Brunello Cucinelli Spa

Good evening and welcome to the presentation of the annual revenues of the 2022 full year of the fashion house Brunello Cucinelli. The speakers tonight will be Brunello Cucinelli, Chairman, Executive Chairman and Creative Director, Luca Lisandroni, CEO, 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, press star followed by zero. Now I'd like to give the floor to Brunello Cucinelli. Thank you and good evening. Well, it's not the revenues, but actually financial statements. But anyway, it's the same. So first of all, welcome, as usual, you analysts, investors, members of the press, It is always a pleasure to have you. And we were just mentioning this before during the board meeting. I think we are back to normal after three rather painful, special years and also reflective years because we have had time to reflect upon our current way of living. We have wondered a lot about the way we live in modern times, but there's something that escapes us because I have the impression that 8 billion human beings are all looking for something. We don't know what, but they're all in the lookout for something. With this year, we resume the usual number of calls, four. We've held six in the last three years. We added July and December because we felt the need to speak with you every month and a half. Before we begin, we would like to say a big thank you for the great cooperation and the trust you have placed in us during this three-year period that will still be remembered for centuries in the history books. So, as usual, we are all here. We have Luca and Riccardo, the two CEOs, Moreno and Dario, the CFOs and the co-CFOs, and then Pietro. And the next call in April for the quarterly figures will only be held by Luca Moreno, Dario and Pietro, as Riccardo and I will be in Dallas for the big Thanksgiving event for the award received by Neiman Marcus last week. And I will give you more color about this later on. So this award is viewed as some kind of Academy Award of Fashion, not buzzed. So this is how we would like to proceed. I will read you the highlights of 2022, then the CFO Moreno will go into details. I will take the floor again to talk about, first of all, the 11th five-year project from 2023 until 2027. Then the major themes in 2022. A very good visibility on 2023, and the pretty solid visibility on 2024. So the themes we would like to address after the numbers. So pretty important. We'd like to touch upon style and the awards, the special relations with Monty Brands. We held a dinner in Milan during the Fashion Week. A great project we have ongoing with King Charles III in the Himalayas. And the first kilos of Kashmir arrived a few days ago, and we appreciate it very much. And then the very important topic, which is the blue-collar or artisanal labor, because this really ranks high on the agenda. So net revenues 919 million euros with a splendid growth of 29.1% at current exchange rates and 24.8% at concert exchange rates. EBIT 134 million up 74% with margins reaching 14.6% compared to 10.8% in the previous year. Net profit of €87.2 million, up 54.9% year-on-year, with a margin on sales of 9.5% compared to 7.9% in the previous year. Significant investments of €72.5 million plus €15 million for the acquisition of, that you are familiar with, of 43% stake of the prestigious Lanificio Cariaggi Kashmir. that enjoyed a particularly good year. Net financial debt of €7.1 million, a further improvement compared to the €23 million last year. So, an important part now, the excellent first quarter, almost at an end, and the important fall because there's just 15 days left for the first quarter. So the important fall-winter 2023 men's-women's order collection just completed make us envisage for the year 2023 a strong revenue growth of around 15%, up from 12%, with a healthy, fair and balanced profit. So the board of directors will propose a shareholders meeting convened for 27 of April, the distribution of 0.65 euro dividend per share, payout ratio of 50%. So this is my comment on this. I thought long and hard about this quote, but you see, I really wanted to tell you something interesting. So the year 2022 was for our fashion house, A year that we define as one of high inspiration, of consistent growth, but above all of striking recognition of our brand for its identity in style, craftsmanship, exclusivity, and in the way it presents itself with respect to creation. So how we behave with the world. We view this year, 2023, as the beginning of a new time. with the awakening of great values and ideals. And perhaps it is time to come up with up-to-date solutions for blue-collar workers, restoring moral and economic dignity to the craft trades, our Italy being a manufacturing country that is well loved by the entire world. So after the lofty, noble International Neiman Marcus Fashion Awards 2023 received a few days ago in Paris, which represents some sorts of Academy Awards of fashion. And given the excellent sales in the first quarter almost ended and the sizable fall-winter 2023 orders for men and women, we have decided to raise our estimates to a plus 15% growth in revenues, whilst assuming a healthy increase of around 10% for 2024. So, Moreno, it's over to you for the details, and then I'll resume the floor. Good evening, everyone, and thank you, Brunello. I would like to start analyzing the main financial trends for 2022, remaining as well as available for any further insights in the Q&A session. Profit and loss account. The final net revenue figures confirm the preliminary ones of 9th of January, I would therefore move directly to the analysis of the profit and loss account starting with the slide number 23. The significant revenue growth of 29.1% contributed to the complete full rebalancing of margins and the reabsorption of the transitory effects of the pandemic on the main cost items. We believe that this result was favoured by certain choices made during the pandemic years when we decided to preserve to keep the corporate structure unchanged and to keep planned investment and business planning also unchanged. The first margin shows an important increase with a margin of 71.5% compared to 63.3% last year, thanks to the positive contribution of both the sales mix, channel, geographical area and product, as well as the currency dynamics. In relation to the channel mix, the positive impact is related to the growth of the direct channel amounting to plus 38.6%, with the growth like-for-like and the positive contribution of the network development. In relation to the geography mix, the positive impact is related to the growth in America plus 40.5% and Asia plus 28.1%, proportionally higher than the growth in Europe. with markups favoring the first margin. Please note that the markup differentials in America and Asia vis-à-vis Europe favor the first margin, but they have an essentially neutral impact at the operating margin level, as they only cover the higher marketing costs, including transport and duties. The product mix is favored by the growing attention of the end customer and the search for special garments with the highest content of manual skills and craftsmanship. Currency in this 2022 has positively impacted the first margin, contributing, however, to the increase in overheads produced abroad. New commercial initiatives, the expansion of retail and digital channels, contribute to the development of the business, but they also contribute to the overall increase in operating costs, which we comment on in slide 26 and 27. Personal costs amounted to 164.7 million against 132.9 million at the end of 21, with 17.9% compared to 18.7% last year. In 2022, our human resources amounted to 2,308 FTEs compared to 2,160 FTEs in 2021. Net of IFRS 16 effects, the cost of rent is 133.6 million euros, incidence 14.5%, against 115.3 million in 2021, incidence 16.2%. The increase in rental costs, which grows less than proportional to turnover, is mainly related to the development of sales spaces, the opening of new flagships, boutique extensions, and the opening of the Casa Cucinelli spaces. Significant investments in communication with a significant strategic value were up from £36.1 million to £52.2 million. with the relative incidence rising from 5.1% to 5.7% of revenues. The growth is also related to events and activities dedicated to hospitality with customers in the boutiques, in the Casa Cucinelli spaces, and having guests visiting our village of Solomeo. EBITDA net of IFRS 16 effects reached a margin of 18.7% up from 15.4% last year. EBIT margin amounted to 134.4 million against 77 million last year, with a margin of 14.6% up from 10.8% last year, an improvement. Net financial charges show the negative value of 10.4 million down from 13 million in 2021 . This decrease is influenced by the positive effect in 2022 of the accounting of the transaction related to the purchase of the 43% stake in Cariaggi. there was a positive difference of 6.7 million, indeed, between the purchase price of the equity investment and the equity value based on the approved financial statements by Cariaggi as of 31st December 2022. In comparison with the figure as of 30th of June 2022, which instead reported a positive value of plus 11.9 million, the negative value of 2022 negative by 10 million, is significantly impacted by exchange rates. The first six months of 2022 reported a strong positive contribution of unrealised foreign exchange gains, mainly on real estate use rights, which was diluted in the second half of the year against the dynamics of the euro. In particular, if we take as an example the most significant foreign currencies, i.e. the US dollar, The comparison between the exchange rate on December 22, 1.0666, and the exchange rate as of 30 June 22, 1.0387, this highlights the significant revaluation of the euro, resulting in the dilution of the unrealized exchange gains that had been recognized as of 30 June 2022. Finally, net profit reached 87.2 million, up 54.9% on last year, with a tax rate of 29.7% that we can view as ordinary and healthy for a group that pays most of its taxes in Italy. As of 31st December 22, net profit as a percentage of sales was 9.5%. Now, Trade working capital investments. I would now like to share some brief comments on net working capital. Moving on to slide 28. Net working capital at 140.8 million euros compared to 142.2 million euros as of 31st December 2021 is stable in absolute value against a strong growth in turnover amounted to plus 29%. The absolute value of inventory rose to 242.8 million euros compared to 199 in December 21, with growth correlated to business development. The inventory ratio at 26.4% against 28% in 21 Well, the inventory ratio benefited from the excellent sales performance in the second half of 22, which was higher than expected and resulted in a momentary and extraordinary reduction in the ratio compared to our usual standard. With regard to trade payables, which increased from 201 million in 21 to At £238 million in 2022, I would like to emphasise that the Group has not changed in any way the payment terms to its suppliers, co-workers and consultants. The increase is therefore mainly related to purchases of raw materials and external workmanship, which increased in the second half of 2022, following the excellent performance of the sales campaign for the Spring-Summer 2023 collection, and a significant start of production for the fall-winter 23 campaign. Turning to slide 29, investments in sales, production, logistics, IT and digital amounted to €72.5 million, with an incidence on sales of around 8%, plus the purchase cost of €15 million for the 43th stake in the Cariaggi Lanificio. So the pre-IFRS 16 typical net financial debt was €7.1 million, a further improvement over the €23 million at 31st December 21 with a cash generation from operating activities and the healthy management of networking capital, enabling the group to sustain investments at the distribution of a dividend of €0.65 per share, up 55%, with compared to last year with a payout consistent of 50% of consolidated net income. So this is the end of my speech. Thank you. I give the floor back to Brunello. So we can say a very special year. So first of all, I'd like to dwell on our five-year project because with 2022, our 45th year has come to a close. And we define this year as a year of total full rebalancing for our industry. You see, not just for our company. Perhaps the same will be true for many companies in 2020, 2022. You see, there were companies that really were at a loss in 2022. Sorry, 2020. From this 2023, well, this year marks the beginning of an 11th five-year plan, 2327. And as Riccardo was saying, we like this idea of having a five-year plan. Well, and we also have a pretty good visibility on the next 10 years. If we had to say something special about this plan, we would hope that business in China... which today accounts for about 12% of the total, well, will come closer to that of the Americas to reach a balance like the following, Americas 30, Europe 35, Asia 35. So this is what we envisage for the future. For the rest, we would like everything to flow with normality in healthy growth, fair and balanced profits, very rigorous in our style, which is what we have built over the years with daily patience and dedication, because style and product are key. In these 45 years, for almost 25 years, we have only made cashmere pullovers. This brand, we started with a total look at the beginning of the year 2000, so the brand in its total look can be said to have a little more than 15 years of history. The time we dedicate to this past year, well, I would like us to dwell only on the great contemporary themes. The first theme is the great value of exclusivity. This is what we think, obviously. This is not what the market thinks. For us, exclusivity has a very high value. This theme is increasingly felt and strong in all markets. You see, I have always believed that the truly elegant do not want items that are too widely distributed and massified, even if they are very much cherished and sought after. This has always been the case, also starting from Emperor Hadrian. Many customers are buying special items, well-made, durable, expensive and exclusive that can be reused and repaired. I saw an ad on TV of a company that sells cars in Europe and they talk about the value of repairing. And I liked it. So this is generally happening very strongly in many markets. And out of all, we would say America. So the average price is growing, not because due to price increase, but because they buy pricey items. So exclusivity and then taste. Well, you know, There are usually seven years of one taste and seven years of another one. The taste has turned towards elegance, refinement, cleanliness. And we saw the fashion shows, and this is the case both for ladies, but especially also for men. There is a great comeback to wearing very chic, refined outfits. And this is in line and in keeping with our taste and culture. uh thought hopefully we can ride the wave of this seven year years so we feel that we modestly feel we have a great future in this category in men's you see the gq uk 2021 award has definitely established our taste and maybe we can say that there is not so much on offer in this range in Italian menswear. Then craftsmanship, very important. What is appreciated is the level, degree of craftsmanship in our garments. You see many customers actually buy a garment and they take a look at the inside, which means that they want to know how it was built. And we repeat that in our collections, the rate of craftsmanship is around 52% manual work, I mean. So we really need skilled hands. The other day we were talking about the artificial intelligence with Reid Hoffman, and we were saying, if you gave us a small robot, we would like to put it in a workshop to see whether it is able to cut And so, and of course, Reid was laughing. Perhaps he's coming to meet us in April to talk about AI and how to govern technology. So this is the great theme of the blue-collar labor for the coming decades. And then I will dwell a bit more on this. Another big theme this year, the lack of good products on the market resulting from the difficulties of manufacturing. Well, I have to say that in Italy, thanks to our welfare state that allowed us not to lay off workers, we have had and have full production facilities, and this has helped us a lot in the past year. So this was seen in the large amount of restocking by both monobrands and multibrands who were actually complaining about deliveries in general from supplier companies because there was a lack or shortage of products. This has benefited us in terms of turnover, image, and also in terms of inventory because it is the first time that our inventory is at 26 and usually we had 29 and 30. But business went well, luckily enough. And honestly, I still believe that still in the first half of the year, there is not a full rebalancing of production because there is still a shortage of products on the market. briefly on prices we update prices twice a year when the collections come out and our benchmark is europe 100 usa 124 asia 128 this is this is a important theme especially now that many people are back on the road so arriving in Rome and finding a completely different price to your place of origin can definitely make the difference. So the 2023 collections are over and for 2023 we have had an average increase of around 8%. But the purchase of pricey items has increased, but these are actually garments with a very high degree of craftsmanship. Then in 2022, so the, oh, I apologize, there's a beautiful sunset outside, Borrello says. So the first quarter 2022 was rated good. Good plus or good star for the second quarter, excellent and excellent both the third and the fourth quarter these are the comparisons that we have used for 2023 because this way of rating everything with a straightforward adjective gives us a concise quick and true assessment of everything so to summarize about 2023. So given the very good first quarter that is almost over, we're talking about 2023 now, given the excellent fall-winter 23 men's-women's order collection, you know that the order collection was excellent. It went well in terms of numbers, but also in terms of feedback. provided both by customers and members of the press, knowing that from August onwards you will be displaying in your stores very good pieces in your stores. Well, this definitely is very comfortable. So, given the brand's great momentum, a bit because of the taste and for the awards, And a bit for our idea of humanistic capitalism and human sustainability. Well, this is very strongly felt. So, therefore, we envisage a year with these figures. So, this is for 2023. We raised turnover estimates from 12% to 15%. Then a PTA around 18%, 19%. and we like this lot. EBIT around 15%. Investment around 8%. It's very important to keep your image contemporary of the stores, the showrooms, the case cucinelli. We were just talking about this this morning. We believe that the life cycle of a contemporary store perhaps is no longer what it was 10 years ago, four, six years. Perhaps you need to really renew the whole store every two, three years. So we invest a lot so that the showroom and the stores are cutting edge and contemporary. We like the idea of having a net profit of around 10%. This is a fair result with some sort of dignity of work. This is what we believe. Moreno mentioned the tax rate, 29%, but you did not tell them, Moreno, that for five years in a row we paid 23% because our government for five, six years once with a patent box and with everything. So it went down to 23%. And I believe that having a 23% tax rate is pretty important. Then the regular distribution of dividends and net financial position, positive, not bad. So positive for the first time. But you see, I have always maintained that positive net financial position is good. but extreme care was taken to ensure that the products and the stores are important. They need to be fresh and contemporary. Otherwise, as I say jokingly, you see, there was a friend of mine who kept talking about cash. And I said to you, beware, a full cash can take you to the graveyard. Just jokingly, we try and invest in taste and style. Of course, not having that is important. Then, last for 2023, the boutiques. We will open three new stores, particularly enticing in Chengdu now, Dubai Mall in April, Sorry, it's not Dubai Mall. We already are present in the Dubai Mall with excellent results. And then we will be opening a great boutique in Miami between October and November. In Rome, we changed our location. We moved to Via Condotti. And we will hold the opening at the end of the month. So these are our plans. April, so three new boutiques a year. extending a few stores and sometimes it's not always easy to find a location in the prime street then 2024 forecasts so we still maintain our plan to open around three new stores and for 2024 we envisage a healthy growth of 10 percent Then since 2012, the year when we went public to 2022, our average growth was 12.6%. And we have also made up for the loss in 2020. So we still have our growth projection of 10%. Of course, growth 21 was to catch up on 2020. and 22 was unexpected for how the market picked up again, the taste and everything. Multi-brands. We held a dinner in Milan. We have 400 accounts worldwide, perhaps the world's best. We held a dinner devoted to them, and it was part of the Milan Fashion Week. And I have to say it was a very special occasion because they went back to feeling important. They can definitely, they have a trustworthy partner in us for the next five to 10 years. I took about 416 photos with them because, you know, some ladies might not like the selfie and they want to take it again. But seriously speaking, we received beautiful letters from them because it is the first time that they felt really center stage. We believe in them very much. We always consider them to be the true guardians of the brand because the day before we had the journalists, 500 members of the press, then they turned up, 400 of them who had already viewed the collection and place the orders so when you go home you feel more reassured because if they tell you that the brand is doing not so well you must be willing to listen to their feedback when they actually turned up both journalists and multi-brands wearing your stuff well then you can Imagine that your brand is doing well. Then the important theme of craftsmanship. So we would like to try and remove the word operario, blue collar worker. In Italian, operario is not a very nice word. You see, young people do not like to work as operai because everyone talks about good jobs, that it's great to be a tailor, but then, as a matter of fact, we'd prefer others to apply these traits. Do you agree? I see Dario nodding. So this kind of labour, this work, needs to regain moral and economic dignity. So, so we held an assembly on february the 15th we were all connected also from abroad and we made it official for the first time that these artisans they must earn 20 percent more than the white collar workers because we as you know they make and artisans, they make more money because they are what in Italy were called the specialized blue-collar workers. I remember my father, he would have really gone out of his way to be viewed as a specialized blue-collar worker. And then workplaces, at least in Italy, but abroad too. My friend from Del Vecchio from Luxottica before he passed away, he was telling me that we need to have the courage to make beautiful workplaces because we have been used to having our factories windowless because it is a waste of time. We think the opposite. Workplaces must be beautiful with windows. A couple of seconds about King Charles because we started this beautiful project in the Himalayas for the regenerative agriculture for the wildlife for planting trees and the other day we received the first kilos of Kashmir and you might know this kind of Kashmir, Pashmina Kashmir just a few kilos because It comes from an altitude of 4,000 meters. And Riccardo is actually going there in a few days. But we really like this relationship with the king. You know, it all started when we went together to the G20, invited by our former Prime Minister Draghi. And he talked about the climate. And then we started this project together. Then he sent me his wishes for the festive season, I sent him a special letter, and he replied to me on January 28th in a very, he replied to me, sent me a beautiful letter, and he said not only that, he not only mentioned this beautiful project, the Himalayas, that he is very pleased with, but he also said that the words I said to him, actually reassured him. It's a very nice letter. Just the final words of the king's letter. Just one sentence. I feel the need to write this down because I felt grated and reassured. And then I will tell you how it ended. Bless you for the remarkable leadership you are showing and for the profound sympathy that abides in your soul. So I said, wow, that's a beautiful language. Fantastic. So this is the great project with King Charles. And, you know, I mention this because this is a project of the SPA investing 500,000 euros a year. but I like it very much, and we will make exclusive pashmina garments with this cashmere coming from this fantastic area. Style and awards. In September 2021, we were presented with the GQ UK Prize for the Men's Taste, and this has reassured and strengthened our menswear. In November 2022, Neiman Marcus announced this award and we went to receive this prize last week in Paris. A hundred years old prize that represents some kind of Academy Awards of Fashion. And I have to tell you a fun anecdote before going to Paris I basically went back to my birthplace and from the square I could actually see my home where I was born then I went to the cemetery from there and I also mentioned this in my acceptance speech I went to visit all my relatives and I said hey I am about to leave for Paris pray for me help me out And as soon as I come back, I will show you the prize. And then I was moved myself. But that's what I did. I went back, came back from Paris, and I went to show them the prize. This might sound odd, but this prize really represented for us the consecration of taste. This is something that really strengthens us. And there is no doubt that that in 2022 was affected by the price received in 2021. And already now with the press and the sales, the price is definitely helping out and something unexpected. And then family. We were saying this morning that the true luxury brands, they have always had a family behind them. Ferrari and all the rest, the Patek Philippe and Monsieur Dumas. So this morning we submitted to the board that the last addition to the family that was not part of, member of the board, Piastrelli Alessio, husband of Carolina, my daughter, it will be submitted to the shareholders meeting that he becomes member of the board. He is in charge of the menswear team, although he's not, well, he's very good at that. So we have a, I really like this idea that the whole family is within the company, where there is myself, the executive chairman and creative director, Riccardo Sio, Luca is not part of the family, but actually he is a little bit part of the family. Then we have Camilla, my eldest daughter, in charge of ladies' style. Alessio, men's style. Carolina is with me, co-president and creative. So there is the family in the company. Then, conclusions. I'm trying to tell you the following, but we feel that this is a very favourable time for special taste, special luxury, therefore for our enterprise too. This is what we feel. And before bidding goodbye, I'd like to say that I am putting together some sort of of ten rules so I'd like to write down ten rules about our idea of longevity for the coming two centuries and once it is over we will show it to you and you will tell us what you think for example the fact that the company is not greedy might make a company live longer. The fact that you do not decide alone, because sometimes being alone does not bring good decisions. Then arrogance, well, a company does not survive with that, and then some others. So thank you for everything. Ask us all the questions that you need. Hopefully, well, we were pretty clear So what I said at the very last, that it is things are going well for true luxury, this is the kind of idea we'd like to convey. Thank you. Coruscant operator speaking. We now start the Q&A session. Whoever wants to ask a question, please press star followed by one on your keypad. To exit the booking list, press star followed by two. Please ask your question speaking into the microphone. Whoever wants to ask a question, press star followed by one now. First question, Flavio Cereda Jeffries. Good evening, Brunello. Good evening, everyone. I have three questions. So let's start from China. When you were somehow struggling there in the past, was this linked to the fact that you did not have that much leatherware and logo? I think that Post-pandemic, things have changed completely. So I was wondering whether you could confirm that actually the approach of the Chinese consumer has really radically changed. Yes, I can confirm immediately. And by the way, Luca is leaving on Sunday, but this is definitely the case. They're looking for special garments, no logo, young celebrities wear us, although we do not sponsor anyone. So I can confirm already. Then other things on China, perhaps Luca can tell you something that Luca is leaving on Sunday. I can confirm. Then you mentioned the Milan Fashion Week event, and I had the privilege and opportunity to take part in it. I have two questions on this, on what I observed. A great night, definitely. So the specialty stores, they keep losing some weight in your revenues mix because you open stores, you do relocation. But as you said, what is still fundamental for you, well, the multi-brand is still important for you. Well, it is not losing in importance. Now it's 40%, perhaps at the end, Of this year, it's going to be 37%. If you grow more in retail, well, that's what happens. Although I think that in the future, in some countries like Korea and China, we will see a wealth of beautiful multi-brands. We said this a few years ago. Now we have 39 multi-brands there. But I am confident in the coming years. Of course, in our percentage from 40, we will drop to 37 because the retail grows a bit more. But for us, they're still very, very important. These 400 accounts we've had forever, we have never lost one euro from them. They really give you an idea, give you a feedback on the brand. and you were there at the party, you see what they say about the brand, whether it's working, whether it's not working, and if the brand is working, they pair it with even other beautiful brands. So that's why we consider it very important. And I think that we have enjoyed 5% more revenue thanks to that dinner. The most beautiful thing they say is we can do plans with you. We can plan ahead with you. And if you can plan ahead one, two, three, five years, that's what matters. Then, of course, your product needs to be good. But we are still very important for us. Last thing. A special focus on glasses, I noticed. And so my question is, what about fragrances? Can you tell us something? Well, you asked me this question about a year ago. Yes, but I'm pleased. So, first of all, I'm very happy with the football results. Well, I can say on fragrances that we have been working on this for a couple of years. We are close, but what is important is to identify the right fragrance because... it's been a year and a half that we have mentioned we have to be in negotiation with all different teams different doses and we are closed the idea is to do it with any italian company wonderful 700 million unlisted company and i think we are close the nice thing is you need to find the right scent the right fragrance it took us a long time because even the fragrance must be contemporary so there is a modernity in fragrance in fashion everywhere so i can say we are close we will let you know when but we are close with an Italian family-run company.

Thank you.

Next question by Chris Huang, UBS.

Hello. Good evening, everyone. Thanks for the presentation and for taking my questions. Congratulations on the results, and I have three questions, please. Firstly, on your upgraded sales guidance to 15% from 12%, it would just be very amazing to hear what is driving this upgrade since the Q1 sales release in January. Would it be possible to hear any trends by region and by nationality? So that's my first question. Secondly, a high level one on the potential of the brand. It is very exciting to see the brand reach a new milestone this year in 2023 of 1 billion sales, which should be seen to mark a new and very important chapter for Brunello Cucinelli. So can you share some of the key learnings throughout this journey since the IPO back in 2012? And should we expect any, you know, possible strategic or business updates given this new exciting chapter? And my last question is on your first margin. So in 2022, it reached a record high at 71.5%, which is, of course, thanks to very strong mix and also FX tailwind. How should we think of first margin going forward? Should we assume that, you know, this above 71% is a new ordinary level? Thank you very much.

Very well, young Chris, whom I met in Milan. So, we have raised our estimates. Well, I can't really tell you what the geographical breakdown is, but across all countries we are having great performance, that's for sure. As to the potential of the brand, well, I have mentioned it before. These prizes, these awards, this recognition and acknowledgement of a specific taste and the tendency, the trend that is actually in keeping with our taste, this gives us a lot. You asked me a nice question. What are the lessons that we have learned? Well, first of all, the first margin. Yes, we honestly believe that the first margin could increase slightly, but not. We want to keep the very same structure. We would like to have a 10% net income with us being an Italian company. I have always maintained this. Young people gather information. They want to know where a product is made, how much the workers make, and this makes a difference. For example, I would never buy a product of someone who has too much of a profit. We want to have a fair profit, and you are familiar with this philosophy. The potential, as you said, Chris, we closed the first 45 years. We are now starting with this new chapter. We will reach the 1 billion revenues before we thought it would take two, three years. As to the potential, I believe that luxury ready to wear, well, there is a lot of desire for that. because, say, you buy an accessory, but then when you start traveling the world, you can't only wear your accessory, and this does not actually give you a taste. Many friends from China, South America, they also want to wear something luxury, with a ready-to-wear, with an international taste. And we very much believe in this. And there is a very interesting figure. We had 85% ready-to-wear ten years ago, five years ago. This year, 85.2, which means that we are definitely identified through ready-to-wear. And in order to create a taste, you need ready-to-wear. You need clothing. If you take a look at the last 50 years, those who were able to create a taste, they were ready to wear. Otherwise, there's no chance that you can create taste with an accessory. So I'm very happy with this taste that we focus on on a daily basis in a strict manner. Before going to Paris, we all wondered, what shall we wear? Let's take a close look because they're going to take pictures. So we will be published and photographed together like it was the case back then for Coco Chanel and others. So clothing makes a difference. And we wanted to work for clothing. And it is our trade. We are being successful in accessories too, mind you. But if you ask me, I would like the percentage of accessories to still stay the same.

Okay, thank you very much. That's super helpful. Have a great evening.

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Next question by Andrea Randone. Good evening.

I have a couple of questions. The first one is on tourists. There has been a pick-up but 2023 could be even better. I'd like to understand how are you experiencing this since you have a very exclusive clientele. So a few indications on this. And then a long-term question. Over the years we saw that you were very consistent in taste and you also expanded your technical skills with blazers and then of course, with Cariaggi. So how do you think you could strengthen your ready-to-wear business? Maybe with new companies? say no because we have a great chance for menswear and at this moment in time we are making half and half in terms of numbers and value is higher for the ladies because the prices are higher so we have this I think we have a great chance on this kind of taste that we represent. We did our glasses with Luxottica and the whole team came to Milan. They came to view their collection in eight people team. So we will do fragrances when the time comes by always looking after the product extremely. So are a ready-to-wear company, but you see glasses is another trade, fragrances is another trade, and we are basically a ready-to-wear company. And we are very pleased that we heard the other day in Paris that we are a recognizable both for menswear and ladieswear. And Dolce & Gabbana told us a few years ago that we had achieved to offer the same identity in menswear and womenswear. Then tourists, truth be told, everything is full wherever I go. And for example, even here in Perugia, February, March, everything is full. I don't know how we will be able to still book restaurants. So we are very confident for that. So much so that we ended our call by saying that these two, in the coming months, tourism will play a very important role. So we can definitely confirm that business is doing very well. But at least as far as we are concerned, they are searching for beautiful garments. The price mix has increased for special garments.

And reconditioned, when you...

when you recondition. When you recondition or actually when you revise your engine. So today, as Ad was saying here, we have re-hauled, revised cars, which means to change the world and the climate and the way of living. So this is quite an important thing. So we have expensive, pricey garments that you can repair, reuse. So hopefully I was clear, Andrea. Thank you. Thank you very much.

Next question from Paola Carboni.

Good evening, everybody. Two questions. The first one, still on tourism, my perception is that you have always had more local customers than other brands, but with the brand growth in the past few years in terms of perception, taste appreciation, have you seen in the last quarters, we have seen a rebound of tourism. Have you seen a higher incidence of purchases by tourists in your European stores vis-à-vis before the pandemic? And linked to this, whether you are experiencing some Chinese tourism outside of China, Macau, Korea, so your exposure to tourism is higher than three or four months ago. And the last point on the Casa Cucinelli project, whether the openings are completed or whether this plan can continue in 2023. So this year, we will open the Casa Cucinelli in Hong Kong, Everything has already been secured, so a sixth Casa Cucinelli. And you know what its purpose is. Tourism. I would say things are going extremely well. They went very well in 21 and in 22. Do you remember when I... said to you that we were to expect great results. And it happened to us, but also to many others. There is a lot of positivity. You see people around, people who are willing to spend and invest. So I think, Paola, that it couldn't be better than today. Then if you ask me what is the difference between true luxury and the rest, well, I only speak for end luxury. Yesterday, here, there was a young Chinese family in Solomeo, so the Chinese are back in Solomeo. So there is a lot brewing, I would say, Paola.

Thank you. For further questions, press star followed by one on your phone.

No more questions. So we would like to thank you immensely. Whatever you need, just give us a call. And the important thing is in April, in April, Riccardo and I will be in Dallas, so this call will be held by my team, but it will be pretty quick. So tonight we wanted to focus not just on the figures, but to talk about the strategies having to do with the product and the labor of human beings, artisanal work, because that will be the issue in the coming years, to have enough hands making garments. Thank you very much and goodbye. Have a nice evening. Chorus Call Operator speaking. The conference call has ended. You can now disconnect your phones. Thank you.