Brunello Cucinelli Spa

Good evening and welcome to the presentations of the revenues for the first nine months 2022 of the Fashion House Brunello Cucinelli. Speakers will be Brunello Cucinelli, Executive Chairman and Creative Director, Riccardo Stefanelli, CEO, Moreno Ciarapica, CFO, and Pietro Arnaboldi, Head of Investor Relations and Corporate Planning. In order to receive help from an operator during the conference call, please press star followed by zero. Now I'd like to give the floor to Brunello Cucinelli. The floor is yours. Good evening. And first of all, thank you. Thank you for introducing us as a fashion house. So thank you. So I would like to greet you all with pleasure, analysts, investors. and usually there is some members of the press too. So as you might know, we always attach a lot of importance to these calls, so much so that we have already notified to you that another one will be organized for December the 6th, because You see, having another appointment for next March the 15th, we thought it would be too long, so we will have it in December. So we are all here, as usual, except for our esteemed Luca Lisandroni, who is in Korea for three days, the first trip after the beginning of the pandemic. So before I begin, I would like to bring to your attention something that, you know, I don't really want to boast, but last week the La Sapienza University of Rome acknowledged to me a very great recognition. It is a very important recognition because, as you know, La Sapienza is one of the major European universities, and it was actually set up five or six years before the Perugia University, and I was awarded an honorary Ph.D., in management, banking, and commodity sciences, but actually it is as if it was for my capacity as a CEO of a company. What I actually, we felt honored above all, was the fact that the magnificent rector, and with her speech, and then the dean and the department director with their two speakers, laudations and praises, well, they were really fascinating speeches, fascinating for what they said about our company. And at the end of it all, we were acknowledged or recognized this idea of working with humanistic capitalism and human sustainability, and you know it all. So truth be told, we are working with a very good attitude, with a good Spirit. So I don't know about you, but what's there, but it's like 22 degrees Celsius today. It's like spring here. I don't know what the weather is where you are. So how the call will unfold. First, I will read out the highlights to you. Then we would like to comment on the manufacturing Italy. and today and also about the politics because the new government is now forthcoming we will comment on the first nine months of our business we will be talking about markets the forecast closing of 2022 then the forecast for 2023 with orders in-house for the spring summer 2023 the wholesale orders and also we will mention this new five-year plan and because We have changed the dates once again. It's 23-27. And then last but not least, four or five minutes to what we consider the most important theme. And we mentioned it during the board meeting. We called it a great plan for a great future. Universal working conditions for human beings. So we attach really a huge importance to this, and I'll tell you why later on. So now, the highlights. Net sales amounted to €642 million, with a splendid growth of plus 27.7% at current exchange rates, plus 23% at constant exchange rates compared to last year. Then we enjoyed very good growth in all channels and geographies, with sellouts of the fall-winter 2022 collections that actually have very high value. Very, very good growth in all regions. America's plus 45, Asia 22. Well, here, I will tell you later, we break down or break out of this China, which amounts of 13% out of 22. Europe 21 and Italy 10. very strong results in both the retail channel up 43% and the wholesale channel too, up 10.5%. So very, very interesting. So these results and the great appreciation reported for the collections currently in the stores, all this leads us to imagine a wonderful growth in revenues in 2022, close to 25%. Just let me drink a sip of water. So this is my comment. The results of the first nine months of 2022 really are splendid. We are indeed achieving great results thanks to the image that the brand enjoys worldwide for its style, way of working, and humanistic conception of business. The above lets us envisage an extraordinary, prodigious end of the year, with a growth in sales close to 25%. We continue to support our great project for a great future. Universal working conditions for human beings. There is no doubt that having our production and sales facilities at full capacity, having not laid off anyone during the last two years, while this allows us to cope with the large quantity of goods requested by the market, where, in general, demand exceeds supply. The weakness of the euro and the short production chains are rewarding not only us, but the entire Italian fine manufacturing sector, proving just how strong our welfare state is. The order intake for Spring-Summer Men's-Women's 2023 was excellent, both in terms of image and quantity. All this makes us envisage a 2023 with sound sales growth of 10%. So, before we start, I'd like to spend a couple of words on Italy as a manufacturing country. day, we met with Milleri, the CEO of Luxottica, and talking in general about eyewear and projects, we were just saying that there is a strong request, a strong demand for special products. And he said, well, yes, we have a large demand for horn, a horn that comes from Agordo, that is very special. So what is happening in our view? Well, first of all, the demand is stronger than the supply. And why do I say this? We can say this better if you have wholesale to compare because the wholesale clients maybe do tell you that they are receiving less winter goods. And this is something that you would never notice if you only run your own stores. So what we say is that welfare state that enabled us not to lay off anyone, not to fire any workforce, and we mentioned this during the board meeting this morning too, well, we believe that there is a strong production structure, there is a strong commercial structure, and this way we can be present internationally and we can cope with this demand, with this increasing demand. You see GDP, it was three, then now they say two. So we started three, then 3.2. The national GDP, now they say 3.4. But there's no doubt that what we are seeing now is the great availability of products, thanks to our production facilities. Currently, we have an unemployment rate in Italy, which is about 7-8%. And in the past 20 years, similar rates happened in 2008. So for us, it's something very, very special. And also, we have a short production chain, and this is very important. Another factor there is the weak euro we are exporting to manufacturers. And we believe that these great benefits perhaps could be there to stay also for next year. So as we were saying this morning, I don't know what will happen to the GDP next year, plus 0.3 or 0.5, but we will have advantages because the production chain cannot be built overnight. You need expertise for that. So this is the advantage of manufacturing italy then sales so in the first nine months of the years sales went very well and so they are also for the first 15 days of october you see i said this because sometimes we are asked how the last week how we performed the last week so for those of you who are interested that things are going well in october too So now it's been three months that the new Fall-Winter 22 collections are in the boutique. So now you can have an opinion about the appeal of the product. And this is very important, the fact that you know that people like the product. Whereas if your product is less interesting, you see that's a problem. What is really strongly felt is the demand for exclusive, special, high-quality products handmade garments. In our opinion, luxury means well-made garments, exclusive garments, garments that can be handed down to the next generations. And it seems that customers are looking for garments that they will never throw away. This is a very strong feeling. It's perhaps You see, especially among young people, the fact of reusing, reconditioning, repairing, this is very, very strongly felt. Perhaps it's just for us because our garments are pretty expensive. Then markets in general, we would say that all markets are performing very well. So USA very strong, Europe strong, very strong too Asia strong with China and for us it is doing well but mind you you should know that it is about 13% of our business so our business breaks down roughly as follows 35 US 40 Europe 25 Asia of which 13% China. Then a special word about... So a special word on Europe. You see, even regular customers, even in small towns, are performing very, very well. So local customers are doing well. then as far as the digital world is concerned we are enjoying a good and balanced growth of around 25 percent seven percent direct from solo mail and overall our estimate is for about 13 14 percent but you see it is our website is still a very interesting communication tool. Two, three months ago, our finding was that 60% of customers arrive in the physical store with the image they actually saw on the website. This is very important. So in this important channel, we see a healthy and robust growth over the years. Of course, somebody two years ago said, that perhaps we would not need the physical stores anymore. I remember a member of the board even said that maybe we wouldn't even need the ladies or the staff to make coffee. But physical stores are, however, very important for the image and for the business, and we see it in retail. We see the results that we achieve with MyTheresa in terms of numbers and taste. It is true that they have a very good taste. That Mr. Porter, great results, a company with a lot of taste. I think, you see, they are a beautiful online store and they will have a future, but provided that they are fresh, modern, the way in which they mix and match, the way in which they display, but I really like them. Congratulations. Then physical stores, we have returned to a basic importance because customers, first and foremost, they want to be advised, especially for menswear, you know, that many wives actually call us asking us to advise their husbands as to what to wear. Of course, also well-off or rich people need to look good when they go out, so they need reassurance. And by the way, our business currently is menswear and womenswear is 50-50. It's just slightly higher for the women in terms of price. And then another important theme is kindness, the people meeting you in the store, the people stuffing the store. Because the idea that we nurture is that of never, never pushing. So if you turn up at the store, The sales associate will welcome you. Sometimes they even become your advisor. Then maybe you can have a cappuccino, a coffee. You see, physical stores, they play a very important role. Then the taste of stores. A few years ago, the first store to be opened was Saint-Tropez. in the early 2000s, and we wanted these stores to be somehow some sort of living room, where the largest stores, they have a bar, like in the Madison, London, Paris, then we have the middle-sized one, 270, 280 square meters, and they have a mini bar, sorry, an average bar, And then the small stores have a mini bar. What does this mean? It means that you turn up at the store, you can have a cappuccino while your wife is shopping. And at the Madison, we have customers who basically turn up for a cappuccino and a pastry and then maybe they do not shop at all or maybe they shop the day after. So every one of these stores has a medium or small library between 40 and 70 books. You see, we would like everything to be somehow a small but pleasant experience. And now, I would like to devote one minute to the praise given by my friend, I'd like to relay what he said during an interview, because this is precisely what we build our brands upon. So I would like to pass on to you a nice judgment given by my New York friend, Robert Burke, who first worked for a decade at my master's Ralph Lauren. And I told you that in 2019, I went to see him and he had tearful eyes. and then Robert started working as our wonderful client Bergdorf Goodman, and now he is a freelance. When we started in the year 2000, we started the Total Look, and Robert Berg had another wonderful friend, Peter Rizzo, Michael Bastian, Yuki Katsuda, a 40-year-old gentleman, And when they came to Pitti, you could spot them immediately. And they would come here to Solomeo in the early 2000s. And that's when we were starting to put on these garments. We would mix and match them and talk about combinations. And for me, that was really an encouragement to me because they were particularly fascinated by the brand. And Robert, who is now a great expert in luxury retail, he said two things. From day one, the brand presented itself with a very strong identity and remained true to that aesthetic, focused on quality, craftsmanship, and exclusivity. And it soon became the benchmark for Italian luxury products. Then he said, I think that today they have reached the pinnacle of luxury. And then another good thing he mentions, Cucinelli is extraordinarily focused on the product and his customers whom he knows very well. And then he ends by saying they have become excellent retailers of their products and they have created a unique and special experience in their stores. We now see other brands starting to adopt a similar approach to retail But Cuccinelli is ahead of the curve. So what I say, thank you, Robert. You have always been very chic and kind to us. But I really wanted to say this because it was the Goodman team at the beginning of my path in early 2002 to talk to me and discuss with me and choose the path ahead. Then prices... The price structure, you know it already, is the following 100 Europe, 120 US, 128 Asia. We change prices twice a year when we release our collection. Raw materials. For everything concerning raw materials, we would like to confirm that we have no difficulty in finding them and because the warehouses in the factory are in place to guarantee quantity and quality. And perhaps this was one of the biggest decisions we took in 2020, Riccardo and Moreno, when we did not cancel any order. We said, let us leave the cashmere orders and the silk orders, and now we have raw material to meet the demand. So likely 2020 full year 2022 earnings. Well, we can call this the year of total rebalancing. So 2020, it was minus 10% revenues, 2021 plus 30%, plus 20, sorry, in 2022 plus 25. We will reach a healthy EBDA of around 18%, a healthy EBDA inventory around 29% is healthy for us. You can't have a factory unless you have an inventory. Then healthy investment of around 8% and then we'll see in two months time, but we are perfectly in line. Then a healthy net financial position. We basically do not carry any debt and a sound capital structure of close to 50% of turnover. Dividends, as you know, are at 50%. Then we have ended 2023 collections with excellent results. So the important orders in-house collections are viewed as young and at the same time beautiful and elegant. And we were saying it is not always easy, but you see, we enjoy what we have. everybody seems to be in the lookout for exclusive garments. And for now, we envisage for 2023, we envisage a growth of a healthy 10% as planned. So we think that in 2023 we will return to a nice balanced business. Then a new five-year plan, a new change here. A few calls ago we said that we had closed 2021 and we had started the 2022 five-year plan, but we actually realized that 2022 is not really a linear year because there's some products missing. you see the results are rather odd, so we decided to leave it as a suspended year. So our five-year plan will make its start on 1st of January 2023, where... So everything is extremely positive for us. So... So now, why... In this five-year plan, we decided to choose as the main theme this great project for a great future. It will be the most important project for the coming years. We called it a great plan or a great project for a great future, universal working conditions for the human being. You see, as we have heard around, Many people actually resigned without having another job. Riccardo will say there's this new phenomenon that is called the silent quitting. So people work without passion while they wait for something better. And for all companies, regardless of their size, Gold companies, they say that they cannot find people to hire, especially young people. So this is a very serious phenomenon. So for us, however, this is not the case for us, but we want to devote all our forces for the coming years to this very sensitive issue. So it's not that we have not focused on it in the past, but we still consider it very important. So what should we look at? Well, workplaces. We can't hide. Well, in this discussion, I would like you to focus on production departments in the factories, not just the nice offices. We have 2,500 people, 1,200 on retail, and they receive important salaries and they staff our stores. So we would like everything to be focused on production too. So we need to have better workplaces, better working hours, and also the fact of being online all the time. Wages, especially for blue-collar workers, this is another theme, and we want to focus on salaries, up to 2,000 euros in Perugia, perhaps 2,300 for those living in Milan. And then how do we treat each other daily at work? This is a very strong theme, and we see it, we feel it from the people who are coming for job interviews. Often you see our factories are nice, with nice offices, but this is not always the case for the production departments. have been taught that in the production departments there should be very few windows because it is considered a distraction, whereas I think that there is more creativity if you can see outside. Now, going back to wages, I think that all this needs to happen up to €2,000 net per month because It's not the same. Whereas instead of earning 1,900 euros, your life changes. And especially you'll find people who are willing to come to work for you. And then, by the way, a small digression, in June we have taken action to basically reduce inflationary pressure on those who earn under €2,500 per month for the year 2022. So for us, it is about 1,000 out of 2,500. Then working hours. We must return to balancing working hours as well as the right time spent online. I say it very often. perhaps we could work for 7.5 hours a day. But as we were saying in the board this morning, we do work for eight hours. But actually, we calculated that one hour is not for the company because you basically spend time on your device. So all in all, we work seven hours, although we spend eight hours in the office. plus two hours to go to and fro from work, and then one and a half hour of lunch, you see, that means adds up to many hours. So seven hours should be enough to have enough time for your private life. So in our beautiful factory, you see, we allow ourselves to call it beautiful, but you know that Leonardo, before he passed away, he said, a factory in Agordo, Leonardo del Vecchio said, a factory in Agordo is very beautiful. We would like there to be a nice climate of esteem and respect in people, because you see, if I give you esteem, esteem generates responsibility, and responsibility engenders creativity, that's for sure. And creativity in products does not depend on three to five people. We have 60 people to create the product. But I don't think that creative comes from all 60 of them. There are other people in the company that just with one small piece of advice, they can improve conditions and creativity. And then one more minute, and then we open up for Q&A. How can we imagine our young people coming to work in our factories if we do not give them moral economic dignity? So very often we would like the children of other families to apply specific traits. If you say, you see, I'm going to work in a factory. I earn €1,250. I work in production with the conditions that I've described before. It is not very easy to suggest these jobs or recommend these jobs to our children. And these great concepts still apply to everyone, not just to us. It applies to pizzerias and restaurants, all activities. And this is what we try to put into practice in our wonderful, that's how we call them, wonderful schools of arts and crafts in Salomeo. where this year we are being very successful because they all found a job after finishing the school. And this year we would have almost 50% more students. Perhaps in the end we could say that all this is human sustainability. You know that our sustainability is broken down into climate-related emissions, economic sustainability, where you work, how much you earn, and what kind of work environment you work in. Then there is cultural sustainability. What does your company do to create corporate culture and also in the community? And then the spiritual sustainability. I think it is very important. You see, if you treat me well, my spirit is lifted. If you give me a nice view, a nice window, I become more creative. If you maybe comfort me when I'm blue, when I feel blue, my spirit will be lifted. So spiritual sustainability perhaps is the most important one. So to conclude, my dear friends, first of all, before I... So for the future, we imagine that perhaps it will be more difficult to find people to make beautiful garments rather than to find people to buy these beautiful garments. We are working in a very good atmosphere. So we had this assembly of the 100 The other day, and we hold it every two years, and we took stock of our company. And we said it always went well, but this time it is going even better. But we really need to have the courage to improve the workplaces and the wages, and especially the work conditions in the production department. And that's what I tried to say that I discussed at the G20 in 2021, when I talked about humanistic capitalism and human sustainability. So before I forget, tomorrow in the evening we will have a dinner in Milan, then we will have one in Paris and London, and then one in New York with our investors. And I hope that I will meet about 100 of you in the coming two months. Then if you can come and visit, next year for me it will be more difficult to meet you unless you come here because we have events in China, America, Northern Europe, and I don't know how I will do that. Perhaps I will send the youngest, Luca and others, and Riccardo. But you see, you have, whenever you think of a company, really working conditions rank first. You don't need much, you see. If we can maybe increase wages for the production workers. It really has a very small impact on a BDA but it does change their life completely and also the vision of the company because young people are struggling. Thank you very much. I apologise for being pretty lengthy but I really wanted to talk about labour. Let us now open up for discussions and then you can call us or send us emails later on. Thank you. Carlos Coloperator speaking. We will now start the Q&A session. Whoever wants to ask a question, please press star followed by one on your keypad. In order to leave the booking list, press star followed by two. Please ask your questions. You're speaking into the microphone. Whoever wants to ask a question, please press star followed by one now. there will be a few seconds of silence to let the investors or analysts book their questions. First question by Flavio Cereta, Jeffrey. Thank you. Good evening, Brunello. Congratulations on your numbers and for all that you said about labors that you know these are teams that are very dear to you. So I'd like to focus now on the growth expectations in particular, because there is this plus 25% and then 10% next year. Compared to what you were expecting a few months ago, where does this driving force come from, from the U.S., from men's, women's, maybe more retail. And to conclude, I think that you will double your revenues in six years, not ten. So I'd like to ask, what changed? Well, Flavio, what has changed? That's a great question, first of all. Well, it comes from all markets, I would say. You see, now menswear has the same value as women's wear, but there's something special on the market. I was saying this to some ministers the other day. You should not underestimate the Italian production structure. It is really at one rate. If you go to any multi-brand client and you ask them, what about the shipments from companies, they say that they are receiving 80% of what they expected. which means that there's a product missing on the market, there's a lack of product and we were not expecting this because the first semester the stores were closed and the second semester was better but we were not expecting this and you do not actually, you're not able to see this in the retail store Because if there was 10% less in a Milan store, you wouldn't notice it. Because we did not basically stock up. We waited before placing the order. And now we are struggling because demand far exceeds supply. And that's why we are achieving this result. Because You might say, these people, they get all the budgets wrong. No, this is not the case. That's why we have decided to separate this year to see it as a standalone year because we want to restart with our normal growth this year. Because 2021, 22, these are special years. The first year, instead of losing 25, we lost 10. Last year, we caught up with 30. This year, we are having a very special season. And probably what you say, we will double our revenues in completely different, with a completely different timing. But honestly speaking, in 21, 22, 23, we were not expecting this revenues growth. But this year is very special, let me tell you. And you can feel it everywhere. You just need to talk to multi-brands. Why? Because production is an issue everywhere. Very often, Flavio, we talk about sales, but production is a true strong problem. Raw materials, you say there's a lack of them, there's a shortage. It's not true. If we do not buy the white cotton from our suppliers six months in advance, we do not have the cotton for the white shirt. And when the pandemic broke out, we all did that. What I was saying before, Flavio, thanks to our Italian government, you see, Mileri was saying that all the production facilities are full. In other countries, they laid off workers, and now reconstructing the production in the company is not something that you can do in three months. That's why I'm saying that when in March and April we said that our GDP would probably have reached 3%, now maybe 3.2%, 3.4%, because there is demand for that. And I believe that we will have a great advantage in 2023 too. But you see, Flavio, I'm not saying here that the GDP in Italy will grow by 0.3 or 0.6, but I'm sure it will grow more than other countries because we have the production commercial facilities. Our company today is stronger than 2019. Then in 2019, we lost money, but we did not... 2020, we lost money, but not the facilities. And if we had had 30, 40 million more of money in our pocket and 15% less production capacity, we would not have this. I don't know whether I was clear, but you see... It takes long to train people, and I will say it once again, this in Milan, London, Paris, and New York, this is a typically Italian advantage. I spoke about this with someone who is very close to Draghi. This is thanks to our welfare state.

Yes, thank you.

And I didn't say this, but a new government is coming in two or three days. Do not get frightened. I'm 69 and I have witnessed 64 governments. Last night I was reading something interesting. After Caracalla in Rome, in 100 years, they had 27 emperors in Rome. So the idea that one emperor or one prime minister in our country spends little time time at the government comes from ancient Rome. Andrea Randone Intermonte. Thank you and good evening. Good evening, Brunello. I have two questions. The first one is going back to the fact that these extraordinary staggering numbers this year. I'm sure there are also exchange rates related components. I believe that there must have been the need to increase production of garments during the year because from what I remember you have You plan for 8% volume growth and 2% price. This year, although prices will have increased more, volumes actually grew more than 8%. So how do you manage this? This is my first question. And the second on labour. How do you act or intervene with the third-party contractors if you do? And they work nearly exclusively for you, right? Yes, yes, I'll tell you now. So, first of all, a few days ago, Larry Fink actually paid tribute to Italy and its structure. And we should not underestimate that last year we were awarded the fashion designer of the year 2021 in UK and this really boosted menswear. The recognizability of a taste that only three or four fashion designers received this. And also to answer Flavio's and also Andrea's question, Yes, of course, taste is actually playing in our favor. But we have a production facility. Well, we have all third-party contractors that we met last September with 6,800 people, 3,900 of which work for us, and the other half works for us, Chanel, Hermès, Dior, so through textile industry. This is where growth comes from. The fact that there is a lack of product on the market. Go to the multi-brand, ask the multi-brand clients and they will tell you that there is a shortage of delivery. Then, labor. Andrea, this is very important. We want it to rank first in our next five-year plan because we have to build the new artisans of the coming year. But we have decided, you see, that a young person, a young tailor needs to make some money. They're honing their trades, and we have to give back economic dignity to certain trades. You have come to our factory, and you see, as you saw, the best workstations are those where workers work basically on the machine, on the network, and if you can look out of a window, that's much better. So, Andrea, you should always expect what I basically said on work. So, it is true, we underestimated our growth forecast, but we're not talking about, you know, great changes here, but there is a shortage of goods on the market. We started delivering the fall-winter as per habit and this year many multi-brands wanted the goods a month in advance because they had had issues in spring-summer too. So we had a good production facility and 75% in Umbria, then we have Tuscany. My worry is how to train artisans for the coming years, and we must give them true money. They need to be proud to be artisans. So if you pay them €2,200 a month, 24 years of age, beautiful facilities, they can see the sky, and work on quality products, you see, because this does not happen for the retail, for the people staffing the stores. You see, those who come for job interviews, for manual work, they want to know about their working conditions and about their wages. Imagine sending your child, your son to work, or your daughter to work for 1,200 euros. You should know that we work differently.

Thank you for your answer.

So your BTA around 19%. No, no, no. Andrea. Similar to 2019. I didn't say 19. Yes, yes. Full rebalancing. Full rebalancing. Because when everybody is back to their balance, I don't think that we will have the same growth rates But do you remember when we said in May, June, you see, we will have good quarterly results, half-year results, nine-month results. And until now, my esteemed Vitton has had unexpected figures. Then you might say, what will happen in November? But you see, whatever happens, we will all close the year. with a wonderful growth vis-à-vis our predictions or our estimates because growing 20-30%, you see, my esteemed Vuitton, 30% on billions, you see. So, it will be an exceptional year. I'm sure about this.

Thank you. Antoine Belge, BNP Exxon.

Yes, good evening. It's Antoine Belge at BNP Exxon. Three questions, if I may. The first one is about China. I looked at the numbers for Asia in the third quarter. I think they are up around 14%, 1.4%, with some positive contribution from currencies, so probably growing less than double digits at constant currencies, so Can you maybe tell us if China was growing?

Excuse me, can you please restart the question because we couldn't hear the beginning. If you can ask the question again. Thank you.

Yeah, it's about China. Because you don't disclose China, but you disclose Asia. And Asia was up 14%, 1.4% in the third quarter with some positive contribution from currencies. So It seems that overall Asia in the third quarter was slowing to less than double digits. So is it possible to tell us a bit more precisely what was the trend in China? My second question is about the U.S. consumer. To what extent have you seen a lot of sales to U.S. tourists in Europe? And are you seeing this now still happening now that We are in the month of October. And finally, on the EBITDA, a number of 18%. I'm a bit surprised that it's not a revised up because you already had 18% when you were forecasting 15% sales growth. So now it's much stronger, 25%. So I would have expected stronger sales to lead to a stronger margin in 2022. Thank you.

So, as far... So, American tourists in Europe, yes, this year Americans have invaded Europe, but now, in October, Americans have gone back to America, and Europe is still performing very well, and the US is performing very well, especially local customers, as we said before. As far as the growth in China is concerned, so... As far as growth in Asia is concerned, we have a first half with 27%, whereas we have a third quarter with plus 14%. So we know that in Asia, for example, in Japan, there is an opposite effect of currency. So this does not involve Asia, because in Japan it is absolutely the opposite. So the 14% growth in Asia... with in China some lockdown phenomenon, we feel it is a very positive growth. Yes, of course, Brunello says, because Antoine, we always start from a very important second semester. Then as far as profitability is concerned, yes, we have declared 18 and hopefully we can do it well. But it's not that we have changed our budget for hundreds of millions There is a good mood on the brand and this augurs well because we have a good mood now. We have orders in-house for the spring-summer. And as you know, if the sell-out of fall-winter is important now, it means that in January they will have better budgets. That's why you feel that we are very confident because today's confidence means success. that this will still be there in 2023. Because clients will be coming with the budgets that are in line with how the previous season went.

Okay. And maybe just one clarification. In the new sales guidance of 25%, how much is the contribution from FX foreign currencies? Is it fair to say maybe 5%?

It's between 4.5% and 5%. Yes, that's precisely right. Antoine, we think that it is October the 19th. Not much will change. We think that it could be 4% or 5% for the effect of the exchange rate.

Thank you very much. Thank you, Antoine. Next question from Guido Luccarelli-Sitti. Good evening, everyone. You already answered my question on the two weeks of October.

the impact of globalization on labor and also the luxury consumer long-term, if you see any positive or negative changes from this. And then, second point, vis-à-vis the digital 13-14% today, how do you see this long-term? So as far as consumers are concerned, we met, you know, a while ago. Maybe you should use the word user, not consumer, because this is not a nice word, consumer. So I think that we will have some users of our products that are increasingly mindful. They want to know where it's made, how it's made. And the other day, We had Gwyneth Paltrow and Cameron Diaz for dinner, and one of their friends said something nice. They said, from now on, I will only buy your brand because I saw where you work. So I said, I want you to really commit to this, I said to her. But, Guido, I said once again, a lot of attention will be paid to how and where the products are made. Then as far as Made in Italy is concerned, my impression is that Made in Italy is an extremely highly worth brand, the name Made in Italy. There are some Chinese companies that I know who would like to manufacture in Italy to just be able to say we are Made in Italy. So it really is very important. Under one condition, we need to change the working conditions, otherwise it will not work. Then digital. I believe that it will still play an important role. We have a growth projection that is similar to the others, but it is fundamental for communication because if Two years ago there were 30% of people going into physical store after visiting the website. Now it's 60% and it is still on the rise. So it is important, but especially for communication. How you show the product, what you communicate, how you photograph it. And as I was saying, I'm always fascinated by my friends at MyTheresa. because Riccardo and Luca went to visit and they really are great. Beautiful online boutiques. And I like this very, very much. Like Mr. Porter, when they come, we always discuss on how to have a wonderful boutique online. You know, I'm very much fascinated also by the wholesale.

Thank you very much. Next question, Paola Carbone, Equita. Yes, good evening, Brunello.

I have three questions going back to the lack of products. Is this This is a driver that increases your market share because this is not the case for you, a shortage. So perhaps this is supporting you further. And do you think that this will still be an advantage in 2023 or perhaps the other brands will align in terms of product availability supply chain? So perhaps others will become slightly more competitive. Second question has to do with the sales mix. Are you experiencing some change in the sales mix, the outperforming product categories, or the price points that outperform if we can have some colors on the mix. And then last but not least, going back to the questions on margins in profitability in 2022, I was wondering whether there are any updates on the marketing budget. If I remember well, the latest indication was for a 5%, 6% budget. Yes, it's always been the case. So is it confirmed? Let's start precisely from this one. Budgets usually have always been 5.2, 5.7. That's the range we would like to maintain. Then sales mix, I would say more blazers for women because this is the time for blazers. Back to the Gilles Sander taste of the 90s. But the demand is always for special goods.

garments that you can pass on to others.

And this is very strongly felt. You see, they do not shop thinking that they will never use this garment again the following year. Then as far as the product is concerned, we are obviously clothing. We have orders in-house for spring, summer, men's and women's. We have very good feedback from the press, and I believe that Italy and Italian companies, and also Italian manufacturing companies, companies that manufacture for our esteemed French, because they say that 60% of their production is in Italy, and I'm happy for them who manufacture here, for our manufacturers, and for us. Now, what is lacking is products, so we enjoy this. But you should expect, especially for all the players. So we did see the budgets of 2020. They were a disaster. We thought we were really doomed. And now, two years down the road, everything has changed. Everything. even us in 2021-2022, we will grow by 40-45%. So we should never forget where we started in 2020. Of course, those who basically laid off stuff just to save, now they have the problem of reorganizing production, and I don't think that they will want to go back to work if you fire them. We just had one client who said, I want to buy half of what I thought, but for us he is no longer a client. I'm very confident you can feel the value of Made in Italy. If I can give a couple of colours on profitability to Paola, the CFO speaking. First of all, we have always said that the very same positive effect we have on sales for the forex, we have also for the opposite on the cost, because for the cost that we pay abroad rent, staff, communication we have the opposite effects so five points of Forex on revenues also affect costs you should consider this and another thing is that for this kind of higher production this translated into higher internal staff for production and commercial you should also consider that we offer the contribution to our employees to support them due to the inflation. We also gave some energy contribution to our supply chain because we tried to support this energy price impact. Then we have the stock grant for the first level of management. And also the trips and travels had an impact because there was more activity, there were more travels. So it's a whole range of macro themes so that not all the increase in revenues translated into leverage. But truth be told, Paola, we are very happy of how it is going and how taste is going, because that's what matters.

And the brand is actually performing well.

Now we have to design beautiful collections for the next season. But you see, we have a good team of people. But at the end of the day, creativity comes from how you treat human beings.

Thank you very much.

Thank you. Yes, but I feel pretty confident about our beautiful country. Because they kept talking bad about welfare state, but not anymore. I think we can say that we were among the best in how we managed the pandemic and also the welfare state. And now we reap the results.

Thank you. There are no further questions at the moment. Next question, Louise Siegelhert, Goldman Sachs.

Oh, hi. Good evening. Thank you for fitting my question in. I just had one follow-up, obviously a very strong result in Q3 again, and wonderful to see the momentum. I wondered if you could just help us understand the cohort and the customer mix. Obviously, as we're getting a little bit more cautious about consumer spending, it seems to be very resilient at the high end, but is this more about taking a larger wallet share from the existing customers or is this also about attracting new customers to the brand? Thank you.

So every year we have existing customers and we also keep gaining new customers. You see, Louise, we talk a lot about customers, and we say young customers. But you see, I was young myself. What you buy at 25, you don't buy at 27. What you buy at 27, you don't buy at 29, because that's the way it is. So we have our important customers. We were awarded the prize, the GQ prize for menswear, and we have many new customers. Of course, they need to be wealthy. because we have that kind of product. But in the company, you see, we are not fascinated by looking and being always in the lookout for young, young customers. Because young customers, you can really be sure that after two years, they will stop buying your brand. You see, human beings, now they find their balance when they turn 38 to 40. So when we say... Our clientele today is very sound and I would say between 35 and 50 years of age. But what matters is that all these important celebrities, actors and movie directors, and we do not pay them, of course, they all tend to wear these garments and they pay for them. And this is very important for us that We have a Chinese actor wearing this, or Los Angeles, or an Italian actor or actress. So we are very pleased. But I say it once again, I do not want to have very, very, very young customers, because after three years' time, you will lose him or her. So since we want our company to survive for the next 100 years, we need sound, solid customers. Yes, Riccardo was actually adding something interesting here. We never talk about, we never make any distinction between VIP or non-VIP customers. For us, if you turn up and you just buy one pullover, and if you are someone who buys for $100,000, it doesn't make any difference. These are all friends of the brand. Because the fact of organizing stuff for the VIP clients, yes, you can make more money, perhaps, but those who are not VIPs, how do they feel? And this is not part of our corporate culture. For us, it is all friends of the brands and customers that if you buy a sweater only, they might buy this sweater for 30 years. or maybe if they buy for 20 pullovers in a year, maybe they no longer buy you.

Thank you, Luis. No more questions.

Okay, thank you very much. Thank you for your questions. And you should know that we work especially on the labor conditions of the human being to make very special, high-quality goods. Thank you and good night.