Martin Beer: Thank you for the question, Kunal. On the top customer, the share of the business in terms of GMV for Q1 LTM was 39.4%. So another increase. In the last earnings report, we reported 38.4% or 38.5%, I don’t recall exactly. So we added another percentage point as we went from the last quarter to this quarter. So it’s expanding. The continued spend of the top customers versus the continued slowdown aspirational customers make that share of business bigger. We don’t break out in our reports the specific AOVs for top customers, for standard customers, but we have repeatedly stated that the top customer AOV is more around 1,000 compared to the average that we achieved in this LTM EUR660.
Kunal Madhukar: Got it. And then, one of the things that you kind of talked about was when it comes to the spring-summer 2024, that the buying levels were determined after the slowdown started. So what if the luxury market continues to remain weaker overall? And so even at the lower level of [Technical Difficulty] business, is it possible that retail [Technical Difficulty] end up with like more inventory than even what they feared?
Martin Beer: I mean obviously the answer to that is an equation. And one part of the equation is for sure smaller. Inventory for spring-summer will be smaller than the combined inventory of fall-winter in the market or the combined inventory of spring-summer [’22] (ph). So, that’s certain. The other part of the equation is will we see demand levels comparable to the last 12 months or will there be up and down? The best guess is, there will be similar because the rest will be speculation. And if they are similar, then it leads to improved sales rules. It leads to less promotions in the market. Thus it leads to a better top line and to a better margin. Of course, if the market rebounds suddenly quickly, it gives you an extra boost. If the market goes south, it could very much be that the reduced inventory is sort of eaten up by even further reduced amount, but that’s speculation.
Kunal Madhukar: Got it. And then one last one, and I’m sorry, I just keep going on. On the liquidity side, can you help us understand how we should think of free cash flow for the rest of the year in order to understand whether the 60 million revolver that you have is sufficient to meet liquidity needs for the near term?
Michael Kliger: Yeah, happy to do so, Kunal. So in the quarter 33 million use of cash, very typical as we build up the seasonal fall-winter ’23 merchandise and pay for that. We ended the quarter with no long-term bank debt, which is quite unique in our balance sheet, 7 million cash and 16 million use of the revolver, so a net utilization of 10 million of the 60 million revolver. And we expect that our revolver is fully sufficient, fully sufficient because we now have the fall-winter merchandise all in the warehouse. We expect that the revolver is fully sufficient to cover the seasonal peaks. And so we’re very comfortable with what we have today.
Kunal Madhukar: Got it. Thank you so much.
Operator: Your next question comes from the line of Abhinav Sinha from Societe Generale. Please go ahead.
Abhinav Sinha: Yeah, hi, thanks. So two questions. One, on the top customers you said that it grew to 39% of the GMV. So my question was like is there a critical number beyond which it will start showing on the EBITDA margin as well. So that’s one. And second is on the gross margin I mean was the one I mean if I remember correctly you are in a normalized scenario you have a 46%, 47% gross margin for the 1P business. So how was that? Was it also down like 6%, 7% or was it worse or better than the rest of the business? Thank you.
Michael Kliger: Well let me take the first question and then Martin addresses the margin question. I mean, is there, I understand, it’s like the tipping point or, number one, as you rightfully assume, profitability with top customers is higher than with aspirational customers. And so if we would, surely theoretical, of course, have 80% business with the top customers, it would, of course, also impact the EBITDA of the overall customer, of the overall P&L. So in that sense, your logic is absolutely right. But as you see, we are continually expanding our share of top customers, having gone from 34 to 36 to 38 over the last three years. But that is the organic speed. So there is no expectation, and there’s actually also no organic way to boost the top customer share sort of within one quarter or within two quarters to something close to 50.
That’s not possible. Therefore, the improvement in EBITDA is continue focus on top customers, but reduce promotional intensity in the market.
Martin Beer: Yeah, I’m happy to do the gross profit margin question. Exactly as you pointed out, Abhinav, I mean, the last years we have consistently achieved the 47% gross profit margin due to our focus on the sweet spot in online luxury, due to our focus on top customers, due to the core elements of the business model. And right now, we are in this unprecedented transitory situation where we see the 300 to 400 basis points, operative gross margin dilution due to this situation, due to this heavy promotional environment driven by access inventory. And so this phase is transitory and obviously we then expect in the next quarters and especially then fiscal year ’25, a normalization of this gross profit margin slippage to again achieve the gross profit margin levels that we saw before.
