Q2 2024 MYT Netherlands Parent BV Earnings Call

[music].

Greetings and welcome to the mitral read the second quarter of fiscal 'twenty 'twenty four earnings conference call.

Operator: Greetings and welcome to the MyTheresa second quarter of fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode.

At this time all participants are in a listen only mode. Today's call is being recorded and we have allocated one hour for prepared remarks and Q&A.

Operator: Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. It is now my pleasure to introduce your host, Martin Beer, MyTeresa's Chief Financial Officer. Thank you, sir. Please begin.

It is now my pleasure to introduce your host Martin be Mitra resist Chief Financial Officer. Thank you Sir please begin.

Martin Beer: Thank you, operator, and welcome everyone to MITREAS' investor conference call for the second quarter of fiscal year 2024. With me today is our CEO, Michael Klieger. Before we begin, we'd like to remind you that our discussions today will include forward-looking statements. Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties, including the risks and uncertainties described in our annual report. Many factors could cause actual results to differ materially. We are under no duty to update forward-looking statements.

Thank you operator.

Welcome everyone to <unk> Investor Conference call for the second quarter of fiscal year 2024.

With me today is our CEO Michael <unk>.

Before we begin we'd like to remind you that our discussions today will include forward looking statements any comments, we make about expectations are forward looking statements and are subject to risks and uncertainties, including the risks and uncertainties described in our annual report.

Many factors could cause actual results to differ materially we are under no duty to update forward looking statements. In addition, we will refer to certain financial measures not reported in accordance with Iff's on this call you can find reconciliations of these non <unk> financial measures in our <unk>.

Operator: In addition, we will refer to certain financial measures not reported in accordance with IFS on this call. You can find reconciliations of these non-IFS financial measures in our earnings press release, which is available on our investor relations website, at investors.mytracer.com. I will now turn the call over to Michael. Thank you, Mark.

Earnings press release, which is available on our Investor Relations website.

Investors Dodge Nitro Isa Dot com.

I will now turn the call over to Michael.

Thank you Martha.

Michael Klieger: Also, from my side, a very warm welcome to all of you and thank you for joining our call today. We will today comment on the results and performance of our second quarter of fiscal year 2024. We are pleased with our results in a challenging macro environment. Positive revenue growth and positive Adjusted EBTA in the second quarter. We not only surpassed market expectations but also outperformed almost all competitors. As expected, we continue to see slow demand for aspirational customers across all geographies and a high promotional intensity in the market due to the excess stock of fall-winter merchandise.

So from my side very warm welcome to all of you and thank you for joining our call today.

Today called the results and performance of our second quarter fiscal year 2024.

We are pleased with our results in a challenging macro environment.

Positive revenue growth and positive adjusted EBITDA in the second quarter.

We not only surpassed market expectations, but also outperformed almost all competitors.

As expected, we continue to see slow demand from exploration customers across all geographies.

High promotional intensity in the market due to excess stock fall winter merchandise.

Michael Klieger: However, these macro headwinds actually allowed us to demonstrate the Fundamental Strengths of Our Business. We grew the company's top line and strengthened our bottom line. We achieved double-digit revenue growth in the United States. We reached a record average order value of 672 euros LTM and posted a gross profit margin of 50% in the second quarter.

These macro headwinds actually allowed us to demonstrate the fundamental strengths of our business model. We grew the company's top line and strengthened our bottom line, we achieved double digit revenue growth in the United States, We reached a record average order value of six.

<unk> hundred 72, Urals, LTM and posted a gross profit margin of 50% in the second quarter.

Our resilient business model and our clear focus on the high spending won't drop building top customers allow us to win market share in the current market environment, and we are well positioned to benefit and accelerate when market conditions will improve.

Michael Klieger: Our resilient business model and our clear focus on the high-spending wardrobe building top customers allow us to win market share in the current market environment, and we are thus well positioned to benefit from and accelerate when market conditions improve. I want to highlight three key messages today.

I want to highlight two days three key messages to you.

First the excellent growth prospects for digital luxury has not changed at all and if anything has become better for a player like us coping so well with the current headwinds.

Michael Klieger: First, the excellent growth prospects for digital luxury have not changed at all and, if anything, have become better for a player like us coping so well with the current. Second, our clear focus on big spending, wardrobe-building top customers enabled us to generate solid growth in the second quarter and makes us a key partner for all our brands in their own clientele. Third, we continue to evolve and innovate our business model so that we are prepared for future growth and business demand. Market share gains, resilient financials, best-in-class customer economics, and ongoing innovation for future growth make us clearly stand out in the current market environment. Let me now comment in more detail on these three highlighted areas. First, the excellent growth prospects for digital luxury have not changed at all.

Second our clear focus on big spending wardrobe building top customers enabled us to generate solid growth in the second quarter and makes us a key partner for all our brands and their own client telling effort.

Third we continue to evolve and innovate our business model. So that we are prepared for future growth and business demands.

Market share gains resilient financial it's best in class customer economics.

And ongoing innovation for future growth.

US clearly stand out in the current market environment.

Let me now comment in more detail on these three highlighted areas today.

First the excellent growth prospects for digital luxury have not changed at all according to the latest Bane I'm a research study the global luxury fashion market grew by 4% in 2023 with the online share dropping to 20% from 21% in 2022.

Michael Klieger: According to the latest Bain Altagrama research study, the global luxury fashion market grew by 4% in 2023, with the online share dropping to 20% from 21% in 2020. However, the forecast for 2030 sees the overall market expanding by a factor of 1.5 times and the online share increasing to 30% to 33% by that year. That would create a digital luxury market of over 170 billion euros.

However, the forecast for 2030.

The overall market expanding by effect of one five times and the online share increasing to 30.

233%.

That year.

That would create a digital luxury tam of over 170 billion euros.

Michael Klieger: In the meantime, the long-expected consolidation process of only the fittest surviving in the digital luxury multi-brand sector is happening, and MyTeresa is one of the main winners. Second, our clear focus on building top customers enabled us to generate solid growth in the second quarter of fiscal year 2024. We grew our net sales by plus 8.3% on a constant currency basis compared to Q2 of fiscal year 2020. This solid growth is above market performance and about peers, which mostly shrank. It is highly noteworthy that the United States generated again an outstanding growth of plus 17.4% in terms of net sales compared to Q2 of fiscal year 2023. The United States continues to be a significant growth driver for MITRE RAIL. And the market accounted for 19.9% of total net sales in the second quarter of fiscal year 2024.

In the meantime, the loan expected consolidation process of only the fitness surviving in the digital luxury multi brand sector is happening and Mitra razor is one the main winners.

Second our clear focus on big spending wardrobe building top customers enabled us to generate solid growth in the second quarter of fiscal year 2024.

We grew our net sales by plus eight 3% on a constant currency basis compared to Q2 of fiscal year 2020 through this.

This solid growth is above market performance and above peers, which mostly shrank it.

It is highly noteworthy that United States generated again, an outstanding growth was plus 17, 4% in terms of net sales compared to Q2 of fiscal year 2023.

United States continues to be a significant growth driver for <unk>.

The market accounted for 19, 9% of total net sales in the second quarter of fiscal year 2024.

Michael Klieger: Our top customer base, Uber, increased by plus 15.6% compared to Q2 of fiscal year 2020. In the United States, our top customer number even increased by plus 47.6% in the second quarter. Further evidence of our focus on top customers is that our average order value increased once more by plus 5.4% to a new record high of Euro 672 LTM in Q2 fiscal year 2024 compared to fiscal year 2021. Our clear focus on big spending, water-building top customers makes us a highly desired partner for luxury brands in their own clientele.

Our top customer base grew by plus 15, 6% compared to Q2 of fiscal year 2023 in the United States, our top customer number.

<unk> increased by plus 47, 6% in the second quarter.

Further evidence of our focus on top customers is that our average order value increased once more by plus five 4% to a new record high of Euro 672, LTM in Q2 fiscal year 2024 compared to fiscal year 2023.

Our clear focus on big spending water building top customers makes us the highly desired partner for luxury brands in their own client telling effort.

The second quarter, so again, mainly high impact campaigns and exclusive product launches demonstrating our strong relationships and the support from our brand partners.

Michael Klieger: The second quarter saw again many high-impact campaigns and exclusive product launches demonstrating our strong relationships and the support from our brand partners. All of them further increased our brand awareness, brand equity, and positioned us globally as the leading digital luxury platform. We launched exclusive capsule collections with Givenchy and Victoria Beckham, only available at MYT. We launched exclusive ski and upper ski collections with Chloé, Bogna, and Pucci X Fusso, and we partnered with Loro Piana for the second time to launch the cooling collection only available at Loro Piana and Myteray.

All of them further increased our brand awareness brand equity and positioned us globally.

The leading digital luxury platform.

We launched exclusive capsule collections with <unk> and Victoria Beckham only available at <unk>.

We launched exclusive ski and up cookie collections, with Chloe Borgwarner and Pucci Exco side.

And we partner with local people enough for the second time to launch the cooling collection only available at lower piano and micro arrays.

One special highlight to mention is the launch of an exclusive global digital campaign in collaboration was Brunello Cuccinelli, featuring robot Montgomery and greater la market, which outperformed across all media channels. This partnership was one of the most desired luxury brands shows how.

Michael Klieger: One special highlight to mention is the launch of an exclusive global digital campaign in collaboration with Brunello Cuccinelli, featuring Robert Montgomery and Greta Bellamacchina, which outperformed across all media channels. This partnership, one of the most desired luxury brands, shows how relevant and beneficial such joint activations are for our customers. Please see our investor presentation for more details on our brand collaboration. We also hosted, again, exclusive events for our top customers, providing them with a money can't buy experience. Examples of such events in the second quarter included the celebration of the Givenchy Capsule Collection in Paris with the CEO and Creative Director of Givenchy Press and a two-day experience in Vienna with MUSE.

Relevant and beneficial such joined Activations for our customers.

Please see our investor presentation for more details on our brand collaborations.

We also hosted again exclusive events, while our top customers, providing them with money can't buy experiences.

<unk> of such events in the second quarter included the celebration of the <unk> capsule collection, Paris, with the CEO and creative director Opdivo sheet present, and a two day experience in Vienna with new.

Michael Klieger: We also hosted our top customer events in LA and New York City. Furthermore, we ran our highly successful pop-up installation in Los Angeles in December. Together with our partner, Flamingo Estate, we created a life-size replica of the estate, fully made out of gingerbread, including a MyTheresaDream blanket.

We also hosted our top customer events and L, a and New York City.

Furthermore, we ran our highly successful pop up installation in Los Angeles in December.

Together with our partner Flamingo estate, we created a life size replica of the estate.

Fully made out of ginger rate, including a mitral <unk> dream closet, the holiday house created a truly immersive physical luxury shopping experience. We hosted over 4000 registered visitors over the course of street weeks.

Michael Klieger: The Holiday House created a truly immersive physical luxury shopping experience. We hosted over 4,000 registered visitors over the course of three weeks. For the opening night, we proudly welcomed guests such as Nikki Hilton, Elia Wood, Chrissy Teigen, and Sean LeBecher.

Opening night, we proudly welcomed guests such as Nicky Hilton Elia would proceed.

Sean.

Michael Klieger: Please see our investor presentation for more details on this unique pop-up experience. Third, in the second quarter of fiscal year 2024, we also continued to drive innovation for future growth and business. We successfully ramped up operations in our new 55,000 square meter Leipzig distribution center, with almost 30% of all customer orders already served from there at the end of the year. Because of the direct adjacency to the International Air Freight Hub of DHL Express, our customers now benefit from significantly later cut-off times for international delivery, part of our strategic global partnership with DHL Express.

Please see our investor presentation for more details on this unique pop up experience.

Third in the second quarter of fiscal year 2024, We also continued to drive innovation for future growth and business to box.

We successfully ramped up operations in our new 55000 square meter licenses distribution center with almost 30% of all customer orders already served from there at the end of December.

Because of the direct adjacency to the international Air freight half of DHL Express our customers now benefit from significantly later cutoff times for international deliveries.

As part of a strategic global partnership with DHL Express. We also recently signed a multiyear agreement that will provide us with access to sustainable aviation fuel SaaS under the go Green plus service from DHL.

Michael Klieger: We have also recently signed a multi-year agreement that will provide us with access to sustainable aviation fuel, SAF, under the Go Green Plus service from DHL. We are the largest global e-commerce platform based in Germany investing in POSAT to reduce CO2 emissions. Please see our investor presentation for more details on the SAF agreement. Finally, I'm also very proud to announce that MyTeresa is one of the first luxury brands already present with its own app on the just-launched Apple Vision Pro, being true to our strategy of taking customers on a true money can buy experience. MyTheresa app will take users on an immersive digital action shopping experience to Capri, Italy, and Paris.

We are the largest global e-commerce platform based in Germany investing into SaaS to reduce.

Emissions.

Please see our investor presentation for more details on the SaaS agreements.

Finally, I'm also very proud to announce that <unk> is one of the first luxury brands already present with its own app on the just launched Apple revision pool.

True to our strategy of taking customers from true money can buy experiences the mitral will take users on the diverse digital shopping experience to Capri, Italy, and Paris strong.

With all of the above it should come as no surprise that we are pleased with our performance in the second quarter of fiscal year 2024, we believe that our results demonstrate the strength and consistency of our business model delivering profitable growth.

Michael Klieger: With all the above, it should come as no surprise that we are pleased with our performance in the second quarter of fiscal year 2024. We believe that our results demonstrate the strength and consistency of our business model, delivering profitable growth. We see ourselves as a clear winner in the consolidation of the luxury e-commerce space. We are thus also well positioned to benefit from the tremendous growth prospects when market conditions improve. To capitalize on these prospects, we are actively evaluating opportunities to support and accelerate our investments in future business growth. This also supports our strong confidence in our medium-term growth trajectory and profitability levels despite the short-term uncertainties in the macro environment right now. Now, I hand over to Martin to discuss the financial results in detail. Thank you, Michael.

See ourselves as a clear winner in the consolidation of the luxury E Commerce space.

We are also well positioned to benefit from the tremendous growth prospects.

Market conditions will improve.

To capitalize on these prospects, we are actively evaluating opportunities to support and accelerate our investments in future business growth.

It also supports our strong confidence in our medium term growth trajectory and profitability levels. Despite the short term uncertainties in the macro environment right now.

And now I hand over to Martin to discuss the financial results in detail.

Thank you Michael and.

Martin Beer: In line with what we saw in previous quarters, we are again pleased with our top-line performance in the quarter, with net sales growth of plus 8.3% at constant currency. This comes in a challenging macro environment and with persistent, heavy promotions from peers. In line with our guidance for this quarter, we achieved profitable growth with a plus 4% adjusted EBITDA margin. As January and February so far are well in line with our expectations, we continue to guide towards solid and profitable growth at the lower end of our. In addition, we are pleased with our well-executed inventory management and plus 19 million operating cash flow in the quarter. We ended the quarter with 85 million euros of unused credit lines from our existing rollover, which we were able to increase by 50%, from $60 to $90 million, to capture growth opportunities. Now we review our financial results for the second quarter of fiscal year 24 ended December 31st 2023, and we'll provide supplementary details on certain key developments that affected our performance throughout the quarter. Unless otherwise stated, all numbers refer to year-olds.

In line, what we saw in preceding quarters. We're again pleased with our top line performance in the quarter with net sales growth of plus eight 3% at constant currency.

This comes in a challenging macro environment and with persistent heavy promotions from peers.

In line with our guidance for this quarter, we achieved profitable growth with a plus 4% adjusted EBITDA margin.

As January and February so far are well in line with our expectations. We continue to guide towards a solid and profitable growth at the lower end of our guidance.

In addition, we are pleased with our well executed inventory management.

Plus $19 million operating cash flow in the quarter.

We ended the quarter with 85 million euro unused credit lines from our existing rollover.

Which we were able to increase by 50%.

$60 million to $90 million to capture growth opportunities.

Now I'll review, our financial results for the second quarter of fiscal year 'twenty. Four ended December 31, 2023 and.

And we will provide supplementary details on certain key developments that affected our performance throughout the quarter.

Unless otherwise stated all numbers refer to euro.

In the second quarter of fiscal year 2024.

Martin Beer: In the second quarter of fiscal year 2024, we grew GMB by 5.9% on a constant currency basis. On a nominal basis, GMV grew by 1.5% to 219.1 million, as compared to $215.9 million in the prior year period. Once again, our top customer focus played an essential role in driving growth. Net sales grew by 8.3% on a constant currency basis in this quarter. On an IFRS basis, net sales increased by 3.6% to $197 million, as compared to $190.1 million in the prior year period. We continue to have seven brands operating seamlessly under the CPM, in our collaborative efforts with brand partners.

We grew <unk> by five 9% on a constant currency basis on a nominal basis <unk> grew by one 5% to $219 1 million.

As compared to $215 9 million in the prior year period.

Once again, our top customer focus played an essential role in driving growth.

Net sales grew by eight 3% on a constant currency basis in this quarter.

On an IRS basis, net sales increased by three 6% to $197 million as compared to $190 1 million in the prior year period.

We continue to have seven brands operating seamlessly under the CPM.

And our collaborative efforts with brand partners.

Offer them complete flexibility by providing both models wholesale and CPM.

From a regional perspective, we experienced a solid performance in Europe.

With a 55, 7% share of net sales in the quarter versus 56, 3% previous year.

Europe in total grew by two 4%.

Impressive continued growth in the U S up 17, 4% pushed the net sales share to now 19, 9% versus 17, 6% in the prior year quarter.

Martin Beer: We can offer them complete flexibility by providing both models, wholesale and CPM. From a regional perspective, we experienced a solid performance in Europe with a 55.7% share of net sales in the quarter versus 56.3% a year earlier. Europe as a whole grew by 2.4%.

And rest of World, we saw overall stability with a slightly declining share from 26, 1% to 24, 5%, mainly due to softer demand in APAC.

We expect a continuation of these trends going forward.

Martin Beer: Impressive continued growth in the US of 17.4% pushed the net sales share to now 19.9%, versus 17.6% in the prior year quarter. And the rest of the world, we saw overall stability with a slightly declining share from 26.1% to 24.5%, mainly due to softer demand and Continued stable growth in Europe, impressive outperformance in the U.S., and overall stability in the rest of the world.

<unk> stable growth in Europe.

Impressive outperformance in the U S.

And overall stability in rest of world.

As mentioned by Michael our average order value increased by a remarkable five 4% to an industry, leading 672 euro.

And this is based on our performance of the last 12 months.

So a continued trend for us in the last quarters and years in absolute terms the increase in AOA translates.

So an additional 35 euros.

For shipped order and improves our order economics.

Our commitment to full price selling.

Is also visible at gross profit level with consistently industry, leading gross profit margin of around 50% in this quarter.

Martin Beer: As mentioned by Michael, our average order value increased by a remarkable 5.4% to an industry-leading 672 euros. And this is based on our performance in the last 12 months. So, a continued trend for us in the last quarters and years. In absolute terms, the increase in AOE translates to an additional 35 euros for Shipped Orders and improves our order economy.

Even though our gross profit margin continues to be effected by continuous promotional environment.

The margin slippage during the second quarter narrow.

As expected to 490 basis points from 740 basis points in Q1.

Martin Beer: Our commitment to full price selling is also visible at the gross profit level with consistently industry-leading gross profit margins around 50% in this quarter. Even though our cross-profit margin continues to be affected by the continuous promotional environment, the margin slippage during the second quarter narrowed, as expected, to 490 basis points from 740 basis points in Q1. If you consider only the operational gross, then the margin slippage is at 300 basis points in the quarter, down from 400 basis points in Q1. As the operational cross-margin slippage is driven by fall-winter 23 overstock in the market, we expect the operational cross-margin slippage to reduce further in the coming quarters, in line with lower additional financial effects from inventory depreciation, CPM share, and shifts between quarters. In total, gross profit was $98.3 million compared to $104.2 million in the prior year period. The gross profit margin in the quarter was at 49.9%, up from 42.5% in Q1 but down from 54.8% in the previous quarter. Adjusted shipping and payment costs during the three months ended December 31st increased by $4.2 million, or 14.9%, to $32.5 million.

If you consider only the operational gross margin.

Then the margin slippage is that 300 basis points in the quarter down from 400 basis points in Q1.

As the operational gross margin slippage.

It's driven by fall Winter 2000, <unk> III overstock at the market, we expect the operational gross margin slippage to reduce further in the coming quarters.

In line with lower additional financial effects from inventory depreciation CPM share and shifts between quarters.

In total gross profit was $98 3 million compared to $104 2 million in the prior year period.

The gross profit margin in the quarter was at 49, 9%.

Up from 42, 5% in Q1, but down from 54, 8% in the previous year quarter.

Adjusted shipping and payment costs during the three months ended December 31 <unk>.

<unk> increased by $4 2 million or 14, 9% to $32 5 million.

The increase in adjusted shipping and payment cost ratio from 13, 1% to 14, 8% in Q2 was mainly due to a higher share of sales in countries, where we pay all the duties for our customers.

Such as the U S.

And an overall growing sales presence outside Europe.

Successfully implemented changes in our payment in custom setup will mostly offset further cost increases and therefore, we target to achieve stability.

And the cost ratios in the upcoming quarters.

Martin Beer: The increase in Adjusted Shipping and Payment Cost Ratio from 13.1% to 14.8% in Q2 was mainly due to a higher share of sales in companies where we pay all the duties for our customers, such as the U.S., and an overall growing sales presence outside Europe. The successfully implemented changes in our payment and customs setup will mostly offset further cost increases. And therefore, we target to achieve stability in Cost Ratios in the upcoming quarter. Amit Vyaporman, macroeconomic conditions, our focus has remained dedicated to the acquisition of high-potential customers. Continuing the strategy from our preceding quarter, we focused our marketing on the most promising new customer acquisition and top customer retention strategies and aligned our marketing efforts with an overall softer market center. As a consequence, marketing expenses decreased by $5.3 million to $23.5 million during the second quarter. The marketing cost ratio decreased by 260 basis points, to 10.7 percent, from 13.3% in the prior year quarter.

Amidst the aforementioned <unk>.

Macroeconomic conditions, our focus has remained dedicated to the acquisition of high potential customers.

Continuing the strategy from our preceding quarter, we focus our marketing efforts on the most promising new customer acquisition and top customer retention strategies and aligned our marketing efforts with an overall softer market sentiment.

As a consequence marketing expenses decreased by $5 3 million to $23 5 million during the second quarter.

The marketing cost ratio decreased by 260 basis points.

10, 7%.

13, 3% in the prior year quarter.

Adjusted selling general and administrative expenses.

Grew by $6 2 million to $33 9 million during the second quarter of fiscal year 2024.

The adjusted SG&A cost ratio increased by 270 basis points to 15, 5% as compared to 12, 8% in the prior year quarter.

The search is mainly due to an increase in personal costs for operational staff.

Especially at our new warehouse in Leipzig.

With our continuous efforts to decrease SG&A costs.

We target a decrease of the SG&A cost ratio in H two.

Our fiscal year, 'twenty four versus H, one or fiscal 'twenty four.

Martin Beer: Adjusted Selling General and Administrative Expenses grew by 6.2 million to 33.9 million during the second quarter of fiscal year 2024. The adjusted SG&A cost ratio increased by 270 basis points to 15.5% as compared to 12.8% in the prior year quarter. The surge is mainly due to an increase in personal costs for operational staff, especially at our new warehouse in London, with our continuous effort to decrease SG&A costs. We target a decrease in the SG&A cost ratio in H2 of Fiscal Year 24 versus H1 of Fiscal Year 24. In the second quarter of fiscal year 2024, we achieved profitable growth with an adjusted EBITDA margin of 4.0% at $7.9 million. This comes despite a continuously challenging macroeconomic environment and is above market expectations.

In the second quarter of fiscal year 2024, we achieved profitable growth.

With an adjusted EBITDA margin of four 7% at $7 9 million.

This comes despite a continuously challenging macroeconomic environment and as above market expectations.

It again shows the resilience of our business model and our successful focus on sweet spot of high end luxury.

Depreciation and amortization expenses increased only modestly during the second quarter by $1 million from $2 8 million or one 3% of <unk> three.

$3 8 million or one 8% of GMB driven by right of use asset depreciation related to the new warehouse in Leipzig.

For Q2 of fiscal year 2020 for profitability. This also demonstrated.

And adjusted operating income or adjusted EBIT.

As well as adjusted net income level.

Adjusted EBIT during the quarter was up $4 1 million.

And an adjusted EBIT margin of two 1%.

Adjusted net income stood at $3 1 million with an adjusted net income margin of one 5%.

Martin Beer: It again shows the resilience of our business model and our successful focus. The Sweet Spot of High-End Luxury, Depreciation and amortization expenses increased only modestly during the second quarter by 1 million, from 2.8 million or 1.3% of GMV to 3.8 million or 1.8% of GMV, driven by right-of-use asset depreciation related to the new warehouse and land. For Q2 of fiscal year 2024, profitability is also demonstrated on an adjusted operating income or adjusted EBIT, as well as an adjusted net income level. Adjusted EBIT during the quarter was $4.1 million.

Let's take a look at the cash flow statement in.

In Q2 of fiscal 'twenty, four we had a positive operating cash flow of $18 5 million.

This compares to a negative $27 1 million operating cash flow in the preceding quarter.

The increase in cash flow was anticipated and was mostly due to reduced inventory order volume.

Targeted levels of trade payables.

Capex or invest in cash flow in the quarter was only at $1 4 million as the Capex for the new warehouse in Leipzig will come to an end in this fiscal year.

Looking ahead to fiscal year, 'twenty five and beyond.

We expect capex to stay below 1% of <unk> <unk>.

Martin Beer: And that's just the EBIT margin of 2.1%. Adjusted net income stood at $3.1 million with an adjusted net income margin of $1.5 billion. Let's take a look at the cash flows. In Q2 of fiscal year 24, we had a positive operating cash flow of $18.5 million.

In line with our targeted performance in our business model.

We continue to successfully execute our inventory management.

We gradually reduced our inventory growth levels.

Plus 56, 5% in June 23 to 44, 4% in September 23, and now plus 33, 1% year over year growth in December 'twenty three.

If you would net out the effect from early deliveries of spring summer 'twenty for <unk>.

Martin Beer: This compares to a negative $27.1 million operating cash flow in the preceding year quarter. The increase in cash flow was anticipated and was mostly due to reduced inventory order volume at targeted levels of trade payments. CapEx or investing cash flow in the quarter was only at 1.4 million as the CapEx for the new warehouse in Leipzig will come to an end in this fiscal year.

Compared to previous year growth is at plus 21% end of January 2024.

And we are seeing a continuation of the decrease also in February.

At the end of January 2024.

Days inventory outstanding.

We're at 278 days.

Net of this effect and compared to 317 days end of June.

2023.

We expect to achieve our targeted 260 days inventory outstanding by the end of fiscal year 'twenty five.

Martin Beer: Looking ahead to fiscal year 25 and beyond, we expect CAPEX to stay below 1% of GMV in line with our targeted performance in our business model. We continue to successfully execute our inventory management.

This inventory level and strategic path on inventory management is in line with our luxury positioning and successful inventory strategy over the last five years with superior gross profit margins achieved.

Given our plus $18 5 million positive operating cash flow.

Martin Beer: We gradually reduced our inventory growth levels, from plus 56.5% in June 23 to 44.4% in September 23, and now plus 33.1%, year over year growth in December 23. If you would net out the effect from early delivery, spring, and summer 24, compared to the previous year, growth is at plus 21% at the end of January 2024. And we are seeing a continuation of the decrease also in February. At the end of January 2024.

We only had a very small utilization of our revolving credit facilities of $4 9 million.

End of December 'twenty three.

We nevertheless increased the revolving credit facilities by 50% from 60 million.

$290 million to.

To capture additional growth opportunities.

With the utilization of only $4 9 million end of December the non utilized part amounted to $85 1 million of borrowing capacity or in other words over 94% unused borrowing capacity.

We are in discussions with our primary banks about replacing our revolving credit facilities with our syndicated loan facility with a longer term.

Martin Beer: Days Inventory Outstanding, We're at 278, net of this effect, and compared to 317 days at the end of June, 2023. We expect to achieve our targeted 260 days of inventory outstanding by the end of fiscal year 25. This inventory level is in line with our luxury position and successful inventory strategy over the last five years with superior gross profit margins achieved. Given our plus $18.5 million positive operating cash flow, we only had a very small utilization of our revolving credit facilities of $4.9 million at the end of December 23.

We believe the new credit facility will be in place in the next couple of months.

And that it will give us even more flexibility.

Remember besides the revolving credit facilities, we do not have any other bank debt.

And with an equity ratio of 61%.

Strong balance sheet.

With all of the above.

It comes as no surprise that.

But we're very confident with our strategic positioning.

We have implemented appropriate measures to align with market dynamics and steer the company towards profitability in the midst of a visibly challenging and consolidating environment.

The performance during the first weeks of our third quarter is encouraging and is still confidence in us.

Our assumption of a slowing promotional environment in H two of our fiscal year is true.

Martin Beer: We nevertheless increased the revolving credit facilities by 50% from $60 million to $90 million. Capture Additional Growth Opportunities. With the utilization of only 4.9 million at the end of December, the non-utilized part amounted to 85.1 million of borrowing capacity, or in other words, over 94% of unused borrowing capacity.

Leading to improvements in the top and bottom line.

We therefore again confirm our guidance for the full fiscal year 2024 at the lower end of the guided range as of <unk> and net sales growth between 8% 13%.

<unk> profit growth between 8% to 13% and an adjusted EBITDA margin between three and 5%.

We remain very confident in the medium and long term outlook for our business.

Martin Beer: We are in discussions with our primary banks about replacing our evolving credit facilities with a syndicated loan facility with a longer term. We believe the new credit facility will be in place in the next couple of months and that it will give us even more flexibility. Remember, besides the revolving curtain facilities, we do not have any other bank debt, with an equity ratio of 61%, a strong balance sheet, and all the above. It comes as no surprise that we are very confident with our strategic position.

We're gaining market share and have completed two major infrastructure milestones.

We have less benefit more quickly and over proportionately.

When the luxury market recovers from the current economic challenges.

Our market position is getting stronger every month.

Our medium targets remain at the level that.

We have always guidance double digit growth rates at a high single digit profitability level.

And with this.

I will now turn the call back over to Michael for his concluding remarks.

Thank you Margaret.

We are pleased with our second quarter of fiscal year 2024 earnings results.

Martin Beer: We have implemented appropriate measures to align with market dynamics and steer the company towards profitability in the midst of a visibly challenging and consolidating environment. The performance during the first week of our third quarter is encouraging, and we still have confidence in us that our assumption of a slowing promotional environment in H2 of our fiscal year is true, leading to improvements in the top and bottom line. We therefore again confirm our guidance for the full fiscal year 2024 at the lower end of the guided ranges of GMV and net sales growth between 8 to 13 percent, gross profit growth between 8 to 13 percent, and an adjusted EBITDA margin between 3 and 5 percent. We remain very confident in the medium and long-term outlook for our business. We're gaining market share and have completed two major infrastructure milestones. We will, however, benefit less quickly and more proportionally when the luxury market recovers from the current economic challenge.

We are very pleased to see ourselves well positioned to achieve our fiscal year 2024 guidance targets.

<unk> on the first weeks of trading.

Third quarter as just mentioned.

We are extremely pleased with the medium term outlook for the company given the very positive projections for the digital luxury sector and our competitive strengths versus most other players.

We believe that <unk> offers the best digital luxury shopping experience for big spending consumers and true luxury brands.

And with that.

I ask the operator to open the line for your questions.

Thank you Michael and we will now open for Q&A in order to ask a question Press Star then the number one on your telephone keypad to raise your hand and joined the queue.

We kindly request to please keep to one question and one follow up today and if you are listening via a loudspeaker on your phone and are called upon to ask a question. Please use the handset to ensure your question can be clearly heard.

And your first question comes from the line of Matthew Boss from J P. Morgan Your line is open.

Michael Klieger: Our market position is getting stronger every month. Our medium targets remain at the level that we have always guided, double-digit growth rates at a high single-digit profitability level. And with that, I will now turn the call back over to Michael for his concluding remarks. Thank you.

Great. Thank you, it's Amanda Douglas on for Matt.

So Michael could you elaborate on sales trends post holiday that you are seeing in the U S and Europe and that would speak to offensive moves you are making to capture market share just given the online luxury industry consolidation <unk> seen thus far.

Michael Klieger: We are pleased with our second quarter of fiscal year 2024 earnings results. We are very pleased to see ourselves well positioned to achieve our fiscal year 2024 guided targets based on the first weeks of trading of the third quarter, as just mentioned. We are extremely pleased with the medium-term outlook for the company, given the very positive projections for the digital luxury sector and our competitive strength versus most others. We believe that MyTeresa offers the best digital luxury shopping experience for big spending consumers and true luxury brands.

Okay.

Thank you Amanda of course, Sean so.

The general trend of course is globally, the slowdown of the aspirational customer that we sold 23. However.

We see continued strength in the U S markets stabilization in Europe.

And we even see in the U S market the first signs of a pickup.

Turning to exploration customers of course. This is early stage and can be attributed to a much better sentiment in regard to economic outlook, which always is the risk to change but.

Yes.

<unk> by Martin we are very.

Confident with our guidance based on the further acceleration of the already strong performance in Q2.

Sales trends in Q2 is of course always influenced by the holiday season, we had a lull stretch before but almost a truly working week before the holidays.

Operator: And with that, I ask the operator to open the line for your questions. Thank you, Michael. And we will now open for Q&A. In order to ask a question, press star, the number one on your telephone keypad, to raise your hand and join the queue.

But what we also soil.

Momentum continued into into January which is not always the case.

One interesting trend we saw was that.

We believe there will be more.

U S customers this year spending domestically not going over to Europe based on the pattern of.

Vacation wear and resort, where they were buying already in January.

Operator: We kindly request that you keep to one question and one follow-up today, and if you are listening via a loudspeaker on your phone and are called upon to ask a question, please use the handset to ensure your question can be clearly heard. Your first question comes from the line of Matthew Boss from JP Morgan. Your line is open. Great, thank you. It's Amanda Douglas on for Matt.

And thus.

The main outlook is strong U S market, even the slight recovery there on the aspirational customer.

With strength globally of the big Spenders everywhere.

Most uncertain region remains Asia was sometimes a very good sign sometimes.

<unk> signed so hard too weak.

That's great and then just a follow up for Martin.

Nice to think about the timeline from here to see inventory levels more aligned with Dnb grout and just your confidence in achieving greater full price selling share in the second half of the fiscal year.

Michael Klieger: So Michael, could you elaborate on sales trends post-holidays that you're seeing in the US and Europe, and then speak to offensive moves you're making to capture market share, just given the online luxury industry consolidation we've seen thus far? Thank you, Amanda. Of course, Michael. So the general trend, of course, is a global slowdown in the aspirational customer that we saw in 2013. However, we see continued strengths in the US markets, a stabilization in Europe, and we even see in the U.S. market the first signs of a pickup among aspirations. This is an early stage, and can be attributed to a much better sentiment in regard to the economic outlook, which always has the risk of change. But, as mentioned by Martin, we are very confident with our guidance based on the further acceleration of the already strong performance in Qt. The sales trend in Q2 is, of course, always influenced by the holiday season.

Yes happy to talk about that.

Despite the addition to in addition to the growth rates the nominal growth rates of the inventory, we always look at days inventory outstanding.

And.

As I called out the days inventory outstanding are strongly decreased from from a high of 317 days typical for our industry, but still high end of June.

To now end of January, especially if you take into consideration the early deliveries effects of spring summer 'twenty four.

278 278 days.

And the 278 days.

You have to relate to the 260 days that is our targeted level because with the 260 days, we have achieved on average over the last five years and with that.

Level we.

We we always we'll always able to have a consistent strong gross profit margin level.

Michael Klieger: We had a long stretch before, almost a full working week before the holidays. But what we also saw was that momentum continued into January, which is not always the case. One interesting trend we saw was that we believe there will be more U.S. customers this year spending domestically, not going over to Europe, based on the pattern of resort where they were and us.

And as I called out obviously, there are shifts between quarters and.

We have targeted to achieve the 260 days.

And our fiscal year 'twenty fives, but.

It all depends on how the situation will evolve, especially seeing competitors competitive behavior, but we're really confident on.

On achieving that level at the latest in fiscal year 'twenty five.

Michael Klieger: The main outlook is a strong U.S. market, even a slight recovery there among the aspirational customer. Continued strength globally of the big spenders everywhere. The most uncertain region remains Asia with sometimes very good signs, sometimes mediocre signs, so hard to tell. That's great.

Maybe earlier and that implies that inventory levels.

Will decrease.

And in line with <unk> in the next quarters.

And then come back to this normal level normalized levels of 260 days and then.

Will increase with GMB.

On.

Going forward on those.

Martin Beer: And then just to follow up for Martin, help us to think about the timeline from here to see inventory levels more aligned with GNV growth and just your confidence in achieving a greater full price selling share in the second half of the fiscal year. Yeah, I'm happy, happy to talk about that. Despite them, in addition to the growth rate, the nominal growth rates of the inventory, we always look at the days inventory outstanding. And, as I called out, the days inventory outstanding strongly decreased from a high of 317 days, typical for our industry, but still high, end of June, to now end of January, especially if you take into consideration the early delivery effect of spring, summer 24, to 278 days.

Eddie just on each quarter.

Yes.

The second big topic on this inventory management and looking at industry trends is is of course, our full price.

Sure.

As Michael.

And as we always.

Emphasize we focus on.

Selling at full price and this is in line with our high end positioning with our top customer focus with our ready to wear focus.

And so we stay true even in the last quarters on this focus of strong full price.

And.

The lower gross profit margin.

Called out in the last two quarters, So Q1, and Q2 of our fiscal year was driven by access inventory in the market fall Winter 2003, and now with spring Summer 'twenty four.

Martin Beer: And the 278 days, you have to relate to the 260 days; that is our targeted level because with the 260 days, we have achieved an average of the last five years. And with that level, we are always able to have a consistent, strong gross profit margin level. And as I called out, obviously, there are shifts between quarters, and we have targeted to achieve the 260 days by the end of fiscal year 25.

And we see confirmation of that in the early sales of the spring summer 2004 season.

We expect a much lower.

Level of excess inventory in the market and therefore, a much lower level of promotional intensity in line with what the ordering volume off spring summer 'twenty four and debt.

Martin Beer: It all depends on how the situation evolves, especially in terms of competitive behavior, but we're really confident of achieving that level at the latest, in fiscal year 25, maybe earlier. And that implies that inventory levels will decrease in line with GMV in the next quarters and then come back to this normalized level of 260 days, and then we'll increase with GMV going forward in each quarter. Yes, and the second big topic on this inventory management and looking at industry trends is, of course, our full price share. As Michael called out, and as we always emphasize, we focus on selling at full price.

And the industry.

And so we expect a decrease.

The operating gross margin slippage.

Further on in H two of fiscal year, 'twenty, four and therefore an improvement.

Off the situation.

We have been seeing in the last six months.

That's great color. Thank you.

Your next question comes from the line of all of the churn from TD Cowen Your line is open.

Thanks, a lot good morning, Michael and Martin the margins this quarter were better than we expected.

It's leading to guidance at the low end of your previously issued guidance and what drove some upside this quarter and margins and Michael what's see what's underlying your thoughts on the U S customer aspirational customer seeing some some positive glimmers.

Martin Beer: This is in line with our high-end positioning, with our top customer focus, with our ready-to-wear focus. And so we stayed true, even in the last quarters, to this focus of strong full price, the lower gross profit margin as called out in the last two quarters, so Q1 and Q2 of our fiscal year were driven by access inventory in the market fall, winter 23. And now with spring, summer 24, and we see confirmation of that in the early sales of the spring, summer 24 season.

And why do you have conviction that the luxury market could be recovering.

Martin another one on your guidance, what's the bottom line are you, saying that inventories will be a source of cash and also your guidance what does it imply for operating cash flow for the full year. Thank you.

Thank you Oliver.

Hand over.

Margin for the guidance.

Martin Beer: We expect a much lower level of access inventory in the market and, therefore, a much lower level of promotional intensity in line with the ordering volume of Spring, Summer, and 24, in the industry. And so we expect a decrease in the operating gross margin slippage further on in H2 of fiscal year 24 and, therefore, an improvement of the situation that we have been seeing in the last. That's a great color. Thank you. Your next question comes from the line of Oliver Chen from TD Cowan. Your line is open. Thanks a lot.

Let me talk about the U S. The customer view and my confidence in recovery.

First of all we are very comfortable with this calendar year on the basis of the strength of the <unk>.

Top spending customers, we continue to drive our strong numbers was that segment.

Again, we grew 16% overall, we grew more than 47% our count in the U S and we don't see a sign of weakness in there and so with that segment spending was that segment, having its high loyalty to our two rated offer we already are.

Martin Beer: Good morning, Michael and Martin. The margins this quarter were better than we expected. What's leading to guidance at the low end of your previously issued guidance? And what drove some upside this quarter in margins? And Michael, what's underlying your thoughts on the US customer, the aspirational customer, seeing some positive glimmers? And why do you have conviction that the luxury market could be recovering?

Very strong position and are in the position to deliver our guidance.

As you rightly put first glimmer aspirational customers kicking in.

Is even on top of that.

Don't see it globally, yet we saw it in the U S. We saw in Q toward Q2, which is of course very important exploration customers are occasionally buy.

And that is of course very important in the accessory sector vessel bags and trolls.

Michael Klieger: Martin, another one on your guidance. What's the bottom line? Are you saying that inventories will be a source of cash? And also, your guidance, what does it imply for operating cash flow for the full year? Thank you. Thank you, Oliver.

And there is of course, the scenario that that will continue with potentially financially easing in the U S coming back.

Great of a speculation, but we know that interest rates.

Tremendous influence of consumer spending in the U S far more than in other geographies, where interest rates don't drive direct.

Michael Klieger: I will then hand over to Martin for guidance, but let me talk about the US and the customer view and my confidence in recovery. First of all, we are very comfortable with this calendar year on the basis of the strengths of the top spending customers.

Consumer spending so that's where the glimmer of hope exists, but I want to stress.

Our outlook for H, two is really based on the strength in the top customer segment, which we haven't seen that quarter after quarter.

Michael Klieger: We continue to drive our strong numbers with that segment. Again, we grew 16% overall. We grew even more than 47% of our account in the US, and we don't see a sign of weakness there.

And then hand over to Martin on your cash and guidance questions. Yes. Thanks, Oliver good talking to you.

As you know our ultimate goal and target and expectation is the profitable growth growth to continue the profitable growth also for the full fiscal year and remember last quarter, we were breakeven.

Michael Klieger: And so with that segment spending, with that segment having its high loyalty to our curated offer, we already are in a very strong position and are in the position to deliver our guidance. The, as you rightly put, the first glimmer of aspirational customers kicking in, is even on top of that. And we don't see it globally yet. We saw it in the US.

So for us the return to profitable growth.

As a as a very good it was.

A very good step into that direction.

And obviously, we want to continue that step.

And expect and also see that.

See thats coming.

Michael Klieger: We saw it in Q2, which is, of course, very important for aspirational customers that occasionally buy. And that is, of course, very important in the accessory sectors of bags and shoes. And there is, of course, a scenario that that will continue with potentially financial easing in the U.S. coming. That's a bit of speculation, but we know that interest rates have a tremendous influence on consumer spending in the U.S., far more than in other geographies where interest rates don't drive directly. www.mytrendyphone.com. Our outlook for H2 is really based on the strengths in the top customer segment Yeah, yeah. Thanks, Oliver. Good talking to you.

So.

The guidance.

The guidance incorporates this expectation of profitable growth.

And we always also last quarter guidance.

On the lower end of the guided ranges and given the uncertainty in the market.

We.

And also seeing the trend in January February we want to stay true and confirms our guidance at the lower end of those ranges.

And yes, calling out on the inventory situation.

Yes, I mean, as we want to.

Decrease days inventory outstanding that implies that we are.

Returning to more normalized levels of inventory, obviously this inventory.

Paid for so.

So as we sell.

Cell.

Have increasing share of those inventory sell downs.

Martin Beer: I mean, as you know, our ultimate goal, target, and expectation is profitable growth, to continue the profitable growth for the full fiscal year. And remember, last quarter, we were breakeven. So for us, the return to profitable growth is a very good step in that direction, and obviously, we want to continue that step and expect and also see that coming. So the guidance incorporates this expectation of profitable growth. And we always, also last quarter, guided on the lower end of the guided ranges.

We expect a positive cash contributing.

From from this return to the <unk> and.

You saw some of it in Q2, obviously.

That level.

B.

Taken as a as a blueprint for the coming quarters.

It was a very significant step this will continue.

And the overall.

Cash flow perspective for the full year.

Looks looks solid we don't.

No.

We don't give a.

Cash flow.

<unk> for the full fiscal year, but we are very comfortable with our reducing in inventory the positive cash effects from that.

Martin Beer: Given the uncertainty in the market and also seeing the trend in January and February, we want to stay true and confirm our guidance at the lower end of those ranges. And yeah, calling out on the inventory situation. Yes, I mean, as we want to decrease days inventory outstanding, that implies that we're returning to more normalized levels of inventory. Obviously, this inventory is all paid for. So as we sell, and have an increasing share of those inventory sell-downs, we expect a positive cash contribution from this return to the DIOs, and you saw some of it in Q2.

And then obviously the finance setup as I called out that we.

Have a minimal.

Utilization of the existing revolver.

<unk>.

<unk> 5 million in end of December and we increased the.

The loading facilities from $60 million to $90 million by 50%.

So.

That is also a good situations. So continued decrease in inventory levels coming down that has a positive cash effect as you rightfully called out.

Martin Beer: Obviously, that level cannot be, you know, taken as a blueprint for all the coming quarters. But it was a very significant step. This will continue, and the overall cash flow perspective for the full year looks solid. We don't give cash flow guidance for the full fiscal year, but we are very comfortable with our reduction in inventory, the positive cash effects from that, and obviously the finance setup, as I called out, that we have a minimal utilization of the existing revolver of 5 million at the end of December, and we increased the revolving facilities from 60 to 90 million by 50%, so that So continued decrease in inventory levels coming down, that has a positive cash effect, as you rightfully called out, and we increased the revolver to capture growth opportunities to see how we can increase our market share going forward in this special situation, so we're really comfortable on the cash and on the inventory side. Okay, thank you. And one follow-up. The landscape continues to be volatile, and competitors such as Farfetch and Net-a-Porter are promotionally going through a lot. What's the nature of your overlap?

We increased the revolver to to capture growth opportunities to see.

How we can.

Increase our market share going forward and the special situation. So we're really comfortable on that.

On the cash.

On the inventory side.

Okay. Thank you and one follow up on the landscape continues to be volatile and competitors, such as Farfetch and that our <unk>, our promotional and going through a law.

Lotte, what's the nature of your overlap and these can be uncontrollable factors in terms of how the competitors behave.

Why do you have confidence given that what we're seeing an aspirational inventories could still be too high at several players that sell similar brands.

I mean.

What you described as the competitive environment.

Absolutely fair description there is.

But I don't have disruption there is a lot of uncertainty.

And what is other multi brand players we have of course significant customer overlap.

However.

It's very important is that we feel strongly believe that what happened over the last couple of months.

Vindicates and supports our strategy focus on the big Spenders.

Michael Klieger: And these can be uncontrollable factors in terms of how the competitors behave. Why do you have confidence given that what we're seeing in aspirational inventories could still be too high at several players that sell similar brands? I mean, what you describe as the competitive environment is an absolutely fair description.

Be very restrictive.

Promotions will be very strict about markdowns focus on full price that in.

In the medium and particularly long run get sued a better customer cohorts gets you the loyal customer towards the ones that repurchase.

So while I.

I don't see scenarios that.

Disruptions at other players may cause continued negative.

Situations.

Michael Klieger: There is a lot of disruption, there's a lot of uncertainty, and with other multi-brand players, we have, of course, significant customer overlap. Forever.

Markdowns and promos.

I actually believe with what we have seen last year starting in September October November.

Two significant players struggling.

That is exactly the timeframe of which we just reported strong financial numbers. So we feel very well positioned even if there is a scenario where some other players continue to struggle and continue to.

Michael Klieger: What is very important is that we feel strongly believe that what happened over the last couple of months fully vindicates and supports our strategy: focus on the big spenders. Be very restrictive on promotions. Be very restrictive on markdowns.

Operate for short term cash needs.

The outcome is clear we sold the outcome for some of these players and therefore that strategy is not ours and we feel that strategy is short cycle.

Michael Klieger: Focusing on full price, in the medium and particularly long run, gets you the better customer cohorts, gets you the loyal customer cohorts, the ones that we purchase. And so while I can see scenarios that disruptions at other players may cause continued negative situations and markdowns and promos. I actually believe what we saw last year, starting in September, October, November, with two significant players struggling, means that is exactly the time frame for which we just reported strong financial numbers. So we feel very well positioned, even if there is a scenario where some other players continue to struggle and continue to operate for short-term cash. But the outcome is clear. We saw the outcome for some of these players and, therefore, that strategy.

Thank you best regards.

Thank you Oliver.

Your next question comes from the line of <unk> <unk> from Societe Generale. Your line is open.

Yes, hi.

Couple of questions from my end. So one is on the top line.

Now given that we already are.

5% growth for.

Good morning.

In order to achieve your target of around 8% growth you need 9% to 10% sales growth.

Second half, which is just coming on a base of <unk>.

15% to 16% last year.

So when you say that the January and February in line with our expectation.

Do you.

<unk>.

Unlike implying that you are seeing high single to low double digits.

<unk> sales growth. So Thats first question second is on the gross margin could you throw some color.

Michael Klieger: It's not ours, and we feel that this strategy is short. Thank you. Best regards.

From what I understand is most likely in this quarter to the CPM, Brian would have underperformed.

Operator: Your next question comes from the line of Abhinav Sinha from Society General. Your line is open. Yeah, hi. A couple of questions from my end. So one is on the top line. Now given that we are already at 5% growth for 1H, in order to achieve your target of around 8% growth, you need 9 to 10% sales growth in the second half, which is coming on a base of 15 to 16% last year. So when you say that January and February are in line with your expectation, are you implying that you are seeing high single to low double digit GMV or sales growth? So that's the first question.

Given what getting as reported and things like that so.

Any color on how the <unk> margin was year over year.

Yeah, so on that.

<unk>.

Thank you very much I will defer.

For the margin question Mara.

Martin on your first question.

You have you're in full control of your mathematics, absolutely true.

Yes.

The H two.

Implies an acceleration of top line growth to achieve the guidance ranges at the low end.

Our statements.

At least the first couple of weeks confirm our confidence that we will achieve our guidance.

<unk> exactly what you just stated so.

I can confirm your calculations.

Michael Klieger: Second, on the gross margin, could you throw some light on that? I mean, from what I understand is, most likely in this quarter too, the CPM brands would have underperformed, given what Kering has reported and things like that. So any color on how the 1P margin was year over year and, yeah, so on that. Thank you. Thank you very much. I will defer the margin question to Martin on your first question. You have, you're in full control of your mathematics, so absolutely true.

Thanks.

<unk>.

Yes.

Yeah.

Yes on the gross margin up enough.

To help you.

I called out the operational gross margin and this is then referring.

Two.

The the non CP.

Part.

And there we saw the decline in the operating margin slippage of 300 basis points.

And you're completely right that a lower CPM sure.

Martin Beer: The H2 applies an acceleration of top-line growth to achieve the guided ranges at the low end, and our statement that at least the first couple of weeks confirms our confidence that we will achieve our guidance implies exactly what you just stated. I can confirm your calculations, Abhinav. Thank you. Yeah Yeah, on the cross-margin, Abhinav. Happy to help you. I called out the operational cross-margin, and this is then referring to the non-CPM part. And there we saw the decline, the operating margin slippage of 300 basis points, and you're completely right that a lower CPM share and also given the weakness that you call the algorithm brands in the overall market have an effect on the numerical mathematical calculation of the gross profit margin in relation to net sales as the CPM gross profit margin is 100%.

And also given the weakness that you called out with the brands.

Overall market Hasnt effect of the <unk>.

<unk> America mathematical calculation of the gross profit margin in relation to net sales as the CPM gross profit margin is 100%.

The gross profit is the commission.

Which one.

Then basically the same number as in the net sales and if that share decreases.

Then.

It has a decreasing effect.

And that.

Effect is about 50 to 60 basis points.

The cost corporate margin slippage and that is the.

Attack that into the financial effects of the gross profit margin development.

Apart from the 300 basis points operating.

Margin slippage too.

As one part of the more financial effects.

But you'll see and it's also easy to two two.

Insulate those effects if you relate to the if it relates the absolute gross profit through the <unk> number.

Martin Beer: The gross profit is the commission, which is then basically the same number as in the net sales, and if that share decreases, then it has a decreasing effect, and that effect is about 50 to 60 basis points in the gross profit margin slippage, and that is the attack on the financial effects of the gross profit margin development apart from the 300 basis points operating margin slippage as one part of the more financial effect that you see, and it's also easy to ins And then you can also come to a 340 basis points decrease, which is then, with shifts between quarters and other financial effects, more in line with what you were calling out, independent of whether a brand is wholesale or CPM on the overall gross profit performance. Got it. I got it. And I mean, the remaining I mean, you said that 300 basis points came from the operating operations and 50 to 60 basis points was the impact due to the CPM. So the rest, mostly I mean, it came from like other technical factors or what were they like?

And then you can you can you can come.

Also to a 340 basis points decrease which is then.

With shifts between quarters and other financial effects more in line.

But you are calling out.

Dependent upon whether a brand is a wholesale our CPM on the overall gross profit performance.

Got it got it.

And I mean.

The remaining <unk>.

Had that 300 basis points came from the operating operations and <unk> 260 basis point was the impact.

The impact due to the CPM, so diverse mostly I mean, it came from like other technical factors.

Alex.

Exactly I mean the.

The overall message is that that the operating gross board cost.

Margin slippage is going down 400 basis points to 300 basis points the overall.

Gross profit margin slippage, that's going down from 740 basis points to 490 basis points and therefore, the remainder is 190 basis points of other effects 50, 60 basis points of CPM share.

Martin Beer: Exactly. I mean, the overall message is that the operating gross margin slippage is going down from 400 basis points to 300 basis points. The overall gross profit margin slippage is going down from 740 basis points to 490 basis points. Therefore, the remainder is 190 basis points of other effects, 50, 60 basis points of CPM share, 90 basis points of overall inventory items, special write-downs, and then there's also around 50 basis points of shift between quarters. And in line with the reduction of the operating gross profit margin slippage, those financial effects are expected to reduce as well.

<unk> 90 basis points of overall.

Inventory topics, especially.

A special write Downs and then there is also around 50 basis points of shifts between quarters and in line with the reduced with the reduction of the operating gross profit margin slippage also those financial effects are expected to reduce and so.

Core message and all of this very complicated technicalities.

Is that we expect that the gross profit margin reduction.

A reduction.

We'll we'll get lower will improve given the spring summer 'twenty four situation given our strong position in the market and giving our top customer focus. So we will obviously see that and expect that to happen in the next quarters.

Martin Beer: And so the core message in all of this very complicated technicalities is that we expect that the gross profit margin reduction will get lower and will improve, given the spring-summer 24 situation, given our strong position in the market, and given our top customer focus. So we will obviously see that and expect that to happen in the next quarters with an improvement in this gross profit situation.

In.

And the improvement in this.

Gross profit situation.

Got it.

Thanks, Thanks for providing the detail. Thank you.

Your next question comes from the line of Kunal <unk> from UBS. Your line is open.

Martin Beer: Very, very clear. Thanks. Thanks for providing the detailed color.

Hi, Thanks for taking my questions.

Sure.

I guess I guess this is this is all about the guide and how strongly it how strongly confident you are about the guide.

Operator: Thank you. Your next question comes from the line of Kunal Madhukar from UBS. Your line is open.

In terms of gross margin guide when we look at gross margins and you're talking about continued slippage in the remainder of the fiscal year.

Martin Beer: Thank you for taking my questions. I guess this is all about the guide and how strongly or how strongly confident you are about the guide. In terms of the gross margin guide, when we look at gross margins and we're talking about continued slippage in the remainder of the fiscal year, I just want to understand your gross profit margin in fiscal 3Q23 was 45.6%. So, if your gross margin is going to continue to slip on a year-over-year basis in fiscal 3Q24, then your gross margins would be much lower than the high 40s that you need to be able So once you want to understand how much of a slippage we should be expecting here and whether the 8 to 13% of gross profit is still viable. And then, on shifting to the balance sheet, a couple of things. One is I don't see the five million liabilities to banks. I see 1.4 million euros. So where is the remaining 3.6 million euros in liabilities to banks?

Just wanted to understand your gross profit margin in fiscal <unk> 23 was 45, 6%.

So if your gross margin is going to continue to slip on a year over year basis in fiscal <unk> 2004.

Then your gross margins would be much lower than BB high.

Hi, Hi, <unk> that you need to be able to hit the <unk>.

Sure.

8% to 13% growth target.

Want to wanted to understand.

How much of a slippage should we be expecting here.

And whether the 8% to 13% of gross profit.

Viable.

And then shifting to the balance sheet a couple of things one is I don't see the 500 million liabilities to banks I see $1 4 million euros. So that is the remaining $3 6 million euros liabilities to banks.

On the balance sheet, and then I also see trade and other payables as well as other liabilities being significantly higher.

Then than <unk> levels.

Can you can you talk about what is driving that.

Thank you.

Kunal.

If you could talk on those specifics no happy to do so.

No.

The utilization of the revolver, you're completely right you called that out $1 9 million and the rest are.

Martin Beer: on the balance sheet, and then I also see trade and other payables as well as other liabilities being significantly higher than 1Q levels. Can you can you talk about what is driving that? Thank you. Kunal, happy to talk about those specifics. No, happy to do this. So the utilization of the revolver, you're completely right. You call that out, 1.9 million.

Guarantees, it's basically utilization of the revolver with rental contract.

Guarantees.

So it goes against the revolver, but obviously, it's not cannot cash driven and that's why it's not on the balance sheet.

Martin Beer: And the rest are guarantees. It's basically a utilization of the revolver with rental contract guarantees. So it goes against the revolver, but obviously, it's not cash driven.

Second on the trade payables increase you'll ultimately already saw that hope is very quick.

And rightfully so.

But.

Martin Beer: And that's why it's not on the balance sheet. Second, on the trade payables increase, you also saw that evolving very quickly and rightfully so, but it is also in line with the growth of the inventory levels. So, right now, trade payables are 25% of the overall inventory position that we have. And, as I called out in the call just now, we obviously target a certain level of trade payables in relation to inventory. And with 25% of trade payables in relation to the overall inventory position, it's a good ratio.

It is also in line with the growth of the inventory levels. So right now our trade payables are 25% of the overall inventory position that we have.

And as I called out in the call just now.

We.

Obviously.

Target a certain.

Level of trade payables in relation to inventory and with 25% of trade payables in relation to.

The overall inventory position.

Good ratio, we feel very comfortable with that looking at.

Payment terms with with the brands.

And your first question on.

Guidance gross margin guidance, yes, we also.

Martin Beer: We feel very comfortable with that, looking at payment terms with the brands. And your first question on guidance, cross-margin guidance. Yes, we also confirmed our guidance for gross profit at the lower end of 8 to 13 percent. And yes, you're completely right.

Confirmed our guidance for gross profits at the lower end of 8% to 13% and yes, you're completely right that implies.

And improvement.

The cost profit situation in Q3 and Q4.

Martin Beer: That implies an improvement in the gross profit situation in Q3 and Q4. And that, as I called out earlier, that is driven by a different situation in spring-summer 24 and a new situation or a different situation on the cross-profit margin slippage. Completely right; it's mathematics.

And that is as I called out earlier that is driven by a different situation.

On spring Summer 'twenty four.

And.

<unk>.

And a new situation.

In a different situation on on the cross profit margin slippage completely you're right, it's mathematics, and we we guided for absolute growth of gross profit margin and we confirmed.

Martin Beer: And we guided for absolute growth of cross-profit margin, and we confirmed the guidance also for cross-profit margin. And your next question comes from the line of Blake Anderson from Jeffreys. Your line is open. Hi, good morning.

The guidance also for gross profit margin.

And your next question comes from the line of Blake Anderson from Jefferies. Your line is open.

Yeah.

Hi, good morning I.

I wanted to talk about the aspirational customer trends, you talked about getting a little bit better.

Michael Klieger: Wanted to talk about aspirational customer trends. You talked about getting a little bit better. How price sensitive are they versus recent quarters? I'm just wondering how much they are still seeking promotion. And then how are you planning to try to capture the share of those consumers versus you have previously, such as during the pandemic? Thank you. Happy to address. So again, as a physician, it's a glimmer

How price sensitive are they versus recent quarters, just wondering how much they are still seeking promotions.

Then how are you planning to try to capture the share of those consumers versus you have previously such as during the pandemic.

Thank you happy to address so again.

Oliver Chen.

Physicians, it's a glimmer and Europe's youre right.

Michael Klieger: And you're actually right. This is Q2. This is a seasonal sale. This is also a reason why aspirational customers are always, www.mytrendyphone.co.uk, Pressure on their perceived economic situation is continuing. We are totally focused on our top customers, our big spending ones. So there is no strategic.

Q2, this is season sale.

Yes.

Also reason why exploration customers always historically stronger and then Q2 and they are looking for deals they're looking for discounts.

Pressure on their perceived economic situation is continuing so we.

We are.

Totally focused on our top customers are.

The expanding loans.

So there is no strategic.

Michael Klieger: Erection's strategic focus on winning back market share from aspirational customers. The significance of aspirational customers Now, the first signs coming back are reading that the pressure on the overall market, the pressure for some other players that are so dependent on that, may reduce, and then the emotional intensity may reduce. Our focus remains strongly on the big water building spenders that have the far better economics, have the far better loyalty ratios, and have the far higher... That's helpful. And then, if I could ask you two more questions.

<unk> strategic focus on winning back market share from the aspirational customers the significance of aspirational customers now.

Now.

First signs coming back as well.

That the pressure on the overall market pressure for some other players that are so dependent on that may reduce and then the.

Promotional intensity reduces our focus remains strongly.

The big Big Wardrobe building spenders that helps us better economics.

Better loyalty ratios.

Yeah.

Average order value.

Got it that's helpful. And then if I could ask two more one was on fashion trends that youre seeing for calendar 2024.

Michael Klieger: One was on fashion trends that you're seeing for calendar 2024. Any categories that you're leaning into or changing from the last 12 months? And then, curious about your take on luxury spend shifting online. Do you expect that penetration to increase over the next couple years? And maybe how big of a secular benefit do you see versus the briefing years? Thanks so much. I'm so happy to address the very, very helpful. Let me start with the second question.

The categories that youre leaning into your changing from the last 12 months.

Then curious your take on it.

<unk> spend shifting online how do you expect that penetration to trend over the next couple of years.

And maybe how big of a secular benefit do you see versus recent years. Thanks, so much.

We're happy to address very very.

So let.

Let me start with the second question. So if we go with the best available data source 23 was a bit of normalization after jump in on that duration.

Michael Klieger: So if we go with the best available data source, 23 was a bit of a normalization after a jump in online penetration. If you purely look at luxury, the luxury digital penetration dropped from 21 to 20, so a slight decrease after some significant increases. 21-22.

Surely not good luxury.

The luxury digital penetration.

Rob from 'twenty, one to 'twenty, so a slight decrease after some significant increases.

In 'twenty one to 'twenty two.

Michael Klieger: The longer-term view, and again, relying on that data source, is fully intact. This will go up this digital penetration from 20 to 30 percent. Uh, being autographed, predicts we will be at 30 to 33% by the year 2030.

Longer term view and again relying on that data source.

Is fully intact. This will go up this digital penetration from 20 to 30.

<unk>.

I'll take that model predicts we will be at 32, 33% by the year 2030, so that.

Michael Klieger: So Hailwind will continue to support our business proposition. We'll continue to do, we'll continue to, www.mytrendyphone.com because of consumer behavior, consumer trends, that even the most affluent people are time constrained, are time pressed, and the convenience and... Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies, problems and are coming down, sort of the hurdles, price points of what people shop online go up, go up, and therefore we are very comfortable to benefit from this trend, even beyond gaining market shares from other players.

Tailwind will continue to support our business proposition will continue to we'll continue to.

Support our business model and the trend is.

Because of consumer behavior consumer trends.

Even the most affluent people are trying constrained our time pressed the convenience.

Ease of shopping at home also luxury is is the driving force.

Price points are.

No.

Problem that are coming down.

So look the hurdles price points of what people shop online goes up it goes up.

Therefore, we are very comfortable to.

Benefit from this trend.

Even beyond gaining market shares.

Other players.

Michael Klieger: In terms of fashion trends, we continue to focus a lot on ready-to-wear as the core category for our top customers. As the market starts to improve, we hope to also see people who struggle to make a better living, and so on. The ready-to-wear trend that we continue to see is consumers really desperately looking for experiences for traveling and going out. So wardrobing for occasions, be it skiing, be it summer vacation, wardrobing for festivities is clearly a key trend that our buyers are really leaning in on. And then there are subtrends, of course, stylistically, will it remain purely the quiet luxury trend for such occasions, or will more colorful, more marketing-focused aesthetic make its comeback? I think on the second one. We expect still that, Home Down, Quiet Luxury, Trent Bolzano for calendar year 24, but then, as passion has always gone through these cycles, we will also see a more exuberant... type of aesthetic, more color. And that will be good for the industry because we need these cycles.

In terms of fashion trends, we continue to.

Focus a lot on ready to wear as the core category for our top customers.

As the market.

Starts to improve.

Hope to also see.

Some better growth in shoes and bags. These were the two categories that suffered more from the decline or from the slowdown.

And on.

Ready to wear trend.

Trend that will continue to see is consumers really desperately looking for experiences for traveling for going out so wardrobe for occasions can be it.

Somewhat vacation wardrobe being four facilities is clearly a key trend in our bias are.

We're really leaning in on that.

And then there are sub trends of course, holistically as it or will it remain purity, either quiet luxury trend for the such occasions or will Moore.

Colorful and more marketing focus static make its comeback I think on the second one.

Alright.

We expect still that.

Toned down quiet luxury trend boson for calendar year 'twenty four but then.

<unk> has always gone through these cycles, we will also see more exuberant.

Does that take more color than that.

It will be good for the industry, because we need these cycles we need.

Michael Klieger: We need the impetus for changing your wardrobe. But for the moment, we have it on the highest, brands with outstanding materials with outstanding fabrications, as we call it out a brand like women's prime example of, got it. Thank you. Best of luck to you. Thank you. And that does conclude our Q&A session for today. I would like to thank our speakers, Martin and Michael, for today's presentation, and thank you all for joining us. This now concludes today's conference call. Enjoy the rest of your day. You may now disconnect.

The impetus for changing your wardrobe so.

But for the moment, we have anything to add on.

High end.

Brian was outstanding materials was outstanding fabrications, as we called out to Brian's point that opportunities.

Prime example of this trend.

Got it thank you best of luck.

Thank you.

And that does conclude our Q&A session for today I would like to thank our speakers Martin and Michael for today's presentation and thank you all for joining US. This now concludes today's conference call enjoy the rest of your day you may now disconnect.

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Yes.

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