MYT Netherlands Parent B.V. (NYSE:MYTE) Q2 2024 Earnings Call Transcript February 15, 2024
MYT Netherlands Parent B.V. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Mytheresa Second Quarter of Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today’s call is being recorded and we have allocated one hour for prepared remarks and Q&A. It is now my pleasure to introduce your host, Martin Beer, Mytheresa’s Chief Financial Officer. Thank you, sir. Please begin.
Martin Beer: Thank you, operator, and welcome, everyone, to Mytheresa’s Investor Conference Call for the second quarter of fiscal year 2024. With me today is our CEO, Michael Kliger. Before we begin, we would like to remind you that our discussions today will include forward-looking statements. Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties, including the risks and uncertainties described in our annual report. Many factors could cause actual results to differ materially. We are under no duty to update forward-looking statements. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non-IFRS financial measures in our earnings press release, which is available on our Investor Relations website at investors.mytheresa.com. I will now turn the call over to Michael.
Michael Kliger: Thank you, Martin. Also from my side a very warm welcome to all of you and thank you for joining our call today. We will today comment on the results and performance of our second quarter of fiscal year 2024. We are pleased with our results in a challenging macro environment with positive revenue growth and positive adjusted EBITDA in the second quarter will not only surpassed market expectations but also outperformed almost all competitors. As expected, we continue to see slow demand for aspirational customers across all geographies and high promotional intensity in the market due to excess stock of fall winter merchandise. However, these macro headwinds actually allowed us to demonstrate the fundamental strength of our business model.
We grew the company’s top line and strengthened our bottom line. We achieved double-digit revenue growth in the United States. We reached a record average order value of €672 LTM and posted a gross profit margin of 50% in the second quarter. Our resilient business model and our clear focus on the high spending wardrobe-building top customers allow us to win market share in the current market environment, and we are thus well positioned to benefit and accelerate when market conditions will improve. I want to highlight today’s three key messages to you. First, the excellent growth prospects for digital luxury has not changed at all. And if anything, has become better for a player like us scoping so well with the current headwinds. Second, our clear focus on big-spending wardrobe-building top customers enabled us to generate solid growth in the second quarter and makes us a key partner for all our brands in their own clienteling efforts.
Third, we continue to evolve and innovate our business model so that we are prepared for future growth and business demand. Market share gains, resilient financials, best-in-class customer economics and ongoing innovation for future growth make us clearly stand out in the current market environment. Let me now comment in more detail on these three highlighted areas for today. First, the excellent growth prospects for digital luxury have not changed at all. According to the latest Bain-Altagamma research study, the global luxury fashion market grew by 4% in 2023, with the online share dropping to 20% from 21% in 2022. However, the forecast for 2030 in the overall market expanding by effect of 1.5 times and the online share increasing to 30% to 33% by that year.
That would create a digital luxury TAM of over €170 billion. In the meantime, the long expected consolidation process of only the fit is surviving in the digital luxury multi-brand sector is happening and Mytheresa is one of the main winners. Second, our clear focus on big-spending wardrobe-building top customers enabled us to generate solid growth in the second quarter of fiscal year 2024. We grew our net sales by plus 8.3% on a constant currency basis compared to Q2 of fiscal year 2023. This solid growth is above market performance and above peers, which mostly shrank. It is highly noteworthy that the United States generated again an outstanding growth was plus 17.4% in terms of net sales compared to Q2 of fiscal year 2023. The United States continues to be a significant growth driver for Mytheresa and the market accounted for 19.9% of total net sales in the second quarter of fiscal year 2024 Our top customer base grew by plus 15.6% compared to Q2 of fiscal year 2023.
In the United States, our top customer number even increased by plus 47.6% in the second quarter. A further evidence of our focus on top customers is that our average order value increased once more by plus 5.4% to a new record high of €672 LTM in Q2 fiscal year 2024 compared to fiscal year 2023. Our clear focus on big-spending wardrobe-building top customers makes us the highly desired partner for luxury brands in their own clienteling efforts. The second quarter saw again mainly high-impact campaigns and exclusive product launches, demonstrating our strong relationships and the support from our brand partners. All of them further increased our brand awareness, brand equity and positioned us globally as the leading digital luxury platform.
We launched exclusive capsule collections with Givenchy and Victoria Beckham only available at Mytheresa. We launched exclusive ski and uprisky collections with Chloé, Bogner and Pucci x Fusalp. And we partnered with Loro Piana for the second time to launch the cooling collection only available at Loro Piana and Mytheresa. One special highlight to mention is the launch of an exclusive global digital campaign in collaboration with Brunello Cucinelli featuring Robot Montgomery and Greta Bellamacina, which outperformed across all media channels. This partnership is one of the most desired luxury brands shows how relevant and beneficial such joint activations are for our customers. Please see our investor presentation for more details on our brand collaborations.
We also hosted again, exclusive events for our top customers, providing them with money-can-buy experiences. Examples of such events in the second quarter included the celebration of the Givenchy Capsule Collection Paris with the CEO and Creative Director of Givenchy present and a two-day experience in Vienna with Miu. We also hosted our top customer events in L.A. and New York City. Furthermore, we ran our highly successful pop-up installation in Los Angeles in December. Together with our partner, Flamingo Estate, we created a life-sized replica of the estate fully made out of ginger-bread, including a Mytheresa dream closet. The Holiday House created a truly immersive physical luxury shopping experience. We hosted over 4,000 registered visitors over the course of three weeks.
For the opening night, we proudly welcomed guests such as Nicky Hilton, Elijah Wood, Chrissy Teigen, John Legend. Please see our investor presentation for more details on this unique pop-up experience. Third, in the second quarter of fiscal year 2024, we also continued to drive innovation for future growth and business demands. We successfully ramped up operations in our new 55,000 square meter Leipzig distribution center with almost 30% of all customer orders already served from there at the end of December. Because of the direct adjacency to the international airfreight hub of DHL Express, our customers now benefit from significantly later cut-off times for international deliveries. As part of our strategic global partnership with DHL Express, we also recently signed a multiyear agreement that will provide us with access to sustainable aviation fuel, SAF under the GoGreen Plus service from DHL.
We are the largest global e-commerce platform based in Germany, investing into SAF to reduce CO2 emissions. Please see our investor presentation for more details on the SAF agreement. Finally, I’m also very proud to announce that Mytheresa is one of the first luxury brands already present with its own app on the just launched Apple Vision Pro. Staying true for our strategy of taking customers on true money-can-buy experiences, the Mytheresa app will take users on an immersive digital luxury shopping experience to Carpe Italy and Paris. With all the above, it should come as no surprise that we are pleased with our performance in the second quarter of fiscal year 2024. We believe that our results demonstrate the strength and consistency of our business model, delivering profitable growth.
We see ourselves as a clear winner in the consolidation of the luxury e-commerce space. We are thus also well-positioned to benefit from the tremendous growth prospects when market conditions will improve. To capitalize on these prospects, we are actively evaluating opportunities to support and accelerate our investments in future business growth. This also supports our strong confidence in our medium term growth trajectory and profitability levels despite the short-term uncertainties in the macro environment right now. And now I hand over to Martin to discuss the financial results in detail.
Martin Beer: Thank you, Michael. In line with what we saw in preceding quarters, we are again pleased with our top line performance in the quarter with net sales growth of plus 8.3% at constant currency. This comes in a challenging macro environment and with persistent heavy promotions from peers. In line with our guidance for this quarter, we achieved profitable growth with a plus 4% adjusted EBITDA margin. As January and February so far are well in line with our expectations, we continue to guide towards a solid and profitable growth at the lower end of our guidance. In addition, we are pleased with our well-executed inventory management and plus €19 million operating cash flow in the quarter. We ended the quarter with €85 million unused credit lines from our existing Rover, which we were able to increase by 50% from €60 million to €90 million to capture growth opportunities.
Now review our financial results for the second quarter of fiscal year 2024, ended December 31, 2023, and will provide supplementary details on certain key developments that affected our performance throughout the quarter. Unless otherwise stated, all numbers refer to euro. In the second quarter of fiscal year 2024, we grew GMV by 5.9% on a constant currency basis. On a nominal basis, GMV grew by 1.5% to €219.1 million as compared to €25.9 million in the prior year period. Once again, our top customer focus played an essential role in driving growth. Net sales grew by 8.3% on a constant currency basis in this quarter. On an IFRS basis, net sales increased by 3.6% to €197 million as compared to €190.1 million in the prior year period.
We continue to have seven brands operating seamlessly under the CPM in our collaborative efforts with brand partners, we can offer them complete flexibility by providing both models, wholesale and CPM. From a regional perspective, we experienced a solid performance in Europe with a 55.7% share of net sales in the quarter versus 56.3% previous year. Europe in total grew by 2.4%. The Impressive continued growth in the US of 17.4%, pushed the net sales share to now 19.9% versus 17.6% in the prior year quarter. In Rest of World, we saw overall stability with a slightly declining share from 26.1% to 24.5%, mainly due to softer demand in APAC. We expect a continuation of these trends going forward, continued stable growth in Europe, impressive outperformance in the US and overall stability in Rest of World.
As mentioned by Michael, our average order value increased by a remarkable 5.4% to an industry-leading €672 and this is based on our performance of the last 12 months, so a continued trend for us in the last quarters and years. In absolute terms, the increase in AOE translates to an additional €35 per ship order and improves our order economics. Our commitment to full price selling is also visible at gross profit level with consistently industry leading gross profit margin of around 50% in this quarter. Even though our gross profit margin continues to be affected by continuous promotional environment, the margin slippage during the second quarter narrowed as expected to 490 basis points from 740 basis points in Q1. If you consider only the operational gross margin, then the margin slippage is at 300 basis points in the quarter, down from 400 basis points in Q1.
As the operational gross margin slippage is driven by fall/winter 2023 overstock in the market, we expect the operational gross margin slippage to reduce further in the coming quarters, in line with lower additional financial effects from inventory depreciation, CPM share, and shifts between quarters. In total, gross profit was €98.3 million compared to €104.2 million in the prior year period. The gross profit margin in the quarter was at 49.9%, up from 42.5% in Q1, but down from 54.8% in the previous year quarter. Adjusted shipping and payment costs during the three months ended December 31 increased by €4.2 million, or 14.9% to €32.5 million. The increase in adjusted shipping and payment cost ratio from 13.1% to 14.8% in Q2 was mainly due to a higher share of sales in countries where we pay all the duties for our customers, such as the U.S. and an overall growing sales presence outside Europe.
The successfully implemented changes in our payment and custom setup will mostly offset further cost increases, and therefore, we target to achieve stability and the cost ratios in the upcoming quarters. Amid the aforementioned macroeconomic conditions, our focus has remained dedicated to the acquisition of high potential customers. Continuing the strategy from our preceding quarter, we focused our marketing efforts on the most promising new customer acquisition and top customer retention strategies and aligned our marketing efforts with an overall softer market sentiment. As a consequence, marketing expenses decreased by €5.3 million to €23.5 million during the second quarter. The marketing cost ratio decreased by 260 basis points to 10.7% from 13.3% in the prior year quarter.
Adjusted selling, general and administrative expenses grew by €6.2 million to €33.9 million during the second quarter of fiscal year 2024. The adjusted SG&A cost ratio increased by 270 basis points to 15.5% as compared to 12.8% in the prior year quarter. The surge is mainly due to an increase in personnel costs for operational staff, especially at our new warehouse in Leipzig. With our continuous efforts to decrease SG&A costs, we target a decrease of the SG&A cost ratio in H2 of fiscal year 2024 versus H1 of fiscal year 2024. In the second quarter of fiscal year 2024, we achieved profitable growth with an adjusted EBITDA margin of 4.0% at $7.9 million. This comes despite a continuously challenging microenvironment and is above market expectations.
It again shows the resilience of our business model and our successful focus on the sweet spot of high-end luxury. Depreciation and amortization expenses increased only modestly during the second quarter by €1 million from €2.8 million or 1.3% of GMV to €3.8 million or 1.8% of GMV, driven by right-of-use asset depreciation related to the new warehouse in Leipzig. For Q2 of fiscal year 2024, profitability is also demonstrated on an adjusted operating income or adjusted EBIT, as well as adjusted net income level. Adjusted EBIT during the quarter was at €4.1 million and an adjusted EBIT margin of 2.1%. Adjusted net income stood at $3.1 million with an adjusted net income margin of 1.5%. Let’s take a look at the cash flow statement. In Q2 of fiscal year ’24, we had a positive operating cash flow of €18.5 million.
This compares to a negative €27.1 million operating cash flow in the preceding year quarter. The increase in cash flow was anticipated and was mostly due to reduced inventory order volume at targeted levels of trade payables. CapEx or investing cash flow in the quarter was only at €1.4 million, as the CapEx for the new warehouse in Leipzig will come to an end in this fiscal year. Looking ahead to fiscal year ’25 and beyond, we expect CapEx to stay below 1% of GMV, in line with our targeted performance in our business model. We continue to successfully execute our inventory management. We gradually reduced our inventory growth levels from plus 56.5% in June ’23 to 44.4% in September ’23 and now plus 33.1% year-over-year growth in December ’23.
If we would net out the effect from early deliveries of spring/summer ’24 compared to previous year, growth is at plus 21% end of January 2024. And we are seeing a continuation of the decrease also in February. At the end of January 2024, days inventory outstanding were at 278 days, net of this effect, and compared to 317 days end of June 2023. We expect to achieve our target at 260 days inventory outstanding by the end of fiscal year ’25. This inventory level and strategic path on inventory management is in line with our luxury positioning and successful inventory strategy over the last five years with superior gross profit margins achieved. Given our plus €18.5 million positive operating cash flow, we only had a very small utilization of our revolving credit facilities of 4.9 million end of December ’23.
We nevertheless increased our revolving credit facilities by 50% from €60 million to €90 million to capture additional growth opportunities. With the utilization of only €4.9 million end of December, the non-utilized part amounted to €85.1 million of borrowing capacity or in other words, over 94% unused borrowing capacity. We are in discussions with our primary banks about replacing our revolving credit facilities with a syndicated loan facility with a longer term. We believe the new credit facility will be in place in the next couple of months and that it will give us even more flexibility. Remember, besides the revolving card facilities, we do not have any other bank debt and with an equity ratio of 61%, a strong balance sheet. With all the above, it comes as no surprise that we are very confident with our strategic positioning.
We have implemented appropriate measures to align with market dynamics and steer the company towards profitability in the midst of a visibly challenging and consolidating environment. The performance during the first weeks of our third quarter is encouraging and instills confidence in us that our assumption of a slowing promotional environment in H2 of our fiscal year is true leading to improvements in the top and bottom line. We, therefore, again, confirm our guidance for the full fiscal year 2024 at the lower end of the guided ranges of GMV and net sales growth between 8% to 13%, gross profit growth between 8% to 13% and an adjusted EBITDA margin between 3% and 5%. We remain very confident in the medium and long-term outlook for our business.
We’re gaining market share and have completed two major infrastructure milestones. We will just benefit more quickly and over proportionally when the luxury market recovers from the current economic challenges. Our market position is getting stronger every month. Our medium targets remain at the level that we have always guided, double-digit growth rates at a high single-digit profitability level. And with this, I will now turn the call back over to Michael for his concluding remarks.
Michael Kliger: Thank you, Martin. We are pleased with our second quarter of fiscal year 2024 earnings results. We are very pleased to see ourselves well positioned to achieve our fiscal year 2024 guided targets based on the first weeks of trading for the third quarter, as just mentioned. We are extremely pleased with the medium-term outlook for the company given the very positive projections for the digital luxury sector and our competitive strengths versus most other players. We believe that Mytheresa offers the best digital luxury shopping experience for big spending consumers and true luxury brands. And with that, I ask the operator to open the line for your questions.
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Q&A Session
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Operator: Thank you, Michael, and we will now open for Q&A. [Operator Instructions] Your first question comes from the line of Matthew Boss from JPMorgan. Your line is open.
Amanda Douglas: Great. Thank you. It’s Amanda Douglas on for Matt. So Michael, could you elaborate on sales trends post holidays that you are seeing in the US and Europe? And then speak to offensive moves you are making to capture market share, just given the online luxury industry consolidation we’ve seen thus far?
Michael Kliger: Thank you, Amanda, of course, sure. So the general trend, of course, is globally the slowdown of the aspirational customer that we saw in 2023. However, we see continued strength in the US market, stabilization in Europe. And we even see in the US market, the first signs of a pickup, among the aspirational customers. Of course, this is early stage and can be attributed to a much better sentiment in regard to economic outlook, which always has the risk to change. But as mentioned by Martin, we are very confident with our guidance, based on the further acceleration of the already strong performance in Q2. The sales trend in Q2 is, of course, always influenced by the holiday season. We had a long stretch before, almost a full working week before the holidays.
But what we also saw that the momentum continued into January, which is not always the case. One interesting trend we saw was that, we believe there will be more US customers this year spending domestically, not going over to Europe based on the pattern of vacation wear and resort wear they were buying already in January. And thus, the main outlook is strong US market, even a slight recovery there on the aspirational customer, continued strength globally of the big spenders everywhere. Most uncertain region remains Asia with sometimes very good signs, sometimes medical sign, so hard to me to predict.
Amanda Douglas: That’s great. And then just a follow-up for Martin, help us to think about the timeline from here to see inventory levels more aligned with GMV growth? And just your confidence in achieving greater full price selling share in the second half of the fiscal year?
Martin Beer: Yeah. Amanda, I’m happy to talk about that. Despite an in addition to the growth rates, the nominal growth rates of the inventory, we always look at today’s inventory outstanding. And as I called out, the days inventory outstanding strongly decreased from a high-317 days, typical for our industry, but still high-end of June to now end of January, especially if you take into consideration the early deliveries effect of Spring/Summer 2024 to a 278 days. And the 278 days, you have to relate to the 260 days that is our targeted level, because with the 260 days, we have achieved on average over the last five years. And with that level, we are always able to have a consistent strong gross profit margin level. And as I called out, obviously, there are shifts between quarters.
And we have targeted to achieve 260 days, end of fiscal year 2025. But it all depends on, how the situation will evolve, especially seeing competitive behavior, but we’re really confident on achieving that level at the latest in fiscal year 2025, maybe earlier. And that implies that inventory levels will decrease in line with GMV in the next quarters and then come back to this normal level, normalized levels of 260 days and then will increase with GMV on going forward on those — on each quarter. Yes. And the second big topic on this inventory management and looking at industry trends is, of course, our full price share. As Michael called out, and as we always emphasize, we focus on selling at full price. This is in line with our high-end positioning with our top customer focus with our ready-to-air focus.
And so we stayed true even in the last quarters on this focus of strong full price and the lower gross profit margin as called out in the last two quarters, so Q1 and Q2 of our fiscal year was driven by excess inventory in the market for winter 2023. And now with Spring/Summer 2024, and we see a confirmation of that in the early sales of the spring/summer 2024 season, we expect a much lower level of access inventory in the market and therefore, a much lower level of promotional intensity in line with the ordering volume of Spring/Summer 2024 in that – in the industry. And so we expect a decrease of the operating gross margin slippage further on in H2 of fiscal year 2024 and therefore, an improvement of the situation that we have been seeing in the last six months.
Amanda Douglas: That’s great color. Thank you.
Operator: Your next question comes from the line of Oliver Chen from TD Cowen. Your line is open.
Oliver Chen: Thanks a lot. Good morning, Michael and Martin. The margins this quarter were better than we expected. What’s leading to guidance at the low end of your previously issued guidance? And what drove some upside this quarter and margins? And Michael, what’s the — what’s underlying your thoughts on the US customer, aspirational customer seeing some positive glimmers — and why do you have conviction that the luxury market could be recovering. Martin, another one on your guidance. What’s the bottom line? Are you saying that inventories will be a source of cash? And also your guidance, what does it imply for operating cash flow for the full year? Thank you.
Michael Kliger: Thank you, Oliver. I will hand over then to Martin for the guidance, but let me talk about the US and the customer view and my confidence in recovery. First of all, we are very comfortable with this calendar year on the basis of the strength of the top spending customers. We continue to drive our strong numbers with that segment. Again, we grew 16% overall. We grew even more than 47% of our accounts in the US. And we don’t see a sign of weakness in there. And so with that segment spending, with that segment having its high loyalty to our curated offer, we already are in a very strong position and are in a position to deliver our guidance. As you rightly put, the first glimmer of aspirational customers kicking in is even on top of that.
And we don’t see it globally yet, we saw it in the US, we saw it in Q2, which is of course very important for aspirational customers that occasionally buy, and that is of course very important in the accessory sectors of bags and shoes. And there is of course, a scenario that that will continue with potentially financial easing in the US coming, that’s a bit of a speculation, but we know that interest rates have a tremendous influence of consumer spending in the US, far more than in other geographies where interest rates don’t drive directly consumer spending. So that’s where the glimmer of hope exists. But I want to stress, our outlook for H2 is really based on the strengths in the top customer segment, which we have delivered quarter after quarter.
And then I’ll hand over to Martin on your cash and guidance questions.
Martin Beer: Yeah, yeah. Thanks, Oliver. Good talking to you. I mean, as you know, our ultimate goal and target and expectation is the profitable growth, to continue the profitable growth also for the full fiscal year, and remember last quarter we were breakeven. So for us, the return to profitable growth is a very good step into that direction, and obviously we want to continue that step and expect and also see that coming. So the guidance incorporates this expectation of profitable growth, and we always, also last quarter, guided on the lower end of the guided ranges, and given the uncertainty in the market, we also seeing the trend in January, February, we want to stay true and confirm our guidance at the lower end of those ranges.
And yeah, calling out on the inventory situation, yes, I mean, as we want to decrease days’ inventory outstanding, that implies that we are returning to more normalized levels of inventory. Obviously, this inventory is all paid for. So as we sell, have increasing share of those inventory sell-downs, we expect a positive cash contributing from this return to the DIOs, and you saw some of it in Q2. Obviously, that level cannot be taken as a blueprint for all the coming quarters. It was a very significant step. This will continue, and the overall cash flow perspective for the full year looks solid. We don’t give a cash flow guidance for the full fiscal year, but we are very comfortable with our reducing in inventory, the positive cash effects from that.
And obviously, the finance setup, as I called out, that we have a minimal utilization of the existing revolver of €5 million in end of December, and we increased the revolving facilities from €60 million to €90 million by 50%. So that is also a good situation. So continued decrease in inventory levels coming down, that has a positive cash effect as you rightfully called out and we increased the revolver to capture growth opportunities to see how we can increase our market share going forward in the special situation. So we’re really comfortable on the cash and on the inventory side.
Oliver Chen: Okay. Thank you. And one follow-up the landscape continues to be volatile and competitors such as Farfetch and Net-a-Porter [ph] are promotional and going through a lot. What’s the nature of your overlap? And these can be uncontrollable factors in terms of how the competitors behave. Why do you have confidence given that what we’re seeing and aspirational inventories could still be too high at several players that sell similar brands?
Michael Kliger: I mean, what you described as the competitive environment is absolutely fair description. There is a lot of disruption. There’s a lot of uncertainty and with other multi-brand players we have, of course, significant customer overlap. However, what is very important is that we feel strongly believe that what happened over the last couple of months really indicates and supports our strategy, focus on the big spenders, be very restrictive on promotions, be very restrictive markdowns, focus on full price that in the medium, particularly long run, gets you the better customer cohorts, gets you the loyal cost cords, the ones that repurchase. And so while I can see scenarios that disruptions at other players may cause continued negative situations in markdowns and promos, I actually believe with what we have seen last year, starting in September, October, November, with two significant players struggling.
I mean that is exactly the timeframe of which we just reported strong financial numbers. So we feel very well-positioned even if there is a scenario where some other players continue to struggle and continue to operate for short-term cash needs. But the outcome is clear. We saw the outcome for some of these players, and therefore, that strategy is not ours, and we feel that strategy is shortsighted.
Oliver Chen: Thank you. Best regards.
Michael Kliger: Thank you, Oliver.
Operator: Your next question comes from the line of Abhinav Sinha from Societe Generale. Your line is open.
Abhinav Sinha: Yeah, hi. A couple of questions from my end, so one is on the top line. Now given that we are already at a 5% growth for FIRST HALF, in order to achieve your target of around 8% growth, you need 9% to 10% sales growth in second half, which is coming on a base of 15% to 16% last year. So when you say that the January and February are in line with your expectation, do you — are you implying that you are seeing high single to low double digits GMV or sales growth? So that’s first question. Second is, on the gross margin, could you throw some color? I mean, from what I understand is most likely in this quarter to the CPM brands would have underperformed, given what Kering has reported and things like that. So any color on how the 1P margin was year-over-year and yes, so that. Thank you.
Michael Kliger: Thank you very much. I will defer the margin question to Martin. On your first question, you have — you’re in full control of your mathematics. So absolutely true. The H2 implies an acceleration of top-line growth to achieve the guided ranges at the low end and our statement that at least the first couple of weeks confirm our confidence that we will achieve our guidance implies exactly what you just stated. So I can confirm your calculations, Abhinav. Hence Martin can…
Abhinav Sinha: Thanks.
Martin Beer: Yes. On the gross margin, Abhinav happy to help you. I called out the operational gross margin, and this is then referring to the non-CPM part. And there, we saw the decline in the operating margin slippage of 300 basis points. And you’re completely right that a lower CPM share and also given the weakness that you called out with the brands in the overall market has an effect of the numerical mathematical calculation of the gross profit margin in relation to net sales as the CPM gross profit margin is 100%. It’s — and the gross profit is the commission, which is then basically the same number as in the net sales. And if that share decreases, then it has a decreasing effect. And that effect is about 50 basis points to 60 basis points in the gross profit margin slippage.
And that is the attack that into the financial effects of the gross profit margin development apart from the 300 basis points operating margin slippage to as one part of the more financial effects that you see, and it’s also easy to insulate those effects if you relate to the — if you relate the absolute gross profit to the GMV number. And then you can come also to a 340 basis point decrease, which is then with shifts between quarters and other financial effects more in line what you were calling out, independent of whether our brand as a wholesale or CPM on the overall gross profit performance.
