Good evening. This is the conference call conference operator. Welcome, and thank you for joining the Moncler first half 2020 financial results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Paola Durante, Strategic Planning, Intelligence, and Investor Relations Director of Moncler. Please go ahead, madam.
Thank you. Good evening, everybody. Thank you for being with us tonight for our first half 2020 financial results conference call. First of all, as usual, let me introduce you to the executive team on today's call. Our Chairman and CEO, Mr. Remo Ruffini, Luciano Santel, our Chief Corporate and Supply Officer, and Roberto Eggs, our Chief Marketing and Operating Officer. Before starting the presentation, as always, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Moncler's current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties, and other factors that could cause results to differ even materially from those expressed in or implied by these statements. Many of which are beyond the ability of Moncler to control or to estimate.
Let me also highlight that given the nature of our business, interim results can be influenced by seasonal effects, and therefore cannot be taken as a proxy for full-year trends or results. The important things, given the later starting of this call, I anticipated that we would make our best efforts to conclude it within one hour. I ask all participants to limit to one question at a time. Of course, if there are more questions, we will take it after, please limit to one the first time you speak. Finally, as usual, there are press invited in this conference in a listen-only mode. Let me now hand over to our Chairman and CEO, Mr. Remo Ruffini.
Good evening, everyone, and thank you for attending Moncler first half results conference call. Tonight it is a bit later than usual, so I will try to be short and focused in order to leave all the time you need for questions, but given the current situation, it is important and needed to provide you with an update on our strategy. It is not easy for me commenting on our results. It is the first time since the amazing journey started that Moncler report negative results, a direct consequence of unprecedented situation the world is facing in this month. We have learned that things might not always be planned in life and also in business. We have worked together to redefine our priorities. We have outlined what needs to be done and what could be left for tomorrow.
We understood once more that being agile, flexible, being able to evolve continuously, and most importantly, being digital, are crucial pillar of our future success. We're an agile and flexible company. I ask my people to push this to the limits in order to cope during this difficult time. In our path to evolve continuously and to become a digital-oriented company, I understood that the speed of this evolution needed to be accelerated. I felt this had to be now, or it could have been never. I truly believe that over these years, also thanks to the important partnership with YNAP , we have reached many important targets. Now, I feel Moncler has to evolve. As I already told you, crisis can bring progress. To make that happening, you need the right people and the right organization.
Over these difficult months in Moncler, we have been work all together to find how the crisis could make us stronger. During this time, when attitudes to shopping may be changing and habits may be become even more online, I felt we needed not only an evolution, but a revolution in our digital culture. For this, we decide to create a new digital organization and to internalize the commerce business while working on the new website that will start to operate next year based on a complete innovative concept designed on a totally different and personalized customer journey. Omnichannel and customer journey are important. Fantastic work. I feel in this day may be sometimes misused. How can we create a seamless experience for our Moncler client among all channel, among all touchpoint? How should it be different and unique?
How can we create our own contents using the same tools but making them very Moncler? The answer to this critical question will define the Moncler of tomorrow, will support our success, will make us stronger. The fact that Moncler launched Moncler Fragment with a live stream on Weibo with 32 million viewers the first day, a record number in the luxury industry, has made me even more convinced that our house has a robust foundation. We need now to build more floor. I will spend most of my time during this month trying to understand the sector evolution and working to ensure that Moncler can be a leader in it. This pandemic might change people, might change attitudes, might change customer behaviors, but the desire for beauty and uniqueness will never change. One thing that might change is how and where people will expect to find this inner beauty.
Our clients always have to feel unique when interacting with any place they are. Any touch point, our digital experience has to support it, our innovations capacities to provide the tools. Our clienteling is to make all our existing and prospective clients feeling part of a unique experience of the Moncler world. Being able to use the big data in a smart way. I know that I demand a lot. We set challenging targets. We want to double the weight of the online business over the next three years. Challenging, I feel achievable because we have and we are creating the right team for them. The next months, the result will be impacted by the pandemic. If I look at Moncler in 2022, I see a company bigger, stronger, and able to create something even more unique.
Now let me leave the floor to Roberto and Luciano for more comments on our results. Thank you very much.
Thank you, Remo. I'm Roberto. Let me bring you to the results, the revenue breakdown by region. We'll comment the further results along the presentation. This is on page five. The result of the first semester 2020. Globally, we reached EUR 403.3 million, which is a 29% decrease compared to H1 2019, with a stronger decrease in Q2 linked, as we will see later on the fact that we had most of our store, more than half of our store closed during the second quarter. Results in the first half have been severely impacted by the measure adopted by the different governments worldwide to limit the COVID-19 pandemic. Italy recorded a 39% decline, in particular in Q2. Retail underperformed due to store closure and the lack of traffic, especially on the travel retail side. EMEA results were slightly better, with revenue decreased by 23%.
Here, especially with Germany, Scandinavia, would like to add Switzerland that outperform in Q2. Asia and rest of the world reported a 27% decline in H1. In Q2, Japan, Hong Kong, and also Macau underperformed compared to the rest of the region, while mainland China reported a double-digit growth, especially the month of June was very good in China. In Korea, the group performed remained solid during the quarter and since beginning of the year. Americas reported a 41% decline with similar results both in Canada and U.S. and in both Chinas. Here also with strong improvement during the month of June. Let me bring you to the following chart on page six, where we have the revenue breakdown by distribution channel. We passed the mark of EUR 100 million for the wholesale business, which reported a decline of 21% during the first half of the year.
While retail declined by 32% during the first semester with a Q2 at -57%. This is, of course, as I was mentioning, incorporating the effect of more than half of the network being closed for around two months in April and May. The comp store growth was down 38%, while online outperformed with double-digit growth during the first semester. Let me bring you to page seven with the Monobrand store network evolution. We reached 213 stores at the end of the semester.
We started the year with 209. We had one closure that was already planned for Italy with the closure of our Moncler Enfant store in Via della Spiga. This was something that was planned and as well as the doubling of the space that we have in Rinascente , so compensating for the closure of the dedicated store in Via della Spiga. We had also the opening of new country.
This was during the first quarter with Kiev. Recently, we opened early July, a beautiful store in Calgary. Regarding Asia, we had one closure, in Hong Kong, that was also planned. It was the end of the lease that we didn't review in the garden. While the increase you see on the U.S. market is driven by conversion of Holt Renfrew shopping the shop that we have in wholesale that are now retail stores in Calgary, Vancouver, and Toronto, as well as the opening of one retail store in Valley Fair, with Bloomingdale's on the ground floor at the entrance of the department store. Regarding the rest of the year, we have in total 10 openings that are planned. I will just mention two that are more important for me than others. One is the opening of a new country with the retail approach, which is Barcelona.
This is meant to be also at the end of the year, probably in December, as well as our flagship store in Paris on the Champs-Élysées, between Vuitton and Dior. I would like to mention also one relocation that we had early June, which is a relocation in Printemps Haussmann, because it's the first time that we have been able to open a ground floor location in a European department store. This will be followed during the month of August with an opening with the KaDeWe Group in Alsterhaus in Hamburg. We will have also there a beautiful store on the ground floor. By the way, also, KaDeWe is going to be the group who has one of the last important group department store where we were with a wholesale model that we will transform and convert into concession during the summer.
We plan to have two stores opening in Alsterhaus in concession and convert the store we have in KaDeWe Berlin in concession, as well as an opening and conversion in other in Munich. Regarding wholesale mono brand, we are now at 63. You see one decrease. This is mainly due to the fact that we had these four conversion on the Canadian market. In the meantime, we also had some few openings. One is the airport of Taipei, terminal two. We open also with DFS in Cairns, Australia, and an opening of a dedicated shop in the shop for the Enfant in Moscow Barvikha. We move to the following page. Here I let you go through the detailed analysis of the impact of the COVID-19 that we are reporting. I will just go through the main headlines. February, we had five store close.
They were all located in China. In March, the number of closures went up to 111. As you see, Italy and all Europe was closed as well as Americas, and some were selected closures in China and in Hong Kong. In April, we had 123 closures. Italy was still completely closed, and we started with few reopenings in Europe. Japan and Singapore at the time became closed as well as the stores in Americas. May was the month where we had more reopenings, more than 80 stores reopened. In Italy, some stores were still closed, the majority was reopened as well as France. Japan also reopened in the month, Canada and a few stores in the U.S. U.K. reopened only in the month of June. At the end of the month, we still have nine stores that are closed, three in Italy.
These are the stores that are in the airport, in Malpensa, that are now open, and the store in Padova. We have three other stores in Europe, in Istanbul, Saint-Germain, and in Printemps Louvre, in Paris. The last one that we are still closed in U.S. were San Francisco, Atlanta, and Costa Mesa, and all these stores are now open. Regarding the action that were taken during the last few months, there was a strong effort that was done in terms of communication to refocus digitally in terms of communication on the values of Moncler that we started communicating last year. There was also a fantastic event that Remo just mentioned, with Weibo in China, our first phygital event with the launch of one of the collection of Genius, the one with Fragment with Hiroshi Fujiwara, that drove more than 32 million views.
This is now still the record for luxury brands on Weibo. Regarding clients, we implemented a project that we call New Locals. These are a way to reactivate or activate travel retailers when they are traveling around the world, and the fact that now with the pandemic, they cannot travel anymore. We have a strong project to activate them, mainly in China and in Europe, to activate these people that are used to buy abroad, to try to convert them and bring them buying into their country of origin. I think we can move to the next two pictures. One I wanted to mention is an opening that took place during the in Wuxi Center in China. This is in Center 66. This is part of the Plaza 66 Group in China. Another opening that took place just at the end of June.
Here we cheat a little bit because I think it was early July, but I wanted to show you that the store is really beautiful and it's the smallest but probably the cutest store we have, and it opened in Capri.
Okay. Thank you, Roberto. Good afternoon, everybody, thank you for attending our call today. We are now at the page 12, where we report income statement. Just technical information to start. We report for the first time, the full set of results under IFRS 16 only. We also report our stock-based compensation that we used to report separately in a separate line. Now it is embedded in each item, in each line of the income statement, selling and G&A, respectively. We also report on the side of the chart an explanation and the indication of the amount of both of the stock-based compensation this year, last year, and the impact on our operating margin of the IFRS 16 application. Let's start with the business results. Top line at EUR 403 million, down 29%, already fully explained by Roberto.
Gross margin 69.3%, down against the 76.7% we reported the first half of last year. The decrease of gross margin totally due to an extraordinary write-down of inventory for about EUR 30 million. Additional write-down because we normally include in our cost of goods sold, let's say physiological write-down that in the first half of this year was about EUR 8 million. On the top of EUR 8 million, again, we provided for additional EUR 30 million, mostly allocated to the current Spring-Summer 2020 collection. As you know, as you may remember, we already discussed the last time we met after the lockdown. During the lockdown, we immediately took action to cut our production plan for the full winter season. For the Spring-Summer season, 95% of our production was already completed. Again, we took actions also to carry over some items from Spring-Summer 2020 to Spring-Summer 2021.
A very synergy activity, very complex activity implemented by our merchandising team together with product development and supply chain that mitigated significantly the impact of the leftover. Again, EUR 30 million is the last number that came out and was included in the cost of goods sold and consequently impacted gross margin. Selling are lower than last year in absolute value, but of course the percentage is higher due to the fixed cost portion of our retail business mostly, and mainly rents. Even though we also on this specific item on rents, we immediately implemented actions. We opened a discussion table to renegotiate our rents, our leases with the landlords. Results are fairly good, honestly. Honestly, also less than what we originally planned, but discussion have been very tough. Honestly, I would say that at the end, we got some good results.
Second important fixed cost is D&A, depreciation amortization, that by definition is fixed. This year is even higher than last year due to the important CapEx we have implemented over the past few years. Honestly, we didn't save that much on the payroll item because as you know, as we said many times, we set as a priority the protection of our people, first from the health point of view during the lockdown, but second, also from the economical point of view. In fact, as you may remember, we paid them 100% of their compensation even during the lockdown, even when the stores were closed. Overall, a fairly good result considering the situation. G&A, more or less the same story. G&A are lower than last year, still on a percentage basis, higher.
Because, as you know, we have invested a lot over the past few years in our organization. Last but not least, because this is part of our communication today in the digital department of our organization, also in view of the sourcing of the online business. Marketing, important to highlight that we included in the marketing expenses, if you want inappropriately, but this is accounting principle, the over EUR 10 million, almost EUR 11 million charity we did for the city of Milan. Without that EUR 10 million and over charity, marketing would have been more or less in line with H1 2019. For the year end on marketing, last year, you see in the chart we reported 7%. For this year, we expect a number that will be closer to 6%. Operating margin, EBIT EUR 35 million negative.
Let me say that without the 30+ 10, over EUR 40 million extraordinary items would have been slightly positive. Financial, EUR 11 million for the vast majority due to the lease liabilities. Tax rate, 32% positive, of course, because we take advantage of the tax credit, and at the end, the net results are negative for EUR 31.6 million. As you may see, we don't report EBITDA. We decided not to report EBITDA any longer because under the new IFRS 16, EBITDA is not a metric we use as management team. We don't believe EBITDA is a meaningful metric any longer. For your information, we reported page 19 of the appendix, the reconciliation between EBIT reported and EBITDA adjusted before the application of IFRS 16. Okay, we can move now to page 13, where we report the CapEx, EUR 36.7 million against EUR 41 million last year.
With a revised plan for the year-end to spend much more than last year. Honestly, we expect about EUR 90 million, EUR 91 million. Much less. Much less? You said much more. Sorry, much less than last year. To spend about EUR 90 million, EUR 91 million. Last year, as you can see, we spent EUR 121 million. This decision was made after the pandemic problem. We decided to cut our CapEx of about 30%. The CapEx we spent in the first half are more or less equally distributed between retail network and infrastructure, mostly information technology, logistics, and last but not least again, the CapEx information technology platform spent for our online business, the sources of the online business. Okay. Let's go now to page 14, where we report the working capital, which is fairly good, 6.8%, as compared to 5.5% last year. Not bad.
Credit, I would say pretty good and pretty well under control. Inventory, of course, much higher if you consider that EUR 267 million are net of the EUR 50 million additional write-down we talked about before. Inventory problem pretty important in this period. Let's move to page 15, net financial position, EUR 595 million positive, excluding lease liabilities , EUR 200 million better than one year ago. Of course, in part, thanks to the non-distribution of dividends, because, as you know, we decided not to distribute dividends this year. Let's move now to page 16, balance sheet. Nothing to say unless you have questions. Cash flow statement, page 17. We changed a little bit the format of the cash flow statement. We start now as a first line from the EBIT.
We add D&A, the other location adjustment that are related to stock-based compensation, the IFRS impact, and all the other lines, we already discussed about, with the only exception of a change in other assets, which is negative. Much higher than last year, mostly due to the tax credit we reported in the jurisdictions where we reported a tax loss. Free cash flow, EUR 74 million negative as compared to EUR 71 million positive last year. Net cash flow, the impact mitigated by the fact, as I said before, that we didn't distribute dividends this year. We are done with the presentation now, and we are open to answer your questions. Thank you.
Excuse me, this is the chorus call conference operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Anne-Laure Bismuth with HSBC. Please go ahead.
Yes. Hi, good evening, everyone. I will stick to one question. Regarding the performance in retail, which was down 32%, and given the fact that retail like for like were down 38%, it will imply a contribution from new space of 6%. Given the fact that when you open four stores in Q1, the contribution should be less than this. If you can just clarify this point and also help us to understand what we should expect in terms of contribution from new space for full year, please. Thank you.
Okay, thank you. Thank you, Anne-Laure, for your question. You're right, more or less, the space contribution was 6%. Of course, first half for a couple of reasons, including seasonality, not only the breakdown is not a meaningful 100%. For the second half of the year, it should be higher, the space contribution. We stand with our overall guideline of about 8% for the year end.
Thank you.
Welcome.
The next question is from Elena Mariani with Morgan Stanley. Please go ahead.
Hi. Good evening. Thanks very much for the detailed presentation. I will stick to one question as well. Would it be possible for you to elaborate on your exit rate and on the trends you have observed in recent weeks globally and perhaps with a stronger focus on Mainland China? I just would like to know how, in your opinion, we should think about Q3 and Q4, and whether it makes sense to assume that your sales will most likely remain in negative territory until the end of the year given the lack of tourist flows. I know it's difficult to tell, but perhaps your feeling based on how you've seen the business evolving.
If this is a good assessment, also how we should think about the evolution of gross margin and OpEx, taking into account the write-down you recorded in inventory and also your expectation on the evolution of the cost base. Thank you.
Hi, Elena. It's Roberto. You started well, but you ended with two questions at the end, as usual. Let's say it's one question each between myself and Luciano. As you know, we do not comment results on a monthly basis, but I can give you maybe some flavor on how we have seen the evolution during the quarter two. Of course, the worst months in the last quarter was April, where most of our stores were closed, and then gradually we reopen. What we have seen, it's an improvement of the performance in all the region. Some are more affected than others, and some are exiting from the crisis in a faster way. China, that was locked down in March and was gradually reopening in April, did well. It was a double-digit growth, and we have seen an acceleration on the Chinese market in April.
May and June was by far the best months with a strong double-digit growth, also helped by the program that we had with, as I was mentioning, the New Locals driving to drive the sales of travelers that are usually buying our goods into the Chinese market. Korea did well and was never really completely closed, so we have been continuously operating there. Despite the fact that one-third of the business now it's a duty-free business, we have been registering positive. The semester was positive for the Korean market. Japan had also a recovery, but a little bit slower than the Korean market. Americas, different problems. We started by the lockdown, as you know, and then we had some riots where we had nine stores that were closed, three of them really damaged and took us two to three weeks to have them being reopened again.
I must say that the exit of the month of June and the start, and we are now on the same trend, was pretty good, so very encouraging. A faster recovery than what we have been experiencing in Europe. In Europe, we say the northern part of Europe with Scandinavia, with Switzerland, with Germany, with Austria to a lesser extent because there is still a strong aspect of travel retail in Austria, but have been doing fine. Germany was even positive in the last two months. While the southern part of Europe is suffering more, especially, I must say the two cities that are the most affected are Milano and Paris, that are heavily dependent from travel retail.
To give you a flavor for the end of the year, I think it's really difficult because everything will depend on the recovery of the travel retail that honestly, for the long haul, we don't expect to have in the course of 2020, but probably more a gradual improvement toward the beginning of 2021. While we expect probably a little bit of what we call the travelers but are the local travelers, the German traveling to Paris, the German traveling to Italy, and so on, or the Chinese starting to travel to Korea and to Japan, is we see more opportunities for this business to restart, and everything will be linked to the restart of the locals. travelers, sorry. One thing that you need to bear in mind is that globally, semester one for Moncler accounts usually around 34%-35%.
2/3 of the year is in front, or the result of the year is in front of us. Usually what we have towards the end of the year, the last quarter, is a predominance of local buyers compared to travelers. Travelers are very strong in Q2 and Q3 to a lesser extent, so we are less relying on travelers in Q4.
Elena, about your question on profitability, on gross margin. Gross margin first half of the year, as you said, was heavily impacted by the additional extraordinary EUR 30 million write-down based on the visibility we have now, and considering that, as we said before, we took immediate action to cut our production plan for the current full winter season. We don't expect now any additional need to write down inventory in second half of the year. Having said that, and considering that H1 sales represent about one third of the total, the impact on gross margin for the year end should be significantly lower and mitigated, because the EUR 30 million should not be higher, and the sales should be much higher.
About operating margins, you know that our sales, as I just said, in the first half represent one third of the total, Our OpEx represent much more, less than 50%, Again, the weight of our organization overall is much higher, because it's not variable, it's mostly fixed. Having said that, and based again on our current visibility, also operating margins, because of the impact of OpEx, should be better. Of course, much better in the second half. I can't tell you any number. Of course, this is the thinking process in our mind.
Thank you to both of you. Have a good evening.
Operator. Sorry, I just take a question from the web. Julian is asking, "Can you please explain what are the incremental costs related to the digital internalizations, both CapEx and OpEx, and how will you manage to minimize disruption risks?" I leave it to Luciano, I think.
Okay. I take the first part of the question. The CapEx is something we said in the past, and we confirm that we are spending for the new online platform about EUR 15 million, one five, excluding the second phase of the project that will be implemented next year, that relates to China Mainland. Because all the world where we have the online business will be under the Salesforce platform, and the cost altogether, not only Salesforce, of course, reported in our CapEx is EUR 15 million. Of course, we started to spend last year, and we have spent a lot and reported a lot of this EUR 15 million last year, another important portion this year, and the last part of this CapEx next year. About OpEx.
Variable OpEx are consequent to the concession fee we will pay for Salesforce, but the majority of OpEx will relate to the organization we just discussed about before, because, of course, we have been building this organization starting last year, even in 2018. Of course, the cost of this organization is quite important. We never disclose any number, but it is quite important. Having said that, of course, we aim and we plan to maintain and to protect the online business profitability we have now. Of course, the most important reason why we source this business is not profits, to further increase profits that are already very good, but to take advantage of the huge opportunities we see in this channel. Roberto.
Okay. On the minimization of the disruption risk, let me say that we started this project with the pilots on the Korean market already more than one year ago, because the kickoff of the e-commerce on Korea took place at the beginning of June 2019, based on exactly the same UX as the website that we are in the other country. I remind you that Korea was not part of the deal we had with YOOX Net-a-Porter, we were free to launch this market and operate it ourselves. It has been now one year of tests that we have been doing. We have then been discussing, assessing the possibility to further develop the culture internally, and we have been investing both in terms of supply chain, but also in terms of talents that we have recruited. We are now in place.
We are putting in place a new digital organization within Moncler that will cover at the same time the digital part, the engagement, and all the transformation parts. We're including also the part related to innovation and the CRM part, as well as the social media. We are now pretty confident that we have the setup that is ready. We have now been working on the plan to internalize the e-commerce part, and basically we have two streams that are running in parallel. One is the internalization that we start with the U.S. and Canadian market by October this year. This is the agreement that we have. We will start moving, and internalizing the migration with a go-live that is expected to start at the beginning of Q4.
We have already started the phase of design of the EMEA market that is by far the more complex because we are in more than 30 countries with different VAT level. We want to be able to provide the full omni-channel service from the beginning. Here we have already started and put the team in place for the EMEA, then that will be followed by Japan and at the end, the launch of the Chinese market that is requiring a specific organization that will be located in Shanghai, that will be working in strong connection here with the HQ. There is another stream that has started already, at the end of last year, which is the new UX redesign.
The new website redesign where we want to bring a little bit of the, let's say the flair of the entertainment industry, and also give more fluidity in the way you navigate throughout the website. This is running in parallel with the objective there to launch this new website by the end of H1 2021, beginning of H2 2021.
Operator.
Okay. The next question is from Thomas Chauvet with Citi. Please go ahead.
Good evening. I have just a quick follow-up question for Roberto on e-commerce and then a question on Genius. Just, Roberto, on the press release you made earlier, you said you expect the share of e-commerce to double in three years. Do you mean direct e-commerce, which I think is around 5% of your sales or your total online business with the third parties?
Sure, Thomas, answer to this first part, yes, we mean the full business. This is both what we are managing directly, that we will be managing directly through our own website, so our own e-commerce. Also the one that we have through the e-tailers and the different partnership now with department store, and other websites that are selling Moncler. Basically, we want to move from 10% to roughly double the weight, so 20% by 2023.
Okay. My main question is on Genius. Have you made any major change, in recent weeks, months to the timing or the depth of the collaboration plan for the rest of the year? Within your EUR 30 million of inventory write-down, was this relatively broad-based across Genius and the Moncler collection? The respective share of each business or was there a bigger weight, maybe for Genius within that write-down? Thank you.
No. Regarding Genius, yes, we had to review the calendar of the different launches, linked to the fact that, at the given point in time, as you know, our rhythm is more or less one launch per month. When we had two-thirds of our network that was closed, obviously we decided to postpone the launch because the way we leverage Genius is not only online or digitally, but it is always a combination with the omni-channel between the retail store and the online store. We had a month without launch, and now we have restarted with Fragment also in terms of days of comparison. The month of June last year, we had a strong launch with Palm Angels, and we didn't have any this year.
There will be a little bit more launches in the last four months of the year linked to this pandemic issue and the fact that we had the lockdown in most of the country. There is no more write-down on Genius than in the past, is something that is similar. For the launch of Fragment, we haven't seen a difference in terms of, let's say, weight of the sales. Also driven by the fact that Japan and China and Korea were back to normal. Of course, a little bit of an impact in Europe because in Europe when we sell, we sell both to local clients but also to travelers that were not present.
Thank you.
The next question is from Susy Tibaldi with UBS. Please go ahead.
Hi, good evening. Given that Q3 is your most important quarter for the wholesale channel, I just wanted to check what are your expectations there given your current order visibility. Thank you.
Just let me re-explain which quarter is important for which channel. Q3 is usually the month, the quarter where we do the results of the wholesale part because it's where we are shipping the full winter season. This is something that has started, that is obviously made a little bit difficult in some of the areas like the U.S. by the fact that the department store are under pressure. With most of them, we have found an agreement and a coverage that is ensuring that we can continue to do to our business continuity with them. Q4 is the quarter of the retail. Q3 for the retail is a little bit more important than Q2, more or less at the same magnitude as of Q1. It's important, but not as important as the last quarter where we do 45% of the sales.
The efforts that we have in terms of product launch and so on, are really concentrated in the last 4 months of the year regarding Genius, and of course we have now started to sell the Fall/Winter season. The decision we have been taking in discussion with the wholesale partner that we have and with our region, was to extend the presence of the Spring/Summer season a little bit longer to give opportunity to our consumer to buy to our clients, because of course, with the two months of closure, they didn't really have the time. We have now in July, a month where we are selling still something very balanced between Fall/Winter and Spring/Summer, while last year we were already selling at 70% of Fall/Winter. This will be back to normal.
We have a catch-up in terms of Fall/Winter distribution, and by beginning of August, we will be back to comparable figures and number compared to 2019.
The next question is from Luca Solca with Bernstein. Please go ahead.
Yes, good evening. If I may, I would like to ask you a question on like-for-like calculated differently. If we are to compare oranges to oranges, we need to consider that many of the stores were actually closed during the first half. What would be the like-for-like gross number if you just took sales of the stores in existence last year for the days that they were open this year on year?
Yes, Luca. Of course, it's difficult to give you a precise answer. What we can tell you is that, of course, the result would have been better, but to be honest, we do after we reopen the stores, if I look at June, as Roberto said, June, of course, was much better than May and even better than April, but still with the very low traffic in some regions, not in all of them, because China very well. Everything that we said before, still on an aggregate basis, June was still a negative comp.
Luca, let me give you some additional flavor that will not completely answer to your question. The effect of the pandemic is not only, as you know, on the fact that the store is open or not, is linked to the fact that there is confidence for the consumer to go back and buy. There is also the fact that the travelers are not traveling anymore. They are buying more locally. I'll give you two example. China with very strong month of June, very strong double digit. If we had to calculate the comp sales there, it is the positive effect of the pandemic and not having people traveling. There we have had a sales density that is higher than last year. Similar to the Swiss market, where the Swiss were also used to buy and go abroad to buy. They are now staying.
The results we're currently having on the resort store in the ski resort are really excellent. We are doing figures that are similar to what we do usually in the winter season, and we had to ship more product to the, what we call internally the ski resort that of course have no ski at all in the summer. Some others are completely affected by the fact that there is a lack of travelers. As I was mentioning, if you look at the like-for-like for Paris and for Milano, it's really negative.
Understood. If you were to break down the like-for-like that you reported, how much would you say is from stores being closed and how much is because people are not traveling and the feel-good factor has been affected and so on, so that we get a good understanding of the real underlying like-for-like?
Excuse me, Luca. Your question was how much of the comp is due to store closure?
Yeah. Correct. How much is instead due because people are not traveling or because the feel-good factor is not there, people are more conservative about their finances, they lost their job, whatever?
Okay. The second one is clearly very important. Also the first one. Remember that most of our stores were closed in Q2. That is for a retail standpoint, a low quarter. March was important and we started there. Also the travelers instead are very important. We don't have a precise figure, and don't really think it's something that we would even calculate. Of course, remember that the travelers for sure, in particular in these months that are the summer period in which in EMEA they count a lot. Hong Kong is still a very difficult market because of not Chinese there. They are counting. The travelers are for sure very important.
Maybe one element, Luca, is the performance on the locals and what we have seen, and here I see really the similar figure as I was mentioning in Europe for the performance we have seen, all the northern part of Europe where the locals are performing better than usual. It's, in some cases, a double-digit growth that we have with the northern part of Europe nationality. While in Milan, in Italy, for example, the performance on the local is still negative and in Paris is the same.
Understood. Thank you very much.
The next question is from Andrea Randone with Intermonte. Please go ahead.
Thank you. Good evening. Just a quick question about your negotiation of rent. Can we think your talks are to have a temporary effect or this can be also a permanent benefit? Thank you.
I mean, the way we approach the landlords and this problem, honestly, was to fix the problem now based on the current situation, with the mutual agreement to sit with them again if, hopefully not, the situation should continue in the future. This is for the vast majority of negotiations and the vast majority of rent reductions we got. Of course, some of the leases we renegotiated will have an impact also in 2021, in the years after, because we renegotiated all the lease for all the term of the lease. Again, the vast majority, again, this was the approach or the strategy we decided to implement when we opened this negotiation table, to fix the problem now and then we will see in the future. Again, the benefit, we will have some benefit also for the future, but not so important.
Very clear. Thank you.
The next question is from Flavio Cereda with Jefferies. Please go ahead.
Yes. Thank you. Good evening, everybody. A quick question on the supply chain. We're seeing that a number of countries in Eastern Europe, including Romania, are unfortunately experiencing significant spikes at this moment in time of COVID-19. I was wondering, I guess, what mitigating action can you take? And is there a backup plan if you have issues even in your own production plant? Thank you.
Hi, Flavio. Supply chain, we are facing, honestly, problems every day. Having said that, I have to tell you that, crossing fingers, we never stopped our production. Our own factory has never stopped, with only two out of 1,000 people, two cases, positive cases, that are not serious cases. This, thanks to some luck, for sure, but also because we implemented a very strict, stringent procedures and protocol. In the rest of our production network, we had, and we're still having some problems in the countries you mentioned. Honestly, production is for the most part, for the full winter season, of course, completed. We have some delays as compared to last year, but honestly, not that much. I will say that we are in a pretty good shape. Of course, I can't anticipate what may happen in the future, but again, so far so good.
The same in our logistics activity, that is located also in a very hot region of Italy, in Piacenza. Notwithstanding the location and operations in our logistic hub never stopped. We could not only ship out our finished products to our regions, to our customers, but also most importantly, to feed, to ship raw materials to our production network, even during the lockdown. Again, we don't see any material problem on that side, honestly.
Superb. Thank you, Luciano.
Welcome.
The next question is from Paola Carboni with EQUITA SIM. Please go ahead.
Yes. Hi. Good evening, everybody. Two very quick questions. The first one is on your cost control action. Given what you did in H1, should we expect the pace to accelerate in H2 or to slow? I don't know how you look to your cost containment action for the remainder of the year. Secondly, you have commented about June, which was sharply recovering on the previous month. Would you expect this pace of improvement to continue as much as you are seeing in July? To stabilize a little bit? I don't know. Just a quick comment, if you can, on the really current trading. Thanks.
Start maybe, Paola, with the current trading. I think what we have seen in Asia, it's something that is solid unless there is a second wave that we cannot plan. Things there can only improve. We still have the situation in Macau and Singapore, where Macau, we are not closed, but basically 99% of the business is done by Chinese coming to game in the casino, and currently they are not traveling. As soon as this will reopen, it will clearly further improve the result of APAC. We have the situation in Hong Kong that is a mix of political situation and COVID situation. If the COVID is solved, I think there also we will see an improvement.
The action that we have started with the New Locals, the travelers that are not going abroad in China is continuing, and we see improvement on the Korean market and on the Japanese market. U.S. seems to be also on the right track, but there, as you know, the fact that there is the presidential election may also cause some further discontinuity in the business that we cannot foresee. I think the situation that is more difficult to evaluate is Europe, because we have more than half of the business that is driven by travel retail. If there is no travel retail coming back, I don't really see an improvement in the months to come. Maybe a little bit more towards the end of the year, because as I was saying before, the last quarter, we have the proportion of local in Europe that is inverted.
We have more sales to locals in the last quarter. It's 60% on locals, 40% on travel. If the travels are not there, and if we do a good job with the locals, I think that there is a possibility to catch up a little bit. All this will depend on elements that are not really in our hands, the reopening of the borders, the travelers, and especially the health situation.
About cost control, Paola. Cost control is part of our culture. To answer your question, second half, we will implement the same actions with the same attitude and the same approach we had in the first half. Of course, some OpEx are associated with the projects we decided to put on hold. Other OpEx are associated with ordinary business activities, like travel. Of course, we didn't travel during the lockdown, but we hope to start again to travel in the second half of the year, with not ourselves only, but our organization. Having said that, we have, I would say, very deep culture of cost control. In the second half of the year, our OpEx, we will apply the same approach and the same attitude of the first half. Difficult to give you, of course, a precise number, which normally we don't do.
In any event, both selling and the G&A. Of course, selling for the most part are associated with retail expenses. Again, we talked about rent. Of course, a part of the negotiation will produce an important impact in the second half of the year. Just to clarify what I said before, because in the long term, the impact is not important. Of course, the impact in the second half of the year will be visible, will be pretty material. Again, we decided, and we still maintain our strategy, not to save and to cut expenses on the people side, because we consider people an asset more than a cost. Having said that, this is what we aim to do.
Marketing, we said before, is not just a cost control, but more a strategy to reduce the pressure of marketing expenses this year for obvious reasons, and to end up by the end of the year in the region of 6-something% on sales.
Okay, thank you very much.
The next question is from Melanie Flouquet with JP Morgan. Please go ahead.
Yes, good evening. Thank you for taking my question. I have actually one for both of you two, sorry. The first one is regarding cost in H1 in selling and marketing. They were down 5% or 4.5%. Some of your peers have reported strong double-digit declines on lower declining sales. I was wondering whether you can help us maybe understand a bit better, maybe it's your commitment to investments, maybe it's your fixed cost base is higher, but how big the share is compared to your peer group. My second question is on online and your ambition to double the share of online as a total business. How much of a game changer and contribution of China is embedded into your assumption? Thank you.
Bonsoir, Melanie. Good evening. Regarding the marketing expenses, as you have seen, we have been investing EUR 44.3 million during the first semester. Out of this EUR 44 million, there is roughly EUR 11 million that were exceptional investment that we did for charity. We should be looking at a figure that is more around EUR 33 million investment compared to the EUR 43 million we had in H1 last year. There is EUR 10 million less investment that we did.
Yeah.
These investments were already in place. They were invested during January and February for the launch event that we did in Milano. Again, very successful, just before we had the lockdown. After that, we kept mainly the investment on the digital part, and we cut the investment especially on traditional media, because having the store closed was not really making sense for us. What is left.
I was more looking at selling and marketing together, because most companies are reporting them together. I was looking at selling and actually the bigger part is the selling cost, grouped together. The rights reported -5, excluding the EUR 11 million, -9 or -8.5. That's still not the decline that we saw at your peers. As you mentioned, it's a conglomerate that just reported -16 on the lower decline in sales. Is this because you're in a different investment phase, or is it because you have a higher fixed cost base for increasing your rents that you could revitalize? Are you
Maybe, I think Luciano will complete the answer that I will give. The way we plan usually in terms of staffing in the store is to have additional people coming to help with the peak that we are experiencing towards the end of the year, that we start recruiting usually in August, September, to cope with the people that are staying with us until January, February. The days that we have for the months between March and August are personnel that is fixed and that we don't have additional recruitment there. Of course, we didn't recruit. We also think that we'll be able to manage the end of this year with a reduced number of additional people, of temporary people, maybe even without temporary people, depending on the way the results are going to go on.
We have been working, taking leverage on the layoffs whenever it was possible. Currently, for example, in Europe, we are turning with 50% of the personnel that are working one week and that are on layoffs the week after because there is order twists that are missing. Then we will continue with this.
Just, Melanie, if I can add something. We normally say that our OpEx altogether, selling, G&A, marketing, are 60% fixed and 40% variable. If you look at the numbers and excluding the EUR 10 million, EUR 11 million actually charity activity, we ended up with exactly, let's say 35/65. If you consider that this is the first half of the year, that seasonally is much lower than the second half, is totally consistent with our guidance. Considering that in our OpEx, in selling mostly, that you mentioned, we include the D&A, depreciation, amortization, that are high and higher than last year, not lower, but even higher because of the CapEx of the past few years. Something important to highlight about the productivity. We could be more aggressive, honestly, on productivity.
Again, we prefer that at least for the time being, to be very sensitive with our people to maintain high their motivation. Of course, not only health, but also their motivation for the next future. We could be more aggressive, but this is not what we decided to do.
Melanie, regarding the growth that we expect to be generated by all our digital activity, I think it's a blend of different elements that we're going to bring. First of all, I think a better integration between the digital store and the physical store by an enhanced omni-channel and enhanced omni-channel service also with the one pool inventory that we have not been able to implement while we were working with the YNAP. I think this is one of the key elements of the strategy for 2021. We have also new services that we have started to develop, like video messaging, digital appointments, distance sales, and phygital events that are also driving sales. On top, we expect that the new concept, the new UX, the new, let's say, digital experience that we'll be experiencing on the commerce side will drive also additional sales.
We don't disclose the results of the sales online that we have. Let me say that the contribution of China with the online is by far lower than the one that we have with the physical stores. For us, with also the deployment of a dedicated team on the Chinese market, there will be objective to catch up and to have a weight of the Chinese market a little bit more in line with the weight of the retail store that we have.
Thank you. Does that change your strategy with Tmall and Tencent, maybe? Where are you planning anyway?
As you know, I don't know if you remember, Melanie, we had a test that we did with Tmall two years ago.
Yeah.
It was in September 2018. I think that both in terms of team and also digital experience, we were not ready. It was a kind of warm-up that we had. We have been keeping discussing with them, and I don't see why we shouldn't be entering Tmall one day at the right moment. Now we are discussing and currently working on the strategy for the Chinese market, assessing if it's better to enter first with our new website or if it is with Tmall. These are discussions that are going in parallel, and probably in a few months, we'll be able to give you a more precise answer on this. We are also keeping discussing with Farfetch, so a discussion and the table is open there, as they have been improving a lot the services they are providing. There are also discussion going on.
Thank you.
Operator, it is very late. We have only the time for the last one. Thank you. The next question is from Louise Singlehurst with Goldman Sachs. Please go ahead.
Following on from Melanie's point there on digital, actually. Is there anything else on the product category mix as well? 10%- 20% by 2023 is a very big jump, I just wonder if there's anything else in terms of the product category mix. In addition to digital, does it change at all your views of the long-term store ambitions? At the moment, there's lots of question marks regarding store footprint, I realize, in a normalized environment, the longer term ambitions. Thirdly, following on from the announcement with Interparfums, I just wonder if I could quickly get a comment on there in terms of your ambitions there as well with perfume. Thank you.
A lot of questions in one question, Louise. First of all, regarding the product, as you know, we have been doing tremendous efforts to develop new product categories that we call now new core categories within Moncler. The tricot, the knitwear, the shoes, the leather goods that have been growing in this past three, four years at a pace that was even higher than outerwear. Now we have in the product portfolio, something that is more balanced. We are going to also implement on the website that is now shut with a back-end dressed with the product. We will have more total look. I think that definitely there is room for improvement and growth at a higher speed, this product category that will get more visibility on the website. Clearly, I think that this is one of the lever in terms of growth.
We think also that if you want to be serious on the digital channel, you need to start think also of dedicated product that you will find on this channel. It's something that we're working between my digital department and my merchandising team. It's something that will go along and that will further reinforce the performance on the e-commerce side. I agree with you. The target is challenging, but in Moncler, we like challenges.
Great. Thank you. Just on Interparfums.
The long-term store vision, yes. I think here I will give you the standard answer on which we believe we have now 213 store worldwide, which is less than half of what the big players have. I think we still have room to grow. We probably maybe not at 15 doors per year, maybe to be a little bit less, always looking more at the quality of the location rather than the number of openings. You can count on something that is slightly more than between 10 and 12 openings per year. I think it will depend also on the fact that travel retail will start or not because we are under-penetrated in terms of stores in airports. We have 22 stores now. I think there, if the travel retail restart, there is a possibility probably to add a few other stores on this channel.
The Interparfums one.
The last one, Interparfums. I think it's a discussion we had with Mr. Ruffini since I joined, and from what I've heard, he was having discussion and this idea in his mind even before me joining. It has been now one year that we have been discussing with them, starting the development. It's something where everybody in Moncler and I think everybody in Interparfums is believing a lot in the potential. It's a license, so they are going to be the one developing the product with us. In terms then of communication and so on, I think it's an additional boost that we'll have in terms of visibility for Moncler as a brand. We want to do something also in the Moncler way. It's a project that we have started. As we mentioned in the announcement, we plan for a launch early 2022.
We are all very excited, but I don't want to disclose more than that, because we want to keep, let's say, the surprise for the moment of the launch and not to disclose it too early. Everybody's very excited about this launch and this collaboration.
Very clear. Thank you for taking my questions.
With this last one, in terms of leaving you with a little bit of curiosity, we thank you, all of you, for the participation. Let me say that the next release on Q3 interim management statement will be on October 22nd, and our silent period will start on September 23rd. Thank you very much for all the very interesting questions. Sorry if we have been a little bit later than what planned. In any event, if any follow-up you still have, Aditya and myself we remain at your disposal. We wish you all a nice summer break. Thank you. Ciao. Good night.
Ladies and gentlemen, thank you for joining. The conference is over, and you may disconnect your telephones.