Welcome to the Pandora Interim Financial Report for the Second Quarter First Six Months twenty twenty. For the first part of the call, all participants will be in a listen only and afterwards there will be a question and answer session. Today, I'm pleased to present Michael Burgby, Vice President, Investor Relations, Treasury and Tax. Please go ahead.
Yes. Thank you, operator, and good morning, everyone, and welcome to the conference call for Pandora's Q2 results. My name is Michael Delby, I'm heading up the Investor Relations team. And with me today, here at the head office in Copenhagen, I have the usual team with me, CEO, Alexander Vallartyk CFO, Johannes Boyer and the hardworking IR guys, Christian and Nickyk. The Q and A session will be at the end of the call.
Usual, please limit your questions to two at a time. Pay notice to the disclaimer on Slide two, and I'll jump quickly through that to Slide number three and hand over to Alexander. Alexander, please. Thanks, Michael. Good morning, everyone, and thanks for joining today.
At our last earnings call, global economists were in the midst of an unprecedented situation with changes, I think, rarely seen before. The world is still very uncertain, and we have probably not seen the full consequences of COVID-nineteen yet. Sales recovery in the second quarter was faster than we expected, but we still expect the period with higher than normal uncertainty in the months to come. We managed Pandora through the crisis with the highest integrity and long term focus. Tough decisions had to be made to protect cash and profitability, but without compromising the health, safety, jobs, our employees' salaries.
But when there's change, that also means there might be opportunity. I'm very proud of how this organization has shown agility and determination. We have generated tremendous e commerce growth, and we have found creative ways of operating while physical stores have been impacted. When markets reopened, all companies had to consider how aggressive they wanted to reenter. We leaned more on the accelerator and less on the brakes.
We're operating in a quite fragmented industry, and our scale advantage and P and L structure means that we can invest heavily in market share gains when opportunity arise, like the one we just experienced. Given the unusual circumstances, we are satisfied with the progress. Sellout growth so far in quarter three is around minus 10% versus last year. This has to be considered as reasonably strong as a fair amount of stores are still closed. We're operating with reduced hours and with the limitations of social distancing.
The sales recovery here in Q3 has not been as clear as in Q2. We are seeing an effect of new surges and local lockdowns. So uncertainty continues to be high, which we will discuss in more details later. Please move to the next slide. Management retention is in a large extent on crisis management, long term focus and ambition to improve the fundamentals.
Programme NOW is progressing as planned and successful initiatives have now become part of our normal routines. We are therefore rescoping the focus of Programme NOW with fewer and sharper priorities for the final stretch. The new executive leadership team is in place and operating in the new organizational structure, which we implemented during the quarter. We can already see an effect on decision making, cooperation and best practice sharing globally. Fundamentally, we're as such moving in the right direction.
The primary objective of the program is that we keep our brand relevant and exciting for consumers. Despite the current disruptive environment, our key brand metrics are still indicating that the brand momentum is solid and improving. Please turn to the next section. The health and safety of our customers and employees has been and remains our top priority during this pandemic. This had to be balanced with the need to protect cash and profitability.
Of the number of different initiatives, I'd like to emphasize the work that we have done with Unicef, a long term partnership that we kicked off last year. During the C-nineteen pandemic, we have supported UNICEF in helping children and societies in developing countries where C-nineteen is a critical health risk because of the limited healthcare capacity. To raise awareness, we're cooperating with the family of Bob Marley to rerecord a very relevant song called One Love. And we've donated, 1,000,000 US dollars to the court, matching the same amount from public donations. Now turn to Slide seven.
During the second quarter, we made three significant decisions. First, we ensured to keep investing sufficient marketing efforts behind the brand momentum created during Programme Now. Secondly, we decided to keep in particular store staff on the payroll and using the downtime to improve our selling skills and training and improving our knowledge about the products. Finally, we designed a comprehensive comeback plan for the day when markets would reopen. We have the financial muscle and P and L structure to increase spend across markets to build on the brand momentum and ultimately to win in the retail and gifting space.
More recently, we've been preparing for the heavy trading season that's coming up. Things like social distancing guidelines or even changed consumer behavior requires us to reconsider how we can offer both a safe and excellent consumer experience. We're currently running a track of 11 ideas and collect feedback across markets to come up with global best practices. The key thoughts range from how we can better serve consumers outside the ordinary store environment, for example, virtual shopping assistance, food to temporarily expanding floor space via pop up stores, for instance. Please turn to the final slide of this section.
So where are we today? Since March, physical stores opened faster than expected with only around 10% of the stores closed by July. Recently, however, we have seen local COVID-nineteen surges and new local lockdowns leading to a small increase in closed stores. Currently, we're holding just above 10%. As examples, we're temporarily closed in Victoria, Australia.
And each week we find new places that are going up and down. The situation is still uncertain and somewhat unpredictable and we monitor the development closely. Turn to Slide 10 for some comments on the more fundamental development. Programme Now was initiated in late twenty eighteen to improve the health of Pandora. We have progressed well, but there's still work to be done.
Several of the initiatives such as the data driven media spend on our rooted in normal day to day operations. The Rescopes program now consists of three tracks instead of four. The commercial reset track has been taken out. Because promotional dependency is much lower, the inventory position and number of DVDs or assortment is at a much healthier level, and we will keep it this way. From a brand perspective, the updated initiatives focus on how to make spending even more effective.
And we have a special task in China, which I will come back to. Overall, I believe we have reached somewhat of an inflection point. We see early results of our initiatives and now we'll continue to push hard on the rescoped focus areas. Next slide, please. You know that I like this slide.
These are important lead metrics that measures how our brand momentum develops. Despite COVID-nineteen, we're having laser focus on the health of the brand. We decided to decrease the media investment during the lockdowns in traditional media, but we still managed to maintain solid momentum. As expected, key brand metrics are impacted by the situation, but they still indicate a better momentum than before the relaunch. We have already stepped up the media level again, close to pre c nineteen levels, and we will continue to invest hard for the remainder of the year since we know this drives our business.
Go to the next slide. The exceptionally strong online growth of 176% speaks for itself. This is an important endorsement of the work that we're doing on digital. It is also an endorsement of other brand initiatives. We are as a brand able to excite our consumers to take them from offline to online.
The improvement is driven by both higher traffic, but also higher conversion rates. Trends continue to be healthy in all the main markets, even after the physical stores have reopened. There is no doubt that online is going to be important in this last quarter of the year. We're already now increasing capacity to be able to handle significantly higher volumes than what we have been used to in the past. Go to Slide 13, please.
I wanted to provide you with some quick and encouraging data of our end of season sales running globally from week twenty two through '30. Notice that this is partly Q2 and partly Q3. The clear direction or learning, if you may, is an increase of our full price sales compared to last year. There are two main drivers of this. First, our inventory position is generally speaking very healthy, so we didn't have a lot of DVDs that actually needed to be cleared out, and our full price products seem to resonate.
Secondly, it shows our improved brand momentum. We can drive conversion rate with our brand proposition without using the promotional doping. This is important given the competitive retail environment that we're experiencing in the reopening phase. Next slide please. The strategic reorganization has taken us one step closer to finalized product development strategy.
This is anchored with the newly established global business units under Carla. One business unit, moments and collaboration, focusing on the core, rejuvenating the platform and making it exciting. The second business unit oversees all other product categories and upstream platform development efforts. What we've done since the brand relaunch has mainly been focused on getting our core back in shape. The Moments platform is almost 70% of the of the business, so it is critical.
Again, this quarter, we saw that Charms performed in line with the whole business. However, platform. In the long run, we need more legs to stand on. And this means more consistent platform building, which could for instance build on concepts like Under Armour. It also means innovations within other categories, not just need to products, but long term well invested concepts that can be unique and iconic in the industry.
We will provide you with more information on the formal product development strategy when we're ready, but this is progressing at full speed right now. Flipping to Slide 15. One of the things that has worked well both for our revenue and our brand is the collaborations and influencer work done since our relaunch. Harry Potter, Millie Bobby Brown, but also the work with our influence and muses are injecting new energy and excitement into the brand. We've recently activated Pandora ME in early July, which has led younger and new consumers alike to the brand.
Now we have entered a new partnership with Lucasfilms, which entails 11 Star Wars charms and one Star Wars bracelet available, which will be available from early October. We're very excited about this collaboration. Very cool, Charles of Chewbacca, Yoda and the other legendary characters. The next slide will be the last from my side before I hand it over to Anders. We've all been discussing China in great details over the last year.
China is the world's largest jewelry market, and Pandora has a market share of less than 1%. We're building a solid plan to change the direction. We're already in execution mode with Jack, our new China MD leading the journey. Fixing fundamentals start with organization and culture. This is the enabler for any turnaround.
With increased capacity in the organization, we will start focusing on the functional execution where we see a lot of low hanging fruit. Low hanging fruits in how we market our products, partners we choose for media, our merchandising approach, and finally, the online and retail experience. However, with improved operational performance, we're probably only a third of the way. The critical job is to build a brand. Pandora is not very well known in China, at least not for anything unique.
In that sense, we're starting from a clean slate. We will not treat China very different from any other market. Pandora is the brand built on self expression, collectability while being affordable. Consumer research in China has confirmed that our position is highly distinctive and relevant. I don't expect this to be a quick fix, but I'm confident that we can get substantially bigger market share in China in the years to come.
This concludes my review of program now, and I will hand it over to Anders. Thank you, Alexander, and good morning, everyone. Please turn to Slide 17 and an update on the cost program. Since the outbreak of the C-nineteen, our approach to managing cost has obviously changed because the lower sales in the second quarter focus in the quarter has not just been on structural cost savings, but also on short term cost management. But this slide only shows the structural cost savings as part of the program and not the short term C-nineteen related savings.
And we have, of course, taken many short term cost measures in the second quarter. But we've also continued to execute on optimizing the underlying cost structure of the business. And we have progressed quite well across all cost buckets on this slide. And therefore, we today can reconfirm our run rate target of DKK 1,400,000,000.0 by the 2020. And that means that we will see another around 200,000,000 also incremental cost savings since in 2021 compared to this year.
And please turn to Slide 19 and a short update on some of the second quarter numbers. As we already disclosed in early July, revenue and earnings were weak in the quarter. But ironically, they were at the same time better than what we had originally expected. And seen in the light of the circumstances of C19, there's three things that we want to emphasize. First, I just want to repeat that the online sales are basically exploded to 176 percent growth in the second quarter.
And the reason I repeat this is that it's a critical factor both in case of new lockdowns, but also for our long term development and ambitions on the online business. Secondly, the positive EBIT margin speaks to the resilience of our business even during a one of a kind crisis like C-nineteen. And last, cash flow was very positive and is also a testimony to the resilience of our business. And this means that we ended the quarter with a quite conservative debt level. Then please turn to the next slide and a breakdown of the revenue growth.
Understanding the revenue development in the second quarter is all about C19 as you can see the the new bridge here, decrease in organic growth of 38% and that's the dark gray box is purely a result of the decline in sellout following the C-nineteen outbreak. And that's the large pink box saying minus 39. Obviously, we can't separate hot and cold water and we don't know what the revenue would have been without c nineteen. But I think it's fair to say that most of the minus $39,000,000 in that pink column we can blame on C19. Changes in the store network and forward integrating had basically no revenue impact in the quarter.
The overall second quarter revenue development is probably of less interest. I know it's of less interest. But the interesting thing is what happened during the quarter and until today. And sellout growth did improve throughout the quarter from being about minus 70% back in March and until today, where, as Alexander says, we have in the last six weeks been around minus 10%. And we'll talk a little bit more about that in the guidance section in just a minute.
On a more technical note, I'll comment on the small plus 1% just box that says channel mix and other. That's the difference between the organic growth and sellout growth because some of you might have expected there will be a larger difference due to the channel mix of the sellout. But the reason why this is not the case is partly because we don't include sellout data for multi brand dealers sellout. And hence, as probably most of you know, they're not included in that sellout number, the minus 39. But they are obviously included in the organic growth and this can then cause some differences.
And secondly, some of our partners have naturally held back on their purchase orders in the second quarter in order to manage cash. And on that latter point, we have seen that trend reversing in July, where there's been quite a healthy selling to our partners. And please turn to Slide 21. The main driver of the decrease in EBIT margin is clearly deleverage coming from the revenue decline as per the first pink box here on the slide. We have managed OpEx quite effectively, I think, and ended with OpEx being 15% below last year.
And in that number, we have government subsidies in there, which reduced the OpEx by about DKK 110,000,000 in the quarter. But when we see a sudden and significant revenue drop like this, we can't avoid that the bottom line hurt in the second quarter. The second pink box from the left is what we call nonrecurring adjustment of production volumes. This is referring to the shutdowns of our productions in Thailand, which we decided to do to manage inventory during the quarter. And that impacted cost of sales by around 18,000,000 or around three percentage points in the quarter.
And this is a non recurring effect, by the way. And excluding these non recurring costs, the gross margin would have been around 78% in the quarter and thereby a two percentage points increase compared to the second quarter of last year. Then please turn to the next slide. We thought that it would be appropriate to include a few comments on the increase in raw material prices that we have seen recently. Our exposure to silver and gold combined was about DKK 1,500,000,000.0 last year.
So based on a silver price of $28 per ounce, we will see a drag of around four percentage points on the gross margin compared to 2019. I know that the slide here says twenty five dollars that's the parting point, but I'm using I was just quoting the silver price as of this morning, which was just around 28 As you probably know, we're hitting around 70% of the next twelve months use of silver and combined with the time lag from when we use silver in production until it hits the P and L of two to four months. This means that the majority of the impact from the recent increase will not be seen until mid 'twenty one. We also benefit we'll be benefiting a bit from the decrease in the type that we have seen during the first part of the year because half of our cost of sales is paid in type that. As you can indirectly see in the slide here, exposure to Taipei was around 2,500,000,000.0 in 2019.
And there's also other opportunities for us to improve the gross margin. And that's the same thing that we would do despite the increase in vessel prices. And that includes the cost reduction as part of Programme Now. But there's also other potential measures like product design, which can come into play in situation like this. But net net, the big increase in silver and gold prices is likely to have a negative impact on the margin from mid next year if the prices continue to be at this higher level.
Then please turn to the next Slide 23. In the second quarter, we were able to deliver a very strong positive cash flow despite a negative reported EBIT. And this was driven by many different cash initiatives during the crisis, but also a return of excess cash of two months tax that we paid in 2019. Working capital ended at a record low, 2.8% of revenue and inventories have been managed and receivables decreased well in line with lower revenue in the quarter. And CapEx was also more than 40% below last year.
So but as we have said during the last two quarters, we will see that working capital will increase during the second half of the year, not least in the third quarter as we are stocking up ahead of the Q4 trading season. And this will be a drag on the cash flow in the second half. Longer term, we still see that we can manage the company with a working capital level in the high single digit percent of revenue. Our leverage, the net interest bearing debt to EBITDA was about 1.1 by the end of quarter and well within our capital structure policy and far from the covenant threshold in our loan facilities. So this finishes the second quarter review and I'll now go to Slide 25 and the guidance.
Today, we are seven point five months into the year. And there's no doubt that we can say that the uncertainty is reduced compared to three months ago when we withdrew the guidance. But with that said, the situation continues to be highly uncertain. And despite this elevated uncertainty and adherence with the governance rules for companies listed in Denmark, we have released a new guidance for 2020. And the guidance is based on very specific assumptions.
And you can almost consider the guidance as one possible scenario for 2020 based on assumptions about C-nineteen. And that's five really important C-nineteen assumptions behind the guidance as you can see here to the right on the slide. First of all, we assume that there will be no material lockdowns like what we saw during spring. We do assume however that could continue to be a few local lockdowns as we are currently seeing in Australia. Thirdly, we assume that the number of open stores will gradually increase and plusminus essentially the whole network will be opened by the end of the third quarter.
And then we assume that the macroeconomic and consumer spending will not worsen materially compared to where we are now. And last, we are assuming that the social distancing will have a negative impact, not least in the fourth quarter in the physical stores. And based on these specific assumptions, we are guiding on the same parameters as before, and that means organic growth and the EBIT margin excluding the structuring costs. As you can see to the left here, the organic growth in 2020 is expected to be between minus 14% and minus 20%, and the EBIT margin is expected to be in the range of between 1619%. And we know that this is quite wide ranges and we've chosen that deliberately and because we would like to start wide and then as the second half of the year progresses, we can narrow in the guidance.
This also means that we may continue providing more regular updates to the market than we would do in a normal year, like what we did back on in July 8 when we came with the Q2 trading update. Then moving on to Slide 26. The interesting components of the guidance is what the full year guidance implies for the second half of the year. That's what we have shown here. And organic growth is expected to be between minus 5% and minus 15% in the second half with an EBIT margin being between 2024%.
And the organic growth guidance compares to a sellout of revenue development so far in the third quarter of around minus 10% and should be seen in the light of the current stalling of the gradual improvement that we saw until July due to the renewed C-nineteen impact. July revenue development was slightly better than the minus 10% and August so far has been slightly worse. But we should stress that this is a very, very short time horizon to exaggerate too much on. And the guidance should just repeating that also be seen in the light of our expectation that social distancing will have a negative impact on the business in the peak season in the fourth quarter. The question is just how much?
Please also note that the profitability will be skewed towards Q4 as usual, but likely even more this year than in prior years. And we would also like to emphasize that in this scenario with this guidance, we will continue to invest in the brand in the third and the fourth quarter and we will continue to invest in building the organization during the last two quarters of the year. We'd also like to mention that we see a high likelihood that our partners, our wholesale partners of that they will buy the Q4 stock as late as possible given the C-nineteen uncertainty. And this may lead to a shift of revenue from the third quarter into the fourth quarter, causing a phasing effect that will be negative for the third quarter and equally positive for the fourth quarter. Finally, we have, as you can see to the right here, updated what we call the guidance building blocks, and we're just calling out two of those.
As you can see here, we are narrowing the expectations for the net store closures and now expect around 50 closures net for the year. And then we are reducing our CapEx guidance again by another DKK 100,000,000 to around $600,000,000.0600000000 for the year. And with this, I'll leave the word to Alexander on Slide 27. Thank you, Andres. Quarter two was a quarter which will not be forgotten from many different angles.
I am very proud of how our organizations managed through a difficult period with the highest level of integrity. The sales recovery in the quarter has been very clear. I think Pandora's business model has proved its resilience delivering positive EBIT margin and solid positive cash flow in the quarter. We're still executing on the underlying health of the business and Programme Now has been rescoped to reflect this. And finally, I think we provided what I consider sensible financial guidance based on some very specific assumptions.
On these remarks, we will now open for the Q and A session. Operator, please.
Our first question comes from Lars Thollum Carnegie. Please go ahead.
Yes. Two questions from my side. I do have more, but then I'll jump into line again. So one of the tricky things is, of course, as you referred difficult to separate hot water from cold water. But we're all curious what the real underlying trend is.
Given what you're seeing in August, I assume lockdowns matter, whether it's in a market where you have an e store or where you don't have an e store. So specifically on the run rate you're seeing in August of slightly worse than minus 10%, can you maybe give some color on which countries are locked down on it? To what extent you are able to capture revenue online in those markets? And maybe also give some color on the momentum in some of those markets that have not experienced new lockdowns like Continental Europe, maybe also some comments on U. S, if you see momentum improving there?
And then a second question, which goes to your increased online share revenue. Again, in some of those markets that are more back to normal, what is the underlying share now compared to where it was before COVID-nineteen? And you have, of course, now been closing down some stores. In that context, what is your experience in terms of being able to keep the customer when you close down a store? And if online is capturing a bigger share of revenue on a more permanent basis, which thoughts does that give you regarding the necessary size of your physical network?
Thanks.
I can start off on your first question, Lars. I think we have to zoom out and not get bogged down too much in what's happening in the last two or three weeks because on that basis, it's frankly impossible to understand the momentum of the business. And I would go as far back as you know, when we started kind of turning the corner somehow in q four into Jan Feb. Then I think we have a big pause button. We can see quite a linear comeback from from the store closures for the store reopenings.
There's obviously the mix shift between on and offline, which we'll talk more about. And then I think the way I look at it is the the store, let's say, momentum in in the first few weeks here is is strictly speaking due to external factors. So so and then, you know, trying to dissect this is is very difficult. Because, also, if I compare to last year, the trading conditions, I mean, the environment is just different. So it's quite quite a tough question to to give a a a very precise answer on.
I think when when we look at it, we see that the momentum that we started gearing up behind program now, I would say, as markets reopen, we start we kind of have the sensation that we're coming back on to that momentum. Now of course, with these flare ups like we see in Melbourne, for instance, or Belgium recently and Hong Kong recently, it will have some short term impact. And therefore, looking on it week by week is is might drive you to the to the wrong conclusions quite frankly. So so I think we we need to stay a little bit at a higher level. I don't know, Anders, if you have some more color to that.
I think it's six weeks so far in the third quarter. We have to be quite careful and only a few weeks since the spikes of COVID-nineteen increased. But I think thing we can say that look at the minus 10% for the first six weeks of the third quarter that comes in a period where around 10% of the stores being closed. But we can't just say, well, that means that then the without those stores being closed, it would have been flat. But I think that a couple of points there, whether the stores that are where we see have closed currently is more skewed towards market where online is less than in our key markets, Latin America, Philippines, some Eastern European markets.
So there's no doubt that it has an impact that will be bigger than if it had, so to speak, been the stores in The UK that was closed, where the online share business is much bigger. So of the 10% negative sell out in the first six weeks, has an impact that with 10% of the stores being closed. Then secondly, I think we should as we have talked upon just recently that China is an issue and was that in the second quarter as well. And then if you sort of then use that to dissect the minus 10% for the first six weeks, will come get towards a point you're saying, well, for the that means that for the remaining markets, which is obviously inclusive seven big markets that we report on, you're getting to a better number. That is not minus 10% but better than that.
I think that's helpful.
Are any of them growing, Anders, without being specific?
I think, yes, think we can say that there are there are some going and some are not, but we will not give so put any precise numbers to that.
And then online?
Second question, Lars. I think it's it's way too early to make any massive conclusions on the network. It is obviously a question which we we look at, you know, closely. I think that the main decision we have made is to increase the capacity for the e commerce. So essentially, already in the business to handle double the volume from what we had last year.
I think that's the only major decision we've made So far, it is also clear that, in in places where you only have e com, our sales as a total business is lower versus where you had ecom plus store. Now what the exact equation will look like? I mean, it's probably fair to say that in the future, we'll have somewhat less physical stores than than we have today. How many and how fast? I think we'll just have to monitor the situation.
I I keep reminding people of that. Our network is quite light footed in terms of the length of our lease contracts. We we the CapEx per individual store is is not huge, so we can be quite, you know, fleet footed if if February is required. So so we'll keep coming back to this question. And when we get a bit more smarter about it, I mean, of course, we will let you know.
Thank you very much for answering the questions.
Thank you. Our next question comes from Magnus Jensen, SEB. Please go ahead.
Hi, this is Magnus here. Thank you for taking my questions. Also two questions from my side. The first one goes to the second half. In your report, stated that you had this out of stock situation in Q4 last year.
How much of a tailwind could that be for Q4 this year? The second question is to your store concept. I mean you've spent some time redeveloping your concept, but it sounds like on what you're saying, Alexander, that it has not really worked. Could you give some thoughts about what has gone wrong? And also maybe what some of the learnings you learned and what you plan on going forward with the new concept design for your concept stores?
My two questions.
Hi, Manos. It's Manos here. On the first question, so without being too specific and it's not because I don't want to answer it on the out of stock situation, but it had an impact last year. I I think we talked about that when we announced the full year numbers. And when we tried to quantify it back then, I think we said it could be a couple of percentage points that it hit us last year because of our stock situation, give and takes and some impact.
On
the store concepts, I mean, we set out to do this, we were expecting, kind of what other specialty retailers would expect behind a refurb. You would expect, I don't know, a sales increase of, let's call it, ten ten percentage points, which we have received in some places and not in others. So it the picture has not really been conclusive. And before I push the button on what very likely might be one of the biggest CapEx investments I will be making when I'm, running Pandora, I need more certainty. I I I think that's the point.
We have some positive learnings about the store environment, you know, the look and feel, and and so we we can kind of that gets a big thumbs up from from consumers in all the geographies that we've done. We've also changed the way we merchandise in the stores, and that was the idea behind that was to kind of drive, you know, conversion rates and basket size up. We have not really at least not conclusively been able to say that that way of merchandising has led to this contribution of driving sales. So so kind of from a look and feel standpoint, yes, we could spend the money. But from a purely from a, you know, return on investment standpoint, that looks like not the most attractive option in front of me.
Next steps is, so, I mean, there's plenty of learnings. Of course, we have these stores up and running. We're not starting from scratch. We did plenty of consumer research, so we know which pain points we're trying to address. And it may also be that that execution might differ depending on the size, location, and let's say, mission of that trip.
We have some stores that are based more, you know, for for tourism. We have some shops which are more kind of for the local shopper. So it might not be just one solution that's gonna cater to all tastes here. There's a new team that's that's set up. There's a new leader of that team that comes from the from the retail ops side.
In the past, I think maybe we had too many marketeers leading that work. So we are now kind of balancing that out with some more operational thoughts. So we're trying to marry kind of the good conceptual insights and experiences together with a bit more of a hard nosed operating mindset so that we can because the the challenge is is actually not so much when you have low traffic periods, then probably it makes it can works. But when you get into these big spikes like Mother's Day, Black Friday, Christmas shopping, when the volume of customers is is of a very different nature, I think the current execution doesn't really cater for that to be operationally effective. So we need to sort that out.
So we hope to have some some new tests running, at least, you know, some beta tests running by the end of this year, hopefully, so we have some news coming to early next year.
Thank you.
Our next question comes from Chara Bhaskini, JPMorgan. Please go ahead.
Hello. Hi. Thank you for taking my questions. The first one would be on the on your guidance for the second half of the year. And the the basically, assuming the 10% decline continuing in for the rest of the year towards And at the same time, assuming actually potentially the situation continues to improve, are you being conservative there in your assumptions given the lack of visibility at the moment?
Or are you also factoring in the fact that the base from last year started getting tougher from September as you start counting your brand relaunched last year? That would be the first question. And the second question on silver. And you talked about some mitigating actions for to counteract the impact from the latest move of silver prices. Can you expand a little bit more on these mitigating actions?
And would those also include price increases next year? You.
Kieran. It's Anders here. On the guidance for the second half of the year, it's a very valid question. Think we have spent quite some time about how you think about the guidance in an environment like this. So I think a couple of reflection.
I think one is that when we look at the trading for the first six weeks of the third quarter and combine that with the level of uncertainty and 10% of the stores being closed. Think it is indicating that we are still underlying well on the way in our transformation. It's as I think as was the last top one we used it, tracing is difficult to separate hot and cold water. That's clear. But everything that underlying we are seeing good momentum.
Having said that, the business environment is needless to say, highly uncertain and we wanted to reflect that in the guidance. I think you should see the guidance as a reflection of the uncertainty in the market in general and not as an uncertainty about Pandora and how we specifically perform. If the market is there, if the traffic is there on the streets, I think they're confident that our revenue will follow. If the traffic is not on the street consumer demand is not there for C-nineteen reasons, then we will be impacted as well. So decided to guide and round out the current performance of minus 10% as the midpoint.
So we both see a potential to end the second quarter second half, sorry, five percentage points better than where we are currently or 5% worth compared to where we are currently. And maybe one way to talk about it is, say, what would happen if we ended at the low point of the guidance, the minus of 16% organic growth for the second half of the year. And that would be, again, maybe a consequence of external factors as we see it. First, it would be the current worsening of momentum that we see driven by C-nineteen surges and local lockdowns. We do not know how this will impact consumer sentiment.
Obviously, that's a big unknown. And secondly, as we are going into the Q4 peak trading season, that will be impacted even more so by social distancing that one compared to what we already what we already are seeing. And we are taking a lot of mitigating factors, Alexander mentioned. But this is a new situation for us. We have not tried it before.
Nobody has tried it before. And we just have to see how that how that plays out. And then on the sort of comparison base, the Q4 as you know last year is more net net, a more difficult comparison base than what we've seen so far this year despite the out of stock situation that Magnus asked about just a second ago, the net net, the fourth quarter is a more tougher comparison base compared to the first three quarters of the year. And then I think we should also last long answer here, but mentioned that the improvement that we've seen in the revenue development during the last months and also in the third quarter, we do not know if there was some type of rebound in consumer spending just after the lockdowns and whether consumers redirected money, for summer holidays, etcetera, traveling towards discretionary spending. And all of that, lot of words here ended up saying that we think that it's a reasonable guidance will be to guide around the current trading level.
But as mentioned, it's likely that we will keep updating the market as we progress and maybe also before the official Q3 trading statement is due in early November. And then, yes, on silver, are the silver prices have been almost stable, you can say for seven, eight years compared to what's happened during recent weeks and months and when a massive increase in prices happens like what we've seen here, of course, you have to think very creatively. And we can't give you a full answer yet. Think net net, it's fair to assume that there will be even as a mitigating actions, it will have an impact on the gross margin and EBIT margin going one year forward, assuming that the prices remain at this hopefully elevated level. But we are looking into all parameters of what drives the gross margin, including product mix, what kind of products that you're also promoting and focusing on in our campaigns.
We are looking at product design like what Pandora also did eight, nine years ago when the silver prices were also high in 2011, I think it was. And we are also looking at pricing even though the way that we set prices is not a cost plus based pricing. I think many of us know that painfully that has been sort of experiments with increasing prices in the past with no success. But of course, we'll have to ask ourselves the question again when you have such a massive increase in COGS as we see here.
Thank you. Just to follow-up on this last point, for the time being you're not seeing yourself passing on this increase to your consumers for the time being?
I think as Anders said, I mean, in the last few years, there's been a focus on on the higher price point, options in our assortment, which led to traffic and brand engagement to go down. So I think we've learned a lesson now as a company twice in the past. So we're not going to jump into that trap. As Anders says, though, I mean, if prices remain at this level or even moves beyond, of course, like any sensible business would have to take a look at it. But I'm super sensitive to making sure that that we remain an affordable option for people out there.
So so that's you know, you shouldn't read into this that we're just gonna pass it on. That that there's gonna be a lot of sweat before we get to that point.
Perfect. Very clear. Thank you very much.
Thank you. Our next question comes from Frederic Anderson from ABG. Please go ahead.
Thank you. Hi, guys. Thanks for taking my questions. A couple of ones from me as well. Starting on the 8% like for like in the open stores you report, Obviously, that's driven by quite hefty growth in the e store.
Just curious on whether you'd be willing to give us a ballpark figure on how many stores that includes in that calculation? That's my first question. And the second one on online, which obviously grew quite significantly. You're talking about securing some additional online capacity. I think, Alexander, that you said doubling capacity.
Does that imply that you essentially assume 100% sales growth online in Q4? So
thank you for asking. To start with the first one, then no way we will not provide the number of stores exactly included into this number because it is not a number that we believe that you should interpret on. Of course, you can see like in The U. K, the twelve first weeks were closed stores completely closed. And then in the last two weeks, they were open with reduced traffic.
So of course, in that number, you'll have a significant like for like number around 100%. So we don't think this is the right number to look at if you look at the underlying business. And you should rather look at the number of stores that are closed now, 10% closed, and the minus 10% and see how those compare. I think this would be a better we have tried to track the underlying business even though this is difficult. So yes, we will refrain from commenting too much on this number as we don't think that it's meaningful, unfortunately.
Honestly, you can comment on number two. No. I can take number two on online. So so so we're doing a number of things to strengthen our ecommerce business. I mean, you go back, I don't know, a couple of years here, and ecommerce was like a non factor.
Now it's most definitely a factor and actually, you know, did did help the the company quite quite a lot during q two. So on one hand, we are improving our ability to forecast online because in the past, you know, the forecasting area was you hovering a couple of points up or down. But when when the the the growth rate 10 doubles, I mean, it is just difficult to to manage from a supply chain standpoint. So that's one aspect. We also know that this surge in demand drove a lot of unhappy customers.
So we are also changing service providers and our own protocols to service customers better. Then on and then the third point is obviously we're gonna redirect a bit more of our our marketing investment towards the things we've now learned over the last, let's say, six months that drive the ecommerce trading harder. So we'll kind of push more towards digital drivers. And then to your final question on capacity, yes, we are more than doubling the capacity. And that's, again, when the year started, we had a conversation on whether the the budget for the year should be 10% growth on ecom or 30% growth.
We ended up with now a 176. You can imagine that the supply chain was nowhere near ready to to deal with this. And and it's not an automated handling in the in the DCs. It's manual work. It's somebody going and picking, you know, small small pieces together, putting it in an envelope, and sending it off.
So you double that volume, you need more people. That that's the the the simple way to solve it right now. Whether we get into automation in the future, that that's a different discussion. So so we are just gearing up to be ready. I'm not even sure that the 100% is gonna be enough, to be perfectly honest.
That that's the most current conversation we're having internally. Some markets, it may be sufficient. Some other, it may not. So you cannot take that 100% to to kind of put in your Excel spreadsheets and say that's the ecommerce world. I don't know.
It's certainly gonna be a lot more than it was last year, and and that's kinda how we're building it. And I just hope that the 100 capacity that we're building right now is gonna be sufficient.
That's perfect. Thanks.
Our next question comes from Arnold Hsnorth, HSBC. Please go ahead.
Yes. Hi. It's Ananda Smith from HSBC. So my two questions are, first, on the I would like to come back on the online performance, especially in comparison with the the performance of the Q3 to date, so the minus 10%. I just wanted to know if you can share more comments about the performance in online during that Q3 to date.
I know it compares versus 176% online revenue in Q2? And my second question is about the partnership for the launch of the Star Wars collection on the October 1. What is your plan in terms of marketing? Will you plan to launch select events online? And what do you plan in terms of partnership, collaboration by your hand or next year?
And what is your plan in terms of product launches for Q4?
On the online growth for the first weeks of the third quarter, what we can say is that it's below 176%, but it will still be a number that in a normal year that will be visible. So still significant growth, but obviously as the store openings are progressing, it it it come it comes down, but it's still well above where we would normally be. And that's also why, as Alexander said, that we're building capacity of buying this insurance premium, so to speak, building extra capacity to continue coping with that significant online growth for the rest of the year. Okay. In terms of the the partnerships, so there's gonna be I mean, we divide now the marketing initiatives essentially in three size packages, you know, not very creative.
It's either small or it's medium or it's large. And and then you could think of the small packages as quite limited exposure in terms of windows and and media. The large packages is full on national launch with TV and and, the rest of it. And Star Wars would fall in in the latter category. So that is gonna be a very strong program.
I mean, we also have the Harry Potter from last year through Cycle, so which was very, very successful. This initiative has tested in a similar way with consumer test that we've done before. So we have a lot of conviction that that is gonna be another strong collaboration program. Then you had a question on collaborations. For next year, we don't talk about.
Some of this is kind of in in the works, so it's a bit sensitive. So we normally do not disclose the next year programs when it comes to the ProLabs. In terms of product launches, Star Wars is is one of the kind of key things that is coming in the back half. We also are gonna make a big push behind the twenty year anniversary. You know, we've been a drip feeding in these top charms each month, but we're gonna make a big push behind, I think it's in September where the company then or the brand actually turns twenty years officially.
So I think those are the main points and then there's a few other bits and bobs, but that's probably what we're talking about in this environment.
Thank you. Thank you.
Our next question comes from Frans Foyer, Handske Bank.
A question regarding Q2 and the full price like for like sales trends, if you are able to quantify that, I gather that clearance sales were down significantly. And adjusting for that your like for like in Q2 would have been better. And of course, not sure what clearance sales, how important were they in going into Q3 and Q4, probably not much in Q4, I guess. But maybe you could talk about those issues.
Let's see. So the numbers that we recorded in the presentation, as you said, they straddled Q2 and Q3. So it's not a clear cut quarter assessment. If I take that period, the overall sellout was flat, give or take, to last year. However, within that, we saw quite some shifts, which is the reason I mentioned it.
Because, we had last year, I think we put something like 600 DVs on the clearance in the summer, and now we put I think it was around 230 or 40. So significantly lower amount of DVs, which is obviously the result on one hand from the inventory kind of management in general that we've been much more tight on. And secondly, we made an assortment reduction during last year, if you remember, went from 1,800 DVs to 1,200 DVs. So, actually, we have we have less crap in the tail. So, therefore, we should also expect that so the so my need for these kind of clearances becomes less.
Now, of course, I have the the merchandising organization jumping up and down being nervous about not hitting their target because, you know, any salesman, they lots of discounts makes life easier for sales, but it's not necessarily what we want to do. So, therefore, I was quite pleased to see that the the volume was halved on the what's sold through on clearance that was more than picked up or was more was picked up essentially by full price sales. So from a health of the brand, it's that's brilliant because we're managing to convert people not on the basis of of sales or clearance, but on full price. And you can also do the math on from a margin standpoint what is obviously a lot more attractive to sell full price than clearance sales. So there's a number of different really important underlying health attributes to to that period, which was the reason I I mentioned it in the presentation.
That makes sense. Thank you. You also mentioned that there is a well, you are you have a you're addressing the product development strategy and there is a need to supplement the Moments concept with with new concepts. Could you talk a little bit about that? What it is you want to add to your to the spectrum, so to speak, which, Moments does not offer?
I think I mean, if you look at my my peers, my global peers in the same category globally, there's hardly any one of them that only lives of one major platform. Most of these companies, they have three, four, five, or six different platforms. And these are kind of enduring platforms. So they they're there for for years and years and years. Similar to Moments, you kind of hit the strike with consumers, and then you just need to keep it fresh, which is I think where Pandora went wrong.
Somehow there was a belief that you couldn't keep Moments fresh, which is what I think the first job we have done here is to to to reinject energy into moments and consumers are responding. So that's brilliant. We now need to complement this with the few others, and and we're a little bit too early in the curve for me to disclose anything. When I have something interesting, then then you can rest assured I will share that with you guys. Okay.
Thank you very much. Thanks.
Our next question comes from Omar Saad from Evercore. Please go ahead.
Good morning. Thank you for taking my question. My first question actually, wanted to follow-up on the last one. Maybe if you could expand a little bit on your product development, it sounds like a reorganization around the two different business units. Maybe a little bit of context why you're making these changes?
What was broken in the product development process before? Is it something in the process itself? And then how do you think the how should we think about this will how this will affect the kind of flow of product newness going forward? Then I have a follow-up on the loyalty program. Thanks.
So
you can look at this for many different ways. You can have a look at the organization, say other people good or bad. But, actually, when I came in, is, what, a year and a half ago, you just look at the outcomes. And you saw that from a results standpoint, our new innovation was not helping this company to drive growth. And that became quite the prob problematic because the whole organizational setup was geared to focus on new product innovation.
So if the outcome is that you don't get any growth and the only thing their organization is is kind of busy doing is trying to drive growth on that, then there's something clearly wrong. Then there are a couple of other things which also led kind of to the reorganization that we put in place in in April. But but the core of this was to ensure that we have an organization that is much more working from the outside in. So meaning that we actually try to understand what consumers like or don't like or even try to second guess what they might like. But for that, you need a different organization set up, and that's what this kind of GBU structure is there to do.
It's to essentially decipher what's going on from the outside with the help of, you know, both call and quant methods, turn that into insights from that kind of filter that through a product strategy so that we kind of stay within the confines of what we think Pandora should be working on. And then that eventually then drops into the the product development people and and the creators on that side of the fence. In the past, you could probably characterize this by that this first filter wasn't even here. We we didn't do any of that work. So it was much more about kind of the product development organization trying to sort out those questions.
And arguably, they're good at creative, but they're not particularly analytical. So that's kind of what we've added is a bit more science to the art. And then hopefully that that combination of of science and art is what's gonna lead to to better predictive predictability in in the numbers that we generate. And also that we deliver products that people are actually interested in. And I think you can see some of the early inklings of this, looking at Pandora MEE, for instance, I think that that is based on some some quite profound consumer insights, which has delivered some interesting results for us.
And we can do a lot more in that space to give to give one example. Did that answer your question? This is very
yeah. This is very helpful context. Thank you. Along those lines, if you think about the loyalty program using data, adding science, as you mentioned, to the art, what role is the data in your loyalty program in terms of giving you consumer insights? Is that a big piece of it?
Or are you doing other studies using consultants? You know? And is there, you know, a way to kind of ramp up that data analytics and and and and and in terms of the product development process and those connections
you have with consumers? Thanks. So so so there is there are a couple of different steps. So so one is when when you're trying to just identify opportunities. Okay?
Loyalty means that you've already kind of got them in default, and now I'm trying to figure out how more to do good things. And, actually, two quite different, aspects of the whole puzzle. So on the first piece, when it comes to generating new insights in terms of where to go with our product innovation, I think here we're using more, let's call it, traditional methods to start with. You know, there are tested tried and tested methods of how we approach this. Maybe not in the jewelry industry, but outside, I mean, the FMCG world that I come from, this is like bread and butter.
So we're just trying to take some of these methods, align them to kind of the the type of environment we're operating in, and then start running it. On the other hand then, when it comes to data, I mean, we announced, I think, a few months back that we are investing heavily in creating a data hub here in Copenhagen. So in the past, we had, you know, small pockets of resources around the globe and knocked all of that down with exception of China because it's a different ecosystem there. But, and then pull all those resources into to Copenhagen to create a tech hub here. And these guys, they live and breathe of data.
And that that data we will use in terms of being better merchants, in terms of, kind of the loyalty aspects that you you were talking on. And, eventually, I hope we'll also crack a method on how we can scrape those insights and use that for product development. There are quite few companies, that that are sort of mastering this today. So and we have still some some ways to go to kind of finalize the the building of the tech hub. But I think in in the future, you should expect that we will propel some of our insights through the data that that we we gather.
I mean, we have an amazing touch points. We we touch I'm not sure that this is unique visitors, but we have roughly 500,000,000 visitors to our stores either offer online. And today, we actually only use a fraction of of, that data to to drive this business, which is crazy if you think about it. We we should really be able to be super precise on on what we do. But we come from a history of being quite analog.
So this is is not just to put the tech in. We also need the culture and the people that that know how to maneuver in this new environment. But but that that's kind of the direction that Pandora is taking. So we wanna lead in the tech space, as a company.
Thank you.
Our next question comes from Sung Ji Ahgwal, Citi. Please go ahead.
Hi. I have two questions, please. So the first one on the level of marketing investments in second half. I understand that it would be up year on year. What is the level of spend we are talking here up, you know, in your base case revenue scenario?
And the second one on gross margin.
I'll come
back to it.
On on the level of marketing spending in in the second half, I'm not saying that mid share will be above last year, but in percentage, probably, yes, percentage of revenue. But in absolute terms, I think you should more think about it as in line with last year. But remember last year going into Q3 and at least Q4, we were already upping our spending at that point in time. Yes. And the only other thing I would add to that is that you know, media rates have changed somewhat, this year due to COVID as well.
So so even if we spend a 100, you might actually get a a bit more bang for the buck this year. Now this varies country by country, varies by the media mix you have, of course, but that that is something I'm driving very hard. Because as I said in the in in the presentation, know, COVID is a problem, but with problems also comes opportunities which you need to run hard after. And that's one of them that that we're trying to change.
Thank you. Then the second one on the gross margin. I understand that the second quarter gross margin was around 78% if I strip out the COVID-nineteen related restructuring charges. Given the impact from silver prices will not be felt second half, do you think that's a sustainable level for second half?
The gross margin going into the second half, we will be and I'm also looking at mister treasury here, Michael, but we will be comping at having a higher silver price in Q3 and Q4 in the COGS than what we had last year. I think if we go back to the I'm just thinking loudly, going back to the guidance when we made that in Feb originally, we said that we would have a headwind from silver prices and the tieback of around 1.5 percentage points, and that's mainly coming in the second half of the year. But that again, that's not coming from the recent price increases, but what happened previously. So that in other words, your question more directly, I think there will be some headwind on the gross margin in the next couple of quarters comparing to the underlying gross margin in the second quarter.
Our
next question comes from Lars Toffman from Carnegie.
Yes. Just a follow-up question regarding the lease costs. I assume the current climate gives an opportunity to renegotiate leases. I wonder to what extent you're doing that, what impact it has short term, but also if it has any long term implications that are meaningful when looking at your sales and distribution costs going forward? Thank you.
Maybe I can start over. As part of the reorganization that was designed and implemented, we also established a global network management unit, and we have and there was a new senior vice president, a new role with a gentleman who joined us there on just before the summer holidays. So that and the the the the gentleman who's come into that role, he's he's done similar work in the past. I think long story short, that's clearly an opportunity to take a different approach to our leases both from I think how they are structured, how do we think about what sort of the fine print of the clauses in touch and agreement, but also rent levels. And then of course, with what happens currently in the world and in retail for other companies as an opportunity to reduce that.
And that is part of it. If you look at Slide 17 in our cost savings program, there's some white space in the Harvard ball on retail expenses and part of that is clearly on opportunities to lower rent across the world. It will take time. Some you can renegotiate before the lease expires and some probably better off waiting until lease expires. It will come step by step.
But as Alexander said, fortunately, we're not locked into ten year leases, but on average, it's it's it's fairly short term leases that gives us an opportunity to step by step to to realize those savings. And not putting a number on yet, but that's definitely an upside. We're spending around just SEK 2,000,000,000 per year on leases. Think that one of the observations they this this team, the new team had was that they they probably think we should try to get into shorter leases even than we have currently. So we have that flexibility.
Also coming back to your earlier question, Lars, on, you know, how you're gonna adjust the network. So if we sit in two long leases, then that, of course, makes us less flexible. So that might be worth for us in some locations to consider. I think we'll take a much harder stance as well in the lease negotiations. We might even ditch some some locations in the negotiations in order to to make sure that we actually get some some some more relief than what we've experienced with some some people today.
So Yep. Thank you very much.
Thank you. Our next question comes from Prabhupada, RBC. So
I was just wondering if you could help us understand the sort of mood amongst franchisee partners. Obviously, they've had significant store closures through the second quarter period with no e commerce offset. So as you think about the structural shift of revenues from an offline environment to an online environment, How has that changed the dynamic and the relationship between Pandora the business and then the franchisee operators of physical stores? Any insight there would be most helpful. And then secondly, just around some of the comments you made on current trading, which you say is running at minus 10%, very encouraging to hear that improvement through the last few months.
But are you seeing any big differences between your physical retail concept stores and wholesale or franchisee operated concept stores or even just across channels more regularly, excluding e commerce? Just curious about whether any particular channel is under or over performing as we go into the third quarter? Thank you.
I'll start with your second question. So what we saw was when kind of the environments opened up, our stores performed better in the first couple of months even. And I and we kind of write that to, to the fact that we did not send our staff, away. So they were still on on the payroll, largely speaking, whereas a lot of the franchisees obviously furloughed or or, you know, terminated their people. So they they it took them longer to kind of get the teams back on.
But we we, you know, we value the fact that we have, you know, very experienced people in our stores. It takes quite some time to to train people in this particular it's not a very transactional way of selling that we do on Pandora. So so that seemed to have paid off quite nicely. Now when we sit here today, broadly speaking, our partners perform at the same level as us. So that they they just took them a while to to catch up.
In terms of the franchise sentiment, I mean, clearly, the the cost structure of a franchisee versus a Pandora is very, very different. I mean, we carry a heavier fixed cost burden, versus these guys. They, you know, they they have the lease, which to a large degree, many of them, like many retailers didn't pay initially. They sent their staff home. So, and and we then also look at our, receivables.
They are paying the bills to us, which would suggest that, you know, at least they they they still stand. Quite a few of them have have decent balance sheets from what we have gathered. So right now, I'm not getting a lot of phone calls. In fact, I'm not getting a single phone call from, franchise partners that that are, struggling. That's not to say that they aren't, but it it hasn't reached, that type of levels.
And and most of these people were shut down for six to eight weeks. So it looks like that there is resilience to to cover that type of a period at least. I don't if you have some of the short effect. Don't Just repeating, think it's important not to look at the second quarter numbers and taking that as an interpretation that structurally that the partners is performing worse or just repeating in the third quarter so far. The stores have been performing the same no matter who operates them, whether it's us or our partners.
And again, looking at our cash flow in the quarter, you can also see that despite the significant hit that we've all had in the second quarter, but the partners even more so because they are operating physical stores only. Then our receivables have been brought down quite nicely. As Alexander said, also have had cash and decent balance sheets. But then last, I think in the prepared notes in the beginning of the call here, you also said that we have seen very nice selling coming into July in the start of Q3 here. And again, that's a pull from the partners and not something we are pushing in, but a pull from the partners, seeing that we have good brand momentum, saw the good brand momentum in Jan, Feb of this year, but also seeing that we're actually doing better and doing quite well here coming out of the crisis in the second quarter.
And just the final technical addition to explaining the numbers in Q2 was that the first market that opened were China and Germany, and these are clear O and O markets, whereas the later or the sort of franchisee market, Italy and UK is opened relatively late in the quarter. Great. Thank you.
Our next question comes from Shira Batsini from JPMorgan. Please go ahead.
Hi. Thank you. Just a quick follow-up questions. On your e commerce performance in Q2, I was just wondering, and also according to the data that you see, did you think that your ecommerce performance was boosted or was supported by maybe taking market share within the gifting market, within the gifting, yeah, options? And also given that maybe in other categories that the purchasing was less viable in a way.
So I was wondering if you took market share within gifting and how you see this evolving as the lockdowns have been lifted. And actually, just a clarification also on your comments now on the selling in July being strong. Just wondering, was the selling in July actually ahead of the sell out, or was it in line with the sell out you could see? Thank you.
On your first question, whether we took market share gains in gifting, I just wish I had that data. We we that that, I you know, would be incredibly difficult. First of it's difficult to gauge ecommerce, share performance to begin with. I mean, Amazon doesn't reveal it. Tmall, you can scrape it.
But other than that, we have our own DTC, and, of course, we don't share our DTC performance with anybody. So in fact, there is no database which would help answer your question. So so I think I will only say that I wish I did, but I don't have any facts to back it up. So and we can't build the business on Wishes. So so that's I I I the second question, maybe I'll direct to Michael.
Yeah. No. So whether the sell in was higher than sell out, I think it what how you can see it in the numbers was that the organic growth was sort of clearly better than the sell out growth. Yes. So as you would expect.
Sorry. The organic growth was better than the sell out growth?
Yes. Exactly.
Understood. Thank you.
Thank you. There appears to be no further questions. So I will hand back to the speakers for any other remarks.
First of all, thank you for joining us. As I said in my closing remarks, q two was was truly strange. I I know that a lot of your questions really are trying to decipher what is the underlying momentum of this brand, especially given the fact that we came out of or are in the midst of a turnaround. We're we're doing our best to try to kind of, lay the land, but I'm you know, hopefully, things normalize and stabilize a bit, and and then we can be a bit more precise on the momentum. We have some indicators that I have mentioned that the brand seems to be healthy.
And, of course, everybody's taking a toll in in q two, our sense is that we've come strong out of the gates in in pretty much every market except China as we've talked about. So we I think we kind of look to the future with some some energy and passion and belief that the program now is gonna continue yielding up. I think on that note, we'll close the call. Thank you for listening.
Thank you.
Thank you. This now completes
our conference call. Thank you all for attending. You may now disconnect
your lines.