Announcer:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Oliver Chen:
The future of digital luxury, what's happening here? Thanks for listening in to this TD Cowen Insights Podcast episode. We're recording live at our 10th annual Future of the Consumer Conference in New York. My name is Oliver Chen. I'm TD Cowen's retail, new platforms and luxury analyst. I have the privilege of hosting this episode with Martin Beer. He's LuxExperience's chief financial officer. Martin oversees all finance, investor relations, risk and legal within the group and has held this role since 2019.
Martin, it's a pleasure to be here with you. You've been at our conference from the beginning, so it's really nice to spend time with you. So, Martin, Mytheresa closed the acquisition of YNAP, Net-A-Porter, Mr Porter, YOOX a little over a year ago and became LuxExperience. For those less familiar, can you provide an overview of the platform? Where does the business stand today?
Martin Beer:
Yeah, happy to do so, Oliver, and you're a big supporter and have followed the story from the beginning. Let's start with the legacy platform, Mytheresa. As you know, Mytheresa has always been the global leader of multi-brand digital luxury and is proving and has been proving this also in the performance in the last nine months. Very strong double-digit growth, outgrowing the peers in the US especially in the last quarter, exceptional growth, plus 33%. That is a testimony to the great positioning and especially targeting the top customers. Clear top customer focus, 4% of the customers make 40% of the revenues. That also then translates directly to the increasing profitability because obviously, those top customers have a very high brand loyalty. They come back because of our curated offer and not because of marketing or the special discount. Also, in the last quarter we reported very strong AOV growth, plus 12%. And that top customer base grew by 18% in the quarter year-over-year for Mytheresa.
So very strong, strong growth in Mytheresa and increasing profitability and we want to implement this logic, this focus on growth and profitability also at YNAP, at Net-a-Porter, Mr Porter and YOOX that we acquisitioned a year ago. We are really well on this process. And so we have set up complete new leadership teams at the storefronts and have been working on the transformation plan. The transformation plan is focusing on completely redefining the operational set-up, on warehouses, studio production, customer care, consolidating, making it more efficient. Re-platforming the IT, using and leveraging the existing IT platform at Mytheresa, which has been also a core element of the success of Mytheresa. And also, cutting corporate costs at Net-a-Porter, Mr Porter and YOOX. And this is clearly visible in the continuous reduction of the SG&A cost ratio for last quarters and will continue to do so.
And right now, we will finish the fiscal year 26 this month with two-and-a-half billion revenues, net sales, and with the different profitability levers to break even on group level all in for fiscal year 26. And we clearly guided that in the medium term, we want to achieve four billion net sales with seven to nine percent adjusted EBITDA profitability and that is around fiscal year 30. And therefore, we clearly are now targeting for growth on the top line in all segments and will substantially and sequentially improve the profitability, adjusted EBITDA profitability, going from zero now to the 8% in around fiscal year 30, so around 200 basis points sequential improvement.
And maybe lastly, where are we right now. What is unique about the clear positioning and also the story is that this transformation plan is fully funded. It's a three-year plan, it's fully funded and we are running this completely debt-free with the $430 million additional cash. It's an ideal position to be in and to have this transformation plan on a fully funded basis.
Oliver Chen:
One thing famous, from my perspective, at LuxExperience is your curation. Also, a lot of money-can't-buy experiences. Tell us what are the core competencies of LuxExperience?
Martin Beer:
It starts with a core essence of what we do. So the curation, the inspiration through curation. This is the first key of Mytheresa and that caters to the top customer that wants to come back and really enjoy this curated effort. We have very strong brand collaborations that are unique that enable us to have very close, close ties with the leading luxury brands and that enables us to have exclusives. Clothes collaborations, events, marketing campaigns that we do together and that is unique.
And the second element on our core competencies we should also call out if the excellence in execution. Because as you know, a lot of competitors also struggled executing. So this highly demanding business model, as you know we have a very high net promoter score at Mytheresa, over 85%. And therefore, the execution is, for us, as key.
And maybe the third element of unique core competencies is the community aspect that we are focusing on and that our top customers really enjoy. As you mentioned, bringing together the top customers in those events together with brands, and popup locations, and personal shopper assignments, style suites where you get together not only bringing a friend, but also enjoying other top customers worldwide. That is really highly appreciated of the top customers to be part of that community. You should always never forget, it's a high emotional attachment to the brand. The customers don't view us as a transactional platform. They really see that emotional differentiation.
Oliver Chen:
Relationships matter.
Martin Beer:
Yeah.
Oliver Chen:
And also, that longterm view on co-creation and the trusted platform. How would you describe the luxury customer today? What motivates them and what's changed?
Martin Beer:
As you know, the luxury customer is multifold. We cater to the top customer and therefore, you see what has changed in the numbers of all the brands. There were times when all the luxury brands really worked well, what has changed is a bit the polarization in the brand portfolio. So some brands succeed better than other brands to really show the customer added value on brand perception, on uniqueness, on creativity that is then valued by the customer and some brands are not. And they get punished and have lower numbers. You could argue that the luxury customer is becoming clearly maybe more demanding or more clear, "Is this brand really delivering value to me in the brand perception, in the quality, in the creativity or not?"
Oliver Chen:
What does the future of luxury look like to you? How do you think consumer behavior will evolve and how are you positioned with respect to this?
Martin Beer:
The wealth creation worldwide is immense so the number of wealthy people, especially in the top, increases strongly. And therefore, luxury is always part of being a human. You have emotions, you want to enjoy, you want to treat yourself, you want to differentiate. It's part of self-expression. And therefore, luxury will always play a significant part of their lives. And therefore, the world of luxury, and you had those great conversations with [inaudible 00:08:10] a couple days ago, luxury is there to stay. The luxury market will grow and therefore it's clear to be able to cater to that market is very important.
Oliver Chen:
What about digital meets physical? I've attended many of your events, which are really quite unique. What do you see happening with the future of stores and in-person? It's a big market opportunity outside of digital as well.
Martin Beer:
Exactly. The digital in certain aspects has clear advantages to physical. If you think about personalization, time, the time you need, the efficiency, the selection, what you can do on the digital side is quite substantial. And you could also have a certain preferential treatment in the digital world, having access to newer valuables, having preferential treatment in customer care. So you can have this quality aspect also in the digital world.
But I agree with you, the physical aspects and when we talked about the community aspect, it is important and so it's both. You have to combine the digital experience and the advantages of the digital experience with the physical ones. And so I think the uniqueness is to get both in line and have it very efficient.
Oliver Chen:
We had fun yesterday, I was playing music, cultural DJing here at the Palace Hotel. So which parts of your job are the most fun, in addition to being with me, and which ones are the hardest? So, both.
Martin Beer:
The fun part is obviously, we talked about that yesterday, is the impact that you do, you see the change. And it's sort of fun to be able to acquire a company twice your size and completely putting it upside-down, restructuring it, and setting it up for growth. And really being able to, maybe afterwards, in a couple years say, "Hey, I was part of that, I was part of that journey to make it happen."
And obviously, the hard part of this are the people, the people side. You have to motivate the people. You have to also at the beginning, clearly differentiate between the ones that will not change and should not be part of that journey and the other ones that are really open for change and for getting along. And to be able to differentiate that and see that, who can be developed and who not, is quite a challenge. And obviously, there are also some tough decisions along with it.
Oliver Chen:
Very human in magic and logic and transformation. Last question. You're using AI in many ways and we see a framework here at TD Cowen of AI pre-purchase, purchase, post-purchase, as well as merchandising, labor, inventory, as well as magic and logic. How would you break down your top AI priorities? What are you most excited about?
Martin Beer:
AI has become a very significant part of the overall value chain. It started early on a learning, bidding algorithm on predictive lifetime value, which is learning, learning, learning and we have so much data on the top customer as we are the biggest digital luxury platform. And we're leveraging that data, which is also quite dynamic, because what we sell is new. Most of it did not exist last year. We learn from the customer behavior and the brand perception, and to have always improving that bidding algorithm.
And now, it comes to agentic AI where agent-to-agent communication and SEO optimization to really be able to increase the relevance of those search engines. So that has always been the core, but the bread and butter AI is for us, the product catalog, translations, personalization, real-time personalization in every aspect. And I think it will continue to play an even more aggressive role also with us on operational efficiency and improving processes, and also looking at the cost side. Yeah.
Oliver Chen:
Thanks, Martin, it's been fun. It always brings me a lot of surprise and delight to interact with you and interact with your websites, and your money-can't-buy experiences are quite differentiated. I appreciate your time.
Announcer:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
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