LUXE

Business Context and Reporting Period

Company: MYT Netherlands Parent B.V. (trading as Mytheresa)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal Year ended June 30, 2024

Business Overview: Mytheresa is a leading luxury multi-brand digital platform shipping to over 130 countries. The company operates primarily online (98% of net sales) with two physical retail stores in Munich, Germany. It curates products from over 200 luxury brands, focusing on high-net-worth individuals. The company is an emerging growth company and a foreign private issuer listed on the NYSE (Symbol: MYTE).

Key Financial Metrics (Fiscal 2024 vs. Fiscal 2023)

Note: Adjusted metrics are non-IFRS measures excluding share-based compensation and certain transaction-related expenses.

Material Changes and Drivers

• Revenue Growth: Net sales grew 9.8% driven by a 7.1% increase in Gross Merchandise Value (GMV) and a 7.4% increase in Average Order Value (€703 vs. €654). However, the number of active customers slightly declined from 856k to 852k.
• Margin Compression: Gross margin decreased by 390 basis points to 45.7%. Management attributed this to increased promotional activities by competitors, resulting in a lower full-price sell-through rate, and a shift in mix toward wholesale brands (which have lower margins) compared to the Curated Platform Model (CPM).
• Expense Increases:
  • SG&A: Increased 7.9% to €159.3 million, primarily due to higher personnel costs (especially fulfillment staff for the new Leipzig distribution center) and rental costs.
  • Marketing: Decreased 13.7% to €96.7 million as the company shifted focus from broad aspirational marketing to targeted top-customer retention.
  • Depreciation: Increased 30.5% due to the new distribution center in Leipzig.
• Share-Based Compensation (SBC): SBC expense decreased significantly from €30.0 million in FY23 to €18.5 million in FY24, contributing to the widening gap between GAAP Net Loss and Adjusted Net Income.

Guidance, Outlook, and Risks

Management Commentary & Strategy:

• Operational Consolidation: On July 16, 2024, the company announced the consolidation of distribution functions into a new state-of-the-art center in Leipzig, Germany, closing the legacy Heimstetten center. This is expected to optimize shipping and reduce costs long-term but will incur one-time restructuring costs (estimated €5 million) in FY25.
• Growth Initiatives: Continued expansion into new categories including Mytheresa Kids, Mytheresa Men, and Fine Jewellery/Watches. The company aims to increase wallet share with existing top customers.
• Internal Controls: Management identified a material weakness in internal control over financial reporting as of June 30, 2024, related to the risk assessment process for changes in business operations. A remediation plan is underway.

Key Risks:

• Geopolitical & Economic: Exposure to global economic downturns, inflation, and geopolitical conflicts (Russia-Ukraine, Israel-Hamas) affecting discretionary spending.
• Brand Partner Relations: Reliance on maintaining relationships with luxury brands; risk of partners limiting supply or changing terms.
• Cybersecurity & Data Privacy: Risks associated with data breaches and evolving global privacy regulations (GDPR, CCPA).
• Inventory Management: Risk of inventory obsolescence and write-downs due to shifting fashion trends.

Investor Verification Checklist

• Internal Control Remediation: Verify the progress of the remediation plan for the material weakness in internal controls over financial reporting.
• Leipzig Transition Costs: Monitor the actual costs and operational impact of the distribution center consolidation in FY25.
• Customer Retention vs. Acquisition: Analyze the sustainability of revenue growth given the slight decline in active customers and reliance on top-tier customer spending.
• Gross Margin Recovery: Assess whether the company can restore full-price sell-through rates and gross margins amidst competitive promotional pressure.
• Share-Based Compensation Volatility: Review the impact of future LTI grants on GAAP profitability, given the significant variance between GAAP and Adjusted metrics.