Douglas AG (DOU) Earnings Call Transcript

Ladies and gentlemen, welcome to the DOUGLAS Group Q3 2025-2026 Earnings Results Conference Call. I'm Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sander van der Laan, CEO. Please go ahead.

Yes. Thank you very much, and good morning, everybody, on the 12th of August, another hot day ahead of us. So, we are here today to give you an update on our third quarter results, which I will do as normal together with Marco, our Group CFO. So, this morning, we also released, let's say, our press release. And as most of you have read, we have to report a relatively weak quarter, which was impacted by the weak dynamics in especially our largest markets, Germany, France and the Netherlands, which collectively account for 60% of our sales. And in those markets, Germany, the market has declined, the French market was flat and also the Dutch market, premium beauty market has declined. So that has led to, let's say, results which are below expectation, where we also see that customers are very receptive to price. Certainly, online, there is a significant price competition because pricing is much more transparent and customers are generally lack kind of the confidence where the consumer confidence is at a very low point in many markets in the lowest point ever. Although more recently, it looks like that this is kind of bottoming out. This has led to a sales decline in both channels with a negative sales in the stores of 2.5% and a negative sales in the e-com channel of minus 1%. If you would separate Parfumdreams/Niche Beauty, which are our pure-play brands from the e-com channel, then for the DOUGLAS NOCIBÉ e-com business, we have for a slight positive number. And we look to the omnichannel number for the full company, we have to report a minus 2%, which led to EUR 988 million of sales. EBITDA. Adjusted EBITDA of EUR 127.5 million, which is a margin of 12.9% and net income of minus 2.6% and net leverage of 3.1. Our debt position is actually developing positively. But since it is debt divided by EBITDA and the EBITDA has declined and our leverage has moved to 0.1. The pre-IFRS leverage is actually at a very, I would say, healthy level of 2.2. So that is basically the summary of our results. Looking on the next page, I was already alluding to that. If you look to the selected beauty market in Continental Europe, I'm saying Continental Europe because we do not operate in neither the Nordics nor in the U.K. We do see that in the Continental Europe, the market is growing. We only have market data for roughly -- not roughly, for 8 to 9 countries out of the 22 countries where we operate. But if we look at the data and we look at the development, then we do see that the premium market is growing. However, it is growing in those markets where we are at a relatively smaller position because in Germany, the Netherlands and in France, which account for 60% of the business, those 3 markets together had a decline in the third quarter. And in Southern Europe, Italy, Spain, Portugal and in Central Europe, the market has been growing. In Central Europe, we have a strong position. But in Southern Europe, we have a strong position in Italy, but we have a very, let's say, small position in Spain, which is a big market, and we do not benefit from the developments over there. Consumers are increasingly focused on price and value. That is, by the way, not specific for selected beauty. You could basically say that for retail in general, there is a significant more focus on pricing and value as a result of, let's say, the uncertainty in the world, both economically but also from a social and -- let's say, perspective. What we also see that within this market, which is growing, that the store channel in general is under pressure. So, in most countries, we have seen declining traffic in the store channel in general. I do not mean specifically DOUGLAS. And as a result of that, we do see that the store channel sales in many countries has declined versus the prior year. On the flip side, we do see that the e-com channel in many markets is more dynamic. But as I just said, there is more pricing competition in there. So, the ability to realize, I would say, a healthy gross profit is more challenging. So that is basically a perspective on the market development. Translating it to, okay, what does it mean for DOUGLAS on the next page. We have adjusted our guidance for the current financial year on the 18th of June. And today, reflecting on the market and our current performance and our expectation for the kind of the current quarter, the fourth quarter, we are basically reconfirming our guidance, and we expect that our sales will end up between -- well, you can see the range between EUR 465 million -- sorry, between EUR 458 million and EUR 463 million, which means that we expect a full year sales growth between 0% and 1%, and adjusted EBITDA margin of around 15% and a net leverage between 3x and 3.5x is our expectations for the full year, and we have no reason to adjust that since June 18. With that, I'm handing over to Marco, who will give an update on the financials, and then I will later come back to give a few updates on strategic developments and core initiatives. Marco?

Thank you. Thank you, Sander. Let me now talk about our financials for the third quarter of the financial year. In Q3, group sales declined by 2% year-on-year to EUR 988 million, and on a like-for-like basis, sales were down 4.5%, reflecting continued consumer caution, heightened price sensitivity across our markets as well as adverse weather conditions, including heatwaves in several regions, which negatively impacted store footfall. Moreover, the year-on-year comparison was slightly affected by Easter timing as Easter-related trading was partially sitting in March this year versus fully in April last year. From a regional perspective, the decline was primarily driven by DACHNL, SE, France and PD Beauty, while CEE remained resilient and continued to grow. On profitability, adjusted EBITDA decreased by 19.4% to EUR 128 million, corresponding to a margin of 12.9% compared to 15.7% in the prior year. The main driver was pressure on gross margin as promotional intensity remained elevated. Despite we maintained a strict cost control, the benefits from these measures were more than offset by higher personnel expenses related to the store expansion over the last 12 months and wage inflation. Looking at the channel performance, store sales declined by 2.5% to EUR 661 million, corresponding to a like-for-like decrease of 6.5%. Lower traffic and softer conversion rates continued to weigh on performance. E-commerce sales proved more resilient, declining by just 1% to EUR 327 million. When we focus on DOUGLAS NOCIBÉ only, i.e., excluding Parfumdreams and Niche Beauty, e-com sales actually grew 0.6%, confirming the stronger performance in the premium positioning. Growth in cross-channel services, which increased by 18% versus prior year, partially offset lower online order volumes. And at the same time, the DOUGLAS App continued to gain relevance, accounting for 43% of e-commerce sales, up from 40% in the prior year. In addition, our Retail Media business continued its strong momentum, growing by 24% year-on-year, reflecting the increasing attractiveness of the DOUGLAS platform for brand partners and the strength of our customer reach and engagement. Cross-channel services now account for approximately 6% of group sales, up around 1 percentage point versus last year. This trend is particularly important as it shows that more customers are engaging with the DOUGLAS ecosystem across multiple touch points. These customers tend to be more loyal, spend more overtime and generate higher lifetime value, underlining the strategic importance of our omnichannel proposition. Overall, while consumer demand remains subdued across channels, the continued adoption of cross-channel services and the growing importance of the app demonstrate the strength of our integrated omnichannel model and support customer engagement across the system. For example, in Germany, we have a ROPO effect of 25%, meaning that 25% of our stores customers research online before they buy offline. Across markets, trading remained impacted by lower traffic and weaker conversion rates, resulting in negative sales growth in most regions. Profitability development across most markets reflected ongoing gross margin pressure, driven primarily by mix effects and promotional trading environment, negative store like-for-like creating an adverse operating leverage effect and the ramp-up in performance of newly opened stores. CEE continued to stand out, delivering 4.4% sales growth while maintaining a strong adjusted EBITDA margin of 21.6%, demonstrating the attractiveness of the region and supporting overall group profitability as well as the possibility to sustain margins with a positive top line growth. DACHNL, France and SE saw more moderate sales declines, while PD Niche Beauty remained affected by a challenging competitive online environment and the repositioning of the business following the 11 Akzente store closures. Looking at gross profit. Gross profit decreased from EUR 457 million to EUR 436 million, resulting in a gross margin decline of around 110 basis points to 44.2%, primarily driven by price promotional effects and mix from a category and brand perspective. Lower volumes added further pressure on gross profit, while supply contributions remained slightly below prior year level. Moving on to operating expenses. Overall, net operating expenses increased by 3% year-on-year from EUR 299 million to EUR 309 million. This was primarily driven by higher staff costs, while other net operating expenses increased only by 1.8%, mainly driven by continued IT investments. Starting with the staff costs, the increase was mainly driven by the expansion of our store network over the last 12 months. In addition, wage inflation across European markets led to higher personnel expenses. As a result, coupled with negative like-for-like in the stores, the staff cost to revenue ratio increased year-on-year. We're actively addressing this through several measures, including adjusting working hours in the stores with lower footfall, implementing temporary personnel cost reductions and continuously optimizing our store network. These initiatives are aimed at improving productivity while maintaining a high-quality customer experience. Looking at other network operating expenses, marketing efficiency continued to improve, resulting in a lower marketing cost to revenue ratio. Property costs, excluding rent, remained stable, reflecting our disciplined cost management approach. IT costs as a percentage of sales slightly increased, reflecting continued investments in our technology platform and infrastructure. For example, during the quarter, we went live with our latest digital commerce platform in Romania, marking another step of progress in harmonizing and upgrading our architecture across Europe. Finally, delivery costs remained broadly stable year-on-year. When looking at the store perimeter, like-for-like stores perimeter costs were slightly below last year, confirming the continued attention to cost development, but the negative sales like-for-like and the gross margin investments led to a bottom-line dilution in margins. Overall, the increase in net operating expenses was driven by higher staff costs related to network expansion and wage inflation as well as continued IT investments, while other operating cost categories remain well managed. As already pointed out, lower sales and gross margin pressure weighed on profitability. Despite continued cost discipline, adjusted EBITDA declined by 19% to EUR 127.5 million with a margin of 12.9%. Below EBITDA, depreciation and amortization increased to EUR 98.1 million from EUR 92.7 million in the previous year on an adjusted basis, reflecting investments made in the previous periods in our store network refurbishment as well as technology infrastructure. You may notice that reported EBITDA is slightly higher than adjusted EBITDA, and this is due to the adjusted gains from the sale of certain real estate assets in the Netherlands, bringing a capital gain of approximately EUR 6 million and cash proceeds net of roughly EUR 9 million. Adjusted EBIT declined to EUR 29.4 million compared to EUR 65.5 million in the prior year quarter. The financial results developed positively, improving by 13.3% year-on-year from negative EUR 32.9 million to negative EUR 28.9 million, supported by slightly lower interest expenses and favorable FX development. On taxes, we expect the full year effective tax rate on an adjusted basis to be at around 32%. This is slightly higher than the expectation at the beginning of the year, mainly as a result of the lower earnings leading to a greater impact of non-deductible items on the taxable income. On a reported basis, the effective tax rate will look higher due to the non-deductibility of the goodwill impairments we took last quarter. Overall, the quarter reflects a challenging trading environment, lower gross margins and the result impact on operating leverage weigh on profitability, leading to adjusted net income of negative EUR 3.8 million compared to positive EUR 24.1 million in the prior year period. We made further progress on capital efficiency during the quarter. Average net working capital declined by 27% year-on-year to EUR 166 million, equivalent to 3.6% of sales compared to 5% in the previous year, driven by continued inventory and supply chain initiatives. Average LTM net working capital calculation benefits from a full year effect of the supply chain financing utilization that is, however, stable on a year-on-year basis at roughly EUR 135 million. The underlying inventory performance shows a slight increase in DIO from 122 to 125 days, mainly as a result of the lower sales in the quarter despite the larger store network footprint, leading to increased stocks compared to last year. At the same time, CapEx decreased by almost 30% to EUR 31 million, reflecting a more targeted investment approach while continuing to support strategic priorities including selective store modernization, digital capabilities and supply chain infrastructure. We expect CapEx to be around EUR 130 million this year, slightly lower than our initial assumption, reflecting the updated market conditions, in particular of the store channel. This includes a more targeted approach to our store network, combining selective openings and refurbishments with dedicated store closures when returns are no longer meeting our requirements. In fact, in the first 9 months, we closed 31 owned stores compared to 12 in the year before. As a result, capital is being reallocated towards higher returning opportunities across our omnichannel system. And these investments support cross-channel integration, scalability, productivity and customer experience while requiring significantly lower capital intensity than a traditional physical expansion. However, such investments are often shifting to operating expenses in the SG&A part of the P&L, especially when referring to software, as commented earlier, which is important to our cash flow generation. Adjusted free cash flow amounted to EUR 406 million, corresponding to a cash conversion of around 70%. After cash EBITDA adjustments of EUR 6 million, reported free cash flow reached EUR 399 million and after lease payments of EUR 251 million, free cash flow amounted to EUR 148 million. The year-on-year decline in free cash flow is primarily driven by the lower earnings contribution, reflecting the softer trading environment and lower profitability compared to the prior year. This impact was partially offset by reduced CapEx as we continue to prioritize investment discipline and allocate capital toward the highest return opportunities across our omnichannel ecosystem. Property rents show an increase year-on-year, mainly linked to the store and warehouse openings of the last year, and this development will naturally stabilize with the normalization of the network evolution in the future. Net financial debt decreased from EUR 924 million to EUR 863 million on a year-on-year basis, more than offset, however, by higher lease liabilities resulting from new store openings and lease extensions. As a result, reported net leverage increased to 3.1x from 2.7x, driven by the higher lease liabilities and as Sander mentioned earlier, the lower EBITDA into the network, while pre-IFRS 16 leverage stood at 2.2x. The leverage remains a key capital allocation priority for us. Now concluding, let me remind a brief summary of our year-to-date performance. Our 9-month results were challenging, but provide a solid foundation towards achieving our 2026 updated guidance, with sales and profitability developing in line with our expectations. Omnichannel execution continues to be a key growth driver, supporting customer engagement and reinforcing our market position across channels. At the same time, our continued focus stays on operational excellence, disciplined cost management and working capital supports earning quality, strong cash generation and deleveraging. Based on our performance in the first 9 months and our expectations of the fourth, we confirm our fiscal '25-'26 guidance, as previously mentioned by Sander, we continue to expect net sales to sit in the range of EUR 4.58 billion to EUR 4.63 billion, corresponding to a growth of 0% to 1% and then adjusted EBITDA of around 15% and leverage guidance, we confirm our target of 3 to 3.5 range. With this, I hand over back to Sander for the remaining of the presentation.

Yes, Marco, thank you very much. So, I wanted to provide a brief update on the strategic direction, and I wanted to come back on some examples of key initiatives which we have deployed in the, let's say, in the current quarter or in the recent quarter or in the current quarter. So earlier this year, before the summer, I already shared with you that we've done a strategic exercise where we have reflected on our performance, on the development in the markets and our expectations in the market and we have looked again at our own kind of strategic priorities going forward. And that has led to, let's say, an evolution of our strategy. So fundamentally, we still believe that the 3 commercial pillars to be the #1 premium destination in all markets; number 2, to offer the most relevant assortment with clear differentiation; and number 3, to scale the most seamless omnichannel experience. We believe that the combination of these 3 pillars is creating a competitive customer proposition, which will allow us to grow and allow us to create value, let's say, in the markets where we currently operate. And that should be based on a foundation where we're building a united future-proof foundation for sustainable and profitable growth going forward. So, on this page, not a lot actually changed in the exercise which we did before the summer. And maybe the most important word, what we added to this page is clear differentiation because we do see the development on the online side and the fact that a number of the premium beauty brands have authorized, let's say, a few players as well that it's important to strengthen the differentiation dimension in DOUGLAS and especially to work on those brands which are unique to DOUGLAS, either Coco brands and exclusive brands. So, differentiation is a key strategic lever going forward. We've translated these 3 pillars and this foundation in 21 key result areas priorities. And we have basically created an acronym for each of them, brave, clear, scale and united to make it a bit more memorable, not only for you, but also internally in the organization while we're working on this with our, let's say, 18,000, 19,000 people. And today, I wanted to give you a slight update on those ones which are not hidden. So let me not walk through them because in the examples, which I want which I will give in the next few pages, I will come back on all of them. But for each of those key result areas, we have developed a plan. We have a team in place. We have somebody who owns that, and we're working with a long-term, midterm and short-term perspective on each of them to basically deploy our strategy. We have also decided that it will be good to go a bit more in-depth into the evolution of our strategy, and we believe that a quarterly update is not the proper kind of environment. So we are planning, let's say, a moment in the fourth quarter of the calendar year, so basically between October and Christmas, quite likely not in the December month, but we will come back to you with more details on the evolution of our Let it Bloom strategy, where we intend to go deeper into a number of the priorities and also with a longer-term perspective. So, we owe you that and we will get back to you. Today, I wanted to highlight a few initiatives where we have done and delivered a number of visible results either towards our customers or from an internal build and organizational perspective in order to build our foundation. So, the first one is about the first pillar, which is about to develop a #1 position from an omnichannel perspective. And obviously, we see that social media and social commerce becomes more and more important, not only in the daily life of our customers and citizens, but also in developing premium beauty brands and wanting brands and also growing the sales. And we see a significant step-up within our organization in terms of leveraging the brand power of DOUGLAS and NOCIBÉ, we do see that together with social media and also with creative partnerships and with influence that we can really drive the visibility and convert engagement into, let's say, towards certain brands into tangible sales for DOUGLAS. And therefore, we also are not only measuring it internally, but also, we are sharing with you externally that our social media and social commerce sales is significantly growing. The absolute numbers are still relatively small, but the growth is certainly there. By the way, the growth rates are quite different between the different markets because in the German market, for instance, we are more advanced in the social media domain versus in certain CEE markets where we see a positive development across the group, and there's more in the pipeline, and that is one of the areas that we would like to come back on in the fourth quarter of this year. That is basically initiative 1. Initiative 2 is all -- everything about our assortment. And like I said, we are historically focused on selective brands, Chanel, Dior, Shiseido, Tom Ford, Lancôme, Yves Saint Laurent, et cetera. But within those selective brands, we are focusing more and more on exclusive brands. These are brands which are exclusively being sold by DOUGLAS, either in all our markets or in a number of our markets. So, we have so-called group exclusivities, but we also have cluster exclusivities. LolaVie is the brand with Jennifer Aniston as kind of the brand personality. Morphe an makeup brands, About-Face an makeup brand. Each of those brands are exclusive to DOUGLAS across all our markets. We started this year with Balmain. That is a brand owned by Estée Lauder, where we have signed an exclusive agreement to basically develop Balmain in the fragrance market across all our markets, and these brands are doing very well. Fenty Beauty is an example of a cluster-specific brand. So, in the Netherlands and in Belgium, we have an exclusivity agreement with kind of the brand owner. And in Germany, there is only 1 alternative player offering this brand, which is a French competitor, but the French competitor has a relatively small footprint in Germany. Hence, we also have the opportunity to develop the brand. And Orabella is an exclusive across all markets, brands for DOUGLAS again in the fragrance category. And we really see and we've showed that to you before that our exclusive brand sale is really getting traction. So today, it's 9% of sales. It has grown in this quarter with 14.7%. So basically, if you simplify, it has grown from 8% to 9%. With the 9% of sales, we are unique. That means that we have an omnichannel pricing. That also means that we don't have price competition because others are not selling it, and that is basically building a USP and it is also building, let's say, protecting a part of our gross profit going forward. So exclusive brands, very important pillar to drive a key result area to drive differentiation. The third thing what I want to share with you is that also with selected brands, we have, let's say, winners and losers. So, despite the fact that the market is, let's say, in our most important countries, not growing or at least slightly negative when we talk about Germany and more negative when we talk about the Netherlands, we do see a number of winning brands across, I would say, the 4 core beauty categories. So, in fragrance, Prada, Balmain, Carolina Herrera are clear winners. In skincare, Rituals, the Beauty of Joseon, Erborian, K-Beauty brands, 2 K-Beauty brands, Morphe, Charlotte Tilbury, About-Face, Kérastase, LolaVie, and Milkshake are developing very positively. So, there are winners and losers across all these categories. What is new in terms of transparency towards you on the next page because we have so far never disclosed our sales performance by category. So, this is the first time that we share with you our sales development in the respective categories. Keep in mind, we have 4 core beauty categories, actually 5, fragrance, skin, makeup, hair care and accessories. Fragrance is roughly 50% of the sales, skin care and makeup roughly 20% of sales, hair care, a strong runner up 4%, 5% of sales and accessories is actually 1% or 2% of sales. And what you can see that in our biggest category, fragrance that we are down 3.4%, we are down 4.2% in skin care, we're up 1.7% in makeup, we're up 18% in hair care, and we're down 7.8% in accessories. So, the core challenge for DOUGLAS is we feel pressure in 3 big markets, Germany, France and Netherlands. And we feel sales pressure in our #1 category fragrance. And the combination of that is clearly leading to the top-line pressure as we are currently experiencing it. I also showed to you on the slide before that within those categories which have declined, there are brands strongly growing, but that is not offsetting the decline kind of other brands. So, it is a mix, let's say, you would say, a mixed performance across these different categories. On the next page, we want to show you an example or there is 2 page actually of our desire to build a seamless omnichannel customer journey. So, what we do see is a strong growth of our cross-channel services, which underscores, we believe, the attractiveness of the omnichannel model and also the desire of customers to really shop omnichannel. And be aware, in the vast majority of the shopping trips, a brick-and-mortar store still plays a very important role. So, the pure-play only trips is a significant smaller percentage of, let's say, customer behavior until now. We are currently offering 4 different omnichannel services. The first one is Click & Collect. A customer goes to our website, shops online in the assortment, which we have available in our warehouse. And within a few days, that product can be click and collected either from a store or from a pickup point or in some cases, from another retailer and Click & Collect is growing 4.1%, sits in our e-commerce sales. The second service which we offer is Click & Collect Express. A customer goes to the website, selects a store and can shop within the assortment of that store. An average store of DOUGLAS has somewhere between 6,000 and 11,000 SKUs. The warehouse in Germany carries 60,000, 70,000 SKUs. So, the customer here can shop in a smaller portion of our assortment. But the benefit is the customer can pick up the article within 2 to 3 hours from the store of his or her choice. And we do see a significant increase of the sales. There are 2 drivers for that. The first driver is we didn't have the service or we don't have the service yet in all the markets. So, we're rolling out there is basically a ramp, you could say, an expansion dimension. But secondly, we also see a like-for-like that's in development. This sales is also being reported within e-com. You could debate should we report it in the store channel or should be reported in the e-com channel because both channels actually play a role. And ultimately, do the transaction, let's say, in the store because that will pick it up, but we just decided to report it in the e-com channel. If we would have swapped it to the store channel, clearly, e-com sales would grow less and store sales would grow more. The third part is on in-store orders. A customer goes to a store and wants to buy an article, which maybe is not available in the store because we only have 6,000 to 11,000 articles or one of those articles is out of stock. And then the customer can order in-store and then get it home delivered or also pick it up in that store on another store. The last service which we are now starting to pilot is Click & Return. You bought something, you're not happy with it and you can return it to a store. The combination of all these services is growing 18.2% and it's 6.6% of our sales. So again, it was 5% of our sales. It's now 6% of our sales and the pure players don't offer kind of new services. So, another, I would say, example of differentiation and developing very positively. Moving to basically the next initiative is focusing on omnichannel and e-com. We are accelerating our e-commerce transformation -- sorry, our omni channel transformation with an increased focus on e-com to reflect the preferences of our customers. And in June 2026, we've launched an AI-enabled beauty adviser in our German app and our German online store where basically a customer can talk with this adviser, communicate with this adviser and our AI adviser is giving, let's say, personalized advice and also personalized duty recommendations, obviously, also making recommendations with products and brands, which we offer, which we sell. So, there's a request from the customer or a problem or a demand, and we try to cater towards that demand by making a tailor-made advice and hopefully also sales transaction. As I already said earlier, the stores remain a crucial pillar of our omnichannel model because you can see on the top right, in 75% of all the customer journeys, the store is still playing a role. Despite that strong, I would say, USP, we cannot deny that the store channel in beauty in general is under pressure and that also our like-for-like sales is under pressure. And that has led to the conclusion that we need to -- that we have decided to review our store network across the entire company and that we're not only, let's say, looking for on the one hand for opportunities to remodel, expand or relocate existing stores, but we're also reviewing stores which are below a certain profitability, either because the store is underperforming or because the store sits in an area which is basically under pressure. And that network review will certainly lead, let's say, to an optimization effort of our store network in a number of specific countries. It's too early to communicate specific conclusions on that because we are still working on that. Clearly, there are landlords, store management, employees involved, but we want to do this properly before we are becoming more transparent on it. In the current quarter, we have opened 15 stores. We've also closed in the current quarter 19 stores. 19 stores is a relatively big number because this was the quarter where we closed almost half of the Akzente store network, if I say correctly, 9 -- 11 stores we closed out of the 19 are Akzente stores. So, these are, let's say, stores in Germany. So, you could say our regular closing was 8, which is not a kind of strange number. And we have, in this quarter, refurbished, including relocation, 19 stores, which means that we ended the quarter with 1,967 stores. On the next page, building a solid foundation. Our supply chain transformation is well underway. We also informed you already a few quarters ago that we have opened a NOWAC and OWAC for the north part of Central and Eastern Europe, that is a warehouse in Poland. The warehouse has successfully started to supply our Polish stores and our Polish e-commerce customers. And since a few weeks, we have also connected this NOWAC warehouse to Czech and Slovakia. So, we have now closed our online warehouses in Czech and Slovakia. We closed our coworking facility in Czech and Slovakia, and we supply in these 2 countries from the warehouse. And in the next few weeks, we will also do the same with Hungary, where that means that in a few weeks from now, the NOWAC is supplying all countries with the plan to connect them to the Baltic countries, Czech, Estonia, Latvia, Lithuania in 2027. And with that, our NOWAC implementation will be complete basically in the year ahead of us. In addition to that, our service provider has implemented a new warehouse management program, management system into the warehouse. And we have also automated the warehouse in recent weeks. Automation often comes with some turmoil. So, we also have to admit that for at least 4 to 6 weeks, we have a significant implication on our service levels towards our customers, in this case, in Poland, which has certainly impacted our sales development in the month of June and it has also impacted the sales development in Poland in the month of July. As we speak now, we have the situation under control. Service level toward stores are at the required level. And in the e-com channel, we're still slightly behind, but we are rapidly catching up. In the month of August, we are now in August, we will open our we have opened our BeNe OWAC. This week, we have delivered the first stores from our newly developed warehouse in the Netherlands. And in the next few weeks, we will ramp up from a handful of stores to all the stores in Belgium and the Netherlands. And in calendar Q1 2027, we will migrate also the e-com part. So, for the rest of this quarter, stores will be done by the BeNe OWAC in Belgium and the Netherlands and the online customers will be done still by our legacy facility. In early 2027, we will close this old facility and also integrate them into this new OWAC warehouse. And that would mean -- that means that we will then have 6 or 7 OWAC in operation, 1 to go. The final one is called the SOWAC. That is the OWAC supporting the south part of CEE for the Balkan countries, i.e., for Bulgaria and Romania. It will be a much smaller OWAC because our volume is smaller. We intend to open this OWAC in Romania, quite close to Bucharest. And we're currently finalizing a tender. Actually, I think that this week, we will communicate our preferred partner of choice. And then the intention will be that roughly 1 year from today, this OWAC -- SOWAC in the South will also be operational. So, a lot of developments on the supply chain side. And then basically in 5 years, we migrated from a legacy supply chain where each country had their own supply chain, and we have duplicated between online and offline to 7 omnichannel warehouses, 1 warehouse, stock supporting 22 different countries. The last point I wanted to talk about is about the technology part because we continue to make progress in harmonizing our infrastructure. In this case, we talk about the IT infrastructure. Marco was already mentioning an example of the launch of our e-com platform in Romania. So that means that as we speak, we have the same e-com platform active in 14 of our countries. Basically, all our big countries and only the small countries are, let's say, on the to-do list. Klarna is currently supporting 13 markets and Adyen is currently supporting 17 countries. 2 years ago, we had a different every country had its own online payment provider. So basically, we had 22 different payment providers. Currently, Adyen is our preferred provider doing 17 countries and a few are still to come. So, a lot of rationalization, simplification and standardization in the back office, let's say, I would say, of DOUGLAS. With that, I wanted to summarize basically our presentation for today. So firstly, the premium beauty market has significantly slowed down in terms of growth versus what we saw 3, 4 years ago. It also slowed down much faster than we had expected. We had expected a market which would grow 4%, 5%, 6%. But the reality is that the market in Continental Europe is growing 2% to 3%. It is not growing in our most important or biggest countries, Germany and France. The Netherlands is not the biggest country, but it's a relevant country, and that weighs heavy on our performance. Secondly, we do see a continued consumer price sensitivity and a desire of customers to buy products at a discount. So I haven't said that before in this meeting, but we are not actively promoting more customer is actively seeking more promotional deals, and that leads to pressure on our gross profit. And in addition to that, we see an acceleration of the online channel where the competitive price is just one click away. So that puts more, I would say, a focus on pricing going forward. We are making adjustments to align our business even more closely with the development at both customer and market level with an increased focus on e-com and a structure assessment of the profitability of our store network, and that will lead to a number of conclusions and decisions. We are focusing on what differentiates us, exclusive brands, cross-channel services are 2 examples where we showed where we've given you some insights. We have a lot of brands which are growing. We are growing strongly in Retail Media, but today, we didn't give you too much insight in that. And we are positioning the DOUGLAS for the future with the plan to do a further update on the evolution of our Let it Bloom strategy in the fourth quarter of the calendar year 2026. And last but not least, we are confirming the full year guidance for the current financial year. With that, I wanted to pause, and we would like to move to Q&A. So, operator, please take it from here.

[Operator Instructions] The first question comes from the line of Vandita Sood from Citi.

I just have 2 questions, please. I think firstly is on the guidance. You've reiterated the guidance. But if I work out sort of the midpoint, it's pointing to a positive sales development in 4Q and at the midpoint of the adjusted EBITDA, it's maybe slightly ahead of where consensus is at the moment for the fourth quarter. So just want to check, is this something that's based off of what you're seeing currently as of July and start of August? Or is there not that much to read into it and it's within range, so you're happy with the range? And then the second question, we've talked a lot about how important the assortment is and brand is of course, that's key. I just wondered where you benchmark your delivery proposition as more and more sort of pure players are coming into the market. Are you happy with the cutoff time for next-day delivery orders? Are you competitive in terms of the convenience of the online proposition that you have? Just curious your thoughts there.

So, Vandita, thanks for the questions. I'll take the first one on guidance, and then Sander will take the second one on the assortment and the rest. So, we updated our short-term guidance in mid of June, pointing now to a much narrower range, let's say, 0% to 1% of growth. of course, at the time, we had the benefit of the knowledge of well into Q4 expectation performance. And by the way, when you work out in your math, it is sort of a continuation of Q3 into Q4, you also fall within the ranges of the guidance and get to the lower end of that. At the same time, let's say, to your question, we feel comfortable with the range as it stands now as well as with the consensus where it sits. And therefore, we don't feel need of updating it any further as of today. That's for the topline and also for the profitability percentage. In the last closing quarter, we reported a profitability reduction at adjusted EBITDA level of around 280 bps again, working out the math into Q4, a comparable year-on-year decline into Q4 still basically would lead you to the around 15%. For the full year, basically, hence, our reasoning on the confirmation of the guidance today. And I would give to Sander the answer to the second question, if that's answering your question, Vandita.

Yes.

Thank you, Marco. So, Vandita, regarding the e-com delivery proposition, generally, we believe we know that we are competitive versus, let's say, the beauty players in terms of omnichannel beauty players or pure play let's say, other pure-play beauty players. We have the ambition to deliver in maximum 2 working days. And with that, let's say, and we are delivering that in many of our markets, but not yet in all our markets. In some markets like the Netherlands, if you order before 7:00 a.m. today, in principle, you get it tomorrow, the delivery basically window is 24 hours. But in Germany, a significant portion of our orders is being delivered on the second day rather than the first day. So, we continue to work to shorten the lead time and the deployment implementation of our 7 OWAC is going to help us with that. Secondly, what we can offer is click & collect, click & collect in our store network and Click & Collect in Express, we believe that we are competitive and we have something unique to offer, certainly towards some of the pure players. And thirdly, from a cost perspective, we also believe that we are competitive. So, below a certain price, you have to pay a small delivery fee above a certain and you get it for free, and we also competitive with that. So, in that sense, we believe that we are in the right -- we are in an okay place, but we see opportunities to further improve our competitiveness going forward. Does that answer your question, Vandita?

Yes, that's very clear. It was just on the basis of, obviously, if you look at something like an Amazon at just at 10:00 a.m., 11:00 p.m. cutoff time. But yes, no, it's clear that there's pros and cons.