Release Date: September 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong revenue growth and positive adjusted EBITDA in the fourth quarter.
- Significant growth in the United States market, with a 22.8% increase in full fiscal year 2024.
- Record high average order value of EUR703, showcasing successful focus on high-end luxury brands.
- Decreased customer acquisition costs by 2.5% in the fourth quarter.
- High customer satisfaction with an internal net promoter score of 83% in Q4 fiscal year 2024.
Negative Points
- Ongoing macroeconomic uncertainties impacting demand, particularly in China and Asia.
- Gross profit margin slippage in Q4 fiscal year 2024, reducing by 150 basis points.
- Promotional intensity in the market by competitors affecting overall profitability.
- Inventory levels still above target, with days inventory outstanding (DIO) at 296 days.
- Challenges in the aspirational customer segment, with slower normalization expected over the next few seasons.
Q & A Highlights
Q: On the quarter, gross margins were lower than what we were modeling. What’s happening there? And as you think about working through inventory levels over the next nine months, which inventory levels are you most concerned about?
A: (Michael Kliger, CEO) We believe we are in a cyclical moment and have seen the trough. We are cautiously optimistic with our guidance of 7% to 13% growth. (Martin Beer, CFO) We improved the gross profit margin situation from Q1 to Q4 and expect no further slippage for the full fiscal year. We are working through inventory levels and expect to achieve our target of 260 days by the end of fiscal year '25.
Q: How would you compare and contrast the US customer relative to Europe and Asia?
A: (Michael Kliger, CEO) The US consumer sentiment is very positive, with our growth far above market trends. Europe is improving, especially in southern countries, while Germany remains an exception. Asia, particularly China, is still facing uncertainties, but there are bright spots in Singapore, Thailand, Malaysia, and the Philippines.
Q: Could you elaborate on how the consolidation in the sector influences your business regarding new customer acquisition, brand relationships, or the broader promotional environment?
A: (Michael Kliger, CEO) Consolidation should normalize promotional intensity and digital marketing spend. We believe quality of customer relationships and assortment building will drive success, rather than competing on the lowest price.
Q: Could you elaborate on the cadence of your gross profit dollar growth expectations throughout fiscal '25?
A: (Martin Beer, CFO) We expect gross profit growth to continue and be strong, but it depends on the overall market situation. We are not explicitly targeting gross profit due to market uncertainties.
Q: What are the key factors that would drive you to be at the low end versus the high end of your sales guidance?
A: (Michael Kliger, CEO) The range of 7% to 13% growth is more influenced by macroeconomic and political environments than key initiatives. Our initiatives focus on creating communities for luxury enthusiasts and offering the best assortment.
Q: What are you seeing across the industry on luxury brands pricing given some of the weakness in the aspirational consumer?
A: (Michael Kliger, CEO) Significant price increases have stopped, and prices are staying flat. Some brands have started to lower prices, but this is still the exception.
Q: Do you have any expectations for your new Greater China President and any next plans for China?
A: (Michael Kliger, CEO) China is strategically important, and we continue to invest in the market. We will launch a new program on WeChat and focus on more customer engagement. Chinese top customers are very focused on ready-to-wear and tend to spend even more than European top customers.
Q: How are aspirational customers performing? Can you talk about customer growth versus transactions or their AOV?
A: (Michael Kliger, CEO) Aspirational customers are slowly normalizing. We grew our top customer base by 3.4% and average spend per top customer by 4.6%. For the total population, we saw flattish customer numbers with more weeding out of higher spenders versus aspirational customers.
Q: Could you clarify if the growth rate you're seeing is similar to the fourth quarter?
A: (Michael Kliger, CEO) We feel comfortable with our numbers in line with our full-year guidance of 7% to 13%. We are confident with our previous guidance of growth.
Q: Could you elaborate on the differences between top customers in China and the US?
A: (Michael Kliger, CEO) Chinese top customers are very focused on ready-to-wear and tend to spend even more than European top customers. They are also very interested in travel and festive wear, similar to trends seen in Europe and the US.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
