Greetings, and welcome to Mytheresa Third Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in listen only mode. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. It is now my pleasure to introduce your host, Martin Beer, Mytheresa's Chief Financial Officer. Thank you, sir. Please begin.
Thank you, operator, and welcome everyone to Mytheresa's Investor Conference Call for the third quarter of fiscal year 2022. With me today is our CEO, Michael Kliger. Before we begin, we would like to remind you that our discussions today will include forward-looking statements. Any comments we make about expectations are forward-looking statements and are subject to risks and uncertainties, including the risks and uncertainties described in our previous annual report. Many factors could cause actual results to differ materially. We are under no duty to update forward-looking statements. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non-IFRS financial measures in our earnings press release, which is available on our investor relations website at investors.mytheresa.com. I will now turn the call over to Michael.
Thank you, Martin. Also, from my side, a very warm welcome to all of you and thank you for joining our call today. We will today comment on the results and performance of our third quarter of fiscal year 2022. Our business has shown excellent strength and resilience. We are pleased that Mytheresa delivered very solid results and continued profitability despite the impact of external challenges. We outlined last time the delays in spring summer deliveries from the third quarter into the fourth quarter, thus also moving the corresponding revenues from the third into the fourth quarter. Unfortunately, there were additional and totally unexpected external shocks in the third quarter. We saw in March a strong rise of COVID infections in Asia, shutting down public life. Even more tragic and totally unexpected was the outbreak of war in Ukraine at the end of February.
This had a temporary negative impact on consumer sentiment in Europe. Despite all this, Mytheresa delivered very solid results and continued profitability in the third quarter of fiscal year 2022. I want to leave you today with three key messages allowing you to have a clear view on the strengths and health of our business. First, the fundamental drivers for continuous growth for our business remain all in place. Mainly, the shift of luxury consumers to online shopping, as well as untapped geographic and category growth potential for our business. All of this supports our belief in a long-term growth trajectory of 22%-25% annually. Second, despite the challenges in the third quarter, we have produced excellent results and KPIs demonstrating our customer excellence, which is driving customer loyalty and sector-leading profitability.
Third, the first weeks of the fourth quarter fuel our confidence to remain the best partner of choice for luxury designer brands to engage with our high-value multi-brand customers and for a speedy passing of the external shocks. Therefore, we have full confidence to deliver a solid fiscal year at the low end of our guidance. Let me now comment in more detail on these three key messages for today. First, in the third quarter, we grew our gross merchandise value by 13.2% compared to Q3 of fiscal year 2021. Our continued growth momentum compared to extraordinarily strong growth in Q3 fiscal year 2021 is evidenced by the consistent high two-year growth rate in GMV of 67% in the third quarter of fiscal year 2022 over Q3 of fiscal year 2020.
We had a very good number of new customers in the third quarter with over 110,000 first-time buyers shopping with us. We combined the growth once again with a strong gross margin, so our growth was driven by consumer demand, not by promotional intensity, which we have seen break out in some markets with some players recently. Again, I would like to remind everyone that luxury is still lagging in online penetration. It is estimated by Bain and Altagamma that still only 30% of personal luxury goods spend will be online by 2025. This would be nevertheless a global online market of EUR 110 billion, of which at least 30%, or over EUR 33 billion, is estimated to be captured by multi-brand fashion platforms of which we believe we are the clear leader.
The long-term growth potential and our continued long-term guidance of 22%-25% annual GMV growth is of course also supported by regional expansion and category expansion in addition to share of wallet penetration of customers. United States showed again the highest growth for Mytheresa was 41.6% of growth in GMV compared to Q3 of fiscal year 2021. The US accounted for 16.4% of our business in the third quarter, compared to 13.1% in the third quarter of fiscal year 2021. We continue to see strong demand of luxury consumers, particularly from states like Florida or Texas.
Logically, we have therefore focused our activities in these states in the third quarter with high impact customer events such as a physical pop-up and dinner in collaboration with Vogue in Palm Beach and a shopping lunch hosted by a local brand ambassador for us in Dallas. People are spending their disposable dollars on unique and special pieces and are dressing up. We saw it clearly at our recent party in Miami, hosted together with Domenico Dolce to celebrate the upcoming launch of our exclusive capsule collection of Dolce & Gabbana, only available at Mytheresa. While mainland China was of course impacted by the unfortunate return of COVID outbreaks, we grew again by over 25.9% in GMV compared to Q3 of fiscal year 2021. We continue to pursue our long-term aspiration of being the best destination for luxury multi-brand wardrobe shopping in China.
As part of this strategy, we launched our flagship store on JD.com in the middle of March. This is not just to generate short-term revenue growth, but rather longer-term customer awareness and trust. We believe that JD.com provides a good environment for this approach, also evidenced by the recent announcements of brands such as Louis Vuitton, Givenchy, Loewe, Dior and Bulgari to open a presence on JD.com. From a category perspective, we see continued success with our new categories of kidswear and menswear. In the third quarter, our kidswear business grew by 21.9% in GMV compared to Q3 of fiscal year 2021, and accounted for 3.4% of our total business, making us a global leader in luxury kidswear.
In the third quarter, we also launched a very successful beauty pop-up with French plant-based skincare brand Sisley, which was accompanied by a 360-degree marketing campaign. The campaign included a video featuring three generations of the founding family, digital beauty sessions and a high-caliber lunch hosted by Christine d'Ornano during Paris Fashion Week. Please see our investor presentation for more details on the Sisley campaign. In addition, I'm delighted to announce our entry into a full range of luxury lifestyle products as a new additional category in May 2022. All of the above gives us full confidence to deliver multi-year annual growth of 22%-25% for our business. Despite the challenges in the third quarter, we have produced excellent results and KPIs demonstrating our customer excellence, which is driving customer loyalty and sector-leading profitability.
Based on our excellent relationships with brand partners, we were again able to produce impactful digital content and campaigns that created visibility to our unique, high-value multi-brand customer base that cannot be easily reached by mono brand offerings. Examples from the third quarter include the launch of the highly anticipated LOEWE x Spirited Away collection, exclusively available on Mytheresa, which almost sold out within 12 hours. The launch of the exclusive Moncler Grenoble collection, only available on Mytheresa. The launch of exclusive menswear shoe styles in collaboration with Berluti and the highly anticipated launch of the Manolo Blahnik Birkenstock collaboration and many more. Please see our investor presentation for more details on our brand collaborations in the third quarter. With our impactful campaigns, we were able to excite our existing and develop new customers.
We expanded our LTM active customer number by 21.6% year-over-year to 755,000. It is again noteworthy that we kept our customer acquisition costs fairly stable compared to extraordinary low costs in the third quarter of fiscal year 2021. One main driver of the profitability of our business are the strong underlying customer KPIs. We had again very positive repurchase rates in Q3 of fiscal year 2022 for customer cohorts first acquired a year ago. Please see our investor presentation for more details on this.
The average order value increased in the third quarter of fiscal year 2022, and the average spend per customer grew by 4.4% for fiscal year to date 2022 in the third quarter compared to Q3 fiscal year to date 2021. All of this drove profitable revenues from existing customers. The particular focus of our business are our top customers as they drive the almost 100% revenue retention from year two onwards for newly acquired customer cohorts. Our top customer base grew by 33.3% fiscal year to date 2022 in the third quarter. To engage and satisfy top customers, we have again grown our team of personal shoppers around the world and particularly in the U.S. This allowed us to organize intimate top customer events around the world.
Just in the third quarter of fiscal year 2022, we held events in the Middle East, Paris, Dallas, Palm Beach, London, Dublin, Hamburg, Zurich, and New York. Another special service we offer to our best customers is the exclusive resale service in partnership with Vestiaire Collective. We continue to see strong traction with this service, and our customers sold preloved items with a value of over EUR 850,000 in the third quarter of fiscal year 2022. We are quite proud as a business to be so actively involved in advancing circularity in our industry. In March, we expanded the service to the United Kingdom, and as of summer, we will also introduce the same service to our U.S. customers.
We achieved high customer satisfaction as measured internally with a net promoter score of 77.7% in the third quarter of fiscal year 2022. Not as high as last year due to continued global shipping delays driven by workforce shortages due to COVID. The quality of execution and health of our business is well captured by our ability to grow the business globally with a strong gross margin and sector-leading profitability. Martin will talk about our bottom line results in the third quarter in a few minutes. Third, the first weeks of the fourth quarter fuel our confidence to remain the best partner of choice for luxury designer brands to engage with our high-value multi-brand customers and for a speedy passing of the external shocks.
Just over the last four weeks, we have launched or pre-launched collections only available at Mytheresa with brands such as Zimmermann, Nensi Dojaka, the 2021 winner of the LVMH Prize, Dries Van Noten, Dolce & Gabbana, and Pucci. The Pucci pre-launch is noteworthy as it marks the arrival of a new creative director at this prestigious fashion house owned by the LVMH group, and Mytheresa served as the exclusive global partner to launch the collection with a 360-degree marketing campaign, including a weekend experience in Capri to celebrate the launch. All the mentioned exclusive merchandise only shoppable at Mytheresa delivers long-awaited newness and comes on top of remaining spring/summer deliveries as of mid-April. This forms an unprecedented cadence of launch campaigns that will continue well into July.
As mentioned above, we will also launch in mid-May a new category on Mytheresa presenting a full range of luxury lifestyle products. The ongoing development of the war in Ukraine as well as the COVID situation, particularly in Asia, makes it impossible to predict the macroeconomic environment for the coming months. The luxury sector has consistently proven in the past to be the most resilient consumer sector of all. We believe we are the best partner of choice for luxury designer brands to engage with our high-value multi-brand customers. We have full confidence to deliver a solid full fiscal year at the low end of our guidance. With all the above, it should come as no surprise that we are overall very satisfied with our performance in the third quarter of fiscal year 2022, despite clear challenges.
We believe that our results demonstrate the fundamental strengths of our business model, delivering profitable growth. We see ourselves as one of the few winners in the clearly consolidating luxury e-commerce space. The combination of best brand partnerships and best high-value wardrobe building customer base gives us full confidence to continue achieving outstanding results in the future. Now I hand over to Martin to discuss the financial results in detail.
Thank you, Michael. I will now review the financial results for the fiscal third quarter, January to March 2022, and will provide additional detail on some of the key topics previously mentioned. Unless otherwise stated, all numbers refer to Euro. GMV during the quarter was EUR 186.6 million, a 13.2% increase from EUR 164.8 million in the prior year quarter. This compares to a previous year quarter that grew +47% to the Q3 of fiscal year 2020. Our quarterly two-year growth rate was at a strong 67%, in line with the two-year growth rates of preceding quarters between 65% and 68%. We showed a strong performance before the start of the unpredictable external events outlined by Michael. Our GMV growth from July to December 2021 was at 28%.
As a reminder, GMV is one of our key value driver, as it shows the depth and growth of our customer relationships. Despite the external factors and a tough comparable from previous year, we delivered a strong GMV due to robust new customer growth and strong existing customer cohort performance. Customer engagement and retention continued to track very well as our active customers who shopped with us in the last twelve months grew by 21.6% to 755,000. On a two-year basis, LTM active customers grew by 63%. The robust two-year growth rates in active customers and high retention speaks to our unique positioning, attracting a highly valuable multi-brand customer, and our ability to deliver excellent service. During the third quarter, net sales increased by EUR 4.7 million or 2.9% year-over-year to EUR 169.5 million.
Due to the one-time effect of selected brands switching from the wholesale model to our curated platform model, the net sales increase is lower than our GMV growth in the quarter. The difference in growth rates between GMV and net sales is purely a one-time financial accounting effect from brands switching from the wholesale model to the curated platform model. For the CPM brands, we can only book the platform fee as net sales. As planned, in the third quarter, we had in total six brands who have started shifting from wholesale to CPM. For those brands switching, we now report the platform fee as net sales and not the GMV as the net sales. 12 months after the full transition of those brands, this one-time effect will be over, and net sales will grow in line with GMV again.
As mentioned before, we once again saw significant growth in many regions of the world in the third quarter, except for Europe, which was impacted by the Ukraine war. The U.S. remains a top growth region with 42% GMV growth compared to the prior year quarter. Mainland China grew by 26%. Our total orders shipped in the last twelve months increased by 23.1% to 1.7 million. Gross profit of EUR 82.8 million increased by EUR 10.4 million or 14.4% year-over-year, even stronger than our GMV growth.
The gross profit margin of 48.8% improved by 490 basis points compared to the prior year period of 43.9%, driven by our growing share of CPM revenues and a higher share of countries with prepaid duties charged to the customer, as for example, in the US. In these countries, our prepaid customs duties are reflected in the prices. Out of the 490 basis points increase, 290 basis points originate from the CPM effect and 200 basis points from the higher share of DDP countries. The underlying merchandise gross margin remains stable, reflecting the ongoing focus on full price, fully consistent with the high-end position of Mytheresa. Our consistently strong gross profit margin reflects the unique high-end positioning of Mytheresa.
Shipping and payment costs grew by EUR 5.9 million to EUR 25.1 million, driven by an increase in total orders shipped. As a percentage of GMV, shipping and payment costs in this quarter increased to 13.5% from 11.7% in the prior year quarter. This increase of 180 basis points is mostly driven by an increasing share of countries where we pay all the customs duties for the customer, such as the U.S. As mentioned before, the payment of these duties is reflected in our prices and therefore increase our gross profit margin in respective countries in the same amount. If you exclude the DDP costs, the shipping and payment cost ratio in relation to GMV was stable at 8.8% versus 8.7% in the previous year quarter.
Despite increasing internationalization and cost pressure on logistics, we were able to keep this ratio stable. During the third quarter, marketing expenses increased to EUR 23.3 million compared to EUR 22.1 million in the prior year quarter, primarily due to the increase in number of our customers acquired. As a percentage of GMV, marketing expenses decreased to 12.5% from 13.4%. We were again able to attract new customers at competitive costs and had a strong existing customer cohort performance. Given the external factors in the quarter, we aligned our marketing activities accordingly. Adjusted selling general and administrative expenses grew by EUR 4.1 million or 20.3% to EUR 24.3 million.
Adjusted SG&A expenses as a percentage of GMV increased modestly to 13% from 12.3% due to the short term less strong top line growth, driven by multiple unprecedented external factors in the quarter. Around 80% of our SG&A expenses are personal expenses as we provide most services in-house and have built up core competencies ourselves along the value chain. Personal expenses increase with the number of FTEs, especially in our warehouse, shipping and customer care activities, and are in line with expected GMV growth. Adjusted EBITDA was EUR 10.2 million as compared to EUR 11.1 million in the prior year quarter. The adjusted EBITDA margin was at 6% compared to 6.8% in the previous year quarter. This is quite remarkable.
Despite the external factors affecting top line in the quarter at a very short notice, the strong 6% adjusted EBITDA margin shows the resilience of our business model. We continue to deliver an industry-leading performance on top and bottom line. Depreciation and amortization expenses were relatively stable at EUR 2.3 million compared to the prior year period at EUR 2 million. The resilient profitability of our business model is also visible on operating income level. For the third quarter of fiscal 2022, Mytheresa reported an adjusted operating income of EUR 8 million compared to the EUR 9.1 million in the previous year quarter. Despite the top line effects, our adjusted operating income or EBIT margin in this quarter is at 4.7%, only 80 basis points lower than in the previous year quarter.
Adjusted net income in this quarter was EUR 5.6 million as compared to EUR 4.5 million in the prior year period. Also on adjusted net income level, we have generated a multi-year track record of continued and resilient performance. We continue to focus on delivering profitable growth, which is clearly visible in our very simple and transparent P&L. EBITDA, adjusted EBITDA, adjusted operating income, and adjusted net income are non-IFRS measures. Moving to the cash flow statement. During the nine months ended March 31st, 2022, operating activities generated EUR 22.9 million positive operating cash flow, driven by a decrease in owned inventories due to brands switching to CPM, which means the deliveries were in our warehouse, but not in our balance sheet. Wholesale and CPM combined inventory at the end of this quarter increased in line with our expected GMV growth in the next quarters.
In the quarter, we had again a net increase in cash and cash equivalents. With a strong cash flow from operating activities and after taxes, CapEx, and finance, cash and cash equivalents increased by EUR 16.8 million during the nine months ended March 31st, 2022. The positive operating and free cash flow underscores that Mytheresa operates a superior capital-light model. We ended the quarter in a strong financial position with cash and cash equivalents of EUR 93.5 million and total unused availability under the revolving credit facilities of EUR 60 million as of March 31st, 2022. Given our solid cash position, we reduced our committed revolving credit lines from EUR 90 million to EUR 60 million to reduce interest expenses.
Given our Q3 results and increasing performance visible in the first weeks of Q4, we expect to achieve our full fiscal year guidance at the low end of the given ranges. Our fiscal year 2022 will end in June 2022. Our guidance for fiscal year 2022 was GMV in the range of EUR 755 million-EUR 775 million, representing 23%-26% growth. Net sales guidance in the range of EUR 700 million-EUR 720 million, representing 14%-18% growth. Gross profit at EUR 350 million-EUR 365 million, representing 22%-27% growth.
Finally, adjusted EBITDA in the range of EUR 64 million-EUR 71 million and an adjusted EBITDA margin of 9%-10%. This is our maintained guidance for fiscal year 2022, and now with the fiscal year coming to an end, we expect to achieve our guidance at the low end of the given ranges. We are very satisfied with our performance during the third quarter, despite the external shocks, and we've seen increasing performance over the last weeks. We are very proud to target an overall performance level for the full fiscal year on top and bottom line that is very strong and unparalleled in the industry. We confirm our guidance of a positive free cash flow for the full fiscal year 2022, and therefore target positive operating and free cash flow conversion. To finish, let me talk a bit about our medium and long-term targets.
As laid out in our investor presentation, we target annual GMV and net sales growth of 22%-25% medium term. We expect to double the GMV achieved in fiscal year 2021 already in fiscal year 2024. Adjusted EBITDA will also grow 22%-25% per year in the medium term, with a stable adjusted EBITDA margin around 9%-10%. In the long term, with a higher share of existing customers in our GMV, we will be able to reduce our current 13% marketing spend of GMV substantially and position ourselves for higher adjusted EBITDA profitability level longer term. I will now turn the call back over to Michael for his concluding remarks.
Thank you, Martin. We are overall very pleased with the third quarter earnings results as we continue to grow profitably. We see ourselves perfectly positioned to take advantage of the ongoing shift to online and luxury spend, the continued consolidation in distribution platforms, and the global expansion opportunities. We are confident that Mytheresa offers high-value consumers the best multi-brand digital shopping experience there is. With that, I'd like to ask the operator to open up for your questions.
Thank you. For our Q&A, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally, and we ask you please limit yourself to one question and one follow-up. Our first question today comes from Matthew Boss from JP Morgan. Your line is open.
Thanks, and congrats on a nice quarter. Michael, your two-year GMV growth this quarter matched the second quarter, came in 500 basis points above your target model. That's despite exposure to both Eastern Europe and China. I guess, what have you seen that gives you confidence in the continued resiliency of your customer in the luxury category? And then can you just elaborate on regional performance that you've seen in the past few weeks that drives your view for the speedy passing of the external shocks?
Sure, and thank you, Matt. What are the observations? I mean, number one, of course, we have the privilege of already knowing how the first weeks of the fourth quarter are developing. When you look to our numbers, the U.S. continued a very strong trajectory. Also Mainland China, despite the quite harsh lockdowns that of course hit them further from March into April. It is and was really Europe and, in the regional breakout that is in the Q3 that can also be observed. We are strong in Europe. That defines, of course, also the opportunity in other geographies, but at the moment, this is where most of our business sit. At the end of February, when the business broke out, there was a scenario of angst in these regions.
While our customers are, what I would say, quite resilient to inflation, to recession, being at the top of the pyramid in terms of wealth and income, that did put them into a scare. The shift back to vacationing, the shift back to going out that continued in the US is also coming back in Europe, and that gives us confidence. The second level of confidence is what Martin explained. We have a business model that can adapt to even sudden shifts in demand and still produce the profitability. We have a very high share of variable costs, and four weeks were actually enough to react to that, and it was more reaction. We are confident.
We don't need more of these test scenarios, but we are very confident in our business model, and demand continues to come back as the world hopefully and permanently comes back to normal.
That's great. A follow-up for Martin on the profitability side. For gross margin, could you just speak to the stability of the underlying merchandise margin that you continue to see as you continue to grow market share? Any change to full price selling or just any dynamics, internal or external, in the competitive landscape to consider as we build out the fourth quarter gross margin and go forward?
Yeah. Thanks, Matt. As Michael said, I mean, our focus is really on full price selling
We target for a customer that values the unique positioning of Mytheresa and not a discount-driven proposition. Therefore, also in this quarter, the underlying merchandise gross margin was very stable despite the challenges. We stayed true on our focus on full price. That stability we will not give up, and the stability continued in Q4 and obviously will lead us through fiscal year 2023 and further on. It's an inherent element in our value proposition.
That's great, Kilger. Best of luck.
Our next question comes from Michael Binetti from Credit Suisse. Your line is open.
Hey, guys. Thanks, for taking all our questions here and appreciate all the detail. A couple for you to help us look ahead. Can you help us understand how much? You made some comment that the US GMV trend was continuing in the fourth quarter. I think you said it was about 42% GMV growth in the U.S. in the third quarter. Is that about the right level? Is that what you're speaking to the year, on a year-over-year basis? It looks like, as you broke down the gross margin in the third quarter, the big influences were the percent of sales to, or CPM, I guess, to total GMV.
Should we expect that same impact to gross margin in fourth quarter that you pointed to, since that seems to be the most influential driver?
Thanks, Mike. I'll take the top line question, GMV question, and Martin can comment on the gross margin projection. Yes, the 42% was referring to Q3. In terms of Q4 performance, as I mentioned, one of the main issues in Q3 was obviously in Europe, and we see that passing based also on the first weeks of trading. We believe we can come back to our global growth level more evenly across the geographies, and that drives our confidence to deliver a strong Q4 and achieve the guidance at the lower range. That commentary on GMV. Martin, maybe you take the margin question, gross margin question.
Yes. Hi, Michael. Definitely the underlying forces for increased gross profit margin are also valid in Q4.
The magnitude, obviously, there's a lot of financial IFRS effects in there in addition. The two call-outs that we had, the growing share of CPM revenues and the higher share of countries where we deliver duties paid, will also affect the gross profit margin of Q4. Those two drivers will also be driving the gross profit margin up in Q4. For the magnitude, I mean, the 490 basis point was quite strong in Q3, but it will be a significant increase, yes.
Okay. I wonder if I could add one. You noted that lower marketing expense as a percentage of GMV was an opportunity longer term. What is it? You were pretty specific that you see that in the longer term. What is it that influences the timing of achieving that? I wonder how much progress you think you could make on that in fiscal 2023, for example.
Thanks, Michael. That's a very good question because it is very specific, and we can actually answer it quite specifically. This is driven by the share of business from existing customers versus share of business from new customers. Our online marketing spend, which accounts for the majority of our marketing spend, is really to acquire new customers, to bring them onto the platform. We have then many other levers and vehicles to retain them, to drive loyalty. As more of the business is from existing customers because of the high cohort retention, naturally every year, there is the share of existing businesses increases. Also, of course, as we drive wallet penetration, as we drive category sale to existing customers, the need to drive total revenue from new customer increases becomes less. This is not the intention.
We wanna drive revenues from new customers as hard as we can, but existing business will slowly get bigger and bigger, and therefore the share of the online spend for new customers will be, diluted, and that is really driving this.
Okay. Thanks a lot, guys.
Our next question comes from Oliver Chen from Cowen. Your line is open.
Thank you for taking our question. This is Joanna in for Oliver. Just curious on the active customer growth. Was it, you know, a little bit slower than you expected? We are lapping a difficult comparison from last year, but just wanted to get your thoughts around, you know, how you're thinking about active customer growth going forward. Any color around China will be helpful. I know you're seeing more positive trends, but any, additional color will be helpful. Thank you very much.
Yeah. Let me start with the second one. This is where predictions are very tough at the moment. The zero tolerance policy of the Chinese government, of course, requires quite harsh lockdowns, and we have seen that first in Shenzhen, Shanghai, and then Beijing. Under this logic, public life really shuts down. Of course, China is a vast market, but markets like Beijing, Shanghai are a big driver for fashion sales. We are absolutely optimistic on the future of the Chinese market, particularly for us as we focus on wardrobe building because we see the Chinese consumer is more and more maturing in the share of just quote-unquote, buying accessories, bags, and shoes, versus also buying wardrobe is going our way. Short term, it is almost impossible how the spread of COVID and the necessity for sort of strict lockdowns develops.
It remains to be seen short term, but takes nothing away from the medium to long term. Again, Q3, we saw good growth in Mainland China despite these challenges. On the more general question of active customer growth, yes, I mean, the two-year growth rate shows good momentum in active customer growth, but we would have seen an even better number if we did not face the challenges in Europe. Clearly, with less headwind, we could and will produce an even better active customer growth. The very strong results of business from our existing customers, particularly our top customers, shows that we always can rely on our existing customer base, and then we will have to weather sometimes these headwinds driven by external factors.
We will continue to grow because this is the market share game that we can clearly see against some not so strong competitors at the moment.
Got it. Just one follow-up. How are you thinking about the return rate, you know, as sort of we continue to see a rebound in social events in the U.S.? Do you expect it to tick up, you know, in the fourth quarter and the year beyond? Thank you so much.
Sorry, did you speak about the return to social life or specifically return rate? Sorry, I didn't-
Return rate to the business. Yeah.
I think the U.S. was leading the way out of the pandemic. We have seen the strong trend in the U.S. for some quarters now. We continue to see, even in Q3, despite the challenges somewhere else, good business. Good business in the sense, constant expansion. Yes, there are some strong local competitors, but our unique positioning and we see as we see everywhere else, when we drop capsules, when we drop exclusive, which you can't buy anywhere else except for Mytheresa, this is how we get these customers that are constantly looking for newness and are willing to spend as long as it is a special item. Particularly in the U.S., there is enormous willingness and ability to spend as long as you're assured that this is a unique piece.
The return to us, if you ask for that, I mean, there was an article recently put out. I mean, everything you miss in Barneys, Mytheresa has it. Hello?
Our next question comes from Kunal Madhukar from UBS. Your line is open. Please go ahead.
Hi. Thanks for taking my questions. A couple if I could. One on AOV. Can you talk about AOV trends in the third quarter and how you expect it to trend in the fourth? I think there has been a number of questions on gross margins, especially with regard to the guide. To get to the low end of the guide on the gross margin side, we probably need to model a Q-over-Q, a significant decline in like, you know, the benefit that you are seeing from the CPM model. Is it the CPM model or the underlying 1P where we should see a decline on a Q-over-Q basis? Thanks.
I think, Martin, you should take the question on gross margin versus gross profit. I think that's very important to clarify.
Yeah. I mean, we can start with that, Kunal. There's no decline in the underlying gross margin profitability considered in Q4, and therefore in the overall full fiscal year. As we guide toward the lower end of our ranges, the profitability is exactly as we guide it, and we upgraded our guidance in Q2. The logic of the CPM resulting in a very comparable profitability stays exactly the same. The CPM, and when we have it now for a couple of quarters, shows the exact results as we plan.
There's no surprise in the CPM and the gross profit in absolute terms and the gross profit margin is in line with our overall guidance, what we always had.
Also maybe on the AOV, you saw that we now in the, in Q3 LTM AOV grew. It's now at EUR 617 LTM versus the EUR 588 in the previous year. That shows again our focus on full price and also our strong existing customer cohort behavior as Michael outlined. The strong growth in top customers of 33% year-to-date is also then reflected in the high AOV. That is in line with the last quarters with the continued strength and growth in AOVs.
Thank you.
Our next question comes from Geoffroy de Mendez from Bank of America. Your line is open.
Hey, thank you very much for taking my questions. I have three of them. Just the first one, going back to your guidance for the full year. If you're doing 23% GMV growth, I think it means that Q4 has to re-accelerate to something like 25% from 13% in Q3. I suppose there is an element of the comp base, which is a little bit easier. Are you seeing underlying performance getting better in all regions? I think you said the U.S. was still very good. Is it fair to assume Europe are also re-accelerating after Q3? That's the first question. The second one is on the CPM.
I was wondering if you could give us an update on how much it is as a percentage of GMV and where you see that number going in fiscal year 2023. The last thing is on your comments on the new category that you're starting for lifestyle. If you could give us any insights into what types of product that would be exactly like things like you know AOV and why exactly you're going after new categories. Thank you very much.
Thank you very much. Let me take questions one and three. Yes, you're absolutely right. Mathematically, we are looking at an acceleration in Q4, and the first weeks of Q4 give us exactly that confidence of an acceleration from where we were in Q3. Absolutely right. On your third question, why are we going there? Our intention and also the desire from our customer is that we serve them as best as we can in all their, let's call them luxury needs. This is why we started the resale service with Vestiaire Collective. This is why at the pop-up level, we have looked at beauty, particularly skincare.
This is where we got a lot of comments and requests from customers to expand the fashion offer that we have, and people that like to wear beautiful things tend to also like to live with beautiful things into lifestyle products. There are, as always, certain elements that regardless of the category we take along. Number one, curation and editing. Also in lifestyle products, there's an enormous offer out there, and we serve our customers with this edit through multi-brand. Number two, we focus on the high end. This is not to sell products with an item value of $50, but of course this is to focus on the high end. We are looking at product ranges or price ranges in terms of products from $250 to $1,500.
Totally taking the Mytheresa qualities, bring them to an adjacent category, which has many fashion brands. We will also carry brands that today are not on our website to really serve this lifestyle product category. We are looking forward to it because it's all based on implicit customer demand that we have encountered in our research and in our customer focus groups. Martin, can you take question two?
Yeah, sure. Maybe also in addition, Geoffroy, on your question one, mathematically, the lower end of our full fiscal year guided range will lead Q4 at a 22.7% increase in Q4 GMV. The CPM share as always, we are not giving the share of the CPM model in our GMV because then you could back out the platform fee, and this is very sensitive information. We are seeing the positive effects of the CPM in our business model now offering both models to brands. We will see that an increasing share in fiscal year 2023. As we said last time, we think that we have about now half of the brands that will switch.
Therefore, fiscal year 2023 will also be in transition year. From fiscal year 2024, the growth will continue.
All right. Thank you very much.
Our next question comes from Abhinav Sinha from Société Générale. Your line is open.
Hi. Thanks for taking my question. A couple of questions from my side. We saw that in Q3 you had some supply chain challenges because of which the revenue growth slowed down. Now that it's fixed, can we expect more like a surprise in Q4? If that's the case, then why do you guide at the lower end of your target for FY 2022? The second question is on CPM. I know that you don't give precise data, but initially when you had introduced the model, the target was less than 20% for FY 2022. Like any hint on whether you are tracking that, or is it like way behind that? Thank you.
I think on the first question, just to be precise, what we saw in Q3 and what we discussed last time was a shift of deliveries, a delay stemming back to production issues in Europe in November and December. Of course, fundamental external shocks that drove it. We are clearly looking at acceleration, as Martin just described. That acceleration drives our confidence in delivering the guidance at the low end of the range. In terms of CPM, maybe Martin, you wanna take that?
Yeah. The CPM, there's no change, it's up enough from what we set in the last quarter. We see great traction from the brands shifting to the CPM and also great satisfaction on their side. It's a clear win-win model. The overall target of well below 20% of the full fiscal year, we will continue to target, and we will see that. There's no change in the CPM traction, no change in the CPM ramp up because it's a well-tuned process where both sides have to work on the supply chain integration on the IT, so everything is as expected. There's no change.
Right. Just to be clear, like in terms of IT, the CapEx is from the partner side, not from Mytheresa side, right?
I mean, the work is needed on both sides. We do most of the work.
Right
We OpEx our IT. The brands, we have now six brands live with CPM. All the IT we needed for that is fully reflected in our P&L.
Okay. Thanks.
We have a follow-up question from Michael Binetti from Credit Suisse. Please go ahead.
Hey, guys. Most of my questions have been answered. I apologize for jumping back in. On that point, since the CPM model does influence the profitability on the different lines so much, would you mind just updating us on, you know, the six brands that you have in today? You said about half of the ones that in total want to be on the CPM model. Is the next round of brands the same magnitude as the ones in the model already today, so that we can try to think about rolling forward some of those profitability metrics?
Yeah, happy to address it. Yes, roughly we are. Again, we estimate how many brands will in the end join the CPM model, but roughly half of what we believe at the moment. Those that started now are bigger ones. You can expect that the additional volumes that will come on to this to the CPM model will be not of that size that we have seen so far.
I think you said in the prepared remarks that you saw growth was driven by consumer demand, not promotional intensity, which you have seen break out in some markets with some players recently. Would you mind just fine-tuning what you're seeing with that comment, please?
We have seen some quite aggressive pricing in Korea over the last couple of weeks.
Mm.
We have seen some early starts of sale in the U.S., which, compared to the pandemic phase of the market, is early. It's kind of, for those examples I quoted, coming back to some of the characteristics that we saw before the pandemic. This is nothing we are not used to. This is what we had to deal with. The pandemic, luckily or fortunately, created a pause on some of these tactics, but we see, it seems at least, that it is slowly coming back for some players.
Has that impacted the underlying assumption you've made for promotional levels in fourth quarters? You've seen the competitive set change at all?
No. I mean, we observed this, but this does not change our stance on promotional intensity. Our margin stability is now, I think, in its fifth year on product margin. Regardless of the environment, we continue to drive our business and particularly drive our customer base with exclusive merchandise, with special products, and this will not be changed.
Okay. Thanks a lot, guys.
Thank you.
We have no further questions, so today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Thank you.