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Speaker 1: Now we're going to switch gears and take a look

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Speaker 1: at the luxury e commerce market with Michael Kleeger, a

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Speaker 1: CEO of My Teresa who joins us. Now, it's an

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Speaker 1: interesting time to talk about luxury and retail, and you've

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Speaker 1: had a long history when you think about the retail

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Speaker 1: market more generally, Michael, how does your market, the higher

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Speaker 1: end of consumer here compare with what we're seeing across

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Speaker 1: the broader American economy.

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Speaker 2: Thanks for having me. I mean, for sure, the luxury

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Speaker 2: market and the luxury consumer shows higher resilience to significant geopolitic,

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Speaker 2: geopolitical news or economic news, and therefore we have seen

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Speaker 2: good development in luxury spend online. There is clearly a

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Speaker 2: two tier market. There are these consumers which we call

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Speaker 2: the aspirational luxury consumers. They have held back on spending

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Speaker 2: and that trend has taken place over the last twelve months.

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Speaker 2: And then there are these big wardrobe building spenders and

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Speaker 2: they continue to spend, They continue to invest in pieces.

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Speaker 2: Price points are not really an issue for them. And

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Speaker 2: so with this tale of two customer segments, the higher

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Speaker 2: end is spending and continues to spend.

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Speaker 1: How much does that start to hold that though I mean,

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Speaker 1: at what point do you see the higher end of

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Speaker 1: the consumers start to break a little more? What would

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Speaker 1: it take?

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Speaker 2: Well, I mean, obviously the wells of these consumers I

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Speaker 2: type are tied to the stock market, are tied to

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Speaker 2: commodity prices, are tied to real estate markets, and so

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Speaker 2: even though in some of these sectors we have seen

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Speaker 2: uncertainty overall, just looking at the indecs today, these numbers

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Speaker 2: are pretty good and therefore the wealth for our consumers

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Speaker 2: and those consumers is in good shape. And so if

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Speaker 2: something what happened there, then of course they may also

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Speaker 2: be impacted. But unemployment rates, inflation rates are far less

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Speaker 2: of a concern to these big spenders then, of course

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Speaker 2: for the overall consumer population.

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Speaker 3: Michael, what stopped working with online retailers? So we had

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Speaker 3: far Fetch selling to South Korea's Kupang just recently, it

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Speaker 3: was facing administration before that, where it was a darling

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Speaker 3: just a couple of years ago, Matches Fashion and Trouble,

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Speaker 3: nukesneta perte not doing so well. Essencelang off staff list

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Speaker 3: even the real real what's wrong with this segment?

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Speaker 2: Excellent question. It comes back to the two consumer segments.

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Speaker 2: I alluded to. There are luxury spenders, we call them

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Speaker 2: aspirational consumers that are keen to buy one or two pieces,

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Speaker 2: the iconic bag, the iconic pair of sneakers, but they

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Speaker 2: usually tend to spend one or twice a year, particularly

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Speaker 2: around the holiday season. And then there are the big spenders,

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Speaker 2: the continue spender a luxury lifestyle, and those continue to spend,

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Speaker 2: and our focus has always been to serve these big spenders.

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Speaker 2: So in our last quota, which is our first quota

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Speaker 2: in the fiscal year July to September, we grew net

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Speaker 2: sales in the US twenty eight percent. We grew our

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Speaker 2: top customer base by fifty six percent, so quite con

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Speaker 2: quite in contrast to the general even luxury online pattern,

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Speaker 2: and that's only due to a different customer segment that

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Speaker 2: we focus on.

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Speaker 3: But then, why are you guiding to the low end

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Speaker 3: of expectations and everything? Why isn't this business more profitable

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Speaker 3: and why is the stock down so much this year?

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Speaker 2: Well to the first part of your question, we are

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Speaker 2: guiding for growth this year, for our fiscal year. We

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Speaker 2: are guiding for profitability and very unusual profile to any

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Speaker 2: one of those companies you mentioned. So we are clearly

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Speaker 2: outperforming the sector. The sector is under stress on the

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Speaker 2: aspirational consumer side, and that has led to quite intense

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Speaker 2: promotional activities of players that found themselves with too much

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Speaker 2: stock in the market. But again merchandise stock, I mean,

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Speaker 2: but again, we are guiding for growth, We are guiding

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Speaker 2: for profitability for the full fiscal year, even though to

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Speaker 2: the lower end of our guidance. So we see ourselves

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Speaker 2: as clearly the winner in the market, and we clearly

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Speaker 2: see ourselves as outperforming on the share price. Yes, our

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Speaker 2: share price has not reflected our performance. We do see

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Speaker 2: that investors are trying to figure out what is happening

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Speaker 2: in the luxury sector, is it as resilient as they expected,

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Speaker 2: and of course trying to understand the difference between players

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Speaker 2: that had focused on this aspirational consumer versus players that

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Speaker 2: like us, but also like some of the big luxury

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Speaker 2: brands that are always focused on the big spenders.

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Speaker 1: Speaking of the big spenders, you had mentioned promotion activity.

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Speaker 1: It seems like the age of inflation really has impacted

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Speaker 1: everybody across the board. How much longer do you think

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Speaker 1: that the promotional activity will stay strong and how steep

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Speaker 1: are the markdowns on average.

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Speaker 2: The promotional activities are clearly linked to the fact that

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Speaker 2: too much stock is in the market, and the specifics

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Speaker 2: of luxury is that they are tremendous le time. So

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Speaker 2: we are currently at the end of fall winter twenty

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Speaker 2: three season. This is merchandise that has been bought last

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Speaker 2: year in November, October, December, so this was bod and

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Speaker 2: there's still no understanding how weak the market on the

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Speaker 2: aspirational side would be with spring summer twenty four, which

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Speaker 2: is the next season starting. It already has started, but

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Speaker 2: the peak will be in March April. We will have

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Speaker 2: much less stock in the market because this was bought

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Speaker 2: in March April May of this year. With a clear

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Speaker 2: view on the slowdown and with much less stock in

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Speaker 2: the market, we expect a far more disciplined approach to

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Speaker 2: markdowns and the far reduced promotional intensity in the market.

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Speaker 3: Michael, We're very, very concerned with the Chinese consumer right

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Speaker 3: now as well, because obviously China can be a very

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Speaker 3: interesting leading indicator for the United States and economic activity.

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Speaker 3: What insights can you give us on the Chinese consumer?

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Speaker 2: Well, the Chinese consumer spend has followed a completely different

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Speaker 2: pattern from Western Europe. Remember, the pandemic really did not

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Speaker 2: impact Asia and particularly mainline China until autumn of last year.

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Speaker 2: Only autumn of last year, when the official policy towards

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Speaker 2: Corona changed towards COVID, there were massive infection rates and

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Speaker 2: massive lockdowns and the Chinese consumer coming out of this

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Speaker 2: phase in January February of this year, there was an

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Speaker 2: expectation of a quick rebound, of a sharp rebound, and

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Speaker 2: that has not happened on a broad scale of consumer spend.

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Speaker 2: It had happened on hospitality, it has happened on travel.

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Speaker 2: Numbers are up, so the sector is improving. But the

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Speaker 2: sharp rebound back two levels before the pandemic hit lost

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Speaker 2: autumn did not happen. And that's a slow return at

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Speaker 2: the moment.

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Speaker 3: Fascinating. Michael, thank you so much for your insights today,

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Speaker 3: coming to us all the way from Unique Germany, that

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Speaker 3: is Michael Klieger, CEO of my Terisa