adidas AG (PNK:ADDYY) Q1 2023 Earnings Call Transcript

adidas AG (PNK:ADDYY) Q1 2023 Earnings Call Transcript May 5, 2023

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome, and thank you for joining the adidas AG Q1 2023 Conference Call. . It’s my pleasure, and I would now like to turn the conference over to Sebastian Steffen, Head of Investor Relations. Please go ahead.

Sebastian Steffen: Thanks very much, Francie, and good evening, good afternoon, good morning, everyone, wherever you’re joining us today, and welcome to our Q1 2023 conference call. With me here today in beautiful Herzogenaurach, our CEO, Bjorn Gulden; and our CFO, Harm Ohlmeyer. Bjorn will kick it off in a second with his prepared remarks, and then both Harm and Bjorn will be available for your questions. During the Q&A session, as always, I would like to ask you to limit your initial questions to two and that’s, of course, not because the fewer questions you ask, the sooner we will be able to head into our well-deserved weekend, no. That’s, of course, because we want to allow as many people as possible to ask their questions. So please stick to the two question rule. And with that being said and without any further ado, over to you, Bjorn.

Bjorn Gulden: Thanks, Sebastian, and hello, everybody. I will take you through the numbers, but also take you through some visuals to explain a little bit where we are and what we’re doing. And I think it starts with actually the front page where here, you see the jerseys that we have made for all the teams that will play in the World Cup for women in New Zealand and Australia this summer. And these are jerseys developed only for the female teams, and I’m actually very proud of it. You have 8 teams here, actually have 10 when we go to the tournament. And as you remember from the European Cup in U.K., women’s football is incoming, and as you see here, having 10 teams in that tournament shows you that we are heavily investing in women’s soccer.

If you look at the numbers, I’m sure you had a look at it so I’ll go quickly through them. €5.3 billion in sales, which is basically flat, currency-neutral. And if you then — as we have to do these days, look at the missing Yeezy, then we are actually up 7% without that. If you look at gross profit, losing 510 basis points is, of course, not good, mainly because of discounts and also write-offs of inventory. Of course, there are all the moving parts, which I’m sure you will ask about later, but that’s the major reason. I think that down the road, our gross margin should again go towards 50. But of course, the gross margin will be the biggest problem for the rest of the year. If you look at OpEx, again, an increase, as you see here, around €110 million.

And this is, of course, that part of our OpEx was planned and based on a higher sales. And of course, there’s no leverage now when we are so far behind the plan that was originally set. But again, Harm and the team has been very disciplined in OpEx, and that’s also then the reason why we actually are then having a small profit of €60 million despite, I would say, all the troubles. And it’s actually better than what I had expected because I told you we’ll have a small loss in Q1. And again, if you remember, the €724 million loss we had in Q4 then is, of course, a big swing. If you then look at the top line, minus 20% in North America seems dramatic, and it is, but it’s also what we actually planned. If you take the Yeezy business into account and the rest of the business, it’s down 5%.

And of course, these are not strong numbers, and of course there’s a big challenge to turn this around in the U.S. But also here, I do think we have a lot of, what should I say, initiatives in place, and I will take you through a few of them. Important for us, being the home of football or soccer, we extended the MLS contract during Q1 and that is strategic for us very, very, very important because I do think we have to own soccer around the world. And again, as you will see later, we are trying also to create much more soccer culture for the street. And to do that, of course, we need to play bolt on where we are today but also play on our heritage, and that’s why it’s important to protect our #1 position in soccer in the big markets. You see up in the left corner, where we tried some of the things that has to do with street.

The designer, Daniel Patrick, worked together with the Red Bull team of New York and also took part in the fashion shows. Again, one of these initiatives to bring fashion, music and soccer together in a similar way that we’re actually doing in basketball. Then we had Patrick Mahomes, the best football player currently, and of course, him being the MVP, we have also started to use him more in our marketing. Very, very important in America is the festivals. And as you probably know, during the last 3 years because of COVID, there was little activity. Now the Coachella was on the road again, and we decided to overinvest. We had a lot of presence there. And I think for the first time, there was also an Asian, our top group from Korea, Blackpink, our major stage and did a great job for us.

We also had a great lineup of other artists and a lot of our athletes was there, and I think it’s fair to say that our, what I should say, investment there was the most visible on the Coachella. I think Coachella then also was topped by our collab with Bad Bunny. You see here him on stage, but you also see our, what should I say, pavilion or launch or whatever you call it. And then the collab shoe, the Campus, that he has developed with us that you later will see is now also a best seller in the high end of the distribution. So this recipe works. The basketball investment goes on. I have said many times that I think to connect to the street in the U.S., we need to be credible in basketball in the court and then take that credibility on the street through our Classics or through new developed silhouettes.

For the first time in the history, adi, I think, had 2 teams in the semi-final or the final 4 of the college tournament. Both Miami and Florida were playing in adidas. We also extended the Grambling State University that plays a big role in the street culture, and of course, we are continuing the signature shoes because it’s part of this culture, and here, you see the examples of the Harden Volume 7. Maybe even more important that we finally were able to launch Fear of God. We did that in L.A. a couple of weeks ago, a great shop with Jerry Lorenzo. We had invited all our hyped customers there and it’s fair to say that the reaction was great. You see some of the items on that slide. And here, you see the lifestyle direction on the footwear side.

And the second picture is actually the first performance shoe, which is called Basketball 1. There will be a Basketball 2 and there will be a Basketball 3, so you actually see quite some performance shoes coming out of the Jerry Lorenzo’s Fear of God. That is also going to be played in the NBA. I think personally that this is a game changer. You will start to see this product visible during the second half. We will have some commercial launches also at the back end of the second half, and then of course, this should be a major part of our basketball initiatives for 2024 and beyond. If you then look at EMEA, also here is slightly better than what I thought with a small plus. If you take Russia out, which you kind of have to, at least do for a while in the way you compare it, then we were actually up 9%.

And the changes we’ve done there, remember, we announced or promoted Arthur, who was running the region to now be the Board member for global sales, and he has then decided to divide the European setup in this way that he will have 2 reporting lines. One is Mathieu, who has now been running, for example, the French business. He will be in charge of Europe. And then Dave Thomas, who’s doing emerging markets, will not report into Europe anymore, but actually straight into Arthur. So that will be a change going forward. Two very good leaders that I think will help us get more growth in both regions. If you then go into China, still a negative number of minus 9%. If you take Yeezy out, it’s flattish. But what is actually very positive is that the sellout in China is up in all our channels, meaning that our own retail is up double digit, and also, our retail partners are having positive numbers on the sellout.

That means that we’re currently selling in less than we’re selling out, which is, of course, is the healthy way of doing it. And I think it’s the first time in a long, long time that, that’s happening. In general, a lot of energy in China when it gets to doing new things and the fact that they’re not in any, what should I say, restrictions and that people are working freely and not sitting at home. Here, you see an example of that. They took one of our technical shoes from the ’90s, the Climacool and did a tech launch only for China. Very successful, created a lot of buzz, and this technical look that adi used to do in the ’90s is very popular, and the Chinese team did a great launch we did back in February. Also positive is that we have started using celebrities again coming out of, I would say, dance, skateboard and a little bit of music.

It’s not the way it used to be, but it’s starting in the direction. And we see that has an impact both on the traffic online and also on the conversion. I think more importantly down the road is that we see that the Chinese are back again in sports. All the marathons, 5Ks, 10Ks, half marathons are sold out, which means that people are moving again after 3 years of little sports activity. And therefore, we have, of course, as adidas started signing a lot more athletes and also doing more events. And here you, for example, see the Shanghai Half Marathon which was sold out and we are sponsoring. So more sports interest, which is of course, plays in our direction. The 2 large regions, both Latin America and Asia Pacific, doing very well. Latin America growing, again, almost 50%.

I think it’s fair to say that we have a very energetic team that has the tools to grow. Flavia, our female leader there, is doing a great job. And I think we’ve given them more freedom in both doing local programs and also doing the assortments the way they want to do it, so a lot of momentum. And also in Asia Pacific, you see the positive numbers, so that’s a positive thing. And that gives you then the flattish year-on-year sales, and again, the 9% compared to non-Yeezy. If you look at the channels, wholesale, where we sell into the retailers, and they sell to the consumer, plus 3%, own retail brick-and-mortar plus 11, I think we have 47 less stores now than we had a year ago. That means that the like-for-like number is a little bit higher and it’s about 13%, both in our concept stores and in our outlets.

And that shows you a positive, what should I say, development for, of course, selling out is more important than selling in. E-com, of course, different. Reported minus 23% and if you take Yeezy out, it’s actually plus 12%. And here you see, of course, that the Yeezy business for our e-com business was very, very important, and we have not been able currently to replace that. And of course, that is then, what should I say, a challenge for the future. You should also know that we’re trying to take the promotions down in e-com are trying to protect our franchises. So top line maximization is not the goal of e-com, but it’s to make it profitable, protect the brand, and then of course, clear product where that’s needed, but not to be promotional on in-line important franchise.

That gives you the split in our channel of 66% wholesale, 34% D2C, which I think is now a healthy balance. And over the D2C, then you see the split between own retail and e-com is the 19%, 15%, which again, I think under the current conditions where we are, it’s a pretty healthy mix. Look at the divisions. Footwear at €3 billion being up 1%, and again, you have to remember despite not having Yeezy. Apparel at minus 3% at almost €2 billion. I think it’s fair to say that there’s more apparel inventory around in the market than footwear, and I think we expected this, so not a big. Positive surprise is that the accessory business is growing and currently at 8%. And that gives you then the split, footwear being 57%, apparel 37% and accessory 6%.

And again, I have always said in other companies that 50% footwear is a good ratio and here, even close to 60%. And I think we all know that this industry is led by footwear, and that’s why I said also here for the future, we have a good starting point. What I’m very proud of, although I have — cannot take the honor for it is that I’ve said all the time that I think the performance pipeline at adi is good. And you see also here, same thing as we talked about end of Q4, all performance categories up, all of them double digit, except for training, which is flattish. And I think that, again, is a healthy starting point because it would have been worse if we now are up in Lifestyle, but down in performance because we all know that, that is more difficult to turn.

Football, the X, the Predator and the Copa, 3 fantastic franchises here in one of our packs. And again, since I’m new, I can promise you that all the franchises going into ’24 is even better. And all the interaction we had with the distribution tell us that we look very, very good for ’24 in football. Women’s football gained importance. And I already showed you on the left side, the jerseys for the World Cup and also in line with taking this business series. We launched the women’s ball, and it’s ironic, but now many of the men’s tournaments are actually playing with the women’s ball because that’s the way it is now in the pipeline, a great ball, which is also selling decently around the world. I talked about trying to bring Soccer more to the streets.

Photo by Christian Wiediger on Unsplash

One of the things we’re doing there is to take all iconic jerseys from the ’80s and the ’90s and then launched them as streetwear. Here you see some of examples. And you will going forward, also see original product combined with football. And we did, for example, for some of the teams do some bus branded together with the teams and they sold out within hours. So a new way, I think, of using the heritage of the brand in a way that only we can do. Sustainability, as is important, as always, that’s why we continued doing projects. And here is the Predator with Parley, and we will continue to do projects like this. What is new? We did extend the contract with Union Berlin, probably the biggest surprise in the bonus league, great personality, great people, fits our brand, so we extended that.

We started our cooperation with the Kings League, something that maybe many of you don’t know, it’s a 7 against 7 league in Spain, especially in the Barcelona area. Very, very popular on Twitch. And I say YouTube, and youth channels, something you should have a look upon because it’s a different way of actually being in the soccer game, and we are the major sponsor. And then I already said that we extended the MLS contract. We have 2 running campaigns. One, the Running Needs Nothing But You, where we used runners and other athletes. So you see Salah showcasing the mood of running and also, of course, the product. And then very important, we did The Ridiculous Run campaign where we talk about women being afraid or running alone outside a very important message and again, very important in our communication.

Very proud again of our products. The adizero franchise, in my opinion, probably the best running shoes out there from a design point of view, but also from a construction, from a weight and from a last. And the reason I’m saying that is that these shoes are winning almost half of the races around the world. And of course, Boston was the most impressive one, we’re number 1, 2, 3 and 4 in the Men’s class was wearing adizero, and the #2 woman also. And you know when you have the 3 — the 4 best ones, then it’s definitely a credible thing for the products. Same thing here, proud. Adi, for the third time, had wrote records where they invite 140 of the best athletes in the world to run 5K, 10K and half marathon around our campus. We also had a run for our own employees, more than 1,000 people showed up, and it was a tremendous event for us and I think it’s something that only adi can do.

We had also other celebrities from other sports. You see Kaká here, if you remember him from Milan and Brazil. And this — the live of our campus with athletes and our own employees and all the stars is a tremendous thing. And I get goosebumps when I think about it because this is the way I remember adi from the earlier days. Sustainability, of course, communication-wise and product-wise, very important. We used to do the run for the oceans. We have now widened this into Move for the Planet. The concept is that when you log on to our running app and you do sports for more than 10 minutes, we will donate €1. And the hope is, of course, that as many as our members does that, so we can actually collect as much money as possible to put into the different programs in sustainability, and the campaign starts on June 1.

We also signed with Les Mills as a partnership in training, training being a huge category, especially on the women’s side, and our partnership there very important, a lot of activities going on. And one of the activities also our partnership with RHEON where we have taken materials that has been developed actually in the space program with NASA and put that into our leggings and our bras. And again, a highly technical product to build image in the training side and especially on the women’s side. More women. We had a celebration of Mikaela Shiffrin winning 88 World Cups, 2 more than Ingemar Stenamark. And of course, she being part of our family, we’re very proud. She also spent the last week here on campus and was an integral part of many things that we did, and a fantastic athlete and a fantastic person.

Outdoor in general, you know there is an Outdoor boom. We have TERREX connected to it. Also here, focus on women. You see here the women hiker. We did collab with the National Geographic, both in footwear, apparel. And here also inspired by the Japanese market. We did a collab with And Wander, which is a Japanese outdoor label. And again, a lot of activities going on both in the true performance, but also in the lifestyle area. And again, Outdoor being now under the TERREX label doing well. For those who are interested in golf, we finally launched UltraBOOST also in golf. I think it’s fair to say that BOOST is the most comfortable form in the industry, and there’s no other sport where you spend so many hours in the shoes as in golf, so it was very logic than to put UltraBOOST into golf.

And needless to say, the most comfortable shoe in the market, and I can only suggest that you try it because it’s the best golf shoe that you can have. We continued also with more aggressive design on the apparel side. Here, the floral design that we did together with Rose Zhag. She is the best amateur in the world of golf, been that for 3 years. And here, you can see she looks great, and I’m sure she will be pro in a very short period of time. I’m a sports romantic, many people here are. Adi has always been very visible in many sports, and that’s what we’re trying again to nurture. We have, since we talked last time, resigned All Blacks. All Blacks being maybe one of the most symbolic teams in the world. They will also be here on campus preparing, I think, 10 days in the preparation for the World Cup in France.

And we will launch a spectacular jersey for them during that time, and we will extend the offer into lifestyle because their logo is carrying a lot of lifestyle appeal. So you can see — or expect to see a lot of interesting things on that. In special sport, proud that we have 2 female boxers from India who both won the World Title. So again, focus on smaller sports on the female side. And then a special thing in Germany, you will have the Special Olympics in Berlin in June. We outfitted more than 400 athletes of the German delegation the other day. Again, our commitment to sports and very, very important for our DNA. That was Performance. We have talked about having issues in Lifestyle. You see both Sportswear and Originals still being negative.

But we also see some highlights. The TERREX, the range still doing fantastically well. I think the energy in certain markets around these models are great. And you have to remember, we haven’t scaled it yet in a way that you see it in the numbers. There are periods coming in as we speak in much bigger numbers, and this will start to have an impact on our business going forward. New is that we have another winner. That’s the campus that you see on the foot of this model. Not a TERREX style, not a Tiro style, but again, one of our classics. And I think that the way we have done collabs, you see it here together with Bad Bunny and you also see the Samba that we did with Ronnie Fieg, is causing a lot of energy. And as you can see outside the Kith store in Tokyo, people are lining up in hundreds to actually buy this product.

And of course, that’s creating a later high-low effect for our brand. In general, a lot of activities in lifestyle going on, a lot of positive feedback. Of course, with many things that’s still not as scaled, but you know you need to do small things first to get heat back again and then scale them. And I think it’s fair to say that when we work through our archive, we are in a very good situation if we can manage this properly. I would not be surprised if you also see shoes like Superstar coming back heavily, as you see in white, black and black-white, because we already start to smell it. The trend magazines and in the, what should I say, fashion areas, and then we will have another winner. Great job of Adidas with Gucci. I think the Samba boom that we see is coming out of this cooperation, and here, you see some examples of it.

And again, I think both the Gucci team and adidas team has done a great job on these lines. And I guess that at least I have very, very many so-called friends who wants to get their hands on this collection, and of course, I will try to help them. Pharrell talked about it last time, now being the LVHM head lead on the Men’s side. Here is his take on the Samba thing where he will launch many, many fashionable colors together with us in the second half of the year. Very cool, I would say, development. Sportswear also starting to turn around. We now have a positive order book. Here you see the Jenna Ortega and the AVRYN shoe. And again, the things are starting to go in a direction where we also get the right volumes on this. That was the physical product.

We’re also dealing with the Metaverse. There was a fashion week end of March, where all the brands were showcasing in that space. I’m very proud that we also here are very active and that actually, our launch was the most visited also in this space. Probably not my world but the world for the younger generation, and we are actually investing quite some time and energy with talent also in this space. That was sales and products. Very quick on the balance sheet. Inventories, as you can see up here, 25% are reported. That’s 27% in neutral currencies. I’ll get back to that in a second. Accounts receivable flat, of course, because our wholesale business is flattish. Accounts payable, down €600 million. Same thing again. This is also proof that we’re sourcing less, buying less, which is in the strategy of getting our inventories down.

And inventories up, accounts receivable flat and payable being down causes then working capital to go up. And of course, this will start to normalize as we get a better balance on these short-term activities. That means cash and equivalents at around €800 million. I think Harm’s goal is to be around €1 billion, so we are in the ballpark of the number that he wants to have. Inventory, just a quick one on that. As you can see, €5.7 billion. The Yeezy part of that is €500 million. If you remember, back in Q4, it was €400 million, so that tells you that there’s another €100 million that came in. And this is what we told you that when the contract was broken, we had things in production that we continued with to not what should I say, have people in the factory lose their jobs.

And as you can see, then €100 million has been delivered into our inventories also on the books during Q1. I have the feeling that if you take the Yeezy out, we are at €5.2 billion, which is less than we had in Q2 last year. And I think with the plans that we have that we should have, our inventory in control, both from an amount and also from a mix at the back end of this year. When it gets to the relationship to the trade, we are leaving the on the game and feel that we now have to earn the game. We have invested over the last 3 months’ time, energy and, of course, resources in really showing our retailers what kind of partner we can be. A couple of weeks ago, we had the owners and the CEOs and the most important people or most important retailers here on campus for 2.5 days where we showcased everything we have.

We showed them the pipeline and innovation. We showed them the Campus. We showed them the resources. Of course, we showed them the product. And we also showed them the new creative direction of the brand. And if they have a nice wrist wear, they could also play, for example, paddle with, and take part in other activities. For me, a great, great event with a lot of good feedback. We did the same specifically for football. We invited again all the football specialists to be here for 2 days, went through all the product and concepts for ’24 and also the innovation pipeline beyond. Had players like Del Piero, Alonso and also our long-term partner, Beckham, here, and again, in a great atmosphere. And again, as being new to the brand again, the feedback on the ’24 line is fantastic because I think it’s the best line both for footwear and Apparel, including Lifestyle for Original that I have seen.

Running. I told you already that we have the products, we have the technologies. Of course, we don’t have the market share yet for A, winning the races and B, having the products. So again, we did the same thing. We invited the specialists to be here for 3 days. They were also here during the Road to Records. And I’m very, very sure that Alberto and his team will get better distribution because now we have the product and look forward, A, to only not get credibility, but also get commercial business in the running area going into ’24. At the other spectrum of our business not in sales, but in sourcing, we did the same. We invited all our suppliers for a 3-day summit in Jakarta where we again presented where we are, both positive and negative, and had a very honest discussion about what we need to improve.

Topics like speed to market, topics like local sourcing, and of course, trying to share resources was the major topics. And I have the feeling that was very, very welcome. And again, I love these suppliers because they have experience making products for many, many, many years. And I think we need to use the technology even more than what we have done. So that was what we have done. A quick look at the outlook. It shouldn’t be surprise for you, a big, big focus on the core of the business. Design, development, sourcing, which is the creation of the product. Then marketing and sales and then, of course, delivering it as good as we can. And neither — or if it’s wholesale or DTC, doesn’t really matter, we need to do both better than we’re doing.

And of course, in the middle of all that is the consumer and everything we do need to reach the consumer because if not, it’s a waste. That also means that in ’23, we will continue to focus on things that are important to build the base for ’24, which would be a better year. And that should again then lay the groundwork for ’25 and beyond which should be, I would say, good, good years. Most importantly, that is our people. It’s obvious that the people have had a tough time during COVID, not being on campus. And of course, when the results are not good, the atmosphere is not great. So important that we create that adidas spirit again, which adidas was known for. Product is king. Without the right product, we will never win, so product is hero.

Everything we do should hit the consumer. Retailers is our partners, and I really mean partner. We need to share all ups and downs with them, and they need to feel that we are the best servicing partner in the industry. And then, of course, we are there for the athletes and not the other way around. And that’s an attitude that adi has always been known for, and that’s what we’re trying to wake up again. You know better than me that there are still some challenges in the environment. The geopolitical tensions and the situations is still not good. There are macroeconomic challenges although, at least what I can see, there are some positives. Inflation is coming down. The raw material prices have come down. Freight has started to normalize, so at least there are some external factors that help us.

And then the high inventory levels that you have seen or we have seen are still there, but my feeling is that when we get to the back end of the year, I think the whole trade and the brand should be in a better shape which will, of course, help all of us. You put that all together, and we confirm our guidance for ’23, which we have said from the beginning is a transition year. Net sales with a high single-digit decline and an operating model that is now basically a breakeven. The assumption for that is that we don’t sell any of the Yeezy inventory which then translates into a €1.2 billion lower sales and a loss of operating profit hypothetically of €500 million. In addition to that, we said that we could see an operating loss of €700 million if we have to write off the existing inventory, which would then be the €500 million of the balance sheet.

And then on, of course, based on all the strategic changes we need to do of around €200 million. This is in line with everything we told you last time we spoke. So again, we have all the ingredients for success. I am — so very positively, I wouldn’t say surprised, but confirmed what I’ve seen. But in the short term, we’re not performing the way we should. And I hope you have some patience with us because for us to short term, try to show numbers would not make any sense. We need to manage through the year in the best way. And then, of course, using all the energy to do the right thing also for the future. So with that, I hand over again to you, Sebastian.

Sebastian Steffen: Yes. Thanks very much, Bjorn. And Francie, we would be ready to take the questions now.

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Q&A Session

Operator: . And we have the first question from Erwan Rambourg from HSBC.

Erwan Rambourg: Congratulations and good to hear you’re alive and kicking, Bjorn, after your recent accident. So I’ll keep it to 2 as planned. Just on China, I’m wondering if you can comment on your vision of Western brands relative to local Chinese brands in terms of market share? Do you think we could see a situation later this year of stabilization of market share? And maybe just related to your business, you said that you were down 9%, and at the same time, sell-through is up double digits. So should we expect a snapback, a rebound in Q2 for sales? Or is that still a bit premature? And then maybe secondly, I think you made a few comments around the fact that you were hopefully a bit closer to determining exit options for Yeezy. I’m just wondering if you could take us through what the latest thinking is on the possibilities there?

Bjorn Gulden: Yes, I’m doing fine after my ski accident. I never look pretty and I don’t look pretty and also enough so small damage, so — but I’m okay. In China, we need to be careful because the positive thing is the following. We have so in less to the trade that they have sold out. So that means, for the first time, inventories in the trade of adidas product is going down, and there is a demand that the retailers haven’t seen for a long, long time. It’s the first time I see this in many, many quarters. And that makes all of us, of course, positive. We also had our 2 big retail partners from China here in headquarters, and it’s the first time again that they see, I would say, not on the light of the tunnel, but see some normal developments coming.

That gives our team, which you remember has been almost in 2.5 years kind of quarantine or under heavy restriction of course, have a lot of energy, and there’s a lot of activities now going on in China that is consumer fronted. We talked about athletes, we talked about culturally-relevant events. We talk about in-store activities. And also in the social media side, starting to build campaign again to generate traffic and conversion. So that’s very positive. The reason why I’m hesitating to say, okay, that would mean that Q2 and Q3 will be up in sales, of course is again, if I say that and it doesn’t happen, you get mad at me so I’m careful. But the indication is, of course, that if this continues, that will happen. It’s obvious. And I do think you will see an increased top line coming in China.

But don’t arrest me on quarter-to-quarter because it’s impossible to kind of be certain about that. My personal feeling when it gets to market share is that, of course, all the Chinese brands have exploited the last 2.5 years and in a very smart way. But I do also — and again, from everything I can see, feel that is being saturated so that the growth that they got almost for free is starting to slow down, and that you will see Western brands, again, starting to take back some market share. And I, of course, hope that we will take most of it back again. I do not think that China will be 1-to-1 the way it was because competition is, of course, now harder. But I am counting on China being one of our fastest-growing market and also one of our most profitable markets, if not the most profitable.