Release Date: December 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mavi Giyim Sanayi ve Ticaret AS (IST:MAVI, Financial) ranked 8th on TIME's World's Best Companies Sustainable Growth 2025 list, highlighting its commitment to sustainable growth.
- The company acquired over 400,000 new customers in the third quarter, demonstrating strong brand appeal.
- Turkey retail operations showed resilience with a 3.6% growth in volume despite economic challenges.
- Online sales in Turkey grew 7% in inflation-adjusted real Turkish lira terms and 12% in volume, driven by effective marketing and CRM efforts.
- Mavi's North America business and export markets contributed positively to international sales growth.
Negative Points
- Economic slowdown and anti-inflationary measures in Turkey have led to lower purchasing power and softer consumer demand, impacting sales.
- International revenue contracted by 4.6% over nine months due to macroeconomic weaknesses and operational challenges in Europe.
- Gross margin declined by 140 basis points in the third quarter, affected by lower consumer demand and increased markdowns.
- EBITDA margin deteriorated by 560 basis points year on year, driven by higher employee costs and weak sales performance.
- Inventory levels increased due to warm weather affecting jacket sales, potentially leading to higher markdowns in the future.
Q & A Highlights
Q: Does Mavi have plans to invest in countries with lower labor costs in the future?
A: Ahmet Yavuz, CEO, stated that Mavi is committed to Turkey due to its strategic advantages in retail and quality. However, they are exploring nearshoring activities in regions like Georgia, Egypt, and the Balkans to source similar quality products at better margins.
Q: Can you elaborate on the increase in net working capital in the third quarter? Is it seasonal or due to other factors?
A: Ahmet Yavuz, CEO, explained that the increase is mainly seasonal, related to mid-season product drops and weather-related sales timing. They expect improvement by year-end and do not foresee a need for additional financing.
Q: How does Mavi plan to manage the risk of declining purchasing power due to inflation and potential wage adjustments?
A: Ahmet Yavuz, CEO, emphasized a balanced approach, focusing on operational efficiency and maintaining competitive pricing. They aim to offer quality products at reasonable prices to retain consumer loyalty despite economic pressures.
Q: With the normalization of margins, do you anticipate further margin contraction in 2025?
A: Ahmet Yavuz, CEO, acknowledged cost pressures and a competitive environment. While they aim to maintain margins around 50%, they are prepared for challenges and will focus on consumer sentiment and product quality.
Q: What is Mavi's strategy for the Russian market amid the ongoing conflict?
A: Ahmet Yavuz, CEO, stated that Mavi maintains a small retail presence in Russia and plans to expand once the conflict resolves. They see potential for growth in the Russian market, contingent on geopolitical stability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
