Brunello Cucinelli Spa

Good afternoon and welcome to the presentation of revenues for the first quarter of 2024 of Casa di Moda Brunello Cucinelli. The speakers tonight are Mr. Brunello Cucinelli, Executive Chairman and Creative Director, Riccardo Stefanelli, CEO, Dario Pipitone, CFO, Moreno Ciarrapica, Co-CFO, Senior, and Pietro Arnavoldi, Investor Relations and Corporate Planning Director. If you need assistance from an operator during the conference call, please press star zero. Let me now yield the floor to Mr. Brunello Cucinelli, please. Thank you, good afternoon, and thanks to Anna Maria who's going to translate my presentation tonight. I hope I will be speaking slow enough for you to translate properly. So thank you all investors, analysts, and journalists. It's always a pleasure to hear you. And the last time was about one month ago. We're here in Salomeo, all of us with the only exception of Luca, who this morning after the board meeting moved to Turkey where we have an event tonight. So I am replacing him. Actually, I was supposed to be traveling around. I just came back last night and I'm going back to London again tomorrow morning, but I'm here with you tonight. So how would you like this to happen tonight? So first I'll read the data on the sales of the first quarter that are very, very good. We'll discuss them later. Then I'll give you an overall summary view of the markets, which we have widely discussed about one month ago at the March call time. Then we're going to give you a summary on the 2024 forecasts that are pretty concrete at this stage. Then we would like to talk about a few very important things, the great extension of the Solomeo factory between 2024 and 2025. I'd like to discuss the factory workers' conditions and the quality of life in our factories and the quality of life of the people working for us. Then I'd like to discuss the value of the products which we call contemporary products. And then an important part of our discussion tonight should be dedicated to what we call exclusive and absolute luxury, which is the key issue for us. And I'd like to share with you why we decided to call it gentle luxury. So I'll now give you some data first. Net revenues stand at 309 million euros with a very important growth, plus 16.5% at current exchange rates and 17.9% at constant exchange rates. Excellent results in all geographical areas and distribution channels. We feel high value perceived around the image of our brand, an expression of exclusivity, rarity, and also lifestyle and high and Italian-based craftsmanship. Revenues by geographical area are the following. America's price 19.5%, Europe plus 13.9%, Asia plus 16%. Sales by distribution channels, retail plus 15%, wholesale plus 19%. We confirm the estimate of nice revenue growth in the region of plus 10% for 2024. and we believe we will also make a healthy and fair profit. Last month, at a wonderful event in Rome, we presented the first national and international campaign on our first eyewear collection, designed in partnership with the esteemed Essilor Luxartica House. And we started the distribution of this collection in our stores and in high-end specialized eyewear segment, including prescription glasses, too. Let me now read my quote for today. The value of exclusivity, rarity, and creativity in gentle luxury. The value of artisan manual work. The first quarter of this year has completed with excellent sales results that describe very well the appreciation towards our collection and lifestyle throughout the world. The excellent order collection for the collections of fall-winter 2024 for both men and women and a very positive series of comments from the international press, which, you know, is very important, of course, and large multi-brand stores about our gentle luxury style lead us to repeat, once again, our expectations for the whole 12 months of 2024. We expect revenues growth around 10% and a healthy and fair profit. We are really confident that the quest for beautiful, well-made, exclusive and rare products will continue over time. That's acknowledging the very high value of manual and artisan work. I also added a couple of comments that I'm happy to share with you. I would like to close this economic document with a very quick humanistic comment. Recently, day in, day out, for a time that appears to be too long now, Mankind witnesses in amazement at more than one conflict, which is so unexpected between human people, between sisters and brothers. But I'm sure that common sense and universal harmony will once again be back to drive all the actions of those who have the responsibility to reach a shared destiny, which should be potentially rich in happiness. So inspired by my master Pythagoras, my wish is that creation will help us in waking up everywhere in the world. So for our children and grandchildren, we really hope this is going to happen for real. Now let me come to economic performance. For 2024, I would like to summarize in general our thinking and our ideas about the current year. So the The revenues of the first quarter are excellent, as expected. And actually, I'm sure you remember that the summer 2024 collection, which was presented between July and September last year, had gathered very enthusiastic comments. The order collection for the fall winter collection was completed in March during the men and women campaign, and it was excellent. the judgment of the international and national press on the collections which as I said is extremely important just like the multibrand soils judgment was also excellent so we confirm totally as we said a month ago the judgment on the global luxury market on our absolute and exclusive luxury take and we confirm we are distributing our products in a well balanced way globally as Luca explained a month ago So speaking of the market again, we would like to confirm that the content of individual regions, as Luca pointed out, is well balanced and the demand for beautiful, elegant, young and exclusive that can actually be inherited and handed over from generation to generation. is recording a very interesting performance in all major markets. So Asia is doing very well in all its territories, from China, Korea, and Japan, and it's very consistent over time. The Americas are doing really, really well too. And last but not least, great robustness in the European business, as we know too. Let me talk about prices. You know that for the fall-winter collection, we increased between 1% and 2%. our price comparison globally. You know that if Europe is 100, the U.S. stands at 120 and Asia at 128. So this is our proportion. An interesting thing is that last week we organized a dinner in Milano with some very important Italian multi-brand stores because we wanted to understand their opinion. You know, they always have a feel of the market. So we discussed a lot of major issues, including the contemporary looks of the brands and the value of exclusiveness and rarity of products. We also discussed the theme of policy and the importance of being very punctual in delivery. And so... We actually devoted a lot of attention to the fact that the big issue of price increases is something that receives a lot of attention and care. And many people actually ended up saying, many end users, many end buyers say that these prices are not justified. So this is something we tend to hear more and more frequently. So let's look at the fundamental forecast for 2024. We confirm we expect revenues to grow by about 10%. We expect EBIT to increase by 10 to 20 basis points. So it should stand around 16.6 to 16.7%. Net profit is expected about 10% as expected. CAPEX is expected to stay at 8 to 8.5% plus one which we postponed from 2023 for one property investment. Investment in image, events, meetings in the Casa Cucinelli are expected to stand at about 7%, just like in the last few years. So we also imagine the inventory to be better balanced. It was a bit too low in 2023. Net financial position is healthy, and dividends will be pretty normal as expected in the last few years, with the only exception of 2021. of course, with the big COVID crisis for everyone. So for 2024, we confirm a very, even more positive attitude than originally expected. Let me speak of 2025. You know everything about our plans for 2025, where we imagine to grow around 10% again in our revenues, and to obtain a fair and healthy profit, which is about 10%. So As Patagora said, 10 is 10 for us. So you're all familiar with our view of the company by 2030, where we imagine we will double revenues, which means we will keep growing in the region of 8% or 9% or 10% every single year between today and 2030. So we imagine that in the end we'll have healthy growth, healthy profits, We do not want to lose exclusivity at all. This is going to say, like, rarity, image, and style that are always difficult to conserve with contemporary products. So in the end, between today and 2030, we aim at protecting the Brunello Cucinelli brand, and hopefully we can always consider it as a luxury expression, gentle luxury again. So what are the main topics that we hold dear? We would like to summarize it in the last three or four minutes. You know everything about the working conditions for blue-collar workers and white-collar workers, but we're going to talk about factory workers, blue-collar workers only today, because I think this is the most important. You're very familiar with everything we think about this theme. So we succeeded, and... We actually successfully gave some mobility to the term of the factory worker, the operaio. We've been working for 40 years on this without actually improving it. But we finally added two terms, which we're very happy with, which is gold or platinum factory worker. Now, let me explain this better. So when we hire factory workers, we hire them at level 5, which is the maximum per contract. But once you start there, you may become a factory worker qualified as gold or a factory worker qualified as platinum. So we believe that if a factory worker is in late 20s, someone who is pretty familiar with his trade and so on, they may want to become a factory worker at Cucinelli because they can aim at becoming gold or platinum factory workers. Now we're going to share this idea at the AGM on May 10th. Now Moreno, Riccardo, I'm sure that you all agree with me in saying this is more gratifying for factory workers. Now another very important topic for us is the place of work itself. We want Our factory is to be beautiful, well-cared, full of windows, especially at the production places. You know, people said in the past that factory workers don't need to be able to look outside because they waste their time and become distracted. We seem to be used to thinking that looking out the window and looking at the sky is a waste of time. But actually, if you do have a window, you can actually... look outside for a hundred times without really wasting too much time. Because in the end, we think that some jobs, well, we seem to be happy to let other people's children do them. So that means that we need savvy hands with savvy works. And so you heard us discuss this topics many, many times already, but since we don't have many data to report today, we would like to share these ideas with you too. Now, the salaries of our workers is another important thing for us. We always wanted our salaries to be slightly better. We've realized that if we take about 1% of our profits and invest them in factory workers' salaries, this actually changes these people's lives. And so they improve their creativity, responsibility, the happiness of working. You think people are happy to work. Well, you know, we work eight hours a day plus some commuting time, so it takes a lot of time from our daily life. So we need our jobs to bring us joy as well. We need people to understand they work for some healthy purpose, that their work improves the quality of life of... of many, many people around them, so this is what we want to do. Another very important topic for us is exclusive absolute luxury. I'd like to dwell on this for a few minutes now. In the century-old history of luxury, luxury has never been described with adjectives. I mean, 2,000 years ago, Emperor Hadrian described luxury, but it was kind of an absolute description. Kent described luxury as the symbol of moral good. So when I started this work with Kashmir, and even later, up until maybe 20 or 25 years ago, we used a few expressions to describe luxury.

So... In what sector do you work? In what bracket are you? I'm in the medium bracket. I'm in the medium to high end. I'm in the very high end of the market. And so I do not want to repeat myself, but clearly we do high fashion. So we are in the high end of the market. And then people started saying, talking about absolute aspirational accessible luxury. And so for the first time when I was with Loro Piana, with my dear friend Loro Piana, we were at a conference, one of the very first conferences in Milan dealing with luxury. And there's a person who I knew And he said, well, I'm also in the luxury sector. Well, I have a factory in Umbria and we manufacture pullovers and we sell them for 25, 30 euros. And Loro Piano said, but what kind of luxury is that? So I still do not understand what this accessible luxury actually means. Well, seriously, we discussed this very often. I think that every single human being independently of his or her economic situation, where all human beings always want to achieve something, aim at something. And this applies to everyone, regardless of the economic conditions that we have. Otherwise, I wouldn't have buried the green trousers that my mother obliged me to wear. So we are going to make a couple of reflections on luxury. So be patient. We have 10 minutes more so we can have quite a long conversation. So would you be ready to buy something which is too much widespread? I wouldn't. Would you be ready to buy a brand which manufactures a beautiful watch for 30,000 euros and a bracelet for 100 euros from the same brand? I wouldn't. be ready to buy a beautiful car, a very expensive car, I don't know, $300,000 and the same brand manufactures another car for $35,000? Well, I wouldn't. Or would you be ready to buy something which is widely widespread but also very expensive? I wouldn't. Would you buy something if you know that the person, that company, earned too much. No, I wouldn't, because so is the human being. And for ages, since Pythagoras and others, we've always been like that. And let me go on. Would you be ready to buy many things from the same brand, even though everything is beautiful? Well, I wouldn't. In my garage, I have five beautiful cars, but they're not all the same. I have a beautiful Bentley, a Rolls, a Range Rover, a Jaguar, a beautiful Porsche, but I wouldn't replace my five beautiful cars with five cars of the same brand. I wouldn't. Definitely not. So diversity is a great principle. It is curiosity. It's knowledge. If you have a brand which has been in the medium-high end of the market, as we used to say, I don't think that this brand has no chance to become unique or special. And, well, you know, Vacheron Constantin will celebrate the 180th anniversary. I talked with their managers and we also made a video but here you find the great value of research that leads to the multi-brand approach. Well, you know, I would like one day to invite 25 brands for an event. I will organize this event myself. So this is our idea of luxury. Luxury must be something beautiful, well-made, exclusive and rare. For all product categories, so also for eyewear and fragrances, we do have the same positioning. And by the way, we were informed, and I'm very happy about this, so we were informed that with the women's fragrance, are in the short list of the best fragrances and I'm happy because we spent three years working on this fragrance and we also had to convince the fragrance expert, he's 79, and well he insisted on saying that this fragrance was not okay because 25, 30-year-old women would say this is not the right fragrance. But, you know, so also for eyewear and fragrances, we have the very same positioning, the basic at $229. And then another important thing, we never use the expression VIP client. For us, customers are all the same. It may sound strange, but I think that if we want to survive 50, 100 years, we should take this approach. So do not expect from us to manufacture items with an entry price of 100 or 200 euros a bracelet or pullover. We want to be pricey, a high-priced brand, but not an expensive brand. So pricey means that you have the fair, you've defined the fair price. And then a minute on products, which is the most important thing. As we say, we have to be creative, refined, fresh, young. We have to combine special colors, so a special pinstripe. And so we manufacture pullovers that cost 10,000 euros and you need 60 hours to work on them. And visual merchandising has to be beautiful, especially for menswear. You know, we often go to the stores and we need the people to give us some advice. And, well, sales... have to be advisors. They have to convey trust. And so maybe we all have to be a bit more normal, you know. And this is what I see when I go to the store. And this applies to all our staff. Do not sell something to a person which doesn't fit that person. Of course, we need to pay attention. Today I met the CEO of TikTok. He's a young man. Well, I don't know. He may be around 40. And he had a very tiny jacket. He was so lean. And so that's the reason for calling that type of luxury gentle luxury. And this means living by measure of I do not want to bore you, but in Greece, in ancient Greece, all people lived by measure. So storms were part of their life. So if there was a pandemic, this was part of their life. The Black Death killed thousands of people. And luxury needs education, needs gentleness. So we appreciate a lot the fact that our customers buy a balanced number of items. And those who buy many things, well, they will no longer be with us in a couple of years. We have about 400,000 customers today, half of the Umbria inhabitants. where you do not need to be a billionaire to buy our garments. But if the collection is a contemporary collection, I don't think it will be impossible to double the number of customers in five, ten years. So if we have 800 customers in five or ten years, Well, this would be great. I'm not joking. So we like customers to buy a few items, otherwise they get bored. And so balance is very important. Measure is very important. Then some final details on case Cucinelli in Rome. We will open by the end of September, October. And these case are... make us really very happy. And what do we do in this case? We organize events with journalists, with analysts. And in this case, Cucinelli, you can even breathe a lifestyle, a way of living. And the places reflect our identity.

I was...

Talking about with Massimo, well, if in Madison Avenue you have coffee and cappuccino, people may stay for a cup of cappuccino, for example. And then to conclude, I'd like to repeat myself. Our keywords are elegance, rarity, exclusiveness, contemporary approach. And so do you remember the great Gatsby, which is set around 1926, 27, with a beautiful, young, refined garment? So we leave serenely and in a nice atmosphere. Well, clearly, everything is easier. But this is a good moment. We have to focus on moral duty and we have to drive growth so that growth is well balanced with a healthy profit. And this may make us a little bit better and we may also contribute to improving the world because this is our strategy. this company should survive for the following 300 years. I don't know whether this will be the case, but we will do our best. So now it's half past six, so we have time for discussion and for questions. Thank you very much. This is the chorus call operator. We will now start the Q&A session. If you want to ask a question, please dial star plus one on your telephone to leave the booking list. Please dial star and two. Please ask your questions using the receiver. If you want to ask a question, please press star plus one now. There will be some moments of silence so that you can book for questions. The first question from . Hello, good evening, Brunello. Can you hear me? Yes, very well. Sorry, so let me take the chance of asking you a couple of questions considering the moment that the luxury industry is going through. So first question, you talked about exclusiveness. Well, in the industry, the sector, considering that the distribution is extremely thorough, extremely capillary, and considering the stores that become increasingly large, do you think this also is a factor that leads to a low level of exclusivity for some brands? And then the second question, unfortunately, due to the latest news on our money, Well, in your opinion, is there a hidden problem in the supply chain for the Italian fashion and how do you control that in order to avoid unexpected news as it was the case for Armani? And then the third question concerning the results that were published yesterday, L'Europiana, LVMH. And LVMH commented on the results and they said, well, we cannot do luxury only, but you show and you are the proof that gentle, quiet luxury is still the successful principle. Can you confirm that as far as you are concerned, business is still successful for the type of products that you manufacture and for your customers? Let me start from your last question, Flavio. And let me also refer to Sergio Loro Piana because we grew up together, Flavio. We used to go to exhibitions, to trade fairs, Together, well, they have a beautiful fabric company, factory. And when we met at Pitti, well, he was maybe the most elegant mate I've ever met. His brother, Pierluigi Piggi, was really fond of fabrics. And so when we met, we used to talk about food or about fabrics and elegance. Sergio was really a very elegant man. I remember once in Florence at Pizzi, he came with a beautiful tie, and I wore a gray pinstriped suit with orange shoes and a pullover on my shoulders. And Sergio said, I like this very much. So having his approval in such a refined way was very special. So he was one of the most elegant men in the world. And let me say something else. Well, he did not believe in multi-brand, and I instead liked that approach. And also, let me tell something for the Arnaud company. We went public in 2012 and in 2013. We were in Paris for a luxury conference organized by Deutsche Bank, and one person asked me, but what do Loro Piana think of you? And they said, well, if Loro Piana go public, because we went public the year before in 2012, well, if they go public, they will have to bring money with track, and then the year after they were taken over by an old family and, well, people say that the price was too high, but look at what Loro Piano today is. It's a beautiful company, a beautiful exclusive luxury company, and this is what makes a difference. So let's talk about distribution first and finally supply chain. Well, I always said to ourselves, well, We were younger. We had a store in Paris, Classe Victoire, and, well, people always stood in a queue because the store windows were really beautiful. And so if we have a store, even a smaller one, which is full of people, well, you may have a larger warehouse with more inventories because, well, the stock room is very important. And so we're not too much attracted by large sizes. And finally, a very important topic, the supply chain. We have 3,000 employees, and then we have 400 micro companies with 20 people in average. They're a family run with father, mother, and children. We met them twice a year in September when we discuss the deliveries, and this is a very beautiful moment because we talk about plans for the future, about the workplaces, the wages and salaries of their staff, other schools. We see whether they have an air conditioning system, otherwise we have them installed. So we help each other a lot. And, well, let's say 5,500 employees work exclusively for us and then for Chanel, for Dior. So, we think that the working conditions that are in place are okay. But, of course, we believe a lot in that and we do not want to judge anybody. I think that the every, We're all Italian garments. I have a lot of fascination. But as I said before, we have to invest in our factories. We have to invest in our staff so that they get a fair pay. And they all know how wages are. You cannot pretend them to work 18 hours a day and then companies reach... stellar results. So I think we have to rebalance ourselves. We are listed on the stock exchange, of course, and we want to achieve profits, but profits should be fair and people should be able to earn a fair amount of money. Also, because now you know, if you take a picture and if you publish it one minute after, everyone knows the truth. And we are constantly in touch with all our teams and with all the artisans and companies that work for us. We have no platforms. And in the last few years, considering that these small artisanal companies are still family-run, Well, there has been a very nice generational shift. The owners we used to talk to, well, the founders, are now their children. Well, you know, the owners are 49 years old, and the staff are on average 44. So the type of work is still artisanal, and this company remains small-sized, but it is still in the hands of the family. But considering that the net profit of these companies is low, Flavio, we cannot pretend from them to grant discounts and rebates. They need to achieve a fair profit too. So we will be able to manufacture beautiful garments. And so the problem in the future will not be who is going to buy our garments, but who is going to make them for us.

Very clear and very consistent. Thank you very much. Have a nice evening. The next question will be asked by Andrea Randone of Intermonte. Please. Thank you. Good evening. Good evening, everyone. I'm Brunello. I have four quick questions. The first is an update about the dependent factory and on men's ready-to-wear in general. Second question, your wholesale channel is, of course, a very beautiful one and says so. So you were talking about meeting in Milan and all. So can you comment how you see their business? So the people you work with, how are they performing apart from the business they do with you? I think they're doing pretty well. Is there a lot of confidence in the sector? My third question is just a curiosity because we've seen beautiful pictures about tennis fashion and the Guadagnino film on tennis and so on. So it's a curiosity. I mean, there are some fields which were not typically yours to begin with, but do you see an enthusiastic response from the customers there? I think you do. And final question, you just talked about fragrances earlier. Can you please repeat your standing on fragrances? Maybe I lost connection for a second, and I didn't quite understand what you said about that. Yeah, let me take your last question first. So we've been informed that we've been shortlisted to receive the award for the best fragrance with our women's fragrance. We're very pleased, actually, because we all thought that our men's fragrance was absolutely top of the range, and so we rated it with 10 out of 10. For women's, we rated 9 out of 10, and so we're very happy to have been shortlisted for the best fragrance. Tennis. Well, tennis is pretty much in line with our taste. I used to play tennis, too. Ricardo still does. And at times it may be a bit boring, but whenever we do go and play tennis, we tend to wear very carefully chosen outfits. And so in our stores, too, we did very beautiful presentations for tennis. We'll do it for ski when the season comes, for golf. So it's a bit what you want to wear, not just for playing golf, but also for going to the golf club, and this is part of luxury. Wholesale. Wholesale is very interesting. It's performing really well. Last Saturday I had a conference where I spoke in front of about 500 business people from our area, and there is a lot of possibilities, but we still have to remember that we need factory workers to be perfectly organize and receive everything they need. So everything we do is very beautiful and very interesting, I have to say, because we've been discussing about pushing even harder on style and design, pushing even harder on research, because that really makes a difference. Many people go to the stores and they come in the store with a picture from e-commerce sites, But if you have good sales associates that can really give you some advice and suggest you match the Cuccinelli jerseys with somebody else's trousers and so on, this is really opening up a lot of possibilities. And we've seen that the key idea is that of striking the right balance. I mean, many times we've been... charmed by sales which were not really paying off well enough and so they were not that useful. We are actually going back to giving more importance to the store, to the physical store, to connections with the clients through our sales associates. And some of the things that we've been discussing at this dinner confirm our opinions. We heard from the top 10 multi-brand stores in Italy. And they actually have a pulse, and they understand how Italy is performing and everything is performing. You know, everybody from all over the world, they come to Italy to see how we present things and how we're performing. So we can organize a dinner in Milano with the top ten Italian multi-brands. If you want to come over, we'll be happy to host you. with the multi-brand stores because actually our multi-brand accounts tell us we are the ambassadors of our brands and I agree with you. Loro Piana didn't really like the idea of selling through multi-brands as much as we do but we are at the top retailers globally and so we believe they are very important for us. Speaking of Loro Piana again, our I was wearing a jacket this morning with Lorapiana fabric. It's very light cashmere. It's so thin, and it's fantastic, and it doesn't crumble. It doesn't stain or whatever. So I did it with my friend, Sorja Lorapiana, who's not there anymore, unfortunately, and I'm happy to keep promoting the quality of the work and the Arnaud family that has bowed into real luxury. So we may have different tastes, but we have the same appreciation for quality. We helped each other and told everyone Loro Pena is a beautiful brand, and they told everybody Brunello has beautiful taste. So we helped each other out a lot. So thank you to the Loro Pena family, and they are a family for all of their support. We're not competitors. We actually work together in the same We have a slightly different taste. We all understand that men's fashion is extremely important. So you mentioned penne, but men's fashion in general is becoming more and more important. We're going back to elegance. Elegance is the name of the game today. This is what we saw at Pitti, in Milan, in Milan's Women's Fashion Week. And please stop talking about quiet luxury because I don't really... understand what you mean by that. What is it, trousers and a t-shirt? I like to have something more chic, more refined, more elegant, and more interesting. Thank you very much, Brunello, and thank you, Riccardo, as well. Goodbye. Thank you. Next question from Oriana Cardani of Intesa San Paolo, please. Good evening. Thank you. Good evening, Brunello and everyone. I have two questions. So the first is about this little acquisition of Sartoria Eugubina that you have announced. Could you please comment on that transaction? And can we expect anything else similar to this to happen again? And my second question is about Japan. So I'm thinking of what the Vuitton Group said yesterday that they saw a huge effect of growth because of Chinese tourists traveling to Japan, especially recently. So can you please remind us the overall impact of Japan on total revenues for you? And even the tourist flows may be not that relevant for you. Did you also notice some positive impact from that trend? Yeah, let me take this question on Japan first. For us, it's about 6%. We believe the image is absolutely beautiful. Things are improving all the time. And I can tell you that there is a whole movement of tourists traveling everywhere in the world today. Here in Umbria in April, the most beautiful restaurants and hotels are fully booked. So Reschio is a place where my mother was originally born, and everybody comes here because of the medieval castle, because of the spiritual nature of the place. So I'm really confident we'll see big tourist flows pretty much everywhere, even too much at times, I have to say. In some cities, there might be some over-tourism, actually. The Sartoria, well, the Sartoria is really, really nice, very beautiful. It employs eight young ladies. In 2016, they actually decided to put their financial efforts together. They opened this sartoria and they have beautiful hands. They are very savvy in their work. They did a kind of a small IPO in a way, informal, of course, IPO. We asked them to open new windows and everything in the same environment where they're located. And so we started a new beautiful little factory. It's going to be ready in 18 months, and we'll have about 100 or 120 people manufacturing jackets there because luxury is about jackets for men in particular. So they're difficult for women too, but the men's jackets are even more difficult to manufacture properly. because for women, they're a bit more lenient, so to speak, but for men, they have to be perfectly constructed. So we want to manufacture new men's jackets there. So you said, are we to expect something else in that sense? Well, in case something interesting, artisan and beautiful comes up on the market, we'll be happy to think about it, like we did with Chanel when we bought Cariagics. So I do believe in the artisan work and quality, and I know that if you work with people in a serious, respectful way, they have all to gain and all to grow, and we have all the necessary guarantees. So I can tell you that the rate of faulty products is virtually zero there because you have very skilled workers and very skilled people working with their hands and doing work. So this is something that also comes from working in a beautiful environment.

Next question, Melania Grippo from BNP Paribas. Hello. Good evening. I have two questions. One question on the performance of Europe. So plus 9%. I'd like to know whether there are any significant differences between and among the European countries or whether this performance is uniform throughout Europe. If not, can you tell me which is the best performing country? And what about the strong growth in wholesale? Are there any one-off effects and can we quantify them? As far as Europe is concerned, Melania, I must say growth is beautiful everywhere. For us, it's beautiful in China, too, but China accounts for 12 or 13 percent of our business. We have a nice project, but things are performing really well everywhere. But, again, we go back to the main topic, which is exclusiveness, exclusivity. And distribution is an important topic. I was saying before I went to Los Angeles and, well... I saw that there was a sugar with the name of the brand. So wholesale is really very dynamic and with our project we will be extremely successful in the next five to ten years. Creativity is really key because, you know, they launch 100, 150 brands and they put them all together. They no longer want to organize a special corner exclusively for you. They do not want this. They do not want to abide by the rules, to be obliged to stick to instructions. And, you know, back, well, years ago, we used to provide instructions, but this is no longer the case. And so creativity has... been reduced a little bit because we were obliged to, well, they were obliged to buy eight or ten pullovers, but for the future fashion, there will certainly be a very successful future. And the results are the fruit of what we have been reported, so the appreciation of the success of our products. But, you know, there are deliveries, there's quality, there's taste, there are instructions. If you are courageous to listen, five hours to all this, you will get home with much more confidence. Well, you know, now we're going to have another one in November and we go. and see someone in their store for a couple of days. On Saturday evening, we stay together and we discuss, and that's good for them, for us, for the taste, for style. And if you are able to survive that meeting, Melania, you will understand how you and your brand performs.

Thank you.

Well, I don't know if we've been clear, maybe a bit boring, because, you know, when we have a conference call without figures, without data, we have time to discuss. I know they're here. Next, the next question from the English call, Levi Hu from CICC, please.

Good evening from Hong Kong, everyone, and good evening, Mr. Brunello Grisnelli. Congratulations, great results. I have two questions. The first one is on our adjacent business. So we have launched the fragrance business around last year and also launched the eyewear business last month. So I wonder when we'll be able to see royalties income in our revenue breakdown and how meaningful it will be for our total revenue in the mid to long term? That's the first question. And the second one is, if I look at our retail boutiques, it increased only 2% in terms of point of sales year on year, but we delivered 15% retail revenue growth, which is remarkable. So I believe we have increased our retail density significantly. I wonder, what do you think will be the maximum headroom we'll have in terms of retail density before we have reached the saturation point and we'll be forced to open more stores to ensure the customer experience?

Thank you very much.

Well, first of all, thank you very much. Actually, I'm not an university graduate, so thank you for your compliment. So fragrances and eyewear, they're doing very well. But I can tell you we're not concerned about the royalties. We're more concerned about image. and taste and quality. We work with very serious companies for both eyewear and fragrances and so we're going to continue for the next at least 30 years. As to new openings, we want to grow 10% and we want to open two, three new stores every year if we find the right locations. The expectation is we want to renovate or extend the four or five stores every year But this will allow us and must allow us to stay very exclusive. So can we open 20 stores tomorrow morning? Yes. Can we grow by 40% instead of 10%? Yes. But if we do three years like that, then what's going to happen? What's going to happen to our company for the next 50 or 100 years? So, you know, we do believe in growth, but it has to be very trustworthy. It's got to be very calm. So if you open too many stores, you won't be that elegant in a way. So you are maybe an analyst or an investor. If you see things from the investor's viewpoint, you may want to open 20 stores and to increase sales by 40%. So you'll keep shares for two years and maybe you'll make money on that and then you go. So you know something nice? When we went public, two important Italian companies asked me to buy 3% of the company. So that was at the IPO time. I wasn't that experienced at the time. So they said that we would be friends and they wanted to stay with us for 40 years for style, design, and so on. And so we did give them 3%. And then after one year, they made a huge profit. They sold immediately. Now, we do have a strategy for the next 30, 40, 100 years. And we want to grow, but we want to grow nicely. So for 22 years today, we've been growing 12% per year. So the growth in 2023 and 2022 was actually heavily impacted by the post-pandemic period, that's for sure. So even last year, we thought we would grow by 11% or 12%, and eventually we grew by 22%. But there wasn't much product on the market. It was post-pandemic. We're still striking a new balance. But we're happy as we are today. So I don't know whether I can persuade you. Since then, Citi, while we would like our stores to be – very welcoming. We want you to find little bars and a good atmosphere. We don't want to be intruding on our customers' choice because we think this is the best way for our shoppers to be happy. Thank you. Next question will be asked from Louise Singlehurt of Goldman Sachs. Please.

Hi, good evening, everyone. Thank you for taking my question. And thank you also for the comments so far, particularly the philosophy around pricing, which is very clear. I wondered if you could just answer one question for me on the U.S. That had a very strong development in Q1, and I wondered if there was a large space contribution as well as very strong underlying momentum, and if there's any commentary you might be able to share with regards to the U.S., consumer purchasing behavior and any changes you've seen in the period. Thank you.

So a very interesting question. Thank you very much, Lisa. In America, we've always sold 35% to 36% of our revenues in the next few years. We hope it will be one-third US, one-third Europe, one-third Asia. Now, there is a lot of awareness from many customers that are really keen on real luxury, the value of exclusivity. Day in, day out, people come and see us and invite us, but I think that maybe, and I'm asking Riccardo and Pietro whether they agree with me, I would say this is the first where people look at our behavior too, so how the company behaves, where it works, how it works. So looking at customers that are really struck when they see the way we work, when they see that we respect people and so they appreciate our behavior, this is another thing we consider a big compliment from shoppers, from clients. The Neiman Marcus Award, of course, was very important in this sense, and also the reason for the awards we received was very important, too. We also received an award in Shanghai. And actually, we feel we've been awarded these prizes to reward the brand and its noble attitude and its exclusive attitude, too. People seem to like our taste, seem to like the way we behave. the way we work in Madison Avenue or Los Angeles. You can go to the store, sit down, have coffee, just spend time there. And actually, this is a very good representation of our lifestyle. So this is what we particularly care for. Last year, we had a beautiful dinner in Los Angeles with all sorts of important actors. Actually, By the way, we were at Wimbledon. There was an actress who was so famous right now. She came to our store and didn't even ask for a discount. I mean, she just appreciated our brand. So, you know, the way we behave, the way we present ourselves is also appreciated. Would you like to wear something if you knew it's been produced by hurting people or the earth, the planet, animals? I think I wouldn't like that. I don't know whether this is convincing, but this is our attitude. Next question from Chris Wang of UBS, please.

Hi, it's Chris from UBS. I have three questions, please. Firstly, can you just maybe comment a little bit on the Q2 trends? I know we're only two to three weeks into the quarter. but we'll be very interested to hear what you've been seeing so far of the American, European, and Chinese consumers. That's my first question. Secondly, on the 2024 guidance, you gave 10% sales growth for the year. I caught the comment that you did fall-winter collection price increase of 1% to 2%, and previously mixed was said to be an even bigger driver than pure pricing. So just keen to understand, what is your underlying assumption of this 10% if we kind of break it down into pure pricing, the mix, and the volumes growth. And last but not least, on EBIT margin, you very helpfully gave a range of 16.6 to 16.7 for the full year, which is roughly 20 to 30 basis points expansion year over year. So on this, can you comment if you are expecting the expansion to be balanced across the two? or is it going to be H1 or H2 weighted? Thank you very much.

Good question, Chris.

I must say we are happy with the trend, and now it's April the 15th. Everything is aligned with the first queue and with the projections that our prices have been increased 1%, 2%. So we will have 8% or 9% in terms of prices and 1% or 2% in terms of garments. And we expect a slight improvement. So we are very confident with all the numbers we gave. Sorry, sorry, 8, 9% in terms of volumes, in terms of number, so 8, 9% in terms of pieces or volumes, and 1, 2% price increase. Well, you may also say, well, is this guidance of 10% conservative? No, it's not. Well, if we get a little bit more, we will be more than happy. We will not reject any further growth, but we are very happy. We are particularly happy with the situation. That's the atmosphere that we have in the world. We want to remain exclusive and we want to be beautiful but we want to remain exclusive we want to keep our exclusivity and we want to continue to govern the growth and so we if we move down and if we focus on the medium end of the market we may increase the turnover but this is not the right recipe you may have a a person who bought a high-end item. But, well, you know, if the positioning changes, you are no longer willing to buy these products. My father, for example, well, I bought a Vacheron Constantin. My father has a watch. I had a watch for 50 euros. And, you know, I'm happy. I'm wearing a Vacheron Constantin because it's exclusive and that makes a difference. Well, this evening we had a very nice conversation on luxury, on real luxury, on the way we perceive luxury and the meaning of it. Next question from the conference in Italian, Paola Carboni, Equita Sim, please. Good evening. Good evening, Brunello. I have two questions. I hope I will be quick. So the first question is about the Chinese. Can you elaborate a little bit more on that? And yesterday with the LVM8 numbers where we show that they are now driving the growth, do you also see that different pace compared to the other nationalities? And then we mentioned that We explained your distribution model, which is based on the monobrands and specialty stores, so it's a bit different. But what's the situation now, and what opportunities do you see in the years ahead? The second question is on wholesale. Can you give us... bit more color on the markets and on the geographies that are driving the strong results that we saw in the first queue. And moving on, apart from the store openings in the monobrand network, have you ever thought of converting some hot shops so as you did in the past years. Are there any opportunities in some geographies? But first of all, I'd like to know whether you see any differences between the performance of wholesale in Europe and the performance of the wholesale in the U.S. Okay, so let me start from the last question. Well, if we open a small shop, it's simply to replace another store which has been refurbished. We do not opt for temporary stores because this doesn't provide exclusivity to the store. No, no, I was not, well, you may, I was misunderstood. I meant the shopping shop. All right. So as for wholesale, So we are still focusing on the fact that they do not have to lose their identity. Well, in the past, there was Barney, and so this is the way they should be. Wholesalers performing well throughout the world, and well, you know, Italian wholesalers Well, what we have seen in our experience is that the department stores that prefer to rent out the spaces, giving up a little bit of profits, could hedge themselves. So we will always focus on those with their own proposition, with their identity both in the digital and in the physical world. Paola, in the future we hope we will have good opportunities in the next five to ten years. We start with 12 or 13 percent, but we do not want to reach 18 percent in a matter of a year opening 15 new stores. We want to open one store a year. We may refurbish one and open another one, but we want to remain exclusive. When we got this award last year, They said something that I really like. You are an exclusive brand, they said. And Chinese customers pay a lot of attention to the exclusivity. The person who made the interview had two iPhones and an iPad, and while we were speaking, He was showing the price in Shanghai and the price in San Francisco. And, well, he asked me the reason for that price difference. Well, I told him he should ask these people. So we want to remain exclusive. But most of all, we want to remain an apparel brand. So it's 85%, of course. And, you know, growth may be slightly slower than an accessory brand, but that's the only way to retain one's identity. And taste is made up of apparel only. If you sell products, you are not identified with a taste. If you go to a trade, you are immediately identified as Brunello Cucinelli. Once you've identified the taste, well, one year the collection may perform a little bit less, but taste remains unchanged. And we want to focus on taste, and taste has to be the one that we identified. I saw pictures When we went to play tennis, well, these pictures are really beautiful. So, well, I'm not so young and we want to be extremely rigorous in terms of taste. Thank you very much. We've had a very nice conversation, so we've been talking about taste for three-quarters of an hour. Mr. Cucinelli, for the time being, there are no booked questions. All right, so I'd like to thank you all wholeheartedly. So we've had a very beautiful conversation. For three-quarters of an hour, we have been talking about taste in a call where we usually focus on numbers. Hopefully, the conference calls that we usually have in July in mid-July, well, considering that we have just one figure to disclose, sales, we can have another nice conversation on taste. Thank you. Thank you very much. Thank you. This is the current call operator.

The conference is now over. You can disconnect your phones. Thank you.