Dear ladies and gentlemen, welcome to the Mister Spex Q1 2022 Conference Call. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Frank Böhme, Head of Investor Relations, who will lead you through this conference. Please go ahead.
Hello, everyone, and welcome to our first quarter financial results presentation. Today's call will be hosted by Dirk Graber, Founder and Co-Chief Executive Officer of Mister Spex, as well as Sebastian Dehnen, Chief Financial Officer. Dirk will give you an update on our strategic initiatives before Sebastian will continue and guide you through the financial results of the first quarter. Following the speech of both gentlemen, we will host a Q&A session. Let's get started, and over to you, Dirk.
Thank you, Frank, for the introduction. Thank you everybody for participating in the call. Yes, you've seen probably the press release from this morning and our financials. You've heard it probably from a lot of other conference calls and read it in the press. It's quite a challenging environment at the moment for consumer retail companies, including optical. Q1 still impacted by COVID in Germany. On the one side, traffic, on the other side also people being absent, quite high absence rates because of quarantine rules impacting also our business. The war in Ukraine and inflation. Overall, this leads to a quite low level of consumer sentiments, right?
What we are doing, we are focusing on the things that we can control and we can manage and to protect our business and also to enhance it and to build it. Because the underlying financials that we see for our business model are very well in place. Now I want to show you some of the insights from Q1, what we've seen. What you see, it's a difficult market environment. We see that the consumer confidence GfK index is at a very low level. That also is duplicated into the Google Trends, which we typically use as a good indicator on how much traffic online is there available on a year-over-year level. Both are at a moment negative.
Also if you look at the GfK data for the optical retail market for January and February, you see the market is still as an entire market below 2019 levels. Typically this has been a 2%-4% growth every year. Overall, it's a challenging environment, as I said. We see that also in our retail stores. Our retail stores are located in high traffic locations, prime retail locations, either shopping streets or malls. What we see is that in Q1, traffic is still below 2019 levels substantially. What we've been able to do is to counter that with substantially higher conversion rates. All right.
We see doubling conversion rates in our retail stores and leading to actually revenue like-for-like growth versus 2019 levels, which is a very good sign. This also continued in April and May. This is something besides just this conversion rate topic, we're working on improved productivity measures for our retail stores. This was tough in Q1 because of the absence rates, as I said, sometimes 20%-30%. This is getting substantially better now. We're also working on the traffic. We mentioned that in previous calls that we tested a number of initiatives and things that worked well, we continued to do.
For instance, our TV spot that we use is now having a substantially higher share of, I would say, store-focused scenes and making the customer more aware of our 57 retail stores by now. We also used more and more targeting in terms of our offline mailings around the stores. After a very successful campaign in March, we've now doing a second one in May to activate more and more customers to increase the traffic in our retail stores. There, these mailings also show very good return on investment from just the incremental sent out already. Our store rollout continues. As I just said, we are at 57 stores now. We sticking to our guidance to open a minimum of 20 this year.
We already opened nine of them, so four in the first quarter and already five in the second quarter. We also secured a first location in Switzerland for later this year. I can say that I think all of the locations that is on that list here are already secured for 2022. The new stores also showing revenues that are in line with our expectations, which is a very good sign for 2022 as a whole. Last time we mentioned that we already started to increase prices to offset some underlying cost inflations. Also we are not basically detached from that development or the overall inflation in the market.
To counter that, we started to increase multifocal prices first, and we've done that in February in Germany, Austria. We just also increased prices for single vision glasses. We're seeing good developments of our unit economics and a positive impact of obviously on overall gross margin. There are still some areas where we have future potential, especially international markets which we did not yet touch, except for Austria. We'll review that also on a continuous basis to see the impacts, and what we're gonna do with that in the next months as well. I think exciting news are on Tribe.
As you know, we've been invested in the company since October 2020, and to focus on getting a lot of data from people using mobile phones in terms of measurement for the overall face, for pupil distance, segment height. What we've done is yesterday we acquired the outstanding shares of Tribe, now being a 100% owner of the business. Why did we do so? Because we've seen technology develop very well, approved in terms of quality that our ambitious targets are met and to better integrate them and provide basically a more optimal development environment and faster, I would say deployments in terms of features and integration with our tech platform.
We decided to buy the remaining shares early and I'm just coming out of an all hands meeting basically with the team, which is obviously very international and is looking forward now to work with us and getting live more features. Our customers will benefit in mainly three areas, right? One is frame size recommendation based on a lot of information from scans of their face in terms of size, in terms of shape. Here we already see very good impacts from basically subsets that we've been able to analyze and give recommendations to our customers and with leading basically to substantially higher conversion rates and follow-up order rates in case of a home trial.
Because people are just more aware. I mean, the frames are fitting even better with using these apps. Second is PD and segment height measurement. I mean, we have this in place already for quite a long time, so here we also roll that out to more and more devices and applications, providing obviously lower return rates and more comfort in our services if we provide them online. The third one is something we're still working on, our bespoke 3D-printed frames, which is obviously a category that allows us to address, I would say, customer groups that look for unique products. Obviously this will increase AOV and gross margin for us as well.
That is something very unique in the market, addressing, I would say, quite a high share of people that are buying frames that are wanting a 100% fit, because everybody is unique, basically. That is helping us to address these customers. Last but not least, we are also caring about what really matters. After a lot of personal initiatives from our colleagues at Mister Spex in the first weeks of the Ukrainian war, we have now established a program in Germany and Austria, where we provide free prescription glasses and contact lenses to all Ukrainian refugees in our stores.
We're not doing this as a big PR campaign, so we not even talk about it in our PR. What we do is we are approaching health organizations to help us basically to get to the right people that need basically help and integrated them in spreading the news and the offer to Ukrainian refugees. I think that's already, although it started only beginning of May, very welcome by a lot of these organizations and refugees from Ukraine. Now, having given you some overview on more the strategic topics, I hand over to Sebastian to give you an update on financials.
Thank you, Dirk. Taking a look at our overall performance, we have grown 6% on a year-over-year development up to EUR 47.2 million in revenues and growth of 35% on a two-year stack. What you actually see is that, particularly Q1 2021 was a very high comp base, where we have grown 27% year-over-year. With this +6%, we actually confirmed this development. What we have seen is, and Dirk mentioned it earlier, that we have seen a certain impact on our business when it comes to depressed consumer sentiment driven by the geopolitical uncertainties and the rising inflation.
Also the situation of the pandemic, which not only has seen impact on the consumer side, but also in our operations when it comes to logistics and our retail functions with record high sick rates in a range of 20%-30%. Taking a look at the categories, starting with the most relevant one from a margin perspective, prescription glasses remained stable at EUR 20.8 million. What we have seen here is a certain online fatigue, which we have seen primarily in prescription glasses, which was at least in parts compensated by a brick and mortar recovery.
Sunglasses increasing by around 8% year over year, which is a good development considering and keeping in mind that last year the sunglasses season started much earlier, so we had a huge increase last year in February already, which remained till April. Whereas, we have seen this year that due to the weather conditions, this trend and uplift is rather starting end of April, beginning of May. Contact lenses continues its recovery trend with once again double-digit growth, 13% year over year. What is the driver behind this development? We actually see that more customers are actually going back to work, to offices, and we see an increase in social events, which actually drives up the contact lens revenue. We are talking about our key customer metrics.
We actually see an increase in all three of those active customers, increasing to 1.7 million, which is a 7% increase year-over-year, primarily driven by our fairly high repurchase rate, so our existing customers conducting repurchases, and in parallel, we see a good new customer development. When it comes to number of orders, it's showing a similar development as active customer development with a 6% increase year-over-year to 554,000 orders and average order value only with a slight increase of 1%, but which is actually a good sign, as we have to keep in mind when you take a look at our revenue mix, our product mix, prescription glasses decreased by 3% year-over-year, which was then actually absorbed by contact lenses.
Nevertheless, we were able to increase AOV by 1%, and we have seen an increase in average order value in each of our categories, so in prescription glasses, in sunglasses, and in contact lenses. When we take a look at our two reporting segments, Germany increasing by 7% to EUR 33.6 million, 34% on a two-year stack, which is positively impacted by double-digit revenue growth of our store cohorts, which nevertheless, even when it was mid double-digit, was behind our expectations, as Dirk Graber also mentioned, due to the sick rate. We initially expected a little bit more. Other than that, online, as mentioned earlier, we have seen a certain fatigue. Germany, we were able to grow contact lenses and sunglasses double-digit.
When we take a look at international, the situation on the online side had a stronger impact on our international business due to the fact that we do not have so many retail stores live yet, so we were not able to, let's say, compensate or overcompensate the the minor development in online, bringing us to EUR 13.6 million in revenues in the first quarter this year, which is a 4% increase compared to last year's level and a 37% increase on a two-year stack. Overall, contact lenses was the strongest driver in revenue development internationally.
When we take a look at the overall picture, revenues, as mentioned already, gross profit margin at 49.2%, which is a 240 basis point decline compared to last year, primarily driven by an unfavorable product mix compared to last year. As mentioned, 3% less in revenue on a spectacles side, eaten up by contact lenses. Generally, when we take a look at the coming quarters, we expect a year-over-year increase due to the fact that we expect an acceleration primarily on the prescription glasses side, but also on sunglasses side. Where those two categories should over proportionally outperform the contact lenses business, and by that increase our gross profit margin.
The price increases that Dirk mentioned should also help us in that regard. Personal expenses at EUR 14.1 million. Strong increase compared to last year. To put this a little bit into perspective, when we just take a look at the year-over-year increase as it is, it's at around 37%, but we have a couple of special effects that need to be taken into account. On the one hand side, we had short-time work impact last year, and we have over-proportional strong increase in, for example, vacation accruals. This year, we should level out at the end of the year. We should also not forget that last year we had a lot of store rollouts in second quarter till the fourth quarter, which on a like for like basis also have a material effect.
When we take a look at without those effects, we are talking about a low teens increase compared to last year. Other operating expenses at around EUR 16 million, slight increase compared to last year, overall 5%. Primary driver behind that development is a strong increase in our marketing expenses, as already mentioned during the quarterly call for our third quarter, but also the full year reporting. We see strong increase in marketing inbound costs, which affect the overall marketing cost increase. This brings us to an adjusted EBITDA of -EUR 4.6 million, driven by lower gross profit margin performance and a gross profit in absolute terms, but also increasing costs. What does that mean for our outlook?
As already indicated during our full year reporting, we expect an increase compared to last year on the revenue side and an increase in adjusted EBITDA compared to last year. We need to keep in mind that the Q1 performance had due to several reasons a certain impact. When we're thinking about the consumer sentiment, when we are thinking about the rising inflation and the high sick rates, this was behind our expectations. Nevertheless, we expect now an acceleration in the coming quarters, and particularly after the transitional Q2 quarter, particularly also on the prescription glasses side, which should help us to achieve our top and bottom line guidance. This brings me to the end of today's presentation, and we are now happy to take your questions.
Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift the handset before making a selection. One moment please for the first question. The first question is coming from Cédric Rossi at Bryan Garnier & Co. Your line is now open.
Yes. Good morning to everyone. I have three questions. The first one is, I was curious to have your view on the trends by price point, because some retailers already mentioned a lower activity with lower income consumers. I was curious to have your view on the performance by price category. The second question is on prescription. It was quite soft in Q1. You mentioned some new marketing campaign that is launched in May. On a full year basis, do you expect also the prescription to outgrow the other categories?
On a like for like basis, because I know that your new stores will also contribute to the acceleration, but I was also curious to have your view on the like for like basis, especially versus sunglasses. That is probably the fastest growing category at this time for the industry. My third question is just a clarification. Sorry, because my line was poor. Dirk, when you mentioned that the like for like was positive for your new stores in April and May, you were referring to the new store cohort or specifically regarding the stores that have just opened? Thank you.
Thank you, Cédric. Trying to answer the question step by step. First on price point. I think what you mentioned, meaning lower price points, see lower activities. I think we see that, indeed premium products are the fastest growing category across prescription and sunglasses. Here, I think these are the, I would say, consumer groups where probably inflation is not limiting their spending, right? In terms of, I would say lower price points, because this or is relating to people with, probably lower available income, just in a general way. We do see, similar effects, that, I would say they are moving slightly slower. What we.
I'm trying to do is obviously providing here also attractive offers, campaigns throughout the year to address these customers and provide them with affordable prices. I think our general price positioning should help us also going forward in these customer segments. Your observation is correct on that. Second, in terms of prescription glasses, yes, we do expect prescription glasses to over proportionally grow for the full year. This will obviously be dependent on the second half of the year. We've seen very strong year-over-year development last year, so meaning the basis for prescription glasses in the first half of 2022 is very high for us.
Just giving you an idea, in April 2021, we saw prescription glasses growth of over 60% at EssilorLuxottica. Now we need to obviously beat that. In our second year, second half of the year in terms of like-for-like will be substantially, I would say, easier to see substantial or the double-digit growth numbers. In terms of sunglasses, obviously sunglasses are very especially the start of the season is very impacted by the weather and the seasonality. We've benefited from the overall market development in the last two years, seeing mid-20% growth rates in sunglasses last year and the year before.
Here we see that now finally in May, the weather turned to be good, and we're seeing substantial growth rates as well. On like-for-like, the stores, the slide that I showed in terms of retail growth, but also what I mentioned is that we see throughout all the historic cohorts that they have double-digit growth rates like-for-like versus last year, which is good, which is encouraging, because we see a good recovery now for the first months of this year. The new store cohorts that we're just opening, they are in line with our expectations since we don't have like-for-like numbers here.
We did have obviously some budgets based on our experience over the last two years. Here we're pleased to see basically that they are performing in line with the expectations. I think that's.
Okay. Very clear. Thank you, Dirk. Yeah.
Thank you.
Yeah. The next question is coming from Sam England at Berenberg. Your line is now open.
Yeah. Hi. I was just wondering what kind of strategies you have in place to mitigate cost inflation in the business, particularly in logistics. Any color on that would be great, please.
Maybe two things. One is regarding HR costs, we obviously had always salary increases budgeted already. I think last five years, we always had 5%, and we included that in our budget as well. We obviously might need a little bit more this year because of inflation rates, at least in the first quarter, being around 7%. We work continuously on improving our processes and productivity in operations. Investing in automation is one of the strategies. Gradual basically performance improvements is the other one, especially in operations.
Okay. Thank you very much.
As I mentioned, we're trying to work on the gross margin in terms of price points to then basically cover most of these inflationary things in our P&L.
Sure. Just to follow up on that, are you seeing any impact on volumes for price increases that you've put through so far?
That's a good question. Since, on the lens prices, it's quite late in the funnel. By the way, we did not change the frame prices that much yet. I think we don't see a lot of impact on volumes, which is good. That's why we also first increased the price for multifocal and compared the progressive multifocal segment with our single vision segment. We haven't seen any substantial, basically, volume impacts. Now, in the second step, last week, we also increased the single vision prices to be basically able to compare.
I think what is important is that, especially for the more price-sensitive customers, we did not change our core value proposition that the standard lenses are for free. That is still the case for all single vision glasses. The second thing is on the multifocal, what we've did is we actually lowered the entry price by 10 points from EUR 109 to EUR 99, but increased more the premium products. I think that turned out to be a good strategy to basically be affordable on the one end, but also trying to get the, I would say, willingness to pay for premium products, to overall increase our margin.
Great. Thanks very much. That's very clear.
The next question is coming from Alexander Thiel at Jefferies. Your line is now open.
Hi, good morning, gentlemen. First, could you comment again on the magnitude of your price increases and how this compares to your competitors? Are you still roughly 20%-30% cheaper? Secondly, could you comment in light of the weak consumer confidence, if you are seeing changes in the replacement cycle, and sorry if I missed it, but could you comment again on the difference of growth paths we have seen between online and offline in Q1? Thirdly, on your current trading, could you comment on your visibility in the first 1.5 months in the second quarter and the shift in sales mix? Based on my understanding, we need to see quite an uplift in prescription to increase gross margin.
Mm-hmm.
Catch back over EUR 10 million of EBITDA, basically to make the guidance. Thank you.
I might have missed just the second one by noting it down, but I'll try to at least answer the first and the last one, and then you might repeat it, Alexander Thiel. Price increases versus competitors, that is hard to measure how our competitors increase prices, right? Because there are different elements. There are frames, there are lenses and so on. Some of them are not very price transparent. I can tell you what we've done is, our multifocal prices, we increased on average, for the lenses by 7%-8%. If you combine that, basically it leaves you with a 3%-5% increase for the frame plus the lenses in total.
For single vision, the price increase for the average lens package, although the standard lenses are for free, was in the mid-teens. Here, I would say the overall increase for the frame plus lenses, I would expect also in the mid-single digits. If there are price increases on the frames and sunglasses and so on, we obviously try to pass that on to consumers in line with the market pricing. What we do see at the moment is, because of the late start of the sunglasses season, there has been quite some promotional activities from competitors. Which is obviously impacting also our overall pricing level, including promotional campaigns, especially for sunglasses. That's on that. Second, on current trading Q2.
I would say April was a very challenging year-over-year comparison month for us, as I just said, 60%+ growth last April in prescription category. April was in line with Q1 development in terms of growth overall. Now we are seeing basically a good uplift since the beginning of May that is driven partly by the weather, as I just said, picking up sunglasses. That's something which we see. Also the increasing store footprint obviously helps to increase the prescription glasses growth. As you mentioned correctly, we do expect an increase in our prescription glasses business later Q2 and in the second half of this year.
Including, obviously then double-digit growth rates for prescription as well. I think the second I just remember is consumer sentiment. That is obviously something that we need to deal with, but it's a little bit out of our control. What we do is we focus basically on the things that we can control and manage, which is obviously our promotional activities. It's how we manage basically operations, including obviously very strict P&L management, in terms of being aware of the situation.
Thank you, Dirk. Sorry, my line is quite patchy. Just coming again back to the second question. I mean,
Yes.
I was asking, do you see any changes replacement cycle? If you could comment on the different growth paths you have seen between online and offline in Q1. I would have a follow-up for the acquisition of-
Can you just repeat the first one? Sorry, Alexander, can you just repeat the first sentence? Do we see any impact on?
Repurchase cycle.
Oh, sorry.
Yeah.
That's one I didn't get. Yes. So repurchase cycle, that's something that we monitor obviously, and we see that. I would say that the long-term repurchase cycles are intact, but we do see some, I would say, postponement in the first 12 months, 24 months after you've initially purchased at the moment, which is basically a signal of, I would say, consumer sentiment, right? We see that.
When it comes more to the replacement driven repurchases year two, three and four, we don't see that impact, but we see it in, I would say, the more shopping-affine people that I would say are purchasing also in year one and two to a higher extent.
Okay. On the difference between online and offline in Q1?
I think that offline, I mean, we always look at our customers across all channels. In terms of repurchases, that shouldn't make a big difference for us where customers buy. What we see in terms of performance is what I also shown on the, I think the first slide, that there is an overall muted demand in regards to traffic online, right? Online is, I would say, slower growing at the moment, especially when it comes to prescription. On the other hand, our retail stores really show good year-over-year like-for-like developments. Also the older cohorts plus the ones that we opened last year and in 2020.
Here we see, I would say, a good development beginning of this year and also in the second quarter.
Okay. Thank you very much.
As a reminder, if you have a question for our speakers, please dial zero one now to enter the queue. There seem to be no further questions. For closing remarks, I'll give back to Frank Böhme.
Thanks a lot for your interest. If you have any further questions, please reach out directly to me. Have a nice day, and bye-bye.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.