in stay safe. And thanks again for your time today. Ladies and gentlemen, this does include today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day. Thank you.