Lanvin Group Holdings Limited (LANV) Earnings Call Transcript & Summary

Thank you for joining us and welcome to the Lanvin Group's 2023 First Half Financial Results Conference Call. [Operator Instructions] Please note today's event is being recorded. Now please take a moment to review the disclaimers. During this presentation, the company will be making certain forward-looking statements included, but not limited to, future performance and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and other factors and they are not guarantees of performance. For today's presentation, I would like to introduce Joann Cheng, the Chairman and CEO of Lanvin Group; David Chan, Executive President and Interim CFO of Lanvin Group; Siddhartha Shukla, Deputy General Manager of the Lanvin brand; and Silvia Azzali, CEO of Wolford. With that, I would like to turn the call over to Joann Cheng to start the presentation.

Thank you all for joining us today. I'm Joann Cheng, the Chairman and CEO of Lanvin Group, and I'd like to start by recognizing the entire Lanvin Group and the brand teams for their efforts in the first half of 2023. Among our achievements in the first half: we transitioned our creative direction at Lanvin and set our future path. launched our creative lab program to bring new insights to creative direction for Lanvin, we welcomed Nao Takekoshi into our family as our Creative Director for Wolford and we acquired the Lanvin trademark in Japan. Regarding our financial performance for the first half, we had a solid first half continuing our top line growth and margin improvement across our portfolio. Our industry faced macroeconomy challenges in the first half. But to our credit, we were nimble and decisive in adapting our strategy such as accelerating the buyback of Lanvin Japan trademark and the development of Lanvin Lab while pushing out certain marketing initiatives to launch during better market conditions. Furthermore, we saw improving pace in growth in all our regions starting in April. We continue to make progress on our path to profitability. Our improvement in gross profit and contribution profit are evidence of our commitment to profitable growth. We have done the groundwork for our brands to ramp up their growth and are excited about our prospects for the remainder of 2023. We have an exciting second half planned with the first Lanvin lab collaboration launched with its first-ever collaborative designer, the Granny award-winning artist, Future. The opening of Lanvin's Madison Avenue store in New York City. Wolford's next step is Nao Takekoshi as the Creative Director and his collaboration with #21. As well as St. John's partnership with celebrity stylist Karla Welch. With that said, I'm pleased to report that we continued to grow our group revenue in the first half of 2023 achieving EUR 215 million compared to EUR 202 million in the first half of 2022 representing a growth of 6.4%. Our gross profit for the year increased to EUR 125 million over EUR 113 million with our margin improving to 58.5% from 55.9%. Our financials show period-over-period stabilization of our core operating line items, including cost of sales, marketing and selling expenses and G&A expenses. The progress we have made in optimizing our cost structure has created significant operating leverage to drive profitability as we accelerate our top line growth in the second half. With that, I'd like to turn it over to our Executive President and Interim CFO, David Chan, to go through some of the details.

Thank you all for joining us today. I'm David Chan, Executive President and Interim CFO of Lanvin Group. Like Joann, I'd like to take a moment to recognize the entire Lanvin Group family for their hard work in the first half of 2023. I see the progress we have made and I'm excited for our future. First, I'd like to direct you to Pages 5 to 7. You can find the deck that we have just uploaded to our IR website. Our sales continued to improve across the portfolio period-over-period. We saw particularly strong growth in Greater China at 13.9% with Sergio Rossi, Wolford and St. John leading the way. EMEA grew 5.3% from strong domestic demand and North America remained resilient managing through an unsteady economy by growing 2.6%. Our DTC channel grew at 5.1% while our wholesale channel grew 2.2%. Additionally, we saw increases in other revenue mainly stemming from increases in our royalty revenue from the acquisition of the Lanvin Japan trademarks and from clearance income. Wolford and St. John, 2 of our 3 largest brands by revenue, continued their solid growth with revenue up 8.4% and 11.3%, respectively. And Sergio Rossi showed very strong results with growth in all regions and channels at an overall growth rate of 22.4%. Caruso continued to take advantage of the acquired luxury trend and its production capability by growing its B2B Maisons business in Europe by 42.9% and 33.6% overall. Moving on to Lanvin. As Joann mentioned, Lanvin began the year by transitioning its creative direction and taking steps to planning new creative initiatives to be launched in the second half resulting in comparatively lower period-over-period revenue of EUR 64 million in the first half of 2022 versus EUR 57 million in the same period in 2023, a decrease of 10.8%. Following the 4-year tenure of Bruno Sialelli, Lanvin decided to make a strategic change in its creative direction and also launched Lanvin Lab, both of which will impact revenue in the second half but did not benefit the results in the first half. With the trends in Greater China and U.S. improving, we're expecting a strong second half performance as our strategic plans begin to accelerate Lanvin's revenue growth. As I've mentioned in our full year 2022 earnings webcast, Greater China and North America are significant areas of potential growth and as the numbers show, we continue to keep them as the focus areas for our growth. Next I'd like to point you to Pages 8 to 10 and to discuss some of our first half brand highlights. Focusing on Lanvin first, our flagship brand had some key achievements. Lanvin's Fall/Winter 2023 Fashion Show was well received with a strong acclaim and recapturing elegance in the wearable form. Second, we successfully reacquired Lanvin's trademark in Japan from Itochu Corporation who has been and remains a valued strategic partner for us. Achieving this milestone allows us to integrate our global IP to further develop a consistent brand image and pursue strategies in a key market for Lanvin. Finally, we announced the launching of Lanvin Lab with our first guest designer Future who not only is a music icon, but also embodies the spirit of Lanvin's new philosophy. I speak for the entire Lanvin Group when I say we're extremely excited for Lanvin Lab's first collection, which will launch for Winter 2023 with ready-to-wear and accessories for both women and men. We are embarking on an exciting new phase at Lanvin, which Siddhartha Shukla will provide more details in a later part of this webcast. Touching on some of our other highlights. Wolford had a busy first half kicking off a number of initiatives including collaboration with iconic singer Grace Jones and hiring Nao Takekoshi as Creative Director. Wolford also launched The W Club to provide customers with an integrated digital platform that promotes self-esteem, body awareness and physical activities and is curated for with Wolford's athleisure product offerings. Sergio Rossi and St. John also had a few notable collaborations, including St. John's collaboration with world-renowned producer Shonda Rhimes and a partnership with celebrity stylist Karla Welch. While Sergio Rossi started a project with Japanese artist Mari Katayama called the High Heel Project and officially launched a special capsule with AREA in the first half leveraging AREA's strong brand in North America. Looking back at achievements during the first half, I realize we have a lot of momentum buildup in our brands, which is why I'm excited for the second half. And now getting back to the financial fundamentals, please turn to Page 11 for a review of our profitability and margin performance. Group level gross profit continued the positive trend increasing to EUR 125 million from EUR 113 million with the margin improving to 58.5% versus 55.9%. We continue to benefit from scaling our revenue and we see this impact continue to improve our profitability. Our operating leverage is most evident in our contribution profit increasing from EUR 6 million to EUR 15 million with the margin improving from 2.9% to 6.9%. I'd like to remind you that our definition of contribution profits, which is a non-IFRS measure, takes gross profit less selling and marketing expenses. This is a key metric for us to gauge the performance of our variable operating efficiency and we have seen significant progress over the past few periods. Furthermore, taking into account our fixed G&A expenses for the period and calculating the after G&A profit also known as our adjusted operating profit, we saw a near 600 basis point increase in the margin showing the potential operating leverage we have created. As a group, our adjusted EBITDA was lower because of the revenue decrease in Lanvin and the resulting reduced cost absorption as well as an increase in investment for selling and marketing. The increase in selling and marketing, including investment for the launching of Lanvin Lab for in-person fashion show as opposed to digital ones in the previous year, for the transitional creative direction and to setup all the brand sales and marketing planned for the second half. While Lanvin's result were lower, all of our other brands continue to improve. With the changes we have made at Lanvin, we are setting our path for the future and I'd like to reiterate we are on track to break-even adjusted EBITDA. With that said, I'd like to turn your attention to Page 13 where we show our margin evolution. Our historical trends have remained consistent with steady improvement period-over-period and notably a strong second half each year. While we are still working on increasing the balanced accessory versus ready-to-wear, we have made significant progress in optimizing our product mix to enhance margins. Furthermore, as you can see on Page 14, we have stabilized our OpEx with most of the OpEx reduction behind us. We have been able to grow sales while consistently reducing our OpEx as a percent from 107.4% 2 years ago to 87.2% for the first half of 2023. Additionally, we have been able to keep the OpEx flat period-over-period going from EUR 183 million to EUR 188 million, a EUR 5 million increase while increasing revenue by EUR 13 million. Some of the brand level achievements I'd like to highlight are first for Lanvin, we have rightsized team across function and empowered regional leaders to streamline the organization and we have also scaled OpEx on a near real-time basis with focus on efficiency and critical review of business expenditures. Wolford is nearing completion of the restructuring measures including the pooling of distribution activities in Milan and manufacturing efficiency and overhead reduction initiatives. For St. John, the OpEx rationalization is on track to be completed in the second half of 2023 including upgrading the supply chain and rationalizing production. This transition to being a brand company as opposed to a manufacturing business has already brought stability to the brand. Overall, the group is in its strongest position ever to accelerate revenue and capitalize on operating leverage we have built. Our entire team is working towards achieving adjusted EBITDA break-even in 2024 and with our results today, I'm confident we'll achieve our goal. Turning to Page 15, we take a brief look at our global retail doors. We continue to pursue a rationalization strategy to manage our footprint. We have closed several additional doors in the first half as we strive to optimize our new economics. With continued effort to rationalize and portray our group's product offerings and store network, our retail sales per square meter have increased globally and in particular the Greater China region. Furthermore, St. John and Sergio Rossi showed significant improvement in the first half. Much of the work is behind us and our store footprint is ready to accelerate growth. Looking at our store growth regionally. We took advantage of opportunities in North America and recently opened our new flagship Lanvin New York City stores on Madison Avenue in July. We remain focused on the potential of Greater China as well as new opportunity in the Middle East where we have plans for our first Lanvin and Wolford locations in the regions to be opened in the second half of 2023. We plan to remain diligent and optimistic with our retail network in 2023 to optimize our footprint and maximize ROI. Turning to Page 19 and looking ahead at the rest of 2023. We're excited about many initiatives we have invested in occurring in the second half as discussed. We believe the second half of this year will see improving market conditions that we'll be able to capitalize on and drive top line growth. Additionally, we're progressing on our pipeline of new strategic partnerships to enhance production capability as well as expand on the retail footprint. On the M&A front, we're having discussions with several interesting parties. Overall, we'll continue to build our unique ecosystem with best of kind partners to enhance our performance and shareholder value. With that, I'd like to discuss our brand level results and upcoming initiatives. I'd like to start with Lanvin on Page 18. As I mentioned, Lanvin focused on a creative transition while managing through a globally softness first half market. While revenue was down, I'm pleased to report brand gross profit increased from EUR 30 million to EUR 32 million period-over-period from higher sell-through rates resulting in margin increasing from 47% to 56%. Additionally, contribution loss remained relatively flat in the face of lower revenue dipping slightly by EUR 500,000 from a EUR 4.3 million loss to a EUR 4.8 million loss. Lanvin's ability to manage through a creative transition through uncertain economic conditions shows the brand's resilience and its credit to Lanvin's management team. The brand will complete its creative transition in the second half and will begin to capitalize on those changes. With that, I'd like to turn it over to Siddhartha Shukla, Lanvin's Deputy General Manager, to discuss the exciting upcoming [Technical Difficulty].

Thank you, David. I so appreciate the support from the group and likewise share your optimism about the future of Lanvin. I'd like to highlight some of the products we have coming up in the second half as we continue to see through what has been a very important period of transformation in our operating model and our strategic approach. First and foremost, our focus remains on driving responsible and profitable growth as evidenced by the first half improvement in margin and gross profit that you've mentioned. Organizationally, we continue our rightsizing and refining of the operating structure in line with the size, scale and ambition of our business including controlling expenses, building a team of entrepreneurial talent and innovating the business model with new strategic approaches to product and communication. In particular we're closely examining customer profiles and developing relevant next generation products and marketing, the beginnings of which we will see in the second half. Our new creative model, which was announced last April, is comprised of 3 verticals. One, the Lanvin men's and women's runway and precollections that remain at the heart of the Maisons with a new artistic direction to be announced in the coming months. Two, a dedicated division for the development of leather goods and accessories in order to build a resilient high volume, high margin long-term business. And three, Lanvin Lab, the experimental space for new partnerships. The first being a collection developed with the Grammy Award winning musical artist, Future, that is set to debut this winter. Regarding our product strategy, we reset our product merchandising approach 1 year ago focusing on a more diversified lifestyle assortment across men's and women's that balances a casual offer with a new sophistication spanning wardrobe and occasions. Additionally, we introduced a robust program of leather accessories and shoes across price points and function and we'll be introducing special products and capsules to respond to the various needs of today's consumer including this Fall's launch of the icon Ballerina and additions to our seasonless evening wear occasion capsule. We are also implementing customer-centric marketing approaches via more strategic segmented investments and integrated cross-channel activations to encourage acquisition, retention, repeat purchasing around specific product campaigns and key cultural moments. This will naturally fuel what is a still underleveraged digital business, which we see powered through the shared U.S. Lanvin Group digital service and the more sophisticated full funnel growth marketing tactics I've just referred to. Geographically, we're seizing the opportunity in Greater China with a considerable advantage versus our competition via internal expertise, local connectivity and the real agility and speed to market. And in the United States, we're stabilizing what has been remarkable growth over the past 2 years into a more sustainable business with momentum across all categories and channels. Finally, we are leveraging collaborations, partnerships and VIP placements to acquire new customers across demographics growing our global database. Examples of this are obviously Lanvin Lab and Future, but also our collaboration with the Chinese star Cheng Yi, Beyonce who we dressed for Renaissance World Tour and fundamentally, our ongoing engagement with qualified influential communities across social media to amplify product launches and these are all just the beginning.

Thank you very much, Sid. Going on to Wolford, we have high expectation for Lanvin and happy to see the progress we have made so far. So moving to Page 19. I'd like to discuss Wolford's results. Revenue increased by 8.4% from EUR 54 million to EUR 59 million in the first half of 2023 with Greater China growing an impressive 46.7% by driving growth in both DTC and wholesale channels. North America, a key objective for Wolford, saw results improved by 10.3% driven by North American B2C. Wholesale grew by 28.2% mainly from an opening of new franchise locations, which are included in wholesale revenue as well as organic growth and price increases. While franchise revenues are included in the wholesale channel, it is [ obsoletely ] B2C as its product are sold from Wolford's brand stores. Gross profit improved on an absolute basis from EUR 38 million to EUR 42 million from higher revenue with the margin increasing from 70.7% to 71.5%. Contribution profit increased significantly from a loss of EUR 2 million to a profit of EUR 4 million in the first half of 2023, a significant swing in the margin from negative 3.6% to positive 6.7%. The contribution profit marked improvement was due to operating leverage from higher sales as well as getting beyond the nonrecurring expenses that elevated the OpEx in 2022. The progress that Wolford has made on its past profitability is a credit to Wolford's management team and effort of initiatives they have undertaken. And with that, I'd like to turn it to our newly promoted CEO of Wolford, Silvia Azzali. Silvia, I'd like to congratulate you on the work you have done on Wolford and let you know that we're as excited about the future of Wolford. To you, Silvia.

Thank you, Rocco. And sorry, guys, my line dropped. I was so excited for David's words. Thank you, David, for your kind words and sorry for the trouble. So I'm happy today to report that despite ongoing political and economic challenges, we were able to grow revenue and improve profitability. At Wolford, we focus on investment in effective marketing activities, on trend designer collaboration as well as Wolford new focus and elevated product proposition of iconic styles and smart seasonal assortment. I'm happy to say that we are in line with our plans. We are taking the right path and results are highlighting that as previously announced also by David. As you all know, the challenge to our profitability last year was mainly the many legacy issue that affected our results. After only 6 months, I am really proud to say that results are now there with plus EUR 5 million of EBIT improvement, almost EUR 1 million every month of improvement, which is really massive. Our homework was intense and touched several areas like gross profit improvement, OpEx optimization and staff cost. Furthermore, structural changes to the company including the restructuring of supply chain with our new product strategy is creating more focus on our iconic styles. Lastly, the review of our product offering has positively impacted our gross profit while allowing us to significantly reduce our OpEx and stopping the onetime expenses we incurred last year while starting our restructuring journey. Regarding our team, our staff costs are very much under control and were slightly reduced compared to last year despite the 10% mandatory increase from the Austrian government to mitigate inflation effects. In April we onboarded our new COO, who is doing a great job in restructuring our supply chain. The effect have not fully impacted our results, but more will come in H2 in terms of company decomplex, additional cost saving while was really needed at Wolford as we own our manufacturing. That's the reason we are known for our quality and excellence. With that said, I'm happy to say that the restructuring was an initiative for what we needed to change and was not just a cost cutting exercise. As such, we continue and even increased our investment on brand and IT to be able to support and speed up even more our transformation. On the brand side, let me mention that the appointment of Nao Takekoshi is supporting our top line strategy, which show preorders growing double digits. We were present at the Milan Fashion Week for the first time ever with our iconography exhibition to launch the Grace Jone's campaign, campaign that has been highlighted as the best one of Fall/Winter '23 by L. Also, The W Lab is progressing successfully. In May we did our new #21 collaboration, which was perceived extremely well thanks to the creative vision of Alessandro Dell'Acqua leisure dress. The next collaboration was launched yesterday with Jonathan Simkhai, a young well-known American designer who is well-known out also in Europe, by the way. He owns the contemporary floor of U.S. department stores. The growth of the first half is mainly organic so very healthy. But let me mention 2 openings of which we are proud of. A pop-up in the heart of East Hampton where visibility is growing during American summer and the reopening of our IFC store in Hong Kong, which used to be one of our best store in the world. We also continue to promote our athleisure collection that is called The W and we launched The W Club event around the world and we were the sponsor of the Yoga Day on the 21st of June, that is the day of the Equinox, with an online session in Asia, U.S. and Europe. As I am so excited, let me also unveil you a super project that will be soon launched. This project is called the Ultimate Leggings project. Thanks to the creative vision of Nao and thanks to the innovation ability of our production, we will launch a leggings program that will surprise everyone because fitting and comfort will meet aesthetic and enable leggings to become a master garment for every woman embracing body diversity as beauty and strength for every woman. You have to stay tuned on that because this is going to be really, really big. Lastly, it is also very important to mention our IT investment. We will launch our new web shop at the end of September after 18 months of development with new products in age and also new user experience. With it, I am sure our digital sales will grow even faster. And following that, in January 2024 we will launch our new omnichannel platform that will fill our last gap to really take the speed. As you can see, 2023 is really the year of Wolford as so many things we have fixed and so many additional initiatives will be completed in H2 to give us the bright future we deserve. Thank you for the chance to speak now and I will turn it back to David.

Thank you, Silvia. Okay. Moving to Page 20. Sergio Rossi with its first full comparable period saw tremendous revenue growth of 22.4% improving to EUR 33 million compared to EUR 27 million in the same period. Sergio Rossi saw strong growth across all regions. Most notably, I'm pleased with the consistent growth in Greater China at 20.9% as well as the progress we've made in North America growing at 31.5%. EMEA continued to be a stronghold for Sergio Rossi with 29.7% growth driven mainly by the local demand. From a channel perspective, Sergio Rossi had significant growth at its DTC channel of 15% with a particularly strong recovery in Greater China at 45.6% growth. Wholesale revenue increased 31.3% from increase in order particularly for third-party production. Turning to profitability. Gross profit increased from EUR 15 million to EUR 17 million while margin was a bit lower going from 54.9% to 51.9% due to the increase in wholesale, which I mentioned includes B2B manufacturing. Excluding the manufacturing business, gross profit margin increased in all of the channels in the first half. Contribution profit margin increased significantly over 400 basis points from 13.4% to 17.5% with the profit increasing over EUR 2 million from EUR 3.6 million to EUR 5.8 million from increased operating leverage. Next I'd like to discuss St. John so please turn to Page 21. St. John's saw another solid performance with revenue increasing from EUR 42 million to EUR 47 million, a growth of 11.3%. St. John performed well despite inflationary and other economic challenges in the U.S. Most notably, St. John saw a large boost in Greater China with improved uptake in its reinvented mix and match product lines and the region outside North America grew a combined 81.7%. St. John continued to focus on strategic transformation of its DTC channel, which grew by 23.8%. The brand also improved its wholesale network at the same time resulting in gross profit growing from EUR 26 million to EUR 29 million with the margin improving from 61.4% to 62.3%. This increase was primarily driven by higher DTC revenue and a new wholesale model with one of his clients, which raised the core sale gross margin higher. Contribution profit margin also grew by 50 basis points increasing profit by approximately EUR 700,000. St. John continues to embody our strategy of integration and collaboration. St. John's management team has made significant progress on its OpEx and working capital efficiency and it has shown in their results. As I mentioned earlier, St. John's OpEx initiatives will be completed in the second half including upgrading the supply chain and rationalizing manufacturing. The transition from a manufacturing based business model to a brand company has set the foundation for accelerated growth. And so I'm looking forward to a solid second half especially with the U.S. economy looking better. Turning to Page 22. I'd like to discuss Caruso's results. Caruso had a strong half continuing to leverage its 2022 success in its B2B Maisons business, which grew 33.6% on a like-for-like basis as well as from its own Caruso brand, which also showed strong growth. Total revenue was EUR 20 million compared to EUR 15 million in the same prior period representing a growth of 33.6%. Caruso continued to capitalize on acquired luxury trend with its B2B Maisons manufacturing clients in Europe, a stronghold growing by 42.9%. The brand is expecting continued growth thanks to a strong response to its new Caruso collection as well as positive business management in the Maisons. Gross profit grew from EUR 4 million to EUR 5 million and the contribution profit follows suit going from EUR 3 million to EUR 4 million. Gross profit margin increased from 25% to 26.3% and the contribution profit margin increased from 20.5% to 22%. At this point, I would like to turn it back to Joann to provide some final remarks.

Thank you, David. To close our results call, I would like to highlight some key takeaways. First of all, we faced some challenges in the first half of 2023, but we remained resilient. We continued to drive growth and improve margins. Secondly, the creative transitions we undertook at Lanvin in the first half impacted the results. However, it also set us up for a strong future. Thirdly, the positive reception of our creative leverage at Lanvin and Wolford give us confidence that we are on the right track. For the rest of the brands; Wolford, Sergio Rossi, St. John and Caruso; all made significant progress and grew by 14.7%. Wolford in particular is an example of the strategic direction that we are taking on our path to profitability and the progress they have made is validation of our direction. Much of the lab work is complete to begin accelerating top line growth and capitalize on our operating leverage and we have made additional investment in the first half to support that growth. We are seeing stronger trends in Great China region and plan to capitalize on the momentum. We also remain optimistic in the North American market for the remainder of the year. Finally, I would like to conclude by saying that we are excited for the remainder of the year. We have a lot of [indiscernible] to not only increase our brand equity, but also drive our top line profitability. On behalf of the entire management team, thank you for listening to this presentation.

[Operator Instructions] And today's first question comes from Tracy Kogan with Citigroup.

I think you mentioned that you see trends at Lanvin improving in the second half and was wondering what early reads you might have on that? And then I had a follow-up.

Sure. I think we are definitely planning a lot for the second half. As I mentioned, the first half being a very transitional first half for Lanvin's creative direction. I would probably invite Sid to give a little bit more comment on what we are planning or some of the trends that we see at least for the first few months into the second half. For example the leather good products that we're planning on, the creative direction that we will be making a decision on that for the few months and it's also the future collaboration, right, which is a big kind of a testimony for the second half, which will be launched in kind of the later part of 2023. Sid, you want to chime in a little bit on this?

I'm sorry, Mr. Chan, looks like we're not getting any audio for Mr. Shukla's line.

Okay. No problem. I think, Tracy, you had a follow-up, right?

Yes, sure. I guess on the CapEx line, it looks like it had increased significantly in the first half versus last year and I was just wondering if you could go over some of the big investments you've been making and kind of what the timeline is on those when you might expect to see the benefits from those investments?

Yes. Our CapEx strategy is still relatively consistent. In 2022, as we mentioned, we're going to see over 80% of the CapEx spend is really baked into the store expansion. I believe we have opened across 5 brands. Obviously we have a lot of closure to keep rationalizing our stores. But I think we have over 15, 20 stores in the first half, those are majority of our CapEx spend. As you can allude from Silvia's kind of comments as well, IT expansion is also one of our key kind of a contribution factor. We are making quite a bit of investment whether building a new site or some of the back-end IT infrastructure. So those are 2 areas that we're going to continue to make investment for the future growth on the CapEx. Hope it helps.

You said you opened 15 to 20 stores growth I guess so you maybe closed a bunch more. What is the cost of the buildout for your stores these days and has that been coming down as you've been refining the model?

Sorry, I'm incorrect. I think we opened total about 12 stores total in the first half and then we closed about 21 stores. So we have net loss of about 9 stores, right? And then the cost is very dependent. I think Lanvin generally speaking is a little bit more expensive. We haven't disclosed like -- kind of naturally speaking will be more expensive. The Wolford store historically has been a little bit smaller, but we are changing the -- if you look at the Hong Kong IFC stores that we have a new model that Wolford want to get into with athleisure products that were coming on. So we're rebranding kind of restructuring the Wolford a little bit. So in terms of square footage, we've a little bit bigger than a typical Wolford kind of historical hosiery stores. The Lanvin store would be very on par with a typical luxury house, but I think we are focusing on 100 to 150 square meter compared to a much bigger space for other competitors.

[Operator Instructions] Today's next question comes from [ Lee Wei Hu ] with CICC.

Congrats on the improvement of results. And Silvia, I can confirm that your Wolford store in IFC Hong Kong is very successful. Our office is right above that. I've got 2 questions. The first one is on the future artistic director at Lanvin. I understand he or she will be working with Lanvin Lab. Is it more of a [indiscernible] collaboration model or is it more like the Gucci model where the artistic director has a say on the fashion direction, but the lab will also have mostly on the merchandising? I'm just trying to understand the working relationship with the 2 at Lanvin in the future. That's my first question.

Sure. I can answer and I'm not sure whether Sid can hear us now. Anyway so in our previous presentation, we say that we still have -- we are now in the process of searching our creative director. So overall speaking, we have created overall in charge for future. I mean the so-called future collaboration with brand winning reference is our test Director for Lanvin Lab. That's in parallel with the ready-to-wear and accessory lines, which is a special program to really diversify our product like a road map to attract the young people in the [indiscernible] generation. So we have 3 verticals. Lanvin women as a runway and perception. This is still our main collection. And we also will have a dedicated division for leather products and accessories. In the Lanvin Lab, which the first like future [ directories ], we actually will see the experimental space for our new partnership when we launch and push out these capsules, we talk to the young customers. So maybe Sid, if you have anything you want to add to say to [ Lee Wei ].

Sure. Thank you for the question. And yes, I would quickly echo what Joann said. We have clearly sort of identified these 3 verticals as a way to reorganize the studio and the creative approach, but also because we recognize that Lanvin is not a mono product brand. It's a multi-product, multi-category brand as well as it having relevance across demographics. And so I think Lanvin Lab as it's an experimental stage allows us to give freedom to different voices, but it also fundamentally acknowledges Lanvin's place as a cultural brand within the luxury landscape.

Got it. It's very helpful. And my second question is on Sergio Rossi, one of our best performing brands. There are some rumors that Gianvito Rossi is up for sale and some luxury conglomerate might be interested in acquiring Gianvito Rossi. I'm trying to get an understanding of our current relationship with Gianvito Rossi and are we worried about the cannibalization once the brand has a new owner?

Yes. I think that is not a rumor. It's a confirmed news that Richmond Group has acquired shares of Gianvito Rossi. Nothing has changed in current business environment that Sergio Rossi still carries its heritage. We talked to like elegant young women who is in love with high heel shoes and also we want to really something to become trendy and talking to young generation by push out our competitor shoes like SR1 or sneakers. But again elegance is the core. So in the second half year, we are preparing for Lanvin, our Mermaid capsule, which is back to kind of the core. So there's not much changes and there's also no so-called collaboration between these 2 brands are planning now.

Got it. Because apparently part of the success of Gianvito Rossi's heritage is from his father and I was just trying to see if any noncompete or any [indiscernible] we have in place to protect the very good momentum of Sergio Rossi. Anything to share or any strategy you might have would be very helpful.

I think we just -- I think difficult for us to comment on other brands. I think we believe we have 6,000 pairs in the heart of the factory, which is in Sergio Rossi Milan. So we remain to be pretty focused on really modernizing the 6,000 archives really, there's a lot of opportunity there. Our store base in Asia and North America is still very much wide open. You can see from the number, we have very good success in the Greater China for the first half. For North America, we just enter very, very touching really the surface of the growth. We started with online with Shopify kind of platform we built last year and we see good growth on the digital front. However, the second half or this year we're planning a much bigger presence in the North America for Sergio Rossi. So yes, we still remain very focused and trying to bring our DNA and modernizing DNA and capitalizing in these kind of low-hanging fruit, I would say, in these 2 regions, right?

Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Okay. So if there's no other questions, I want to thank everyone online that spent time with us. But if any further questions, feel free to reach out to Lanvin Group IR team and PR team. So thanks for your time again. Have a good day.

Thank you very much, guys.

Thank you, everyone. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.