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 Full Year 2021 Financial Results 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. Please go ahead, madam.

Thank you, and good evening. Good evening to everybody, and thank you for being here today on the Moncler full year 2021 financial results. As usual, I will introduce the speakers on today's call. Moncler Chairman and CEO, Mr. Remo Ruffini; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Brand Officer; and Luciano Santel, Chief Corporate and Supply Officer. With us tonight, there is also Carlo Rivetti, Stone Island CEO. Before starting the presentation, sorry, some boring part, I need to remind you that this presentation may contain 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. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of Moncler to control or estimate. And now I leave the floor to our Chairman and CEO. Thank you.

Good evening, everyone, and thank you for attending our call tonight. 2021 has been another remarkable year. A year in which, even in the pandemic, has continued to shape our life on our way to do business. We have not only delivered strong results but we have completed important projects that have reinforced our group and our brands. This is the moment in which I'd like to share with you some of our achievements, but even more our many future projects. Talking about achievement. First of all, let me say that I'm extremely proud that in 2021, Moncler Group passed the EUR 2 billion revenues and generated EUR 550 million of free cash flow. Both our brand revenues result well above the pre-pandemic level with a strong acceleration in the last 3 months. I'm also proud on how the Moncler brand has continued its strong momentum, increasing its size. But on this, I will leave Gino after to comment. And I am also satisfied on how the integration with Stone Island is proceeding. Not only our corporate function has been integrated, but also from January 1st this year, we have started managing directly the Korean market, while we have launched many projects to spread the direct-to-customer culture. And I am happy to see that Stone Island brand continued to maintain an extra rebate, not only supported by some activities in event, but even more important by the strength of product 2022 collections have been very well received. In particular, the fall/winter 2022 sales campaign started in January, and we are extremely happy with the feedback and orders, while keeping them tight and selected. But above all, I'm really proud this year on how the group has integrated sustainability in all action, in all projects, in any division. In 2021, we have further reinforced our effort and result. I believe that the team is doing amazingly not only for all the projects, of the important recognitions received, but even more because I do believe that the Sustainability Division has been able to truly spread the sustainability culture in the all group. We feel all very committed. We have huge challenge ahead of us and only united as a company and as a sector, we can move mountains. Moving to 2022. My first thought goes to today events, a situation that is touching all of us and for which we hope for a prompt and peaceful resolution. We know that this year uncertainties remain, but we are ready to face them. We have unique talent, some of them jointly recently in Moncler in Northeastern Ireland. And more importantly, we have a solid vision. We want to shape the future of our group knowing that communities, sustainability and digital are the core of our actions to continue to keep our customers at the heart of our work. You know that in our group, we always push for higher peaks. And we have a deep pipeline of projects for 2022, some of them also shape to celebrate important anniversaries for both of our brands. However, I will not anticipate too much tonight because we have -- we are going to have a Capital Market Day, the first with also Stone Island on May 5. So don't try to get us anticipating much. We'll keep all secret until May. Now I leave the floor to Gino to more details on Moncler brands. Thank you.

Thank you, Mr. Ruffini. Good afternoon to everyone. We're moving to Slide or Page 4, and I will touch base on some of the brand highlights. I have to say this quarter was an incredible quarter for the brand on top of the great results we got and we shared with you in Q3 regarding MondoGenius, right? So few things I want to highlight from here. Of course, the first one is the announcement and the launch of the partnership with Inter Milan, which got an incredible positive sentiment across consumers, especially here in Europe. And of course, we have the opportunity to get not only a strong reaction from media, but on the back of that, we were able to launch product exclusively at moncler.com, which were sold out in just 2 weeks. The other big -- among many other stories that are important stories, we were able to be back on the communication of our Moncler collection, which is our -- one of our core businesses with the launch of the We Love Winter campaign, which was featured across key markets around the globe with very, very strong success, not only in terms of the engagement and the visibility of the campaign, but of course, in driving the business to new heights as well. Last but not least on this slide, I just want to comment on the Born to Protect, something that Mr. Ruffini just mentioned in terms of our commitment to sustainability, we just did, what we believe is a great brand statement. And more importantly, we are extremely proud to start backing up our sustainability plan, not only from all the actions we are taking internally, but all the commitments that we are pushing out and the communications we are doing around it. We move to the next slide, just a few other comments. Of course, on top of everything I mentioned a few other things happen in terms of the world of Moncler Genius. First of all, we were able to launch a new project with Alyx and Matthew Williams regarding Moncler 6. And this include some work that we did around Fortnite as well in terms of skins, which provides a lot of learnings for us in terms of how we can keep finding new ways to connect with customers and communities around the globe. Secondly, we launched the Palm Angels collection during Miami Art Basel and then after that, around key markets with another strong success around this collection. Not only, again, in terms of just the revenue we're able to see, but the impact in terms of how this is connecting multiple markets around the globe. Last comment from my end on the brand highlights is around the introduction of the House of Genius, something that we work in partnership with David Fischer, which is the Founder and the Chief Editor for Highsnobiety. And this includes multiple executions, including some pop-up retail like spaces like Selfridges in London or collaborations with Hoka footwear, which was very successful in terms of the sell-through when we launched this project. So these are just some of the highlights. What I want to do now is to leave the floor to Mr. Roberto Eggs, who will talk a bit about the financial results.

Just one comment maybe also on Stone Island brand and what has been done. There are too many events that we have featured at the end of Q4. One was a music event with the lineup of musician as part of the Stone Island Sound program in London and Milano and second one an art-meets-motocross performance in Miami during Art Basel . Regarding the full year revenue of Moncler, Remo already preempted the fact that we reached for the first time the EUR 2 billion mark for Moncler and Stone Island together. The results of the fourth quarter were really good, and they were further accelerated above the pandemic level, so which is plus 30% compared to 2019. If we look at the detail of this EUR 2.046 billion that we did, this is a plus 44% compared to 2020 and plus 28% compared to 2019. And during the last quarter, I would like to highlight here, especially the growth that we had compared to 2019, which is a plus 40%. Moncler, as a brand, for the full year revenue 2021, EUR 1.824 billion, which is a plus 28% compared to 2020 and a plus 14% compared to 2019. Last quarter has seen an acceleration with a growth rate of plus 30% compared to 2019. Regarding Stone Island, the 9 months consolidated revenue starting from first of April were EUR 222 million and the last quarter, EUR 66 million. If we move to the Moncler revenues by geography, I will comment the performance compared to 2019 as we believe that this is a more relevant benchmark for us and at constant exchange rates. In Q4 Moncler brand further accelerated, reaching double-digit growth in all regions. Chinese Mainland continued to be the main growth driver, followed by Korea and North America. Asia, which includes Asia Pacific, so Mainland China, Greater China, Japan and Korea represent 49% of the full year revenues, with an acceleration in Q4 and reached a plus 39% growth, driven by exceptional local demand in all markets, including Japan. In Q4, Mainland China and Korea continue to post outstanding results. Japan returned to solid double-digit growth in the last part. EMEA revenues, which represent today 1/3 of the total revenues of Moncler posted a significant acceleration in Q4, rising well above pre-pandemic level with plus 16%, driven by strong local demand and outstanding performance of the direct online. We have seen also a return of the tourist intra region. Americas, 17% of the full year revenues continued its exceptional results with a plus 31% in Q4 with the positive contribution of all channels and, of course, DTC and the online outperforming the total revenues. If we look at the Moncler revenues by channel, Moncler brand DTC revenues represented 78% of total. So back to a kind of normal similar to 2019 with a total turnover of EUR 1.429 billion, which represent a plus 16% compared to 2019. The fourth quarter direct-to-consumer revenues strongly accelerated up to 31% versus 2019. The comp growth in 2021 was plus 23% versus 2020 and plus 1% compared to 2019. Direct online channel almost doubled, so plus 100%, also boosted by the successful internalization of the .com that started in 2019 with Korea and was completed last year. In 2021, Moncler opened 18 stores. Among them, the most important one in the last part of the year were Milan Galleria and Chengdu Swire. Wholesale revenue, 22% of the total sales reached EUR 395 million, so a new record for Moncler, which represent a plus 15% compared to 2020 and plus 8% compared to 2019. In Q4, wholesale rose 19% versus 2019. I pass the word to Gino for the online.

Okay. So as Roberto mentioned, I think the results we get in to our .com business have been very strong. We were able to double our business against 2019. The total online business reached 15% of the total revenues. But I think more importantly, I think one of the things that we want to really measure against is the level of engagement we are finding against consumers, right? It's not just about reaching those numbers. And I think those numbers were a consequence of the great work the team was able to do in terms of engaging and bringing consumers into our platform. So that's why we were able to see an increase in traffic by 30% versus the previous year. Again, just a comment in terms of engagement, and the way the team was working, campaigns like We Love Winter were able to bring 1 million people traffic at the week of the launch. And that was, for us, unprecedented. The other big thing for us is start looking at membership, something that I think we are starting to showcase for first time, which is log-in customers. So those who are able to join us in a way and for us being able to understand them better and serve them better more one-on-one. And then, of course, the other big thing for us in terms of engagement is to see a 60% increase in terms of the product page view, which is people spending more time than standard in understanding the story, understanding the product and engaging with our platform way longer. Last but not least, we always discuss in the past few calls about our focus on China. I think we are starting to see a really strong performance on WeChat, but more importantly, we are planning our Tmall launch on Q3 2022. So more news there. And then of course, we will keep improving and going deeper in terms of our social media presence around, of course, Western and Asian channels moving forward. So with that said, I will go back to Roberto.

Thank you. I'm sure that you are eager to hear more about Stone Island and the revenues for the first year with Moncler. Stone Island, as you know, consolidated figures started from first of April 2021 and contributed EUR 222 million to the full year group results, including the unconsolidated first 3 months, so from January to March 2021, the total full year revenues of Stone Island reached EUR 310 million, which represents a 35% growth compared to 2020 and a plus 26% compared to 2019. In full year 2021, consolidated EMEA results accounted for 77% of total revenues in Italy, the most important market in EMEA contributed to more than 1/3 of the total revenues of the region followed by U.K. and Germany. Wholesale business contributed to 78% of total revenues of Stone Island, which is the opposite of Moncler. Moncler is 78% in retail and D2C and 22% in wholesale. Here, we have still a business that is still very much a wholesale business, but direct-to-consumer performance has been driven by solid organic growth and some new openings. Direct online remained strong and accounted for some 30% of total direct-to-consumer. Main openings for Stone Island during the year have been Paris Galeries Lafayette [indiscernible] New York City and Shanghai, iApm. If we look at the total number of stores for the Moncler Group, we have now 267 stores at the end of December '21. 237 are Moncler stores, 30 are Stone Island stores. What are the change that occurred in Q4. Moncler opened 4 new stores. The most important are Milano Galleria, Copenhagen, Zurich Globus and Chicago. And we had also some important relocation like Roma Piazza di Spagna with an expansion where we doubled the size of the store. Stone Island openings were unchanged, but we have been working now during the last quarter of the year, working on the joint venture for the Korean market that we have signed, and that is effective since the first of January 2022. And we switched 23 mono-brand stores that were handled by our partner, importer into retail. So we are currently in this phase of function retail excellence in Korea, and we have now 24 -- 23 more mono-brand stores with Stone Island in the network. For people having visibility of the presentation, you'll see a picture of the store, fully renovated store of Piazza di Spagna, which was pre-pandemic, one of the stores with the higher sales density in the network. So we hope that this is going to be a new start for us and the other one is the relocation of Chicago, which is now a flagship store of 380 square meter that we opened at the end of the year. Thank you.

Okay. Thank you, Roberto, and good afternoon, everybody, and thank you all for attending our call today. We are now at Page 15, where we report as we did at the end of the first half of the year, a bridge between the income statement reported and adjusted. The adjustments are totally related to the Stone Island transaction and regard a small portion of the purchase price that has been allocated to the Stone Island order backlog and released during the year for EUR 20 million and some legal cost associated with the transaction for EUR 3.6 million. We believe that the adjusted income statement more properly reflects our business results, and it is a more fair comparison for the upcoming 2020 results that we report this year. Page 16. We report income statement of 2021 as compared with 2020, as usual, but also as we did for this year with 2019, that is more meaningful fiscal year. The top line has already been presented in detail by Roberto and Gino and we report a 42% growth rate with a 76.6% gross margin, a little bit lower than the 77.7% reported in 2019. But again, this is due to the inclusion in our perimeter of Stone Island business, which is, as we said, a wholesale business model company with a lower gross margin of about 60% as Moncler has in the wholesale business. So the weighted average makes this number a little bit lower, but just to let you know, even if we don't report results for this brand, I can tell you that Moncler brand only gross margin was higher in 2021 than in 2019. The other side of our business model is included in the selling expenses that are lower than in 2019 for the same reason, Stone Island being a wholesale business model has lower selling expenses that are normally more in the retail business model. And again, just to let you know, Moncler brand only reported selling expenses totally in line with 2019. So with a small improvement, which report a better retail business productivity this year than in 2019. G&A. G&A, 11.4% lower than last year, but significantly higher -- 1 point higher than in 2019. Again, this is something we normally tell you. I mean, we want the organization to become stronger, stronger to face all the challenges and the complexity of our business and specifically important to remind you that in 2021, we in-sourced, we internalized our online business. And over the past 2 years, we have invested a lot to build a strong digital organization. This is an example. But of course, we have invested and keep investing in the supply chain in logistics, information technology, retailers. So all of the different areas of our business, we keep investing in talents and in people needed to make these results happen. Marketing is slightly below the 7% of 2019, but this is, again, only because Stone Island still has -- or still had in 2021 a much lower marketing budget, to be clear and transparent with you, the marketing expense of Moncler brand only was even higher than 7% in 2021. For the upcoming years of 2022 and after, as you know, as we said other times, we plan to increase the Stone Island marketing budget and at the end to reach 7% that will be -- still is our, let's say, golden rule. EBIT at 29.5%, slightly lower than 30.2% we reported in 2019, but much higher than what we planned and expected at the beginning of the year when we said we should end up between 25% and 30%. So we did the better, we are very happy about that. Only one comment on tax rate simply because you may see, and I'm sure you did see, 29% much higher, I mean, back to normal. So it is also a good indication for the future and much higher than we reported last year and the year before when we still had the tax benefit of the Patent Box in 2019 and the tax benefit in 2020 coming from the tax realignment of Moncler trademark. Okay. Let's move now to Page 17, where we report CapEx. CapEx, I mean, nothing particular to highlight. I mean, now EUR 125 million, 6.1%. So better than what we did in 2019, better, I mean, we invested a little bit more also due to the fact that we report in this number also EUR 6.5 million of Stone Island CapEx. It's not a big amount. Something more important to comment is the future than 2021, for 2022, we plan a total CapEx budget of EUR 106 million, more or less. And the CapEx budget for Stone Island will be much higher in the region of [ EUR 20 million, EUR 25 million ]. So of course, we will start to invest more and more so in the distribution, in the retail channel that is, of course, a part of our strategy, as you know. Let's move now to Page 18, where we report net working capital with a very, very low net working capital very, very few times because considering that in this number, we report also Stone Island, again, since it is a wholesale business model, it normally reports higher net working capital. This 7% is lower, I mean the lowest ever. This is for a couple of reasons. So there are some reasons associated to business, I wanted to highlight and to celebrate because we still have a very efficient inventory management. We still have a very strong credit control. Also something important to highlight is that thanks to the internalization of our e-commerce business, we have an improvement of our receivables because, in the past, we had the receivables versus [indiscernible]. Now we cash directly -- we collect directly cash when we sell the product online. And so I mean, altogether, receivables and inventory are very good. Something quite unusual is payable that is about EUR 30 million higher than what it should be, normally it should be because we shifted some payments to our suppliers from December and January in part because of some different cycles and different timing of the production cycle. So the fair net working capital would be about EUR 30 million higher, still, honestly, very, very good, but not so much. Next page, Page 19. Of course, the other side of what I said, cash we reported at the end of the year was EUR 730 million, even if you take out the EUR 30 million total before that are extraordinary still EUR 700 million cash that is much better than what we planned at the end of the year. And honestly, I think much better than what the market, the financial market expected. Only one comment about the dividends because today the Board approved the proposal to our shareholder meeting to distribute EUR 0.60 per share, which is about 40% payout. Next page, please. The balance sheet. Honestly, I don't have anything to say unless you have questions later, so we can move the age to Page 21 where we report a cash flow statement with an amazing cash acceleration, with an amazing free cash flow. Let me highlight, amazing, not just because we wanted to celebrate our business success, but also because we wanted to mitigate the market expectations for the future. This consolidation has been over our expectations, but also because you know that the cash flow is the comparison of 2 pictures of the financial situation in 2020 and 2021. 2021 was very strong. 2020 was very weak because of everything. And that's why we generated a lot of cash in net working capital, EUR 92 million, which is quite unusual. This is why we generated EUR 52 million in other asset liability, which is quite unusual. And so I mean, I'm ready to answer your question, if any about these 2 lines that are quite extraordinary. But just to let you know that, again, the EUR 550 million are the result not only of very strong business results, but also of some unusual, let's say, balance sheet items. Okay. Corporate update. I mean, just a comment on some important projects and events, Stone Island integration. I mean, we keep working together as a team, as a family, with Stone Island, as a team with the Rivetti family with very, very good results. One important result that Roberto already highlighted is the internalization of our distribution in Korea through the joint venture that is up and running since January '22. And also the integration of our information systems so that is on plan for this year. I mean the information systems associated with the distribution for sure this year and the rest for next year. Information technology, an important update about an unfortunate event that you all know, right before Christmas, we suffered the malware attack. As you probably know, we had a temporary outage of our information technology systems with exception of the systems in-store and e-commerce that fortunately continue to operate. The data systems have been reactivated in a few days, starting from, of course, the systems more associated with the business transactions. So I mean, that's been a very unfortunate event, but in anyway, now all the systems are up and running again since early January. About the Moncler production capacity something important to update you if -- it's something we already discussed about, which is the new facility, production facility we are building in Romania in the same area where we already had our production facility. This will be ready in Q3 of this year in [ October -- I mean ] starting from September, October, with the final goal final ambition to double our own production capacity in that facility. Okay. Page 24, sustainability. I mean, many, many projects, many activity. I wanted to highlight only a couple -- 3, actually, I like -- I personally like more. One is that we have almost eliminated all single-use plastic. The other one is about Born to Protect. I mean, this is the first -- the second bullet point. 30% of our Moncler Genius collection is made entirely of sustainable fabrics under the label, Moncler Born to Protect. And the other one I like -- I personally like very much is the project to recycling certified down. I mean we take all the leftover garments, we extract, we take down, we clear it, we regenerate it down, and then we use the same down in new products. And this is happening now, and will be now a collection in the fall/winter -- upcoming fall/winter '22. Okay. I think we are done. Thank you very much, and ready to answer your questions.

Yes. Operator, we can open to the question-and-answer session.

[Operator Instructions] The first question is from Melania Grippo with BNP Paribas Exane.

This is Melania Grippo from Exane, BNP Paribas. I have 2 questions. First is, of course, you had a very strong Q4, and I was wondering since year started, have you seen any changes in the environment, in any particular countries? Is there anything to call out? I mean have you seen changes in customer behavior, willingness to spend? And my second question is actually a clarification. You mentioned during your presentation, the CapEx for both Stone Island and Moncler, if you could please repeat because I did not catch. And also if you -- I read in your presentation that you opened quite a few pop-up in 2021. Can you say how many? And if you intend to open them in '22, and in case how many?

Melania, I'll start maybe with the trend at the end of the year and the start of 2022. As we said, strong acceleration in Q4, especially strong months were October and November. And overall, it was a growth that was double digit in all markets, including Europe, where we even had a positive comp compared to 2019 in Europe driven by the return of the local tourists, especially in city, in capitals and touristic areas in the apps. And a strong also growth in China, strong rebound also in the U.S. market. And Japan, that did suffer a little bit due to some closure of stores in the Q3 had also a good end of the year and a good start of 2022. And if I just give an indication for the start of this year, we are on average for January, February to a similar growth rate that we have experienced during Q4 for Moncler and similar also for Stone Island.

Okay. Melania, about your question about CapEx. Of course, I think you referred to 2022. Our total CapEx budget is EUR 160 million. We plan for Stone Island about EUR 20 million, EUR 25 million, which is 3x what we spent for Stone Island in 2021, so much more, but still much less than what we are spending for Moncler. This is due to the fact that, again, this year, we will start to invest in the new stores, but the year after in 2023, I mean it's premature to comment 2023. But of course, with the extension of the retail network, we will spend in CapEx more for Stone Island than what we spent last year and this year. I think I answered your question.

Yes. I think there was a question also regarding the pop-ups were roughly 10 pop-ups that were opened during -- to sustain the big event, MondoGenius of September and similar number of what we call pop-in, which are dedicated areas in key flagship stores for Moncler also at the end of the year.

Yes. Excuse me, just one thing, just a clarification on your January, February trend. When you said that it's similar to Q4, is this year-on-year?

Yes, in terms of growth rate, yes.

The next question is from Elena Mariani with Morgan Stanley.

First of all, congratulations on your EUR 2 billion sales milestone, that's impressive. I've got few questions for you. The first one is your view on the U.S. market. We've been discussing a lot about the U.S. with investors and with companies. And I was very keen to get your view particularly given the sequential acceleration that you've seen in the fourth quarter. We've heard that there is a new consumer emerging, a new consumer that is very focused on [ urban style footwear ], but at the same time, there are clearly risks to see a slowdown or at least a growth normalization. So what is your view on this market? And how sustainable do you think this demand is going to be going forward. That's question number one. Question number 2 is on China. I was very curious to know whether you think you have benefited from the Chinese Olympics. I'm not talking about solely the specific last few weeks, but everything that you have done with the brand, the collaboration, the pop-ups. So do you think that this has helped you over the past few months when it comes to brand awareness? And do you see the Chinese getting closer to winter sportswear? And do you see this as continuing going forward? And then my final question is for Mr. Ruffini. I mean, the sector is becoming more and more consolidated. There is a lot of cash being generated. I mean we all know about the sector dynamics. In terms of long-term vision, would you see yourself as a larger brand aggregator perhaps expanding your portfolio to diversify into footwear or other complementary brands and categories? Or do you see the current perimeter of the group as the right one for the long term? Here, I'm not talking about the next couple of years. I know you're very busy with Moncler and Stone Island, but what's your ambition for the long term for the Moncler Group?

Okay. Let's start -- first of all, thank you very much for the question. We will start with the U.S. comment. I think again, definitely, we're seeing strong reaction from that market. We agree with your comment in terms of the opportunities we have there. I think we start seeing a lot of strong connection with the brand, especially on the East and West Coast, key markets, I would say, especially in New York. But then we are seeing some strong results in other cities as well. So this is something that for us, we are focusing on, and you will see us working heavily towards that market as well and the opportunity to even open up to this new luxury consumer that you were mentioning that is super strong in the U.S.

To complement the answer of Gino, I think what we have seen interesting is growth on the younger generation, generation Z and Millennials that have been one of the strongest together with Europe and the Chinese market. So I think this is, I think, the way we communicate the product that we are offering and the way we position the brand is really getting into the trend that is currently working very strongly on the U.S. market. Also a very strong and positive reaction to the new website, where we have been able to generate strong triple-digit growth compared to 2019. So I think in terms of conversion is one of the markets where the fact that -- of first managing direct and having a different look and feel and a way to communicate on the website has been a real success. And we see also that in terms of demand of clients coming back to stores, this has been very strong with the opening of the new Los Angeles flagship store that we have with the opening of Chicago. And the project that we have for this year in Miami District, Detroit and Dallas, we see a potential for Moncler to growth. Ultimately, we have only 26 stores currently in the U.S. plus 10 [ shop in the shops ] so 36 for quite a large market. I think there is still potential to grow to invest on the market. And we have also developed a very strong relationship and bond with the department stores, and we see there possibility probably in the future to move some of the business that we had in wholesale into retail concession business or part of the e-commerce business that is becoming very, very important for the department store. So I see a lot of positive signs coming from these markets. I continue maybe...

1 last comment, just discussing as we are hearing Roberto talking about the U.S. as well. I think the other thing that we're seeing strong signs from customers is around footwear in the U.S. as well, and that's another opportunity for us that we believe is very important for the brand and very important for the U.S. market as well. So that's another important topic that we wanted to add at the end on North America.

The second question was regarding China. And we are all very excited about this -- the trend -- this trend is move that China is showing towards winter sports globally. I think the Winter Olympics have been a kind of accelerator, but the trend was already there, probably because they were preparing to the Olympics. So we see more and more people that are interesting by ski, and we believe that we are probably one of the most legitimate brands to communicate on this because we were born in the mountains. We have, for 2022, a strong plan for the end of the year in terms of pop-up to join the previous question of Melania, strong activation that is foreseen for the end of 2022 also a big event that we're preparing for the 2022-2023 collection.

So talking about the cash you say, I think since ever, we're looking forward to have a very, very solid company. And having said that, we just make a big acquisition for us, amazing brand that is Stone Island. We have a lot of things to do. Stone Island is super successful brand, especially for the young generation. But we will -- as Roberto say we want to really turn company into direct to customer, with the direct customer approach means we need really time to redesign the organization. As Carlo always say, it's not a revolution, but it's really an evolution of what they did in the last 4 years, means that we have a lot of things to do, and we really confident that we can go straight to the customer to not filter between us and the market, and we can build really a very strong brand. This for sure is the midterm. For the long term, I don't know. Again, we do not plan to make any acquisition. But last year, for example, Stone Island happen, but really, in our mind, is really to concentrate to build up a strong family. As I said, we have 2 fantastic brands, and we have really a lot to do.

The next question is from Susy Tibaldi with UBS.

So my first question was on your inventory. We know that you have a very strict management of inventory, and you always say you prefer to end with too little rather than with too much. So I was just wondering, in Q4, the demand has been really exceptional. And we know firsthand that going into stores many products didn't have a lot of sizes left, so I mean, how -- do you think that -- I mean, obviously, the demand was clearly ahead of what you had planned in terms of supply. Is this something that you can, let's say, how quickly can you adapt to the kind of demand that you see in the market? And if it's fair to assume that perhaps you also held back a little bit of inventory because you were thinking about the upcoming Chinese New Year. Secondly, on the space expansion, this year, space was up 10% year-over-year, and it was higher than you initially indicated at the start of the year, I believe. And I think already for few years, perhaps space always tends to end up the year a little bit stronger than we initially expect, which is great because it means that, I mean, you're doing really great, the brand is evolving and expanding. So how should we think about the space component going forward? And also, it seems you are moving more towards this idea of opening the flagship where consumers can really, really experience the brand very well. So it would be great to have an update there. And perhaps just one last question on your EBIT margin. So this year and below the 2019 level, which is something that you were already very upfront in saying that, that was going to be the case. And how should we think about the margin going forward? Your like-for-like has returned to and exceeded pre-pandemic levels. You have e-commerce, which is accretive. You're -- there's upcoming price increases coming as well. Should we expect these -- all these positive factors to benefit the margins in 2022? Or are we in a situation where you actually, at this stage, you prefer to really invest in Moncler and also Stone Island? And so your priority is your top line rather than your profitability?

Okay. Thank you for your question, Susy. About inventory, of course, as usual, we may run out of summer sales, and this is case for everyone, and this was, for sure, the case in Q4 in December. Having said that, I mean, we ended up with about 60% of sales rate at the end of December. That means that we still had another 40% available for January and February. January, February business, as we said before, is doing well. Of course, January and February business is driven not only by the fall/winter inventory, but also by the new spring/summer inventory. So [indiscernible], honestly, I think we are in a good stock position to face our business demand. But again, of course, this is something important to reiterate, I believe I'm sure you know that, but we prefer scarcity, we prefer to run out of inventories rather than having at the end of the season to match inventory. So this is part of our strategy, or philosophy, if you want. About space growth, I mean, of course, needless to say, our space growth strategy has been driven over the past years and that will be driven in the next future, more by expansion of our existing stores than new openings. And this is important from the strategic point of view. Having said that, we estimate a mid-single digit of space contribution in the growth rate. Talking about operating margin...

Can I just add something on the philosophy of expanding our direct-to-consumer business. Yes, the tendency over this past couple of years has been to do experiments that have been very successful in getting larger space. And you have seen that we have been able, despite the increase of the space to increase from 2020, and we are getting very close to 2019, which is the record year in terms of sales density to open larger stores where we can express the brand differently and having a space that is not only a transactional space where you come and basically you buy, but where you leave a different experience for Moncler. I think Champs-Élysées has been 1 place of experiment for Moncler, where we have introduced new concepts like personalization, immersive rooms and clienteling location in the store that we call [indiscernible] is something that we have been experimenting now also in China, in Chengdu with a store that is much more digital and very connected to consumers. And it's something that we would like to pursue, not everywhere. But when things make sense for us, it will be a way to develop a different experience that is aligned with what we are doing digitally. And we have some flagship stores that are planned for this year. Most of the openings will take place as usual between July and September. But we have this flagship store plant in Europe with Madrid, Düsseldorf, we have also a flagship store in China in Chengdu. We have also some important relocation expansion in Macau. We already talked about Chicago. We have the project of Miami and other flagship stores. I think in all these stores, we are going to blend this digital experience with an enhanced client experience in the store. But ultimately, the consequence of it will be a higher sales density, but also an attachment to the brand that is going to become bigger and bigger. And yes, as Luciano said, we have, for this year, more plans for relocation and expansion than openings.

Yes. Susy, about your comment and your question about the EBIT margin. First of all, let me say that we believe that a 30% EBIT is very, very good. And our job, our mission and what we do all the day is to protect this 30% EBIT forever, rather than changing 35% or 34% or whatever percent in 1 or 2 years. This is important because behind this simple and obvious word, there is a strong and a very clear strategy. Having said that, of course, you are right, we are increasing prices, but you know why we are increasing 10% of prices in fall/winter because we face as everyone important production cost increases in raw material, mostly but not only, also in labor cost. So this 10% price increase will not translate into additional margin. About online. You are right -- in theory, you're right. And let me highlight in theory because, of course, the online business may be profitable even if -- even a little better than the physical business. But again, we are not chasing margin improvements, we're chasing huge opportunities we see in the online business, which is not a business only, which is a communication, talking with our communities, building a brand stronger and stronger. And of course, increasing our top line that is growing very nicely, but again, with a much, much higher potential.

Okay. And sorry, just 1 quick technical clarification. Your online sales, they -- these do not go into like-for-like. The like-for-like is only for the physical stores, is it correct?

No. Comp store sales includes, of course, online and direct online as usual. Direct online only, of course.

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

I'm Anne-Laure Bismuth from HSBC. I have 3 questions, please. The first one is on the U.S. I was wondering if it would be possible to have an indication of the percentage of sales that has been done with new customers. The second one is on the store opening. So I've heard you comment that you are planning to do more relocation and expansion this year than stores opening, but can you give us the number of stores that you are planning to open this year. And finally, about the production. So you are building this new facility in Romania. But can you refresh my mind about what is the percentage of production that is done internally, and what it will imply with the new production facility?

Anne, first question regarding U.S. and the new customer. It's -- roughly 2/3 of the sales has been done with 63%, 64% with new customer. But what has been driving the performance of the U.S. market is that we have also increased the royalty of the existing ones. So we have been able to attract new customers, and I was referring before to the fact that it's one of the highest region in terms of generation Z and Millennials. So very positive on this side. And on top, one of the market where the return of existing customers, the royalty rate has been increasing. So we have been selling more to existing customers that have been returning more to the store, and we have been able, at the same time, to recruit new clients. In terms of store openings, we have secured roughly 15 openings for this year, and we have a number of relocations that is slightly higher than that.

Yes. I mean the new production plant we are building in Romania in May in the next year to double the capacity we have in that building. Important to highlight just to make sure I understand your question is that in Romania, overall, not only in our facility, but also with some very important and historical production passes, we do the majority of our production. What do we do in our own factory right now represents about 15%. With the new building, we will exceed the 20% with an ambition to achieve about 30% when the facility will be 100% up and running with all the production lines. So these are the 3 numbers, 15% now, over 20% next year, up to 30% hopefully, in a couple of years in our own facility. But Romania is the vast majority of our overall production.

The next question is from Thomas Chauvet have with Citi.

Three questions, please. Firstly, a question perhaps on sales productivity for the Moncler brand. If my calculation is correct, you've returned close to EUR 36,000 per square meter for 2021, so in line with 2019 and 2018 levels. So could you confirm this is the case? And maybe Roberto provide some information on how retail metrics have evolved in '21 relative to '19 in the past, you -- can you provide the average store size, traffic, evolution, conversion, UPT average basket, that would be very useful. Secondly, on the price increase of around 10%, you said back in Q3, this would be for the fall/winter collection. Given what's going on in the industry, some competitors have already passed on price increases very early in the year around the magnitude, have you reconsidered your pricing strategy for this year, particularly on the spring/summer collection? Or is it too late now? And finally, following up on the question on the e-com and LfL, and how you're computing this for '21 and for the year ahead? When do the [ interlized ] -- internalized, sorry, e-commerce operations enter in the same-store sales calculation? So for instance, the U.S. and Canada were internalized in October 2020, do they start to hit the LfL after 12 months, in October '21, so Q4 and so on for Europe, China and Japan later this year?

Sorry, Roberto, just on this one very quickly. It's true that we internalize the e-commerce business because it was run by WinApp before and now is done internally. But remember that even under the WinApp, it was already retail business. So it has always been included in the retail, DTC and comp calculation. Only if we open a new market in terms of online like we did a few years ago with Japan, in this case, this -- the revenues generated online in Japan was not comp for 1 year, but this is only the case.

Understood.

On the store productivity, we dream to be already back to 2019, which is obviously our ambition. We were at plus 20% compared to 2020. 2020, as a reminder, was EUR 26,000 per square meter. We increased slightly more than 20% at EUR 31,400, which is a significant improvement, especially taking into account that some of the stores were closed during the first half of the year. So if I'm just looking at the productivity that we had at the end of the year, in Q4, it was -- at the comp was positive. It was similar to the one we had in 2019. But for the full year, we are still being impacted by the closure that we have had during the first half of the year. Regarding KPIs, let me give you some metrics. The average store surface increased by 2% last year. So we are now at 180 square meter for Moncler. We are at 130 for Stone Island. But on Stone Island, we are working on a new concept that we plan to open mid of this year in Chicago. And probably there also we're going to look for stores with a slightly bigger surface to be able to express better the values of the brand. As I mentioned, sales density increased slightly more than 20%. The traffic was up 7% compared to 2020. The conversion was a double-digit conversion increase compared to 2020. These are good because usually, as you know, there is a strong correlation between traffic and conversion. usually, when you increase traffic, you may have a small impact on conversion. Here, we have been able to do both, increase traffic and increase conversion. And overall, the average selling price, UPT and average transaction value increased by 1%.

About the price increase, Thomas, we -- I mean we increase prices in fall/winter '22. In this current spring/summer, we didn't increase prices. I mean we keep adjusting prices, but not significantly as we do -- we did for the fall/winter '22. Of course, we decided to increase prices when we faced the impact of the raw material cost increase. Taking into account the stock position, not only our stock position, but also the stock position of our suppliers. As you know that in these circumstances, there is some kind of long wait that may delay the impact depending on the amount of stock that is in the supply chain. And so that's why we waited to increase prices. Of course, we did increase again in the fall/winter 2022. And we will increase prices more or less the same in the next spring/summer 2023. So this is the overall picture. We didn't see any reason, any need to increase prices in this spring/summer 2022.

Okay, given the time, we have space for a few other questions, but I would ask people to keep maybe a little bit to 1, maximum 2 because we have a few people on the line. Thank you.

Next question is from Louise Singlehurst with Goldman Sachs.

I'll keep to 1. I thought it was really interesting commentary in terms of the distribution and potential channel mix. If I think about the store numbers that you're highlighting for the U.S. and the potential opportunity in the market, and I presume very similar for China. Can you just help us think about the views of channel mix going forward and the benefit of online? I presume now you've got the businesses integrated, you're getting quite excited about the online mix going forward. And relative to that target that you talked about for the online mix by 2023. I think you talked about 20% of the group sales when you were internalizing the business when you announced that a couple of years ago now. If you could give us an update, that would be fantastic.

Louise, thank you for the question. Yes, we -- it's one of the strong focus, not only because we believe in it, but because I think the consumer behavior has changed, and they are looking more and more to buy online. What has been surprising is -- during the pandemic is that, yes, there was a trend where younger consumers were used to go and buy online. What we have seen especially in Europe and more mature countries like Japan and Korea is that even people from -- that are a little bit more up in the edge are also looking to buy now and are getting used to buy online. So yes, in the focus that we have, we see potential to grow on the DTC globally, on the retail side, especially in the U.S. market and on the Chinese market. But most importantly, we foresee a growth rate over proportional on the online business for the 3 years to come. This is the horizon which we are working, and that will be probably what we're going to disclose during the Capital Market Day. But yes, we foresee a growth rate on the online that is much stronger than what we can see on the retail part. What we see also is the trend on the wholesale is to have more and more conversion to go more directly even when we talk about e-tailers to go -- so moving part of the business from e-tail from wholesale into concession to be able to better master the communication and the flow of product and the supply chain is increasing the client experience and also as a result, the level of sales and the sales through. So these are the 2 big trends we are seeing. Gino, do you want to add something?

No, no. The only comment I will make is something that even Roberto, I think, mentioned before, which is how we are looking after -- again, I think Luciano sorry mentioned this before, how digital is helping us to go deeper in terms of the relationship and the engagement with consumers. And this is something that even Roberto and myself are working about how we can even further connect our physical and digital experience for the brand. So truly great experiences, both in the physical world to what Roberto also mentioned before and in the digital world, so we can have a different level of engagement because we believe that at the end, the relationships are super important to then drive into the commercial aspect of it. So this area of relationship over transaction is something that will guide us in terms of how we can create deeper connection with communities around the globe.

And can I just ask 1 quick follow-up in terms of the benefits versus obviously brand .com will be the priority, but what are the benefits of the e-concessions? Is it attracting like a new cohort to the brand? Obviously, we'll hear more on May 5, but...

Yes, Louise, we are starting now. We have 2 e-concessions, 1 that started already with the fall/winter with Mytheresa and the second one is we just signed up for the spring/summer, we started with [indiscernible] Roma. And we have ongoing discussion with the other ones. Well, first of all, there is a much higher level of communication on which product to push giving them more insight like if they were one of our stores, and what are the activities? So all the -- let's say, the connection and communication between the e-tailers and the brand are completely of a different level. We are planning specific action together. We are planning to develop specific capsule for them. And of course, they enter into our what we call auto replenishment system that we have for our stores. So this is also improving the product availability. So at the end also delivering a better service to the consumers. These are the main advantages that we see and also a bit better knowledge from our side on to whom we are selling. So who is the end consumer at the end, which is another factor that is very important. And you know that this knowledge is at the end, what is driving the growth of the company.

Next question is from Luca Solca with Bernstein.

It's the first day of war in Europe today in the Ukraine. It's difficult to grasp how this will evolve and what implications this could have. I wonder how you're thinking about the risks inherent in this situation on 2 areas I would ask. One, your dependence on Eastern European and Russian clients, in Russia and in the rest of Europe specifically. And two, your operations on the ground in Romania, if my geography is right, the factory is towards the west. I wonder if you have any subcontractors in eastern part of Romania in Transnistria, or if you expect any potential disruption because of refugees or any other things going the wrong way in that area. And if you are preparing any contingency plans?

Very, very sad news even if somewhere it was maybe even a little bit expected, but we were all hoping that this will not happen. So we have been in very close contact with our team on the ground in Kyiv. We have 1 store in Kyiv. We have a team, the store is closed. Regarding the impact that we see potentially to the business, I don't know if it's more maybe related to increase of the price on oil and so on, that may have an impact on increase of raw materials. But if I'm purely looking at the dependence on the local market, meaning Russia and Ukraine, these represent roughly 2% of our business. So not really material. This was -- I was seeing that till a couple of weeks ago more as an area for potential growth for us, but we're not as dependent as other luxury brands on these 2 countries.

Yes. Luca, about the supply chain, first of all, we don't make any production in Transnistria, you mentioned, important to say that. About Romania is difficult to predict, of course, Romania is not very far from Ukraine. It's difficult to predict, honestly. I can't give you an answer. Our thoughts now are very close to people who are suffering for this situation. Honestly, I can't predict. Honestly, I don't see any impact on our supply chain in Romania. Honestly, I don't know why we should have any impact. But of course, anything may happen. The situation is very, very sad.

The next question is from Antoine Riou with Societe Generale.

I have 2 short questions. The first one, just to rebound on Thomas question on sales densities. Roberto, you mentioned that back in 4Q, you were already back at the 2019 levels, given the solid start of the year and price increases in the second half. I mean, do you see any reasons for sales density not to be back to the 2019 levels in 2022? That's my first question. The second question is just on marketing and events. What do you plan? I mean you had the big Genius event end of last year, which has been super successful, given you plan still to spend quite a lot in terms of A&P. Can you tell us basically what you are planning for this year? Will there be another Genius event or something big in the second half of the year?

I will dream to be back at 2019 levels, but you just heard the question of Luca. So I think there is still some unpredictability during the year. The COVID is not over. And you know that we usually overperform in the months that are the strongest for us, even if we have a good start is very encouraging. We have still 10 months in front of us with many uncertainties. So we are going to work very hard to be as close as possible as the record year of 2019 in terms of sales density, but this will be influenced of a lot of factor, no closure, no restriction, a little bit of reopening of the travel and the travel retail. But let's say that we are confident that we will be able to improve the results of 2021. And this, we are committed to.

Yes. Antoine, regarding again, your question about marketing, I think, again, as you've seen in the past few months, we are ramping up a lot of efforts. I think -- we're super excited about the plans we have for the future. I think I need you to respect what Paola said at the beginning about some of the news we will hold for the Capital Market Day. And this will be some of those. So again, I will ask just to be a bit patient a few more months, but we will showcase there a little bit of -- and we will be able to answer to your question, but I can tell you internally, we're super excited about the year ahead.

Next question is from Rogerio Fujimori with Stifel.

Could you talk about recent category trends for outwear versus knitwear and other non-outwear categories? Anything to call out in terms of standout performing categories aside from the strong growth for footwear in the U.S.? Or was the growth momentum relatively uniform across categories?

Thank you, Roger, for the question. What we have seen is the first half of the year where the non-outerwear category, were performing really well. And as usual, when we come back to the fall/winter season, the very good metrics that have been -- of results that have been explaining the KPIs that have been given before are explained by an excellent performance of the outerwear. So overall, we are still at 75% an outerwear company. I think what is interesting this year is that we recently launched for Grenoble an active work collection that is more spring/summer collection. So with this, we have new categories that we are pushing. The cut and sewn and the knitwear have been performing extremely well. They represent today roughly 15% of the total. The part of the soft accessory is developing very well with an enlarged size of stores we will have additional capacity to display this product. So I'm confident that they are going to overperform the outerwear category in the years to come. And finally, I think it's the point and one very strong focus from Gino, I don't know if it's linked to his past, but he's focusing a lot on footwear, and we all believe that there is a bright future for Moncler on the shoe wear category, especially the sneaker for men and the boots for women. So these are categories that have been performing extremely well in the U.S., but also that are starting to pick up in Asia, and this is the encouraging factor that we are getting strong demand now also from the Chinese market.

The next question is from Flavio Cereda with Jefferies.

Two quick questions for me. Number one, did you experience any real supply chain issues in Q4 because it was kind of a recurring refrain if you go into your stores, be it in Europe or in the U.S., you keep hearing, I wish we had more of that, wish we had more that, not sure that's coming in. So I was just wondering whether that's just a phenomenal sell-out, or whether there was any supply chain issues at all? And number two, on Stone Island, because we're not mentioning Stone Island. Can you give us an update in terms of the internalization of the distribution here, what the targets are at this time?

About the supply chain issues. Honestly, I mean, and smiling, we faced the issues with the supply chain all the day long. Having said that, big issues because I think this is what you are referring, honestly, no. Our supply chain has been up and running in 2020, 2021, notwithstanding the situation, of course, issues are associated with contagious that make a percentage higher than before. So sometimes our factor is -- have to stop some production lines. So it's not normal as in the past but in any event, we never stopped our production. So honestly, looking at all of these problems from far away no big issue, no big issues, frankly. Of course, and there are issues associated with transportation that make our shipments longer. I mean we take longer to reach our regions because, again, the transportation issue is not only associated with the cost increase, which is 3, 4, 5x higher than before, but at least associated with the lack of transportation, I mean, because all the civil flights are not there anymore and 80% of our transportation in our sector is through serious flights. So again, this is something. Of course, we face all the days and not bigger problems, but for sure, delays mostly due to this logistics issue.

Yes, Flavio, regarding Stone Island, it is more direct-to-consumer approach that we really believed in. We have started, first of all, a pilot for retail excellence, where we have defined a new customer experience with the store managers, and also the client promise. And we have started the pilot in Germany. This started at the end of 2021 around November, December. We are now planning to roll out in Europe, starting from Italy in April this year. And in parallel, we are working for Korea because as we have now moved the Korean market into a joint venture with direct control on the stores, we have moved now these 23 stores under our direct management. We have a new GM that is there, that is absolutely backed up and helped by the local Moncler organization. And we are going -- we are planning to have the rollout of the older systems, the clienteling app and retail excellence in the Korean market in the course of the first 6 months of the year. Regarding the other internalization Japan and China are foreseeing for 2023. And as you know, U.S. market is already a direct market there. So it's a matter of implementing the system, but there is already direct management. So these are the main focus we are having. The situation in the U.K., which is the other important market, we have a longer contract that is ending at the end of 2024, but we'll be able to handle the online part starting from next year. So these are discussions we have started with our partner locally, and we're working hand-in-hand with them. Regarding wholesale, we have planned reduction of the number of agents, so taking control of some of the wholesale agent that we have. We had -- when we took over Stone Island, 29 agents were working to reduce this, but this needs to be done also hand in hand with the agent to give continuity to the business, but it's something where we have started to work on.

Keep up. Good job with Inter.

We know you are a big fan.

The last question comes from Paola Carboni with Equita SIM.

I just wanted, if possible, to have some anticipation on what you have planned for the 70-year anniversary? I don't know, if you can spare something, or whether we have to wait until the Capital Market Day for that as well. And secondly, as far as Stone Island is concerned, if you can comment about the retail performance of Stone Island at least for the -- all the stores where you can give us a sense of the 2-year stack comp growth? And also the kind of growth you have experienced on the order backlog, which you commented is very good for the fall/winter collection.

So Paola, thank you for the question. I will be quick on the first one. Unfortunately, I will have to give you the same answer as before. This is part of the conversation we'll have in just a few weeks in the Capital Market Day, and we will be able to share plans and within that, some of the things that you were mentioning too. So I will ask you for some patience there, and I will let Roberto answer the other questions.

Regarding the retail KPIs, I think we'll be able to give you some more interesting figures at the end of 2022. Honestly, it's far too early. We are currently putting in place the Moncler system there that have been adapted to the experience we want to deliver to the consumer. But the metrics that we have now, we are not ready to share them. I think we need also to give more -- have more direct access to -- in consumer data because the data collection was not up to the level we have in Moncler and so on. And so we are currently working to do the setup to do the training because it's not only about putting the system but is convince people that is the best way to operate and train them for this. It's about finding also the right profile of store managers that we have in most of the case, but they need to be trained to have the -- for the staff the right attitude in the stores to redesign the incentive scheme. So all what we have been able to put in place in the Retail Excellence Project in Moncler that took us 3 years, we would like to do it, let's say, in half of the time, 1.5 years, but you need to give us a little bit more time to give answer as precise as the one we have for Moncler because we need first to do the setup and start from there.

And as far as the order backlog...

Just on the order backlog, the campaign just ended the end of last week. It was very, very positive. So we count on a good double-digit growth for the next fall/winter season with a strong demand from our wholesale clients even to the point that we had to cut down a little bit the demand because like for Moncler, we want to be able to sell less than what is really demanded by the end consumer. So we are tightening a little bit the demand, but the demand and the way the collection was received was very, very positive. So of course, it's only selling and the proof will come from the sellout on the market, but we are very confident.

Yes, it's Paola. I think that with this answer, we end tonight's session, which has been even a little bit longer than normal. I thank you, all of you. Just remind you that next week, we will publish the management report, which will give you some more information compared to what you can find on the press release and the presentations, ahead clearly of the report that will be published in due time. And we are here for any follow-up questions. So thank you very much. Good evening to everybody. Thank you.

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