Good evening. This is the Chorus Call conference operator. Welcome and thank you for joining the Mokla 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.
At this time, I would like to turn the conference over to Ms. Paula Durante, Strategic Planning, Intelligence and Investor Relations Director of Moncler. Please go ahead, Madam.
Thank you, and good evening, everybody. Thank you for being with us tonight for our first half twenty twenty 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 Santa, our Chief Corporate and Supply Officer and Roberto Exa, 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. And the important things, given the later starting of this call, I anticipate that we would make our best effort to conclude it within 1 hour. Therefore, I ask all participants to limit to one question at time.
Of course, if there are more questions, we will take it after, but please limit to 1 the first time you speak. And finally, as usual, there are press inviting this conference in a listen only mode. Let me now hand over to our Chairman and CEO, Mr. Remo
Good evening, everyone, and thank you for attending the Montclair 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 question. 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 think might not always be planned in life and also in business. We have worked together to redefine our priorities. We have outlined what needed 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 are an agile and flexible company, and I ask my people to push these 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. And 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 brings progress, but to make that happening, you need the right people and the right organization. Over these difficult months in Montclair, we have been work all together to find how the crisis could make us stronger. So 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 decided to create a new digital organization and to internalize the e 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, but I feel in this day maybe sometimes misused. How can we create a seamless experience for our Moncler client among all channel, among all touch points? 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 the live streaming Weibo with 32,000,000 viewers the 1st day, a record number in the luxury industry has made me even more convinced that our house has robust foundation. We need now to build more floor. I've spent most of my time during this month trying to understand the sector evolution and work 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. What things 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. Touch point, our digital experience has to support it, our innovations, capacities to provide the tools. Our clienteling as to make all our existing and prospective clients feeling part of a unique experience of the Moncler world, also 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 in the next 3 years. Challenging, but I feel achievable because we have and we are creating the right team with them. The next month's result will be impacted by the pandemic. But if I look at the Montclair in 2022, I see a company bigger, stronger and able to create something even more unique. Now let me leave the floor to Roberto Luciano for more comments on our results.
Thank you very much.
Thank you, Raimo. Let me bring you and Roberto Rex, let me bring you to the results, the revenue breakdown by region, who will comment further results along the presentation. This is on Page 5. The result of the first semester 2020, globally, we reached €403,300,000 which is a 29% decrease compared to H1 2019 with a stronger decrease in Q2 linked, as we will see later on, on the fact that we had most of our store more than half of our store closed during the Q2. Results in the first half have been severely impacted by the measure adopted by the different governments worldwide to limit the COVID-nineteen 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 and we like to add Switzerland that outperformed 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 good in 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 channels here also with strong improvement in during the month of June. Let me bring you to the following chart on Page 6, where we have the revenue breakdown by distribution channel.
We passed the mark of €100,000,000 for wholesale business, which reported a decline of 21% during the first half of the year, while retained declined by 32% during the 1st semester with Q2 at minus 57%. This is, of course, as I was mentioning, operating the effect more than half of the network being closed for around 2 months in April May. The Comscore growth was down 38%, while online outperformed with double digit growth during the 1st semester. Let me bring you to Page 7 with the Monobrand store network evolution. We reached 2 13 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 Enfran store in Spiga. This was something that was planned and as well as the doubling of the space that we have in Arena Chien, so compensating for the closure of the ticket store in CVS Piga. We had also the opening of new countries. This was during the Q1 with TS.
And just now recently, we opened early July a store in a beautiful store in Capri. 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 LeaGarden. While the increase you see on the U. S.
Market is driven by conversion of all train through shop in the shop that we have in wholesale that are now retail stores in Calgary, Valleyfair 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 2 that are more important for me than others. 1 is opening of a new country with a 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 Elysees between Vuitton and Dior.
I would like to mention also one relocation that we had early June, which is a relocation in Tranton Rosemarin 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 Cadetee Group in Asterhaus in Hamburg. We'll have also there a beautiful store on the ground floor. By the way, also Cadet is going to be the group. It was 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.
So we plan to have 2 stores opening in Halterhaus in concession. And convert a store we have in Katteve Berlin in concession as well as an opening and conversion in Oberplinger 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 4 conversion on the Canadian market.
But in the meantime, we also had some few openings. 1 is the airport of Taipei, Terminal 2. We opened also with DFS in Cairns, Australia and an opening of dedicated shop in the shop for the Enfran in Moscow, Barbica. We move to the following page. Here, I let you go through the detailed analysis of the impact of the COVID that we are reporting.
I will just go through the main headlines. February, we had 5 store close. They were all located in China. In March, the number of closure went up to 111. As you see, Italy and all Europe was closed as well as Americas and some selected closure in China and Hong Kong.
In April, we had 123 closures. Again, Italy was still completely closed, and we stopped with few reopenings in Europe. Japan and Singapore at the time became closed as well as the store in Americas. May was the month where we had more reopening, more than 80 stores reopened. In Italy, some stores were secured, but 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 9 stores that are closed, 3 in Italy. These are the stores that were that are in the airport. You mentioned in Malpensa that are now open. And the store in Padova.
We have 3 other stores in Europe, in Istanbul, Saint Germain and in Printembourg in Paris. And 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 digital event with the launch of 1 of the collection of Genius, the one with fragments with Heroshi Fujiwa that drove more than 32,000,000 SKU. This is now still the record for luxury brands on Weibo. And regarding clients, we implemented a project that we call new locals It's 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. So we have a strong project to reactivate them, so mainly in China and in Europe to activate these people that are used to buy a boat to try to convert them and bring them buying into their country of origin. I think we can move to the next two picture.
1 I wanted to mention is an opening that place during the quarter in Booksy Center in China. This is in Center 66, it is part of the Plaza 66 group in China and another opening that took place just at the end of June. And 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 Q3 store we have and it opened in Capri, as the world to reach out.
Okay. Thank you. Thank you, Roberto. And good afternoon, everybody, and thank you for attending our call today. We are now at 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. And we also report our stock based compensation that we used to report in a separate line. Now it is embedded in each item, in each line of the income statement, selling and G and 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. So let's start with the business results.
Top line, EUR 403,000,000 down 29%, already fully explained by Roberto. Gross margin, 69.3%, down against the 76.7% we reported in the first half of last year. The decrease of gross margin, totally due to an extraordinary write down of inventory for about $50,000,000 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 €8,000,000 But on the top of the €8,000,000 again, we provided for additional EUR 30,000,000 mostly allocated to the current springsummer 2020 collection because as you know, as you may remember, I mean, 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. But for the springsummer season, 95% of our production was already completed. And so again, we took actions also to carry over some items from summer 2020 to summer 2021.
So a very surgery activity, very complex activity implemented by our merchandising team together with product development and supply chain that mitigated significantly the impact of the leftover. But again, EUR 30,000,000 is the last number that came out and was included in the cost of goods sold and consequently impacted gross margin. Margin. Selling are lower than last year in absolute value, but of course, the percent is higher due to the fixed cost portion of our retail business mostly and mainly RENZA, even though we also on this specific item on RENSA, we immediately implemented our shows. So we opened a discussion table to renegotiate our rents, our leases with the land loss.
The results are fairly good, honestly. Honestly, also less than what we already planned, but the discussion has been very tough. And honestly, I would say that at an end, we got some good results. 2nd important fixed cost is D and A, depreciation, amortization, that when the finish is fixed, but 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, 1st, 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. So overall, a fairly good result considering the situation. G and A, more or less the same. The same story, G and A are lower than last year, but still on a percentage basis higher. Also because, I mean, as you know, we have invested a lot over the past few years in our organization.
And last but not least, because this is part of our communication today in the digital part and 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, that over €10,000,000 almost €11,000,000 charity we did for the city of Milan Without Beto 10 and over 1,000,000 charity, marketing would have been more or less in line with the first half of last year. For the year end, on marketing, last year, you see in the chart, we reported the 7%. For this year, we expect a number that will be closer to 6%. At the end, operating margin EBITDA, dollars 35,000,000 negative.
But let me say that without the 30 plus €10,000,000 over €40,000,000 extraordinary items, that would have been slightly positive. Financial, EUR 11,000,000 for the vast majority due to the lease liabilities. Tax rate, 32%, positive, of course, because we take advantage of the tax credit and that the net result negative for €31,600,000 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, and we don't believe EBITDA is a meaningful metric any longer.
But 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 CapEx, dollars 36,700,000 against $41,000,000 last year, But with a plan, a revised plan for the year end to spend much more than last year, honestly, we expect about EUR 90,000,000, EUR 91,000,000
Less.
Much less. Sorry, much less than last year. To spend about €90,000,000 to €81,000,000 last year. As you can see, we spent under the $21,000,000 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, like Torque and Infrastructure, mostly Information Technology, Logistics.
And last but not least, again, the CapEx information technology platform spent for our online business, the insourcing of the online business. Okay. Let's go now to Page 14, where we reported working capital, which is fairly good, 6.8% as compared to 5.5% last year, not bad. Credit, I will say, pretty good, pretty well under control. Even though, of course, much higher, if you consider that EUR 2 67,000,000 are net of the EUR 50,000,000 additional write down we talked about before.
So inventory problem, pretty, pretty important in this period. Let's move to Page 15. Net financial position, €595,000,000 positive excluding lease liabilities, €200,000,000 better than 1 year ago, of course, in part thanks to the nondistribution of dividends because, as you know, we decided not to distribute dividends this year. Let me move now to Page 16. Balance sheet, nothing to say Unless you have questions on the cash flow statement, Page 17, we changed a little bit the format of the cash flow statement.
We will start now as a first line from EBITDA. Of course, we add the D and A, the other allocation adjustment that are related to stock based compensation, the IFRS impact and all the other lines, I mean, 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. Again, free cash flow, of course, €74,000,000 negative as compared to €71,000,000 positive last year. Net cash flow, the impact mitigated by the fact, as I said before, that we didn't distribute dividends this year. Okay.
So 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. The first question is from Alor Bismuth with HSBC. Please go ahead.
Yes. Hi. Good evening, everyone. So I will speak to one question. So regarding the performance of retail, which was down 32% and given the fact that retail like for like were down 38%, it will imply a contribution from NewSpace of 6%.
But given the fact that you can't force stores in Q1, the contribution should be less significant. So if you can just clarify this point and also help us to understand what we should expect in terms of contribution from the space for full year, please? Thank you.
Okay. Thank you. Thank you, Alain, for your question. And in your right, more or less, the space contribution was 6%. Of course, first half, for a couple of reasons, including seasonality, not only the breakdown, it's not a meaningful 100%.
For the second half of the year, it should be higher, the space contribution. So we stand with our overall guideline of about 8% for the year end.
Thank you.
The next question is from Elena Mariani with Morgan Stanley.
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 on how you've seen the business evolving. And 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.
Elena, it's Roberto. You started well, but you ended with 2 questions at the end, as usual. But let me let's say it's 1 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, too. Of course, the worst months in the last quarter was April, where most of our stores were closed and gradually we opened.
So 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 readily reopening in April, did well. It was a double digit growth, and we have seen an acceleration on the Chinese market in April, May June was by far the best months with strong double digit growth, also helped by the program that we had with, as I was mentioning, the new local store driving to drive the sales of travelers that are usually buying a goat into the Chinese market. Korea did well and was not never really completely close.
So we have been continuously operating there. And despite the fact that onethree 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 9 stores that were closed. 3 of them really damaged and took us 2 to 3 weeks to have them being reopening again. But 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. So 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 2 months. While the southern part of Europe is suffering more, especially the, I must say, the 2 cities that are the most effective are Milan and Paris that are heavily dependent from travel retail. Now 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 throughout the beginning of 2021. While we expect probably a little bit of what we call the travelers, but are the local travelers, so the German traveling to Paris, the German traveling to Italy and so on and so, 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.
I think one of the drivers, sorry. One thing that you need to bear in mind is that globally, semester 1 for Montclair accounts usually around 30% 34% to 35%. So 2 thirds of the year is in front of the result of the year is in front of us. And usually, what we have towards the end of the year and the last quarter is a predominance of local buyers compared to travelers. So 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 in the first half of the year, as you said, was heavily impacted by the addition €30,000,000 write down based on the visibility we have now. And consider that as we said before, we took immediate attention to cut our production plan for the current for winter season. We don't expect now any additional need to write down inventory in the second half of the year. Having said that and considering that the first half of the year sales represent about 1 third of the total, The impact on gross margin for the year end should be significantly lower and mitigated because the EUR30 million should not be higher and the sales should be much higher.
About operating margins, you know that, I mean, our sales, as I just said, in the first half, represent 1 third of the total, but our OpEx represent much, much more, less than 50%. But again, the weight of our organization overall is much higher because it's not available. 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, but of course, this is the thinking process in our mind.
Thank you, 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 carbon and OpEx? And how will you manage to minimize disruption risks? So I'll leave it to Luciano, I think.
Okay. So I'll take the first part of the question. I mean, the CapEx is something we said in the past, and we confirm that we are spending for the new online platform about EUR 15,000,000 dollars 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 50,000,000. Of course, we started to spend last year.
We have spent a lot, reported a lot of this EUR 50,000,000 last year and other important portion this year and the last part of this CapEx next year. About OpEx, 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. And of course, the cost of this organization is quite important. We never disclosed 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 a pilot on the current market already more than 1 year ago because the kickoff of the e commerce on Korea will take place at the beginning of June 2019 based on the 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 the YOOX NET A PORTER. So we were free to launch this market and operate it ourselves. So it has been now 1 year of test 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 Moncler that will cover, at the same time, the digital part, the engagement and all the transformation parts, including also the part related to innovation and the CRM part as well as the social media. And we are now pretty confident that we have the setup that is ready. So we have now been working on the plan to internalize the e commerce part.
And basically, we have 2 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.
So we will start moving and internalizing the migration with a go live that is expected to start at the beginning of Q4. In parallel, we have already started a phase of design of the MR market that is by far the more complex because we are younger than 30 countries with different VAT level, and we want to be able to provide the full omnichannel service from the beginning. So here, we plan to 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 locally that will be located in Shanghai that will be working in strong connection here with the HQ.
In parallel, there is another stream that has started already at the end of last year, which is the new UX redesign, so the new website redesign that we want where we want to bring a little bit of the, let's say, the fare of the entertainment industry and also give more fluidity in the way you navigate throughout the website. And 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 3 years. Do you mean direct e commerce, which I think is around 5% of your sales or your total online business with the 3rd parties?
Q1, Thomas. I'm sorry to this first part. Yes, we mean full business. This is both what we are managing directly that we will be managing directly through our own website, through our own e commerce and also the one that we have with the retailers and the different partnership now with department store and other websites that are selling Montclair. So basically, we want to move from 10% to roughly double the weight, so 20% by 2023.
Okay. And 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 planned for the rest of the year? And within your €30,000,000 of inventory write down, was this relatively broad based across Genius so the respective share of each business? Or was there a bigger weight maybe for Genius within that write down?
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. And when we had twothree 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 always a combination with the omnichannel between the retail store and the online store. So we had a month we thought launch and now we are we have restarted with fragments also in terms of base of comparison. The month of June last year, we had a strong launch with Palm Angels, and we didn't have any this year.
So there will be a little bit more launches in the last 4 months of the year into 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. It's something that is similar. And for the Lancashire Fragrant, 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 travel to travelers that were not present.
Thank you.
The next question is from Susie Tibaldi with UBS. Please go ahead.
Hi, good evening. So 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 fall winter season. So 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 stores are under pressure. But 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. Then Q4 is a quarter of the retail. Q3 for the retail is a little bit more important than Q2, more or less, adjusted magnitude of Q1. So it's important, but not as important of the last quarter where we do 45% of the sales.
So 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 fallwinter 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 springsummer season a little bit longer to give opportunity to our consumer to buy to our clients because, of course, with the 2 months of closure, they didn't really have the time. So we have now in July a month where we are selling still something very balanced between the fallwinter and spring summer, while last year we were already selling at 70% the fallwinter. So but this will be back to normal.
We have a catch up in terms of full 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 Sorca with Bernstein.
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, year on year?
Yes, look, I mean, of course, it's difficult to give you a precise answer. What I can tell you what we can tell you is that, of course, the result would have been better. But to be honest, we do after we reopened the stores, if I look at June, I mean, as we said before, as Roberto said, the June, of course, was better, 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. I mean everything that we said before, but still on an aggregate basis, Juno was still a negative comp.
Look, let me give you some additional flavor that will not completely answer to your question. But the effect of the pandemic is not only, as you know, on the fact that the store is open or not. It's 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 and they are buying more locally. This is an example.
I'll give you 2 examples. China with very strong month of June, very strong double digit. If we had to calculate the comp sales there, it will be also it is the positive effect of the pandemic and not having people traveling. So 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 and are now staying. So the results we are currently having on the resort store in the ski resort are really excellent.
So we are doing figures that are similar to what we do usually in the winter season, and we have to ship more product to the what we call internally the ski resort out of Guam, not ski at all in the summer. Some others are completely affected by the fact that there is a lack of travelers. And as I was mentioning, if you look at the like for like for Paris and for Milan, it's really, really, 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 is that we get a good understanding of the real underlying like for like?
Luca, your question was how much of the comp is due to store closures?
Yes, correct. And how much is instead you 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. But March was important, and we started there.
And also, the travelers instead are very important. So we don't have a precise figure and don't really think it's something that we would even calculate. But of course, remember that the travelers, for sure, in particularly in this month that have the summer period in which in EMEA, they count a lot. Hong Kong is still a very difficult market because of not the Chinese there. They are counting.
So 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 the 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. So it's a for in some cases, in a double digit growth that we have with the northern part of Europe nationality. And while in Milan or in Italy, for example, the performance on the locals 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 and good evening. Just a quick question about your negotiation of rent. Can we think your I mean, talks are to have a temporary effect? Or this can be also a permanent benefit? Thank you.
Yes. 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 the 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 and the years after because we renegotiated all of the lease for all of the term of the lease. But again, the vast majority and again, this was the approach, 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. So again, the benefits, we will have some benefit also for the future, but not so important. Very clear. Thank you.
The next question is from Flavios Tsereda with Jefferies. Please go ahead.
Yes. Thank you. Good evening, everybody. So a quick question on the supply chain. So 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-nineteen.
So I was wondering what I guess what mitigating action can you take? And is there a backup plan if you have issues even in your own production plant?
Flavio, I mean, supply chain, I mean, we are facing, honestly, problems every day. But as I said that, I have to tell you that crossing fingers, we never stopped our production. Our own factory has never stopped with only 2 out of 1,000 people, 2 cases, positive cases that, I mean, not serious cases. And this, thanks to, I mean, some luck for sure, but also because we implemented a very strict stringent procedures and protocol. In countries you mentioned.
But honestly, production is, for the most part, for the full winter season, of course, completed. So we have some delays as compared to last year, but honestly, not honestly, not that much. So I will tell you 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 logistic activity logistics activity that, I mean, is located also in a very hot region of Italy in Piacenza. Notwithstanding the location, I mean, operations in our logistic hub never stopped. And so we could not only ship out our finished products to our regions, to our customers, but also, most importantly, to feed them, to ship raw materials to our production network even during the lockdown. So again, we don't see any material problem on that side, honestly.
Okay. Thank you, Luciano. The
next question is from Paola Carboni with Equita SIM. Please go ahead.
Yes. Hi. Good evening, everybody. 2 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 too slow? I mean, I don't know how you look your cost containment action for the remainder of the year. And 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 or to stabilize a little bit? I don't know.
Just a quick comment, if you can, on the really current trading. Thanks.
Start maybe, Paolo with the current trading. I think what we have seen in Asia, I think it's something that is solid. And unless there is a second wave that we cannot plan, I think that 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 gaming in the casino. And currently, they are not traveling.
So 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. So 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 in 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. So 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 locals in Europe that is inverted.
So we have more sales to locals in the last quarter. It's 60% on locals, 40% on travel. So if the travel 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. But all this will depend on elements that are not really in our hands, the reopening of the Board of the travelers and especially the health situation.
About cost control, Paola. Cost control is part of our culture. So 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 I mean our organization. So having said that, we have a very, I will say, very deep culture of cost control in the second half of the year. Our OpEx 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. But in any event, both selling and the G and 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. And just to clarify what I said before, because in the long term, the impact is not important. But 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 people side because we consider people an asset more than a cost.
But as you said that this is what we aim to do. Marketing, I mean, we said before, it's not just a cost of control, but more a strategy to reduce the pressure of market expenses this year for obvious reasons and to end up by the end of the year in the region of 6 something percent on sales.
Okay. Thank you very much.
The next question is from Melanie Suki with JPMorgan. Please go ahead.
Yes. Good evening. Thank you for taking my question. I handle the 2, 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 advertising sales. So I was wondering whether you can now personally understand that if that's your commitment to investments in your fixed cost base is higher than the higher the square is compared to your peer group? And my second question is on online and your ambition double the shares of online as a total business. How much of a game changer and contribution of China is embedded into your assumption?
Thank you.
Good evening. Regarding the marketing expenses, as you have seen, we have been investing EUR 44,300,000 during the 1st semester. Out of these €44,000,000 there is roughly €11,000,000 that were exceptional investment that we did charities. So we should be looking at a figure that is more around €33,000,000 investment compared to the €43,000,000 we had in H1 last year. So there is a €10,000,000 less investment that we did.
But these investments were already in place, and they were invested during January February for the launch event that we did in Mihan. Again, very successful just before we had the lockdown. And after that, we kept mainly the investment on the digital part, and we cut the investment on especially on traditional media because having the store closed was not really making sense for us. So what is left I
was now looking at selling and marketing together.
I was because most companies are reporting them together. So I
was looking at selling and actually the bigger part is the selling cost grew together. So you're right, reported minus €5,000,000 excluding the €11,000,000 minus €9,000,000 or €8,500,000,000 That's still not the decline that we saw at your peers, as in H4, it's a combined right purchase reported minus €16,000,000 on your lower declining sales. So is it because you're in a different investment phase? Or is it because you have a higher typical base points between your rents that you could verbalize on
the Maybe I and 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 people 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 keypad that are staying with us until January, February. And then the days that we have for the months between March 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 will 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.
And we have been working taking leverage on the layoffs whenever it was possible. And currently, for example, in Europe, we are turning with 50% of the personnel that are working 1 week and that are only off the week after because there is all the twists that are missing. And then we will continue with this.
So just Melanie, if I can add something. I mean, we normally say that our OpEx altogether, selling G and A and marketing are 60% fixed and 40% available. If you look at the numbers and excluding the $10,000,000 $11,000,000 actually charity activity, we ended up with exactly, I mean, let's say, 35%, 65%. But 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. Also considering that in our OpEx in selling mostly that you mentioned, we include D and A, depreciation and amortization that are high and higher than last year, not lower, but even higher because of the CapEx of the past few years.
Also, something important to highlight about productivity. I mean, we could be more aggressive, honestly, on productivity. But again, we prefer, 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 let's say, 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. 1st of all, I think a better integration between the digital store and the physical store by an enhanced omnichannel and enhanced omni channel service also with the one pool inventory that we are not be able or we have not been able to implement while we were working with the 1 app. So 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 digital 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 you will be experiencing on the e commerce side will drive also additional sales. We don't disclose the results of the sales online that we have, but 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. And for us, with the 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 this mean does that change your strategy with Tmall and Tencent maybe? Can you or where are you planning anyway?
We as you know, I don't if you remember, Melanie, but we had a test that we did with TIMOL 2 years ago. It was in September 2018. And I think that both in terms of team and also experience digital experience, we were not ready. So we it was a kind of warm up that we had. We have been keeping discussing with them, and I think that there is I don't see why we shouldn't be Chinese market, assessing if it's better to enter first with our new website or if it is with Timol.
So 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 to a discussion and the table is open there as they have been improving a lot the services they are providing. So there also there are discussions going on.
Thank you.
Operator, it's very late, so we have already time for the last one. Thank you.
The next question is from Louise Singlehurst with Goldman Sachs. Please go ahead.
Hi, good evening, everyone. I shall keep it very brief. Just following on Melanie's point there on digital actually. Is there anything else on the product category mix as well? 10% to 20% by 2023 is a very big jump.
And 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 kind of store ambitions? Obviously, at the moment, there's lots question marks regarding store footprint, I realize, but in a normalized environment, the longer term ambitions. And then thirdly, following on from the announcement with Inter Parfums, I just wonder if you could quickly get a comment on that in terms of your ambitions there as well with Perfins.
A lot of questions in one question, Louise. So 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 our class. So the 3 core, the knitwear, the shoes, the leather goods that are being growing in these past 3, 4 years at a pace that was even higher than outerwear. So 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 pack shop just with the product. We'll have more total look. So 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. So 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 seeing also of dedicated product that you will find on this channel.
So it's something that we're working between my digital department and my merchandising team. So 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 Montclair, we like challenges.
Great. Thank you. And just wanted to talk about
The long term store vision, yes. I think here, we'll give you the standard answer on which we believe we have now 213 stores worldwide, which is less than half of the what the big players have. So I think we still have room to grow. We probably maybe not at 15 doors per year, maybe it will be a little bit less, always looking more at the quality of the location rather than the number of openings. But you can count on something that is slightly more than between 10 12 openings per year.
I think it will depend also on the fact that travel retail will start or not because we are underpenetrated in terms of stores in airports. We have 22 stores now. So I think there, if the travel retail restart, there is a possibility probably to add a few a few other stores on this channel. And the first one, Terparfa. I think this has been 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. So it has been now 1 year that we have been discussing with them, starting the development. It's something where everybody in Moncler and everybody in the enterprise is believing a lot in the potential. It's a license.
So they are going to be the one developing the product with us. But 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. And we want to do something also in the Moncler way. So it's a project that we have started. As we mentioned in the announcement, we plan for a launch early 2022, and we are all very, 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. But everybody is very excited about this launch and this collaboration.
Okay. So 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 22, and our silent period will start on September 23. Thank you very much for all the very interesting questions. Sorry if we have been a little bit later than what planned.
But in any event, if any follow-up, you still have, Aditya and myself remain will remain at your disposal. We wish you all a nice summer break. Thank you. Ciao. Good night.