Brunello Cucinelli S.p.A. ($BC)

[Audio gap] an Executive Chairman and Creative Director; Luca Lisandroni, CEO; Ricardo Stefanelli, CEO; Dario Pipitone, CFO, Marino Ciarapica, Co-CFO, senior; and Pietro Arnaboldi, Investor Relations and Corporate Planning Director. [Operator Instructions] Now I would like to hand over to Brunello Cucinelli.

Good evening. Welcome back, as usual [indiscernible] analyst investors and year-end. This is the second call of the year, but it is actually the first to discuss 2026 on the occasion of the Q1 revenue figures. We believe it is a very important call because we -- of the period we are living through. This is why we would define the scope as extremely important. All of us are present, 10 of us, as usual and the call will proceed as follows. I will read out the key figures that Luca will provide you with a careful global overview of the market. Then I will resume sharing our forecast for 2026 in detail and also some visibility on 2027. Based together with Ricardo, we will summarize the following investments in artisanal production capacity, our elasticity, flexibility and reversibility that was already tested in 2022 during the pandemic. And also in 2021, when we resumed our business and activities following the [indiscernible]. We will then focus on the new e-commerce platform built with artificial intelligence in which we place great confidence, especially now as was the case in 2020. Let me read out the [indiscernible]. Excellent results with growth of 14% at constant exchange rates and total revenue of EUR 369 million plus 8.1% at current exchange rate, outstanding performance of the retail channel at 20.1% at constant exchange rates and very positive contribution from the wholesale channel up 4.3% at constant exchange rates. Very favorable trends across all geographies. Constant exchange rate growth of 20.3% in the Americas, 4.4% [indiscernible] 17.8 in Asia. Double-digit retained growth across all three continents. Order intake for the full winter 2026, men and women's collections is of the highest quality with very positive feedback from the trade price and also the wholesale clients. Excellent contribution from a new e-commerce site based on the artificial intelligence called [indiscernible], which has already proven its ability to greatly increase client interaction through personalized customer-made experiencing and [indiscernible], it has attracted attention from major tech companies [indiscernible] in silicon valley. The quarterly results with consistent growth in the first half of the year, excellent sellout of the spring summer collection that are currently on the shelves, you should know that if your inventory is obsolete that narrows the good you have in the stores. Also, the order intake for the fall winter collection described by trade press and major global buyers as perhaps the most beautiful ever, while all of the above will allow us to look at the entire 2026 year with confidence. These highly positive elements together with a strong and prestigious global brand image and positioning in the most exclusive luxury segment, they allow us to confirm expected growth of 10% at constant exchange rates for 2026. And strongly believing in our business model, we also anticipate revenue growth of around 10% for 2027 too. This is my comment. The first quarter of 2026 ended with so with a 14% increase in revenues, a result we may confidently regard as excellent. On a global level, the brand's elevated image positioned within the most exclusive tier of luxury, it remains as image very robust, and we believe it is enjoying the finest moment in our history. The consistency and identity of our style, our visual merchandising and the lifestyle we saw ardently seek to express. They appear to us, both figures and dynamic, while their guiding principles remain steadfast over time, great creativity, contemporary products, craftsmanship, manual skills and exclusivity that's important. We are confident that the prestigious accolades received in 2025 for our stylistic identity together with the release of the movie 2026 will continue to fuel interest curiosity and Azure around Amazon. At this particular juncture for humanity, we have drawn upon what we learned back in 2020 during the pandemic and subsequently put into practice, namely the importance of clarity in the fundamental principles of our enterprise the necessity for all our decisions to be reversible, elastic and flexible culturally as well on an almost day basis. And finally, the need for great caution in patients without thereby relining our rightful ambition. This is what we asked all our colleagues during the customary quarterly internal assembly that we held on March 2nd. And we want to put into practice eating of Thomas Moore, who said, "Oh, my God, help me affect what I cannot change and help me change what I can." Like of the above as well as the of the strong appreciation garnered by the whole winter 2026 collections described by the international trade price and leading global buyers as the most [indiscernible] in our history, we look to the current year with particular confidence, anticipating revenue growth of around 10% with a similar outlook for 2027. Now Luca, you can now give us global overview.

Good evening, and good evening, everybody. I would start commenting our results for this quarter that are particularly strong, slightly exceeding our expectations and showing further acceleration compared with the second half of 2025, which we had already regarded as excellent. The 20% growth in the retail channel represents the most significant elements of these results, and I would begin my review precisely here. We view this growth to be meaningful and particularly robust for a number of reasons. First, once again, strong geographical balance, as Brunello mentioned, we are growing double digit in the retail across all three continents. The second element is an excellent balance between organic and non-organic growth. [indiscernible] performance of existing stores remains very healthy and consistent, confirming our belief that there is that we have already mentioned in several occasions that there is still considerable potential within these locations, thanks to the youth and freshness of our network. At the same time, new openings and expansions we have delivered, while they have translated into -- and we expect the contribution enabling us to continuously enhance the quality of our network, while safeguarding the evolution of our profit and loss account. We have identified growth opportunities in a non-dilutive manner. When we take a look at the contribution of nonorganic growth in the first quarter, as you might remember, there is marginal contribution offered by the three openings at the start of the year, or [indiscernible], 1 in China and Naples, they are middle sized, and they are in 3 new locations. But the greatest contribution was comes from the 2025 openings that, as you might remember, all were all concentrated in the second half of the year. The third remark I'd like to make is the virtuous balance between volume and value growth. Sales volumes are increasing in pet with the growth in number of end customers while the average selling price is also rising, supported by a highly positive sales mix. For us, this is a very encouraging sign that talks about the quality of our creative offering and the positioning of the brand. This has been the case for a few years from [indiscernible]. Then to perfect gender parity. In this quarter 2, revenues shows gender parity, 50%, men 50% limit. And we consider this a very distinctive feature of our brand. The last mark regards the time dimension. We are expanding our sequence of double-digit retail growth quarters, and this shows consistency of our performance and continuity of our performance even across different marketing environment. Within the quarter, it is worth noting that March remained in line with the growth of the previous two months, even after the outbreak of the world. Only the Middle East saw some impact, but this was offset during the month by the overperformance of other regions. For the first two months in the same region in the Middle East. So the Middle East accounts for approximately 5% of our revenues, both by geography and by customer nationality. The region shows a good balance between retail and wholesale, with retail focused concentrated in Dubai and Abu Dhabi and the rest is managed through wholesale agreements. What is even more important is that the Middle East contributed positively to growth in the first quarter. Thanks to the excellent start in the first two months of the year. In March, however, all traffic in the area fell by more than 50%. And although it is important to highlight that all stores remain open and fully operational. And we confirm their salaries fully. Let us now turn to wholesale. There's a slight growth at constant exchange rates there, very good, which we consider very positive and fully in line with our expectations for the channel for the full year. Spring summer deliveries were once again perfectly on time and complete enabling our multi-brand clients to begin the season with full assortments and to achieve very encouraging sell-out results. As you know, as we said last time, we have asked all our multi-brand partners to pay increasing attention to their online conduct while leading them free to receive and all the quantities consistent with this discipline. In talking about home sales is always useful to distinguish between specialty stores and department stores. Specialty stores represent one of the strongest pillars of our business in our distribution and revenues. And they are in excellent health, highly attentive to research, very important for the whole industry, and they are busy trying to understand this particularly favorable moment in style. Yes, to 30% wholesale and 30% retail [indiscernible]. In times of international tension, the raw specialty stores becomes even more significant thanks to their close physical proximity to customers and the strong relationship of trust they maintain. Department stores. Let's look at tax Nimmarkus and [indiscernible]. As we said, we've been back to full operations since the end of January, and this is shown by our results. For our brands, sales to end customers in the quarter are higher than in the same period last year in 2025. And this is to both for concessions and for wholesale products and both for menswear and womenswear. And payments have been extremely punctual. Let us now look at geographies. As you've seen, the Americans and China, both in excellent health are driving overall growth. These two markets increasingly year as systems that are somewhat insulated from the rest of the world. They are strong because of the size of domestic demand. And on the other side, they showed by physical difference from the Middle Eastern work. And they are also protected by a relatively moderate media coverage of the Middle Eastern complete. From a trend perspective, China and Americas are experienced in the same phase of demand elevation. And actually, the average selling price in this region is rising more rapidly than in other parts of the world, reflecting a strong desire for uniqueness in special governments. In China, for us, sales are concentrated exclusively in major cities with Hong Kong once again becoming a very strong top of traction. In the Americas, our sales performance is also excellent across our major cities. We're achieving double-digit growth in New York, Main Los Angeles, Chicago and Dallas and the main resource locations such as [indiscernible], while overall growth is strongly supported by the reaction of demand across the whole national territory, which has revealed new opportunities even beyond major cities and medium results. Europe. Without in Europe are in line with our expectations, we anticipated whole sales to be broadly in line with last year, and we're very pleased with retail growth of 10%. The noncomparable factory is now much more limited in Europe versus other regions. And we note the excellent start of the new store in [indiscernible] Paris, which we opened last November. The performance of comparable stores across the various European markets in this first quarter is, therefore, very solid. So we can conclude that globally, the performance of the physical business is excellent. That is the performance of the digital channel, our online boutique is growing rapidly this first quarter, strengthened by the new features that Brunello mentioned, and we are going to talk about that later, too. They are based on our [indiscernible] artificial intelligence. And this has immediately led to a significantly longer session sign, which means greater opportunities for sales and communication and well as, in our view, a more elevated than the sensitive image. Also increasingly satisfactory enter partnership with [indiscernible] experience and all is platforms by the [indiscernible] were achieving double-digit sales growth outside higher sell-out percentages. And these excellent results show very close collaboration and strong discipline. We certainly believe that 2027 is very successful year for the digital channel. We actually see that customers are becoming more and more confident with digital challenges, and we're talking about two luxury customers. And the digital experience is very agile and nimble is very in nature, which is a big advantage in this moment in time. So a detailed analysis by geography, channel and growth driver provides positive and mutually reinforce evidence of a business in excellent health, supported by the clearest identity, strong brand appeal, product strength of clarity of positioning and rigor in the strategic development [indiscernible]. Then when moving from actual data to forecast, then necessarily, we've not taken into account the contextual analysis, and we've seen this as 3 concentric circles. Our fashion health within our sector, within our industry and in the global market. So if we look at this shape, we feel the company is a very good shape. We have resolved these initiatives, projects and commercial investments in place to support the expected sales for the upcoming period. [indiscernible] the industry is doing well. So it's a bit better than last year. We have closed fashion weeks with a very positive [indiscernible] we felt a very good environment with a strong perception of new ideas, and this is true for both [indiscernible] and Paris. We noticed renewed energy and a great focus on product. And in our view, this will prove [indiscernible] in the months ahead. However, Global Markets are saturating the current high level of international pension offline in a more challenging environment than initially expected, but we have no ranges to uncertainty, and we firmly believe more and more that in uncertain times, it becomes even more important to maintain clarity of purpose, while exercising daily flexibility and execution without giving into -- or give up our ambitions. As we always do in such sensitive delicate moments we have gathered, and we can confirm today our guidance on expected revenue growth of about around 10% for 2026 and 2027, maintaining voice realistic and confident attitude. Today, we're experiencing the welcome center very natural, entirely and force growth, which seems to broaden our horizon and make the opportunities ahead even clearer and more tangible. So I stop here, of course, if you have questions, we'll be happy to compete for any of this.

Fairly good. This is Brunello speaking. So following Luca's comments, the forecast for 2026 is revenue growth around 10%, EBIT slightly improving, investments around 6% because you know that industrial investments have been completed. Net financial position improving and this with a healthy and excellent visibility. And we expect the same to be true for 2027. We would like to virtually change to involve the same strategy in 2026. So why are we provide an estimate and sharing them with you. This is a typical problem with [indiscernible] in 2020. So we do share our estimate review at very unusual moments. It wouldn't be much more cautious not to do so. Many of you analysts told us we were bold in doing so back in 2022. But as well as part of our culture, company culture. And also, we have close connections with the local institutions and authorities like the mayor, the provincial has and so on. And everybody is asking us how are things going. And it's hard for us to say we cannot [indiscernible] because we are a public company. So just like we did in 2020, we are trying to give you an idea and an exchange of will update you immediately. So internally, we work with projects every day. And this is what we want to convey to you. But we are ready to adjust them on a daily basis according to them in cases it's necessary. So let's gone with some 3-year considerations. We consider 2026, '27 and '28, an overall period, which belongs to the 2024, 2028 span, which we defined as the annual healthy harbor because in 2024 and '25, we have completed our investments in our production facilities, which we are confident with guarantee high-quality production for the next 10 to 15 years. And now this will be the trend of the harvest. 2028 will more 50th bird of our company, and we want to get there with peace of mind. Our facilities allow us to have flexibility, speed elasticity, reversibility, which is really really important, and we will discuss it further with [indiscernible]. So why do we change our estimate. Well, first of all, Q1 performance reflects the value of the strict summer collection, which will test a particularly beautiful and creative last September. And we are looking -- increasingly looking for special beautiful, bearable, unique governments with great creativity and exclusivity. And this is something we noticed for both men and women. So we implement it's more use and acceptable to where the [indiscernible] or 3 seasons in a row where as we wanted to change more frequently. My second comment is that the full winter '26 collection entering stores in July, we received extremely favorable feedback during recent women fashion week in Milan and Paris. That were rated as excellent in international price and by the clients. As we said, there may be the most beautiful ever. And as you know, multibrand clients on the players that are out there and quickly understand the state of health of each brand because they actually see hundreds of collections every season before everybody else does. And this gives us strength. Something else that Luca hinted to is that during the latest very large fashion shows, we actually felt completely fresh energy and then the work, this is a different point. But both in Paris and Milan, there was a lot of energy around the brand, around the luxury industry. We have been waiting for that for perhaps 3 years. And this new energy is something we still breathe when talking to the press. The price is definitely able to anticipate the times we are going through. Now fourth point in our stores, and this is really as far is really important. The atmosphere blend home and shop which is what we wanted. We have 10 [indiscernible] Cucinelli, and we do balance everywhere. So we need in other stores, we have led by we actually very nice sales close. They're not in system. They have a lot of taste. They have a beautiful lifestyle. So as we speak, we consider our boutiques to be very contemporary and beautiful just like our showrooms because there's two rooms where we present collections, while if they look old, they have that impact on collections too. We want the [indiscernible] Cucinelli to be our ambassadors. The last one, beautiful one will open in Shanghai, and we will have this family like event with maybe 100 to 120 guests. This year is also going to be very important for the brand. Next week, we are going to travel to New York to present [indiscernible]. So we'll start in New York and then we'll travel around Europe and Asia and will complete this in the Middle East in December, hopefully. So these are the main reasons why we confirm our estimates, even though there's a word painful and quite unexpected one, it's difficult to accept it for our modern times. But for me, a lover of history, we know that way is part of [indiscernible] time. So in summary, we believe the brand is experiencing a strong positive momentum, delivery for many reasons, including design identity and creativity craftsmanship [indiscernible] then able to do the ways in place of the work and the value of Solomeo. These are very important tenets for us. And above all, there's a lot of research behind our product and great exclusivity even online. So we discussed it all the time. We believe that also in communication we actually need to be very exclusive on the communication front as well. Our clients are at [ 150,000 to 500 ] people globally, so there's not too many in terms of amount. And we make those things that today the brand is pretty cool. We paid our process, the brands may be either pericorneal [indiscernible]. So give us a year of elasticity and flexibility [indiscernible].

Good evening, everyone. I would like to share with you, as I usually do, some reflections on our production structure, which we believe is one of the most distinctive and solid elements of our fashion house. So as you know, alongside actually in Solomeo, which has doubled in size over the past 2 years in also 2025. And alongside high-quality tailoring workshops dedicated to maintain women out way in Carrabino, you can [indiscernible]. Well, besides alongside all that, we can rely on the supply chain made up of 400 small artisan enterprises with which maintain a direct never intermediated relationship. And this does not mean that we want to pass any judgment on the platforms and all those who use them. This is our culture. And by the way, in our region, Umbria, we have 70% of these small workshops, and the others are located in markets Tuscany and Veneto. So currently, they have a 8,700 people, more than 8,400 in 2025. And the average age is what we like is that the owners are full effect and the employees on average are 44 years old. So the generation handle that has already happened. And as we often say, it is a very simple straightforward model. This craftmanship requires hands. So if we want to maintain this top-notch quality, we need to understand which hands will probably work here in the future. And we believe that in this day and age nurturing this minus skilled culture is one of the most contemporary approach that [indiscernible] adopt. And if there is a distinctive element of our production chain is flexibility as Brunello since our stress test was in 2020 and the following years in 2020. In particular, we found ourselves working in the context of great uncertainty, the same month in March, where the traditional seasonal planning became, in effect, weekly planning. And actually, daily planning -- and I clearly remember how week after week, we adjusted production batches. We transferred skills from one contractor to another. And at times, we even slow production, focusing more on research and creativity. And then we resumed it and then we also changed our holidays. So back then, we have two very clear objectives. On the one hand, to ensure continuity of work for our artisans. And on the other hand, we have to protect the company. At the time when market visibility was extremely limited. What we find particularly interesting is what happened immediately afterwards in the following two years. Well, we experienced the opposite situation, the market demand is exceeding our expectations and which we have to meet with great speed. Thanks to our [indiscernible]. Even in that case, our supply chain demonstrated the very same capability and in the opposite sense to adopt restart and return to growth while maintaining consistently the best in quality. So once again, we believe that between 2020 and 2023, we underwent the 3 structural test, a stress test and another important element that we do not mention very often is one of the bottleneck of all the supply chains are raw materials. You see more materials in this regards, we believe we are pretty robust and solid, thanks to two things. First, the thing first is our relationship with strategic partners such as Karia, our main cashier supplier, in which we are shareholders alongside Chanel. With them, we also plan inventory levels here, of course, we are speaking of raw materials for periods of 1240 months in advance. And the second element is our relationship with the most important Italian suppliers of raw materials, with whom over the years we have built the same type of relationship with our contractors, direct specialized across different product categories stable based on trust, but also of the same productive culture. With them, we do not just research new materials or service performed, but we also plan purchases where I'd like to sum up by saying that we have a wide-ranging network, but it's very cohesive at the same time, built some people and direct relationship. We have a great capacity for adaptation. So flexibility, elasticity demonstrated the most complex moments and a complete supply chain, which includes raw materials as well as manufacturing. So we are tackling this moment with confidence. So now a couple of minutes on e-commerce and then discussion. So I believe that e-commerce is a great tool for luxury, especially for brand image. But before moving on, Michael Klieger, the CEO of [indiscernible] on Lux experience, well, perhaps the [indiscernible], he said something very interesting. E-commerce has ceased to be a place of convenience of good price becoming a place of service, novelty and experience. I see new interest because it is the most flexible commercial tool patents. I really have found many interesting things here about e-commerce. We worked on [indiscernible] and many contacted us to pay the congratulations. So we enjoy a great relationship with the cynical [indiscernible] people, someone from the silicon valley actually saw in this new e-commerce, a great invention that might indicate a new path in designing and realizing websites in this as well as in other sectors. And I'd like to now share with you a comment by [indiscernible], partner at IVP. One of the major investments in [indiscernible], who said the following. And this is [indiscernible]. This is exactly the innovation needed to renew how websites are designed and function. It is a beautiful idea that could point everyone to new ways of making digital sites and experiences more engaging and therefore, more successful. We like this very much this e-commerce, it's an important resource for our online dialogue customers. We believe a new creative digital approaches, but hopefully a bit unconventional whilst they can attract clients' attention, they can encourage them to spend more time on our website discovering collections in an engaging way. As Luca was saying before, early numbers are significantly higher than traditional e-commerce indicating strong visitor interest in interacting with this new online experience. Visitors tend to spend over 10 minutes on the website, double about [indiscernible] before. They view 20% more products on average. So it's a very significant figure there. And of course, this is a novelty. So it's very appealing. So we are present in the U.S., Italy and in April, this 30 all over the world. We'd like to say that there are two companies that are among the most important worldwide with whom we are discussing possible developments. They have shown a tangible interest. So it is something really serious because it's a new kind of tools. So as it happens, both in 2020, it is a very special time for mankind. We do not really know where everything is going to serve. We have to be hopeful. So at the beginning of March, during the classic quarterly meeting with all connected, we spoke about the outbreak of the [indiscernible], but Brunello and I, we are the senior members, we reflected that every 6, 7 years something happens worldwide, the attack from 2001, the Twin Towers, followed in 2008 by the bank's crafting, 2015, the Greek set than 2020, the pandemic, 2026 Gulf war. As you can see, the [indiscernible] every 5, 6 years. Not enough, this happens to us at a very favorable state situation for our brand. So we believe that it could be slightly less difficult for us. But we must be ready to change plans quickly even daily. Therefore, so what we said, we decided to follow the teachings of Thomas [indiscernible]. Some more on a long-term effect, but we cannot change a change what we can change. So we are reiterating the early 2020 path during the pandemic. We held this board meeting where we spoke about this. We want to talk and focus on business only. And we don't want to beat anybody else who wants to offer other different proposals. We want to focus on our business. But at the same time, we see that we have more time because we meet less people not directly linked to business. We must be more creative, innovative, kind, open solutioning, extremely attentive to every single detail because this can make the difference. And it's the difference amounted to 2%, 3%, you might be able to win over a customer. This is the way we are working nowadays. So please do not think that we underestimated and that we are taking it like [indiscernible], but we really wanted to focus on how we are approaching the situation. And now let's open to Q&A.

[Operator Instructions] First question by Andrea [indiscernible], Intermonte.

I have three questions for you. The first one, in your press release, too, you mentioned a significant number of new clients in America. Can you perhaps give us a bit more color on our client base. We know it's very long. But if you can tell us how you see an expansion of these numbers? Second question on store openings for the -- in the retail network. Last year, it will happen in the second half of the year. This year, already in the first quarter, you started opening stores. So what are your plans for the year in this regard? And the last question I'd like to ask important question, although painstaking, you saw it was 6% negative exchange rate in the first quarter. You gave an indication of a guidance of 2% negative in the year. If this guidance still valid?

Well, we are not with it, and we don't have crystal ball. And then, I just wanted to point out that you are always the person asking you win you win a price here. as far as new customers are concerned, the brand is on. So we have many young customers, both genders who approach the brands, and this is very important to us. It's very interesting that the average age is 35 to 45. As far as openings are concerned, Luca will [indiscernible], but I'm ready until yesterday, we had -- we could have said that the dollar was going to look very high. And if it had been yesterday, we could have said that we would close the year between 1, 1.5 and 2. One thing that's important, and there is the average since when we went public in 2012, it was 0.3 perhaps in some years, it just swings a little bit, but this is the average. We keep working obviously for in the second half of the year. And for the actual , that's exactly what we were expecting Lucas commentary because we knew that, that was the exchange rate until March. As far as the network is concerned, no change in strategy. The timing of the openings is very much influenced by when we signed prime location. So it could be the first or second quarter depending on when these opportunities actually happen. We -- also we opened the three stores. We envisage that in the second quarter, we would open an important store in Vancouver, in Oak Ridge and then towards the end of the year at Abu Dhabi and Mexico City, between the end of this year and the start of next year. As usual, expansions play an important role this year. In the third quarter, we will expand the Geneva store, the Toronto store and once again saddling this year and the next one, the expansion of the [indiscernible] 66 in Shanghai. [indiscernible] Cucinelli already mentioned, we are working actively on the location, and we believe that we can be ready for August. Yes, Brunello saying for the openings, perhaps if we managed to find the right location, we might change the timing. That is always the same. And it's the brand is experienced going through a good touch and the collection is first thing that matters more than anything else.

And as we were seeing in the past calls, it's a great momentum for our brands.

Next question by Chiara Battistini, JPMorgan.

The first question in the 20% direct-to-customer growth, can you give us this link between volumes and the mix you spoke about this mix as opposed growth. The second question linked to this strong performance in PTC. In terms of volumes and inventories. Are you happy with the Spring [indiscernible] inventory or given the flexibility in your supply chain, does this help you meet [indiscernible]? And my last question is, if you can provide an update on the situation. How -- whether the business has resumed now? And what are your expectations to this account for this year.

Luca?

[indiscernible] things are going [indiscernible]. Revenues is on the rise. We expect a good year with over 3 [indiscernible], we planned important expansions within better for both men's and women's. And we consider the results of the first quarter to be very important because we really improve the loyalty of many American customers to these luxury brands. And as I was saying from the financial point of view, we received -- we have been paid on time. We believe that, as Brunello said, [indiscernible] affair was only limited to 2025 and it had only to do with the financial situation, that is an opportunity for our company. Retail performance. There's a great balance between volume based and value-based growth. This is something we are always pleased about. We like the fact that even if the price goes up, the goods are sold because there is this desire to pursue the creativity of the brand, and this is the nature of our brand. And on the other hand, we like volumes to grow and also the number of customers because this conveys the idea of the company that can look ahead to a bright future. Inventory, primary speaking of or as Luca was saying, customers are always seeking out very special things, and we are pleased with that inventory. We then modern, as we were saying before, because obsolete inventory mirrors, obsolete stores. Production, as Riccardo mentioned, everything is going well there, but we are ready, should anything happen. We are ready to adjust and it could happen overnight as it happened back in 2020. We have basically reapplies all the strategies that we have in 2020. I might say it was bigger in 2021, we are prepared, we lay some patients repair the brand. If it turns out better, and it's a true [indiscernible] then it will -- we will be fine, but we prepare for the worst.

Next question will be asked by Natasha Bonnet of Morgan Stanley.

Congratulations on the really great set of results. My first one would be might be a taking a little bit. I'm sorry, but any change in trends you've seen so far in April versus Q1, especially the exit rate from March? And my second question would just be on the performance of the Middle East, if you could give us a bit more color. I think you said traffic in stores was down 50% in the month of March. Was that for the full month? And how were sales impact is a similar level? And have you seen that evolve lately? And then my last question would be on SAC. I know you had previously mentioned you were planning on converting 5 Neiman Marcus doors from wholesale to concession. Is that still a plan for this year.

Luca will start, the [indiscernible] continue.

Okay. Luca speaking. Planning for [indiscernible]. Five locations have been identified for conversion during the year. And for the Middle East, yes, we confirmed that during the month of March, of decreased by 50% by [indiscernible]. And as we said, the Middle East accounted for 5% of our revenues, both in terms of geography and nationality. So that means that the middle as export demand towards Europe as much as it received then from [indiscernible]. [indiscernible] can discuss. As far as [indiscernible], people look for quality more and more. We do [indiscernible], which we call [indiscernible] couple of hands. We need as people to be prepared to everything works well, schools and academies or will something which is important, is we have 25,000 people applying for jobs with us every year and nearly 4,000 of these people want to be working in production. And so they know that they have good salaries, good workplaces. But also they know we're looking at more special things by the time. And also before winter collection is like the spring-summer collection has been phasing at all. So at this time, as we've seen in the passengers in February, March, products are elegant, sophisticated censorship very coming in. So with [indiscernible] seems to be going among these trends all the time. For [indiscernible], we have seen our transactional that projected very beautiful at their source and full of people. So it's a special and very beautiful time for fashion. There's a lot of innovation. People want a very special products, not necessarily unwearable, that's for sure, but [indiscernible]. Yes, comfort, for instance, is one of the specific demands of the recent fashion funds. But should we summarize on new trends is exclusivity, uniqueness, quality and elegant [indiscernible]. So this would be the summary of the fashion trends we have seen in the last few weeks. So this is a execution. So you find the, let's say, energetic for winter. We have beautiful collections for winter and hopefully, the famous geopolitical situation will allow us to play out of that. And as far as the beginning of April, we have recorded no significant changes versus March. And we see for getting about April, and April is following around the same trend in March.

Next question will be answered by Chris Huang of UBS.

It's Chris from UBS. I have three, if I may. The first one on the wholesale order book. I think in the press release, you mentioned that you only resumed shipment with stocks from mid-January. So could you give us some visibility on what to expect for Q2 in the wholesale channel? Is something similar to Q1 a reasonable level? Secondly, I want to ask about the Americas DTC. I think you highlighted in the press release that the U.S. CDC channel continues to accelerate sequentially. Could you maybe talk about the underlying drivers here? And are you in any concern about any potential impact from perhaps a more new to stock market performance, I mean, if we look at S&P 500 is not actually growing too much year-to-date. So I just wanted to hear your thoughts on that. And last not least, on the cluster performance. If I look at your regional retail trends, it is quite clear that the Japanese -- sorry, the Chinese, American, European consumers are up in the double-digit territory. Are you able to talk a bit about the Koreans, the Japanese, I'm just interested to hear other trends in other Asian markets.

Thank you, Chris. Let me answer that. Well, so far, even in the U.S. what I'm going to do on and we see it very positively as we speak. I mean it's really successful in the United States. Luca, any comments on Korean using countries?

Yes, of course, we have gathered campaign orders as we lose these orders in terms of both condition policy. Well, for us, this is very important because the -- there's a clear indication that the level is getting higher and higher. So since these markets didn't buy much from, let's say, mid-market brands there are more space for we are luxury today. thank you for your question on Japan and Korea. These are two markets that are doing very, very well. Both markets appreciate quality better much, Japan in particular. And something we absolutely like is that both these markets are captured to serve multibrands. And department stores are very, very important there. The customer lose it was important for is unprecedented and are I mean they have been loyal to department stores and master-brand stores for centuries now. So this shows how contemporary, and how important well executed multi-brand are. So Korea, is actually becoming more and more important in our world, too. Our people in the design offices are working on this more more. For less [indiscernible] -- well, Chris, 10 years ago, we would never imagine to do research in Korea. We used to go to the U.K., Germany, Belgium, where our people do go out and do a lot of research in Japan and Korea. [indiscernible] an extremely creative countries. So this is very, very interesting for us. And now, Luca speaking now, as you know, we do have wholesale and distribution agreements there that are really important for us. And last year, we opened a beautiful story in [indiscernible], which is convened a fantastic met for our brand. And when the owner invited me to launch, however, the lets all Italian and garlic free. [indiscernible] my wife over and she said, "We have to say as an Italian [indiscernible] prelaunch for you," which was fantastic, by the way. So that means a lot of mutual respect between countries. So generally thinking, we're very positive puts everything with the exception of [indiscernible] of the world.

James Grzinic from Jefferies.

Congratulations for a fine quarter. I have two quick questions. We are happy to Brunello comments. So starting from the Middle East. What was the impact on the wholesale order in the region in the third quarter. So can you -- did you already see an impact, or is it something that we will see later on. And then this rates 20% retail in the first quarter. Do we have to believe that this contribution might be around 7% to 8%, given the timing for your openings in 2025 and the next.

Our efforts for the first quarter, looks speaking, there's great balance in comp on comp. Then as part to the order collection in the Middle East, it had completed indeed before the start of the war, but to enter comments, nobody asked to cancel any orders. So this is very positive. The only thing that we said with them, we had some shipments of the summer -- the summer in March that we diverted elsewhere, but it was just the summer sales. So we can say that for the time being, we do not really feel it this war. And it is also incredible to acknowledge how everybody wishes to live normally. So stores were closed for one afternoon only as a matter of fact. And we images of other stores opening. We speak to with America on a JV basis. say that actually the war is ranked second or third in the news, whereas in Italy, in the Italian television starts off immediately with the war any kind of new solutions. And now we have -- with Ukraine now Iran. So I have been at all whoever said or part of the 4 years because indirectly our experience, it was in America. This topic comes second or third when the news goes a. Well, yes, they are further away geographically. But Brunello said, personally, I feel as we have been at all for 4 years since when Russia started with the invasion of Ukraine in 2022. As I wish and hope that, well, to be told, I was really scared, frightened the other night when the President said those words, I spoke with my wife, and you might even think that something tragic might happen, as it was the case for the Hiroshima bombing. So of course, you try not to think about that, plus you have a big fear. So we live in two worlds. On the one hand, we have the business, and we focus on that. And on the other hand, we have tension and fear underlying it all. And on top of that, I would say that humanity needs a new world order. And within this world order. It will take efforts to reach this new world. Well, hopefully, we are close to the -- to our destination of the -- well, yes, but when you have a president make you some statements, truth to be told, we will wipe out the whole civilization. And in love with the culture, I have the [indiscernible] the great at home, who ruled Persia between 500, 503. It was demand due to enlighten for mankind. If I hear someone say that they will white house this civilization, I was really scared. And I thank God, right in the middle of the night, I received the message of the truth -- to sorry, truth being signed. So there is some sort of seeping concern because we are the first generation who, well, never experienced a war directly.

Next question by Oriana Cardani, Intesa Sanpaolo.

My first question is about the performance of the European market in the third quarter. Were there some regions that outperformed or underperformed and what supported growth, local demand or also tourist demand still positive. And the second question concerns retail in the U.S. in the first quarter. In the press release, you mentioned an acceleration compared to the previous quarter. What if we possible to have a precise figure for this retail growth?

Luca?

As far as Europe is concerned, Oriana, growth is well scattered across geographies. As you know, we -- may I say that if you hear someone complains a bit more Germany, the German market, they are complaining when it says, but we can't say that results defer in German stores. But the Germans are a bit like that. The [indiscernible] mentioned this the other day, but there was an article [indiscernible]. And also two reasons, [indiscernible] are two reasons is the high-end tourism and therefore, it is not as impacted by the breaking out of the war. As to the American retail, we can confirm that we had already experienced a particularly favorable second half of the year last year and the third half of the year, but it is a very responsive market. And it is welcoming our collection, a lot of appreciation, Brunello?

I have to say that the market is faring well. But then, of course, different brands, different One thing is for sure, the market is in dire need for new and upcoming brands. This is the way it is. When you walk into your department store and you say, what's new? And you want a new restaurant in Milan, your restaurant in Rome, you want new brands. So that's what the customers ask for. And as the [indiscernible] year said in 17th century, 1 trend, 1 fashion will be replaced by another, and this one by another again. Today, we have Mr. [indiscernible], who is the member of our Board. And he said, "Well, yes, that's a difficult [indiscernible], and if we get the connections wrong, we will have 20% less, whereas the past everybody is faster, we always have sales." But for the time being, we are all focused on good things, although they will really is there. And now I want to believe in this truth because I think the nobody wants the war. But it's something bigger than us.

But -- why did you confirm estimate to my ask?

Because we believe in that because we need to have something to work on and also because we want to really be clear with all the local institutions, and we want everybody to know what we are doing. We don't want to hide behind the statement we are listed, so we can't develop anything.

Next question from Poala Carboni of Equita SIM.

Congratulations for this great trend in the third quarter. Two quick questions, back to what you said about the latest in March, where after the war broke, of course, there was an impact on the Middle East, but it was offset by other geographies that are performing very well. So could you please give us more details about them and some color as some poor to that? And then my second question is about Europe. And wholesale European particular. I know you had asked your clients to be more, let's say, careful digital channels. So it was after what response you have from our customers here.

Yes. Brunello speaking. In December, [indiscernible] to our clients and a collaborate, but you have very beautiful cyclical stores and be very careful with online stores because online may be a small percentage of sales, but they may be pretty dangerous for your image and everybody understood and responds it. So I think the atmosphere here is really good. So for the quarter, yes, we did have a slight decrease in that faster. But [indiscernible] talking about a few hundred thousands of. So these are not earth shattering figures actually. So of course, the spring/summer collection was particularly good. We are harvesting very good results. But in general, I think we are receiving. We are seeing a very good atmosphere on the brand. So the brand is healthy. It's in great shape. There were times when the brand was not as healthy as today, but these new collections, this new size before winter, we had a beautiful, beautiful welcome. And if you look at the new collections from other brands, including our lot Chanel, with the new designers coming on, there's a lot of excitement and uses here.

Okay. Some said, there was a slight decrease, but nothing to to worry?

No, absolutely, absolutely not.

Okay.

Also wholesale accounts are doing well. They have canceled the orders for winter, no particular problem. But we don't want to take this too lightly, considering the times we're living through. So we'll see what happens in Q2. The retail might be growing by 15% to 16%. And before we say that we sale will be slowed down, see what I mean in call the general impression. But so far the most important against base triceps agreement, we all need it. And as a company, we are not really suffering the cost of energy too much. to in any proportion as to alter our P&L because 63% of our production is handmade. Of course, we're not energy intensive. We don't want to take things too lightly, also because being too light at the moment like now, well, I said it during several meetings. We are very focused, and we are very careful to anyone who suffered the consequences of war. We are at war, that's the truth.

And the other question?

Yes. Paola, you may imagine that the Middle East is 5% of our revenues and 1 month of what will it was offset by slight overperformance in other geographies. So we've actually talking about relatively small figures. So we know that the European performance was in line with our expectations. And America and Asia actually outperformed and this has more than offset what we haven't obtained in the Middle East. There are no further questions so far. Very good. So thank you all of us for everything. And hopefully, will get together again in a few days' time, and the war will be further away. Thank you very much.

This is the chorus call operator. The conference is now over. You may disconnect your phones. Thank you.