Brunello Cucinelli Spa

Good evening, and welcome to the conference call on the Q9 2023 results of Brunello Cucinelli. The CEO, Mr. Stefanelli CEO, the CFO, Moreno Ciarapico, CFO Senior, and Investor Relations and Corporate Planning Director, Mr. Lombardi, will be taking the floor. To be assisted by an operator during the conference call, press star followed by zero. And I would like to hand you over to Luca Lisantroni. Please go ahead, sir. Good evening. Thank you very much. Thank you for attending our conference call. I'm here with Riccardo. And we'll be taking the floor today during this conference call to comment on the results of the first nine months of 23. As you might know, Brunello, together with Carolina and Alessio, is traveling in the States, so he won't be here tonight. However, we are in good company because we are here with Dario, our CFO, Moreno, and Pietro. And we would like you to think of us as if we were accompanied by all the people who have contributed to the incredible results that we are going to comment on in a minute. So we are a very young, energetic, cohesive, enthusiastic group of people open to the world and to change it. So tonight we'll try and be exhaustive and as brief and as clear as possible allow those of you who are planning to attend Ferragamo's conference call. And we would like to thank Marco Gobetti and his team for their support. Our call will be subdivided into two parts. The first part that will be devoted mainly to the results. So besides analyzing the first nine months results, we'll be providing our outlook for the full year. And then we'll be providing you with the guideline for 2024 as well. And today our guideline is, I think it's fair to say that it's very robust. And then we'll be also illustrating our project for 2025. We have a fairly good visibility on 2025 after completion of the 11th five-year plan. And then the second part of the conference call will be devoted to a more qualitative analysis. We'll be commenting with you. main trends that have emerged on the various geographies. We would like this call to be entitled The Call of the Markets, or even better, The Call from the Markets, because our idea is that of providing an in-depth and dynamic analysis on the results, of the results achieved. And I'd like to move on to the results, so revenues amount to €818 million, up 27.5 percent at current exchange rate, which is such amount to 28.8 percent at constant change compared with the same period of 22. All the geographies performed very well in a very balanced way. The Americas up 21 Europe up 18, Italy 20%, Asia 50%. So I'm rounding up the figure. As for the distribution channels, they are also well-balanced with substantial growth. Retail up 35%, wholesale up 70%. The very good results of the first nine months of the year and the attention to the exclusivity of our governments make us think of substantial growth of revenues for 2023 between 20% and 22% compared with the previous estimate of 19%. And Brunello has commented as follows. In the first nine months of this particularly good year, we have achieved significant growth in sales and image. Given the high quality of sales, we expect a nice healthy profit as a result. We see there is a robust demand for high-quality handcrafted garments that epitomize an idea of quiet and precious luxury that reflects our personality. Based on the above, we have chosen to raise or to review upward the year-end sales growth estimates from 19% to 20-22%. Given the excellent sell-out rate of the fall-winter 2023 season and the exceptional order intake for the spring-summer 24 one, we are very confident in our balanced growth project for 2024, which we have estimated at around 10%. And in these days of distressing news, I call upon the world's great man, the temporary guardians of creation with all my soul and with all my mind so that they may be enlightened and shed light themselves on the darkness of war and find the path of peace for so many suffering human beings. And we know that today we are asking you a major effort to leave aside for a moment the strong emotions that we have all been feeling over these days to focus on our economic and financial results. These results are really excellent and they've been driven by the soundness of a trend that emerged in the first month of the year and has continued in July, August and September. These results are extremely satisfactory for us and they enable us to combine the exclusive positioning of our brand and the relationship, the very strong, sound relationship with our customers. In the first nine months of this year, we have witnessed two main trends emerging. First, the widespreading of this new concept of luxury, namely quiet and precious luxury. and then the search for uniqueness that has been witnessed in all geographies. As for Q3, as you might have seen, Q3 in absolute terms is very similar to the two previous quarters, and percentage-wise it features a growth of 21%. Considering the contribution of the various geographies, well, the picture that was described in June remained unchanged. The Americas account for 35% of our sales, Europe 38%, Asia 27%. And this mix is very interesting. similar to what we will be seeing at the end of the year. As for the geographic mix, we expect that by the end of the year, Asia will grow in terms of contribution by a couple of percentage points. Moving along the direction that we have anticipated, moving from geographies to channels, the whole FED channel completed the Q3 in an incredible way with an incredible result. It grew by 20% thanks to very timely deliveries and the order intake for the new season. As you know, as for the fall-winter season, orders intake take place in Q1 and shipment takes place in Q3 normally. As for the retail channel, retail ended the Q3 growing 22%, much higher growth rate than we expected considering the growth rate that was reported in 2022 that was already very good. Please remember that the timing for shipping is generally Q1 and Q3 for the wholesale channel and that's why wholesale accounts for a larger share of contribution to sales in Q1 and Q3, whereas Q2 and Q4 are mainly driven by the retail channel. This is why our current channel mix is accounted for by retail 62% and wholesale 38%. We can expect that by the end of the year, the retail channel will account for a larger share, roughly two percentage points more. At the same time, however, We would like to remind you that the retail sales is accounted for by the concessions in multi-brand stores that account for 10% of the total. So if we consider our sales broken down by single brand and multi-brand stores, stores, the breakdown by channels would be even more balanced. 23 will be remembered as an incredible year for our retail channel, for our retail business. However, we are extremely satisfied also with the performance of the wholesale channel. The wholesale channel has seen the advent of new multi-brand players, both physical and digital. I'm thinking, for instance, of what we managed to achieve with Elaine Crawford in China or my Teresa, a digital player. They have laid the foundation for a stronger and even greater growth going forward. At the time, where we are witnessing a change in taste, we believe that being present in multi-brand stores has been of paramount importance because we have been able to make our brand visible to customers who have not paid so much attention so far to our brand. And so the number of customers has increased substantially in this year. But let's now look at the next quarter Q4. We have discussed at length about the guideline provided and in preparing the estimates for Q4 we have considered a number of factors that will affect the results of Q4. Well, first of all, we have been able to retain our positive performance. And every quarter we have exceeded the expectations that we had at the beginning of the quarter. And of course, we are particularly satisfied with these results. And then the winter season started off very, very well in terms of sales at the store. This means that our customers, the end customers, appreciate what has already been appreciated very much by our buyers and by wholesale channels. And then the seasonal nature of our business. Consider the average price of the fall-winter season collection that is generally higher than the spring-summer collections because of overcoats, heavy jackets, or knitwear. Q4, as a consequence, is the quarter that reported the highest sales in the year. But at the same time, We considered that Q4 in 2022 was a very strong quarter where both the wholesale and retail channels performed very well. In those days, if you remember, the markets were euphoric after the concerns brought about by the pandemic. In our retail network, we see numerous customers who have already portrays the fall winter season, at the beginning of the season, and of course at the same time if we have to consider the tensions in the Middle East, we're not so much concerned about the impact that such tensions can have on the Middle East area, rather because of the violence that involves innocent people, something that we wouldn't like to see As a whole, and on the grounds that I've just illustrated, we expect a very sound Q4. We expect €3 million worth of sales. That would be the record sales ever experienced by our company. And this is definitely a target that we couldn't even think of a few years ago. This is why we have reviewed our estimates for the full year 23. So by the end of 23, we expect our revenues to increase between 20 and 22 percent, which percentage-wise in an absolute term, this would mean 1.1 billion euro in terms of revenues achieved by the end of the year. This translates into two main targets achieved. So first of all, we'll be exceeding the a 1 billion milestone and it would mean doubling our revenues compared to 2020. So, this year the sales trend has led us to review upward our estimates and this additional performance has been generated with a network of stores and wholesale clients that has remained unchanged. And especially these results have been achieved with the very same strategy and the very same initiatives that we had planned at the beginning of the year. So we've been really surprised by the way that our collections have been, let's say, received and welcomed by the markets. This applies to our brand, but also to many other luxury brands. Today we hear about the slowing down of the market, but if you look at the absolute figures of our sales, of our store traffic, or the acquisition of customers, well, we've got the impression that we're still witnessing a very sound and strong demand. Thinking of the past, thinking of October, November last year, and you know that October, November is the time when we draft the budget for the following year. I remember last year speaking with the colleagues of other brands, and everyone would have been very happy to report a double-digit growth rate And I believe that most of the healthy brands that are on the market will report much higher results in terms of revenues than the one expected and hoped for October last year. And I would like to... Refer to the other KPIs. Again, revenues are expected to grow between 20-22%. EBIT is expected to grow by 16% in line with the margins reported in the first six months of this year. Growing versus the 14.6% reported in 2022. And then net income between 10-11%, which is very, very good. And then as for stocks, we expect 25%. Capex amounting to 8%. Investment on advertising and events, 6%, 7%. The net debt remaining unchanged. And we expect to pay out dividends amounted to 50% of our profit. So this is, I believe, the ideal situation for our company. The company is reporting very high and quick growth of revenues without diluting the perception of exclusivity that accompanies our brand. Quite diverse. We do believe that revenues growth has been accompanied by a further strengthening of an idea that we cherish, namely an exclusive brand with an accent on the ready-to-wear and a distinctive taste. So a company has a sound P&L, balanced margins, and a very sound balance sheet that... despite the substantial investments made over the past years, and considering the investments that we have planned, will remain sound. Currently, the company has 2,500 employees that account for the most valuable assets of the company and also the basis to plan future growth. And after the 2024 look, let's have a look at 2024.

For 2024, we expect revenues to increase by 10% with good balance between the price mix and the volume increase. So may I interrupt you here, Luca? This balance in effect between volumes and price mix is something which we think will happen with very well-balanced pricing. So we'll keep our pricing strategy, which is 100 in Europe, 120 in the U.S., 120 in Asia. Sorry for interrupting. Of course, I would say that in 2024, we do expect that both sales channels would increase their sales. For the wholesale channel, we already have very relevant information. A great part of our revenues is represented by the good orders we have already collected for the sales campaign of Spring Summer 24, which is going to be the revenues of the first quarter of 24. As to the retail channel, we still trust we'll see a further improvement of comparable sales, both for the menswear and womenswear, based on comps that are going to be pretty relevant from the beginning of the year. We can actually confirm that the opening of new stores, the plan of new openings for 2024 is already consolidated. We are going to open three main stores, two in the first part of the year, Miami Design District and a lovely store at the Macau Fall Seasons. Whereas in the second half, Towards the end of the year, we are scheduled to open one store in Toronto at the Yorkdale Mall, which is one of the most important malls not just in Canada, but in North America as a whole. So you know well that over the last few years, a very important role was not just opening new stores, but also extending existing ones. So extensions of existing stores allow us to improve our presence in the cities where we do operate already, so we can capitalize on locally established presence without exaggerating in expanding the network of our stores. Amongst the most important extensions for next year, there are two that are particularly charming. At the end of the first quarter next year, we expect to extend the store in Venice, whereas towards the end of the year, we are going to extend our store in Vienna. Those new openings and extensions together with the CAPEX will invest in technology and the industrial part of our operations. So make us think that next year CAPEX is likely to be, again, nearly 8% of the turnover as far as communication is concerned. We believe that the investment we did last year, or rather this year, which is 6% to 7% of revenues, will allow us to be discovered gradually by customers, but at the same time to make sure that everybody who will show their interest towards us will receive a full representation of our taste and a full representation of our brand and product. On the other side, we want to... continue along the store animation program, which was very rich and busy and very important throughout the year. As to 2025, as we see today, we expect it to be very similar to 2024, and we expect the revenues to grow by 10 percent as well, with the same kind of investment strategy. Compared to what we already told you recently, we can tell you that the new element is that today and for some months already, we have achieved very good visibility on all actions we expect to perform in 2024. So we are in the best possible conditions to start building our performance in 2025. Thanks to this, We already started scouting for the two, three new stores. We are scheduling to open in 2025, and so we already have very interesting and very important options there. So, Rick, correct me if I'm wrong, but in industrial terms, the estimate of future needs on the segment by segment, category by category basis has already been updated, and we are very confident we are all set to go. And most importantly, we also understand what the main events will be in the first part of 2025. Very good. Thank you, Luca. Let me give you a couple of quick comments on production. As we anticipated in our last conference call, we have gathered our small artisan companies in Solomeo in mid-September, as we usually do. And this is really important for us, not just to share results, but also to share the expectations for the next few years. All SMEs we work with sees this opportunity to go back home with a good understanding of their future, which is also the basis on which they make decisions in their investment, their future, on training their people. When we meet our SMEs, we also work about the blue color and factory workers, which is something that, as you know, has been very important for us for quite some time now. It's a direct contact. There's no platform to go between. It's typical of the Italian culture, and this allows us to experience products firsthand, day in, day out. Then Solomeo, we believe that the project for the new factory, which is continuing and the investments we've made in all the land surrounding our industrial facilities, will guarantee the company and Solomeo to keep growing for the next 100 years, which is what we like to think of. So you will know that as a family, we're very strictly connected to the concept of long-lasting growth. things, long-lasting products and investments, and also we believe that the combination between Solomeo and the factory is the best prerequisite for us to think in secular terms. Looking out of Solomeo, in mid-November, we will actually open the first part of the new Penne facility, where we'll start manufacturing the first product anytime soon. And we're really eager to see and to start using this facility, because As we imagine, the location is really rich in artisan know-how and skill sets. So you may remember we first discussed this in April, but we get access to manual skills and artisan skills there that are quite rare and scarce and lead us to think that we can expect a great growth there. Thank you, Rick. Now let's close this part on numbers. As usual, we wanted to be totally open with you and let you know about our expectations. And I think we should look at markets now. So if you agree, I start with America. There is two data that are important for us. America accounted for nearly 30% of the total growth of revenues of the company in the first nine months of 2023. From a different angle, compared to the first nine months of 2019, the American market grew by 91%. Both things make us believe that America is a very important domestic market for us, a very relevant and important one, but it hasn't really become the typical mature market for us. If we look in particular at 2023, we see that some very clear things happened in America. The first very clear event is that the demand for luxury has become much more widespread in different locations. So demand has kept very strong in large cities like New York City, Los Angeles, Chicago, and Miami. It has grown enormously in all main resorts like Aston, the Hamptons, and Palm Beach. But the real surprise for us was actually the performance in, let's say, second tier cities such as Austin, Texas, Minneapolis, Nashville. So all cities where we do have operations through specialty stores and department stores. Another very relevant issue we have observed in America is that ready-to-wear is becoming more and more important. There is a kind of rebalancing of traffic within department stores between the ready-to-wear and accessories categories. And this is a trend which is very strong, very visible in America, and I think it's pretty much visible everywhere, which is people attach more and more importance to understanding and acknowledging the value of exclusivity and brand positioning and artisan quality of products. So we keep investing in America. We're very convinced. about this market. We invest in our own stores and in multi-brand stores. We believe that multi-brand partners are fundamental for us to help bring the same brand image to all end customers. At the beginning, we said Brunello is traveling in the U.S. Let me give you some information about that trip because I think it's really telling and predictive about our strategy on the American continent. Tuesday night, starting from the East Coast. We celebrated 25 years of fantastic, mutually satisfactory partnership with SACS. For that celebration, we completed two covers, the six store windows on Fifth Avenue, and the layout and the setup of the windows was really special. It was the Solomeo Express, a kind of a dream train system that started from the windows and went into the stores with stops and stations in the individual outputs on different floors of the department store, one of which was dedicated to the exclusive launch up until the end of the year in the North American market of our fragrances. The event was completed with a lovely dinner at the upper floor restaurant where Brunello and his family had an opportunity to personally thank the many people who, by simply coming there, expressed their estimate and their appreciation of the brand. Now, the group has traveled to the West Coast, where in the iconic location of Chateau Marmont in LA, Brunello is going to receive the many Californian friends of the brand in a private event held where a very heterogeneous group of guests was invited, including artists, actors, musicians, great entrepreneurs, at a moment which is going to be a very friendly gathering of people. And we had an opportunity to gather all of them. beautiful people who, over time, have been a kind of reference point in that beautiful part of America. The last day of that trip will be dedicated to the product completely and to the last chapter of the celebration for the very important Neiman Marcus Award, which Brunello received earlier this year. So you see, there's pretty much everything in this trip. There's a lot of care for image, a lot of... Unrelenting attention for the visual merchandising, the product as a key core, an important issue for us, the need and desire to gather all categories under the same umbrella. We love to listen to people, look for their feedback. There's a lot of glamour, but also gratitude and personal relationships. And we believe all those elements together were fundamental in driving us in America through a very successful journey. Europe now. Europe is still the dream destination of luxury clients globally. Even today, European cities still host all the most important stores, the actual flagship stores of a lot of luxury brands, so much so that they become actually travel destinations in individual cities. Think of Paris, for instance. If you really think about it, today Paris has two open-air luxury salons, one in Avenue Montaigneux, the other in Paris Saint-Honoré. You may remember that up until a few years ago, Paris Saint-Honoré was a luxury destination just in the top part of the street, whereas the whole street, which is really long, has now become a luxury retail street. And the Champs-Élysées are also joining in as a further luxury destination in Paris. So I'm using Paris as an example to show that the importance of luxury in European cities and global cities is increasing enormously over the last years. On the other hand, take London. Now, despite Brexit, despite the cancellation of tax-free relief, London is still having very interesting developments. both in monobrand stores and in the wonderful department stores the city boasts, and it keeps investing in its own development quite a lot. So I'm thinking of Sloan Street, for instance, which may certainly become much more charming and interesting than it is today. One final example for Europe is the Côte d'Azur, the French Riviera. So we had a very, very positive season there. The French Riviera was very successful thanks to our presence through a flagship store in Montecarlo, a new lovely store in front of the Palais du Cinéma in Cannes, and a small but resort-oriented store in Saint-Tropez. And we believe that the French Riviera gave a huge contribution to our revenues in the first nine months, but also gave a great contribution to strengthening our image as a lifestyle brand. Italy. Italy is experiencing a record year through both sales channels, and this is mainly due to the unique, multi-centered nature of luxury markets in Italy itself. So there's not a single great capital, but there are many cities like Milan, Rome, Venice, Florence, that are extremely important for luxury retail. There are resort locations and provincial cities as well. And there again, retail was very lively and very brisk and interesting. So all together in Europe, we did experience a lovely summer. And we're really confident we'll experience winter, which is going to be just as lovely and interesting. And also we are confident to say that also thanks to the really domestic nature of our operations here. Then Asia. Asia contributed 40% of the overall growth in the first nine months. Two areas in particular were most important, China and the Middle East. but we also had excellent performance in Japan and Korea. I just came back three weeks ago from Asia, and I have to say that I saw for myself, I felt and I realized the great potential of this project, which they call the Greater Bay Area. So first of all, I saw an infrastructure which is complete by now. I drove around from Hong Kong, Macau, Shenzhen, And then in a very short train trip, I reached Guangzhou. And in each of those four cities along the perimeter, I found luxury retail, which is absolutely exciting. And the level of investment made there is absolutely remarkable. Now, this area, by size and by concentration of wealth, is deemed to become one of the most important luxury areas globally. It is called a hyper-connectory. It's a hyper-connector connecting finance, technology, fashion, art, and entertainment. Hong Kong. Hong Kong is in great health, and we are actually far above the performance of 2019. And in particular, Hong Kong is back to welcoming a great number of tourists coming from mainland China at the Mid-Autumn Festival a few weeks ago. Something else that really struck me as I came back from my trip to China is the intention of many landlords from Hong Kong and from mainland China to try and reproduce in these destinations too some of the atmosphere of outdoor luxury retail. So in Hong Kong, Shanghai, and Shenzhen, I noticed there's a lot of desire to go beyond the typical design of indoor malls, which is typical in China. They would like to integrate some outdoor open-air locations, too, to increase the space for creativity of individual brands and to offer shopping experience to end customers, which is going to be really rich in content and fully immersive. And then in general, city by city in China, I noticed that luxury retail is becoming more and more elevated, which is speaking well for the future. And our sales are increasing in each individual city where we have operations, thanks to serving more and more clients. So on one side, we have new clients walking into our stores for the first time. But on the other side, I'd like to remember that our established clients have a loyalty level which is just as high as the Western benchmark.

I conclude about China to inform you that we are waiting for the next award that will be given to Brunello next December. And this award will be, again, awarded in a country that we believe is extremely has an extremely high potential, where our brand is still very young, namely China. As for the Middle East and Dubai, they're still attracting tourists coming from all over the world, and there we expect incredible times characterized by growing expenditure devoted to garments by the local customers. And thanks to this, we have been able to extend our local customer basis. And we have seen a high contribution of the Middle East to our revenues. And thanks to the recent openings in the area and the great job done in this area recently, we have been able to see growing the contribution of this geography. rely on this going forward as well. And concluding about the digital channel. So the physical channel has accounted for the lion's share in 2023. However, direct sales through the digital channel are growing as well. But what is growing even more is the number of visits of our websites. Something that is very, very interesting, in my opinion, is that the number of interactions of the native digital customers with our staff is increasing substantially, which means that digital customers are looking for a piece of advice and human interaction, as you know. As you might know, ever since we started our boutique online, we've always aimed at having a high-quality website, a very effective and efficient website. But above all, we wanted to endow a tool that is, I mean, unpersonal with a human touch. I would like to conclude by thanking all our co-workers, our employees, the journalists, the analysts, and the investors for accompanying us along this path. So thank you very much, and now we're open for questions. This is the course call operator. We can start the Q&A session. If you wish to ask a question, press star followed by one on your keypad. To leave the waiting list, press star followed by 2. Please ask us questions using your headset. If you want to ask a question now, you can press star followed by 1. First question by Andrea Randoni at Intermonte. Thank you very much. Good evening, Luca and Riccardo. Good evening to you all. You've already commented extensively on the results, so my question will focus on three points that I would like you to comment on. You mentioned Hong Kong and China. And you mentioned the Golden Week in China. Can you report on the Golden Week in a few words? And then Italy. You said it's a stronger market. You said there are many cities where luxury is actually present. Can you please comment on the retail wholesale channels in Italy in particular? And then the third question refers to... The comments made by some observers about high interest rates. Some of your wholesale customers, be it department stores or other wholesale customers are asking for extending the payment terms. Have you experienced anything of this kind? Well, starting from your last question, Well, honestly, no. No one has asked for different payment terms and conditions. Our receivables are extremely sound and healthy, I would say, so we do not expect any issue in this regard. As for Italy, I can confirm that the performance of both the wholesale and the retail channels has been very strong. As for the retail channel, The spring-summer season has been incredibly good. We have achieved a very high sales rate. And the beginning of the fall-winter season shows similarly good performance. As for the wholesale channel, well, our network is now well consolidated. We have a large number of stores also in the second layer towns. And as I already pointed out, our revenues are mainly accounted for by these second-layer cities. As for China, we believe that we have already achieved very good results there, and we'll be expecting even better results for next year. China is still focusing on luxury retail and investing on it. We see an incredible number of new projects of luxury malls that we are currently analyzing carefully, paying the utmost attention to our distribution in China. As you know, our network in China is still limited in terms of number of nodes, and we would like to retain the exclusivity of our brand in China as we have already done in other geographies as well. Thank you very much. Next question by Melania Grippo at BNP Paribas. Good evening. I've got two questions. I know that your consumers are mainly local. But I would like to know whether in Europe you have seen an increase of Chinese tourists between Q2 and Q3. And what do you expect for October? The second question is the following. One of your competitors recently launched a capsule collection using recycled cashmere. I would like to know whether you also use recycled cashmere or whether you are planning to use it going forward. Well, Ricardo, answering, and I start with your second question. Yes, we have seen the same, I mean, capsule collection that you mentioned. However, we still believe that... quality is an intrinsic quality of raw material. This has always been our view and our approach, so we do not expect to change our view and our approach in this regard. In other words, we believe that quality is a key point, but sustainability is something that can be mirrored by the products but also by other factors that we have discussed already like the attention paid to people who actually make our garments or the moral and the ethical sustainability that we have so frequently discussed We try and communicate our idea of sustainability through our products, and our idea of sustainability is slightly wider and covers all the points, all the items that I've just mentioned. So again, we'll go on sticking to our idea of quality and sustainability. As for tourists, between Q2 and Q3, we haven't seen any major changes in the tourist flows. What we have witnessed between end September, early October is that the mid fall festival or the mid autumn festival has attracted many Chinese from mainland China in particular. We believe that markets are actually focusing mainly on local offering. When I said about the growing role of luxury in the retail channels in China, it's testified by the closer link, the closer relationship that has been built between the Chinese consumers and the stores that they go to. Another question by Adrian Duverscher, Goldman Sachs. Please go ahead, sir.

Hey, good evening. Thank you for taking my question. So the first one would be if you could comment, please, on the resilience from the higher spending cohort. Have you seen any increase in the proportion this year versus last year? And if so, have you seen any difference between geographies in Europe, the United States, and in China? And then my second question, is there anything in the performance that you've seen in the first nine months of the year that makes you feel differently now specifically regarding your expectations in China back at the reopening in January compared to now, and how you think about China and the outlook for 2024. Thank you very much.

So we haven't seen any major change in the Chinese tourist flows towards Europe. We've seen a growing mobility of the Chinese in the Asian area. This is probably the only novelty that we have witnessed. As for expectations about China going forward, well, we expect growing visibility and growing awareness of our brand in that area. We are a young brand in China, and we have never tried to speed up the growth of our revenues there, but at the same time, we are confident that the fundamentals of our company are greatly appreciated there, which means a great appreciation for our offering and especially this quiet luxury that we have already mentioned there's a growing attention for uniqueness in that market as well and there's growing attention to garments to apparel as a category and the demand there is a increasingly a local demand, so demand from Chinese consumers in China.

Next year in China will be the Dragon Year. Dragon is the only... I mean, it's a symbol of strength and prosperity. So the Year of the Dragon takes place in 2024.

And the sum of the figures of 2024 add up to eight. Eight is a magic number in China. So I think all the conditions are there for us to report an incredibly good performance in 2024 in China.

And I conclude with the following. This year, we expect China to increase its contribution to our revenues by two, three percentage points. And next year, we expect it to grow one, one-half percentage points in the mid-term.

Let me remind you that if you have further questions, you can press Star 1 on your phone.

Next question, in English again, from Chris Huang of UBS.

Please.

Hello. Hi. Good evening. Thank you for taking my question. I have two, if I may. My first question is on a comment you made during the presentation that the department stores in the US are increasingly allocating more space to the ready to work category versus maybe accessories and other goods. Is it possible that you provide some quantification and also comment why this is the case. Is the ready-to-wear category enjoying better momentum in general, and what is driving this kind of strong momentum for ready-to-wear? That's my first question. And my second question would be on overall trends um in the sector because now uh we're starting to see some softening trends um in the overall luxury industry uh but still uh your performance with this strong q3 and the guidance rate kind of confirms um that the brand is still enjoying very very very strong growth so maybe if we look into q4 this year and also for 2024 can you maybe just provide some maybe either qualitative or quantitative comments on how we should think of your growth, and if possible, any comments on margin will be very, very helpful as well.

Thank you very much. Thank you very much, Chris.

Now, as far as department stores are concerned, it's not so much a question of physical space, but it's a question of redistributing traffic on different floors. So I think that the reason why ready-to-wear is becoming more and more important is due to the fact that many people are now investing more and more in caring for their own image. And the change in taste has been quite visible. So many people today look at their wardrobe and maybe they don't simply find something they like there anymore. Now, as far as our feelings we have for October, it's a very good impression we have, very good feeling. And if we look at the sales we expect for the last quarter, then, of course, we are looking at a more limited growth rate because, as I told you, the fourth quarter of 2022 was really very, very strong both for wholesale and for retail sales. So we believe that we need to give kind of an overall evaluation and assessment on the importance of turnover throughout the full year, the whole 12 months. So this is what is really going to remain in our minds. 2022 was a year when all main markets, sorry, 2023 was a year when all the main markets were very strong, very positive, and they offered very good opportunities. My final comment is when we look at margins, well, normally the second half has margins that are higher than the first half. So for this year, we expect margins will be pretty much the same in both halves because the growth in sales was stronger in the first quarter than what we expect to obtain in the second half. But our judgment is, of course, excellent for each individual timing, each individual quarter for next year. Very good. I don't seem to see any further questions. So if it is so, let me thank you very much for your time and wish you a very pleasant evening. And hopefully we'll meet you again anytime soon in person. Thank you very much.