I do. I've been an avid customer of Mytheresa. We're excited to have Mytheresa here for our fireside Q&A conversation. Thanks for joining us today. It's Oliver Chen, Cowen's retail and luxury analyst. We're pleased to have Dr. Martin Beer, the CFO of Mytheresa, ticker MYTE. A quick introduction on Martin. He first joined in 2019 as CFO and has been a member of the board since 2020, and he has over 17 years of executive leadership roles within fast-growing, digital-focused and B2B and B2C e-commerce companies. Prior, he was at McKinsey & Company. Mytheresa has been a really innovative company for me to cover. They're at the pinnacle of digital luxury, and they focus on a very, very high-end wardrobe-building customer. So for starters, Martin will share a video before we jump in the Q&A.
Feel free to cue the video now. Thank you.
We have to do something against this in the next room. Show this room, yeah. Put up the sound.
Perfect.
Thanks so much.
Martin, that really distinguishes Mytheresa with your curation and your experiences that sets you apart. So the question is: What does set Mytheresa apart from other digital players in the luxury space? What would you say are your core competencies?
Yeah. Thanks, Oliver. I mean, maybe to this video again, I mean, why is this important? It's just nice pictures, but it really shows that we, as a player, much more than any other industry peers, have the strongest relationship, the strongest ties with the luxury brands. No other retailer has so many exclusive events that you just saw, with names of such high caliber, I mean, Loewe, Brunello, Valentino, you all saw the names. And what's really important is that the number of those events and the collaborations increase every year. So the ties with the brands are becoming stronger and stronger because the brands really want us to be successful because they realize that we are adding value.
We give them digital visibility to a certain customer that does not go to brand.com, or into their stores. So it's really important to see that evolving in the last years, being the number one perceived by the brands in the industry, global number one, and also it speaks to our top customer focus, because these, those events are tuned towards our top customer, and this is our top customer strategy. So we are the player in the industry that is the least promotional and the least affected by aspirational customer weakness, because we really focus on attracting and retaining top customers, inviting them to those events, and giving them a money-can't-buy experience, because to those events, I mean, the top designer attends, and he only attends once per year.
So this is just a focus on Mytheresa and the Mytheresa positioning. Coming back to your question, what are the core assets? What are the core strength is exactly speaks to that. It is that it's our unique focus on high-end creation. So we are the most curated player in the industry, really the most focused player. We focus on the high-end brands and really curate our program around that. We have the top customer focus that you just saw, and we have the best execution in the industry. So really focus on delivering an experience for the customer that is unparalleled. Speaking to the highest Net Promoter Score in the industry with 80%.
So really, the strong curation, very focused, the top customer focus, and also the focus on operational excellence.
Martin, the industry has been highly disrupted in terms of your competitors facing a certain degree of distress. You are profitable. What set you apart? What do you see happening with consolidation and/or you capturing customers of distressed competitors?
Yeah, I mean, there's... I mean, first of all, we've always been profitable, and that, I think, sets us apart. For example, for MATCHES that I think just is facing currently a lot of difficulties. So that disciplined focus on high-level curation, on the top customer, on that growth avenue, on that focused market approach, very disciplined, enabled us to grow and to grow with profits. So we've always been profitable, and with that approach, always took market share from our competitors. And even in the, for the luxury industry, difficult situation last year, we were able to grow top line and also to stay profitable.
I think that sets us apart from peers, where we want to continue to even stronger capture market share, because the situation is tough, as you described, and so more people in the industry fall over the cliff. We are happy to take market share and attract the customer and speak to the customer of those competitors and convince them that Mytheresa has the best offer.
Your long-term algorithm calls for high teens revenue growth, adjusted EBITDA margins of at least 8%. Could you speak to building blocks to this algorithm in terms of, GMV growth and also, cost leverage points in the margin structure?
Yeah. I mean, we're the opposite of a hockey stick because we've always been profitable and always are growing that way. So if you look at those numbers that you called out, high teens-low twenties top line growth. The last six years, we had a CAGR of 25%. If you look at profitability, two years ago, we had 10% Adjusted EBITDA. Obviously, it was a very strong year, unprecedented positive, but we always had 7-8% Adjusted EBITDA profitability, and in the current situation, given the challenges, that profitability went down. So the building blocks to coming back is more achieving that growth rate, what we have been achieving.
So again, staying true and focused on what we're doing and, once that, once those challenges in the market, in the overall market, that also affects us, will turn away, then that will enable us right away to increase profitability. If you look at more specifically, how do we increase profitability, it is mostly driven in the gross profit margin. If you see gross profit margin today, where we achieve a profitability of 3, 3.5 adjusted EBITDA margin, my gross profit margin is 500 basis points below what it, what it is used to be, what is, what it is used to be. And that's why then it's easy math to come up to the 8%.
The gross profit margin slippage that we have seen in the last quarter has reduced. We were able to, with our focus on full price, to achieve a significant reduction in the gross profit margin slippage, much better than the other players. We already see in Spring/Summer 2024 and Fall/Winter 2024 very strong sell-through rates, stronger higher share of full price, full price share. It is just the overlay that now, on a short-term perspective, there are some players that really struggle, for example, MATCHES and others, and getting rid of the excess inventory, and that still holds us back from achieving right away a stronger gross profit margin. But it is a short-term perspective, as they are not get delivered anymore from the brands.
In the medium-term outlook, there is no structural impediment that our gross profit margin will significantly improve again. Having and having additional tailwind that those competitors have been falling away and are not there anymore, so helps on the top line, and it also helps on the gross profit margin side because the promotional intensity significantly reduces.
Zooming into this year in terms of your guidance at the low end of an 8%-13% range, what gives you confidence in, you know, double-digit growth into the next quarter, which is implied in terms of the guidance? It's related likely to some of your earlier comments.
I mean, first of all, it's just, I mean, the fiscal year ends this month. So obviously, there is some visibility also in Q4, and that's why we kept on the guidance on 8%-13%. And that implies also for Q4, which is April, May, June this year, that we will grow double digits. And so it is driven by the underlying factors that I talked about, that Spring/Summer 2024 merchandise, Fall/Winter 2024 merchandise, has a much better position in the market. Our continued success, and also driven by weakness of our peers. And that's why we guided, we continued our guidance on the top line, double digit for Q4.
That leads to an overall guidance of 8%-30%. I mean, the lower end of 8% of the guidance of 8%-13%. Also on the bottom line then, the improvement also in Q4, April, May, June.
Mm-hmm. You also have a very globally diversified business. How would you contrast Europe relative to the U.S., and you're seeing really outstanding numbers in the U.S.?
Yeah, I mean, obviously, we have as a core European player, so about 50% of our business is Europe, where we have strong market positions. Last quarter, we grew ex-Germany 13%, so we continue to see also there double-digit growth with a strong foothold. Obviously, Europe is not Europe. I mean, there's a lot of different country behavior inside of Europe. So we see Italy, Spain, France, very strong. Austria, Switzerland, Germany, a bit weaker, but it changes. But it's a strong foothold in Germany. Then we have the U.S., and have experienced very strong growth in the U.S. in the last quarters. Around 30%-40% of growth in the U.S.
U.S. now makes 22% of our business, and we are, we are uniquely positioned in the U.S., as our curated offer, what kind of brands we bring to market, how we go to market, not only on performance marketing side, but also on offline. You saw in the videos the Holiday House, the Gingerbread House, the East Hampton pop-ups. How we, how we tackle the U.S. apparently makes a lot of sense and speaks... and enables us to, to increase that market. And maybe just on the number-wise, why are we able to grow 30%-40% each quarter in the U.S.? is also based- it's also due to our, I mean, small base. I mean, we, we have a very focused, as typical in luxury, very focused business.
3.6% of our customers make 40% of our business, very typical for luxury. So, 3.6% of 860,000 customers, active customers, at around 30,000 top customers, and 20%, so 6,000 customers in the U.S. And that shows you, 6,000 customers in the U.S., I think that's all your best friends. It's very easy to grow, as we are still tiny. We do 22%, EUR 200 million in the U.S., but it's a significant growth potential.
This has been a hot topic, aspirational customers. It's been weaker, but getting better, and we're facing easier compares with aspirational customers. Can you quantify the growth you've seen here in the U.S. lately and your thoughts on that, if it's helping or hurting, and how it may be impacting average order values?
Yeah, I mean, the aspirational customer weakness is, you know, is like, has been always a key topic for those conferences. And, everybody is looking on improvement signs, as we heard this morning. With us, we definitely see green shoots in the U.S. on aspirational customer. I mean, it's clear. If we—if you grow more than 40%, you also are successful with aspirational customers. So the aspirational customer is, in our view, with our market positioning, is coming back. Obviously, that is not a high net worth individual below 75,000. That's what we heard this morning. Is a different aspirational customer, but we definitely see improvement there, and that obviously will help.
I mean, the U.S. is a very dynamic country, region, and will come back, in our view, the earliest. Europe is still a mixed pot, with Germany being the lowest or the most pessimistic. Growth rates are very low, and expectations are very modest. And yeah, Middle East is also booming.
Why, why might the U.S. be earlier? And also, what are the green shoots you're seeing with aspirational?
I mean, U.S. has always been very dynamic.
Yeah.
As you called out this morning, stock markets are up. There are some positive elements on high net worth individuals that do want to come back and want to treat themselves more, not just on restaurants and vacations, but also on luxury items. We see aspirational cuts in all different regions in the U.S., like the East Coast, Florida, Texas, West Coast. They're all over, and, but it's - I mean, it's not, I think it's too early to call it out now, the aspirational customer-
Yeah.
-is back.
Yeah.
Definitely not. There are some green shoots, but it's still, it's still too early to tell.
Got it. You also pointed out softer demand in Asia-Pacific. What's driving this volatility lately? How would you characterize your business there, and the macros that you're seeing?
I mean, China, is and will be the second largest online luxury market in the world. It is very important, and remember, two years when we sat here, some people said, "You can only grow if you are in China. China is the only place that will show growth. U.S. will not grow." Now, it's the opposite, so this is also naive to think about China of not growing, of not being a very important player in online luxury in the future. There's a lot of high net worth individuals there, a lot of potential there. But you're right, it is for everybody. It is very—it's still spotty also for us.
The good thing is that we are less dependent on China than a lot of luxury brands or a lot of peers. So for us, China is an investment, is a potential.
Yeah.
Once China opens up, and we have this very strong, the biggest event ever in Beijing with Courrèges. And we are investing. We're investing in China, and to really capture the benefits of growth once it stabilizes. But right now, it is also too early to tell that they are now back.
What do you see happening, with respect to the Gucci brand, and also perhaps your CPM or your curated platform model?
Mm-hmm.
the Kering portfolio? Some of the Kering brands are particularly exposed to aspirational, and there's a movement to make them more timeless now. Are you-
Yeah.
Are you enjoying what you're seeing with execution currently?
I mean, first of all, I think it's—I mean, also for us, Kering, especially Gucci, as we called on the IPO four years, three years ago, was the most important brand. And that we are growing at such a high rate despite the Gucci and Kering weakness, I think also speaks to our business model, having a multi-brand offering, us enabling, as a kind of a portfolio company, to grow with other brands, if Gucci and Kering not grow right now. I mean, Loro Piana, The Row, Brunello, always those quiet luxury brands really perform very well. And yeah, as everybody erodes, the past success of Gucci is now also their legacy, and it's unclear.
I mean, we had a lot of success with the Ancora season or Ancora fashion from the new designer. Obviously, it's just a very high base that they operate from. For us, I also perceive that as a huge potential for us because we're an ideal partner as a multi-brand player to enable Gucci, as an example, if they want to address a certain different customer group, not that customer group that is more tuned toward logo or loud fashion, to also speak when it and attract a different customer group, then it's easier through a multi-brand player than to Gucci itself.
And so, we are also seen by the Kering group and Gucci as a very strong partner to help them to benefit from the investments that they are planning. And, I see that also for us as a huge potential in the future once they bounce back. It is unclear when that will be.
Martin, a related question, like quiet luxury versus logos, and or both, how does that manifest in your portfolio? How do you see the market evolving? Customers actually buy both to a certain extent.
I mean, right now, it is still very much driven by the so-called quiet luxury, so the Brunello, The Row, Loro Piana, the Tom Ford. Also, I mean, with us, the Dolce & Gabbana, and obviously, all due to our heritage, perform very, very strong. But this will also, as you are well aware, this will also not go on forever. So there will be a reversal of the trend, and there will be then the need again to be more fashion-oriented, to express yourself. Because at a certain point in time, people probably will be kind of saturated of quiet luxury and want to show that. And there again, a multi-brand player can help to-
What's driving quiet luxury for so long now, Martin?
I really can't tell. I really can't tell. It's, I mean, obviously, from the customers that talk to us why they are buying Brunello, it is—they just love the design, the fabrics, the quality, and obviously, it's also among their peers, it's clear that this is a Brunello coat they're wearing.
Mm-hmm. It's quiet, but loud.
It is. Exactly. So it is. It's still an expression of personality.
Yeah.
It's still an expression of what you want to be perceived as.
Mm-hmm.
It mirrors the overall sentiment in the market.
Mm-hmm. Stealth wealth. Subtle, but elite. What about the promotional environment? You spoke to this. Are you seeing more promotions, less promotions? It sounds like less.
The overall, I think there's two sides of the story. The overall, underlying is that, as expected, there's less promotional intensity with Spring/Summer 2024 and Fall/Winter 2024.
Mm-hmm.
We see higher sell-through rates-
Yeah
... less promotional intensity because there's less inventory in the market.
Yeah.
Everybody ordered less, and also the brands are more selective on supplying merchandise to certain partners. This is the overlay, which is great, and which is reassuring. Right now, and if, for example, and there are still crazy players out there that do early promotion, early deliveries 30%, but they don't have the inventory for that.
Yeah.
That's why the customers then come to us and say, "Well, help me with certain brands, and getting the right sizes." But the additional topic is then the immediate effect of players exiting the markets.
Yeah.
That is then also driving inventory and a bit fueling the promotional intensity that we see right now, last quarter, this quarter, and it might go on for one or two quarters that we have to deal with it. But the real benefit is that once that is over, again, huge tailwind, as those market players are not there anymore. I mean, remember-
Yeah
... last year when we sat here, I mean, MATCHES going away, Farfetch going away, it, a lot of people are struggling. It is an unprecedented consolidation in the industry that's going on, and that obviously helps the players that really perform well.
Yeah. I write about this in my research, the power of physical meets digital, and bricks and clicks, and the connected. How do you think about M&I, M&A? You were originally part of Neiman Marcus Group, and I think that consolidation in this industry could be quite healthy. How do you more generally think about M&A?
I mean, as we said on the earnings call, we have such a strong organic growth trajectory and profitability, and we completely focus on that.
Yeah.
We don't need any deal. We don't need M&A.
Mm-hmm.
But obviously, it would be not correct to not look at opportunities-
Mm-hmm. Yeah
... on an opportunistic level.
So lightning round questions: How are you using A&I, AI within your business? And second, I ask this question of all CEOs, like: How's the health of the consumer that you're seeing on a scale of 1-10?
I mean, AI obviously is affecting all departments also with us. But we and we are experimenting a lot. We were looking at it. I mean, there's obviously clear parts on translation and then and certain topics, but you have to be, if you operate in such a high-end luxury market, you have to be very careful.
Yeah.
I mean, we had some also some negative experience on a chatbot conversation, which was not the right tonality for a customer. So they demand excellence, and with excellence, you can only... You have to be flawless, and that limits a bit customer-facing experiences with AI. But, I mean, this is unstoppable, so we will continue to look at it, the IT, from every aspect, from every angle, and we'll keep on focusing that. I mean, health of the customer as it is such a mixed bag, obviously when I talk of top customers, I would call it a nine. If I look at the sum, I might call it a seven because there's so much...
We talked about the regions, we talked about the differences. It's not really the one-
Mm-hmm
... type, type of customer.
Last question: What's your favorite book, TV show, or streaming show?
I liked from Paul Giamatti, the new movie, the guy that has done in Sideways, you know, the Pinot Noir-
Yeah
... Napa Valley.
Yeah.
What's the guys that have to stay over the weekend? I really liked that movie, but I also love blockbusters. So on the flight here, I watched again Dune: Part Two.
Yeah.
The Harkonnen is that, that really narrow. So I like that. And from a book-wise, just reading a German book, Daniel Kehlmann, Lichtspiel, very very good book on a movie maker in the Hitler era and how he influenced, or with his movies, this overall sentiment.
Great. Well, Mytheresa has been clearly a curated, edited, partner of great brands and with top customers, and it's been wonderful to see all the innovation. Thank you, Martin.
Thank you.