Q3 2024 MYT Netherlands Parent BV Earnings Call
Greetings and welcome to the Mitek, He said third quarter fiscal 'twenty to 'twenty four earnings conference call. 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: Greetings, and welcome to the MyTheresa Third Quarter Fiscal 2024 Earnings Conference Call. 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. It is now my pleasure to introduce your host, Martin Beer, MyTheresa's Chief Financial Officer. Thank you, sir. Please begin.
Now my pleasure to introduce your host Martin Beer My theory says Chief Financial Officer. Thank you Sir please begin.
Speaker Change: Thank you operator, and welcome everyone to mitral recess and Investor Conference call for the third quarter of fiscal year 2024.
Martin Beer: Moderator, and welcome everyone to MITREAS' investor conference call for the third quarter of fiscal year 2024. With me today is our CEO, Michael Kliger. 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.
With me today is our CEO Mike Seeger.
Speaker Change: Before we begin we'd like to remind you that all discussions today will include forward looking statements any comments, we make about expectations are forward looking statements are subject to risks and uncertainties, including the risks and uncertainties described in our annual report.
Martin Beer: Uncertainties, including the risks and uncertainties described in our annual report.
Martin Beer: 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 IRFS on this call. You can find reconciliations of these non-IRFS financial measures in our earnings press release, which is available on our website.
Speaker Change: Many factors could cause actual results to differ materially.
Speaker Change: We are under no duty to update forward looking statements.
Speaker Change: In addition, we will refer to certain financial measures not reported in accordance with <unk> on this call.
You can find reconciliations of these non <unk> financial measures.
Speaker Change: In our earnings press release, which is available on our Investor Relations website.
Martin Beer: Investor Relations website, at investors.mytheresa.com
Speaker Change: That's an investors start my Teresa Dot com.
Michael Kliger: www.nasa.gov I will now turn the call over to Michael. Thank you, Martin. 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 third quarter of fiscal year 2024. We are very pleased with our results in a still-challenging macro environment. With strong revenue growth and positive adjusted EBDA in the third quarter, we demonstrated our leadership in a clearly consolidating sector.
Speaker Change: I will now turn the call over to Michael.
Michael: Thank you very much also from my side, a very warm welcome to all of you and thank you for joining our call today.
We will do they comment on the results and performance of our third quarter fiscal year 2024.
Michael: We are very pleased with our results in a still challenging macro environment.
Michael: With strong revenue growth and positive adjusted EBITDA in the third quarter, we demonstrated our leadership in a clearly consolidating sector.
Michael Kliger: As expected, we achieved a strong, double-digit, top-line acceleration in our business, particularly in the United States, in the third quarter. We continue to see slower demand from aspirational customers and promotional intensity in the market by competitors, but our clear focus on the high-spending, wardrobe-building top customers allows us to win market share in the current environment. Strong top customers, a record high average order value, and excellent customer satisfaction scores underline our intense customer focus, which is a key success factor for MyTeresa.
Michael: As expected, we achieved a strong double digit top line acceleration of our business, particularly in the United States in the third quarter.
Michael: We continue to see slower demand from aspirational customers and promotional intensity in the market by competitors, but our clear focus on the highest spending wardrobe building top customers allows us to win market share in the current environment.
Michael: Strong top customer groups are record high average order value and excellent customer satisfaction scores.
Michael: Our intense customer focus which is a key success factor for mitral Visa Inc.
Michael Kliger: We clearly see ourselves as one of the few winners in the consolidating Luxury E-Commerce sector. I wish to highlight three key messages to you today that make us stand out in the third quarter and demonstrate the strengths of the MyTeresa business despite ongoing macro health.
Michael: Let me see ourselves as one of the few winners in the consolidating luxury e-commerce space.
Michael: I wish to highlight two days three key messages to you, but make us stand out in the third quarter and demonstrates the strengths of the <unk> business despite ongoing market headwinds.
Michael Kliger: First, our commitment to multi-brand inspiration with a highly curated office. True luxury brands drove strong growth, particularly in the United States, in the third quarter. Second, our clear focus on big spending, wardrobe building top customers, resulted in both strong growth of the number of top customers as well as the average spending of these customers. This highly desirable audience makes us the best platform to partner with luxury brands for exclusive activation. Third, our very flexible and resilient business model allowed us to significantly improve our profitability compared to Q3 of fiscal year 2020. Highlight this in the third quarter. Record High Average Order, Increasing Customer Acquisition, and Stable Operating Cost Ratio.
Speaker Change: First our commitment to multi brand inspiration with a highly curated offer of true luxury brands drove strong growth, particularly in the United States in the third quarter.
Speaker Change: Second our clear focus on big spending wardrobe building top customers.
Speaker Change: And both strong growth of the number of top customers as well as the average spending of top customers.
Speaker Change: This highly desirable audience makes us the best positioned platform to partner with luxury brands for exclusive Activations.
Speaker Change: First our very flexible and resilient business model allowed us to significantly improve our profitability compared to Q3 of fiscal year 2023.
Speaker Change: Record high average order base decreasing customer acquisition costs and stable operating cost ratios highlight this in the third quarter.
Michael Kliger: In summary, we have accelerated our top-line growth, expanded our top customer business, and significantly improved our profitability in the third quarter of fiscal year 2024. Let me now comment in more detail on these three accomplishments.
Speaker Change: In summary, we have accelerated our top line growth.
Speaker Change: We expanded our top customer business and we have significantly improved our profitability in the third quarter fiscal year 2024.
Speaker Change: Let me now comment in more detail on these three accomplishments.
Michael Kliger: First, let's look at the growth acceleration in the third quarter. We grew our Gross Merchandise Value, GMV, by plus 14.7% compared to Q3 of fiscal year 2023. On a two-year basis, we grew our GMV by plus 35.2% compared to Q3 of fiscal year 2020. This strong growth is clearly above the luxury market. Once more, our business in the United States generated outstanding growth with plus 41.6% in terms of GMB compared to Q3 of fiscal year 2023. The United States accounted for 22.3% of GMB of our total business in the third quarter of this year 2024.
Speaker Change: First let's look at the growth acceleration in the third quarter, we grew our gross merchandise value or GMB, plus 14, 7% compared to Q3 of fiscal year 2023.
Speaker Change: On a two year basis, we grew our <unk> by plus 35, 2% compared to Q3 of fiscal year 2022.
Speaker Change: This strong growth is really about the luxury market average.
Speaker Change: One is more of our business in the United States generated an outstanding growth was plus 41, 6% in terms of GMB compared to Q3 of fiscal year 2023.
Speaker Change: United States accounted for 22, 3% of <unk> of our total business in the third quarter of fiscal year 2024.
Michael Kliger: And we continue to see the market as a major source for future growth for MyTerrain. The U.S. luxury consumer, including the aspirational segment, will definitely shop more again. Most importantly, the highly curated offer from True Luxury Brands by MyTeresa resonates extremely well with big spending U.S. consumers looking for multi-brand inspiration. We have grown our U.S. business 2.6 times over the last three years. We also experienced good growth in Europe in the third quarter, with +9.3% compared to Q3 of this year 2023, while results in China and Asia were still negatively impacted by strong macro headwinds and uncertainties.
Speaker Change: And we continue to see that.
Speaker Change: Market is a major source for future growth for Mitel Lisa.
Speaker Change: The U S luxury consumer, including the aspirational segment definitely shop more again.
Speaker Change: Most importantly, the highly curated offer from true luxury brands by Mitel laser resonates extremely well with big spending U S. Consumers looking for my T brand inspiration, we have grown our U S business two six times over the last three years.
We also experienced good growth in Europe in the third quarter with plus nine 3% compared to Q3 of fiscal year 2023, while the results in China and Asia was still negatively impacted by strong macro headwinds and uncertainties.
Michael Kliger: And recovery in these markets in the next quarters will provide a further boost to our. Second, our clear focus on big spending and wardrobe building. In the third quarter of fiscal year 2024, our top customer base grew by plus 17% compared to Q3 of fiscal year 2023, and the average spend per top customer grew by plus 3.3%. Overall, the business with top customers grew by plus 20.9% in terms of GMV compared to Q3 of fiscal year 2023.
Speaker Change: Recovery in these markets in the next quarters will provide a further boost to our topline.
Speaker Change: Second our clear focus on big spending wardrobe building top customers is the fundamental driver of our success.
Speaker Change: In the third quarter fiscal year 2024 hour top customer base grew by plus 17% compared to Q3 of fiscal year 2023.
Speaker Change: And the average spend per top customers grew plus three 3%.
Speaker Change: Overall, the business with top customers grew by plus 29% in terms of <unk> compared to Q3 of fiscal year 2023.
Michael Kliger: The further evidence of our success with top customers is that our average order value increased once more by plus 8% to a new record high of €692 LTM in Q3 FY2024 compared to FY2023. Our superior access to big spending, the wardrobe, and building, and top customers makes us the highly desired platform for luxury brands to partner with. The third quarter saw again many high-impact campaigns and exclusive product launches demonstrating our strong relationships and the support from our brand partners.
Speaker Change: Further evidence of our success with top customers is that our average order value increased one small by plus 8% to a new record high of Euro 692, LTM in Q3 fiscal year 2024 compared to fiscal year 2023.
Speaker Change: Our superior access to big spending wardrobe building top customers makes us the highly desired platform for luxury brands to partner with.
Speaker Change: Third quarter, so again, mainly high impact campaigns and exclusive product launches demonstrating our strong relationships and the support from our brand partners.
Speaker Change: All of them further increased our brand awareness and chameleon positioned us globally as the leading digital luxury platform. We've launched exclusive capsule collections with capes and Cohash only available Mitra laser as well as exclusive styles from Louisville Paulos Ibiza.
Michael Kliger: All of them further increased our brand awareness and clearly positioned us globally as the leading digital luxury platform. We've launched exclusive capsule collections with capes and courage, only available at MyTheresa, as well as exclusive styles from Loewe's Paola Ibiza collection, only available at MyTheresa.
Speaker Change: Collection only available at <unk>.
Michael Kliger: We were also the exclusive pre-launch partner for collections from Brunello Cuccinelli and Loewe, giving MyTheresa customers exclusive first access to these products. One special highlight in the third quarter was also that Mayte Reza was one of the very few partners globally to launch the collection of the new creative director at Gucci, Sabato de Sarno, called Gucci Uncle.
We will also exclusive prelaunch part for collections from Lello Cuccinelli employee the bags, giving <unk> customers exclusive first access to these products.
Speaker Change: Special highlight in the third quarter was also that my today as that was one of the very few partners globally to launch the collection, the new creative director at Gucci somewhat toward the sound and we'll call.
Speaker Change: Call It Gucci uncle.
Michael Kliger: Please see our investor presentation for more details on our brand collaboration. Reinforcing our focus on big spending wardrobe building customers, we also hosted exclusive events for our top customers, providing them with money can't buy experiences. Examples of events in the third quarter included the celebration of the Cate capsule collection in Paris with the founder and creative director Cate Holstein present.
Please see our investor presentation for more details on our brand collaborations.
Speaker Change: Reinforcing our focus on big spending wardrobe building customers. We also hosted exclusive events for our top customers, providing them with money can buy experiences.
Speaker Change: <unk> of events in the third quarter included the celebration of the Cage capsule collection in Paris, with the founder and creative Director Kate Holstein presence.
Michael Kliger: In the United States, where our top customer number grew a remarkable 48.3% in the third quarter, we hosted events in New York City during New York Fashion Week, in Los Angeles during Freeze, and recently also in Connecticut. We also strongly believe in the ongoing recovery of the Chinese luxury market and recently hosted V.I.C. events in Shenzhen and Xiamen, as well as in Singapore.
Speaker Change: In the United States, where our top customer number grew a remarkable plus 48, 3% in the third quarter. We hosted events in New York City during the New York Fashion week in Los Angeles during freeze and recently also in Connecticut.
Speaker Change: You also strongly believe the ongoing recovery of the Chinese luxury market and recently hosted EIC events in Shenzhen and Sherman as well as in Singapore.
Michael Kliger: Please see our investor presentation for more details on our events and customer experience. Another recent highlight was the customer and brand experience that we created together with our partner Courreges during Shanghai Fashion Week. As part of the official calendar of Shanghai Fashion Week, we hosted 3 events in 24 hours. We created a public exhibition at the fashion house Courage, celebrating our exclusive capsule collection but also showcasing archive pieces never shown before outside of We hosted a talk with the Artistic Director, Nicolas DiFelice, for Chinese fashion students. And we hosted a V.I.C.
Speaker Change: Please see our investor presentation for more details on our events and customer experiences.
Speaker Change: Another recent highlight was the customer and brand experience that we created together with our partner who crashed during.
Speaker Change: During the Shanghai fashion.
Speaker Change: Part of the official calendar of Shanghai fashion week, we hosted three events in 24 hours, we created public exhibition the fashion House <unk>.
Speaker Change: Celebrating our exclusive capsule collection, but also showcasing archived pieces never shown before outside of France.
Speaker Change: The talk was the statistic director Nicola SD Felicia for Chinese fascist students and we hosted a VIP dinner for press and our Chinese top customers wins, the CEO and the artistic director.
Michael Kliger: dinner for the press and our Chinese top customers, with the CEO and the Artistic Director attending. Please see our investor presentation for more details on these remarkable events and our needs. Let me conclude this statement by commenting on the third accomplishment in the third quarter, namely the significant improvement in profitability compared to Q3 of fiscal year 2023. MyTheresa operates a very flexible and resilient business model, which allows us to react quickly with changing advice, which we proved in the more difficult recent quarter.
Speaker Change: Please see our investor presentation for more details on these remarkable events and the media coverage.
Speaker Change: Let me conclude.
Speaker Change: My statements by commenting on the third accomplishment in the third quarter, namely the significant improvement in profitability compared to Q3 of fiscal year 2023.
Speaker Change: <unk> operates a very flexible and resilient business model, which allows us to react quickly to changing inbox, which we proved in the more difficult to recent quarters.
Michael Kliger: Martin will talk in a few minutes about the details of our bottom-line results for the third quarter of fiscal year 2024, but let me provide you with some key operational results for the third quarter. Customer satisfaction, as measured by our internal Net Promoter Score, reached 80.6% in Q3 fiscal year 2024, a strong increase over last year's Q3 results. As mentioned, our average order value increased by 8% to a new record high of EUR 692 LTM, also driven by the ongoing expansion of our fine jewelry.
Speaker Change: Martin will talk in a few minutes about the details of our bottom line results.
Speaker Change: Third quarter fiscal year 2024.
Speaker Change: But let me provide you with some key operational results of the third quarter.
Speaker Change: Customer satisfaction as measured by our internal net promoter score.
Speaker Change: 86% in Q3 fiscal year 2024, a strong increase over last year's Q3 results.
Speaker Change: As mentioned, our average order value increased by 8% to a new record high of Euro 692, LTM also driven by the ongoing expansion of our fine jewelry awesome.
Michael Kliger: Our number of first-time buyers reached over 118,000 in the third quarter of fiscal year 2024, while our customer acquisition costs, CAC, actually declined by minus 2.8 percent compared to Q3 of fiscal year 2023, which is a remarkable achievement in the current environment. We also continued the ramp-up at our new Leipzig distribution center, from where we shipped already more than 60% of all customer orders at the end of March. Finally, we recently launched our new MyTheresa retail media services, allowing our luxury brand partners to place paid media campaigns on our platform.
Speaker Change: Our number of first time buyers reached over 118000 in the third quarter of fiscal year 2024.
Speaker Change: Our customer acquisition costs Tac actually declined by minus two 8% compared to Q3 of fiscal year 2023, which is a remarkable achievement in the current environment.
Speaker Change: We also continued the ramp up of our new Leipzig distributions from where we shipped already more than 60% of all customer orders at the end of March.
Speaker Change: Finally, we also recently launched our new Mitel is a retail media services, allowing our luxury brand partners to place paid media campaigns on our platform.
With all of the above it should come as no surprise that we are very pleased with our outperformance in the third quarter of fiscal year 2024, we believe that our results demonstrate the strength and consistency of our business model.
Michael Kliger: With all of the above, it should come as no surprise that we are very pleased with our performance in the third quarter of history in 2020. We believe that our results demonstrate the strength and consistency of our business model delivering profitable business. We see ourselves as a clear winner in the consolidating luxury e-commerce space. We are extremely well positioned to benefit from the tremendous growth prospects when market conditions improve globally.
Speaker Change: <unk> profitable growth.
Speaker Change: We see ourselves as a clear winner in the consolidating luxury e-commerce space.
Speaker Change: We are extremely well positioned to benefit from the tremendous growth prospects when market conditions will improve globally.
Michael Kliger: 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, despite the ongoing 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.
Speaker Change: To capitalize on these prospects, we are actively evaluating opportunities to support and accelerate our investments in future business growth.
Speaker Change: This also supports our strong confidence in our medium term growth trajectory and profitability levels. Despite the ongoing short term uncertainties in the macro environment right now.
Speaker Change: And now I hand over to Martin to discuss the financial results in detail.
Martin Beer: Thank you Michael Yes, we're very pleased with our performance during the quarter and.
Martin Beer: Yes, we're very pleased with our performance during the quarter. In line with our overall guidance for H2 of our fiscal year 24, in the past quarter, we achieved double-digit growth top-line and improved our profitability bottom-line. We significantly reduced our gross profit margin slippage and are fully on track with managing our inventory position.
Martin Beer: In line with our overall guidance for <unk> of our fiscal year 'twenty, four and the past quarter, we achieved double digit growth top line and improved our profitability bottom line.
Martin Beer: Significantly reduced our gross profit margin slippage and are fully on track.
Martin Beer: With managing our inventory position.
Martin Beer: We extended and secured our revolving credit facility for the next years and continue to be the value, adding reliable and preferred partner, but.
Martin Beer: We extended and secured our revolving credit facility for the next years and continue to be the value-adding, reliable, and preferred partner for the top luxury brands. In a challenging and consolidating market, we confirmed our successful leadership position as the clear winner in multi-brand luxury. MyTheresa is all set to become a multi-billion business in the medium term, with an ongoing double-digit annual growth trajectory of high teens and low 20s and an adjusted EBITDA margin of at least 8%.
Martin Beer: The top luxury brands.
Martin Beer: In a challenging and consolidating market, we confirmed our successful leadership position as the clear winner and multi brand luxury.
Martin Beer: Theresa is all set to become a multibillion business medium term.
Martin Beer: With an ongoing double digit annual growth trajectory of high teens low twenties.
Martin Beer: And an adjusted EBITDA margin of at least 8%.
Martin Beer: I will now review our financial results for the third quarter of fiscal year 'twenty. Four ended March 31, 24 in more detail and we will provide additional background on certain key developments that affected our performance throughout the quarter.
Martin Beer: I will now review our financial results for the third quarter of fiscal year 2024, ended March 31st, 2024, in more detail, and will provide additional background on certain key developments that affected our performance throughout the quarter. Unless otherwise stated, all numbers refer to euros.
Martin Beer: Unless otherwise stated all numbers referred to euro.
Martin Beer: In the third quarter of fiscal year 'twenty four GMB growth was at plus 14, 7%.
Martin Beer: In the third quarter of fiscal year 24, GMV growth was plus 14.7% compared to the prior year quarter, achieving $252.2 million. Our track record on top-line growth is further evidenced. Our two-year growth rate of plus 35.2% and 3-year growth rate of plus 53.1%. Customer engagement and retention continued to be strong during the third quarter, with a total of 862,000 active customers. As mentioned, we were able to grow the number of our top customers by plus 17% in the quarter and by plus 16% in the last nine months. Our focus on attracting the most valuable, high-potential, multi-brand luxury customers and nurturing loyalty with excellent curating and service continues to be our way.
Martin Beer: Compared to the prior year quarter, achieving $252 2 million.
Martin Beer: Our track record on top line growth as program further evidence.
Our two year growth rate of plus 35, 2% and three year growth rate of plus 53.
Martin Beer: One 1%.
Customer engagement and retention continued to be strong during the third quarter with a total of 862000 active customers.
Martin Beer: As mentioned, we were able to grow the number of our top customers by plus 17% in the quarter and.
Martin Beer: And by plus 16% in the last nine months.
Martin Beer: Our focus on attracting the most valuable high potential multi brand luxury customers.
Martin Beer: And nurturing the loyalty with excellent curation and service continues to be a winning formula.
Martin Beer: In the U S. Our top customer base grew by an exceptional plus 48, 3% in the quarter.
Martin Beer: In the U.S., our top customer base grew by an exceptional rate of...
Martin Beer: Group by an exceptional plus 48.3% in the quadrant. During the third quarter, net sales grew by 17.6%, reaching $233.9 million.
Martin Beer: During the third quarter net sales grew by plus 17, 6%, reaching $233 9 million.
Martin Beer: We have seven major brands operating seamlessly under the CPM and are able to...
Martin Beer: We have seven major brands operating seamlessly under the CPM and are able to offer our brand partners both models wholesale or CPM.
Martin Beer: and are able to offer our brand partners both models, wholesale or CPM. From a regional perspective, we saw again exceptional growth in the U.S. and strong growth in Europe and the rest of the world. In the U.S., net sales grew by plus 44.6% in the quarter, Europe plus 9.3%, Europe excluding Germany plus 13.1%, and rest of world plus 16.4 percent. Our global business model and seamless execution worldwide ensure that we capture growth opportunities wherever they open up.
Martin Beer: From a regional perspective, we saw again exceptional growth in the U S and strong growth in Europe and rest of world.
Martin Beer: In the U S. Net sales grew by plus 44, 6% in the quarter.
Martin Beer: Plus nine 3%.
Martin Beer: Europe, excluding Germany, plus 13, 1%.
Martin Beer: And rest of World plus 16, 4%.
Martin Beer: Our global business model and seamless execution worldwide insurance, capturing growth opportunities wherever they open up.
Martin Beer: Our global setup becomes more effective every quarter with now only 51, 6%.
Martin Beer: Our global setup becomes more effective every quarter, with now only 51.6% of net sales coming from Europe, where we have a strong leadership position, and 48.4 percent already from the U.S. and the rest of the world, where we experience exceptional growth opportunities.
Martin Beer: Net sales coming from Europe.
Martin Beer: With strong leadership positions.
Martin Beer: And 48, 4% already from the U S and rest of world.
We experienced exceptional growth opportunities.
Martin Beer: Our LTM <unk> increase of plus 8% or 51 Euro per all delivered is remarkable and.
Martin Beer: Our LTM AOV increase of plus 8% or
Martin Beer: And improves our economics, notably.
Martin Beer: During the third quarter of fiscal year 'twenty four gross profit increased by plus 12%.
Martin Beer: [inaudible] and improves our auto economics notably. During the third quarter of fiscal year 24, gross profit increased by a plus 12% to $101.6 million as compared to $90.7 million in the prior year quarter, and with a gross profit margin of 43.4%. The cross-margin slippage further decreased, and has come down significantly from 740 basis points in Q1 and 490 basis points in Q2 to now 220 basis points in Q3. In addition, the gross profit margin slippage in relation to GMV was only 100 days. We experienced a solid gross profit increase of plus 12%.
Martin Beer: $101 6 million as compared to $90 7 million in the prior year quarter.
Martin Beer: And with the gross profit margin of 43, 4%.
Martin Beer: The gross margin slippage further decreased.
Martin Beer: Come down significantly from 740 basis points in Q1, and 490 basis points in Q2 to now 220 basis points in Q3.
Martin Beer: In addition, the gross profit margin slippage in relation to <unk>.
Martin Beer: There's only 100 basis points.
Martin Beer: We experienced a solid gross profit increased by plus 12%.
Martin Beer: But still not as strong as we expected. Inventory Clearance Activities
Martin Beer: It's still not as strong as we expected as inventory clearance activities.
Martin Beer: of competitors exiting the market impacted growth. As highlighted before, we clearly see improvements in the cross-profit margin situation. With another expected double-digit growth rate of gross profit in the upcoming Q4, we expect total gross profit to be on last year's level for the full fiscal year 2024. The overall market environment has not yet normalized, but our margin development shows that we are able to contain the effect. We continue our commitment to full price selling, which is highly valued by our brand partners.
Martin Beer: Competitors exiting the market impacted the growth rate.
Martin Beer: As highlighted before we clearly see improvements on the crossover margin situation with.
Martin Beer: With again, the expected double digit growth rate of gross profit in the upcoming Q4, we expect total gross profit to be on last year's level for the full fiscal year 'twenty four.
Martin Beer: The overall market environment has not yet normalized but our margin development shows that we are able to contain the effects.
Martin Beer: We continue our commitment to full price selling.
Martin Beer: Which is highly valued brand pumps.
Martin Beer: Our adjusted shipping and payment cost ratio increased from 14, 3% to 15, 3%.
Martin Beer: Our adjusted shipping and payment cost ratio increased from 14.3% to 15.3% due to our increasing international sales share and strong growth in countries like the U.S., where we pay all customs duties for the customs, due to our continuous efforts to CAPTURE EFFICIENCY in the Shipping, Payment, and Custom Setup. We expect to mostly offset further cost increases.
Due to our increasing international sales share and strong growth in countries like the U S, where we pay all customs duties for the customer.
Martin Beer: Due to our continuous efforts to capture efficiencies.
Martin Beer: In the shipping payments in custom setup.
Martin Beer: We expect to mostly offset further cost increases in the future.
Martin Beer: and therefore target stability in the cost ratio on this level in the upcoming quarter. Following our strategy of the preceding quarters, our focus remained yet again on the acquisition of high potential customers and top customer retention. We adjusted our total marketing expenses in line with the overall softer market environment.
Martin Beer: And therefore target stability and the cost ratio on this level.
Martin Beer: The upcoming quarters.
Martin Beer: Following our strategy of the preceding quarters.
Martin Beer: Focus remains yet again on the acquisition of high potential customers and top customer retention.
Martin Beer: We adjusted our total marketing expenses.
Martin Beer: So the overall softer market environment.
Martin Beer: As a consequence.
Martin Beer: Our marketing expenses decreased by $2.6 million to $23.1 million during the quarter. The marketing cost ratio decreased. 250 basis points, to now 9.2%. Our cap decreased by minus 2.8 percent. Despite this low marketing cost ratio, we were able to achieve a net sales growth of plus 17.6%. This excellent performance by new and existing customers shows the effectiveness of our AI-driven performance marketing tools, our increasing brand, the superiority of our curated offering, and our excellent service delivery.
Martin Beer: Our marketing expenses decreased by $2 6 million.
Martin Beer: $23 1 million during the quarter.
Martin Beer: The marketing cost ratio decreased by 250 basis points.
Martin Beer: So now nine 2%.
Martin Beer: Our cash decreased by minus two 8%.
Martin Beer: Despite this lower marketing cost ratio, we were able to achieve and net sales growth of plus 17, 6%.
Martin Beer: This excellent performance on new and existing customers shows the effectiveness of our AI driven performance marketing tools, our increasing brand strength the superiority of our curated offering.
Martin Beer: And our excellent service delivery.
Martin Beer: We continue to focus on growth in a cost effective manner.
Martin Beer: We continue to focus on growth in a cost-effective manner. We were able to keep the adjusted selling, general, and administrative expenses mostly stable in absolute terms at $30.8 million as compared to $29.7 million in the prior year quarter. With our strong growth in the quarter, the adjusted SG&A cost ratio decreased by 130 basis points to 12.2% as compared to 13.5% and the Priory of Peerage.
Martin Beer: We were able to keep the adjusted selling general and administrative expenses, mostly stable in absolute terms at $13 8 million as compared to $29 7 million in the prior year quarter.
Martin Beer: With our strong growth in the quarter, the adjusted SG&A cost ratio.
Martin Beer: Decreased by 130 basis points.
Martin Beer: So 12, 2%.
Martin Beer: As compared to 13, 5%.
Martin Beer: In the prior year period.
Martin Beer: We will continue to grow in a cost-effective manner, but we'll also...
Martin Beer: We will continue to grow in a cost effective manner.
Martin Beer: But it will also ensure that we build up the right resources to achieve our strong growth targets in our short and medium-term growth trajectory. As a result, we are very happy about our improved profitability. Our adjusted EBITDA has improved significantly as compared to the prior year quarter. For example, during the third quarter of fiscal year 24, adjusted EBITDA stood at $9.2 million as compared to $3.2 million in Q3 of fiscal year 23. The adjusted EBITDA margin improved by 230 basis points to now 3.9% as compared to 1.6% in the prior year period, for the full fiscal year 24 ending on June 24.
Martin Beer: But it will also ensure that we build up the right resources.
Martin Beer: To achieve our strong growth targets in our short and medium term growth trajectory.
Martin Beer: As a result, we are very happy about our improved profitability.
Martin Beer: Our adjusted EBITDA has improved significantly as compared to the prior year quarter.
Martin Beer: During the third quarter of fiscal 'twenty four adjusted EBITDA stood at $9 2 million as compared to $3 2 million in Q3 of fiscal year 'twenty three.
Martin Beer: The adjusted EBITDA margin improved by 230 basis points.
Martin Beer: Three 9% as compared to one 6% in the prior year period.
Martin Beer: For the full fiscal year 'twenty four.
Martin Beer: Ending in June 2004.
Martin Beer: We continue to target the lower end of our guided 3 to 5% adjusted EBITDA margin. Given the continuous challenging market environment and luxury worldwide, achieving this profitability level is remarkable and clearly beats peer performance. It enables us.
Martin Beer: We continue to target the lower end of our guided 3% to 5% adjusted EBITDA margin.
Martin Beer: Given the continued challenging market environment and luxury worldwide to achieve this profitability level is remarkable and clearly beats peer performance.
Martin Beer: It enables us to continue to capture market share.
Martin Beer: Continue to capture market share, grow strongly, and fortify our leadership position, as market uncertainties are expected to continue. We also expect our profitability levels in the next fiscal year to be around that level. Given our low levels of depreciation and amortization, unique and typical for the MyTresor business model, we again achieved strong profitability also on adjusted operating income, or adjusted EBIT. The adjusted EBIT margin was plus 2.3% compared to a 0.1% adjusted EBIT margin in the prior period.
Martin Beer: Grow strongly and to fortify our leadership position.
Martin Beer: As the market uncertainties are expected to continue.
Martin Beer: We also expect our profitability levels in the next fiscal year to.
Martin Beer: To be around that level.
Martin Beer: Given our low levels of depreciation and amortization unique and typical for the micro as our business model. We again achieved a strong profitability also on adjusted operating income or adjusted EBIT level.
Martin Beer: Adjusted EBIT margin was at plus two 3% compared to a 0.1% adjusted EBIT margin in the prior year period.
Martin Beer: The adjusted net income margin was at a positive plus 1.8% in the quarter. Looking at cash flow for the quarter, given the seasonal inventory buildup, Operating cash flow was at minus $11.6 million compared to minus $36 million during the prior year period. The minus $11.6 million came after a plus $18.5 million operating cash flow in the preceding quarter, a much lower use. Operating cash flow in the quarter compared to the previous year quarter was mostly driven by reduced inventory purchase
Martin Beer: The adjusted net income margin was that a positive plus one 8% in the quarter.
Martin Beer: Looking at cash flow for the quarter, given the seasonal inventory buildup.
Martin Beer: Operating cash flow was at minus $11 6 million compared to minus $36 million during the prior year period.
Martin Beer: The minus 11 6 million came after a plus 18.
Martin Beer: $5 million operating cash flow in the preceding quarter.
Martin Beer: The much lower use operating cash flow in.
Martin Beer: In the quarter compared to previous year quarter is mostly driven by a reduced inventory purchases.
Martin Beer: We are on track to manage our inventory levels.
Martin Beer: We are on track on managing our inventory levels.
Martin Beer: As of March 31st, inventory is at plus 11.9% year-over-year, lower than our top line growth and significantly reduced from the 44.4% at the end of Q1 and the plus 33.1% at the end of Q2 of fiscal year 24. At the end of March 24, our D.I.O. was at 280 days, down from 310 days in June 23, and approaching the target range of 260 days.
Martin Beer: As of March 31 <unk>.
Martin Beer: Inventory is a plus 11, 9% year over year.
Martin Beer: Lower than our topline growth and.
Martin Beer: And significantly reduced from the 44, 4% at the end of Q1, and a plus 33, 1% at the end of Q2 of fiscal 'twenty four.
Martin Beer: End of March 24 hour Dio.
Martin Beer: It was at 280 days.
Down from 310 days in June 23.
Martin Beer: And approaching the target range of 260 days.
Martin Beer: Cash flow from investing activities was at $4 9 million compared to $6 5 million in the previous year quarter.
Martin Beer: Cash flow from investing activities was $4.9 million compared to $6.5 million in the previous year quarter. This was mostly driven by the remaining payments for our new distribution center in Latin America. We continue to have very low capex cash flows in our business model and therefore expect the cash flow from investing activities in the next quarters to return again to below 1% of net sales. As of March 31st, we have successfully entered into a new multi-year revolving credit facility agreement.
Martin Beer: This was mostly driven by the remaining payments for our new distribution center in logic.
Martin Beer: We continue to have very low capex cash flows in our business model and therefore expect the cash flow from investing activities in the next quarters to return again to below 1% of net sales.
Martin Beer: As of March 31, we have successfully entered into a new multi year revolving credit facility agreement, replacing the old one and securing us 75%.
Martin Beer: Replacing the old one and securing us 75 million dollars.
Martin Beer: securing us $75,000 million in cash. This will enable us to fund our continuous growth strategy.
Cash.
Martin Beer: This will enable us to fund our continued growth strategy.
Martin Beer: As of March 31, the cash utilization of the credit line was at $26 1 million with $10 6 million cash at hand.
Martin Beer: As of March 31st, the cash utilization of the credit line was at $1.5 billion.
Martin Beer: The total capitalization of the credit line was at $26.1 million, with $10.6 million cash at hand. We expect an even lower utilization at the end of our fiscal year, end of June 24. Please remember. But besides the revolving credit facility that we use for seasonal networking capital financing from time to time,
Martin Beer: We expect an even lower utilization.
Martin Beer: At the end of our fiscal year end of June 24.
Martin Beer: Please remember.
Martin Beer: But besides the revolving credit facility that we use for seasonal net working capital financing from time to time.
Martin Beer: We do not have any other bank debt on our balance sheet.
Martin Beer: We do not have any other bank debts and our balance sheet.
Martin Beer: We have a very strong balance sheet with an equity ratio of 65%.
Martin Beer: We have a very strong balance sheet with an equity ratio of 65%. With all that Michael and I talked about so far, it comes as no surprise that we remain very confident in our short-term and
Speaker Change: With all what Michael and I talked about so far it comes as no surprise that we remain very confident in our short term bonus.
Martin Beer: and especially in our medium and long-term outlook.
Speaker Change: And especially in our medium and long term outlook.
Speaker Change: For the full fiscal year 'twenty four.
Martin Beer: for the full fiscal year 24, which ends on June 30, 2024. We confirm our guidance for the top and bottom line at the lower end of the guided ranges of GMB and net sales growth between 8% to 13% and an adjusted EBITDA margin between 3% and 5%. The ongoing consolidation in our industry is gaining speed, and it's clearly visible who are the outperformers. We're getting, Michael Chair.
Speaker Change: Which ends on June 32004.
Speaker Change: We confirm our guidance for the top and bottom line at the lower end of the guided ranges.
Speaker Change: <unk> net sales growth between 8% to 13%.
Speaker Change: On an adjusted EBITDA margin between three and 5%.
Speaker Change: The ongoing consolidation in our industry is gaining speed and it becomes clearly visible who are the outperformance.
Speaker Change: We're gaining market share on an accelerated level.
Martin Beer: on an accelerated level, and have...
Martin Beer: and have completed our two major infrastructure milestones securing our successful growth. Our fundamental new IT setup and the new Distribution Center in Leipzig.
Speaker Change: And have completed our two major infrastructural milestones securing our successful growth are fundamental new setups.
Speaker Change: And the new distribution center in Leipzig.
Speaker Change: My trees is all set to become a multibillion business medium term.
Michael Kliger: My thesis is all set to become a multi-billion business in the medium term, with an ongoing double-digit annual growth trajectory of high teens and low 20s and an adjusted EBITDA margin of at least 8%. And with that, I will now turn the call back over to Michael for his concluding remarks. Thank you, Mark. We are very pleased with our third quarter of fiscal year 2024 earnings results. We are seeing the top-line acceleration and profitability improvement as projected and are on track to achieve our fiscal year 2024 guidance.
With an ongoing double digit annual growth trajectory of high teens, low <unk> and an adjusted EBITDA margin of at least 8%.
Speaker Change: And with this.
I'll now turn the call back over to Michael for his concluding remarks.
Michael Kliger: Thank you Martin.
Michael: I'm very pleased with our third quarter fiscal year 2024 earnings results.
We are seeing the top line acceleration and profitability improvement as projected and are on track to achieve our fiscal year 2020 for guidance.
Michael Kliger: MyTheresa is poised for an extremely successful next chapter in its journey to become the global leader in digital activities. We believe that MyTheresa 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.
Speaker Change: Hi, Teresa is poised for an extremely successful next chapter in our journey to become the global leader in digital luxury.
Speaker Change: We believe that <unk> offers the best digital luxury shopping experience, where big spending consumers.
Speaker Change: And true luxury brands.
Speaker Change: And was that I ask the operator to open the line for your questions.
Speaker Change: Thank you we will now begin our question and answer session. At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question Cynthia Press Star one again.
Operator: Thank you. We will now begin our question and answer session. At this time, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. As a reminder, please limit yourself to one question and one follow-up only. We'll pause for a moment to compile the Q&A list. Your first question comes from the line of Oliver Chen from TD Kallen. Please go ahead.
Speaker Change: As a reminder, please limit yourself to one question and one follow up only we'll pause.
Speaker Change: For a moment to compile the Q&A roster.
Speaker Change: Yeah.
Speaker Change: Your first question comes from the line of Oliver Chen from TD Cowen. Please go ahead.
Speaker Change: Yes.
Speaker Change: Hi, Michael and Martin This is Neil go from all of our team.
Yawen Gao: Hi Michael and Martin, this is Neil Gao from Oliver's team. My question is on U.S. growth; nice job on the over 40% there. What was the year-over-year comparison in the region, and has the growth there been more broad-based across customers and categories, or are there specific areas and trends you'd call out as key drivers of the strength? And then what are your key initiatives to lean into that customer going forward relative to Europe and Asia, which is obviously a smaller piece of the business? Thank you.
Speaker Change: My question respond U S growth nice job on that over 40% there what was the year over year comparison in the region and has the growth there have been more broad based across customers and categories are there specific areas and trends and callouts as key drivers of the strength and then what are your key initiatives to lean into that customer going.
Speaker Change: Forward relative to Europe, and Asia, which is obviously is a smaller piece of the business.
Speaker Change: Yes. Thank you for your question.
Michael Kliger: Yes, thank you for your question. In the third quarter, we grew our business in GMV by 41.6% over the quarter of last year. So a clear acceleration on the already good numbers, double-digit growth numbers in Q1 and Q2, which makes the US business actually now, with 22%, the largest region for our company. And we are very pleased with this, and we see as drivers a similar pattern to what we have seen in other geographies.
Speaker Change: In the third quarter, we grew our business in gmg.
Speaker Change: 41, 6% over third quarter of last year.
Speaker Change: So a clear acceleration on the already good numbers double digit growth numbers in Q1, and Q2, which makes US makes the U S business actually now with 22% the largest region for our company and we are very pleased with this and we see as drivers.
Michael Kliger: It's really the top customers, are really the big spenders, the number of big spenders, the two highest tiers in our customer pyramid. This number even grew 48% in the U.S. So it's really growth at the top, which then, of course, means it's really growth driven by ready-to-wear. It's really growth driven by the big regions for these types of customers. Number one, California. Number two, the East Coast, Manhattan, New York, Connecticut, but then also, of course, Florida and Texas.
Speaker Change: Similar to what we have seen in other geographies, it's really the top customers.
Speaker Change: It's really the big spenders, the number of big Spenders that Hyatt to highest tiers and our customer pyramid.
Speaker Change: This number grew 48% in the U S. So it's really growth at the top which then of course means it's really growth driven by ready to wear.
Speaker Change: It's really growth driven by the big regions for these type of customers number one, California number two east Coast Manhattan, New York, Connecticut, But then also of course, Florida, and Texas, So highly correlated to the areas where there are these type of customers.
Michael Kliger: So highly correlated to the areas where there are these types of customers. And we are continuing to focus on these customers by providing unique experiences for these customers, be it in the US themselves or inviting US customers to come to unique experiences that we host in Europe. For example, two weeks ago, we hosted an event with Brunello Cuccinelli, and we welcomed US customers there. Next week, we will host an event with Deutsche Gabbana in Capri, and we will welcome US customers there.
Speaker Change: And we are continuing to focus on these customers by providing unique experiences for these customers be it in the U S themselves or inviting U S customers to come to.
Speaker Change: Unique experience that we hosted in Europe. For example, two weeks ago. We hosted the event was Brunello Cuccinelli and we welcome to U S customers there.
Speaker Change: Next week, we will host an event with Deutsche in Gabon that copy and we will welcome U S customers. There. So that continued focus on the high end plus more brand awareness, we will have.
Michael Kliger: So, that continued focus on the high end, plus more brand awareness. We will have, as last year, a pop-up in the Hamptons this year. So, there's really a lot of marketing activities clearly targeted to those customers looking for multi-brand inspiration, and we see a clear desire by top-end customers to have a platform that solely focuses on luxury for multi-brand inspiration.
Speaker Change: As last year pop up in the Hamptons. This year. So is it really a lot of marketing activities clearly targeted to those customers looking for multi brands inspiration and we see a clear desire by top end customers to have a platform that solely focuses on much Julie commodity Grande exploration.
Speaker Change: Got it and then obviously you didn't mention again the continued green shoots on an aspirational customer in the region.
Michael Kliger: Got it. And then, obviously, you did mention, again, the continued green shoots and the aspirational customer in the region. So are you seeing a pickup in like handbags and dresses, shoes, like some of those categories? Yeah. And just any any commentary on if that was maybe a sequential acceleration from the last quarter? How do your expectations for the aspirational customer back up prior to compared to the prior quarter? No, thanks for reminding us that we continue to see those green trees.
Speaker Change: So are you seeing a pickup in <unk>.
Speaker Change: Handbags and dresses shoes like some of those categories.
Speaker Change: Yes, and just any commentary on if that was maybe a sequential acceleration from the last quarter.
Speaker Change: What are your expectations for the aspirational customer backup prior to compared to the prior quarter.
Michael Kliger: No, thanks for reminding me. We continue to see those green shoots. So the U.S. is by far the strongest region in luxury spend. And this is also due to the fact that the aspirational customer is coming back. The only thing I want to stress is our fast acceleration in the third quarter is really much, much more driven by our success with the big spend, while we do observe the green shoots on the aspiration.
Speaker Change: No. Thanks for reminding that we continue to see those green shoots.
Speaker Change: So the U S is by far the strongest region.
Speaker Change: In luxury spend and this is also due to the fact that the aspirational customer is coming back.
Speaker Change: The only thing I want to stress is our fast acceleration in the third quarter is really much much more driven by our success is the big spenders.
Speaker Change: While we do observe the green shoots on the exploration customers.
Speaker Change: Got it thank you.
Speaker Change: The next question comes from the line of Matthew Boss from Jpmorgan. Please go ahead.
Operator: The next question comes from the line of Matthew Boss from J.P. Morgan. Please go ahead.
Matthew Robert Boss: Great, thanks. So Michael, how would you characterize the overall health of your core luxury customer today? Could you expand on new customer acquisition trends and speak to competitive advantages you see today for your model relative to peers in the marketplace?
Matthew Robert Boss: Great. Thanks so.
Speaker Change: So Michael how would you characterize overall health of your core luxury customer today could you expand on new customer acquisition trends and speak to competitive advantages you see today for your model relative to peers in the marketplace.
Matthew Robert Boss: Yes.
Michael: Thanks, Matt happy happy to do so so.
Michael Kliger: Thanks, Matt. I'm happy, happy to do so.
Michael: Our core customer base, which are the top spend nurse.
Michael: Is very healthy.
Michael: Very healthy strongly performing this drives our <unk>.
Michael Kliger: So our core customer base, which are the top spenders, is very healthy. Very LCU. Strongly performing, this drives our unique plus 14% like-for-like growth in the quarter. To my knowledge, that is not matched by anyone. And it is driven by the core. It's driven by attracting more of these customers in the last quarter, 17% more, and these customers also spent more, 3.3%. There he is!
Michael: Unique plus 14% like for like growth in the quarter to my knowledge.
That is not matched by anyone and it is driven by the core in <unk>.
Speaker Change: It's driven by attracting more of these in the last quarter, 17% more and these customers also spending more three series that is yes.
Michael Kliger: There are geographic differences, so, as mentioned on the call, the U.S. is. The strongest region, Europe, is stable.
Speaker Change: Our geographic differences so as mentioned on the call.
Speaker Change: The U S as the <unk>.
Michael Kliger: In Asia, we still see uncertainties. In all the regions, it is from the top, and it is our focus on these spenders. And that is also because we focus on that. That's a key point of differentiation to many other platforms; we focus on curation and inspiration. This is what these customers look for. This audience is a multi-brand audience, so it is attractive for brands to create visibility with them, which makes brands willing and keen to partner with us.
Speaker Change: <unk> region, Europe is stable and Asia, we still see uncertainties.
Speaker Change: Yes.
Speaker Change: In all the regions. It is from the top and it is our focus on the spenders.
Speaker Change: That is also because we focus on that that's a key point of differentiation.
Speaker Change: Many other.
Speaker Change: Platforms, we focus on curation on inspiration. This is what these customers look for.
Speaker Change: This audience is a multi brand audience. Thus it is attractive for brands to create visibility with Zen.
Speaker Change: Which makes brands within keen to partner with US we mentioned on the call again, the unique products, but also experiences. We can therefore offer our customers and then it becomes sort of a reinforcing cycle will have more unique things you attract.
Michael Kliger: We mentioned on the call again the unique products, but also experiences we can therefore offer our customers, and then it becomes sort of a reinforcing cycle. You have more unique things, you attract a better customer audience, and that makes it more attractive for brand partners to work with us, particularly important at the moment, while we are, of course, not completely insulated from discounting in the marketplace from too much inventory. It is still the best customer because their full price share is very high, and thus, we have come quite a distance from the not-so-great performance in Q1 to the much better performance in Q3, and we see ourselves to continue on that stretch.
Speaker Change: Better customer audience and that makes it more attractive for parts of our co brand partners to work with us and.
Speaker Change: Particularly important at the moment, while we of course not completely insulated from.
Speaker Change: Discounting in the marketplace from.
Speaker Change: Too much inventory.
Speaker Change: It is still the best customer because theyre full price share is very high.
Speaker Change: We have come.
Speaker Change: Quite a distance from the not so great performance in Q1 to the much better performance in Q3 as we can.
Speaker Change: How are those to continue on that.
Speaker Change: Stretch.
Michael Kliger: And finally, the landscape is changing, as Martin and I referred to. The landscape of truly inspirational, multi-brand platforms that operate on a global basis is getting consolidated. And thus, we believe we have extremely good chances to continue and become a multi-billion player with this focus.
Speaker Change: Finally, the landscape is changing as Martin and I referred to so the landscape of truly inspirational multi brand platform said operate on a global basis.
Speaker Change: <unk> is getting consolidated and thus we believe we have.
Speaker Change: Screaming Eagle chances to continue and become a multibillion player with this focus.
Speaker Change: Great and then maybe just a follow up Martin could you speak to current inventory in the channel how that maybe impacts forward expectation for the promotional landscape and then multiyear any structural constraints to returning to 46% to 47% pre pandemic gross profit rate of.
Matthew Robert Boss: Great. And then maybe just to follow up, Martin, could you speak to current inventory in the channel? How that maybe impacts forward expectations for the promotional landscape? And then, multi-year, any structural constraints to returning to 46 to 47 percent of the pre-pandemic gross profit rate of GMB?
Speaker Change: <unk>.
Max: Yes happy to do so Max I mean, obviously.
Martin Beer: Yeah, happy to do so, Matt. I mean, obviously, as we call it in Q3, we've still experienced a cross-profit margin slippage of 220 basis points, also driven by a one-time effect of certain competitors exiting the market. And we do see some activities there. And so the overall market situation on inventory levels has improved, especially for spring-summer 24, but there are still uncertainties regarding competitive actions and looking ahead. Remember, I mean, we are staying true to our course, we are focusing on full price selling, and we are the least promotional actor in the market, and that speaks to our, you know, retention.
Speaker Change: As you as we called out.
Speaker Change: In Q3, we still experience.
Martin Beer: Gross profit margin slippage of 220 basis points also driven by.
Max: A one time effect of certain competitors exiting the market and we do see some activities there and so the overall market situation on inventory levels.
Max: As has improved especially on spring summer 'twenty four but there is still uncertainties regarding competitive actions.
Max: And looking looking ahead and always.
Martin Beer: of top customers and retaining our existing customers.
Max: And remember I mean, we are staying true to our course, we are focusing on full price selling we have a lease promotional.
Max: <unk> in the market and that speaks to our.
Max: <unk>.
Max: Retaining our top customers and retaining our existing customers.
Martin Beer: That is why the
Max: That is why.
Max: <unk>.
Martin Beer: They shop with my Theresa. There are no structural barriers to
Speaker Change: The shop with my Teresa.
Speaker Change: There are no structural barriers to returning to gross profit levels that we experienced before.
Martin Beer: www.mytrendyphone.co.uk It still waits to be seen whether this is in the immediate upcoming quarters or whether this is or whether this will take more time.
Speaker Change: But.
Speaker Change: It's still.
Speaker Change: It's to be seen whether this is.
Speaker Change: The immediate upcoming next quarters or what.
Speaker Change: Whether this whether this will take more time.
Speaker Change: Great color best of luck, Alright, and maybe Matt I can add to this.
Martin Beer: Sorry, maybe Matt, I can add to this.
Michael Kliger: There are, of course, two issues with what we call promotional intensity. There are players that have been overstocked and are discounting to get off the discount.
Speaker Change: There are of course tool through issues in what we call a promotional intensity. There are players that have been overstocked and our.
Matt: Discounting to get off their discounts.
Michael Kliger: We clearly see a significant improvement in stock levels for spring-summer 2024, the current season. We also will see the same thing for fall-winter 2024. So, a clear return to normal is happening. But we do have one additional effect at the moment, which is short term not good, medium term is more, as players exit the market. There's even more one-time offload. And so we have seen one time offloading in the months of February and March.
Matt: We clearly see the significant improvement in stock levels for spring Summer 2004.
Matt: And we will we also will see the same thing for fall Winter 2004, So the clear return to enrollment is happening.
Matt: But we do have one additional effect at the moment, which short term is not good medium term has more.
Matt: As players exit the market.
Matt: There is even more one time off loading and.
Matt: So we have seen onetime off loading in the months of February March.
Matt: That is not structural that is actually positive structurally but short term there.
Michael Kliger: That is not structural. That is actually positive structurally, but in the short term, there's even more stock coming to the market. And thus, the strong performance in Q3 makes us very comfortable with those short-term pressures, which, as I said, clearly give us medium-term upside. We can also mitigate these pressures, but then, combined with the normal promotion density, we will maybe have a more lingering effect. But the two are quite separate. One is one time only. Play is exciting, the other one is ongoing, and the seasonal... buy in the channel as a whole is much healthier for spring, summer 24, and winter.
Matt: As even more stock coming to the market and thus with strong performance in Q3 makes sense.
Matt: Very comfortable that those short term pressures, which as I said clearly give us medium term upside.
Matt: We can also mitigate but.
Matt: Then in combined was the enormous promotion intensity, we will maybe add.
Matt: More lingering effect, but the two are quite separate one is one time.
Matt: I guess exiting the other one is ongoing and the seasonal.
Matt: By in the channel as a whole is much healthier for spring somewhere 24% and for winter 2012.
Matt: Yeah.
Matthew Robert Boss: That's helpful. Thanks, Michael.
Speaker Change: That's helpful. Thanks, Michael.
Speaker Change: Sure.
Speaker Change: Again, if you would like to ask a question. Please press star followed by the number one on your telephone keypad and if you would like to withdraw your question since <unk> again as a friendly reminder, please limit yourself to one question and one follow up only.
Operator: Again, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, simply press star 1 again. As a friendly reminder, please limit yourself to one question and one follow-up only. Thank you. The next question comes from the line of Grace Smalley from Morgan Stanley. Please go ahead.
Speaker Change: Keith.
Speaker Change: Next question comes from the line of Grace Smalley from Morgan Stanley. Please go ahead.
Grace Smalley: Hi, Thank you very much and my question would just be if you could just comment more on what youre seeing on current trading in April and May relative to the acceleration that you saw in Q3, and then breaking that down in terms of any change in behavior, you're seeing a question from product categories or brands in fashion trends.
Grace Smalley: Hi. Thank you very much.
Grace Smalley: And then in the past you've taken about and consumer preferences shifting towards quiet luxury just have you seen that continue or any changes there. Thank you.
Speaker Change: Well happy to do so so.
Grace Smalley: My question would just be if you could just comment more on what you're seeing in current trading in April and May relative to the acceleration that you saw in Q3, and then break that down in terms of any changing behavior you're seeing across different product categories or brands and fashion trends. I know in the past you've spoken about consumer preferences shifting towards quiet luxury. Just if you're seeing that continue or any changes there. Thank you.
Speaker Change: While we do not comment on current trading.
Michael Kliger: Well, I'm happy to do so. So, while we do not comment on current trading, we did, or Martin did, confirm our guidance for the full fiscal year, and that implies that we see continued double-digit growth also in the final quarter of fiscal year 24. So it's clearly implied in our guidance that double-digit growth continues. In terms of patents, it is still true that some of the strongest brands are what you can categorize as quite luxury, even though it's not always clear whether Luripiana, Xenia, and Bonello are all the same. I would strongly argue that they are not.
Speaker Change: We did that confirm our guidance for the full fiscal year and that implies that we see continued double digit growth also in the final quarter of fiscal year 2004. So it's clearly implied in our guidance that double digit growth continues.
Speaker Change: In terms of the pattern it is still true that.
Speaker Change: Some of the most strongest brand.
Speaker Change: Or what you can categorize as quiet luxury even though.
Speaker Change: It's not always clear weather.
Speaker Change: Louisiana Zenyatta Bonello, all the same heavily argue they're not.
Speaker Change: I stated before in.
Michael Kliger: As stated before, I firmly believe that, as we are in fashion, this trend will come to an end at some point. While we have seen great success for a brand like Loewe that does not fit the pattern of quiet luxury, it will also be interesting for the coming season to see how the development, how the new creative director Valentino is shaping Valentino, the brand itself, but also the market, because fashion is also about fashion trends and cycles.
Speaker Change: Firmly believe that as we are in fashion. This trend will come to an end at some point.
Speaker Change: While we have seen great success with brands like Louis Eva that does not fit the pattern of quiet luxury.
Speaker Change: But we will also be interesting for the coming season to see how the development.
Speaker Change: Our new creative director Valentino is shaping.
Speaker Change: Valentino the brand itself, but also.
Speaker Change: The market because fashion is about also fashion trends cycle.
Speaker Change: Cycles. So I do believe fashion, we will come back I believe it will be good for the sector and I also believe.
Michael Kliger: So I do believe fashion will come back. I do believe it will be good for the sector, and I also believe the quiet luxury brands will continue because they have strong relevance for a certain audience. Overall, the market has missed some of the more fashion forward aspirational customers, and they need to come back.
Valentino: The quiet luxury brands will continue because they have strong relevance for certain audience.
Valentino: Overall the market has has missed some of the more fashion forward aspirational customers and they need to come back.
Valentino: Okay, great. Thank you and then just as a follow up.
Grace Smalley: Okay, very clear. Thank you. And then, just as a follow-up, are you able to just comment on how you're thinking about the strength of your balance sheet and how you go about internally approaching or evaluating potential M&A opportunities versus organic growth opportunities to the extent that you're able to comment, please? Thank you.
Speaker Change: David just comment on how Youre thinking about your balance sheet and how you go about internally.
Speaker Change: King or evaluating potential M&A opportunities organic growth opportunities to the extent that you're able to comment. Please. Thank you.
Michael Kliger: Well, I'm happy to address the second question and then Martin can talk about the balance sheet. So, um... As is evident from our performance and our positioning, we strongly believe that through our organic growth, we can achieve our multi-year targets, and can become a multi-billion company. So organic growth is the default strategy. We may look at unorganic growth; that is an option. While the focus is clearly on organic growth, we will not, at this stage, comment on any specific M&A opportunity that is
Speaker Change: Happy to address the second question and Martin can talk to the balance sheet. So.
Speaker Change: <unk>.
Speaker Change: As is evident by our performance and our positioning we strongly believe that through our organic growth, we can achieve our multi year targets.
Speaker Change: It can become a multibillion company. So organic growth is the <unk> strategy. We may look at inorganic growth that is an option.
Speaker Change: While the focus is clearly on <unk>.
Speaker Change: But we.
Speaker Change: We will not.
Speaker Change: This stage comment on any specific M&A opportunity that is out there.
Speaker Change: And maybe just so much maybe in addition, grace I mean, obviously the balance sheet no no change in the ultimate strength, there, 65% equity ratio.
Martin Beer: And maybe in addition, Grace, I mean, obviously, the balance sheet, no change in the ultimate strength there, 65% equity ratio, very, I mean, we don't have any additional bank debt, on top of the very operational use of the roll-over and carry facility that we were able now to fix for the next years to have a solid base for the growth, replacing the old one. And so we continue to have that balance sheet strength with having no more longer-term bank debt. Great.
Grace Smalley: Great. Thank you both.
Speaker Change: I mean, we don't have any additional debt.
Speaker Change: Debt.
Speaker Change: And on top of the very operational use of the rolling credit facility that we were able now to fixed for the next years.
Speaker Change: To have a solid base for the growth, placing the old one.
Speaker Change: And so we are.
Speaker Change: We continue to have that balance sheet strength.
Speaker Change: With having.
Speaker Change: No no no more longer term bank debt.
Beth: Great. Thank you Beth.
Beth: Thank you.
Speaker Change: As there are no further questions at this time. This concludes our Q&A session I would like to thank our speakers for today's presentation and thank you all for joining US. This concludes today's conference call you may now disconnect.
Operator: As there are no further questions at this time, this concludes our Q&A session. I would like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's conference call. You may now disconnect.
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Speaker Change: Okay.
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