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

We are ready now for the last session of the day. I also invite Roberto Eggs to comment the Q1 revenue results.

Thank you. So I hope that you are full of energy. It's going to be a, let's say, 10-minute session full of number, but you have already seen it. So I don't think that there is not any surprise in what I'm going to present, but I think it's a good recap before going in the last Q&A session that we're going to have here on stage. If we look at the results of the first quarter, we are very happy about the results we have had. As you know, in green is -- will be always Stone Island, in blue is Moncler. We reached EUR 590 million during the first quarter of the year, which is a plus 60% compared to -- at constant exchange rates compared to 2021 and which is a plus 58% compared to 2019. Of course, you see that there is no figure for Q1 2021 for Stone Island because we started consolidating the figures from the 1st of April 2021. So if we look at the growth rate that we have had on Stone, I will come back to this, it was 31% growth rate, so similar to the growth rate that we had with Moncler at plus 29%. In terms of share of business. During the first quarter of the year, the Stone Island represents 20% of the total sales, and Moncler represents 80% of the total sales. If we deep dive now in terms of region for Moncler, the total turnover of Moncler is EUR 473.4 million, which is a plus 27% compared to 2019 and plus 29% compared to 2021. You see a positive and double-digit growth rate in all the regions starting from Asia with plus 15%. Clearly, here, we have been -- at the end of the month of March, been impacted by the closure of the stores that we had roughly. Stella was saying this morning, 1/3 of the network was closed, a little bit more than in April. But despite this, the results have been good, plus 48% for EMEA compared to 2021, double-digit growth compared to 2019 with a plus 11%. Here, we have had very good performance in Germany, U.K., Spain. I will add also above the average, Switzerland and Benelux. Slightly below the performance of this top region but still positive, we had Italy and our French market. Finally, to conclude, the EUR 73.5 million for the North American market, which is plus 36% compared to 2021 and plus 40% compared to 2019, with the growth on both channels. We -- you know that in the U.S., we are still very balanced between wholesale and retail, both channels with a strong double-digit performance. If we look at the shares in the pipe between the different regions, we move with Asia moving from 54% to 49%, Europe increasing from 31% to 35% and U.S. weights from 15% in 2021 to 16% in 2022. If we look at the performance per channel. Positive performance on both here also despite some of the conversion that we have had from retail to wholesale. I'm looking at Christiana because she is always the one suffering from this conversion that we are doing. 32% growth compared to 2019 for the retail, 34% compared to 2021 and a similar growth rate for the wholesale channel at plus 12%. Between 2019 and 2021, the growth was similar. If we look at the share, we are more to the average -- the yearly average of Moncler between retail and wholesale, 80% retail, 20% wholesale. It's going to be this year with the current performance of the retail channel, we are going to end the year probably at 82-18. If we look at Stone Island, this is one of the first time we're sharing the split per region. Europe, strong positive performance, EUR 85 million turnover. We have 23% growth compared to 2021, 54% compared to 2019. We have -- with a good performance in all the region in Europe and a significant weight of the Italian market, that weights 25% of the revenues. Then we have a strong increase that we have seen here in Asia with plus 61% compared to 2021 and plus 153% compared to 2019. This is linked to the conversion Romeo was talking about as we performed at the beginning of the year, on the 1st of January, where we converted the 23 stores that were in wholesale in Korea that have become retail in Korea, and this is clearly impacting positively the growth rates that we have in -- globally for the region and especially also on the retail channel. And finally, U.S. market that has been performing very well on both channels, retail and wholesale. It's a plus 62% compared to 2021 and plus 76% compared to 2019. Overall, a strong performance, sound performance at 31% and 67% compared to 2019. If we look at the performance, and here you see the difference of business model that we are changing little by little in Stone Island. You see the weight of the wholesale. What is the darker color is not retail, it's wholesale. 76% of the business is the wholesale business, 24% for the retail business in Stone, but clearly increasing a lot from the 15% of last year, again, linked to the conversion of the 23 stores we have in Korea. Overall, both channels performed very well. The wholesale channel plus 16% compared to last year, despite the fact that they don't have any more the wholesale business of Korea. So despite that plus 16%, plus 99% compared to 2019. And if we look at the retail, it's a triple-digit growth compared to last year, boosted by the Korean conversion and plus 59% compared to 2019. Regarding the number of stores that we opened. You know that for Moncler, we usually try to open the stores at the start of the third quarter where our full winter collection is arriving in store. We like to start with something that is very strong. So we have between July and September more than 10 openings that are planned and on which we are currently working. The first part of the year was, as usual, quite light with 1 DOS, which is a conversion from wholesale to retail at the Munich airport. And Stone Island, there are 23 openings, these are the conversion I was referring to, plus 1 new opening. And you see also one increase in the last line, which is the wholesale. We move from 64 shop-in-the-shop in Moncler to 65. This is the opening of the ground floor location in Geneva with Bongénie where we are maybe more, say -- they are close to us, Chanel is close to us, even if they were there before, and we opened it at the beginning of the year with currently very good results. This is in a nutshell the results of the presentation. I would like to welcome my colleagues on stage for the Q&A session. Thank you.

I call Luciano, which I don't see. Here he is. And Gino Fisanotti for the questions on results. So first, to start with, in the meantime, you submit some questions. You can sit if you want, as you wish, really. At the end of the day, we are all tired. I sit and you stand. Okay. There was a question that was made before on comp store sales growth that has not been fully understood by some of the analysts/investors. So the question was is it fair to assume -- well, which kind actually of comp are you assuming in 2022 and then in '23, '24? And if there is a difference between physical and digital offers.

So probably, I was not clear. For 2022, what we are expecting is a double-digit growth in terms of comp, clearly led by the current results we are seeing. So confident to this double-digit growth rate that we will have on the comp rate for 2022. For 2023, what we are budgeting is, let's say, a usual mid-single-digit growth rate for the retail on which we'll have to add most probably a higher percentage for the online, probably a double-digit comp on the online. So the mix will give mid- high single-digits comp growth rate for what we call our D2C. I hope I was clear this time.

Okay. I hope it's clear. It's clear. Somebody says like this, so -- okay?

Okay. The first question for the Q1. Can you comment on the accelerate from Q1? Have Europe and U.S. further accelerated into Q2 as some other brands have flagged? How much is China down now since the start of the new outbreaks? So some color on current [ rating ].

So yes, the -- let's say, the April that is now closed, been another good month in the trend of what we have seen for the first 3 months of the year. So similar growth rate that we have seen for the first 3 months. So slightly better than the month of March, also linked to the fact that there have been a little bit less closure on China and still a very strong performance on Europe. On the U.S. market, that continues to go on the similar trend that what we have seen and still strong performance for Korea and Japan. So the trend is there. We didn't see a decrease despite the fact that -- of course, China was impacting the first quarter only in March, but the trend of April is similar to the trend of the first quarter.

And what has been the performance of Mainland China quarter-to-date? So I think they refer to April and May. I think you [indiscernible].

Around minus 30%, minus 30%, 35%. This always depends on lockdown, reopening and so on. So I would say, slightly better than the end of March but still impacted by the closure.

Okay. Another one, on the contribution of Korea for Stone Island in this quarter and in the full year, what is the -- what can be estimated?

The impact of Korea in the conversion is very important because what we did last year, I think we disclosed the figure at agreement point in time was a little bit more than EUR 50 million. Clearly, by moving the business model into retail, you multiply this figure by 2.6%, 2.7%. So not far from EUR 50 million, especially if we improve a little bit the performance in the second half of the year through what we are putting in place in retail excellence. So you can -- in terms of -- in absolute terms, you can count on a positive impact between EUR 30 million to EUR 35 million compared to 2021.

Okay. And then there is one question for Luciano, which I know is a preferred question. Now the webcast is asking about the consensus. How do you feel about the current 2022 consensus?

Of course, I normally say after first quarter, it's very premature to comment in the fiscal year, but in any event, what I told some of you before is that the current consensus is reasonable. Honestly, after such a good first quarter, I think we can do better. But if and only if the situation in China should last for longer because, of course, the fact that we are now in the second quarter is helping us because second quarter is not particularly important for our business. But should the situation lasts also Q3, and I hope not more, it would be much, much more impactful. So if the situation will be solved, let's say, by the end of second quarter, July, not later than July, I still believe that we can do slightly better, let's say, 20-plus, 20%, 25% maybe a reasonable assumption based on, honestly, the strength of the brand. The first quarter results all in part affected by the situation in China. So again, in normal, semi-normal circumstances, I think that the consensus is not only reasonable, but we may even do a little better, okay? Optimistic, Paola.

I think, as always, Luciano is perfect. Okay. Question for Gino, not on numbers, so this one, right, earlier, you have showed the upcoming partnership collaboration with Lebron James. We saw basketball items at the store visit yesterday. Is the basketball culture were the one area of focus for Moncler? Or is it that a coincidence? Should we expect more?

First of all, the partnership with The Lebron Foundation -- and I just want to be clear about that part, it's not with Lebron as a person, it's with the foundation. Based on what we discussed today about creating new opportunities for black and brown communities in the U.S. and around the globe, I think the basketball pieces on the stores definitely is a coincidence. Again, I haven't seen them, but there's nothing -- there's no connection there. I love that people are trying to connect everything, but...

No, no, it's not connect -- you're right. It was a gift that was developed for...

Right. Now I know.

It's holding the blacks, holding...

Okay. Alberto's -- again, yes, now I got it. Okay. No, I think that was more a CRM execution, but that has nothing to do with The Lebron Foundation partnership.

Okay. Then there is another, I think, Luciano, Roberto, but a Luciano question. On China price gap, how can you reduce the price gap for the current 40%, 45% towards the 30%?

This is our favorable question.

[ Luciano ] will add to the end anyway.

I mean a price gap, seriously, of course, it is still an issue even if it's not so serious as it was in the past because together with Roberto, we have adjusted the pricing over the years to make the price gap lower and lower. But also after the appreciation of the local currency, the price gap is still over 40%, way over 40%, 45%. Our final target is to go down to 30%. I think that it will take -- it may take a couple of years, but it is still our target, 30%.

I agree. If I may add something because there was -- there have been no question regarding the price gap between the region for Stone Island. And I think it's also a relevant topic. Yes, the Stone Island is better positioned than Moncler because the price gap was quite reduced. The price gap with the U.S. is slightly above 20%, 20%, 25%, depending on the evolution of the exchange rate, which is, in my view, quite aligned with the good practice that we see with the other peers in the industry. And if we look at China, Japan and Korea is in the high 30s. So there will be probably something to be done in years to come, but they are already in a better shape and in better position regarding price gap compared to Moncler.

Okay. The next one, I think, for Luciano again. Which touch points are you planning to build between Stone Island and Moncler? What are the potential areas of synergies between the 2 brands? Could Moncler leverage Stone Island's strong expertise and material in any way?

Okay. First of all, something that has been done -- has been reported today is very important. We love the 2 brands, and we believe that the 2 brands must maintain a total identity, and they must be independent for everything is associated with the brand. So when we talk about supply chain, I think that for the time being, the supply chains are separate from all the different points of view. There are conversations between the 2 teams because we also strongly believe that the mutual exchange of knowledge may be very helpful for Stone Island as much as for Moncler. But for the time being, we are not targeting or the strategy looking for synergies. I think that the 2 brands in their respective supply chain are doing a good job. Synergy is something we will evaluate maybe in the future, but not now, not in the supply chain.

Okay. Question for Gino. Could you comment on the upcoming opening on Tmall? How much could Tmall contribute to total online sales in China?

Okay. So this is...

We don't provide such detail.

I know Paola really well. I think, for us, I think Tmall is -- I think we already mentioned this and Stella mentioned this as well. I think for us is the opportunity to start with a soft launch and we started learning all the way through. When we go into the 17th anniversary in September, again, our expectation is definitely to start connecting the Chinese customer where they are, and that's the biggest opportunity. As I mentioned, I think it's important for us when we start thinking about Tmall, we should not decouple Tmall from all the activities that we're still doing in our DTC channel as well. In terms of contribution, I will say, they will be, I don't know, probably lower single digits for now. But I think the expectation is for us to start growing that platform in the next 2 years. But again, until we don't start the process in September, I will be cautious about sharing a number for now.

And another one for you, Gino, which is a very interesting one. I hope I read it well. How do we reconcile the notion of utilitarian luxury with the fact that footwear is driven by iconic breakthrough products? Any hope that Moncler may come up with a winner like Zegna has recently done with the Triple Stitch or on a bigger scale like Balenciaga with the Triple S?

So the question again?

How do we reconcile...

No, no, I get it. But how we reconcile -- let me see, how we reconcile the notion with the fact that footwear is very much -- yes. I would say definitely footwear is not only breaking through iconic styles. I truly believe that footwear is a game of consistency as well, right? It takes some time. Sometimes you establish a silhouette and stay consistent there. I think if you look over time, when you talk about iconic footwear, even some of the most iconic pieces of sneakers today around the globe have probably 20 or 30 years since they launched it, right? So for us, it's about -- utilitarian luxury for us is a way of how we filter, how we understand something that is authentic to us. And of course, we -- I think one of the things we mentioned today was about less is more, how we can start focusing on fewer styles, how we can iconize them. But of course, we are starting the first steps to try to iconize those products, and that will take time. That will be a journey. So I think you have some recent examples. I think it was mentioned there, the one product from Balenciaga or you can go to the extreme one, Air Force 1 from Nike. Of course, the consistency there will be critical. And for us, again, based on the architecture we showed today, we have a few opportunities to try to establish. And definitely, we will start, I think, on footwear. Another thing important is to read the reaction of the market and understand which is they want to have the biggest chances to become iconic first, and that's what we exactly will do. So recovering to something we discussed before, this is an opportunity. On footwear, you never -- you always have to go and, of course, have an authentic perspective and then learn the reaction to understand which is the one that consumers will adopt. We have our -- of course, our idea of how we want to go for it, but hopefully, as we go into September, October, when we launch our new strategy, we will start learning together about the ones that -- hopefully more than one that will become an iconic silhouette for us moving forward.

Okay. Another question on price increases. We did some price increases aligned with the industry trend this year. Do we see limited to absolute price levels and price increases for our category, down jackets, main category?

I think it always depends on how the -- where the market is moving. If you would have told me 2 years ago we are going to increase prices 11%, I would have been scared. And the reaction that we have seen with our team and with the wholesale partner has been quite positive. So they have been increasing -- still increasing volumes and increasing their buying according to the price increase. So it has not been a hurdle. There are probably some limits, but we have not touched them now, and I think we need to see how things are going to evolve. The fact that the full industry is going up in prices, and not only in our industry but in other industries with the increase of raw material and energy is somewhere diluting a little bit the impact that could have been scaled -- scaling 2 years ago.

Plus, there is a lesson that I always learn from our Chairman that you build the brand first and then prices follow.

No, clearly, but here, it was not done. An intentional price increase that was there, it's more...

No, no. But I mean there is always a limit...

And I think we have been doing in both cases, both for Moncler and for Stone Island, a very good job on the brand itself, and we can absolutely support this price increase for the end of the year and most probably for the beginning of next year.

Maybe another one that we already talked about this morning, but maybe since now there is a broader webcast, so we can reiterate about the sustainability of the growth in the U.S. market through the rest of the year and into 2023.

I think it was well explained by Roberto. I think the basic of the growth for Moncler and I believe for Stone Island because I think it's really Stone Island is in its infancy and the world is open for this brand. I think all the basics for an increased presence and footprint and activation of the different communities we're working on is there for the U.S. market. The shoer is another opportunity for us to grow. And there are these pockets of wealth that are currently emerging in city that we were not considering in the past and becoming now a brand that has also more ambition for the spring/summer collection. I think that probably destination like Dallas, Houston, they were not on the radar screen a couple of years ago, are fully under radar screen today. So I think that there is potential for us to grow also on top cities where we have a strong footprint in Miami, New York, Los Angeles. On top of this, other New York -- other pockets of growth that we can go and pick up with the new strategy or compare in terms of product and branding.

Okay. I -- as you move -- just reading, as you move away from fur, is the overall ASP going to be impacted as SQL? Are new sustainable materials going to support ASP?

You want to answer, Gino, on the evolution of the product portfolio and then I add something on the pricing?

Regarding? Tell me more.

The question is -- like a portion of this morning now, getting up the upper part of the pyramid form of...

Yes, yes, yes. Okay. I think -- yes, I think we mentioned -- I can't remember now what part of the day we mentioned this. I think, again, we believe that, especially on the more the high end of our product, I think on the Moncler collection, of course, Edith, I think you probably have the chance to see today, is the more high-end part of our collection, and we believe that there's a massive opportunity there for us to keep pushing into the high end of our product collection. So that's something that we're looking in a way to keep growing and to keep contributing more into the big contribution that the Moncler collection has for us.

And the other thing that is going to help us mitigating the exit from the fur, that I remind you is going to be done through another 2 exercises. So we already started -- just for you to be informed, we already started decreasing the volumes of fur already 1 year ago. We continue to do it this year, and we have another one exercise to go before getting out is also all the work that has been done on the iconic pieces of Moncler that are especially enhanced this year with the 17th anniversary and on which we are expecting very good and positive results in terms of on sale and involvement with consumers.

Yes. And all the work that the team of merchandising doing on the collection. [ Ali from Suzi ], there is another question for Gino. What's the plan in terms of communication on footwear? Are you planning some big campaign to increase the awareness? Can you clarify what specialty stores do you plan to sell in the U.S.?

Okay. So I think, again, it's the same conversion before. I don't -- we believe that the most important thing is to authenticate ourselves as a footwear in this case, a sneaker brand. So what we will do in the first 6 months, as we discussed before, if you remember, for the people who are here, we talked about we will be focusing on fewer styles, of course, and is connected to the idea of how we will build some icons towards the future. We will start authenticating the brand with the right -- in terms of distribution in terms of media, and then we'll start to work with the right people and the right ambassadors. We don't expect a big kind of communication campaign. Remember that for us, September to December will be all about our 70th anniversary and then we will go into the reboot of Grenoble. But yes, what you will see from us is they start popping up in the right places with the right people in terms of that process authentication. I think the big support of the big communication campaign around footwear will come a bit later. Definitely will be support, and we will have some clear strategic partners from the media perspective that will help us to do so, but there will not be a specific campaign there. Then regarding our distribution, I think we -- again, I will not open up, but I think we have, from the U.S. to Europe to even Asian market, some key destinations, especially footwear destinations that for us are critical that will help us to establish ourselves again in this process of authenticating Moncler as a footwear brand.

Okay. I don't see any other question. So I don't know if you don't have any follow-up question. I think it has been a very long day. I hope you enjoyed. We did a lot, particularly the previous day, last night and the night before. Thank you so much again for being with us all day today and yesterday, and we hope to see you soon more and more in person right now. Thank you.