Moncler Spa Ord

Good evening. This is the Coral School Conference operator. welcome and thank you for joining the montclair first half 2024 financial results conference call as a reminder all participants are in listen only mode after the presentation there will be an opportunity to ask questions should anyone need assistance during the conference call they may signal an operator by pressing star and zero on their telephone at this time i would like to turn the conference over to miss elena mariani strategic planning and investor relations director of montclair Please go ahead, Madame.

Good evening, everybody, and thank you for joining our call today on Moncler Group's first half 2024 financial results. As usual, let me introduce you to the speakers of today's call. Besides myself, you have Gino Fisanotti, Moncler Chief Brand Officer, Roberto Eggs, Chief Business Strategy and Global Market Officer, and Luciano Santo, Chief Corporate and Supply Officer. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties, and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. Let me also highlight that given the nature of our business, interim results can be influenced by seasonal effects and therefore cannot be taken as a proxy for full year trends or results. Finally, I remind you that the press has been invited to participate to this conference in a listen-only mode. So before handing it over to Gino, let me just present the key highlights of today's results on page four. Group revenues in the first half of the year were up 11% at constant effects, with the Moncler brand for the first time exceeding the 1 billion euro revenue mark in the first half of the year, up 15%, and Sun Island down 5% at 189 million euros. The group also reached a notable H1 operating profit exceeding €250 million with an EBIT margin of 21% compared to 19.2% last year. Net income was €181 million and our net cash position at the end of June was very healthy at €846 million compared to €471 million in June 2023. Let me now hand it over to Gino for the key highlights of the Monter Brand. Gino, over to you.

Thank you, Elena. Good afternoon to everyone. Again, a few things from my end. I think on the back of a very strong Q1 in terms of executions and brand momentum for us in Q2. First of all, we have the opportunity to really create an interaction between Monter and art, creativity, and design. This was the first time for the brand to be present during Milan Design Week. And again, we were by design and lucky enough to have the Venice Biennale and Design Week happening at the same time. So we strategically took the decision to take over one of the most iconic landmarks of the city, which is the Stazione Centrale, the train station, the main central station. And by doing that, we were able to transform that space into an exhibit space that, as we discussed before, was all about art, creativity, and design. A few things just to highlight. In terms of art, we were able to work in partnership with the French iconic artist JR, and this was able to create a full takeover of the facade of this very iconic landmark, something that, of course, created a lot of structure and invitation to everyone attending Design Week to look at. And then in terms of the creativity, of course, we work in a project curated by Jefferson Hack, with some of the most extraordinary minds that shape culture today, like Daniel Arsham, Deepak Chopra, Isamaya French, and others, by taking over the full communication of the station. Just to give an idea, over 240 billboards and more than 100 digital screens were all too covered to be part of this experience. That was able to connect with over 3 million people who passed by that week, which was a new record. And of course, this helped us as a backdrop to our summer campaign that was able to reach over half a billion people around the globe. Last but not least, connected to this as well, we were able to present through media our upcoming work in collaboration with iconic designer Jonathan Ive, Johnny Ive. This is something that we will be launching later this year, but we were able to announce during Design Week as well because we believe that was a perfect backdrop to do so. If we move to the next slide, and before I pass to Roberto to talk about Stone Island, of course, we continue our progression towards spring-summer diversification, and this was not the exception for us in Q2. This is why you can see that we have been doing conscious efforts around our spring-summer Montclair collection. during this time, especially on the back of April and beginning of May. We were able as well to launch on the back of June our Montclair collection pre-fall, as well as the introduction into what is coming right now, our fall winter collection. So again, as I mentioned before, hopefully this will start making sense to all our conversations about how we're starting to push to become a more all-year-round brand and the diversification we want to do into spring-summer as well. Roberto, to you.

Thank you, Gino. Good afternoon to everybody. I would like to bring you through the three main highlights of Stone Island during this last Q2. The first one, which is probably one of the most interesting co-creation of this year, which is the co-design capsule between Dior, so the Tim Jones Studio, and Stone Island, a tribute to Christian Dior and Massimo Osti, the founders of the houses. The collection was introduced as a preview during Milano Fashion Week at the end of June and then in Paris during Paris Fashion Week. The collection is being sold only in Dior stores, not in the Stone Island store. But it was very, very interesting to see the amount of coverage that this co-creation has been generating and the traffic also that this has been driving also to the Stone Island store. The second important event that took place during Milano Design Week is our series number eight that we call Stone Island Prototype Research, very much orientated around research and experimental processes. Also here, a very big success on the exhibition with more than 12,000 visitors that came to visit the exhibition at the Stone Island position. Finally, the second drop of the New Balance 574, which is a legacy model showcased by Sun Island which is showcasing the expertise of Sonan in color research. Despite the fact that we increased a lot the volumes on this capsule, it has been sold out in one day. And we changed also the balance between online sales and physical sales in the store in order to drive traffic in the Sonan store. So it's something to be repeated, a very, very interesting launch that we did this time with New Balance. Let me drive you through the result of Montclair and Stone Island first by geography and then by channel. I would like to start by Montclair where we reached for the first half of the year more than 1 billion turnover at 1 billion 41 million which is a plus 15% compared to H1 2023. Q2 recorded a plus 5% growth supported with a solid growth in D2C channel. Asia, which includes for us, as a reminder, Asia-Pacific, Japan, and Korea, recorded a plus 6% growth, and the big drive of the growth was driven by Japan, positive on locals, but really driving this growth through tourists, and also the positive performance of Chinese mainland, We had also Korea and rest of Iraq, which showed softer trends. EMEA revenues increased by 6% in Q2, supported by solid tourist purchase, but also with positive local consumption. Finally, the Americas declined by 1% in Q2, the positive performance of the D2C channel was offset by the decline of the wholesale channel, which is something that is driven by us for conversion, but also difficulties in department stores. On the next page, on the performance by channel, the D2C of Montclair showed an increase of 19% during H1 2024 at 875 million, The comp sales during H1 is at plus 14%. In the second quarter, D2C revenues grew 8% versus the second quarter of 2023. All three regions recorded positive growth with EMEA outperforming. Wholesale revenues reached $165.5 million in H1, down 5% versus H1 2023. Q2 was in line with the performance of Q1 with a minus 5%, mainly impacted by the ongoing efforts to upgrade the quality of our distribution. Let me drag you through the results of Stone Island by geographies. Stone Island in H1 reached 188.9 million, which is a minus 5% compared to 2023. Q2 was down by 4%, with a decline in the wholesale channel almost entirely offset by strong double-digit growth in the D2C channel. Q2 in Asia grew by 27% year-on-year, the strong performance of Japan and solid growth in Asia Pacific. Trends in Korea remain softer than in the rest of Asia. EMEA declined by 11% compared to 2023, with the strong double-digit performance of the D2C channel not enough to fully offset the decline of the wholesale channel. Finally, the Americas, with a decline of 15% in Q2, the positive, here again, positive performance on the D2C channel, with a quarter that was offset by the decline of the wholesale channel. Last page on the performance of Stone Island, the performance by channel. Stone Island recorded a wholesale revenue at 96.3 million with a minus 24% for the H1. The second quarter was in line with the performance of the first quarter with a minus 28%. The revenues in D2C channel grew at 92.6 million with a plus 29%. In Q2, revenues of this channel were up 27% thanks to a positive contribution from all regions with Asia and EMEA outperforming. Finally, in terms of openings, we had two net openings regarding Montclair in terms of DOS. One, which is a conversion from wholesale into retail in Macau, with the four-season Macau, where we have been, by changing, let's say, the ownership of the store, we have been able to double, more than double, the size of the stores. The second one is in Jinan, within the Mixi Mall, in the Shandong province. Jinan for... In the knowledge of everybody, it's a city of 6 million inhabitants. And finally, for Stone Island, one net opening, which is the former store of Montclair in Vines, that we transformed into a Stone Island store. The next two pictures that you see on the presentation are the example of what we did with Macao Four Seasons and with Vines Colmart. The floor is yours, Luciano.

Okay, thank you, Roberto. And good afternoon, everybody. Thank you for attending our call today. We are now at page 16, where we report our profit and loss. It shows a top line of 1.2 billion. That has already been commented in depth by Roberto. And a pretty good gross margin of 76.7%, significantly higher than last year. thanks to the higher contribution of our DTC channel that grew very, very nicely, as we said two minutes ago. On the other hand, the selling expenses increased as compared to last year for the same factor, but less than gross profit. That means that our stores were productive and profitable, also thanks to the fact that most of the growth was in organic growth. So very good on this side. G&A a little bit better than last year, but also thanks to a one-off income of 7.5 million euros associated with an insurance refund we received after the unfortunate malware attack of December 2021. Marketing expenses increased. a little bit behind last year, but only for a timing effect, a different and more balanced phasing of our marketing activities between H1 and H2, still with our indication of a 7% marketing spending for the year end. And an operating profit of 259 million, 21% margin. Worth mentioning financial income, financial expenses that include a significant amount of financial income, about 13 million, much better than last year. And at the end, a net result of 180.7 million, up 24% as compared to last year. Let's move now to page 17, where we report our net capex. Behind last year, 56 million. Last year, we reported 69 million. but this only for, again, a timing effect. We still maintain our guideline for the year end of about 6% capex on our revenues, more or less equally distributed between our distribution network and the infrastructure. Let's go now to page 18, where we report the networking capital. That shows slightly better incidence as compared to last year, 8.5%. Last year was 8.6%. So very good. Honestly, nothing to add except very good. Very good control of our credits and very efficient inventory management. Let's move now to page 19 where we report our net financial position. $846 million after a dividend distribution of over $300 million. That makes this number lower than the end of the year 2023, but much, much higher than the same period of last year when we reported 470 million. For some reasons, I'm going to comment in a second. Balance sheet, page 20, honestly nothing to comment. To comment, of course, open to answer your question, if any. And cash flow statement, page 21, that shows again a quite healthy free cash flow of $126 million. Last year, there was a negative number for $34 million, so very good. All the economic indicators higher than last year. Better than last year impact of a networking capital for the reasons said before. And a timing effect of 65 million due to taxes that are due in Italy at the end of June. But because the end of June was Sunday, we paid the taxes July 1st. So this is only timing. and we paid 65 million in July. But overall, again, a quite good free cash flow, a quite good cash generation. Thank you. We are done with the presentation, and we are ready now to answer your questions.

Yes, operator, I'll give the line back to you. I kindly ask you to stick to a maximum of two questions per person to give all participants the opportunity to ask a question. Thank you.

Thank you. This is the Chorus Co-Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Edouard Aubin, Morgan Stanley. Please go ahead.

Yeah, good evening. Thanks for taking my question. So one question on sales, one on profitability. So, Roberto, in the past, you've commented, you've given us some color on the trends by nationality. If you could do that again, please, for Q2 trends. And so that's for nationality, but also related to that in terms of the movement, in terms of geography you've seen in APAC and to what extent it might or might not have impacted your profitability. So that's question number one. And then question number two, Luciano, you had indicated that you were expecting gross margin expansion this year, among other reasons, because of the higher DTC penetration. But clearly it came in substantially higher, the expansion in APAC. in H1 than anticipated by the market, if you can just provide a little bit more color. And, you know, this led to a beat in terms of your EBIT margin. So are you sticking to the full year EBIT margin of about 29.5, 30 percent? Or are you now more confident that you could exceed that? Thank you.

Thank you for the question, Edouard. Roberto speaking. I start by the question regarding the different nationalities and clusters that we have. I think the most important one everybody's interested in too is to have a view about how did we perform with Chinese. Chinese for us were still up double digits, even if during the quarter, even if meaningfully this is slowing down versus Q1. So very positive on Chinese. Koreans were softer, but we have to remind that the Koreans have been the fastest growing nationality for Montclair in these past four years. So it was something that was somewhere expected. Japan is flattish, but positive locally in Japan. The growth for the Japan country has been, as mentioned during the presentation, mainly driven by Chinese and by South Asian clients that have been traveling to Japan because of the weekend. Regarding Europeans, we had single-digit positive growth for the main important nationalities. Americans were single-digit positive in line with Q1, even if they remained volatile. So we see positive weeks and weeks that are not as good, but overall they were positive during the quarter.

Hi, Edward. About your question on gross margin, of course, as you stated, gross margin was much better this year than last year, thanks to the contribution of the DTC business. Assuming that in the second half of the year, the contribution of the DTC business will be still growing as compared to last year, we may reasonably expect a growth of our gross margin as compared to last year, also in the second half of the year. More difficult to answer is your question about EBIT, about operating profit, because as you know, our operating margins are totally driven, mostly driven by the top line, specifically by the safe density. which is something as difficult to predict for the second half of the year, for the current uncertain situation in all the different markets. Having said that, of course, our ambition is still to deliver a great profit in line with what we did, with what we delivered over the past few years. That is what You said before, but again, very difficult to say now and something that I cannot guarantee right now, of course.

Sorry, Luciano, just to clarify, did you say that you expect the gross margin expansion in H2 to be more or less similar to H1 or did I misunderstand?

It's something I didn't say, Edward. Actually, I don't know the extent of the expansion. I can predict this expansion for the reason we reported the expansion of the staff, that is the higher contribution of the TTC business. The extent of this expansion is difficult to predict, and honestly, I don't want to bet on numbers that I can't know right now. Sorry.

Okay. Thank you.

The next question is from Erwan Ramburg, HSBC. Please go ahead.

Yeah, hi. Good evening, everyone, and congratulations on a very resilient quarter relative to peers. Two questions, so one on the price and the space impact for Q2. I believe price should moderate in H2 and space might expand further, but I'm wondering if you can comment on what the contribution was for both price and space, and how you can project the back half. Second question for Gino, I'm wondering how much you can tell us about the Shanghai events, not in terms of what you'll be doing, but how do you measure this relative to the other big events that you've been organizing over the years, the 17th anniversary in Milan or the big event in London? What are you targeting for this event in terms of returns or visibility, or how will it differ from the previous big events that the brand has organized? Thank you.

Okay, thank you for your question about, I mean, you said the price space. Am I correct if I understand comp versus space? I mean, of course we don't report this number quarter by quarter, but normally the guidance we provide to the market is that we expect for the full year a contribution of space mid to high single digit. And this we still expect might be the case for this year.

And the question on price, close to 10% of price in Q1 and I think high single digit in Q2. I'm wondering what the price part of the equation becomes in H2.

Okay, price volume, you mean?

I think you're talking about price increases, right?

Price increases, yes. Price increases for this year is, as we said, in the region of mid-single digit, more or less the same for the second half of spring, summer, and for winter. Last year was much higher for the reasons you know very well. This year is much more moderate.

Right. Thank you. Sorry I cut you off, Gino.

Oh, no, all good, all good. Thank you. Good to hear your voice. A few things on Genius again. Let me go to what I can say or what you expect. I think the first thing I would say is, for us, it's the very first time that we're bringing Genius outside of Europe, right? And again, it's for us a great step forward to bring this to Shanghai. Of course, as you know, we have a strong relation with this market since I think the first store in 2009. I think it's a strong developed market for us, and we believe this is a great opportunity to bring this there. As you know, genius is a concept that is all about creativity, and we really believe that creativity is one of the sharp points that makes Moncler very distinctive within the luxury industry. We'll keep pushing to evolve this further, so you should expect something special. Again, I think genius has been helping us when we start talking about not only the scale but the return. It's not only about the immediate return, but it's about helping us to not only connect with current communities, but open the door to new communities as well. We have seen the effect of London last year. We are very hopeful about what we will do this year as well. So, again, more to come. Of course, as you said, what we announced so far is the date, which is the 19th of October, and the city, which is Shanghai. So looking forward to share more as we go with you.

Thank you. Best of luck. Thanks.

The next question is from Oriana Cardani in San Paolo. Please go ahead.

Yes, good evening. Thank you for taking my questions. The first is about current trade. Can you give us an update on the trend that you see in July with some details on what's happening in each region? And the second question regards the online business. So how is this business line evolving? Thank you.

Thank you for the question. Let me take the first one. I'm going to comment only once on the current trading because we are here to discuss about Q2, but we're ready to make some disclosure about the current performance. Just maybe to put the context, I think it's important to clarify that the Q2 performance was pretty consistent across the three months. So it's not that we had one month very strong and one week. It was pretty consistent amongst the three months. Let me also remind you that for Montclair, July and August are still considered low season in terms of sales. So the trend that we're going to give is not an indication or a proxy for the rest of the year. I will say that overall trend at the start of Q3 is not materially divergent meaningfully from the Q2. We are quite aligned in terms of trend. The two regions that are outperforming currently are EMEA and Japan. And we have mainland that is a touch softer, even if the Chinese cluster is still positive for us. In the light of the current environment and the ongoing sector normalization, you should not expect Q3 performance to be materially different from the one we discussed for Q2 for the D2C business. For the wholesale, let me remind you the guidance that we gave at the beginning of the year for the full year, which was a high single-digit decrease. We have seen a minus 5 during H1, so you can expect The second half, especially Q3, where we have usually the delivery of the fall winter season to be on the high side of the high single digit decrease. Especially because we took a measure last year for some of the tailors that were not performing. We have been cutting, we took the decision a year ago to cut the volumes. And also we continue with the elevation of our distribution in wholesale. So this is something that was guided by us, decided by us one year ago. So we're going to see some of these effects for the wholesale part on the second half of the year.

Oriana, thank you for the question. Regarding online, I think I have to say that definitely Q2 show a weaker performance than Q3. then definitely Q1 across all the regions. I think this business remains extremely volatile right now. I think we haven't seen this across the board. I would say... I would say as well that we're seeing some of the reasons for these. Again, there's a lot of promotional activities going on in the market as well, which is sometimes affecting mainly the conversion part. I think we're seeing still strong performance in terms of the paid traffic, less on the organic traffic. And I think there is a behavioral change that we're seeing more and more of .com being a search platform where some of the transactions are definitely moving into the into the physical retail as well. So that's what I can share as a top line of what's going on in the online business.

I understand. Thank you very much.

The next question is from Melania Grippo, BNP Paribas. Please go ahead.

Good evening, everyone. This is Melania Grippo from BNP Paribas. I have two questions. One, if you could please remind us your structure in terms of price gaps, Europe especially versus Japan and mainland China. And also, I understood that you said that your Chinese cluster is positive, but I was wondering if you could please comment, give us an idea of your performance in mainland China in Q2.

Thank you for the question, Melania. On the price gap, we are still probably one of the highest of the industry, even if we have materially decreased it in these past years. And this is part of the strategy that we have decided to put in place already six, seven years ago. So it's the first time that the price gap is between Europe and Asia below 40%. It's in the range of 36%, 37%. We decided to – usually we have, let's say, the region in Asia between mainland China, Japan, and Korea that are quite aligned. This year, because of the weak yen, we decided not to increase the prices in Japan, to match the prices in China, because we will have probably jeopardized or alienated the business that we have our with our local consumers so we increase it to an extent that is now having we're having a price gap between mainland china and and japan of roughly five six seven percent depending on the fluctuation which is lower than the price gap of some of our peers but that is enough to generate a very healthy and nice growth with the tourists while also bringing positive figures with our local consumers. So we are positive on the locals and strongly positive, double digits, with the tourists mainly from mainland China and Southeast Asia, as I was commenting during the presentation. Regarding the Chinese cluster, I said that the Chinese cluster is up double digits, even if it has been normalizing compared to Q1. We have been and we remain positive in Q2 in mainland China. So not only the Chinese cluster is positive double digits, but we were positive locally with our Chinese consumer in China. while we have been experiencing, like most of the brands, an increase of the Chinese buying offshore. So we have currently 40% of our business with Chinese that is done outside of China, and it was 30% in Q1.

Thank you.

Great answer. Thank you.

The next question is from Huang Chris, UBS. Please go ahead.

Thank you. It's Christian from UBS. I have two as well. One on Moncler and the other one on Stone Island. Firstly, starting with Moncler, a more theoretical question. Can you just share some observations when it comes to the consumer behavior during different seasons, given the business seasonality you have in a brand, especially in a weaker macro? Do you tend to see consumer demand concentrate on the core categories such as the outerwear Or do you tend to see the higher-end categories outperforming the overall brand, which I guess in your case would probably be the netwear, the non-outdoor products? Secondly, on Song Island, can you maybe just break down the light for light and space contribution and maybe share some key learnings on the brand's innovation journey? Thank you very much.

Chris, thank you. Thank you for your question. I think, again, great question. I think we mentioned about a recification we want to do around spring, summer. I think without going too much into the details, I think what we can share with you is that we're happy to see other classifications growing faster than the brand right now. I think Needware is that case. uh for us um this is something that i think we have been discussing before and and is by by design so i think we're seeing of course on top of the the strength that we have as a brand in outerwear we're seeing other classifications in this case we can call out midware uh but we didn't need where even cut and so on as well which is other classifications that have been contributing to to to the growth that we have been discussing so we are happy to see especially when you mention about consumer behavior, to see that that behavior is starting to come around in terms of seeing Montclair as a relevant brand all year round.

Regarding the question on Solar Island, the DTC growth has been generated by an unhealthy mix between comp and space. We don't want at this stage to be more precise on this as we are just at the start and the beginning of our retail transformation. Retail transformation that is also starting by the elevation of the product. Very successful, let's say, performance of our sub-collection, especially the Ghost collection that is having success in all the region. And that is also an elevation of the product portfolio that we have with Western Ireland, also an increased weight of part of their outerwear collection. We have also a meaningful increase in terms of D2C performance on the main retail KPIs. We remain slightly, like the current sector, negative on the traffic. But apart from the traffic, all the metrics that we have started to monitor it, in terms of conversion, unit per transaction. Average tickets are up and are following the strategy that we are currently putting in place. and also the campaigns that we have started to run with people that are bringing also their communities and enlarging the reach of Stone Island. Also, we are going to feature for the first time women in our campaigns. Peggy Goo, a very famous Korean DJ is going to probably, is what we hope, increase the reach and increase the number of followers of the brand while staying true to the DNA of the brand. Thank you.

The next question is from Luca Solka Bernstein. Please go ahead.

Yes, good evening. Lucas Holker from Bernstein. One question about retail space productivity. With this healthy comp sales growth, so like-for-like sales growth, is it, and without knowing how the average store size is evolving, I was wondering whether your new goal as far as the sales per square meter is concerned is now approaching 50,000 euros. I wonder if you have a more precise and sort of clear view on that. The other point I had in mind was the fact that you had such a big press up between Japan and Asia in general and Europe. Is that potentially a blessing in disguise? Because we see now a number of brands struggling to keep uh the sort of the the desired price gaps between across regions uh while the japanese yen devaluation in a way is solving your problem because you are reducing the price gap uh just because of where the currencies are moving so my question on that is uh are you experiencing a less extreme issue as far as damaging your own Japanese consumers with price increases, for example, and also without doing that, less of an issue of Chinese tourists coming to Japan or Chinese professionals coming to Japan to create parallel trade of your products. Thank you very much.

Good evening, Luca. On your first question regarding the retail space, you know that the ambition we have in terms of productivity is 40,000 euros per square meter, which is not what we have achieved yet. We close the year 2023 with a record of 38,000 Euro per square meter. Let's see at the end of the year, depending on how things are going to evolve in the second half of the year, if we can reach this ambition or not. It will very much depend on the performance of the last quarter of the year. We commented the comp on the first half, which is 14%. And there was an LC comp positive also in the second half if we don't disclose figures regarding this. So this is where we stand and where we want to remain. Regarding the price gap, I think we had many opportunities already discussed together to see if it's the right level that we have today. We know that we have still some work to do to further decrease the price gap. But currently, it has not been an issue that was raised by our local teams in Asia. We have been able to perform locally while enjoying healthy growth with travel retail destinations. For the yen, clearly the decrease is helping us to decrease and to come closer to where we want to be, which is below 30%, probably in the range of 25% one day. It will take another couple of seasons to do so. But we don't see problems. We don't have questions or complaints from the local consumer in Asia. And we are enjoying nice growth in Japan and Europe, thanks to the price gap with the tourists. Thank you, Roberta.

The next question is from Louise Singlehurst, Goldman Sachs.

Please go ahead. Hi, good evening to you all, Roberto, Luciano, Gino, and Eleanor. Thank you for taking my questions. Just a couple of follow-ups for me, if I can. Just going back to the comment, Roberta, you mentioned China being positive, which is an absolutely fantastic result, given what we're hearing across the peers and how tough it was in Q2. Is there anything... to call out that you're seeing within, and I know we keep obsessing about China, but it's obviously very difficult to have clear observations from the outside. But is there anything that you've seen in the first half this year which would make you feel differently or any surprises versus where you were at the beginning of this year, any change, whether it's traffic, conversion. And then my second question was just on space. Given where we are and the regional performance, is there any difference in how you're thinking about the new space allocation by region over the medium term? So not necessarily for second half 24, because obviously it's the planning, but as you look more over the next year? kind of two years, you certainly sounded a bit more positive on really focusing on the U.S. opportunities for store expansion earlier this year. Thank you.

we thank you thank you for your your question and what surprised us with with china was definitely the first quarter of this year with the fantastic performance on on the chinese new year we take the full advantage both locally in china but also with the restart of the travel retail to maximize our sales with chinese during during q1 and clearly Since then, we have seen a softer performance locally, but also because as Chinese, as I was explaining, we have 10% more, the weight of Chinese buying outside move from 30% to 40% in Q2. So clearly this is impacting the local performance of our Chinese, even if globally the cluster even now in the start of July remains positive. In terms of deployment and strategic deployment of Montclair, we are still under-penetrated or under-distributed compared to some of our peers. Clearly, we mentioned that America, not only US but also South America, is one of the focus that we want to add in the next year. It's not something that can be quickly fixed because we are conscious that we are under-penetrated on the North American territory and this is going to be one of the focus that we have in in the future Europe will be mainly mainly the world will be mainly driven for that's a transformation of existing source relocation and expansion less about openings even if we have seen some opportunities on on secondary or less relevant geographies like Portugal and Greece that we want to have a footprint But they are not, let's say, the first priority that we have. We have demands locally. We are fulfilling the needs of these clients for the online and for when they are traveling. And we know that there is potential. Finally, on Asia, clearly for us, China remains a focus. A lot of relocation now also on the Chinese market. As we have increased dramatically our performance locally, we have access today to better positions compared to when we started 15 years ago in China. So there is a clear focus also for us to improve the visibility of the brand. And we think that with the current number of stores, which is 46, we still have some room to further increase the penetration of Montclair on the Chinese market.

Thank you very much.

The next question is from Charles Scotti, Kepler. Please go ahead.

Good evening. Thank you for taking my questions. I have two. The first one on the wholesale, some of your competitors have indicated worsening trends in the wholesale channel, but it doesn't seem to be the case for you as you can find the high single-digit decline guidance for Moncler. Do you also reiterate the high teens drop for Stone Island expected this year? And also the market wholesale channel is very promotional. How do you monitor on that and could this make you accelerate your wholesale rationalization further? And another follow-up question on wholesale, will the merger between Sachs and Neiman Marcus have any impact on your business? And second question on the free cash flow, which was very good with a stronger working capital control and lower CapEx. Can you come back on the seasonality of the CapEx in H1? Because it seems that you opened the same number of stores than last year, five. And also, if you could give us more color on the sales flow in your stores and the level of inventory left over today. I think you have been pretty conservative on production volumes for this year, but show trends where to stay soft in H2. How confident are you in keeping the working capital under control? Thank you very much.

Charles, thank you for your question. We'll answer to the first one regarding wholesale. We are currently pushing for even more selective distribution agreement and approach for both Montclair and for Stone Island. This implies sometimes also moving some of the good key accounts into a concession model. It's also what we did with some of the retailers that became e-concession. We are currently just at the end of a June move for Montclair Sachs into an e-concession after having moved in October last year the Fifth Avenue stores into a concession. We have reduced the exposure on the retailers by cutting 40% of the volumes for the fall-winter season in order to be able to have, let's say, a healthy growth that is respecting the commercial policy that we have. So I think we are, with the season that is starting now, quite confident that all these price promotions we have seen around the market will affect us to a lesser extent. As I was mentioning for Montclair, the second half of the year for wholesale will be less good than the first half. So we are going to further decrease in the high single digit number. The performance probably Q3 is going to be worse than Q4 before seeing something that is probably more healthy next year while staying probably negative still in 2025. For Stone Island, it's the opposite. We have had a strong decrease in wholesale in H1. We think that our second half for wholesale should be slightly better. And we are going to continue to push, let's say, the change of business model that we started and we initiated two years ago, moving the business into more of a D2C business with more control. One important element also on which we have been working a lot and is going to start at the beginning of August is the fact that we are going to start managing our own online with our new website for Stone Island that we are going to launch at the beginning of August. something we have been working strongly in these this past one year that is going to help us continuing in the elevation of the brand perception and also introducing new omni-channel services like we did in montclair back in 2018 is the attempt to introduce a new way of selling and an omni-channel approach also for us on island starting from second half of the year

Yes, let me ask you the question about free cash flow, that you're right, it was good. Actually, last year was not particularly good because we decided to change our supply chain phasing, anticipating the production in order to better serve our markets. And for this reason, networking capital impacted significantly, more than 50 million negative. This year, the impact of working capital is much lower, also because we were able this year to manage more efficiently our inventory. So the impact on that side is lower. And the other point you mentioned is CapEx. CapEx, as we said before, is only timing. The reason why it's lower than last year is about the infrastructure, because last year we reported the end, the completion of our production facility, second production facility in Romania, that impacted significantly, and some important investments in logistics. Talking about retained network, last year we not opened yet, We reported significant investments, capex, for the opening of Zurich, Miami, Munich for Fortune Island, Plata 66, so some very important and very expensive projects, more and more than this year. Some important projects this year will happen in the second half of the year and for this reason we still maintain the indication of a 6%, about a 6% impact of CAPEX on our revenues. Talking about networking capital. as you know there is a lot of attention by management team in controlling networking capital and specifically receivables on one side and even more importantly Our inventory position is higher than last year, but less on a percentage basis than last year. And again, because this year we are a little bit more efficient in managing inventory. Inventory is made of the end of spring-summer season and the beginning of of our full winter season that just started a few weeks ago we have what we need honestly of course talking about talking about the cell true for the spring summer season was good was in line with our plan actually is in line because the summer season is still in our stores and we're still selling that season. For winter, it's still premature, even if the season started quite well. Of course, as you know, back to what our Open-to-buy strategies that you should know very well. We tend to be very prudent in developing the inventory in our open-to-buy, but on the other side, we have some flexibility in our supply chain that makes us reactive should the market demand be higher than expected. So, again, we have everything, but not more than what we need in our inventory now.

Thank you very much, Mr. Granville.

The next question is from Peter Aldedania, RBC. Please go ahead.

I'll try to be brief. So I have two questions and a quick follow-up.

Excuse me, sir. Could you please get a close answer?

Yes. Hi. Sorry. Is that better?

Yes, much better. Thank you.

Thank you. Apologies. Good evening. Okay. My first question is on gross margin. I just wanted to follow up and clarify. Is all of the gross margin expansion in H1, I think it's 180 basis points year on year to 76.7%. Is it all driven by channel mix or is there some contribution coming from either price or regional or product mix? Just wanted to understand the dynamic because that will help us better understand or try to forecast the dynamic or what we could expect for the second half based on the channel growth rates that you have indicated for Q3. My second question relates to performance in the second quarter by collection. Have you seen any noticeable differences between mainline collection versus Grenoble in terms of the sell-through rates or customer interest? And just a very quick clarification, thank you for sharing the offshore-onshore mix of Chinese spend in the period. Could you just help us understand what the tourist versus local spend is for the European market and the Japanese market? Thank you.

Okay, your first question is about gross margin. Gross margin was very healthy, honestly, as you said. Mostly, not totally, but mostly driven by the DTC contribution much higher than last year. So this is what made our gross margin very good. Other minor good effects, but not material, honestly. And so this is mostly, mostly driven by the channel mix. And again, for the second half of the year, of course, channel mix, we still... be predominantly DTC as compared to wholesale and so we expect a similar equivalent but I can't tell you how much expansion of gross margin for the same reason.

Second part, good evening. Second part of the question, or second question was more about the performance across the different dimension of the brand. I have to, again, on this one, of course, Moncler Collection remains the biggest contribution to our business. And as I mentioned before, of course, it was an important focus for us on Q2 regarding our spring, but mainly summer offering there, as we mentioned before. I have to say, Grenoble keeps performing well across all regions. I want to keep reminding that the Grenoble scenario is a focus for us. This is the second year that we introduced Spring, summer at the beginning of the season and right now, literally yesterday, we introduced pre-fall. So we're seeing really strong performance on top of what we have normally in winter. Again, on top of that, of course, we have good expectations on the launch of the collection we have in winter on the back of the show we presented in St. Maurice with this collection. So we're excited to bring this to market. And then last but not least, as we always say, Genius is an important aspect for us, but beyond the revenue itself, of course, it's the biggest recruiter we have for the brand. A quick reminder that the last Genius Collection of this year was presented in February. We did the launch of JC, and then we are in a pause until we go into June. into the the show in in shanghai and right after that we will we will continue so but again as always we said genius is something we leverage way beyond uh the revenue aspect but i would say uh as we always cast the three dimensions play very critical roles for us strategically we we know what the the role is and they're playing uh they're playing in that way and and we're super excited to see the response we're getting across the three of them

Just some more information regarding the split between tourists and locals. For the Chinese market, we were at 30% of the spend for Chinese offshore in Q1 that moved to 40% in Q2. Regarding Japan, you can take as a proxy that more or less 30% of the business done in Japan currently is being done by tourists, as I mentioned, mainly by our Chinese clients, but also from clients from Southeast Asia. And for Europe, as an indication, on a yearly basis, The Europeans buying in Europe remains the first nationality for Europeans, but we have seen obviously an increase of the spending of Americans that continue to perform, also Koreans that continue to be positive. and Chinese that have been raising a lot during the first quarter of the year with the Chinese New Year, becoming softer now towards the end of Q2 and start of Q3. And this is for one main reason, which is, in my opinion, the Olympics, that is also having a negative impact in terms of Asian tourists in not in Europe but at least in Paris we have seen that especially and I refer to my experience of London 2012 that in the few weeks before the start of the Olympics you see usually a decrease of the usual tourists coming to buy luxury and we have not yet no welcome in Paris the tourists that are going to come for the for the olympic games that are usually a lower spender that are are buying more entry prices so clearly we have adapted our assortment in that sense what we may expect also during the the summer but time will tell is that let's say location like london may benefit from some of the tourists that were usually planning to go to Paris. So London could be the good surprise of the third quarter.

Thank you very much.

The next question is from Chris Gao, CLSA. Please go ahead.

Thank you. Good evening. Thanks for taking my questions. So before I ask my question, we're definitely excited to know that Moncler Genius event will take place in Shanghai, and we look forward to welcoming you in October. And two questions from my side, please. The first question is regarding the mainland China market outperformance. So you are doing positive growth. This is a great achievement given offline retail environment is quite volatile in mainland China in Q2. And I believe this has been outperforming quite a few peers on the ground. So if looking deeper into the retail matrix, just wondering which part do you think you are doing better than peers? Are you seeing better traffic, better conversion, higher ticket size, better repurchase, or is it related to more help from store opening? So just want to understand more about where the outperformance is coming from. And the second question is regarding your strategy in Hong Kong Macau. So as to a tourist market to Hong Kong Macau, especially for the mainlanders this year, you can see some dilution, especially from other tourist destinations like Japan market. And also some mainlanders shift back to spending in mainland structurally, right? So right now, what are your strategies in Hong Kong Macau market to protect the store productivity there? And also, especially I wonder what we'll do more in terms of your CRM strategy. And a follow-up on that is, is there any tourist contribution in Hong Kong Macau market now versus pre-pandemic level? Thank you very much.

well thank you for your question i must say that the first one i will have is only really a partial question because uh i would like to know the metrics of our peers to be able to comment on where we are doing better than than others so it's extremely difficult to say i think like um everybody we have been experiencing a decrease in in traffic towards the the second uh Second half of Q2 mainly linked to the fact that there is an increase of offshore buying from Chinese. I was commenting before, 10 percentage point in total. It's a lot. But this is, as we know, is always fluctuating. So it may differ and change throughout the end of the year. I think, as I was commenting during the call, also at the end for the result of the full year 2022, I think we have a very good team. uh locally that has a very good understanding about the needs of the chinese consumer and operationally they are amongst the best performing team that we have so i don't know if this is explaining partially uh the the good performance that we have and if we are better than than the peers i i cannot tell you but i i we are we are happy about the the team we have in place and we have a good understanding about the chinese consumer regarding hong kong and macau No, I was two, three years ago thinking that Hong Kong was at the end of the road and it will never recover the volumes of 2018. And then we have seen at the start of the year a very, very good performance of Hong Kong that has been softening now because of having our Chinese consumer traveling more towards Japan. We also know that today the yen will become stronger. It will become stronger one day that we'll see Hong Kong again and Macau again and Hainan again. retaking positive growth. So I think we need to stay flexible. We need to be reactive. And we are happy about the current network that we have there. And we are going to focus mainly on refurbishments of existing stores and improving the customer experience both in Hong Kong and in Macau.

Okay, thank you very much. This is very helpful. So just want to follow up, you are continuously investing in Hong Kong Macau, and the current store number also still looks ideal for you, right?

Yes, we have the Macau conversion from DFS was something that was planned. So I think it was in line and it was something, it was the best performing store that we have. So I think that the investment we have did there to the conversion was the right one anyway.

Thank you so much. It's very helpful.

The next question is from Liwei Hu with CICC. Please go ahead.

Good evening, Gino, Roberto, Luciano, and Emina. And congratulations on the hard-earned great results. I have two questions. The first one is a follow-up on growth drivers for Chinese cluster in the past semester. I'm curious in how much of that growth was driven by recruitment of new customers and how much from more spending from existing Chinese customers. It would be very helpful to have some color on that. And second question, is it possible to share with us the number of clients globally for both Moncler Brand and Stone, especially the number of American clients, which is clearly under-penetrated and the growth in size of clientele globally in the past few years would also be helpful. Thank you very much.

Libehu, thank you for the question. We haven't noticed a dramatic difference between Q1 and Q2, between recruitment and work on the existing client. The work on existing client is something that we have started to work on since more than five years. It's really a focus of the local team. in the stores, they need to welcome and work on the conversion of the natural traffic that is there, but then all the client telling activities they are pushing are on clients that are already in the database. And on this, with also the launch of Montclair 3.0, Montclair 3.0 last year, there have been a lot of tools that have been able and helped the local team to enhance, let's say, the relationship with the client. We have also kept some of the innovation that were developed during the pandemic, like distance sails and so on, that obviously, we call it new way of sailing, that we continue to push, not only in China, but also in all the other regions. I didn't quite get your question on the American, so let me try to give you a little bit of an holistic vision of what we are trying to do in the Americas. It's a long-term investment that we have in the Americas. We know that we are underpenetrated, but we see this Like a glass of wine that is half full. So we have still possibility to grow the business and to develop it. The more relevant that we have now of the spring summer season is clearly helping us also to develop the presence of Montclair in the southern part of the U.S. We have had very good experience in Atlanta, Houston, and Dallas. So in the plan of development, because we have only 45 stores in the Americas, there is further development that are foreseen in terms of network development. There is also the change of business model that we have started to do one year ago in May with Nordstrom that is starting to pay off. So it's an hybrid model where we are the owner of the stock. We share the cost of the client advisor and we have higher visibility amongst a multi-brand and in a multi-brand environment. We have the change of facts. There was a question before I did an answer on Neiman Marcus and Sachs. If we see this more as an opportunity or threat for us, it's more an opportunity that we have because we had a very strong relationship with Sachs. We had a Neiman Marcus that was fixing into his business model that he didn't want to discuss. I hope that this may open discussion to also an evolution of the business model with them. We know also that during the next One year, there won't be any change before there is an approval from the Commission to approve the merge between the two. But we see this more as an opportunity for us to be even a more relevant player with them. So this is the global approach. There is also specific development that we want to have. We want to push more Grenoble. We have a plan to open an additional store in resorts on top of the existing one. in Aspen and in Vail. We have also plans to increase the visibility in New York. We did fantastically well with Miami, with the opening of the Miami district, with the doubling down on the store in Bolarbo. And also we have planned to further develop the presence in Los Angeles. So the big three cities will get much better visibility in the 12 months to come. Thank you very much.

One little thing to add to what Roberto was saying regarding China, I think on top of what we were discussing about existing and new customers, I think Roberto mentioned the obsession for many years regarding current customers and of course always looking for opportunities to to connect and bring new customers in. I would say the other important aspect that the team in China is leveraging pretty much is the digital platforms. And if you keep in mind the work that today we're doing around WeChat, Timo, and JD is allowing us, which with really strong performance right now, is allowing us to even bring new and more customers to the brand as well. So I think a little bit to what Roberto was saying, it's like an almost end-to-end approach from the team there, which is helping us to keep this balance that you were asking for. This is very helpful.

Thank you very much.

The next question is from Rogerio Fujimori with Stifel. Please go ahead.

Good evening, everyone. Thanks for squeezing me in. I have only one question for Roberto on the current trading for Moncler Brand in the US, just to complement your July trading comments for the other regions. Thank you.

I said at the start that I didn't want to comment on each single performance in July. I can only reiterate the fact that the performance in the region is in line with the performance of Q2.

Thank you.

The next question is from Paola Carboni, Equitasim. Please go ahead.

Yes, hello, good afternoon, everybody. Just a quick one left from my side. On Stone Island, actually, can you start sharing with us any possible color about your plan for 2025? both on further brand elevation actions and on the retail side, and possibly what we should expect in wholesale, so how much possibly you should still work on the wholesale rationalization, whether this is complete or not, and so on. Thank you.

Okay, thank you, thank you, Paola. Mid-Northern Ireland, starting from this year, again, you know the story. Ireland is expected to decrease the wholesale business, as we reported in the first half, but also in the second half, the wholesale business will be significantly down, offset, hopefully offset for the second half of the year by... a growth of our DTC business, that is the business strategically most important, more important for Stone Island and the business we are investing more. For 2025, of course, difficult now to predict, but I mean, talking from the strategy point of view, we will continue the strategy that will be to invest, to keep investing in the DTC business. Something important to reiterate that Roberto said before, the DTC business is physical retail, but also the online business. And the online business, we are ready in a few weeks, actually two weeks from now. to start with the new website of Stone Island that will be directly operated by ourselves and not any longer by YNAB. And this is something we have great expectations, of course, not only for business, but also for the brand enhancement. For next year, again, DTC business is something we will keep investing. On the wholesale, we still expect a weaker business. Difficult to say right now how much will be down. most likely in some regions less than this year. Of course, something important to remind you is that with the next year, we will internalize the business that is actually currently operated by a local distributor in the uk and this is something that for sure will put our what will put us in a position to rationalize that market and this i expect for sure will imply a decline of the business a much more selective approach probably some kind of cleaning of the market. And this is something that will impact for sure the wholesale business. In the other regions, I expect a lower decline. But again, what we are very focused on and we keep investing in the DTC business Of course, from the organic growth point of view, that is way more important. And for this, again, we are investing in retail excellence projects, but we are also investing in product in the collection and in the categories, as you know, that made the story and the identity of Stone Island that are outerwear and knitwear that are performing very well and much better than the other categories. From the new openings point of view, we still have a plan of selective new openings. It would be less difficult to open many stores, but this is not part of our strategy. The strategy is first to make the existing stores grow organically and then to open stores. So for next year, don't expect an important number of new stores for Stone Island.

Okay, thank you very much, Marie-Claire. Thank you.

The next question is from Thomas Chauvet, City. Please go ahead.

Good evening. Two questions, please. The first one, could you provide an indication of how Attawear growth compared to knitwear and sneakers in DTC in the second quarter directionally? And secondly, a follow-up on current trading, maybe, Alberto, for the Moncler brand, you indicated similar DTC growth in July relative to Q2, so a high single-digit. The ComBase in Q3 is 25 points easier than Q2. So would you expect at some point this quarter to see a natural return to double-digit growth, perhaps in September, which was quite weak last year? You had warm weather and a delayed start of autumn-winter, if I recall well. And also in current trading, did you say the Chinese cluster was positive in July but no longer double-digit, if I heard you correctly? Thank you.

Thomas, first question regarding the different countries. I think, again, I mentioned a bit of this before, just to go a bit more in detail. I think all countries grew well year to date. In Q2 specifically, I think Needware outperformed all the other countries, growing double digit. Of course, also given that we are in a spring-summer seasonality, but I have to say that on top of Ottawa, Needware, inclusive of Cat and Son and Foodware, have been growing in all cases. So that's a bit of the... the high-level picture of that. And again, as I mentioned before, Needware have been outpacing the rest of all the different classifications during the first half and specifically in Q2.

Right, Thomas. I will just repeat what I said because I don't want to give more color than what I said so far. What I said is that the overall trend at the start of Q3 are not diverging meaningfully from Q2. We have EMEA and Japan performing, and mainland China, which is a touch softer with the Chinese cluster, that is still positive. This is what I want to say. I don't want to give more colors than that. Thank you for your understanding.

Understood. Thank you, Robert.

Okay, I think we're done with the Q&A. Operator, tell me if I'm correct.

Yes, there are no more questions registered.

Okay. Thank you very much for participating in this call and for staying with us until such a late time in the evening. Let me just give you a quick reminder of the next release. Our Q3 results will be on October 29th after market close, and our quiet period will start on September 30th. Thank you again for your questions, and please, as usual, for any follow-ups, feel free to contact myself or any member of the IR team. Thank you again. Have a great evening, and obviously, we wish you also a wonderful summer break. Thank you.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephone.