Maisons du Monde S.A. (ZMM.F) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Maisons du Monde 2021 Annual Results Conference Call. [Operator Instructions] We would like also to inform you that this event is also available live with cycle synchronized slide show. During this conference call, statements could be made that constitute forward-looking statements based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecast, or implied by such forward-looking statements. All listeners are reminded to read the forward-looking disclaimer on Slide 2. For a more complete list and description of such risks and uncertainties, please refer to Maisons du Monde's filings with the French Autorite des marches financiers. I would like to hand the call over to Clemence Mignot-Dupeyrot, Head of Investor Relations. Please go ahead, Madam.

Good morning to all of you, and welcome to Maisons du Monde's Full Year 2021 Results Call. I am Clemence Mignot-Dupeyrot, Head of Investor Relations, and I'm delighted to be with you today. I am with our CEO, Julie Walbaum; and our CFO, Regis Massuyeau, who will be making today's presentation. It will be followed by a Q&A session. You have no doubt seeing the press release we issued this morning. The conference call slides are available on our website. This call is also being webcast, and a replay will be available on our website later today. All listeners are reminded to read the forward-looking disclaimer on Slide 2. I will now turn the call over to Julie Walbaum.

Thank you, Clemence, and a very warm welcome to Maisons du Monde. We are happy to have you with us. And I'd like to take this opportunity also to thank [ Chris Welton ] for his contribution over the past couple of years and to wish him well in his future projects as he prepares to resettle. Our agenda for today is on Slide 3. I will begin with an overview of the key business and strategic highlights for 2021. Then Regis will take you through our numbers, and I will return to discuss our priorities and outlook before opening the floor to your questions. So let us begin on Slide 5, with the year's highlights. Well, in short 2021 was an excellent year for Maisons du Monde despite the challenging context. We operated in a complex environment with persistent headwinds from the COVID crisis. On one hand, lockdown and restrictive measures continued in several markets. In Germany, for instance, our stores were closed for total of 5 months out of 12. Supply chain also continued to be materially disrupted. That said, thanks to our strong model and the focus and commitment of all our teams, we made major advances on our strategy and business priorities. On strategy, let me mention 3 highlights. First, we formalized our company purpose, Raison d'etre that captures Maisons du Monde history, its culture, and also its aspiration. It is inspiring everyone to open up to the world so that we create together unique, heartful, and sustainable places to live. To us, this purpose means far more than mere words. All of the company's roadmaps have been aligned around these management projects. Investments have been committed and bold choices have been made, all with a long-term view. Indeed, we firmly believe that combining performance and sustainability is the way to go to best operate in the world of tomorrow. Also, we held in last November, our Capital Markets Day, during which we reaffirmed our unique inspirational yet affordable positioning powered by our distinctive omnichannel model. We also shared our vision to become the most desirable and sustainable home and living brand in Europe as well as our ambition to create sustainable value for all our stakeholders through a focused and return-oriented approach. We presented our medium-term financial targets and also our ESG goal, which we will remind you up later in the presentation. In addition, we announced the divestment of Modani in the US, reducing our stake to 15% from 70% by selling a controlling stake to optimal Investment Group. This decision is fully in line with the strategic review that we launched last March and reflects our decision to focus our attention on Maisons du Monde's existing positions in Europe, where we see better value creation opportunities. With our remaining 15% stake, we will be able to continue to observe evolutions in the US market and also benefit from future value creation as Modani continues its growth. Concerning operations, I will mention 4 key highlights that will not roll on as I will develop them in the coming slides. They are improved brand awareness, strong customer dynamics, increased digitization, and international expansion. In terms of financials, again, I will not steal Regis' thunder as he will be presenting our financials shortly. But the key message here is that our strong top line growth and rebound in profitability translates into record-high earnings per share and a proposed dividend that would also be the highest ever paid out by Maisons du Monde, if approved by our shareholders at the upcoming general assembly. On Slide 6, we look at some operational highlights that demonstrate the progress we made on some of the key strategic pillars that we presented at our CMD. We presented our ambition of strengthening our direct-to-consumer love brands, and we are clearly making headway. The 2021 BBA survey showed that we were among the top 5 harmonizing brands in terms of unaided awareness in 3 out of 4 largest markets. Also, our number of active customers was up 22% in 2021 to more than 7.5 million. We said we would develop our omnichannel model, and that's happening as well. Digitally enabled sales accounted for more than half of our total sales, with 33% coming from online and 20% from click-in-store. Our marketplace kept ramping up and GMV reached EUR 61 million in 2021 or 23% of total online GMV in France. And as we grow, we are also accelerating our Pan-European development with international sales up 19% in the year and 18 gross store openings in a total of 21 made outside France. I will return to all these aspects later in the presentation. Slide 7 focuses in aggressive detail on how this translated in terms of financial performance. And as you can see, our 2021 metrics were at the top end of our upgraded guidance for the year or even beyond. Concerning top line, we guided to growth in the low teens, and we delivered 15% excluding Modani. On EBIT margin, our guidance was between 9% and 9.5%, and we delivered the top end of the range that is 9.5%. And on free cash flow, we said we would deliver materially above 2020 level, and we did more than that with cash flow up 69% to EUR 90 million. This translated into record-high earnings per share of EUR 1.52 excluding Modani sale, representing a 58% increase compared to 2020. And on the back of this strong performance, we will propose to our shareholders at our AGM in June to approve a record dividend of EUR 0.55 per share. Well, all in all, it is a year of clear rebound for Maisons du Monde and this set of financials illustrates the strength of our omnichannel growth model and the capabilities of our teams to navigate in a complex and moving context. Now let's zoom in on some operational highlights, beginning with our brand on Slide 8. Our direct-to-consumer brand is a key asset and in 2021, we made further strides in strengthening what already is the love brand, one that is part of consumers everyday life and one that is differentiated in the home and living space by its creativity, inspiration, and engagement. Concerning creativity, we are in our second year of our capsule collections in collaboration with inspiring designs. And this slide mentions too. For 25th anniversary, we teamed up with [indiscernible] to present the capsule collection of one of a kind of cycled products whose profits were entirely donated to the [indiscernible] that combat violence against women. And next in line coming next frame is Lisa Gachet, the founder of the Make my Lemonade fashion brand who has designed a collection of desirable and sustainable objects such as lamps, vases, dishes, and textiles. They will be available as of May on our website and in select stores. All the profit of this capsule collection will go to [indiscernible] an NGO that fights for gender equality. We are also working and developing new innovative and responsible fabrics as we did last year with recycled [indiscernible] for outdoor collection. Inspiration was nurtured by our interior design services. Rhinov achieved another year of strong growth with a customer base up by 50% year-on-year to reach 30,000 customers and sales were up 60% to reach EUR 4.5 million in services stores. Engagement came from our stronger bonds with our communities and reinforces profile. On social media spot, our number of followers in Instagram rose another 17% to reach more than 5 million across Europe and over 280,000 stories we share, that is nearly 800 every day. As for CSR, Maisons du Monde was featured among the top 10 preferred brands in France across all categories in the first OC&C CSR-oriented ranking. The key pillar of our distinctive business model is our omnichannel strategy. And on Slide 9, we focus on how we leveraged our digital performance. We continue to grow our online sales in 2021 with another year of double-digit growth at plus 15%. Over 2 years, our online sales are up 46%. And if you look at online GMV, while it grew by 20% in 2021. In terms of products sold, we saw strong sales of outdoor, sofas and frame. Online performance was very different between H1 and H2, largely due to the comparable base. H1 benefited from easier comps as the pandemic-related ramp-up of digital was only just starting, and online sales were up 45% in H1. H2 had a much higher comparable base, so sales were down 16% year-on-year as online traffic normalized and sales were more balanced between stores and online. But what's important is the continued growth in the year on an already high base, demonstrating that our onshore model keeps getting traction. This strong omnichannel model strategy does show results on customer side as well. Our active customer base grew by another 22% to reach more than 7.5 million and the number of new customers grew by 30%. Also illustrating the ramp-up of our approach, click-in-store GMV was up 13% and Click-and-Collect GMV has almost doubled over the year. Finally, we have launched new delivery options to meet customer needs, including 48 and 24 hour home delivery for our click-and-collect and also pick-up points for large items. Another key part of our online offer is our current marketplace and on Slide 10, we show that it's rapidly ramping up and rising in popularity in the home decoration space. GMV in 2021 reached EUR 61 million, representing 24% of French online GMV. GMV in December 2021 was up 42% compared to December 2020, the marketplace is first full month of activity. Being an important part of this ominchannel strategy, we have started to roll out our marketplace in stores where customers can access it through dedicated tablets. At year-end, this was possible in 85 of our French stores. The development of our marketplace is underpinned by an ever-growing catalog an important addition last year with our key categories. Overall, we more than doubled our offering. We added 140 vendors, bringing the total to over 300. And at the end of the year, the marketplace offered over 760 brands and nearly 100,000 products from basically 340,000, 1 year ago. The marketplace is fully integrated to the Maisons du Monde ecosystem and offers customers a seamless experience. As a result, customer satisfaction remains consistently high with a rate of 4 out of 5. We pay close attention to maintaining this rate at a level comparable to Maisons du Monde and it is key for our brand image as well as customer experience and loyalty. and all this turns into higher sales. Indeed, we show that the Maisons du Monde customer will buy in the marketplace spend on average more than 50% more than Maisons du Monde-only customer, whether that is on Maisons du Monde or market less products. The value retention rate is also extremely high at 98%, and our partners clearly see the benefits of our being under Maisons du Monde brand. For our top 20 vendors, 25% of their sales already comes from marketplace after only 1 year of preparation. The other break in our omnichannel strategy is our total stores and you can see on Slide 11 that we ended the year with 357 stores in Europe, 5 more than 1 year earlier. Our fourth quarter was particularly active as we opened 8 new stores, 2 each in Italy, Portugal and Spain and 1 each in Belgium and Switzerland. During the same period, the group closed 1 store in France. Taking a full year view, openings in 2021 were again concentrated in the markets out at France. On a net basis, Maisons du Monde closed 9 stores in France and opened 14 in the rest of Europe. To go into more detail by geography. In France, our footprint optimization strategy led us to close 12 stores and to open 3. In the rest of Europe, we opened 18 stores and closed only 4. Our openings included our first store in Austria, bringing the number of markets in which we operate as a omnichannel player to 9 countries. Our total store network commercial area reached 433,000 square meters at the end of the year, up 13,000 square meters or 3% compared to the year before. Slide 12 focuses on our Pan-European expansion. The pie chart on the left show that France still contributes to more than half of our sales, but the share of international is growing consistently from 43% in 2019 to 46% in 2021. Nearly half of this growth in international markets came from online. We are seeing a strong performance in mature markets with Spain, Italy and Belgium growing at around 20% year-on-year. At the same time, new markets are ramping up at a fast pace. In Germany, we did show sales growth despite the fact that stores were closed for nearly half the year as digital more than offset the lost store sales. Compared to 2019, growth in Germany exceeded the 20%. In Portugal, sales almost doubled with 2 new stores opened in Q4. I'll wrap up my opening section on Slide 13 with a look at the further progress we made on ESG in 2021. On the environmental front, our sustainable product offering is developing rapidly, and products made from sustainable wood were up 21%, while those meant from sustainable textile were up by an even stronger 36%. We continued to advance on energy efficiency as 97% of our stores are now powered by renewable energy and all our French stores cut ISO 50001 certified. And we're also making major headway on waste reduction and green logistics. At our repair center, the number of repair or recondition products was up 85%. In total, more than 50,000 products were put back in sellable conditions as part of our secular economy approach. As you know, we are committed to reducing our greenhouse emissions, not just in our own operations, but at our partners as well, what is known as Scope 3. In the spirit, we did take part in the FRET 21 initiative that aims at reducing carrier emissions. And we're also one of the first 15 e-merchants in France to sign last summer, the French e-commerce federation FEVAD, responsible e-commerce charter that is committed to greener logistics. On the social front, our first responsibility is towards our employees in order to reward them for the exceptional commitment and also support their purchasing power in the current inflationary contacts. We have decided to grab an exceptional 500-year bonus to all group employees in Europe, whether they have been working full time or part-time with us. We have also included our [indiscernible] in this initiative. The idea is to be particularly supportive of our small wage colleagues, again, in line with our company purpose. We also launched important diversity and inclusion initiatives. We are signatories of Entreprises pour la Cite diversity charter that aims at fighting discrimination. And we also launched a mentoring program for our leadership group to help young people coming from underprivileged backgrounds to access to workforce. Our efforts have been recognized by a number of key players in the sustainability world, including MSCI, which ranks us #1 in home retail, Sustainalytics and Vigeo Eiris, both of which rank in the top 5% or better. With that, let me hand over to Regis for the financial review.

Merci, thank you, Julie. Good morning, everyone. Happy to be with you again this morning. I will start on Slide 15, with our Classic 2021 sales, which posted strong double-digit growth despite the disruptive environment that Julie has just described. This slide shows the building blocks of the growth. With the disposal of Modani, we are restating our 2020 sales from the EUR 50 million contribution from Modani to create a comparable base. So the starting point is 2020 full year sales of EUR 1135 billion. Like-for-like growth was up in double digits at more than 13%, adding EUR 148 million in sales. Development added another EUR 23 million, split roughly evenly between the contribution of stores opened in 2020 for $11 million and stores opened in 2021 for EUR 12 million. As we have already announced at the end of Jan, this brings us to our full year sales of a little more than EUR 1.3 billion and the 15% reported growth was up above our guidance of growth in the low teens. Let's go into detail, Slide 16. On this slide, we break down our sales by quarter over 2-year period, sorry. Slight difference with what you have seen before as the figures shown here have been restated for Modani. Sales were up in every quarter of 2021 compared to the same quarter of 2019, with double-digit growth in the first 3 quarters and slower growth in Q4, which faced a more challenging comparable base. Overall, we are up in double digits over the pre-pandemic period with our 2021 full year sales, up 11% versus 2019, of which 6% like-for-like. If you look at our sales performance in greater detail, you will see that growth was actually and even over the year. 2021 was really a tale of 2 halves. As you recall, in the first half, we posted sales of EUR 634 million, with very strong growth of 35% versus H1 2020 as we, of course, were cycling over a low base due to the pandemic. In the second half of 2021, our sales of EUR 672 million were broadly stable versus the same period in the previous year as we faced headwinds from low product availability, notably in furniture. During this period, store sales grew 8% and benefited from a favorable comparable base in the fourth quarter as French stores were closed in November 2020. Online sales, on the other hand, declined 16% to EUR 170 million and represented at the end, 25% of our total second half sales. This reflects an exceptionally high comparable base and a return to more normalized development of online traffic. Despite this web traffic slowdown, we posted a positive Christmas season, proving us right in the choices we had to make earlier in the year regarding supply. We will come back to this later. Slide 17, we take a closer look at our sales performance by categories, channels, and geographies. And you see that we can be very satisfied with our performance as it shows double-digit growth across the board. Let's start with category. Furniture sales were up 11%, reflecting the strength of our collections and strong sales of products and in inventory, notably outdoor and so forth. However, the category was penalized in the second half by limited availability and longer delivery times. Compared to 2019, furniture sales were up 4%. Let's keep in mind, supply was already challenging in 2020, and we had to prioritize shipments in the second half, which we did in favor of decoration to secure our Q4, limiting already growth potential for furniture. For decorations, sales, which carry higher margin were up by an even higher 18%. Demand was strong in this category, and Maisons du Monde performed well, thanks to rigorous and agile management of sourcing throughout the year. This notably enabled us to secure the Christmas season, which is, as I just said, a strong season for decoration items. On a 2-year tax, sales were up 16%, with a CAGR over the period of 8%. By channel, store sales were up 16%. This growth, of course, reflects the fact that stores were opened more in 2021 than in 2020, 85% of the time versus 75 in 2020. Compared to '19, stores achieved broadly flat sales despite several weeks of closure of our like-for-like stores this year in 2021 and also smaller sales contribution from non-like-for-like as we had a net opening of only 1 store over the period 2020-2021 compared to a net opening of 43 over 2018 and 2019. This shows the increasing relevance of our store model. Online sales showed a healthy growth of 13%. The growth rate slowed in 2021 as we see -- saw a rebalancing towards more in-store activity. Over 2 years, online sales are up by a very strong 46% and they are stabilizing at far higher levels than pre-pandemic, 33% of total sales compared to 25% in 2019. Over 2 years, online sales posted a strong 21% CAGR. On channels, I think it's worth remembering that we estimate the COVID-19-related restrictive measures in the year reduced total sales by EUR 45 million, with store sales down 60%, partly offset by a EUR 50 million gain in online sales, all of this took place in the first half. Finally, by geography, you see that sales in France were up 12% versus 2020, 4% versus 2021 -- 2019, sorry, while international sales were up 19% in both periods. As Julie mentioned, this reflects the Pan-European expansion as we focused our growth mostly on market outside of France, while actively managing our store network in our own market to relocate to fewer but better locations. To put it in numbers, the number of stores was reduced by 14 in France between '19 and '21, while the number of stores in the rest of Europe increased by 15%. On Slide 18, let's take a closer look at the category mix ratio. This graph shows the evolution of the furniture share of sales. We can observe the low level of 2021 at 41% and the one-off recurring low H2 at 35%. Taking a long-term view, we see that until 2019 Furniture was gaining in the product mix every year, notably as a result of online penetration. The structural trend reversed in 2020 and again in 2021 due to COVID-related disruptions on supply chain. So 2021, number illustrates 2 realities. First, our furnitures have been penalized by the manufacturing and supply chain constraints. Second, the fact that we are not yet at year-end at our target level of inventory for this category. This reality has been amplified by our agile and pragmatic approach to support decoration supply at year-end to support the Christmas season. As we enter 2022, we are determined to keep rebuilding our inventories, especially on furniture. Realistically, this will take a few more quarters. I take this opportunity to post and give some highlights on the freight situation that has been particularly tense and difficult since the end of 2020. Against that backdrop, we have decided to specific actions, reviewing the overall strategy with other forward orders. We have developed a new approach, mixing 1 year and longer-term contracts and developing new routes. Negotiations for 2022 is now over and pricing for 22 secured. However, capacity is still not back to normal, and we expect disruptions to continue throughout 2022. Let's move to EBIT on Slide 19, which progressed strongly to reach a record high of nearly EUR 124 million, up 39% or EUR 35 million in 2021. It's an equivalent expansion of 160 basis points to 9.5%, returning to a high level of profitability. The bridge on the slide shows you the different binding blocks of this improvement. Let's start with gross margin. Gross margin was stable, thanks to good management of supplier contracts in the context of strong inflation, a low level of promotion, a favorable mix effect of decoration margin, a favorable effect driven by decoration with a higher mix on margin and an effect positive of the marketplace. Overall, as just mentioned, freight inflation and no significant impact on 2021 as its effects really began towards the end of the year and will impact gross margin in 2022. On logistics, we gained roughly 240 basis points, thanks to strong operational efficiencies in transport and cost optimization plans. In 2021, we benefited also from an over-sale effect as our better sales performance allowed us to dilute fixed costs. Finally, 2020, as you remember, has been impacted not only by lockdowns but also by strike with some material one-off costs that did not repeat in 2021, creating a favorable year-on-year guidance. On SG&A, store operating and central costs were up 90% year-on-year, reflecting 21 gross store openings versus 9% in 2020 and the absence of governmental COVID-related subsidies unlike 2020. To that extent, 2020, we know was not a normative year for SG&A as partial unemployment schemes and discounts on rental artificially improve the base. Another important point in this bridge is advertising. As explained during our recent Capital Market Day, we strongly believe in the necessity to invest to develop web but brand equity and new initiatives as well. Advertising costs increased by EUR 15 million to support those initiatives around the brand, the marketplace ramp-up and overall sales growth. Compared to 2019, advertising on sales ratio increased by an average 40 to 50 basis points every year, which is very good development to support our future growth. Regarding DNA favorable effect is mainly a leverage effect considering a stable level of rent expense in parallel of top line growth of 15%. This result on EBIT is very positive in the context of significant inflation, notably on freight, it shows that we are monitoring very cautiously our bottom line with the right discipline and an efficient resource allocation approach. On Slide 20, we turn to our strong free cash flow generation, one of the major successes of the year. Free cash flow came in at EUR 90 million compared to EUR 53 million in 2020, which is an equivalent of precisely 69% decrease. The bridge on this slide shows you the different moving parts. Without any surprise, this decrease is mainly the result of the EBITDA improvement, illustrating the strength of our profitable growth model that I just described before. Working capital requirements decreased by EUR 8 million due to higher level of inventory compared to 2020, partly offset by lower accounts receivable and changes in payables. Working capital net sales ratio improved to 1.1% from the 2.1% ratio in 2020. As commented before, the level of inventory is, however, not yet optimal and remains a key business priority. To that extent, we consider 2022 inventory replenishment that will affect free cash flow generation. CapEx finally was up EUR 2 million due to higher store development investment, while the CapEx to net sales ratio stood at 3.9%, down from 4.1% 1 year earlier. As mentioned during the Capital Market Day, CapEx will follow a different trend and will represent a peak in 2022 in our CapEx journey as we reopen the first phase of our new logistics platform. This project per se, will represent an extra EUR 15 million CapEx. A word to finish on debt and leverage. Thanks to our strong liquidity, in 2021, the group reimbursed EUR 50 million term loan associated to its senior credit facility as well as you remember, as the EUR 150 million French state-guaranteed loan. Taking into account its cash and cash equivalents position of EUR 163 million, Maisons du Monde debt position was EUR 60 million at December 2021. This translates into a leverage ratio decreasing to 0.36 times. Slide 2021, I will end the start of the presentation with EPS and the dividend. As Julie mentioned, our EPS reached a record high level in 2021, supported by our strong activity. Excluding Modani, it stood at EUR 1.52, i.e., plus 58% versus 2020 and a 15% increase versus 2019. On a reported basis, it reached EUR 1.72 as the divestment of Modani adds EUR 0.21 to our EPS. You can observe a slightly positive effect on the financial results, mainly due to interest charges effect as we decreased our debt. Regarding tax, our ETR lands at around 28% and benefits from the small reversal of a tax provision recorded in 2020. Again, this sharp EPS evolution, plus 58% versus 2020 and 15% versus 2019 is showing the conversion of a profitable growth agenda. As a result of this strong performance, we will be submitting our dividend to our Annual General Meeting on May 31 for an amount of EUR 0.50, representing 45% increase compared to 2020 in translating to a payout ratio of 36% of EPS, excluding Modani. It is for us another evidence of our commitment to return value to our shareholders. With that, let me hand back to Julie.

Thank you, Regis. Let's now look at our priorities and outlook for the year. As you see on Slide 23, I would say that our business priorities are largely the continuation of what we focused on in 2021 with a couple of additional points. In terms of commercial activity, we intend to keep strengthening our brand, building on the strong attributes and the achievement of 2021, while also continuing to improve customer experience. For example, we will develop new capital collections for designers and further develop our communication with our consumer communities. We will also continue to strengthen our omnichannel model through both levers, continued expansions of Southern Europe with 0 to 5 net openings all outside France and the further development of our digital footprint, notably through the deployment of the marketplace in all our stores and also the launch of another European country online. In terms of supply, we will work at replenishing inventories gradually in the complex price in raw material sourcing environment with target a normalized level of inventory by year-end. We'll give you updates on this point as visibility improves. Furthermore, we will open our new logistics sensor in Northern France, starting with the first half, manual configuration before launching the automation phase. Regarding our ESG agenda, we will be deploying a Good is Beautiful Label, while also improving product possibility and further enhancing supply governance. I will have the opportunity to present Good is Beautiful in greater detail later in the year. But in a nutshell, it is a brand movement aimed at embedding sustainable development in our strategy and making this commitment more visible with the ambition that our customers and partners, including marketplace sellers with join in. Before giving you our outlook for the year, let me update on our current trading on Slide 24. We continue to see disruption in our supply chain with production in Asia and freight remaining complex and tensions net worth by substantial raw material custody. Moreover, even if we are seeing signs of easing in Europe, which is good news, we are not over the pandemic yet, and we are closely monitoring the health situation probably in Asia. Furthermore, as you know, we are operating in a more inflationary environment globally, which may impact assumption in general and Home & Living in particular, after a period of heavy household equipment at the peak of the pandemic. While it goes without saying that the war in Ukraine has geopolitical uncertainty to the macroeconomic challenges and may create further disruptions and inflationary pressure with a possible impact on demand. All that being said, there are also positive objective factors that will support supply and growth in 2022, improved product availability and ease of comps in H2, for example. To that point, let me shed some light on how the year may look like. Well, again, 2022 will be a year of 2 halves. As expected, we see a slow commercial start to 2022 for the external conditions describable and also a record high comparable base, notably for online, which has grown by 77% in Q1 last year and another 25% in Q2. All of this will translate into slightly negative Q1 and a broadly flat H1. H2 will benefit from easier comps and from a progressive inventory replenishment, which will both lead to sales acceleration. To date, considering the current enviromnent trend and is yet to be determined impact on demand in our operating countries, it is hard to say to what extent sales will accelerate, but this certainly well. Also on the positive side, we do not foresee at this stage substantial impact of this complex on product supply as we have limited exposure to East European sourcing. This leads me to our full year 2020 guidance on Slide 25. Taking into account the factors adjusted sales, we expect for 2022 positive revenue growth, the extent of which will be made more specific as visibility improves. An EBIT margin around 9% through a strict management of our costs and resource allocation as we've been doing over the last couple of years. And finally, free cash flow of EUR 65 million to EUR 75 million in the light of our inventory replenishment objective and also the investment needed for our second warehouse that will start operating by the summer. After our midterm commitment in returning value to shareholders, we also confirm our dividend payout ratio of 30% to 40%. And finally, 2022 will be a landmark year for MDM ESG journey as we will reach carbon neutrality on Scopes 1 and 2. Despite current uncertainty, we do stay fully confident in our ability to meet the medium-term guidance that we presented at our Capital Markets Day last November and which you can see again on Slide 26. We confirm all of our 2025 objectives, namely revenues of between EUR 1.8 billion to EUR 1.9 billion, and EBIT margin of around 11%. Cumulative free cash flow of more than EUR 350 million during the 2022, 2025 period, a 30% to 40% payout ratio. And finally, carbon neutrality for Scopes 1 and 2 and a 25% reduction in carbon intensity as Scope 3 level, together with a doubling of our responsible products from 20% to 40% of our total offering. So to conclude on this presentation, let me say that our 2021 performance was another illustration of our unique value proposition, which represented our Capital Markets Day, that is a direct consumer love brand, a distinctive business model that delivers high and sustainable growth and a robust financial model that drives increasing shareholder results. Thank you very much for your attention, and Regis and I are now happy to take your questions.

[Operator Instructions]

On the portal, we have the first question from Florent Tine. A question on H2 profitability. Can you give us more explanation regarding the quite low level of EBIT margin versus what you were used to, meaning EBIT margin above 13% in H2 in the past. It seems that your marketing expenses increased by 50% in H2, but we did not see any impact in the sales with flat sales in H2. Do we have to understand that in the coming years, you will have to spend more marketing expenses just to stabilize the sales?

I can take that one. Thank you for the question. I think it's important to bear in mind the overall story in 2021 vis-a-vis EBIT margin. EBIT level. First, it's really management of the gross margin. And I think it's important to flag this in the context I described and you all know vis-a-vis inflation. And I'm sure we may discuss later about 2022 gross margin evolution, but 2021 gross margin is really a key factor of the year. To what extent H2 can be explained at this level that you flagged below usual, I think indeed, there is an acceleration of marketing. You associate directly marketing investment phasing with the trend evolution of sales, marketing has not been about only what you bought during the year, but it was really as well about marketplace launch that you may not factor precisely, but will -- that has been a couple of million already in 2021. So and this marketplace investments on marketing does not translate into sales, as you know, because we just take only the contribution vis-a-vis the commission. But so it's marketplace evolution that has been a factor of marketing investments. Another element, I think, in this -- in this question of the trajectory of the margin is related a bit to a certain extent to the freight. I mentioned that freight started being a bit of an impact at year-end with limited factor, but it was really H2. And we mentioned that already when commenting the preferred high level of margin in H1 that we were expecting this inflation to start at the back end of the year. So in a nutshell, margin was a bit impacted by freight at the end of the year. Second, marketing costs indeed increased one of the element being the marketplace support.

First question on the phone comes from the line of Clement Genelot from Bryan Garnier.

I have 3 questions from my side, if I may. The first one is on Ukraine, what could be the actual impact from the war on this operational side, because if I'm right, your production sites are in Vietnam and China, and the wood now comes from Russia as well. My second question is on the gross margin in 2022. What's level of gross margin do you expect in 2022 given that now you have maybe a better view on the price increases' magnitude and timing and also on the freight costs? My third question is on the OpEx and more especially on the wages. What is the extent of wage increases would we expect in 2022? Recently indicated a 3% to 4% wage increase in its French in-store employees' wage. So, is it a magnitude that we could expect related to Maisons du Monde?

Thank you, Clement. I would take your first question and Regis will answer the other 2. Regarding the conflicts in UK, and you're perfectly right, we have very limited exposure to Europe and sourcing of raw and close to 0 to Eastern Europe and sourcing. The only manufacturing we have in Europe is around our sofas, and they are not in Ukraine or the neighboring countries. So if there is an impact that would be more on demand, given the fact that this conflict may trigger different economic sanctions that might increase the inflationary pressure which in turn might impact consumption and consumer behavior. But you're right on the supply side, the impact should be very limited. So really, the uncertainty for us is more around potential demand contraction due to overall price inflation.

On gross margin first, to your question, what is the expectation for the year, it will be a couple of big moving part, I would say. Indeed, and we mentioned that earlier, raw material inflation and freight cost increase will have the impact now in gross margin in 2022. As I said, our contracts are confirmed now with the freight forward. So we do estimate that gross margin, all in all, should decrease by 100, 150 basis points versus 2021, which is to say roughly to be around the 65% line. How does it -- does it move inside? I think -- I would mention 4 elements. Indeed, raw material and freight will have a major effect, probably will be 400 to 500 basis points. One element, as we replenish inventory will be a negative mix, which is a positive news for us in term of trajectory of business, but to the reverse of the effect of 2021. Replenishing inventory and furniture will drive probably a negative mix effect, around 50 bps. On the other side, we have some positive, indeed, pricing because we started pricing, let's say, at the back end of the year 2021, and it will have a sequential progressive effect at the time of each launch of the new collection. But, overall, over the year, it should be pricing effect around 300 basis points. I say 300 because the price per se could be higher, but we do envisage to increase the level of promotion, probably, versus a low level we had in 2021. Another positive will come from many initiatives that we have in term of efficiencies, in purchasing, in logistics, warehousing activities, that should drive some positives. So those parts should give you a better view on the trajectory from gross margin, which is again, in this context, I think a good development because we are monitoring the pricing to protect the level of demand to the extent that we -- of the overall global inflation context, and at the same time managing this inflation, which is just massive, notably on freight. To say as well in precise that this gross margin will have a 2-tier approach, probably a lower level in H1 and a higher level in H2, considering that the price effect will come in -- the pricing effect will much more come in the second part of the year. Your next question was about wages in our zone where we operate. We do see 2% to 3% in our current discussion with our internal partners and it's fully embarked in the guidance that we gave this morning with the margin around 9%. So it's really embarked and we are confident to control this to this level.

Next question we have online is from Marie-Line Fort from Societe. Could you tell us how is the current trading at the beginning of the year and also to help assist to make the phasing, would you say that H1 2022 should be between H1 2019 and H1 '21? Second question is, what was the impact of Modani divestment on your cash flow statement? Another question is in terms of M&A, given your very sound financial position, do you expect to look at potential targets and in what [ field countries ]? Last question is, how many stores do you project to open in 2022 and where?

So I will take your questions 1, 3, and 4 and Regis will answer the second one. So on the current trading, well, as we said, the consumption is soft at the moment with -- which again comes from different reasons. Overall, a global inflationary context. Latest estimates that we've been seeing forecast a 6% in the Eurozone for the year. And the recent geopolitical context doesn't help us with that. And more specifically in our category, we had an extraordinary start to the year last year. We did mention the 77% growth online, but we also had a 20% growth in at store level. So all of that indeed turns into soft consumption. And if I take just a quantitative measure for that, in February, if I take the Google searches -- the Google search volume for how many [ big words ], well, those were down 20% year-on-year, and that is across our main countries. So that is not just a French situation. Now, if I take a channel view to maybe give more specifics on the current trading, well, in terms of retail, what we see is positive traffic and we see that throughout Europe. But this is mainly due to base effect. If I -- if we recall 2021 again, we had a lot of closures in Germany and Switzerland in January and February last year. In Italy, we were closed all weekends last year, and in France we were closed in all shopping malls in February. And finally, in Spain, we were closed in all of Catalonia. So all of this means that the higher opening ratio this year makes the traffic positive. Now in terms of visits, what we see is a smaller conversion rate, but a higher basket. So basically, those who come, when they buy, they buy for more. And we see the same trends in terms of conversion rate in online. We have less people converting, but when they convert they buy for more. In terms of traffic, the picture is a bit different online. We did say that it was positive traffic in retail throughout Europe. Online, the traffic is negative out of France, again, to the base effect. But what is really good news is that it is still positive in France. And here, we see the marketplace dynamics, which again keeps having a very good trend. Actually compared to the global context, it's over-performing, and we're really seeing good results coming from the marketplace, which keeps gaining share in total of French online GMV. So for us, that's a very positive development. And this is why we've been accelerating our marketplace strategy with the finalization of the rollout in stores, but also the opening of another online country this year, just to really leverage what is currently happening. Now, to elaborate on the sequence of the guidance, well, first, let me underline the confidence we see in the model and on our ability to keep growing after a 15% growth last year. The current context is particularly volatile in European economies around inflation and impact on demand, which makes specific forecasts challenging at this time. Obviously, as visibility improves, we will be able to give more specifics. Where we can be specific is around H1, because, as I said, we do not see any specific impact on supply of the Ukraine situation. So the broadly flat H1 is something that we can forecast on. And again, that is on the back of very high comps, as H1 2021 is a plus 35% versus 2020. So it is for us, over a 2-year period, still a very good performance. And as I said, sales are expected to grow in H2. Maybe, Regis, to the second question.

Which was on Modani, right, Clemence? So thanks Marie-Line for the question. The free cash flow I presented is without discontinued activities. So you cannot read directly the proceed of Modani on this bridge because as per IFRS 5, we are communicating everything this morning without the effect of Modani. So transaction per se generated an extra cash to our model, which is around EUR 12 million. You had a question on M&A, I guess, whether it is part of the agenda. Everything we have today in our plate is organic. And I think there is no different message versus what we said in the use of cash versus what we mentioned in the Assembly. And I think that was the last question on store openings. So for this year, Marie-Line, what we plan is a net opening of 0 to 5 stores, and that will be skewed to international. What we see country -- geography-wise is a negative net in France, up to minus 5 and a positive net outside France, between zero and ten. So that would be the plan for the year, and that is also the opportunity for me to link that to the strategic plan. As we said, we would be in the 5 to fifteen net opening range over the course of the plan. But to give you a perspective, then maybe a longer-term view, in our strategic plan, both 2021 and 2022 are years of limited net openings. So I remind you that it was plus 5 last year and 0 to 5 this year. Why? Because the number of closures is fairly high in those 2 years, in the mid-teens. Indeed, in our capital allocation optimization policy, we want to make sure that we rationalize our pace of equity. Now in the subsequent years, that is starting in 2023, the number of gross openings should stay high, or at comparable levels, but the number of closures will go down substantially, particularly in France where the portfolio should be stabilized at this stage. So as a result, net openings from this year on will go up. This explains the midterm perspective, just to give you this longer view.