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 Q1 2023 Interim Management Statement. [Operator Instructions] At this time, I would like to turn the conference over to Elena Mariani, Strategic Planning and Investor Relations Director. Please go ahead, ma'am.

Thank you, operator, and thank you all for joining our call today. The interim management statement call is hosted by Luciano Santel, Chief Corporate and Supply Officer; and by myself. I will start providing a brief overview of our results, and then Luciano will be happy to take your questions. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on the group'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 the group to control or estimate. Let me also highlight that given the nature of our business, interim results can be influenced by seasonal effects and therefore, cannot be taken as a proxy for full year trends or results. Finally, I remind you that the press has been invited participate to this conference in a listen-only mode. Great. Moving to Page 3 of the presentation. I would like to start our call today commenting on the art of Genius, an unprecedented event, which took place on February 20 in London that marked the evolution of Moncler Genius from a universe of collaborations with fashion designers into a real platform for corporation across different industries, including the world of art, design, entertainment, music, sports and culture. These extraordinary events at Olympia London has seen the physical participation of over 12,000 people, and it became the biggest brand event in Moncler's history from the point of view of brand reach and engagement, beating the recent record set by the 70th anniversary with results that have surpassed any expectation. That evening, we presented collections from Alicia Keys, Pharrell Williams, RocNation by JayZ, Salehe Bembury, Palm Angels, FRGMNT, Mercedes-Benz, adidas Originals and Rick Owens. All these collections are being launched and will be launched over the coming months through both spring/summer and fall/winter 2023. And talking about Genius, if you move to Page 4, we can quickly go through the 2 launches that we had over Q1. First, JW Anderson and then the first launch from the Art of Genius, the Alicia Keys collection launched at the end of March. But this quarter was not just about Genius. As you know, we continue to focus on all the 3 dimensions of the Moncler brand, Genius, Grenoble and Collection. And when it comes to Grenoble, we're very proud to say that after a soft launch last year, this year, we have successfully launched our first-ever full spring/summer collection featured by Sean White, our Grenoble brand ambassador. This collection is based around super versatile garments fitting all kinds of weather and activities, and we're very proud of this. Last but not least, in spring/summer 23, we introduced new variations of colors and styles in our Trailgrip family. The new Trailgrip Lite is a lighter and slimmed-down version of the original Trailgrip, but still maintaining its comfort and excellent technical power. Moving to Page 5. Let's talk about Stone Island brand initiatives. First, let me highlight the extremely successful footwear launch in collaboration with New Balance. Stone reinterpreted New Balance Classic 574 style using a distinctive design and a linear and more modernized structure. It was an enormous success and all pairs were sold out practically immediately after launch. We also launched the new Ghost collection derived from the concept of camouflage with totally monochromatic pieces in 100% organic cotton fabric, and also the new Marina collection characterized by navy functionality, innovative fabric, pastel colors and reflective Stone Island Marina print. We will keep on working on the brand evolution in order to increase the voice, the audience and the relevance of the brand worldwide. And with this respect, we are pleased to announce that the second phase of development of the brand strategy will be led by Robert Triefus, who will join as CEO of Stone Island starting from June 1. Let's now move to Page 6, where we provide an overview of the group Q1 revenue results, focusing on growth at constant effect. In the first 3 months of the year, the group generated EUR 726 million of revenues, up 23% versus last year. The Moncler brand, accounting for 83% of Q1 group revenues, generated over EUR 600 million of revenues, up 28%, whilst Stone Island grew 5% versus 2022 to EUR 122 million of revenues. First, let's focus on the Moncler brand only. Moving to Page 7, where we analyze in detail the performance by region. Asia, that, as you know, includes APAC, Korea and Japan, generated over EUR 300 million in the first 3 months of the year, contributing to 50% of total revenues. The region rose by 32%, boosted by a strong demand from Chinese customers, also supported by the lifting of COVID restrictions, but not only both Japan and Korea continued to register a very strong performance. EMEA was up 29% and contributed for 36% of Moncler revenues, driven by strong demand, both from local customers and tourists, particularly coming from the U.S. and Korea. And local consumption in this region continued to grow at a double-digit pace. Q1 revenues in the Americas, 14% of total sales, grew by 9% in the quarter, accelerating sequentially compared to Q4 despite a continued significant outflow of U.S. tourists, particularly towards Europe. Let's now focus on Moncler brand revenues by channel on Page 8. In the first 3 months of 2023, the DTC channel recorded an extraordinary performance, up 34% with strong growth across all markets. This is true for both the physical and online channel that were both up strong double digits. Wholesale grew by 5%, in line with management's expectations. However, looking at the rest of the year, the performance of this channel will be impacted by the newly approved conversion of Nordstrom from wholesale into a hybrid retail model which will have a material effect on wholesale revenues already from the second quarter of the year. Moving now to Stone Island regional trends on Page 9. EMEA grew 4% in Q1, with Italian funds performing particularly well. Asia was up 28%, thanks to both, a great organic growth in APAC, but also to the effect of the conversions of the Japanese stores that happened in August '22. The Korean market was weaker also due to the ongoing change in business model. Americas, the smallest region for the brand, was down 20% year-on-year. Wholesale was impacted by a weaker trend and a more cautious approach among U.S. department stores. However, the DTC channel recorded a positive performance. Looking at Stone Island trends by channel on Page 10. Wholesale recorded a decrease of 7% in the quarter, mainly due to the Asian conversions, but also to the very selective strategy in the development of this channel with a strong control over volumes. The DTC channel instead was up 40%, thanks to the very strong organic growth in EMEA and also thanks to the conversions. Although please note that the performance of this channel would be double-digit positive, even excluding the impact of these conversions. The direct online channel also continues to register solid double-digit growth. And last but not least, let's briefly examine our store network on Page 11. At the end of March, Moncler retail stores reached 255 units, while Stone Island stores were 71. Over the course of Q1, Moncler saw 4 DOS net openings, among which Dallas for which you can see some pictures on Page 12, but also London Heathrow and Seoul HD Mok-dong. The Stone Island network instead saw 1 net closure. You can see, however, the beautiful pictures of the new store in Sanya, Hainan classified under wholesale, and of the store in Kobe, Japan, on Page 13 and 14. We reached the end of the presentation so I will now hand it over to the operator for your questions. Operator, you can now open the Q&A session. Thank you.

[Operator Instructions] The first question comes from Ed Aubin of Morgan Stanley.

Elena and Luciano, congratulations for the strong -- very strong performance. So 2 or 3 for me. The first one on China. So I think in Asia, as you said, Elena, organic growth, sales growth was up around 32%. I don't know if you could provide some more specifically the performance in China. And if you would be kind enough maybe to give us the performance for the fourth quarter last year, the comp base. So that would be one on China. The second one on China. It seems clear so far in the results season, that there is quite a polarization of performance so far this year, further polarization in the Chinese market. In our view -- in your view, sorry, what is driving this? Or maybe to ask the question another way, what are you doing in China which is really particularly resonating in the Chinese market? And then lastly, I know it's a sales results, but you gave earlier in the year an EBIT guidance of around 30%. I mean you're taking prices up. You're going to get operating leverage. Advertising is going to remain around flat at about 7% as per your guidance. Shouldn't we expect some margin expansion given the strong performance year-to-date?

Okay. Thank you. Thank you for your question. So about China, I mean Asia overall did very well in the first quarter. Talking about China, China did extremely well. I mean just to remind you what happened in the last quarter of last year. I remember that the beginning of October was very strong, and then there was 1.5 months of lockdown in China. And then at the beginning of December, business started to recover very nicely in December. And this January, honestly, there was some kind of a rebound with a very strong Chinese New Year in the weeks before and after the new year, China was up double digit. February also was very strong. March also very, very strong. Also helped from the fact that from mid-March last year until the end of May, you may remember, China was in lockdown. So I mean, from mid-March, including April, I mean, China is doing very well. It's up triple digit, but the base of comparison with last year is not, of course, meaningful because last year, there was a lockdown. Something important, some color to add about China is that I mean, the release of the strict COVID policy allowed the business in China to recover very, very, very well. But also the business in the areas close by China, I mean, I'm thinking of Hainan, which is still China, of course, but there were no people in November. Now, I mean, in the first quarter of the year and again in April, I mean in the island, in Hainan island, we're doing very well. We have 3 stores there. I mean they are reported under the wholesale channel because they are operated by the local partner, China Duty Free. But they are doing very, very well. Something I like to remind everyone is that Hong Kong, Hong Kong is doing very well. I mean Hong Kong, many people said in the past that was dead. Well, now Hong Kong, I mean it's not yet, of course, at the level of 2018 when it reached the peak business, but business is getting better and better and is getting closer to that level. Of course, Macau, of course, Taiwan and also on the Southeast Pacific, Singapore, Australia, I mean all of that region did very well. What do we do well in China better than others? I mean, I don't know what and I won't compare our brand with the others. But for sure, I can tell you that I mean the brand in China is very, very strong. I mean the brand momentum in China and not only, but China first brand momentum is very strong. I can tell you that also our business strategy that has been driven in server by a very strong brand strategy and very, very selective distribution strategy is something that is delivering good results because we don't have so many stores in China. And over the past 2 years, we have been focused and more on expanding the existing stores and to transform them in flagship stores. I'm thinking of the Chengdu, Hangzhou, Beijing, Sanlitun. Now we just opened a few days ago in Shanghai, the new store in Plaza 66 relocating the previous store that was in the basement, but still doing big volumes and making of that store on the ground of real flagship store. We will open -- we will relocate the China World. And so in our strategy, distribution strategy, has been on one side, very selective, and on the other side, very brand-oriented. So -- and something very important, our retail operations in that market, but not only, but within that market specifically, I think that are a very, very high level, and this is thanks to the retail excellence project that had been implemented in all the regions. But for sure, the execution of that project in China is definitely, definitely excellent. So this is -- I mean, in a few words, the explanation of why our brand is doing so well in China. Question number 3, I mean, operating leverage. I mean, theoretically, I mean, you are right. Of course, on the other hand, again, I mean, we have -- I mean, our target, our priority, as I said, I mean, and you know very well, is not how to increase our operating margins, but how to make our brand both stronger and stronger. So having said that, we have a target in mind, we have an ambition in mind, which is to touch or to barely touch the 30% operating margin. And this is still in our mind so you may be right. But I mean, it's more important for us as a management team to keep investing in the brand, in the organization to make this company stronger and stronger than to achieve 1 or 2 points higher operating margin. So for the time being, honestly, our position is still the same. I told you, and I said this in the market in the past, 30% is a very good target that we have still in mind. We don't even think of doing more or better. Thank you.

The next question is from Melania Grippo of BNP Paribas Exane.

This is Mealania Grippo from BNP Paribas Exane. I have 3 questions. The first question is on Moncler retail. You reported very strong trends. And I was wondering if you could give us an idea of how this compares with your current trends? Are you seeing a strengthening from this level? My other question is on the U.S. and the American cluster. Could you please tell what was the performance of the cluster in Q1? And what are you currently seeing if you're seeing any deterioration in the cluster as well in the U.S.A? And finally, on Stone Island, U.S. was quite weak. You explained the reason, but do you expect this trend to continue for the rest of the year?

Okay. Thank you for your question, Melania. So first question about retail. I mean retail, again, needless to say it again, first quarter was very strong across the board. And April is substantially in line with the first quarter with some color. I mean Europe in line, even a little better. China, better, but again, remember that the base of comparison is much is in April than in the first quarter. U.S., that was already first quarter a little bit softer than the other regions. Asia is a little bit softer. Not the DTC. I mean, DTC is still positive, and DTC is still doing well. There were sale channel in the U.S., and I'm talking about the department stores. Their business trend is definitely softer. And their approach is softer and a much more cautious and prudent in placing reorders because I mean, our wholesale business in April is not so material. But last year, they placed more reorders than this year. So this is the only, let me say, shade of our business in the U.S. But again, on the retail business, the DTC business is positive and doing well. About U.S. cluster. Again, the point is that our DTC business in the U.S. is positive. And we will, notwithstanding the fact that many American customers are traveling to Europe mostly and shopping in Europe. And they represent the first component, the first contribution of outside the region customers, together with the other nationalities, specifically one that are very interesting to mention is Korea, and the other one is China because, I mean, the Chinese I mean, still represent a very small contribution of our business in Europe, but that contribution is growing week after week. So back to your question. The U.S. cluster is doing well. It is up double digit, putting together, of course, business in the U.S. and business in Europe mostly with the U.S. customers. Last question about Stone Island. I mean, our view for the year is in the top line in the region of a high single digit, honestly. I mean behind this number -- this mid-single-digit number we report in the first quarter, of course, as you see. So you know there are 2 different channels. One very good, which is the DTC; the other negative declining that is our sale. Of course, both numbers are impacted by the internalization of our business in some markets, specifically Japan and the DTC channel in the U.K. But even without this internalization, the retail business would be double-digit up. And also business would be more or less flattish. So again, the 2 different channels, the first one, strategically very important for us because in the channel we have invested more. We have been focused more over the past 2 years after the acquisition, the other channel that is our side softer this channel. And on the other side, our approach is and will be more than ever very, very selective with a very strong control over volumes, as Elena said before. So I mean, this is the picture of the first quarter. For the rest of the year, again, we will keep investing and focusing on the DTC channel, maintaining this very strong and selective approach in the wholesale channel. With -- I mean, the top line that, again, we see the top line in the region of high single digit.

The next question is from Luca Solca of Bernstein.

The first question again on Stone Island and a bit of a broader question here. You presented the acquisition as of Moncler 10 years before. I wonder on this grand project of turning Stone Island into Moncler into future Moncler, where you see your standing? What are the areas where you have progressed the most? And what are the areas that are still to be addressed? And what do you expect the new CEO to focus on? What would be the agenda for Robert as he comes on board? The second question deals with your events that are becoming more and more impressive. I think that the genius of the Genius event, forgive my pun, is that it caused a huge amount of buzz in the beginning were costing similarly to a traditional catwalk show. I seem to understand that the new and most recent events must have required significantly more investment and more costs. I wonder if you could tell us how you feel about that? And if you feel that the returns you've been achieving on the back of these events outweigh the extra costs? And if the, let's say, return versus cost ratio is improving or not? And then as we're just about to move into the 2 quarters that are at least important for you, I wonder what you think about your seasonality prospects? And if you're set up to offset some of the weakness in top line growth on the back of the lower season hitting the brand this year because of all you've done in terms of diversifying your product assortment and moving into other product categories?

Okay. Thank you, Luca, for your questions. I mean the first question about Stone Island. I mean what did well, what did wrong, I mean we spend our day to fix problems and not to celebrate success. I think that something important to remind everyone is that 10 years ago, Moncler was not such a brilliant brand as it is right now, not celebrating such greater results of the first quarter. There were lights and shade in Moncler as there are lights and shade in Stone Island now for several different reasons. First of all, I mean, when we decided to implement that acquisition was an acquisition of a brand, okay? I mean we didn't look at the results, of course, we did. But I mean our first priority was the value of the brand and the potential of that brand, okay? And of course, we decided immediately that the first priority was to develop, to build a strong DTC strategy. And so this is what we did there, and I would say, successfully because we have internalized the business in Korea, in Japan, in again, the DTC business in U.K., not yet the wholesale business. That would be internalized next year. Not yet the China business, that would be internalized next year. And in parallel, we implemented. I mean, we put at the help of Stone Island, the retail -- the stronger retail know-how that we have developed over the years. And we have implemented the same we did in the past. With Moncler, the Retail Excellence project in Stone Island and the rationale under the leadership of Robert -- Roberto Eggs. And I think that the results -- the DTC results over the first 2 quarters, are quite good. Of course, again, some shades and some lights, light in Europe, light in Japan, some shades in the Korea. As Elena said before, because that market is softer than other Asian markets, but also because we have implemented a real transformation of that business model because we have converted the retail business that was operated by independent third parties to a retail network that is operated by our own store managers that have been hired over the past few months. Of course, it will take some time to these people to -- I mean, to get the full understanding and knowledge of the brand, of the business and of their customer base. Not again, we are confident about the process. So overall, again, we are satisfied. I don't want to say happy, but satisfied with the results. And I can tell you that are totally in line with our expectation and with our long-term plan that is associated with the brand value not adjust to the business we can generate or we can increase in the short term because this is not and it has never been our priority. I hope I answered your questions.

Yes, Luciano. Maybe just one point on the retail transformation. Because my understanding is that moving Stone Island on the same successful path that Moncler has known in the past 10 years or so goes through making Stone Island more productive in terms of sales per square meter. And I wonder where you stand particularly on that front.

I mean, honestly, but I mean needless to say, Stone Island right now is less productive. I mean the store productivity, the sales density is less, significantly less than what Moncler has achieved but is getting better. And so the gap between Moncler and Stone Island is getting much smaller and smaller. But there is still a significant difference. But again, this is not something you can achieve overnight. But this is the reason why we are investing in the DTC business. And again, Retail Excellence project is aimed to achieve these results. But of course, if I look at the result right now, I mean we are still far from what Moncler has achieved over the years. And another point about Stone Island I forgot to mention is the arrival of the new CEO. We made a decision, I mean, several months ago, 1 year ago. We saw, we realized the need of having a new leadership for Stone Island with all the responsibility and the capability to drive the business and the brand and the brand first. So that's why we decided to get in touch and at the end to hire Robert Triefus. I mean I think you know his CV. I mean, he has spent the last 15 years in Gucci, contributing to the strong brand success of Gucci before in Armani. And so he is bringing his strong know-how and experience in the brand strategy, which is something that's really important because, again, we have, in our hands, a beautiful brand with a beautiful -- with a great potential. Of course, now we have to increase the voice of that brand, the audience of that brand and the relevancy of that brand. So that's why, I mean, we rely on the capability and the strong experience of Robert Triefus. Second question about the events. I mean Genius, as I said, I mean, needless to say it again, was a great event in London with about 10 billion reach, over 1 billion engagement. I mean, all the numbers are unprecedented in our history, 12,000 people in the event, the 40,000 people outside of the door desperately trying to enter the event. So everything was very strong. Of course, the return of that event, I mean, it's difficult to quantify, but I can tell you that, honestly, looking at the results of the first quarter, I think that the brand momentum that has been generated also by that event is under -- evident under our eyes. Of course, to your point, that event was very expensive, yes. Do we have the money to keep doing that kind of event? Not 1 a week, for sure, not one a month. But in any event, I mean, as our sales grow also our marketing budget, 7% marketing budget is growing. And I think that what is very important is to spend that 7% wisely, okay? Well, and very focused on our 3 pillars that are Genius, of course, and this was the event in London; but also Grenoble, and we spend in the first quarter of this year as much as in the last quarter of last year money in Grenoble with very good results. And of course, the core -- our core Collection. And touching also your third question about the seasonality. You may have seen that we are running a summer campaign for Moncler right now. And that is, I think, very visible. And this is in the direction to enhance the business in a season that is definitely weaker than the fall/winter season, but it's getting better and better. And of course, not only because we are investing money in marketing, but because over the years, we have made -- we have made our collection broader and broader, introducing spring/summer categories, increasing our network category, increasing, I mean, our shoe business with the new collection we introduced in August last year that has been renovated for this current spring/summer season, the Trailgrip shoe. And so I mean, from the product point of view and from the communication point of view, I mean we are increasing that business in spring. And again, this is something you know very well because I told you other times. I mean I remember many years ago, when the business of the second quarter for Moncler was a loss-making business. Now I mean, we are not making the profit as much as in the fourth quarter, but we make some profit. And this is the combination of all the activities we have implemented to announce the spring/summer season product communication. Okay.

The next question is from Susy Tibaldi of UBS.

I have one follow-up on China. Is it possible to give an indication on how much the Chinese cluster is growing? Maybe if you are not comfortable to tell us on a year-on-year basis, maybe thinking about on a 2-year basis versus 2021, it would be very helpful just to have an idea. And also how you're seeing this in Mainland China versus the other -- the Greater China regions, so within Hong Kong, Macau and Taiwan? Secondly, to go back to the spring/summer season now that you have launched Grenoble. I mean, now that in Q2, this spring/summer collections obviously take the bigger proportion and you have less outerwear, are you already starting to see some positive results? Like are you getting some feedback from the store or from the customers that you can share, basically, just to understand you're maybe still far from the optimal state that you want to achieve in these product categories? But are you already seeing some meaningful improvement also to understand how we should be thinking about modeling the second quarter? And lastly, on tourism. I remember before COVID, in Europe, Q2, Q3, it was 60%, 70% of sales to tourists. Now we don't have the Chinese back yet, but are you expecting the tourists to become over half of their sales in Europe already in the coming quarters? Or still be below that? And because we are seeing now a bit more tourism, do you think there is a possibility that we are going to see a little bit of shift of the seasonality? So maybe a bit anticipating the purchases into Q3? So we could have a bit stronger flows into Q3 and then potentially a bit of a weaker Q4 because of this tourism flows?

Okay, okay. Thank you, thank you for your questions, Susy. About the Chinese cluster. Of course, we don't provide, I mean, specifically this kind of numbers, not quarter-by-quarter because it would be not particularly meaningful. But in any event, I mean, the Chinese cluster was in the region of 1/3. It is about 35% of our total business. Of course, I'm not talking about the first quarter only, but I mean considering the last 12 months. And again...

The retail.

Yes, correct. Elena corrected me. We are talking about the retail business because it's difficult to measure this contribution in the wholesale business. And so I mean this is the Chinese cluster. Again, the Chinese cluster over the past 2 years, 3 years, has been growing, has been growing, has been consolidating in China because -- in China and in Greater China because they have not traveled after COVID. But again, this is something that you know very well, notwithstanding the restrictions and notwithstanding the lack of Chinese customers in Europe, and we have maintained that contribution with a strong increase of this less in China. The other question was about Grenoble in spring, also in China and also in the other regions and close by China. I mean, the release of the COVID restrictions allowed the Chinese customers, I mean Chinese people to travel within China and in the regions close by like, again, I mean that, of course, is China. But as I said before, Hong Kong, business is doing very well, thanks to locals but also thanks to people coming from China Mainland, Macau and Taiwan. So all that region is doing very well. About Grenoble, what we call dynamics, which is the spring/summer Grenoble collection. This current spring/summer '23 is the first season we introduced this category. This line is doing well, honestly. Of course, again, as we normally do when we introduce a new line, we start with a very selective approach in volumes. And so we didn't put too much volumes in our network, but the sellout is good and very, very encouraging. And we also believe -- strongly believe, in the potential of this pillar of the Grenoble Moncler to be developed, not only in winter that is, of course, the heritage and DNA of the brand, but also in spring for a year -- all the year-round potential. About tourism, I mean, you're right, in the second half of the year in Q3, even more in Q4, tourism outside the region represented more than 50%, about 60% of our business. So what may happen this year? Honestly, we don't know. But I can tell you what we see now that the Chinese customers are traveling to Europe represent still a small contribution, but a growing contribution of our business, still a small percent, but it's growing week after week. Of course, this will totally depend also on the availability of flights from China. But we expect, let me say, we hope that in the second half of the year, we will see again a significant return of Chinese customers to Europe, but difficult to predict now.

The next question is from Thomas Chauvet of Citi.

Three questions, please. The first one, congrats on the very strong Moncler retail growth, plus 34%. Is it fair to assume high single-digit space contribution? And so about mid-20s percent retail LfL? And within the LfL, is that still well balanced between volume and price? Secondly, on wholesale. Back in February, you guided for wholesale up mid-single digit at the Moncler brand for the year depending on the shop-in-shop and e-tailers conversion. With what you said about the U.S., Luciano, softer at the start of Q2, are you still sticking to that guidance? And then can you also, on wholesale, comment on Stone Island? The U.S. is down 20% in Q1. I suspect that's all wholesale pretty much. And finally, on margin in H2 last year, you had a bit of margin pressure at the Moncler brand due to the marketing spend of the 70th anniversary and obviously, the China revenue shortfall. Can you comment on how you see the shape of H1 versus H2, particularly as you held the big Genius event in London in March that suspect will increase the marketing budget in H1, but maybe not in the full year? So any clarity on that would be useful on the phasing.

Okay. Thank you. I mean the first question was about the space contribution. Honestly, in the first quarter of this year, the vast majority of that growth rate was driven by comp by organic growth. Space is a small, small part of that number. Of course, for the year-end, we still maintain our guidance, our plan to see the space contribution in the region of mid- to high single digit. But in the first quarter, it was lower. The vast majority of that 34% was comp. The other question about wholesale, our view for the fiscal year. Okay. For Moncler now, this is an important question because, as Elena said -- I'm talking about Moncler now. As Elena said, I mean, we are finalizing -- actually, we have already finalized this agreement with Nordstrom to convert their space dedicated to Moncler brand and to -- in a hybrid retail, model hybrid. And this is the way they call it because the inventories are under control, responsibility, allocation of the product. And from the people point of view, they provide the people that are mostly focused on our brand. So we will report this business under the retail channel. It means that because it represents about mid-single digit of our growth, the guidance we normally gave to the market to increase the wholesale business of mid-single digit for this year, and I don't know for next, but for this year, will be closer to a flattish growth, okay? And also not also, only, but there are other smaller but several conversion of wholesale shop-in-shop into retail. So our view for this year is not mid-single digit, as we said in the past, but it will be more or less flattish. About Stone Island, I mean, any guidance on wholesale only, I mean, is difficult, and honestly, is not totally meaningful. For sure, I mean, our focus, as I said before, since ever, since the acquisition of the DTC business. The wholesale business is important. But it is strategically very important if and only if we maintain our very selective approach. So I don't know what the number we will report at the end of the year under the wholesale business. What is important for us is to develop a healthy wholesale business without high inventory problems in our wholesale customers. And so this is the way we want to approach and we have approached in the past for Moncler, too. So again, the wholesale business for the year-end, for sure, will be negative in any event. But again, what we look more and we are interested more is the DTC business and also the wholesale business, but again, more from the qualitative point of view than from the volume point of view because the quality brings the quantity. Next, about the U.S. okay, the shape of margin, shifts of margin also, I mean this is not a good question because, of course, having spent this year a significant amount of money for the event in land on -- in the first half of the year, differently from last year when the event was in September, of course, you should expect for the first half of the year, a result that will be more impacted by marketing higher this year than last year. At the end of the year, it will still be 7%, but the distribution of this 7% between the 2 semesters will be different this year from last year. But I mean, important to highlight. About the U.S. market, you asked some question?

No, it was just about Stone Island in the U.S. If they would -- I mean you talked about business trend, business weakness, but I don't know if there was anything also particular cleanup of doors in the U.S. that explain why Stone Island in the U.S. is down 20%.

I mean, of course, you know that, I mean, behind that 20% decline there is a very small business. I mean Stone Island is still a very small business brand in the U.S. with still a very limited visibility, a very limited awareness and of course, this is not helping the business trend in the U.S. Again, the DTC business was positive. We still have a lot to do in the U.S. and not only, but I mean in the U.S. we still have to build the brand and the potential of that brand because, as I said other times, the brand perception in some specific areas of the U.S., or New York and Los Angeles is very good. There are very strong communities of lover of that brand. But of course, the distribution of this awareness is still a very, very limited. And so again, the business is soft. The wholesale business is soft because, of course, I mean, as I said before, department stores are not doing particularly well. And of course, the brand relevance with the department stores is not significant, not yet.

Luciano, can I just come back on your wholesale comments with Nordstrom? So did you say that Nordstrom is 5% of your total wholesale business? And so this goes to 0? And that's why your mid-single-digit guidance is now flat. So I guess you'll get a big tailwind in retail space contribution. I don't know, are you going to record to that, but...

Yes, more or less. What I said is that if you take our original guidance to grow the wholesale business of 5%, without Nordstrom in the wholesale business because it's just a shift, that business is expected to grow flat, to be more or less flat. Something important is not only a shift from one channel to the other, but also a shift from the second quarter and the third quarter to third quarter, fourth quarter. There is a shift, of course. So in the second quarter and the first half, you will see the impact of this Nordstrom conversion. But of course, that business will convert it into sellout business in Q3 and Q4.

Okay. But you said it's a hybrid retail-wholesale model. What does that mean? Is it -- from an accounting standpoint, is this retail or wholesale? Is this accretive to your retail business? Or is it just moving...

I mean it is retail, and it will be reported on the retail business in line with what other brands are doing. And so honestly, I mean we comply -- I mean, we believe that this is a retail because Moncler is responsible of the inventory, okay? So I mean we are responsible of buying, together with the department store, allocation and at the end of the sell-out and then the leftover. But it is a hybrid because, I mean, not all the space will be shop-in-shop. People will be provided by Nordstrom. So that's why it is called a hybrid. But again, it will be reported under retail.

The next question is from Chiara Battistini of JPMorgan.

I just have one actually left on Europe. To come back on that because Europe was also very strong for Moncler brand. So I was wondering whether, first, if we could actually have the contribution of tourism in Europe in Q1 to understand the contribution between the tourists and the domestic consumer? And then looking at the domestic consumer, the European cluster, if you could make any comment on that please, and maybe possibly if you are seeing some countries outperforming others? And also, if -- and I know we touched on this before, but if you could see or could comment in any way on the contribution of Genius and the impact on Genius on the European domestic consumer specifically, maybe post the event, if you've seen any indicators that you could share with us, please? And just -- sorry, just a follow-up on Nordstrom. Is it fair to assume a sort of 2% tailwind, I guess, following up on Thomas' question, a 2% tailwind to retail this year just because of the conversion from Nordstrom, please?

Yes, your first question about Europe. I mean, business in Europe over the past 2 years have been driven mostly, mostly by local customer business, and this is very important, a very nice to remind everyone because I mean that business has been developed over the year, thanks to a very strong, I mean, culture of building relations with our customers and building our customer base. Having said that, the contribution of tourism outside the region is growing. You may remember that since last year, the weight and the contribution of American customers was quite important. They still contribute significantly to our business in Europe on the top of Americas. We started seeing Korean customers coming from that region. And again, still at a smaller extent, also Chinese customers. So business is still a majority driven by local, but the business coming from tourism outside the region is growing very, very nicely. And for the time being, in these 3 different internationalities, the European cluster is a positive double digit, yes, of course, and contribution of Genius on our...

So you're asking what's the contribution of -- I mean what is the effect that we had post the Genius event, right?