Safilo Group S.p.A.

Good evening and welcome to the Safilo Group Full Year 2024 Financial Results. This call may contain forward-looking statements related to future events and operating economic and financial results for the Safilo 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 result may therefore vary even significantly to those announced in relation to a multitude of factors. Today's participants are Mr. Angelo Trocchia, Chief Executive Officer, Mr. Michele Melotti, Chief Financial Officer, and Ms. Barbara Ferrante, Director of Investor Relations. I will now pass the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin, sir.

Thanks. Good evening, everyone, and thank you for joining us today to discuss Safilo's full year 2024 performance. As we all know, 2024 was a year shaped by economic uncertainty, geopolitical tensions, and shifting consumer behaviors. The Iowa sector was not immune to these challenges, as market conditions weighed on demand across different regions. Despite this, we proved our resilience and flexibility, successfully navigating market headwinds and consolidating our competitive edge. We achieved this by leveraging dynamic brand portfolio management, making targeted investments, and maintaining a steadfast dedication to the quality of services, both for our customers and consumers. Today, I will walk you through our key business highlights, followed by an update on our sustainability progress. then leaving Michele to guide you through the details on our sales, economic, and financial performance for the full year. Turning now to the highlights for 2024, let's start with our top-line performance. Our total sales declined by 2.3% at constant exchange rates. a result that reflects the combination of still unfavorable market dynamics in North America and the impact of concluding the Jimmy Choo license, two headwinds which were mitigated by the continued positive performance of Europe. If we exclude the effect of the license phase-out, our sales trend was slightly positive, thanks to the combination of our key growth drivers, in particular Carrera, David Baker, Tommy Figer, and Carolina Rivera. Now, while the revenue environment remained challenging, we saw clear progress on our profitability metrics, driven by the improvement of the gross margin, which reached nearly 60% of sales. reflecting the increased efficiency of our industrial footprint and an effective pricing strategy. From a financial perspective, we also demonstrate solid cash generation. We declare cash flow from operating activities which exceed €70 million. This allows us to support key investments, namely the acquisition of the perpetual license for the eyewear by David Beckham, a strategic move that significantly strengthens our home brand portfolio, which as a result now represents approximately 60% of the total revenue. Last year, we also substantially completed the long-term stabilization of our licensed portfolio. This involved the early renewal of Boss & Hugo and Marc Jacobs, alongside the continuation of our important partnership with Moschino, Missoni, and Levi's. Building on this momentum, at the beginning of this year, we successfully renewed Under Armour and D-Squared. As a result of all this work, we have now secured roughly 80% of our licensed portfolio through 2030 and 2031. Building on these business highlights, I would now like to focus on the performance of our key home brands. which continue to be a central pillar of our strategy, demonstrating both resilience and growth potential despite a market environment that remains challenging. On one hand, we saw strong headwinds driven by successful distribution expansion, solid consumer demand for optical frames, and brand equity reinforcement in key markets. On the other, we faced headwinds from weather-related impacts on sunglasses, a soft sport business environment, and more cautious wholesale purchasing trends. Let's talk about Carrera. Carrera was a standout. We saw double-digit growth in both Europe and North America, and it's exciting to say that the U.S. is now Carrera's number one market, a testament to its growing global appeal. What's really resonating is the Carrera Women collection. It's been incredibly successful, and we have seen strong performance across both optical and SAR categories. And, of course, I want to advise the Carrera Ducati collection. It has continued to perform very well. We have seen strong interest from the sport and fashion forward consumers. The quality of the collection and the brand recognition has been a winning combination, demonstrating the brand's versatility and strength in diverse market segments. If we move to Polaroid, Polaroid faced a bit of a challenge with the sun season in Europe delayed by adverse weather conditions in May and June, which impacted early summer sales. Despite the challenges, Polaroid managed to close the year with only a marginal slowdown thanks to a strong recover in the fourth quarter. This rebound was mainly driven by the optical business, but sunglasses were also moderately positive, signaling improving momentum heading into the new year. Last year, Blender had a very challenging quarter four, largely due to a tough comparison with the same year of 2023. which had been boosted by the success of its first collection in collaboration with Coach Prime. On the other hand, in 2024, Blenders continued to expand its wholesale network as we kept progressing with the brand's omni-channel strategy. Recently, we have observed intensified price competition in Blenders' market segment, prompting us to react more swiftly. Let's talk about Smith. Smith also experienced its specific headwinds, impacted by lower winter pre-order and the soft summer bike business, reflecting broader challenges in the sport and the outdoor sector. However, its direct-to-consumer challenge remained robust, and we saw a strong Q4 rebound, driven by a positive start of the 2025 ski season. So also in Smith's case, we had a moderate overall slowdown due to this market fluctuation. But the brand continued to reinforce his strong competitive position. And to finish, let's talk about the VBECA. The VBECA, which had another phenomenal year. We achieved high double-digit growth across Europe, North America, and Middle East, driven by strategic distribution expansions. It's been great to see the brand benefit from a real well-balanced product mix with both optical and some collections contributing significantly to its success. Before handing over to Michele, I would like to brief you also on our sustainability journey, as 2024 was a year of significant progress on this front. One of our biggest achievements was further reducing our environmental impact. By the end of the year, 95% of our electricity consumption was covered by renewable sources, up from 90% in 2023. This milestone helped us achieve a 90% reduction compared to 2023 in Scope 1 and Scope 2 emissions. At the same time, we made important advancements in sustainable products. Last year, the share of new collections made by recycled or bio-based materials increased to 23%, up from 70% in 2023. And for some of our brands, this percentage was even higher, over 90% for Polaroid and more than 40% for Bose. Tommy's figure and relax. These results, together with upstream live chain improvement initiatives, helped reduce scope-free emissions by 5% compared to 2023. Behind environmental impact, we remain strongly committed to social responsibility. We marked 20 years of partnership with Special Olympics, a collaboration that we have now extended through 2027, reaffirming our commitment and dedication to inclusion, accessibility, and eye health. And Polaroid participation in the global Love Your Eyes campaign, promoted by the International Agency for the Prevention of Blindness, is another example of our role in advancing vision care and accessibility. We know there is still more to do, and as we move forward, we will continue embedding sustainability into everything we do. And now, I would like to hand it over to Michele.

Thank you, Angelo, and good evening to all of you. Let's take a closer look at our sales performance for 2024. We closed the year with a total net sales of €993.2 million, down 3.1% at current exchange rate and 2.3% at cost of exchange rate compared to 2023. In Q4, sales performance improved compared to the previous quarter of the year, recording a contraction of 1.6% at current exchange rate and 1.1% at constant exchange rate. As highlighted by Angelo, our full-year revenue performance was slightly positive, excluding Jimmy Choo, while it was positive by almost 2% in Q4. Our underlying sales performance reflected a mix of dynamics across different market and product categories. Europe remains our strongest performing region with independent opticians and chains proving to be our most resilient sales channel. Within our product portfolio, prescription frames continue to outperform sunglasses, affecting steady positive consumer demand for optical products across all regions. Our online business remains solid, around 16% of sales, driven by two diverging trends. On one side, we saw particularly strong performance from Smith Directing Consumer Channel, while Blender faced a softer year due to the tough comp that I just discussed. Looking at our European performance, we closed the year with sales up 1.6% at cost of exchange rate after recording a flat performance in Q4. Excluding the impact of the Jimmy Choo phase-out, full-year sales in Europe grew mid-single-digit, with Q4 up around 3%. France was one of our best-performing markets, supported by an expanding commercial network and strong demand for prescription-free. The Italian market was moderately positive, while Eastern European markets posted strong results, in particular Poland and Turkey. Last year, Germany was also an important positive driver for us, benefiting from the growth of the internet peer-to-peer clients. The market decelerated in Q4 as the business environment became more uncertain. A key driver of our success in Europe was the continued expansion of our UN Sub-Silo B2B platform, which has now been adopted by more than 28,000 clients, helping us to improve efficiency and strengthen relationships with our partners. Among our brands, Carrera and David Beckham delivered the strongest growth, while among our licensed brands, Carolina Herrera and B-Squared led the way, along with the successful launch of Vitro eyewear collections. Turning to North America, sales were down 5.2% at cost as a change rate, with a similar trend in Q4 contracting by 4.6%. Excluding Jimmy Choo, North America remained slightly negative, penalized by an election year and the climate of uncertainty that affected business and consumer confidence. We already commented on how, throughout most of the year, we faced an unfavorable sport business environment, which impacted mid-performance. As you may remember, last year we had... A delayed start to the 2024 ski season, which limited restocking. Then the spring-summer season saw the bike segment still somehow overstock at retail level. On the other front, sunglasses remained largely weak due to cautious purchase behavior from the wholesale channel, while prescription fame continued to show solid growth, supporting the brand with greater exposure to this category. As a matter of fact, Carrera, David Beckham, Tommy Fieger, and Margecos performed well, supported by strong collection, a favorable product mix, and expanded distribution. Q4 was mainly affected by the drop in sales of blenders and by the still subdued sunglass business in the wholesale channel, which nevertheless showed signs of improvement towards the end of the year. As said, on a positive note, Smith continued to progress in its D2C channel and saw a recovery in physical stores, supported by a strong start to the 2025 ski season and a favorable comparison base. In other Pacific regions, full year sales declined by 21% at cost exchange rate, recovering most of the drop accumulated during the first nine months, thanks to a strong rebound of plus 12.9% recorded in Q4. China was a standout performer, continuing to gain traction as one of our key growth markets. The strong reception of our collection at major optical fairs in Shanghai and Beijing helped to stimulate demand and reinforce our brand positioning. In China, Polaroid, Tommy's Figure, and Ports were the brand driving our growth in the region. By contrast, in the Southeast, Asia distributor sales contracted over the first nine months of the year, affecting the overall performance. Finally, Q4 rebound was driven by China, which regained speed after its temporary slowdown in Q3, and by a nice recovery of Southeast distributor. In the rest of the world region, the year closed with a decline of 5.9% at cost of exchange rate, showing a mixed trend across market and regions. In Latin America, target retail was a weak spot, affecting overall sales. However, Brazil showed sign of recovery in Q4, held by more stable domestic demand. Last year, sales in the Middle East grew, driven by the positive progress by Carrera, Tommy Hitzinger, and David Beckham, while India saw some deceleration after a period of strong growth in 2023. Q4 saw some recovery, with sales up 2.4% at cost as an exchange rate, while the currency environment was particularly unfavorable with the significant weakening of the Mexican peso and the Brazilian Lira, which affected the overall large-run performance at current exchange rate. Turning to our economic performance, in 2024 we made another significant progress in improving our gross margin. For the full year, gross margin reached 59.7% of sales, an improvement of 250 basis points compared to the reported gross margin in 2023, a year impacted by the restructuring of the Italian footprint, while the improvement stood at 100 basis points compared to the 2023 margin adjusted for related restructuring costs. Throughout the year, the key drivers of our gross margin improvement were the increased efficiency of the supply chain following the restructuring of the Italian footprint we completed in Q4 2023, along with a positive pricing effect. Sales mix was instead an end in the year, affected by the diluted impact of ESOP's business, while in Q4 we had an unfavorable channel mix due to the lower contribution of blender D2C channel and higher contribution of sports shop. For this reason, our Q4 gross margin at 59.5%, stable compared to Q4 2023 adjusted margin, was a very solid result. At the operating level, our adjusted BDA reached €93 million, up 1% compared to the adjusted BDA in 2023, while the margin improved by 40 basis points to 9.4%. reflecting our decision approach to cost management with partially counter sales pressure on the operating leverage and some persistent cost inflation. A key factor behind this was the normalization of IT investment following elevated spending in 2022 and 2023 to accelerate our digital transformation. On the other hand, last year we continued to strongly support marketing investment, which remained high and heavily digital-oriented. In Q4, our adjusted BDA margin also saw an uplift at 7.5% of sales, marking the strongest progress versus the previous year, with a 60 basis point improvement, driven by disciplined spending on selling expenses and improved operating leverage. Moving to our adjusted net result, we closed the year with 34.2 million euros from 14 in 2023. Excluding the effect of the valuation of the optional liability on minority interest, our adjusted net performance improved by approximately 17%, also supported by the 15% decline of net financial charges, which reflected lower interest rates and a reduction in gross debt. Finally, looking at our cash flow and at that position, 2024 confirmed our financial solidity and ability to generate cash. In Q4, free cash flow reached 18.9 million euros versus 13.3 million in Q4 2023, bringing the free cash flow for the year to 16.7 million euros. This was characterized on the one hand by the significant improvement in cash flow from operating activities, which totaled 76.2 million euros, reflecting our good economic result and an efficient networking capital management primarily driven by the reduction of inventories. On the other hand, cash flow for investment grew to 48.9 million euros from 8.6 million, mainly due to the investment to acquire the perpetual license for hours by the rebecca. Last year, despite the acquisition of the perpetual license and the completion of our share buyback program for 11.8 million euros, we managed to maintain our net debt stable at 82.7 million euros, while declining by around 3 million euros pre-IFRS 16. Our financial leverage remains healthy at 0.48 times, ensuring we have the flexibility to continue investing in our growth priorities. With that, I lend back to Angelo.

Thanks, Kevin. As we look ahead, the complexities of the macroeconomic and geopolitical landscape, marked by escalating challenges, will continue to influence markets. shaping how we do business and making it particularly difficult to predict how trends will evolve in the coming months. As noted earlier, toward the end of last year and into January, we began seeing signs of recovery in North America's wholesale channels, while February benefited from a strong winter season for Smiths. March is our most significant month in Q1. We provide valuable insights into market sentiment and consumer confidence. In this context, we remain focused on strengthening our partnership, staying agile, and maintaining operational flexibility with the goal of sizing opportunities to drive a return to revenue growth. Our commitment to continuous margin improvement and consistent cash generation remains steadfast, ensuring the efficient allocation of resources and making strategic investments that drive long-term value creation. It is precisely with this objective in mind that at the end of last year, we also decided to conclude three minor license agreements, which together accounted for approximately 1% of the total sales. Our focus on our home brands has never been shorter, and we are particularly excited about the major brand initiatives and campaigns already in motion for this year. On Carrera, following last year's highly successful launch, Carrera Women will be a major priority also in 2025, further expanding the brand's reach and capitalizing on its strong momentum within this segment. And 2025 sees the launch of the new Carrera Sport Collection, which reaffirms the brand's bold, authentic identity in the world of sport. This collection extends the brand iconicity to a broader audience, the fashionable in sports, whose active lifestyles don't mean compromising on style. Additionally, we continue to build on Carrera's strong momentum by focusing on key geographies, with a particular emphasis on North America, where the brand had an amazing 2024. We are also proud to share an exciting milestone for Polaroid, our recent announcement as the official Iowa partner for ATP Tour for the next three years. This is a huge opportunity to bring the brand to a truly global stage, helping us connect with new customers and grow our presence worldwide. As part of this partnership, Polaroid will be front and center in some of the biggest tournaments, namely the Mutua Madrid Open, the Internazionale Biennale d'Italia and the Swedish Open. Benefits include prominent brand visibility, dedicated activation space in farm zone and a notable presence at kids' activities on site. We are also delighted to welcome Lorenzo Musetti, currently ranked in the ATP Top 20 and an Olympic bronze medalist as the ambassador of this partnership in the face of the 2025 Polaroid Eyewear Global Campaign. His talent, passion, and style perfectly embody the Polaroid spirit. 2025 will be another year of strategic development also for David Beckham. Our storytelling journeys continue with this new advertising campaign set against the standard backdrop of Morocco and featuring David once again to reinforce the brand identity. We have also expanded the brand distribution footprint following the success last year of the eyewear by David Beckham self-rich pop-up store in London. The luxury department store is now scaling up with two additional pop-up store locations in Manchester and in Birmingham. Even more exciting, we are launching for a prime customer of ours, the first eyewear monobrand store by David Baker in the heart of Mykonos Town, an exclusive destination with a global audience. These are some meaningful examples of how we want to channel resources into what truly matters, ensuring our brands remain at the forefront of the industry. Finally, as you will have read in our press release, we have today decided to proceed with the new buyback program for 15 million shares, equally approximately to 3.6% of our share capital. This plan represents a strategic step aimed at an efficient management of our financial resources while maintaining flexibility in order to cite any future investment opportunities a matter on which we remain constantly focused and active. This concludes our presentation. Thank you for your time, and you are now ready to open the Q&A session.

Thank you, sir. Excuse me, this is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. To remove your question, please press star and 2. Please pick up the receiver when asking questions. We will pause momentarily while participants join the queue. The first question is from Oriana Cardani of Intesa San Paolo.

Yes, good evening. Thank you for taking my three questions. The first one is on gross margin. What is your expectation for this year? Do you see room for expansion? The second question is on the evolution of marketing expenses. Do you expect them to increase as a percentage of sales this year? And the third question is on the growth profile for sales this year. what is the size of price mix effect that you expect in 2025? Thank you.

I start with the first one on the margin. Of course, as you know, we don't provide specific items on this, but of course our aim is to continue bringing to the operational level as much as possible the improvement that we will achieve at the cross-margin level, plus, of course, some better support from the operating leverage. And overall, of course, we are still aiming to continue to support and improve our profitability.

On the marketing? Yeah, on the marketing, I think, first of all, I think this year is going to be a year in which we will be managing any kind of investment and cost in a very, very tight, tight year because the uncertainty which is around is pushing us to manage like that. As a principle, we are ready to catch any opportunity, mainly investing, as I was expressing before, behind our main brand. So, you know, there is a full-fledged advertising plan, quite aggressive behind Carrera, behind the Smith, behind the Rebecca, behind Polaroid, somehow behind Blenders, but we are ready to retune. And the fact that most of our investment is digital, we can retune in a very fast way according to what we will see is going to happen on the market. Just as a reminder, I mean, our marketing spend today is already quite high. So it's not an issue of increasing so much. It's more an issue to optimize the investment behind the activities which have the high payoff. The good thing is that being most of the investment digital, we can be very flexible and very fast in reacting when we see what's going to happen behind the priority brand.

On price mix, we continue to manage actively our pricing. We do see opportunities to continue managing actively our pricing strategy. Definitely this year we will see a better support from Mix, as we will not have this year some negative contribution, brand effect on the phase-out of the Jimmy Choo close-out phase. And, yes, that's on the track.

Understood. Thank you very much. The next question is from Nicola Storer of Kepler.

Good afternoon. Thanks for taking my questions. Three for me as well. The first one is on Europe. If you can comment a bit on entry speed into 2025 in Europe, considering the slowdown you have experienced in the last part of 2024. Second question is on working capital. If you can tell us if you see further room for improvements and if yes, from where. And the last question is on tariffs. What's the current situation and how are you dealing with those? Thank you.

So I answer to the question on Europe. I mean, Europe has done well. I mean, obviously, JED and Fed, they have the weight that they have. We need, as I was saying before, we need to really wait for March because March is a pivotal month. for the quarter, but Gen and Feb, Europe has been performing well, where France, Central Eastern Europe performing better than Germany, where Germany we see some sign of softness. So we just need to wait now March, but the beginning of the year in Europe has been so far so good.

Yeah, on working capital, our goal is to maintain fair control over the working capital. We do see additional opportunities both on the inventory side and on the DSO. And this should enable us also to minimize, eventually, any working capital absorption also in a top-line scenario that should resume growth. On the tariffs, We are closely monitoring the evolving stance on the U.S. administration, the incremental tariffs imposed on Canada, Mexico, and China. Our goal is to proactively manage the risk as effective as possible, ensuring that all necessary mitigation measures are in place. In the last year, we have started to diversify our supply chain also out of China, so we are better positioned compared to a few years ago. Mitigation measures are a work in progress. Negotiation with our supplier already started and commercial action are the other important levers that need to be defined to counter tax. The ultimate impact will highly depend on how the topic settles, so potential exception, competitive reaction. We are closely monitoring the development to refine our projection forward. At this stage, it's really premature to provide a quantification of the overall impact for us.

Thank you.

The next question is from Cedric Lacazben of Stifel.

Yes, good evening. Thank you for taking my questions. I have two questions. The first one is on the U.S. demand per segment. You've had some areas of strength and prescriptions and has been slower. Players today mentioned volatility in the market and the volatile consumer. Can you maybe tell us a little more on what you've seen versus last year's trends? And is there any chance that the U.S. market turns positive this year or is it too premature? And the second one is more on the phasing, given your launches and your strategic plan. The phasing of the quarters during the year, do you expect a stronger second half or do you expect kind of a normative growth rate along the year? How do you see the year in terms of quarters? Thank you very much.

Okay, so I start from the U.S. I mean, toward the end of last year, so in Q4, we observed an initial uptick in the wholesale demand in North America. So finally, somehow, a potential recover in that channel. January was also a positive month, followed by a normalization of February. So Q4, January and February, positive sign. Now the question is, is March where, I mean, we have some first sign that an American consumer, which with this level of uncertainty, is becoming more nervous. So we need to see now March, but end of last year and June has been fantastic. showing some positive sign. Now, the question mark is all these discussions and this uncertainty, are they going to have a negative impact on making the American consumer more nervous? I think, to be honest, in the next two, three weeks, we will know more out of that. The question, I think, was... H1, H2. H1, H2. Ultimately, the year has been designed to have a strong start of H1, mainly on our brand. Then, one element on top of the uncertainty that, to be honest, no one else can explain, can control. Here, the real one big question mark is, last year, May and June, if you remember, the weather definitely was not good, and the sun has been suffering. So last year, we had a very positive optical, a negative sun. So theoretically, May and June should be the period where we may have some upside compared to last year if the season is going to be better. This is if we look to the external market. If we look internally, and I hope it is last time we are referring to that, is that just like to remember that in Q1, Still, we have some Jimmy Choo. Q1 slash Q2, we have some Jimmy Choo effect. Now, this is an internal element that somehow you need to take into account. But from the market, we've been starting very strong. Q1, Q2, and Q2, May and June, we should have compared to last year, upside on the sun, obviously, if the season will come in.

Thank you.

The next question is from Cedric Rossi of Brian Gagné.

Yes, good evening, everyone. I have two questions. The first one is regarding Carrera. So you tried during several years to crack the female customer base and the U.S. market, and it seems that you were successful in these two segments last year. So I was curious to have your view on what has changed in the strategy to be successful there. The second question is regarding David Beckham. I was surprised to learn that you will open the first store in Greece. Does it mean that we could have further store openings in the coming years, especially in the US? Thank you.

I start from the second one. Just to be clear, the shop has been opened by one of our long-term strategic customer, the shop is going to be David Baker, but it's going to be owned by this guy, not by us. So we don't have plans to open our own shop, our own retail shop on David Baker. Obviously, the location is in Mykonos, so it's going to be huge, attractive, and a strong contribution to the brand, to the brand building of the brand itself. So just to be so detailed. But there are no... but no idea on expanding in retail with David Baker. It's growing already like this enough, so it's okay for the next years. Home Carrera, but look, Carrera is a journey. We started five years ago. We have repositioned the brand. I mean, the Carrera position now, I think, we got to a much more clear positioning. Before, it was a little bit of a confusion. Today, when we look to Carrera, we talk about the core of Carrera that we have repositioned in a less extreme way. Carrera, old, bold, bold style. So this has been a reposition of the full brand. And in the light of this reposition of the brand, the women, it has a lot of space because already today, 30% of the consumer of Carrera were female. But they were really happy and unhappy on the execution. So the fact that thanks to the new position, which is a little bit less bold, It's a little bit less extreme. It's allowing women to fit more with the brand. And the women's collection is an amazing collection that's been got very fantastic. It's been received fantastic last year. And to be honest, the first data of Jen and Seth are showing that it's the right show. So it's an answer to your question. It's a combination of... having a reposition, the full Carrera brand, less boldish, a little bit more American, if you like, but with the women, which was already there, but now has the way to express themselves more. So the Carrera pillar will be core, women, and sport. And looking to North America, the two main pillars would be core and women, less sport, because the sport is more a fashion of sport, which fits more for Europe. And then you have the Ducati, which can be an opportunity next year. We're going to have three races in North America. So that is opening up additional opportunity on Carrera North America.

Okay, clear. Thank you, Angelo.

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question comes from Andrea Bonfa of Banca Acros.

Hello, good evening. Some of my questions have been already answered, so I would like just to expand on a few details. The first one is, again, on potential U.S. duties. I mean, as far as 100% of U.S. states, How much was done in China vis-à-vis Europe, if it's possible to know? And the second one is related to your advertising and promotion expenses. In the light of your previous comment of the important commitment to your proprietary brand, shall we anyway still pencil in around 13% for those level of expenses? Thank you very much.

Yeah, on tariff, as we said before, we have started to diversify our supply chain also out of China. We are currently, for the U.S. market, sourcing 70% of the goods from China, so 7-0. Roughly 10% is Asia out of China, 10% is Italy, and 10% is U.S., as we also are producing our goggles for the Smith brand in U.S.,

In terms of advertising, I think there is an important thing. It's due to the fact that our 60%, 65% of our investment in advertising is digital. We are very flexible. This gives us a big advantage on how we prioritize and we face the investment. So currently, let me say, you can assume same level of investment of last year, because as I said, it's already quite a high level of investment, also if you compare with some of our competitors. But obviously, this amount of investment would be prioritized behind our four brands and then on two of the licenses. But we will be very flexible. We will be very tight according to what we're going to get on the market. So we will likely be in a very, very tight and flexible way as we did last year. But you can assume a comparable level of investment on advertising for the year.

Thank you very much.

The next question is from Domenico Ghilotti of Equita.

Good afternoon. I have just one question on the buyback program. So how do you want to execute the buyback and what is the timeframe in which you want to execute the buyback?

So the buyback will be executed through SAP SPA. Timing-wise, the AGM will approve the buyback in April. We are the AGM of SPA. And then, I mean, right after, we should be able to execute the buyback.

And the rationale is the optimization in the capital allocation. So can you just elaborate on why you decided now to launch a buyback?

I mean, we believe that considering our strong result and our strong flow generation, it is the best tool also in terms of flexibility given the overall context, as you said, to manage effectively our capital structure.

Okay. Thank you. Gentlemen, Ms. Ferrante, there are no more questions registered at this time.

Okay, so thanks very much for being with us and enjoy the remaining evening. Thanks very much. Thank you. Bye-bye. Thanks.

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.