Douglas AG ($DOU)

Ladies and gentlemen, welcome to the DOUGLAS Group Q2 2025-2026 Earnings Results Conference Call. I am Matilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. At this time, it's my pleasure to hand over to Sander Van der Laan, CEO.

Yes, operator, thank you very much, and good morning to all of you. On behalf of myself, Sander, the Group CEO; and Marco, our Group CFO; but also, Dafne, our Head of Investor Relations, is present here in this room. And we are here today to give you an update on our financial performance for the second quarter of the financial year '25-'26. But we also want to put it in the context of our strategy, and we also want to highlight you some of the initiatives which we have taken or which we are about to take. We also realize that we're doing this against the background that we have made an ad hoc announcement roughly two weeks ago, where we have made a number of statements or publications already on an update on our guidance and also on a goodwill impairment, which we are on the impairment which we are taking on NOCIBÉ and Parfumdreams, and we will come back clearly on those topics also today. So, I will give -- maybe let's move to the next page. So, I will give a brief introduction. Then I hand over to Marco, who will provide an update on the financial performance for the quarter and basically for the first half year. And then I will come back to share an update on the strategic plan of DOUGLAS, and I want to highlight some of the initiatives which we have taken or which we are about to take. And then we want to give you the opportunity for a Q&A. That is basically the agenda. So let us move to basically the summary of last quarter. So, in the second quarter of '25-'26, which, by the way, is the quarter where we cycled a tough quarter in the year before. Just to refresh your memory, in our Q1 '24-'25. We did actually relatively well. We delivered kind of 6% plus top line growth. But the second quarter, which is the quarter which we cycled now was a tough quarter, where we had a slight even decline in that quarter, partly, by the way, driven by Easter and also by the planning of that, the 28th of February in the year. It was a leap year. But anyway, in this quarter, we are now cycling a weaker comparison and that obviously would create the expectation that it should be possible to show a kind of a stronger number. And in that context, we, let's say, would have hoped for a higher sales number than 1.1%, but we delivered growth of 1.1%. We have seen that this is driven mostly by E-Com, where especially in E-Com, our cross-channel sales, which is, by the way, largely generated in our stores has been contributing to it. And we also have seen that our net result is significantly impacted by the goodwill impairment and store asset impairment relating to France and a goodwill impairment on the brand Parfumdreams, not on Niche Beauty. Marco will come back on those two specific impairment charges. That has led to an overall performance in terms of 1.1% sales growth. The stores overall being slightly up with a negative like-for-like in most countries on the store base and a positive contribution of our network development, i.e., opening stores, closing stores and refurbishing stores. E-Com 2.4% up, including cross-channel services, an EBITDA margin of 12.2%, which is EUR 116.1 million, an adjusted net result of minus EUR 10 million, a reported result of EUR 124.6 million, and we will update you on this impairment. And the net leverage, which is, you could say, broadly stable versus last year, which was, by the way, driven by slightly lower debt and a better cash position but the fact that our EBITDA has declined has contributed to basically this 2.9 leverage for the quarter. And again, Marco will come back on most of -- all of those numbers, and I would say a bit more. We also want to reiterate to you that we do see that the premium beauty market globally, but also in Continental Europe is adapting to what we call a new normal. What do I mean with the new normal? Post-COVID, we saw basically three years of strong recovery of premium beauty globally and also in Europe with basically double-digit growth rates in three consecutive years. And within that market, the store channel actually gained share again vis-a-vis the E-Com channel because the E-Com channel had an acceleration during COVID and that kind of normalized in that first period. But since year and a half years, we are noticing a significant slowdown of the premium beauty market across Europe. So last year, you could say the market has grown somewhere between 3.5% and 4%. This is last year. In the more recent months, we see a lower number of that, but there is still growth in premium Beauty Europe. The challenge for DOUGLAS in that slower growth market that especially our more mature markets, i.e., Germany and France, are really on the lower end kind of the growth spectrum. So, in France, we have seen a decline in the market over the last financial year. We see a continuation of the decline in the first basically seven months of the new financial year. There are some periods where it's slightly up, but then it's probably driven by different events or phasing of events. But in most markets months, the market has been down. And in Germany, you could say that at best, the market is considered to be flat. And there is also seasonal impact. So, for instance, in March, the market was slightly better in Germany. But in April, we've just seen that premium beauty was down 7.7% just in the month of April driven partly by Easter. There's a bit more Easter sitting in the sales of the market in March. But we also do see that customers are very, very hesitant and that basically customer confidence is at the lowest point for many years in a number of our big markets. And clearly, the global socioeconomic situation, the situation in the Ukraine, the upcoming new energy crisis, the situation in Iran is not motivating people to spend significant amounts of money on discretionary stuff. So basically, I have now addressed the first two points of what I call the new normal. The third thing is that we do see that the E-Com channel within that muted market is doing better than the store channel. We also see that, by the way, in our own numbers. But what we also see that in the E-Com channel that pure players and marketplaces are challenging the selectiveness of certain beauty brands. We do see, for instance, that a large American-based company who invented an online bookstore in the past is now also starting to sell more and more premium beauty brands in Continental Europe. And clearly, that creates an impact, let's say on the competitive landscape. And it also requires a more strategic reaction from us, and I will come back on that a bit later. And then last but not least, in a market which is under pressure where the brands feel the pressure and all the retailers feel pressure on their top line, that is also an environment where customers are seeking more a promotional deal and where retailers and brands are fighting for sales. Hence, there are two drivers which have an impact on kind of the gross profit development of retailers and specifically of DOUGLAS. So, we actually want to stop kind of, let's say, blaming between the tough market environment. We consider this market environment to be the new normal. And our plan for the short, the mid and the long term is supposed to address the challenges and also opportunities, which we do envision in this market. So also, in our financial planning for the years ahead of us and our strategic plan for the years ahead of us, we do not expect that this market environment will change very quickly. We don't expect that the Ukraine or the Iranian war is going to be solved quickly. And we do expect that customers will, let's say, continue to become more digital. Hence, in our strategy and our initiatives, we will also address that. I will come back on some of this a bit later in the presentation. On the next page, we are basically summarizing the key message from the ad hoc announcement, which we have made two weeks ago. So, we are working with a short-term guidance with a sales range between EUR 4.65 billion and EUR 4.8 billion. That was already the guidance from the beginning of the year, and we still stick to the guidance, although it is more realistic to expect that we will finish at the lower end of that range by the end of this financial year. From an EBITDA perspective, we have changed our guidance from around 16.5% to around 16%, which is partly a reflection, you could say, of the trends in the first half of the year and especially the gross profit development and it's also partly a reflection of the deleveraging, which we expect if we will end up at the lower end of the sales range. So that was a change which we communicated two weeks ago. And from a net leverage perspective, it's basically the result of the developments on the left side of this slide. We still expect to finish within the bandwidth between 2.5x and 3x. We are actually at 2.9x after basically the second quarter. So, this is the guidance change which we have communicated last week. So, there is nothing new versus our announcement of two weeks ago. With that, I'm handing over to Marco, who will shed some further light on the financial performance in the second quarter and the first half of the year.

Thank you, Sander. And we go to Page 7 and let me walk you through our group performance for the second quarter of financial year '25-'26. Starting with the sales. Group revenues increased to EUR 950 million, up 1.1% year-on-year on a reported basis. However, on a like-for-like basis, sales declined by 1.3%, reflecting a still challenging consumer environment. Looking at channels, stores sales grew by 0.5%, while E-Commerce continued to outperform, increasing 2.4% year-on-year. And from a regional perspective, growth was primarily driven by CEE, up 5.9%, and DACHNL up 1.4%. And these positive trends were partially offset by declines in PD/Niche Beauty and Southern Europe. Turning to profitability. Adjusted EBITDA was equal to EUR 116 million compared to EUR 122 million last year, representing a 5.1% decrease. And as a result, our EBITDA -- adjusted EBITDA margin declined from 13% to 12.2%. Increased consumer price sensitivity continued to put pressure on gross margins. And while we maintained a strong cost discipline, which helped to partially offset this margin pressure, some dilution remains. This is mainly due to expansion-related costs not yet being fully absorbed with the recently opened stores not yet at their run-rate sales levels. In summary... [Technical Difficulty] So, I would like to continue on Slide #8. So, at group level, sales increased by 1.1% to EUR 950 million. Price increases in both channels supported top line growth, although this was partially offset by volume declines, resulting in a negative like-for-like development of minus 1.3%. A very encouraging development was cross-channel services such as Click & Collect, which grew by 29.8% year-on-year, underlining the strength of our omnichannel proposition. Our stores remain the largest channel, accounting for 66.3% of the group sales, slightly lower than last year. Store sales increased by 0.5% year-on-year, mainly driven by new store openings and refurbishments. However, this growth came despite lower footfall and lower conversion rates, which continue to reflect a cautious consumer environment. We were able to grow our market share in Germany and France, among other markets. Turning to E-Commerce. Performance was clearly stronger. Online sales grew 2.4%, increasing the channel's share of group sales to 33.7% and growth was driven by higher number of orders and a higher average basket size with a particularly strong contribution from the DOUGLAS app, which continues to gain relevance in customer engagement. Sales through the DOUGLAS app increased significantly, now accounting for 43% of total E-Commerce sales, underlining the growing importance of our mobile channel. In summary, Q2 growth was primarily driven by commerce momentum and network expansion, while underlying demand, especially in stores, remains subdued. Strengthening traffic, volumes and further leveraging omnichannel capabilities remain our key focus areas going forward. Moving on to Slide #9. We show the performance of our segments in the second quarter in terms of sales and adjusted EBITDA margins. Starting with sales. Growth was achieved in two of the five segments. Central and Eastern Europe once again delivered the strongest performance with sales increasing by 5.9% year-on-year, confirming its role as our main growth engine. DACHNL also remarkably recorded a moderate growth of 1.4%. In contrast, France remained broadly stable with a slight decline of 0.4%, while Southern Europe and PD/Niche Beauty continued to face more challenging conditions with sales down 1.3% and 2.1%, respectively. Turning to profitability. Adjusted EBITDA margins came under pressure across most segments, and the decline is mainly driven by lower gross margins, reflecting high promotional intensity and continued customer price sensitivity. CEE continues to deliver the highest margin level despite a year-on-year decline. DACHNL and France also saw moderate margin erosion, while Southern Europe experienced a more pronounced decrease. In PD/Niche Beauty, margins remained slightly negative despite showing strong improvements, highlighting the competitive pressure on our pure-play E-Commerce segment continues to be very high. Moving on to Slide #10 and zooming into the building blocks of the gross profit evolution year-on-year. Gross profit decreased slightly from EUR 425 million to EUR 423 million, while the margin declined from 45.2% to 44.5%. Looking at the individual drivers, we saw a positive volume and sales effect of EUR 3 million, reflecting, of course, the higher sales. However, this benefit was more than offset by a negative price promotion and mix effect of EUR 11 million. This clearly highlights the ongoing impact of discount-driven sales and increased promotional intensity continuing to weigh on margins. On a positive note, supply contributions increased by EUR 5 million year-on-year, providing a partial relief in underlying the constructive collaboration with our brand partners. Nevertheless, these positive supply effects were not sufficient to fully offset the margin pressure from pricing and promotions. Let me now turn to the development of our net operating expenses. In a context in which top line is not growing as fast as in the past and gross profit margin is under pressure, we made significant efforts to manage our costs and results are visible. With a 1.5% year-on-year growth, net operating expenses growth is only slightly above top-line growth despite the number of stores opened in the last 12 months. In fact, when we look at the like-for-like perimeter, net operating expenses are actually below last year, ensuring a stable cost to revenue ratio. When stores opened in the last 12 months reached a run rate potential, we also expect a corresponding benefit on the cost to revenue ratio, thus enhancing our margin. Looking at the components, staff costs increased from EUR 180 million to EUR 192 million, and this reflects our network expansion and the net effect of variable compensation. As a result, the staff to cost revenue ratio is slightly higher year-on-year. At the same time, we're actively managing this through efficiency measures, including reduced working hours in stores with declining footfall, temporary staff cost reductions and scaling new store openings. This allows the like-for-like store perimeter to actually show a slightly lower year-on-year staff cost base. On the other hand, other net operating expenses decreased by approximately 7% from EUR 123 million to EUR 115 million. This improvement is mainly driven by more efficient marketing spending in some of our geographies, leading to a better marketing cost ratio. Property cost ratios improved slightly, but we achieved further efficiency gains in IT costs despite ongoing investments in our technology stack. Finally, last year, we had a low single-digit million-euro amount of one-off negative effects related to past accruals that are not happening again, of course. Moving on to Slide 12. Let me now walk you through what is driving the non-recurring charges in the first half. This is linked with the updated guidance for financial year '26 that we issued on April 30th, generating certain implications also on asset impairments. During our impairment testing and in light of the evolving market conditions, we identified a goodwill impairment primarily related to our French business for EUR 87 million, but also platform games for EUR 12 million. As a result, we recorded a non-cash goodwill impairment charge of approximately EUR 99 million in the period. In addition, we also recorded certain store asset impairments for a total of EUR 14 million, again, mostly in France. These impairments reflect changes in key assumptions, including market conditions and growth expectations rather than any immediate or sudden change in the underlying operational performance of the business. And naturally, these charges do not affect our cash flow, cash position, liquidity or compliance with any debt covenants. From an operational standpoint, our French business continues to deliver a remarkably solid P&L and cash flow contribution, however, and we remain very confident in its long-term strength and positioning. Excluding these non-cash charges, our underlying adjusted EBIT was equal to EUR 19 million. Moving on to our full P&L for the quarter as a synthesis of the previous comments, revenue continued to grow in Q2 despite the decline in like-for-like sales, supported by selective store openings, E-Com and a strong growth of omnichannel services and exclusive brands. Despite active cost management, adjusted EBITDA decreased around 5% year-on-year, reflecting gross profit margin pressure. Significant one-offs primarily related to goodwill impairments led to a negative EBIT of EUR 101 million and EBITDA adjustments of EUR 6.8 million were also incurred primarily relating to the implementation of strategic initiatives and also the accrual for the expected costs for the closure of roughly 10 Akzente stores that we announced recently. Below EBIT, the financial result is slightly worse than last year mainly due to FX effects, while financing interests are actually slightly lower than last year themselves. And taxes came in with an effective rate of 29.7% before goodwill impairment, in line with our expectation. And overall, this resulted in a reported net loss of EUR 125 million, however, corresponding to a net loss of EUR 10 million on an adjusted basis. Let us now look at our net working capital and CapEx. Average net working capital decreased from EUR 240 million to EUR 161 million. That as a percentage of sales means a decrease from 5.3% to 3.5%. Days of inventory outstanding were stable at 123 with an increase in inventory driven by the store network rollout, however, compared with a higher cost of goods sold in basis. The main driver behind the reduction in net working capital was again the rollout of our supply chain financing program, which as of March 2026, the utilization of the program amounted to EUR 148 million compared to EUR 60 million as of March 2025, hence contributing to the last 12 months average in the calculation accordingly. Turning to CapEx. Investments in Q2 decreased from EUR 36 million to EUR 26 million. And as previously indicated, fiscal year '25 was a peak year for our store investments, and we do expect this year to end slightly below the EUR 150 million original expectations, mainly due to a more selective approach to new store openings in line of the footfall development in many of our markets. CapEx continues to be allocated to store refurbishment and new store openings, but we do plan a greater shift of investments towards technology and international commerce activities going forward. In summary, we delivered a strong improvement in net working capital efficiency while maintaining discipline and focused investment activity. And this supports our liquidity position and provides flexibility as we continue to invest selectively in growth and strategic initiatives. Let me now walk you through our free cash flow development for the first half year of fiscal year '25-'26. We start with an adjusted EBITDA of EUR 450 million, capital expenditure of EUR 71 million on a cash basis, while net working capital has a larger negative impact of EUR 83 million, mainly driven by operational dynamics. Taxes of minus EUR 25 million and other items that contribute for a positive EUR 32 million, mainly linked with change of provisions. As a result, we reached an adjusted free cash flow of EUR 303 million, in line with last year in terms of EBITDA to free cash flow conversion, which sits at around 65%. After EBITDA adjustments and property rent payments of EUR 168 million, we arrived at a free cash flow post-property rent of EUR 127 million. Looking at our net debt and leverage structure, we report as of the end of March a slightly lower net debt, however, driven again by lease liabilities. Total net debt increased slightly from EUR 2.19 billion to EUR 2.16 billion year-on-year. And within this, net financial debt was reduced significantly from EUR 1.01 billion to EUR 852 million. This reduction was achieved through strong cash generation and also the use of our supply chain financing program, which supported liquidity. At the same time, lease liabilities increased from EUR 1.18 billion to EUR 1.3 billion. This increase mainly reflects new store openings and lease contract extensions and is therefore directly linked to our ongoing store network expansion strategy. However, this value has been stable since September, and the year-on-year growth is slowing down as, of course, the opening pace also decreases. Looking at net leverage, it increased slightly to 2.9x compared to 2.8x last year, again, primarily due to IFRS 16 lease liabilities because on a pre-IFRS 16 basis, net leverage is actually stable at 2x. So, in summary, our balance sheet remains robust, and we continue to combine disciplined debt management, focus on cash generation and targeted investments in growth, ensuring sufficient financial flexibility even in a challenging market environment. Final slide is a reaffirmation of Sander's slide before on the outlook of 2025 and 2026, which we updated on April 30th. Given the current trading environment, we refined our expectation. And for net sales, we now expect to reach the lower range between EUR 4.65 billion and EUR 4.8 billion, corresponding to a 1.6% full year growth. And starting from a 1.5% year-to-date sales growth, it implies mathematically a 1.8% growth in the year to go. On profitability, we anticipate an adjusted EBITDA margin of around 16%, reflecting continued pressure on gross margins, while we remain disciplined on costs. And again, taking into account the year-to-date EBITDA margin, this would imply a year-to-go margin of around 20 bps lower than last year. Regarding our capital structure, net leverage is expected to be at the upper end of the range, hence approximately 3x. We're actively managing the levers within our control to support this. In summary, despite the external environment remains challenging, we're focused on the protection of profitability, strengthening the cash generation and maintaining a disciplined approach to capital allocation. This concludes my part of the presentation, and I hand over to Sander to talk further about our strategic initiatives.

Yes, Marco, thank you very much. So roughly three years ago, we have basically launched our, at that point in time, new strategy, which has had and still has the title, Let it Bloom and which was basically focusing on four pillars. And the plan was and still is to build the strongest omnichannel premium beauty platform within Continental Europe. Given kind of the changes in the market environment, the changes in the competitive landscape and also given kind of the pressure which we feel on our financial performance, we are obviously not sitting on our hands and just observing and do nothing. So, what we've done over the past few months, maybe we can go to the next slide, we have reassessed our four strategic pillars. and all the key initiatives which sitting behind this. And basically, we have made on this page a few, I would say, small modifications, but the core of what we wanted to do, what we are working on and what we want to continue to do remains in place. The sentences which are highlighted red are changes. So, we stated before, we want to be the #1 premium – sorry, the #1 beauty destination in all our markets. We now just want to emphasize that we want to focus predominantly on the premium/selective segment of the beauty market. We want to offer the most relevant assortment, but we're going to put more focus on differentiation on brands and products and concepts, which we have and the competition doesn't have. And we still are building an omnichannel experience, but we want to do it in a more scalable way, and we want to make the customer journey seamless across the different elements of our omnichannel beauty ecosystem. And we want to continue to build a foundation which is united and future-proof and which will enable our sustainable and profitable growth for the future. So, these are, you could say, optically maybe a few smaller changes. But what we've also done on the next page, we've reassessed the 20 initiatives which were sitting behind or which were actually the content of the pillars which we had before. And we have basically decided to eliminate a few of those initiatives to add a few initiatives and to accelerate a number of initiatives. And that leads to a summary, which we call The Brave Plan in Pillar One, The Clear Plan in Pillar Two, The Scale Plan in Pillar Three and The United Plan, let's say, in the foundation, you can also call that a pillar or a horizontal pillar. And clearly, these acronyms are standing for something. And since we don't want to disclose all the elements of our commercial strategy, first of all, from a competitive perspective and secondly, because we're still working on some of those elements, we decided today to give you some insight into the initiatives where we have written down a full sentence. So, for those initiatives, we want to provide an update today. We are sharing what we're doing or what we're working on. But I can tell you there is more in the pipeline for the stuff which is disclosed and the stuff which is not disclosed on this page. And you need to see these changes in the context of the changing market environment. Our expectation is that the customer confidence is not going to improve in the short and the midterm. So, we expect that at least for the next 18 months, customers will continue to be very, let's say, negative about their expectations for the future. And against that background, we need to make sure that we're working on the right things. So let me give you some highlights of what we are currently working on. In the most recent quarter, Q2, we continue to further roll out our new Beauty Card loyalty program, and we are currently active in nine of our countries. By the way, most of these countries are the larger countries. We currently have more than 64 million members in our program. We have added 3 million members since we started to roll out the program in country number one. So, we can also see that the rollout of the program is attracting new members basically to our beauty program. And we can also see that our Beauty Card sales, let's say, is growing 4.2% versus the prior year, which is significantly above, let's say, the total sales growth of the company. And these Beauty Card members are customers who we know, we know who they are, we know where they live, we know what they shop, and we know what they have spent more in which categories in which brands in which location. So that is, I would say, a positive development of our loyalty program. The second point that is very much related to Pillar Two, we do see that certain brands are becoming less selective, i.e., especially some few players are starting to sell or are being authorized or are buying products in the gray market, and we compete more and more with few players in the premium beauty domain. And that means that we need to make sure that we continue to create more differentiation in our assortment. What is the definition of differentiation? Differentiation is first and foremost, our own corporate brands portfolio. So, DOUGLAS COLLECTION, Orebella, Jardin Bohème, one.two.free!, and Dr. Susanne von Schmiedeberg, which are the four brands which we own and which you can't buy anywhere else. That is the first component. The second component is that we are spending more time and efforts to list exclusive brands and to develop exclusive brands. And the combination of those two elements is currently 15% of our sales. We are not comparable with these brands and with this 15% of our sales. Hence, our USP and our gross profit margin is more protected. And we have a strong desire to accelerate the growth of these, let's say, unique brands towards DOUGLAS. So, I'm also happy to share that in the second quarter, we launched four new group exclusive brands, Balmain, which is, by the way, a fragrance brand owned by Estée Lauder, Orabella, About-Face and LolaVie, which are not owned by larger companies. And with these four brands, we made a start across all our markets. So, we are selling these brands in all our online stores and in a growing number of our brick-and-mortar stores. And what we do see is that our exclusive brand portfolio is accelerating. So, we grew in Q2 16.5%. And currently, exclusive brands and corporate brands together is doing 15% of our sales. And we want to continue to grow, let's say, our exclusive brand portfolio, and we want to grow our exclusive brands on a like-for-like basis. In addition to that, we are still very, very open and also proactive in developing our selected brands. And here, you see by category, some of the, I would say, the winning brands. So, Armani, Prada, Yves Saint Laurent are really in, let's say, in the fragrance domain, making a significant growth spurt, I would say. Rituals, Korean K-Beauty brands like Beauty of Joseon and Erborian are really doing very well. Huda Beauty, Charlotte Tilbury, Armani doing really well. Kérastase doing fantastically well. It is already doing more than 1% of our sales, and we didn't sell Kérastase in most of our stores until two years ago, but also some other premium hair care brands are doing well. So also in this more challenging market environment, we see winners and losers. And these are the brands which are clearly winning within the DOUGLAS domain. Two weeks ago, we launched Fenty Beauty first in the Netherlands and in Belgium, online and offline, had a great start. And in the next month in June, we are planning to launch Fenty Beauty in a significant number of German and Austrian stores, both online and offline. So, these are examples of selected brands which having momentum, which also are contributing to the development of DOUGLAS, both from a sales perspective as well as from a point of differentiation perspective. To give you some insight in the development of specific categories. So, on this page, the five core beauty categories of DOUGLAS are, first and foremost, fragrance, which is more than 50% of our sales. And we are by far the largest fragrance beauty retailer in Europe. And also, fragrance is contributing, I would say, positively to the top line. Skin care, slightly more than 20%, having a negative contribution to the top line of DOUGLAS. Makeup making a positive contribution in terms of sales share very comparable to skin care. Hair care still being small, depends very much on the country, but 2%, 3%, 4%, 5%, 6% of sales share depending on the geography, showing double-digit sales growth. And then accessories, which is basically flattish, let's say, compared to the top line. So, the message is with both on a category level and on the brand level, there are very significant change -- sorry, deltas between the development of categories and brands. And clearly, we want to focus more on the winners or on those categories and brands where we see more growth potential going forward. As Marco on the next page was already alluding to, we continue to believe in the proposition of omnichannel. We believe that in premium beauty, having brick-and-mortar stores, having 16,000 beauty advisers is a fantastic starting point to launch new brands, to familiarize customers with new innovations, with new smells, new products, et cetera. But we also acknowledge that the E-Com channel is growing faster than the store channel. And therefore, we will continue to invest in the omnichannel elements of our strategy but we have decided to shift CapEx and OpEx investments more and more from the store part to the digital part and/or the omnichannel part. So, we launched three years ago as part of our Let it Bloom strategy, the objective to open 200 net new stores in the next three years. That is, by the way, coming to an end in December 2026. We also said that we wanted to refurbish 400-plus of our existing stores. That objective also comes to an end by the end of 2026. And for the years ahead of us, we will still open new stores, but we expect a lower number of new store openings going forward. And we also expect that there will be in certain countries and certain locations an assessment where some of the like-for-like stores are continuing to contribute economic value to the company. And we also expect that on the E-Com side that our growth in the market and also of DOUGLAS will be ahead of the omnichannel growth which we are forecasting. So, we are making changes in the allocation of capital, in the allocation of people and the allocation of resources. On the next page cross-channel services. Just to repeat for those of you who don't have that completely top of mind. Cross-channel services is Click & Collect. You go to our website, you order an article and you can click and collect it from our stores or from a pickup point. Click & Collect Express, you go to our website, you select a store, you make an order in that store, and within two hours, you can pick up that product from the store. And then in-store orders, you are in a store in one of the 2,000 stores of DOUGLAS, you want to buy an article, which either is sold out or we only have it online and you can order it online in that store and you can either pick it up from the store or we can home deliver. The combination of that, we call cross-channel services. We report that as part of our E-Com sales, but it's very much the result of having an omnichannel network. That part of our business is developing very, very well. And you can see that on the next page. In 76% plus of all our customer journeys, the store is playing a role. In only 24% of all the customer journeys, that's a digital-only kind of customer journey. So this is just acknowledging the relevance of having an omnichannel, let's say, strategy in place. And then you can see in the middle, the growth rates for the four services or the three services I was just referring to. So, Click & Collect up 7.7%. Click & Collect Express up 71.3%, heavily driven, by the way, by the rollout of this service across our store and, let's say, in-country network. So, there is a kind of a non-like-for-like component, but also on a like-for-like basis, Click & Collect Express is developing positively. In-store orders growing 5% plus and collectively 29.8% growth of cross-channel services. So exclusive brands is an element of differentiation. Corporate brands is an element of differentiation. The Beauty Card is an element of differentiation. Offering omnichannel services is an element of differentiation. And all these individual building blocks are in isolation showing very good development. We still have to acknowledge that the aggregate result of that is not sufficiently visible yet in the total top line development of the company. And by the way, on the right side, you can also see the value of an omnichannel customer. So, an omnichannel customer is on average spending EUR 321 annually with DOUGLAS omnichannel and has a purchase frequency of 4.8x. We were in the store domain, a loyal customer would maybe visit two or three times per year a store. That is considered to be a loyal customer in the premium beauty world. So, you can see what omnichannel is bringing in terms of frequency and, let's say, acceleration. The last initiative I wanted to share with you is actually also, I would say, an official announcement because we have not yet publicly announced that. But in the back of our organization, we have been preparing the launch of the first DOUGLAS AI-enabled beauty adviser. So, we can proudly claim that we have 16,000 people in the stores who know everything about beauty. And once the customer is in the store, you can talk to one of our BAs, beauty experts. But we also want to offer the equivalent of that in the online domain. And that's why we're very happy that we're going to launch publicly in Germany, let's say, this AI-enabled BA, which basically, as you can see on the right side -- or maybe you can't see it -- but you are typing in your question as if you're speaking to the BA and then you get an AI-enabled recommendation. Firstly, that is a brand-independent advice what you do -- what you should do or what you shouldn't do. But when you go a little bit deeper, the AI-enabled beauty adviser can also make you certain recommendations in terms of brands. And clearly, there is a commercial steering process, let's say, behind us. So, we've been testing this first amongst our own employees and more recently in an A/B test environment in Germany, and we're now almost ready to roll that out starting in Germany in the weeks ahead of us. So hopefully, this gives you some insight in a number of kind of the strategic initiatives, which we have been working on and are working on. And as I said, we're not sitting on our hands. We will continue to do more of that. And obviously, we will also communicate more of those initiatives in the months and the quarters ahead of us once we believe it is shareable and once we believe it's not sufficiently -- it's not really damaging our competitive proposition in the market. To conclude, I would like to summarize by, first of all, we have been growing sales in a challenging market environment. We have been managing our costs very well. The combination of sales and gross profit pressure has led to a reduction of our adjusted EBITDA of roughly 5%. Secondly, we do believe that the slowdown in the beauty market has led to a new normal. And we actually do expect that this new normal will be there for the foreseeable future. By the way, in the last quarterly call, we communicated to all of you that for the midterm that we were expecting a development of the premium beauty market in Continental Europe of somewhere between 3% and 4%. Based on the most recent development, also taking kind of the socioeconomic situation and the situation in the Gulf into account, we are now working more with a hypothesis that the premium beauty market will grow around 3% for the next three years rather than 3% to 4%. So, you could say that is also the lower end of the range, which we expected basically six months ago, which is a reflection of the, I would say, the situation in the world. We are accelerating the execution of selected strategic initiatives, and we especially want to focus on those initiatives, which are differentiating us from the competition and which are helping us to drive our growth. We will continue to put emphasis on our omnichannel model, on cross-channel services, on a curated beauty assortment and the development of a stronger technological and supply chain backbone. We're constantly developing our omnichannel platform and customer journey to satisfy customer needs. And for instance, our AI beauty advisor is an important new, I would say, element in that desire. And last but not least, for the third time, we are reconfirming the guidance, which we have communicated on the 30th of April. Our sales will be at the lower end of the range, as you can see on the right side, adjusted EBITDA of around 16% and the net leverage at the upper end of the range between 2.5x and 3.0x adjusted EBITDA. With that, our presentation is coming to an end, and we now want to offer the opportunity for you for Q&A. Operator?

[Operator Instructions] The first question comes from the line of Jürgen Kolb from Kepler Cheuvreux.

Thanks very much indeed for this very comprehensive presentation and all the details on your future strategy. With this respect, two questions on the strategy. One, how are you seeing in this context everything related to mergers and acquisitions? Obviously, we know that in the past, M&A has been a very solid foundation of the DOUGLAS strategy. Since the IPO, you've been concentrating on store openings and refurbishments. How do you see the M&A situation going forward? Is there a target that you could maybe -- or where you think this makes sense to maybe take a little bit of pressure out of the market from that perspective? First one. Secondly, on the digital expansion, AI beauty advisor, of course, that's the next logical step. How about agent commerce? What's your strategy here? How far have you developed that? How visible are you and are your products and is DOUGLAS for all kinds of digital agents?

Thank you, Jürgen. Shall I take those two questions, Marco? So first of all, on M&A, you're correct -- first of all, Jürgen, you're correct that we have not done any M&A basically in the past three and a half years. You could say that coincides with my arrival as the CEO of the company. And you're also correct that in the deeper past, we have done quite some M&A, but we also need to acknowledge that not all of that M&A has been successful. So, we had certainly in Spain, some, let's say, unfortunate decisions. And also, with the announcement in terms of goodwill impairment for both NOCIBÉ and Parfumdreams, that is also a reflection of the goodwill premium, which we have paid in the past. So, we have been very, how would you say, defensive in that sense. We do not exclude M&A in the near term or in the midterm. And certainly in, let's say, in the store channel, we do see a number of smaller regional, let's say, predominantly store-focused premium beauty retailers who are either struggling or looking for a, let's say, a new parent. So, we have looked at kind of our 22 markets, and we also have made kind of a list about who would potentially be of interest for us. So, it's not that we completely excluded. We also have prepared some homework. And also, there is kind of a very small list of targets which we would really be interested in. Clearly, I'm not going to disclose kind of the targets of that. So, I don't exclude that. That's the answer to the first question. Secondly, in terms of digital expansion. So obviously, we see and we not only track what's happening in the digital domain and what's happening in terms of agentic commerce, but in the acceleration of our E-Com strategy and our digital strategy, we are paying attention to that. And we do believe that we are well positioned to benefit from this trend kind of going forward. By the way, we're also proudly claiming that last week, we were selected in the DOUGLAS Italian E-Com website as the best premium beauty store of the Italian market. So, in that sense, we are already quite well positioned. But we do acknowledge that agentic commerce offers new opportunities. And if you're not prepared well enough, it will also provide, let's say, threats which we need to mitigate. So that is clearly part of our planning going forward as well.

The next question comes from the line of Yashraj Rajani from UBS.

I have two, please. So, the first one is on inventory levels across the market. So, I appreciate that everyone seems to be having a bit of a tough time given the consumer sentiment at this point but on the basis your conversations with some of your suppliers, how do you think about inventory levels across the market? And do you see that promotions continue to be potential pressure on your gross margin in the coming quarters? Or do you think that, that sort of slowly fades away? So that's the first question. The second question is, Sander, you also spoke a lot about this new normal in the premium beauty market, and I appreciate you put midterm targets out there. But does this in any way sort of change your perception on when we get to a 2x net leverage? And in your mind, like what should be a reasonable timeline to get to the 2x leverage?

Okay. Yash, I'm happy, Marco to take both questions. So firstly, on inventory. We do record as of the end of March a year-on-year increase in inventory, it's around EUR 57 million, if I'm not mistaken. However, on the one hand, the business grew. And of course, we grew 1.1% in sales, but we grew even a bit more on the cost of goods sold. In this sense, the margin slight dilution means basically more items sold for the same revenues. And this has led to the fact that actually the days of inventory outstanding are flat year-on-year, 126. It doesn't mean we're happy. We want to improve, and we are putting in place actions to improve, but it doesn't signal, let's say, on the KPIs, a significant worry, let's put it this way. By the way, the EUR 50 million of increase in inventory year-on-year, we estimate around EUR 30 million to come from actually the stores network growth. And I think we are also in a situation where we are front-loading a lot of investments in the sense when you look at our lease liabilities in the last 12 months, inventory levels and even fixed costs hitting our P&L and profitability levels, many of these items refer to the peak into the new openings. We opened 90 stores last year, which we do expect to, let's say, unfold to a benefit in the coming quarters and years. Why? Because the pace of openings is slowing down, and so you are going run rate with the openings and not, let's say, adding on top. And secondly, we do operate with a fairly, let's say, dynamic and fast supply chain where we adjust our levels quite reactively. And therefore, it doesn't mean that if for the quarter, the sales were lower than expectation, we do suffer a little, let's say, higher stock levels at the end of the quarter, but it doesn't mean that there's a clearance need, let's say, because then we adjust our purchases with our technological-driven systems in the coming weeks and months. On the new normal and implications for our midterm, our midterm guidance that we issued last year pointed to a low to mid-single-digit top line growth with a stable profitability pointing to a deleveraging path targeting a range of 2x to 2.5x. So first of all, 2.0x, maybe in your question is a bit on the low end of this range, whereas 2.5x is also, let's say, a more reasonable, I would say, expectation and target given the recent developments for the midterm, which still sits within our midterm guidance and our intention to become a dividend-paying company. Of course, once leverage is brought down a little more and cash flows, of course, improve consequently. And again, on profitability-wise, as mentioned, due to the many investments that we've done, we always intended 2026 to be a stabilization year on the side of the promotional pressure as well as the unfolding of the investment benefit and therefore generating upside in the years to come.

We now have a question from the line of Adam Cochrane from Deutsche Bank.

A couple of questions, please. First of all, can you just remind us what the customers benefit from the Beauty Card is? And maybe does that really work across both in-store and online to help maintain those and grow those customers? Secondly, if online is the sort of growing category more so than stores, why is the Parfumdreams sales so weak in the period? Why if online is growing, has that not been stronger and more participating in the growth of that part of the category? And then staying on online, within the sort of core business, can you remind us of the relative profitability of online compared to store within the mix? And as you grow more sales online, assuming some degree of substitution, what does that mean for the outlook for EBITDA margins?

So let me take the first two questions, Marco, and then you take the 3A and 3B. So, first of all, Adam, the Beauty Card, the key benefits of them are, first of all, the more you spend, the more beauty points you collect the beauty point is basically a currency which you can use in the near future. So that is, you could say, saving -- it's a savings program. That's one. But secondly, with everything you buy by using the Beauty Card, we get personal information about the customer. And therefore, we can make our proposition towards that customer more targeted in terms of assortment, in terms of branding, in terms of pricing, in terms of communication. So, personalization is the benefit for both the customer and also for us. And with that personalization with the data which we collect behind that, we can commercialize that, let's say, in our discussions with the brands because the brands would love to know who is buying in Yves Saint Laurent, in Germany or in France or whatever, but they don't know the customers on a name basis. We know the name address and the e-mail address. So, we can target basically those customers on behalf of the brands with a DOUGLAS specific proposition. So that is the answer regarding the Beauty Card. Secondly, within online Parfumdreams, by the way, we have two brands in there, that's Parfumdreams and Niche Beauty. I don't think we've disclosed the size of, let's say, of those individual brands. But Parfumdreams is in terms of sales, significantly bigger, a number of times bigger than Niche Beauty. Parfumdreams is active in 15 countries in Europe, if I say it correctly. Niche Beauty is active in more than 100 countries, let's say, in Europe. But for both brands, the DACH market -- sorry, 100 countries is not in Europe that goes beyond Europe. But for both brands, the DACH region is still a very significant portion. And by the way, Niche Beauty is developing top line-wise significantly better than PD. So, we feel more of the sales pressure on PD. And to make it very simple, that is ultimately mostly related to pricing and promotions. So, PD is a price player. And at a certain point, it is about who is the cheapest. We also have kind of a minimum margin or a minimum price we want to achieve. And below that, we don't go any deeper. And clearly, at this point in time, we've not found kind of the sweet spot of that. So that is the simple explanation for PD. With that, handing over to Marco.

Yes. So, on profitability of our E-Com core, and when I say core, I am, for example, excluding in my mind, the retail media business that's, of course, significantly accretive to the business in general but specifically in E-Com where we reported. So, E-Com core -- E-Com in general, of course, follows a slightly different, let's say, P&L structure because you would have a slightly lower gross profit margin, at the same time, different cost structure. You don't have the fixed costs of the stores such as personnel. You do have a bit higher logistic and marketing costs and you land at an EBITDA margin, which when you just compare the channels is higher in the stores and lower in E-Com. However, because nowadays, a lot of, let's say, store costs are now D&A, namely the depreciation of the right of use, the old rent. And of course, in principle, also the capital allocated to the stores to maintain them and open them and refurbish them is bigger. When you go down to the EBIT percentage profitability, the two channels for us are actually fairly aligned. And therefore, it might mean that a significant, let's say, expansion in E-Com might have, let's say, might limit the growth of EBITDA margin. But then at EBITDA, the expansion of the margin would follow a balanced view. Yes. And also, I think I'm addressing both the 3A and 3B with this also looking forward.

We now have a question from the line of Nick Baker from BNP Paribas.

Two from me. You spoke about new sort of pure-play online competition in Europe and alluded to Amazon. So how much of a new threat is this? And how much of a paradigm shift does this represent? And then second question is, can you give us more details about the very exciting AI beauty adviser that you're rolling out? How interactive is this going to be? Can users, for instance, take those photographs themselves and apply beauty filters, et cetera? So, a bit more color on that would be amazing.

Nick, can you clarify your first question a bit because I did not -- I understood you have a question on Amazon and a paradigm shift. But can you clarify a bit more to make sure that I have the right interpretation?

Sure, certainly. My question was about whether Amazon is a new which I believe you were alluding to, is a new threat and how much of a paradigm shift does it represent for the European market and the competition within it. So, whether this sort of takes us to a new kind of level of competition within Europe?

Okay. So, okay, that's clear. So, first of all, it is not new for us that Amazon is starting to sell selective beauty. That's also not new in this quarter that already is happening for a number of years. Just to remind you that in the United States, Amazon is a significant retailer, a pure-play retailer, and they have already started to focus on selective beauty a number of years ago. And in Europe, we didn't really see a strategic focus from them until, let's say, two years ago. Today, you can basically buy every beauty brand, you can buy that on Amazon, but that is not different today versus a few years ago because that is largely driven, let's say, by the gray market and by the marketplace from Amazon. But what is more recent is that we see that some of the premium beauty brands are starting to authorize Amazon and basically are starting to ship beauty brands from this brand to Amazon. That is a more recent development in Europe. That has already happened to other pure players as well, and let me not repeat the names of our, let's say, key competitors. We now see that Amazon is doing that. And clearly, we keep a close eye on that. By the way, there is not one Amazon in Europe. Amazon is active in most of our larger markets but it's not so big and significant in most of our smaller markets. But especially in Germany, in France and in Italy, where they are a sizable retailer where they were already sizable in selective beauty before this year, we keep an extra eye on that. So that is the situation for now. And we are not happy with it, but we also do believe that our strategy omnichannel offering services, creating more exclusivity, omnichannel services, retail media are all weapons in basically our competitive battle against the pure players. Then your second question was if the launch of the AI tool, which we're going to -- sorry, the AI-enabled BA, which we launched in June, if that also provides opportunities for making pictures and visuals. At this point in time, as far as I'm aware of that will not yet be the case in the first version, also looking to you, Marco, but I'm not aware of that. I do know that we're looking at that, but it will not be part of basically the version, which we will launch in Germany in a few weeks from now.

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

I've got a few questions. I'll just give them out. So first of all, thank you for sharing the details on the strategy and exclusive and corporate brands. I guess I just want to understand it's 15% today, where could this get to? Is there a ceiling? And what does it take to convince brands to sign on with you exclusively? So, do you need a better supply chain? Do all your stores need to be fully refurbished? Like, what is it that you need to work on to get this number higher? The next question is a bit more guidance related. So, the guidance for the second half implies a 20 basis points decline in the second half. The 2Q evolution and just the gross margin was 70 bps. So just what's making you confident?

Vandita, can we interrupt you for a minute? Somehow your line is very bad. So, we understood the first question about corporate brands and exclusive brands. But I don't think we could understand or hear the second question, which I think is about the second half of the year, but then we missed it.

Okay. Is this any better?

Slightly better.

Sorry. Yeah, exactly. So, the first question was about what the levers are to get the share of exclusive brands higher. And then the second question is just the guidance is, as you say, 20 bps decline in the second half, but what gives you the confidence that it will be lower than that given the margin -- gross margin evolution itself was 70 bps in the second quarter? And then, just also want to understand how refurbishments impact the like-for-like reporting. So, if a store has been closed for a short time and when it reopens, does that come under like-for-like or not? And then the last one, just really small is there was about EUR 8 million of adjusting items to EBITDA. Just I think EUR 5 million was the strategic programs. Just what do these relate to? And what should we expect for the full year?

Shall I take -- Okay, we understood it. Thank you, Vandita, for those four questions. Shall I take the first one, Marco, and you take number two, three and four? So, your first question was about corporate brands and exclusive brands, which is today collectively roughly 15% of our sales. And by the way, in that domain, corporate brands is roughly flat at this point in time because our exclusive brands are growing, let's say, in the second quarter. When we talk about exclusive brands, we are making a distinction between so-called group exclusive brands, which are brands which we are launching basically across all our markets and clusters specific brands, which are exclusive brands, which we have exclusive in a smaller part of our kind of geographic domain. Our core focus is sitting on group exclusive brands, and we're taking a much more proactive approach to start approaching or talking to younger brands, starter brands, scale-up brands in an earlier phase. So, we have established a group exclusive brands team basically year and a half years ago under the leadership of our Chief Assortment and Purchasing Officer, Stephanie, who is, by the way, as we speak in the United States, talking to some new exclusive brands for the near future. So, we're offering those exclusive brands an entry into Europe, and entry into the market-leading premium beauty retailer in Europe, and entry into 22 online stores and potentially up to 2,000 brick-and-mortar stores. In most cases, we are signing agreements with these brands, which are often multiple-year agreements where we agree on the level of exclusivity and also the level of support and the level of commitment, which we will get and which we will expect also from the brands. And we are actively working on a pipeline of initiatives and launches. So, we have a pipeline, let's say, available, which will lead to more exclusive brand launches in the rest of this year and also in the next two years. And we want to continue to grow and develop our like-for-like exclusive brand portfolio. With all of that, we do believe that we will be able to significantly grow this 15% to a higher percentage. We've also formulated an internal objective by year, basically for the next three years. But we are not disclosing, let's say, that objective for, let's say, competitive reasons. But I can assure you that the trend which we have seen more recently in exclusive brands is a trend which we would also expect basically for the years to come. With that, I'm handing over to Marco on the three questions.

Vandita, so firstly, on the second half, implications for the margin. I think it's fair to say that when you plot our quarterly margin evolution, we have been declining in EBITDA margin year-on-year for quite a few quarters, although showing signs of improvement because starting from last year, for example, more than 100 bps down to 80, and so on. And importantly, I think what we see on the cost management in the last quarter is also quite, I believe, reassuring as to the possibility to safeguard the cost to revenue ratio because in the last quarter, we lost only 10 bps, let's say, on SG&A basis despite arguably lower than, let's say, than wished top line growth and also taking into account, again, the store expansion that last year happened and back loaded. So, the second half of last year started to be more loaded with opening costs. And therefore, we expect to compare against a, let's say, more comparable, let's say, cost base from a simple point of view of the store perimeter basis. We do think that certain gross profit margin pressure will remain, although it continues to annualize against already, let's say, existing pressure, and therefore, the assumption to be able to partially counterbalance it with cost saving initiatives that we're implementing, by the way, in various elements. To give you an example, we are making use of AI-generated marketing assets to reduce our production costs and more efficiency on the net marketing expenses, or we are doing other, let's say, lighthouse investments into AI, for example, to become more efficient as an example, in customer service and so on. And your third question on refurbishments is in like-for-like. So, our definition of like-for-like excludes, of course, new openings until they annualize after 12 months and also excludes refurbishment or relocations. If they have been closed for refurbishment for more than two weeks, or they went under a space change of more than 20%. That means for 12 months, this store is also out. It also means that the like-for-like definition is very strict, call it this way, because if we were to look at the same-store perimeter growth, so let's say, including the refurbishments, but still excluding the new openings, then our like-for-like would improve by roughly 100 basis points. And basically, as we've done many refurbishments, that's something that we need to catch up on in the coming quarters. And then finally, on your questions on the adjustments, you can find in the presentation in the backup some more details. But basically, in the last quarter, which is also driving the first half of the year, we've had a few items, including when we call strategic initiatives, you can be essentially of implementation, so warehouse implementations. It can be related to the necessary IT investments to create interfaces to link the warehouse or the actual cost to set it up, or potentially double running costs when we have temporarily the ramp-up of the new warehouse, and let's say, in the meantime, that the old one is still operating. So, we keep in EBITDA, let me say, simplistically, only one running warehouse, and the unused one is sort of adjusted. We also booked around EUR 2 million of all costs related to past acquisitions that resulted from a, let's say, tax consequence on VAT from 2017. That's a very, very one-off item, but unlike strategic initiatives is really just popped up this quarter. And then for the full year, last year, we had roughly EUR 12 million of total adjustments for the full year. I would expect this financial year to be on a similar level. In the year to go, we are expecting not only some cost adjustments, but also some actual revenue adjustments because we have sold a couple of non-core real estate assets in the Netherlands, which is clearly -- despite an income, it's also a non-recurring income, and therefore, we will adjust these costs, which you will see in the next quarter reporting.

The revenue?

Yes. The income.

Yeah. Yeah.

The gain.

Yeah, not the cost. There's a gain. Yeah.

In this case it will be a small gain, let's say. We'll come back to it when we finalize it.

We now have a question from the line of Joffrey Bellicha Meller from Bank of America Securities.

The first question I have is on Southern Europe. And I just want to understand a little bit what are the competitive dynamics you are seeing there that led to the sales decline in that region? And more importantly, the EBITDA margin decline was a bit wider than the rest of the group. So, is there anything specific that is going on in those markets that we should be aware of and that you would flag? And then the second question is regarding your exclusive and corporate brands. Obviously, you're making a very strong push and very logical push in that direction. I just wanted to understand a little bit better if you could discuss the difference in gross margin that you are seeing in exclusive and corporate brands compared to the rest of the portfolio, to the extent that you can share that information?

I will do that. Okay. So, Joffrey, I'll take the first question, and then Sander takes the exclusive brands question. So Southern Europe, you're right. It showed a bit of a slowdown in the growth rate. Of course, Italy is our largest market there, followed by Spain and then to a smaller extent, the Adriatic and Portugal. There, last year, we did suffer slightly in the summer, you may recall from previous calls, some supply chain complications because we changed warehouse over the summer, and that led to some, let's say, hiccups in the initial phases of the go-live of the change of operator which has created some weakness in the performance in the second half of calendar year 2025, just to put a little more into perspective. The situation is now much more under control in the sense that the performance is now back into the expected standards, and so that's not a problem anymore. We do witness a strong competition not only from pure players online and Sander already quoted Amazon as a very sizable competitor in premium beauty, also in Italy, but also from other brick-and-mortar retailers, both in Italy and Spain, that tend to operate with a slightly more aggressive approach compared to, let's say, not only us, but also the let's more established omnichannel retailers. And so, in this sense, there is a part of competition that plays a role. And there's also at an EBITDA level, there's also a mix effect between the channels, as I was mentioning earlier, at EBITDA, E-Com carries a slightly lower EBITDA margin than equalized EBIT. And in the last few months, actually, E-Com has outgrown quite a few stores in Italy, for example, and so you have a slight dilution effect coming in there as well. But what works quite well in Southern Europe is our cost management. And so that partially counterbalances, let's say, the pressure on the margins. And yes, this is a little bit the situation that I can comment about.

Okay. Thank you, Marco. So, Joffrey, on corporate brands and exclusive brands, without disclosing the specific numbers, I can give you some indication. So, both corporate brands and exclusive brands are accretive to our gross profit development and EBITDA. Corporate Brands logically is sitting significantly above, let's say, the 45% gross profit, which we make as a company. But also, our group's exclusive brands portfolio is also sitting above the 45%. So every extra euro that we make in those two domains is helping our gross profit. And in addition to that, the volatility of gross profit development is significantly less because there is significantly less pricing and promo activity with those brands, because we are not really competing on those specific brands with our competitors. So, let's say, the stability of the gross profit is also better. And obviously, if we are going to accelerate the growth of corporate brands and exclusive brands, it will make us more unique, i.e., differentiated versus the competition, but it will also protect, let's say, gross margin erosion for, let's say, to a bigger extent as what we have been currently experiencing. Is that answering your question, Joffrey, for now?

Yes. Thank you both for the answers on both questions. Just a quick follow-up, if I can. In regard to the last commentary you made on the gross margin, I also wanted to ask you, considering the discounting you're seeing at the moment, how should we -- do you have a view on the risk of discounting in your fiscal year '27?

Well. First of all, we have given guidance for this year, and we've adjusted our guidance just two weeks ago. We're not guiding way on gross profit. We're guiding on top-line leverage and on EBITDA. We've explained that there is a structural pressure on the gross profit, not only at DOUGLAS, but also in our markets. We do not expect that the competitive landscape is going to change. But that doesn't mean that our gross profit will continue to go down. We are not talking today about specific numbers for next year. But we are trying to give you a feel that we're working on a number of building blocks in our strategy, which are basically creating a counter pressure for that. Retail media, the partner program, corporate brands, and exclusive brands are all elements that are actually enhancing our gross profit development for the future. And we also need that because at the same point in time, we do see that the E-Com domain creates pressure on those brands, which are more widely, let's say, available in our markets. But we are not in a position today to give you a quantitative indication about gross profit for the next financial year.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Sander van der Laan for any closing remarks.

So, thank you very much, operator. Thank you all for attending our quarterly call. We do -- obviously, we all feel that the market environment and the performance of DOUGLAS require changes and adaptations in the near and the midterm. We wanted to give you an update on what has happened year-to-date. We also wanted to give you an indication that we're not sitting on our hands, but that we are reacting by accelerating certain elements of our strategy. And we fundamentally believe that we are well-positioned for the near, the mid, and the long term, and we will get back to you with the next quarterly update in August. Thank you very much and have a great day.