Moncler Spa Ord

Good evening. This is the Coral School Conference Operator. Welcome and thank you for joining the Montclair Group First Quarter 2025 Interim Management Statement 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 Ms. Elena Mariani, Group Strategic Planning and Investor Relations Director. Please go ahead, madam.

Thank you, operator, and thank you all for joining our call tonight. I will host this interim management statement call together with Luciano Santel, chief corporate and supply officer. I will start providing a brief overview of our results, and then Luciano and I will be happy to take your questions. 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 near 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. Okay, before diving into the presentation, I'd like to take a moment to talk about the context in which we're currently operating. The macro and geopolitical landscape has remained highly volatile and increasingly unpredictable, a trend that has only intensified in recent weeks. In this environment, our focus as a group is very clear to continue executing our long-term, brand-first strategy across both Montclair and Stone Island, staying true to our commitment to creativity, innovation, and customer centricity. At the same time, it is equally important to maintain very strong operational discipline and financial rigor. Flexibility and responsiveness have always been part of our DNA, and today they are more essential than ever as we navigate this period of uncertainty. Now, moving on to our Q1 results, I'm delighted to announce that as a group, we achieved revenues of 829 million euros, up 1% at constant effects, with Moncler at plus 2% and Stone Island at minus 5%. Both brands registered solid growth in our core DTC channel, Moncler at plus 4%, Stone Island at plus 12%, despite an exceptionally demanding comparable base from Q1 last year. Now, moving on to our Moncler brands remarks, let me say that there is no better way to start than commenting the extraordinary Moncler Grenoble experience we brought to life in March. This year, Moncler Grenoble landed in Courchevel, a powerful moment that took the brand's core identity to new altitudes. Over the course of a full weekend, we immersed the Moncler Grenoble community, including ambassadors, celebrities, or friends of the brand, in the world of Grenoble, a universe combining high performance with high style. It was an experience designed not just to showcase a collection, but to express the full dimension of the brand. I'm sure you probably caught a glimpse of this on social media, but the highlight of the weekend was the spectacular show at the Courchevel Altiport, more than 2000 meters above sea level, where we unveiled the Fall Winter 2025 collection in a truly unforgettable setting. The event has been instrumental in further authenticating this distinctive brand dimension in the performance luxury space. And just to share a few stats, the event had a very strong media impact. over 3 billion in potential reach globally, over 300 million in global engagement, over 2,000 press articles and over 1,000 social press articles, making it the most impactful Montclair Grenoble event up until now. But it wasn't just about Courchevel. Still talking about the three brand dimensions and Grenoble in particular, if you move to page five, you can see that in Q1, We continued our all year around journey, launching our third spring summer Montclair Grenoble campaign, introducing a collection of lightweight layers designed to adapt to outdoor activities such as trekking or hiking. Talking about Montclair Genius, following on from the lineup presented at the City of Genius event in Shanghai in October last year, in the quarter we launched the collection in partnership with Fragment by Hiroshi Fujiwara. Hiroshi, who is a Moncler Genius friend and long-time collaborator, reimagined functionality and technical expertise on everyday wardrobe pieces. Finally, when it comes to our main collection, I just wanted to flag in particular the strong brand, the strong plan behind the launch of the Men's Spring Summer 2025 Collection with a very powerful campaign featuring world-renowned actor Penn Badgley, which has been extremely well received globally. and a new footwear capsule designed by the very talented Salehi Bembry. Moving on to Stone Island's key initiatives in Q1. First, I would like to highlight the opening of the new Stone Island showroom in Milan, a key milestone in the brand's journey, which is enabling Stone to better present its collections and special projects to international audiences. On the distribution front, in January, we celebrated the opening of Stone Island's relocated store on Rue Saint-Honoré in Paris. A very important brand statement, spanning a total area of 200 square meters, with a design fully aligned with our recently developed global retail concept. A store that, thanks to a higher visibility and a better positioning, has already been delivering much better results compared to the older store. In terms of marketing, Stone unveiled the next chapter of its community as a form of research project showcasing its spring-summer 2025 collection. This next group of community members featured in the campaign was led by Spike Lee, a longtime Stone Island enthusiast. And then finally, in terms of product, I would like to highlight the revisiting of one of Stone's corner store fabrics, Razogonmato, which was first launched in 1984. In fact, we introduced the performance version of this fabric, showcasing Stone Island's continued strong focus on materials innovation, research, and development. Now, talking about numbers, we're going to start with the Moncler brand on page 7. We're happy to say that in the first quarter of the year, the brand grew by 2% at constant currencies. And looking first at the performance by geography, Asia was up 6%, thanks to the positive growth that the brand continued to register in the Chinese mainland, despite, I have to say, an extremely demanding base of comparison, and the ongoing shift of Chinese consumption abroad. Japan accelerated compared to Q4, mainly supported by tourist spending, while Korea showed softer trends compared to the previous quarter. EMEA was down 1%, impacted by the negative performance of wholesale. The DTC channel held steady versus the strong Q1 last year, and both local and tourist consumption remained positive in the quarter. The online channel instead was soft and continued to penalize the DTC performance of the region. Q1 revenues in Americas were down 2%, mainly impacted by the negative trend in the wholesale channel, while the DTC channel held up year-on-year. Looking at Moncler revenues by channel on page 8, we're pleased to say that in Q1, the DTC channel recorded good growth, up 4% at constant currencies. This performance is especially noteworthy considering the market volatility we have been navigating since the start of the year, as well as the exceptionally high comparable base the brand was facing across all regions, which last year all grew at a double-digit pace. Wholesale revenues instead were down 5% in line with management expectations, mainly due to the ongoing efforts to upgrade the quality of our distribution through further network optimizations. In fact, the share of wholesale revenues in the first quarter is now below the 15% mark versus the DTC share of almost 90%. Let me take this chance to reiterate that we expect this channel mix evolution to continue and we therefore expect wholesale to remain negative through the course of the year and to end 2025 with wholesale revenues down approximately high single digit, not different from the performance registered in the fiscal year 2024. Exactly what we said during the last conference call. Moving now to Stone Island on page 9, revenues for the brand were down 5% at constant currencies with a continued solid double-digit growth in the DTC channel, partially offsetting the decline in the wholesale channel in its largest quarter of the year. Looking at trends by region, Asia grew 15%, mainly driven by a strong performance of Japan and of the Chinese mainland. Korea improved compared to Q4, although it underperformed the rest of the region. EMEA revenues were down 11% as the positive performance of the DTC channel was not enough to affect decline in wholesale. And finally, America saw a decline of 18% in the quarter, mainly due to the double-digit negative performance in the wholesale channel. The DTC channel instead recorded positive growth and further improved compared to Q4. Looking more specifically at Stone Island trends by channel on page 10, the DTC channel continues to perform well and grew by a solid 12% in Q1, thanks to a positive contribution from all regions, particularly Asia. Wholesale revenues instead were down 19%. This is a higher decline compared to our full year indication due to a different timing of deliveries in Q1 versus Q2 compared to the timing of last year. In the second quarter, we will see a reversal of this. And so you can expect wholesale for stone to be positive in Q2. When looking at full year 2025, we reiterate the indication we gave upon full year results, pointing to a wholesale channel for stone that will continue to decline, but to a lesser extent than what we saw in 2024. And remember that you can expect a more negative performance in the first half of the year compared to the second half of the year, something we already mentioned last time. Last but not least, let's briefly look at our store network on page 11. At the end of March, Moncler counted 284 directly operated stores, while Stone Island counted 90. Over the course of Q1, Moncler saw one new store opening, Shanghai Grand Gateway, and three closures, including Shanghai The Rio, which we closed given the opening of the Plaza 66 flagship nearby, San Francisco Bloomingdale's given the closure of the department store in the city, and Seoul Incheon Airport Terminal 2, as we will keep a store in Terminal 1. The Sun Island DOS network was unchanged in the quarter. And finally, as usual, on page 12 and 13, we have two wonderful examples of recent store network initiatives. For Montclair, we have the opening of Shanghai Grand Gateway, which I've just mentioned. And for Stone, we have the relocation of the Paris flagship, which I described earlier on in the Stone Q1 highlights. We reached the end of the presentation, so I will now hand it over to the operator for your questions. I kindly ask you to speak to a maximum of two questions per person to give all participants the opportunity to ask a question. Operator, you can now open the Q&A session. Thank you.

Thank you. This is the Coruscant Conference Operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Edward Oben Morgan Stanley. Please go ahead.

Yeah, good evening, Elena and Luciano. So two questions for me. First of all, I think at the beginning of the year, you had in mind about DTC performance sales, about Flatish. So what kind of came in better than expected versus your initial expectation and related to that issue, maybe could comment by the trend by nationality that would be helpful. So that's question number one. And then question number two, Elena, in your prepared remarks, you mentioned the volatility, which has obviously increased quite dramatically in recent weeks. I know it's very early days, you know, and you don't really like to comment about trading over the past three, four weeks, but To what extent, you know, this volatility around the world and in the U.S. is impacting some of the customers' shopping patterns. That would be helpful. Thank you so much.

Thank you for your questions. Actually, you're right. Our expectations for the first quarter, considering the, let me say, major results of last year, were more cautious than we made it. If I can first give you the shape of our business in the first quarter. The first quarter started very well in January. January was good, honestly. Also, thanks to the different timing of the Chinese New Year. February, for the same reason, was softer and much, much softer. But overall, I mean, the quarter was positive. And honestly, we are good. Very happy about this result. Again, needless to remind you, but I mean, last year we reported 26% in the DTC channel growth rate. And the year before, you may not remember, but we reported 30%. And so two years in a row with a very strong double-digit growth rate, this year 4% is something we are honestly very, very satisfied about. Talking about volatility of current weeks, I mean, of course, we are talking about a few weeks. Honestly, I don't find anything special to highlight. I don't see any change, particular change in our customer behavior. And so even if out there the situation is quite, let me say, turbulent, but in our business, I can't tell you anything special I want to highlight that can be a sign, a meaningful sign for the future. Of course, the future to come is something we are, to some extent, concerned about. Of course, we maintain our focus on our business, on our brand. So business is surreal. Thank you.

Understood. So on my first question, Luciano, again, so versus your expectation, which nationality kind of explained the beat? Is that, you know, the demand from Chinese was more resilient than expected? That would be the main explanation?

No, no, you're right. Sorry, I forgot to answer this question. I mean, nationalities, I mean, China, Chinese, sorry, I'm talking about the cluster, Americans and Europeans were positive, Koreans, unfortunately, negative, and Japanese, flat. And this was not much different from what we expected. We saw and we reported in Q4 with the only difference of Korea that, I mean, as the trend has deteriorated, Korea was more or less flat in Q4 and now in Q1 was negative. But, I mean, this is what we saw in the first quarter.

Thank you.

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

Good evening, Luciano and Elena. A couple of questions, please. The first one on pricing. I trust that the spring summer 25 prices are set. Have you been thinking already about the level of pricing now you might need to adjust for the autumn winter collection, particularly if tariffs of 10% or 20% are maintained for EU imports into the US. Secondly, on manufacturing and supply chain more broadly, is there any opportunity to manufacture any of your products in the US? I assume the answer is no. But I just wanted to check. And when you think, Luciano, of your global supply chain, are Hungary and Romania still the preferred location for manufacturing, given the high level of expertise there, given the volume your partners can produce at a pretty good quality and cost? Thank you.

Thomas, thank you for your questions about the first question. Any pricing strategy consequent to the international tariffs, not in spring, not in spring-summer? Because, I mean, the spring-summer collection has already been shipped out to the U.S., So no impact in this season for fall-winter. Nothing we have decided yet, honestly, because the situation, as you know, is still very, very, let me say, unclear. So for fall-winter, it will totally depend on whether or not the current administration, U.S. administration, will confirm or not the 20%. In any event, for this year, the impact, the loss of any potential relation to prices is not expected to be material. Of course, for 2026, still to see, maybe more material, but we don't have information. about manufacturing in the U.S. Honestly, something, let me say, a broader twilight is that we still are more worried about the current and the future of health of the American economy and of the consumer confidence much more than the tariffs themselves. So for this reason, I mean, the production in the U.S. is something we are not evaluating right now. Also because you already gave a very clear answer to your question. We make production where there is a very strong know-how that this time is Romania and Italy. And so we are not planning to move production from these two areas, the two regions, because of the two regions where we can deliver high-end quality with a very high know-how. US is something that I think is premature for sure, but honestly, I see very complex to evaluate any manufacturing facility in the US.

Thank you, Luciano. And just on your comments about your concerns about the US economy, have you and maybe Roberto and Mr. Ruffini started to maybe reassess your short, medium-term investment plan there for the rest of the year, but also you've got this big flagship store coming early next year. Is that Fifth Avenue store already locked in? Have you signed the lease? Is it completely fixed term now or are you... potentially reconsidering some of your investments i know elena mentioned rightly this is a long-term investment in the brand particularly in the us and china but obviously the next 12 months or maybe the next three and a half years of mr trump's mandate will be uh maybe maybe highly uncertain if you recalibrated perhaps your investment plans for particularly the u.s market

Thomas, Elena was totally right. I mean, our strategy remains totally unchanged because we strongly believe in the potential of the U.S. as a country and as a market and a great potential for Montclair because, as you know very well, our business is under-proliferated. So, I mean, we may decide eventually not now to slow down the pace of the implementation of the strategy, but not to change the strategy. And as you correctly highlighted the most important investment, the most important pillar of our strategy for the next future is the opening of the FlexiStore in Fifth Avenue that is fortunately, let me say fortunately, already locked in. And so the store will open early 26 and will be a very important strategic step for our future growth in the U.S.

Thank you.

The next question is from Louise Singlehurst, Goldman Sachs. Please go ahead.

Good evening, Luciana, Eleanor. Thanks for taking my questions. Many congratulations on a great start to the year. I know really a very tough environment. We'll wait to see what comes ahead, but obviously a great start. I wondered if you could just help us think about that space contribution in Q1. I know you don't break it down, but just assuming... um if that was around the mid single digital whether that was more in q1 i know seasonally it's a little bit higher in the obviously the larger um the larger quarters and linking forward i know you just talked about the space expansion for the us but more broadly are you thinking about any other changes from your original plans as you look out to 2025 given the current volatility in recent weeks and whether we should take a little bit of a haircut to that mid single digit space expansion plan for 2025. And then my second question was just on mainland China, obviously a very solid result in the period. Is there anything that you're seeing in China, any changes? Obviously, we can talk about the performance during the quarter, but anything that you would call out to get some signs of life for the underlying consumer sentiment and what you can tell us there? Thank you.

Yes, thank you for your question. About the space contribution, you know, we want to disclose on a quarterly basis the space contribution, but not because we don't want, but because in a quarter is totally, totally meaningless. But I confirm that our, let me say, guidance and targets for the year-end will be in the region of mid to single digit. In the past, you may remember that it was mid to high single digit. Now it's more mid than mid to high. In each single quarter, honestly, it's not meaningful. About China, again, China did well not only as a market but also as a cluster because we did a significant and growing business with the Chinese customers in other regions, specifically Japan. In both regions, business with the Chinese customers was up as compared to last year. And the interesting thing to say is that in Europe, I mean, our benchmark is still 2019, of course. We are still behind 2019 as a contribution of the Chinese business on the total business in Europe, but it is growing year after year. As well as in Japan, business with the Chinese customers in Japan was up in the first quarter compared to first quarter of last year. I hope I answered your second question, not the first one, but you will forgive me.

That's great. Thank you.

The next question is from Anne Giesemuth, HSBC. Please go ahead.

Yes, good evening. I have a question, please. So the first one is about the performance by nationality. I wanted to come back on the performance of the Chinese cluster that was at double digits in Q4. Will you be possible to clarify how much the cluster was up in Q1, please? Was it in the high single digits or still in the low double digits? And my second question is about the split of the growth for the Montclair brand between price, mix, and volume in Q1. Thank you very much.

Okay, about the Chinese cluster, I mean, we don't report, sorry, but we don't report specific precise numbers and not on a quarterly basis. The Chinese cluster was up. Of course, again, we are very happy about the strength of the brand in China and with the Chinese customers. This is something we keep saying and we are very, very happy and proud of it. But we don't report any specific numbers, but it was positive. The other question was about price mix volume in the first quarter. In the reading of the first quarter, It's not so easy because the first quarter is at the intersection between the end of the fall winter season and the beginning of the spring summer season. So depending also on the weather, a little bit more cold or warm, We may sell more fall winter that has a slightly higher price point. So at the end, long story short, most of the growth was price and price mix, where mix is mostly dependent on a little higher contribution of fall winter than spring summer. Volumes were much, much lower.

And Lore, if I can help you a little bit on nationalities, because I know the type of exercise you're trying to do. So when you compare Q4 and Q1, well, in Q4, our Chinese cluster was up low double digit. It wasn't a very strong double digit. And then we had other nationalities positive, the Americans and the Europeans. And if you might recall, we had the Korean cluster that was flattish and the Japanese cluster that was negative. In the first quarter, we still had Chinese and Americans growing nicely. They were, let's say, the two fastest growing nationalities. The Europeans were also positive, maybe a little bit less than these two. So yes, maybe not exactly the same figure as Q4. They were all a little bit moderating, but not materially. And then we had basically the Koreans that were turning negative and then the Japanese turning flattish. So they sort of swapped these two. These were the key moving parts.

Thank you very much. The next question is from Antoine Berge, BMP. Please go ahead.

Yes, good evening. It's Antoine. I've got two questions. So first of all, a bit of a technical question, so sorry about that, but Coming back on the tariffs and especially to what they are going to be applied, I think you have an agreement, I think the so-called first cost program, by which you're allowed to use the production cost rather than the transfer price. So basically for a product that is maybe going to be sold at $100 in the U.S., What's the taxable base? I don't know. Is it one-third of the retail price? That would be a good proxy for calculation. In other words, if there is a 20% increase in tariffs, what sort of price increase in the U.S. you would need to offset that, taking into account no price elasticity. My second question is more about the comps because, of course, when you did plus 26% in Q1, of course, it was a very high comp base. So from a mathematical standpoint, then the comps get much easier. I think it's 8 in Q2, then 0, then 0. So mathematically speaking, it should be quite easy for you to have double-digit growth in each of the three remaining quarters. These are the maths, of course, and combs. Sometimes they work, sometimes they don't. But is there, especially regarding Q2, something that would prevent you to grow double-digit on a much easier basis?

About the first question, you are right, in our industry we have this benefit, the so-called first cost, that allows companies to pay duty on the industrial cost under some specific and technical conditions that you probably know. Of course, our current calculations, just to make it clear what I said before, I mean the potential impact this year and eventually next year is based on the assumption, is based on the current situation that provides the first cost technicality. Of course, the industrial cost, you may make the calculation, is much lower than the retail price, and it is about 50% of the intercompany price. So, of course, it's a significant benefit. Second question about, I mean, second quarter, again, comp was good last year, needless to say, even if we don't report, but I mean, with a 26% growth rate, evidently part of that was organic. Second quarter was weaker. This honestly does not have any meaning at all. For now, I mean, we are looking at the opportunities of our business in this second quarter that is becoming more and more important, considering the growing importance of the spring-summer season. But any extrapolation of the opportunity to take advantage of a lower comp of last year is something that I can't give you an answer on.

Also because Antoine, I mean, when we were commenting on Q1, we were always looking a little bit like at the past couple of years that we're growing plus 30% and plus 30%. It's true that last year Q2 was slower, but the year before it was the fastest growing quarter. If I remember well, it was up 45%. So not an easy comp in the second quarter and particularly given the current environment. I mean, we wouldn't really give you any indication on what to expect. We obviously feel prudent at this point, given the situation.

Okay. Look, on the comment, yeah, it was plus 40 something. I recall that. But it was also when you were already pushing the new strategy, but the sort of greater focus that was presented at the capital market there about pushing a bit the non-winter products too. So maybe it was not a pure base of comparison. But I leave it there. I understand the message. Thank you.

The next question is from Susi Tibaldi, UBS. Please go ahead.

Hi, thanks for taking my questions. So I was just wondering, how are you planning overall your DTC business for this year, given the volatile environment? Because I remember you always say you plan for a mid-single-digit like-for-like. Last year ended up being a bit below that, with 3%. This year, the outlook is probably not that much better. So And is there also any difference on how you plan your spring summer versus your fall winter? Because we see that over the past year or so, actually your spring summer is becoming a bit smaller in the context of your full year. And then secondly, I know there is a sales call, but can you just remind us of some of the costs that you will have in H1 versus H2? If I remember correctly, your marketing phasing is going to be more H1 weighted because of the events that you highlighted earlier. Is there also any other costs that we should consider the timing of which would either benefit or impact your H1 profitability? Thank you.

Okay, Susie, first question about how we plan our DTC business. You're totally right. This is what we usually did in the past. This year we are even more prudent for evident reasons. But just to remind you that we planned a mid-single digit in 2023. And we ended up with 19% comp. And we planned 5% last year. And we ended up with a 3% comp. And this is because even if we plan the mid-single digit, you may know that we maintain at about 10% production. We decide to launch in season. So this was the case, of course, in 2023. In 2024, of course, less. And this year, of course, we don't know yet. But in any event, in answer to your question, the mid-single-digit this year is even a little bit less, but still with the same potential to take advantage of the flexibility of our supply chain that is... estimated around 10%. So with that 10%, we can fulfill a potential and hopeful additional demand coming from the market. I mean, the way we pay this business has not changed significantly, but just to give you some more color, this year, of course, is a little bit more prudent. Talking about the shape of our profit and loss and profitability in the first half, You are right. First of all, we expect a higher marketing spending in the first half of this year than last year, closer to what we reported two years ago. when we held the Genius event in London. So the marketing contribution will be higher, of course, still with the 7% that is our usual golden rule for the year end. Another item to highlight, I'm sure you remember, but just important to reiterate, is that last year in the first half we reported the benefit of the insurance payment for the 7.5 million, that of course this year will not be in our results, and this is another element. For the rest, nothing special. Anticipate, nothing special. We know now, I can tell you.

Maybe the only thing to remember, sorry, so the only thing to remember on top that obviously these are the key moving parts, then the profitability will depend on the top line evolution, which is still the most important factor. So that's what you need to take into account. Clear, thanks.

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

Hello, Luca from Bernstein. Buonasera, Luciano, Elena. The first question about channel dynamics at Stone Island. Optically, the numbers in total look not so good. But actually, when we look at the trends for retail, they look good. They look good enough. I was wondering if you could help us dissect the effect of new space here and if there was, in fact, a positive like-for-like development and how we need to understand the combined first quarter and second quarter in wholesale. You're writing about there was a shift in deliveries between the first quarter and the second quarter. and also the effect of moving to a higher quality wholesale setup. I wonder if in total, when you look at the combined first two quarters, you expect wholesale to be up in total, considering also the fact that I understood that Stone Island is probably going to rely more on wholesale than retail, at least. at least for a while. The second question is also focused on channels and maybe an attempt to understand how the Moncler brand at this time is now organized in the U.S. You moved from wholesale to concessions with quite a significant number of key accounts in America. I wonder if The split is now approaching the total split between retail and wholesale, and I doubt it, but I would be grateful if you could give us a sense of how this has been moving and where we stand in terms of wholesale and retail for Montclair in the West. Thanks very much.

Hi, Luca. Starting from Stone Islander, Starting from your second question, the wholesale is not expected to be positive in the first half of the year and not in the fiscal year. Our, let me say, expectation and what we already said to the market is that we expect still a negative number in wholesale for Stone Island this year, but single digit, let me say maybe mid, maybe high single digit, but in any event a negative number. And this will be the case in first half because the second quarter, as I said before, is expected to be positive for the different timing in deliveries that made the first quarter particularly bad. The 19% down is driven in part by by this timing in deliveries, but deliveries in the second quarter will not be enough to make the number for the first half positive. But in any event, it will be negative single digit, and what I can tell you is that we expect the second quarter to be better. So both single digit negative, but second half hopefully better than first half positive. I hope I was clear enough. Talking about DTC, in space, it's not something we disclose, but in any event, you are right, there is a space contribution, but there is also a significant organic growth contribution. So overall, the DTC channel is doing well is doing fairly well. Let me say that all the retail metrics inside the store are good, are very good. Notwithstanding, I mean, pressure, some pressure coming from traffic, not only for Stone Island, but traffic is a more complex variable. But overall, I think that we are doing, I mean, the team, the Stone Island team is doing well. a great job in developing that kind of retail culture we keep talking about. Something important about space, yes, not for the quarter but for the year, is that you may remember for this year we don't expect a significant space contribution because except for the openings of last year but this year this year we are not planning to open many stores so we have we are implementing and we already implemented some specific relocation projects like the opening of the new store in paris that As I mentioned before, of course, much more powerful, also bigger, but not many new openings because we want at this stage of the development of the brand to maximize the potential of the organic growth. So this is Stone Island. I'm talking about Montclair. I'm talking about specifically the U.S. U.S. wholesale represents now about 20% of the total. It is still an important 20%, let me say, because, I mean, the 20% we do with the department stores that are for our industry, not for Montclair only, very important. in that country. Of course, we continue to implement our strategy together with our partners and department stores. implement as much as we can a strategy to convert business wholesale business into hybrid models or concession models as we did in the recent past with Saks Saks the store in Fifth Avenue Saks the online business with Nostrom with Bloomingdale's this is something that is still open and on our website In the agenda, in our conversations, we have with the new big player that is SACS after the merger. So again, the number is what I told you before, is 20%. Of course, overall, as you know, right now, the contribution of wholesale is lower, is about 13%. So in the U.S. it's still a little bit higher, but not that much.

And Luca, just to make you understand the progression, if you just go back a couple of years to, let's say, 2022, wholesale was about 35% of sales in the US. So we moved from 35% to 20% just in a couple of years, not to mention, obviously, 10 years ago when the business was more like 50-50.

Understood. Thank you very much indeed. Thank you both.

The next question is from Piroldania RBC. Please go ahead.

Thank you. Good evening. So my first question just relates to the approach towards costs and any projects you have from an OPEX perspective. Given the increased macro volatility in the market, are you planning to postpone or reduce your OPEX spending as you progress through 2025? And then my second question just relates to Grenoble. Obviously a very successful and high-profile event at Courchevel, and you've been talking for a number of quarters now about the intention to increase the technical outerwear component within the product range. Could you just help us understand whether the mix of Grenoble through the autumn-winter 24-25 period has increased? and the contribution to growth that that may have had on the back of the event that you hosted earlier this year. Thank you.

Thank you for your question about our current plans to reduce our expenses. This is something that is, let me say, constantly in our agenda because This company, this organization, has been, since ever, let me say, quite a good, cost-efficient organization. Cost efficiency is part of our culture. Of course, in this kind of situation, we are even more focused on reducing expenses. Let me say that all expenses All projects in our budget are important, but of course some of them are still important but less urgent. Others are important and urgent, so we tend to give priority to these kinds of projects, to these kinds of expenses. and not to cancel, but maybe to delay some projects or to delay some expenses in order to reduce the cost impact in this year. I mean, the company has been quite flexible and reactive on this side. Also, there is something important to reiterate that you probably know, but I mean, the structure of our expenses is a 60% fixed and a 40% variable. That, of course, is something important to protect the profitability in this kind of situation. Of course, on the other side is something that decreases the operating leverage when business is doing very well. Let me say that it is more safe but good in this situation. About Grenoble. Grenoble represents about 10% of our business. It is growing faster than the rest of the business. So, I mean, of course, we have a great expectation for Grenoble. Of course, it will take time, but it keeps growing faster. Not at a very fast pace, but honestly very, very nice. And again, we have great expectation, not only for what Grenoble is and must become more and more in the winter and in the winter sports, But to position Grenoble also like as the most authentic luxury brand for outdoors independently on the season. So also in spring and summer season, our effort is becoming more and more visible with a very, let me say, nice collection of that is doing quite well. So great expectation for Grenoble. And I mean, the results are good. Of course, we are never in a hurry when we wanted to implement a long lasting strategic project. And so don't expect great results overnight, but step by step, we are very confident about the potential of Grenoble.

Great, thank you.

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

Thank you Luciano and Emila and good evening and congrats on these resilient results. So I have two questions, both on tariff. The first one is, is it possible to give us a breakdown of in-house production and third-party production at the moment? I understand they're mostly in Europe, but I just want to get a sense of our direct control on production to counter with the tariff. And then the second question is more of a thinking exercise. So in the case that U.S. consumers spend more in Europe, should we hike price in the U.S.? Will that be margin accretive or margin dilutive theoretically? Because when we look at 2024, when Chinese spend more in Japan, it looks like it was more margin dilutive for the industry. But China and Japan had different cost base in terms of rental. So I wonder when U.S. travel to the U.S. and purchase more in the, when U.S. consumers purchase more in the Europe, will that also be margin dilutive or is it more insignificant impact? Thank you very much.

Okay, thank you for your question. Our in-house production by the end of this year should be in the region of 30%, 3-0. Because, of course, we have our production facility with the two now buildings in Romania. I mean, we keep buying some small facilities in Romania, so I don't want to to bore you but in an event something important to highlight is that the opening of a facility in italy for network only in september of last year and i mean all together we expected about 30 percent in our production for the end of this year talking about dilutive or a creative business if customers move from one region to the other. Honestly, this is not something particularly relevant for us. You mentioned Japan. Honestly, Japan, for probably historical reasons that mean our profitability in Japan is not much different from China. In talking about your current example of American customers that may come to Europe to buy, let me say that, first of all, the price gap with the US at the current exchange rate is much, much lower than in the past. So this makes Europe more convenient, but not significantly more convenient. also mean any dollar, any euro people spend in Europe or in America. on a retail business that is mostly fixed rent is an additional margin. So the main difference, talking of eventual dilution or accretion, is the structure of our lease contracts. In some regions, like in Asia, it's mostly variable. In Europe and in America, it's mostly fixed. So when rents are fixed, an additional euro of business is an important contribution to margin. So again, I follow your thought, but not honestly something we see and we look at as a relevant issue.

Thank you very much. This is very helpful.

The last question is from Fujimori. Please go ahead.

Hi, Luciano and Elena. I have just one quick follow-up on China. I was just wondering if you could elaborate on what you were experiencing in terms of shopping mall traffic in China in March post-Chinese New Year. Thank you.

The post-Chinese New Year, of course, was softer as expected. I'm not sure I understand the question, but before the Chinese New Year, business was It was very good and better than last year. After the Chinese New Year, of course, traffic was down, but this was something totally expected. Honestly, we don't see any other component in traffic that we can consider relevant in about the customer behavior in China, except what I said, but tell me if this was the question or I misunderstood the question.

Hi, that's clear. Thanks, Lucien.

You're welcome.

Gentlemen, there are no more questions registered at this time. I turn the conference back to the management for any closing remarks.

Thank you. Thank you, everyone, for participating in this call. For any follow-up questions, as usual, you can contact myself or the rest of the AR team. And as a reminder, our H1 2025 interim management statement will be released on July 23rd after market close. and our quiet period will start on June 24th. Thank you again, and have a great rest of the evening.

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