Lanvin Group Holdings Limited Ordinary Shares

Thank you for joining us, and welcome to the Landvin Group's 2024 First Half Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. Now please take a moment to review the disclaimers. During this presentation, the company will be making certain forward-looking statements, including but not limited to future performance and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and other factors, and they are not guarantees of performance. For today's presentation, I would like to introduce Eric Chan, the CEO of Landvin Group. and David Chan, Executive President and CFO of Landvin Group. With that, I'd like to turn it over to Eric Chan to start the presentation.

Thank you. Thank you all for joining us today. I'm Eric Chan, the CEO of Landvin Group. This year, just like last year, we remain committed to growing our brand by driving awareness and heat through our products. We will continue investing in developing our brands and their products, and as such, I would like to welcome the new creative leaders who have joined our family, Peter Copping and Long Fan, and Paul Andrew and Sergio Rossi, both of whom are world-class creative icons and bring tremendous energy and excitement to our group. I would also like to take a moment to welcome Preacher Quimbert, the new CEO of UFORT. He joined us in June 2024. and they bring us a wealth of experience in luxury fashion and operations, and I am excited for the path he will create for the brand. The story of the first half was the macroeconomy headwinds, what our entire industry faced. Ongoing political instability as well as bearish economy signals were impactful in the first half of 2024. Just as they have started to be in the second half of 2023, Additionally, the wholesale channel continues to be challenged globally, and the challenges was further compound by the macroeconomy headwinds. Longvine Group and our brands were not immune to the top-line challenges that prevailing market conditions present in the first half. However, while the story of the market was about microeconomy headwinds, Longvine Group's story had not changed. We continued to focus to our product portfolio and generating brand hits and we continue to technically expand our footprint in new markets while putting in training underperforming locations. We not only continue to improve our cost structure, but also took a proactive approach by implementing more aggressive cost-efficient initiatives to combat the macroeconomic headwinds. We continue to make progress on our path to profitability, We have improved our food price sell-through as well as inventory management to sustain our growth profit margin during a challenging environment. Additionally, we have remained focused on synergizing our fixed overhead to right-size our platform for the future. With that said, our group revenue in the first half of 2024 was €171 million, representing a decrease of 20%. Our gross profit margin for the year remains steady, down just 1%, with gross profit totaling €38 million. We continue to refine our operations, and we plan to use this time to market ambiguity to further hone our cost structure. At the same time, we plan to invest in marketing and product development to set our path for tomorrow, not only financially, but creatively. with the addition of the new talents who will help drive our group forward. With that, I would like to turn it over to our Executive President and CFO, David Chan, to go through some of the details.

All right, thank you. Thank you, Eric. Thank you for joining us today. I'm David Chan, Executive President and CFO of Long Long Group. I'll be walking you through some of our brand's highlights to start. I'd like to direct everybody to page five of the presentation. The highly anticipated announcement of the new artistic director, as Eric mentioned, for Lanvin was made in June of this year. Peter Copping, who will be joining Lanvin in September, brings a fresh view of couture and will help write the next chapter of a storied history of the brand. Additionally, in the first half, the second edition of Lanvin Lab was released with a sculptural collaboration with world-renowned modern artist Erwin Werk. The piece was designed incorporating a pencil cap bag as well as the iconic cash sneaker. The monumental piece will tour five key cities in China throughout the summer. Moving on to Wolford, the brand opened its first location in the Middle East, in Kuwait City. The brand has big plans for the region as it continues to expand its leisure and bodywear collections and will continue to pursue opportunities in emerging markets. Additionally, in the Middle East, Sotirasi opened its first store in Dubai Mall and plans another store to be opened in 2025 in Abu Dhabi. This is a testament to the growth opportunities of our brands seen in the region and the resilience of the region in another challenge, global market for luxury. Another significant piece of news for Sotirasi was the announcement in July of the new creative director, Paul Andrew. Paul brings a unique view as a as a successful founder of his own footwear brand to the Italian sub-affair of Sardegassi. His innovative styles will bring a lot of excitement and the heat to the brand. Now, moving to St. John. The brand held a number of successful marketing events in the first half of the year, leading up to and after the launch of its new New York flagship store. The brand's highly successful campaign, John24, Dovetail a fantastic year of generating brand heat in 2023, the brand continues to grow its presence in a new demographics and its performance has been elevated by new and younger clientele. Lastly, I'd like to talk about Caruso. The brand saw a strong first half with its own Caruso branded product line. In the first half, the brand also continued to implement new business development initiatives to build its Mazon business and also continue its profitability trend. Next, I'd like to point you to page six to discuss our plans for the second half. Given the market headwinds for the foreseeable near term, all of our brands will focus on cost efficiency initiatives to continue to drive margin improvements. To support our initiatives in the first half, we brought a new manager to facilitate operating cost efficiency measures. In the second half, we'll be adding new team members to our brands to affect changes and further adapt to market conditions. The group will further invest in marketing for four brands. Lan Van and Sergio Rossi, in particular, will focus on planning the highly anticipated first collections for Peter Koppen and Paul Andrew, which will come in 2025. Despite the conditions of the wholesale market, the additions of Peter and Paul provide foundation for wholesale buyers and give creative direction and confidence to our upcoming collections. In the second half, The group and our brands will work on further synergizing the cost base as well as aggressively culling the retail network. The plan to improve the ROI on marketing expansion initiatives with an eye towards new collections from Long Bon and Sergio Rossi. Now, moving to page seven, I'd like to highlight some of the group's level initiatives we are undertaking in 2024 to support our brands. The group has been working on a number of initiatives with strategic partners to develop product category expansion as well as support our brand's global logistics. We are currently in development of a framework so that all our brands can be benefited from group-level service platforms. Similarly, we have been in discussion with a number of partners in the Middle East regions to support our brand's expansion in that region. The strength of the market in the Middle East and a strong brand awareness that our group carries in the region provide great opportunity for expansion. Lastly, we continue to find opportunity to synergize back office function to reduce overhead and improve efficiency. Overall, the theme of the second half is setting our brands up to have a successful future in 2025 and beyond. And now, going to the financial fundamentals, please turn to page nine for a review of our revenue performance. The group's first half revenue was impacted by the global softness in luxury, which was further compounded by the continued challenge in the wholesale market. For Warford and Sardarossi, however, two non-recurring impacts to top line in the first half also added to the decline in sales. For Warford, integration issues with its new third-party logistics provider caused shipment delays for an extended period of time during the first half. And for Sardarasi, planned reduction of third-party production contributed to decrease in revenue. Moving to page 10, on a regional basis, EMEA and Greater China saw the largest decreases in revenue at 27% and 24% respectively, while North America saw a more modest 11% decline. By channel, D2C revenue decreased by 14% and wholesale revenue, which continues to be challenged due to the global slowdown in the wholesale environment, was down 30%. From a margin standpoint, on page 11, gross profit margin held steady at just a 1% decline. The top line decrease was mitigated by better full-price sell-through and improved channel mix. Our efforts to improve and promote better quality and higher margin revenue continue to yield fruit. Contribution profits were down due to the continued investment in marketing, as well as reduced absorption of retail overhead from lower revenue. Reacting to a softer market in the first half, our brand took measures to selectively invest in ROI-maximizing marketing campaigns. Additionally, our brand made tactical expansions, particularly in the Middle East, of its retail footprint while further culling underperforming locations. The group also took proactive measures to synergize G&A, and the brand also contributed to reducing fixed overhead, as you can see on page 12 and 13. This helped minimize the revenue impact, with adjusted EBITDA going down only €1 million to €42 million loss for the period, a 3% decrease period over period. Turning to page 14, as I mentioned, we continued to aggressively call our store network. while opening stores in ROI-maximizing locations. In the first half, we launched our first Wolfer and Sotirasi stores in the Middle East and relocated our flagship New York City St. John's store to a prime location on Madison Avenue. We reduced our overall fleet by about 21 stores and added open or relocated eight retail locations in the first half. For the rest of the year, we plan to implement additional initiatives to reduce costs and improve margins while continuing our tactical approach towards marketing and footprint and expansion with a focus on maximizing ROI. And with the additions of Peter Koffing and Paul Andrew for Long Vaughan and Sergio Rossi, in particular, we will help build the brand's stories for the next chapter with our new creative leaders. Overall, we plan to build our future and gain momentum to maximize our opportunities as the luxury market improves. Moving to brand-level performance, I'd like to start with Lombon on page 17. Lombon continued to manage through soft first-half market conditions without an artistic director. This top-line impact was further compounded by a contracting wholesale network. Overall, the revenue decreased by 15% to €48 million. The market impacts were felt in all regions, but our efforts to further penetrate opportunity zones in APAC were successful with the regions. excluding Greater China, seeing growth of 9%. From a channel perspective, D2C decreased 10%, and as I mentioned, the biggest contributor to the decline was wholesale, which was down 23%. With the addition of Peter Coppin, we believe the wholesale channel, despite its general struggles, will be revitalized for Long Bon moving forward, so we see a big opportunity. While revenue was down, I'm pleased to report the brand's gross profit margin increased from 56% to 58% from higher full-price sell-through and strategic inventory management. The improving results are a testament to the efforts the brands have made to improve design, planning, and material sourcing. Contribution profit remained at a loss of €9 million, mainly stemming from the brand's continued commitment to strategically investing in marketing. However, below the contribution profit line, the brand improved its G&A by 29% and maintained its effort to drive profitability. For the second half, the brand plans to drive retail foot flow and online traffic as well as increase conversion and transaction value. Additionally, the house plans to further optimize expenses through operational cost efficiencies to improve D2C profitability in preparation for expansion into new geographies. The brand will reinforce its letter goods and accessory programs and expand its seasonal carryover items across product categories while activating and recruiting new clientele and capital market share. With the addition of Peter Copping, the brand will also introduce new product styles to capitalize on momentum of its arrival in Q3 in 2024. Moving to Wolford on page 18. Wolford had a unique situation in the first half, which was significant revenue impact drivers. Integration issues with this new 3PL resulted in delay shipments spanning months and led to out-of-stock situations. The situation interrupted was otherwise a very successful global launch of the brand's wild leggings, which show exceptional sell-through. The logistic issue has been resolved, and the brand expects to recover in the second half. Gross profit margin decreased to 63%, mainly due to the under-absorption of fixed production costs due to lower revenues. as well as the planned liquidation of excess stock to improve the quality of its inventory. Contribution profit fell to a loss of €8 million for the period. Wolfer's product evolution and increased breadth has set it up for recurring success. Already, the key legwear products account for 38% of revenue and ready-to-wear and lingerie 46% and 15% respectively. These new product categories have revamped the brand's margin profile. However, we understand that the situation at Wofo requires a different approach to cost structure. As such, we announced joining of Regis as the new CEO of Wofo in June 2024. Regis brings a wealth of luxury brand operating experience. He will spearhead efforts to strengthen the workforce and key support function with stronger leadership, as well as implement sustainable cost model for transforming supply chain and distribution. For the second half, the brand plans to aggressively improve its cost structure as well as store economics, but will also explore opportunities for expansion. Warford opened its first store in Middle East in Kauai City and believes the region is ripe for expansion. With region's expertise in international development, the brand will take a selective approach to capitalize on expansion opportunities. Moving on to page 19. Sergio Rossi saw revenue decline by 38% in the first half. The main driver was a decrease in wholesale revenue, which was down 60% overall, and it was impacted by twofold by a general stagnation of the wholesale market, as well as a planned reduction of third-party production. The initiative to reduce third-party production stemmed from efforts to improve the overall white label offering and rebuild it in higher margin accounts. As such, while revenue was down, gross profit margins saw a much more modest decline of 2%. Contribution profit remains positive, landing at just under €1 million. For the second half, the brand will continue to improve the quality of its revenue and further drive cost reduction through operating efficiencies in manufacturing and supply chain. Additionally, Saturasi plans to right-size its overhead and retail network to benefit current market conditions. On the product side, the brand is extremely excited by the joining of Paul Andrew. Sergio Rossi will spend much of his second half supporting Paul as he helps to write the next chapter of the brand. Additional multimedia campaigns will be launched with a universal theme celebrating Sergio Rossi's heritage and self-affair. To support current collection as well as help prepare for Paul's first collection launching in 2025. Next. I'd like to discuss St. John. Please turn to page 20. With less exposure, global markets saw a decrease in revenue of 14%. North America, by far its largest market, saw a more moderate decrease of 10%. This decline was seen relatively even across all channels. St. John, being a few steps farther away from other brands, On other, our strategic path of operating efficiency showed a significant improvement in growth profit margin, going from 62% to 69%. The strategies that have been implemented since 2023 have proven successful, resulting in higher full-price sell-through and better growth margin from improving channel mix. Contribution profit margin was also up from 11% to nearly 12%. The brand's efforts to revamp its product and image have paid off, The story of his first half of St. John was a highly successful campaigns advance that were held as well as the launch of his new flagship location in New York City. The brand refresh and effective marketing campaign have attracted a whole new younger demographic to the brand and can be seen by the market marked increase in social media followers. For the second half, St. John will continue to stoke its brand heat while driving its basic product lines. Additionally, the brand will optimistically hone its cost structure by right-sizing its retail network and overhead. Lastly, moving on to Caruso. Please turn to page 21. Caruso had an impressive first half. Despite macroeconomic challenges, the brand held its ship steady with only a slight decline in revenue, which was down only 1%. The brand saw a reinvigoration of its implicitly Caruso product line, which grew by 21% with a robust performance and both ready-to-wear and made-to-measure service. The Mazon's business faced a bit of slowdown due to the current global condition impacting its client. Caruso's profit margin increased from 26% to 29% from improved in-house product production efficiency and reduction of outsourcing. Contribution profit margin also increased from 22% to 24%. For the second half, Peruso plans to revitalize its Amazon business with additional business development initiatives. Additionally, it will implement new employee initiatives, including the 360 organizational review and ESG action plan to enhance team member loyalty, participation, and growth. At this point, I'd like to have Eric provide some final remarks.

Thank you, Stephan. To close our results call, I would like to highlight some key takeaways. First, we face a challenging first half of 2024, both externally and internally. However, we remain resorted in our mission to grow our brand and to grow our profitability. Our proactive approach mitigates some of the impact, but we plan to drive continued improvement in the second half. Second, we welcome some exceptional leaders into our family. both on the creative and the business side, and I'm extremely excited about our future. Thirdly, while I anticipate continued softness in the luxury through the second half, we will be positioning our brands to capitalize on improving market conditions by continuing to strategically invest in marketing and product development. And fourth, our approach to our retail network will continue to be tactical, We have located a number of opportunity zones for each of our brands and we look to expand our footprint aggressively but traditionally. I would like to conclude by saying that Long-Time Group is committed to its brands and our strategy to improve our top line and profitability. On behalf of the entire management team, thank you for listening to the presentation.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Tracy Kogan with Citi. Please go ahead.

Thanks, guys. I was wondering if you could talk about how business trended through the quarter, if there was any difference in performance, I mean through the half, if there was any difference in performance as the period went on, if you ended on the lows or the highs, just any comments you could make on trends by month. Thanks.

Thank you, Tracy, for the question. Good to hear from you. Yeah, I think I can provide some general remark. I think we obviously, as we mentioned in April, the pressure point started in the second half of last year. We saw a little bit of uptake in, I would say, the first quarter, but I think we do see a pretty clear path in terms of kind of pressure in the second quarter They're starting probably sometime in end of April, kind of early May, that type of period.

And was that pretty consistent by region? Was there one region? It seemed like North America held up better overall, but just wondering by region if there was any difference in performance by month.

Hi, this is Eric. In fact, it's pretty consistent across most of the regions. I mean, from the Asia Pacific to the EMEA to the American market. We think actually the macroeconomy headwinds actually hit all the regions, I would say, except some very particular markets we may see because of particular reasons. I mean, there's less heat. For example, like Japan, because the currency or the middle years, which is up-and-coming markets. Other than that, basically, it's pretty consistent.

Great. Thank you, guys.

You're welcome.

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