Good evening. Chorus Call operator speaking. Welcome to the presentation of year results for the 2017 fiscal year for the Brunello Cucinelli Group. I'd like to remind you that all participants are in listen only mode. Following the initial presentation, there will be an opportunity for some Q&A from the financial markets. The speakers will be Brunello Cucinelli, President and CEO of the company, 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. I would like to give the floor to Mr. Brunello Cucinelli. The floor is yours.
Good evening, ladies and gentlemen. I'll try and not speak too fast so that the English listeners will have an appropriate path for the translation. First of all, I would like to thank you all, first and foremost, investors, analysts, journalists.
We really want to thank you warmly from the deep of our hearts for everything that you have given us in the last 6 years when we have been a listed company, 40 years of us as a business, as a company, because we celebrated our 40th anniversary just a few days ago. In my opinion, we have enjoyed an experience of life and work, marked and fought with humanity, esteem, respect, and the way that we have to speak to each other, to interact with each other, has always brought us to make important decisions whilst respecting the creation along the process. Also respecting the great values of the human being, because our life has always been human-centric. I say that the great values are always the same, justice, truth, beauty, and love.
Last night, I was playing with my granddaughters, Riccardo's and Camilla's daughters. I always have so much fun with them. They amuse me. Suddenly, I was hit by this beautiful piece of news, the two Koreas are meeting to make peace. I basically rediscovered a letter that I had read some time ago of a Russian thinker of the beginning of the 20th century, who, at a certain point, sent this letter to his children. I'd like to read out a couple of paragraphs for you. I was really touched by these words. He said, "Look at the stars more often. When you feel sorrow in your soul, look at the stars or at the blue sky.
When you feel sad, when someone offends you, when you struggle to accomplish something, or when you are overwhelmed by your inner storm, get out and stare at the sky. That's when your soul will find peace." Pavel Florensky. I have to say, it is a really beautiful expression and statement. Thank you for your attention, and I'd like to do the following. I will give you just the highlights of the company, then Moreno Ciarapica, who is sitting just opposite me, will drill down to a few more colors and details. I'll resume the floor, and I'll give you some visibility on 2018, some visibility on 2019 and 2020 planning. We'll be talking about products and markets. Last but not least, the fascinating world of the online business. Net revenues, EUR 503.6 million, +10.4% at current exchange rates versus 31st December 2016.
EUR 10.9 million was the improvement cost of exchange rates, EBITDA EUR 87.5 million, +11.8%. Net profit EUR 42.1 million, +13.4%, excluding the patent box benefits. I'd like to make a digression or an addition here. You see, from the aesthetic point of view, we prefer to highlight the 13.4% adjusted profit and not the 41.4% including the patent box benefits, because you see, frankly speaking, it would not look good to show the great leap of profit in a year, whereas we have always been supporting, chasing a fair profit and moderate growth. This is what I wanted to say about profit. We enjoyed significant growth in revenues in all geographies. Italian market, +11.2%, Europe +10.6%, North America 6.6%, it's because of the Forex situation, Greater China 36.2%, rest of the world 5.2%. Sales improved in all distribution channels.
Retail monobrand, +19.6%, wholesale monobrand +1.6%, wholesale multibrand +6.2%. There was an important reduction of the net financial position, which dropped to EUR 15.7 million as of December 31, vis-a-vis EUR 51 million last year. Investment plan CapEx is EUR 35.7 million, mainly commercial in nature. Always focusing on safeguarding our brand, both in the brick and mortar channel and the online one, we will be dwelling on this later on. The BOD will propose the distribution of EUR 0.27 dividend per share, equal to 35.9% payout ratio. This way, I think that I have given you an overview, I'd like to close by saying that 2017 has ended, reporting once again particularly pleasing results and showing a growth path that is consistent, moderate, but sound year in, year out.
This growth is pursued, hopefully both in the physical and online world, in a balanced manner, and it has resulted in our business crossing the EUR 500 million revenue threshold, an achievement that makes us very, very satisfied. Another important point, the good performance in our spring/summer sales, the excellent sales campaign in fall/winter 2018, which is now coming to an end, and the very special feedback from the national and international trade press, seem to indicate that yet another positive year lies ahead, featuring double-digit growth in terms of both revenues and profits. Our appealing development projects and the great brand protection efforts online are the pillars of our daily work, a work that fascinates us and enables us to enthusiastically pursue and seek a good life.
I'd now like to give the floor to Moreno Ciarapica, who will be giving you more colors. I'll resume the floor later on. Thank you.
Thank you, Brunello, and good evening, everybody. Following the release of preliminary revenues on January 8 that were confirmed by the final data, I would move to slide 11 of our presentation. I would start from the improvement of our EBITDA margins that went from 17.1% last year, an adjusted figure excluding the non-recurring personal cost amounting to EUR 1.5 million, and moved to the current 17.3% with an increase of 20 basis points approximately. We consider this 11.8% growth of EBITDA a healthy one, and this growth goes together with the 10.4% increase of net revenues, in line with the indication that we have always communicated to the financial market.
The increase of EBITDA margin is strictly linked to the first margin increase that went from 65% to 65.2% against an incidence of operating costs on sales stable 48.8%. Amortization amounted to EUR 22.7 million, increasing by 13.3% versus EUR 20 million in 2016, with an incidence and impact that moved from 4.4% to 4.5%. We expect a slight increase of incidence at the end of the year 2018 due to higher amortization depreciation that will be in the financial statement due to the investments in 2018. The impact of net financial expenses moved from 0.7% to 1%, considering a significant reduction of the average net financial position, and this increase is to do with Forex development.
We would like to remind you that this increase is mainly due to the accounting of Forex hedging, and in particular, the accounting of the unrealized losses on Forex having to do with intercompany funding in foreign currency that are temporary in nature because they are subject to the valuation based on the exchange rate. As to 2018, considering the forecast of all financial institutions whereby the volatility of Forex could not be as strong as in 2017, where it reached its peak, we expect a reduction of net financial charges. Let's now take a look at 2017 net profit, excluding, as Brunello was saying, the benefits ensuing from the patent box linked to the agreement with the Italian Inland Revenue Authority for 2015-2019. Benefits for 2015-2017 have amounted to EUR 10.4 million, EUR 4 million of which having to do with the last year.
2017 net profit, excluding the tax benefits of the patent box, amounted to EUR 42.1 million, as shown in the box bottom right on slide 20-11. And it displays 13.4% growth vis-à-vis the net profit of EUR 37.1 million in 2016, with an ordinary tax rate that dropped from 30.5% to 29.2%. We consider this tax rate as ordinary and foreseeable also for the next few years, net of the future benefits relating to the patent box. For 2018 and 2019, they will be accounted for in the relevant year, and they will only be quantified when drafting the relevant financial statements. We could imagine more or less the same amount as in 2017.
Moving on to slide 12, we take a look at the first margin operating costs with the increase of the first margin driven by the business evolution, the like-for-like sales results that were very positive and the channel mix. The weight of retail revenues went from 49.6% to 53.7%. 2017, like-for-like amounted to 4.4%. Whereas the like-for-like of the yearly months of the year between January the 1st and February the 25th amounted to 4% at performance, in line with the very same level between 3% and 5% that we have always considered as sustainable and appealing. The like-for-like developments, as already anticipated, they fully represent the performance of our collections on a half-year basis. And this is the reason why, starting from this year, we will share the like-for-like performance as of June the 30th and December the 31st.
The operating cost increase was in line with the business performance, the incidence is stable at 48%. The incidence of personnel costs went from 17.5% to 17.6% upwards. The reason was the arrival in the 2017 consolidation perimeter, the arrival of the people staffing the new direct managed spaces for conversions and for net opening, and the five shop-in-shop in the luxury department stores of Holt Renfrew in Canada, which were previously managed with a wholesale formula. The incidence of rents went down from 12% to 11.7%, the increase by EUR 4 million from EUR 55 million to EUR 59 million has to do with the development of the retail network, including the aforementioned four opening and four conversions, besides some extension of shops.
Investments in communication went up from EUR 24.7 million to EUR 28.7 million, with an incidence on sales moving from 5.4% to 5.7%, with acceleration in the second half of the year driven by the investments on the digital channel. Other general operating costs went up from EUR 59.8 million to EUR 65.7 million, their incidence on sales stayed unchanged at 13.0%. The increase has to do to higher IT and digital cost development and maintenance, on top of the cost needed to insource the online boutique. Moving on to slide 14, the income balance sheet. We take a look of the net working capital and its incidence on sales from 28% to 25.2%. The management of inventory was very positive, reducing from EUR 154 million to EUR 152.6 million, with an incidence on sales dropping from 33.9% to 30.3%, a level that we think might represent a healthy balance in our inventory management.
Also considering the limited number of new direct boutiques to be opened. Trade receivables went down from EUR 47 million to EUR 45 million, following the healthy and positive management of cash-ins, the fact that the online boutique, the four boutiques in Moscow, and the five shop-in-shop department stores were actually converted to direct management stores. Trade payables, slight increase there, EUR 65.3 million against EUR 63 million, the other assets and liabilities decreased from minus EUR 9.4 million to minus EUR 5.6 million, which was mainly to do with the fair value evaluation on the hedged derivatives. Investments on slide 15 amounted to EUR 35.7 million in 2017. As usual, their aim is to safeguard the exclusivity and the prestige of the brand, both in the physical and online channel, as well as investing in the IT platform. We keep to maintain cutting edge.
In the following years, we will also maintain quite a high level of ordinary investments, which should be around EUR 120 million-EUR 130 million in the three-year period, 2018-2020. Debt reduction performed in an excellent manner. Debt went down from EUR 51 million to EUR 15 million, driven by the cash generation of operations and also the positive contribution of the trade working capital. Cash generation, therefore, absorbed investments fully, EUR 35.7 million, the payment of EUR 10.9 million of dividends for 2016, that represented a payout ratio of 29.9%. In 2018, we will still pursue cash generation in order to absorb investment that we expect, also to absorb the increase of dividends and payouts that went up from 29.9% to 35.9%, with a net financial position, which at 31st December 2018 could amount to EUR 0, to then improve the following year.
Finally on slide 17, shows how we were able to reduce debt by, however, maintaining over the years an important level of CapEx and also progressively gradually increasing the payout. One last thing about the Forex hedging and the impact of foreign currency. Before giving the floor to Brunello, I'd like to devote some time to the very careful Forex risk hedging that we carry out, so that in 2018 we will preserve our margins, also despite the volatility in Forex. Our hedging policy, as you know, in the currency, has as a target to neutralize the absolute value EBITDA from the impact of Forex fluctuation. When the price list of collections are defined, estimated revenues are always hedged.
A part of the revenues, which amounts more or less to the cost in a foreign city, this part is not hedged, and it is subject to Forex fluctuation. If the currency and Forex impact has mainly lead to this chunk of the revenues, we want to maintain the absolute value of EBITDA unchanged. This is our aim, because the impact of Forex on revenues is offset by the opposite impact that currencies have on costs. Our hedging policy, although starting from January, EUR has appreciated vis-a-vis the USD, and today it amounts to 1.24. This policy enables us to maintain our EBITDA 2018 expectations unchanged as far as the expected revenues are concerned, given the further impact of Forex that we have seen in the first months of the year.
It is reasonable to expect slightly lower revenues at current exchange rates vis-a-vis what we thought in January. With a subsequent increase in margins, if the EBITDA stays the same in absolute values, which is slightly higher than 10, 20 basis points improvement on an annual basis that we usually consider as ordinary. This is the end of my contribution. Thank you very much. I give the floor back to Brunello.
Thank you. I'd like to talk about a pretty clear-cut visibility on 2018, as promised. We have to say that things are going really, really well, and hopefully God keeps helping us, and this is always very useful to have that kind of help, too. Summer collection in stores are performing very, very well. The taste is being appreciated, and that's what really counts.
A few days ago, we finished with the sales of our winter collection. I have to say that it all went perfectly well. The buyers provided an excellent feedback, both in Florence for the men's collection in mid-January, and also in Milan last week during the Women's Fashion Week. All the orders for the fall/winter collection have already been harvested. As you know damn well, we are really keen on the feedback from the press, too, because sometimes their feedback does not match that of buyers. Really, the press really makes you understand whether your collection is modern, contemporary, young, youthful and exclusive. We feel that it is now a time that our brand is enjoying this kind of feedback. It is pure Made in Italy, a product with a very high level of craftsmanship, especially in women. There are some couture-oriented touches.
For men, I would say it is a very Italian taste, but at the same time, it's very young, also in suits, contemporary, fresh, refined. Of course, we should not be the ones to tell you, because it's not nice to boast about this, but this is what we believe. We're very, very happy. Another important point, there is always the search for exclusive, well-made items. When buyers come to our showroom, this is the first thing they ask from us before looking at the price list, before looking at the quality. Taste and then price last. Visual merchandising plays a very important role, and we have always been keen supporters of this.
We think there is also a lot of attention on the way in which you actually make your products, how your products are made, where they're made, whether you have harmed or hurt or damaged the wildlife and the environment along the process. This is very strongly perceived, especially by young people. There's no doubt. I'm always very firmly convinced that our team must be young. This is true for all industry and sectors, and politics included. I don't want to hide that the elections in Italy of the last couple of days clearly show that there's a need for a contemporary team in politics, too. In our company, the average age is lower than 37 years, 43 for the management, but without me, there would be a very sharp drop.
What we would like to say seriously is that we can project for 2018 a healthy double-digit growth, both in terms of revenues and EBITDA. EBITDA should be slightly more than proportional. In 2018, we will invest more or less EUR 45 million. As usual, if some special opportunity arises, we will try and seize it. If we happen bump into a store in a special location, we will be seizing this opportunity. At the end of the year, net financial position should be close to zero, and we're particularly pleased with this. As usual, we keep saying that the problem with any company is not the level of debt, but to be able to design a modern product. In the future, around 40%, dividend should amount to 40% of our profit. We should have net equity slightly more than half revenues.
We are confident for that. As for Forex hedging, as Moreno Ciarapica was saying, we have done this from the very beginning. Our company started its business in Germany, and we were basically cashing in Deutsche Mark. The advantage was that of getting money, being financed in Deutsche Mark with an Italian rate of 22%-23%. Despite that, we were fixing our exchange rates because we have always wanted to have an industrial pure profit because this is our business. For the 2019/2020 two-year period, we envisage a healthy growth in line with the past years, with a EBITDA slightly higher than the growth of revenues. We would like to invest around EUR 80 million-EUR 90 million, EUR 120 million-EUR 130 million over the three-year period, and the net financial position should be positive and gradually improving.
To sum up, before moving on to the fascinating topic of the web, I'd like to say that true investments lie in seeking contemporary products on a daily basis. We exchange ideas on taste changes. We try and strive to be fascinating, both in the way that we behave, the way we communicate, and how we also behave in stores. We mentioned this at length in the November call. We try also to embrace change without any fear, accepting the fact that each and every one of us wants to feel special. I believe in this very much. We know that every day, there will always be somebody posting a picture of you or even a selfie, so you can't possibly look the same today and tomorrow. Let's now talk about this fascinating theme of the web, the online world.
We are very satisfied and pleased with how things are going, and also we are happy with the way in which we have actually tackled and faced this challenge. On the one hand, communication is paramount, and when you actually log into our website, you see the institutional part with our philosophy. Product is also very important, and the way you present it, visual merchandising, is essential. It's important for sales. We are sure that online sales will improve. We don't know to what extent, but what we did want to do is to set up facilities that could possibly cater for large growth. The real estate is there, facilities are there. This has always been a sort of obsession of mine. We try to update our technology to use ultra-sophisticated technologies.
The investment is important, but I think that this world is changing so fast that we need to be up to date. I like this very much. However, we keep implementing our grant policy of brand safeguards, and we discuss this topic with our partners and stakeholders because we are always fully convinced that the web, the online world, might massify one's image. This applies to everybody. As usual, I devote 70% of my time to products, and it has always been the case from the very beginning. Of course, at the beginning, we were focusing on raising the capital, and you banks have been great with us. If now you see 70%, I devote 70% of my time to product. The half of the remaining 30% is devoted to how the web is changing and how we can be recognizable, special, and unique.
This online world is complicated and, to me, it is also fascinating, and it is evolving very rapidly. A few days ago, we celebrated. We turned 40. Please listen carefully, because this is the dream of my life that I'm about to communicate it to you. What I'd like to envisage for the future is for this company to stay headquartered in Solomeo for a few centuries through my daughters, granddaughters, grand grandchildren, maintaining the ownership, which does not mean that they need to manage and rule the company, because I've always maintained that you do not inherit the way and the ability to manage a company. You inherit the ownership of a company. The works to restore the parks are drawing to a close. We are also completing the works of the peripheries.
I have always loved this art of preserving, I've spent so much money. I've spent a fortune, my father says, "You must be crazy." I'm so lucky to have my father still with me, he's 96. It's always a pleasure to speak to him. Today, I think that, because we want to respect all those who invest in our company, we think it is not fair that the listed company pays for this restoration. It is a private foundation that should pay for it, because if I was an investor from San Francisco or somewhere else, I would say, "Why doesn't your business help me support something or restore something in San Francisco? Why should I spend my money in Solomeo?" Whereas all this restoration work is entrusted to the family foundation, hopefully for a few centuries.
Jokefully, but not so much, I say, "Be careful, because after I'm dead, I'm going to come back and take a look at how you are looking after all these assets. If you don't do things properly, I will be haunting your nights." You see, we need to envisage life over the next 100, 200 years. To come into a close before questions, go to Q&A, we are very happy with business. We are full of gratitude towards mankind and towards you who have shared and agreed with our corporate culture. You have paid tribute to us, and maybe you have also paid tribute to my wonderful country, which is Italy. Endless thanks for everything. If you need us, just give us a call. Do not hesitate, come and visit. Now, let's open the floor for questions. Thank you. Thank you.
Thank you very much. Chorus Call operator speaking. Now we will start the Q&A session. Whoever wants to ask a question, please press star followed by one on your keypad. To exit the booking list, press star followed by two. Please ask your question using the receiver. Whoever wants to ask a question, please press star followed by one now. The first question from the Italian channel by Francesca Di Pasquantonio, Deutsche Bank.
Hello, Brunello, good evening.
Hi, Francesca. How are you?
Yes, numbers speak for themselves. I bet that you are satisfied. I wanted to ask a couple of questions on your presence on the web, your online presence, the way in which you're managing your brand safeguarding, and how you relate to the e-tailers world platforms like Farfetch, Matches, NET-A-PORTER.
What kind of agreements or what kind of constraints do you pose on them, how can you maintain consistency with your online presence? Second question, what about the social media and your engagement there? Are you following this communication channel, too? It is ever increasingly important.
Yes. Thank you for your interesting questions, Francesca. Obviously, I'm very pleased with your kind words. I have to say that I think that, as I said before, the online world massifies your product. We enjoy a great relationship with NET-A-PORTER, Mytheresa, in the German market, I think they are three of the best multi-brand stores in the world. Multi-brand means they buy the goods. Together, we decide how to display it and what to publish. It is a good relationship. This is the kind of care and attention that we devote.
For the time being, we have our products displayed in these three online multi-brand stores. We are online, definitely, but we want to always strike a balance and find a kind of fair amount of online presence. I think that many of us are overwhelmed with documents and emails and stuff and communication. We try not to do the same, because if we hassle you will stop buying the brand. This is the kind of grace that we apply in our boutiques and also the online boutique that is based in Solomeo. We pursue this human privacy. That's what we are looking for, the respect for the human sphere, the private sphere. I think that we really are pushed and hassled too much online.
As far as Farfetch is concerned, I know that it's not nice to express ill judgments, but I think that it's a pure marketplace. I insist on this once again. We operate in luxury. Items are very expensive. I think there should be a very clear-cut distinction between luxury and this so-called democratic luxury, ever accessible luxury. This word didn't even exist up to 20 years ago. We keep pursuing our project that envisages absolute Made in Italy luxury, extreme craftsmanship, costly, a bit expensive, but I think that Europe has a great chance here, not just for ready-to-wear, but also for furniture, for example. A few days ago, I was wearing a particularly well-known watch, not too expensive. Once I suddenly received a group mail that was not tailor-made for me, and what I did was I changed my wristwatch.
What I mean by that is that I want to keep supporting the exclusivity of products. Otherwise, it doesn't make any sense for us to manufacture in Italy with all the level of detail that we apply. I don't know whether I was clear in what I said. As far as social media are concerned, we try and use them in a normal manner. We post something every 10 or 12 days, a special picture, for example, during Pitti or during the fashion week. I think we have a fair balance and grace there, because I might say that the true luxury of the future will be to lead a life that is concealed from our travel mate, that is the smartphone. That's the kind of products I'm looking for.
It's not easy to express one's view, to voice an opinion on these topics, this is the path that we want to keep pursuing. Enlightening and clear as usual. I don't know whether it was very clear. It was for me. Every day we hold meetings on this. We asked all the minds of our company, we asked everyone to behave well on the web because everything that we built in 40 years is at stake there.
Can I have a follow-up question? Can I ask a follow-up question? On store openings that you have in store for the next two, three years, what kind of geographies are you considering or favoring for your opening plan?
The idea is still to open three to five stores a year, expanding an existing one in main cities.
For example, this year we'll be opening Dubai, Las Vegas, China World Mall in Beijing, and Monte Carlo. A good repositioning will take place there. Well, the price is not very convenient there, but that's the way it is. Moreno was mentioning rents before, that they dropped by 0.3%. Well, I think that in main cities, these are the rents to be accounted for in the future too. We would like to open three, five, four stores over the coming years. Beautiful locations. We will try and refurbish the existing ones too to keep them modern and contemporary, and also looking for special staff, because I think that we are all overwhelmed with newsletters and emails. We don't want that. Thank you very much.
The next question is from Flavio Cereda, Jefferies. Good evening, ladies and gentlemen, and good evening, Brunello. [Foreign language] Good evening, Flavio.
Francesca touched upon two key topics. I'd like to ask the following. Openings. Considering the CapEx for the next three years, where will the CapEx focus, considering that the openings are not that many? Secondly, maybe this is a question for Moreno, so we make sure that he's still there.
No, no, we're all here. There's eight of us.
When we take a look at the net working capital, which had been considering a weakness of yours, is now becoming a strength. The numbers that we are seeing now for 2017, is this the baseline scenario for the next few years? Meaning all the actions that you had to take, have they been completed?
I'll start by answering.
Yes, the next two, three years CapEx are, well, commercial CapEx, because we want our showroom to be beautiful and modern because there are no investments in the headquarters or real estate, whereas in 2020, we might have to think about the next five years and to expand our headquarters and facilities. You see, for example, in Monte Carlo, we are just expanding the store, but the locations are very expensive. That's why you need all this CapEx. What do we do about this? Well, today, we have 4 billion human beings from the East to Malaysia. That accounts for 12% of our revenues. We think that on the Far East, there will be quite a good growth there. 85% of our business now is generated in beautiful America and Europe, and we're very pleased with that.
The way the product is perceived in Europe and America is very important, because all these faraway countries, they want to take a look at how the product is appreciated in Italy.
I'd like to add, technically speaking, Flavio, the CFO speaking, I'd like to add the following. Of course, we must and need to constantly renovate and refurbish our locations. We have 94 of them and franchised stores, too, and that's going so in departments. We have to keep refurbishing them on a constant basis. We have some repositioning, relocation, and expansion. Of course, we prefer the latter to the new openings because as we said it many times, they would dilute our presence. We are, over the next three years, we want to focus on high-quality relocation and expansion of existing footage.
Talking about inventory, we have reached a standard level of critical mass of our management, we can definitely optimize what, in the past, prompted a growth in line with the business growth. We have a significant critical mass, whereby in the next three years we will be saving, and we're very pleased with these developments because that benefits the net financial position, too.
Flavio, for the thousandth time, I'd like to go back to this. For a showroom where you present your collection, but you fail to paint it or to refurbish it, your collection does not look as contemporary as if you had refurbished it. You change the tables, you change the fittings and the furnishing. I always dread that your product ages in an old place.
When we start designing the collection, every six months, we change something, a picture, an armchair, a table, just tiny tweaks and changes, you see. The research team for the men's collection came back, and they were very enthusiastic. They are designing new things. They're putting together some pictures and images. It is a costly activity, that traveling for the research team. That's the modernity we were talking about before. Thank you. Goodbye.
Thank you, Flavio.
Congratulations on your Milan, Flavio. Tonight we have the Juventus. I'm not sure that the foreign listeners are interested in this, but I wanted to say it.
Next question, from Paola Carboni, Equita SIM.
Good evening, everybody. Good evening, Brunello.
Good evening, Paola.
I have a question on the competitive scenario, although I think you are beyond any competition, if I dare say.
I would say that other brands have attempted something following your IPO, for example, Falco neri or Fabiana Filippi, and I was a bit concerned at the beginning. I would say that the gap has widened even more over the last few years, not just in terms of volume, but brand perception to wealth of offering collections and style proposition. I wanted your comment on this, or whether I'm wrong and there are other brands that you consider your competitors, that you monitor. Somebody was saying to me tonight, are you worried when you are being copied? Honestly speaking, if you're not being copied, it means that the brand is not successful. You see, it's always been the case since when I was young. Only special brands are copied and counterfeited. What I say is that we might help each other out.
We have made a precise choice of manufacturing in Italy with a specific rate of craftsmanship, and I'm not talking about taste here. We wanted to have a specific positioning. It's not because we are snobs that we think so. See, I always focus on very high quality and modernity of the brand, because there is not that much supply of daywear in the world, and there is a demand for that. You see, women need to change all their wardrobe every six months, and men, too. Do you remember when at the beginning, we were talking about these evergreen items, and we were saying that we have no evergreen? You see, because for example, the men's jacket, the length might differ by a couple of centimeters.
You might think it's the same, but it's not, because if you wear last year's jacket and it looks older than this year's, although the tweaks are very small. We want to keep pursuing very high quality. If you ask me what I'm worried, on a daily basis, is the rate of modernity of my product.
Since we have already discussed about strategy, I have two financial questions. Talking about inventory and its performance in 2017, the objective of a net financial position close to break even in 2018 implies that the net working capital generates some further cash in 2018, we can expect a further improvement of its incidence on sales, or am I wrong in my reasoning?
No, Paola, that's precisely the case.
We expect a further, yet small, benefit also from the net working capital, in addition to that coming from the income statement. I want to add something more in a joke-full manner, Paola. We should not worry about cash too much. We should worry about investing and investing that your brand keeps young and innovative. Because sometimes when you have high debt, of course, you are scared by it, under these circumstances, we should not worry about the EUR 3 million-EUR 5 million. We should worry about investing in a modern brand. I don't want to be a snob here, when we discussed this topic with you many times, we spoke about cash many times. When a company has too much cash, maybe it's not a healthy one.
Andrea Guerra used to say, "Even in best times, companies should invest to stay contemporary." Since then, I've always shared this view. I think we need to be modern, therefore, we need to invest. One last point. As far as hedging is concerned, if I understood properly, we should expect the 2018 margin that improves beyond the usual 10-20 bips. I don't know, can we say whether in 2019 this effect is absorbed, in 2019, should we expect a flat margin, or what will the development be? First of all, the additional benefit vis-à-vis the 10-15 ordinary basis point can be an additional 10-15 basis points. As an effect of Forex, whereby our revenues at current exchange rate will be lower than at constant exchange rates.
As I tried to explain before, what we expect is for the absolute value expected at constant exchange rate of revenues. We think that we can manage to do that, because all the hedging has been done, as I said before. A slightly smaller chunk of current exchange rates rather than constant exchange of revenues, maintaining the EBITDA stable vis-à-vis our expectation, that's where the 10-15 additional basis points come from. It is clear that once revenues go back to normal, when a constant and exchange rates are the same as current exchange rate, this phenomenon might dwindle. We think that there will always be 10-15 points in benefit because of what I said before.
Brunello speaking. Under normal circumstances, we believe that we might have some benefit in terms of income or profit. Yes. Thank you very much.
Next question from the English call Berenberg, Mariana Horn.
Hi. Good afternoon. This is Mariana Horn from Berenberg. Thank you for taking my questions. I have two, please. The first one is on like-for-like performance, and the expectations for the rest of the year. You had a nice 4% performance so far in 2018, and I was wondering whether we could assume this for the remaining of the year, and if you could share the performance of like-for-like, region to region. The second one is on different consumer clusters and different trends that you might have seen. Can you discuss how the domestic and the touristic clusters have performed, especially in Q4 and maybe in the past weeks as you disclosed like-for-like? Also if you could share or if you have seen any specific trend that you think may have stood out and you found interesting. Thank you.
Let's start from customers. Well, it's now been a year or so that we are now once again talking about local customers, and this is very interesting, especially for Europe. Customers shop from the local stores, and they are local customers. As far the like-for-like is concerned, well, the important thing is to express a judgment at the end of the half year, because that's the right way to find out whether your collection has performed well or not. We have always maintained that at a year like-for-like of 4%, we have always maintained that this is an interesting and appealing figure. Would be interesting to maintain it over the years, because if you have too high of a like-for-like, it could be a bit dangerous for the years to come.
It is true that our product, since it is a no logo product, is not typically seasoned. We would be pleased with that. I have to say that this like-for-like is somehow increasing and improving everywhere. I think that there is a positive development there. Better for women, a bit tougher for men's collection, because men need to be shown something very interesting in order to make the purchase. You see, women tend to change their wardrobe every six months, whereas men tend to add to existing items. We are experiencing a good time for menswear because we are the reference point for men's. We are a chic, contemporary kind of menswear, definitely not super fashion. Generally speaking, there's a lot of positivity. This should be said.
We should make a great distinction between recognizable luxury and expensive products on the one hand, and on the other hand, there will be products increasingly industrially made and with a lower price. That's for sure. This is what we are trying to do. When we say that we want to protect our brand online, we want to pursue the first path, because this is the great thing for us. In general, I would say, the first question by our buyers is, we want an exclusive product, which means that probably there is too much of a wider distribution. As far as the region by region like-for-like question is concerned, in the first two months, this 4% is pretty homogeneous across the regions. There are no disalignments or mismatches between one region and the other. Yes, I could confirm that.
Thank you.
Are you happy with the answer, Mariana?
Yes. Thank you very much.
If you want to ask a question, press star followed by one on your phone. Mr. Cucinelli, there are no further questions for the time being.
Well, thank you very much for all the esteem that you have displayed. We are particularly confident. Tomorrow we will start designing the new men's collection. Generally speaking, we would like to say that there's a good atmosphere in our company. We would like to once again say that we really work with serenity. Thank you very much for everything.
Chorus Call operator speaking. The conference call is finished. You can now disconnect your phones. Thank you.