Good evening. Call operator speaking. Welcome to the presentation of 9 months 2018 results of the Brunello Cucinelli Group. I'd like to remind you that all participants are in listen-only mode. Following the presentation, there will be the opportunity to ask questions by the financial markets. The speakers will be Mr. Cucinelli, CEO and President, Moreno Ciarapica, CFO, and Pietro Arnaboldi, Head of Investor Relations. In order to receive help from an operator during the conference call, press star followed by zero. Now I'd like to leave the floor to Mr. Cucinelli. The floor is yours.
Good evening, ladies and gentlemen. Although this time, theoretically speaking, I will be the only speaker, although we are all here, the 8 of us in this room. As usual, I would like to thank you all, analysts, investors, journalists, and I hope that you're all fine.
For us, it is always a great pleasure to disclose results. Maybe it's not the same for you because you might be listening to 5 or 10 calls a day. You see, for us, it is somehow a way to communicate with you, to convey to you our thoughts about our company, the world, the time we're living in. I have to say that this conference call is very important for us because somehow it marks the end of the current year, and we can also give you some visibility about the next couple of years. Therefore, we would like to structure it as follows. First of all, I will give you the main financial highlights. I'd like to say something and spend a few words on 2018 because it is really ending, nearly.
I'd like to spend some more time on 2019 and 2020. A couple of words on the very important press event that we organized last September with 500 journalists. I'd like to really talk to you about the great experience at Silicon Valley last September, and then devote some time to product and markets. I'd now read out my comment. Net revenues, EUR 422.1 million, plus 8.2% at current exchange rates, plus 10.9% at constant exchange rates, vis-à-vis EUR 389.9 million in September 30th, 2017. Revenues are on the growth, on the rise in all markets, Italy plus 5.5%, Europe plus 9.7%, excluding Italy, North America plus 3.3%. Of course, at constant exchange rates, there is a high single-digit increase. Greater China, 29.2%, and rest of the world, 9.5%. All the distribution channels marked a rise. Retail, plus 6.8%, monobrand wholesale, 11.4%, and multibrand wholesale, 9.5%.
This is my comment to results. 2018 is drawing to a close, and to our immense pleasure, further growth was confirmed in terms of both double-digit revenues and profitability, but also and above all, in terms of brand positioning and credibility. We like this, especially. The truly very positive performance of our winter collections and the appreciation displayed for the next summer ones, also in terms of order collection, lead us to envisage further double-digit increase in 2019. I have just come back from several trips around the world, and we are now back with renewed great confidence in our country. Abroad, there is still strong admiration for our culture, our handcrafted products, and our ability to find the best and beautiful side in all things. Maintaining the quality of products that the world expects from us will be increasingly important.
This will be the future for our company, preserving the harmony of places and people we are renowned for, maintaining the creativity, craftsmanship, and exclusivity acknowledged to us by experts and customers, designing fresh, modern, and contemporary collections of very high standing, representing the true essence of luxury. Let's now move to 2018. 2018, we can call it a nearly ended year, and we can call it a record year. Double-digit revenues, EBITDA, more than proportional, and the same also goes for the net income. I would rather like to focus on the contemporary taste of the brand and specifically the menswear collection. You see, menswear collections, they need to be fresh and modern all the time.
As to 2019 and 2020 as a whole, for 2019, considering the sellout of the winter collection still ongoing and the orders collected that are very, very good menswear and womenswear alike. For next year, we can definitely envisage a healthy, fit, double-digit growth. The feedback from the specialized press during the Milan Fashion Week and also multibrand feedback on collections, while these feedbacks were very, very positive. Knowing that for the next spring, summer, we will be displaying collections that have stirred interest and appreciation in all the different markets, well, this gives us a lot of confidence. Now we have to think of the fall-winter collections, and we are just now designing them as we speak. We are already satisfied with them. Of course, if we are satisfied with them, that's not enough. Customers need to appreciate them.
When we have a unanimous positive judgment from the very beginning, it means that it's all downhill. As to the healthy equity situation, half the revenues and the net financial position are such that we can feel very confident about the future. This gives us the opportunity to keep investing for growth, development of our enterprise. As for the next, the two coming years, we can envisage CapEx that could be between 7%-8% of revenues. You see, I think that there's no doubt about it. Because of the expansion of e-commerce, everything tends to commoditize very quickly. In order to be contemporary in your stores, in your showrooms, well, you need to refurbish them as frequently as possible.
New technologies must be extremely modern because you see, you enter a showroom, you take a picture at the collection, while you're taking a picture at the single item, you're also photographing somehow the showroom. The second season, if the showroom is still the same when you take your photos, I'm not saying that your collection ages, it is definitely less fresh. We have to accept that everything happens quickly, and this means that all changes must be quick. Now, a couple of words on the 4th of September event. Well, I held 129 interviews on the run-up to that date, and I was very exhausted because of that. It's the same as when I took the roadshow, the IPO.
One of the last people I met, the potential investors, she basically told me, "Can you tell me about how your company was set up?" I would've shot myself instead of answering, because it was the nth presentation, the 101 that I had. Anyway, this 4th September event was grand because we invited 500 press from all over the world, and we showed them our places, the places where we live and where we work. We showed them the restoration work in the village and also in the periphery, because, as you know, the outskirts was restructured by the foundation and not by the listed company where you are analysts or investors. Undoubtedly, we are experiencing a time when sustainability is important. Everybody talks about it.
Honestly speaking, we like to call this human sustainability, because the truth is that if human beings are happy at work, at the workplace, their creativity rate goes up. The online world. You see, I went to San Francisco in the Silicon Valley, I had a great week there. I was the first speaker at the Marc Benioff meeting, Salesforce, the Dreamforce meeting. I went to see the Apple Park headquarters, a great factory, I have to say. We had lunch there, and there were 6,000 people there. I was impressed by the fact that all these people, they were not really smiling a lot. They were 27, 28 years of age, more or less. I went to meet Mr. Bezos, Jeff Bezos, who wanted to meet me, and it was a great moment to get acquainted.
We discussed for a couple of hours in serenity, and I was very pleased with that meeting. I also went to see three smaller businesses, but very fascinating ones. Why do I say that? Because while I was going back home, I could say that this unforgettable experience gave us an opportunity to reflect upon the great topics of the e-commerce and how mankind is evolving. We are increasingly all the more convinced that we need to have super sophisticated technologies. This is definitely important, so much so that we do invest a lot in this field. You see what happens is that these technologies tend to become obsolete in six months' time, but you can tell the difference between a contemporary technology and a technology that dates back to a few months before.
As to the digital world, we are pretty satisfied with how things are going for us. Now we have our e-commerce. We've had it for two years, nearly. We are now investigating the opportunity to enter the Chinese market, because we could do that and maybe mid next year, because as you know, the rules and regulations there are slightly different. Now I'd like to talk about the markets more or less. An overview. We spent two months traveling around the markets worldwide, and this is what usually happens in this industry between September and October. We held a great assembly, and we decided to do the following. China has become a domestic market for us, too, although sometimes they do not have really domestic, inverted commas, rules. This makes a difference. I went to China 30 years ago for the first time.
I know this country, I like the fact that my staff travels there with a completely different view on these people, because you should see, you should consider that there's 4 billion human beings living there. We don't even have 14%-15% of revenues there in this market. Therefore, we have a lot of untapped potential for the future. We have the impression that there is a special attraction to some specific products worldwide, and I'm talking about high quality, exclusivity, and craftsmanship products, and also, even more so, if they come from Italy, because at least for our concept, Italy represents true luxury. Of course, everything must be very fascinating, visual merchandising too.
All the salespeople must be very young, contemporary, kind and polite. Especially for menswear, where if you have sales staff that is fascinating, they can talk you around, they can make you feel young. Lately, a lot has been said about China. First of all, we would like to highlight that we have not experienced any slowdown in that market. On the contrary, when you actually come back from these business trips, if you actually see what happens in just a 6 months' time, so many breakthrough changes happen that you are fascinated when you come back. This world, for us, is just a small market for us, but we believe that it is bound to become the market of the future because of size, because of knowledge of the brand.
I've always been keen on the Chinese people because they are very much online all the time, but at the same time, they really are the ancestors of civilization. When Rome was established 700 years before Christ, China could already boast centuries long of sophisticated, refined civilization. Honestly speaking, this could be the century of China, like the 20th century was the century of America and the century before, the century of Europe. It is a very important thing for us. Another thing I wanted to mention today, our revenues is 50% monobrand and 50% multibrand. We would like to keep growing in both channels in the same kind of breakdown. What matters is that in the monobrand, 47% of this 50% is the brick-and-mortar stores, and 3% is online stores. As for the multibrand, breakdown is similar, 47% and 3%.
For example, Net-a-Porter, Mr Porter, Mytheresa, these are really the top names in the multibrand channel. We are convinced that multibrands are on the rise worldwide. I give you an example. In China, we went from about 10 accounts three, four years ago to 35 nowadays in just a few years. I think a staggering growth will be experienced by small multibrand names, small Mr Porters, Net-a-Porters online, but it will be definitely growth there. Monobrand stores can grow both in the physical and the digital world. As of today, we think that globally, there will be a 10% online market. You see, we have 50% of our market that is multibrand. We don't really know what their percentage of online business is. But of our revenues, 10% is online. In the end, we envisage a balanced growth over the years between monobrand and multibrand.
Now lastly, I'd like to mention another important topic, menswear. You see, this is an important issue. We believe that this market might experience a staggering evolution. Of course, I do not mean by that the so-called fashion menswear, that accounts for 15%, but rather, I mean the 85% of menswear, 85% of the market, so-called the contemporary businessman market. This market can be broken down between suits, so suiting, and then sporty chic apparel. Of course, the business side, business suit side, has a very high share. You spend more or less, less when you dress casually rather than formally. In this world, I don't want to offend anybody with this, I think that we need new, fresh brands in the suiting world, fascinating brands. After 30 years of market ruled or dominated by the same brands, maybe the market becomes bored.
You see, when I was young, I was modeling for Ellesse. You might remember, this was a top brand for ski and tennis wear. I was a model there, and I knew darn well all the presentation of collections. 1978, 1979, number one in the world. The label that you would wear on the front, it was a tennis ball, and it was really, everybody wanted it. After 2 years, nobody wanted to buy Ellesse. I remember the owner, Mr. Leonardo Servadio, who said to me, "Brunello, come and take a look at this collection. What's wrong with it?" I said to him, "My dear friend, Leonardo, do you know what's wrong with it? The logo. If you make it a logoless collection, it will be different." It was a great experience for me.
Going back to suits, it seems that among these new suiting brands, we are named among the new brands too, and we are honored by that. This also gives us an idea of the large opportunity in menswear suits. We started with a tailoring, here in Solomeo. We call it Sartoria Solomeo, and it's a made-to-measure tailoring. This started for the top 25 accounts worldwide, and it works this way. There is a young tailor, and many young tailors come directly from the schools that you know about, that we set up. When customers step in, tailors suggest or give recommendations for something made-to-measure with a contemporary taste. It is as if you were experiencing something new, because if you are 50 or 45 and you have a 35-year-old tailor, it is easier for you to be recommended something younger.
We manufacture in Italy, so you know what our prices are like. A customer wants to feel young when they wear suits, because by nature, suits, they don't make men look younger. Whereas on Saturdays and Sundays, when you wear something casual and chic, even if you are a senior man with a sneaker, jeans, and a hoodie, you automatically look younger, at least by at least 5 years. To conclude, I just have 1 minute left. I would like to hammer once again what we deem fundamental. We strongly believe in absolute luxury. We believe in made in Italy. We believe in high, top-notch craftsmanship. There are many new artisans that are starting up the trade, and we believe in exclusivity. You see, I don't want to sound like a snob, but I don't want to buy widely distributed products.
We also believe in the importance of renewing suits. We also believe that shops and stores must represent some sort of home where you are being welcomed and where you basically breathe the atmosphere of the brand. We can say that these work conditions and this concentration enables us to work on new collections, in this case, Winter 2019, with confidence, but also with the awareness that every day it is our duty and task to try and be creative, and not just for the style and design. In order to be creative, you need to be open-minded, but also you need to have the courage to listen, because listening becomes tough, especially when you are successful. Thank you very much for your attention. I apologize for having spoken at length, but I really wanted to, once again, hammer on the fundamentals, quality, multibrand, and luxury.
I'm here at your disposal for any questions. You can still always come and visit, give us a call. You're always welcome. Conference call operator speaking. We will now start the Q&A session. Whoever wants to ask a question, please press star followed by 1 on your keypad. In order to exit the booking list, press star followed by 2. Please ask your question using the receiver and speaking into the mic. Whoever wants to ask a question, press star followed by 1 now. The first question is from the conference call in English. Mariana Horn, Berenberg.
Hi. It's Mariana Horn from Berenberg. I had two questions, please. The first one, if you could provide some comments on what you've been seeing in Europe in Q3, and then if you can also comment on what you've been seeing in the month of October. Also the same for China, but maybe also if you can comment on the type of consumer that you've been seeing in China. So maybe the age, and if you've been seeing, maybe in the past few years, a younger consumer. Then the second one, my second question is on profitability for the full year, if you can confirm your expectations and if you can maybe comment on the impact that you will be seeing from hedging gains for the full year. Thank you.
As far as hedging is concerned, as usual, we always hedge for everything when we make the price list. We have no profit or gain on the income statement. But we have been doing this from the very beginning, 35 years ago. We would hedge for the German Deutsche Mark, always. I remember that a bank director back then, they said, "Why are you hedging for the Deutsche Mark? They're always on the rise." I said, "Because we want to have an industrial profit, and this is never going to change." You should never expect any profit or loss from this. As far as the age of consumers are concerned, obviously, whatever happens in China, it regards and concerns younger customers because it is younger people that are more interested in fashion.
Whereas in Europe, it is different because Italy or U.S., a handsome 60-year-old or a beautiful 60-year-old, they want to try and wear something different. What is interesting to me, and you see this as well, too. Everybody seems to be in the lookout for unique products, very high quality, high craftsmanship apparel. Of course, this is an advantage for us because that's precisely what we do, and this is what the market is looking for. I am always convinced of the following. Ovid once said, and it applies to fashion, too. Ovidius said he makes a difference between those who were dressed well and the others who were not dressed well. You could tell wealthy people from poor people apart. This was true 2,000 years ago, like the same as today. I keep saying once again, luxury must be something exclusive.
As a whole, we think there's a very good mood for luxury. My answer to you is the following. As far as the future is concerned, two routes ahead. On the one hand, we have products with a decreasing price, with a very wide distribution, manufactured worldwide. On the other hand, the second path is for products that are recognizable, highly priced, manufactured in special places like Italy, for example. October and beginning of November went very well. Although I'm less worried about the month rather than the seasonality, because what matters for us is, what about the full winter that starts in July and ends in December? What about spring, summer from January to June? As a whole, we are very happy with the results. Of course, you need to have a great visual merchandising, beautiful collections, fascinating salespeople.
This is what matters the most. How can you keep your collections beautiful? Thank you.
Thank you.
Next question from the conference call in Italian, Alberto Dagliano, Saxo. Good evening, Brunello. Good evening. I have a few questions. I would start from the first one on the sartoria tailoring project. Would you like to expand it from the 25 first stores and make it bigger? Or whether you want exclusivity and therefore you don't want to expand it any further? The second question is, when casual wear seems to be grabbing market shares from the formal wear, so your proposition is important. Do you see any change in the split of products between casual and formal for menswear? Your confidence in the online, does this have an impact? Because you sell more casual online, I imagine. The last question has to do with CapEx 78%. Is this a temporary thing in terms of CapEx or OpEx, rents, and other costs?
How much has the cost of doing business in luxury increased? Because this is something visible for all players in the sector. I'll start from this very last question. This 78%, I think it has gone up, not just because of rents, because rents, as research says, they are very high, but they're definitely not on the rise. For us, now it's 10%-12%. Before it was 9% incidence. I think that for true luxury and the web has made everything very quick, so your showroom must always be new, and then your store needs to be refurbished every couple of years. This has got nothing to do with rents. Online business.
You see, the online is also used in order to showcase your product, because maybe you happen to be in Los Angeles, you walk into the boutique, and you go and meet your Los Angeles tailor. The sartoria tailoring. Of course, we started with 25 boutiques with very young tailors. Our idea is to expand and to have this service and the tailor in all stores. It is important to start, because you need to have a young tailor, because it is only if you have a young tailor that you can understand how suits must be designed. An important customer turned up, 48 years, and he said, "I have 21 suits. What can I buy now?" Well, I can just adjust it a little bit, take it in, tighten it a little bit, just tiny details.
He said, "My wife said that I have to throw away the 21 suits that I have and to buy your suits." Well, this is good news for us, it means that if you can dress young on the weekend, it is difficult to dress during the week, because then you don't want to wear a classic brand or a classic suit. You want something fresh. We'd like to expand this business one day, and I firmly believe in specifically this kind of business, because it is true, you have the sporty chic casual look, but if you are wealthy, you see, you need also good suits. I went to meet Mr. Bezos, and he said to me, "Could you please recommend three or four outfits?" You see, that's the kind of customer we're talking about. He was wearing one of our shirts, a blazer, trousers.
He did not welcome me in his home with a hoodie. Maybe years back, he would have worn a hoodie. We had an important dinner with 19 tech guys, 19 billionaires. Yes, they were all billionaires. They were all wearing a blazer. I would have never imagined this. I would have never imagined they would turn up in a jacket, in a blazer. It means that menswear is changing, but your blazer must be very chic, must be very tapered, it must be handsome. This can only be recommended by a young tailor, not a 70-year-old one, truth be told. I am 65 myself, and if I give you a recommendation, it's not the same that if a 40-year-old recommends something. Thank you. Thank you, Brunello.
I'd like to remind you that if you want to ask a question, you can press star followed by 1 now on your keypad. If there are no further questions, I'd like to thank you immensely. Yes, there's one more, Pietro is saying. Francesca Di Pasquantonio. Hello, Francesca. I will be disappointing you with my trivial question. I'd like to know how your like-for-like figure performed in the third quarter in your stores. Well, Francesca, I have to say that it is performing pretty well, but just one difference. Be careful with the like-for-like, because there is a like-for-like of products with no logo, and there's a like-for-like for products with a logo, that's for sure. This is a breakdown that is well-known to the fashion people. We are particularly pleased, Francesca. You see, salespeople must be young, polite, chic.
You have to maybe be offered a coffee or something, for menswear, especially. This is very important. I don't want to listen to anybody who says that menswear is in difficulty, and it is not true, because all the people I know, they want to take pictures of themselves two, three times a day, and they want to be dressed at best. The thing is that what they require is a different product, so that their wife thinks they look better. By nature, Francesca, when you wear a suit, unless it is a specific suit, you don't look fresh and young. I might now want to ask another question. Over the last two, three years, how has the way shopping changed? Because I know that trunk shows are very important for you and direct sales. That everything that happens outside of the shop.
I'd like to know whether this is a trend that is ongoing in a significant way. Well, I wouldn't say that we have a lot of sales outside of the store. What I'm saying is that inside the store, in e-commerce, you need to have somebody recommending products and items. This is what matters. Well, first of all, our customers are mainly wealthy, rich people, and they need to be recommended. The other evening, I had 10 people from Kazakhstan, very wealthy Kazakhs, in my home, and they said, "You know, Brunello, first of all, you invited me to your place, and I'm very, very pleased because it never happened to me. I just went to Seven Stars Hotel," and this shows you how important the human relationship is.
They were asking me, "Can I maybe take this blazer in in order to look younger?" This goes to say that they need somebody recommending or suggesting things to them. It is difficult to pick up a fabric for your suit unless you are from the fashion industry. You want to be recommended by a young, chic tailor. They should say to you, "This is the year of pinstripe, so you should have pinstripe. Last year, it was Prince of Wales." These must be your advisors, polite advisors. We have many wives of wealthy customers who say, "Can you help my husband look a bit younger and fresher?" Of course, tailors must be inspiring. Especially for menswear, Francesca. Blazers, there is no joke about them.
Today, we discussed whether to have blazers one centimeter longer or shorter, whereas for womenswear, it is all different. Menswear, suits two years ago, they are different. You can tell that you are not contemporary. That is why I am saying that menswear, they have a lot of opportunity. We have rich customers, and we can sell them contemporary suits, even if they have thousands of them. Thank you, Francesca. I hope I was to the point. Thank you. Next question by Paola Carboni, Equita SIM. Good evening, Brunello. My question has to do with the online. I think you mentioned a 10% percentage, which could be maybe a future objective vis-à-vis the current 6%? Our online business is worth 5%-6%. Since we are also present in the multibrand market, we think that this is our estimate of the global online market for our multibrand. They have 10%.
When we sell to Neiman Marcus, to Harrods, we think that thanks to their online, our brand has a 10% online percentage. Paola, we have invested immensely in this, and we have facilities that are ready to cater for larger expansion, because nobody knows where it is going to. We wanted to set up the facilities for the future too. Whatever happens in the online world, we have space and technology available. My question was, I think I had misunderstood then. I also wanted to understand your online strategy for the multibrand channels. What I mean by that is that in the light of the potential you see, should we think that in the future, the number of multibrand online will increase? Maybe the number of SKUs online will it increase? Will it become more than or the same as the physical world?
I want to know whether you might have a more aggressive approach in the future. We tend not to be aggressive, generally speaking. For example, today in multibrands, 3% of online is Net-a-Porter, Mytheresa. I think that there are many small-sized multibrands that buy from multibrands online. That is why I think that there will be growth in online multibrands, the same as in the physical multibrand store. What I believe is that in five years' time, in China, there will be 300 great physical multibrand stores. I think that there will be many stores, similar to Net-a-Porter, Mytheresa, although maybe of a smaller size. There will be this growth, that is for sure. Yes. Thank you. Thank you. Next question, Antoine Riou, Societe Generale.
Good evening, Brunello. I had two questions. You mentioned that you saw no evidence of a slowdown in China. When you look at the numbers for the third quarter, there is a slight slowdown in Greater China. I was wondering if you meant maybe mainland China versus Hong Kong. The second question is a follow-up on online in China. I was wondering if you were considering about working with the likes of Alibaba-
Excuse me. Can you please stop one second? I said that there was no slowdown in China. This is important. I did not see any slowdown in China. What I said was, we did not see any kind of slowdown in China, Antoine. This is important.
Okay.
Sorry for interrupting you, this is what I said before.
Okay.
I can explain something else if you need. The only thing is that I never said that there was a slowdown in China. I said that we saw no slowdown in China.
Yeah, no, exactly. That was my question, actually, because if you look at the numbers in Q3, it is actually slightly slowing down, no, in Greater China, Q3 versus first half.
Well, yes, this is between 29% and 32%. I do not even take this into note. I do not consider this to be a slowdown because it is too tiny.
Okay.
This is just some sort of swinging and oscillation. The figures are so tiny and small. They just need to sell two items more at the end of the month, one more delivery wholesale, then that is swinging. Generally speaking, there is no slowdown, neither in terms of taste or in terms of requests.
Okay. I had a second question just on your online strategy in China. Would you consider working with the likes of Alibaba and JD.com with the Luxury Pavilion and Toplife in the future?
Well, at the moment, it's been a month that we are in the lookout. We are seeking a partner in China, an e-commerce partner in China, because you need to have a partner there for the e-commerce. We are considering, we are investigating who this partner could be. I have always maintained that we need to always go for truly absolute luxury. That's what I mean, absolute luxury. Now, I can't really tell you today whether it will be Alibaba or others. What I can say is that we will be opting for the high-end luxury operators.
Okay. Thank you.
Thank you. If there are no further questions, thank you very much. I hope I was clear and exhaustive. Whatever you need, call me or Pietro, and we will reply as timely as possible. We are very happy with the year, and we consider it to be finished already. Hopefully, the collections coming out in January will meet your taste. Thank you very much, and have a nice evening.