Pandora A/S (PNDORA) Earnings Call Transcript & Summary

[Operator Instructions] I will now hand over to our speakers. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the conference call for Pandora's Q3 results. I am Michael Bjergby from the Investor Relations team, and I'm sitting in the Copenhagen head office with the usual team, strictly at least 1 meter apart. Our CEO, Alexander Lacik; our CFO, Anders Boyer; and the IR team, Christian Møller and Mikkel Johansen. There will be a Q&A session at the end of the call. [Operator Instructions] Pay notice to the disclaimer on Slide 2, and we can jump to -- directly to Slide #3. Alexander, please go ahead.

Thank you, Michael, and good morning, everyone, and thank you for joining the call today. It was an eventful last week where COVID-19 escalation led to new significant restrictions on our store network. Most important for us, Belgium, France and the U.K. ordered our stores to temporarily close. We will come back to this, but I want to start somewhere very different. The key takeaway should be that Pandora is turning around. We have not yet fully turned around, but the progress is undeniable despite the current trading conditions. We are focused on building and investing in our brand momentum while, at the same time, obviously navigating the pandemic. 5 out of our 7 key markets generated positive sell-out growth in Q3. The only exceptions were France, which is flat, and China. Our online business almost doubled and accounted for more than 20% of sales in the quarter, very strong numbers compared to historic performance. On top of this, we saw that the trends from second half of Q3 continued into October, where we achieved plus 8% sell-out growth. This gives us confidence in the brand development, but we're also realistic. The recent increase in C-19 infections and new lockdowns create new challenges which we have to manage carefully. Next slide, please. When I joined Pandora, we structured Programme NOW around 3 pillars: brand relevance; brand access; and costs. Today, we yet again increased our cost reduction ambitions, increasing the annual run rate target with DKK 200 million to DKK 1.6 billion. This is a significant achievement, and it showcases the right mindset and culture in our company. With increased cost target also comes increased restructuring costs. But I'm very pleased that we can confirm today that the restructuring part of Programme NOW will be finalized in 2020 despite the disruptions from C-19. There will consequently be no restructuring costs in 2021. Our reorganization is showing great results from faster decision-making, best practice sharing and closer collaboration. Amongst other things, it's improving conversion rate, both on and off-line. This is both about operational efficiencies, improving simple things like efficient merchandising, smart media choices, optimizing stock availability, but it's also about securing sufficient growth initiatives for the future. Please turn to Slide 6 and the COVID-19 section. In the last quarter, we saw a gradual recovery from C-19 and we ended the quarter with only 5% of stores being temporarily closed. However, the recent surges of C-19 has changed the trajectory. The latest government guidelines entails that we'll have 18% of our stores temporarily closed on Thursday. This is clearly a violation of our financial guidance assumption of "less than 10% of physical stores to be temporarily closed for the rest of the year." Anders will come back with more comments on the financial guidance, but it should be clear to everybody that this escalation makes trading in November and December more unpredictable. The important thing to keep in mind during these unusual times are the following: in Jan and Feb, before the first wave of C-19, and in August to October, before the second wave, we saw a very positive sales development. C-19 will create noise for a while, but it doesn't change that we're turning around and that the underlying business is improving. Please turn to the next slide. When COVID-19 escalated in March, we focused on ensuring cash, cost and balance sheet. This work became the foundation for commercial comeback, leveraging our scale and financial health. This has been key to our performance in Q3. We showed agility and readiness in the reopening phase, motivated store staff, fresh product assortment, healthy inventory management and a consistent media push. With these deliberate efforts, we have enjoyed a stronger share of voice in media as well as in mall traffic. But Q3 is already history. We are going into the peak months of Q4, where the store operations are a big question mark and a pressure on the opened stores will be at a very different level. This is when our long preparations will come to the test. More comments on this on the next slide. Black Friday is close and kicks off the peak trading season. At this time of the year, our stores are normally completely full of customers, and we typically have queues outside the stores. These are the conditions that we have to combine with social distancing and an escalation of COVID-19. We have the liquidity and balance sheet firmly in place for long and sustained period of lockdowns and we have the financial firepower to execute when commercial opportunities arise, just like we did in the first half of the year. We have introduced 11 new initiatives to ensure a safe and efficient customer experience. These initiatives can be divided into 4 different objectives. The first one is reducing the transaction time. Average transaction time in December is normally shorter than other periods throughout the year, but we need to cut this even more. Increasing selling space, moving traffic from off to online and, finally, flatten the peak trading periods. One example is the implementation of video-based selling. The customer connects with a live Pandoran in 1 of our dark stores through a new chat and virtual selling platform. It's a technology that allows customers to get the needed advice as well as closing the deal, a great example of how digital tools can support both safety and revenue. We are prepared for Q4 with pragmatic initiatives, but the uncertainty is still significant. This is why we also have to be agile and flexible as the trading unfolds. Please turn to the Programme NOW section, starting on Page 10. The slide shows the quick overview of Programme NOW. The initiatives were rescoped earlier in the year. We have seen significant results from better use of data and personalization. I'll come back to this in a minute. In China during Q3, we concluded a revamping of our management. I see the turnaround in China happening in 3 major steps. The first is to get a new leadership team in place; second, to secure the daily operations, including getting a robust infrastructure in place; and finally, to develop a strategic road map on how we address the underlying issues. We are in a significantly better place for point 1 and 2. The work on Phase 3 has, to a degree, been done in parallel. Specifically, we have concluded on the brand position. We are now developing execution to make this come alive. As I've said before, this will be a multiyear journey but so far, we are progressing at a very good pace. Please flip to the next slide. A few words on the retail metrics. As this is important to understand, the C-19 dynamics and the drivers of our performance. Generally speaking, the basket has not changed much compared to pre-COVID. Average selling price and units per transactions remain fairly stable, but we see large changes in the traffic and conversion. Traffic is almost down 50% in the physical stores with some variations across markets. The traffic is not surprisingly of much higher quality as there are fewer casual browsers. At the same time, the organization is doing a great job converting this traffic. In some markets, the higher conversion rate is, in fact, fully offsetting the lower traffic. In the U.S., sell-out growth was positive in the physical stores. Online traffic is up almost 30%, and the conversion rate is similarly strong, creating the significant growth. Some markets, like U.K., where the consumers used to shop online, the channel grows at triple-digit rates. At the other end of the spectrum, we have Italy, where online growth appears more normal and consumers are showing a preference for physical shopping despite COVID. One final comment is that the online performance has improved towards the end of October as the physical stores were increasingly impacted by restrictions. Moving on. This is an important slide for me because it gives you concrete data regarding the health of the brand momentum. We're all trying to separate underlying performance from COVID-19 effects. The sell-out growth per key market shows a picture that cannot be argued. Something has clearly happened to the brand, and as you see, it's broad-based growth. Three of our largest markets, U.S., U.K. and Germany, generated very solid, double-digit growth. This is delivered in an environment where we face various restrictions in terms of physical stores. With France, showing 0% sellout growth, 6 of the 7 key markets are either flat or in positive territory. China is clearly underperforming, though this is in line with our original expectations pre-C-19. It may look strange that the group is declining by 2% when these 7 markets are performing so well. This is partly explained by LatAm, where most stores have been closed throughout Q3. LatAm dragged the growth down by 3 points. And we also saw other large markets outside of the top 7, such as Spain and Canada being severely impacted by C-19. The combined sell-out growth for the top 7 key markets alone was plus 7%. Finally, it should be noted again that the performance has continued throughout October, which was plus 8%. This is clearly strong performance, and we are encouraged about it. We are aware that it does come on top of a relatively soft comparison base from last year and there's clearly more work ahead to ensure solid and consecutive performance before we finally declare that Programme NOW is finished. Next slide, please. A clear driver behind the performance in Q3 is our organizational effectiveness following the reorg we started in April earlier this year. A very good example is the digital hub that has been instrumental in developing and implementing new initiatives to manage COVID-19. By establishing the hub, we have invested in significantly stronger capability as well as expanding capacity. The first tangible evidence can be seen in the new omnichannel features, which we've developed at record pace as part of our Q4 fast response efforts. Another important change is the new global business unit sitting under our CMO, Carla. They will be instrumental in both defining a new innovation strategy as well as developing a 360 marketing program to go along with that. Finally, they own the end-to-end view for the various platforms to secure growth, both in the base and in the new products. I think we've made strong progress quickly in this space. Next slide, please. Slide 14 outlines our launch tactic in Q3 called, launch & leverage. So what do we mean by this? It's a fundamental decision on how we manage product launches. In the past, Pandora's approach was inspired by fast fashion, launching new products every month, giving them 4 weeks of attention before turning to something new. But Pandora is not fast fashion. Our average customer visits us twice per year. We need to make our proposition and collections consistent and recognizable, ultimately, to build long-lasting iconic platforms like Moments, which, by the way, is a very good example of a platform that we've built and invested in for over 20 years. It is still recognizable and highly relevant amongst our customers. In Q3, we have leveraged and extended the success of Pandora ME and Harry Potter with good success. Both collections were launched last year. We launch and leverage instead of launch and leave. Our product launches and campaigns in September also had more focus on base products under one consistent theme. This makes us less exposed to the success of our new launches because we're campaigning new products alongside base products that we know are performing. The base business represents almost 80% of our sales. Please turn to my last slide before handing over to Anders. I'd like to mention some of the work we're doing with the work stream that we call data-driven growth. First of all, we stepped our efforts up to capture more data as this will be the bedrock for driving data-driven growth. Today, we capture close to 70% of all buying customers e-mails in the U.S. This is a breakthrough statistic if viewed in a historic perspective. One way we're using this is to drive our e-mail marketing. Historically, this has not been a source of revenue growth for Pandora. But while e-mail marketing only contributed to roughly DKK 100 million, it's improving rapidly. The growth this year is over 150%, built on more personalized e-mails. This is clearly a step in the right direction and is an indication of the future potential from improved CRM data. Admittedly, this is an area where Pandora can clearly improve further. Now I'll leave the word to Anders, please.

Thank you, Alexander, and good morning, everyone, and please turn to Slide 16. I'm very pleased with how things are progressing in our cost reset program. When we started out the journey back in early '19, we set a cost saving target of DKK 1.2 billion. And early on, we upgraded that to DKK 1.4 billion, and now we're upgrading it to DKK 1.6 billion. And that's a pretty big achievement by the organization. The higher savings have been identified pretty much across all cost types. And -- but with the largest savings, we are finding in cost of sales or production costs, where we continue to improve efficiencies and simplify processes on the back of the reduction of the product assortment that we did last year. Another improvement is in the other bucket at the lower part of the slide here, where we have identified further cost improvements in media as an example, where we leverage our global scale and are running several tenders. And you should recall that the cost targets only include permanent cost reductions. So that DKK 1.6 billion target does not include the short-term cost measures we have done as part of C-19. Then please turn to Slide 18 and a short review of the financial performance in the third quarter. As announced in early October, our financial performance in Q3 was better than initially expected, and that goes both for the top line, the bottom line and cash flow as well. And I'll quickly go into each of these on the following slides. So starting with Slide 19 and revenue breakdown. The organic growth was minus 5% for the third quarter and better than expected due to the -- a better sell-out performance. And the organic growth includes a roughly minus 1% negative impact from network changes, as you can see to the far left of the chart here. And that's a result of permanent closure of 32 concept stores compared to last year. Another building block in the quarter is the lower sell-in versus sell-out, as illustrated in the pink box just to the left of the organic growth column, the dark gray column in the middle of the chart here. And that represents the effect from franchisees who, I would say, understandably, manage inventory more tightly in these uncertain times. And this part of the revenue bridge should, of course, give a similar positive effect here in the fourth quarter. And as you can see, there's no impact from forward integration during the quarter. Then please turn to Slide 20 and the margin. We generated an EBIT margin of 17.2% in the quarter. And that's a quarter that was impacted by C-19, obviously. And I think it's worth noting that the EBIT margin was only 150 basis points below last year when we filter out the impact from foreign exchange and commodity prices despite the C-19 impact in the quarter. Having said that, obviously, the margin was down compared to last year. And net-net, that was entirely due to the deleverage effect that we see as a consequence of the 5% organic revenue decline on the top line. In the 150 basis points impact from commodity and foreign exchange, the major part actually comes from foreign exchange in the quarter. The increase in the silver prices that we saw during the second half of '19 is still not hitting fully through the P&L due to the hedging combined with a few months of time lag from production until costs hits the P&L. In the prior quarters, you have seen that the cost reductions we are achieving are more or less reinvested into the business and driving the top line. And that's also the case here in the third quarter. We continue to invest and this includes, for example, strengthening of global functions, establishment of the digital hub, establishment of the global business unit teams as well as investing in several digital and online initiatives. Then please turn to the next slide, the cash flow. In the third quarter, we continue to generate quite a strong free cash flow and a high cash conversion. The operating working capital remained at a low mid single-digit level in percent of the last 12 months of revenue, and we saw quite a nice reduction in trade receivables. But I would also like to highlight what we're riding in the lower right-hand corner of the slide here, that our net working capital remained at just around 0 in the third quarter. And then I should also mention that our leverage ratio was 1.1, and that is well within our capital structure policy and far below the covenant that we have -- the covenant threshold that we have in our loan facilities. So that completes the third quarter financial review, and then I'll go to Slide 23 and a couple of comments on the guidance. In the trading statement that we made back in early October, we updated the financial guidance for 2020. And the guidance was based on very clear and tangible assumptions about C-19. And the most important assumptions were that, first of all, that there will be no material lockdowns. And secondly, that less than 10% of the physical stores would be temporarily closed for the rest of 2020. And with the recently announced lockdowns, both assumptions no longer hold true. There have been material lockdowns, and approximately 18% of the store network will be closed in November, so that's obviously well above the 10% threshold included in the guidance. Nobody knows how the pandemic will spread during the coming days, the coming weeks and what this means in terms of potential further lockdowns. And under such uncontrollable and external factors, you could say that it would be quite natural to suspend the guidance. But as some of you know, most of you know, we are obliged by the Danish FSA to provide a financial guidance, and this is part of the reason why we are not suspending the guidance. Due to the unpredictable development, we have also decided that we will not try to guess or speculate in the C-19 development with regards to geographical expansion and duration because we'll not be right anyway. So we have decided not to change our financial guidance. And the fact is that we will probably be able to deliver on the guidance if there will be no new restrictions other than what has been communicated or announced already, and assuming that the current restrictions are fully lifted when they are supposed to end. And that will mean around December 1 for both France and U.K., for example. And the fact that we see that we can deliver on the guidance within these assumptions is based on the strong performance in October and our ability to take consumers online when stores close down in key markets such as the U.K. And then you can ask, do we think that is realistic? That there would be no other lockdowns than what has been announced so far? No, probably not, but we cannot outline a better or more realistic scenario. And we're just guiding based on the effect as of this morning when we released the announcement. So additional or longer lockdowns clearly represent a significant downside risk to our guidance. And it's not unlikely that we will have to suspend our guidance if more lockdowns will be announced in the near future and once there's more clarity about the external environment. Please turn to the next slide, 24. As we've said a couple of times already, October has started out well and continuing the path that we saw from September. But -- and that is an important 'but', we will see weakening already from this week, obviously, as lockdowns take effect. Secondly, you should recall that October is a small month compared with November and December and just above around -- just above 20% of the quarterly revenue. And thirdly, the peak trading season has not yet started, and we do not yet see the full implications from social distancing yet. So the implicit fourth quarter guidance on top line is ranging between minus 4% and minus 13% organic growth and between 25% and 29% EBIT margin. And these ranges are obviously wide, with less than 2 months of the trading left. However, this, yes, clearly signals the level of uncertainty that we are facing. Given that we've just announced that October sell-out growth was plus 8%, and organic growth in the same ballpark, then the implicit guidance range for November and December is an organic growth of between minus 8% and minus 19% roughly. As Alexander mentioned, we are changing our restructuring cost guidance to DKK 1.2 billion. And to understand that change, it should be noted or recalled that the 2020 guidance for restructuring costs before C-19 broke out was DKK 1.3 billion. Then we reduced it to DKK 1 billion when C-19 broke out as we deliberately slowed down certain sort of cash-heavy Programme NOW initiatives. So the change in restructuring costs up to DKK 1.2 billion is mainly related to 2 factors, and the bigger part relates to reinitiation of projects that were put on hold due to C-19 and then there's a part related to execution of the higher cost target that we've just announced. All other building blocks to our guidance are confirmed compared to the guidance provided in the second quarter report. So that concludes my part of the presentation. I'll now leave the word to Alexander.

Thank you, Anders. Before heading to the closing remarks, I wanted to share some highlights of our new products. As you know, we launched the Star Wars collaboration collection in October, bringing some iconic and really beloved characters to the market. And we have seen some very good early results, in particular, in the U.S. Now we are about to launch the annual Christmas collection. This will be a refresh of our base offering and keeping the assortment fresh and interesting. The Christmas collection fits very well with our current assortment and will be supported by our collaborations, such as Disney and Star Wars. Lastly, I'd like to highlight that we're launching a Colours collection in January next year. This is another step how to personalize and express yourself through jewelry. It's a collection that will have a broad range as all product categories will be available in Colours. Now go to the next slide for my closing remarks. Q3 was a good quarter, and we are pleased with the sell-out performance and the EBIT margin given the circumstances. We've had a good start to Q4, but as Anders mentioned, the uncertainty related to lockdowns remains high. We will continue to stay agile and flexible as the quarter evolves, and we'll navigate through new challenges imposed by C-19, just like we did earlier this year. At the same time, we continue to improve the fundamentals of Pandora. The cost savings and brand results of Programme NOW are encouraging and important. With those remarks, we'll now open for the Q&A session.

[Operator Instructions] Our first question is from Silky Agarwal from Citi.

So I have 2 questions, please. One on October. Could you share some color on how many stores were roughly closed in October? And also a bit of color on the markets. So which markets -- I believe the top 7 markets are still outperforming. But importantly, I was looking for some color on China. Did you see any month-on-month improvement in China? And also what was selling well? Was it -- I believe the performance was led by charms, but just wanted to confirm there. And two, I have on silver prices. They have developed favorably over the past 2 months. So I was looking to see if you are planning to update or provide more color on the '21 and '22 gross margin impact. I think your original guidance was around 400 bps impact based on silver prices around USD 36.

Silky, so before the lockdowns, I mean -- I think in early August, we were kind of cruising towards 10%. And then that kind of came down, so I think the quarter ended roughly in 5% closed. It should also be remarked that roughly, I think it's 25%, 30% of the store network also operates with limited opening hours, and that's in various parts of the world. Then your second question was on China. The way I would characterize China is before COVID happened, I think we spoke and had the expectation for the year that China would be down 20% to 25% kind of given the run rate trends over there. Then we've had this COVID in the middle, and now we're kind of back to roughly that level. So it's in the 20%, 25% region, let's say. And then I think I'll hand it to Anders on the silver price topic.

Yes. Silky, it's Anders here. On the gross margin impact, there's a number of factors impacting the gross margin. If you look at it on a run rate perspective going forward, the bigger one obviously being commodity prices, silver being the biggest part of that. But -- and as we write in the announcement, everything else equal, if silver prices stays where they are, there will be a roughly 300 basis points negative impact from higher silver prices when we -- from sort of mid next year onwards. But there's a couple of other factors going the other way, one of them being the cost reduction program. That will still be some tailwind from the cost -- Programme NOW cost reduction program going into next year. There will be a bit of tailwind from the [ Timebeads ] as well, which we are not seeing actually in the numbers yet here in the third quarter, but that there will be some tailwind from that, from Q4 onwards. So net-net, I don't think you should expect that we can offset the 300 basis point headwind from higher commodity prices, but we can offset a decent chunk of it, but not all of it, on a run rate basis.

Yes, I just want to make sure that we answer the first question right. So in October, it has been approximately 5% that were closed.

Our next question is from Lars Topholm of Carnegie.

Yes, congrats with an excellent quarter. A couple of questions for me. So I just wonder, the 8% like-for-like growth you recorded in October, that's roughly 10 percentage point better than Q3. If I want to have a feel for where that improvement comes from, should I just roughly add 10 percentage points to the Q3 like-for-like growth for each of your key markets? Or are there some picking up more and others picking up less? That was the first question. The second question goes more to how you handle this temporary store closure situation when you have to sell in your Christmas collection. How do you decide whether to ship inventory to stores, to e-stores or your physical stores? And if stores are closed, is there risk that if they open again in early December, they won't have the right inventory? How do you manage this?

Lars, this is Michael speaking. I think I'll start with the next question -- the first question because we have -- we do not want to provide too many comments on the current trading. Probably, what I can say is important here is that actually the top 7 key markets were already around this plus 8. They were at plus 7 actually in Q3. So I would say that the best way to give an indication of this is that the top 7 key markets are performing in line with Q3. And then what we've seen is actually the rest that are performing better, for example, Latin America opening up in October compared to Q3. So Latin America was a significant drag in Q3 and not to the same extent in October. So you should more look at the rest than some of the top 7 key markets. Go ahead.

And on your second question, Lars, I mean, this is obviously a conundrum, right? Because you're kind of trying to second-guess where the next shop is going to close. So we've been doing all sorts of scenario planning here. But I think there are a couple of things, which we have done. First of all, we have taken our inventory position up in general. So that's one. And we've tried to hold a larger portion of that increase back in our DCs, which then allows us to float it to where it needs to go. So that's one point. As you know, we've also added extra e-commerce DCs, in particular in the U.S., but also here in Europe. So then you have another point of inventory essentially to manage. And then what we've done with this increased inventory, we focused that on the top 500 DVs. So it's a lot less seasonal-dependent. So even if the stores would be closed for a period of time, I can still sell this inventory. This is the best-performing part of our inventory. And of course, then the biggest unknown is the new items. But actually, we don't have that many new items. I mean, Star Wars collection was already launched. The other collection that's being launched in Christmas is kind of more, a refresh of the base. So it's not a high-risk inventory from that standpoint. And then we just have to be very agile. It's actually a daily conference call with all the countries and our DCs and the supply chain to manage the situation and move stuff around. So -- but of course, when you get very short notice and shut stores, then, of course, there's very little you can do with the inventory that sits in those stores. So -- but it's something...

In that context, Alexander, I mean, typical franchise store would, I guess, have negative cash flow from Mother's Day more or less until Black Friday. So if you either are unable to give them the right inventory or for that matter, if you're not allowed to open in December, would that put some of your franchises into more severe financial trouble? And do you have a plan ready for that?

I don't think we have anything in the drawer. So far, what we experienced in the second quarter was that the franchisees were very quick on their feet to kind of manage their cost situation. What we've understood from the U.K. now is that the government is going to put up a similar type of support to business operations as they did in Q2. So on that basis, probably less so, but I mean, there is -- it's true that given kind of where the volume sits, distributed in a year, this is the most important part of the year, not just for the franchisees, but also for us. So if we're into severe lockdowns in this period, of course, it's going to put strain on the system. But so far, if you look at it from a kind of country-by-country place, I think it would be U.K. is probably the one which is in a higher risk profile. Because in U.S., they've had a good run in Q3, the franchise partners had a very good performance. And there, the stores aren't necessarily closed. France is, as you know, predominantly an O&O market for us. So then you're left with U.K. that, let's see if they can reopen after 4 weeks or not. But it's clearly something we keep on our radar.

Our next question is from Anne-Laure Bismuth of HSBC.

Yes. I have two questions. And actually, these questions are about China. So you mentioned a comprehensive term growth plan and to rebuild the brand positioning in China. So I just wanted to know if you can give some example of concrete action that you have been -- that you will be taking or you have already taken in order to rebuild the brand momentum in China. And given your comment about the performance in October, so it seems that China has also improved and in line with the performance of the selling growth that you mentioned for the 7 key markets. So I'm just wondering in terms of online performance, so what is the exposure of the Chinese market to online, please?

Okay. So as I mentioned, I see China as a 3-step rocket. And the tangible outcome so far is that we have a new management team in place. And the last people came onboard in the quarter, so that they need to kind of gel and get their act together. Then the second piece, which -- I mean, Jacques has been working on since he joined, is to improve just our operating discipline, let's say, and start to untangle some of the infrastructure there and getting that in shape. So, so far, I would not think that we have done anything that you could put under the third pillar, which is more about the kind of relaunch of the brand, if you may. That's work that's still to come. I think we've done the base work on analyzing what's wrong, so I think we have a good grip on what's wrong and I think we have a pretty good idea on how to fix it. And now this new team needs to get together and start working on that execution. But I wouldn't expect that to have any material impact until into next year, to be honest with you. So now it's more about just doing good operational basics, which is also not insignificant, given kind of the starting point we had in China. And then from memory, last year, Q4 was also starting to become quite soft in China. So I think that the baseline to which we're trading against is quite soft. So I wouldn't write too much to the October performance. Of course, it's good that it's not deteriorating more, but I don't think we -- you should not look at that number, say, now the guys have sorted out China. This is going to take some time.

And what is the exposure to online in China, please?

Roughly 20% across. Essentially, it's through Tmall. We have a tiny bit DTC, but frankly, it's insignificant. It's a couple of orders a day, it's not meaningful. So it's a Tmall, 20% is kind of the way to think about it currently.

Our next question is from Magnus Jensen from SEB.

Yes, 2 questions from me as well. First, on your online business, which clearly is doing really well these days. And you say that you are prepared for -- you said that earlier, at least, that you're prepared for around 100% growth online. Given that we are looking at lockdowns now both in U.K. and France, but potentially maybe also other places, growth could easily go over 100% again, as you saw earlier in the year under the lockdown period. What would happen if you ended up with more than 100% growth? How will you be able to deliver on that? That's my first question. The second question is in terms of your marketing spend compared to competition. Because one of the things you said that has been driving your improvement is clearly marketing, but also that you, over the COVID-19 period, have been able to spend more than your competition because of your very good cash position. Is there any way that you can sort of illustrate for us how much more you've spent on marketing compared to competition and how much that means for your improvement? That's my 2 questions.

I can give you a solid answer on the first one. The second one is a bit more difficult, so let's see if we can figure something out. But -- so we actually have a little bit more capacity than the 100%. I think it's to the tune of 130%, whatever. But that -- what that actually means is it's 100% capacity to deliver on the customer promise, okay? So I can deliver more, significantly more, but it's just going to take a little bit longer time for me to ship it to you, okay? Because the kind of bottleneck we have is in the picking and packing. The bottleneck is not the inventory, the bottleneck is not logistics, the bottleneck is how many people physically can pick and pack. And that's kind of where we ramped up. We have more packing space. We have more people trained to run. All the systems are running. So that's all kind of done. So the only thing is they can pack -- and I'm just making up a number here. Let's say that, that unit can pack 1,000 orders per day. If that goes to 4,000 orders, well, they can still pack them, but it's just going to take longer time. And therefore, today, if you order from us, you should expect to get it in 2 to 3 days, generally speaking, across the world. That 2 to 3 days may go to 5 and 6 days, and it may go to 2 weeks. So the more the volume shifts online, the longer time it will be before we can actually deliver it. And of course, the sensitivity here is around Christmas. Because if I ordered a Christmas gift, it's no good for that to turn up 2 days after Christmas. So I think that's what it's all about. So we can absorb more than 100%, but it's just going to then start encroaching on the customer promise. Then on your second question. It's an incredibly complicated question because there is not even a proper report today that says what my share of voice is in terms of media. I have it for a few markets. It's not standardized. The agencies are not providing this so it becomes a bespoke report that we order. But anecdotally, what we've seen in the quarter is that our share of voice has significantly improved versus the same period prior year. But more than that, it's not really meaningful to get into because it's not just robust enough. But again, we can just see the outcomes in terms of the like-for-like performance, which has been very, very strong. So that's as much as I can say.

Our next question is from Fredrik Ivarsson from ABG.

A few from me as well. Following up on Magnus' question there on online. Alexander, when you talk about online capacity, how are you considering click-and-collect in there? I mean, hopefully, stores can open up by the Christmas or holiday season, but Black Friday could obviously be more difficult in terms of click-and-collect so I'm just curious about that. That's my first one.

Well, I'm not sure how to answer that. I mean, we have click-and-collect up and running in essentially, in all of U.S. and I think now is also in all of U.K. But of course, there's no -- if the store is closed, then it doesn't really help. I'm not sure how to answer your question in a different way.

It's all right. Maybe if you could just share some light on the share of click-and-collect versus straight deliveries in those 2 countries.

So well, U.K. just started. So that's a little bit early. But in U.S., we've had it up and running, and in the stores where it's been up and running for a while, click-and-collect typically ends up being somewhere around 4% or 5% of the business. That's kind of where it gets to. But of course, now that might -- and the only other thing I would say in the U.S. is also, we have curbside delivery. So people call to the store and then they come to the parking lot, and then we conclude the transaction on the parking lot, but that's a U.S. phenomenon. We don't see that anywhere else in the world. So...

Excellent. That's clear. And second question on performance per market. You obviously reported very strong growth in most of the key markets. But if my math is correct here, it looks like all other markets were down around 25% in the quarter. And then I think Michael said that those markets have now improved. And I'm curious to hear whether those improvements is on the back of just markets reopening or if you also sort of redirected your marketing efforts to get those markets going.

We can share the answer between me and Michael. I mean, I think we mentioned that LatAm was obviously closed to a large degree during the quarter, which pulled it down. Spain, because of tourists are staying at home, which is also may be part of the explanation why Germany is on fire, because Germans are staying at home and they're not vacationing down there. And of course, not the entire store network is kind of skewed towards tourism in Spain. I think, it's roughly 1/3 of the stores are more tourists. So of course, the volume has gone down, and they've had to revert more back into the local customer. What else? And then we have -- I think that those are kind of the major points, right?