Moncler S.p.A. (MONC) Earnings Call Transcript & Summary

Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler First Quarter 2021 Interim Management Statement Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Paola Durante, Strategic Planning, Intelligence and Investor Relations Director of Moncler. Please go ahead, madam.

Thank you. Thank you, operator, and good afternoon to all of you. As usual, during our first quarter call, I will provide myself a brief overview on the results, and then Luciano will make some final remarks that is here with me. Before going into the presentation, let me remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Moncler's current expectations and projections about future events and are subject to risks and uncertainties that could cause results to differ even materially from those expressed in or implied by the statements. Let's move now to the presentation. Going to Page 3. Let me give you some initial comments on our interim management statement revenue results. Q1 2021 revenues increased by 21% at constant currencies versus the first quarter of last year. Compared to first quarter 2019, revenues declined by 2%. We are extremely satisfied with the results achieved across Asia, particularly in China but also in the other Asian markets and in the Americas. While in EMEA, government measures implemented to contain the pandemic continued to negatively impact store traffic and, therefore, retail revenues. In terms of channel, let me highlight the extremely good results of our direct online business, which further accelerated compared to Q4 2020 and almost touched triple-digit growth rates. Before going into further details, I need and I want to remind you that I normally comment and I will comment also today constant currencies performance. Let's now move to Page 4 of the presentation where we look at the revenue breakdown by distribution channel. In the first quarter of this year, retail revenues rose by 22% while wholesale was up by 17%. Compared to the first quarter of 2019, retail revenues were down 2% and wholesale minus 1%. Retail performance was driven by outstanding growth, particularly in the Chinese mainland and online. Note that during the quarter, around 60% of our EMEA retail stores were closed. Following the reopening of the U.K. and of most of the Italian stores, this percentage today is lower but still at around 40% of the store in EMEA. All retail metrics in the quarter improved, with the only exception, as you can imagine, of store traffic, which was negative at worldwide level. Commenting on wholesale, our solid wholesale revenue performance reflects not only the strong reception of our spring/summer collections but also an increasing level of reorders requested from our most important sales clients during the quarter. And finally, on the online. The online business was strong in both channels, both retail, direct online and wholesale online. In particular, the direct online have experienced a sharp increase compared to the previous quarter and recorded a very strong and outstanding, I would say, double-digit growth in all regions, with U.S. and Korea in the triple digits. In terms of main KPIs for online, all metrics improved in the quarter, including traffic, average order value and conversion rate. Let's move now to Page 5, revenue breakdown by region. I will only make a quick general comment here, given that I'm going to analyze each regions in the next pages. All regions, excluding EMEA, reported double-digit growth in the quarter and were above 2019 level. In details, compared to Q1 2019, Asia grew by 17%, America rose by 3%, while EMEA, including Italy, was down 25%. So let's now go to Asia, Page 6 of the presentation. As you know, when we comment Asia, we comment the 3 regions being APAC, Japan and Korea. APAC in the quarter largely outperformed and has been followed by Korea and Japan. APAC growth was boosted by the triple-digit performance of the Chinese Mainland and also benefited from the positive contribution of all the other main markets. In fact, not only Taiwan continue to record a very positive performance but also Hong Kong SAR and Macau SAR were growing by double digits in the quarter. Korea. Korea continue to perform strongly despite a more challenging comparative base and also the fact that were no Chinese travelers in that market. And this, thanks, this performance was really driven by the strong brand momentum that Moncler is having in Korea but also by the very good, I would say, fantastic job that our people there are doing in terms of clienteling and CRM initiatives. We are also particularly pleased with the performance in Japan, which recorded positive results in the quarter despite the government measures to limit the spread of the pandemic, which impacted the traffic in the quarter and the absence of tourists. Let's now move to Page 7, where we comment on the region EMEA which include also Italy. Europe and Italy combined reported a minus 15% decline. This performance was entirely impacted by the long store closure and only partially offset by the very good results of the online business. In the quarter, we posted positive results in Russia, Spain, Germany and Scandinavia. On the other side, the very important 3 markets, Italy, France and U.K. underperformed the average of the region, having had many more, I would say, store closure days in the quarter. Moving now to Page 8, we comment on the Americas market. Revenue in the Americas region rose 34%, with both core markets and all channels up strongly. As I already mentioned, online in the quarter was very strong in both U.S. and Canada while wholesale benefit also from increasing reorders. Now we can move to Page 9 and we can briefly examine our store network. At the end of March, our retail stores reached 221 units compared to 219 at the end of 2020. In terms of store temporary closed due to the COVID restrictions, this impacted around 25% of our store network. As we said and we already commented, this was largely in Europe. So 25% of the store network were closed in the quarter. And today, we have around -- still around 30 stores temporarily closed. At the end of the quarter, there were 56. In any case, for any details, you find a chart, a table or more than a chart, sorry, in the appendix of the presentation. I have completed now the analysis of the revenue results and will hand over to Luciano for some final remarks.

Okay. Thank you, Paola, and good afternoon, everybody. Thank you for attending our call today. We are now at Page 11, where we report a quick update of the Stone Island transaction that was finalized, as you know, at the very end of March. And results of Stone Island will be consolidated in the second quarter and the current second quarter of the year starting from April 1. Business of Stone Island is doing well, I would say very well. The first quarter was very good. Unfortunately, the results of first quarter are not included in this presentation, but they will be included and consolidated in, again, the second quarter that will be reported in July. Of course, together with the Stone Island senior management team, we have started all the different processes for the integration and the announcement of their business, of Stone Island brand with very clear goals in our mind that are the announcement of the protection of the strong identity of the brand, and on the other hand, the construction of a very solid infrastructures in terms of information technology and logistics needed to support their growth for the next future. Let's move now to Page 12, where we report, as usual, our sustainability strategy, which is based on 5 main pillars that are: climate, circularity, responsible sourcing, diversity and inclusion, and the community. And on this last point, but very, very important, something important to remind you that there is, in our press release today, is that Moncler contributed to the construction of a vaccination hub in Milan, which will be the largest hub, vaccination hub in Lombardia. And through this vaccination hub will be provided around 10,000 vaccinations per day. So a very important contribution for the hopeful solution of this unfortunate situation that impacts all the world and Italy particularly. Something more to highlight in this slide, a couple of important projects. I wanted to remind you, I mean, within the pillar of circularity, I wanted to tell you that we started in January of this year to recycle our first tonne of certified down, which is, believe me, a very big amount and we are very happy and satisfied. Of course, this is only the first step, but we are very happy and proud about it. Another point regards the sustainable nylon. I mean, you may see in the slide that we have a pretty ambitious target by 2025 to achieve the 50% of sustainable nylon. Well, this year, in the current collection, spring/summer and even more in the upcoming fall/winter season, 5% of the nylon, close to 5% will be sustainable nylon, which considering the volumes we use in nylon is another very, very important step we are very proud of. Another point I wanted to highlight is in the diversity and inclusion pillar. We have created, as you probably know, the Diversity and Inclusion Council in January, and we are now implementing, with the help of an international consulting firm, a diversity inclusion assessment of our whole population around the world, which is, again, very important to perceive, to understand the feeling, the perception of our employees, of our people about this very important matter. I'm -- okay, I'm done for now and we are now ready to answer your questions. Thank you.

Yes. So operator, we can open the Q&A session. Thank you.

[Operator Instructions] The first question is from Chiara Battistini with JPMorgan.

I have two, please. The first one is on your wholesale performance in Q1, which was actually better than what I had expected. So could you actually maybe give some color or split how to think about the level of reassortments in traditional wholesale business versus the concession strength? And maybe any regional color within wholesale? The second question is on the Americas region. You mentioned it was up 3 on a 2-year stack on Q1 '19. I was wondering if you could elaborate more by channel in this region, because as you mentioned that online has continued to perform very strongly. I was wondering what's dragging, whether it's wholesale or retail, physical retail there. And actually, I have a very small one, third one. If you could remind us, please, in a normal year, so say, let's take full year '19, how much of your sales was tourism in Q1, Q2 and Q4, please?

I mean, about your first question, I mean Q1, yes, it was good. It was very good, above our expectations, also because, I mean, [indiscernible] performed well. And specifically, as you pointed out, wholesale was very good. Wholesale was very good in Q4, it was, you may remember, so wholesale is registering a positive trend, honestly, in all the different regions. Of course, Europe is suffering. Businesses suffer in Europe in all the channel, but wholesale is doing better at retail. and in all the different subchannels. Of course, we have some shop-in-shop that are reported under the wholesale business. And these are the shop-in-shops are very, very well, specifically some in Asia. I mean, one for all, I want to remind you is the store we have in Hainan that is operated by China Duty Free that is now performing, I mean, the #1 store in our network. But also, I mean, all the wholesale business in all the geographies is doing well. The online business, the business with e-tailers has been doing very well. And to go to your second question about America, still talking about wholesale. Wholesale business in America, the first quarter did very well, not just for deliveries of spring/summer that were, of course, up as compared to last year, but with the same contribution the last year but because reorders were very strong. Actually, as Paola said, reorders coming from wholesale were very strong in all the different regions, including reorders coming from department stores in America in the U.S. About the Americas, I mean, you asked about the 3 different channels. Obviously, all the 3 different channels were positive, so wholesale again, as I said before. Online, needless to say, because Paola said before, I mean, we reported we are tripling the business in U.S., in the online business. Of course, there is a base of comparison last year that was very weak because you may remember that last year, I mean, the business was operated under [indiscernible]. And for the COVID situation, the warehouse in New Jersey was closed for 2, 3 weeks. But in any event, I mean, we are reporting a business which is the triple up of last year. And retail, to retail to in America was positive. So all the 3 channels did very well. [indiscernible] Okay. In a normal year, I will say that the first quarter is about 23%, 23%, 24%. The second quarter is much lower, it's 10%, 12%. The third quarter is 25%, 26%. And Q4, of course, is the most important, is about over 40%.

Chiara, also the weight of tourists in the quarter.

The weight of tourists in the quarter. I mean, I can tell you that Q3 is the most important 1 for tourists, for tourists from other regions, Q4 less because as you may remember, in Q4, our business, which is very strongest, made a lot with the local customers. But let's say that Q3 is the most important one.

Sorry, a couple of follow-up questions, actually. Well, Q3 most important one. Q1 and Q2, are they similar, in terms of tourism rate?

Well, similar. While Q1 is slightly above Q2 is, yes, it's a little bit higher than Q2, but tourists, yes.

Super. And when you mentioned that all channels in the U.S., in Americas were up, you mean against 2020, not 2019?

Yes. I think Luciano was referring to 2020, exactly.

Yes. I mean, I was talking about 2020, but of course, against 2019 is more or less flattish.

The next question is from Louise Singlehurst from Goldman Sachs.

Two for me, please, if I may. I wonder if you can help us think about the space contribution. Obviously, you have the store number. But if you could just help us. Clearly trying to work out the implied like-for-like in that retail number, if you could help us there. And then secondly, when we look at the seasonality of the business, I wonder if you can help us think about how you think internally about the seasonality. And the reason I asked that is obviously, we had a very good start to the year when we spoke to you back at the full year results in February. But I just wonder, with the seasonality and the product category, you obviously haven't seen the same strength during the quarters, what we've heard from some of the peers. And presumably, that's partly category-related, as well as the exposure to Europe with the additional lockdown. And then finally, just in my -- actually, a third question, if I may. On the e-commerce, if you can just update us where we are in terms of the internalization of the different regions and still on track for the new website, I think, is coming in June.

Okay. Thank you for your questions. About space contribution and like-for-like, of course, I mean me needless to say, you know that we don't report these numbers by quarter also because honestly, are totally meaningless quarter-by-quarter. I can tell you that like-for-like, of course, was very strong in Q1 as compared to 2020. Again, sorry to highlight that, but of course, I'm commenting on the results against last year, not the year before, unless you have questions about the space contribution. Honestly, even if it is meaningless but it was very low. Space contribution for Q1 was very low. And the reason is that the stores -- a few stores, more we have this year as compared to last year. Most or a significant part of them have been opened in Europe. And Europe unfortunately is not doing well. I mean, one example for all our beautiful, amazing flagship store in Paris at Champs-Élysées is not performing as we expect it to perform. Hopefully soon. About seasonality, I mean, seasonality in our business, for our brand is still very important. Honestly, still much higher than for other brands, if I can compare Moncler with other brands. And as we said in the past, probably at the end of Q3, we see this seasonality in this particular situation last year and this year, too, a little bit higher than before. Having said that, this is to anticipate your other question that is performance in the quarter. January was very good and much better, much stronger than February and March, this for sure. Even if, honestly, looking at the financial results, this is the reality. Looking at the collection, looking at something that is very important strategically for our business, which is the development of the other categories as we started to sell the spring/summer collection, we see now the need to our category, the [indiscernible] category growing very nicely and better and more than outerwear, which again is affecting our business because the average selling price is lower, but strategically, honestly, we believe it is a very good sign for the future. About your last question, the e-commerce internalization, let me remind you, even if I'm sure you know that last year in October, we started the sourcing of North America. Actually, we started 2.5-year ago with Korea but that was more a test. So U.S. and Canada are up and running and again are doing very well. Now in June, let me cross my fingers. But I mean, in June, we plan to start the internalization of Europe, which is by far the most important market for our online business and it is also the most complex market for our -- for the online business because I mean, different jurisdictions, different tax rules, different currencies, different, I mean, duties done, sometimes. So I mean, we are very, let's say, hopeful, anxious, and we are working very hard in the very last weeks before the go-live that again is expected to happen in June.

The next question is from Antoine Belge with Exane BNP Paribas.

It's Antoine Belge at Exane BNP Paribas. Three questions, if I may. First of all, going back to this question of seasonality or actually, product category, because at the end of the day, we are sell-side analysts and we look at you against other players which are selling different products. So if my memory doesn't fail me, I mean, during Q1 is a combination of selling down jacket, still winter products and starting to sell more like diversification products. And so is it a case that Moncler would be more vulnerable or less resilient in the COVID situation because of the lack of tourism? Because usually, in that period, you have, I don't know, people that only buy Moncler down jackets when they travel to colder places. And of course, if they're not traveling that they are not compensating at home. So any sort of thought around that this is -- or is it completely wrong? Second question. If you look at the sort of product offering, more, I would say, the core collection versus your collaboration collection, I mean, if you could comment on the mix, which one did better? And finally, I take onboard that Stone Island will only be consolidated in Q2. But for us to start having a feel for what type of sale we should consolidate, I mean, would it be possible to either get obviously, the Q1 sales in euros for Stone Island or actually some kind of a growth rate that the brand experienced in Q1? And also any sort of qualitative comments on the integration?

Okay. About the seasonality, I mean, your, let me say, speculation is, it's difficult to answer your question. I think that, I mean, again, as I said before, seasonality is still very important for Moncler. And in this situation, is even higher than before. We said that COVID started, as you know, more than 1 year ago. You know very well that, of course, Q2 was terrible, Q3 much better and Q4 was, let me say, remarkable. So I mean, I think that, yes, seasonality is a factor but saying that we are weaker or more vulnerable, I would say that is not the case, honestly. Of course, talking about Q1, as you said before correctly, our business in Q1 is a mix of the end of the fall/winter season down jackets, heavy jackets and the start of the spring season, of course, with a lower average selling price. And so this is also one of the reason why January was stronger, but also, I mean, normally, January is stronger than February and March. But I honestly don't agree with you that this is a vulnerability issue for Moncler. But what I can confirm is that this seasonality is something stronger, higher now than under a normal year. About your second question, the vast majority of our business, is still developed with our main or core collection. Of course, Genius collaboration, special projects are not important, are extremely important, are extremely important for several different reasons. I'm sure you know very well from the communication point of view but also to keep communicating with our customers, to call them every time we have a drop in the store. And you know that when they come to the store, they buy or they may buy the individual drop, Genius drop or they buy the core collection. But I mean, this is an important instrument to generate traffic and to keep talking with our customers. But Genius and collaboration, whatever, still represent less than 10% -- within 10%. So the vast majority of our business is still the core collection. About Stone Island, we can't now report, disclose numbers but I can tell you that, I mean, I can comment on the consensus, if you want, which I find reasonable. Of course, the consensus is related to the 9 months from April 1 to December 31. It is over, a little bit over EUR 200 million. I find that consensus reasonable. Having said that, again, as I said before, from the quality point of view, we are very happy with Stone Island results. I can tell you that, as you know, as we said in the past, the spring/summer campaign back in June of last year was up double digit. And following the campaign that was completed a couple of months ago, more or less, is still up double digit. So I mean, of course, I'm saying that because you know that the wholesale business for Stone Island still represents about 80% of the total. But we are pretty happy also with the retail results, even if many stores are still -- many of the existing stores are in Europe and of course, some of them are closed. But the stores that are open are doing quite well.

Maybe just as a follow-up on what you said about Genius and the collaboration. I think you said they are they may account, probably less than 10% but they are a traffic driver. So I'm curious to understand is that, they were a driver when stores were open, but are they as much of a driver when in Europe, for instance, when people are more having to switch online? Yes.

Okay. Yes. I mean, it is a driver, of course. It is a driver, more powerful and more powerful region. So when we talked about Asia before, they did very well. It did very well on all the collection, the core collection, the main collection and Genius. But Genius was very important also to generate traffic in Europe, of course, in the stores that were opened. But also something important to say that even with, and when the stores are closed, we keep doing business. As you know, as we said also in the past, implementing the so-called digital sales. And in Europe, we generated in the Q1, 17,000, 1-7, orders through distance sales. And most of them important, part of these orders were generated with Genius. I mean, the last 1 is [indiscernible], the 1 before was JW Anderson. So I mean, we are actively fighting this unfortunate situation, also increasing more and more the distance sales.

The next question is from Susy Tibaldi with UBS.

My first 1 -- hello, can you hear me?

Yes.

Yes, Susy, we can hear you. Yes, we can hear you. Can you hear us?

You can? Okay.

Yes, you're fine. Yes.

Yes, so my first -- okay. My first question is on the nationalities. I wanted to ask, I know you're commenting mainly on 2020 but if we look compared to 2019, are all nationalities above the 2019 level in terms of sales? And also specifically, what about the Chinese nationality? Can you remind us if that has already returned to growth? Secondly, I think it's -- I was wondering if given the seasonality that you already discussed, if you think that during the spring/summer season, it may be harder to compete with other players in the market? Because clearly, when it comes to outerwear, you are the top brand in the luxury space, but when it comes to other product categories, clearly, there is more competition perhaps from also other luxury brands, which are growing at an incredible pace. So I was just wondering also internally when you compare your figures versus some of the other peers out there, how you explain the gap and the sort of sequential deceleration that we have seen? And then thirdly, do you have perhaps an indication that you can give us when it comes to the start of April now, so the second quarter, because now Europe, some parts of Europe have reopened? So if you have any comments, if you can -- if you see that people are actually quite excited to go back to the stores or still a little bit hesitant? And actually, I just had a very quick follow-up to a previous question because you mentioned that January was very good, much better than February and March. I was just wondering if that was again related to 2020 or 2019. I was just confused because last year, I think the comp started to get much easier in February, March because of COVID and lockdowns. So I just wanted to clarify if that comment was related to 2019 or 2020.

Yes. I mean, your very last question, comparison was more with 2019 because, of course, I guess, last year, you are totally right, is also meaningless comparison. Now January was stronger than February and March, even if, I mean, this is part of our seasonality but for this year more than in 2019. Second quarter started pretty well, I mean, in line with the first quarter, honestly. Again, second quarter for us is a very, very weak quarter. I mean, this is the reality. It is now and I mean, in the recent couple of years, in the recent years, the weight of Q2 is -- has been growing because you know we have developed also from the collection point of view, other categories with very good results, but still unfortunately, but I mean, this is part also of the DNA of our business. Second quarter is weaker than the others. And you may remember, I don't know if you do, but in the past, when we used to report for all the quarters, our financial results, second quarter was a loss-making quarter. Right now is making profit. So I mean, this is a good point. Even if, of course, needless to say, the profit we during second quarter is way below the profit we do in Q4 or even Q1. So I think that talking about comparison with other brands, of course, I mean, we compare or you normally compare Moncler with other players that are very strong, very good, very big and are reporting very, very strong results. From the product point of view, honestly, I don't see a big, big competition, probably their product, for sure. I mean, they don't have the seasonality we do have. So maybe they have, for sure, a second quarter that will be -- and that has been historically better than what it will be our second quarter. But again, of course, we compare our business with ourselves. And so what I can tell you is that Q2, for sure, will be weaker. As in the past, I hope for sure, better than last year but this is not a reasonable comparison. But also, I mean, we look at 2019 and we see very good signs for the brand, because at the end, what we look at is business, of course, but not just the short-term business results, we look at the strength of the brand. And what is very encouraging is that the brand is strong everywhere, even if in Europe, where 60% of the stores during Q1 were closed, but the brand is strong because in all the stores that were opened or any time they opened stores, traffic comes to our stores because the brand is strong. Also something important before talking about your first question, which is probably the most important, but talking about Europe. And also, I mean, you used a term that was deceleration in Q1, if I remember correctly. I mean, honestly, if I understood correctly, we don't see any deceleration, honestly, in our business. Of course, again, if you compare our results with other brands, other players with a different product, you may be right. But if I can tell you, 1 reason, very important is our exposure to Europe, Susy, because I mean, Europe represents, in Q1, over 31% of the total business and for the year-end is even higher, is over 35%, which is the double than others. So I mean, if you look at our results in each individual regions, I think that Asia, excluding Japan, was close to 80%. Japan, as Paola said, was positive. I mean, mid-single digit, but still positive. America was very good. Europe was down 15%. The weight of Europe, the weight of that minus 15% for our business is something that is impacting the final result. But again, I don't see and I will not talk about any deceleration. About nationality. I mean, talking about Chinese. I think that, I mean, again, China, in the Chinese market is doing very well. But also the business we do with the Chinese customers in Q1 of this year is close, is more or less the same we did in Q1 of 2019. That means that we have totally offset the total lack of Chinese tourism with business we do with Chinese customers in their local market, which is, I would say, a very good result. Of course, yes, other nationalities. I mean, Korea is up needless to say, because a majority of the business is developed in their country, that is very strongly up. Japanese is more or less flat. I mean, they don't travel a lot, not as much as Chinese, but I mean, they used to travel a lot to Hawaii. They don't now, but their business is up, so I mean, more or less, one is offsetting the other. And North America, And North America is up, of course.

The next question is from Elena Mariani with Morgan Stanley.

A couple of questions from me as well. The first 1 is on your cost base. I was wondering how we should think about the first half of the year, given that pretty much you do most of your H1 in the first quarter. I remember that last year, you were unable to save, what in the first half of the year. So how should we think about the savings to come through in the first half? And particularly, when I think about rentals, and also when I think about marketing, if you could help us understand how we should think about it in the first half of the year, that would be great. Second question is about your store base. I was wondering how the pandemic has, if it has, in any way, changed your view on the store rollout. You talked previously about full year '21. But I was wondering more about the medium term. Are you still planning to open 10 to 15 stores per annum? How many do you see in China? What about travel retail? So what's your view there given that the business has become a little bit more local? And then thirdly is more of a clarification about all this discussion around the gap versus peers. So am I understanding correctly that you feel that perhaps the gap in recovery versus the peers that have already reported results is, in your view, due to your product category? So apparel/outerwear versus perhaps leather goods or jewelry? Because you talked about Q1 being mostly skewed to Europe. But when I look at the growth rate versus peers, even in other geographies, there is a little bit of a gap, for example, in the U.S. So what's your explanation if there is one?

Thank you for your question. Let me start off on your very last question because this is very important to clarify. No, no, I don't think that the difference is the product mix. I mean, even if we are in different businesses, still luxury but with different product, but I don't think that the difference and what makes our results, so that honestly are very good lower than the bigger players that you have in your mind that are, I mean, big players. We have to learn a lot but this is not the collection, is not the product. The difference, I mean, 1 reading of this fact is that is our exposure to Europe geographically. I mean, if you have in mind, and I'm sure you do, because you know the other brands results better than they do, our exposure to Europe is over 31% in Q1 and for the year-end is over 35%. If you look at other brands, they are in the region of 14%, 17%, 18%. And again, so the weight of Europe, which is negative for ourselves and is negative for everyone, but I mean, they may be better -- they are better. But again, I'm making comments on our business, not on theirs, but again, they did great results. But the big difference is our exposure to Europe. So this is what makes our results that are great, sorry to say again, but they are great, lower or different from the others, not the product category. I mean, we live with our product categories, with our strategy, we don't want to change it. We want to maintain our roots in the outerwear, in the down jacket, in the winter, in the cold, in the mountain, okay, but we are also implementing other categories. But I mean, we are not competing with great, great brands you may have in mind that do other category, other product. And so again, the difference, if you want to share my reading, is the geography mix. Okay. Based on -- back on your other questions.

The cost base.

The cost base. I mean, right now, of course, I can tell you, I can give you some qualitative thoughts, comments, the cost base. First of all, something we didn't mention but it's important to mention is that last year, our cost of goods sold and our gross margin was heavily impacted by a write-down of inventory. This year, again, we don't report the results but I can tell you that inventory is under control, and so gross margin is and will be healthy. About rental, we have implemented last year and we keep having discussions and negotiations with landlords, mostly in Europe, of course, but not only. And we are obtaining some rental reductions that are helping our selling expenses. Of course, overall, the impact of selling expenses in Europe is still pretty high -- very high and much higher than in 2019 because by having 60% of the stores closed in the Q1, hopefully, second quarter will be different. But this is having an impact notwithstanding the rent reductions we are obtaining. About the market there is something important to say, is that for the year-end, as we said, we maintain our, let's say, guidance to go back to the 7%. But in Q1 and Q2, you will not see a marketing budget high as much as in the past because we have changed, as you know, our strategy about the Genius event that last year, like before the lockdown and the year before, was held in February. This year will be held in September. So that part, which is a significant part of the budget, will be reported, the cost will be reported in the second half of the year. But again, for the year-end, we are still targeting 7%. About the store...

Store base, yes.

Yes, store base rollout. I mean the, let's say, the overall guidance of 10, 15 stores a year is still the current guidance. Of course, we were very selective before and we are even more selective now. We are targeting only important locations where we wanted to open big stores, a very visible store to properly communicate the values of the brand. And also, we are spending money to expand some existing stores. About China, let me make a comment on Hong Kong, which is part of Greater China. In Hong Kong, we used to have 7 stores. Now we have 6 because we closed 1. Honestly, we are redesigning the store network in Hong Kong based on the situation that unfortunately is not very healthy and since not the COVID, but even before when the protests in 2019 started. And so we expect in Hong Kong to have, for sure, a big store in Canton Road, the first big store in the Central part of Hong Kong, for sure, I hope for sure, still in the airport. But maybe probably, we don't know yet, some other minor stores may be closed in the future. About China, we have a couple of important openings this year, 1 for roll in Chengdu, which is becoming one of the most important, exciting, vibrating city in China. In [indiscernible], also, we are opening a 2-floor store, which will be a flagship store with the facade on the street. We just opened in [indiscernible] But again, the strategy has not changed. We are not now because China is doing -- like resi, we are not opening stores everywhere. I mean, this is very important, even if I don't want you to get bored, but let me say it again, the strategy has not changed. We are, we were and we are, we will still be very, very selective. Travel retail. Travel retail, I mean, only 2 years ago was booming. Now is in the situation, you know, I mean, most of the stores in the airports we have are closed with only a few exceptions. And so travel retail is a big question mark, even if I believe that sooner or later, hopefully, soon, when the situation will be back to normal, people will start again to travel. So our stores in the most important airports will start again to open and to be successful. But for the time being, we have put on hold also the projects that we had before. I mean, I don't want to make any example but there were some projects that now are on hold or waiting for a clearer scenario.

And may I ask 1 final clarification, sorry, because I'm not sure if I understood correctly your comments about the second quarter. So you said that it started very well, but you said that you would expect it to be weaker. But what do you mean by weaker? In terms of growth rate versus Q1? Because we all know it's a smaller quarter. So can you help me understand. Maybe I've missed something, sorry.

No, no, you're right. Thank you for asking the question again because this is a very important point. It's not weaker even if I used this term is wrong. Second quarter for Moncler is a small quarter. It was smaller before. It will be smaller this year, even if, I can tell you that over the past years, this quarter is still the smallest but is growing more than the others. And so again, as I said before, it was a loss-making quarter in the past. Now it's making profit. But it is still a small quarter. We can't and even we don't want to change our identity overnight. So I mean, the second quarter, Elena, is a small quarter for Moncler. A meaningless or less meaningful quarter for Moncler, for sure. So I mean, the results have to be considered based on this factor that I mean, the results are good but are good compared to last year, as compared to 2019, but still in a small business quarter.

The next question is from Anne-Laure Bismuth with HSBC.

I have just a few quick questions regarding the store rollout strategy. So you mentioned that you are still planning to open 10 to 15 stores per annum. In 2021, 15 are planned. You only opened 2 in Q1, so meaning that probably the bulk of the openings will happen in Q2 and Q3. But is it fair to assume rising digit contribution from the new space from '21 and between mid to high single digit in the beyond 2021? And just if you can share the weight of online in Q1 as a percentage of group sales, please?

Yes. As you said, in 2021, we are going to open around 15 stores. That was already announced that are secured this year. And most of them will be, as usual, in the second part of the year. There are still some -- there are some to be opened in Q2. In terms of space contribution, I would say that we are always in the mid-single-digit, let's say, space that we've been guiding or at least commenting more than guiding in the past. Going forward, it's a little bit early to say. So the space contribution depending clearly on the stores that we are going to open. So I would say that a mid-single-digit contribution is something that today seems still reasonable for the future. In terms of online, no, we don't comment the weight on Q1 numbers. Of course, it's growing, but it's not a number that we comment.

The next question is from Piral Dadhania with RBC Capital Markets.

Three quick ones, please. You said that e-commerce accelerated strongly in Q1. Is that because your European network was more closed versus the last period of last year? Or is there a change in your e-comm approach maybe around marketing strategy? Could you -- any sort of commentary around that would be quite helpful. Because I think at the full year, you said 70% of your e-comm activities are geared towards new customer acquisition. So just trying to get a bit more of a handle on sort of new customer recruitment. Secondly, price increases. Are you able to confirm what level of price increases you have planned for spring/summer '21 and then also for autumn/winter? And finally, just on the Aura Blockchain Consortium that was announced by some of your peers, LVMH, Richemont and Prada earlier this week, is that something you guys have looked at or something you may consider joining in the coming months?

Thank you for your question about e-commerce. I mean, talking about Europe, to some extent, what you say may be correct, is correct. But of course, the strong increase of our e-commerce business in Europe is also due to the fact that last year in March, the warehouse of [indiscernible] that was operating and it is still operating our online business until the internalization and that time was closed for 2, 3 weeks. And so the comparison, let's say, it's pretty easy. But you mentioned Europe, but the strongest increase in the online and the e-commerce was in North America also for the same reason. Because I mean, we were under [indiscernible] last year. The warehouse in New Jersey was closed, but also because in North America, the online business is doing very, very well. About price increase. Price increase, okay, in Q1, is totally meaningless. In spring/summer, we increase a little bit the prices. We will increase -- I mean, we are increasing. We plan to increase prices much more in fall/winter because you know that we normally tend not to increase prices unless we need to protect our margins from the currency deterioration. And this is the case this year for the U.S. dollar but also for the Japanese yen and also the U.S. dollar-related currencies. So prices in the second half of the year, you will see a price increase in some geographies, not that much in Europe, in the U.K. Yes, unfortunately, also because, I mean, to pay for the duties. But I mean, overall, our pricing strategy is to maintain prices unless there is a deterioration of the currencies. The blockchain, I mean, of course, we heard that the news about the blockchain. Something important to say is that, I mean, we have been working on this since many years ago, but we have already implemented a digital identity of our product even without or we're not yet a blockchain, because you probably know that our -- all our products have NFC, near-field connectivity tag in all our garments, with the token technology that make our garments unique and all customers have the 100% guarantee that the garments are real, are not fake. If they do, which is very easy with any device, with a cellphone, they scan the tag, the NFC tag. And by doing this, they see not only that the product is real, but I mean, we can put within that tag all the information about the product, all the history about that product, including the specific transaction of that customer when he or she bought the product. But again, without blockchain, not yet. But I mean, we know very well the technology because it's something we are studying. But in any event, the most important part of that project that was communicated in the last week is something we have implemented in the past, which is what I said.

The next question is from Antoine Riou with Societe General.

I have 2 questions. First question, just you mentioned that 2Q was -- the 2Q starting broadly in line with 1Q. I guess you were talking about the 2-year growth versus 2019. Just wanted to get a sense if you could give a bit of granularity by regions. And I'm thinking especially of the U.S., which is improving on the health front. So just wanted to get a sense on your part, if on the, let's say, exit rate in retail in the U.S., there is an improvement, and if we should expect actually the Americas, on a 2-year basis, to fare a bit better. And the second question, just coming back on this question beyond seasonality and the product categories versus peers. Don't you think that the big different factory versus your peers, and Luciano, you mentioned that A&P was still down significantly in 1Q and should be down as well in 2Q. Is that actually, you do spend -- you have been a bit late in terms of spending and EBITDA, been maybe a bit less aggressive in terms of product initiatives, pop-up stores, these kind of things. Just wanted to get your thoughts on this.

Okay. About the first question, Antoine, on Q2. Of course, it started well. I mean, the quarter started well with no main differences, honestly not visible differences among the regions as compared to Q1. So all regions are progressing more or less with the same trend. Of course, Europe, even if it's too early, but I mean, as Paola said, now in Europe, we have still some stores that are closed but less than during the first quarter. So Europe, we are more hopeful to see some better results. About the U.S., again talking about Q2, nothing to add. Talking about retail and the future of retail, I think that I mean, retail business in the U.S. is doing better, much better. And I think that there are opportunities to make that business even better and more successful working on the stores -- on some stores. Talking about new openings, if this is the implicit question, I don't think we have opportunities, and we don't have, in our mind, plans to open many stores in the U.S., but we still believe that there are some stores, and some of them we have current projects to expand the existing stores, 1 is in Los Angeles, Rodeo Drive, that will be relocated in a much bigger flagship store. One is in Chicago, again, in the same street but again, a much bigger, and more visible and more powerful location. And also something that we have already implemented, looking at the past 2 years, some shop-in-shop specifically in Canada have already been converted into retail concession stores as much as we did for Bloomingdale's in the U.S. And so I mean, this is the retail strategy for the U.S. I think that there are opportunities to make retail stores more successful, not to open many, honestly. I don't think we have opportunities to open more stores in the U.S. E&P, yes, marketing. Yes. So this year, the seasonality of the curve of our marketing budget, as I said, will be different, but this is mostly because we made the decision, for several reasons, to hold our Genius event in September and it will be held in China. It will be a great event but we can't now disclose any comments about that event. And of course, this is moving significantly budget that last year was spent in February and so in Q1 to Q3. So this is changing, for sure, the curve of marketing for this year. Difficult to say for next year, but we will see. Of course, it will depend also on the result of this, a little bit different strategy that is also driven also by the current situation because again, February of this year against February of last year is not much different. So we are lucky and happy to hold the event in September and hopefully, when all this situation will be better.

The next question is from Omar Saad with Evercore.

I have 3 quick questions. Number 1 is on inventory. You ended the year, I think, minus 3% year-over-year. How are you feeling about it? I know you said you feel very confident that you're not over-inventory, but do you feel like you have enough inventory? It sounds like January was a stronger month and maybe even depleted that minus 3%. Help me understand if you've been able to kind of build back inventory and if you feel like you have enough for the demand that's building. Second question, is it fair -- on the Genius collaborations and collections, is it fair to assume in 2021, there'll be a significant increase in the number of the Genius projects that you guys have this year? And then lastly, I'm sorry to ask 1 more question about the U.S. It's a little bit surprising that the 1Q sales weren't as strong in the U.S., given the huge amounts of stimulus that came into the market, the very quick vaccine rollout that's been happening. Is there an inventory issue in the U.S.? I mean, the stores are open. Was there any other -- I know you're up over 2019 levels, but I'm wondering if there's any other kind of limiting factors in the U.S.

Omar, thank you for your question. About inventory overall, no, the answer is no. We don't know. We don't see any issue. And with our inventory, not for the current season, not for the coming fall/winter season. Needless to say, Omar, that we are scared, very worried about having too much inventory and not to have enough. But having said that, I think that we are in a pretty good position with our inventory also because we have implemented, over the year, some more flexibility in our supply chain. And so should the demand from the market take off, which is something we all hope so, we will have some flexibility and capability to react to the additional market demand with our supply chain. And so honestly, we don't see any issue on that side. About...

Collaboration.

About the Genius collaborations, we have a lot this year. And I mean, some have already been presented, as I said before, JW Anderson, very strong [indiscernible] right now. I mean, last week but still at the beginning in the stores. Fragment will be the next 1 and some also new designers that will be disclosed in September. And for the future, I mean, the strategy is still to continue with Genius because Genius is not 1 design, 1 project. It's a strategy and the strategy is based on the introduction in the stores of designers, of collections, of collaborations that may attract our customers. Then they can buy it or they may not but they'd probably buy other products. But again, it's a way in the store not only also digitally through the social network and through Instagram, to maintain alive the relation with our customers.

And then lastly on the...

Yes, U.S. I mean, the U.S. was -- I mean, all the channels were good. About inventory, I mean, we don't have -- I mean, if the problem is not to have enough inventory, the answer is no. Also because something important I didn't say, but I'm sure you know, is that we have an important portion of our inventory for the season centralized here in Italy. And we allocate to the different regions that reserve based on the performances. So some inventory that unfortunately may not be allocated to the stores that are closed in Europe may be allocated to the U.S. or to China or wherever the demand is stronger. And this is the same for the online business because online business, again, is tripling in the U.S. But even if, Omar, we don't have implemented yet the [ 1 full ] inventory, which will be implemented after the go-live of the new website and the new platform, but the fact that we have in the same warehouse in the U.S. now the inventory for the retail channel, for the wholesale channel, for the online channel, it makes much easier to take product from 1 inventory and to move to -- from 1 channel and to move it to other channels. And so again, we have this kind of flexibility. That is also one of the reason why, the latest in the U.S., back in October when we started with a new platform and with the new operations started doing very well, also because we had this kind of flexibility, which is not the scientific [indiscernible] inventory yet, but I mean, something that helped to feed the demand from the market.

The next question is from Flavio Cereda with Jefferies.

Two simple, super quick questions. Compared to 2019, the incidence of new customers, what you're seeing now compared to what it used to be, has it shifted significantly 1 way or another? And again, compared to 2019, the percentage of outerwear, so the jackets, is that given we had the weird 2020 in the meantime. Is it up, down similar to 2019?

Flavio, about your question about outerwear, I can tell you that the contribution of outerwear is decreasing. Also the other categories are growing. And this, for sure, in 2021, even if, I mean, we are looking at the very first quarter, it is premature. But in any event, this is something we keep seeing because of the other categories and specifically, the need to [indiscernible] is doing very well and it's growing faster than out of [indiscernible] So if I look back at 2019, I would no doubt so that outerwear contribution is a little bit lower. I mean, it's still the leading category, of course, but knitwear is growing faster together with other categories like shoes, for example. About new customers, it's -- I mean, difficult to say, it depends on the geographies, but in Asia, for sure, we see new customers. Also because, I mean, the growth of the business compared to last year and also the year before because we are talking about Asia and local markets, I mean, we see a lot of new customers. Europe, less, but we have more local customers, repeat customers, let's say that a lot of new customers in Asia, in China, but not only, and in America, too, yes. In Europe are more repeat customers like now, more local. I mean, the business we do in Europe right now, of course, there are no travelers. People are not moving and so it's more and more with the local customers.

Okay. I think we have time for the very last question. Flavio, if you don't have follow-up.

No, no, no follow-up. No follow-up.

Thank you. So operator, we can take the very last one.

[Operator Instructions] Ms. Durante, we do not have any further questions.

Fantastic. So thank you very much to everybody for participating and just remind you that first half results will be published on July 27. The conference call will be, as usual, on the same day and the quiet period will start on June 28. For any follow-up questions, feel free to call us any time, my colleagues, myself, we are here if you need them. Thank you, and have a nice evening. Ciao.

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