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

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler 9 Months 2021 Interim Management Statement. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Paola Durante, Strategic Planning, Intelligence and Investor Relations Director. Please go ahead, ma'am.

Thank you. Thank you, operator, and thank you all for joining this call. As usual, the interim management statement call is hosted by Luciano Santel, Moncler Group Chief Corporate and Supply Officer; and by myself. I start providing a brief overview of our results and then Luciano and myself, as usual, we take all your questions. Before going into the presentation, I need to 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 these statements. Let's now go into the presentation. And I move to Page 2, where you see we have included some brand highlights. In fact, I wanted to start the call today commenting on some of the many important projects and events that happened in the last few months. And of course, I have to start with the Moncler Genius event, the MondoGenius, which took place digitally and physically on September 25. I hope you have seen it the shows or the replay after, but really, it has been an unprecedented event. And the results were above any of our expectations. As of today, the show, the event generated a total reach of 4.2 billion with 510 million views and 238 million on the live audience, impressive. But the quarter has not been only MondoGenius. So we had also 3 strong Genius launches, Moncler Fragment; Moncler 1952, both men and women; and Moncler Hyke, actually, our new Genius. Going to Page 3, you can see that in October, we introduced the teaser of our new corporate campaign, We Love Winter. As you know -- you know, We Love Winter, and prelaunched our first-ever fragrances, which will be fully launched then in Q1 2022. Last but not least, Stone Island presented its running shoes in collaboration with New Balance. The sneakers have been completely sold out online basically immediately, I have to say, I think, in 1 hour and recorded extraordinary results in all the channels and particularly on retailers. I just mentioned the results on the raffle on END for the shoes was in the top 10 ranking of the ever sign-ups. Okay. Let's now go to numbers. So let's move to Page 4, where we comment the group 9 months revenues results. As usual, I comment, of course, on ForEx. But this year, differently from other years, I will mainly comment performance versus 2019 numbers to -- as you can understand, to underline and to value the underlying trend of the business, excluding the pandemic effects. In the first 9 months of 2021, Moncler Group reached EUR 1.2 billion revenues, up 56% versus 2020 and 20% versus 2019. This result includes also Stone Island, the green box. That revenue, as you know, has been consolidated since the 1st April, so for 2 quarters, for the second and the third quarter within the 9 months, and then contributed for -- in the 9 months for EUR 156.4 million. Excluding the acquisition of Stone Island, Moncler revenues in the first 9 months grew 36%, as you can see it from the -- in the chart versus 2020 and 4% versus 2019, with a significant acceleration in Q3, which showed a double-digit plus 10% growth versus 2019. Let's now move to Page 5, and we focus now on Moncler brand only. And on Page 5, we analyze in detail the performance by region. Okay. Let's start with Asia, the blue box. That, as you know, includes APAC, Korea and Japan. Asia generated EUR 468 million in the 9 months, contributing to 46% of total revenues. The region rose by 24% in Q3, driven by the Chinese Mainland, which further accelerated in Q3, and also by Korea that continues to post outstanding performances. Rest of APAC and Japan suffered mainly from the COVID restrictions. You know that Australia has been closed most of the quarter and also many of other -- of the other markets. But in particular, Japan has been very difficult in the quarter due to the COVID restrictions. Let's now move to EMEA. EMEA reached EUR 369 million and contributed 37% of Moncler 9 months revenue. The region showed a significant improvement in Q3 with revenues very close to the 2019 levels, minus 2%, as you see from -- in the chart, thanks to a much stronger D2C business, which has been driven by online. You know that EMEA has been the online -- the direct online has been integrated since July and by local customers. Local, in particular in the quarter, grew, I say nice but it's really a very good double-digit growth -- recorded a very good double-digit growth and sellers factor the lack of the tourism of the travelers, as you know, particularly that we are still missing, particularly the one outside the region. Finally, Americas. Americas posted another strong results. In Q3, you see the business was up 10%. And this performance has been partially offset. So the DTC did very well in Americas, while the wholesale business has been impacted by a different timing in deliveries and also by some wholesale conversions into retail, which affected the results. So very solid results across regions. Let's now move to Page 6 of the presentation, yes, Moncler brand revenues by channel. In the first 9 months, DTC revenues reached EUR 702 million, contributing to 69% of total brand revenues. In Q3, DTC rose by 15%, driven by online and also by the strong performance of -- the very good performance of some new opening stores -- new opened stores. With regard to the direct online, I can confirm, as I was saying, that we have finalized -- concluded the internalization of our e-commerce business. Japan has been internalized early July and China in October. Moving then to the wholesale channel. It grew by 2% in Q3 versus 2019, in line with our expectations. Q3 performance has been influenced by a different timing in deliveries among Q2 and Q3. In fact, as you may remember, in Q2, given the very high request of products of garments, especially in the U.S., we delivered early also some full winter products to fulfill the demand. In terms of year-end indication, I can confirm, just to give you an indication, that year-end sales should grow around mid-single digit compared to 2019, of course. And now Page 7, I'm looking at Stone Island results. In the first 9 months, Stone Island, so from 1st of January to end of September, Stone Island reached EUR 244 million, of which EUR 156 million consolidated in the Moncler Group. Stone Island recorded in the first 9 months a 27% growth versus 2019. Q3 revenues, as you can see from the chart, reached EUR 100 million with a very strong contribution of all channels and all markets. You see in the chart in the -- on Page 7 that EMEA and wholesale are the most important markets from one side and China from the others. Finally, and now I move to Page 8 of the presentation, group mono-brand store network. At the end of September, the group retail stores reached 263 units, 2-6-3, of which 233 are Moncler and 30 Stone Island. In the last quarter -- in the third quarter, Moncler opened 9 DOS. And among these, there are some very important flagships that you can see a picture. You can see the pictures on the following pages. We opened Milano Galleria. We opened Chengdu Swire. We opened Hangzhou MIXC. We did the relocation of Los Angeles Rodeo Drive. And also we refurbished entirely the Beijing Sanlitun store that is now a real flagship also performing quite nicely. In terms of store temporary close, just an update on the COVID, at the end of the quarter, we had 3 stores closed. Nevertheless, you remember that during the quarter, in particularly in China and also in the month of August in -- sorry, particularly in Japan, but also in the month of August in China, we had some shorter opening hours in our store or some very short, temporary closure. And then moving -- so you can see Page 9, Milano Galleria; Page 10, the pictures of our very nice Chengdu Swire flagship; Beijing Sanlitun; and the Los Angeles Rodeo Drive, Page 12. And now let's move to Page 13. That is also, yes, my last page. Page 13, a very quick sustainability update. I just would like to remind and underline the fact that 30% of Genius outerwear presented in MondoGenius, so in the last show that we had, was entirely made with sustainable fabrics and all bear the Moncler Born to Protect tag. This tag guarantees that the products follow Moncler's strict protocol for sustainable materials. As you know, Moncler's sustainable jacket have been introduced in the 2019 collections. And since full winter and since then, the range has been progressively enlarged and also extended to other categories. So I think with this comment, we end the presentation, and now I will hand over to the operator for the Q&A questions, and Luciano and myself will take all your questions. Thank you. Thank you, operator.

Thank you. Excuse me. This is the Chorus Call conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Susy Tibaldi of UBS.

So my first question would be on what you're seeing now. I know you're quite -- usually quite reluctant to comment on the exit rate or the current trends, but it would be very, very helpful to understand how you saw the progression of the growth during the quarter, especially to understand if you saw an acceleration in September given that that's when your important part of the year starts, and that's when local consumers start to have a higher weight. So to understand if you saw an acceleration in September going into October and any volatility during the quarter. Secondly, thinking about the fourth quarter, again. Last year, you managed to grow 5% in Q4 retail despite having a significant amount of stores closed, which was very, very impressive. Is it fair to assume that this year, the traffic is that it's going to be higher? You're seeing higher traffic than last year, similar conversion rate. And therefore, we should imagine also volumes to be stronger than last year plus a little bit of pricing on top. So if you can confirm how to think about the fourth quarter. And then the last point on the margins. Last year in H2, you achieved a record EBIT margin of 39%, significantly ahead of 2019. There were some one-offs, obviously. But how should we think about H2 now? Because if I'm not wrong, at the H1 call, Mr. Santel mentioned that 28% margin for the full year was a reasonable assumption. Now you had a very good start to the second half with a good prospect for the fourth quarter. So is this 28% a bit too conservative?

Okay. So Susy, thank you for your questions. About your first question, the current trend and the evolution of the business trend in Q3, I mean Q3 was a strong quarter in many regions, not all of them because, unfortunately, Japan suffered. And the reason why Japan was weak was totally because of the pandemic spike in July and August and also the delay in the vaccination plan. Now the vaccine supply is much better than a couple of months ago. And the business not only is doing much better. With the exclusion of Japan, I would say that in Q3, all our regions did very well. Regions like China that were already very strong in Q1, in Q2, in Q3 did even better than the 2 quarters before. Regions like Korea that has been strong not since ever but at least over the past 2 years, also last year, you may remember that Korea kept growing in Q3 was even stronger than before. The same for Americas; and Europe, much, much better. I mean as Paola said, Europe in Q3 did very well, notwithstanding the total lack of travelers that, as you may remember, represent in Q3 or used to represent until 2019 up to 60%, 70% of our business. So a great job that was done with the local customers. Of course, some minor currencies like Australia, still heavily hit by COVID, or Singapore, Taiwan did not fare well at all. But I mean overall, of course, about Q3, we are very happy and we are very happy for the acceleration we saw in Q3. Talking about the beginning of Q4, talking about on the last 2 weeks, I can tell you that October, the very first few weeks of October started pretty well with some kind of acceleration. I mean over the past 2 weeks, the business is doing very well. So again, I suggest a qualitative comment. But I mean we are happy with the way that Q4 started. So far, so good. About your second question, which is about Q4, whether or not we can do in the retail better than last year. I can tell you that for sure, we have a space positive impact because we have more stores. And also, the impact, the space impact that's coming from some important locations like Los Angeles Rodeo Drive. So assuming a better Q4 this year than last year is, as usual, very challenging, but it's reasonable, not unreasonable. Of course, needless to say, when we talk about Q4 -- needless to say, because this is something we keep saying every year at this time, we still have had depend most important weeks of the year. Every day, it's an important day of this quarter. So it's a very -- it will be a very prudent, anticipate stronger results for the year-end. But we are confident because looking at the recent past, business is doing well. And it's not only a matter of business because I mean we are confident about the brand. We are confident about the extraordinary results that MondoGenius event developed around the world and the metrics that Paola communicated are really amazing. So to answer your question, it's challenging but doable. Last question about operating margins is, to some extent, a consequence of the second question, about how we'll perform in Q4 in retail. You are right. We said 28% because we believe and we still believe, honestly, that achieving the same result of 2019 was still very difficult because EBITDA was over 30%. I think that 28% or 29% is a fair assumption, but it will totally depend on the next weeks. Again, we are very positive, confident. We cross our fingers because again, we have had the most important period of the year. But I think that 28% or 29% is something reasonable. Thank you.

Next question is from Melania Grippo of Exane.

Good evening, everyone. This is Melania Grippo of Exane BNP Paribas. I've got 2 questions. One, if you could please elaborate on your -- of the performance that you have done in the U.S. You mentioned that it was impacted by some shifts in wholesale as well as the conversion shop-in-shop into concession. If there is -- if you could please provide quantification on this impact. And second question, if you could please remind us your CapEx budget for 2021 for Moncler as well as Stone Island brands. And also, how should we think on this item for next year?

Okay. Thank you for your question. About the U.S., U.S. is one of the reasons that did better in Q3, actually, Q2 also the business in U.S. and North America, Canada did very well. But Q3, we saw an acceleration specifically in the direct-to-consumer in the retail and online business. The wholesale business -- of course, the business -- the wholesale business results depend totally on the deliveries. And as Paola said before, we started earlier than last year and then the year before to deliver to our key accounts, specifically to our department stores in the U.S. fall/winter product are more than before in June. And this was because the sell-out of department stores and not only in the last spring/summer season was very strong. So they found themselves at the end of the season with no product. And so they requested, strongly requested Moncler to anticipate deliveries of a fall/winter season. And this is the reason why the wholesale business in Q2 was particularly strong. In Q3, of course, there was some kind of a rebound effect because of the anticipation of deliveries. And this is the only technical reason why you see a smaller growth rate in Q3 than in Q2. But overall, business in the U.S. and North America is doing very well. Of course, when we talk about wholesale, we report business results based on what we deliver. But we look much more closely and much more in depth to the sellout of our customer -- overseas customers. And I can tell you that the sellout of department stores in the U.S. is very good not only in the U.S., of course. But now we are talking about the U.S. Of course, the conversion of some shop-in-shop into concession stores moved some business from wholesale to retail. But again, overall, excluding these technical aspects, the business overall in North America is doing very well. And I mean we are very happy. Something I can add is that the business growth would be much stronger should we decide to exclude Hawaii and Hawaii is simply because some brands do exclude Hawaii. And if we exclude Hawaii, the growth rate would have been much, much higher simply because Hawaii business is done with Japanese customers that did not visit Hawaii this year. So business is strongly, strongly down in Hawaii. If we exclude Hawaii, the business growth would have been much, much higher. So U.S., very good. Your second question was about CapEx. CapEx, nothing changed there. We -- at the beginning of the year, I think -- or the end of last year, we said that our target was about EUR 130 million for Moncler only. And that's the point. I mean the CapEx budget for Stone Island is not so big. It is, I mean, less than EUR 10 million. So I can tell you that overall, at the consolidated level, we still expect a CapEx in the region of EUR 155 million or EUR 140 million, including Stone Island. Thank you.

The next question is from Erwan Rambourg of HSBC.

I had 2 questions on China and then another one. I'm wondering if you could explain the acceleration in Mainland China on the 2-year stack because a lot of the -- a lot of your luxury peers have actually seen a slowdown, which was related to COVID-19 cases between late July and mid-August. So is it a question of awareness of the brand? Is it a particular launch? Is it a particular campaign? Can you explain how you're actually accelerating in Mainland China? My second question on China is only the price positioning that you have in China today relative to Milan or relative to Paris, for example. I remember you had quite a premium a while ago. It's probably not very important as the world is shut, but eventually, hopefully, the world will reopen. And I'm just wondering where you stand in terms of that price gap. And then my third question is on MondoGenius to understand if the sales are mostly going to be in Q4 or if the bulk was already invoiced late in Q3.

Thank you for your question. About China, China acceleration is something, to be honest, very, very strong. That is the clear demonstration of the strength of the brand because in China Mainland, we are doing -- the business this year, we did in 2019 with the Chinese customers all over the world. That risk that we have practically offset all the lack of business with the Chinese customers in Europe or in North America, Korea, Japan with the business in the local market in China Mainland. The reason for that, I mean, I think there are several reasons. But in one word, the brand in China is very strong. Any time we deliver -- just to give an example, Genius collection to the first region in terms of results of response is the China fragment did very well. I mean all Genius collections did very well and are doing very well in China. So the explanation is that Chinese customers love the brand. Also, if I look at the results of MondoGenius event, the digital results, I can tell you that 30% of the views we reported came from China. So overall, we are very happy and nothing to add except that the brand in China is really very, very strong. About price and price gap, we still have with China price gap of about EUR 140 million -- yes. Okay. EUR 140 million is not the target we set as a management team. Roberto and I have a target that is to go down to EUR 130 million. It is taking longer than expected. But I think that we will get there probably in a couple of years. EUR 140 million, of course, really to say, is still higher than planned but much, much lower than what it was in the past. Of course, the reason why we believe that we have to further decrease the price gap is not because of business core sales but because we believe that having a more balanced pricing policies across the regions is more a matter of a brand integrity. So that's why we believe that the price gap we had to decrease, right now, is 40%. About -- last question was about...

It was about MondoGenius sales if...

Yes. So MondoGenius sales, honestly, I mean first of all, important to remember that MondoGenius as much as all the Genius event we have in the past was still will be a brand event. That means that what we aim to obtain with this kind of event is strong enforcement of the perception of the brand, of the brand awareness. And the digital results, Paola said before, are very encouraging because we were able to hint people, younger generation customers, new customers in new geographies, new people that probably didn't even know the brand. And so this is extremely important. The business impact of this kind of event is not something we can see overnight. And honestly, we didn't expect to see overnight a strong impact on business even if I can tell you that the online business in September during, before, after the announcement of the event. During the event and after the event has been very good. But again, this is not -- was not our goal. So MondoGenius has been, let me say, an extraordinary brand event, very important for the future.

Yes, maybe important also to highlight that we have several Genius launches presented already on September 25, but that will cover the next 12 months. So it will be every month, one launch. So we started with that . That was the first one, but the coverage will be out of 12 months.

The next question is from Thomas Chauvet of Citi.

I have 3 questions, please. The first one, coming back to retail trends. So the plus 15% to your stack retail growth. You had quite a step-up in openings in the period compared to the first half, particularly in Asia. Could you give us some color on the space contribution this quarter so we can try to derive the 2-year stack retail like-for-like? I mean if my rough calculation is correct, you had maybe a low single-digit negative LFL on a 2-year stack in Q3. Is that sensible? And I guess the acceleration in the first 2 weeks of October suggests you may be already positive. Secondly, on e-commerce, well done for finalizing the internalization of that business, that channel. Can you share the overall growth of moncler.com in the period and the weight of e-comm sales in, I don't know, total Moncler brand or total Moncler retail sales? That would be useful. And finally, with your retail opening plans and the resurgence of COVID restrictions in some parts of Asia, are you still sticking to all your store opening plans for Q4 and the beginning of next year, particularly in China in the run-up to the Beijing Olympics?

Okay. Thank you for your question. About your first question, the 15% growth in Q3 was driven by space. Comp, I mean, of course, we don't make our comp public in Q1 and Q3, but I mean we are still slightly behind 2019. Of course, all the numbers I'm commenting are in regards this year as compared to 2019, not last year, of course. So comp, we are still behind. But the strong impact that came from a space because we opened over the past 2 years several important stores. Let me highlight important because we said Milan Galleria but Paris Charles de Gaulle and Chengdu, and the expansion, the relocation of Los Angeles Rodeo Drive. I'm just talking about flagship stores. I mean Sanlitun actually is not a new store, not a relocation, but important to mention because in the same space, we developed a new store, a flagship store, very impactful, very visible with very strong results as compared to before in the same space. So all of these factors together and many others made this strong 15% growth rate. Retail planning or new openings for this year and nothing changed. So all the stores we have in our plan will be opened and are ready to be open. For 2022, our strategy, distribution strategy in China has not changed at all. Of course, our strategy has been since ever, but sorry to say it again, but you know that Moncler strategy has been since ever very, very selective in all the different regions, including China. We are very happy with the implementation of the strategy to open much bigger stores, much more visible. I just mentioned Chengdu Swire, which is a beautiful flagship store, but I didn't mention Hangzhou, for example, which is another new opening. Actually, it is a relocation in a new, much bigger 2-floor space. I just mention Sanlitun. And I mean, there are other cities we are targeting, mostly Tier 1, but also Tier 2 cities, where we have in our pipeline new openings for next year but still with the same very selective strategy. You know that our business strategy is driven by brand strategy and not by the interest to chase volumes. So it would be very easy in China right now, but it's not our strategy at all.

E-commerce contribution.

E-commerce contribution. Okay. First of all, I mean as Paola said before, an important fact we already commented at the end of Q2. We internalized 100% of our online business. And we started exactly 1 year ago with North America. Then in June -- May, June, Europe; in July, Japan; and just 10 days ago, China. So right now, 100% of our e-commerce business is under our direct control and operations. Results are good, honestly, not only because the -- let's say, the machine behind the scene is working very well but also because by driving the car and directly, we can maximize the opportunities. So online is contributing very nicely to our direct-to-consumer growth.

Just to clarify on the space contribution. So basically, in the third quarter, all the growth came from space. So your retail like-for-like were, on a 2-year basis, down probably low single-digit negative. And as you said, it accelerated in the first 2 weeks of October. So I suspect it's not positive, slightly positive. Is it a fair assumption?

What I said is that comp in Q3, I mean the growth -- the DTC growth was driven by space. And talking about comp, we are still slightly behind 2019. And this is in Q3. Q4 is premature. But as I said before, business started very well. So I mean -- okay, good.

The next question is from Antoine Riou of Societe Generale.

My first question is on the performance with locals in Europe. It seems really, really impressive. Paola, you said that it was growing strong double digit, but if we just take the assumption that locals were, let's say, 35% of sales in 2019. And considering that this year, you have almost no tourists, you should be growing strong triple digit to reach the sales level you reached in 3Q. So that would be interesting to get maybe a bit more quantification on the local's performance versus 2019 in Europe. So that's my first question. The second question is just a quick clarification. Paola, I think you said wholesale should be growing mid-single digit in 4Q. Is that correct? And versus 2019. And the last question is just on Stone Island. Given this is mostly a wholesale business, can you give us maybe your expectations for growth in the fourth quarter?

Okay. About your first question. In Europe, locals did very well. You said that and we confirm that. I think that the company in Europe and the retail team is doing a great job with the local customers and all the clienteling activity and all clienteling that has been developed over the past years is delivering the results that are very strong. And let me comment only on a qualitative way. I can't provide the numbers. But what I can tell you and is something that you know -- I'm sure you do, is that locals in Q3 represented less than 50% of the business. And so by having this kind of results, considering the lack, not 100%, but a very strong lack of tourist at least that the growth rate in Europe with the locals was really very good and very strong. Your second question about wholesale, what Paola said to be precise is that she and we expect the wholesale business for the year-end to be in the region of a mid-single-digit growth rate for all the year, not for Q4.

Compared to 2019.

Compared to 2019, yes, Paola you're right. And so mid-single digit for the 12 months period and not for Q4 -- and this is just to clarify, even if I mean and consider that we have reported today the 5% in the 9 months -- I mean Q4 is not expected to be much different. But in any event, the 5%, 6% or whatever, I mean, in the region of mid-single digit is for the fiscal year. About Stone Island. Stone Island, as you said, is not 100% but 80% wholesale business model. So the vast majority of the business, the majority of the business is concentrated in Q1 and Q3. Also because the wholesale business is more predictable than the retail business, I can tell you that -- I mean the results for this year are expected to be good. I mean I can tell you that. I mean it's not something we normally disclose, but I hope that we can touch and pass the EUR 200 million for the 9 months. We consolidated the brand in line with the cost issues. Of course, the retail business is growing and is growing organically so far. And I would say very nicely, when I said before that October is doing very well, I was thinking of Moncler but not only, we're thinking also of Stone Island that is doing a very good results on the retail side. And so I mean, overall, Stone Island, again, the consensus. So this is something we can disclose because it's much easier to predict. It will be in the region of EUR 200 million. Of course, EUR 200 million consolidated plus what we did in Q1 that, unfortunately, it's not in our figures and it's not in our numbers. But overall, the 12-year period will be in the region of EUR 200 million.

The next question is from Elena Mariani of Morgan Stanley.

A few clarifications from me, please. I mean the first one is on China again. So can I clarify that when you say that you had a strong sequential acceleration in Q3 versus Q2, you mean in the retail comp? So not in the total overall constant currency growth, which would also include the space expansion. And so it leads to this question. Can you clarify what the overall growth of the Chinese cluster was in Q3 versus Q2? And how is that developing into the fourth quarter? And how much is China now overall as a percentage of the portfolio? Because I remember that before the pandemic, that wasn't your largest market in Asia but Japan. So how is that countries now looking like post pandemic? And then a couple of other clarifications. So you talked about online and the fact that now you're fully internalized. Is there any impact of this internalization of the online business that we should know in terms of like P&L? And would now the percentage of online sales out of the total group sales? And then a final question is on MondoGenius because I was really impressed by what you put together. And can we mention that event looks like record-breaking across multiple platforms and social media. In terms of what you're planning over the next 12 months, is there something that will be done differently on the Genius project? Or is it more about the way you're sponsoring the event that has been just such massive so much if this year's event has been great. In terms of like launching events or pop-up, I mean how is the planning looking like for the next 12 months and how different will that be from the previous events? Maybe let's leave COVID period aside. Maybe we can compare it to 2019.

So we hope to have -- sorry. I'm laughing because -- sorry. You had a lot of questions. But on top of it, the line was very, very bad. I don't know if it was here or -- so I think we understood most of it, but in case -- so I'll leave it for -- the first one was on China. And clearly, the acceleration that we have seen when we talk particularly in Q3. We already referred to the total revenues of the business, the market, but I also leave Luciano to comment further.

Yes, also I mean talking about acceleration is -- it makes me smiling because China has constantly accelerated also in Q1. But let's say that Q3, as I said before, was even better than Q2 when Q2 was even better than Q1. But as Paola said, this is not -- this is overall revenue in some important openings. But of course, the vast majority of the growth rate in China is organic for sure because of what I said before. About the Chinese cluster that was the other correlated question, we have Chinese customers...

The question was actually on China as a country. I don't know if I'm right.

Yes. I mean if you can disclose also the Chinese cluster, that will be great.

Also, the Chinese cluster. Okay.

Let's say, the Chinese cluster is still more or less the same percentage basis than before, about 35%. The big difference as compared to 2019 is that right now, that 35% is totally developed in China. And before, the 35% was split more or less 50-50 in China and around the world. And it's about China, and then the second question was online.

Online.

I understood that the contribution of the online business on the total. Of course, the first 9 months is not meaningful. It's much more meaningful to provide the number. At the end of the year, I can tell you that for this year, we still stand in the region of 15%, 1-5, including not only the direct e-commerce but also the online business we do with retailers, which is not much different from what we did last year. But you may remember that last year, there was a combination of a strong online business and a very weak retail and wholesale business. So this was the reason why we jumped to 15% this year. All the business channels are growing very well, and we still expect something in the region of 15%, maybe better, but not much, much higher. And this is something. This is what...

And I think there was also a question on costs related to the online, if I'm not mistaken.

The cost and also the other -- okay. So the cost, I mean, is something we have discussed also in the past. This insourcing project was very complex and also expensive project. Honestly, looking at the numbers, I mean we targeted EUR 15 million CapEx 2 years ago. And we ended up more or less with the EUR 15 million, excluding China because China was on the top of the EUR 15 million. So overall, big CapEx, but not so big, to be honest with you. Of course, what is much more important is related to the landing cost because in order to source such a difficult complex and growing business, we need it, and we still need to make our digital organization stronger and stronger. And so of course, we have replaced a concession fee. We paid before to WinApp with much smaller concession fees. So we pay to the different providers like Salesforce, Riskified, whatever, but also with internal course of our organization. So at the end, we are very happy with the results and very confident that the best still has to come. But of course, all of this project was, as expected, very important also from the cost point of view. On MondoGenius...

The last question was on MondoGenius. And here, Elena, you have to help us. I think I understood you asked what was different this year from the previous one, but I'm not sure.

Yes. Not on the event itself that you've done in September but on the next 12 months. So is there something that is going to be done differently over the course of the whole project?

No, not that much, Elena. I think that with all the collections, we have presented it very well, some better than others. And of course, some collections are more salable, more commercial than others. Fragment is a collection we did since the very beginning. It is still doing very well because of its street style, the design Hiroshi Fujiwara is very well known in Japan, but even at least as much as in Japan and China and around the world. Other collections like JW Anderson is more sophisticated. But I mean, overall, no significant changes and no surprises at all. I mean we are happy about the Genius collections over the past 12 months.

Understood. And sorry for my bad line.

But now it's better.

The next question is from Piral Dadhania of RBC.

Just 2 from me, please. The first is on Stone Island. I just wanted to understand on a medium-term view, as you think about increasing the store count there and increasing the retail mix in line with your multiyear strategy, how should we think about the CapEx that's required to support that growth? I think you said this year, the CapEx for Stone Island is EUR 10 million, which is around, I think, 4% or 5% of sales. Should we anticipate that going up? And if so, to what sort of level -- I appreciate it's small relative to the total group CapEx number. And then just another question on Stone Island. Is the Stone Island e-commerce platform sitting on your newly formed internalized digital platform at Moncler? Or is that still a project that needs to happen? And then secondly, just on supply chain and raw materials inflation. I think if I'm not mistaken, you are suffering from some delays in getting certain fibers of raw materials out of Japan into Europe. Are you seeing any sort of ongoing pressure in terms of your overall supply chain? And as we think about peak trading in 4Q, how is the business set up for auto replenishment and being able to supply products for both our retail stores and wholesale accounts as they fell through?

Okay. Thank you for your question. About our long-term view on Stone Island, it is totally unchanged. And it was the base and I would say the reason why we want it. And at the end, we accomplished this kind of, let's say, wedding between the 2 brands. And the long-term view is, first, long-term brand view. And that means that, I mean we believe in the brand more than in the short-term business. Talking about the business, we also believe -- strongly believe in the opportunity that Stone Island, the brand, has had in the future by developing the retail business. But we also believe that at first, we have to develop together with the Stone Island team, a stronger retail culture, which is something that we have been working on altogether as a team during this year, and we will keep working in next years. And then to open -- to start opening on a very selective basis some new stores in geographies where we believe that we can announce the potential of the brand. Talking about CapEx, you said correctly. I mean CapEx in Stone Island right now, are very low because I said before that they are less than EUR 10 million this year as compared to EUR 130 million of Moncler. And of course, a significant part of that EUR 130 million have been spent and saved for the retail development. Of course, what we expect looking at Stone Island is that this amount in CapEx will grow. But what we look at is the percent of CapEx in the future on the total top line that is expected not to grow more than the 6% to 7% we reported for Moncler. So I mean it will not be a drastic change in the business strategy. It will be a step-by-step development of the retail business. Of course, CapEx, you're right, will grow for sure, also because we believe that working on the store format is something extremely important to maximize the perception of the brand. About Stone Island online. You said something extremely correct, even if I don't have a precise answer now. I mean the online is right now operated by WinApp -- is powered by WinApp as much as it was the online business a few months ago. We have -- in our plan, we are looking in our plan at the opportunity to integrate under one platform for that business. But honestly, it's not something we want and we are in the position to anticipate right now also because, honestly, it's not -- we don't believe this is a priority in the short term. But for sure, in the future, we will evaluate this opportunity also to take advantage of the -- all the work that has been developed with the internalization project for Moncler. Last question.

On supply chain.

Very big question. I mean I will try to make long story short. First of all, about the example of Japan, it probably came out in some meetings, but I mean honestly, I can tell you now that, of course, we experienced the problems this year, but honestly, looking at the results, nothing particularly impactful on our revenues, really in one world. That means that at the end, notwithstanding problems associated with COVID, associated with the increase of raw material prices. I think that this year, so far so good and let me cross my fingers because the problem is that -- the problem is not over yet. So I mean, we are very -- monitoring very closely every single day the situation around the world, which is not only the raw materials, the technical fabrics we buy from Japan. But it is also the production we make in some regions like Romania, where unfortunately COVID, it is still a big problem. Of course, we are also experiencing an increase in the cost of raw materials. Even if I can tell you that we don't see a material impact on our margins for this year notwithstanding the fact that we have not increased the prices this year. And we plan to increase our prices only in the second half of next year. It will be a high single-digit increase, price increase to offset the important price increase of raw materials, of transportation, also, of labor cost. So the situation is something that -- I mean we are not worried about. But for sure, we are monitoring the situation constantly and very, very closely. But again, so far so good.

The next question is from Karina Shooter of Goldman Sachs.

Congratulations on the full internalization of your online business. I realize we've had a couple of questions on it this evening, but just to take a little bit more of a medium-term view, could you just help explain to us the benefits of that can bring in terms of your omnichannel initiatives? And can you also update us on your online strategy going forward and whether that's still on track with external partners? I think in the past, you've talked about the potential for a Tmall flagship store for instance, any update there would be great.

The first question is on the benefit of internalization of online in terms of omnichannel.

Okay. I mean I think that this utilization was needed, necessarily, I would say, special step to develop the omnichannel because by having one channel directly operated and the other channel operated by separate parties, is very difficult to implement a real strong omnichannel strategy. So right now, we have had a strategy to really implement the omnicanality, starting from the services we can provide to our customers. Of course, you know that we already started in the past, even though we were still under WinApp, the so-called click-to-store. That is something that resulted to be very, very important, very successful not just for the business we developed but because we were able to meet our customers' request in the stores. Any time that size of that style was not or is not available in the store itself. But of course, this is only one example. Another important example of omnicanality of omnichannel regards the so-called one pool inventory. Of course, in the past, our inventories for the line were also physically separate because one was under the WinApp warehouse and the other warehouse. So right now all the inventories of all channels are in only one warehouse per region. So we have here in our center hub in Piacenza all the inventory for all the channels. This is extremely important to move inventory or simply the allocation of the inventory, not just physically, but to allocate the same inventory to the different channels depending on the different demand. So this is something that we are experiencing very positively right now. But I think that in the future and the next year and the year after will be an important factor of growth of the Marina business. So this is -- and the question was also...

The second one also the -- in concession.

Concession of Tmall also?

Yes.

I mean the concessions is a business that has been growing very strongly over the past few years. And you know that we are converting some of additional businesses into concession like mytheresa and not only in the future, but I mean the conversations are still in -- work in progress with our partners. And that business has been growing very nicely. Honestly, let me say it again, still under the same, very selective strategy to work only with high-end customers with high-end retailers and only under the volumes, we believe, are proper for that channel. About Tmall, I mean the conversations are open with them as we said. And I mean we will not have anything beside the 100% with them. But of course, this may be something that may happen next year.

Okay. I think we now have the time for the last question. So operator, if you can open up to the very last question.

The last question is from Paola Carboni of Equita SIM.

Yes. I have 3 questions. First of all, about the acceleration you have mentioned for the month of October. I was wondering if you can provide some color about the geographies which improved the most compared to the third quarter on a 2-year stack. Further questions, still looking at the fourth quarter, we saw last year a strong acceleration from Q3 to Q4 about 20% more of growth from Q3 to Q4 in comparison to 2019. Do you see any reason for a different performance this year in going from Q3 to Q4? I would say actually this year, you have even the support of the very recent launch of Genius. And so should we expect the same magnitude of acceleration in comparison to 2019 between Q3 and Q4? Or is there any different dynamic to be taken into consideration? And the third question is instead on the cost side. Now that you have completed the internalization, the in-sourcing of e-commerce operation, should we expect that some of the duplication of costs you probably experienced in 2021 will disappear in 2022? And if so, what kind of uplift could we expect -- uplift in margin?

Thank you, Paola. About your first question, October acceleration, I mean we see this kind of acceleration in a good result, let me say good results in all the geographies. The only geography I would like to mention because I said before that it was very weak in Q3 is Japan. That right now is recovering very nicely. But other than Japan, all the other geographies are doing well with some exceptions because we still have Australia with stores that are partly closed. So I mean, not all exceptions. I would say that overall, all the regions are performing well. About the increase of Q4 as compared to Q3, you said that 2020 or 2019?

[indiscernible]

Because 2020 was quite unusual year in 2018. And the growth of Q4 compared to Q3 2018 and this year, I mean it's difficult to predict, but I can tell you that, I mean, Q4 is normally much stronger than Q3 for our retail business. So the assumption to take 2019 and maybe something reasonable. But again, what is important, what I said before, I'm not sure I said. But in any event, the market expectations represented by gross sales for this year are reasonable. So you can take those numbers as a reference. Cost side of the internalization for sure, we have increased our cost. I said that before, for the investments we have made in our organization with some double accounting, as you said correctly. Next year, we will not have a double accounting. But in any event, the double accounting impact is not so significant, honestly. So I mean it's not something that we will significantly improve our margins over the online business, the lack of double accounting costs. What we expect, what we believe and what we aim to is to maximize the online business for the next year and the year after by taking advantage of the machine that now is totally under our control.

Thank you, Paola. And I think that with this question, the -- our call tonight is going to end. So of course, we are here, my main colleagues, Alice, Carlotta and myself, we are here. If you have any follow-up questions, please feel free to call us or to write. In the meantime, we thank you very much for the time, and we wish you a very good evening. Ciao to everybody.

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