Brunello Cucinelli S.p.A. (BC) Earnings Call Transcript & Summary

Good afternoon, and welcome to the presentation of revenues for the First Quarter of 2024 of Casa di Moda Brunello Cucinelli. Speakers tonight are Mr. Brunello Cucinelli, Executive Chairman and Creative Director; Riccardo Stefanelli, CEO; Dario Pipitone, CFO; Moreno Ciarapica, Co-CFO Senior; and Pietro Arnaboldi, Investor Relations and Corporate Planning Director. [Operator Instructions]. Let me now give the floor to Mr. Brunello Cucinelli, please.

Thank you. Good afternoon, and thanks to Ana Maria, who's going to translate my presentation tonight. I hope I will be speaking slow enough for you to translate properly. So thank you, all investors, analysts, and journalists. It's always a pleasure to hear you, and the last time was about one month ago. We are here in Solomeo, all of us with the exception of Luca, who this morning after the Board meeting, moved to Turkey, where we have an event tonight. So I am replacing him. Actually, I was supposed to be a traveling around. I just came back last night and I'm going back to London again tomorrow morning, but I'm here with you tonight. So how would you like this happen tonight? So first, I'll read the data on the sales of the first quarter that are at very, very good. We'll discuss them later. Then I'll give you an overall summary view of the market, which we have widely discussed about one month ago at the March call time, then we're going to give you a summary on the 2024 forecasts that are pretty concrete at this stage. Then we will like to talk about a few very important things the great extension of the Solomeo factory between 2024 and 2025. I'd like to discuss the factory work has conditions and the quality of life in our factories and the quality of life of the people working for us. Then I'd like to discuss the value of the products, which we call contemporary products and then an important part of our discussion tonight should be dedicated to what we call exclusive and absolute luxury, which is the key issue for us. And I'd like to share with you why we decided to call it a gentle luxury. So I'll now give you some data. Net revenues stand at EUR 309 million, with a very important growth plus 16.5% at current exchange rates and 17.9% at constant exchange rates. Excellent results in all geographical areas and distribution channels. We feel high value perceived around the image of our brand, an expression of exclusivity, rarity, and also lifestyle and high and Italian-based craftsmanship. Revenues by geographical area are the following: Americas plus 19.5%, Europe plus 13.9%, Asia, plus 16%. Sales by distribution channels, retail plus 15%; wholesale plus 19%. We confirm the estimate of nice revenue growth in the region of plus 10% for 2024. And we believe we will also make a healthy and fair profit. Last month, at a wonderful event in Rome, we presented the first national and international campaign on our first eyewear collection designed in partnership with this team, EssilorLuxottica house. Then we started the distribution of this collection in our stores and in high-end specialized eyewear segment including prescription glasses too. Let me now read my quote for today, the value of exclusivity, rarity and creativity in gentle luxury. The value of Artisan manual work. The first quarter of this year has completed with excellent sales results that described very well the appreciation towards our collection and lifestyle throughout the world. The excellent order collection for the collections are Fall Winter 2024 for both men and women and a very positive series of comments from the international press, which is very important, of course, and large multi-brand stores about our gentle luxury style lead us to repeat once again, our expectations for the whole 12 months of 2024. We expect revenue growth around 10% and a healthy and fair profit. We are really confident that the quest for beautiful, well-made, exclusive and rare products will continue over time. That's acknowledging the very high value of manual and artisan work. I also added a couple of comments that I'm happy to share with you. I would like to close this economic document with a very quick humanistic comment. Recently day in, day out for a time that appears to be too long now, mankind witnesses in amazement at more than one conflict, which is so unexpected between human people, between sisters and brothers. But I'm sure that common sense and universal harmony will once again be back to drive all the actions of those who have the responsibility to reach shared destiny which should be potentially reach in happiness. So inspired by my master Pythagoras, my wish is that creation will help us in waking up everywhere in the world. So for our children and grandchildren, we really hope this is going to happen for real. Now let me come to economic performance. For 2024, I would like to summarize in general, our thinking and our ideas about the current year. So the revenues of the first quarter are excellent as expected. And actually, I'm sure you remember that the summer 2024 collection, which was presented in between July and September last year, had gathered very enthusiastic comments. The order collection for the Fall/Winter collection was completed in March during the men and women campaign, and it was excellent. The judgment of the international and national press and the collections, which, as I said, is extremely important, just like the [indiscernible] judgment was also excellent. So we confirm totally, as we said two month ago, the judgment on the global luxury market on our absolute and excluded luxury take. And we confirm we are distributing our products in a well-balanced way globally as Luca explained a month ago. So speaking of the markets, again, we would like to confirm that the content of individual regions, as Luca pointed out, is well balanced, and the demand for a beautiful, elegant, young and exclusive ready-to-wear that can actually be inherited and handed over from generation to generation is recording a very interesting performance in all major markets. Asia is doing very well in all its territories, from China, Korea and Japan and its very consistent over time. The Americas doing really, really well, too. And last but not least, a great robustness in the European business, as we noted. Let me talk about prices. You know that for the Fall/Winter collection, we increased between 1% and 2%. Our price comparison globally, you know that if Europe is 100, the U.S. stands at 120 and Asia at 128. So this is our proportion. An interesting thing is that last week, we organized it in Milano with some very important Italian multibrand stores because we wanted to understand their opinion. They always have a feel of the market. So we discussed a lot of major issues, including the contemporary looks of the brands and the value of exclusiveness and rarity of products. We also discussed the theme of policy and the importance of being very punctual in deliveries. And two, we actually devoted a lot of attention to the fact that the big issue of price increases is something that receives a lot of attention and care. And many people actually ended up saying, many end users, many end buyers say that these prices are not justified. So this is something we tend to hear more and more frequently. So let's look at the fundamental forecast for 2024. We confirm we expect revenues to grow by about 10%. We expect EBIT to increase by 10 to 20 basis points. So it should stand around 16.6% to 16.7%. Net profit is expected about 10% as expected. CapEx is expected to stay at 8% to 8.5% plus one, which we postponed from 2023 for one property investment. Investment in image events, and meetings in the Casa Cucinelli are expected to stand at about 7%, just like in the last few years. So we also imagine the inventory to be better balanced. It was a bit too low in 2023. Net financial position is healthy. And dividend will be pretty normal as expected in the last few years, with the exception of 2020, of course, with the big COVID crisis for everyone. So for 2024, we confirm a very -- even more positive attitude than originally expected. Let me speak of 2025. You know everything about our plans for 2025, where we imagine to grow around 10% again in our revenues and to obtain a fair and healthy profit, which is about 10%. So as Pythagoras says, 10 is 10 for us. So you're all familiar with our view of the company by 2030 where we imagine we will double revenues, which means we will keep growing in the region of 8% or 9%, 10% every single year between today and 2030. So we imagine that intent will have healthy growth, healthy profits. We do not want to lose exclusivity at all. This is going to stay like rarity, image and styles that are always difficult to conserve with the contemporary product. So in the end, between today and 2030, we aim at protecting the Brunello Cucinelli brand. And hopefully, we can always consider it as a luxury expression, gentle luxury again. So what are the main topics that we hold dear? We would like to summarize it in the last three or four minutes. You know everything about the working conditions for blue-collar workers and white-collar workers, but we're going to talk about factory workers, blue-collar workers only today because I think this is the most important. You are very familiar with everything we think about this thing. So we succeeded and we actually successfully gave some ability to the term of the factory work. The [indiscernible], we've been working for [ 40 years ] and this without actually improving it. But we finally added two terms, which we're very happy with, which is the gold or platinum factory worker. Now let me explain this better. So when we hire factory workers, we hired them at Level 5, which is the maximum as per contract. But once you start there, you may become a factory worker qualified as gold or a factory worker clarified as -- qualified as platinum. So we believe that if a factory worker is in late 20s, someone who is pretty familiar with his trade and [ so on ]. They may want to become a factory worker at Cucinelli because they can name it becoming gold or platinum factory workers. Now we're going to share this idea at the AGM on March -- on May 10. Now Moreno, Riccardo, I'm sure that you all agree with me, and this is more gratifying for factory workers. Now another very important topic for us is the place of work itself. We want our factories to be beautiful, well cared, full of windows, especially at the production places. You know that people said in the past that factory works don't need to be able to look at site because they waste their time and become distracted. We seem to be used to thinking that looking at the window and looking at the sky, the waste of time. But actually, if you do have a window, you can actually look outside for 100 times without really wasting too much time, because in the end, we think that some jobs, well, we seem to be happy to let other people children do them. So that means that we need a steady hand with [indiscernible]. And so you heard us discuss this topics many, many times already. But since we don't have many data to report today, we would like to share these ideas with you too. Now the salaries of our workers is another important thing for us. We always wanted our salaries to be slightly better. We've realized that if we take about 1% of our profit and invest them in factory workers salaries, this actually changes the people's life. And so they improved their creativity, responsibility, the happiness of working. Well, you think people are happy to work. Well, we worked 8 hours a day, plus some commuting time. So it takes a lot of time from our daily lives. So we need our job to bring us joy as well. We need people to understand they work for some healthy purpose that their work improved the quality of life of many people around them. So this is what we want to do. And another very important topic for us is the exclusive absolute luxury. I'd like to dwell on this for a few minutes now. In the century old history of luxury, luxury has never been described with objectives. I mean, 2,000 years ago, Emperor [indiscernible] discussed luxury, but it was kind of an absolute description. Can't describe luxury as the symbol of moral [ good ]. So when I started this work with Cashmere and even later up until maybe 20 or 25 years ago, we used a few expressions to describe luxury. In what sector do you work? In what bracket are you? I'm in the medium bracket. I'm in the medium to high end. I'm in the very high end of the market. And so I do not want to repeat myself. But clearly, we do high fashion. So we are in the high end of the market. And then people started talking about absolute aspirational, accessible luxury. And so for the first time, when I involved with Loro Piana with my dear friend Loro Piana, we were at a conference, one of the very first conferences in Milan dealing with luxury and there's a person who may know knew. And he said, "Well, I'm also the luxury sector. Well, I have a factory in Umbria, and we manufacture pullovers and we sell them for EUR 25, EUR 30." And Loro Piana said, but what kind of luxury is that? So I still do not understand what this accessible luxury actually means. Well, seriously, we discussed this very often. I think that every single human being independently of his or her economic situation, where all human beings always want to achieve something, aim at something. And this applies to everyone regardless of the economic conditions that we have. Otherwise, I wouldn't have buried this green trousers that may mother obliged me to wear. So we are going to make a couple of reflections on luxury. So we will be patient. We have 10 minutes more so we can have a quite a long conversation. So would you be ready to buy something which is too much widespread? I wouldn't. Would you be ready to buy a brand which may -- which manufactures a beautiful watch or will [indiscernible] for EUR 30,000 and a bracelet for EUR 100 from the same brand? I wouldn't. Would just be ready to buy a beautiful car, a very expensive car, I don't know $300,000 and the same brand manufacturers another car for $35,000? I wouldn't. Or would you be ready to buy something, which is a widely widespread, but also very expensive? I wouldn't. Would you buy something if you know that the person, that company earned too much? No, I wouldn't because so is the human being. And since -- for ages since Pythagoras and others, we've always been like that. And let me go on. Would you be ready to buy many things from the same brand, even though everything is beautiful? Well, I wouldn't. In my garage, I have five beautiful cars, but they're not all the same. I have a beautiful Bentley, a Rolls, a Range Rover, Jaguar, a beautiful Porsche. But I wouldn't replace my five beautiful cars with five cars of the same brand. I wouldn't. Definitely not. So diversity is a great principle. It is curiosity. It's knowledge. If you have a brand which has been in the medium, high end of the market as we used to say, I don't think this brand has no chance to become unique or special. And well, you know [indiscernible] less than 10 will celebrate the 180th anniversary. I talked with their managers and we also made a video. But here, you find the great value of research that leads to the multi-brand approach. Where you know I would like one day to invite 25 brands for an event. I will organize this event myself. So this is our idea of luxury. Luxury must be something beautiful, well made exclusive and rare for all product categories, so also for eyewear and fragrances, we do have the same positioning and by the way, we were informed and I'm very happy about this. So we were informed that with the women's fragrance, we are in the short list of the best fragrances. And I'm happy because we spent three years working on this fragrance. And Luca had to convince the fragrance expert, he is 79. And well he insisted on saying that this fragrance was not okay because 25, 30-year-old women would say this is not the right fragrance. But what you know also for eyewear and fragrances that we had the very same positioning the basic at $229. And then -- another important thing, we never use the expression with client. For us, customers are all the same. It may sound strange, but I think that if we want to survive 50, 100 years, we should take this approach. So I do not expect from us to manufacture items with an enterprise of EUR 100 or EUR 200 a bracelet or pull over. We want to be pricey, a high-priced brand, but not an expensive brand. So pricey means that you have the fair, you've defined the fair price. And then a minute on products, which is the most important thing. As we say, we have to be creative, quick mind fresh, young, we have to combine special colors, so a special pinstripe. And so we manufacture pullovers that cost EUR 10,000 and you need 60 hours to work on them and visual merchandising has to be beautiful, especially for menswear. We often go to the stores and we need the people to give us some advice. And well sales assistance have to be advisers. They have to convey trust. And maybe we all have to be a bit more normal you know. And this is what I see when I go to the store, and this applies to all our staff, did not sell something to a person which doesn't fit that person. Of course, we need to pay attention. Today, I met the CEO of TikTok. He is a young man. Well, I don't know he may be around 42. And he had a very tiny jacket, he was so lean. And so that's the reason for calling that type of luxury, gentle luxury. And this means living by measure. I do not want to bore you, but increase in ancient Greece, all people lived by measure. So storms were part of their life. So if there was a pandemic, this was part of the life, the black [indiscernible] killed thousands of people and luxury needs education, needs gentleness. So we appreciate a lot the fact that our customers buy a balanced number of items. And those are here by many things. Well, there will no longer be with us in a couple of years. We have about 400,000 customers today, half of the Umbria inhabitants and where you do not need to be a billionaire to buy our garments. But if the collection is a contemporary collection, I don't think this will be impossible to double the number of customers in the 5, 10 years. So if we have 800 customers in 5 or 10 years, well, this would be greater. I'm not joking. So we like customers to buy a few items otherwise to get bored. And so balance is very important, measure is very important. And some final details on Casa Cucinelli. In Rome, we will open by the end of September, October. And this Casa make us really very happy. And what do we do in this Casa, we organize events with journalists, with analysts. And in this Casa Cucinelli you can even breathe a lifestyle way of living. And the places reflect our identity. I was talking about with Massimo, well, it is in Madison Avenue, you have Coffee and Cappuccino, people may stay for a cap of Cappuccino for example. And then to conclude, I'd like to repeat myself. Our keywords are elegance, rarity, exclusiveness, contemporary approach. So do you remember the great [indiscernible] day which is set to around 19, 26, 27 was a beautiful young refined garments. So with these serenely and in a nice atmosphere. Well, clearly, everything is easier. But this is a good moment. We have to focus on moral duty and we have to drive growth. So that growth is well balanced with a healthy profit and this may make us a little bit better, and we may also contribute to proving the world because this is our strategy. This company should survive for the following 300 years. I don't know whether this will be the case, but we will do our best. So now it's half pass 6. So we have time for discussion and for questions. Thank you very much.

This is the Chorus Call operator. We will now start the Q&A session. [Operator Instructions]. The first question is from Flavio Cereda.

So let me take the chance of asking you a couple of questions considering the moment that the luxury industry is going through. So first question, you talked about exclusiveness. Well, in the industry, the sector, considering that distribution is extremely zero, extremely capillary and considering stores that become increasingly large. Did you think this also is a factor that leads to a low level of exclusivity in for some brands? And then the second question, unfortunately, due to the latest news on our money, well, in your opinion, is there a hidden problem in the supply chain for the Italian fashion? And how do you control that in order to avoid unexpected news as it was the case for Armani? And then the third question concerning the results that were published yesterday, Sergio Loro Piana. So and LDMA commented on the results, and they said well, we cannot do luxury only, but will you show any other proof that gentle, quiet luxury is still the successful principle. Can you confirm that as far as you are concerned, business that is still successful for the type of products that you manufacture and for your customers?

Let me start from your last question, Flavio, and let me also refer to Sergio Loro Piana. Because we clear-ups together, Flavio. We used to go to exhibitions to trade fairs together where they have a beautiful fabric company actually. And when we met [indiscernible], well, he was maybe the most elegant [ mate ] I've ever met. His brother, [ Pierre Louis GPG ] was really fond of fabrics. And so when we met, we used to talk about food or about fabrics and elegance. Sergio was really a very elegant man. I remember once in Florence, [indiscernible] came with a beautiful tie and they wore gray pinstripe suit with orange shoes and a clover on the shoulders. And Sergio said I like this very much. So having his approval in such a refined way was very special to me. So he was one of the most elegant man in the world. And let me say something else, but he did not believe in multibrand. And I instead liked that approach. And also, let me tell something for the [indiscernible] company. We went public in 2012. And in 2013, we were in Paris for luxury conference organized by Deutsche Bank. And one person asked me, but what do Loro Piana think of you and I said well, if Loro Piana go public because we went public the year before in 2012, well, if they go public, they will have to bring money with truck. And then the year after, they were taken over by the [indiscernible] family. And well, people say that the price is too high. But look at what Loro Piana today is. It's a beautiful company, a beautiful, exclusive luxury company, and this is what makes a difference. So let's talk about distribution first and finally, supply chain. Well, I always said to ourselves -- well, when we were younger, we had a store in Paris. [indiscernible]. And well, people always stood in a queue because the windows were really beautiful. And so if we have a store, even a smaller one, which is full of people, but you may have a larger warehouse with more inventories because -- well, the stock room is very important. And so we're not too much attracted by large sizes. And finally, a very important topic, the supply chain. We have 3,000 employees, and then we have a 400 micro companies with 20 people in average, there are family run with father, mother and children. We met them twice a year in September when we discussed the deliveries, and this is a very beautiful moment because we talk about plans for the future, about the workplaces, the wages and salaries of their staff, for the schools. We see whether they have an air conditioning system. Otherwise, we have them installed. So we help each other a lot. Well, let's say, 5,500 employees work exclusively for us and [indiscernible], for Dior. So we think that the working conditions that are in place are okay. But of course, we believe a lot in that, and we do not want to judge anybody. I think that they were all Italian garments have a lot of fascination. But as I said before, we have to invest in our factories. We have to invest in our staff so that they get a fair pay and they all know how wages are. You cannot pretend them to work 18 hours a day and then companies reach stellar results. So I think that we have to rebalance our sales. We are listed on the stock exchange, of course, and we want to achieve a profit. But profits should be fair and people should be able to earn a fair amount of money. Also because now you know if you take a picture and if you publish it, one minute after, everyone knows the truth. And we are constantly in touch with all our teams and all, with all the artisans and companies that work for us but have no platforms. And in the last few years, considering that these small artisanal companies are still a family run. Well, there has been a very nice generational shift. The owners -- we used to talk to was the founders are, now their children. But the owners are 49 years old and the staff are on average 44. So the type of work is still artisanal and this company remains a small size, but it is still in the hands of the family. But considering that the net profit of these companies is low, Flavio, we cannot pretend from them to grant discounts and rebates, they need to achieve a fair profit, too. So we will be able to manufacture beautiful garments. And so the problem in the future will not be who is going to buy our garments, but who is going to make them for us.

The next question will be asked by Andrea Randone of Intermonte.

I have four quick questions. The first is an update about the [indiscernible] factory and men's ready-to-wear in general. Second question, your wholesale [ channel ] is, of course, a very beautiful one in phase. So you were talking about meeting in Milano. So can you comment how you see their business? So the people you work with, how are they performing apart from the business they do with you? I think they're doing pretty well. Is there a lot of confidence in the sector? My third question is just a curiosity because we've seen beautiful pictures about [ tennis ] fashion and the [indiscernible]. So it's curiosity. I mean, there are some fields which were not typically yours to begin with. But do you see an enthusiastic response from the customer is there? I think you do. And final question, you just talked about fragrances earlier. Can you please repeat your standing on Fragrances, maybe I lost connection for a second, and I didn't quite understand what you said about that.

Yes, let me take your question. Your last question first. So we've been informed that we've been shortlisted to receive the award for the best fragrance with our women's fragrance. We're very pleased, actually, because we all thought that our men's fragrance was absolutely top of the range. And so we rated it with 10 out of 10. For women, we rated 9 out of 10. And so we're very happy to have been shortlisted for the best fragrance. Tennis. Well, tennis is pretty much in line with our take. I used to play tennis too. Riccardo still does. And at times, it may be a bit boring, but whenever we do go and play tennis we tend to wear very carefully, chose an outfit. And so no one told to. We did very beautiful presentations for tennis. We'll do it for ski when the season comes for gold. So it's a bit what you want to wear, not just for playing golf, but also when going to the Golf Club, and this is a part of luxury wholesale. Wholesale is very interesting. They -- it's performing really well. Last Saturday, I had a conference where I spoke in front of about 500 business people from the -- from our area. And there is a lot of possibilities, but we still have to remember that we need factory workers to be perfectly organized and receive everything they need. So everything we do is very beautiful and very interesting, I have to say, because we've been discussing about pushing even harder on style and design, pushing even harder on research because that really makes a difference. Many people go to the stores, and they come in the store with a picture from e-commerce sites. But if you have good sales associates that can really give you some advice and suggest you match the Cucinelli jerseys with somebody else's trouser and so on. This is really opening up a lot of possibilities. And we've seen that the key idea is that of striking the right balance. I mean, many times, we've been timed by sales, which were not really paying up well enough and so they were not that useful. We are actually going back to giving more importance to the store, to the physical store, it's connections with the clients through our sales associates. And some of the things that we've been discussing at this dinner confirm our opinion. We heard from the top 10 multi-brand stores in Italy, and they actually have a polls and they understand how Italy is performing and everything is performing. Everybody from all over the world, they come to Italy see how we present things and how we're performing. So you see -- we can organize a dinner in Milano with top 10 Italian multibrands. If you want to come over, we'll be happy to host a dinner with the multibrand stores. Because actually, our multibrand accounts tell us we are the ambassadors of our brands. And I agree with you, Loro Piana didn't really like the idea of selling through multi-brands as much as we do. But we are at [indiscernible]. We are in the top retailers globally. And so we believe they are very important for us. Speaking of Loro Piana again. I was wearing a jacket this morning with Loro Piana fabric. It's very light cashmere, it's so thin and it's fantastic. And it doesn't crumble, it doesn't stain or whatever. So I did it with my friend Sergio Loro Piana who is not there anymore and fortunately I'm happy to keep promoting the quality of the work and the family that has bulge into real luxury. So we may have different taste, but we have the same appreciation for quality. We helped each other and tell everyone Loro Piana is a beautiful brand, and they told everybody Brunello has beautiful taste. We have to each other out a lot. So thank you to the Loro Piana family, and there are family for all of their support. We're not competitors. We actually work together in the same market. We have a slightly different taste. We all understand that men's fashion is extremely important. So you mentioned [indiscernible] but men's fashion in general, is becoming more and more important. We're going back to elegance. Elegance is the name of the game today. This is what we saw at [indiscernible] in Milan, in Milan women's fashion week. And please stop talking about quiet luxury because I don't really understand what you mean by that, what is it the trousers and T-shirt, I'd like to have something more [indiscernible], more refrained, more elegance and more interesting.

Next question from Oriana Cardani of Intesa Sanpaolo.

I have two questions. So the first is about this little acquisition of Sartoria Eugubina that you have announced. Could you please comment on that transaction? And can we expect anything else similar to this to happen again? And my second question is about Japan. So I'm thinking of what the [ Vitol Group ] said yesterday that they saw a huge effect of growth because of Chinese tourists traveling to Japan, especially recently. So can you please remind that the overall impact of Japan on total revenues for you? And even the tourist flow is maybe not that relevant for you. Do you also notice some positive impact from that trend?

Yes, let me take the question on Japan first. For us, it's about 6%. We believe the image is absolutely beautiful. Things are improving all the time. And I can tell you that there is a whole movement of tourist traveling everywhere in the world today. Here in Umbria in April, the most beautiful restaurants and hotels are fully booked. So [indiscernible] is a place where my mother was originally born and everybody comes here because of the medieval castle because of the spiritual nature of the place. So I'm really confident we'll see big tourist flows pretty much everywhere. Even too much at times, I have to say, in some cities, there might be some over tourism naturally. The Sartoria. Well, the Sartoria is really, really nice, very beautiful. The employees are 8 young ladies. In 2016, they actually decided to put their financial efforts together, they opened this Sartoria and they have beautiful hands. I mean they are very steady in their work. So we actually -- they did a kind of a small IPO in a way, informal, of course, IPO. We asked them to open new windows and everything in the same environment where they're located. And so we started a new beautiful little factory. It's going to be ready in 18 months, and we'll have about 100 or 120 people manufacturing jackets there because luxury is about jackets for men in particular. So they are difficult for women's too but the men's jackets are even more difficult to manufacture properly because women's, they're a bit more lenient, so to speak, but for men, they have to be perfectly constructed. So we want to manufacture new men's jackets there. So you said we do expect something else in that sense. Well, in case something interesting artisan and beautiful comes up in the market, we'll be happy to think about it like we did with Chanel when we bought Cariaggi. So I do believe in the artisan work and quality. And I know that if you work with people in a serious respectful way, they have all to gain and all to grow, and we have all the necessary guarantees. So I can tell you that the rate of faulty product is virtually zero there because you have very skilled workers and various skilled people working with the hands and doing the right things. So this is something that also comes from working in a beautiful environment.

Next question Melanie Grippo from BNP Paribas.

I have two questions. One question on the performance of Europe, so plus 9%. I'd like to know whether there are any significant differences between and among the European countries or whether this performance is uniform throughout Europe. If not, can you tell me which is the best performing country? And what about the strong growth in wholesale. Are there any one-off effects? And can we quantify them?

As far as Europe is concerned, Melania, I must say growth is beautiful everywhere. For us, it's beautiful in China too, but well, China accounts for 12% or 13% of our business. We have a nice project, but things are performing really well everywhere. But again, we go back to the main topic, which is exclusiveness, exclusivity and distribution is an important topic. I was saying before I went to Los Angeles and well I saw that there was a sugar with the name of the brand. So wholesale is really very dynamic. And with our project, we will be extremely successful in the next 5 to 10 years. Creativity is really key because they launched 100, 150 brands, and they put them all together. So they no longer want to organize a special corner exclusively for you. They did not want -- they said they do not want to abide by the rules to be obliged to stick to instructions. And you know back well years ago, we used to provide instructions, but this is no longer the case. And so creativity has been reduced a little bit because we were obliged to -- well, they were obliged to buy 8 to 10 pullovers. But for the future fashion, there will certainly be a very successful future. And the results are the fruit of what we have been reported. So the appreciation and the success of our products. But there are deliveries, there's quality, there's taste. There are instructions. If you are courageous to listen, five hours to all this, you will get home with much more confidence. Well, now we are going to have another one in November, and we go and see someone in their store for a couple of days. On Saturday evening, we stay together and we discuss, and that's good for them, also for the taste, for the style. And if you are able to survive that meeting, Melania, you will understand how you and your brand performs. Well, I don't know if we've been clear, maybe a bit boring because when we have a conference call without figures without data, we have time to discuss.

The next question from the English call, Liwei Hou from CICC please.

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

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

Next question will be asked from Louise Singlehurst of Goldman Sachs, please.

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

So a very interesting question. Thank you very much, Louise. Well, in America, we've always sold 35% to 36% of our revenues in the next few years. We hope it will be 1/3 U.S., 1/3 Europe, 1/3 Asia. Now there is a lot of awareness from many customers that are really keen on real luxury, the value of exclusivity. Day in, day out, people come and see us and invite us, but I think that maybe -- and I'm asking Riccardo and Pietro where they agree with me. I would say this is the first country where people look at our behavior too. So how the company behaves where it works, how it works. So looking at customers that are really struck when they see the way we work, when they see how that we're respectful and so they appreciate our behavior. This is another thing we consider a big complement from shoppers, from clients. The [indiscernible] award, of course, was very important in this sense. And also the reason for the awards we received was very important to -- we also received an award in Shanghai. And actually, we feel -- we've been awarded the prizes to reward the brand and its noble attitude and its exclusive attitude too. People seem to like our taste, seem to like the way we behave, the way we work in Madison Avenue, Los Angeles, you can go to the store, sit down, have coffee, just spend time there. And actually, this is a very good representation of our lifestyle. So this is what we particularly care for. Last year, we had a beautiful dinner in Los Angeles with all sorts of important actors. And actually, by the way, we're at Wimbledon, there was an actress who was -- she is so famous right now. She came to our store and didn't even ask for a discount. I mean she just appreciated our brand. So the way we behave, the way we present ourselves is also appreciated. So would you like to wear something if you knew it's been produced by hurting people or the Earth, the planet, animals? I think I wouldn't like that. I don't know whether this is convincing, but this is our attitude.

Next question from Chris Huang of UBS.

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

Good question, Chris. I must say we are happy with the trend. And now it's April 15, and everything is aligned with the first Q and with the projections. Our prices have been increased 1%, 2%. So we will have 8% to 9% in terms of prices and 1 to 2 in terms of garments. And we expect a slight improvement. So we are very confident with all the numbers we gave. Sorry, sorry -- 8%, 9% in terms of volumes, in terms of number, so 8%, 9% in terms of pieces of volumes and 1%, 2% price increase. Please, well, you may also say, well, is this guidance of 10% conservative? No, it's not. Well, if we get a little bit more, we were more than happy. We will not reject any further growth, but we are very happy. We are particularly happy with the situation. That's the atmosphere that we have in the world. We want to remain exclusive. And we want to be beautiful, but we want to remain exclusive. We want to keep our exclusivity and we want to continue to gather the growth. And so we -- if we move down and if we focus on the medium end of the market, we may increase the turnover, but this is not the right recipe. You may have a person about a high-end item, but well you know, if the positioning changes you are no longer willing to buy these products. My father, for example, Well, I bought [indiscernible], my father had a watch for EUR 50. And I'm happy. I'm wearing a [indiscernible] because it's exclusive, and that make a difference. Well, this evening, we had a very nice conversation on luxury, on real luxury on the way we perceive luxury and the meaning of it.

Next question from the conference in Italian, Paola Carboni, Equita SIM. Please.

I have two questions. I hope I will be quick. So the first question is about the Chinese. Can you elaborate a little bit more on that. And yesterday with the [indiscernible], where we show -- we saw that they are now driving the growth. Do you also see that different pace compared to the other nationalities? And then we mentioned -- we explained your distribution model, which is based on the monobrand and specialty stores. So it's a bit different. What's the situation now? And what opportunities do you see in the years ahead? The second question is on wholesale. Can you give us a bit more color on the markets and the geographies that are driving the strong results that we saw in the first Q? And moving on apart from the store openings in the mono brand network. Have you ever thought of converting some hard shop further as you did in the past years. Are there any opportunities in some geographies? But first of all, I'd like to know whether do you see any differences between the performance of wholesale in Europe and the performance of the wholesale in the U.S.?

Okay. So let me start from the last question. Well, if we open a small shop it is simply to replace another store, which has been refurbished. We do not opt for temporary stores because this doesn't provide exclusivity to the store. No, no, I was not -- I was misunderstood. I meant the shop-in-shop, all right. So as for wholesale, so we are still focusing on the fact that they do not have to lose your identity. Well, in the past, it was [indiscernible] so this is the way they should be. Wholesale is performing well throughout the world. Well, as you know, Italian wholesalers, what we have seen in our experience is that the department stores that prefer to rent out the spaces giving up a little bit of profit could hedge themselves. So we will always focus on those with your own proposition with the identity, both in the digital and in the physical world. As for China, Paola, in the future, we hope we will have good opportunities in the next 5 to 10 years. And we start with 12% or 13%. But we do not want to reach 18% in a matter of a year opening 15 new stores. We want to open one store a year. We may refurbish one and open another one, but we want to remain exclusive. When we got this award last year, they said something that I really like. You are an exclusive brand, they said. And Chinese customers pay a lot of attention to the exclusivity. The person who made the interview had two iPhones and an iPad. And while we were both speaking, he was showing the price in Shanghai and the price in San Francisco and well, he asked me the reason for that price difference. Well, I told him he should ask these people. So we want to remain exclusive. But most of all, we want to remain an apparel brand. So it's 85%, of course, and you know growth may be slightly slower than an accessory brand, but that's the only way to retain one's identity and taste is make up of apparel only. If you sell products, you are not identified with a taste. If you go to a trade you are immediately identified as Brunello Cucinelli. Once you've identified the taste well, one year, the collection may perform a little bit less, but taste remains unchanged. And we want to focus on taste and taste has to be the one that we identified. I saw pictures when we went to play tennis well -- these pictures are really beautiful. So we're not so young. And we want to be extremely rigorous in terms of taste. Thank you very much. We've had a very nice conversation. So we've been talking about taste for three quarters of an hour.

Mr. Cucinelli, for the time being, there are no booked questions.

All right. So I'd like to thank you all, whole heartily. So we've had a very beautiful conversation for three quarters of an hour. We have been talking about taste in a call where we usually focus on numbers. Hopefully, the conference call that we usually have in July in mid-July, while considering that we have this one figure to disclose sales. We can have another nice conversation on taste. Thank you. Thank you very much. Thank you.

This is the Chorus call operator. The conference is now over. You can disconnect your phones. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]