Fed Governor Adriana Kugler to resign
- Inflationary pressures in the clothing and footwear sector, with inflation at 27.5%.
- Macroeconomic challenges and a cautious revenue growth outlook for 2025.
- The potential impact of global economic conditions on consumer spending and international market performance.
- The ability to manage increased costs and maintain profitability.
Despite these challenges, InvestingPro analysis shows the company maintains strong fundamentals with a current ratio of 1.73, indicating robust liquidity to meet short-term obligations. The company’s comprehensive Pro Research Report, available to subscribers, provides detailed insights into its risk management strategies and competitive positioning among 1,400+ top stocks.
Despite these challenges, InvestingPro analysis shows the company maintains strong fundamentals with a current ratio of 1.73, indicating robust liquidity to meet short-term obligations. The company’s comprehensive Pro Research Report, available to subscribers, provides detailed insights into its risk management strategies and competitive positioning among 1,400+ top stocks.
Key Takeaways
- Mavi’s revenue grew by 3% year-on-year to 8.8 billion TRY.
- Stock price declined by 8.99% post-earnings announcement.
- Net income increased by 7%, with a gross margin improvement of 210 basis points.
- The company plans to expand its sustainable product offerings.
- Cautious revenue growth outlook for 2025 amid economic challenges.
Company Performance
Mavi Giyim demonstrated resilience with a 3% growth in consolidated sales, reaching 38.519 billion TRY in 2024. The company’s focus on expanding its product lines, particularly in sustainable fashion, contributed to its revenue growth. Mavi maintained its strong position in the denim market with significant brand recognition and customer acquisition.
Financial Highlights
- Revenue: 8.8 billion TRY, up 3% year-on-year
- EBITDA: 7,450 million TRY, with an 18.5% margin
- Net income: 2,675 million TRY, up 7% with a 6.9% margin
- Gross margin: 50.3%, up 210 basis points
Market Reaction
The stock’s decline of 8.99% following the earnings announcement suggests investor concerns, possibly due to the company’s cautious growth outlook. The stock’s movement towards its 52-week low reflects broader market apprehensions about the economic environment and Mavi’s ability to navigate it.
Outlook & Guidance
Mavi projects low to mid-single digit revenue growth for 2025, with a targeted EBITDA margin of over 17.5% on a reported basis. The company is planning to open 20 net new stores and expand 15 existing ones, alongside launching eight retail stores in the United States. Mavi remains focused on operational excellence and customer loyalty amidst economic challenges.
Executive Commentary
CEO Junay Thiago expressed a defensive outlook for the year, stating, "We are planning for a very defensive year where we are hoping for the worst or planning for the worst." He emphasized the company’s commitment to delivering high-quality, sustainable products to consumers, saying, "Our focus is on getting the best product, best sustainable product, best quality, best fashion into the hands of our consumers."
Risks and Challenges
- Inflationary pressures in the clothing and footwear sector, with inflation at 27.5%.
- Macroeconomic challenges and a cautious revenue growth outlook for 2025.
- The potential impact of global economic conditions on consumer spending and international market performance.
- The ability to manage increased costs and maintain profitability.
Q&A
During the earnings call, analysts inquired about Mavi’s pricing strategies to counter a 30% increase in the cost base and the company’s net cash position strategy. Questions also focused on international market performance and store traffic conversion rates, reflecting concerns about Mavi’s ability to sustain growth in a challenging economic climate.
Full transcript - Mavi Giyim Sanayi Ve Ticaret AS (MAVI) Q4 2025:
Moderator/Operator, Mavi: Welcome to Navi and Nas regarding the first quarter and the full year results of 2024. Before starting, I would like to timely remind you to review the disclaimer on the WestCast presentation and consider all forward looking statements and comments in accordance with the cautionary statements on the disclaimer. In accordance with the decree of Capital Markets Board, our financials are reported using IAS 29 financial reporting in hyperinflationary economies. The financial figures in this presentation and all comparative amounts for previous periods have been adjusted according to the changes in general purchasing power of Turkish lira in accordance with IAS 29 and are finally expressed in terms of purchasing power of Turkish lira as of 01/31/2025. To enable investors’ analysts to conduct a full fledged analysis, supplementary historical information for selected key performance indicators is also provided.
Please note that such supplementary figures are clearly identified and is made available only for information purposes. Our CEO, Junay Thiago, will be presenting the results now followed by a Q and A session. Lastly, I would like to remind you that this presentation is being recorded. Please make sure to keep your microphones muted throughout the presentation. Now I will leave the floor to Jeanette.
Junay Thiago, CEO, Mavi: Thank you, Dibro. Hello, everyone. Welcome to our 2024 full year financial and operational results webcast. 2024 turned out to be yet another challenging year, marked by headwinds in the macroeconomic environment that impacted consumer purchasing power and demand. Throughout this period, at Mavi, we continue to prioritize remaining a reliable and responsible partner for our employees, customers, business partners and communities while remaining focused on our long term goal of maintaining a healthy business franchise.
Before we review our 2024 total year performance, I would like to take you through the strategic highlights of 2024, offering an insight into the key developments within the Money company. In a highly competitive landscape, it is our responsibility to ensure Mavi remains aspirational, our love brand and preferred choice of consumers at all seasons. In 2024, our primary focus has been on further elevating our brand positioning while attracting new customers as we have been consistently doing year after year. We base our approach to business mainly on three strategic pillars. Firstly, our top priority is relentlessly offering the right high quality product at the right price.
In the context of Turkey’s recent inflationary period, this commitment has been even more critical, serving as a key driver in building consumer trust and gaining market share. Investing in and expanding our premium product segments is central to our strategy to enhance brand positioning and enabling us to attract new customers to our wide range of product portfolio. In addition to our established premium lines such as Mavi Black, Luxe Black, Pro and Mavi Icon, this year we introduced the Mavi Edition collection targeting the modern man with a premium style defined by a contemporary fashion code. This collection focuses on high quality essentials and sophisticated smart casual products. Our second strategic pillar focuses on reinforcing Marie’s positioning as Turkey’s go to denim centric casual brand.
Our The Genius Mavi campaign reinforced our leadership in the denim market, showcasing Mavi’s broad range of fits, styles and trends that cater to all customer segments from core to premium price points. At the same time, we continue to ensure that Mavi is the destination for casual lifestyle with hero subcategories such as basics, logo and polo T shirts, sweatshirts and non denim bottoms. Increasing the appeal of Mavi as a lifestyle brand represents the third and final strategic pillar. Our collaborative collections, Wunder and Marche were key in attracting new customer groups. Wunder is resonating with a younger audience while Marsha has proven successful in attracting fashion forward urban women.
The Marsha collaboration significantly helped our business in expanding our market share within the twenty five to thirty five age group of female consumers. Additionally, the growing Mavi Terrainin collection reinforces the total look concept, further strengthening Maven’s unique brand story. As a result of these focused strategic initiatives, we have seen a substantial increase in our top of mind awareness levels in denim, which have recently surpassed 70%. In other words, we literally own the heart and mind market share of the denim category in Turkey. Furthermore, we’ve successfully acquired a new record number of 1,500,000 new customers in 2024 and gained market share across both denim and non denim categories.
We are dedicated to creating the happy smile customers, both in store and online, ensuring the highest level of satisfaction. Our newly upgraded retail store concept not only enhances the way we showcase our offerings, but also reinforces Mavic’s premium brand perception. Alongside this, we’ve redefined our retail organization and field operations model to align with a new service framework designed to increase operational efficiency and elevate the overall customer experience. We are confident that all these investments will be critical in increasing customer loyalty and continued business growth. In the digital space, we continue to invest in UI, UX improvements across our online platforms.
Key innovations introduced in 2024 include the gene finder, digital gift card, enhanced personalized search capabilities, expanded shipping and payment options and AI powered WhatsApp chat feature. We are increasingly leveraging data analytics and AI driven tools to refine and enhance our online shopping experience. This year, we shifted our focus beyond the linear customer experience approach to a comprehensive analysis rendering around the total customer journey and lifecycle. We initiated three sixty degree customer monitoring and analysis, ensuring we listen to and deeply understand our customers through multiple chats. I am also proud to share that MAUI was honored with the Gold Award in the Ready to Wear category at the tenth ACE Awards, which recognizes exceptional customer experience based on feedback from 1,500,000 customers.
We continue to drive growth across all key areas of our business with a strong focus on retail expansion, online innovation and omni channel integration. In retail, we’ve seen an 8% increase in retail space with 16 net new store additions and 15 existing stores undergoing expansions. This not only strengthens our physical presence, but also enhances our ability to provide an elevated customer experience across our locations. On the digital front, we are seeing remarkable growth in Mavi Online. Our Mavi app now has 8,000,000 active users, up from 5,700,000 in 2023.
This increase is a testament to the growing demand for our digital platforms. Mobile devices continue to be the key driver of digital sales growth with 90% of traffic and 80% of sales. We are also expanding Mavi’s digital footprint globally with mavi.com slash third year now reaching customers in The GCC and Europe. Our omni channel initiatives are delivering significant results. In store online sales in nominal terms have surged 190% year on year, now contributing close to 2% of our total store level.
These omni channel leopards have driven nearly $600,000,000 incremental revenue, reinforcing the power of our integrated shopping experience. Click and collect has also become a popular option, now accounting for 10% of mavi.com purchases. Additionally, we’ve enhanced the convenience by allowing in store returns for online purchases, creating a seamless experience for our customers. As part of our commitment to become a more data driven organization, we’ve made significant advancements in our CRM strategy. In 2024, we upgraded our CRM approach with a new segment management model, now tracking and targeting customers across eight segment models and 18 main individual segments.
This enhanced segmentation allows us to tailor our marketing efforts more effectively and ensures we’re delivering personalized experiences for our customers. In terms of personalized engagement, we have taken a major leap forward. We’ve designed and implemented over 300 targeted campaigns in 2024, a substantially decrease from 100 in 2023. These campaigns are designed to not only acquire new customers, but also to strengthen engagement and drive long term loyalty. We are also advancing our understanding of customer behavior through customer acquisition and lifestyle analytics, focusing on identifying the pathways that turn casual buyers into local customers.
This is central to driving sustainable growth and enhancing customer retention. The acceleration of our data driven transformation continues with the integration of AI powered solutions. We’ve launched a data analytics platform that supports our pricing strategy, utilizing price elasticity calculations and predictive analytics to ensure we’re always competitive while maximizing margins. Our investments in product analytics are also designed to help us better understand and respond to customer and market expectations. We’ve implemented solutions to monitor consumer data sources and identify emerging fashion trends as they are emerging, enabling us to take speedy product introductions.
Additionally, we’re partnering with innovative startups while building our internal capabilities for data collection and AI powered fashion trend forecasting. Finally, we are utilizing GenAI powered solutions to enhance the productivity of our support functions such as finance, legal and HR. This is just one more way we’re integrating technology to streamline operations and create efficiencies across the whole organization. Mavic’s strength lies in its people. I cannot highlight enough the quality of people working in our company.
Clearly, I am very proud of the team we have. On the diversity front, 60% of our workforce, 52% of our management team and 50% of our Board of Directors are women, reinforcing our dedication to equality. In 2024, we’ve launched the three sixty degree feedback and competency assessment programs to enhance performance and leadership developments and the Nine Box Talent Framework that ensures effective succession planning for key positions. Our Mavi Young Talent and Mavi Next Gen initiatives continue to attract and nurture future leaders. At Mavi, we also prioritize community building.
We are proud to be recognized as the number one brand of youth in Future Brights Understanding the Youth Research made in August 2024, with 20% of the respondents naming Mavi as their favorite brand. We are engaging in numerous community initiatives such as Indigo Turtles, Volunteer Camp, The Martin Villainal, music festivals, campus activities and building vibrant social media communities. Our team Mavic community remains a strong influence among youth and we continue to make a positive social impact through projects like Sociedad and Skill Development Center, Teves Scholarship, Land Loop and JanDash and Meow and Half initiatives supporting Stray Animals. There are two major highlights in 2024 in the sustainability area that made us very happy. First, once again, we made the A List of CBP with a AA score on our Climate Change and Water Security reporting for the second year in a row.
I commend my team for their dedication in making Mahave a top notch company when it comes to sustainability initiatives. The second trade recognition Mahave received was Ramy Wright’s eight in Time magazine and Statista’s list of world’s best 500 companies in sustainable growth, placing Mavi in number one position in the apparel industry globally. It is truly an honor to be crowned with this title globally. In 2024, we’ve expanded our sustainable Mario Gold Glue Collection with two new additions: the regenerative gene collection crafted from cotton soft blue regenerative panel practices and the Imagine for Mavi upcycle collection created in collaboration with Murad Turkile, which extends the lifecycle of them. With the contribution of these initiatives, the all blue and better cotton product sales accounted for 27% of total revenue and 58% of total denim revenue in 2024.
Also this year, Mavi conducted its first double materiality analysis to monetarily define sustainability goals and integrate the potential impacts, risks and opportunities into sustainability strategy. We continue to work towards our net zero goals in line with the Science Based Targets initiative criteria. We initiated the Circularity Enculsion project in partnership with Nimogo and in collaboration with eCorgi and with the contribution of our customers, we have contributed 50,000 seed wells to reforestation efforts, helping to restore nature. After the strategy recap, I would like to now start reviewing our 2024 results. Our consolidated sales reached N38.519 billion in 2024, growing 3% year on year.
Turkey retail sales grew 5% and Turkey online sales grew 8% during the period. EBITDA realized TRY 7,450,000,000.00, resulting with an EBITDA margin of 18.5% year to date. Our net income growing 7% year on year realized at TRY 2,675,000,000.000 with 6.9% net income margin. With 1,500,000 new customers, Turkey active Cartos Card members who shop with us in the last twelve months is 5,900,000 as of year end. Moving on to review our channel performance on Slide 12.
The softness in trading environment continued in the last quarter with two ks retail revenue contracting 1.4%, two ks online revenue growing 7% and bringing the total two ks revenue to 1% growth year on year in real Turkish data terms in the fourth quarter. Total Turkish sales grew 6% in 2024. International revenue grew 5.8% in constant currency during the fourth quarter, finalizing the year with a 2.2% contraction year on year. The weakness throughout the year was primarily driven by demand weaknesses across some of our international markets, the sensation of operations of some wholesale customers and some transitionary warehouse and IT projects in Europe. The positive performance of North America business was the main driver of growth in the last quarter.
Looking into our two ks retail business in more detail, In 2024, in line with our expanded targets, we opened 18 stores, closed two stores and expanded 15 stores in square meters in Turkiye reaching three fifty two stores and 188,500 square meters total selling space. This is 8.5% increase in sales area year on year, which will be supporting our sales targets in 2025. In Turkey, the retail sector continues to benefit from increased retail space driven by population shifts, the development of new urban areas and addition of new shopping malls. We take a disciplined approach to store openings, focusing on robust feasibility studies and short payback periods. I am pleased to share that all the new stores opened over the last past year have already delivered positive store contributions.
On Slide 15, let’s elaborate on the like for like store performance. In the last quarter, like for like sales contracted 3.9% in real Turkish lira terms and 3% in volume. In the year 2024, like for like sales grew 1.6% in real Turkish lira terms and 4.8% in volume. Including the new space contribution, total volume growth in the year realized at 8.5%. Basket size grew 1% in real terms and close to 58% in nominal terms in 2024, reflecting effective pricing and increased units per transaction.
We believe it is important to note here that the official clothing and footwear inflation in TrueCare was 27.5% in the year, much below the headline inflation. Moving on to Slide 16 to review category based developments in Turkey retail. In 2024, all categories grew in number of pieces except jackets, which was sort softer this year mainly due to relatively warmer weather in the season. Shirts, accessories and non denim bottom categories were the main drivers of growth this year. Dental sales growth is 2% in the year and is balanced with the growth in non denim bottoms category which grew 25 year on year.
This growth performance in long term bottoms was driven by the rising demand for woven pants with Mavi proactively expanding its assortment to align with this trend. Our knit business constituting of T shirts, sweatshirt and jersey outfits grew 2% and this is balanced with the shirts category which grew 7%. In 2024, our new women’s accessory offerings, including a wide range of handbags, were received very well and contributed positively to our accessories category growth of 13%. Overall, in 2024, we contribute to deliver market share gains in both denim and non denim categories and strengthened our position among the top players in the apparel market in Secure Care. Going forward to review our online sales performance on Page 18.
Global online sales including the wholesale business partners constituted 11% of total consolidated revenue in 2024. Online sales in Turkey consisting only of direct to consumer channels grew 8% driven by a strong 14% growth of mavi.com and constituted close to 9% of total sales in Turkey. Although marketplace sales have been somewhat softer this year due to reduced traffic, Mali continues to be among the top five players in the jeans and T shirt categories on both Jan Dio and FC Broda. International online contracted 18% in the inflation adjusted TL figures in 2024. Internationalmarket dot com is also a growth channel with 5.4 growth on a constant currency basis.
Online business makes up close to 32% of total international sales. Now let’s move on to review our consolidated financial results, starting with reviewing our gross margins platforms. Since the second half of twenty twenty four, the decline in purchasing power and increased markdown communication in the overall market to stimulate shopping appetite has started to weigh in on pricing environment, putting pressure on gross margins. Nevertheless, in the last quarter, our margins improved 120 basis points on an inflation adjusted real basis. That is the 04/20 basis points lower impact of inflation this quarter versus same quarter last year.
Our gross margin realized 50.3% in 2024, improving two ten basis points year on year given 170 basis points lower impact of inflation adjustments this year and 150 basis points positive impact of imputed interest rate. Moving on to Slide 21 to review our EBITDA performance. In quarter four, the gross margin improvement was mainly reflected in the EBITDA margin. We have demonstrated a very disciplined OpEx management in the last quarter with OpEx to sales ratio deteriorating only 30 points despite our decision to execute a 25% mid year salary increase. We are closed the year with 18.5% EBITDA margin well in line with our latest guidance division and our long term sustainable EBITDA margin outlook.
On Slide 22, we look into our net income margin performance. The impact of inflation accounting on net income resulting from balance sheet and monetary inflation adjustments is significantly high in the fourth quarter mainly due to high inventory levels at the end of third quarter. With With this impact, the net income margin that was 8.2% before the inflationary accounting results with a 0.9% on a reported basis. E82 million net income in Q4 brings the net income for the year 2024 to TRY2675 million, growing 7% year on year. We closed the year with a net income margin of 6.9%.
On Slide 23, we will review our operational cash flow and working capital performance. Through dynamic product planning and a flexible sourcing strategy, we continue to manage inventory and working capital with efficiency, ensuring optimal resource allocation and operational agility. I am pleased to share that our inventory levels remain exceptionally healthy comprised mostly of fresh spring summer season products. Given the year’s uncertainties, this accomplishment underscores the strength, collaboration and expertise of our multifunctional teams. We created TRY 6,300,000,000.0 cash from our operations in 2024 with a cash conversion ratio of 88% similar to the very strong performance last year.
Moving on to Slide ’24. In 2024, we invested TEN1430 million in CapEx, resulting in a CapEx to sales ratio of 3.7%. These expenditures were primarily focused on store openings and expansions as well as digital investments and R and D. Most of the CapEx related to our new headquarters will be included in next year’s figures. Our net cash position growth grew both in nominal terms and in real terms in 2024 to reach ZAR5.4 billion.
As always, the foreign currency that reflected in our consolidated reports pertains solely to our subsidiaries, which borrow in their respective local currencies, thereby eliminating currency risk. Slide ’25 is a reminder of our targets for the year 2024 and their realizations. Recall that we have revised our guidance after third quarter results and delivered results in line with these revised expectations. In the next page, we provide our guidance for the year 2025. The economic policies attempting to tackle inflation in Turkey will likely continue to put pressure on consumer purchasing power in 2025.
Navigating another challenging year, we will remain focused on what we can control and continue to invest our long term strategy to remain a sustainable, profitable growth company. We will continue to prioritize our platform in the apparel market, win with our customers’ love and loyalty for our brands and to function in our respective duties with an overall commitment to operational excellence. Supporting our long term growth aspirations, we plan to open net 20 stores and expand another 15 stores in Turkey. We will also start our journey of retailization in North America this year by opening eight retail stores in The United States Of America, all investing in our shopping malls and premium locations. With that, we expect low to mid single digit revenue growth with 17.5 plus percent EBITDA margin on a reported basis including inflation accounting.
Without inflation accounting, we expect 35 plus percent revenue growth with 20% plus EBITDA margin. We target to maintain our net cash position and spend 5% of revenue on CapEx. This CapEx figure includes the new headquarter investments and the CapEx related to store openings in the years. Some final words as we do typically on this quarterly review with you guys on the current quarter and the trading environment. Recall that the first quarter of last year was extraordinarily strong.
Hence, we are up against a very high base this quarter. Impacted by the severe cold weather conditions, the quarter started soft in shopping appetite in February with two ks retail sales growing 20% and online growing 41% year on year. With the weather getting better and the new season products arriving in stores, in the first seventeen days of March, we delivered 42% year on year growth in Turkey retail and 61% year on year growth in Turkey online. So as we stand, we look like we are set to deliver the results and the guidance we set out for this year. And with this positive note, I would like to end my presentation.
I’d like to thank you for all coming in and joining us in sharing this presentation. At this point, I will leave the floor to Burcu and you guys. And if you have any questions, I’ll be more than happy to answer them. Thank you. And rise.
Thank you, Duygu. Thank you, Jeanette. My question is regarding the developments on February, the beginning of the year. Can you please provide further detail about the pricing dynamics and how do you supply sustain that growth whether through volume growth or through pricing? Thank you.
Overall, we started the February still the very early beginning of the year. Actually, February is where we have the highest markdowns. The new product typically arrives at the very back February. So net net, I think what we are aiming for, as you know, there is around the 30% inflation for our salary increase or cost base increase. So when it comes to our pricing strategy, whether it’s through product mix or pricing, we are aiming that we can at least negate some of the cost base increase by playing around and managing our product rigs and costing in terms of getting to around 25% to 30% price increase.
Of course, this is a ballpark figure. We typically digest and segment all the categories, whether it’s blue jeans, t shirts as well as I mentioned in my review, we are using our strategic pricing tools to assess the competitive market environment because as you all know by now and hopefully that we are a committed brand to win I mean, our brand committed to win in Turkey and to be in sync with the consumers’ disposable income when it comes to their shopping capabilities and habits. Therefore, we are tracking things very sort of closely. So February is probably not the best indicator. March, as I was mentioning, has more of the new products arrive.
As typical when we start here, we are a little bit more conservative in terms of what the pricing and the consumer appetite in terms of planning might be. But the first seventeen days were quite encouraging, as I mentioned. So when the new products arrived, which were in the new price position, as you see, we are guiding more for a 35% plus growth, but the initial 17 names were more like 40% plus growth and 60% plus growth in ecom, which was extremely encouraging. We believe the portfolio, the newness, the freshness, the quality and the service levels will be key contributors to our success this year. And success, by the way, I just want to take this opportunity to reiterate once again and maybe in my own words that we see this when we do the guidance for this year, we are planning for a very, one could say, a defensive year where we are hoping for the worst or planning for the worst.
But hopefully it’s going beyond the expectations and delivering better results through the year. And I think as Marimi, we have that capability. I think that mindset is going to be critical, especially in terms of OpEx management and working capital management and inventory management. We are blessed with being in Turkey as I keep reminding you all. We have the agility and flexibility to be quick to the shop.
Our tools and as I mentioned in my presentation, AI, digital tools, insights are making us even more up to speed in terms of catching the trends and being very fast to the shop. So we believe this year will be another challenging year, but when it comes to pricing, cost, OpEx, etcetera, these things I think we can handle and we’ll do that against whether it’s the local competitors or the international competitors. We feel as Mavi, we will have the cutting edge again this year. I don’t know if that answers your question. I’m more than happy to elaborate further if you have further questions.
No, very much indeed. Thank you very much,
Moderator/Operator, Mavi: We have a question on the chat screen. Let me read it. Hi. We have observed that Navi has maintained a strong net cash position for an extended period, particularly when viewed on a pre TFRS 16 basis. However, instead of utilizing this cash to generate financial income, a significant portion of strategically allocated discounted product purchases effectively integrating into working capital and contributing to profitability and the income statement?
Tom, would you assess the financial advantage gained through this approach, especially when compared to alternative investment opportunities like money markets funds?
Junay Thiago, CEO, Mavi: Our primary focus at Mabhi is to make sure that we are in the business of making apparel and offering the fashion forward products and making customers happy in terms of selling our jeans, T shirts, etcetera. So our focus is not on financials in that sense. Our focus is on getting the best product, best sustainable product, best quality, best fashion, best quality, best pricing into the hands of our consumers. Therefore, we put and we will continue to put because that’s who we are. That’s our competitive advantage, being able to service the customer with surprising them at the price point, at the quality, at the service level, at the experience level with the great product and great experience.
And that’s what makes them speaking to Mavi and ensure that they come back over and over again to shop with us. Therefore, our priority when we have the excess cash or the financial strength is to use the money to make sure that we are booking the capacity, mitigating some of the costs in favor of the consumers and making sure that the consumer is happy shopping with the great products we have. I would also like to take this opportunity through this question to remind all of you that with the cash position we have, we have reiterated that we would like to use this cash position and stay in a cash positive sense as much as possible in this high inflationary, high interest rate environment. Therefore, having a bit of these reserves makes us more comfortable and relaxed vis a vis the competition and also strengthens our hands in terms of the increasing cost environment for our sourcing partners where we can keep their business and our relationship running at a very healthy business streamline and ensuring that we get the right quality products onto our shelves where we need them. Therefore, hopefully over the next eighteen months, twenty four months as the inflationary pressures in Turkey subsides and the government’s intervention and determination to crack inflation settles in.
And we can also walk away from some of this cash position and go back to a normal financing instruments to fuel our growth. That would be my quick end of the answer for that question. Let’s go to the other question.
Moderator/Operator, Mavi: The next question is from Mary Yuzirun. How do you evaluate the entry of global competitors like Levi’s into the Turkish denim market and the fact that the price gap between MAUI’s products and those of its competitors has been consistently narrowing over the past two years?
Junay Thiago, CEO, Mavi: Levi’s has been in Turkey for probably longer than Mavi has been around. So therefore, one cannot necessarily talk about Levi’s end in Mali. Right now, Levi’s market share, just this is the fact, is around 1% independent sphere and they don’t sell much when it comes to casual lifestyle. So maybe Levi’s in that sense is not the best answer. But of course, you can expand the question in terms of asking us how is the index companies, Lara is doing, how is the mine doing, how is H and M doing.
In terms of our pricing and price metrics, we see where they are, whether it’s the quality brands or whether it’s the multiple that we sustain, whether we are denim T shirt, sweatbands, apparel other apparel and accessories, we believe we are at a well advantaged position to deal and tackle the competition. This question I think is taking a bit of a talk when I look at market share and mix of data that I shared to my marketing team on some of the bigger and typically cheaper priced competitors we have, local priced competitors and it has less impact on Miami’s business running chase. Therefore, we are a bit immune, I would say. On the contrary to this pressure that we’re talking about, on the contrary, we are looking into ways to see how much of those customers, whether it’s H and M, Mangro, Zara and other derivatives that we can continue to switch over to Mardie. How are we going to do that?
Just to reiterate, as we are continuing to grow our square meters, as we are continuing to open up new stores, we are seeing more and more, especially most recently we opened up a new store concept and if you have a chance do visit it in Hilta and we will expand that concept across the Turkish market this year. We automatically see a sales uptick. Therefore, both the product offering, the growth in square meters and the way we present and sell our products and the quality and the fashion expense is making headwinds. So we are in that sense quite confident. Whether the total market shrinks, grows, that’s another story.
External is put aside as I mentioned in my presentation. We will leave the externalities aside and we will focus on doing our business, our ADC properly. And at this point in time, in our offices at least, when we review our price positioning vis a vis international competitors, we don’t feel much of a threat coming from them, although we take them seriously, most importantly when it comes to product and innovation and fashion rather than pricing.
Moderator/Operator, Mavi: Mario, you’ve got another question. What is your expectation for the average occupancy cost ratio representing the rent to sales ratio for MAUI stores in 2025? And how does this compare to previous years?
Junay Thiago, CEO, Mavi: Very good question. I mean, when I look at our numbers, which is a fantastic formula, I mean, one of the key indicators of whether a company is doing a good job or not is, as we mentioned, this OCR ratio. And when I look at the numbers across the years, it has come down from 12.8 to 11.8% then to 12.2% and most recently last year to again around 10%. Therefore, this year, we have budgeted again to maintain it at around 10%. Therefore, our square meter platforms and rent ratios are in a very healthy position.
So we feel we are quite confident. We are working relationship. By the way, I mean, two thirds of our rent is on variable cost and also our business partners are happy, meaning our mall vendor small operators are happy with Mahdi’s business growing. They make money, we make money and the ratios are coming down or at least maintain.
Moderator/Operator, Mavi: Okay. We see that we don’t oh, we have a question right now. Okay. Haya, go ahead please.
Analyst: Hi. Thank you very much for the presentation and opportunity to ask questions. So I have one question about the guidance. You are sharing the imputed interest impact. And can you share some guidance by excluding the imputed interest?
So do we have a better, I mean, sense about your guidance excluding all the accounting impacts? That’s my first question. And the second one, your international business has been stagnant for a couple of years. Do you expect some normalization going forward or do you expect same plan to continue? Thank you.
Junay Thiago, CEO, Mavi: Thank you. Let me start with the end and then I’ll hand over to Birgael CFO to talk about the impact of the futures interest and how it would play out for the year. In terms of the international business, we believe the North America business, you will start seeing a pickup in top line growth. As we open up more stores and expand our business. Therefore, we are more confident in terms of more growth coming in in terms of international business.
Germany business has been stagnant this year, but as we speak, whether it’s the warehousing system or the SAP transition, a lot of the IT and technical problems will be behind us over the next one month. Therefore, from there on, we are quite confident that we will start focusing more on delivering against the consumer and growing the business there. Russia, you will recall, is an area where we are keeping business as it is. So it is at this point still a maintained attitude. Therefore, if we have if we’re asking more in a meat to our perspective, we expect the North America business to grow and potentially grow in double digit terms, in U.
S. Dollar terms, Euro to stabilize, Euro business to stabilize and start growing. And Russia at this point is more like maintained as it is until more clarity comes through regarding the Ukraine war and future of Russia’s relationship with the boss. Having said that, now I’ll pass it on to Bjei, our CFO. She may maybe have a few comments on your thoughts.
Moderator/Operator, Mavi: We expect interest rates to come down in Turkey this year. So in my business expectation, we are expecting interest of interest impact will be lower in 2025. So in this guideline, we approximately still 1.2 to 1.5 points impact of interest interest.
Junay Thiago, CEO, Mavi: To
Moderator/Operator, Mavi: We have a question from Barish. In the cash and cash equivalents book loss, there is a line amounting to BRL1.3 billion other cash and cash equivalents. Can you share the details of this line? What does this include? Maybe I can just comment on this.
There is actually a small explanation there. It is the credit card receivables that we view as cash and as it’s under the cash and cash equivalents. But you can also see it on the report. We have a note. Guleyman, Aif Al Islam has another question.
What are your expectations regarding store traffic and conversion rate?
Junay Thiago, CEO, Mavi: When we look at the data for the last one year quarter on quarter, now I’m talking about total apparel and then I’ll mention SAP results on MAVI. In terms of total apparel, when it comes to MAVI, so the total apparel market, the traffic has been slightly declining. The consumer’s frequency of shopping apparel has been slightly declining and also the unit per transaction of total apparel market has also been slightly declining from consumers buying 1.7 units of products coming down to 1.6, so slightly so there is a softness over the last one year that has been coming in. For Huawei, what we are targeting in terms of the performance for the rest of the year is more like 100 index. So what we want to achieve is in terms of building this budget and the guidance, of course, that we maintain traffic.
As you know, every year, we’re trying to gain around 1,000,000 to 1,500,000 new customers that have never shopped with Mavi. We are growing our square meters. We are expanding our product portfolio. Therefore, with all these expansionary approach and this year, another 20 stores coming into our portfolio on top of the 15 we introduced last year, They will all have relative positive impacts on this. One other thing is greatly supporting our business in terms of conversion and customers being able to buy more has been the only general integration.
So as I mentioned, this year there was an incremental CHF 600,000,000 of revenue being generated through sales in the shops through online sales for products that were not in the store. This year, I think this number will also continue to grow as our sales staff and also consumers are learning that they can or realize that they can do better shopping and have a better shopping experience, omni channel shopping experience in many stores. Therefore, if we cover all our bases properly, by the way, as I mentioned, the industry does 1.6 in terms of UPT, but ours is more than 2.2, two point three. So we’re already ahead of the market in terms of conversion and frequency and also units for things that are shopping. Our job, regardless of who is coming in, is to make sure that they’re coming in to shop and they’re coming in to buy.
Therefore, all of our fiscal year 2025 guidance at this point is more or less on a 100 index mindset for the time being. Thank you.
Moderator/Operator, Mavi: We have Teotush who has a question. You can go ahead, Teotush.
Teotush, Analyst: Yes. Hello. Thank you very much for the call and for the explanation. There’s also moving parts. I think it will be useful at least for me to maybe understand how you see seasonality throughout this financial year.
And by that, I mean, if we look at the quarters, the upcoming quarters, just around the base effects in terms of trading last year, the guidance does mention the high base for 1Q. But I want to make sure I understand how it plays out in terms of margins and base effects across 2Q, 3Q, 4Q as broadly and generally as we can discuss
Junay Thiago, CEO, Mavi: this? That’s a good question and it’s a bit complicated now in terms of for you, I mean, for someone who’s trying to understand this year last year and this year and output has become challenging, it’s also been a bit of a challenge for us. If you don’t mind, I’ll say a few words on this because it’s a very good question, something we put a lot of effort. First of all, if I look at, remember that this quarter I said because of the base it’s going to be a challenging year and we might even close the first quarter on a minus vis a vis last year. But what I’m doing and what my team is doing, I mean, looking at the past three, four years of volume growth and performance, we are actually on a tailwind basis delivering a high single digit growth in terms of volume, around 8% to 10% growth.
So Mavic typically is a growth company where from one quarter to another, from one season to another, we’re able to grow. A bit of distortion on two fronts has taken place. One, there was the earthquake and then no earthquake time zone and then this period coming in. So there was a bit of ups and downs plus a bit of the what we call the holiday period, real estate period moving fifteen days every year towards into the quarter. So these are all distorting the whole picture to a certain extent in terms of planning across the seasons.
If you take away the first six months as a bundle, which will be probably finally a normalized period for us, which is from this February until July. Our numbers will come out sort of even or flat. From next fall winter season starting, hopefully this will be behind us in terms of ups and downs and we will be tracking more on the generic MAVI single digit growth, which is what we plan for from one season to another as always and we’ll continue to grow our business from there. Therefore, this first half of the year, we’ll be looking a little more nasty when it comes to numbers in terms of headwinds because of the base impact. But when we go into a fallwinter impact, numbers will normalize and hopefully a bit of these ups and downs that we have witnessed previously will normalize.
Therefore, we have to this year when you look at it from one quarter to another and if you weren’t really following MAVI every quarter, it might be a bit of a confusing year, which is also putting a bit of a pressure on us also in terms of when it comes to planning, what would be like, etcetera. But again, a side point I would like to say is last year our square meter growth accounts for around 4%, five % growth should organically contribute to around 4%, five % growth if everything goes normal. This year we have another 20 stores and 15 expansions. Across the year, of course, it’s not annualized, but that should add another 3%, four %, five % volume growth. So if you put it all together, we are on a base level targeting at a high single digit growth.
Then we have to also factor in some headwinds for the first half of the year and softness in the market, therefore, which brings all of us to the guidance where we are saying it will be a low single digit growth for this year under normal circumstances. As always, internally, we of course are not happy. We want to do better than this. We want to see if we can do more product innovation, improve our services, improve our store layout, get better products, do better marketing, etcetera, to beat these numbers. But at the very onset of the year with a lot of uncertainties going on, that’s how we view the numbers.
Teotush, Analyst: That’s super helpful.
Junay Thiago, CEO, Mavi: If you have more specific, I can give you a bit more detail, but hopefully that gives you a flavor of how we are viewing this year overall.
Teotush, Analyst: No, I think that’s very helpful. So thank you very much for that comment.
Junay Thiago, CEO, Mavi: I don’t see any other questions coming in. And if that’s the case, as always, Bruno and Aya team and my CFO and Mehmet and Vijay are always more than happy to come back and help you with any other question you might help, so am I. I wish us all a happy, healthy New Year. I look forward to seeing you as we present the first quarter results in a couple of months. Tough year ahead, but we are all gain, we are all positive.
We feel blessed for having the Mavri brand and the franchise that behind us and we look forward to tackling any challenges that might be. So all our best and take care. Bye bye.
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