Safilo Group S.p.A. (SFL) Earnings Call Transcript & Summary

Good evening, and welcome to the Safilo Group First Half 2022 results. This call may contain forward-looking statements related to future events and operating, economic and financial results for the Safilo Group. Such forecasts, due to their nature, imply a component of risk and uncertainty. Due to the fact that they depend on the occurrence of certain future events and developments. The actual results may, therefore, vary even significantly to those announced and related to a multitude of factors. Today's participants are Angelo Trocchia, Chief Executive Officer; Gerd Graehsler, Chief Financial Officer; and Ms. Barbara Ferrante, Director of Investor Relations. I will now hand the call over to Mr. Angelo Trocchia, Chief Executive Officer. Mr. Trocchia, you may begin, sir.

Thanks very much, and good evening, good evening, everyone, and thank you for attending today's conference call on the Safilo Group First Half Results 2022, including a trading update on the second quarter. We are pleased with the development of our business in the second quarter. Our strategic objective to build a Safilo with a strong and balanced portfolio of brands, geographies, product and channel is processing -- is progressing well, supporting us in sizing opportunities where they arise. Given the complex environment which we continue to operate and the company's specific headwinds, we still had to face this year, we are certainly pleased with our top line growth, very solid at both the reported and organic level with some clear growth engines, which have well overcome some soft areas. And more than anything, we are today pleased with the market growth of our profits and the margin expansion, which has come along with it. In quarter 2, our total net sales grew 11.2% at current rates as ForEx became an even bigger tailwind on the top line, adding almost EUR 90 million and by 4% at constant exchange rate while our organic growth, which is still to be considered our most meaningful KPI of revenue was very solidly at plus 9.8%. To be noted, after the 14.3% we posted in quarter 1. This performance resulted in our H1 sales being up plus 11.8% at current rate after adding a total of around EUR 28 million of positive ForEx impact, but also at 6.2% at constant currency and an important plus 12% at the organic constant currencies level. It is worth remembering that in H1 2021, our business had already exceeded pre-pandemic level, reporting the growth of 7.7% at constant exchange rate compared to the H1 2019. And it is an interesting data point that our H1 2022 is up around 15% versus H1 2019 at constant currencies. With the organic performance, always calculated on a constant brand perimeter, up around 25%. In the second quarter, our gross margin increased to 56.5% of sales, which we consider a significant milestone on the path towards our goal to structurally improve the group's overall margin profile. These enable a virtual cycle to improve profitability, while at the same time, reinvesting in marketing and advertising activities to further fuel the growth of our brands as we did also in the second quarter. This has brought our H1 adjusted EBITDA to 11% of sales, 130 basis points higher than in H1 2021 and 270 basis points higher than the 8.3% margin recorded in H1 2019. This semester is also a record year for our group, reaching an adjusted net profit of EUR 33.7 million. The highest net result in Safilo resin history in the first semester. And this is, for us, an important confirmation of the direction of the work we are taking to build a more and more profitable business at bottom line level. Let's see how our key business driver played out in this first 6 months, affecting our organic sales. This year, Europe our second largest region has bounced back strongly driven by the reopening of the economies and the return of local international tourists thus becoming the group's key revenue growth driver. Our organic business instead remained substantially in line with last year in North America where this year, the peso consumption has been, without doubt, more moderate behind the tougher economic environment in the United States. And the market where our sales were facing an even more demanding comparison versus quarter 2, 2021 when we had posted a double-digit organic growth versus the pre-pandemic level of 2019. In quarter 2, we also benefited from the strength of our business in emerging markets, in particularly Brazil, Mexico and Middle East, which continued to deliver solid sales growth while China remained impacted by the COVID-related lockdowns. In terms of products and channel, in quarter 2, we saw a continuation of the key organic trends we recorded in the first quarter with the sales of sunglasses and the business of goggles and helmets for wind and summer sports activities remaining our key engine of growth, and prescription phase confirming the major resiliency posting another quarter-on-quarter mid-single-digit growth. At the organic level, sunglasses grew around 14% in the first semester, goggles and helmets plus 34%, while prescription frames increased by 5%. If we look from a channel perspective, we continue to benefit from the evolution of our multichannel business model on 1 hand, fully sizing the opportunities provided in the period by the strong recovery of physical retail. And on the other side, continue to develop our online sales consisting of our direct-to-consumer business and the group sales via internet pure player, which together grew by 6% at constant exchange rates also in quarter 2, confirming the share of our total revenue at a solid 14.4% in H1. And we continue to leverage on our diversified distribution network by also progressing with the development of our B2B platforms, including new and Safilo in Europe, wholesale altogether grew by 12% in the first half of the year. Let me give you some color on our brands -- on how our brands performed in this first 6 months and how we are making them stronger and even more relevant for our clients and consumers. Let's start with career in Polaroid, both confirming nice double-digit growth rates also in quarter 2 with Polaroid, which closed the semester back to the growth also versus '19. Thanks to a strong colorful sunglasses collection and to a new wave of well-orchestrated marketing and product placement activities, which are conveying Polaroid's strong brand equity in its core markets. Polaroid was certainly the brand most hit by the COVID induced decline of the sunglasses market during the last season, and it was conversely the first one to benefit from the rebound of the product category in Europe, but also, in Latin America, India and Middle East, where the brand is developing fast. I'm sure some of you may have bumped into our new colorful Polaroid pop-up store in the train station in Rome, one of the business in the world with almost 500,000 passengers a day. Polaroid is there, it's a wide range of colorful eyewear for the entire summer season. And so far, the project had quite amazing results, both in terms of visibility, brand awareness and sales opportunity for the Italian market. Another very interesting project we recently in line with Polaroid was in Spain, where our brand was the sponsor of the Mass Cool in Madrid, one of the most important music festivals in Europe with more than 40 international influencers who posted stories and content under slogan [indiscernible] the sample colors, reaching along with live coverage of the official Polaroid record more than 7.5 billion users. So the music is a relevant platform for the Polaroid strategy even moving forward. And let me say that while Polaroid is coming back with big time this year after still [ compass ] 2021 for the sun business. On the other hand, Carrera is having its second consecutive growth year, further accelerating on its very positive 2021 performance and growing around 30% or its 29-theme business. And the recipe is quite simple for Carrera, strong sun and optical collection. Carrera is certainly becoming 1 of our core assets in the prescription frames business, very focused and appealing marketing advertising investment currently developed around the brand Motorsport of Drive your Story. The [indiscernible] Carrera's project this year, I'd like to mention its arrival in the MotoGP as official partner of Ducati team, launching an amazing 2022 limited edition collection to mark the start of the multiyear global licensing agreement for the development distribution of Carrera Ducati co-branded optical eyewear and sunglasses. Let's go to Smith. Another quarter of outstanding performance on this portfolio of sports and outdoor focused products in its traditional sports stores, but more and more in its direct-to-consumer channel. As you know, Smith is today our biggest brand, market leader in its reference product categories and still with a huge potential to grow by geography and product segments to strategic areas on which, as you know, we are working relentlessly. Smith's current business has more than doubled compared to 2019. So we are indeed very happy about the success and how the great team behind it is today working more and more with blenders on the cross-fertilization projects. Coming now to blenders. The brand had a flattish start of the year, which was then followed by a soft quarter 2, as the business context in North America has become progressively more challenging for pure e-tailers. On Blender, which is clearly running again its past 2 years of exponential growth rate. We are working on different levers. On the brand core D2C business, a key topic we are tackling in the U.S. is the diversification of the performance media mix. Historically, mainly Facebook oriented to other digital channels like, for instance, TikTok with great success, connected TV plus its international expansion in the English-speaking countries first, a project which today is to be running especially for Canada and Australia. As previously discussed, Blender is today also evolving its multichannel business model by entering selected wholesale clients as well as by opening its first dedicated stores. There are 4 of them today with the objective to reach up to 6 by the end of the year. Coming to our licensed brands, also in quarter 2, BOSS, Tommy Hilfiger, David Beckham, Under Armour, Isabel Marant were outperforms, all posting excellent double-digit growth rates. With regard to our new launches, we are particularly proud of the strong demand for Carolina Herrera's collection, possibly one of the Safilo best launch ever, a brand which is very meaningful for the Iberian market in Latin America, but progressing fast also in the United States in line with the [ Fashion House's ] core strategy. So this year, Carolina Herrera, together with the [indiscernible]. This square has given a valuable contribution to our strategy for a more diversified and balanced licensed portfolio. I stop here and hand over to Gerd for additional details on our economic and financial performances.

Thank you, Angelo, and good evening to all of you. Adding as usual, some color to the main drivers already highlighted. I'll start from our net sales performance by geography, our reported performance and more importantly, commenting on our organic trends, which represents the performance of the brands fully comparable as present in both periods. That said, by market, starting with our key growth driver, Europe, 41.5% of our business at the end of the semester grew 14.1% on a reported basis and constant ForEx, 22.7% organic after another significant bounce back in the second semester -- second quarter, respectively, plus 12.1% reported and plus 20.7% organic as the business context remained very dynamic, also driven by a significant return of local and international tourists, mainly from the United States and the Middle East. Sunglasses were the leading product category, rebounding by a strong double-digit growth rate in all key European markets, in particular, in Italy, France, Spain and Portugal, with Polaroid and Carrera being our stars together with Tommy Hilfiger, David Beckham, Isabel Marant and the new business of Carolina Herrera, as Angelo was saying, playing a significant role. Among the other markets, I would also mention Germany, which remained well supported by the good performance of the main Internet pure players as well as the quite meaningful sales increase we recorded in Turkey and Poland where in the latter, we opened a brand-new subsidiary at the beginning of this year and a special focus on the development of our own core brands. It is worth noting that the European prescription frames business remained very solid, up by a high single-digit rate in the quarter, with the region representing together with Latin America and the Middle East, the key growth driver of the product category. Business in North America, 45.3% of our total revenue in the first half was up overall plus 7.7% at current ForEx, driven by the significant revaluation of the U.S. dollar against the euro. It was down minus 2.2% and a constant ForEx. On an organic basis, North America remained in the semester in positive territory, up 2.4%, reflecting the mid-single-digit progress recorded in Q1 and the substantial stability just highlighted by Angelo in the second quarter at minus 0.6%. We tend to consider this as a reasonable performance given the double challenge the region faced on 1 side with the demand in Q2 2021 when we reported an organic growth of around 15% compared to Q2 2019 at the time. And on the other, with a slower consumption pace in the United States behind a tougher economic environment. Smith was our strongest assets, in its core categories of goggles and helmets followed by a sound performance of Carrera, by BOSS and HUGO, Under Armour and David Beckham. On the other hand, as already highlighted, the second quarter was soft for Blenders and for some of our other local brands, which suffered the slowdown in consumption more. In H1, emerging markets represented the remaining 13.1% of the total business. Net sales in Asia Pacific were down 8.9% constant ForEx in the semester, minus 8.5% in the second quarter, with the business in Greater China remaining the main drag of the reported performance due to the month of April and May having been heavily impacted by COVID-related lockdowns. In Q2, sales momentum was instead dynamic in a number of Southeast Asian markets in Australia and in Japan, thanks to our ongoing expansion of brands such as Carrera, Smith, BOSS, Kate Spade and Levis, which supported the whole region to record a positive organic performance of plus 5.9% in the quarter, and plus 4.1% in the first half. As highlighted before, Latin America, India and the Middle Eastern countries, representing together the so-called Rest of the World region, and 8.7% of total group revenue, where our growth engine over the entire H1, with the second quarter sales up a reported plus 24.9% at constant ForEx, plus 26.4% organic. Positive sales momentum continued into the second quarter in Brazil, Mexico and other smaller Latin American markets driven in particular by the strength of the key brands of the region, namely Tommy Hilfiger, Carrera, Polaroid, BOSS and HUGO. Similarly, our focused sales plans continue to be favored by dynamic trading environment in the Middle East and in India, 2 markets where sales were again very positive, thanks to the significant progress of our core owned and licensed brands. Moving to our economic results in the second quarter and in the first half of the year. The solid pace of profit recovery we achieved in these last quarters is quite noticeable with our gross and operating results growing at 2x to 3x the rate of sales growth. In the second quarter, we had a positive milestone in Safilo's recent history, certainly at the gross profit and margin level as our sales growth continued to be driven by an increase of volume, a positive price/mix effect provided by a richer brand assortment, largely absent of phase-out sales and on the opposite, our new products and brands, which lifted our price mix, plus the selected adjustments taken last year to start countering increasing input costs. These key top line dynamics, together with additional structural cost of goods sold savings for around EUR 6 million in the first half allowed us to more than offset inflationary pressures as well as the ongoing ForEx headwind, which diluted the gross margin by over 100 basis points in the second quarter. We closed the second quarter with a gross margin up to a meaningful 56.5% of sales, 420 basis points higher than Q2 of 2021, with the underlying improvement compared to last year, adjusted gross margin having been of 280 basis points. In the first half of the year, our gross margin reached 55.8%, respectively, 450 and 280 basis points higher than last year on a reported and adjusted basis. Below the gross profit, we delivered a robust economic performance also at the operating level, notwithstanding the increase has occurred in the first quarter of selling, general and administrative expenses by 13% in the second quarter and by 13.9% in the first half of the year, mainly driven by our now higher investments in marketing and advertising activities following the business peak season and the positive momentum of our key brands. The second quarter and the semester also continued to record higher EDP expenses following the impact in the P&L of Software-as-a-Service investment project under the new IFRIC agenda, the equivalent of which in Q2 and in H1 of last year was still being capitalized. The IFRIC SaaS impact accounted for EUR 1.8 million in the second quarter and a total of EUR 3.7 million in the first half of the year and reflects the ongoing investment in Safilo's digital transformation. At the adjusted level, we closed the second quarter with an EBITDA of EUR 30.6 million, up 28.5% while the adjusted EBITDA margin rose by 140 basis points from 9.2% to 10.6% of sales or 11.2% if we exclude the IFRIC SaaS impact. This resulted in EUR 62.6 million of adjusted EBITDA in the first 6 months of the year, taking our adjusted EBITDA margin to 11% of sales or 11.6%, excluding the above the described IFRIC impact 130 basis points or 190x IFRIC higher than last year. In H1, our adjusted EBIT stood at EUR 39.2 million. The margin grew to 6.9% from 4.8% in H1 2021. We ended the first semester with a record adjusted group net profit of EUR 33.7 million, which represents an exponential increase compared to the EUR 4.4 million recorded last year. Below the operating profit line, we recorded 3 positive dynamics. First of all, a significant reduction of net financial charges from EUR 11.6 million to EUR 2.7 million this year, thanks to the share capital increase undertaken last year, which more than half group net debt plus a net positive impact of EUR 3.4 million from exchange rate differences compared to a net negative of EUR 0.9 million last year. Second, in the semester, we had a gain of EUR 8.7 million for lower liabilities for put and call options on noncontrolling interests, mainly due to the increase, which occurred in January of this year of our controlling stake in Prive Revaux from 64.2% to 82.8%. Third, our effective tax rate was this year of 26.7%. Moving to our cash flow and financial performance. At the end of June, our free cash flow equaled a cash absorption of EUR 14.5 million compared to the absorption of EUR 4.8 million recorded in H1 of last year. The cash flow from operating activities was slightly negative by EUR 3.6 million, reflecting on 1 side, the significant improvement of our economic performance, we had, in fact, a positive EUR 52 million of positive cash flow from operations before the change in working capital. And on the other, the absorption from net working capital, which was driven entirely by a strong and seasonal increase of trade receivables, while the dynamics recorded by the other key components of working capital, a slight increase of trade payables and of the inventories offset 1 another. It is worth remembering that while cash collection remains strong and healthy during the entire semester, the activity of the period could not count on around EUR 10 million due to some anticipated payments from customers at the end of 2021. In terms of CapEx, the semester saw a cash flow from investments of EUR 6.2 million, while the cash payments for the principal portion of lease liabilities, IFRS 16 equals EUR 4.7 million. Concluding with the group's net debt at the end of June, this stood at EUR 105.6 million or EUR 63.5 million pre-IFRS 16 slightly better than the EUR 109.1 million recorded at the end of March and around EUR 11 million higher than the EUR 94 million recorded at the end of December last year. Very briefly on the key components of the net position, gross debt equaled EUR 184.2 million, of which around EUR 42.1 million was the IFRS 16 impact, $107.6 million the term loan facility guaranteed by SACE and EUR 34.5 million to term loan facility signed in 2018. We then closed the semester with a cash position of EUR 78.7 million. I'll stop here and I hand over to Angelo for his further remarks on the business evolution and further actions.

Thanks, Gerd. Our first half of the year was solid on the top line with some clear growth engine and even more so on the bottom line, where we were able to offset not measurable headwinds, well surpassing last year's results when we have, as a matter of fact, already exceeded 2019. These results coupled with our visibility in the current quarter, which is still suggesting top line growth driven by Europe and the emerging markets just discussed and North America remaining stable at the organic level, give us confidence to confirm that already in 2022, we will reach the economic target fast forward in the 2024 business plan, which envisaged around EUR 1 billion of sales and an adjusted EBITDA margin between 9% and 11% in 2024. Under the assumption of a reasonable stable economic and business environment for the rest of the year compared to the current scenario, where numerous macro headwinds persist, including strong inflationary pressures and their related in the consumption call it related restriction and the conflict in Ukraine. We now expect full year 2022 net sales to grow mid-single digit at constant exchange rates compared to 2021. And the adjusted EBITDA margin around 10%, up from the 8.4% recorded in 2021. Our aim is to provide an update of our medium-term economic and financial targets in the fourth quarter. Before concluding our presentation, I would like to say that we are proud to have just joined the Fashion Pact, a global coalition of companies in the fashion and textile industry, including their suppliers and distributors, all committed to a common core of key environmental goals in 3 areas: Stopping global warming; restoring biodiversity; and protecting the ocean, becoming a signatory of the fashion part is part of our purpose-led strategy based on 3 sustainability pillars: planet; product; and people. And it represents a further step confirming the group's commitment to develop projects and initiatives that address the global challenges of tomorrow in the areas of climate, oceans and biodiversity as per the Fashion Pact mission and priority. So this is another meaningful step forward in our sustainable journey, which takes the but higher, giving us an additional opportunity to make the difference for our planet in collaboration with many outstanding companies as you can see in the slide showing the other synergies of the Fashion Pact. Last week, we further asserted our business committed and effort to bring more recycled material to the eyewear industry announced the introduction of this month and add review in our sunglasses and prescription collections, becoming the first player in the market to use all smart renew materials for [indiscernible] across all types of application and production processes. This concludes our presentation, and we are now ready to take your questions.

[Operator Instructions] The first question is from Tom Nass of Cowen & Company.

Tom on for Oliver Chen with Cowen and Company. Congrats on a strong first half. Two questions for you. First would be should we enter into a sustained global recession, how would you highlight your promotional strategy going into the second half and maybe some color across regions and brands?

Okay. I mean I think that -- do you want us to answer right now? Or do you want to ask the second question you had?

You could go ahead and answer now, and I'll follow-up with the second question.

I mean I think the way that we are looking at this is really through the lens of a well-diversified portfolio. So we have a brand portfolio that goes across all the segments and all the various price value positioning in the market. And then we have a very broad portfolio in terms of geographies, as you may have seen, along with, I think, also an interesting channel portfolio. So we believe that with this diversified portfolio, we should be able to invest in a way and in places where we can have the best response from the consumer. So looking at the H2, we see Europe performing very strong in the third quarter, and we do expect that this will continue also throughout the rest of the year, and we see the same in Latin America and in EMEA, while we are hoping that in China, especially in the second half, we may also have a rebound of the consumption. So these are certainly places where we will continue to invest. But when I say invest, to invest in the marketing and advertising of our brands. In North America, I think we're seeing a little bit more tough economic environment, but the dynamic there is that the more upper part of our brand portfolio is doing well. We're seeing good results on brands like HUGO BOSS and Carrera, on Martignacco and so forth. So we will continue to invest there, but we will be ready to shift in case the American consumer over time, perhaps may be more enticed by the more value end of our brand proposition. So I think we're going to invest in a very targeted way, depending on which brand country channel combinations are the most promising. And maybe I should say that we do expect, especially on Smith, which is our sports channel proposition both in the sports channel trade, but also on the e-com, which represents more than 20% of Smith sales, we see a very good consumer reaction at the moment, and that's another brand that we'll keep on investing and for the rest of the year and for the key winter season.

Just slightly if I can add to stress what Gerd was saying. I think today, the good thing is, first of all, we have a very, very tight [indiscernible] trying to read the signals from the different markets. But I think one of the big advantage we have, which both in terms of brands, we can really cover different consumer need and completely different price position, which gives us the flexibility to really understand what is happening and react. And also, we cover in a more balanced way different geographies. So in reality, last year, we had a huge rebound in U.S. We were -- Europe was a little bit behind. This year, we have a rebound in U.S., and we have a little bit of rebound in North America, and still China next year can be positive. So I think today, the big advantage of Safilo is to have a broad portfolio of brands, which cover different price position means also a different consumer needs. And on the other side, we can play on the geographies according to what we see the dynamic is going to be. So I think this is a big advantage of the Safilo today and on how also we are running the business within a clear framework but with quite a flexibility to turn the investment and the priorities and the focus according to the dynamic, which is going to be different country-by-country or at least region-by-region.

Great. My follow-up question would be regarding the decision to join the fashion pact. Are you able to add some additional highlights here on what this could mean for financials, say, how should we think about regulating this ESG strategy to COGS or gross margin?

Well, I would say -- I mean, the Fashion Pact is an important further step on the way. We've been obviously engaging in sustainability reporting for a number of years now. This year 2022 focus for us is to really establish the comprehensive data set that we need to meaningfully improve, let me say, our ESG footprint going forward. So we're working hard on establishing Scope 3 emission tracking, and we're working hard on establishing a proper life cycle assessment for our portfolio of brands so that we have a good baseline to them based on the Fashion Pact, which is obviously then a science-based target initiative, which will then also set goals that the fashion pact members would sign up to over the coming years, having that, let's say, that set of data, we can then also formulate coherent strategies. As Angelo was saying, we are working more and more to bring sustainable materials into our portfolio. We have already today as a Safilo more than 400 models that are made based on recycling -- recycled or sustainable materials, partnering a lot with companies like Eastman as we were saying. And I think that is something that we're going to expand on. So I can't quantify today what will be the exact impact on the gross margin or on the OpEx going forward other than that we are putting focus there, and we're putting capabilities to expand it and eventually clearly expecting that also the consumer will appreciate those kind of things.

Yes. I don't think that we can translate immediately, I mean, what we are doing also sustainability with the gross margin. But by sure, more we will be serious around sustainability, which is a journey, it's not something that you do in 1 year, more we will get close to a part of the consumer, which are becoming more and more sensitive to this kind of topic. So I don't think it's so much an issue of gross margin. It's more an issue to say to get more real, become more relevant for some of our consumer and then make our brand stronger, stronger and stronger. I mean, the fact that we have already today 400 SKU on some brands based on the recycle or sustainable material is going to be an advantage. It's going to translate in a short-term gross margin difference, not at all, but by sure, it's going to position our brand, it's going to position Safilo in the eye of the consumer in a strong way. So in the medium term, by sure, we will have a return behind these activities. I'm sure that Polaroid, we have a sustainable collection. It works well. We get -- we had a lot of positive feedback from the consumer, especially in some regions, in Europe, for example, we get huge -- a huge traction, traction from the Nordic countries where this kind of topics are more strong. So yes, I mean, the measure for me is not the gross margin insured. But by sure, we have customers which are calling up, the customer which prefer to put our collection on the shelf compared to some of the collection of the competitors. And then in the medium term, it will translate in stronger brand and a strong positioning and then again, strong business and profitability.

The next question is from Oriana Cardani of Intesa Sanpaolo.

Yes, I've got two questions. The first one is on prices. Can you tell us the actions done in pricing this year? And what are you planning for next year? And how long do you expect to be able to sustain the price increase without seeing a drop in demand? The second question is on M&A. What kind of deal should make sense for Safilo now? And do you see now opportunities considering the current market condition and also the price tag in [ bag ] in recent deals?

And I think on the first -- let me take the first question on the pricing. Let me say that what is always important for us is that we are seeing the price mix effect to come on top of the positive volume effect, and we have been able to see that both in the first quarter and in the second quarter so far of this year, which means that we are not only benefiting from a higher price mix, we're also transacting more in the market. What has helped us this year, as we were saying, is clearly that we have a richer brand mix. I mean we don't have exit business anymore as we had last year. We have launched new collections on new licenses that are coming in accretive, and we are seeing upswing on some brands like Polaroid that have accretive gross margins. Then, I mean, we have taken pricing interventions in the second half of last year, which are clearly benefiting us in the first half of this year as well. We are always focused on trying to bring pricing together with value so that we are also giving a richer brand proposition, if you wish, to the consumer and our industry. The good thing is that there's a very high rate of innovation. So there's a lot of new styles, a lot of new models that are coming out with the new collections so that we can use also this innovation type of pricing in order to bring new products to the market. We will remain vigilant on cost and input inflation. We are clearly seeing logistics costs to remain quite high. We are seeing, let me say, starting to see some moderate impacts from energy costs. And we're going to keep monitoring. And we're going to keep monitoring those dynamics. And if it is necessary, we will then consider potential future implementations or adjustments. But at this moment, I think we are satisfied with where we are at with the actions taken. On the M&A, I mean, right now, let's say, we are certainly actively looking at the market. There is nothing that today would be, let me say, of discussion grade in terms of specificity, but we are actively looking at the market. In principle, yes, it's true that when there are downturns, sometimes new opportunities crystallize themselves out. I think we are quite looking at objects that would give us a meaningful complementarity, a meaningful fit to bolt-on to our company rather than big transformational things. So we are more looking into that direction. But we don't have anything right now to share further. I don't know, Angelo, if you want to...

No, I think on the M&A, obviously, we are -- it's an important stream of all our work. But we know quite in a detailed way what is happening there, what are the potential targets. Let's see what is happening with the new economic cycle. I think we have clear priority, which is brands, which are going to add on our Smith Blenders, Carrera, Polaroid and Prive Revaux. So we know which kind of brand that are we looking for. But on the other side, to be honest, we are also not ready to crazy overpay. So we need -- we have -- we're very focused on M&A, but we are not ready to overpay because that should not be healthy for our P&L. So we are very ready for that. But let's see what is going to happen in the next month. But we have a very clear year which kind of target we feel can reinforce the Safilo portfolio.

Next question is from Cedric Rossi of Bryan Garnier.