Abhinav Sinha: Got it. Got it. And I mean, the remaining — I mean, you said that 300 basis points came from the operations and 50 basis point to 60 basis point was the impact due to the CPM. So the rest mostly, I mean, it came from like other technical factors or what were they like?
Martin Beer: Exactly. I mean the overall message is that the operating gross profit margin slippage is going down from 400 basis points to 300 basis points. The overall gross profit margin slippage is going down from 740 basis points to 490 basis points. And therefore, the remainder is 190 basis points of other effects, 50, 60 basis points of CPM share, 90 basis points of overall inventory topics, special write-downs and then there is also around 50 basis points of shift between quarters. And in line with the reduce — with the reduction of the operating gross profit margin slippage, also those financial effects are expected to reduce. And so the core message in all of this very complicated technicalities is that we expect that the gross profit margin reduction will get lower, will improve given the spring/summer 2024 situation, given our strong position in the market and giving our top customer focus.
So we will obviously see that and expect that to happen in the next quarter in an improvement in this gross profit situation.
Abhinav Sinha: Got it. Very clear. Thanks for providing the detailed color. Thank you.
Operator: Your next question comes from the line of Kunal Madhukar from UBS. Your line is open.
Kunal Madhukar : Hi. Thanks for taking my questions. I guess, this is all about the guide and how strongly or how strongly confident you are about the guide. In terms of gross margin guide, when we look at gross margins, and we’re talking about continued slippage in the remainder of the fiscal year. I just want to understand, your gross profit margin in fiscal 3Q 2023 was 45.6%. So if your gross margin is going to continue to slip on a year-over-year basis in fiscal 3Q 2024, then your gross margins would be much lower than the high to high 40s that you need to be able to hit the 8% to 13% growth target. So I want to understand how much of a slippage should we be expecting here? And whether the 8% to 13% on gross profit is still viable?
And then on shifting to the balance sheet. A couple of things. One is I don’t see the €5 million liabilities to banks. I see €1.4 million. So where is the remaining €3.6 million liabilities to banks on the balance sheet? And then I also see trade and other payables as well as other liabilities being significantly higher than 1Q levels. Can you talk about what is driving that? Thank you.
Martin Beer : Kunal, happy to talk on those specifics. No, happy to do this so. So the utilization of the revolver, you’re completely right. You called that out €1.9 million, and the rest are guarantees. It’s basically a utilization of the revolver with rental contract guarantees. So it goes against the revolver, but obviously, it’s not cash driven, and that’s why it’s not on the balance sheet. Second, on the trade payables increase, you also already saw that as always very quick and rightfully so. But it is also in line with the growth of the inventory levels. So right now, trade payables are 25% of the overall inventory position that we have. And as I called out in the call just now, we obviously target a certain level of trade payables in relation to inventory.
And with 25% of trade payables in relation to the overall inventory position, it’s a good ratio. We feel very comfortable with that, looking at payment terms with the brands. And your first question on guidance, gross margin guidance. Yes, we also confirmed our guidance for gross profit at the lower end of 8% to 13%. And yes, you’re completely right. That implies an improvement of the gross profit situation in Q3 and Q4. And that is, as I called out earlier, that is driven by a different situation on spring-summer 2024 and the new situation or the different situation on the gross profit margin slippage, completely right, it’s mathematics. And we guided for absolute growth of gross profit margin, and we confirmed the guidance also for gross profit margin.
Operator: And your next question comes from the line of Blake Anderson from Jefferies. Your line is open.
Blake Anderson: Hi. Good morning. Wanted to talk about the aspirational customer trends. You talked about getting a little bit better. How price sensitive are they versus recent quarters? I’m just wondering how much they are still seeking promotions? And then, how are you planning to try to capture the share of those consumers versus you have previously, such as during the pandemic?
Michael Kliger: Thank you. Happy to address. So again, as all of tens position, it’s a glimmer and you’re absolutely right. This is Q2. This is season sale. This is also reason why aspirational customers are always historically stronger than Q2. And they are looking for deals. They are looking for discounts, pressure on there is perceived the economic situation is continuing. So, we are totally focused on our top customers, our expanding ones. So, there is no strategic direction and strategic focus on winning back market share from the aspirational customers. The significance of aspirational customers, now for a science coming back is really that the pressure on the overall market, the pressure for some other players that are so dependent on that may reduce and then the motion intensity reduces. Our focus remains strongly on the big water building, spenders that have to start better economics as the far better loyalty ratios and have the far higher average order value.
Blake Anderson: Got it. That’s helpful. And then if I could ask two more. One was on fashion trends that you’re seeing for calendar 2024, any categories that you’re leaning into or changing from the last 12 months? And then, curious your take on luxury spend shifting online. Do you expect that penetration to trend over the next couple of years? And maybe how big of a secular benefit do you see versus recent years? Thanks so much.
Michael Kliger: We’re happy to address to very helpful. Let me start with the second question. So, if we go with the best available data source, 2023 was a bit of a sort of normalization after a jump in online penetration, clearly look at luxury the luxury digital penetration dropped from 2021 to 2020. So a slight decrease after some significant increases in 2021 to 2022. The longer-term view, and again, relying on that data source is fully intact. This will go up this digital penetration from 20% to 30% being auto game predicts we will be at 30% to 33% by the year 2030. So that tailwind will continue to support our business proposition — will continue to support our business model. And the trend is because of consumer behavior, consumer trends that even the most affluent people are time constrained, are time-pressed and the convenience and ease of shopping at home also luxury is the driving force and price points, no problem and are coming down sort of the hurdles, the price points of what people shop online goes up, goes up.
And therefore, we are very comfortable to benefit from this trend even beyond gaining market shares from other players. In terms of fashion trends, we continue to focus a lot on ready-to-wear as the core category for our top customers. As the market starts to improve we hope to also see some better growth in shoes and bags. These were the two categories that suffered more from the decline or from the slowdown. And on ready-to-wear trend that we continue to see is consumers really desperately looking for experiences, for traveling, for going out. So wardrobing for occasions, be it ski, be it summer vacation, wardrobing for festivities is clearly a key trend in our bias are really leaning in on that. And then there are some trends, of course, statistically, is it — will it remain purely the quite luxury trend for the such occasions or will more colorful, more marketing-focused static make it come back.
I think on the second one, we expect still that the home down quite luxury trend holds on for calendar year 2024. But then as fashion has always gone through these cycles, we will also see more exuberant type of aesthetics, more color broadway. And that will be good for the industry because we need these cycles. We need we need the impetus for changing your wardrobe. So – but for the moment, we have removed in on the high-end brands with outstanding materials, with outstanding fabrications as we called out a brand like [indiscernible] is really a prime example of this trend.
Blake Anderson: Got it. Thank you. Best of luck
Michael Kliger: Thank you.
Operator: And that does conclude our Q&A session for today. I would like to thank our speakers, Martin and Michael for today’s presentation, and thank you all for joining us. This now concludes today’s conference call. Enjoy the rest of your day. You may now disconnect.
