Douglas AG (DOU) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Douglas Group First Quarter 2024/'25 Earnings Results Conference Call. I am Yusef, the Chorus Call operator. [Operator Instructions] The conference must not being recorded for publication or for broadcast. At this time, it's my pleasure to hand over to Alexander van der Laan, CEO. Please go ahead.

Yes. Thank you, and good morning from Dusseldorf, Germany. Welcome at our Q1 financial results, let's say, call. So today, Mark Langer and myself want to give you an update on our financial performance in the first quarter of the year. And we also want to provide some voice over clearly to our numbers, and we want to give you an update on some strategic initiatives, which are well on its way. So basically, let me first start, let's say, with the financial performance. So we've reported this morning that in Q1, which is clearly the key season for a premium beauty retailer, we have delivered store sales of 5.7% and E-Com 6.2%. So that is, let's say, slightly below what we delivered last year. To be fully transparent on that, on the 19th of December, we have reported our full year results for '23/'24. At that point in time, we indicated to you that we had started well in October and November. However, in the last 2 weeks of December, which are the key weeks for a premium beauty retailer, we have experienced a slowdown, let's say, in our sales and that is reflected -- is being reflected in these numbers because some of you might have expected a slightly higher number. However, the last 2 weeks didn't really contribute to that. Why is that? Well, first of all, we believe that general negative consumer sentiment in the world, in Europe, but certainly in Germany and in France hasn't helped us. The second thing, what we experienced at premium beauty, which is a consistently growing category, is also experiencing slowdown, not only globally but also in Continental Europe, where we operate. And last but not least, this year, we had a very late Black Friday. Black Friday was basically at the end of November, which means that the E-Com sales is mostly realized, let's say, in December because then the deliveries take place, but we've also seen that some of the Black Friday sales has eaten into our Christmas sales, especially in Germany and France. So collectively, that has led to a slowdown in the sales in the second half of December. Also in the beginning of January, so the first, let's say, weeks of Q2, we continue to see a softness in sales. So let me open with that. When you look to our profitability, you can see that from an adjusted perspective, we have been able to grow our EBITDA with 1.5%. And clearly, Mark will come back on the full P&L. On a reported basis, a very, I would say, strong number of 9.9%. The delta between those 2, clearly, the absence of having adjustments, which we also -- we expect to continue that trend. So we don't expect significant adjustments in the near future, which has led to the EBITDA percentages, as you can just see. The EBITDA growth is being translated into a very, I would say, positive bottom line and clearly, the delta between net income and reported EBITDA sits in the financial expenses, where we are fully benefiting now from our improved balance sheet situation and a significant reduction in interest expenses. And then we've also seen that, that in combination with our net working capital development has generated, I would say, a strong cash flow of almost EUR 0.5 billion. That means that when you -- you basically combine our EBITDA development and our net debt development that our leverage ratio has continued to improve, i.e., to decrease to 2.3, which is a significant improvement versus the prior year, but also a significant performance versus the post-IPO situation. And clearly, the impact of the peak season helps because we have strong seasonality in our leverage. However, we continue to expect a further, let's say, improvement in the leverage in the remainder part of the year. And the last block on this is about our operational -- let's say, capital efficiency. So net working capital, which we measure on an average LTM basis over the last 12 months, has decreased as a percentage of sales with further opportunities, let's say, to be achieved going forward. So that is basically the financial summary. Mark will dive into kind of the, let's say, the numbers a bit deeper and the drivers behind the numbers and I will then come back with an update on a number of strategic initiatives. Mark, please go ahead.

Yes. Thank you, Sander, and good morning, ladies and gentlemen, also from my side. As already stated, we started with very solid development into the current fiscal year. The continued growth in sales and adjusted EBITDA was achieved against a strong comparison period last year and a challenging economic environment. Consumer sentiment again deteriorated in many European countries, especially in the DACH region, we saw a slowdown since mid of December. Still, we were able to attract customers by our omnichannel value proposition, our large product range and in personal and digital beauty advisers. Our growth was driven by both channels. The stores recorded significantly more visitors when in E-Com, the visitor numbers declined. Higher baskets fully made up for that decline. Our group like-for-like sales increased significantly by 5.3%, while reported sales growth was higher with 5.8% due to our store expansion program. In Q1 of the prior year, the group's sales still comprised the sales made by this ARPU, which are no longer included in our E-Com sales. When excluding these sales from the prior year figure, reported growth amounted to 6.5%. Due to the subdued consumer sentiment, the promotional intensity in the quarter was higher. Therefore, price increases were not fully passed through to customers. The achieved growth and supplier bonuses did not make up for that. Despite the fact that we employed more personnel in our expanded store network, increased wages last year to mitigate the impact of high wage inflation and hired more temporary staff for the high season, we improved our personnel cost ratio. This was partially supported by the integration of the former separate Parfumdreams warehouse. Also, our logistics cost and marketing cost ratio both improved. Furthermore, we continue to standardize our tech stack in order to improve efficiency and further develop RCM systems. This will support data-driven customer activation and help to better steer marketing campaigns. IT costs, therefore, increased. Due to the pressure on the gross margin, and despite the strict cost management, the adjusted EBITDA increased by 1.5%. Let's take a look at our 5 segments, and I will start with our largest segment, which comprise Germany, Austria, Switzerland, the Netherlands and Belgium on Slide 6. Within this larger segment of the group, we saw significant sales growth on reported and like-for-like level. This growth was driven by both channels with a stronger increase in our E-Com business. The market overall grew only slightly. We saw a solid increase in footfall and customer numbers in our stores with 8 of these stores being under refurbishments. Our customers increased their basket size and the net sales per item strongly slightly increase the number of items in their basket. Still, sales started to slow down in the second half of December. In the E-Com part of the segment, we saw an opposite development. The number of orders decreased, but higher baskets more than offset this, bringing E-Com in the segment to 7.5% sales growth. As a result of that strong development, the E-Com's share in the segment rose to 41.5%, far above the 33% average of the group, the highest among our omnichannel segments. When it comes to adjusted EBITDA, we had some opposing effects. On the one hand, the gross margin decreased as we gave higher discounts and received lower supplier bonuses in absolute terms and relative to sales. On the other hand, our marketing income was higher and will reduce the logistic cost ratio. As we opened 3 new stores and hired more temporary staff for the peak season, the personnel cost increased in relation to sales. In total, this led to the underproportionate uplift of adjusted EBITDA and thereby the decrease in adjusted EBITDA margin for the segment. Moving on to our large -- second largest segment in the group, France. Please go to Page 7 now. The footfall in our French stores decreased as well as the conversion rate, leading to a lower number of customers. Strongly higher basket sizes and higher sales for item more than made up for that and led to the slight increase in sales. In E-Com, we saw a temporary dampening effect from the rollout of our new platform. This led to a slightly less orders, which was more than offset by higher baskets. E-Com's share in the segment, therefore, remained nearly stable at 24%. While the market was flat in the quarter, NOCIBE was able to increase its sales and gained market share. Alongside the platform rollout and the necessary IT support, our IT costs increased. In a competitive environment, with high promotional intensity, we kept the marketing contribution from our suppliers as well as the marketing spend. Accordingly, the marketing cost ratio remained stable. In contrast, our personnel cost ratio increased while the logistic costs decreased. All in all, this resulted in the slight increase in adjusted EBITDA and a slight decline in adjusted EBITDA margin for France. Moving on to our segment, Southern Europe, on Slide 8. In our store business, a much higher number of visitors were attracted by our offering. The refurbishment of 16 stores did not dampen this. With a nearly stable conversion rate, many of the visitors became customers. The segment was the only one where the basket size decreased due to a lower number of items per basket. However, there was no down trading, so sales per item increased slightly. The upward trend in our E-Com channel in Southern Europe has continued. Lower number of orders was more than offset by larger baskets. The share of our E-Com business increased to 13.8%. When it comes to adjusted EBITDA, we were able to fully pass through price increases in Southern Europe, but received less supply bonuses, leading to a decrease in gross margin. Also, we spent slightly more in marketing. We also received more marketing contribution, which led to a lower marketing cost ratio. At the same time, the personnel cost ratio and the logistic cost as a percentage of sales increased partially due to the strong E-Com business. As a result of these effects, the adjusted EBITDA remained virtually stable, and the adjusted EBITDA margin declined. However, excluding the reversal of an inventory valuation of EUR 3 million that was done in the prior year, we would have seen an operational improvement. Coming to our fastest growing segment, Central and Eastern Europe on Slide 9. This segment once again achieved the highest level within the group with regard to sales growth and overtook Southern Europe in terms of size for the second consecutive quarter. In the store business, we recognized a strongly higher footfall in a larger number of stores as we opened 14 new stores since the beginning of the fiscal year and despite the refurbishment of 5 stores in the first quarter. In the last 12 months, we increased the number of our stores by 29, being well on track here. The slightly lower conversion rate was more than offset by the increased footfall and led to a higher number of customers. In contrast to other segments, this was the only one where the sales per item declined. As the number of items per basket increased to a much higher degree, the basket sizes were still larger. In our E-Com business, we saw significantly more orders with larger basket sizes. The combination drove the extraordinary sales increase in E-Com. As this performance was stronger than in stores, E-Com sales contribution rose to 24%. In a highly promotional environment, we could not pass on the full supplier price increase to customers as significantly higher supply contribution could not make up for that, which led to a lower gross margin. We received more marketing contribution from our suppliers and also spent more on marketing so that the marketing cost ratio worsened. On the other hand, we kept the profit cost ratio stable despite higher number of stores operated. We were able to leverage our logistics cost ratio based on the significantly higher sales. As I explained in earlier occasions, the opening of new stores is a temporary dampening factor for margin as it takes time until the store is fully operational. In total, the sum of the mentioned effects led to the decrease in the adjusted EBITDA margin, while the absolute adjusted EBITDA increased. Now to the fifth segment, our segment, Parfumdreams/Niche Beauty. As part of our strategy, Parfumdreams is positioned for highly price-sensitive customers. In the segment, we received more orders, but with lower basket sizes due to the competitive environment online. That was the reason why we could not pass on the full supplier price increases and received less supplier bonuses, leading to a lower gross margin. In addition, we spent more on marketing and we received less marketing contribution, which increased the marketing cost ratio. Following the closure of the former Parfumdreams warehouse and the reduction in headcount, our process costs went down in absolute and relative terms. However, the before mentioned effects led to the decrease in adjusted EBITDA and had a margin dilutive effect. Let us go back to the group level and summarize how the developments at segment level had added up per channel. Please go to Slide 11. Our stores welcomed a significantly higher number of visitors, also supported by the net opening of 20 owned stores in the quarter and 39% in the last 12 months. We converted a large part of them into customers with, on average, higher basket sizes, more items per basket and higher sales per item in all segments except Eastern Europe. E-Com grew for the 11th consecutive quarter. The channel saw less orders, but on average higher basket sizes. E-Com had a sales contribution of 33%, almost unchanged from last year's Q1. Let's move on to Slide 12 and look at our P&L. As described in the segmental performance, the highly promotional environment in the peak season did not allow for a full price pass-through to consumers. Due to a strong increase in sales, the absolute gross profit increased, while the gross profit margin decreased. Our net operating expenses grew slower than sales. As shown in the segments, this was due to an improved personnel cost ratio and a better marketing cost ratio. As mentioned before, IT costs increased due to the platform rollout in France, the standardization of our tech stack and investment into RCM system to support data-driven customer activation. As a result, our reported EBITDA grew by an overproportionate 9.9%. With the prior year being affected by high adjustments to EBITDA in the context of the IPO and the associated refinancing, the growth on an adjusted basis looks smaller than the reported level. As expected, the adjustments came down strongly. The financial results improved significantly, thanks to our new financing structure with better conditions and to reduce debt level. The tax rate normalized to 27.8%, brings the net income to EUR 163 million, an increase of 30% on prior year. Turning to net working capital and CapEx on Slide 13. Our average net working capital was EUR 245 million. This resulted from higher inventories to support the peak season as well as trade bonus and marketing receivables. As a result, the working capital as a percentage of LTM sales amounted to 5.4%, a slight improvement versus last year. The warehouse move in Germany and the continuous use of the AI-based inventory management software, RELEX, Germany, Austria, Switzerland, Italy and Poland decreased DIO by 6 days. As planned, our CapEx was significantly higher with a strong focus on store refurbishment and store openings, mainly in Central Eastern Europe. Main investments related, especially to the 34 owned stores that were refurbished as well as 20 owned stores we opened in this quarter. Furthermore, we continue to invest into the establishment of a group-wide uniform E-Com platform and further invested into our IT stack as well as our international E-Com as part of the Let it Bloom strategy. Let us now review our cash flow and liquidity position, starting with free cash flow bridge on Slide 14. As we have already discussed, most of the positions and the adjustments nearly don't move the needle anymore, I will only explain the Position Others, which we haven't touched upon yet. The cash inflow from the Position Others resulted especially from VAT liabilities, which were lower than Q1 last year. Thanks to the positive development in adjusted EBITDA. And despite our investments, our free cash flow after EBITDA adjustments amounted to EUR 494 million, an increase of nearly 8% versus last year. Slide 15 shows our liquidity and leverage. Our net debt, including IFRS 16 liabilities, amounted to EUR 1.9 billion carrying amounts and was significantly reduced by the IPO proceeds of EUR 850 million and the equity injection of our major shareholders. Further supported by our solid business development, our leverage ratio decreased to 2.3x. You'll find the cap table on Slide 36 in the appendix. We aim to continue on our deleveraging path by focusing on strict cost discipline and cash management and by capitalizing on our strength. I reiterate our target to reduce our net leverage to 2.0x at the end of calendar year 2025. Let us now turn to Page 16 for our guidance. Based on our omnichannel business model, the expansion of our store network and the continued improvement of our E-Com capabilities, we keep our guidance unchanged. We expect to achieve sales between EUR 4.7 billion and EUR 4.8 billion in fiscal year '24/'25. We intend to grow profitably. Based on the current market trends, which are weaker than initially anticipated, we expect our adjusted EBITDA to come in at the lower end of the range between EUR 855 million and EUR 885 million. Through sustained improvements in net working capital management, we aim to decrease the net working capital to below 5% of sales. Based on the improved adjusted EBITDA, the better financial results following the refinancing as well as D&A and taxes at levels comparable to the average of the previous years, we aim to achieve a net income between EUR 225 million and EUR 265 million. All this will help us to move towards a leverage ratio of 2.0x at the end of calendar year 2025. Ladies and gentlemen, with that, I will conclude the financial part of today's presentation, and I will hand it back to you, Alexander. Thank you.

Yes, Mark, thank you. So to conclude, I wanted to give you an update on the deployment of our Let it Bloom strategy. So as you know, we have launched our Let it Bloom strategy almost 2 years ago, and it's based on 4 strategic pillars, which you can see on the slide from the left to the right. And within each of those pillars, we have 5 key initiatives in place. And today, I want to give an update on 4 initiatives, which are highlighted, let's say, with the color purple. So let me start with initiative #1. We want to be the #1 premium beauty destination for our customers. And in order to do that, we are developing our store network. So what you can see here, and Mark was already alluding to it, that we've opened a significant number of new stores in the current quarter with a very prestigious flagship store in Zagreb, the capital of Croatia, with 14 new openings in CEE and 2 franchise stores in France being closed. We've opened our fifth store in Belgium in Genk and our fifth store in Slovenia. In both markets, we entered basically 2 years ago, and we are well on our way to develop a national footprint in both Belgium and in Slovenia with a significant number of store openings in the pipeline, especially for Belgium in the years ahead of us. We also had some, I would say, high-profile openings in Landquardt, that is an outlet center in Switzerland; in Pompei, where one of the largest brand new shopping centers of Italy has been opened; and in Tallin, which is the capital of Estonia. Estonia a small country, but also a country where we're developing a national footprint. On the refurbishment side, we have fully modernized 36 of our existing store estate. 16 of that were in Southern Europe, including 11 in Italy and the remainder store numbers are largely being concentrated in Germany and France, where we continue to operate and update our store network. And we are now exceeding the 1,900 store mark again with more new stores in the pipeline. The second topic, I want to say something about is about E-Com, about innovation and differentiation. So as you know, being a premium beauty retailer, it is very important to continue to develop an active relationship with our customers across all 8 groups, I would say. Social media is playing a very important role in that context. And through social media, we have been able to significantly grow ourselves. We have developed more, let's say, partnership cooperations with influencers. And we can see that those influencers can have an enormous impact on our sales development. So for instance, in the DACH region at Black Friday, we have made a deal with an influencer who was promoting a certain brand. And just that single influencer in combination with the promotion code which she could offer to our customers, we were able to generate EUR 1 million plus of incremental sales. So this social media development continues to help to keep the, let's say, the itch and the development of the Douglas brand dynamic and up to date. We see, let's say, a sustained growth of this not only in Germany, but also our social media teams across Europe are working closely together to further, let's say, scale up internationally. And on the right-hand side, Mark was already talking about the PD Niche Beauty segment, that Mark spoke a bit more about PD, our value proposition in the pure play domain. We also have a Niche Beauty brand which is positioned on the other end of the spectrum where we really want to focus and cater towards very -- I would say, more exclusive customers with more exclusive brands. We've seen a very strong growth of Niche Beauty. We see that the expansion of our luxury and niche assortment is really driving that. So we've been able to launch Charlotte Tilbury, Kevin Murphy, Maison Crivelli, My Blend and Dries van Noten in this exclusive Niche Beauty domain. We have a very successful loyalty program, the club, and we continue to activate, let's say, our customers for a, let's say, a very modern and up-to-date newsletter and marketing approach. So Niche Beauty is developing well in the markets where we operate. A third initiative I wanted to talk about is in the remain of developing a range of distinctive brands and to basically further develop our beauty assortments. As I've shared with you before, we are focusing as the Douglas Group and the Douglas brand and NOCIBE on 5 core beauty categories. In Haircare, which was traditionally not being sold in perfumeries, is a very strong runner up. So Haircare as a category continues to grow strongly with a double-digit sales growth, let's say, across all our markets. Haircare is a category where we see more and more celebrity brands popping up and driving demand. And I'm very happy and proud to announce that we have made a deal with Rita Ora, a famous singer. And we are going to exclusively launch the brand of Rita Ora TYPEBEA, which will exclusively being sold at Douglas and will be launched in the current financial year. We were going -- we will roll this brand out in every market, exclusively means that you can only buy this brand in the Douglas online or offline shopping environment. And we're going to launch the brand in 22 countries. So it will be online in 22 websites, and we're going to launch the brand in 900 plus of our stores. It will be a launch consisting of 6 SKUs, 6 items, so 4 key products about hair growth and 2 hair styling products, and we will clearly activate the brand strongly as of February 17. The fourth initiative I wanted to talk about is about the development of our operating model and the development of our basically supply chain infrastructure, which should lead ultimately to lower stock, better availability and a much more responsive supply chain. So we are developing a network of 7 OWACs, one warehouse, all channels. 4 of those warehouses are already up and running in Germany, Hamm; in France; in Bologna; and in Madrid. But there is some news to be shared, let's say, with you. First of all, to start with France. Until the beginning of the year, we were operating 2 single channel warehouses, one was owned and operated by NOCIBE and the other one was operated by an external service provider, GEODIS. We've decided to basically outsource our own operation and integrate our own operation into the GEODIS operation. So that means that we've moved from 2 warehouses, and you could also say 2 inventory points to 1 warehouse, where the full assortment is now being concentrated and from where we can supply both our stores in France as well as our E-Com customers in France and Monaco, 100% operated by GEODIS that has led to a reduction of our, let's say, employees on the payroll and we've been able to manage and mitigate this in a country where it's sometimes not always easy to simplify your own operations. So that project is successfully concluded. In Italy, we have made a deal with a new service provider. So we have a warehouse in Bologna which is going to be relocated within the Bologna market again, and it's going to be operated by Arvato, which is also our partner, which operates our highly automated warehouse in Hamm, Germany. So we're going to, let's say, move the warehouse. We believe we can create more efficiencies. In the beginning, the warehouse will focus on Italy only as we do today, but the plan is that as of 2026, we also want to supply Croatia and Slovenia from Bologna, which will not only lead to efficiencies and inventory reductions, but will also allow us to significantly expand our online assortment, let's say, in the Adriatic markets. That means that we will have an extended capacity in this warehouse and where we will replace a number of manual processes by fully automated or semi-automated letter systems operated by our German partner, Arvato, as well. And then last but not least, there's another big one which we're working on, and that is the development and the implementation of our first OWAC in Central and Eastern Europe. We are going to open our first OWAC in Poland in the summer of 2025. And this year, this OWAC, one warehouse, all channels is going to replace the, I would say, the data infrastructure, which we currently have in Poland and we'll start to supply all our Polish stores and all our Polish E-Com customers as of, let's say, Q3 2025. With the plan to basically replace our supply chain in both Czech, Slovak, Hungary and into the 3 Baltic countries in the course of 2026. So that basically means that we will ultimately close down 5 different warehouses, keeping stock in 5 different countries, replaced it by one warehouse and with that, that one warehouse will also have a significantly bigger assortment available for the countries outside Poland. So this is a very, I would say, important and transformational project for the Douglas Group, which will reduce complexity, it will extend capacity, it will bundle our purchasing, and it will allow us to become more efficient, again through semi-automation of the warehouse management processes. And last but not least, it will significantly improve the service to our stores since the leader between the lead time between the order and the delivery will be reduced from 2 to 4 weeks to a few days only. And from a customer perspective, we have the ambition to deliver every customer, let's say, in this geography within ultimately 48 hours maximum. So that will significantly improve our service capacity towards customers as well. The OWAC in Poland is going to be operated in a place close to Warsaw. It's a bit difficult for me to pronounce, but you can read it as a subtitle. So that is a small town close to Warsaw. We've signed a lease agreement with CTP for 46,000 square meters. And we have again signed a contract with our long-term industry partner, Arvato. So as I stated, we will operate -- start to operate in the second half of next year. And this warehouse will be combined with a second operation because we currently have a warehouse already in Poland, in Breslau which is our Corporate Brands warehouse, basically supplying all of Europe. So the warehouse, the new OWAC close to Warsaw will not only contain the OWAC, but it will also contain our Corporate Brands, let's say, assortment, which will be operated by the same provider. So we're working towards a true omnichannel supply chain with ultimately 7 omnichannel warehouses. So the only 2 I have not been talking about yet is the Netherlands and Romania. So we're currently working on the plan to develop an OWAC in the Netherlands as well, which is supposed to deliver the Netherlands and Belgium in the course of 2026. And we are planning to work on a OWAC in Romania, which is supposed to support Bulgaria and Romania. So I would say, a hugely strategic initiative with significant benefits for both customers and from a financial perspective. So these are the 4 initiatives within our 4 pillars, I wanted to talk about today. And with that, I'm coming to an end, let's say, of our update to all of you. So in summary, we have had a solid start into the financial year despite challenging economic and market circumstances. We have delivered a strong October and November, but unfortunately experienced a slowdown in the second half of December and into the first weeks of 2025. We've been able to grow, let's say, our profitability on an adjusted basis, but even more so on a reported basis. Our net income has significantly improved due to the decreased interest expenses and due to our strong operational performance. We are well on track with the implementation of our Let it Bloom strategy and the 20 initiatives, which you have seen in my presentation before. We have good progress in several result areas like network development, assortment and supply chain. The Douglas Group's full year targets remain unchanged. Although we believe that our adjusted EBITDA, it's more likely that it will end up at the lower end of the range between EUR 855 million and EUR 885 million. So with that, I want to conclude with the last statement that the Douglas Group is making steady progress towards achieving a leverage ratio of around 2 at the end of calendar year 2025, so by the end of this calendar year. So with that, I wanted to pause on the presentation part, and we now want to provide an opportunity for Q&A.

[Operator Instructions] The first question comes from the line of Vandita Sood from Citi.

I just have 3 questions, if possible. So the first one is just thinking about contribution from store growth. If I look at just average store growth that would imply maybe 2% growth. And then obviously, the contribution to the top line is maybe employing 40% productivity. So is that the right way to think about it? Or are the stores you're opening smaller? Do they take some time to mature. So that's the first one. The second one is just on -- if you can give us an update on how the Corporate Brands' performance is and is that still growing ahead of the total group. And the third one is just to understand how the Retail Media business is doing and if you're seeing brands reducing their marketing contribution and supply bonuses. Does that also have a knock-on effect on how much they're willing to spend with you on retail media? Or is that separate?

Yes, okay. So first of all, on the Corporate Brands part, we have not disclosed, let's say, quantitatively the development of our Corporate Brands. But our Corporate Brands growth is largely in line with the development of the top line. We have 4 brands which are owned by us: Douglas Collection; one.two.free!; Susanne von Schmiedeberg; Jardin Bohème and the performance of these brands differ slightly. But overall, the growth of Corporate Brands is largely in line with the top line. On Retail Media, we see a continuation of a strong development. So we have an ambitious plan. We've also strengthened/expanded our team. We currently are offering Retail Media services in 9 of our countries. Germany, clearly, a very strong one, but we see a significant growth in the other 8 markets as well. So Retail Media continues to do well, and it is also significantly enhancing our bottom line performance.

Yes. And Vandita, let me come back on your question on the contribution, both in top line and I would also say bottom line from refurbishment expansion. Let me first start with refurbishment. Clearly, this varies in size. Sometimes it's more technical, but some of these are major investments we target. We have a cash payback on the investments typically on refurbishment at 3 years and faster and the percentage uplift related to that one to the non-refurbished reference case can vary between low to mid-single digit. But also in some cases with major refurbishment with the introduction of new brands, we were able to achieve double-digit improvements. When it comes to new stores, I mentioned that, I think, in the context of CEE, if it's a new shopping center that is still building up its client base, it might take a few quarters or sometimes 12 to 18 months even for fully reached maturity. So it's sometimes as you can also see in our Q1 number, dilutive as one contributing factor to the structural profitability of CEE. But still many of these stores already in the first year, highly accretive to the group because we have a higher structural profitability of these stores in these markets. So it's an offsetting effect. In general, we would say that the size of stores that we open are maybe slightly above the average of our existing stores. So the store sales productivity is slightly higher. And clearly, we aim with refurbishment, there's an immediate impact in terms of store productivity and profitability and also for the new openings, which typically have a cash payback of 3 to 4 years after a ramp-up. Does that answer your question, Vandita?

That's brilliant.

The next question comes from the line of Mia Strauss from BNP Paribas.

I just wanted to get -- maybe get a bit more color on how each of the categories performed between Fragrances, Cosmetics and Haircare. Was the promotional intensity felt across all of them? Or was it more centered around a few? And then what kind of growth can we expect in these categories going forward? And secondly, you talked about having lower number of orders, but larger basket sizes. So what are you looking at doing to eventually increase the shopping frequency there? And then lastly, I just wanted to kind of get an indication of what sort of exit rate we're talking about at the end of Q1. Have -- are we seeing any pickup ahead of Valentine's Day, which obviously is tomorrow? So just a bit of color on that.

Mia, thank you for your questions. I will pick up -- answer the first question, and Mark will talk about the second and the third. So we are not disclosing, let's say, the specific category developments, quantitatively. So I'm neither in the presentation, and I will also not make it too specific now. I've already stated that Haircare is growing double digits. So clearly, that category is helping, and we expect a, let's say, a significant continuation of that, although Haircare is still a relatively small category as a percentage of the total sales. You could say that the other 4 categories are plus/minus around the top line development of our total company. Clearly, Fragrances is very important for us. Fragrances as a percentage of sales, depends a little bit of the country between high 40s and up to almost 60% of our sales. So Fragrances has done well. And also when you look in the market developments, the fragrance category in general is still doing quite okay. So there is not a big, I would say, difference between the performance of the other categories than Haircare.

Yes, thanks Sander. And to your measures, Mia, clearly, with this more muted environment right now, there is a bundle of measures that we right now are pursuing in terms of driving first visitor numbers, both the stores. We still see healthy conversion rates, but we also need to work on -- and I think there was the second part of your question in terms of basket sizes and categories. And I think Sander gave already some very good examples. You have seen our initiatives in Haircare. We just mentioned that we see healthy growth there. So moving consumers from a single category purchase, which typically, as Fragrance accounts for 50%, it's the anchor category. We're aiming to broaden the basket by introducing new categories to these consumers. This is again where our CRM capabilities plays an important role. So from this data analytics approach, we can anticipate quite well in our CM mailing, which is the most likely -- most attractive category for you, we should expose you beyond your core category. So that's one element where we are investing and we are focusing on. But we also need to deal with an environment where we -- consumers have been more hesitant in their willingness to visit our online in-store offering. So this is where customer activation in particular, in the context of the key commercial moments ahead of us, Valentines Day just around the corner and with Easter following. We -- as Sander said, we have seen more muted sales trends also going into the second quarter. So the slowdown that we have experienced in the market in the second half of December has continued into the second quarter. We can't comment on the key commercial moments in the first -- in the second quarter calendar and first quarter of '25, but we do recognize that the environment and the competitive intensity has increased, and we don't expect this to change short-term. So I would leave it there in terms of the exit rates and current trading trends that we see today.

The next question comes from the line of Jurgen Kolb from Kepler Cheuvreux.

First of all, your big advantage is that you have a loyalty card, which contributes quite significantly to your overall sales. And I was wondering if you could maybe share some insights as to if there is a special customer group that is specifically holding back from a purchasing perspective or any specific changes that you've witnessed where you were surprised to see that? Secondly, on the OWAC situation, would it be fair to assume that you are running double costs right now, you're ramping up the new OWACs and, however, still having your current warehouses. So what double costs may disappear as of next year when we have the fully fledged Polish warehouse, for example, in operation? And then I had a third one follow-up after these 2, if I may.

Yes, please go ahead. Should I take the second, you the first. Okay. So let me start with the OWAC. You're right. Historically, we had sizable double running cost, particularly when we ramped up the sizable OWAC in Hamm. We still have them today. You have seen we have, I think, close to EUR 3 million adjustments in the current quarter. So there's a smaller adjustment due to running cost inefficiency. Overall, I'm extremely happy how smooth, not only in terms of double running costs, Jurgen, but also in terms of service levels, both the transfers in a highly unionized environment in France went. So we had no disruption or very minimal disruption, I must say, in terms of store service levels so that we ensure that our stores and our E-Com customers are being served. And we have a similar observation for the Bologna move that Sander mentioned. So there's a smaller, but quantify it as a rather -- a low single-digit million amount due to double running costs. This is also to be expected for this fiscal year. There will be some ramp-ups, but this is embedded in our adjustment guidance and our financial guidance due to the ramp-up of the new warehouse in Poland later this year, but they will have only a minor impact and they're fully reflected in our adjusted EBITDA guidance that we updated today. Maybe on the consumer segments?

Well, first of all, when you look to our loyalty card program, the number of people out there who have a loyalty card from Douglas continues to grow. So we've been able to add a few million new card holders just over the past 12 months, and that is still growing. Secondly, we are going to relaunch our loyalty program. In the next call, I can also give a little bit more on updates. If you talk about customer behavior, since we operate in 22 markets, it is difficult to give kind of a generic statement about all the people, younger people, boys or girls or whatever. So it's -- I cannot say that there is a specific customer group in a specific country going up or down. That would also be too specific for this call. But what I can say is that we see that customers are much more sensitive to price. And certainly, in the online domain, we can measure that, let's say, more quantitatively and also can see because every customer is basically personally identifiable, that customers are much more open for, let's say, a better deal and also making more price comparisons. So that -- in that environment, customers are seeking for a good deal. As you can imagine, that puts pressure, let's say, on the margin, as Mark was already alluding to. But it's -- we cannot say that the specific group is spending less. That would be too general to say.

I think a follow-up question, if you want to go ahead?

Have you seen the usual suspects in terms of increasing price competitiveness? Or is there a new competitor or is it just across the board that everybody basically, especially on the online side is pushing down prices?

Well, first of all, we have a period of significant price inflation behind us. So when there is a lot of price inflation, that clearly helps the markets to grow. The pie is getting bigger, and that is basically good for everybody. We see now the reverse of that. So price inflation has significantly come down, has normalized, and we expect that this normalization will basically continue. So the market growth has come down. So companies, including we have to fight, let's say, for our share in our position. And we did not experience, let's say, big new competitors in the markets where we operate with what you would call usual suspects. Yes, some of those usual suspects, especially in the E-Com domain have been and are extremely, let's say, price aggressive. So we can see that, and we can also see that the customer is looking at it. Hence, we need to react to defend our position and our sales and share development going forward. So with that, operator, I think we are coming to an end. I want to thank everybody in the call for your presence, your attendance and your questions. And we continue to work on strengthening Douglas as the #1 omnichannel premium beauty destination in Europe. The circumstances and the market development has, let's say, got a bit more tough. But as a company and as management, we are well positioned to, let's say, to prepare ourselves for that and to manage the company going forward. With that, I wish you a great day. Valentine's Day is actually tomorrow. So today and tomorrow is the big moment for Valentine's. So if you haven't bought anything yet for your significant other, I will certainly recommend you to go to one of our 4 premium beauty brands. Have a great day, and hope to see or talk to you soon again.

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