Safilo Group S.p.A.

Good evening and welcome to the Staffalo Group's First Quarter Trading Update. This call may contain forward-looking statements relating to future events and operating economic and financial results for Staffalo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty due to the fact that they depend on the occurrence of certain future events and developments. The actual results may therefore vary even significantly to those announced in relation to a multitude of factors. Today's participants are Angelo Trocchia, Chief Executive Officer, Gerd Gwesler, Chief Financial Officer, Barbara Ferrante, Director of Investor Relations. I would like to have the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin.

Hi, good afternoon, everyone, and thanks for you, and thank you for attending the today's conference call on FASILO Quarter 1 2020 Trading Update. Quarter 1 2020 will be, and I think everyone of you can agree, will be mostly remembered as the beginning of a period of unprecedented and really extraordinary challenge in which our thoughts and actions have been first and foremost focused on the health and safety of all our people. We have immediately and in a very rigorous way implemented in all offices, in all locations of Safilo, all safety and prevention protocols. Everywhere, as I said, manufacturing, distribution center, headquarter, distribution center abroad, starting only with China, Hong Kong, and Shanghai, and then country, country after country, and ending in all the commercial procedures. I really want to thank again each and every one of our people for the huge effort that they have been doing and they are making every day. and the commitment and dedication that they have really continued demonstrating throughout this time. And in this period of strong business challenge at Asilo, we want also to give not only to show our closeness to our people, but also to give the possible support of our communities. and the health care professionals who are every day in the front line to respond to this health emergency. We have launched the activity Hashtag United for Eye Care, our global corporate activity put in place in different countries by Paso and its brand for the production and donation of safety glasses, goggles, and face shields to supply to hospitals and frontline medical workers in clinical needs around the world. I will take a few additional minutes at the end of the presentation and I will give you more insight on this specific project or activity. At the same time, we have immediately focused on doing everything possible to support our customers ensuring seamless operations and business continuity. I'd just like here to remember that also in the peak of the crisis in Italy, we didn't have any disruption. We've been continuing to provide with no disruption service to our capital, taking orders on 24 hours, seven days on our online and via our B2B website. And our customer service, which has been working completely, is not working, has been fully assuring the full service to the customer. So people, our people, the community, but also the customer in the heart of all what we've been doing. We've been also offering to our customers a series of very well-received virtual training seminars on a variety of topics from brand, product training, visual merchandising, and eyewear technology. And we will continue to make these initiatives available to our customers, staying connected and ready to restart together also in the new ways, also in this new environment. Today, our production and logistics sites in Italy and elsewhere in the world are partially operative to ensure manufacturing and service levels, which are fine-tuned on new consumption scenarios. While in our headquarters in Padova, we are mixing and alternating between smart working, temporary layoffs, and holidays. We have expanded the smart working solution to the vast majority of our office people, almost in all our offices around the world, using laptops, remote phone systems, and video technology. And I have to say that maybe in this field we have been even more engaged, both internally and both externally, even more than in normal times. So in this very special circle, Francis, we have set up since day one, I'm talking about early need of FAB, we have set up a global crisis team meeting every day morning and talking every day to our leaders around the world to assess together how lockdowns and business sentiments are evolving and modulate according to our contingency and recovery plan. we are strictly focused on minimizing extractionary expenditures and topics, adjusting marketing plans, and implementing as much of an effective working capital and cash protection management as possible. In the context of the measures to contain costs, the member of the board of directors have renounced two parts of their annual director compensation, and the extended global management team have renounced part of their annual compensation and education. The situation we are experiencing is, anyhow, on one side, one of the most complex we have ever seen. I think no one of us has really gone through such an experience. is aware, and I'm really, really strongly convinced about that, offering us opportunities to accelerate the digital transformation we have outlined in our strategic plan 2020-2024 that we presented last, December last. And why this acceleration will be happening? Because we are fine-tuning a series of action and tools which will allow us to even more effectively address this new context, working better and more effectively with our clients and consumers throughout the world. In these days, this field has shown that digitally we can keep in contact with our consumers, we can keep contact with our customers even better. Just let's recall that our digital transformation has three main legs. Digital marketing, the B2B ecosystem, and the D2C economy. In these days, we continue to work on several fronts to achieve this goal. Specifically, we work hard and we even accelerate to progress on the development of our new business-to-business platform for clients and on the new CRM program and initiatives to drive as never was needed in this moment, try traffic in store when the shops will start reopening. We expect to start rolling out the B2B ecosystem from summer 2020 in Europe. We are furthermore working to sharpen digital marketing campaigns, which will restart with gradual investment when the markets will be ready and when we start working tightly, and on the other side, we have been start working tightly with pre-variable to cross-fertilize capabilities. I think pre-variable is taking exactly, is exactly spotted on what is working during these days. Finally, on the D2C e-commerce, we have seen this channel significantly outperform the market as consumers have shifted shopping preferences online, reinforcing a trend that has already been before, was very clear already before the COVID time. This has driven the business of SNF, but also has been a positive for the online business of Privy Law, which even these days is getting ready to launch its LX optical propositional online in the US. we are confident that we will be able to close our second acquisition blender within the second quarter, whose fully online business has also continued to grow disproportionately since the beginning of the year. As we have already commented, first quarter of 2020 started well for Safilo. We had a solid and promising January and February, overall up mid-single digits, particularly positive for our own core brands, Carrera, Polaroid, and Smith, which were up double digits in the two months, but also for some of our core licensed brands, Hugo Boss, Tommy, Jimmy Choo. We are on top of the launch of our new three partnerships, David Beckham, Levi's, and Missoni, at the beginning of February. We are quite prepared to go, to enrich our own brand portfolio of different business propositions and new brands in this new digital marketing arena. As is known, offices business trends were suddenly interrupted in the month of March, first in Italy and from the middle of the month across Europe, and then very, very fast to the US, as the outbreak has been spreading really, really fast all over the place. And it was starting from those last two weeks that the most severe measure of national lockdown and halt of business activity were imposed by the public authorities in the affected countries, more heavily disrupting the performance of the month and our first quarter's results. On April 6, we anticipated expectations for our quarter 1 net sales to decline by 11, in range 11.13% at constant exchange rate. Revenues were eventually down 11.5% at constant exchange rate, minus 10.8% at the wholesale business, excluding the production agreement with Carrick. On the other hand, our adjusted ABTDA margin declined disproportionately to 2.6% of net sales from 8.1% in the same period of last year, dragged down by not optimized supply chain factory utilization, so a reduction of the supply chain efficiency, which has been driven by temporary shutdown of the manufacturing and sourcing activities in China, but also by a subdued operating leverage as the big drop of business occurred in one of the seasonally most sizable months of the year in terms of sales and costs. On the liquidity front, the first quarter, our cash needs remain under strict control and we close the period with a group net debt of 135.5 million euros including IFRS 16, including the acquisition of Privedivo, the latter fully driving the around 61 million euros increase in the position compared to December 2019. Today, we are actively utilizing our credit facilities in order to maximize cash management flexibility and responsiveness. And we are also actively accessing current and future financing opportunities, including the possibility for our group to access the financing provided by the so-called Italian degree of liquidity. I stop here, and I know where to get for some additional comments on top line and bottom line.

Thank you, Angelo, and good evening to all of you connected in the call and the webcast. Let me then look in some more detail at our net sales, which in the first quarter equaled 221.1 million euros, down 10.6% at current currency, and 11.5% at constant exchange rate all in, and minus 10.8% at constant forage at the wholesale level. This decline was entirely driven by the drop of volume, while the sales mix remains slightly positive, together with some forage tailwind. Following what Angelo has just commented, in the months of January and February, all our own core brands, Carrera, Polaroid, and Smith, had positive accelerating trends compared to last year, which allowed them to close the quarter with a more moderate decline, overall down 3.4% at constant exchange rates. This performance was driven by Carrera, down 5%, and Polaroid, down 7%, at constant exchange rates, while the sales of Smith remained slightly positive in the period, up 0.7% at constant forex, thanks to the positive performance of the sports channel and of his online business, which in the period was up 4%. This leads me to highlight that in the first quarter, our total online sales increased by almost 25% at constant exchange rates, representing 6% of the group's total revenues from 4% in Q1 2019. The positive performance was spurred by the strong business recorded with the main internet pure players we work with, a positive dynamic that we have seen continuing into the month of April. As for our licensed brands, Tommy Hilfiger, Hugo Boss, and Jimmy Choo were relative outperformers among licenses on the back of their strong start to the year, while the contribution we had from the launch of our three new brands David Beckham, Levi and Yisoni fully compensated the decline we recorded on Dior, which, as a positive note, did not exceed our budget projection. Finally, the acquisition of Privé Riveau contributed for one and a half months to the quarter for 5.5 million euros, all recorded in North America. Let me now go to our sales performance by geographic area. Net sales in our biggest region, Europe, declined 13.5% at current and constant exchange rates, with a wholesale business which was down 12.2%, mainly due to the significant contraction we recorded in March in Italy, which was the first European market to be severely hit by the outbreak of COVID-19 and by the subsequent lockdowns implemented by the Italian government. The rest of Europe, in particular Spain and France, sadly and quickly declined followed suit in the second half of the month, enough of a setback to drag South Europe quite deeply into negative territory. On the other hand, business in Germany, northern and eastern Europe countries remained more sustained, driven by Hugo Boss, Polaroid, and Tommy Hilfiger. In North America, net sales recorded a contraction of 7.8% with constant exchange rates, a performance which reflected a significant deterioration of the business environment suffered by the market starting from the second week of March, when the majority of customers stopped accepting sales reps' visits for order collection and immediate delivery. This was the case for an increasing number of independent optical stores, chains, and department stores, which were then eventually to shut down. The consequences of this severe lockdown were more heavily suffered by our U.S. brand portfolio, Fossil, Juicy Couture, Banana, and also Kate Spade, while in the upper contemporary and fashion luxury segment, Fendi and Marc Jacobs were the two mostly hit. On the positive side, to support our overall sales performance in North America, the just-mentioned acquisition of Privevo, a U.S.-origin brand which goes to enrich our Encore brand's portfolio, but also the very resilient performance of Smith, up 3.5% at Constant Forge in its home market, Hugo Boss, which progressed very well for the greater part of the quarter, And relatively speaking, I'd mention also Tommy Hilfiger, clothing Flattish and Carrera down mid-single digits. Moving to our emerging markets, Q1 in Asia-Pacific declined by 17.5% with constant currency, hit by the early lockdowns imposed in China to respond to the COVID-19 outbreak, which strongly impacted our business, in particular towards the travel retail channel, chains, and the boutiques of our fashion houses. Business to independent stores in China was relatively more resilient, together with our sports business Smith in Australia. To conclude in our top line, in the rest of the world, net sales were down 10.5% in constant exchange rates, mainly as a result of the significant sales deterioration we experienced in Brazil, while positive trends resumed in Mexico after the deceleration experienced in the fourth quarter, and also in the IMEA markets, the sales recorded to growth compared to the same period of last year. Let's then move to the key items and topics of our growth operating performance. As usual in our quarterly trading updates, we provide our EBDA and adjusted EBDA and we do it now exclusively post IFRS 16 as the periods are now fully comparable. As already highlighted by Angelo, the decline in profits and margins was significantly higher than what we experienced at the top-line level, and this was, for a greater part, due to the negative dynamics we suffered at the gross profit level. In the first quarter, our industrial profit equaled €109.4 million, down 16% compared to the previous year, while the margin on sales contracted to 49.5% from 52.7% a year ago. A dilution of 320 basis points, which is mainly explained by the overall lower efficiency of our supply chain due to temporary manufacturing interruptions and half-sourcing activities in China between January and February, with their gradual recovery during the month of March and also a higher impact from obsolescence costs as we increase our related provision at the end of the quarter to account for the current scenarios. On the other hand, sales mix was more favorable on gross margin as the lower weight of the clearing supply business outpaced some negative impact deriving from the decline of the oil. Below the gross margin, to arrive at our adjusted EBDA of 5.8 million euros, which is equal to a 70.8% decline compared to the same period of last year, we suffered a further 230 basis point margin dilution due to the strong operating deleverage we recorded in March, which is one of our biggest months for sales, but also for marketing and selling expenses. While cost containment measures started to be adopted quickly in the month of March, there was not the short-term opportunity to adjust the cost so drastically. As far as our overhead savings program is concerned, this indeed continued into the first quarter for a total of 3 million euros. Finally, on my side and anticipated by Angelo already, our net debt at the end of March remained under control, standing at 135.5 million euros post-IFRS 16 compared to 74.8 million euros at the end of December 2019 and 105.7 million euros at the end of March last year. Group net debt included an IFRS 16 impact of 45.5 million at the end of March 2020, close to the 47 million euros booked at the end of December last year, while the accounting impact was higher at 79.3 million euros in March 2019 when the Solstice retail business was fit in our books with its store leaseholds. The position at the end of March 2020 also reflected the €61.6 million for the acquisition of the 61.34% controlling interest in Privé de Vaux, of which €30 million were financed through a subordinated loan provided by Santiago's reference shareholder and for the remaining portion through our available resources. The increase of our group net debt at the end of March 2020 compared to last year in the end was fully driven by the acquisition. Despite the deterioration of our economic performance, we had more favorable working capital dynamics, meaning the seasonal cash absorption was lower than in the same period of last year, mainly following a decrease in inventories at the sufficient stock levels we had at the end of 2019, granted us the opportunity to continue serving the positive market demand between January and February. Although we do not usually provide on a quarterly basis and it's not relevant for testing in this occasion, we are also highlighting the financial leverage which increased to 1.6 times at the end of the quarter. The way it is calculated is excluding the impact of IFRS 16 and the €30 million subordinated shareholder loan for the acquisition of Privé Nouveau. Following on Angelo's comments, I would also like to confirm that we continue working with all our credit lines available, which we have fully drawn in the quarter in order to maximize available liquidity and minimize time to action. We are in parallel in active talks with our lending banks to assess the new financing resources provided by the Italian in order to strengthen the group's liquidity position and to safely navigate through this period that is quite exceptional at the moment. I hand it over to Angelo for his final remarks.

Okay. So, first of all, I'd like to give you an update on how the business has evolved after the closure of the first quarter. As expected in the month of April, the business activity showed a rather significant deceleration compared to March. Reflecting the almost complete shutdown of the various distribution channels where we sell our products, with the online business which was the only exception. In China, where the virus emergence seems to be normalized, in April we recorded a meaningful improvement compared to the exit speed we recorded in the month of March. And this is indeed a very encouraging business. And the signs we are receiving from China are every day more encouraging. Despite the possibility to see such positive dynamics soon across our key markets following the easing of the lockdown and restrictions that the different countries are now envisaging, we expect such a restart between May and June to be very gradual and patchy. For this reason, while it is still very difficult to have a vision on how much recovery we will experience in these coming months, it is no less clear that our second quarter net fail will be hit more heavily than what occurred in the first quarter, with a consequent greater contraction of our operating results, which are now forecasted to be in negative territory. Clearly, we will keep you posted and updated on how our business and sector environment will evolve, notwithstanding the impossibility to provide a new outlook for the full year, given the still high level of uncertainty surrounding the pandemic and the future recovery of worldwide economies. Obviously, we need to see keeping track on how the lockdown will be eased around the world. I want to conclude by briefly coming back to the activity so-called United for Eye Care project, under which we are today repurposing a portion of our manufacturing to produce safety glasses and facial shields to supply Italian hospitals in critical need. These are certified personal protective equipment devices produced in our plants in Santa Maria di Sala and in Bergamo. I'd like us to remember that Bergamo was one of the worst-hit regions in Italy. After the first launched batch of 10,000 pieces, equally divided between face shields and protective glasses, which were delivered to Papa Giovanni de Tedesimo Hospital in Bergamo, different hospitals in Milano and in Roma, in the Padova area, in Latina, in Brescia, we are producing more to continue supporting health workers on the front line in Italy's fight against COVID-19. These donations, all branded Carrera, are also running at international level. In Spain, which has been a second country in Europe strongly hit, Polaroid is making a contribution to local health care facility, donating 5,000 medical protection masks to operators involved in the COVID-19 health emergency. The supply is delivered to 15 hospitals in a certain number of care residents located between Madrid, Barcelona, and other cities in Spain. In U.S., Smith has joined Gallup for Doctors, a movement to support local and national personal protective equipment shortage across U.S. Smith is currently sending new and used goggles to fulfill hospital requests, and will continue to promote the program, encouraging its community to, on a voluntary basis, donate on the individual level. Also, Blender Eyewear has converted part of its production to make protective glasses for healthcare workers. 10,000 thousand medical devices approved by the Food and Drug Administration have already been donated to hospitals in San Diego and in Los Angeles and is collaborating with Direct Relief and International Humanitarian Aid Organization to supply another 20,000 pieces to the most difficult carriers in the United States. In addition, for the entire month of April, 5% of Blender's eyewear online sale will be donated to the same direct belief. This project or maybe this activity is having an important impact on several manufacturing companies and Italian opticians have shown some great interest for this protective device for internal use or for the workers. said that. We stop here and we wait for your question.

Thank you, ladies and gentlemen. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, if you wish to ask a question, please press star 1 on your telephone. Please stand by while I compile the question and answer list. This will take a few moments. Your first question comes from the line of Cedric Rossi from Brian Garnier. Please ask your question.

Yes. Good evening, everyone. I just have one question regarding the outing. So, Andrew, I heard the current training you gave on April and May, but I just wanted to have more follow on the mood of the retailers from the discussion you have currently with them. if we take the two main categories, so prescription and sunglasses. So I assume that prescription, I'm trying to figure out what to be the trend once the stores reopen. So regarding prescription, I can understand that many people could not get their high exams during a few weeks. And given the sanitary measures in stores, we can expect some bottlenecks. So probably the return could be a bit longer than expected. And regarding sunglasses, I can understand that the start of the season was disrupted by the store closures. But given what's happening for fashion groups, that succeeded in extending the spring-summer collection. Do you also expect, for the sunglass category, also to extend the scientific season that could go until July or November and enable you to catch up with the top staff to the quarter? Thank you.

Okay. I mean, first of all, I think we need to understand that in this moment, we have quite a patchy situation in terms of retail. Let's try to start region by region. In Asia, I mean, and also within Asia, let's look to Hong Kong and China, we are getting definitely positive returns. positive feedback for the retail. So let me say China is, from a retail perspective and from a retail, customer and consumer perspective, let me say we see clear sign of positive mood and the traffic also within the respect of the current limitation, the traffic is back there. If we go to Europe, Europe in this moment is divided in two. So you have the North, Denmark, Norway, Austria, where the retail and Germany, where the retail has reopened. The current number is that still, yes, they are reopened, but not all of them are open. And anyhow, they still... a drop in traffic around 50%. So it's really a traffic drop. So let me say, going back to your question, that the effect is similar between prescription and sunglasses. Obviously, it's lighter, worse on sunglasses. If we go to the rest of Europe, Italy has opened Monday. Spain and Portugal and Greece, I think there will be closer to reopening to Italy, Spain and France will come a little bit late, and now UK looks like they're going to be the last in the road. So, it's very important to understand that there is quite a patchy reopening process, also in terms of traffic, and this is the reason why it's a little bit difficult to really understand what is going to happen, because clear here, time is quite crucial. And I comment partially on why time is crucial. If you look to the US, I mean, most of the fuels, they are in the reopening, in the reopening mode, but still... still quite slow there, so we don't see the speed of reopening that, in a way, we were expecting. But the US is quite difficult to understand if now Trump is really going to give a little bit more push on that. So, as I said, very patchy situation by region and within the region by country. And here, to answer to your question, prescription versus sunglasses, is always that if the speed of reopening, let me say, if by mid of May most of Europe is going to be reopened and the US will accelerate, I think there is a space to stretch the sunglasses. Obviously, if the reopening is going to happen too late, then it's obvious that the retail will be very nervous. So in this moment, the answer is really depending on how fast the reopening will happen there. I have to say that, as I said, we are very, very tight in connection with the customer because we've been really kept a channel open with them. But obviously they are saying, look, let's see how the traffic will go in the next, I think what is crucial is the next two weeks. So if in the next two weeks the traffic in the countries which are already reopened will increase, and if the US really speeds up the opening, then I think the sunglasses season can be safe and can be even prolonged. If the lockdown will be too long, then it will be much difficult. So the next two weeks, according to all the discussions we are having with the customers, are going to be crucial.

Okay, super.

Thank you very much.

Thank you. Once again, if you do wish to ask a question, please press star 1 on your telephone. Your next question comes from the line of Domenico from Iquata. Please ask your question.

My first question is a follow-up on the situation. I'm trying to understand what is the inventory level in the retailers, so if they really stopped bringing the purchase and so you are really strictly meaning to be safe because as soon as they are starting, they will start the reorder or if they were stuck with some inventory in the stores. I wonder if there are discussions, what kind of discussions there are with the brand owners, with different brands for the collection. So how would you manage, they manage, and you manage the spring-summer collection? Any chance of getting rid of the unsold inventory together in agreement with the brands? And third, just a clarification on the guidance you gave. So when you say, okay, you are expecting negative operating results due to what you are referring, I presume, to a beta level already. And fourth question is on blenders. Can you explain why the dealers have been closed yet? So there is any risk on that? or is 32 really the deadline? And last, but probably not least, on the liquidity side, can you remind us, so what is the level of liquidity to have, and are you discussing for additional, you were referring to the first of liquidity also, can you give us a sense of what is the size that you can get from this, if you have already the liquidity?

Okay, so I will answer to the first two. I will answer to the easy one, and Gerd will answer the pretty difficult one. I mean, this is the criteria of the choice, yeah. So in terms of the inventory, I have to say, I think that obviously the retailers, they have some inventory because, you know, the block, the lockdown was quite sharp. I think this is why now the retailers are... let me say, in a look-and-see mood, in the sense to say what is going to happen in the next two weeks on the traffic and then to understand what to do on the inventory. But I don't think that due to the fact that somehow the lockdown has happened quite early, I don't think that, yes, we are sitting on the inventory, but I don't think it's really a huge inventory. Also because Due to the China supply crisis, which has not been our case, but some of the suppliers have been short in delivering in the beginning. So, yes, obviously, it's typical of this industry to have an inventory. I don't think it's really a big, big inventory. The real question they have, and they are surely open with us, is what is happening on the traffic in the next two, three weeks. In terms of spring summer of collection, here we took the decision, which I don't think everyone took the same decision. I think that, first of all, the reason why January and February we were really performing very, very well was because we decided to anticipate the January collection. So we were ready at the beginning of January really with the collection, which has never happened in the year. And this was a decision taken pre-COVID. During COVID, we have anyhow decided, this has been our decision, to keep the April collection. I'm not sure that all the suppliers have taken this decision, but we took this decision to give to the retail the possibility to have some new things to sell when they reopen. So we have kept a smaller, but we have kept the April collection, and we have kept the April collection, the August collection. So in terms of collection, working on the quantity and working on the number or on the breadth of the collection, but we took the decision to keep both the April collection and the August collection. I'm not sure this has been the same for the other, but the point here is that I think, especially in these moments, We need to give help to the retailer. And one help is try to work with them to drive traffic. The other one is to have news to the consumer and then, you know, tell a story to the consumer to buy it. So we took, as I said, being very tight on breadth of the collection and volume, but we took this decision. I'll pass the mic to... Yes.

Okay, on the third question, yes, the operating line guidance for the second quarter refers to the EBDA. On blenders, why is it not closed yet? There was one step outstanding that required the, let me say, the clearing from certain US authorities. Those authorities, in the wake of the coronavirus, have obviously been overwhelmed and understaffed and closed so this has taken a little bit longer but at this point we are almost there so there's nothing wrong with the transaction and we expect that in the coming weeks and certainly within this quarter we are going to have the closing. On the last point of the liquidity Let me put it this way. So starting point is the net financial position that we had in March of the 135.5, within which we had a cash balance of approximately 100 million. If I look at where we just closed April, because April clearly was a very difficult month in terms of business, as you can imagine, the net financial position of April is substantially in line with with that one of March, you know, so basically the cash protection that we have been able to launch very quickly has shown results so far. Then what we are doing is, let me say, on the operating side, we are focused on strong cost reduction, marketing, of course, because the consumption scenario is different, personnel cost, leveraging social tools and amortizers, everywhere in the world, from the United States to Australia, Europe, Italy, everything, and reduction of any discretionary GMA. We have minimized CapEx, so we have taken away everything that is discretionary and minimized the cash outflow in this period. Now, the critical point is The same as a restart, which I think at this moment, as Angela was also saying, is patchy. I think it's a fair assumption for any company that probably lockdown measures are going to be listed within the second quarter. I think it will be critical to see how quickly our business will come back, both in terms of sales, but also in terms of receivables collection from customers that have been closed for some weeks. And so how that exactly will come back in May and June I think is going to be critical considering the in-going position of the end of April that I just mentioned. So I see the business and also the liquidity of the company under pressure in the second quarter for sure. For how much and for how long I think will depend on the speed and death of the recovery. So on top of this operational stream, let me call it, we are running the financing stream, which on the one hand, we wanted to be sure that we have all cash and liquidity on existing lines with us so that we have minimum time to action and we have drawn all the existing lines and we have now new opportunities in particular the Decreto d'Iquidita in Italy but there is also other schemes in different countries around the world so we are in active discussions with the banks on this one to do all we can possibly do in order to bridge this period operationally and financially. I think the Decreto would consent us a very significant size, more than I think we would need in any scenario, because we do have a significant footprint, a significant personnel cost, and also turnover here in Italy, so this is indeed, I think, a promising approach for us. But it's a road that is not necessarily a fast one, because this is a process that is run through government and banks, etc., will take some more time to go through it, but we are on it.

Thank you. Once again, if you wish to ask your question, please press star 1 on your telephone. And you have a further question from the line of Cedric Ruffy from Brian Garner. Please ask your question. Perfect. Cedric Rossi, your line is open. Please ask your question.

Yes. Sorry. See you again. I just wanted to have an idea of the performance of Blender's hours in Q1. Was the brand still in the positive territory? Thank you.

North of 30% growth.

Okay. Super. Thank you. Yes.

You have a further question from the line of Domenico Galotti from Equeta. Please ask your question.

Yeah, it was just a complete review on the working capital side. I was wondering what are you doing in terms of payables? So it's a very good performance in March, in April, sorry. We're also supported by payables.

Yep. So let me say that there are two trends. I mean, so far, I have to say that on the receivable side, we have been still able to collect, let me say not normally, but at least satisfactorily considering the circumstances. On the other hand, we are working on payables, actively working on payables. We have had discussions with many of our suppliers. Obviously, everybody is in the same situation. It's not a classical problem. and we have been renegotiating due dates of payments, and we have been able to roll forward the due date of some payables in this period in order to also help protect the liquidity and rebalance a bit the receivable and the payable dynamic.

Okay. And just to follow up on David's question on the think-tank collection, I was wondering, because I'm listening to Montclair, they are taking big write-downs on the products, on the collections, on the spring-summer collections. I'm trying to understand if there is the opportunity of discussions ongoing with your license or in terms of taking back the spring-summer sun collection is really the season is not kicking in.

Do you mean, Domenico, are we taking back products from the licensed or boutiques? Or are the licensors ready to take back products from Saxony?

Licensors are taking from Saxony in order to clean up the market, in order to avoid that basically you have to inventories and to move to the new season. As we are hearing from, for example, retailers, we will try to sell next year. But I think that Brent will try to avoid this kind of disruption.

This phenomenon is not in our case. I mean, first of all, I mean, we own, we own, I mean, we own the stock. I mean, we own the product. So there is not this kind of discussion. But I have to say, we have been very, very tight on, personally, I don't think that we have this risk in the sense that in most of the shops, we were delivering the January collections. So, personally, I don't see this risk. The risk will be more, as I said, it's crucial what will happen between May and June. Because if the lockdown will keep longer till June, then that case is an issue for the funds And for the August collection, which we can start slowly. But otherwise, I don't see your point. I don't need that.

So also in terms of your own inventory, so apart from what has been already delivered to stores, it's not...

that high, so it's not unusually high, so you have not produced some... No, no, you know why, because I can, at least, I mean, I can talk for us, I mean, we've been, first of all, we've been very, very tight, we were already very, very tight in managing the stock in January, And then as soon as we saw that, we stopped it. So we were not sitting on huge stocks. So for me, it's not so much an issue of stock now. For me, the issue is that related to what is happening, what is more happening, how big can be the August collection. But I don't see a huge deterioration on our stock position because we have been managing it very, very tight.

I think we had more of the dynamics at the end of December 2019. We had an increase in stock and we had a negative flow from inventory. And I remember, of course, the discussions in January with numerous investors that, ah, why are you building stock? Then the whole COVID crisis hit China, disrupted the global supply line, and we were able to use that inventory, which was fresh product. I mean, it was anyway January collection. We also were afraid a bit, maybe, for the restructuring in case we have some disruption in the factories, which never happened in the end. We have the stock, we sold the stock, and we were able to significantly reduce the inventory. In this period, I mean, March and April, we are obviously managing very carefully the stock levels. We are producing only where we have either a back order or we have a confirmed demand, for example, locating, you know, as long as the orders keep coming, we keep manufacturing. and then whatever else, we basically close the factories and we utilize the social tools to offset the stranded cost as much as we can.

Okay, very clear.

Thank you. There seems to be no further questions at this time. Please continue.

Okay. Thanks very much to everyone. Have a nice evening. Thanks very much.

Thank you.

Thanks. Bye. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.