Douglas AG (DOU) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the DOUGLAS Group, Q2 2024-2025 Earnings Results Conference Call. I am the [ Herrmie ] the Chorus call operator. [Operator Instructions] The conference must not being recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sander van der Laan, Group CEO. Please go ahead.

Thank you, operator, and good morning to all of you. Happy to host you for this Q2 and first half of the year, let's say, results call. We are sitting here with our financial and investor relations team, and we is Marco Giorgetta, our Group CFO, and myself, on May 15, and we have just finished the first half of the year -- actually the first half of the year plus April. And we'll also say something about that. We will not comment on May and the rest of this quarter. So as you have seen from us before, after a brief introduction by myself, I will hand over to Marco, who will focus on the Q2 financial performance of the company. I will then follow up with a brief strategy and business highlight section, and we will conclude with a Q&A opportunity for all of you before we will close to call. So that is the setup. So let's start, let's say, with the results development in our second quarter, so that is from January 1 till the 31st of March, '25 in comparison to the same quarter in the prior year. Since we were basically forced to go out with a guidance change -- a short term guidance change in the middle of the quarter, yes, I think you can see that we are very close to what we implicitly indicated. So we finished Q2 with a negative sales development of 2% for the total group. On the Store side, you could basically say the sales was flat, although that was a combination of negative like-for-like, and incremental sales driven by network development, and especially, the E-Com channel, we had a pretty tough quarter with minus 5.6%. However, you know that we disposed Disapo in June last year, so in 2 months from now, we will be like-for-like again. So if we neutralize for Disapo, the group sales was actually not minus 2%, but minus 1%, and the E-com sales is not minus 5.6% but minus 2.6%. You will also know that in this quarter we had 2, you could say, calendar elements, so we had basically 1 day less because of February and Easter had shifted from March to April. This 1 day less, you could basically say that is 1 day on the total of 90 days, so that is around 1% of sales, which we missed. So if you would add it back here, the company would be flat in the month. And since Easter is an event, which in certain countries leads to extra purchases, and in other countries it just leads to a shift in sales because of bank holidays. But net-net Easter is adding sales to our top line. And what, let's say, we saw that's coming back in April, and that's also why I will say something about April on the next slides. From an EBITDA perspective, as a result of our negative sales development, and we also had felt pressure on the gross profit, SG&A, we managed, I would say, very well. But as a result of that, our adjusted EBITDA came down versus the prior year from EUR 145.9 million to EUR 122.4 million. However, the reported EBITDA went up. And yes, coincidentally or not coincidentally, the reported EBITDA number and the adjusted EBITDA number, I should say, percentage and number is exactly the same. So that means that there were basically no adjustments, and that in itself, is also in line with what we had committed to, because we promised that we would significantly reduce in adjustments going forward, not only in this year, but you can also expect that from us in the future. Anyway, EBITDA is down. And then when you look to the net income. Net income has improved from minus EUR 41 million to minus EUR 19 million. There is a negative element because of the EBITDA development, and the clear positive contribution comes from less financial costs, because now the full benefits of the IPO refinancing are kicking in. In the meantime, we've also refinanced our -- the bridge financing of EUR 450 million, which is also bringing our interest expenses further down. But I think there's only small element of that sitting in this quarter. The majority of that benefit will be visible in the quarters ahead of us. So that is the, I would say, the high level summary, and Marco will come back on that more in detail. Although, it is not normal to comment too specifically on -- let's say, on the current quarter, but given the fact that Easter has shifted from March to April before that would be appropriate to say something about April. I'm happy to say that in April, we have seen a positive sales development versus both last year and certainly versus the prior month and the prior months. So sales in April was up. We are not disclosing how much it was above last year, but it was up. We can say that the benefit of Easter was very clearly visible, especially in Germany. So Germany is a country where people are buying more premium beauty items during or around Easter, and we saw the negative element of that in March. But we saw a positive element of that in April. I'm not quantifying it either. But we think that Easter this year was slightly better than Easter last year, so that in isolation has also helped. And what is also really helpful that in Q2, we experienced significant pressure on E-Com, in general, as you saw with the minus 2.6%. Especially in Germany, we had tough -- some tough months. But I'm really happy to say that also in April, E-Com in Germany made a very significant, let's say, step up. Since you're going to ask the question anyway, let me just answer the question already. So one of the key reasons why sales was under pressure is that basically the market in France and in Germany was, let's say, under severe pressure. Both in Germany as well in France, in Q1 -- sorry, in Q2, so calendar Q1, the premium beauty market was in decline versus the prior year. In France, we are talking about 4%, 5%, 6%, 7% depending a bit on the week. So that is a significant, I would say, decline of the markets. In that market, France, NOCIBE gained market share. In Germany, the market was depending on the month 2%, 3%, 4%, 5% down as well, especially in March. But there the Easter effect is kicking in, because we see, let's say, the reverse element in the market happening in April. But the market was down in Q2. And our market share in Q2 was slightly below last year. So if we, let's say, blame the market, that is for the vast majority, is correct. But there was also an element -- let's say, a small element, which is about market share, and that portion we should certainly be able to manage. And I'm also happy to say that in the April sales, both in DOUGLAS as well as on PD, we are seeing that back. But like I said, it is not usual -- we usually don't comment too much on current trading in April, so I won't go a lot further than this. And also do not expect that next year, we will comment on April, because it really is driven by the shift, let's say, of Easter in this case. With that, I'm handing over to Marco, who will dive into the financials.

Thank you. Thank you very much, Sander. Ladies and gentlemen, a warm welcome, also from my side. It's my pleasure to lead you through our numbers for the first time, since my appointment as Group CFO of DOUGLAS as of the 1st May. Of course, I would have wished for better market environments to start with, but these are challenging times, and we will weather together as management team, and with all the DOUGLAS employees. In the second quarter of our financial year, we experienced a slight decline in our group sales as Sander was hinting at. There are several reasons for that. As mentioned, 1 trading -- more -- less a trading day than last year, due to the leap year in February. Secondly, Easter, that fell into our third quarter, while it was in the second quarter last year. And again, as Sander mentioned, commercial importance of Easter is different country-by-country. But in most countries, we can say it's an important commercial and promotional event that clearly has an impact on sales. And again, with the April numbers in our hand, we can already say that this year's Easter business compared to last year's Easter business was also slightly better. On top, rising political and economical uncertainties weighed and continue to weigh on consumer sentiment and the willingness to spend, at least in our largest markets, Germany and France, that account for nearly 60% of our sales. The promotional pressure remained high, again, especially in our largest markets. In this macro context, the sales picture was different in Stores and E-Com. While E-Com, excluding Disapo decreased by 2.6%, Store sales were nearly stable, mainly thanks to the opening of new Stores as well as the refurbishment of existing ones. Central and Eastern Europe, the segment that is in focus for our expansion program continued significant growth path. On profitability, we have some better news to share. As you may remember, our EBITDA was heavily influenced by adjustments in the past years. These adjustments mainly had a onetime character, but it was important to prove that they will fade out, and we have done that, leading our reported EBITDA to show a strong increase of 14.5% year-on-year. This improvement was achieved despite an environment of high promotional intensity, as we just commented, and lower supplier bonuses from lower sales and purchases. Despite a higher number of employees in the newly opened Stores, and the general increase in tariffs, personnel costs decreased as we revised the variable compensation accruals to the new full year targets, demonstrating effective management of this normally fixed cost item. Except for IT costs, where we strategically deemed high expenses necessary, in the rollout process of our technology stack, we kept our costs well under control. And the Easter shift led also to a later start of marketing campaigns that decreased the marketing cost ratio. And finally, logistic cost ratio was also below last year, thanks to a higher average order value and cost efficiency initiatives. These dynamics led our adjusted EBITDA to decrease by 16.1% to EUR 122 million in the quarter, again, however, exactly in line with the reported EBITDA. Overall results, in line with our latest expectations. As always, let us deep dive into the segment developments to provide some insights on the local performance. Let's start with our largest segment DACHNL, comprising Germany, Austria, Switzerland, The Netherlands and Belgium, On Slide 7. Driven by the muted consumer sentiment and the high promotional pressure from some competitors, we saw a sales decrease in both channels within a declining market. In our Stores, the footfall reduced significantly. A vigorous increase in average basket could not make up for that. But the good news is that we did not see a trade down activity by customers with average price per item showing actually a solid growth. Furthermore, we continue to benefit from a successful entry in Belgium, with the Stores opened in the last month contributing positively to our performance. Driven by the higher promotional pressure, the E-com part of this segment experienced a more pronounced sales decrease. We received less orders, which was not offset by, again, a higher basket size. And as a result, the E-com share of the segment went to 41.8%, about a percentage point below last year, but still far above the 33.3% group average, and the highest among our omnichannel segments. The reduction in adjusted EBITDA looks large at first sight, but please note that the prior year figure was EUR 6.2 million higher due to a sublease income, which in this quarter was reallocated to the overheads channel for greater comparability between the segments. So again, no change in overall group result, just a reallocation between the segments. This explains almost half of the absolute reduction and most of the EBITDA margin reduction. Other than that, our IT and personnel costs rose, partially offset by improved logistic costs and marketing costs. In total, this led to a decline in adjusted EBITDA, and thereby, adjusted EBITDA margin for the segment. Moving on to our second largest market, France, we look at Slide 8. As said at the beginning, the market slowdown was also perceivable in France and affecting all channels. The footfall in our French Stores decreased significantly, which combined with a stable conversion rate, led to a significantly lower number of customers. Average basket size was significantly higher again, and driven by a higher unit per ticket. Still, this did not compensate in full for the lower footfall. In E-com, the strong increase in average order could not compensate for the fewer orders we received. And as a consequence the E-com share in this segment slightly declined to 20.4%. As a whole in France, while the market decreased in the quarter, NOCIBE was actually able to gain slightly market share, confirming the solidity of our performance in this quarter. On the OpEx side, following the E-com platform rollout, again, our IT costs slightly increased. However, as we initiated profitability stabilization measures, we improved our personnel cost ratio and marketing cost ratio. Furthermore, the comparisons to prior year is slightly distorted by a one-off item in the supplier bonus of last year, which did not recur this year. All-in-all, this resulted in a strong decrease in adjusted EBITDA and adjusted EBITDA margin. Moving on to Southern Europe on Slide 9. We report a 0.4% sales growth in the region, driven by our Stores business that grew 1.6%, compensating for a decline in E-com. In our Store business, the sales growth was driven by a high conversion rate, more than compensating a lower footfall and a significantly reduced basket size and price per item. By the way, this segment was the only one where the basket size decreased largely due to a mix effect of brands sold. The upward trend, which we saw in the last quarters in our E-com channel in Southern Europe did not continue fully in Q2. A vigorously lower number of visits could not be offset by, again, larger baskets. And therefore, the E-com share in the segment decreased to 13.2%. When looking at adjusted EBITDA, we were able to fully pass through price increases. Although, we received higher marketing income and slightly reduced the logistic cost ratio, we recorded higher personnel costs. However, as a result of this effect, adjusted EBITDA declined by only EUR 1 million, while the adjusted EBITDA margin only decreased slightly. Coming now to Slide 10 on our fastest-growing segment in this quarter, but not only in this quarter, I would say, Central and Eastern Europe. While the segment was not unaffected by the higher promotional environment, yet it continued its significant sales growth momentum and achieved the highest growth rate in the group. For the third consecutive quarter, CEE actually exceeded Southern Europe in terms of sales, so maybe soon we will have also to switch the order of presenting the segments by the way, by size. In the Store business, we recognized a significant increase in footfall, partially driven by the opening of 16 new Stores since the beginning of the fiscal year. And while our customers have bought less items per basket on average, this was more than compensated by the significantly increased average price per item. So in total, this resulted in solidly higher basket sizes and drove sales. Our E-com business, we saw significantly more orders with a slight increase in basket size, and this combination drove the strong sales increase in E-com. And as this performance was even stronger than the sales growth in the Stores, the E-com sales share rose to 24%. Due to the mentioned highly promotional environment, we could not pass on the full supplier price increases to the customers. However, the marketing contribution from suppliers increased strongly. And even though we have also spent significantly more on marketing, then the net marketing cost ratio actually improved. Despite the higher number of Stores operated, we kept the personnel cost ratio stable, thanks to the growth in sales, and we were able to leverage our logistic cost ratio based on the significantly higher sales again. Please bear in mind that as we comment often, the opening of new Stores has a temporarily dampening effect on margins as it takes time until the Store is fully operational and at a run rate level, at the level of established Stores indeed. So in total, the sum of the mentioned effects led to the decrease in adjusted EBITDA margin, while the absolute adjusted EBITDA remained actually stable year-on-year. On the next slide, so Page 11, we look at the fifth segment, our segment Parfumdreams and Niche Beauty. We have already commented on the competitive environment we witnessed in this quarter, especially in Germany. And here in the PD Stores, the segment was affected, of course -- the segment was affected by it. We received less orders, but with larger basket sizes, which led to a nearly stable sales level. Still in the Stores, we felt the late Easter timing and our customers postponing purchases. Pricing pressure weighed on the profitability as price increases could not be passed through to the full extent. In addition, we spent more marketing, which increased the net marketing cost ratio. Furthermore, after the integration of the former Parfumdreams warehouse into the German OWAC warehouse, which by the way, created an efficiency in our net working capital, PD doesn't serve as a backfill partner to DOULAS countries anymore, which -- to DOUGLAS Germany anymore, sorry, which impacts the segment's volumes. On the other side, however, the reduction in headcount from the warehouse closure resulted in lower personnel costs, both in absolute and relative terms. However, the sum of these effects led to the decrease in adjusted EBITDA and adjusted EBITDA margin. Okay. After this deep dive on the segments, I would like now to come back to the group level on Slide 12. So overall, our Stores saw a vigorously lower footfall, which we could not offset by better conversion rate. It was not helped by the net closing of 2 Stores in the quarter. So whilst year-to-date, the net is, of course, positive in a single quarter showed a net 2 Stores closing. So in the first half of the year, again, we opened 17. In terms of sales KPI, while the number of items per basket was virtually unchanged, the sales per item were on average slightly higher, which led to slightly bigger basket sizes. On E-com, after 11 consecutive quarters of growth, we experienced the first sales decrease, therefore, in nearly 3 years. Again, the decline was due to slowdown consumer demand, a competitive environment, and a highly promotional pressure in the market that we did not want to follow to such an extent. So sales contribution from E-com, therefore, decreased to 33.3% or exactly a 1/3 of our business. So in this muted sentiment, however, it's remarkable to note that DOUGLAS showed continuous growth for 15 consecutive quarters. So this was the first quarter again in over 3 years, where we show a slight decline in E-com. Now we can move to Slide 13, which is our group P&L for the quarter. As described in the segmental performance, the highly promotional environment led to lower sales and thereby also a lower supplier income. That's why the absolute gross profit and also the gross profit margin decreased. We significantly improved our net operating expenses, and this reduction is a consequence of the measures we initiated to counter the challenging times as well as phaseout of one-off expenses that impacted last year's P&L, as we commented already. Despite a higher number of employees, the personnel costs were stable, and we attribute this to some extent to the revision of the variable compensation accruals to the new full year targets, again, demonstrating possibility to handle this otherwise fixed cost base. We also achieved savings in marketing and logistic costs. Only the IT costs were higher as our tech stack rollout investments will pay off in efficiency gains in the future. As a result, our adjusted EBITDA decreased 16.1%, but our reported EBITDA grew by a remarkable 14.5%, again, as adjustments, which played a major role in the past were no longer a relevant position. The financial results improved significantly, thanks to the financing structure that's in place since April '24, and that was further improved by the repayment of the bridge facility in March, and we now profit in full from better condition and the reduced debt level. Tax rate in the single quarter is not a completely meaningful indicator for the full year taxation. And overall, however, we can state that the net result on a quarterly basis was significantly increased by over EUR 22 million year-on-year. Now if we move to Slide 14, we look at the working capital and CapEx. Our average working capital -- net working capital was EUR 240 million, that resulted from higher inventories -- average inventories due to the opening of Stores as well as the launch and rollout of several new brands. However, days of inventory standing on average decreased actually by 2 days compared to last year. Since this quarter, we rolled out a new supply chain financing program to support and optimize our working capital swings within the year, and the average payables, which were higher in Q2 are partially the result of this initial program setup. The average trade receivables increased vigorously. But on the other hand, we had lower bonus and marketing contributions receivables, thanks to faster collection from the suppliers. As a result of all these effects, the average net working capital as a percentage of LTM sales amounted to 5.3%, a slight improvement on last year. Again, as mentioned before, significant focus to streamline our capital efficiency and continue on our cash generation path. In line with our growth strategy, our CapEx was significantly higher with a strong focus on Store refurbishment and openings, mainly in Central and Eastern Europe. Furthermore, we continue to invest in 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 our Let it Bloom strategy. On the next slide, which is Page 15, I would like to review with you our year-to-date free cash flow. I think we already spoke about CapEx, working capital and taxes, and of course, adjusted EBITDA. And again, it's important to highlight how adjustments are now playing a marginal role in the cash flow, compared to last year. The remaining position exhibiting a difference versus prior year is the others bucket, largely affected by a change in provisions. So in the end at EUR 308 million or 65% of adjusted EBITDA, our free cash flow was on a solid level in the first half of our financial year. On Page 16, connected with our cash flow generation, we can now switch to focus on liquidity and net debt structure. There is an important caveat. Please bear in mind that the comparison versus last year of available liquidity is, of course, affected by the fact that in March '24, the financing structure post IPO was not yet in place. And therefore, the cash balance was extraordinarily high with the proceeds of the IPO. At the end of March 2025, besides the new financing structure from last April, so from April '24, also the refinancing of the bridge facility was executed, and the bridge refinancing was made by issuing a promissory note loan of EUR 200 million and using ancillaries as well as available cash on the balance sheet. And so despite the bridge facility had extension options that we could have utilized, the successful completion of this refinancing and repayment of debt was a clear signal of continuation on the path of debt reduction and improving financial profile, while still maintaining a solid liquidity headroom to run our business. For these reasons, actually, it's, therefore, more meaningful maybe to look at the evolution of the net financial debt year-on-year because the liquidity and the gross is somewhat distorted. And so in the middle of this slide, we see that the net financial debt actually reduced by EUR 96 million from approximately EUR 1.1 billion to EUR 1.0 billion, again, confirming our net financial debt reduction path. And you can find in the appendix, the details of the cap table. Lease liabilities, on the other hand, were impacted by lease investments, relating to Store openings, renewals and supply chain operations, and this explains the marginal increase in leverage from 2.7x to 2.8x approximately. Let's turn now to my last page for our financial performance outlook. Today, we reconfirm our guidance given in March 2025. We expect our sales to amount to around EUR 4.5 billion in financial year '24-'25, and an EBITDA margin of around 17%, and our average net working capital as a percentage of sales to decrease to below 5%. Our net income is expected at around EUR 175 million. Given the global macroeconomic and political developments as well as the sentiment in the beauty market, we will set up a new midterm forecast as part of our business planning for the upcoming years, and we'll thus comment on that at the occasion of the full year reporting in December. So ladies and gentlemen, with that, I conclude my part of today's presentation. Thank you for your attention so far, and I would like to hand the call back to you, Sander.

Yes, Marco, thank you very much. So as already indicated, I now want to give you a brief update about a number of our strategic initiatives, where we've made good progress. So first of all, I just wanted to acknowledge that this is also a year of, I would say, celebration, not always from, let's say, a performance perspective in relation to our original guidance. But still, we have some memorable events, as you can see on this slide. So it's 115 years ago that the first DOUGLAS Store was opened in Hamburg, Germany. It was 30 years ago that we launched the DOUGLAS Beauty Card. And just recently, we took another important step with a launch of a new version of that in The Netherlands, and I will come back on it in a minute. And only 25 years ago, we were one of the early adopters of E-com. And today, in E-com, we are the #1 online beauty retailer as well. So not only offline, but also online in Continental Europe. So I just wanted to make you aware of that. As you know, in our strategy, we have defined under the wings of Let it Bloom, 4 key strategic pillars. And in total, we have 20 strategic initiatives in place. And today, I want to give you an update on 8 of those, and I'll do this relatively quickly and high level. So first of all, as part of our next-generation CRM program, we have started with the rollout of our new loyalty program. So we've started with the launch of our new Beauty Card in the Netherlands and Belgium. That was the first market, more to come. Basically, the plan is that in the next 3 years, we're going to roll out the Beauty Card in all our markets. In some of our markets, we first need to rollout our tech stack before we can roll out the new program, but we are bringing that in sync. This new program will allow us to create more personalization and also give more incentives, basically in line with the spend level of our customers, both online and offline. The objective is, first of all, to grow, let's say, the Beauty Card sales as a percentage of our total sales, because once somebody buys something with a Beauty Card, that person is no longer anonymous to us. We know who the person is, we know where he or she lives. And in most cases, we have an e-mail address. So that will allow us to, let's say, to approach the customer in a personalized, let's say, manner. And once we can do that, the second objective is to grow the sales per customer on an annual basis. Let me just remind you that we currently have the biggest Beauty Loyalty program in Europe. We currently have 62.1 million members being registered in March 2025. And with that, we are significantly bigger than the #2 or #3 beauty retailer in Europe. The second initiative being the market leader in premium beauty, that also creates obligations and a responsibility from an ESG perspective. So we have an ESG program and strategy in place, with different initiatives in the product, planet, people and governance domain. But to give you an indication what happens on the Store side. So we are currently installing smart meters in all our Stores. More than 1,000 Stores are already completed. And that basically will allow us to track the energy consumption, let's say, in the individual Stores. So the objective is ultimately to not only track it, but also to reduce it. Because we can compare Stores, we can see that a Store is consuming too much energy when the Store is already closed. So something is not happening rightly in the Store. So that is just a simple instrument, which will allow us to measure and reduce. Secondly, we have installed LED lighting in all our Stores. That means that from a CapEx perspective, LED lighting is actually more expensive than traditional lighting. But once you have installed it, it will also reduce energy and it lasts longer. In addition to that, once we open a new Store or once we refurbish a Store, we also are installing or in refurbishment cases, replacing our air-con by an eco-friendly air-con. And last but not least on this page, with more and more landlords, especially, I would say, the larger organized landlords, so landlords with whom we have multiple locations in multiple countries, we are signing so-called green leases, which are contracts which include dedicated ESG clauses and a collaboration agreement between the landlord and us to reduce CO2 emissions in our Store. And in most cases, we're talking about shopping centers in the shopping center of that respective landlord. And we currently have 170 of those agreements. And each time that we renew an agreement or that we sign a new agreement, we're also trying to make sure that we include the green lease paragraph in there. The third initiative is Retail Media. So Retail Media is -- first of all, we are leveraging our first-party data to provide a media platform to the brands, because once they can advertise their brand on our platform, closer to the point of purchase, you can't be. And many brands have already, let's say, discovered that. So we see a continuation of strong growth, let's say, in the markets where we're currently active with Retail Media. The DACH market performed exceptionally well. DACH was already an early adopter. And clearly, it's our #1 segment. But in addition to that, also from an absolute growth perspective, DACH is doing really well. That doesn't mean that we're not growing in the other segments. In all the other segments where we already offer Retail Media, we are growing, but there is still a way to go to match DACH. That is actually great because DACH is setting basically the standards and if already, all our other segments would achieve that level, that would already be a great step up in itself. Retail Media is not only enhancing our top line, but also the EBITDA percentage is significantly, significantly higher than the group average, which we realize with our omnichannel product business. So in that sense, it is adding to the bottom line. We continue to innovate. So this year, we've launched our self-service platform, which also allows now smaller advertisers to participate, and we are currently doing 2 pilots. One is a pilot where we collaborate together from a data perspective with TheTradeDesk. And the second pilot is for now, Retail Media is predominantly an E-com proposition, but we also have started with a test in our Stores in Germany, where in a number of Stores in Germany, we've installed screens or we're using the screens which were already there. So now we can offer an omnichannel kind of Retail Media proposition to the brands. And the first initial results are promising. So we are further evaluating that and considering a step up in of that initiative in the years ahead of us. Moving to the second pillar, let's say -- so this is all about offering the most relevant and distinctive range of brands. We have launched our first exclusive Continental Europe premium haircare brand, TYPEBEA, which is owned by Rita Ora. And we've launched that now in 20 omnichannel -- 20 countries in an omnichannel way. We have opened 900-plus Stores, and this is really an important building block in further accelerating premium beauty hair care. Premium beauty hair care a few years ago was non-existent in our Store network, online and offline, but it now becomes a visible and more significant category. We expect a significant growth of this category going forward. And basically, it is enlarging the market we want to fish in, you could say. And TYPEBEA, since it's exclusive. So for instance, Kerastase is an important brand, which we are also rolling out. But Kerastase is not exclusive to DOUGLAS, so that means there is more price comparison and price competition. And with an exclusive brand, we can refrain from price competition, we can be unique and different. The same for the next initiative. So together with Khloe Kardashian, we have launched XO, which is a big exclusive launch in the category -- in the fragrance category, which is, as you know, our largest category. We rolled this out simultaneously in 20 omnichannel countries again, including 1,700 Stores. So that is, you could say, a 90% plus coverage. And also with a pan-European activation plan, which includes communication in 1,000 shop windows, homepage activations, social media, in-Store activations, and also Khloe visit our DOUGLAS Stores, flagship Stores in both Dusseldorf and Milan, also creating, I would say, a lot of buzz around DOUGLAS, but also the brand and the product in this case. And the brand entered in a number of our markets, the top 10 best sold fragrances in the relatively short period in time. So exclusive launches remains a very important pillar of our assortment strategy, and a strong element to differentiate ourselves. In addition to these exclusive brands, we have another driver, which is our own DOUGLAS Collection Corporate Brands proposition. And under the wings of the DOUGLAS Collection, we launched a new line, The Botanist. As you can see to the visual on the right, it has a reference to, let's say, an Apotheke or a pharmacy. So it's a pharmacy, you could say, concept. We launched 16 SKUs under the DOUGLAS & NOCIBE brands, where we talk about France, with different products, shower gel, body lotion, hand wash and balm, and also with different basically flavors or fragrances. It has been launched in all our countries and in all countries and it has started really well, and we hope to see, let's say, further growth going forwards. So moving on to our expansion program from a Store network development. We continue to open new Stores and refurbish Stores. Marco has already referred a bit to that. So as part of our Let it Bloom strategy, we want to open around 200 net new openings by the end of calendar year 2026, and we want to refurbish around 400 Stores by the end of 2026 as well. In this quarter, we have opened 9 Stores in the different markets. We have closed 11, that is a relatively big number, but basically, we wanted to benefit first off Q4, so our Q1, because in November-December, it is not so difficult to make money also on a Store which is underperforming. So that's why most of our closures are basically done in this quarter, so in the first quarter of the calendar year. In April, we did more than 15 openings and refurbishments. And in Q2, we did 28 opening and refurbishments. And we also opened a few, I would say, iconic Stores. So we opened in the Uberseequartier that is a very big shopping center owned by Westfield, a very, I would say, important new Store in our home market, Hamburg. We also refurbished our Stores in Gelsenkirchen and Berlin. And just 3 weeks ago, which is part of the new quarter, but you can just -- it's public knowledge, we opened our key flagship Store in Antwerp on the Meir, and that is already the #1 Store of the DOUGLAS portfolio, and I would certainly invite you to go there. We also -- as when we came out with new guidance, we told you that we would make some adjustment in our capital allocation process. So still our new Store opening program for this year is fully intact, so we didn't make any changes. But from a refurbishment perspective, we slowed down some of the refurbishments, let's say, to quite likely to new financial year. Still, the number of refurbishments, which are in the pipeline this year is above what we did last year and the prior year. So when we talk about a slowdown, we still make significant capital investments, and we also believe that our numbers can carry that weight, because that is also a commitment to the future potential and the growth of the company in the years ahead of us. Moving on to, let's say, the operating model pillar. As we've shared with you, we are in the process of developing a network of 7 omnichannel warehouses and OWAC, One Warehouse All Channels. So these warehouses carry the stock for our Stores [Technical Difficulty]. We are about to open the NOWAC, so that is the first OWAC for Central Europe. And the NOWAC is going to supply, let's say, Poland as of July, August, September. And then the plan is that in 2026 we're going to use that OWAC for the Baltics, and we're going to use that OWAC for Czech, Slovak, and Hungary. And that would mean that in the next, you could say, yes, 1, 1.5 years, we will close down an omnichannel warehouse in Lithuania. We will close down an omnichannel warehouse in Latvia. We will close our omnichannel -- our E-com warehouse, sorry, I made a mistake, I should say E-com warehouse Latvia -- E-com warehouse Lithuania. We closed the E-com warehouse in Poland. We closed the E-com warehouse in Hungary, and we closed the E-com warehouse in the Czech Republic. So we will close 5 warehouses, relatively small operations and replace it by one big warehouse. That also means that a country like Estonia or Lithuania or Latvia, who currently have around 20,000 articles in the assortment online, that they will have 50,000-plus articles in the assortment online. So it will reduce stock location points, and it will significantly enhance, let's say, our offering towards our customers. But this is a very big transformational exercise, because it also requires renegotiation with suppliers. It requires adjustments of processes and systems in all these countries. So this is not only about a warehouse, it's about implementing the DOUGLAS operating model in those 7 countries. So in combination with the OWAC in Poland, so maybe I have already spoke about this slide, under the same roof of this warehouse, we have one additional activity, because we used to have a warehouse in Breslau, Poland, where we are basically receiving and carrying the stock of our Corporate Brands portfolio. So our Corporate Brand supplier for DOUGLAS Collection, Jardin Boheme, one.two.free!, and Susanne von Schmiedeberg, we're delivering the goods to Breslau. And then from Breslau, we would distribute them across Europe. This Breslau warehouse is in the process of being closed. Actually, it will be closed in the next few weeks, because we've shifted the capacity to the same NOWAC location under the same roof, operated by the same service provider, Arvato, but it's a separate activity. And from that warehouse, we will supply basically our 7 OWACs in the future. And that will also -- this relocation will also create cost savings, because we have a more efficient process, and a more efficient supply chain model going forward. So the old Corporate Brand warehouse will be closed in the next few weeks and in a few weeks from now, we will start to supply all the countries, the DOUGLAS countries, with our own Corporate Brand portfolio from this same Polish location. And by the way, when Marco was referring to lease obligations, so what we also now need to do, we need to reflect the lease obligations in those OWACs, let's say, into let's say, the overall, let's say, balance sheet. But as I also said, in the near future, we will close down 5 facilities. So that will provide a saving, either on the capitalization side or on the OpEx side. To wrap up, in summary, the DOUGLAS Group is on track to reach its guidance for '24-'25 with a sales number of around EUR 4.5 billion, an EBITDA margin rate of around 17%, and net income of around EUR 175 million, and a net working capital, average LTM of below 5%. Q2 was strongly influenced by, first of all, 2 calendar elements, Easter and the February day. And secondly, the combination of customer sentiment and tough, let's say, competitive climate led to a small decline in our top line. As a result of that, we have initiated a number of measures, first and foremost, to stabilize our sales, and to safeguard profitability, which includes SG&A cost reductions, and those were already visible in the quarter behind and we keep working on that, tightening of working capital and phasing of returns. We have increased our reported EBITDA basically with no adjustments in -- no material adjustments in this specific quarter and significantly improved our quarterly net income. The DOUGLAS Group will set a new mid-term forecast as part of the business planning for the coming years. So in our normal process, we are updating our mid-term strategy and mid-term financial plan every year. That process has already started. That should lead into an update of the plan, and into our own internal budget for next year, which will normally be presented to our Supervisory Board in the course of August-September and be approved. And on the back of that, we will come back to you with a mid-term forecast. And we believe it is more prudent to do our homework properly instead of rushing it, and we don't think that will be beneficial for the shareholders. Our strategy remains to be on track, although within the strategy, there are a number of building blocks where we might need to adjust, given kind of the sentiment, let's say, in the world, and obviously, we're doing that. DOUGLAS has full confidence that our omnichannel business model is a winning model, is a model where we can differentiate ourselves from other beauty retailers. And we also believe that our Let it Bloom strategy is the right answer for the short, and the near, and the long term. With that, we wanted to give you the opportunity to ask questions. And I can see that the first questions are already there. So I think we go back to the operator first. Operator?

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

I've got 3, if that's okay. So first of all, on -- if you could remind us how you think about refurbishments, and how you balance the lost sales whilst they're closed, but then maybe the Stores have better sales densities once they reopen. So I don't know if you can pull out some examples for what kind of contribution you see from refurbishments on the top line, and how we should model that going forwards? Secondly, on Central and Eastern Europe, you said that it was also a promotional environment. But can I just confirm my understanding that it's less promotional than, let's say, your other markets, because you're still one of the few premium beauty retailers there with more pricing power? Or is that dynamic changing? And then on Retail Media and your loyalty card, I mean, I was under the impression that you already take the action that you called out in the loyalty program with, I think, 55 million members before, and now you have a few more. Can I just check that the loyalty program -- nothing changes in terms of your existing [ sales ]? And also, is your loyalty program going to also benefit your Retail Media initiative going forward?

Vandita, thank you very much. Sander here. So I will, given the nature of the questions, I will try to answer all of them. So first of all, when you talk about refurbishments, typically, when we refurbish a Store, we have 2 ways or processes of doing that. In a number of countries, we are closing the Store. And then between 3 to 6 weeks later, we reopen the Store fully refurbished. So we first have no sales for 3 to 6 weeks, and then we have an uplift. And the second process we have, especially when the Stores are bigger, we sometimes are closing half of the Store. So then we operate the other half, let's say, with less assortment. And once we have refurbished the half, we switch to the other way around. So that means that we typically don't do this in 3 to 6 weeks. It takes a bit longer. But we certainly at least not closed them, and we are not losing customers and motivating customers to go elsewhere. These are kind of the 2 processes how we do that. In terms of returns, I think if I make it -- if I simplify it, the closure effect or the reopening effect is, on average, more or less compensating the closure effect in year 1. So if you close for 6 weeks and then you reopen, then depending on where we would reopen the Store, if we reopen the Store on the 15th of December, which is not likely, then we will not compensate for the closure effect before. But if we would do this, let's say, halfway the year, then we will more or less catch up, let's say, the missed sales in that specific year. And then in terms of, let's say, return on investments -- it is -- the spread is not so narrow. But typically, the payback for a refurbishment Store should sit somewhere between 2 to 3 years. And that is on average, let's say, what we are aiming for. That's one. Secondly, when you talk about the CEE, the CEE is a growth market. Why is the CEE growth market? Because the number of people who are -- have entered the premium beauty category is still significantly smaller versus what we see in Western Europe, so there is more penetration. And secondly, the GDP development in the CEE is on average also higher than in Western Europe. And by the way, inflation is on average also higher in Eastern Europe, not only in the past 2 years, but structurally. So in that sense, it was a growth market and it is a growth market. So the markets in the CEE, although they grow at a lower pace, they are still growing. So when I talk about France being down 5% and Germany being down a number of percentage points in the first few months of this year, in the CEE, the markets are up. We do not have the same market data for all the markets, because not in all the markets, there is Nielsen or Circana. So we work with an agency, which is called Vector. Vector is consolidating the sales of only Sephora, Notino and DOUGLAS, so we know in some of our markets how this part of the market is doing. You are right that there is not a lot of competition in the CEE, in terms of there are not a lot of big retailers. So I just mentioned 2 alternatives, Sephora and Notino. And these are actually the only 2 who have a proposition which works across countries. Notino competes with us in almost all the CEE markets, and Sephora competes with us in, I think, 4 of the CEE markets, if I say correctly. There is also Marionnaud, but they are not so big. They only operate in 4 CEE markets. And to be honest, they are really, really struggling. So the level of competition -- the number of competitors is not so big. However, both of those competitors, Sephora and Notino are, I would say, well-positioned companies, and with clear propositions. So I would not say that the CEE is less promotional. It's, by the way, difficult to quantify that, but we consider the CEE to be quite promotional. But I don't say -- think that it's -- the trend is fundamentally different in this quarter versus the quarter prior. We continue to see significant growth and growth opportunities in the CEE. So we are opening a significant number of new Stores, not only in the quarter behind us, but also in the remainder of the year. And we are doing that basically in all the CEE countries. By the way, in the CEE, Adriatica, so Croatia, Slovenia is part of Southern Europe. But in terms of market dynamics, it has more of the characteristics of the CEE, that is just the management's allocation, which we have done. Then talking about loyalty card and Retail Media. So when I talked about the loyalty card, maybe I'd given you the impression that we currently cannot track and trace customers in the current loyalty scheme. That is not the case. So we can already do that. But with the new program, we just have, let's say, more instruments to do so. So in that sense, it creates more options. Plus our loyalty card program is more advanced in those markets where our global tech stack landscape is already implemented and up and running. So in Italy, in Germany, in the Netherlands, in Poland, we have more, let's say, technological capabilities to use CRM. Versus in Bulgaria or in Lithuania, where we have not yet implemented our group technology platform there, I could say that our Beauty Card program, there is a program, but it's significantly less advanced versus Western Europe. So you can consider that upside because once we are implementing our tech stack, and the new launch Beauty Card program, we can just, let's say, benefit from that. Yes, there are opportunities, let's say, to connect the Retail Media, let's say, initiative with, let's say, the loyalty program. But we have explored that, but I don't think that I could say that we have -- I cannot give you a very clear perspective about what that specific plan is. We have actually so many opportunities to scale up our Retail Media. So our first focus is to grow where we already are. Our second focus is to expand geographically, because the Retail Media program is not yet active in all markets. The third initiative is to make it more of an omnichannel program by creating digitalization options on the Store side. And the fourth initiative is to offer new services like self-booking. But the combination of that is already creating quite a lot of work. So we also need to make choices. But to further connect Retail Media and the loyalty program, I see as additional opportunity, which needs to be further explored. So Vandita, I gave quite an extensive response on your 3 questions. Is that clarifying? We'll go to Mia.

Yes. We have now a question from Mia Strauss from BNP Paribas.

I was just thinking what sort of growth rates would you model for Q3? Are the pressures that you saw in Q2 still present in the market or as aggressively present? And then -- or is it safe to assume that there's some improvement in Q3, because April, obviously, benefit from Easter? And then maybe if you can comment, if we've seen any pickup on Mother's Day this past weekend? And then secondly, just on the E-commerce weakness in France. So I understand that that's been rolled out now. How much longer do you think that we'll still see weakness in this market? Or should we start to see an improvement here? And then maybe just lastly, obviously, we always want to give a bit more color on how the category performs. So whatever you can give us over there, please?

Okay. I will take the second and the third question, and Marco will take the first question. Okay. So Mia, thanks for dialing in. On growth rate, well, implicitly, today, we are confirming our fiscal year guidance. So the extrapolations that you were able to make on the basis of last month's numbers and this quarter's are, in our case, in our opinion, still valid. It is true we saw a positive sales performance in April. But again, given the volatility and the market circumstances, we -- our position today is yet to confirm the full year guidance of around EUR 4.5 billion of sales. And therefore, I think it's easy, let's say, to extrapolate the year-to-go performance basically. On the performance of the campaigns, it is true that Easter in particular, has proven positive. Mother's Day, of course, is sitting in some countries in the very beginning of May, in other countries, even 1 week later. It depends a bit on the country. So it's a bit early, to be honest, for us to comment about it. But that at least also is comparable to last year. So in a way, we don't expect a distortion of the calendar effect as we did for Easter, and that's why we felt like commenting more about Easter, because it was really a difference year-on-year. I hope this answers your question, Mia. Marco, back to you for the...

Yes. So your question, Mia, was how much longer will the E-commerce weakness continue in France? I would actually like to say, we do not only have an E-commerce weakness, we have a weak omnichannel premium beauty market, because the Store market is -- I would say, the Store channel is similarly weak as the E-com channel is. And within that tough market, we have gained, let's say, a little bit of share in this quarter. I also think given the phasing of Easter last year and let's say, some of the orders might have still been delivered in March. And so there is some incremental, I would say, calendar effect why E-com is maybe performing a bit below the Store side in a number of markets. But I am not concerned about the E-com channel in isolation in France. I'm concerned about, let's say, the omnichannel market in France. And what we do see in France that from a competition perspective, so in Germany, we have one very tough local competitor called Flaconi. Well, there is not an equivalent of that size and shape, and of aggressiveness in, let's say, on the French side. There are other players which are less developed. And the E-com market in general is less developed in France. So it is, let's say, across categories, less developed in France versus Germany or the U.K. or the Netherlands. But also in premium beauty, it is, I think, around 20%. Our E-com share sits a little bit above that. So in that sense, we have a bigger position relatively versus the competition. To come back on your last question about category development, it's not easy to give a group answer on that. So first of all, what I can say is that the hair care category continues to grow in all our, you could say, segments and countries. So even though our total sales was slightly negative, the hair care category has shown a continuation of growth. But for the other 3 bigger categories, fragrance, skincare and color, the performance differs, let's say, between the markets. So I cannot give you a trend, and I don't want to comment on individual categories for individual segments. But there is not a clear trend visible like fragrance is down or skin care is up, that differs by country. But hair care is, I would say, an exception for that.

Maybe just a clarification on the E-com in France. So I understand the external factors, but is there -- so what the weakness you're seeing now, that's all external, it's nothing internal from rolling out the platform in France?

No. The platform is functioning well. We also had a very significant supply chain initiative, because in the course of January, February, we closed one warehouse, our own warehouse and we integrated that in the warehouse of our service providers, so that created some supply chain turbulence. So let's say, it hadn't helped -- didn't support the availability in that specific period. But the platform -- the E-com platform is functioning well today, and the supply chain can always go better, but I wouldn't say there is something fundamentally wrong at this point in time. So the market is tough in France.

[Operator Instructions] The next question comes from Yashraj Rajani from UBS.

I've got a couple, please. So the first one is, if we look at some of the big beauty and fragrance brands, their EMEA results still seem to be in positive territory. So do you think it's a difference between sell-in and sell-out that's actually describing the difference between your performance and theirs? Or do you think it's the premium beauty segment overall, which is underperforming the overall market? So that's the first question. The second question is price versus volume. So it will be helpful to understand what the dynamic is, given your basket sizes? And what are you exactly baking in for price versus volume in your expectations for the second half? And the third one is on Germany. So you mentioned that you've lost some share in Q2. So it would be helpful to understand whom you've lost share to? I think you mentioned Flaconi, and also what gives you confidence that you can actually gain that share back very quickly? Those are my 3.

Yes. So let me take question 1 and 3, and Marco can then comment on the second one. So first of all, when the listed brands are releasing their numbers, so Coty, LVMH, L'Oreal Luxe, Beiersdorf, Puig, I'm reading the same press releases as you do, and I'm less interested in China, and more interested in EMEA and especially in the Continental Europe part. So I do see that all of them are not only reporting weak sales developments globally, but also weakening trends in the markets where we operate. And I mean, I don't want to go too much into detail, and you see pretty big differences between L'Oreal Luxe on the one side and Estee Lauder on the other side. But what speaks most is what we sell and what we register on the checkout of our online and offline Stores, and we know the markets. So maybe some of the brands are reporting that they have more sales in France, as an example, but we know that the French market is just down. So there is certainly a difference between sell-in, let's say, and sell-out. And I would say that we had to go out with our guidance change relatively early, because we feel it first, but I'm quite certain and it's also visible that the brands feel it. And I also hear it from them. And so I know what the sales development is of L'Oreal Luxe in our markets or Dior in our markets or Chanel in our markets, not only with us, but also beyond us. But I don't think it's respectful to comment on their numbers in our markets. So I see actually a confirmation in those releases. Then on the third question on Germany. So I did say that in our second quarter, so January, February, March, that we had a slight loss of market share in Germany. By the way, in Austria, we are doing really well. And in the -- when we changed our guidance, we also said that we felt quite some pressure, especially in the E-com channel. So why are we, let's say, quite confident that we will get behind that? First of all, because I do believe that we have the right initiatives in place, and we have made a number of countermeasures. That's one. And secondly, I also said that in April, especially the German market had shown a significant improvement, let's say, versus -- not only versus March, but also versus January, February, March. And to add to that, especially in the German E-com business, we did significantly better versus the month before. And you were referring to a competitor of ours who, by the way, their mother company released their numbers today as well. And they also commented on the sales numbers of Flaconi for their first quarter, for January, February, March. But I am quite confident that their April number would have been a different -- will be a different number, because I know what the market did, and I know what we did. And I know that we gained a significant share back into April. I also know that we made a margin investment to do that. Because I've said it before, it is not difficult for us to grow our sales in Germany online with 25%. We could also do that next month if we want. But we need to make a very significant gross margin investment, which is not only impacting the E-com channel, but it would also impact our Store channel. So we really try to balance our pricing and promo initiatives, to balance the short, the mid- and the long-term positioning and performance of the company. And clearly, we don't want that anybody eats our cake. But there is a short and a long-term case. So we try to find out the proper balance. And I think that in April, we made a good step into the right direction. And well, you already tried to seduce Marco, okay, and what does it mean then for the rest of the year? We think it's too early to say. Well, April will be -- you can just extrapolate April for the rest of the year. That will be too early, because it was only April, and we still have 5 more months in the current financial year. With that, maybe, Marco, you can say something about rising volume.

Yes, we can actually build on that. It ties quite nicely. And so yes, Raj, on the last 2 quarters, basically reading the comments we made, you could tell that overall, we are growing slightly more on pricing -- prices, let's say, average prices as opposed to volume. Of course, year-to-date, our sales are also quite positive, and that's mainly driven by prices. By the way, it's not necessarily, let's say, bad from a P&L perspective, because we commented also that we have a benefit in, for example, logistic cost weight because, obviously, for the same sales, the higher the basket value and the higher the prices, -- well, fewer shipments you have to make and therefore, more efficient on this side, the P&L is. And also historically, when we -- as we do and we've focused on the premium, let's say, side of the market, the price growth has been a driver of the value inside the market. Then you may have fluctuations between, of course, the months and the cluster or the segments, and that may be often driven by mix effects of certain brands potentially becoming more popular than others in a certain area or quarter. We commented earlier about the Southern Europe slight difference versus the others. But overall, I think we expect a similar evolution, let's say, going forward for the rest of the year.

I think, we have no further questions.

That's right. That was the last question. You can please go and let's listen -- and hear you answering closing remarks, Mr. van der Laan.

Yes. Thank you very much. Well, I can keep it brief. So thank you very much for joining our results call. We are working hard and diligently across 22 countries, with 17,000 people, and I am confident that we are working on the right stuff. It's not so easy out there. People are very uncertain. I think today, something is happening in Turkey with Russia and the Ukraine. Hopefully, that's going to lead to something. I'm not too optimistic about that, but we'll see. But in the meantime, we are managing the part of the world which we can manage, which is the DOULAS Group. And we are looking forward to interact with you in the near future. So make life more beautiful. That is our purpose, and that's what we try to do every day with all our people, for our customers, and other stakeholders. So have a great day, and see or talk to you soon.

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