OVS S.p.A. (0OV1.MU) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS First Half 2021 Results Presentation. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Stefano Beraldo, CEO of OVS. Please go ahead, sir.

Thank you, and good afternoon to everyone. Thank you for being here to the half year results. I'm here with my team. So after the presentation, we are available for your questions. First of all, let me say that obviously, I'm very happy about the results of the first half. I'm very happy because we had the highest EBITDA ever. We had also the highest EBITDA margin ever. And because we had a full recovery of net financial position in 24 months, meaning that we have now absorbed EUR 420 million -- EUR 430 million of revenues lost due to the several lockdowns. Today, we are in term of net financial position EUR 50 million better than 2 years ago before the pandemic started. But I'm even more happy as our result has been generated, first of all, with an incredible market share increase. And being the biggest player of the market is not that easy to increase market share as we did by 12%, moving from 8.1% to 9% of the market. And I want to underline that this has been achieved almost entirely because of the like-for-like performance. The contribution of new openings in the 12 months has been only 1%. So out of the 12% market increase, only 1% has been generated by new openings. And because we are still opening stores, most of the new opening effect will be visible in the next coming quarters. And finally, in terms of merchandising and might because after many, many efforts to improve the most important in terms of ability to attract the new customer, the most important element of the assortment, which is the women, even if you know that we have a higher presence in our merchandising mix of kids. But the one that decide to buy is the mother. And so it's always important to be able to make happy the mothers, which are the ones that normally they buy for themselves, for the kids and some buy also for their husbands. And in these 6 months, women has been the best category, generating a performance, which has been higher compared to men and kids. Either because of the internal brands like Piombo, for instance, even if Piombo has been, in this case, only contributing as designer, as artistic Creative Director with no reference to Piombo brand because the Piombo brand has been used only in the men. But also because of the great result generated by what I used to call in this period, unexpected discoveries. So we have started introducing new small brand that we [ scouted ] across -- mostly across EUR ope, and we started introducing in April, May, and they have generated a great performance. In some case, doubling the sales density formerly achieved by the other portion of women merchandising. Then also men performed extremely well, mostly thanks to Piombo brand, which has been extremely successful and also very important, because thanks to Piombo brand, we attracted new more demanding customers. Basically, it means that our strategy of being a platform is working. Also happy because of the online performance, plus 77% versus '19 and again plus 30% versus 2020. So basically, new brand providing great solution to customers and attracting new customers. Some of these new brands are made entirely by us, like Piombo or Baby Angel, some made by third-party that we discover and we invite being part of our platform. Happy also about the results generated by the store refurbishment. We refurbished some store and the result has been very encouraging. So it means that still today, in the middle of the digital evolution, the store remains an important part of the shopping experience of customers. Happy because we increased the number of customers which are buying both digital and physical. And happy because we increased our loyal customer base by 12%. So basically, in general, I think that in these 6 months, our company is starting harvesting many of the seeds that we planted, if I may say, in the last seasons, merchandising improvement, brand improvement, advertising, new experience in the store are probably -- and also, I was about to forget a very important aspect. The achievements in terms of sustainability, we have been rewarded by Fashion Revolution as the first global brand in terms of transparency, heading a long list of players from the biggest in the world to the smallest which has been considered provided that they had at least EUR 500 million turnover. So all these elements are clearly also evident to the eyes of our Italian customer, which are privileging OVS as first choice when they need to buy and this is why the market share increase has been so important. In terms of outlook, I think that we will continue benefiting from this trend. The only negative nuance is that as you might be aware because it is a general impact in all the industries, we are suffering because of delays in production, in deliveries, in the shipments, et cetera. But fortunately, the nature of our assortment, which is becoming more and more season -- less impacted by seasonality and more cross-seasonal and cross-fashion, because it's more sustainable and well done than fast fashion driven. We have already experienced this year that whatever we do not sell in one season, we can carry forward and selling more than decently in the following season. So there will be some lack of marginality in the first 2 months because of the need of selling more hold goods than new ones given the delays, but this is not impacting in a material way our perspective for the full year. So I think that, having said that, I'm happy to hand the word to Francesco Leoncini for a better illustration of the -- for the better comment to the slide. Thank you.

Thank you, Stefano. Good afternoon, everybody. I'm starting the presentation from Page 3, where we can see that the positive results of OVS is not just internal, but have confirmed at the market level by the trend of the market share. In particular, on the left side of the graph, you can see that over the last 12 months, OVS increased its market share by almost 100 basis points from 8% to 9%. And this growth was higher even of the one of the online players in orange and of other players, international or Italian. And even in the last 3 months, on the right side, you can see that while the [ true] player -- the online true players were losing ground because of the normalization and the expected normalization of the channels, OVS was still able to grow by 27 basis points in just one quarter. Moving to Page 4, and so to the financials. The second quarter, as announced by Stefano, is characterized by a strong growth versus 2020, almost EUR 100 million more sales that translate into EUR 50 million growth in gross margin. Apparently, the gross margin percent is declining, but this is just due to a technical fact that in 2020, the sales were postponed from July to August, and so the quarter was combining just full price months. Normalizing this effect, the gross margin of 2021 would have been 80 basis points higher than last year, thanks to the good choice made in terms of reducing the markdown were not necessary. The increase in gross margin then ends up in plus EUR 18 million on EBITDA level and into a cash generation that moves the net financial position at the end of the quarter from EUR 410 million 12 months ago to EUR 320 million this month, so much higher than the EUR 80 million provided by just by the capital increase. But we will come back on cash flows. On Page 5, we extend the analysis to the initial 6 months. So on one side, including the Q1 2021 that was affected by some lockdowns. But on the other, comparing with the 2020 that had even a more harsh lockdown in that year. So the growth is even more impressive because we go to EUR 220 million in net sales over 2020 and then, of course, to a return from a breakeven situation to a positive EBITDA of around 10% despite said, the lockdown in the first quarter. Finally, this also translates into a net income of EUR 13 million posted for the quarter. Maybe even more interesting on Page 6 is the comparison with 2019 with -- which is a sort of normalized year before the explosion of the pandemic. Well, in that year, OVS posted in the first 6 months, EUR 62.5 million EBITDA. And this year, basically, we are at the same level. Thanks to the 2 souls, let me say of OVS. In the first quarter, when we had to fight against the continuous lockdown imposed because of the pandemic, OVS, thanks to its ability to reduce cost, to be flexible on the cost baseline almost managed to reach more than a breakeven with EUR 5 million EBITDA and so offsetting the gross margin loss because of level of sales. In the second quarter, OVS was more than able to ride the positive consumer mood that came with the reopening and achieving as said, the highest EBITDA for Q2 over the last year and then ending at EUR 50 million. Page #7 shows the results for the 2 brands OVS Upim and for the 2 main channels, DOS and franchising that are all positive, all growing more than double-digits. Page 8, we see the -- we start entering to the financial with the working capital. The growth in the franchising that was just mentioned, grew -- growth in the trade receivable. But with the reduction in the DOS as long as we were cashing in the extraordinary payment terms given to our customers during the difficult 2020. On the other side, also trade payables are reducing, because we are not benefiting anymore of this extraordinary 2020 payment conditions, and so absorbing a portion of cash. The most important element is, however, inventory, that is also represented on the right side with a curve over the last 18 months. So after the peak caused by the lockdown of the first lockdown, OVS managed to constantly reduce the stock, which is now at EUR 410 million with the perspective also to reduce it in the following months, all for the benefit of cash generation. Page #9, represents the back to normal on investments, even recovering some of the projects that were stopped last year when the focus on cash was the main driver. We are also proud, I mean, of the results that we are having in terms of quality of the stores of both the new stores and the refurbish stores that we are opening during this semester and that will have the full effect, of course, in the coming months. Coming to Page 10. We have then the cash flow that in the first half of 2021, managed to generate an operating cash flow after CapEx of EUR 25 million, thanks to both the EBITDA and the limited absorption of cash by the working capital. One note, below, you have the proceeds from capital increase, you see EUR 81 million and not EUR 80 million, because thanks to the sale of the [indiscernible], OVS managed to cash in one additional million after having 100% of subscription, of course, of the capital increase. The comparison, the cash flow, acquire even more relevant when compared on Page 11 to the previous year results, because the first semester is always were -- was always a cash absorption period for the company due to the seasonality. And this year, we managed even excluding the proceeds from the capital increase to more than breakeven with a plus EUR 2 million result. And then leveraging -- reducing by almost 3x the situation of the leverage ratio from what we had at the beginning of the year. This you can find on Page 12, where you can see that the trend of this KPI where we ended up just before the explosion of the pandemic, January 2020, with 2x net debt over EBITDA, then unavoidably, this ratio grew over the period of the lockdown, but starting from January this year is steadily going down and now it is at 2.4x. So, I leave one more of the word to Stefano for some points on the outlook if there is anything to add compared to what we said already in the introduction. What we can see, of course, in this -- in the month of August was a good sales trend provided by the ability that OVS, I can say, now has fully developed in interpreting the elasticity of the demand to the discounts. So for instance, we had a second quarter a full -- where we reduced the discounts, because the demand was not asking for that. And so for instance, we did not [ usher ] on mid-season sales, while in August, when the consumer is more interested in looking for a bargain versus while waiting for the [ quarter ] to arrive, we managed to leverage some higher discount for the benefit of faster inventory reduction and so cash generation over this quarter.

Thank you, Francesco. I would only add a few words about the launch of Piombo Women. Likewise, we did in Piombo man with 500 corners of Piombo dedicated to a particular way of lifestyle in the man segment, we did the same in the women. So I think that each of you can see in the store OVS, a wonderful collection, a wonderful assortment that Piombo woman is represented today. And from the initial responses that we are achieving by customers seems that we started with the right -- in the right way. So I think it's very promising. A few words about Stefanel. After having spent about EUR 4 million for the acquisition of this important brand and after having discovered that during the 6 months of hard work in order to generate our first collection and also discussing with customers, franchisee partner in Greece, Portugal, Russia and obviously, in Italy, we discovered that the brand has an even highest reputation than the one that we supposed to be and we are eager now to see the results of the Stefanel stores. We have invested about another EUR 3 million, EUR 4 million, EUR 3.5 million in refurbishing or opening new Stefanel stores. Today, the network of Stefanel is composed by about 60 between small stores and corners in Italy and about 20 partner franchising stores owned by local partners in Portugal, in Greece and in Russia. The first impression that we are receiving by store managers and franchisee partners are enthusiastic. Let's see what happen. I have to cross my fingers now because relaunching a brand is never an easy task. But apparently, we made a great job, and the one of you that might be interested can have a work in Corso Buenos Aires, Milan or in Venice in front of Ponte di Rialto or in many other locations and to see the new Stefanel how it looks like. I think we achieved a great quality, and we have been able to reduce by more than 30% of the average pricing as we promised. Basically, the -- I think that today, the brand perception of OVS as we wrote is the highest in recent years. And because of a number of initiatives that fortunately are all generating the expected result. This idea of OVS platform is working. You will see several new brands coming, one just arrived a few days ago. Converse kids, for instance, has been introduced, and the initial sellout is already promising. We will have, for the second season gap. We will have other brand. We introduced Eastpak in the backpack segment and several others will follow. So I leave now the space for your questions. Thank you for listening.

[Operator Instructions] The first question is from Domenico Ghilotti of Equita.

A couple of questions. The first, both are related to your guidance. And in particular, the first is related to the top line. If I look properly, you are assuming a slightly negative or flattish performance in second half compared to the second half of '19. So just to understand how much of this could be related to the lack of products on the shelves and how much is linked to other topics or some prudent approach on the second half and how consistent is with the current trading? And the second question is on the cost structure. How are you planning for operating costs? I mean, should we expect personnel rents being more or less back to 2019? Or do you see some structural savings? Are you planning with a marketing effort stronger than '19? Can you help us in understanding?

On the top line evolution, I think that there is a combination of 2 factors. One, as you mentioned, related to the lack of deliveries to the smaller -- to the lower deliveries, which are combined with a continuous reduction of buying that we are making in any case, independent from this. So we are planning for lower intake year season after season. And in order to increase the full price sale, which is what is happening, we didn't mention in this speech, but we had an important step-up in the full price sales from 51% in 2019 to 64% of our assortment has been sold at full price, for instance. So we buy less, we try to buy better. And obviously, if on top of this exercise of prudence, we suffer a delay in deliveries, this is undermining the full like-for-like potential. Number 2 reason is that I believe that after 2 seasons in spring/summer characterized by closures and lockdowns, we had in the second quarter, the one that we are announcing today an important positive rebound. I do not expect the same rebound in autumn/winter given that in the total amount of EUR 420 million, EUR 430 million turnover that we have lost in the last 18 months, basically, approximately 70% of it has been lost in spring/summer. So I do not expect the same ambition of customers to fill the -- with apparel [ goods ] their wardrobes. So I think these 2 elements are the reason for it. On the cost, there will be no material change next year, I mean, or in the coming months. Probably next year, it will be a bit more difficult to continue achieving rent reduction compared to what has been done this year also because of the good performance that we are crossing finger continuing generating. But even in this case, everything will be more or less compensated internally. So we don't foresee material changes.

And just as a follow-up. On the marketing side, are you...

Marketing, we are investing more. We are investing more. But in total, the combination of higher marketing costs and more efficient cost effectiveness, I must say, also thanks to the operating leverage that we are achieving will not change the total impact of SG&A in our profit and loss. With reference to market, you might have noticed, for instance, this year, we spend more. And I think that the visibility is higher. Even today, we are in the press with Stefanel and Piombo [ done ], even in Milan, where the fashion week is about to come, we have an important presence. And this summer, for instance, we invested for the first time trying to inform Italians that OVS is a great place for beach wear. And beach wear has been the segment which this year reacted the most to this spending. It's worth also mentioning that we opened several so-called OVS Holiday, a nice resort like Porto Rotondo or Capri or Jesolo showing beach location. And these locations are performing extremely well, meaning that OVS is not only as I want to underline every second, a commodity provider, we are a commodity provider, but we can also make a camouflage and became an attractive brand once we talk to the same customer when they are experiencing their holidays.

The next question is from Andrea Bonfa of Banca Akros.

My first question has already been answered. The second one, also part has been answered, but if I would like kindly request you still an elaboration on the concept of, let's say, excess of stock of the industry to be mark down and the possibility to resell, let's say, onshore item in the next year season. So is that possible that despite the disrupt that the COVID has brought to your industry that maybe there are some positive lessons from the industry or for you in particular in the sense that there was an excess of stock structure second stock in the industry that now is beginning to [ scaled ] down, but which will be more than recovered in terms of profitability but lower markdowns. That is the first part of my question. And the second that you learned that you can resell unsold items the next year. So basically making your business less risky. I want to have your opinion on this vision?

I think -- thank you. And I think that more than a question, you gave me the -- and all the attendees that the explanation of what is happening basically, because what is happening is exactly what you mentioned. So basically, I believe that one of our main efforts in the last 24 months has been to focus on an assortment which was more and more trying to become more independent from fashion and seasonality and investing in midweight more than in super heavyweight and investing more in sustainable and easy-to-wear goods other than in highly fashion ones. We have never been a fashion-driven company. But even within a company like us, you can module, you can adjust the mix into a more fashionable or a more daily needs assortment. And I think that the combination of quality and natural fabrics and less exposure to fashion is the answer to the question, how can we carry forward our product to the next coming season without losing too much. We have been even surprised by ourselves, to be honest, because my expectations for the year were to be forced to be engaged in higher markdown during spring/summer, given that the mix of all goods, the ones that has been made for -- unfortunately, for spring 2020 when the stores were closed, and we have lost more than EUR 300 million sales. The cash generated by these goods are expected to be a bit lower and the EBITDA generated by the disposal of this good, I expect that it should have been a bit lower, because I thought to be forced to be engaging higher markdown. But we drove the machine day by day, we discovered that the sell-out of our goods was good, in spite of much less markdown. On top of it, you can add that because 40% of our sales are generated by kids. In kids, it is clear that the potential of the assortment to be as new even the year after is much higher than when you are [ Gucci ]. So clearly, if you are 100% committed to fashion, the risk of markdown, because you cannot sell as new, the merchandise in the year after are much higher. So I think that even compared to the market coming to a part of your question, we have been benefited from our DNA, from our nature. I don't think in a market, there is a super high excess of stock today. Many of our competitors made much more discount that we made. So probably they have been able to sell quantities. But with a lack of delivery, which penalized all the markets, I think that even the competitors are experiencing less success of stock. So I hope, I expect that there will be more discipline in the markdown policies in general.

The next question is a follow-up from Domenico Ghilotti of Equita.

I have a follow-up on this topic of the gross margin. In the sense that you are probably facing some cost inflation in general also for freight. And so I wonder if you expect on the other side, you are mentioning that -- so probably there is less goods, let's say, available. And so how do you see the balance of these 2 items going, say, in the rest of the year and the second half of this year?

Domenico, I'm not sure I catch your question. Can you rephrase? Can you reformulate?

Yes. I mean in terms of gross margin, if I understand properly, you are saying that on one side, you do not expect to see a big promotions also because there is less availability of products. On the other side, you should have cost inflation. So you should have freight rates that are higher and so you should try to either have a higher number of, say, full price sales or to raise prices a little bit in order to offset. How -- are you able to manage this cost inflation in the current environment? That's the key question that I have.

Okay. Now it's clear. And I think that I have a good answer for you and for my company, most importantly. Yes, it's true. I think that the combination of higher freight cost, lack availability of product will force my competitors, not only myself to be more cautious about margins and about the possibility to translate some of the cost increase into higher prices, which is exactly what we are doing gradually in the last 18 months, to be honest. And we are, if I may say, accompanying, we are doing together with a constant increase of quality of our product in order to make the gradual and constant price increase more acceptable by our customers. As a matter of fact, we are reducing our volumes. We are buying less. We are introducing more linen, more cash in our offer, more quality. And this means also gradually highest prices. But we never want to forget the lower-end customer base. And so we are always present in the entry level because we want to continue to be perceived as the best compromise between value, quality, sustainability, et cetera. In terms of impact of the cost increase of the freight, et cetera, I am sure that we are a bit less impacted compared to smaller competitors, not compared to Zara, H&M or these kind of companies. But for sure, compared to the majority of the Italian market because the market share owned by small players is still 80%. And this couldn't enter massive auctions like we did in order to secure midterm low rate on the freight. So this is why, for instance, this year, we are impacted by the cost of the container, the TEUs much less than the average of the market. We didn't suffer the 300% or 500% increase like many players complained about. And obviously, we will suffer a certain increase for next year, but we already are working with the improvement of the brand reputation, the improvement of the store, the improvement of our -- of the picture in our website, also in order to make acceptable from the customer perspective, a coherent price increase.

Okay. And second question is on the CapEx side. So you were mentioning in the call that you are opening again. So should we expect, let's say, a similar investment for the second half as in the first half? And can you give us some color on what are the key CapEx also on the digital side? Where are you investing in?

I answered in 2 ways, because the question requires 2 answers. On one side, we expect that we will invest a similar amount because the total yearly CapEx will not change materially compared to the usual ones. And obviously, 2020 has not been usual because in 2020, we have been forced to manage liquidity more than everything else. So basically, we will come back to about EUR 70 million, EUR 75 million CapEx as we -- I think we announced to you. It is also true that we are opening many new stores in the second half and in the last portion of the first half, we opened several stores. Many of them are in franchises. So most of them are refranchising. For instance, this year, in total, we will open probably 80 stores out of Italy. 99%, I'm not sure it's 97 or 99.5 of them are franchising. So maybe 1 or 2 are DOS and the other are franchise. In Italy, we are opening Stefanel corners, Stefanel DOS, but also manage Stefanel franchising and open blockades crop, they are both direct or franchising. So in total, in terms of square meters, we are not offering that many square meter DOS that would impact an increase in CapEx. So we will maintain our CapEx expenditure level. And most of the new square meter will be opened under franchising agreement. And this is quite nice because in this moment, there's a lot of small entrepreneurs, which are making money with OVS, either OVS Kids or blockades or [ craft ], and they want to open new stores, and they are happy to make their own CapEx to manage their rent, the payroll, and we take a risk on the merchandising, because it's appropriate that we continue to command the marketing strategy, the pricing strategy.

Do you still see interest both from franchisee and in case of new openings also in terms of locations or the market is -- so the survival, let's say, are starting to consider a more aggressive strategy. So do you see any change in the attitude of your competitors that have been surviving?

We opened one of our -- I mentioned you 2, you are Italian. So you know Italy, I'm sorry for the ones of you that are not maybe so confident with the Italian geography. 2 among the most performing stores has been opened in the most southern part of Italy, which is one at the Aeolic Island called Lipari, and Zara, H&M, they will never open in Lipari, that's for sure. But there are about 10,000 people living permanently in Lipari and in summer, maybe 50,000, and we are making an incredible performance in this store. And the other one we opened in the mountains between Belluno and Treviso in a place called Praderadego that no one knows. So there is still a lot of penetration to be done in Italy. I had yesterday, one of my partners from Cosenza, which is -- he is very strong in Lucania, in Abruzzi. And the market share of OVS in those places is still subject to increase 3x. So there are regions of Italy where we have 2%, 3% market shares -- market share. And by replacing the more inefficient small player, we can easily double our market shares without making any competition with the big international names that has no interest in competing in that catchment areas. Much more similar to what UNIQLO is doing in Japan than to what Top Shop made in London, for instance.

And my last question, so in terms of brands, in particular, on Upim, I don't know if you have any or if you can share any insight on how much of new clients or how much Piombo is driving new clients entering OVS? So how relevant is Piombo, for example, for getting new clients in the store. And in general, you are mentioning several third-party brands. I'm trying to understand if this is something that is more relevant for the position or if it is sizable also going forward also in terms of really of contribution to group sales?

Okay. On Piombo, even as I told yesterday to the same question, which I received from a Board member, we still do not have a reliable statistic evidence. So we are working on it. All the signals are that we are attracting new customers, man from 35 to 55 years older, bankers, lawyers, architects, so the middle and the upper class of the Italian market. This evidence comes now from the interviews that we make to the store managers, because as you can imagine, this category of people is not the one that starts immediately becoming a loyal customer. This man doesn't ask for a loyalty card. So our CRM activities are less effective in interacting with this customer than with normal family housekeeper, for instance. Nevertheless, we have plenty of signals that this customer -- these new customers are coming and some are among you guys in this moment, I'm sure, because I speak with some of you, and I know that some of you decided to visit OVS, thanks to Piombo. And hopefully, the same will happen with Piombo women. As far as the second part of your question, it is true both -- the 2 ways, let's say. On one side, with gap, we are not increasing the number of sales in terms of sales density in the store. We are making additional turnover in the web, that's it because gap is not competing with us. And it is very complementary with our pricing. So very often, we have tickets where the mother by 2 pieces of OVS, one gap fleet, for instance, for her kids. But on the other side, we have brand mostly unknown, I can mention 2 names and you can check in the store, if you like, which are contributing to the turnover. And these 2 brands, for instance, are hybrid. You can find hybrid in each of our 500 OVS stores now, women casual and Nina Kendosa, which is a brand which I discovered a years ago in Le Marais, Paris. Those 2 brands are making turnover sales density between 100% and 200% higher compared to the average. And hybrid is present in 500 stores. As a matter of fact, in the second quarter, when we introduced several of these brands, the women, the house brand made more or less a flat performance and the newly introduced brand made all the difference. So basically, there has been not a great cannibalization and an additional contribution, which start becoming material for the sales and for the margin.

The next question is from Luca Bacoccoli of Intesa SanPaolo.

3 questions from my side. The first one is on the delays on purchasing. You mentioned a limited impact on the second semester. I was wondering if -- should we expect some further spillover also in next year, so for example, for the spring/summer season? And the second one is on the market share. You are mentioning huge growth opportunities in small towns in Italy. But it's also interesting in understanding what could be in the next 2, 3 years, the targeted market share at the Italian level. So if you can exceed the 10% shareholder given the strong momentum in the last 2, 3 quarters in stealing the market share to your competitors? And the last one is just a clarification on profitability, which in the second quarter was a little bit below last year level, probably is a temporary blip. And so the question is, if it is true or there are some structural factors explaining the margin deterioration for Upim?

On the delay, I have no visibility on next year delays, honestly. It will depend very much from the pandemic situation in the sourcing countries like Bangladesh, India. China is not an issue. And also in the quarter because most of delay are now coming, not because of the delay in production, but also because of a mismatching between the timing where the arrivals and the shipments are managed by the hub, the port where the stop, the merchandising is moved from one ship to another one. So hopefully, next year should be not impacted by this aspect. In terms of market share evolution in future, I think that Upim has a huge potential to increase its market share, and OVS has still a material potential to increase its market share. I think that the OVS entity now is to be present everywhere. Big store like Corso Buenos Aires or Via Torino in Milan, or in Roma in the biggest shopping mall of Rome, but also in the small catchment areas across the country. And given that with the new kind of mobility that Italians are experiencing, they also like to live nearby the place they live with lower commuting between big cities and smaller villages or towns. The strategy of opening stores also closed nearby the second-tier location where real people lives every day is opening to OVS and open more opportunity to grow than to other big players, obviously #1. #2, the like-for-like recovery will depend on the quality of what we will do. So as more as we will be more successful introducing interesting smart innovative brands, complementary to our global offer. And as more as we will be more successful, for instance, in women with Piombo, as more our market share can grow simply because of a like-for-like, take the following: some of the new brands, which I introduced are generating really 200% sales density higher compared to the one that they replaced. It means that we have an important upside, potential upside that only our design team can be able to capture. Will we be able to double our sales density for all the women? No, that's for sure, because there is also a pocket, a wallet, customer wallet availability that we have to face in front of us. But on the other side, I think that the 20% basic increase in the women is possible, depending from the success of our new collections. Last, on Upim profitability. It has been only a quarter issue, not a structural issue. In Upim, we decided to go with a different strategy compared to OVS. I, myself and my team, we decided that OVS improvement in terms of quality of brand, quality of merchandising store fitting was so visible to the eyes of Italians that it was not necessary to enter in a similar markdown policy compared to the one that we made in the past. So we decided to be a bit brave in reducing our markdown also because day by day, we realized that the quality of the assortment didn't require markdown. Upim, this year didn't make any bigger step-up in the assortment. Now they made more or less an evolution of their merchandising mix, even because the strategy of Upim was more to grow with opening new stores than to change the assortment. And as a matter of fact, Upim didn't reduce their markdown. Unfortunately, probably Upim should have increased maybe -- might have increased its markdown in order to increase the quantity. So basically, we are still learning. This business is not automatic. So you can also make some maybe mistake, but I think that Upim didn't make many mistakes. The real issue is that OVS made an incredible profitability increase in a year which has been still impacted by COVID. So I think that Upim today will come to the normal profitability, which was becoming very, very close to the one of OVS.

The next question is a follow-up from Domenico Ghilotti of Equita.

My last 2 questions. The first is a follow-up on the strategy of addressing second-tier location. Don't you see the risk of Amazon Zalando being able to reach this location with no opening or competition or even maybe the online proposition of big brands being able to say, to reach also this location you were mentioning Lipari. Okay, they will not open for sure, but maybe they can be strong enough to be visible and to be chosen by customers? So I would like to have your answer on this. And second question is on the M&A. Have you been able to say, what is your pipeline? Have you been able to scout something interesting? Any color on that?

On the first question, let me answer with a joke. Good luck to deliver goods from [ Saint ] or Milan to Lipari every day with a single daily delivery, the cost of the delivery for Amazon would be crazy. And when you play with low prices like us, it is very expensive to ship e-commerce with the low ticket that you can have and the logistic cost became really, really impressive. So I'm interviewing people for the e-commerce. And I'm looking at how big incidents the logistic has for big players once the question is to deliver goods in a timely manner as required by the development of online. As a matter of fact, Primark is still not approaching the e-commerce at all. And as you are close to second-tier location, as more you find people, which is not enthusiastic using the Internet, the higher sales that we are making with Internet that we make in Milan and Rome, Flores and Bologna. We opened the Stefanel website, and I'm monitoring the daily sales of Stefanel across all Italy. And by far, the higher sales are coming from places like Milan, Rome and also Bolsen, for instance, where eventually people is more German driven in using Internet, using online. So I don't see this risk. And on the contrary, I see very low rent, very limited risk. Anytime I make a mistake, I can close a store in a few snapshots and I'm not beating the cost of the store because most of these small locations are managed by local partner, which has a knowledge of the field much higher than I do. On the M&A, well, basically, we made already, if you can say, 2 acquisitions. One is Stefanel and one is that we acquired almost 20 stores, which were part of a network from DAGRA's perfumery chain, very high-quality locations that we are utilizing either in franchising or DOS for crop, for Stefanel, for OVS Kids or [indiscernible]. We have several opportunities on our desk. In this moment, we have several NDA. We have no anxiety. We have no excess of appetite. We will move in line with the opportunities also of negotiating the better conditions eventually for the deal that we might close. Nothing is so close to be short-term to assume to have a short-term closing.

We have another follow-up question, if I may, from Andrea Bonfa, or...

I think that we had a long conversation. I hope, useful to anyone, one hour has been spent, hopefully well. If there are no other question, I'm happy to thanks everybody for the presentation -- for the participation. And obviously, our Investor Relator Andrea Tessarolo is more than happy to get in contact with any one of you who might make any further or might need any further investigation. Thank you to all of you, and good afternoon.