SMCP S.A. (SMCP) Earnings Call Transcript & Summary

Hello, and welcome to the SMCP 2022 Annual Results. My name is Caroline, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand over the call to your host, Amelie Dernis, Head of Investor Relations, to begin today's conference. Thank you.

Thank you. Good morning, everyone. This is Amelie Dernis, in charge of Investor Relations speaking. Thanks for being with us today for the publication of SMCP full year results. I'm here with our CEO, Isabelle Guichot, and our CFO, Patricia Despointes. As usual, we'll go through the presentation, and then we will have the Q&A session. I apologize, we have an issue on our website, so I sent you the presentation by e-mail. Before I hand it over to Isabelle and Patricia, I invite you to go through our usual disclaimer on Page 2. And I think we can start now.

Thank you, Amelie. Good morning, everyone. Thank you all for joining us today to talk about 2022 with first, the key highlights on results and business initiatives. Then, Patricia will detail our performance, and we also take the opportunity of this presentation of our annuals to provide you with a refresh on our guidance for 2023 and for the midterm. Let's move to Page 4 and 5. As we've seen from the press release, we have a strong result for '22, and we are very happy about our performance. It was an unusual year with twists and turns within the business, but we managed to reach our guidance. This is a huge satisfaction for everyone in the company, if you remember all that happened after we announced the guidance 1 year ago with China under COVID restrictions all year long, inflation lasting longer than expected and geopolitical tensions. The solid performance results from the desirability of the brand and the success of the collection, the full price strategy that we successfully delivered, the thorough execution of our investments and a good control of our costs. I'm very proud of the job done by all the teams, and I wanted to thank all of them, the 6,000 employees, for their involvement. A record level of sales at EUR 1.2 billion, up by 13% on an organic basis versus last year, led by like-for-like growth. The full year performance is higher than pre-pandemic level for the first time since COVID crisis. Obviously, the growth is driven by all the markets in Europe, Americas and Asia, excluding China. Excluding China, the group achieved a strong double-digit of 23% versus last year. As mentioned, we successfully delivered the full price strategy. We have continued to reduce the average discount rate in season, minus 4 points versus last year and minus 9 points in 2 years. After the end of the rationalization plan, the network is back to growth in the last quarter with 13 net openings. As you will see later in the presentation, it's all about for reasonable and geographically balanced growth. Moving on to Page 5. As you can see, we managed to deliver strong results and reached the guidance in a very challenging macroeconomic context. The management gross margin improved versus last year to reach 74.4%. Adjusted EBIT represents 9.2% of sales and reaches EUR 111 million, improving by 15% versus 2021. Net profit exceeds EUR 50 million, doubling versus last year. And the group continues to improve the leverage ratio to reach a satisfactory level of 1.9x to EBITDA. On Page 6, let's focus on sales. 2022 is a record year in terms of sales despite the strong constraints in China due to sanitary situation. Actually, each quarter was at a record level. Q4 reaches EUR 332 million of sales, and the second semester is up 7% versus last year. Our brands demonstrated a strong pricing power with another year of meaningful decrease of discount rates across all 4 quarters. The growth rate versus last year may seem less significant in H2 than it was in H1 but it is only explained by a softer basis of comparison in H1 from COVID lockdowns in Europe and Americas in '21, as you can see from the red line on the graph. Finally, versus '19, as you can see, the growth is visible for each quarter. Let's now move on to Page 7. You will find the performance by region, driven by Europe and America with strong double-digit growth. Patricia will get back in more details by region later in the presentation. The split by region shows that the weight of America has reached 15%, just 1.5 percentage point versus last year. No big change in the split by brand as all the brands are growing. Retail part continues to progress and exceeds 90%, in line with our strategy of being a retail pure player. Finally, digital penetration is strong and stabilizes at 21%, slightly decreasing versus '21, but more and more qualitative and strongly managed and controlled in the context of reduction of digital off price. Moving on to Page 8. Let me present a few brand initiatives implemented during Q4. Starting with the first pillar of our strategy, brand desirability with innovative and creative collaborations. Let's start with Sandro, who unveiled its Hot Stuff capsule. The little devil born in the United States is with a mischievous personality seeks to do good around them. This iconic comic book character is working to patches on jackets, sweatshirts, cardigan and even on a cap. Hot Stuff is represented in its original 1960s version, an esthetic that echoes the brand, vintage universe. Maje continues the campaign with Taylor Hill. After the paparazzi campaign of spring-summer collection, now comes to Party Time capsule in the second half of the season. A sharp and trendy selection of evening outfit for sleepless nights, meant to dress women in a femme fatale style with perfect outfits. Let's focus on Claudie Pierlot with 2 highlights. The fifth anniversary of the iconic Anouck bag. Claudie Pierlot pays tribute to the line of iconic bag in the stores and through its communication. Charming, elegant, recognizable, this bag has been carried out by thousands of women since its launch. To mark the presentation of the spring-summer '23 collection, Claudie Pierlot, for the first time, invited friends of the brand, to A l'Épi d'Or, an iconic Parisian brasserie, 100% Parisian establishment, while we welcome journalists, influencers and other opinion leaders in a warm and authentic setting for the day. The concept was called Café Claudie that we rolled out later in a public space in Galeries Lafayette Haussmann in November and then to our new store, Rue Pierre Charron. Finally, Fursac with a look back at the launch of the capsule collection designed by painter De Rrusie in the Parisian [indiscernible] of Fursac Rue de Richelieu. This 12-piece collection is the very first experiment in fashion and includes a black wool suit, printed T-shirts or shirts in shape that remind the artist's creative universe. Our collaboration with key opinion leaders is helping us emphasize the brand's desirability and visibility over the world. There are few examples of elite celebrity wearing our brands, Paris Hilton, Jean Dujardin and even Queen Letizia of Spain. Moving on to Page 11. You will see a selection of our key achievements in terms of sustainability. I would say that 2022 was really a step-up in terms of sustainability for the whole group. In Q4, we launched SMCP Retail Lab, a certification school for the sales advisors of tomorrow. It's offering an innovative and certifying omnichannel training course, and that will take place over a year in the form of a work-study program offered within our 4 brands. The program has been designed around a tripartite organization with SMCP, ESM, the famous Institut Français de la Mode and EMA SUP, a renowned training school. The first event started in school just a few days ago. We are very proud of this initiative, first, because it addresses the topic of hiring and retaining talent in retail, which is a key issue for our industry and also because our first group of students is an amazing mix of different profiles and personalities, with all having one common point, a desire to learn and motivate and passion, which is fashion. We continue our initiatives in circular economy, a key to create a more responsible fashion together. Maje launched its secondhand services and extended its rental in the U.S. Sandro launched its rental services and extended its secondhand that was initially launched in France, now in Germany and in the U.S. So we're really moving on in that direction. Third point in this slide. We're proud that SMCP obtained a B score on the Carbon Disclosure Project questionnaire. With this rating, the group was recognized for its transparency and performance on climate change. These results encourage us to continue and double down on our efforts to reduce the carbon footprint of our activities. Traceability, I think we really pioneered in that segment. We accelerated the implementation of the project with fairly made by increasing the number of SKUs to reach 250 SKU per brand that are fully traceable in spring-summer '23. You can scan the QR code on this page to see the information available for the clients on the wonderful Maje dress. Key openings, moving on to Page 12, about brand network. This quarter has been the opening of very nice flagship for Sandro with Passy. It's part of that strategy to fusion previously a woman and men store in one and unique flagship, and that's at the corner in 70 rue de Passy. In the meantime, the group continues further selective development in Europe. Fursac opened the corner in Madrid in the last quarter adding Spain to the portfolio of new countries for the brand. We also have a new partner in Malta and in Czech Republic for Sandro and Maje. Not to forget about China. China network continues -- continued its selective expansion to future growth, seize market opportunities and adapt to a new Chinese reality. Here, you can see some openings in Chengdu and Wuhan for Sandro and Maje. To continue with key highlights, we have just integrated, as of January 1, our Australian and New Zealand partners to our network of direct retail. Formerly, those 2 countries were operated in the wholesale mode with a local partner. This market is around 40 points of sales. It's an opportunity for the group to consolidate its presence in area and capitalize on the rebound of Asia and Asian tourism at large. I will now hand it over to Patricia to present our '22 figures in more detail.

Thank you, Isabelle. Good morning, everyone. So moving on to Slide 16. Let's go in a bit more detail on our sales performance by region, starting by France and the EMEA that we can commence altogether with quite consistent trends. It was an excellent year for all our brands in this region, resulting in a full year at plus 23% in France and plus 31% in EMEA and exceeding 2019 levels. Q4 was very strong with France at plus 9% and EMEA at 16% despite high basis of comparison. Growth is mainly driven by like-for-like and notably in brick-and-mortar in Paris with the locals and the tourists and in all our big European markets. This is also supported by a strong control of discount rate with more than 5 points gained in France in '22 and 3 points in EMEA. Digital is in line with '21 in France with more qualitative sales due to fewer discounted operations and growing in EMEA. Finally, as already mentioned, store count is back to growth now with the Q4 at plus 13 POS in the total of those 2 regions. On Page 17, a contrasted situation in APAC and in America. Asia Pacific was a combination of 2 very different situations with, on the one hand, China is still under a lot of constraints in Q4 and we are no different from the market. And on the other hand, other countries, which performed very well, for example, in Korea, a big country for us, or in Singapore. In China, the situation in Q4 looked like a mix of Q2 and Q3, as you can see on the graph on the right. Q4 started as Q3 had looked like, your network nearly all open, but still hit by very low traffic. And after the lifting of sanitary constraints, continued with a trend more comparable to that of Q2 with a big part of the network closed due to high number of cases and very little traffic in the rest of the network. The beginning of this year shows an encouraging improvement in the traffic, and we are confident that the situation will normalize. This is also why we continue to invest in this country to seize the opportunities of recovery. In America, the whole year was very successful, and it's quite explanatory in the graph on the right, where you can see a regular growth of the turnover quarter after quarter. America is now over 15% of the sales of the group. It's gaining 1.5 points in the mix. Both brick-and-mortar and digital performed very well. The reduction of discount rate is quite massive, 5 points gain in '22 after the year '21, which was already quite impressive in this respect. Now on Page 18, let's focus on the P&L performance. One general remark I would do about the P&L comment, you will see several times that 2021 P&L figures have been restated. This is due to a change of accounting method under IAS 38 linked to the accounting of SaaS projects, which means the IT projects on the cloud now accounted for in OpEx, whereas it was CapEx before. We have started applying this method in 2022, and we have restated 2021 for a better comparability. The difference in bottom line is not material, but it can change a bit to view line by line. I close this accounting parenthesis and go back to business comments. Gross margin ratio was quite homogeneous between H1 and H2, back to a level which we consider quite normative. We finished the year at 74.4%, improving versus '21. As always, the variance of this ratio is the result of several pluses and minuses, but in a nutshell, the price increases that were passed were well accepted and enabled us to offset the increase of the cost of goods sold, which can also underline that the continued decrease of discount rates in Europe and America supported the trend and enabled to mitigate the adverse impact in China. Let's go to OpEx now on Page 19. The total weight of store costs and SG&A increased by 0.8 points with many pluses and minuses. The main 2 minus being the impact of inflation on wages and rents and an underabsorption of stores OpEx in China. But SG&A were globally better absorbed, as you can see on the bottom, which partly compensates. You can also see from the arrow, an analytical reclassification of traffic marketing, SEM, SEO, retargeting, from SG&A to store costs, pure reclassifications. In the Slide 20, we analyze the evolution of profitability in terms of EBIT margin to show you that the underlying business has gained 0.8 points of profitability coming mostly from gross margin and amplified by better absorption of D&A, and that the impact offsetting this on the right is only linked to IFRS 16, i.e., technical accounting impact, which is less favorable in 2022 than it was in 2021. On the right, you can also see the H1, H2 operating margin at 8% in H1 and a bit more than 10% in H2. I will go very quickly through the Page 21, which is the evolution of net profit between '21 and '22. We have already talked about adjusted EBIT. Below that, nonrecurring is much lower in 2022. Financial results is also improving by EUR 3 million from a lower average debt, resulting in more controlled interest expenses. Income tax expenses logically increase, and the result is a net profit exceeding EUR 50 million. On Page 22, on balance sheet and cash lines, starting with working capital. The absolute value of working cap is increasing to EUR 178 million, coming mostly from inventories. This increase of inventories comes from several factors, a context of current and expected growth, some inflation also and the restocking in China given the sanitary situation in 2022. That being said, the quality of the inventory is good, composed of recent merchandise aimed at fostering growth. And in percentage of the activity, the weight of working cap increases a bit versus '21, which was particularly tight but remains completely consistent with historical levels. CapEx was stable versus the previous years, and that's a better absorb. And free cash flow and the generation of EUR 34 million, mostly concentrated in the second half of the year within H2 at EUR 29 million free cash flow generated, which leads us to resulting in a decrease of net financial debt on Page 23, lending below EUR 300 million and leading to a very strong leverage ratio of 1.9x. We have repaid in 2022 circa EUR 70 million of debt without needing to draw on the revolving credit facility, which means that we continue to benefit from a very healthy liquidity headroom. I will now hand over to Isabelle.

Thank you, Patricia. Let's move on now to the 2023 outlook. Our strong 2022 enables us to be confident for '23. For full year '23, SMCP anticipates a mid- to high single-digit sales growth versus '22 at constant exchange rates from both like-for-like and network expansion. This will be a bit different from what we experienced in the past few years, where the growth was nearly only driven by like-for-like. '23, we'll be back to mix of both effects with our existing network expected to continue to perform, but also positive impact of openings as we have projects in the past. Regarding profitability, the group expects an adjusted EBIT margin as a percentage of sales and progress in '23. The visibility of inflation continues to be quite limited, so we won't be more precise at that stage. But we'll try to be a bit more granular as the quarters go by. Now as mentioned in the introduction by Amelie, on top of the perspective for '23, we would like also to take some time to talk about the midterm. It's been quite a while now since we did that. If you remember, it was in 2020 and so many things that happened in the market in the meantime. Actually, our strategic priorities have not really changed. We have just rephrased them, precised them a little bit. As you can see then on the Slide 27. The first one is the singularity and complementarity of our brand to foster desirability. The second one is to create a sustainable wardrobe. It was already in our pillars explained in '22 but now it's a top 2. The third and fourth pillar are to develop new touch-points for our clients and reinforce infrastructure's capability. Let's move to pillar #1. Pillar #1 is a singularity and complementarity of our brands. I will not explain the DNA of each brand. You know them and they haven't changed. They just may be now a bit more precise. I ensure on a daily basis in all the actions that we take being in terms of product, retail or communication that each brand totally expresses the specificity of its history and particularity. Moving on to Page 29. Some examples of campaigns that illustrate the creative universe of each powerful brand, and you can see that they really express a different type of women on that. Second pillar, and I will be a little bit more vocal about it. As you know, our ambition around sustainability is structured around these 3 pillars: product, planet and people. We always presented our ambition in the past in this respect. On this slide, you will see our updated targets, which are even more ambitious than the previous that we had shared. In the first pillar, product, it's about developing a desirable and responsible offer by increasing up to at least 75% in '27, the share of sustainable material and products in our collections; to continue to accelerate our development in circular economy with the initiative and geographical rollout of the initiative that we launched and extend it to the other brands; ensure the full traceability of our collection by reaching 100% of SKU fully traceable with a QR code by 2025. This full traceability is something that goes way beyond the legal requirements of the [indiscernible] for instance. Second pillar is to preserve our planet and its natural resources by reducing by 20% our environmental footprint by -- in '27 compared to '18. And we talked about a reduction in absolute value and not in intensity. It's a bold move for our group, which grows quite fast. Rethink logistic flows to use less transportation and develop more responsible store concept based on 7 criteria. That I won't detail today, but that we could forward to you. The last one is people. To develop passionate entrepreneurs, many initiatives could be mentioned, among which, I would like to underline once again the SMCP Retail Lab. And the topic of diversity and inclusiveness. On that topic, we are currently building a worldwide strategy with the output of the survey that -- internal survey that was just conducted. More generally, about corporate and social responsibility, still such an important pillar that we are considering the creation of a dedicated committee within the Board of Directors. Moving on to the next slide. The client-touch points evolve and widen our horizon. The lines between brick-and-mortar and digital are becoming more and more blurred with new omnichannel services developed. Client experience can start on the website and in a store with a click and collect or e-reservation or start in a store with the store-to-web and ship from store services. Addressing customer needs becomes a puzzle of situations with more and more pieces each year. In parallel, we announced the experience in store with a tailored approach by region; be more centric on retail excellence, customer experience with client selling, social platform, live streaming and travel retails to create an ecosystem around our brands. Reinforce infrastructure capability to support the business needs, that's our fourth pillar. Restructural projects such as the new ERP retail that we're implementing as I speak with the first 2 pilots that have successfully been implemented in France this week, and that will enable us more functionality than store and more omnicanality. We also work on the future core ERP that will interconnect more and more flows and stages of the life of the product and some projects that can appear quite technical but which are crucial to an efficient supply chain such as the wireless management system, for instance. And also, obviously, infrastructure, including RFID projects, new clienteling tool, which are essential from the effectiveness of our business and our agility. In the meantime, we also don't forget to reinforce our infrastructure in terms of quality and cybersecurity. Let's move on now to an update of mid-term and key financial ambitions. So when it comes to figures, what can we anticipate in the coming years? In terms of sales, moving on to Page 34, I told you a few slides ago that for '23, we anticipate a mid- to high single-digit growth in '23. This is actually the yearly target that we set until '26, followed by a mid-single-digit growth afterwards. In terms of drivers, we will come from a mix of like-for-like and extension and will support it by a growth for all our brands, slightly higher, obviously, for the smaller brands with a lower comparable than basic like Claudie Pierlot and Fursac. We'll also continue to grow the share of sales outside Europe with both Asia and America growing in the mix and grow also the share of men and accessories. As we mentioned before, on the next slide, after a phase of rationalization of this network, we now reenter phase of network development. Reasonable, selective, of course, which could lead, let's say, to about 60 net openings in average per year, meaning 5,000 additional selling surface -- square meter of surface each year. I'm talking about selling surface because many people regularly ask me how many stores is the good target. I think it is no longer the KPI. Total selling surface is more important for me than number of stores. On the right is an example of this for Maje in Paris where we used to have 2 stores quite close from -- one from each other in same district and very small, and not operationally efficient. We've closed both. We opened another one, more visible, bigger, where we can display the entire collection, provide all the omnichannel services and provide a much better customer-centric service. We can also organize events, pop-up store, for instance. And we have used the store as a pop-up for the launch of the Maje Rental Services. This is a typical example on why square meter can matter more than the number of POS. Geographies now on Page 36. I won't go through all the comments that you can see on the slide, but my main messages will be the following. In Europe, we'll continue to leverage the post-COVID context with strong local customers and a progressive return of tourism to focus on stock productivity. We will, of course, continue to optimize the quality of our network through relocation, also ensuring that we have flagships in all key fashion cities. We will capitalize on some areas with very strong momentum. You can see, for example, the new Sandro store recently opened at Dubai Mall, which is in the top ranks of our network. In Asia Pacific, many markets will continue to be developed. China, of course, is #1, focus on new channel, including travel retail, which is developing very well in China. You can see the example of Hainan at the bottom of this slide. But other markets also are strong and promising. Korea is a big market for us. Singapore, Malaysia are booming, Australia is now internalized, and we're going to invest in that side of the world, down under. And there are still some markets where we are not distributed, that could be addressed going forward, either directly or through cross-border online activities. Finally, America -- namely Japan, for instance. Finally, Americas, this is a market that has significantly rationalized during COVID, not only by closing some stores, but also by renegotiating some rents. There is clearly room to grow for our brands in some states where we don't have store for the moment. You can see the example of Arizona, for instance. We will open Sandro and Maje in '23. A lot of white space in America with Claudie Pierlot and Fursac not yet in the market and also in Latin America, where we could launch some partnership. I will hand it over to Patricia on the figures.

Thank you. This was for top line. Profitability-wise, we intend to increase our EBIT margin, gaining on all 3 main lines, with gross margin targeted to be above 75%, thanks to our pricing power and our continuous efforts to optimize inventories. Store costs from an expected continuous improvement of sales per square meter and finally, SG&A. In this respect, we will continue our investments in 2 lines, marketing and innovation, but other SG&A will increase at a slower pace and should be better absorbed. All in all, we expect to be at least 12% of the EBIT margin by 2026 and gain circa 0.5 points per year afterwards. On Page 38, a few words about how we will use the cash generated. In terms of CapEx, we will continue to dedicate 4% to 5% of sales to CapEx. In the network, it will serve a more balanced development with more CapEx allocated to America and inside Asia, a better balance between all the markets. On Page 39, after taking into account operational investments, so what will be the financial policy? We still have more than 1 year before the maturity of our term loan. So we have time, but we will work on the refinancing of our debt before that date. In terms of leverage ratio being at below 2x at year-end 2022, we consider that we are already at a very strong level. So we won't guide on the level in the midterm. We will just aim at maintaining a sound financial structure. Depending on the context and the opportunities, we could use our free cash flow in the future, either to do a bit of M&A focusing on segments that could add strategic value to our growth in terms of diversification of products or channels and/or to start shareholder returns.

Thank you, Patricia. Let's move on to the conclusion. In conclusion, we strongly believe that our performance, combined with our strategy, puts us in a perfect position to seize the opportunities and continue to deliver profitable growth. In terms of brand portfolio, with the demonstrated success that has transformed SMCP into a unique actor, I would say even a platform of accessible luxury. In terms of distribution, with a more and more balanced network that enables us to capture growth in good days and navigate crisis when they happen with agility. In terms of CSR, with powerful initiatives already in place and strong ambitions for the future to accelerate. In terms of structure, with a unique platform that drives efficiency. And finally, in terms of financial performance marked by a best-in-class gross margin and the disciplined expense management leading to a structurally cash-generating business model. Amelie, thank you.

Thank you, Isabelle. I think we can take the questions now.

[Operator Instructions] We'll take the first question from the line of David Da Maia from CIC.

Three questions from me, please. The first one on China and the second one on free cash flow and the third one on shareholding. So the first one on China, you see performance last year turned out to be better than this year.

It's very difficult to hear. I'm sorry. We almost can't hear you. It's very scattered.

Can you hear me now better?

No.

No.

Now it's better?

It's even worse.

Okay. Sorry, so can I start my question or? Is it okay?

It's little better now.

It's a little better.

So first question on China. Can you share a more precise figure on the performance in Q4 and give us an update on the current situation in this key market? Are you already -- regarding the significant [ withdrawal ] in sales in the beginning of the year? That's the first question. The second question on free cash flow. So this has been quite low last year due to the sharp increase in inventories.

We really can't hear you. It's really -- maybe we heard the first question on China and we can first answer on China. We are in line with the trends described by our peers with a decrease between 20% and 30% versus 21% in Greater China in Q4. What do we see now is the current trending. I think it's a question that everybody will ask. So I'd rather answer it right away. We've seen improvement in January versus December '22. It's a gradual improvement in the first month of '23, still complicated in January with a lot of cases and also traffic a bit low. The traffic is improving in February, and we expect to consolidate -- gradual consolidation of the situation in Q2.

I suggest we take the next question, and we'll get back to you, David, if possible, after the line is a bit better.

We will take the next question from the line of Kathryn Parker from Jefferies.

Just checking, can you hear me okay?

Yes, we can hear you.

Okay, good. So my first question is on the store network. So I wondered if the 60 directly operated store openings also applies to 2023? And I also wanted to check how many stores the Australia internalization applies to and whether this would be included within the 60? And how many remaining foundry stores you plan to convert to the dual-gender format? Then my second question is on the guidance for EBIT margin. So obviously, you're looking for the progression to the 12% EBIT margin. But do you think this will be kind of front loaded in 2023 as you have the return of the China business and support that? And then my final question is on the gross margin and getting back to the 75%. And I wondered what the main drivers of this are? Is it prices going up? Or do you think you can make further progress on your discount rate?

I will answer the first question about the store network. When we talk about 60 stores, it's DOS and POS. So it also includes the new territories in which we are going to open stores. We are working on the project of '23. I don't know if it will be 60 but anyway, it will be immaterial in terms of number of openings between directly-operated stores and the stores operated with partners. Australia was already counted in our number of point of sales in general, but now they will just move to DOS. But at the same time, don't forget also that we have closed our stores in Russia at the end of February. So we will lose also that stores in that part. So that has an impact also on our number of stores. But as I mentioned in my speech, I would say that more and more we look at the number of square meter, which is for us to do, and interesting metrics about it. And then on your question of, what is the number of Sandro store that we still need to convert to unisex, decide to get back to you with a precise number, but we've done already, I would say, a good part of the job.

Thank you, Isabelle. Kathryn, in your question about guidance for 2023, I think it has already been answered by Isabelle saying that we aim at improving the EBIT margin. To be honest with you, it's a bit early to say by how much. Of course, the logic is to have a consistent and harmonious growth that leads us year-after-year to this 12% that we aim at achieving by 2026. In terms of gross margin, we target at or above 75%. We are already at half-way point from this target, which is not that far. You mentioned price and discount. So yes, those will be the drivers a bit equally. In terms of discount, we are already at a very satisfactory level, but we know we can gain a little bit on some markets in the U.S. or in Asia, which has been quite constrained in 2022 and also in digital, which continues to improve in terms of gross margin.

We will take the next question from the line of Gilles Crespel from Alizes.

I have, if you allow me, 2 questions. One is on Asia. I hope you can hear me fine?