LuxExperience B.V. (CFR) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the Mytheresa Investor Call. [Operator Instructions] I'd now like to turn the call over to Michael Kliger, CEO. Please, go ahead.

Thank you, operator, and welcome, everyone to this investor conference in respect, of course, to the announcement that we, as Mytheresa, made this morning. We will provide with our short presentation overview of the transaction and particularly the strategic benefits that we will derive from it, and then we'll open it up to your questions. Let me start by highlighting the 4 key elements of what this allows us to do. Number one, we believe it's a great market opportunity to now actively participate in the consolidation of the industry. We have established ourselves as a leader, our recent results have been strong, and we continue to see fantastic growth opportunities in digital luxury. Number two, we have a clear vision, what we want to do with the amazing assets within YNAP. Together, we create large-scale digital online platform based on the combined GMV of the last 12 months of EUR 3 billion. On the luxury side, NET-A-PORTER, MR PORTER and Mytheresa allow us to go after the market with highly differentiated and complementary offerings based on brand identities that are distinctive in assortments, marketing and customer touch points. But we will leverage a joint infrastructure, particularly naming Mytheresa's technology platform. The off-price business of YOOX NET-A-PORTER -- the YOOX and OUTNET, we clearly see the need to separate it from luxury. We see the complexity of the infrastructure at YNAP as one of the root causes of the issues. And as we have a platform to bring on NET-A-PORTER and MR PORTER, there is a unique opportunity to separate off-price, give it a much more leaner operating model that will drive growth and profitability. The third highlight is that YOOX NET-A-PORTER represents significant value and highly valuable assets of brand equity, customer base, brand loyalty. These have been the pioneers in our digital sector, and with EUR 2 billion GMV on the NET-A-PORTER and MR PORTER side, EUR 900 million GMV on YOOX, significant [ sales ]. And the last key message is, of course, our ability that we have demonstrated through our own business in terms of operational excellence and management of large-scale projects to bring that to the business of YOOX NET-A-PORTER. These are the 4, we believe, highly valuable components of this transaction. The transaction itself was sent out. We acquired 100% of YOOX NET-A-PORTER. Richemont sells us the business with EUR 555 million in cash and no financial debt. In exchange, Richemont received 33% of Mytheresa's fully diluted share capital as of closing. In terms of governance, Richemont will have the right to nominate a member to the Supervisory Board, but Richemont will be a financial shareholder. There are no operational ties included with this deal. Richemont will have 1 seat out of 8, and it's a financial investment towards Richemont. The deal is of course pending customary closing conditions and regulatory approvals. We expect regulatory approvals to be available as of the first half of '25. The market opportunity is significant in digital retail. There has been turmoils. There have been challenges over the last 18 months, but it has not changed that most analysts, most market researchers predict a doubling of digital luxury until 2030. So there is a huge opportunity to now create a player that can really leverage this huge growth, in particular, since other players have exited the market. And with EUR 3 billion GMV in a market of digital luxury that is estimated to be around EUR 70 billion, we are still facing a highly fragmented industry. Mytheresa has established itself as the clear leader in this. With our EUR 900 million GMV, we have significant scale. We grew on average 19% CAGR since '19 -- 2019 -- fiscal year 2019. We had, on average, an adjusted EBITDA margin of 7% from fiscal year '19 to fiscal year '24. 39% of our GMV is represented by top customers. We have close to 900,000 active customers, a leading AOV of EUR 700. We have grown, in the last 12 months, our net sales by 14%. And in the U.S., we grew over the last 6 months, reported 6 months, our net sales by 27%. Industry-leading stats that allow us with this strength in operational results, but also in financial results and in terms of balance sheet, to now take the opportunity to actively shape the structure of the industry. We will bring unique components to this deal, which gives us full confidence that we can turn around the business. We have a proprietary e-commerce tech stack that we developed, designed and went live with it last April, fully scalable, highly performing, ideally built for luxury e-commerce, a unique position to be in. We have completed other large-scale IT platform migrations over the last 5 years, including successfully launching a new ERP. We have developed our own proprietary marketing performance tools to optimize for expected lifetime value. Unique assets that we have been, with our algorithm, developing since 2017. We have proven abilities in operations with our one warehouse that delivers to the world at industry-setting speed. And we have strong brand relationships based on our business of focus on full price and high-end customers. And we have proprietary data analytics tools that, combining the 900,000 customers with the 2.2 million customers, add the 1.4 million customers at NET-A-PORTER and the 2.2 million customers at off-price to create enormous, very rich data pool to develop algorithms from this. So again, the logic is to bring together the brands of luxury, but retain their distinctive brand identities through marketing, assortment, services. They will leverage one infrastructure that provides us efficiencies and synergies, but more importantly, allows us to invest in innovation that can be used by multiple store fronts, but they will be individual and separated store fronts, to cover a much broader base of the market with highly profiled brand identities because we believe you can only win in this market if you have a clear profile of yourself. And the off-price side will sit on a separated tech structure that allows us to optimize for its very streamlined needs and operations. If you compare Mytheresa and NET-A-PORTER and MR PORTER in terms of positioning, Mytheresa is fully focused on the high end. We have consistently grown our AOV, consistently grown our top customer share. We are highly curated with about 250 brands in womenswear. And that is the position we continue to drive with also a very strong base over half of our business in Europe. NET-A-PORTER and MR PORTER has a broader portfolio of brands focused on luxury, but including the accessible part of luxury, including the aspirational customers, including emerging and new brands that don't fall into our portfolio. It's high net worth individuals, but also luxury curious customers. And they have an enormously strong footprint in North America. So a differentiated approach to the market, and we will ensure that this differentiation, if anything, becomes even clearer and even stronger. But these different storefronts will sit on a joint platform for HR, talent, finance, data analytics, technology, payment infrastructure because that can be leveraged across the separated stores. So to summarize, the strategic rationale for the acquisition of YNAP, number one, create a global digital luxury platform across multiple distinguished brands. Second, multiple brands will allow us to cover the market with differentiated positioning, including differentiated brand portfolios, customer and geographic focus. Number three, this makes for a strong value proposition towards luxury brands based on depth and breadth of customer reach through this combined platform. Number four, shared infrastructure, including Mytheresa's technology platform and operational best practices, will facilitate greater efficiency, but also driving higher growth and profitability. And lastly and not least important, we see high potential for synergies in joint administrative services, integrated customer management and leveraging the enormous data pool for future AI innovations. And with that, I hand over to Martin for further remarks.

Yes. Thanks, Michael. If you look at NET-A-PORTER and MR PORTER forming the luxury group, they truly possess exceptional brand equity and high-end customer base with an authoritative editorial voice, and these are the pioneers in the industry. And also, if you look at their KPIs, so NET-A-PORTER and MR PORTER, EUR 1.2 billion GMV and active customer base 1.4 million. 1.4 million active customers, if you compare that to the 850,000 customers of Mytheresa. Highly attractive also the geographic split, NET-A-PORTER and MR PORTER, 46% in the U.S., so a very strong footprint in the U.S. Also, a very comparable focus on the high end, on top customers. So their top customers, make 3% of top customers, make up to 35% of overall revenue. So also there, a strong focus on top customers. And NET-A-PORTER and MR PORTER, on the bottom line, they are profitable at adjusted EBITDA level with a low single-digit EBITDA margin. Off-price, YOOX and THE OUTNET, very valuable properties, long experience, enable luxury treasure hunt shopping through true global player with differentiated localization. Off-price with EUR 0.9 billion in GMV and 2.2 million active customers. The integration of YNAP will leverage Mytheresa's operational excellence, proprietary technology and proven ability to execute large-scale projects, exactly what Michael referred to. We will leverage the unique assets that Mytheresa has as one of the best operators in the industry. An e-commerce tech stack that this proprietary developed is scalable, and we have completed the large-scale IT integration there. Michael talked about the best-in-class customer satisfaction with Net Promoter Scores more than 80%. Mytheresa is a global operator with shipping excellence and then superior delivery times and return handling and a proven ability to capture global online luxury opportunity with, as you know, in the last 6 months, plus 14% net sales growth. We have preferred brand relationships and the leading access to exclusive product and brand experience and AI-driven customer data analytics capabilities that enables marketing efficiencies and a track record of CAC reduction over time. So unique assets. And what is also highly relevant for this deal, Mytheresa has demonstrated its ability to seamlessly execute large-scale projects. And with Project Gecco last year, we finished a large-scale migration to a future-proof platform concerning all assets in the IT stack, storefront, CNS, PIM, OMS. It is highly scalable, fully tailored to luxury needs. And Mytheresa has the tech team of 60 in-house developers, which will obviously be very useful in shaping that road ahead. In summary, this transaction is a unique opportunity to shape the future of online luxury. It combines the resources for becoming the leading global multi-brand luxury group. And with a clear aspiration from today EUR 3 billion to develop a EUR 4 billion GMV business with more than 8% adjusted EBITDA margins in the medium term. It creates significant value upside for all stakeholders, our customers, the brands, the shareholders, our employees. And also with that, I'd like to reaffirm full fiscal year '25 guidance that we put out a couple of months ago, anticipating profitable growth. And with that, I will hand it back to Michael.

Operator, I don't have any tone anymore.

Hello, hand over next to Michael.

Hello? Can you hear me? Thank you, Martin. As you can hear, we are truly excited about this deal as management and as a Supervisory Board. We are, of course, pending regulatory approval. Until then, these businesses operate as complete separated companies, and we will, therefore, refrain from any detailed operational commentary. But other than that, we are very happy to take your questions now.

[Operator Instructions] Our first question comes from Matthew Boss from JPMorgan.

Congrats on the deal. So maybe, Michael, just to start off. Could you elaborate on the market share opportunity and the expansion of your total addressable market that this acquisition provides? And then separately, if you could just speak to the advantages of size and scale as it relates to brand relationships and partnerships over time.

Happy to do so. So as you heard from Martin, combined, this group will represent, based on the last 12 months data, EUR 3 billion GMV. If we take the total digital luxury market on Bain-Altagamma, it's a EUR 70 billion market. Out of that, probably EUR 40 billion is multi-brand, we assume. So we are still a very small player. And what is even more important, the market is growing. The market will double till 2030. So we need to double to maintain market share, and we want to achieve that. We want to be a leading player, global leading player. And so the market opportunity is extremely significant. But we always believed and we continue to believe that market share revenue targets don't matter as long as you can't tell why should customers buy from you. That's why we believe so much in very precise and highly profiled identities. And therefore, we believe growth is even more opportunity with growth if you approach the market with different storefronts, with different identities that can go after different marketplace -- market segments. And so this is the key additional component that we add through this acquisition. And of course, we do synergy potential. We see, most of all, huge potential in having a much broader understanding of customer behaviors through this deal. Again, 900,000 customers, combined with 1.4 million customers, combined with 2.2 million customers. That's the largest database of luxury buying customers. In terms of brand relationships, I think, yes, scale matters. But what we always stress, relevance matters. And with this acquisition, we become even more relevant to the key luxury brand operators because we have a broader audience that we go deeper because we address different audiences with different offerings, and that has been a great success for us, and that is also the future success. So if we can demonstrate that working with us as a group, there is more opportunity because we are not going to cannibalize, we're not going to merge into one brand, but we will offer the positioning that is on Mytheresa and we will offer the positioning that is on NET-A-PORTER, and it will speak in different ways to different customers. Again, the size of this combined entity is such that a huge part of the market is still open. And that's where we feel, in addition to high-quality operations, customer reach, relevant customer reach is a currency that brand partners look for.