Pandora A/S

CSE:PNDORA

Earnings Call Analysis

Pandora Reports Strong Q3 Results, Raises Guidance

Pandora's Q3 2023 results showed impressive growth, driven by their successful Phoenix strategy. Organic growth ended at plus 11% with like-for-like accelerating to plus 9%. Gross margins hit a record 79%, contributing to a solid EBIT margin and a strong cash profile. The company updated its full-year revenue guidance to plus 5% to plus 6%, up from plus 2% to plus 5%, with EBIT margin expectations maintained at around 25%. The initial 6-week like-for-like trading of Q4 indicates high single-digit percentage growth year-over-year. Looking ahead, Pandora targets 7% to 9% organic growth and an EBIT margin of 26% to 27% by 2026. They also expect to return DKK 14 billion to DKK 17 billion to shareholders over the next three years. Additionally, after launching new diamond collections, they've seen a doubling in U.S. sell-out.

Stellar Third Quarter Results and Upward Guidance Revision

Pandora's third quarter earnings call kicked off on a high note with Alexander Lacik, the CEO, expressing delight over the impressive results. The company's Phoenix strategy proved successful, delivering an 11% organic growth, while like-for-like sales saw an acceleration to 9%, indicating a robust across-the-board demand for Pandora's offerings. Customer excitement around the brand was evident, and their engagement with various company initiatives helped to attract new consumers to the fold. The company's financial health was underscored by a gross margin reaching an unprecedented 79%, thanks to strategic efficiency gains and proactive pricing actions that enhanced profitability.

Optimistic Outlook for Year-End and Updated Revenue Projections

As we peer into the final quarter, the momentum is palpable with Pandora observing high single-digit percentage increases in like-for-like trading within the first six weeks, compared to the previous year. Although this only represents a fraction of Q4's revenue, predominantly generated in November and December, these early indicators bode well. Importantly, market expectations have been recalibrated, with organic growth now forecasted at 5% to 6%, a bump up from the previous 2% to 5%. Nevertheless, the EBIT margin outlook remains at an anticipated steady 25%, suggesting investor confidence in the management's ability to sustain profitability.

Ambitious Long-Term Growth and Shareholder Returns

Looking beyond the current fiscal year, Pandora aspires to achieve a 7% to 9% organic growth rate through various customer-centric and network expansion initiatives. Like-for-like factors are expected to contribute 4% to 6% of this growth, while an additional 3% is predicted to arise from expanding the network, a process envisaged as both low-risk and lucrative. The company’s financial discipline shines through with an EBIT margin target of 26% to 27% by 2026. Signaling a commitment to shareholder value, Pandora plans to channel a substantial DKK 14 billion to DKK 17 billion in cash back to its shareholders over the next three years.

Earnings Call Transcript 2023-Q3

[Bilal Aziz, executive]

Good morning, everyone, and welcome to the conference call for Pandora's third quarter results for 2023. I'm Bilal Aziz from the Investor Relations team, and I'm joined here by our CEO, Alexander Lacik; CFO, Anders Boyer and the remainder IR team. [Operator Instructions] Please pay notice to the disclaimer on Slide 2 and turn to Slide 3.

I will now turn over to Alexander.

[Alexander Lacik, executive]

Good morning. Thank you, Bilal, and welcome, everyone. First, let me begin with some key highlights from the third quarter.

We're very pleased that delivering a strong quarter. This once again demonstrates how the Phoenix strategy is coming together to really drive strong growth. The organic growth ended at plus 11%, and our like-for-like accelerated to plus 9% in the quarter. We can clearly see that we've got good brand momentum from the various initiatives we're implementing and we are, therefore, attracting new consumers into the brand.

You'll notice that the like-for-like growth was broad-based across our collections and most of our markets. Once again, the P&L structure remains highly attractive. Our gross margins have now reached an all-time high of 79%, driven in part by our efficiency gains and pricing actions. This all still feeds into a solid EBIT margin and a very attractive cash profile. To put this all together, the Phoenix strategy is working, and we can see that directly through attracting new consumers. Our business model means we can capture all of this value to generate significant value for our shareholders.

Now let's move to Slide 4, please. Considering the progress we made so far this year and our outlook, we are changing our revenue guidance. We now guide organic growth at plus 5% to plus 6% and compared to the previous one at plus 2% to plus 5%. Our EBIT margin guidance remains unchanged at around 25%. We are firmly on track for this despite continued investments into our business to drive future growth.

Now I'll give a few quick words on current trading. We started Q4 well. In the first 6 weeks, our underlying like-for-like trading is up high single-digit percentage levels versus the same period last year. This is a good start. You should also keep in mind that the majority of Q4 revenue is accounted for by November and December. So in that context, it's a smaller sample size. We look ahead with confidence, but naturally would expect trends to moderate a bit as we head into the holiday season, where it's typically more competitive from an external standpoint.

Now let's move to Slide 6, please. As most of you are aware, last month, we hosted a Capital Markets Day in London, where we laid out our plans for the next three years. Before I dive into the third quarter, I just wanted to remind you some of the key details we shared. We highlighted that we will be taking the Phoenix strategy to the next level as we look to change the perception of Pandora into a full jewelry brand. Tied to this, Pandora is setting up for accelerating growth ahead. Doing what we've done over the past two years is working, but we are now ready to unleash the potential of the brand and think that we can take this even further.

Going after these growth opportunities will mean increased investments. Despite this, we still expect to see EBITDA margin expansion. The business as ever, will continue to generate a significant amount of free cash flow with the vast majority of this return back to our shareholders. These three points I've just mentioned, all will translate into mid- to high teens EPS growth into the future. So that's the Pandora business model in a nutshell: solid growth, high margins, highly cash generative and high earnings growth.

Next slide, please. Here, you can see how everything I've said translates into numbers with our new 3-year targets. We are targeting 7% to 9% organic growth, of which 4% to 6% will come from like-for-like with a range of current and new initiatives. This will be complemented with three points of network growth, which is a predictable and highly value accretive revenue stream. For EBIT margins, we will look to balance out investing into the business versus driving operating leverage, but the overall margin expansion, as I mentioned. Specifically, this translates into a 26% to 27% EBIT margin by 2026. Finally, given the expected free cash flow generation, we expect to return between DKK 14 billion and DKK 17 billion of cash back to shareholders over the next three years combined.

Next slide, please. Now this brings me nicely on to how we will be achieving the targets and in particular, driving growth. You should all be familiar with this Phoenix wheel by now with the four strategic pillars that built the foundation of our strategy. At the CMD, we laid out many initiatives across the four pillars. And I will certainly not go through them here one by one, but instead just highlight the breadth of initiatives we have, from restaging the brand early next year to expanding into new design aesthetics and continuing to drive growth across all our markets. The message is simply that we have a lot of growth opportunities across the strategic pillars. As I said, some of the initiatives are already having a positive impact. So on that point, let's dive deeper into how we drove brand heat in the third quarter.

Next slide. So we spoke at great length a few weeks back on how our brand strategy centers on bringing more consumers into the Pandora brand and how we would now become unmissable. Quarter 3 is a great example of how that comes to life. Our strong like-for-like growth was driven in large parts by various brand activations across the quarter, which in return, drove a large increase in traffic into our stores and e-commerce.

And as I've always said, once we get the traffic, the rest is far simpler as we are really good at converting. For the quarter, we were present across many big events. Our Diamonds launch campaign in New York was part of New York Fashion Week and so wide-scale reach. We then were also present across other fashion events in Copenhagen and Paris to mention a few. It therefore shouldn't come as a huge surprise that these efforts are paying off in search trends. And some of you may have noticed that Pandora was the most searched jewelry brand globally. And of course, we continue to dial up our desirability through engaging our new brand ambassadors.

Next slide, please. Alongside all efforts in being unmissable, we had a particularly strong quarter across our social media activations. You can see on the slide some KPIs we have given, but we know how to remain culturally relevant and drive good brand heat. Some of these trends won't be repeatable every quarter, but we have a multifaceted marketing strategy that looks to drive penetration. We will continue to invest into this strategy to drive our brand heat further.

Now, good marketing only works when the product itself is resonating with the consumer. That leads me nicely on to the next slide. Our redefined core covers all of Charms and Carriers. This is our Moments platform and Pandora ME. It's imperative that we continue to develop the designs to stay relevant. I spoke earlier in the year about our new studded chain bracelet, which underpins our unique captive business model in moments. This continues to do very well, and we've also complemented with other variations such as a gold plated version, which is also driving good incremental growth within our bracelets.

Our base products in Charms also performed very well. We simply have the scale and breadth that no one can match. Overall, this helped to drive 7% like-for-like growth for the Moments platform. Meanwhile, it's also great to see our continued efforts and focus on Pandora ME continue to drive strong results with a plus 12% like-for-like growth. This was helped with a good uptick of our new product offering here.

Next slide, please. To fuel with more, we continue to invest in all our other platforms as we truly elevate Pandora into a full jewelry brand. You can see that this year, the strategy has continued to work. Timeless, which is our second biggest platform, reported a very strong quarter of plus 21% like-for-like growth. This was relatively broad-based, but also boosted by various social media trends in products such as the promise ring. When you have beautiful products and relevant marketing buzz, then the impact can be very powerful, given our reach as the biggest brand in the accessible jewelry market.

For diamonds, in late August, you will remember that we launched our expanded assortment. It's very early days, but we have been encouraged by the early signs we have seen since then. The growth in the quarter comes off a low base. But let's speak about that in a bit more detail on the next slide.

As you heard a few weeks back, we remain very excited about the future of Lab-Grown diamonds for Pandora. We believe this has potential to be transformative for the group and have given a new ambition of driving more than DKK 1 billion of revenues by 2026. The first step in this journey was taken in Q3, where we expanded with three new collections, which feature more classical designs while still carrying a Pandora twist.

This was accompanied by an exciting new star studded marketing campaign under the banner of Diamonds for All. The campaign has seen very strong results with our share of voice being particularly strong in the immediate aftermath of the campaign.

In terms of our actual performance, since the launch, we have seen a doubling of our absolute sell-out in the U.S. This is a small sample size, and we have plenty of work ahead, but we remain confident of the opportunity here. As the next step within this month, we'll be launching the collection across Mexico and Brazil.

Next slide, please. Before I dive into the specific markets, I just also want to touch on the personalization growth pillar. It's clearly our job to ensure world-class, in-store experience and complement our products with best-in-class services. In store and online engraving is a great example of this, and we have significantly scaled up our offering here this year with 850 stores offering the service. This is already driving good incremental growth, and therefore, we remain excited about our rollout plans here with a total of 1,450 Pandora stores offering these services by the end of next year.

Next slide, please. Now let's take a closer look at the specifics of the third quarter. We delivered 11% organic growth with a strong like-for-like of 9%. This was a clear acceleration from the trends we saw in Q2. A lot of this is down to the Phoenix initiatives coming to, again across brand, product and in-store.

Now diving deeper into the performance, we believe we did see some benefit from higher-than-expected tourist demand over the initial summer period. We clearly don't know if these holiday patterns remain next year. But overall, we are clearly very happy with the progression of our business. It's clear that the brand heat is consistently moving in the right direction, and we are executing well. This can also be seen from the continued outperformance of our owned and operated stores, which delivered a very strong plus 12% like-for-like growth. As I said last time, we continue to work closely with our partners to help them narrow their performance gap.

Now let's move on to the next slide to take a look at the growth in our key markets. Let's start with our biggest market, the U.S., which delivered a 5% like-for-like growth, a strong sequential improvement compared to Q2 where it was minus 5%. It's great to have a positive growth back in our largest market after last year where we lapsed the comparatives from the stimulus checks. Like with many markets, the U.S. benefited from our brand initiatives driving increased traffic whilst performance was also helped by strong execution with better conversion rates on higher traffic. Performance of the partners improved to be slightly positive in the quarter. However, as I mentioned, there's still a big gap versus our own operated performance, so we keep working on that. As ever, we've got a strong commercial pipeline for the holiday season that's coming up.

Next slide. The performance in our key European markets also improved to plus 4% like-for-like versus the flat in the prior quarter. The U.K. continued to remain resilient despite the weak consumer backdrop. Germany continued to build on its already strong momentum to now deliver a whopping 31% like-for-like growth, with strong growth across all platforms. Again, numbers like these are not repeatable every quarter, but we believe the brand still has a long way to go in Germany.

In Italy, despite the still weak macro, we saw sequential improvement to be broadly flat in like-for-like terms with better brand momentum. And I want to spend an extra second on France, which we saw a notable pickup to plus 5% like-for-like. Whilst there was an element of extra tourist traffic here, we have, as you know, been investing for some time here to elevate the brand desirability. This has included new ambassadors and driving stronger media campaigns and we are clearly starting to see some of those positive elements play out through a higher brand equity.

Next slide, please. In China, our performance was a flat like-for-like. We relaunched the brand earlier in the quarter in the city of Shanghai and have started to see some encouraging signs. You'll remember that Massimo shared some of these with you at the CMD, but just to highlight some data points again. Since the brand relaunched in Shanghai, we've noted a 37% increase in store traffic versus the rest of the country. There's also been positive trends on social media. However, this was offset by weaker traffic elsewhere. As we've said, this will be a journey ahead, and we will continue to monitor our performance going forward.

In Australia, our performance was somewhat weak at minus 8%, which reflects the still weak consumer sentiment and weakness, in particular, in the wholesale channel. Finally, in rest of Pandora, we continued to see strong growth. There was a strong double-digit contribution from many markets where we continue to build out our presence. Growth in Mexico and Spain also continued to remain solid, whilst we saw strong double-digit growth across other countries like Turkey, Portugal and Poland to mention a few.

Next slide, please. You heard me earlier explain how network expansion ties into our new financial targets with a targeted contribution of 3% CAGR over the next three years. This is low-risk and highly predictable revenue stream. In this quarter, the contribution was already four points, reflecting how quickly we see good revenue growth from new stores. We are well on track for our targeted openings this year.

You will also see on the slide a reminder of our vision ahead for network growth. There's so much white space opportunity ahead for us. And over the next three years, we'll be opening around 450 stores. This is through a combination of concept stores and shop-in-shops.

Next slide, please. Finally, I know some of you had the chance to see our new Evoke 2.0 store concept in London last month. For those of you that didn't, I just wanted to emphasize that this new store concept is a step change in how consumers will view the Pandora brand and how we execute. It serves two core purposes. The first one being to elevate the brand, and secondly, to position Pandora as a full jewelry brand. We have ambitious plans to accelerate our rollout here, which you can see on this slide. For this year, we're on track to have our 40 new Evoke stores. So I'm sure you'll keep seeing them pop up near you. So do have a visit for yourself to experience the change.

And on that note, I hand it to Anders for a closer look at the numbers.

[Anders Boyer-Søgaard, executive]

Thank you, Alexander, and good morning or good afternoon, everyone. And please turn to Slide 22. The key message for the quarter clearly was that we delivered a very strong top line. But on top of that, our profitability metrics also remained strong. As usual, on this slide, I'll just dig into some of the other KPIs and then get to the revenue and EBIT on the following slides.

You already heard Alexander talk about the gross margin, but it's worth for me mention it once again because our gross margin did reach a new record high at 79% in the quarter. And this is a continuation of the journey that we've been on for some years with a gradual increase in the gross margin. It's driven by strong underlying foundations and that's why we emphasized at the CMD that the gross margin will remain high going into the future also.

You can see in the table that our working capital was broadly flat in the quarter at around 9% of revenue. And within working capital, you will note that inventories were down versus last year, around DKK 300 million in absolute terms and from around 20% to 18% measured as a percent of revenue.

For the full year of '23, we are well on track to end the year with inventories broadly flat versus last year and thereby down as a percent of revenue, given that Pandora is growing the top line. And this is all in line with what we have said previously. Worth noting is also the improvement in the cash conversion in the quarter to 65% compared to 0% last year. And this difference is mainly reflecting that last year, we deliberately built up inventories.

And finally, just as a reminder, the increase in leverage to 1.5 turns reflects the higher shareholder distributions, which we decided to pay out in order to move up from the low end of the capital structure policy last year to around the midpoint by the end of this year. And in line with normal seasonality, our leverage peaks here in the third quarter before falling back in Q4, where we expect to end this year around 1.2 turns.

And then please move to the next slide. And here, we'll take a closer look at the revenue performance in the quarter. Most of the building blocks in the bridge are properly self-explanatory. So there's just two of them that I want to comment on.

First of all, we saw another quarter with solid contribution of four points from network expansion, and this is in line with the guidance for the full year as well. The EBIT margin on this incremental growth in Q3 was north of 30% and with margins on this network expansion is going even further up when we get to the peak here in Q4.

Secondly, I wanted to comment on the building block that we call sell-out and other -- and the minus 2%. And as you probably know, this is an impact we had expected and it already sits in the old guidance. And there's three sources to this headwind. First of all, lower like-for-like performance among our partners leads them to operate with lower inventories and in some cases, probably too low inventories and this reduces our sell-in. Secondly, we see quite low performance among partners, other points of sale, for example, multibrand stores. And these types of stores are not included in the like-for-like KPI, and therefore, it drags down organic growth only.

And finally, there's a number of other smaller factors -- provisions for the loyalty program that we are launching in a number of countries, the comparator from the diamond launch last year in 2022 and reducing business with a partner in Germany.

And then please go to the next slide. You may have noticed that we have redesigned this EBIT margin bridge slightly this quarter. And this is all in line with what we spoke about at the Capital Market Day and reflects how we think about operating leverage and our investments into growth. On the EBIT margin, our key message is consistent with what we have said all year. Profitability remains solid, all our underlying drivers are progressing as planned, and we are on track to deliver around 25% margin for the full year. And as we have said since the start of the year, the EBIT margin in the first three quarters will be below 2022 and then Q4 will be above.

And I'll explain the drivers of the Q4 margin uplift shortly when we get to the guidance section. But to put it in a simple way, and just to repeat what we said last quarter, then as long as revenue comes in within the guidance, we will deliver on the full year EBIT margin.

And with that, then let's move into the guidance update on Slide 26. As Alexander already mentioned, we have upgraded our revenue guidance, and here's how we think about it. First of all, we've started the year better than expected. Organic growth year-to-date in 2023 sits at 5% and thereby, at the high end of the old full year guidance.

Secondly, we have seen a clear acceleration in growth in the third quarter with organic growth landing at 11%. And on top here of current trading in Q4 has also started well with underlying like-for-like at high single-digit levels and thereby also clearly above the old guidance [indiscernible] since we have updated the guidance for organic growth to between plus 5% and plus 6% versus previously plus 2% to plus 5%.

And we know from the questions and comments that we have received from you this morning that many of you have already done the math to see that the new guidance implies and like-for-likes as specifically in Q4 of between 2% and 5%. And you may ask why we are guiding with 2% to 5% like-for-like in Q4 when the third quarter sits at plus 9% and current trading at a high single-digit level.

And there's four things here that we want to point out. First of all, as you know, the holiday season is typically more competitive across the Board. Similarly, our social media activations were particularly strong over Q3. And this is not a linear progression. Some quarters, we will create more buzz than others. It's clearly our strategy to continue to drive this, but you should not think of this as a repeatable aspect every single quarter. And thirdly, I also want to add that rest of Pandora saw very strong like-for-like growth at 22% in the third quarter and comparatives there do get tougher as we move forward. And lastly, we remain conscious of the macroeconomic situation and the macroeconomic backdrop do remain uncertain. And at the low end of the guidance, we assume macro to weaken.

And then go to the next slide, please, Slide 27. Our EBIT margin guidance remains unchanged at around 25%. The EBIT margin so far this year is in line with our expectation, and we are on track to deliver the 25% margin for the full year. Now based on the year-to-date performance, you will be able to calculate that the guidance implies that the Q4 margin is up year-over-year.

And in this connection, I just want to highlight a couple of pointers which may help you thinking around that uplift. First of all, we had a 100 basis point drag from the pure phasing of costs during the first three quarters of the year. And as you know, this is as expected, and it will swing around in Q4 and become a tailwind.

Secondly, commodities and foreign exchange would be a 60 basis point tailwind in Q4 compared to last year. And that comes after having been a drag of 70 basis points during the first three quarters of the year. So it's also a quite big sequential shift as well. All of this means that we have good visibility on the drivers to deliver the year-over-year increase in the Q4 margin.

Finally, as a reminder of what we said at the Capital Market Day, we will accelerate our investment in order to fuel current and future growth. And you can see that already in play here in 2023, where we have been increasing our Phoenix investments during the year as revenue growth kept going up and operating leverage allowed us to increase investments because we want to build on the momentum that we have and invest for the future while still delivering on our EBIT margin commitment, of course.

And with that, I'll now hand it back to Alexander and please go to Slide 28.

[Alexander Lacik, executive]

So to conclude, we are pleased with delivering yet another strong quarter. And I think it's clear beyond any doubt that the Phoenix strategy is driving this growth. We are now ready to take it to the next level and accelerate our growth as we discussed at the CMD just recently.

Well, you've seen already some of the initiatives playing out as the brand heat is driving great momentum across the board. And due to this, as Anders just pointed out, we have raised the fiscal year revenue guidance and remain firmly on track to deliver our EBIT margin guidance.

Just before we open the Q&A on this chart that you see, you will notice that this is our new upgraded equity story. And it very much encapsulates the point I mentioned earlier and the vision for the group that we laid out at the Capital Markets Day.

And with those words, I think we're ready for the Q&A.

[Operator]

We will now start the question-and-answer session.

[Operator Instructions] The first question will be from the line of Thomas Chauvet from Citi.

[Thomas Chauvet, analyst]

I have two questions, please. The first one, if we go back to the sequence of improvements throughout the year, your revenue guidance at the beginning of the year at the top end was plus 3% organic flat like-for-like. Well done 9 months later, you had plus 6% organic at the top end and plus 4% like-for-like so with a sequential improvement.

Can you explain why your EBIT margin guidance hasn't been upgraded in parallel to that kind of sequential improvement, particularly in the fourth quarter where you've got high single-digit like-for-like so far. It's early days, but a record gross margin and more favorable OpEx phasing.

And my second question on Timeless. It's now become, I think, this year, 15% of Pandora sales. I think it contributed about 3% to group LFL in the quarter, a great sign of confidence in your ability to become a full jewelry brand, as you detailed at your recent Investor Day. Could you comment on the categories driving that 20% LFL in Timeless this quarter? And are you able to allocate more space to this new Evoke concept to perhaps speed up the rollout of Pandora ESSENCE? And how do you think more broadly about risks of cannibalization of sells with Moments but also cross-selling opportunities?

[Anders Boyer-Søgaard, executive]

Thomas, it's Anders here. I'll try to answer the first question. The short answer is that we have been accelerating as the year has been going by. We have been accelerating investments into current and future growth and have been doing that quite deliberately.

We spoke a bit about that at the Capital Market Day as well saying that we want to make sure that we grab the opportunities, all of the opportunities that we have in front of us and fuel the momentum that we feel that we have. Of course, you can also do the math and see that the incremental growth that we are driving this year still comes with 25% EBIT margin. But we have been bringing forward some of the investments as the year has been going by. We think that that's the right trade-off to go for in 2023 and actually also going into 2024, as we spoke about at the Capital Market Day, really making sure that we have put proper power behind the growth opportunities that we have.

And as you can see on the top line, something seems to work with the money that we are putting to work across the business. So yes, I think I'll stop there.

[Alexander Lacik, executive]

Okay. On Timeless, so I'll just take them a little bit one by one. So in terms of entry point to the brand, we can see that a lot of our rings on Timeless act as entry points, in particular, for slightly the younger audiences. So a lot of people can start into the brand and then eventually we can swap them over to the Moments platform.

Speeding up ESSENCE, I mean we have a time line for ESSENCE. It's also a production matter, especially when you're into pearls, is not as straightforward as it is to cast silver, so there is a time line for ESSENCE, but it's coming next year. So that's all fine.

Then the particular detail on Timeless. Its rings are driving very strong growth. I think we can maybe detail out in a separate session exactly what sits there. But in general, I think this is a reflection of that people are now starting to appreciate that the brand is not only about Moments essentially.

And then the other thing, what has been plaguing us in the way we categorize Timeless from prior years is that we had -- you remember this let's call it, capture what's called Reflections that was actually sitting in those numbers. That business has gone from glory to nothing. And as we be kind of sucking wind, now it's such a small part of. So within this, we've had what we call True ESSENCE, that's actually been at a very strong growth rate over the last few years, but now it's becoming more visible in the numbers as Reflections becomes smaller. So there's a bit of a mix shift happening there, but the rings is really what's driving a lot of the growth.

Part of this is also some -- the stuff I touched on social. We see on TikTok, for instance, that these trends just take off like crazy. I think we mentioned that already in Q2 with the Sun and the Moon Ring as an example, there was another -- well, there were a couple of more happening this quarter. And some of this is coming into the Timeless range essentially.

[Operator]

The next question will be from the line of [indiscernible] from Goldman Sachs.

[Unknown Analyst]

Thanks very much for the questions today. I just had two, if that's okay. The first one was just on the trading that you're seeing into October. [ In truth ], you can talk about any differences across the geographies you might be seeing at the moment.

And my second is just on the, I guess, split between repeat and new customers. [ In truth ] if you can also talk to the contribution that you saw within the last quarter between those two customer bases? And what you, I guess, expect or what you guys are seeing drive the new customers into your stores? Is it some of the new ranges or any detail there would be so helpful.

[Alexander Lacik, executive]

So on October trading, it's broad-based. So it's -- there's nothing that's kind of popping up. It's not a one, one to hit. It continues to be broad-based like we've seen in Q3. So I don't think there's much more to deliberate on that at this juncture really.

And let's remind ourselves that the October month, which we're talking about is 20% of the revenue base for Q4. So just to have that back of your head.

On new versus returning customers, I actually have to go into the data. It typically splits -- sorry, we get it in three buckets the way we classify the data. So we have new, we have returning and then we have something that's unclassified. Roughly in the data it's a 1/3, it's a 1/3 it's a 1/3. And that typically is the similar trend. So it's actually what you see is that the, the absolute volume of all three is what's gone up in the quarter. So it's not one over drying versus the other.

And as you could expect, since 60% to 70% of our business still is in the core, that's also in absolute what's driving most people through the door. So it's not like just because we advertise, let's say, Pandora ME or Timeless that you'll get a disproportionate amount. So they kind of move together in a way. And you saw the like-for-like in the quarter on Moments was plus 7%. So -- and in absolute terms, this is where the bulk of the customers numerically speaking, are coming through the door. So I hope that's somehow helpful.

[Operator]

The next question will be from the line of Michael Rasmussen from Danske Bank.

[Michael Vitfell-Rasmussen, analyst]

Yes. And well done, guys, on another strong quarter. Two questions from my side. First of all, did you divest a number of O&O concept stores in countries like Netherlands, Belgium, Ireland, Singapore and Romania? It seems like around 70 stores is missing from the O&O concept line, but they're still there on the total number. So did you divest these to any franchisees? And why did you do so if that's correct?

And secondly, just a few commentary on the momentum in the business also going a little bit further ahead than just the holiday season here. So you guys point to -- obviously comps are getting more challenging and macro uncertainty maybe also is growing a little bit. So just looking into 2024, would it be right to assume that you might grow below the 7% to 9% guidance range and then you will see a pickup in 2025, or how should we think on that?

[Alexander Lacik, executive]

So on the first one, I mean, we have not divested anything to my knowledge, unless something's happened under my radar. Typically, it doesn't in this business. And we are certainly not granting new franchise contracts. If anything, it goes the other way when these contracts are up for renewal. So -- and maybe we just need to have a double check on that number, but we haven't done anything to that nature. That's not part of our strategy at all.

[Anders Boyer-Søgaard, executive]

No. But let's just revert to you, Michael, that -- it's Anders here, on -- specifically on that question, just to compare notes, but the answer is, as Alexander said.

And then on the second question, I think I'll just go back to what we talked about at the Capital Market Day. And you shouldn't think about the 7% to 9% organic growth as necessarily being back-end loaded. We have talked about that the EBIT margin progression towards the 26% to 27% target will be phased or phased towards the later part of the 3-year target period, but it doesn't necessarily translate into -- on the top line.

If macro become -- became really bad, could we then have a year where we will start below that range and then pick up a macro normalizes? Yes, who knows that, of course, could have some kind of impact even though we can see this year that we can deliver nice growth in a weak macro environment. I think that that's important to know. But long story short, we're not guiding for '24 yet, but we're not so categorically saying that 2024 will be below that CAGR that we've set for the next three years, that's not the case.

[Operator]

The next question will be from the line of Gordon Dash from BNP.

[Antoine Belge, analyst]

It's Antoine Belge at BNP. I've got two questions. First of all, the U.S. market came back to growth. I think everyone was -- had been wondering how long the digestion of the comps would last. So is it possible to have a bit of color maybe on the part of the U.S., which are doing better and also in terms of region and states and also the type of product that have been received well and what -- to what extent you're confident that it will continue from that quarter?

And then my second question is about 2024. So I think you're already -- a way about 2024, not necessarily below the long-term guidance. So in terms of the other thing that we -- I wouldn't say no already about 2024. But first of all, I would like to understand, is it -- would be this year also a phasing of margin like we had last year? Or you consider that now you've been rebased and there shouldn't be any major difference in terms of margin evolution throughout the year. And also in terms of the based on current spot rate, so what is the impact from raw material on the one hand and FX on the other hand, on gross margin or EBIT.

[Alexander Lacik, executive]

I can take the first question on the U.S. So first, I'll give you a generic answer and then maybe a somewhat more specific one. In general, when it comes to our business in a given country, there is hardly any variation to discuss when it comes to which type of products sell. The one difference which we have seen and we've spoken about at length is the performance of our franchise partners versus O&O, is driven, as we've many times said that they don't have enough inventory in places and they don't put -- don't have the same, let's say, aggressive scheduling of labor hours that we do in our O&O. Those are typically the only material differences that we see.

Now in the U.S., this is also true, what I just said. What we have seen, which speaks to my latter point is where we have taken over franchise partners, we have seen of course, a pickup in the performance when we run them, i.e., when we put the right inventory in place, when we put the right people in place and when we put the right staffing hours in place, then we can see movement on the like-for-like performance.

So of course, what we have in our baseline is on the West Coast of the U.S. and some of the southern states where we have taken over during the prior year, those franchise partners. And that's probably the only thing which right now would be a delta versus the national performance in the U.S. in terms of performance. But this -- once we get into next year, this will cycle out of this. So there's nothing structural other than that from an operational standpoint. We're just doing a better job than the prior partner there.

And then maybe I'll turn it to you to once again not speak about the '24 guidance. I don't know why you're asking because we guide in February.

[Anders Boyer-Søgaard, executive]

Antoine, maybe starting with the last part of your question on FX and commodities impact next year. Net-net with the current spot rate is almost flat, a small positive on FX. Next, this is for '24. It's more positive on FX and a -- negative on silver and coincidentally actually getting to 0 and yes, building on what Alexander just said here on -- for '24, we're still in the planning phase. So it's too early to talk about the margin in general, but also the quarterly phasing.

But if there's something that would be sticking out on a quarterly phasing, we will say it upfront, like when we guide for '24, like we did early this year. But as you said, we have been doing some rebasing in 2023. So '23 is a better starting point than for '24 than '22 from a phasing perspective. That's the way to think about it.

[Operator]

The next question will be from the line of Piral Dadhania from RBC.

[Piral Dadhania, analyst]

Okay. So if I could maybe just start with your view. Firstly, well done on a good quarter. But first question is just on the 2026 target and how you see the gross margin evolving in the context of the EBIT margin guide. I know you haven't specifically guided to that at the CMD, but we look at that strong gross margin probably end the year around 78%. I'm just wondering where that could potentially get to whether you see upside in that over the next few years?

And I guess that in the context of Thomas' question earlier just around the fact that you keep raising the revenue guidance in 2023, but there's no leverage coming through. So I just wanted to really understand if you do the like-for-like that you say to 2026, how much confidence do you have that the EBIT margin can expand on the operating leverage? Or is it going to come from other sources perhaps?

And then secondly, just a point of clarification. The wholesale DSO days went up to 40 from 34 last year. However, there was a drag from [ a lens ] perspective on revenue growth and then also at the EBIT margin level. Those are quite contradictory. So we're just trying to understand how that works because surely, if you're selling in less the wholesale and your DSO days should go down, perhaps you could just help us understand that?

And then thirdly, just on the like-for-like that you've done in the third quarter, at 9%. If we exclude hyperinflationary markets and the price increases you're putting through in those, what would be the pro forma resell like-for-like on -- for your core business, excluding any hyperinflationary market?

[Anders Boyer-Søgaard, executive]

Anders here. I actually think I counted three questions, but if I'm not mistaken, but we'll go through them anyways. On the gross margin, I think when we had the Capital Market Day, we said that a couple of points of gross margin is going to stay structurally high. There's no one-offs in what we are seeing in the third quarter, you can actually -- if you look at the gross margin bridge we have in the company announcement, you could actually argue that the underlying gross margin is even higher than the 79% because we still have 90 basis points drag from the forward integration.

So I think the way to think about the gross margin going forward is like what we said at the Capital Market Day, it's going to be in the high 70s. And that, as you can see, it's high, high 70s. It's not just high 70s, of course, with an assumption about where silver prices being where they are right now.

There's also -- when we speak about leverage, that's actually also some leverage on the gross margin side as the company becomes bigger, there's leverage on the infrastructure in Thailand and going forward in Vietnam as well. But the -- but as we said at the Capital Market Day, the -- when you look at the bottom line, where we are right now with the amount of growth opportunities we have in front of us, we want to take the opportunities that we have to fuel further top line growth. There's still very nice incremental absolute EBIT and EBIT margin on what we -- on the growth that we're driving, but we are deliberately investing in current and future growth.

And again, as I said, with one of the questions before, I actually think when you look at the third quarter numbers, we can argue that it plays out quite nicely. And then at a point in time when we get further down the road and where we have invested the amount of money, we won't -- against the growth drivers. Then as we said at the Capital Market Day, that could be up to 100 basis points of EBIT -- 100 to 200 basis points of EBIT margin expansion coming your way, so to speak.

Then on the DSOs. The DSO calculation takes into consideration how much revenue that you have, so you can easily have revenue -- wholesale revenue going down and then the DSOs goes up all the other way because it's factored into how much revenue that we actually have. And we calculated specifically on the wholesale revenue. It's not on the total Pandora revenue. If you did that, the calculated the DSOs on the total Pandora revenue you'll get to, I think, it's 15 days in Q3. But that's a little bit of an odd number. So the number that we disclosed, we calculated specifically based on the revenue that we've seen in July, August and September. So the -- it is correct that the DSO is up year-over-year, and we put in a bit of commentary on it in the company announcement on one, let me just see on one of the pages.

And there's a couple of things, and you might have read that already. But one is that the -- there's quite a big difference on the DSOs across countries. It's very low in the U.S., less than 15 days because our partners paid by credit card and quite a lot higher in most other parts of the world. And that's quite some country mix shift in there in the quarter given that the wholesale revenue, specifically the U.S. is down, what was it 40% in Q3. So that explains the majority of it.

And then as we also wrote in the comment, then as a way to try to kick start this too big like-for-like gap that we have between our performance in our own operated stores and the partner stores, we've in a very few selected markets, or partners, we've given a payment term incentive temporarily just as a one-off exception to try to say, well, try to get a decent level of inventories in your store, we are convinced that you will see like-for-like pick up and that being a very good investment for you and yes, so that we've also done specifically in the third quarter, but that should be phased out when we get into already this quarter, Q4.

And then on hyperinflation. That's a Turkey thing only. We have a little bit of business in Argentina as well, but on a group level, that's very, very small. But we have a very good business in Turkey, I should say. And revenue in Turkey is just around 2% of group revenue in the third quarter. And Turkey is accretive to group growth. And we have 3-digit growth level in Turkey, but that's also 3-digit unit growth. It's real money. The growth that we've seen in Turkey, but there is some impact from the macro and the FX impacts and development in Turkey and it's just below one point of growth, specifically in Q3. But we expect this to moderate already going into the fourth quarter here. But specifically in Q3, it is -- has a certain impact on a group level.

[Operator]

The next question will be from the line of Kristian Godiksen from SEB.

[Kristian Godiksen, analyst]

I'll start with the two questions. So as you mentioned yourself, you -- the [indiscernible] guidance like-for-like seems conservative -- 2% to 5% compared to the 9% in Q3 and obviously, the high single digit in October you mentioned. You mentioned the competitors as being stronger in November and December. I guess that was also the case last year. And then so I was wondering a bit about what you will get the full effect now from Lab-Grown diamonds, where you only had 1 month in Q3, and you've also started to -- sell ESSENCE I can see in Q3. So I guess you could also have some effect from the ESSENCE.

So first question would be wondering on what are your assumptions for both Lab-Grown diamonds and ESSENCE. Then on the second question that would be also on the Lab-Grown diamonds. We've seen prices plunge for Lab-Grown diamonds. I was wondering if you could comment a bit on both on your assumptions in this DKK 1 billion target and also on the like-for-like target of the 4% to 6% going forward. And yes, commentary around how you locked in volume and prices in the future. These will be two questions for now.

[Alexander Lacik, executive]

So on the first question, I mean, all of your questions sit in the guidance. We are not going to detail out every single product line and what revenue assumptions we are making. The answer is in the guidance. ESSENCE is a non item because it's traded in 20 stores in Holland. So this is not a number to really discuss. Diamonds, the only color I can put on that is in the -- since launch, it's double the run rate of the business size in the U.S., which is a quite positive. And if we look at what happened last year, we saw that it followed the trading peak, let's say, as we got into the last two months of the year. So we followed the general trend of not just Pandora, but the category. So we should expect that that's going to be the case.

Then on the diamond's pricing, this is a hairy question. because I don't know what you're referencing when you say that the pricing has plunged, where and what and what quality of stones are we discussing because I can drop the pricing if I sell different quality of the stones and just like you do on the mined diamonds, by the way. So I don't know that this is an easy answer to give.

Sorry?

[Kristian Godiksen, analyst]

Sorry, Alex. Just to be more precise, it was more on the sourcing we've seen that production being scaled up from Lab-Grown diamonds in general. I think across the -- obviously, the -- yes, both in sizes and quality, I think your prices for Lab-Grown diamond has come down. So just wondering on the strategy in that regard, prices going forward and also implemented in the 4% to 6% like-for-like growth. What are your pricing strategy if prices are to come down?

[Alexander Lacik, executive]

So there's a couple of things. It's -- silver is a pure commodity, if you may. Diamonds, whether they mined or lab created is not a commodity to that degree. I can go and I can buy stuff that's not fulfilling, for instance, our sustainability criteria, then I probably could buy something that has a different price to it. I can buy a different quality of stone. So it's not -- I think that the big price drop on lab created as far as we can see has kind of happened over the last few years.

Now if we look at the technologies and the type of yields that these producers are getting, this is the biggest difference between pricing. So as they improve their yields, they can pass some of that improvement in cost of goods on -- to be more competitive in the marketplace. We have very competitive rates. And of course, the way my contracts are structured is in case there's a new technology breakthrough and the pricing changes, then we can follow on that.

But we don't expect massive differences, to be honest. So I think we are not seeing necessarily what the things that you're mentioning, not in the short term necessarily. And the thing is when you buy three stones is one thing. When you're buying big volumes like we are, there's also something about having agreements, service agreements, volume agreements. So it's a more complex topic than just talking about a pure commodity like silver. That's a very different type of trade. So it's not a black and white question or answer.

[Kristian Godiksen, analyst]

So just to be sure that was a real [indiscernible] So if prices were to come down, then the contract stipulates that you would be able to say, renegotiate, but prices would follow if some kind of technological breakthrough were to happen?

[Alexander Lacik, executive]

Yes. It's not going to have a negative -- yes, it's not going to have a negative impact on my gross margin. But that, of course, assumes all else equal. So I think it's a more fluid situation.

[Operator]

The next question will be from the line of Lars Topholm from Carnegie.

[Lars Topholm, analyst]

Congrats with a very strong quarter. I had first a question on the momentum through the quarter because I remember, at Q2, you indicated your like-for-like growth has been mid-single digits the first 6 weeks of Q3 and then you end with 9%. So I of course, wonder what the momentum has been in the last 7 weeks. And also, if you say 9% is sort of the run rate for Q4, does that mean you saw sort of an acceleration in the second half of Q3, and now you're losing that momentum again.

And in that context also, Lab-Grown was roughly 5% of sales in the U.S. for the quarter. I wonder what that percentage is since the relaunch, i.e., for the past 5 weeks of that quarter. And then a very tiny second question. And as you mentioned that the holiday season is more competitive, that's why you factor in lower growth in your guidance, wasn't it also more competitive last year? Or is this a specific 2023 phenomenon that has incremental impact on you guys?

[Alexander Lacik, executive]

So let me start with the first one. So your math is correct. Is the momentum different? Yes, it's higher. Otherwise, you can't get to the 9%. So yes, so it's different in the back half of the quarter than the others, otherwise, arithmetically, it doesn't hang together.

On the lab created diamonds, I have to come back to you on the detail for those last 5 weeks. I think the number to that kind of sticks in my head is that the run rate has doubled versus the prelaunch, and that, I think, is the more important number because it just suggests that we are attracting more people to the franchise.

And on the holiday season, no, I don't think there's anything different going into the holiday season other than that the full year of this year, the jewelry market has been in the negative space, which means that people have more and more pressure probably on their P&L. And what we already saw last year, some desperate moves when it came to promotional pricing, they started earlier, they went deeper and this is not just for our category.

So as we've been sitting here thinking about what could happen, we're certainly it's not going to get easier in this season. So it's an assumption that we're making that it's probably going to get a little bit sharper on the price competitiveness just because people probably have been sucking wind -- there are some people that are growing in this category being us and there are some that are not. And of course, as you get to the back end of the year, you have some numbers to catch. So we expect that there might be a little bit more aggression in the market. We shall see in January, if that played out or not.

[Lars Topholm, analyst]

Yes, I think that's fair. Just to understand the first part, absolutely, correct. So implicitly, what you're saying is in the second half of Q3, you have double-digit sell-out growth? And is it that run rate give and take continuing into Q4, or is it the slightly weaker full quarterly run rate?

[Alexander Lacik, executive]

It's higher. But remember also that part of that growth was this kind of domestic tourism. And of course, we don't expect that to be the kind of let's say, anniversary into the next quarter necessarily. So you need to make some judgments on where all of this traffic growth came from. Is it going to continue? And of course, that part we think then maybe is going to soften a little bit as we get into Q4. So it's a bit of a guesswork to be perfectly honest.

[Lars Topholm, analyst]

I understand. But didn't people mainly travel in the beginning of the quarter, that was summer. I mean, I assume they travel more in July than in September.

[Alexander Lacik, executive]

Yes. No. But if you go to Southern Europe, then you get that travel in August. So in the northern countries, we have to take summer when the sun is out and further down, they have a slightly -- so actually, you see it over both July, August and a little bit into September. That's probably what we've seen.

And -- but remember, this is not perfect observation. That's the only hypothesis that we have been able somehow to validate that that's -- because what we have, of course, we have stores which are in let's say, tourist areas, and there we can see what happens. But where we saw the difference was in the stores that are not in the tourist area where we typically don't get tourists because we can see it on the credit cards, whether they are from local or not local. And that's where we saw this unusual trend. And therefore, we had this idea of it's probably the local customer that simply is spending more money in a period where they normally for the previous years, didn't. So it's spread across more than just July.

[Operator]

The next question will be a line of -- from Abhinav from Societe General.

[Unknown Analyst]

On the inventory, like how should we think about the inventory for the last -- for the full year 2023? And second question is on the other -- like I think this question has been asked, but like on the other geographies, how are you trending in the quarter-to-date -- in October?

[Anders Boyer-Søgaard, executive]

On the inventories, we expect the inventory in absolute terms to be roughly flat year-over-year when we get to the end of 2023. And then given that the business is growing, then that translates into a lower percent of revenue, but broadly flat in measured in Danish kroner by the year-end.

[Alexander Lacik, executive]

And on the second question, I mean, we don't comment on individual countries when we're just giving a trading insight, let's say. So you'll have to do with the total business is doing this high single digit into the first 6 weeks.

[Operator]

The next question will be a follow-up from the line of Kristian from SEB.

[Kristian Godiksen, analyst]

I had to limit to 2 [indiscernible]. So first of all, I was just wondering, you've mentioned now in a couple of quarters, the difference in performance between your stores and franchise stores and specifically here in the U.S. I was just wondering what are the pipeline of potentially yes, doing acquisitions, I guess it depends on timing of when the agreement runs out.

And on their inventories, are they -- do they need to buy into the full Lab-Grown diamond collection, sorry, is that a worry? And how to think about the -- outrage of Evoke, is that something that franchisee is doing. So that would be the first question.

And then secondly, on the margin. Just wondering how to think about the impact on the margin from the lower sell into wholesale, how much of that is temporarily, and I guess that should replenish when they need to replenish inventory.

[Anders Boyer-Søgaard, executive]

Maybe I can start on the sell-in, sell-out and forward integration. The -- if I go back to the Capital Market Day Kristian, we said there will be around 1 point of growth per year on revenue from forward integration in '24, '25, '26 is also 1 point this year. In '23, and if you do a bit of math, you'll probably get to that 50, in very rod numbers, 50-ish stores per year on average, and that's how to think about it.

So the -- obviously, we -- we've known -- had this situation for a while where we are doing like-for-like in our own stores, it's quite a lot better than in partner stores. And that, of course, can make it an even more attractive business case for us to run the stores ourselves. But it doesn't change the pace that we're looking at here with around 1% per year of incremental growth.

[Alexander Lacik, executive]

On the diamonds, I mean, it's -- as you know, we have -- initially in the U.S., we went with a selective distribution. So we had select partners that jumped on it. Now we broadened that out. So we don't -- they own their inventories. You can't shove things down anybody's throat, but we're trying to have a sensible commercial conversation and there's strong support in Australia and the U.S. So that's no concern of us.

And when it comes to Evoke, it really depends a little bit on what sits in the franchise contract because in some instances, we have very old contracts, which actually don't stipulate that they have to reinvest in the business. For instance, in Canada, we have a lot of franchisees that are still with the very first iteration of store counts that are called big white and it's difficult for us to move them because purely legally, they don't have to, then it becomes more of a conversation between two business partners somehow.

On the other hand, we do have people where they have it in the contract. So then there's a frequency in the contract. So where that is, they're going to come along. So part of the Evoke rollout over the next three years does include franchise partners upgrading their store. The business case is good. So that's normally not a big topic actually.

And then maybe you can comment, Anders on the sell-in impact on the EBIT.

[Anders Boyer-Søgaard, executive]

Yes. On the last question on the sell-in impact on the margin. That's not a precise answer to that, but I think what I would -- say is that it's less than half of the impact that we're seeing this year is temporary, depend a bit on the -- also on the multibrand side, where we kind of feel that the sell-in of Pandora products has been dragged down by low performance by other brands.

And of course, the multi-brand partner look at the business in a little bit different way than the concept store where there can be a spillover -- negative spillover impact on Pandora from other brands, and how that plays out next year. I don't honestly [indiscernible]. We don't really have a super good guess on that. So I would be cautious and say maximum half and probably less than -- somewhat less than half of the sell-in impact this year is temporary.

[Kristian Godiksen, analyst]

Okay. Perfect. Maybe just final question from my side. Then so I think there's been a couple of questions on obviously on the upgrade of like-for-like throughout the year and you just had your margin guidance unchanged. Is that solely due to reinvestment into future growth? Or has there been anything that has been a disappointment throughout the year?

[Anders Boyer-Søgaard, executive]

Okay. Yes, we had a little bit more -- I mean if you look at that bucket that on the guidance that we call, it's a very long -- cost reductions, price increases and inflation. That is -- we've taken that down 20 basis points over in the decimals here, but 20 basis points since last quarter, where we've seen a little bit more inflation headwind on some of the cost categories that we are buying. We have not been able to offset that fully with our negotiations. And we've had one cost reduction project that won't have the impact this year than we thought. But it's -- that's probably only -- that's the only one, 20 basis points.

[Operator]

The next question will be a follow-up from the line of Thomas from Citi.

[Thomas Chauvet, analyst]

Just a quick follow-up on Europe. If we look at the LFL in your top four European markets this year, there's much greater divergence between countries than in prior years. So would you blame it mainly on the macro and perhaps how the macro has impacted jewelry consumption in each market? Or have you identified perhaps now that we're close to the end of the year, that some of your own product or marketing initiative may not have resonated as well, for instance, in the U.K. or Italy than say Germany, which is booming.

[Alexander Lacik, executive]

No. I mean, I said before, we don't see those type of differences, really. I think you have to always look at the backdrop market and the brand momentum, okay? So U.K. is very much plagued by a very soft backdrop. And there, we know we're kind of flattish in terms of our revenue performance, but we believe that, that is actually suggesting that we're driving market share.

Italy, there's been a much stronger negative in the first half. I think we're cruising at minus 5-ish. Now that moved somewhat more towards flattish in the Q -- here, we also know that the market has been very, very soft and we're building market share. Germany, as we spoke about, negative market but with an enormous momentum on the brand. And France has come from behind a little bit. We've spoken about this now for many quarters.

And finally, it's starting to yield some performance still in a rather soft backdrop in France. So it kind of seems more like where the brand is a little bit, let's say, weaker, then it becomes a momentum question on our side where we sit like with a big market share like in the U.K. and Italy, it seems to be partly a factor also of the share -- what happens in the macro. So it's a bit of a mixed bag to -- and that's kind of how I view it.

We put the same, let's say, initiative program in the markets. We're leaning in when it comes to marketing investment in all the aforementioned markets. So, that is not the decisive factor here. I hope that somehow helps.

[Operator]

As there are no more questions, I will hand it back to the speakers for any closing remarks.

[Alexander Lacik, executive]

Well, I mean, thank you for the attention, as always. I got one interesting question from a journalist this morning, is like Alexander, can you walk on water? My answer was no, I can't, but I sleep really well at night. I hope you do as well, and see you soon. Thank you very much.