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

[Foreign Language] Good morning to all of you joining in person Safilo Capital Market Day, and good morning to all the people connected via conference call and audio and video webcast. Today, we are here to present the group 2022 results, strategic outlook and the medium-term targets. The presentation will last approximately 1 hour, a bit more. And then we will allow 30 minutes for the Q&A session. Taking the questions from the room of course, but also from the webcast and the call. The speakers today are Angelo Trocchia, CEO; Gerd Graehsler, CFO. And today, we also will also have Alberto Macciani, Global Head Marketing, and D2C Home Brands & Communication; and Marcella Manzoni, Global Head, Digital Transformation & Customer Experience. Before we start, I just need to remind you that this presentation contains forward-looking statements based on current expectation and projects of the group in relation to future events. Due to their specific nature, these statements are subject to inherent risks and uncertainties as they depend on certain circumstances and facts, most of which have been beyond the control of the group. Therefore, actual results could differ even to a significant extent with respect to those reported in the statements. That said, I hand it over to Angelo to begin. Thank you.

[indiscernible]. Thanks very much, [indiscernible]. And as we were discussing before, I think it's great that after a while we see physically all together. What is the agenda of the day? Gerd will take us through the 2022 results. Then we will have a specific session on the main achievement of these last 3, 4 years. Then I will come back. We will go through a little bit -- just a reminder, I think that some people in this room knows more than us. But I mean we will a little bit talk about what's going on in the eyewear sector, then we will focus on the Safilo vision and the strategy and the medium terms for the years to come. So I think let's keep as -- Barbara was saying, I think we have asked Marcella and Alberto to be also with us. So I think that also if we can have a question more on branding, that brand is one of the obsession. The other obsession is digital, so Marcella and Alberto can answer where on the last big topic, which is sustainability myself and Gerd will try to answer more. So I hand over to Gerd and then I will take from the eyewear sector. Gerd?

Thank you, Angelo, and good morning to all of you. So I start with the results of 2022. We closed the 2022 at net sales of EUR 1.077 billion, which is a growth of 11% versus a year ago, 4% at constant currency and 7.7% organic growth. We were very pleased with how our own brands accelerated in the year, especially Polaroid, Carrera and Smith and also how many of our leading licensed brands contributed to the growth in the year. Europe rebounded firmly in the year. You may recall that 2021 was still a little bit COVID-induced in the region. So we saw a 16% growth in Europe in 2022 as well as a good growth in the emerging markets. Conversely, in North America, we had already a big growth in 2021. So we have a more normalized performance in the market in 2022, along with some softer demand, especially in the second half of the year in certain price segments and in certain channels of the market. On the other hand, in North America, we had a very good performance of Smith. And in the fourth quarter, also Blenders returned to a strong growth in the period. So the fourth quarter at EUR 245.4 million, up 5.7% or slightly negative at constant currency, slightly positive on an organic basis, some of the trends that I just mentioned have been a little bit more accentuated. Looking at our gross margin. I think we closed the year in a significantly better place than in -- for many years now at EUR 597.4 million of gross margin, a 55.5% of net sales. That's an increase of 19% versus a year ago and a margin improvement of 380 basis points. Clearly, we have some positive drivers. We have the early completion of our cost of goods sold savings plan, the EUR 25 million that we announced back in 2019, and we had positive drivers in terms of price/mix, both of the portfolio but also as we very targetedly use pricing in order to offset inflationary pressures, which in the fourth quarter of the year started to recede. We saw both energy and logistics costs coming down in the fourth quarter, which has, therefore, allowed us to end the year on an even higher note with a 56.7% gross margin. Moving on to the EBITDA. We closed the year at EUR 101.2 million, which is a 9.4% margin on sales, 24% above a year ago and the margin improving by 100 basis points. Clearly, the positive development on the gross margin allowed us to also post a good recovery on the operating level. So not only were we able to improve the structural economics of the group, but we were also able to continue with some of the important investments, notably into marketing. We've been growing our own brands, and we have invested into them and in the digital transformation, where last year, we invested nearly EUR 10 million in Software-as-a-Service projects as we roll out SAP as we roll out Salesforce in our various digital technologies, which, as you know, are now accounted for in the OpEx. In the fourth quarter, the pace of our investments continued but we had a softer end to the year in North America on the top line. Therefore, we have a little bit slower operational leverage than in the other quarters of the year. Still, we closed the year at a 6.5% margin in Q4, and that was also 100 basis points above the same period of a year ago. Moving to the net result. So we finished the year at EUR 58.3 million of net results. That is a margin of 5.4%. Of course, on the 1 side, we had a positive operating performance, which manifested itself also on the net result. We benefited additionally from a reduction in financial charges. You may recall back in 2021, we had some more expensive credit lines. We have refinanced those at the end of 2021 with the capital increase, which then has normalized, obviously, the debt structure in 2022. And we had this year, like last year, a lower weight from liabilities on noncontrolling interests, which benefited the net result by approximately EUR 30 million -- EUR 31 million compared to the EUR 32 million in the year before. On the financial side, we closed the year with a net debt of EUR 113.3 million. This is an adjusted net leverage of 0.7x. The free cash flow for the full year was negative at EUR 16.5 million. We had a positive flow from operations, which was then offset by an absorption of net working capital, in particular, receivables and inventories on both of those items, though, we believe that we ended the year with a solid quality of both the inventory and the receivables on the books, which is also witnessed by lower obsolescence costs. And you can see that, obviously, in the gross margin results and we continue to collect cash well with our customers. In fact, in the fourth quarter of the year, our free cash flow turned slightly positive at plus EUR 1.3 million. We invested EUR 15.7 million of CapEx in the period. And as I said before, we ended the year with a strong balance sheet that sets us up well for what we want to do in the future. So I think before moving on to our strategies going forward, we thought it is worth pausing a little bit and reflecting on what were the main achievements of the past 4 years and how will they in turn and allow us to evolve our strategic choices that we go forward with. So we have depicted here 5 areas on which I would like to comment, things that have worked well for us, things that we will want to continue to leverage as we go forward. First of all, we believe that we have built a highly attractive portfolio of brands, and Angelo will talk more about it, both for the consumer and for the customer. And I think that we have a portfolio from a brand point of view, which is diversified as it has never been before. So we have a much higher share of own brands than we've ever had, and we have a much lower risk in terms of licensed brands than we've ever had. And I'll comment a little bit more on that. We have grown our share of the online business significantly, and we believe that we have been earlier than most of the markets with the choices that we made in the last 4 years, and this will be an enabler also going forward. We have rebalanced our geographical mix and our product mix. These were important vectors that we talked about in the previous strategic plan, and I'll show you a little bit where we are in terms of portfolio there. And last but not least, economically and financially, we have recovered good results that you have seen previously, but we also believe to have found a formula for profitable growth going forward. So let's look into some of those developments. The first 1 is clear that we have been recovering a level of net sales, which is about 2 years in advance versus what we said in 2019. So we surpassed the EUR 1 billion of revenues. We ended up at EUR 1.77 billion, as I said before, there is a benefit on the currency. But even without the currency, we have managed to surpass the EUR 1 billion last year. What is important to recall is that in the number here for 2019, we still had about EUR 200 million of revenues from exiting licenses of the LVMH brands that you may recall, which over this period of growth have actually basically exited our portfolio, meaning that we have been able to grow despite a big block of licenses exiting our portfolio. Why? We have grown organically on our existing brands because we have added an attractive set of new licenses over the period and because we have made 2 acquisitions back in 2020 in the United States. So this dynamic manifested itself, especially in our brand portfolio, so we can see the excellent growth of Carrera, Polaroid and Smith, along with the acquisitions of Blenders and Polaroid, have now brought the share of own brands to about 42% of our net sales. So the own brand portfolio grew 9%. This is on a pro forma basis, so also Blenders and Privé Revaux with the growth rate that they have achieved over the period on their own. And so we have a share that is nowadays, I would say, much higher than it has ever been in the past. I would also say though that on the other 58% of our net sales, we are equally proud to have now really a strong portfolio with which we can win in the market. And a portfolio, which for us is diversified as it has never been before. We do not have any more the concentration of license risks with big licensors that own large parts of our turnover across multiple brands. We have now no single licensed brands that accounts for more than a single-digit percent share of our revenues, and we have no meaningful license that is owned by the same fashion house as any of our other licenses. So we have a much better spread of licenses across the portfolio. And I think that is the brand vector and is an important achievement that we want to further build on as we go forward. The second piece I mentioned before is the online channels. So in 2018, it was 4% of our sales, but we embarked quite early on the mission to grow the online part of the business because we saw the consumer was going there. So we invested early in partnerships with Internet pure players, we invested early in our business with smithoptics.com and we acquired Blenders and Privé Revaux also for that reason to add to our online sales and to add to our D2C capabilities. So this has enabled us to almost quintuple our share of the online business reaching the 15% that we have now. At the same time, also the other 85%, which is our core wholesale business has grown, and this has grown because we have been modernizing the way we go to market with our customers, and Marcella will talk about this further. Our product mix has diversified also very nicely. This was something that we have in the past, also said in our previous strategic plan. You may recall historically, now I'm going years back Safilo was a company that was very much focused on sunglasses, luxury sunglasses behind some big licenses. Today, we have a much more diversified portfolio. So first of all, we have added a third pillar to the product mix, which is sport. So 12% of our revenues now are generated from sport products, snow goggles and snow helmets with which we are market leader in North America with Smith, bike helmets, which is an increasingly growing part of our business as clearly the consumer in the outdoor space is evolving. So we have now 12% of our revenues in sport products, we have 40% of our revenues in prescription frames, so notwithstanding the growth of sport, notwithstanding the acquisitions of Blenders and Privé Revaux that are predominantly sunglasses our prescription frames business has grown in the period and is now at 50%, while sunglasses represent the other 48% of the portfolio. And we believe that from a product point of view, we have now found the right balance going forward. On the geographical side, so the brand channel and product mix that I outlined before also manifested itself in our geographical footprint. North America is now the biggest region in the group. It is about 46% of our net sales. Clearly, the growth of Smith, the acquisition of Blenders and Privé Revaux have helped the geography. And we're happy to be a strong player in North America, which is by far the largest eyewear market in the world, and it is also a very profitable market. So it is good for Safilo to have a strong leg in that geography. Europe, on the other side, which represents approximately 40% of our net sales today, grew in the period, but was more impacted by the portfolio changes. Clearly, the luxury licenses that we have, these were brands that were particularly strong in Europe, and they have exited. But nonetheless, we saw organic growth in Europe as we have really worked on bringing relevant new licenses to the region and improving our commercial capabilities. Last but not least, we have our emerging markets, which today account for about 14% of net sales. They developed nicely. We did want to go towards the 20% mark as per the previous plan. But we also feel that we have not yet had the chance to fully develop the potential there, especially in Asia, where in the last 3 years, we've had lockdowns and slowdowns and all kinds of restrictions in the business but we believe emerging markets remains a big opportunity still for us going forward. On the profit margin, we've achieved a big turnaround. You can see that from the 50-odd percent that we used to be at in terms of gross margin, we have now increased by about 570 basis points, which was on the 1 side, driven by pricing and mix dynamics, both because we've added high gross margin businesses like Blenders but because we have also been very targetedly and purposefully using price and innovation mix in order to improve our marginality. We have completed the EUR 45 million cost savings program that we announced back in 2019, the EUR 25 million of that is COGS and has helped the gross margin, EUR 20 million of that was overhead and has helped us basically also achieved the 9.4% EBITDA margin that we have now. And not only that, we have, therefore, reduced and flexibilize our fixed cost structure. So as we grow the top line, we have a higher degree of operational leverage on the margin. Not just saving and not just margin improvement, we have also been able to invest in the period. We have invested in the growth of our own brands. We have invested in the digital transformation of the group as we strive to become ever more relevant to customers and consumers. Last but not least, we have, as I said before, a healthy balance sheet with a relatively low level of leverage. The path has not been linear. There have been numerous external developments, as you know, in the market. We have made acquisitions. So clearly, in 2020, we acquired Blenders, we acquired Privé Revaux. We subsequently refinanced the bridges that we drew for that in 2021. And we have also in 2022, refinanced our debt capital structure with our bank partners. So now we have a debt maturity that is 2027 at favorable conditions for the group, a low leverage and therefore, also the firepower that we need as we aim to invest in the future. I think this finishes my section, and I hand back to Angelo.

Thanks, Gerd. So I think that Gerd has covered what has been the journey to here, but I think it's more important to understand what we've been doing last year to understand where to go and to deicide and work on where to go. I think it's always good to start from which is the market in which we operate in. And I have to say that coming from other industry, this is the things that I like more out of the eyewear industry because it is a market which structurally has been growing, it will be growing. And it will be growing because there are some fundamental reasons behind that which, from a certain perspective are going to stay there and they will also accelerate. And I will try to cover a couple of them later on. But then there is also another characteristic, which I think this is an industry which has shown to have a very high level of resilience. I mean, I think eyewear compared to other categories, the bouncing back after the COVID has been very rapid. If you remember, in 2021, we had a strong rebound in North America. 2022, we had a strong rebound in Europe. 2023, it should be the year in which the rebound will be more in Asia and in China. But the resilience. So it's a big market, it's a growing market, it's a resilient market. So this 3 characteristics, let me say, let me slip a little bit better the fact that we are in a healthy, in a healthy, in a healthy industry. But the other element where we've been spending quite a lot of time to understand and this why we took also the opportunity to take new resources into the company is the consumer. The consumer moving forward is a consumer, which is becoming more conscious to be a consumer. It's a consumer which is becoming more what we call here attention economy is a consumer which likes to be respected more as a person before as a consumer. So really catching the consumer, understanding the consumer is going to be 1 of the challenge going forward. And then is a consumer which buys where he likes to buy. So this is why digital channel, B2B or D2C will be more and more relevant. And we think, at least from all the data that we are seeing, that they will keep growing disproportionate. And last but not least is sustainability. We will talk a little bit today now and later on, on sustainability. I think that sustainability is not any more nice to have. I think the consumer will choose a brand or a product knowing that the company, which is behind that product of that brand has a sustainability and a sustainability committee. So I think the sustainability is a matter that you will see also later on has become more and more important moving forward. But, I mean it's nice words, but where are the numbers? I mean it's a big market. It's a EUR 49 billion market. Obviously, we're talking about retail, retail value. This is just looking to the eyewear. And this is the market in which we as a Safilo, we play. This is a market which has been growing around 4%. We are assuming in this plan that in a sort of post COVID, we will have a growth of 3%. But here, I'd like to be very clear with all of you is that this growth we are assuming it's not going to be linear. What I mean by that? The 2023 is a year where, to be honest, still, there are so many clouds that we need to walk the year, walk the quarter. But if we look to the long term, absolutely, the growth is going to be between 3% and 4%. Question is 2023, let's see, we are a little bit more conscious on the '23. But by sure, is a market that will keep growing. And why that? This is good and bad because there are fundamental demographic reason behind the fact that this industry will grow. There is an aging population. I'm not seeing you anything new, but if you take China, if you take in Europe, Italy, Germany, more and more, there are countries where the population is aging very, very fast. So more people is getting aged. More people needs to have eyewear. So myopia, presbyopia are becoming really big, big problem, but then are becoming a big, big need for the category to be expanded. This is why I think that this industry somehow will become between 1.3 and 1.5x what is today. The other element, and I think anyone of us knows that we're always looking to -- we are all in front of a computer that we were discussing before or we have an iPad or a mobile phone. And especially the new generation, I mean, the number of hours that our kids or our young generation is spending in front of a digital device is huge, is keep increasing. And obviously, this has an impact on the fact that this generation we need eyewear, more than maybe what we were needing when we were young. And then it is becoming, especially after the COVID more and more attention about the importance of some protection in some part of the world and in the more developed work attention to the UV light. And last but not least, eyewear is becoming more and more a fashion accessories. If you know that -- if you look 1 of the characters of this industry, which is quite strange is the frequency of -- the buying frequency of the eyewear is 1/3 if you compare it to other accessories category. So we believe the step by step also the frequency will increase there. Another element is digital. I think that here, Gerd has touched upon before. I think, obviously, 2022 has been a year in which there's been a little bit slow down, but we were coming from 2 years of incredible, incredible growth, but digital will, the online will be growing. And we assume that the online will be growing low double digit versus the offline will grow between low single digit. Here, the point is not, is the off-line going to disappear? Absolutely not. Is there -- we believe in a world where people are going to buy eyewear only on online? Absolutely not. But by sure, the weight of the online is going to increase. We are assuming that by 2027, the weight of the online will be more than 60% of the total market. And this is the reason why we took some choice back in '19, and this is why we will keep investing on that because the consumer will go more and more on buying online. We see mainly obviously, this phenomena is stronger on [ sun ]. If you see the [ sun ] is moving by far faster on the online, but we see mainly in North America that also prescription eyewear is moving there. Obviously, at a different pace, but we have data. We see also from -- on our smithoptics.com and on the blenders.com that the demand from prescription eyewear on the online keeps growing. And again, the consumer. I think this is the most tricky but also the most important topic. The consumer -- I mean generation -- by 2030 Generation Z will be the biggest consumer target for our category. Obviously, this is putting us a challenge I think a great opportunity because who will understand better how to get encounter with the consumer, we will win. And this is a new consumer. It's a more conscious consumer. It's a consumer which likes to be treated not likely really consumer, but a little bit more like a person. It's a consumer which likes to go on the online, but like also to go on the physical shop get more a sort of emotional and experimentation experience. So understand the consumer, win the consumer is going to be even more fundamental, but this is why we think for us, this is going to be 1 of the area that we will win because we are equipping ourselves to catch this new consumer. Thanks to Carrera. Thanks to Smith. Thanks to Blenders. We are really now learning a lot on influence, how to catch this new generation. You will see, for example, this year for Polaroid, we have done this Mad Cool event in Spain. It's been a huge success. Socially, all the people which are when there have becoming ambassador around Europe. So catch the consumer in a different way is going to be a competitive edge, and we think that we are equipped to do that. And that's sustainability. I said before, again, I think don't [indiscernible] all the consumer going to run to the shop and buy a sustainable product? Not at all. Is the consumer ready to buy a product just because we put the flag sustainable with 30% higher price? Not at all. The point is sustainability is more complex. The consumer will be more inclined to buy a product from a company and a brand which have a sustainability responsibility. It's a little bit more tricky. It's a little bit more at 360 degrees. So it's not enough just to do window dressing. This is a challenge. We have all of us, but they will look carefully on a company which on socially impact -- on the circular economy, all the impact on the world. Is this company which is behind this brand is serious about the stopping, yes or no? That is going to be the discriminator. It's not going to be enough to say, I have a sustainable product. I think that if -- who does that, we get the opposite effect from the consumer. Now let's -- we've been looking to the 2022, we have been looking to the industry and market in which we are in. Let's now really look to the future. And I suggest, if I can ask -- or should I do something to do the video? Should I click again? [Presentation]

It's important to say that this is not just a video. I think we have done a full cascade in any office in any with all the employees around the world. We've been really for months cascading this vision to the full company. Why that? Because I think in this vision, there are couple of words. I mean, first of all, let's be very clear. We respect our past, but we don't need to stay and be killed by our past. So we need to use our past to build the future. Because we can use our past and remain constrained our past. Now we think and we respect our past, but we need to understand where to go, first concept. Another important word is innovation. It's innovative. I think we are trying to do with -- at our level with what we have, I believe that we are really digitalizing the company, but more important, we are looking to a different way, a different kind of relationship with our customers. In other words, we are looking a different way, an innovative way, how to drive this [indiscernible]. So innovation, inclusivity, is this is something of the work that we have been really spread. And this is what I really like to hear in any place of the Safilo, independent if you go to Safilo India or if you go in South Africa or in North America. So we are really trying to have a company which is strongly behind this. I mean this can sound anyone can write that. But I believe more and more moving forward, we need to have people which are fully engaged on what are the fundamental direction that this company likes to have. We have heard digital, you will hear before later on. People knows me a little bit, I'm crazy about that. I think that digital and sustainability are changing this company. One of the reason why in Europe we are winning. In Europe, we are winning. One of the reasons behind that is the fantastic work we are doing behind our brand, but it's also the unique, I call unique work that we are doing on the digital -- digitalizing our way of making business. And next year, we will -- in 2024, we will accelerate even in North America. Okay. So what is our strategy? Honestly, our strategy is very simple and can be judged even too simple, but I believe to be simple is already a key of success. What we like to be as a Safilo? We said we operate in an industry which is healthy industry. We operate in an industry that will grow. We operate in an industry where the consumer will become will complex to catch. And then we think that our strategy is going to be linked to have what we call a balanced portfolio, and I will build on that. And when we talk about balanced portfolio, we try to read the definition of balance according to very specific dimension. We like to be balanced when we look to the brands. We like to be balanced when we look to the channels. We like to be balanced when we look to the geographies, but all this will be done with 2 enablers: digital transformation and sustainability. So the rest of the presentation as myself and Marcella, we are going to give a little bit more meat on the bone on this chart, which sounds simple but is fundamental on what we are going to do. Let's start from the channels. Obviously, this we will keep being focused on our main channels, which are the chain, which are the opticians, which are the retailers. That is going -- which obviously remains our focus. But we will keep investing on the online. As Gerd was saying today, we are around 15%. In our plan, we will keep investing to get our online percentage at 20%. You will hear more and more all the investments we have been doing on the B2B digital channel. We are investing heavily in Europe. We will keep investing heavily -- we will start investing heavily in North America. So our B2B digital channel has to represent in the time horizon of this plan has to get to 12% of our total top line. And then the sport channel, I think that we already understood from Gerd, our sport channel will get to 12%. And why sport channel? Because we have Smith, we have Blenders, we have a part of Carrera, we have Under Armour. So we have built in our portfolio, a series of brands, which I think can be our lever to win by the way, in a channel in the category which is growing. I mean, outdoor is growing. Bike has been booming. Obviously, bike has been booming, it's been growing 70% in the last 2 years. It will not be -- it's not possible that it will keep growing at 70%, but it will keep growing at high double digits. So this is a focus, obviously, on our main channel, but online B2B digital sport channel has to be, from a channel perspective, where we are going to invest. And we think that both in capabilities, both in brands, we have the right lever to win there. Geography, I think we will keep, obviously, strong. We build on how strong are we in North America, on how strong are we in Europe. I think I've already commented before about Europe. But obviously, the emerging part of the world has gone through 3 years, which have not been the easiest way. So we think that on the time horizon of the plan, the emerging markets remain in a strong position in North America, remain in a strong position in Europe, but we think that emerging markets should get around 20% of our total net sales. And then let's go to the brand. I'd like to spend a little bit more time here. I think we've been doing really a huge work on the brand, and I will get in more detail that. And here, I'd like to be very clear to avoid misunderstanding on, we say focus on a diverse set of license while accelerating on home brand. This is very important. So we are not saying that Safilo will not have license. We are saying that we will have a set of license that we think are crucial, but on top of our home brand which needs to represent more than 50% of our total net sales. So this is why here it's very fundamental. We will keep growing. And I think we have been -- we have demonstrated that it's possible to grow. Smith has been growing, Carrera has been growing, Polaroid has been growing, Blenders is more than 2.5x what was when we bought it. So it's possible to grow. So we will keep a set of specific license but our home brand is where we are going to grow. So our home brands needs to represent more than 50% of our portion. And let's talk about our portfolio. Just to be clear and to avoid license to get offended, the list here is poor from A to B to Z. Our first line is what we call our home brand, Carrera, Smith, Polaroid, Blenders, Privé Revaux, Seventh Street and Safilo. And then we have, what I believe personally, one the strongest portfolio of license in this industry. And you see there that we have global brands. We have regional brands. We have brands which are stronger, more on sustainable topic. There are brands which are more stronger in some geographies. So we think that -- I'm not saying that we will not have new license, but we don't need to be obsessed to have a new license. We need to have a new license, which makes sense for the consumer. You know, for example, we have had Carolina Herrera. Why we have had Carolina Herrera? Because we felt that we were missing women premium. And Carolina Herrera, by the way, is going very well. Then we have Boss, Boss is repositioning themselves. So I believe personally that this kind of portfolio, yes, we will add other license but the license need to answer to a consumer need, doesn't need to answer to the need to have a press release. And here, you say you have a global player, Boss told me, you have strong regional player like Kate Spade, North America, Japan, U.K., you have luxury, not big luxury brand, the luxury brands that have their reason, Missoni, Moschino, we have Isabel Marant. We have brands which have local reason in Ports, Ports in China is an amazing success. Yes, the Chinese, they love fashion brand, but I can tell you, they will have more and more Chinese brands. I'm sure we will have maybe with someone else this conference in 10 years' time, they will love luxury brand, large international brand, but they will have more and more local brands. Ports, huge success is a brand just for Greater China. So I think that our brand portfolio overall, I personally think it's very, very strong. We have here some babies I don't mention otherwise, some of the fashioners will get offended, but we have some brands here which are growing 40% for the last 2 years, means that the portfolio is there. But as I said, we will take our home brands above 50% of the net sales of Safilo. And I think -- what is important that when we talk about the home brand, each of our here, we define strong core home brand have a role. This is very important to understand. So we don't look to our brands like only single brand, but each brand has a role in the portfolio of the home brand. Obviously, anyone can define to access, obviously, if we call BCG or McKinsey, they will find different access. But the point of this chart is not so much to look to the access, but to say what is the role of Carrera? I think Alberto will take you through that. What is the role of Smith? What is the role of Blenders? What is the role of Polaroid? Which is a consumer that we are going to attack. And we have done, thanks to Alberto, thanks to the Smith team, thanks to the Blenders' team. We have done a quite detailed exercise. So we know by geography, which is a consumer we like to tackle, how we are going to tackle and how we are going to win. So it's not only an issue of single brand, is an issue to have a full portfolio of home brands. I think now I'm going to do switching -- yes, okay. And there are 4 main topics driver, which is common to -- and just to be clear, each of these brands have a dedicated team because it's not that we don't like to be generic. So there is a dedicated team working on Smith. Smith is run out of Portland. Why Portland? Portland is the world of outdoor. There is Adidas, there is Nike. These all the outdoor companies are in Utah. So Smith is full run out. The brand team is in Portland. Blenders, they are lucky. They are in San Diego. I think they are a little bit more lucky than living in Portland, which is not definitely the most sexy place where to live. But by sure, a lot of people like to go to San Diego. I'm not sure if they like to go for Blenders or for San Diego, but they are in San Diego straight on the beach. So the Blenders brand is fully run out of San Diego. As Carrera and Polaroid is fully run by Alberto out of [indiscernible]. Obviously, then we have execution, local execution, Alberto will cover later. But any brand has a dedicated team. So consumer first, this links to what I said before. I believe this is where really we are trying -- we are doing things that I believe other guys are not doing to catch, to really connect in an intimate way with the consumer. Digital, digital, digital. That is my obsession. This is -- so is also the obsession of the people in Safilo for a pure voluntary base, but that is where we are really, really focused. Some activity we are going to do this year in North America. No one has done in North America what we are going to do on Carrera and I think that Alberto will go there. Then people engagement and culture. This is very important because, yes, these brands are fully run centrally, but I will just give an example of Smith. As I said, Smith is fully run out of Portland, but we have a team which sit in Padua for Europe. One of the element of Smith is to accelerate the growth in Australia. We have a small team of Smith people in Australia. So strategy is global, strategy is central, but then the team in Europe needs to work with Portland to understand what is needed in Europe? Or -- what is needed in Australia? And then omnichannel. I know everyone is talking about this omnichannel. So it's -- but we are doing. I will cover -- just keep it. I will cover more when I will talk about Blenders and I will explain a little bit more in detail what we are doing. So let's start from some of the baby, and let's start a little bit with Smith. Let's start with the video. [Presentation]

So Smith is -- it's a fantastic brand because it's far more than eyewear. It's opened up to us a completely different world. Smith is looking to the guy, which they'd like to have advantage. So there is a sort of performance and competition attitude. It's for there that they just like to have an adventure and [indiscernible] is a brand which is sort of inclusive. They would like to be a brand for everyone. Smith is #1 snow goggle, helmet brand in North America. We have 54% of the North American market. We are absolutely the market leader on the snow goggle in North America. But what is Smith? I think this chart is summarizing more than everything. Our aim is to own the head. So we do helmet, we do goggle, we do eyewear. We are technology innovation-driven. Technology and performance is part of what Smith stands for, and protection. So technology and protection and head, these are the 3 famous words for Smith. So Smith is goggles. I hope you don't see goggle enough in Europe. I can tell you, you will start seeing a lot. Is performance sunglasses. We have -- by the way, we own a special technology on our lenses that people don't believe it, but we produce in Italy. We have prescription eyewear that you can buy on our website. If you go on the smithoptics.com you can load -- if you are in North America. It will be possible also in Europe in a couple of months. But if you are in U.S., you go on your own smithoptics.com, you load the prescription -- we build the lab in Clearfield in 4 days, we sent home the full pair. And then it's bike. Bike is growing. We are growing crazy. Bike is a huge, huge opportunity for Smith. So Smith is a brand which is by far more than eyewear and this is a brand which can -- also in terms of channel, this doesn't go to the traditional retail. So Smith is allowing us not only to cover different categories, which are close to the eyewear, but not only our, but it's allowing us to enlarge our footprint when you talk about retail because the sport retail is not the traditional optical retail. And I'm assuming you understand what I mean by that. So Smith, geographic and channel expansion. As we saw, we are very strong in North America. We will be very strong in Europe. We have approved a very aggressive expansion plan starting in Europe and in Australia. I think Smith, we have not been using our strengths on eyewear. So we will use that. And obviously, as I said, bike. So I've been doing a sort of marketing work. I now jump back to my job, and I leave to Alberto to comment on Carrera and Polaroid.

Okay. So thank you, Angelo, for the introduction into the world of brands. My name is Alberto Macciani, I'm heading the Global Brands portfolio for Safilo and the Communication part. And basically, what I'm going to share with you is a little bit of the road map to growth for Carrera, Polaroid, starting from a little video. And this is, in a way, the Carrera world. [Presentation]

So well, this is the presentation of the newest campaign for Carrera, which was started last Friday. And in a little bit of a summary of what are the brand values and what we want to express for the brand. What you're going to see today is our growth strategy, how we move from the brand positioning and the values of the brand to the architecture of the product and most importantly, how we lend it in the market. As you know, Carrera is doing a big reengineering job because it's a brand that wants to aim to get to a leadership position in the market. And as always, in brands, you start with the values. So we did a deep dive analysis, led by the global team, but of course, with a big input from every market to define what are the key pillars. And generally, when you talk about pillars of brand, you want them to be authentic. You want them to be true to the brand. You want them to be relevant. The product needs to fulfill a need and answer to a problem and you want them to be talk about. You want people to talk about it. The values of Carrera are, of course, the heritage, born in 1956, is the aim to do something highly performing, highly technical, but with a big lifestyle impact. The products of Carrera, you saw Smith before and Smith is really pure performance. Carrera is performance for lifestyle. So you want to look good when you're skiing, but you want to look even better after the skis is done when you are with your friend. That's why this idea of the community and getting people to share Carrera. Carrera a little bit of an exclusive club because it's out of attitude. That's why we talk about the relevance of the brand being technology and style, the role of design. It's so important. We want to build products which are not for everyone. And you can tell from the design of Carrera, there is a product which can't just be worn by anybody. There are brands which are, I call them the big normalizer because everybody looks good in some brands. Carrera is not for everyone, and I think that's a big advantage because you want people to enter the world with the right attitude. Talkability very important is the right attitude. You saw the people before in the movie. They're not models or actor. They are real people, they're real influencer. That's their job. The lady is a boxing girl. The guy is a real DJ. The guy is a car lover, he is a big celebrity in U.S. So they all use their passion to make their life and Carrera is a sort of an enabler in that space. The architecture of the product, again, very important. You want to be sure that the customer is able to sell the right product to the right person because everybody ends at Carrera with a different type of point of view. So we have a part which is named Signature, which is the collection we do for the more wearable products, the 1 that needs to be worn every day, but with a touch of personality. Then in the middle, you see our icons. Those are the products that really qualify the image of Carrera, what people want to see out of Carrera, a little bit of the iconicity of the brand. And then all that we do for sport and outdoor which, again, very, very important, but always with a touch of lifestyle. They are not designed just for performance. Of course, power of collaboration, Carrera has a huge history of collaboration. You remember from Porsche, all the type of huge brands, Supreme, all the others asking really Carrera to create this melting of technology and lifestyle. Carrera is 1 of the very few brands that can really go into the cover of fashion magazine being not a purely fashion eyewear brand. So this is very important. And for example, what we did with Ducati. Partnership, long-term partnership, developing of a product, which is designed for people who are using bikes. So with all the technicalities, which are really make the product different but also with a high lifestyle impact. Big success, now Ducati is a big part of the Carrera portfolio. And I tell you, very interesting, all incremental, 0 cannibalization on the core and also very, very good in opening new doors for Carrera. Because through this collaboration, you find a new meaning for the brand. In market activation, again, very important that all we do from the product point of view gets amplified. I always say the real challenge now is really moving from product-centric to brand-centric which means to build a whole set of values around the product for which people not buy you only for the functionality by the buyer for the experience. The campaign idea that we use on Carrera is what you saw before. We call it, DRIVEYOURSTORY, which is really -- it can -- if you look at the superficial way, well, it's about driving and cars. But the deeper meaning is this is about getting people to do their best and change their destiny. This is a huge insight, especially in a lot of new markets. What is interesting is that Carrera is a highly urban brand. We sell Carrera more or less in 15 cities around the world, the big ones where people are really making an effort. They moved to the city, they started a new job, they start a new life. Carrera is there to help this journey. And using real people, again, we moved this year from classic use of models and testimonials to real ambassadors. These are the 5 that we are using today. And they just love Carrera. So it's not just about doing a sponsorship of Carrera. They use Carrera in their life. Actually, they were the 1 who came to us saying, we love the brand. We love what you're doing. Can we do something more? And they create a community because I think the good thing of modern marketing and communication is that the barrier between the testimonial, the celebrity and the real people is gone. Anybody can connect with these people, and you may get to a closer interaction. Some of the highlights of the campaign, I chose these 2 guys. [ Martin ], he's a resident DJ at Ministry of Sound in London. He's traveling all over the world to talk about new sound, but also very strong on this idea of empowerment, EMEA, U.S., Asian, working on activation for women empowerment. So a lot of interesting story where Carrera is not just an enabler for seeing better, but I always say it's an enabler for a new life and accompany you to your daily challenges. Then, of course, what is very important is that all we do comes live to create desirability because the real value of a product like Carrera is that you see it and you want it even before asking too much, is it the right for me, but there is a sense of desirability. And that's why we invest so much in creating partnership with customer in the key countries. This is Dubai, this is New York, this is India. All the countries in the world where by promoting the image of Carrera in a relevant way through also visible display, you get traffic and you get people to try the product and the brand. I tell you, Carrera is a brand which has a high loyalty. The moment you try Carrera, you keep using Carrera because it's really a bit unique in the market. Celebrities and phenomenon. There's a number of celebrities in the world who actually love Carrera. They use Carrera, but of course, sometimes they have contracts with other brands. Jennifer Lopez is 1 of them. She is a big lover of Carrera and she uses Carrera. This, for example, is 1 of the latest example, Anitta, she's a big Brazilian American celebrities with over 60 million followers. And she came to us saying, can I work Carrera in our -- in my video? And of course, we said, yes, very, very happy and flattered. But when the celebrity is asking for something, you know that it's not just a financial advantage, but there is meaning because she does it because she likes it. And you can see that it's very visible. The moment this video came out. I think we are talking about like 150 million views. The product itself, this model became #1 in U.S., simple as that because people just see it and they go and they ask for the Anitta Carrera. And of course, power of collaboration. This is some of the celebrations we did when Pecco Bagnaia and Ducati won the championship. Again, very big partnership, not just -- to be honest, not just to sell the product. We are selling a lot, but to create meaning because even Pecco now believes that Carrera is bringing him good luck. So any time he goes on a race, after the race, he is asking to have his Carrera on to do the shooting. And I think this gives meaning to the brand because, again, it's really performing but is also for lifestyle, for imagery that are hitting also off the track. So this is a little bit of where we are heading on Carrera. Try to create this ignite of performance and lifestyle. And I can tell you, it's really working in all the key markets. We come to Polaroid, which is a little bit of a different story. I always say imagine Carrera is a bit of an exclusive brand. Carrera is like a club, but not everybody can get in. So you need to be a Carrera thinker to get into the Carrera club. Polaroid is the opposite. Polaroid is really there for everyone. The history of Polaroid is, by the way, amazing -- sorry, you know that Polaroid was invented in 1937 by a guy named Edwin Land, which is the second person in the world in terms of number of patent created after Thomas Edison, so not an easy benchmark. And he is considered to be by people like Elon Musk, 1 of the guru of innovation, because he was really able to understand that innovation is real when it has an impact on many people. Innovation is not niche. Innovation is where you can really do something that has an impact on the world. And he created the polarized lens as his first invention, then the instant camera came later because he just realized that his daughter was having problem looking at the sea. So she was struggling with the reverberates of the sun and he said, "Maybe we can remove the disturbance of the light?" That's why colors are so important to Polaroid, and this is a little bit of the expression. [Presentation]

So again, what you're going to see quickly, starting from the position into the architecture to the activation, the same recipe for any brand. And the positioning of Polaroid is really relevant to the growth model because there is something on the functional benefit about the ratio between price and quality. Polaroid is a brand that the quality -- where the quality is so important and is so relevant for the price. That's why we call it a smart choice in the sense that you buy much more than what you pay. The quality of Polaroid products are outstanding, but we want to keep the sensible pricing because we want to give anybody the chance to try Polaroid on a [indiscernible] purchase. This is very important. We don't want people to think too much when they have to buy Polaroid because they do it on the go. Maybe they do it when are on holiday, maybe the second pair of glasses. We want people to buy Polaroid with a free mind. Sometimes, eyewear especially certain brands, they have a bit of a barrier because you think a lot about buying it because it's very important, not just from the out-of-pocket point of view, but also they define you so well and so importantly. Polaroid is good for everyone from 1 to 99 years' old, everybody can have a Polaroid. Roots, of course, is this idea of innovation, mainstream innovation. Everything we do on Polaroid needs to have a tangible benefit. Just to give you an example, we have seen that a lot of people use Polaroid when they go to the seaside. Well, we invented a pair of sunglasses that is floating. So whenever you lose it in the water, it goes -- you won't lose it. And of course, world of color for the emotional benefit. Customer and consumer, we have the cool, we have the active, a lot of work on kids. This is very important. We have a campaign -- educational campaign was we want to get people to get their sight checked as early as possible. 40% of the people, we just did a survey in Italy with over 3,000 families and moms, say they never check the sight of the kids before school, which is a big issue because if you do it too late, then you might have just bigger problems. So Polaroid has the social angle, which we believe is very important. And again, very, very driven by inputs and viral at heart. We want to showcase the color again. We want people to love Polaroid even before trying it. And we do interactions between brand and digital transformation. This is a billboard something that we tested, it's going to be a live again in the whole of Europe in, I think, a couple of weeks, at the beginning of spring. But basically, people could scan the QR code and do an instant try on, where they could just try the product directly so that you remove 1 barrier. The moment you can also see that the product is fitting well, then you're going to have a very high motivation to go and look for it. The world of Polaroid, we call it the Riviera simply because it's a place of fun and color, and we want to people allowed to be seeing the world at their best, gain the visuals, very impacting, very interesting for the whole of the community. And again, very, very important, create dedicated windows where the color is cutting through. The insight is very simple. The cities are gray. Polaroid is there to put color in the life of people and create desirability, that's why we use imagery. This 1 is the [ gummy ] product, the 1 that you can tear apart because it's made of rubber. It's virtually unbreakable. We want to people get interested by the feature, the technicalities and then go and look for the product and try the product. And of course, cutting through the gray of the city, very important. Huge billboard, again, this was in front of the Cadorna station because traffic is really what makes Polaroid work. Don't think too much. You just see something interesting, the right price, you go and buy it. Thank you.

Thanks very much. I think we will be very fast to just cover the latest brand, and I think [indiscernible]. [Presentation]

Good. So -- I think there is something common between Carrera, Polaroid and Blenders. We need to move from selling products to selling brands. It can sound easy, this is the winning element. We don't sell products. We sell Carrera brand. We don't sell products. We sell Polaroid brand. We don't sell an eyewear. You can have 20 different of this kind of company in North America. And by the way, what is interesting is that Blenders is eating up market share for some brands, which cost 3x or 4x the price of Blenders. So the product is crucial, not going to be wrong, but it's more important, the story behind that. What is the strategy to be fast on Blenders moving forward? Domestic, international online will remain the focus. Domestic North America is the biggest eyewear digital market. So we will be the focus there. What we have launched in Canada, we have launched in Australia in a transparent way. We have slowed down in Europe. We think that the next step is going to be build a Spanish language based platform. San Diego is quite close to Mexico and [indiscernible] South America. So it's North America, North America, North America, it's Australia, it's Canada and it's a Spanish language platform. Then retail, this is very interesting. I'm talking -- just to be clear, I'm talking about mono brands. We opened now 4 stores. By the way, if you go to Santa Monica, you can have a look on that. We have San Diego, we have Encinitas, we have Santa Monica. We have Houston. We're going to open Austin. We have 4 shops now. What is the concept here? Bring together D2C and shop. So if you go to the shop, in the shop in Encinitas, every week, there is an event. So it's a shop, but it's by far more than a shop. They need to make money, don't get me wrong. They need to be all profitable, but the aim is go there, experience and then you can buy what you like. So it's really a combination of the 2 experience and apart from the geography to go Santa Monica is a huge shop, really fully experiential. And for example, in Encinitas, what is interesting, we see that once we have opened a shop, we sell even more on the D2C. So there is a link between e-com, D2C and online and offline. This is the content in the plan. Just to give you an idea, there is a plan to open 3, 4 shops per year, focused mainly in North America. Wholesale, just to be very clear, when we talk about wholesale here, we talk about sport wholesale. So specialized sport wholesale. Remember, go back to what I was saying before, Smith, Blenders, Carrera. Sport will grow in sport wholesale, which is opening up for us a different go-to-market. So this is on brands. Let's go -- we said that we have 2 enablers in our plan. If you remember the first chart. One is digital transformation and the other is sustainability. These are the 2 fundamental enabler, which will assure that we are going to deliver the number that Gerd will share with us. An important point is that here, when we talk about digital transformation, digital transformation for us means touch all the points of the company. Digital transformation doesn't mean only what Alberto show. When we talk about digital transformation, our fundamental aim is to change completely the way in which we engage the consumer and the customer, is a way to empower our employees. And then we will talk -- Marcella will cover and we'll talk a little bit about people, but there is also another important dimension. We are digitalizing our full operation and I will say something more. So if we open up the digital transformation, we have also here different block. Let's start from the first design and concept development. We are 1 of the few. There is also another player in this industry, which obviously I will not mention. We have all our collection, all our portfolio, we have an electronic version. This second sound easy, is not. First of all, behind, there is a system which is quite complex and cost quite a lot but it can sound the detail, but this gives us that any time a product is designed, we can electronically transfer on all our digital platform. Most of the company, they have the product, they take the picture of the product and then they can put on the digital channel. We are now in a position to say any product is designed, 2 seconds after I can put on the D2C, I can put on the B2B. I can put on my -- with some, for example, IBP, we can send to them directly the electronic version of all our collection. And here, there is a digital stream going on there to put together a completely digital way how to manage or how to -- don't get me wrong, you need the design, you need the craftsmanship. But behind, we are really building a sort of big digital system. Supply chain and demand and marketing. This you know better than us that this business model, it's a tricky model. We have all the collection, we have the [indiscernible]. We have thousands of SKU. What we have done? This is a priority for this year. There is a full team of digital people, which are to say, how can we optimize everything which goes from the moment which we design the collection even before. How should that design the collection reading the data? And again, it's going to be data driven. It's not because I like or I don't like. It's not like today's week is sunny or is windy, it's based on data. So we will start to optimize how we design the collection and then we optimize the full chain. And those you can imagine, I mean, you know our financial number is better than us. This has -- is going to have an impact on obsolete. It's going to have an impact on our cost, it's going to have an impact on our working [ capital ]. So digital is touching, supply chain is touching really demand and marketing. This is 1 of the fundamental pillar on which we start working already this year, and then we should start looking to the advantage as of '24. Big area here, digital can really work to tied up this very complex system of collection on launches, on marketing, on demand, on a very complex supply chain. The last bit is people, and I leave the floor to Marcella.

Good morning, all. So as we said, the digital transformation for us is 1 of our enabler. Digital transformation, as you know, it's not only about system and technology, but people is 1 of the pillar in digital transformation. We are proud to say that in Safilo today, we have 2 digital hubs, 1 is in Portland, San Diego and the other 1 based in Padua. As we were mentioning during the presentation, Portland for Smith and San Diego for Blenders, those are our digital hubs that are fully focused today on consumer side, while -- and we will talk a bit later Padua focused on customers, B2B channel. When we talk about Portland and San Diego, we have a combination of capabilities. And for us today, those are representing our home Safilo online business capabilities rooted in Smith and respectively, Blenders, e-commerce teams. They are really focused on omnichannel and also what Angelo was mentioning again before, those are working and doing an extremely good job on integrating the experience between shopper and consumer between retail, offline and online, in-store experience. When we talk about capabilities for the team of Portland and San Diego, of course, those that have very, very strong capabilities in digital marketing, both in terms of online content creation and performance marketing execution. Let's talk now about Padua with a strong focus on customers. This is a journey that we have started more or less 3.5 years and of which the team has done an extreme, say, good job on building what we call and we will talk later about You&Safilo, our first digital channel fully dedicated to our optician within Europe. Talking about people, as we said before, is a question of creating capabilities, as Angelo was mentioning before, empowering our employees in order to be able to execute the strategy that we want. This is the reason because we invested and we kick off in -- at the end of 2022 digital academy, namely Digital Force, on which we decided to create an internal digital academy in Safilo. There is a combination of acquiring technical capabilities and people that have a mindset of moving forward a digital transformation. I said at the very beginning, this is also, I mean, for what I've seen in my experience in the last [ 3.5 years ], digital transformation for us has not only been a technological project, but it's a question to change our mindset and our way to do business and creating relationships with our customers. Digital academy is now at its very first step. We are working with a team of 6 people, plus 2 people that will come very soon. And we will also invest in the second part of the year to complete our academy in embedding within Safilo our internal developers. Why it's important to have a digital hub? This, of course, will help us to be faster in the execution, faster in design our digital product and faster also to reach the need that our customers are telling us in order to be able to meet their expectations. That analytics, this is another important chapter, the 1 which we are investing in our company in Safilo. Why that analytics? We want to become more and more a company with a data-driven company. Data are the one that, of course, they can help as to understand not only -- our financial trend and how we are performing on the sale side, but there is a lot of data that can help us to simplify the job of our people, having them not focus on getting this data from somewhere into the system, but being able to receive data and using data to take decision and understand what's happening outside. We -- in the digital transformation, we are always using more and more data to understand also the behavior of our customers. Data analytics is a combination of integrating new capabilities and also helping all our employees to better understand how to use data and giving them the instrument and of course, also the knowledge they need. This is the reason because since 1 year, we have developed a strong program of training within Safilo, more than 150 people involved in Padua team and more than 600 hours developed in terms of training. The combination of those capability and those -- the team and the people leading digital transformation, of course, they are getting results on what is 1 of the most important chapter for us when we talk about digital transformation, this is customer experience and sales. It's important -- the fact that we decided to call this area, customer experience. So for us, the obsession, as Angelo was seen at the beginning is digital and its customer. We are within my area, fully obsessed on how can I offer the best experience to our customers. And this is the reason because everything that we show you in the next couple of charts is a result of a constant listening to customers and getting feedback from them. There is a very nice things that we have done embedded in our digital transformation in Padua and also for the team of Portland and San Diego is the fact that we are working 100% in agile. For sure, you know what is an agile framework, and this is a way to work, a new way of work that is, of course, I mean, fully focused on creating digital products that can easily evolve and easily, they can also being proposed to our customers. You&Safilo. You&Safilo is our first B2B digital channel product that has been designed with optician -- for optician. It bores in end of 2020 and we are very happy to say that U.S. Safilo is more than e-commerce platform. You&Safilo is not only a nice catalog where customer they can see product and they can buy, but You&Safilo is a digital product that since a couple of years, is evolving, evolving in order to offer a new digital experience to our customers. When we say digital experience for our customer, here, what is important to say is that, of course, we are trying to create a door for our customer to be in contact with us 24 hours a day. We are trying to create an environment, a digital environment for our customers where they can easily do the request and getting the support they need whenever they want. This is the reason because, of course, we have been able to create an innovative interface to offer to our customers, an easy shopping online, this has been our first target when we decide to start with You&Safilo and giving -- and creating this new B2B platform for our customer. We have added a fully -- digitalized, sorry, after sales experience for our customer. What I mean for fully digitalized after sales experience, we are now able to offer to all our customers in Europe, the chance to request assistance for warranty wherever they need for the product. They don't need to call us anymore. They can do easily using their mobile phone, a QR code, sending us a picture, giving us the detail of the product and receiving the product in a couple of days. End of 2022, we have been able to move 80% of our customers using the digitalized process of aftersales. Why this is important for us? Because it's telling to us that the time we are able to design and offer digital experience to our customers, that in some way are making for them the life easy in their shop. These customers, they will come with us and, of course, adopt what we are offering to them. We have also evolved in the customer care support. We are, since a couple of months now able to offer to our customers to get in touch via WhatsApp. And it is super nice because we have seen that without explaining to the customer why they should use a WhatsApp to get in contact with us, they have found the easy way and also the best way and the best use case, as we say, to get in contact with us. And in some country, in Europe, the WhatsApp up has replaced the e-mail channel. So there is a world of customer optician. They are ready to move and of course, I mean, to take the opportunity that we are offering to them. We are continue evolving on our You&Safilo, as said, more than e-commerce platform, Omnia is our latest digital product that we have launch in Europe end of 2022. Omnia is the access for our customers to all brand digital assets. And again, Omnia is not a different space that we have created somewhere. Omnia is now becoming and is embedded in You&Safilo. You&Safilo, 1 door to offer to our customer to get in contact with us. Why it's important to -- and it has been for other 1 of the challenges for 2022, being able to build a fully digital library, where our customer, they can download video, they can allow the images because, of course, this is a way to grant to our customer to get and been able to have all the content they need their social channel, for their shop and et cetera. All the nice video that we have seen so far about Carrera, about Polaroid, our campaign, Smith, all those elements and all those contents are in Omnia. Here, a video of Omnia. [Presentation]

What you have seen, this is Omnia. And Omnia will be 1 of the chapter we will continue to focus on 2023 because listening to our customer, for them is super important and they really need to have simplicity on evolving themselves in a more digital marketing within the shop. Looking to the other future, of course, everything that has been done so far is because, I mean, the intention and the objective is to become more and more the best partner and offer the best experience to our customers. As we said at the very beginning, this is a completely new way to get in communication with our customer and is a completely and renewed modern relationship that we are building with them. We want to go -- and of course, this is what we have done so far, You&Safilo going beyond sales. So it's not only as said before an e-commerce platform. This will be 1 of the most important touch point where customers can get in touch with Safilo. We will focus and we will continue on the further customer adoption in Europe. We closed 2022 with plus 23% of customers active in You&Safilo, we reached more or less in absolute volume, 24,000 customers in Europe out of more than 30,000 that we have so far, when we talk about optician. We have been able just to tell you some achievement to increase 50% of orders if compared to 2021. And 1 other important point is that our customers are, of course, I mean, increasing also the transaction in the platform. So this is telling us that the -- how we are doing is the right way. Europe will be still an area of focus now in the geography. And of course, You&Safilo is 1 of the elements to reinforce a hybrid sales model. As Angelo was mentioning before and also there, this is a combination of online, offline. So what we want to achieve, and this is part of what we already are doing, we want to create, reinforce and consolidate a hybrid sales model where You&Safilo online, our sales team offline and the traditional business model, combining the 2 of them to amplify the reach to our customers, to amplify the interaction that we can have with our customer and, of course, their loyalty and the satisfaction. And Angelo was mentioning before, of course, next step is to prepare ourself to roll out You&Safilo in North America, bringing, of course, the experience done so far in Europe. Last point, I was mentioning that for us, the customer feedback is becoming our third obsession. There is nothing that we don't do before trying to understand if this is important and a priority for our customer, and there is nothing that we don't launch if -- after we don't ask to the customer how he is perceiving the new service, the new product that we -- digital product that we offer to them. Customer perception. You may know every year, we run our annual customer satisfaction survey. Those are the results of 2022 CSI survey, 2 main indicators for us that for us are super important is Net Promoter Score and Overall Satisfaction. When we talk about Net Promoter Score, this is a concept of recommendation. Our likely is that the customer will recommend Safilo as a business partner. So how much customer will recommend us as a business partner. Results for 2022 combining North America and EMEA, we reached a score of 66.6%. What is nice to see is that EMEA itself has been able to reach 81%. And this is 1 of the achievement that in EMEA we have been able to reach. Thanks to the digital transformation and being able to offer new services, new relationship to our customers. Second, KPI, important as well, Overall Satisfaction, how satisfied our customers with Safilo overall with a scale from 1 to 5, we reach 4.4 and EMEA leading 4.5 with a higher score than North America. Those are 1 of the reasons that are telling us that so far, what we have done, yes, it's going in the right direction. And the best practice that we will have been able to roll out and embed also in North America, will also help us to increase overall our results. I now leave to Gerd for sustainability.

Thank you, Marcella. So I will take on sustainability, and then I will close with our financial goals for 2027. So let me say that on sustainability, in the last 6 years, we have been reporting our annual sustainability report and I think we have used those years to deeply understand which are the ESG drivers of our business model of our processes, of our choices, and we are now ready to announce our goals and our commitments for the medium term around the pillars, people, product, planet and partners. Starting, of course, from the purpose of Safilo, which is to help people to see the world at its best. We make sunglasses that help people protect themselves from sunrays. We make optical frames that help overcome myopia, presbyopia. We make sport products, which help people protect themselves from accidents. So it is very much, I think, in the DNA of a company like Safilo to play seriously on the sustainability area. Looking at planet to start with. So in 2022, we decided to join The Fashion Pact. The Fashion Pact is a coalition of leading players in the textile and apparel industries and they are aligning themselves around a common set of goals that we're going to follow. We've invested in those years in energy transition, energy reduction, renewables, photovoltaic investments, et cetera. And you will see in our sustainability report 2022, we've reduced our CO2 footprint by 57% compared to 2019. Now we want to take it a step further. We will validate our goals with the science-based target initiatives, but we aim to reduce our own i.e., Scope 1 and Scope 2 emissions by 70% by 2030, and we are now tackling also the Scope 3 emissions of the group which we expect to reduce by 20% by 2030, which is in line with what the science-based target initiative expects. We will have 100% of our energy needs covered by renewable energy and we will be eliminating all unnecessary plastics over the course of the next years and replacing everything that we do need with more than 50% recycled content from 2025 for B2C businesses, by 2030 on B2B businesses. Moving to product. We aim for more than 25% of our new collections to be made from sustainable, i.e., recycled or bio-based materials. On some brands, the percentage will be much higher than that because many of our licensors are obviously also making strong commitments in the sustainability area. We believe that we have, with new collections, an important lever because they are so frequent in our industry, and they account for such a big part of our sales every year that if we target new collections, it will be the best way to reduce the environmental footprint of our product going forward. We did an extensive life cycle assessment in 2022. We understand exactly which kind of product combinations, material combinations in our product have what kind of CO2 impact, and we can then also design new collections in an always more efficient way. When it comes to people, our current performance and everything that we have been doing will be evidenced or is evidenced in our sustainability report. We are going to prioritize employee engagement as 1 big focus area and every year we will be defining the right areas on which we want to focus worldwide. And secondly, we will continue to create a positive societal impact like we have done partnering with Special Olympics, with Save the Children with [indiscernible] and we will find other partners that are relevant to help us advance this pillar. Last but not least, we want to be a responsible partner. Marcella has talked about customers and Net Promoter Score, which is a KPI that we will monitor every single year. We have licensors that represent many of the brands that you've seen before. As I said, many of them have made strong and public commitments. We believe that with this journey, we can not only continue to deserve the trust of our licensors, but to give them yet another set of reasons to choose Safilo when it comes to entrusting their brand in this industry. Last but not least, we need to orchestrate for success. So this needs to be -- this needs to happen. These are strong commitments that we want to make happen. We have a robust governance in place. We will put in place systems, processes to track trace and report on our progress. And last but not least, in our incentive for key management sustainability goals will play a role so that we ensure we are moving into this direction. I will close with our financial KPIs that we aim for. So what we want to achieve by 2027 is a level of net sales of approximately EUR 1.3 billion, which represents more or less the 4% compound annual growth rate over the period with a focus on our home brands. We expect them to grow mid- to high-single digits, so grow faster than the rest of the business. We have made M&A a key element of our strategy. We would like M&A to contribute 1 point of the CAGR over the plan period, and we have the means, obviously, to do that going forward. And we want to focus especially on those new channels where we want to accelerate as Angelo was saying, the online business, the B2B e-commerce and the sport business so that by 2027, we have also a balanced portfolio in terms of channels. We are not overly dependent on the traditional channel that we will continue, obviously, to focus on, but that we have a broad set of channels and a balanced Safilo also for the long term. We don't see here, but by geography, we aim to grow all 3 macro regions in the plan. Clearly, North America will benefit from some of the portfolio dynamics, Blenders growing, Smith growing, but we also aim to grow Europe and we aim to bring our emerging markets to more or less 20% portfolio share. We don't expect that the growth will necessarily be linear. So this is a CAGR. This is not necessarily the growth rate in every single year. We know that 2023 has his own peculiar context. We have a very uncertain and volatile external environment, but we are very confident in being able to get to the EUR 1.3 billion at the end of the plan period. When it comes to EBITDA marginality, we aim for 12% to 13% by the end of the plan period. The main driver for us is gross margin. We expect gross margin to improve by 200 to 300 basis points. We are at 55.5% at the end of 2022. This will bring us into the high 50s. We used to be there in a bit more distant past of Safilo. This is where our competitors, larger and smaller are playing. And we believe that we have the right reasons to get there. We have a portfolio mix that is beneficial. For example, a brand like Blenders that is growing, will help. We have a pace of innovation, which I said before, more or less half of our net sales every year are renewed with new collections. We craft our new collections not only to fit the brand, not only to use maybe more sustainable materials, but they are also financially crafted to build the gross margin year-over-year. And we will continue to optimize cost. We will optimize our procurement. We will optimize our obsolescence and we will optimize the factories that we have, especially in China and in the United States. We are investing in marketing. Clearly, our own brands are meant to grow faster. So the marketing investment will increase by approximately 100 basis points of net sales over the plan period. So this is a negative in terms of structural economics, but it is an investment to accelerate the growth of our own brands. And last but not least, we have the operational leverage, which we expect to contribute about 100 to 150 basis points as we grow sales, and we keep our overhead base under strict control. Last but not least, Marcella was talking about digital investments and why we fundamentally believe that this is important for Safilo. We see 2023 and 2024 as years in which investments will increase and will peak 2025 through 2027, investments will then ramp down, and we will be using and benefiting from those new capabilities that we are developing. Last but not least, we have cash flow. So as you know, we have returned the company firmly to sales growth. We've improved operating margins. We have been able to post also a positive net income for the past 2 years. Now we want to be sure that over the plan period, also free cash flow will be positive going forward. Obviously, sales growth and margin expansion will continue to improve our free flows from operations. We expect a more moderate working capital absorption going forward as also our business environment has been normalizing, and we expect quite a moderate level of CapEx investments between EUR 15 million to EUR 20 million maximum per year over the plan period because you also know that we have less industrial footprint, and we have many of the investments moving into OpEx for the reasons of the cloud behind. Last but not least, we will engage in M&A activities over the plan period. And this will have, on the 1 side, a cash outflow, but it will add new revenue sources, new synergy sources and new capabilities to Safilo. With this, we end the presentation. Thank you very much for your attention, and we can open to any Q&As you may have.

Domenico Ghilotti from Equita. I will start from the top line targets. So you are targeting 4%, including 1% M&A, so 3%. There is probably some price/mix contribution or not. So price and volume doesn't sound really aggressive, say, really challenging. And on the profitability, just a clarification. So on the profitability improvement, you said the 200 bps from gross margin, that's the idea and 100 bps or 150 from operating leverage and negative marketing of 100.

That's correct. And the gross margin is between 200 and 300. So 200 to 300 gross margin, 100 on marketing negative a 100 to 150 from operational leverage. So these are the building blocks. I mean with regards to the top line, let me say that we have tried to build a plan, which is pragmatic, a plan that is reasonable, a plan that has also, let me say, a degree of appropriate prudence. As I said before, a 4% is over the 5-year period. I think that at the moment, we see a little bit more challenged macroeconomic and geopolitical environment, then I think from the future years onwards, we will see a faster growth rate. So this is how we have built, we have built our plan.

But do you see price/mix contributing?

We see price/mix contributing. On the 1 side, we see it from the portfolio mix, on the other side from the innovation that we do, which gives us an opportunity not to price, but to establish new collections and new products at a new price point that basically adds to the gross margin. And as we have done over every of the last 7, 8 years, even more, every year, we very targetedly and purposefully, we take pricing as there is also inflation in the markets and on the cost. So both volume will grow and price/mix will add on top.

Maybe just to conclude my question. On the marketing side, the message was it will be more front loaded, so the investments, so...

On the digital side, it will be more front loaded. So when we come to the cost for example, of the Software-as-a-Service because most of those investments that Marcella showed are cloud-based, that will be front loaded into '23 and '24. The marketing investments they will go across the whole plan period as we grow the own brands.

Okay. And the last question was on the current environment because you signed it with a pinch of prudency in looking at 2023, last time we spoke, it was -- so you were commenting some volatility in the market. So if you -- now it's in March?

Yes. I mean to be honest, March is just beginning. So it's difficult that to judge March after, I don't know, today is what is the tenth. Also in Jan and Feb, there was more months. So to be honest, this Market Day is not right in the day in the sense that we don't have March in our hands. I think that today, honestly, we see Europe continuing on the trend of last year. China still, we see a few signs, but honestly, we have not seen yet the famous rebound, which should come maybe more in quarter 2, quarter 3. Honestly, in quarter 1, we don't see that yet. And North America, I think that we don't see yet sort of North America start growing again. So in this moment, to be honest, we are -- I mean, we are positive. I think we are absolutely positive on the full year to 2023, I think we need to have a little bit more time to really understand. I mean all the pressure, I mean all what you read what's going on in China. China, it's not really yet where we were expecting to be. The war in Russia is there, you read more than me. So to be honest, we try to be on the 2023 absolutely posing on what we are doing, but cautious because still, I think, at least in my view, there are quite a lot of clouds there. Obviously, we will be more clear once we have the full quarter 1 and some numbers, some months of quarter 2. Honestly, today, having only Jan and Feb is a little bit too early to really have a strong stand on the 2023. On the overall plan, it's challenging on a challenge. I mean, I don't know. I think that we are absolutely okay with the number that we are showing. As I said, as Gerd, we're saying, the point is really the 2023 because we don't think that it's going to be a linear trend there. With some more months in our pocket, we can be more clear. I think it's a good plan. It's a solid plan if the situation will get better. I mean, obviously, we are ready to absolutely catch it. But the important point to be honest, that now, we will work hard on gross margin or using all the operating level but investing, as Gerd was saying, we will keep investing mainly on our brands because if we don't invest then we are not serious. And what we have been doing for the last 3 years, we have been investing and the growth is there, and we will keep investing moving forward.

Yes. Marco Baccaglio from Kepler. First question on the plan is basically, it's almost flat on the licenses business. If you do the numbers. So should I assume that there is a bit of pruning of license portfolio, maybe of noncritical brands, which were maybe signed before the plan?

Okay. No, go ahead.

Sorry. Let me say, the plan is -- has the priority to take our home brand above 50%. I will start from there. The plan is to focus on a certain number of license where I think we can grow faster. But I think we need to look to our license portfolio in a more flexible way. So I think, managing a portfolio of licensing means that you need to manage it. So you'll have in and out. I think for me is the obsession is our own brand, our home brand, certain number of strong license that we see we have huge opportunities and then manage the rest of the portfolio in a way that is allowing us to be flexible. I think any license as a role but it does mean that we need to have necessary more license. We need to have the right license in the portfolio. That is the criteria. And the license needs to answer to a consumer need. That is, for me, consumer need or regional and geographical need. We don't need to have a license just to have a press release.

And I think to build on that. So in our 4% CAGR, we have not assumed that new licenses will contribute to that. They will be there to offset any potential exits or potential pruning that may happen over the period.

Okay. Second question is about 2023. So -- and the question is we have probably less inflationary pressure, maybe logistic costs maybe be even lower in absolute terms than last year. You are trying to sell a plant in Longarone. Let's assume that sales are flat organic. Do you think that profitability can improve compared to 2022 or not?

The answer is yes. We believe so. I think on the 1 side, is dynamics that you mentioned before that we already saw in the fourth quarter. So there is an easing of inflationary pressures. Energy costs and transportation costs have come down. The counterbalancing that we've done last year in terms of pricing will full year will annualize in this year. So I think that there is absolutely the ambition of us to continue expanding the gross margin. This will help us also expand the EBITDA margin, while I said before, '23 and then '24 will be also years on investments. So to your hypothesis of a flat net sales scenario, yes, we would aim to continue expanding the operating margin.

And last question is a bit more tricky, and it's about the minority purchase commitment that you have, which was EUR 70 million just a couple of years ago, and now it's EUR 13 million. So the 1 side obviously means that you will not spend this money probably in the next couple of years. On the other end, one could cross read and say, okay, the acquisition were not performing as initially expected. So can you elaborate a bit on that?

Yes. I mean, the 2 acquisitions are a little bit different. Let me be very transparent on that. I think Blenders, I think, it's delivering what the expectations were a little bit with a different bit time schedule because of 2022. As you know, the D2C world has not -- '22 has not been the easy year for the D2C with the privacy with the Facebook. So obviously, the 2022 has been slowing down a little bit what was the curve. So it's more a little bit of moving forward. Pretty very low. I mean, in a transparent way is slightly under the assumption also for some change which has happened. That brand has a role in what we call affordable luxury. The assumption behind that was to use very much that brand in some retail chain. Some of the retail chain is not with us anymore. So obviously, we need to take that into account. And this is why we will focus Privé Revaux more in North America. And obviously, this is changing a little bit which were the assumption on the Privé Revaux. But on Blenders, it's more a time shift because after 3 years of growth, obviously, the 2022 has not been an easy year for the overall D2C work. But to be honest, Privé Revaux is changing related to external choices a little bit the role that was the original role, where on the other side, I think we remain absolutely positive behind Blenders.

Okay. Maybe I read Angelo, Gerd. I read a couple of questions from the webcast. One is from Adam Crocker, Logbook Investments. Just read as it comes. You exceeded the last midterm goal well ahead of schedule, but have had to raise capital along the way. Would there be any circumstances under this new plan where you might need additional capital. And then it relates a bit to the Domenico question before. Also, is it fair to assume a similar conservatism is embedded in this plan that was in the prior midterm plan?

I think I can take the first question. I'll leave the second to Angelo. Obviously, when we started the previous plan, we were in a very different position as a Safilo. We were a different starting point. And when we did the acquisitions, it was necessary for us to finance them through equity. Now we have a new chapter. We ended 2021 with a very low level of leverage with a very good structure profitability with a good plan, I think, to generate cash going forward. So for what we have assumed to be included as M&A in the plan, i.e., the 1 point contribution to the CAGR, I don't believe that the capital increase would be necessary. We have a new debt structure on the company right now with a longer maturity. We have EUR 300 million in total of facilities. We have drawn EUR 150 million of those. So there is EUR 150 million available facilities, and we have a starting leverage of 0.7 which obviously allows together with nearly EUR 80 million of cash that we have on the balance sheet on top allows us to fund acquisitions from within the firepower that we have. So with regards to what is in the plan.

For the last question, I mean, we did, in fact, that we are almost the same people which rolled the first plan. The approach is going to be -- has been exactly the same for this plan.

Okay. And the other question is from Cédric Rossi, Bryan Garnier. Couple of 3 questions, category. Could you provide us with growth road map by category? Do you expect to grow further your prescription frames? Or do you see more growth opportunities for your sport business? Maybe you can...

I think on the -- I start from prescription. I think that now we have a balanced portfolio. So I think we were -- if you remember, we were [indiscernible] prescription, as Gerd was showing today, we are almost balanced. So yes, I think that we will increase slightly the prescription percentage, but to be honest, I feel that now we have quite a balanced portfolio. So the discussion is not going to move more sunglasses prescription. I think we are there. Maybe we will increase a couple of points on the prescription, but it's not a big deal. We believe strongly on the sport. As I said, we have Smith, which I think it's an amazing brand with huge opportunity. We have not been catching. And Smith is going to be catching -- steal opportunity in North America and mainly outside North America. Carrera, as Alberto was explaining, has 3 legs. One is -- 1 out of the 3 is what we call active, which is sport. So I think that Carrera will grow not only on the 2 legs, but also on the sport. And then we have Under Armour in our portfolio where we are still at the beginning, and then we have Blenders. So absolutely, the sport/outdoor is the product category where I'm assuming we will have a higher growth. In terms of category, would you mean categories? What does it mean category?

That was it.

Okay. Fine. Got you.

That was it. And then there is another 1 on sourcing. The COVID endemic showed that players with the big Asian sources where risk due to supply chain disruptions with your Chinese sourcing growing, how do you mitigate that sourcing risk?

I think that -- first of all, I have to say that we went through the storm of the COVID, and we didn't have any disruption on our supply chain. This is very important. But taking the question on the broader perspective, obviously, we are looking to -- scenarios to derisk the pure Chinese supply chain. So it's a topic on the table. We are obviously working with other guys, but obviously, is an area where we are looking carefully how to differentiate or how to derisk the pure supply chain sourcing. And later on, I think by end of 2023, '24, I think that we can come with more concrete solutions out of that.

Okay. Maybe we have partially already covered the last 1 on gross margin enhancement, the drivers of the 200 to 300 basis point gross margin in the plan.

So I think just to recap, 1 is the mix effect of where we aim to grow our portfolio. If we grow online, especially those are much higher gross margin than in the wholesale business. The second driver is, as I said before, there will always be a component of pricing as we go forward. The third lever is innovation. So with a huge intensity of innovation that we have, every new collection that we launch is a new opportunity to position the gross margin at a higher point. And last but not least, cost optimization remains a focus area. So in the procurement, nowadays, most of our cost of goods sold are clearly in the procurement area as well as in the obsolescence, which is always a good thing to reduce in terms of waste.

A few other questions. First, can you clarify the stock option plan? How does it work? When it would be given? And the assessment of the exercise, stock price? And then on Blenders, do you expect a recovery already in 2023 or it will take longer to see a rebound? And last question, just to give you -- on the Longarone negotiation, what can you add on top of the press release, let's say?

Okay. Let's -- I would start with Blenders, let me say like this. I mean I think Blenders, to be honest, as you saw, we saw growth again already in quarter 4. Obviously, March, April are 2 fundamental months. We have -- we see good sign in Jan, Feb, but to be honest, we need to wait until March. By sure, what we see is that Facebook is back. Last year, what we had with the privacy rules, Facebook hasn't been worked at all. So we were forced to reshuffle our investment. So we move a lot on TikTok and other media, where, by the way, TikTok with great, great results, but some digital television, I mean, the level of return was not so high. What we see? We see already starting from October that Facebook is working better, and we see this trend keeping going in Jan and Feb. So I think that 2023, we should see the recovery from Blenders. Also because, as I was saying before, 2023 is the year in which we are going to have this combination between shop REIT mono-brand retail and D2C. So I believe that in 2023, except that strange things happen, we will see already a recovery for Blenders. By the way, we have also launched carrera.com in North America, building on what Marcella was saying, really this digital hub in North America is the hub, which is running all our D2C. So we have smithoptics.com. We have blenders.com, we have Privérevaux.com, and now we have launched carreraworld.com. So that hub is there. So I think overall, we see -- we start seeing a D2C coming back. On the question on Longarone, obviously, I cannot say anything more than what is in the press release. I think I'd just like to be clear that the choice of Longarone is related to overcapacity which has become structured. So fundamentally, for all the shift in the market, for all the shift of our portfolio, the topic is structured overcapacity that we feel we cannot overtake. So we are looking to how is English, transfer? Transfer the asset to potential buyers. There are discussions going on. So I think any update on Longarone will be done at least at the company level in the right moment and in the right table because they are a table with institution, they're table with the union. So you will keep update once decisions are taken in the -- on the proper table. But the decision is we are going to transfer. We are going to transfer the asset that will fall in 2 lines: one, preserved the know-how and try to [indiscernible] as much as possible the employee which work there. And the last 1?

I think that's -- and just to complete the picture in the 2027 goals that we have articulated economically, Longarone is expected to be out of our perimeter and solved by then. The third point is on the stock options. So our previous stock option plan expired in 2022. So we have -- basically, we are going to propose to the Shareholder Meeting a new 3-year stock option plan 2023 through 2025. There will be a maximum of [ EUR 22 million ] options that will be assigned to the beneficiaries over several tranches. As the previous plan, you have a 3-year vesting period, you have a 5-year exercise period, and our remuneration committee has done an extensive benchmarking on the various criteria. We will request a reserve capital increase to support the stock option plan, but not for the full [ EUR 22 million ], but for half of it, and anything else on top of that, that we assign will need to be managed with the share buyback program, which we also intend to go to the Shareholder Meeting with. But as you know, where the share price currently is and considering the magnitude we are talking about, this is a very digestible amount of cash that Safilo then will accordingly manage over the coming years.

There is a follow-up question from Cédric on Smith. If you can give some additional color on our expansion plan in Europe since Europe is often perceived as a complex market by U.S. brands, will the expansion be managed a by Safilo team or -- in Europe or from America?

Yes, I think thanks for the question. As I said, I mean, the Smith has very strong position in North America. The expansion plan of Smith is based on Australia and Europe. These are the 2 geographies where we have decided to expand. Australia is closer to the North America. So I think the question is, is well posed there. For Europe, what we have set, we have set at a team, which sit in Padua which is composed by sales, marketing and trade marketing. And this team will work tight with the American team to adapt where needed the Smith proposition to the European market. The Smith team has been here 2 weeks -- 1 month ago to really do a sort of proper assessment on what Europe needs because I think it's right, Europe, it's different. It's mainly Austria, Germany, Switzerland, France and Italy. So we are -- we have done an extensive work on what is needed to win in Europe. And this is the reason why we set up this team, which is fully in the Safilo head office. And country by country, there's going to be a trade-off between -- everything is going to be run by Safilo or is going to be by Safilo sales team or it's going to be a combination between Safilo and Smith, but the local team, which sits in Padua is going to run Europe exactly to be flexible to what Europe needs. There are some commonalities, but there are some difference from the American. But the European team is going to drive Europe, obviously in alignment with Portland. But the question is very well -- is the right one.

Okay. There is a question also from [indiscernible]. Any plans on smart or audio glasses?

Look, I mean, let's be here, I like to be very clear. We are looking on this area of business. We are looking serious on that. My personal opinion that in this moment, at least in the time frame of this plan is not going to be something which is going to change dramatically the category. We are working on that. We are carefully looking at that. But I think the time horizon is longer than this plan. You will see that we will come out -- I mean, there are specific projects on which we are working. But the -- our angle is a little bit different from some of the proposition which are currently on the market. But I think it will become significant on a longer-time horizon. An area where we have really thing working very, very hard is, I think it may be in 1 of the chart of Alberto and maybe you should test later on is this campaign with the QR code. So we believe more than more -- smart is also connecting in a smart way, advertising with product experience. That is an area where we think is there is more growth, and that is the area where we are investing more.

Okay. Oriana Cardani, Intesa Sanpaolo. I've got a question on M&A. So can you give us some color on time? Potential target? And an idea of the target of financial leverage at the end of the plan including M&A that you included in the revenues projection?

Yes. I'll leave the last one to Gerd. On M&A, obviously, it's -- to be honest, it's already why that we have quite a clear map on what we think are the right targets for Safilo, which are fundamentally in 3 areas: North America as a geography, D2C as a channel, trend the optical as a category, if I like to summarize. So these are the 3 main areas. We are very clear what the potential targets are, but we're also very clear that at least personally, I'm not ready to pay some of the multiple that someone thinks that they deserve. So I mean, do an M&A is fundamental for Safilo. As you've seen, we have put in the numbers here, but there's going to be right business -- right value out of or what you can buy. So we are very clear. But obviously, as in the marriage, you like to take someone to marry, but you need to fund also the lady or the someone else that is decided to come with you. But obviously, it's a big -- we are very clear. Time-wise, M&A, you never know. It's an area where we are very, very, very focused but we need to get reasonable multiple. We are not ready to just to do an M&A to overspend. That's not the approach.

So in terms of size, what we would have assumed by 2027, considering that it contributes about a point to our growth, it's a size in the range of EUR 60 million to EUR 80 million net sales. We would like to acquire obviously, businesses that are already profitable. We have nothing in the short-term pipeline that let me say, tomorrow, we go out with them with an announcement, and we would probably have wanted to include that already today, like we did in 2019. I mean, it is very difficult, let me say, to judge exactly what will be the price. There's a pretty wide range in the market. But let me say that what we have assumed in this plan is something around that level of sales in terms of investment as well, then what exactly we buy and how much exactly we will pay then depends on the individual transaction. The leverage -- I mean, so right now, we are at 0.7. Let me say that again, it depends on the target. I mean a structural leverage for Safilo that we would be comfortable with as a maximum is around 2.5x. If there are compelling synergies, maybe 1 could go higher in the first year. But the leverage has to get down to a reasonable level pretty quickly. So our strategy is not to become a highly leveraged company, buying brands for huge multiples at which some of the recent deals have been transacted on, but we want to keep our leverage quite contained. So what I mentioned is really a maximum. So ideally, we would like to be well below that level structurally. And don't forget that we have the ambition every year to generate a positive free cash flow. So that should help counterbalance some of those effects.

Very last question. On the -- so in the past, working capital has been a drag on cash generation, including 2022. So what has been your assumption on over the plan period?

So 2022, indeed, we had a buildup of working capital, as I was saying before, receivables and inventories have been the key drivers, also payables to a lesser degree because of the mix in the expenses. So going forward, I think -- I mean, we've obviously had a couple of years of very fast growth. We had a quite, let me say, strong normalization of the external environment. So inventory levels, post-COVID, pre-COVID, they have to be replenished and things have moved a bit of different spaces. So I expect that the percentage of net working capital is going to come down in the coming years. Net working capital should be absorbing cash as we are growing, but let me say, under proportionately to the level of sales. On the inventory, Angelo was mentioning our interventions on data analytics and better demand planning processes that we are seeing, and we're seeing the results already now. On the receivables, to be honest with you, I don't expect any fundamental changes to trade terms or to DSOs. And I'm not concerned with what we're seeing. It's just a matter of phasing of invoicing and collection. So bad debt levels are historically low. Customers are paying. So that is just some normalization.

One question for -- from Roberto Casoni, Otus Capital. Back to the expectation of the market growing 3%, stripping out to the M&A of 1%, we are basically in line with the market. So there are no market share gain despite the opportunities for growth that we mentioned. So he is asking to elaborate a bit more on the level of prudence embedded in the top line assumptions.

Yes. I think as I was saying, this 3%, I think it's -- in our assumption is not going to be linear as our 4% as a CAG starts from 2022. In other words, what I'm saying, we don't know exactly what the growth of the market is going to be on the 2023. And then clearly, this change how you read the growth and then how you read the market share. Obviously, our aim is to grow market share. Question is what this 3%, 4%, how is going to be impacted by the 2023? And to be honest, today, we are prudent on the 2023. But the aim is by sure, to gain market share. By the way, in 2022, we know we have the data. We have been gaining market share in Europe. So the aim is always to continue to do that. But the CAG on S2 is strongly influenced by the 2023. And to be honest, this is my perception, it's too early to really judge what's going to be the dynamic of the 2023. We need to have at least quarter 1, at least March, April, to have a little bit better view on how the 2023 is going to look like. And our style is not overshoot. Our style is work, deliver, move on. And if there are opportunities, be reassured, we will not leave opportunities on the market, by sure, not. But it's a little bit too early. We need to -- I know, but we need to have a little bit of patience to see what's happening in this 2023.

And just a follow-up from Roberto. Just an explanation why the stock option plan is set for 2025 and the plan for 2027?

I mean this is most of our stock option plans to have a 3-year validity. So we have chosen that horizon again this time. And then I think in 2025, there will be, again, an opportunity to assess which is the best way to continue remunerating the management, whether that is stock options or whether there is another set of tools because also here, clearly, the market evolves, the benchmark evolves. So to be not too static for too long, which shows again a 3-year horizon.

Maybe the last question from the webcast is by Anthoni Zanier, Amiral Gestion, is asking if in the EUR 15 million, EUR 20 million CapEx guidance, we include the leases CapEx?

No. So this is not the leases. The leases is a separate line in the investment. So this is really capital expenditures, mostly on the molds and tools for the new models, for the new collections that we produce each year. A little bit of industrial CapEx that we have in the remaining factories and then any IT projects, which are not anymore cloud-based, but obviously, the vast majority in the modern world is going on cloud.

Okay. I think we can close here the Q&A session.

So Thanks very much. Thanks for all present here for -- thanks for the people which are connected, and thanks for your question. And yes, thanks. I think it's time for a nice coffee for the 1 which are here and a virtual coffee for the 1 which are connected. Enjoy. Thanks very much. Thanks.