Q4 2024 Birkenstock Holding plc Earnings Call
Good morning, and thank you for standing by welcome to Birkenstocks fourth quarter and fiscal year 2024 earnings Conference call. At this time all participants are in a listen only mode. Following the presentation, we will conduct a question and answer session.
The company allocated 60 minutes in total to this conference call I would like to remind everyone that this conference call is being recorded I will now.
I turn over the call to Meghan Kulik director director of Investor Relations.
Meghan Kulik: Hello, and thank you everyone for joining us today on the call are Oliver Reicher director of Birkenstocks Holdings plc, and Chief Executive Officer of the book and start groups and Eric Bachman, Chief Financial Officer of the book and Stockbridge, Claude Baumann, Chief sales Officer, David Kahn, President the Americas.
Meghan Kulik: Erica Nico Liacos President of EMEA, and Alexander Hall, Vice President of Global Finance will also join us for the Q&A.
Meghan Kulik: They were reporting the financial results for our fiscal fourth quarter and full year ending September 30th 2024, you may find the press release and supplemental presentation connected to today's discussion on our Investor Relations website broken Stockholding Dot com.
Meghan Kulik: We would like to remind you that some of the information provided during the call is forward looking and accordingly is subject to the safe Harbor provision of the federal Securities laws. These statements are subject to various risks uncertainties and assumptions, which could cause our actual results to differ materially from these statements. These risks uncertainties.
Meghan Kulik: Functions are detailed in this morning's press release as well as in our filings with the SEC, which can be found on our website the Bourbon stockholding dotcom.
Meghan Kulik: We undertake no obligation to revise or update any forward looking statements or information, except as required by law during.
Meghan Kulik: During the call all revenue growth rates will be decided on a constant currency basis, unless otherwise stated we will also reference certain non I O R. S financial information, we use non I F. R. S measures as we believe they represent the operational performance and underlying results of our business more accurately.
The presentation of this non I FRS financial information is not intended to be considered by itself or as a substitute for the financial information prepared and presented in accordance with I F. R. S. Reconciliations of the I F. R. S. Jinan I FRS measures can be found in this morning's press release and in our SEC filings.
Meghan Kulik: Before I turn it over to Oliver I want to draw your attention to the note in our press release and 20-F regarding the change in our segment reporting beginning in fiscal 2025.
Speaker Change: In our fiscal years up to and including 2024, our three reporting segments, where the Americas, Europe and asthma, which was comprised of two operating segments Asia Pacific and Middle East Africa and India.
Speaker Change: During the first quarter of fiscal 2025, we have changed our internal organization to merge the middle East and Africa region with the European operating segment under the leadership of Decouple Yakov to create a new reporting segment, Europe, Middle East and Africa or EMEA.
Speaker Change: While the India region has been merged with the Asia Pacific operating segment to create a new segment APAC.
Speaker Change: Each will continue under the leadership of South bound the change was due to the operational advantages and complementary benefits between the region. No changes were made to the competition of the Americas operating segment.
Speaker Change: As a result, starting with fiscal 2025. The company has three operating as well as reportable segment Americas, EMEA and APAC. Our first quarter 2025 results will be reported under this new segment structure.
Speaker Change: Prior to the release of our first quarter 2025 results, we will issue a 6K with the 'twenty 'twenty four quarters and fiscal year and the full fiscal year 2020 to recast under the new segment reporting structure.
Speaker Change: And your year over year comparison.
Alan: With that I'll turn it over to Alan.
Alan: Good morning, everybody and thank you for joining today's call. We are proud to report a very strong fiscal 'twenty 'twenty four which came in ahead of our expectation.
Speaker Change: We are delivering on the commitments we made during our IPO by expanding profits I believe into the white space opportunities we identify.
Speaker Change: Underpenetrated in product categories, such as auto.
Speaker Change: P J.
Speaker Change: First of all outdoor.
Speaker Change: Important up by region and all of them.
Speaker Change: In our first full fiscal year.
Speaker Change: Since we completed our IPO in October 23, we delivered 2% revenue growth in constant currency.
Speaker Change: Extending our decade long track record of 20% plus compounded annual revenue growth driven by continued growing demand for our products across all segments channel.
Speaker Change: And we are growing brokerage.
Speaker Change: Our 2024, adjusted EBITDA margin was 38%.
Speaker Change: Beating the high end of our expectation.
Speaker Change: In fiscal year 'twenty 'twenty four revenue grew.
Speaker Change: <unk> grew at over twice the rate of the overall group and increased share of business to about one.
Speaker Change: In 24 about half of our top 20, selling silhouette squib coastal.
Speaker Change: Our <unk> business grew at 42% nearly double the pace of the overall business.
Speaker Change: Hello, all retail revenue grew over two times the pace of the overall business as we continue to add to our own store fleet.
Speaker Change: Opening 20, new doors globally in fiscal 'twenty four.
Speaker Change: Leveraging the investments we made in our odds about victory, we launched our newest orthopedic nobody.
Speaker Change: The Blue book basketball, sneakers expanded and relaunched our professional lines, including the fully certified.
Speaker Change: Zero.
Speaker Change: And then our Walter already.
Speaker Change: Yes.
Speaker Change: We also made additional investments in Berlin.
Speaker Change: Low enough to increase production capacity to meet the growing global demand for all our products.
Speaker Change: We increased Paris sold by 14% in fiscal 'twenty.
Speaker Change: While maintaining disciplined distribution to ensure Scott.
Strong full price utilization of over 90%.
Speaker Change: For the year was up 8% driven by product mix and targeted price decrease.
Speaker Change: We grew our wholesale business by 23% in fiscal 'twenty.
Speaker Change: Over 90% of the growth came from existing doors or partners continued to allocate more shelf space to devote himself, Brian increasing almost by adding new categories and usage occasions.
Speaker Change: As consumers are becoming increasingly selective and more intense than they're spending we are taking share and gaining the attention of our key retail partner and desktops.
Speaker Change: Our DTC business grew 21%.
Speaker Change: Penetration of approximately 40% was consistent with last year.
Speaker Change: We ended the fiscal year with 67 stores globally up from 47 at the end of fiscal 'twenty three.
Speaker Change: We grew our membership base by over 30% during the year to over 8 million Barton, who shop more frequently and spend on average 30% more Bengal.
We continue to balanced growth between BSD and <unk> to meet the growing global demand and achieve our profitability goal and maximize our reach especially into the new targeted consumer groups.
Speaker Change: Now, let's move to a brief discussion on segment performance for the year.
Speaker Change: Within our largest segment the Americas, we experienced strong consumer demand for our brand throughout the year.
Speaker Change: Revenue in the region was up 19% compared to fiscal 'twenty three.
Speaker Change: We saw a noticeable return to in person shopping at multi brand retailer in the second half of the year.
Speaker Change: As such our B to B strength throughout the year many of our strategic problem allocated more space to Britain and experienced very strong back to school sell through.
Speaker Change: We have too much.
Speaker Change: Carey brand within our strategic agenda.
Speaker Change: We believe that significant reach with both dot com and social media impressions.
Speaker Change: Defied all consumer demand beyond what we may achieve an hour.
Speaker Change: The Americas DTC channel, which is almost entirely true we delivered revenue growth in the mid teens.
Speaker Change: We expanded our physical retail opening four new stores during fiscal 'twenty four.
Speaker Change: Recently opened our first Boston sporting events et.
Speaker Change: At several additional source data this year.
Speaker Change: In Europe, we delivered exceptional growth of 21%.
Which was broad based across all countries and channels in the first full year since the completion of our transformation initiatives in the region. We clearly see the benefits of the improved quality in our distributions with double digit unit.
Speaker Change: Sure.
Speaker Change: While both <unk> and Sandoz grew at double digits for the year. So still grew at over two and a half times.
Speaker Change: It's possible.
Speaker Change: Driving the higher.
Speaker Change: We have gained shelf space and strategic retail partners and our brand awareness increased an average of 400 basis points in the key markets. Since we began our transformation in 2020 two.
Speaker Change: We saw strength in both the D to C and B to B channels in Europe.
Speaker Change: Our focus on better alignment with key strategic retail partners led to increased orders and elevated sell through performance from these targeted accounts.
Speaker Change: <unk> continued to widen debit to stop assortment to meet the expanding consumer demands.
Speaker Change: In our B to B other book Autumn Winter 2004, we doubled share of business in shoes compared to last year.
Speaker Change: Our European business grew at a similar pace to be up.
Speaker Change: After several years of retail consolidation in the region, we embarked on our retail expansion strategy in 'twenty pool, we opened three new stores in the region, including our first store in Paris.
Yes.
Speaker Change: Several additional locations throughout Europe, while additional owned retail stores and 25.
Speaker Change: Yeah from a region with our POS is growing segment in fiscal 'twenty four growing 42% nearly double the pace of the overall business. We continued to make progress toward penetrating this significant wide space in Brooklyn.
Speaker Change: Still at only 12%.
Speaker Change: While overall revenue mix, we see substantial opportunities for growth and will continue to invest in the segment.
Speaker Change: Aligned with our roadmap and commitment to the region. We added 13, new owned retail stores, bringing our total to 25.
Speaker Change: Additionally, the launch of our online store in the Philippines, and the strong performance throughout our digital channel.
Speaker Change: <unk> strong reached a sequel.
Speaker Change: We also expanded our strategic partnerships, increasing our mono brand off the doors.
Speaker Change: Approximately 20%, which drives <unk> growth in two weeks.
Cheryl: Greater China made up mid teens Cheryl.
Speaker Change: We are still in the early stages of our market roll out there, but are steadily building brand awareness and demand through our increased retail and online presence.
Speaker Change: We opened our first one store in Chengdu.
Speaker Change: Well go out and build upon our successful pop up store in Shanghai permanent store later this year.
Speaker Change: I will now turn it over to Eric to discuss our financial results in more detail.
Thanks, Oliver and good morning, everyone.
Eric Bachman: I'm pleased to share benchmark performance fourth quarter and full year 2024.
Eric Bachman: Again, we saw very strong growth throughout the year, which accelerated in to our fiscal year end, allowing us to achieve another year of over 20% top line growth.
Eric Bachman: Ahead of our expectations.
Eric Bachman: First let's look at revenues fourth quarter 2000, <unk> revenues for Euro 456 million growth of 22% in constant currency excel.
Eric Bachman: Accelerating.
Eric Bachman: Third quarter's growth mindset.
Eric Bachman: <unk> was up 26% our D to C to Poland was up by 18%.
This brought our total revenue for fiscal year, 'twenty said before to over EUR, One 8 billion.
Eric Bachman: 22% from 28, three and a handful of expected growth of 20%.
Eric Bachman: <unk> revenues were up two 3% empty to see were up 21% for the full year.
Eric Bachman: Yes.
Eric Bachman: Now looking at gross profit.
Eric Bachman: In analyzing our fourth quarter gross profit margin that is important to note that the prior year quarter was impacted by several noncash end of year true up adjustments and the reclassification of logistics expenses.
Eric Bachman: Combined these elevated Q4 gross margin by approximately 450 basis points, making is not directly comparable to Q4 2024.
Eric Bachman: The adjustments did not impact EBITDA in the period and deported.
EBITDA margin increased.
Eric Bachman: 90 basis points year over year.
Eric Bachman: On a reported basis gross profit margin fourth quarter fiscal 2024 was 59%.
Eric Bachman: The remaining 190 basis points of decline in gross margin was a result of eight the expected under absorption impact from new production capacity, which account for around 200 basis points be the increase in each of these share relative to last year and see if it impacts all of CIT.
Eric Bachman: Some pricing initiatives.
Eric Bachman: The gross margin in Q4 2024 represents the more normalized change.
Eric Bachman: For the full year gross profit margin was 68, 8% down 330 basis points from full year 2023.
Eric Bachman: As expected about 150 basis points of margin decline was a result of the temporary under absorption costs from the edit protection person team.
Eric Bachman: The remaining 180 basis points from a combination of.
Eric Bachman: Channel mix and other things.
Eric Bachman: Selling and distribution expenditures were euro 141 million fourth quarter, representing 31% of revenue.
Eric Bachman: 640 basis points year over year.
Eric Bachman: Due to in part to logistics route densification into Cogs as.
Eric Bachman: As well as lower consulting and other expenses relative to those incurred during our IPO last year.
Eric Bachman: For the full fiscal year, selling and distribution extended just totally euro hyphen to $7 million or 28, 1% of revenue.
Eric Bachman: <unk> from 29, 8%.
Yeah 2023.
Eric Bachman: General administration expenses, the Europe $32 million or 7% of revenue in the quarter.
Eric Bachman: Actively euro $101 million or five 6% of revenue for the full year 2024.
Eric Bachman: So 80 basis points year over year, primarily due to the incremental public company costs.
Adjusted EBITDA in Q4 of Euro 125 million was up 31% year over year and margin of 27, 4% was up 190 basis points year over year.
Eric Bachman: For the full year, adjusted EBITDA increased 15% to a euro 555 million.
Eric Bachman: EBITDA margin of 38% down 160 basis points year over year, largely as a result of the capacity expansion, but coming in ahead of our expected range of 30% to 35%.
Eric Bachman: Adjusted net profit of Europe, 55 million fourth quarter.
Eric Bachman: It's up 118% and adjusted EPS was euro since 2900.
Eric Bachman: 107% from year ago.
Eric Bachman: Fiscal 2024, adjusted net profit of year.
Eric Bachman: $240 million was up 16% from 2023 E. P. S of Euro 128 increased 30% year over year.
Speaker Change: Let's now have a closer look at our balance sheet as of September 32024.
Speaker Change: Cash and cash equivalents were $356 million as of September 32004.
Speaker Change: Europe $344 million at the end of fiscal 2023.
Speaker Change: We generated euro 429 million operating cash flow during 2024 up 20% year over year.
Speaker Change: This was driven by the strong EBITDA growth.
Speaker Change: Combined with improved working capital efficiency.
Speaker Change: We improved our inventory to sales ratio of 35% down from 40% in 'twenty three.
Speaker Change: Our DSO for fiscal 'twenty four remains very healthy at 23 in line with year ago, Despite the slightly higher <unk> mix.
Speaker Change: During 2024, we spent 74 million euros in capital expenditures and made.
Speaker Change: Net repayments of euro $662 million in outstanding loans.
Speaker Change: Our net leverage was one eight times as of September 30th centrally fall below our stated target of 2.0 times.
Speaker Change: As we look forward to fiscal 2025.
Speaker Change: We believe we are well positioned to meet our stated growth and profitability objectives.
Speaker Change: Our outlook for 2025 was in line with our medium to long term targets.
We expect revenue growth, 15% to 17%.
Speaker Change: Balanced and healthy growth from both <unk> and <unk>.
Speaker Change: We believe this is the right pace of growth to meet demand.
Speaker Change: <unk> or our scar city model and maintain branch health and full price realization.
Gross margin should improve year over year, as we increase utilization and efficiency at our production facilities moving closer to our 60% target.
We expect EBITDA margin in the range of 38, 31, 3% an increase of up to 50 basis points compared with 2024.
Speaker Change: Our effective tax rate is predicted to be around 30%.
Speaker Change: We expect to invest approximately 80.
Speaker Change: $80 million capital expenditures in 2025.
Speaker Change: Primarily related to production capacity and retail store expansion.
We plan to use excess cash to continue reducing our outstanding debt our target leverage ratio at the end of fiscal 'twenty to 'twenty five is approximately one five times.
Speaker Change: Now I'm happy to hand over back to all of them.
Speaker Change: Thanks, Eric.
Speaker Change: Our strength in fiscal 'twenty for an outlook for 'twenty demonstrate our ability and commitment to deliver on the promises we made during our last year.
Speaker Change: We are delivering strong double digit revenue growth excellent margin exceptional cash generation and expanding into the white space areas, we highlighted over a year ago.
Speaker Change: Our brand strength is evident as our growth continues to outpace our peers globally with strong and increasing demand from our <unk> partners and in our growing DTC footprint.
Speaker Change: We are investing in our production capabilities to meet the growing demands of our products.
Speaker Change: While carefully executing on our proven engineered distribution strategy to drive the growth ensure healthy stock levels and maintained strong full price realizations.
Speaker Change: We are entering the next chapter of growth as we tap into our largest white space markets.
Speaker Change: We are increasing brand awareness educating the consumer on the purpose of certain store footprint and are taking market share by following our proven playbook disciplined inkjet distributions to support AOSP.
Speaker Change: With our growing retail presence in the region and continued investment in digital we see a long runway of growth ahead.
Speaker Change: Paul draws to a close so that's the year in which we celebrated its 150 years to make sure.
Speaker Change: Finding alive.
Speaker Change: Yes.
Speaker Change: To empower our people to work as nature intended.
Speaker Change: Many of our wholesale partners use this moment to create specialty retail placements allocating additional shelf space for our brand.
Speaker Change: In our white space region, we're invested to drive awareness. It was great to see the strong appetite for our rich brand heritage.
Speaker Change: As I've said before the.
Speaker Change: The first 150 years were just the beginning of a much larger and more significant in Germany.
I would now kindly ask the operator to open our Q&A session.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. In the interest of time, we ask that participants limit themselves to one question during today's Q&A, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two.
Speaker Change: If you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: And the first question today is coming from Matthew boss from J P. Morgan Matthew Your line is live.
Matthew Boss: Great Thanks, and congrats on another nice quarter.
Speaker Change: So Oliver you cited 15% to 17% growth is the right pace for a healthy long term business.
Speaker Change: Why do you think that's the right pace going forward or any structural change in drivers relative to the past decade of 20% plus growth and just near term could you give us some color on what youre seeing in the first quarter relative to that 15% to 17% pace as.
Speaker Change: As you are cycling the toughest compare at 26% growth a year ago.
Speaker Change: Hello, Matt. Thank you for your question can.
Speaker Change: Can we grow faster, yes of course based on the overall demand we see we can definitely grow faster, but again, we have to think about our whole business for the next decade not in quarters or years.
Speaker Change: We have to plan mindfully.
Speaker Change: The core of our of our business here.
Matthew Boss: And remember we are 100% vertically integrated so we have to think about hiring people, forcing raw material investing in production and we take the responsibility and wellbeing for over 6000 employees globally, it's very serious boss so quality means for us not only the quality staff.
Also in production.
Matthew Boss: Engender distribution, it's a very quantitatively driven.
Matthew Boss: Those organizations, we are riding it.
Matthew Boss: It's a quality comes through different layers raw materials all of it so.
Speaker Change: As a as a comparison if you grow mid to high teens, a year that means you're doubling your business.
Speaker Change: Absolutely every five years.
Speaker Change: And if you think about the whole situation in Britain stock.
Speaker Change: <unk> that you know the output of this organization.
Speaker Change: Five years.
Speaker Change: Timeframe, that's a very very strong growth story and this is how we operate as a company and that's why we committed to the mid and high teens growth during the IPO and we think this is the right pace for sustainable long term growth and yes, you mentioned the 20, plus 20, plus was as a direct record for them.
Speaker Change: Last year and again.
Speaker Change: There will be periods, where we can and will grow faster, but it's just if we feel it's right for our core makeup or our core values. Then we will do this absolutely okay.
Speaker Change: And recording Q1, we're seeing globally, a very strong holiday season.
Speaker Change: Given what we've seen thus in Q1, we feel very comfortable that Q1 will likely come in at the higher end of our 15% to 17% annual revenue growth guidance range, even against the strong comps last year remember last year, there was like 26% growth. So we do think.
Speaker Change: Ending up at the higher end of our guidance range will be a strong signal for the brand and the.
Speaker Change: Global demand, which is definitely outstripping our hour.
Clive: Clive here.
Speaker Change: I had a great great color best of luck.
Speaker Change: Thank you. The next question is coming from apologize from Citi. Paul Your line is life.
Speaker Change: Hey, Thanks, Thanks, guys.
Albert can you give a little bit more color on one can you just though DTC versus BBB is performing and how are you thinking about <unk> versus DTC in F. 'twenty five overall, how you're planning the business around that 15% to 17.
Speaker Change: Each of those segments and then can you maybe talk about gross margin by quarter, assuming one too.
Speaker Change: Year over year, but just wondering when you're looking for gross margins to inflect positive.
Hey, Paul this is niko.
Speaker Change: Thank you for your question I'm, taking the first one on DTC and need to be on growth going forward. So what we will see is definitely will continue to see a balanced growth between DTC and b to b throughout fiscal 2025.
Speaker Change: With some nuances from quarter to quarter as some quarters are more sell in in some quarters are more sell through driven please be reminded.
Speaker Change: Minded that online represents 90% of our DTC currently so in other words retail is just prevent presenting 10% of our DTC and we have been executing our retail expansion plan with great success.
Speaker Change: Recently opened stores are performing really well.
Speaker Change: And they are performing well from day, one powerful about that that opened in Q4 is our top performing store in Europe. Chengdu store is welcoming 4000 visitors every week outperforming our expectations and then Austin stores also really outperforming our expectations.
Speaker Change: Please be assured we haven't secured more locations more exciting locations to open this fiscal year. So you'll hear us more talking about neutral expansion and you will see retail gaining more weight in our DTC channel.
Speaker Change: Our overall view on channel and channel growth is very wonderful food demand, where it occurs while we really remain disciplined in our distribution for me to be as you know 90% of growth is really coming from existing host wholesale partners. What they do is they expand our offering they offer more shelf space and they go with a wider offering to their consumers.
Speaker Change: This gives us a broader reach to consumers with a broad assortment and let consumers enjoy the full breadth of our brand.
Speaker Change: We remain disciplined and our distribution for it to be and this is a high quality and profitable growth with a full price realization that is superior to any other brand out there.
Speaker Change: Thanks, and then any color on the gross margin.
Speaker Change: Sorry, I didn't get the question of winning.
Speaker Change: Gross margin if you look at Q4, the gross margin last year, the number of non cash out of period accounting true ups that impacted the quarterly margin comparison. So these totaled about 450 basis points of which the majority was related to a true up of internal logistic expenses for the year that were reclassified.
Speaker Change: Between cognizant selling distribution expenses.
Speaker Change: No impact on the full year gross margin and even more important no impact at all on the EBITDA. So this is why we should look at the quarterly trends for gross margin EBITDA margin of 24 as a guide for 'twenty five and wireless we as you know we will not be giving quarterly margin guidance. Overall, we have said, we expect a modest improve.
Speaker Change: And gross margin for 25 and EBITDA.
Speaker Change: Go up 50 basis points higher next year.
Speaker Change: Okay. Thank you guys. Good luck.
Speaker Change: Thank you. The next question will be from Michael Benetti from Evercore, Michael Your line is live.
Hey, guys. Thanks for the detail there, let me keep going on the gross margin and how we should think about it going forward into 2025.
Speaker Change: Are there any other unusual items, we need to think about as we look out at the quarterly trends I know there was a big Miss.
Speaker Change: Reclassification <unk> as we roll into <unk> is that an appropriate baseline to think about a year ago and then on revenues I guess, a double click a little bit. Thanks for the color on first quarter you mentioned the tough compares in the quarter.
Obviously the D to C compares obviously very tough in the first quarter or anything to think about between the two channels in the fourth quarter is that obviously effects.
Speaker Change: Margins and then finally on SG&A I'm, just curious if you could speak to the cadence of spend this year or is it it hasnt really aligned very closely with revenue growth in the past and can have a pretty material difference on earnings quarter to quarter. It started growing in the mid twenties last year and ended the year much much lower so I'm curious does SG&A snapped back to mid to high teens in the first half or is that.
Speaker Change: To think about it as like a high single digit growth rate in the first half and it accelerates as revenues through the year.
Hey, Mike. This is Alexandra. Thanks for the question I will take the first and the third part of your question then.
Speaker Change: With our numbers in 'twenty for the quarterly cadence we acquired.
Speaker Change: Confidence that this is a good basis to model. The 25 quarters. So 24 is completely clean there's no no hiccups no.
Speaker Change: Unusual items, you need to know about.
Speaker Change: Of course, we have some seasonality.
Speaker Change: Sure you are aware of that.
Speaker Change: Especially with the higher D to C penetration the first the fourth quarter impacting.
Speaker Change: Gross margin also SG&A ratios, but overall 24 is a good basis.
Speaker Change: To start with 435.
Speaker Change: And then maybe just one one last remark on gross margin.
Speaker Change: Eric mentioned that we are seeing.
Speaker Change: Slides uptrend of the margin and 25, this will likely to happen in the back half of the year.
Speaker Change: Okay.
Speaker Change: The SG&A.
Speaker Change: Well the extra day at the same cadence.
Speaker Change: And also a good starting point for the 25 quarters.
Speaker Change: Ill fluctuations, but this is just pure seasonality and dip.
Speaker Change: Depending on the channel mix, but SG&A is also a good starting point, taking the 24 numbers.
Speaker Change: Okay. Thank you very much appreciate it guys.
Speaker Change: Thank you. The next question is coming from Dana Telsey from Telsey Group Dana Your line is live.
Dana Telsey: Hi, good morning, everyone.
Speaker Change: Do you think about I believe the pairs were up 14%. This year a F. P up around 8%. This year, how are you thinking of that going forward, especially given the production capacity that is coming more online what are you looking at and it also sounds like the traffic in stores did it continue to accelerate from the.
Speaker Change: The current quarter, what are you seeing given the increased penetration.
Speaker Change: Of the stores in the new store openings and just any.
Speaker Change: And more on wholesale in the Americas, what Youre seeing on order trends is it still more from existing accounts or they're new ones too. Thank you.
Speaker Change: Hi, Dana this is Nicole I'm going to take the first part of the question and then I'll hand over to my esteemed colleague David to give you some color on the Americas piece. So on units versus ASP growth, we definitely see volume being a bigger driver of growth as in previous years. As you know finally, we have the capacity to really unlock white space categories such as the.
Speaker Change: Asthma or now APAC region, our closer product category, but also other business areas such as professional these are all incremental fields of play to our unit growth.
Speaker Change: Further to that this increased capacity is also benefiting our b to b business. It really allows us to gain shelf space with existing partners that are widely their assortment offering.
Speaker Change: With that high unit growth, we expect a positive ASP contribution to revenue growth driven by mix predominantly but also like for like pricing going forward.
Speaker Change: Dana Hey, this is David just to follow up on the back half of that question.
Speaker Change: As you've heard repeatedly from US 90% of our growth in revenue comes from not only existing accounts, but existing doors. So that shows that we're getting increased shelf space increased penetration increased spread in our collection, mainly in our current points of distribution the only new.
Speaker Change: New points of distribution would be ones that are very very tactical and strategic for us. We've spoken about this previously, but most specifically related to <unk>.
Speaker Change: Sport.
Speaker Change: Sports specialty where we've over the last year established a nice small basis, but very very disciplined growth in those specific.
Speaker Change: In that specific channel.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question will be from Lana Vas, Alaska from BNP Paribas Barranco annualized Oh, good morning, Oliver and team. Thanks, very much for taking my question.
Speaker Change: Want to ask.
A three part question if I may.
Speaker Change: Last year for fiscal year 'twenty for you opened 20 stores.
Speaker Change: How many stores should we assume for this year and should it be really weighted to Asia that kind of leads us to the second question I think Oliver you mentioned, perhaps China is only 15% of your App My religion. So about 30 million euros. So very small, but can you talk about the positioning of the brand in China and what you think is the longer term opportunity.
Speaker Change: And then lastly, you mentioned that the close to offering was roughly a third of the business, where do you think that goes for FY 'twenty five and longer term. Thank you very much.
Yeah.
Speaker Change: Hey, this is Nick again, thank you for your question I'm going to do the first part of it which is sort of related but I'm hangover I'm going to hand over to Klaus for the Asia piece.
Speaker Change: As you know retail is a massive growth pillar for US. We are currently operating 67 stores, adding and have added 20 stores in 2024.
Speaker Change: We have plans to open more we are very disciplined in regards of locations that we go after but also our return requirements.
Speaker Change: Cash payback on investment is as you know within 18 months. So yes, we do expand but you also expand a very.
Speaker Change: Consciously if you will.
Our aim for fiscal 'twenty five is to increase the door fleet by 50%. So that's a significant growth of our door fleet and as I've said every store that is opened is performing and has to perform really well from day, one so you'll see us.
Speaker Change: Having some really exciting locations lined up.
Speaker Change: We just opened in Europe, we just opened Colombia opened Amsterdam more to come as I said, Paris, It's a very very great success story in Europe, and so there are many others in the other regions so more to come on that.
Hello clouds here entering the China question first of all it's important to know that we're not new in China. I mean, we have a long history, there and yes, we are accelerating our growth.
Speaker Change: We are as you know, we signed up a partner for our B to B I'm almost a store.
Speaker Change: <unk> and <unk>, we are delivering now to six point of sales and we are operating to own stores.
Speaker Change: And then on the digital side.
And social sales channels as tick tock and the Lumi chat program. So looking forward I mean, we keep this pace that makes you infer should double the fleet.
Speaker Change: That's great to hear and then I'll close toward offering where do you think that goes for this year and overtime.
Yes. So this is niko again, so close to offering as you know is now a third of our business.
Niko: It continues to grow at the pace of more than twice as fast as our sandals are important to know that sandals is growing double digit so we grow both of them.
Niko: Areas of the business, while close towards over performing.
It will go.
Niko: More we haven't set ourselves a target for this one but you will see an increased share of close to a business going forward.
Speaker Change: Very helpful. Thank you very much.
Speaker Change: Thank you. The next question will be from Randy <unk> from Jefferies. Randy Your line is live.
Randy: Yeah. Thanks, a lot. Good morning, just unpack closed toe a little more can you give us some a little flavor on.
Randy: The drivers within that category is that the Boston, just getting a lot more threats.
Randy: The assortment, that's driving a lot of that or are there other kind of.
Speaker Change: Use that are kind of driving can you give us a little more flavor of what's driving close though and again do you think that that could approach.
40% to 50% of the mix going forward and lastly.
Speaker Change: What is the difference in ASP on average of close to <unk> versus sandal. Thanks, guys.
David Kahn: Hey, Randy it's David.
David Kahn: First off there.
Theres no copy and paste globally on close to the beauty of the businesses closed toe encompasses everything from clogs boots, and we're seeing positive momentum across every element of closed toe in the U S. Specifically.
David Kahn: It has been driven by clogs the beauty of that is it's not just the Boston. It's also the Tokyo, There's a new clog called Blue tree with a convertible strap that you may have seen at retail that is selling very very well and the impact of clogs actually is even spilling over to our <unk>.
David Kahn: Slipper, which has been in the line for five to six years and because of the interest in clogs is now having its best season in its entire history, obviously from an ASP.
David Kahn: Clogs overall.
David Kahn: As do all of closed toe have a higher ASP than sandals in general.
David Kahn: I don't know what that exact dollar amount is but clearly the mix certainly changes the ASB again, I think the velocity of it is the sell throughs.
Speaker Change: Are much higher than they are across the across the total collection and anything Thats close to right now I think Europe is seeing a bit more of a closed toe shoe and boot reaction. So ill pass this to Nico.
Speaker Change: Thank you David Yes, yes, indeed, so maybe you remember our Q1 last fiscal year fiscal year 'twenty four.
Speaker Change: So a very very strong success of launched boots silhouettes in fact, four out of top 10 in DTC. The top 10 sellers were laced up shoes, and we launched the hydro and the pass code at a price point of <unk>.
Speaker Change: 200 Euro above 200, you that those stars really performed very well. So as you can see we are spearheading.
Speaker Change: Just close to but also boots and lace up shoes in our DTC business and what we do is we take the great learnings in the great success into our <unk> business and also went up 24. The season that we are selling through now with our partners was the first season, where we doubled the order intake for lace up shoes and.
Speaker Change: And for US it was quite significant to do that because we shared on the great success of a DTC and asked our partners to broaden the range with us and invest in to that part of the collection.
Speaker Change: Sell through now of exactly that order intake is doing really positive. So we see a continuation of the trend loss of last Q1 with again.
Speaker Change: Lace up shoes, and boots, really performing well and and over performing against them and the rest of the business.
Speaker Change: Great one more follow up maybe more for Eric.
Speaker Change: Africa help us properly calibrate our thoughts between.
Speaker Change: DTC and B to B, recognizing that in the first half of 'twenty four.
Speaker Change: DTC led b to b, but in the back half <unk> led DTC.
Speaker Change: You know in the 15% to 17% guide can you just give us some maybe qualify do you think.
Speaker Change: <unk> is.
It's higher than growth in D C.
Speaker Change: At least for the first half or for the whole year, just give us just any kind of flavor you can give us between the channels and how they should grow relative to the 15% to 17% either a higher or lower would be super helpful. Thanks, guys.
Speaker Change: Hi.
Speaker Change: Yeah.
Speaker Change: Hey, can you guess, we jumped out by chance.
Speaker Change: Pedro.
Speaker Change: Yes, we hear you.
Speaker Change: Sorry.
Speaker Change: Sorry.
Speaker Change: It wasn't because of the question.
Speaker Change: We don't break it down in detail as you know, but it's a moderate growth in all areas. So it's a balanced growth to whatever the demand is asking for.
Speaker Change: And as.
Speaker Change: I think discussed in the past.
Speaker Change: The <unk> business is as positive process is D to C business margin wise and.
Speaker Change: And therefore overall and for the full Esa is.
Speaker Change: Yeah, it's a moderate growth, it's a moderate plan with.
With no specifics and obviously seasonality a bit as we have seen them in the in the <unk>.
Speaker Change: Quarters this year.
Speaker Change: But.
Speaker Change: Again overall moderate on both sides.
Speaker Change: Well without enough answer.
Speaker Change: This is Mike and I just wanted to follow up there.
Speaker Change: Just a reminder, that you know.
Speaker Change: 40% of our business is already.
Speaker Change: You know pretty sizable.
Speaker Change: And D to C and will continue to grow both the D to C and the B to B business as we look forward into 2025.
Speaker Change: On the DTC side, I think you'll be looking we'll be looking at additional stores on the retail side and that'll be probably more towards the back half, but you'll start to see a greater contribution on the DTC side.
Speaker Change: Versus GDP growth.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question will be from Lorraine Hutchinson from Bank of America and your line is life.
Lorraine Hutchinson: Thank you good morning, I, just wanted to step back and talk about the Atlanta region over the longer term what percentage of sales do you think it could grow to over time and can you just talk about your progress on putting the distribution and partnerships in place for continued outsized growth.
Hello This is Klaus.
Lorraine Hutchinson:
Lorraine Hutchinson: I think we are planning to grow about 30%.
Lorraine Hutchinson: Sure. So we are balancing out in the regions. That's the plan.
Lorraine Hutchinson: And the growth cadence, we like to say that the optimization suite to offer doubled speeds of our mature markets.
Speaker Change: And can you repeat the second question. Please.
Speaker Change: I was just hoping for an update on your progress on building the partnerships and distribution that you need to continue that growth.
Speaker Change: Okay. Thank you.
Speaker Change: As you know, we signed up a partner for China.
We are also very much focused on our <unk> development right now and you can see that we are almost doubling the business on our D to C N.
Speaker Change: <unk> partners.
Partners for Southeast Asia, mainly b to B section very well prepared and we are in context over here to open more stores.
Speaker Change: Operating by ourselves now 25 stores and in the <unk> side, we have 256 stores. We added like 45 stores only this year, so going forward very well.
Speaker Change: No I think it's important for you to understand as Alibaba again, sorry.
Speaker Change: That's.
Speaker Change: My region is we're not only focusing on China. Okay. So we really try to control the growth in our in the in the mindful way and say okay.
Speaker Change: <unk> doubled the speeds aggressive compared to the rest of the world. That's a good speed for us.
Speaker Change: We tried to establish a very strong sales.
Speaker Change: The Asian business, we have a very strong business in Australia, a strong business in Japan, where especially our owned retail is catching up very very positive and very.
Speaker Change: Very good.
Speaker Change: And of course, China is the main focus for a lot of investors, but we try to balance everything moving forwards.
Speaker Change: So don't expect crazy stuff from us in these regions.
Because keep in mind.
Speaker Change: Political situation changed we will you will ask your questions.
Speaker Change: The other way around so mindful rating moving forward doubled the speed we grow in this region over 40%, So I would say that.
Speaker Change: Pretty nice beat in this area.
Speaker Change: And but don't over don't override this it's really it's important and it's but it's even more important to keep it balanced.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question will be from Simeon Siegel from BMO capital markets. Simeon Your line is live.
Speaker Change: Thanks, Hey, guys. Good morning, or good afternoon, I Hope you and your families have very happy holidays Eric.
Speaker Change: Eric or Alexander I, just as we think about the model that we can see from the outside are you comfortable that we're past the restatements regional P&L et cetera, and then just higher level, there's really great revenue guys rats strong brand residents can you share some thoughts on how youre thinking about promotional environment at large may where it's competition versus what you are seeing for you guys and then just maybe speak to that.
Speaker Change: How are you clear so last chance on your site versus wholesale clearance I know theres a breadth first step element there that we can see versus that you can see so any color there promo environment clearance approaches when relevant and then how youre thinking about the progression of gross margin next year in the context of lapping past lock, maybe when that becomes a good guide to gross margin. Thanks.
Speaker Change: So it sounded like more of a long question, but thanks Simeon.
Simeon: So let me start with your comment regarding the P&L.
Simeon: It's very clear, it's not a restatement its a reclassification of internal logistic costs, which can be shown in sales and distribution can be shown in cogs and some.
Simeon: Companies do like this sometimes so we sort of cleans it up from 23 noted as the majority of companies do it.
Simeon: So it showed in our our gross margin. So that's a re class of internal logistic costs noncash impact EBITDA as you have seen the ultimate so so I think that's that's important too to see a ton of sensor and to come to your question, Yes, we feel fine and we had the first year of being listed.
Simeon: Used to sort of look at the all the details and if you see the quality of the numbers.
Simeon: And where we came from as a family run company I think we had a big improvement now and then.
Simeon: And over two.
Simeon: David.
Simeon: Yeah Simeon pay.
Speaker Change: I think on the on the question about the general promotional environment I think what Youre seeing is this bifurcation out there a lot is promoted but the few things that people really demand that they are intentionally shopping for our selling through at full price. We're very fortunate that we are one of those brands.
Speaker Change: As you know, we manage scarcity with such a high level of discipline that the amount of cash which is our inventory, which is the industry term for broken sizes at any given time is mathematically quite small having said that when you.
Speaker Change: You have a very developed.
Speaker Change: Digital business, where you do carry a broad assortment you are going to see what may be more breath, but certainly a very very low depth in any given style. So specifically to the U S, who I know youre referencing with map pricing, we manage wholesale so tight our retails retail.
Speaker Change: <unk> experience in season, well over 95% full price realization on our own D to C business, which again is largely digital right now it's over 90%, so youre going to see a bit more breath, but certainly not any significant depth whatsoever.
Speaker Change: That's really great really helpful. And then just Eric any way to think about when past block as we ramp we've worked through that ramp and it starts becoming a benefit for the line item.
Speaker Change: Yeah.
Speaker Change: Hey, Simeon this is Alexander I will take that over.
Speaker Change: Thanks for that parts overall.
Speaker Change: Absolutely pleased with how well the expansion has gone so far I'm not only in our new factory and positive outlook, but also the existing <unk>.
Speaker Change: Build out in <unk> and in Portugal.
Speaker Change: The expansionary steps. We did 23 adds 24 have been the foundation of our unit growth I think that's also important to mention.
Every single situation that is not only pressure to margin is it gives us the opportunity to substantially grow in unit.
Speaker Change: And this was clearly a drag.
Especially in 'twenty fall as expected and communicated upfront. This was the peak year of the margin pressure and.
Speaker Change: With that transition every year, we are now going into a 25 year, where we will see a better absorption as discussed already.
Speaker Change: Primarily the back half of the year.
Speaker Change: We will also confirm that we expect a full absorption of fixed cost.
Speaker Change: Third quarter of 2006.
Speaker Change: Great. Thanks, a lot guys best of luck for the year ahead and great job.
Speaker Change: Thank you. The next question is coming from Mark <unk> from Baird, Mark Carolinas life.
Speaker Change: Thanks for taking my question and congrats on the strong quarter and year.
Speaker Change: I wanted to ask about pricing it looks like price accounted for about half of the 8% ASP increase in 2024.
Speaker Change: So call it 4% is that a good way to think about 2025 as well.
Speaker Change: Similar question on mix that was also a big driver just should we expect much of a change there for 2025. Thank you.
Speaker Change: Hey, Mark this is Alex thanks for the question.
Speaker Change: And you're absolutely right, so when youre looking into 'twenty five.
Speaker Change: I think as Nicole mentioned also that we are expecting approximately two thirds unit growth approximately one third in AFP growth and yes. The AFP is primarily driven by like for like pricing and product mix.
Speaker Change: With casinos continuously buying more into higher price points and premium products, We mentioned close tools as an example here.
Speaker Change: So a higher level of share, but also product embellishments.
Speaker Change: All supporting this trend and this will continue into the future retail will help on the channel.
Speaker Change: Expansion, but overall in 25, we are not expecting a major influence on ASP from a channel mix.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. The next question will be from Sam Poser from Williams trading.
Speaker Change: Sameer lineup.
Sam Poser: Thank you good morning, everybody. Thank you for taking my questions and happy holidays.
Sam Poser: I just wanted to dig into the D. T C business, a little bit more especially in the Americas, but in total when in the Americas. The DTC business represents probably around 40 plus percent of the sales and of that 90% over 90% is digital.
Sam Poser:
Sam Poser: Well most of the DTC growth that happens in.
Sam Poser: Fiscal 'twenty five happen out of Asia and Europe.
Ex the stores and as and then those stores that opened later.
Sam Poser: Drive incremental it is that's the way to think about it.
Sam Poser: Hello take that one I guess, yeah, hi, Sam it's Megan.
Speaker Change: Obviously, we don't.
Speaker Change: Providing them.
Speaker Change: By channel by region, but I think.
Speaker Change: Tier two to get to your question, yes, you're right on the on the DTC.
Speaker Change: Syed on the U S predominantly E com and I think that.
Speaker Change: We'd love to DTC growth in the U S.
Speaker Change: A lot of.
Speaker Change: The additional growth in DTC will be coming from the additional stores.
Speaker Change: We'll see DTC growth contribution coming from the other regions in particular, we're seeing very strong growth both on the digital side and then on the retail side coming from the region and that will continue to drive DTC growth higher, particularly as we move into the latter part of this year.
Speaker Change: And the digital channels continue to ramp there.
Speaker Change: And what would you call a mature.
Speaker Change: Digital penetration I guess.
Total.
Speaker Change: You know.
Speaker Change: Yes.
Is 40 plus percent mature is that like going to be a tough number to get a head of higher then.
Speaker Change: Digitally and you really just need the store you need to just open the stores and have them really start producing and I guess over the long term you got opened 30 plus stores this year and long term how many stores do you foresee.
Speaker Change: Our own stores do you foresee globally.
David Kahn: Sam Hey, its David here first off we're going to increase our door count physical doors by 50% in 2025, so that's pretty aggressive.
David Kahn: As far as new door openings, I would say and again, it's a little bit mathematical it's a little bit anecdotal, but I would say once you get to a 40% digital penetration in a market that becomes pretty much optimized. It doesn't mean, it's not going to grow it will grow in revenue dollars, but as far as share of.
David Kahn: Business it may be slightly above 40 about optimized where it is and I think we've learned over the last few years from other brands. Once you try to lean into one channel versus the other it may not serve the purpose that youre seeking it to actually serve so I think we have a <unk>.
David Kahn: Pretty optimal balance around the world that might play out a little different by region. It might play out a little different by quarter, but I would say that we have the most healthy balance in the market right now and as we open more retail stores in more physical touch points with that brand that's going to be purely incremental <unk>.
David Kahn: Growth on top of the digital growth that we will see.
Thanks, and a subtle dig to your the other company David Happy holidays again.
David Kahn: Yeah.
Speaker Change: Thank you.
The next question is coming from Janine Stichter from BTG Jeanine Your line is live.
Janine Stichter: Hi, Thanks for taking my question just wanted to get more color on what you're seeing from a customer lens is there any change youre seeing in either repeat purchase behavior or a number of parents and also curious what youre seeing in terms of the customer demographics are you seeing a younger audience or just curious what you're seeing there. Thank you.
Janine Stichter: Hey, this is Nicole. Thank you for your question. So in regards of repeat purchases. We do have a very strong buildup of our membership base currently 8 million members.
There you use your imagination hop fastest can still grow it's growing it's been growing.
Janine Stichter: 30% year on year with already now members.
Janine Stichter: Spending 30% than nonmembers. So what we also typically see with members as they sort of transcend into.
Janine Stichter: Other categories with us, let's say more expensive categories, but also newer categories, such as shoes lace up shoes insole business that is typically adopted much faster than.
Janine Stichter: With members then with non members.
We've done a great job in becoming clearer on our member segments. So you'll see us becoming more personal in how we treat our members and more exclusive we have a very very large amount of product that is exclusively meant for members that is displayed online and that also typically sell through much much faster than <unk>.
The rest of the line so yes, a very healthy growth in membership a very healthy business with members, but yet to be growing significantly.
Speaker Change: Great. Thank you for the color and best of luck.
Speaker Change: Thank you. The next question will be from Jim Duffy from Stifel. Jim Your line is live.
Jim Duffy: Thank you wanted to ask on cash flow and capital allocation.
And a half times net leverage guide at the midpoint of adjusted EBITDA implies just modest improvement in the net debt can you talk about free cash flow objectives.
Jim Duffy: Given us Capex is there some sort of offset to cash generation and the working capital lines or does that imply some use of cash such as share repurchases. Thanks.
Speaker Change: Thank you Eric could you take over yes, we are.
Eric Bachman: Comparatively cash rich, which shows the strength of our business and we hit the target of below two times.
Eric Bachman: Leverage one eight end of the year and the goal for next year is around one five times.
Eric Bachman: Yeah.
Eric Bachman: Going forward. The plan is much the same as it was this year first of all invest in the business. That's always the first priority. So if something is needed. If we think it helps the business we will do it.
Eric Bachman: And.
$18 million is the plan for current year.
Eric Bachman: Afterwards continued to pay down our debt, we expect as I said, one five times leverage end of the year are eventually pay off the U S term loan.
Eric Bachman: And everything after this will be a decision made by the board, obviously, but the strength of our business and the very strong cash flow conversion.
Eric Bachman: Shows that we own the right away.
Eric Bachman: Eric.
Speaker Change: Midpoint of the EBITDA Guide one five times net leverage guide implies like $980 million and net debt.
Eric Bachman: At year end.
Speaker Change: $25 million or so better than fiscal 'twenty for your and what are you thinking in terms of free cash flows.
Speaker Change: Uh huh.
Speaker Change: Capex.
Speaker Change: I'm curious is there some sort of offset that.
Speaker Change: Impeding the progress on the net debt.
Speaker Change: [laughter] calculation wise you are correct of course, we have to be be free on this end and we just wanted to be capable of investing and whatever's needed other buildup inventory or invest until the the capex. Yes for me personally U S term loan is the first.
Speaker Change: Priority because it's the most expensive one that's around $170 million.
Speaker Change #100: S dollar.
Speaker Change #100: Plus as you know there's a there's another euro term loan debt.
Speaker Change #100: The bond.
Speaker Change #100: And everything else will be will be decided by the board afterwards.
Speaker Change #101: Understood. Thank you so much.
Speaker Change #102: Thank you. The next question will be from Irwin Rambourg from HSBC Arrow in your line of sight.
Irwin Rambourg: Hi, good afternoon, everyone. Thanks for taking my question and congrats on a great year I just wanted to come back on APAC to understand if you know what are the P&L implications of APAC is it gross margin accretive is it operating margin dilutive.
Irwin Rambourg: And just maybe it's anecdotal, but moving from opt not to APAC is that linked to particular managers or particular synergies.
Speaker Change #104: By regrouping regions or countries together in a different manner than than in the past. Thank you.
Speaker Change #105: Hey, Evan business et cetera, I'll take the first part of that.
Speaker Change #106: I hand over to Nicole.
Speaker Change #107: So to keep it simple on the biogen sites with that share of business.
Speaker Change #108: Oh of course, you don't get the full leverage.
Speaker Change #108: If you compare that to a to a bunch more bigger business, but we have a really nice price points in the regions. Some markets are already quite developed and we expect.
In the mid to long term no margin.
Speaker Change #108: Pressure from making that region figures, so it's definitely supporting that margin, but in some markets to be fair when starting that up and ramping you don't have the full prop.
Speaker Change #108: Profitability in year, one or year, two but this is fully built into our plan.
Speaker Change #108: Thank you Alexander I'm just on the on the segment change, Yes, we decided to realign our segment structure into Americas, EMEA and APAC.
Speaker Change #108: Basically the decision has been taken because we see structural similarities but also operational advantages between Europe and Middle East Africa, but also in beyond APAC, So Asia Pacific with India stays under the leadership of clause Beaumont.
Speaker Change #108: In the new apex segment that I'll take care.
Speaker Change #108: Responsibility of the EMEA segment, we've just started in Q1 to execute in this new segment formation.
Speaker Change #108: And we'll provide all financials and recon segment results with the next quarter's release in February.
Speaker Change #109: Thank you and just to check I think you said, China was a mid teens contribution to sales. So that's about 2% is that mainland China or is that greater China.
Speaker Change #110: This is great to China.
Speaker Change #110: Thank you.
Speaker Change #111: Thank you. The next question will be from Jay sole from UBS J. Your line is live.
Jay Sole: Great. Thank you so much I guess, you talked a lot about <unk>.
Speaker Change #113: So jus in some of the newer products can you just talk about your injection molded sandals business and how that performed in <unk> and what you expect to see in that business next year.
Speaker Change #114: Hey, Jay this is all about.
Speaker Change #114: You're talking about the Pew.
Speaker Change #115: Segment their outdoor water ready sandals.
Speaker Change #116: Yeah, we are.
Speaker Change #116: We are we are just working on this on this new segment actually was invented to cover the more humidity tropical conditions around southeast Asia and the.
Speaker Change #116: My reached in total.
Speaker Change #116: All of a sudden.
Speaker Change #116: In the U S. The alto outdoor segment and in Europe.
Speaker Change #116: Styles performed pretty good.
Speaker Change #116: So it's just a new category that will be rolled out globally and there will be also.
Speaker Change #116: Coming up some some collaborations styles in some special make ups and some areas, where we are pushing to introduce these new wearing occasion.
Speaker Change #116: Let's say soft hiking, our dollar ish Walter already environment, you may see some of it in the <unk> in the U S or global auto and some other outdoor doors in Europe. So it's a very promising start for this new category and that's why we invested in positive argument just kind of a manufacturing process because it.
Speaker Change #116: Technically why is a completely different setup than the classical corporate optics sandals.
Yeah.
Speaker Change #117: Got it thank you so much.
Speaker Change #118: Thank you and the next question will be from Adrian <unk> from Goldman Sachs. Adrian Your line is live.
Adrian: Hey, good morning, good morning, and thank you for taking my question I'll just stick to one I'll just follow up on the on your manufacturing that you just mentioned in terms of your investments in the factory expansion plans how are they progressing versus your expectation and how do you expect the additional supply to evolve over the next two to three years. Thank you very much.
Speaker Change #120: Hey, Adrian I think we touched on that question earlier.
Speaker Change #121: Earlier in the call, but let me just wrap up that he has everything on plan not only in the new factory and also the other two we are building out.
Speaker Change #122: And this is not a plan, which is done in six to 12 months. We started in 'twenty two and this will allow us until 2006.
Speaker Change #122: Especially building out goerlitz.
Speaker Change #122: This is absolutely on our what we expected so far the drag on margin nothing what will continue in 2005 and 2006, so for now all Goodyear.
Speaker Change #122: Okay.
Speaker Change #123: Thank you.
Speaker Change #124: And we have reached the end of the question and answer session and this does conclude today's conference you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.
Speaker Change #123: Yeah.