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

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS First Half 2026 Financial Results Conference Call. [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. Good morning to everyone. Thank you for attending this conference. I will make the story short. It has been a good quarter in line -- more or less in line with the first quarter. So good momentum for all the brands of the company, for all the brands inside of OVS, like Piombo, like Les Copains, like Altavia, like Utopja, each of them with its own peculiarity, which is one of the reasons when people ask me, how can you manage in such a challenging market to continue to perform so well. And the answer, I think, is the strategy, the strategy and the way the strategy is implemented. The brand inside of OVS are more and more positioning OVS as an ideal place to come, to visit and to expect to receive a good answer to different needs. So Utopja, for instance, is growing, will continue to grow, attracting Generation Z, which 5 years ago were not even considering OVS like a place to be visited. Altavia, I'm receiving telephone calls from friends asking me when Altavia ski apparel will enter in the store because we are waiting. Are you still making Altavia ski. And I say, yes, wait 1 month and in 1 month, you will find Altavia ski. We have people that visit OVS only because they love Piombo and they have expectations like it is a luxury brand. They wait for the first -- for the new collection. And similarly, Les Copains is justifying a higher price positioning simply because people perceive that it's well done, but also is a brand. So the fact that we have brand inside our assortment is really the reason why our positioning is benefiting, I think, more than other, at least in the Italian market and generating this good result. So very good 6 months, good profitability, cost under control, a lot of new initiatives that are giving good results. The one of you that lives in Milan might have seen last week incredible amount of number of people making queue waiting to be admitted to our SHAKA event. We had almost 20,000 people visiting SHAKA and I think 40 million impressions in Italy across the country regarding this event. We opened the second small, I call, luxury OVS store, a small store in the middle of Trento to offer the best of our collection and the store is doing very well. So we have still gasoline in the engine and ideas. So I think that also the second half will benefit from all the good things that we are doing in terms of product innovation and opening new stores. So everything is doing very well. The market is finally stable or slightly increasing. So happy to say that in the last maybe 24 months, we are not assisting anymore to continue -- the continued decrease and shrinking of the market. The market is hopefully now has found its bottom line. And in this bottom line, we continue to benefit from the general trading down. So more and more people also looking at our focus group and market research are trading down and deciding to find in OVS what maybe 10 years ago, they only found in Zara. So finally, we have -- we are an alternative for many customers to Zara, and they declare when we ask what they think about OVS when we make this survey, we speak with thousands of people, and they like what we do, and they are ready also, as I told last week -- no, it was the day before yesterday to Milano Finanza Fashion Week Conference. I told what is true. People is asking us also to increase prices because they are ready to pay for suede jacket more. And the best item which is out of stock today is the suede jacket, but the price of the suede jacket is EUR 190. And 10 years ago, OVS maximum price may be EUR 60. This is why OVS is changing, and this is why OVS is performing well, I think. I think better I stop and I hand the word to Francesco.

Thank you, Stefano. I will start with Page #4, and I excuse for the quantity of numbers in this slide, but it was necessary a little bit on this slide to explain also the performance with and without the integration of Goldenpoint that I remember started the 1st of July last year. So last year was consolidated for just 1 month, but the best month within the semester for Goldenpoint and this year for the full 6 semesters. So in the higher part of the table, we see the reported results with net sales increasing 11%, composed of 3% like-for-like trend in OVS and Upim and an additional 3% organic growth within the [indiscernible] perimeter or let me say, the perimeter excluding Goldenpoint and then, of course, the addition of Goldenpoint for the full semester. So in terms of absolute sales, we are close to EUR 900 million. And so hopefully, moving forward in the next years, we would touch the EUR 1 billion per semester. The gross margin is improving as expected, driven by the euro-dollar improved exchange rate in Spring/Summer '27 vis-a-vis the Spring/Summer '26. And so also thanks to the operating leverage, the EBITDA is increasing by EUR 12 million, EUR 12.5 million, reaching 13% of revenues. And then going down to EBIT profit before tax and net income. On the view without Goldenpoint, we already commented the trend in sales. And this has an even more visible impact in terms of operating leverage, driving an EBITDA growth of EUR 17 million and an EBITDA percentage of 13.8%. So as a difference, the numbers of Goldenpoint, see, first of all, a positive EBITDA to EUR 200,000. While in the same 6 months period of 2025, the company had a negative EUR 4.2 million EBITDA. So the improvement is really material and projecting this improvement somehow also in the second semester, we could reach more or less EUR 3 million, EUR 4 million EBITDA on the full year. Of course, the comparison with last year is difficult because last year, we had just the month of July, so little sales, but very high EBITDA because the EBITDA generation is concentrated in a few months across the year, namely July, August and then December -- November, December, which are the peaks for the seasonality of Goldenpoint. I move to Page #5, where we open more the performance between channels and brands with all plus signs. We grew both on directly operated stores and on the franchising B2B channel. We grew both in OVS and in Upim. And if we look bottom right to the EBITDA margin, we see very high number because OVS reaches 15.1% EBITDA margin, which is among the best of the industry. And also Upim is very close to 12% after having been around 10% a couple of years ago, so showing a long-term trajectory of improvement. Page #6, we move to the financial side of the results with trade working capital pretty stable. We are continuously reducing and improving the receivables also as a consequence of the shift towards the consignment model for which we hold the store -- the ownership of the stock until the moment of the sale to the final customer. And then, of course, it reduces the payment terms from the client that had already cashed in from the final customer. The big movements are of opposite sign on inventory and trade payables, mostly driven by the euro-dollar that is reducing the amount of stock -- the value of the stock on one side and in the short term, also reducing the amount of payables towards the suppliers. On the stock, we also have some material decrease in absolute terms, both on old stock, thanks to special actions and on the current collection that moved quicker than usual. So the sellout as of 31st of July, which still does not include the last month of sales was very high. And so we had this improvement. While on trade payables, we also have some phasing effects that reduced the total amount of trade payables, of course, to the benefit of the cash generation in the medium term. Page #7, capital expenditures. In the first semester, including also within these numbers, the inclusion of Goldenpoint that is undertaking a strong investment plan to refurbish all the stores. So in all the cities, I think that already -- the most visible stores of Goldenpoint have been already refurbished to the new format. And then, of course, continuing catching the opportunity to open additional stores, both in Italy and abroad. In the first semester, we opened the second store in India in the second quarter and is already represented here, the second store in India. In Q3, we will see the numbers also for Dubai. So basically, in building the rationale, the foundations for further profitable growth in the future. Page #8 is the cash flow. The half -- the first half is structurally a cash absorption period with the second half instead very positive. But the element to point out is that overall, the cash generation improves by EUR 15 million versus last year, and it is mostly driven not by temporary or phasing elements, but by the increase in EBITDA, EUR 12.5 million out of the EUR 15 million. And then the discipline and the good performance also on working capital. Page #9 is the picture of this improvement in cash generation with the net debt that reduces by EUR 54 million versus last year despite also the fact that we increased the amount of cash released somehow to the shareholders through dividends and buyback. So otherwise, the improvement would have been even higher. The leverage ratio, in whatever way we would like to see it, is very safe because it's 1.0, 1.1 versus the EBITDA. Also, the treasury shares that we now already have in the portfolio is above the 5% value as of end of September. I conclude on Page 11 with the current trading and the outlook. As said by Stefano at the beginning, the second quarter started, especially the Fall/Winter season in the second half, the Fall/Winter season started in a good way, in line with the last 2 seasons that we had very robust. In addition, the margin will further benefit of the euro-dollar comparison Fall/Winter '26 versus Fall/Winter '25. Operating costs are under control as part of the DNA of OVS. And so we expect to further improve the results also in the second half of the year compared to 2025. Thank you very much, and we are open to catch your questions.

[Operator Instructions] the first question is from Francesco Brilli, Intermonte.

Can you hear me?

Yes. We hear you.

Congratulations for the very robust set of results. I have 3 questions. The first one is on margins. So organic gross margin was up above 100 bps in H1. It was supported, as you mentioned, by FX, but also this is the mix and sourcing. So I was wondering if you can -- could help us understand how much of these improvements is structural? And do you think going forward, particularly looking into 2027 when the FX component and contribution could normalize? The second one is on Goldenpoint, very, very positive performance, EBITDA positive, high growth and the profitability improving quickly. So given this stronger-than-expected, I would say, performance of Goldenpoint, so your view on this for the medium term has changed? What are your targets for this line going forward? And the third one is a little bit more strategic, I would say. So on organic sales, you grew 6% in H1 against the market growing 1.5% in the Italian market. So you -- it's several years that you are growing above the market or gaining shares. So as of today, what gives you the confidence of continuing to structurally outperform the market? And you mentioned a little bit during the initial remarks, but I wonder if you can elaborate a little bit more on this.

Thank you, Francesco. Still Francesco, giving back answer on the first 2 elements. And then, of course, Stefano will close up on the strategic one. The improvement in the margin is higher on the consolidated figures because of the higher margin of Goldenpoint, which has a business model conceived around smaller stores with higher margin, higher store costs. And so this is an improvement that we will see more and more as long as Goldenpoint will be part of the company for the full period. Another element, of course, is that the euro-dollar has been already covered at good ratios for spring/summer '27. So also the look on 2027 see a good coverage. And we are now, of course, in the process of approaching Fall/Winter '27. So there are not organic element in the margins that are represented in H1 2026, no bounce back of tariffs, U.S., just to name one element that other companies in the industry are reporting now. And so this is -- and of course, the medium-term gross margin on the organic perimeter is supposed to be plus slightly above the 60%, 61% as shown. On Goldenpoint, we are very proud of the results achieved so far. But of course, it's not that we are aiming at bringing Goldenpoint at breakeven. We are aiming at bringing Goldenpoint to an EBITDA margin of 12%, 13% as the rest of the group. Of course, this is a trajectory. We do not achieve everything in the first 6 months. And so the trajectory is positive. There are things that were implemented, things that are still for next year. For instance, we still did not look to call and [indiscernible] that will be a topic for improving the performance next year. And so this is the view on Goldenpoint. It will require additional 1 or a couple of -- 2 years, let me say, to be at regime also on this acquisition. But I would say, as we say in Italian, [Foreign Language], the good day we see from the morning. I mean, at least the morning was positive on Goldenpoint.

Regarding the question about how to continue to outperform the market I think that, first of all, I would like to remember that 6% organic growth doesn't mean 6% like-for-like. Organic growth means the growth of OVS, including opening new stores. We mean organic because we want to distinguish from other aspects like the acquisition of Goldenpoint. But within this 6%, I'm happy to say that 3%, 3.5% more or less is like-for-like growth. And it is true that we are continuing growing like-for-like in the last 4, 5 years. This will continue, in my opinion, from a rational point of view, because of a couple of important elements. The most important element is that OVS is still underrepresented in the segment of the women compared to the market. The importance of the women segment in the market is 55%, I think, while within OVS, it is below 40%, growing year after year. OVS in the past was exaggerated in the size of the kid, which was a point of strength. But with the decrease of birth rate, it was a risk for us. So that's why we are super happy in noticing that the investment made in the brand and in strengthening also our product development and style department, design department, creativity is the reason why the women is growing more than other segments. So we are continuing season after season to give more space within the store to the women, to the detriment of the kids. And we are noticing that in spite of this, kids sales remain very robust, very solid. We are not losing like-for-like in kids. We are maintaining the same turnover than 1 year before by increasing the sales density. While in the women, we are growing. And what will happen in the future? First of all, the great success of the change of the style within B.Angel is attracting younger customers, very often the same young lady which are buying SHAKA skin care and makeup product, so with a very healthy cross-merchandising, cross-fertilization within the company. Next year, we will almost double the number of SKUs in B.Angel on the back of the success that B.Angel is generating this year. We will increase the space dedicated to Les Copains, which is today the brand whose sales density is the highest within our assortment. Utopja will increase again because this year, Utopja is making like plus 15%, plus 20% like-for-like, and we will dedicate more space to Utopja. Again, younger generation, which in the past were not looking at OVS. And also Altavia represents a further element of attraction for new customers that were not considering OVS once they had to buy technical and sporting goods at affordable prices. And now they have also OVS as an alternative maybe to Decathlon. Last but not least, within OVS, the beauty department, which cannot promise the recent historical performance of double-digit growth in the last 3 years, will continue to grow more modestly, but will continue to grow. On the other side, speaking the second biggest portion of our business, Upim is growing. Croff is growing in this moment by 13%, 14% like-for-like. There is a lot of space for new opening of Croff stores whose profitability has became very interesting. And Upim itself, just this year, we opened 7, 8 stores, and we have a run rate for 2027 of about EUR 40 million of new turnover due to the new openings of Croff and Upim which this year represents EUR 20 million. So we have another EUR 20 million additional turnover only from mopping expected next year. So these are the main elements why we believe. But the most important is women, the increase of the women department, thanks to the great appreciation that in this moment, the Italian women are having versus our collections.

The next question is from Domenico Ghilotti, Equita.

A few questions. The first is a follow-up on your comments on the sales performance. So if I understand clearly, the women category is the main driver. You mentioned resilient kids. So if you can also give us the sense on the men collection. And if you can also give a sense on the metrics, what is driving the like-for-like? Is more traffic, as you said, more conversion, higher ticket? The second question is on the operating cost in the sense that you were mentioning that you are typically well structured to manage and to keep costs under control. I saw quite significant increase in the first half. So on an organic basis, I calculate something like EUR 20 million higher operating costs, so between gross margin and EBITDA. And so I wanted to have some comments from you. And the last, just a clarification on the current trading, when you say that you are, say, in line with last year, so we have to assume that so far quarter-to-date, you are more or less flattish with last year level and you are expecting a pickup as soon as, let's say, the weather conditions are a bit less adverse, correct?

Okay. So thank you, Domenico, for your question. On the women, what I can say is that the increase of the like-for-like performance is more or less equally spread between traffic, average ticket and conversion. Traffic is growing the most. We have about 2% of traffic increase. We have another 0.5% more or less number of items per ticket and also the average price increase is contributing to the growth. Average price increase, which is not applicable to the kids because we want to maintain a very competitive presence in this segment. We don't want to lose the franchise that we have been able to create with the Italian families. But the price has been increased mostly in Les Copains, which is -- and also partially in Piombo. And I think that we will continue to operate in this way because, as I said before, our customers are now ready because they know that we represent probably the best price-to-quality combination in the Italian market and also fashion, I would say, price, quality, fashion combination in the Italian market. They are asking us to introduce more linen, more wool. For instance, we introduced a much higher amount of cashmere this year compared to the past. So the growth in the women will be sustained by all the elements, I think, traffic, conversion and price also, hopefully, in the future. On the men, we didn't mention simply because it was in between. So as of now, in the 8 months to date, basically, including the beginning of September, 8 months to date, the women is growing like-for-like like 5%, something like that. The men is growing like 2%, maybe something like that, and kids is more or less flattish, which is very good, considering the new entrants of a player like Pepco and Primark, which are super aggressive in kids and considering the decrease of the birth rate. Let me answer on the last question because I want to leave the operating cost question to Francesco. The last question regarding the current trading, why we are positive? Because if you ask to the artificial intelligence, which has been the temperature in Italy in the first half of September and you compare with last year, the answer, unfortunately, will be that the temperature has been higher compared to the very high temperature of last year. So this month, this beginning of autumn/winter started from a weather point of view, worse than expected. And being able to confirm the good results of the last 2 years means that the expectation for the next coming days became good. We know that in certain latitude where weather has not been that impactful, the new collection has been appreciated very well. And for sure, we have a mix of heavy weight, which can be improved compared to the weather situation that year after year became warmer. So -- but because only in this -- in the last couple of days, we have seen in the morning the temperature going below 20 and because we see from north of Italy that the reaction is already very good, while in the South, the temperature still didn't change that much. We are convinced that in principle, there are all the elements why to think that October and November will be positive. So that's why we are happy even if we are flattish. But being flattish in this condition means doing very well. And then there is also the margin, which is increasing, as Francesco said. So the combination of sales and margin is going to be positive. Francesco?

Thank you, Stefano. On the 5% increase on the operating cost, 1.5% is related to inflation that, of course, we had on some costs, especially on personnel because we are having, in 2026, an additional tranche of the increase of the [ Contratto Nazionale. ] 2.5% is the increase in perimeter. So of course, impacting mostly the store costs. And the remaining 1% is related to specific elements. The most important one being marketing. We increased our marketing spending versus the first semester of last year. And this is, of course, also to the benefit of future growth. So summarizing 2.5% perimeter, 1.5% inflation and 1% this marketing increase versus last year.

Okay. Very clear. If I may follow up, just on topic -- on another topic is you were mentioning the hedging policy that is helping 2027. Where are you today in the [indiscernible]?

Nicola?

Of course, we take some opportunities from the last moments, and we are covering all the spring/summer '27 at an average exchange rate that is a little bit favorable to us compared to the spring/summer '26 and out the way to the autumn/winter '27 as in this case with some option -- additional option compared to the current situation.