Good afternoon. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Moncler first half 2018 with 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, IR and Strategic Planning Director of Moncler. Please go ahead, madam.
Thank you. Good afternoon, everybody, and thank you for joining our call today on Moncler's first half 2018 financial results. First of all, as usual, let me introduce you the executive team on today's call. Our Chairman and CEO, Mr. Remo Ruffini, Luciano Santel, our Chief Corporate and Supply Officer, Roberto Eggs, our Chief Marketing and Operating Officer, Andrea Tieghi, Head of Retail, and Sergio Buongiovanni, Executive Board Member. Before starting the presentation, 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 risk, uncertainties, and other factors that could cause results to differ materially from those expressed in or implied by these statements, many of which are beyond the ability of Moncler to control or 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. I finally remind you that press has been invited to participate 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 welcome to Moncler's first half 2018 results conference call. Let me start this conference call with three short comments on a set of results that I consider exceptional. I will try to be as brief as possible to leave more space to your questions, which are always very interesting for us. First, let me say that I'm very happy with the success of Moncler Fragment Hiroshi Fujiwara launch. It was our first Moncler Genius drop and actually the most important one. The supply chain did a fantastic job. Our marketing division supported extraordinarily, along with our CRM, retail, and wholesale teams who did something, I believe, unique. Second, I cannot avoid commenting our outstanding results.
In the first semester, our consolidated revenues increased by 27% at constant currency, with both channels up double-digit, while our comparable store sales rose by an extraordinary 27%. All markets, including our domestic market, posted results above expectation. I'm particularly impressed by the results that we continue to achieve both in China and Japan, markets that are recording a very strong double-digit growth. I'm very satisfied that our outstanding growth came from a healthy business, and has been supported by high sell-through, tight cost control, and good working capital management, generating sound result also in terms of profitability. The second part of the year is not going to be easy. We are all aware of it. We continue to face an increasing challenging base of comparison and a tough comp. We must remain confident, also considering that important project planned for the upcoming months.
We still have many Moncler Genius launches to complete, starting from Moncler Noir Kei Ninomiya, which has been launched today. We'll shortly open our flagship store in SoHo, N.Y., which will be the largest doors of the network, and we will finalize the relocation of other important stores like London, Sloane Street, and Copenhagen. More than 15 doors are secure for 2018, including the nine open as of today. Last but not least, in October, we will launch the whole Moncler Genius building project with important pop-ups around the world. I would like to conclude by underlining that we are working on several important projects with the aim to deliver what our new corporate campaign, Moncler Beyond, is communicating. To go beyond limits, expectation, and generation. I can guarantee that we are all fully committed to it. Now, thank you very much.
Let me hand over to Roberto and Luciano for more details and comments.
Okay. Good afternoon. I'm Roberto Eggs. I'm very pleased to comment on the results of the first semester with some highlights on Q2 results. Let's start by the breakdown by region. Moncler continued to deliver robust double-digit growth in Q2 2018, with a +26% when accumulating the results of retail and wholesale, driven by the successful launch of the first Genius collection, the one of Hiroshi Fujiwara Fragment. The first semester of 2018, the group revenues rose by 27%, reaching EUR 493.5 million. Revenues growth in all region. In Italy, they rose by 9% in H1, largely driven by the retail channel. Q2 was at +5%. We continue in Italy to clean the distribution on the wholesale side by really going selective in our distribution. Concerning EMEIA, the growth remains solid with a +17% in H1.
Results of the second quarter were more or less in line with a +15%. The growth was driven mainly by France, U.K. and Germany. Asia show us the most outstanding results of all region, with a +42% in H1 and with a +47%, a slight acceleration during the second quarter. This growth has been strong in all region, being Japan, Korea, Hong Kong, China, and the rest of APAC. Finally, the result of Americas with a +29% on H1, with the result of the second quarter more or less in line with the first semester at +26% for the second quarter. This has been driven by double-digit growth in both distribution channels, wholesale and retail. Regarding the revenue, the breakdown by distribution channel. We have been growing in retail by +33% during the first semester.
The result of the second quarter were at +29%. This growth has been driven also by an excellent result in the e-commerce, which has been growing in line with last year at twice the pace of the retail channels. Wholesale revenue rose by 12%, which is slightly above our targets of high single-digit growth. This has been driven in all regions, mainly by the effect of the anticipation of the Fragment collection, compared to the launch of Grenoble in 2017. This has been probably having an impact between 2%-3% on the additional growth. Without the effect of Fragment, the growth would have been in line with the growth that we were forecasting around 8%-9%. The growth has also been driven by the very good results of our Moncler wholesale shop-in-the-shop, and also by the opening of stores in airports.
The mix now between retail and wholesale is 24% in wholesale, 76% in retail. We can expect a year-end being at 22%-23% in wholesale and about 76%-77% on the retail side. Regarding the stores opening, we reach now a network of 209 Moncler stores with four new openings in Q2. We expect, as it was said by Remo Ruffini, a total number of 15 doors open by the end of this year, but also this year with important relocation, about an expansion, about 15. The most important ones being the one of New York SoHo, London Sloane Street, and Copenhagen. The Western Moncler network reached now 65 doors in total as of the 30th of June, including shop-in-the-shops in North America with four of them in Canada, in Toronto, Vancouver, and Calgary.
Also with the transformation of the introduction and the opening in the Neiman Marcus of the women shop after an opening 18 months ago of the men shop-in-the-shop, and the opening of the Munich Airport. I hand over now the work to Luciano Santel. Thank you.
Thank you. Thank you, Roberto, and good afternoon, everybody. Let's get started with our financial results at page 10, where we report our income statement. The top line, EUR 493.5 million, already presented in great detail by Roberto, up 21% at current FX and 27% at constant FX, with a gross margin of 76% against the 75.6% of last year. Such increase totally due to the channel mix because our retail business is growing faster than the wholesale business. The gross margin by each individual distribution channel are totally in line with last year. Selling expenses are 36.2% against the 37.8% of last year. Better than last year. Very good percentage, clearly due to the extraordinary organic growth of our retail business and the lower impact of our retail fixed costs.
G&A expenses 12.5%, same number, same percentage as last year, but with almost EUR 11 million more costs totally invested in our organization to make it stronger to support the growing complexity of our business. Marketing costs, 7.2%, again, same percentage as last year, but with expectations for the year end to spend slightly more than last year when we spent, as you see, 6.7%. For this year, we plan to spend about 7%. Stock-based compensation, same percentage as last year with year-end expectation to spend slightly more, 2.2% probably, as compared to the 2% we spent last year. Financial results are much better than last year, thanks to much lower, very low FX losses. Tax rate 27.3%, much lower than the 30.5% we reported last year, totally thanks to the tax benefit coming from the patent box agreement we signed, as you may remember, in December of 2017.
Net income EUR 61.6 million, up 47% as compared to last year. Last but not least, EBITDA EUR 123.9 million, 25.1% margin as compared to the 23.8% we reported last year. Let's move now to page 11 where we report the net CapEx. CapEx EUR 34.5 million in the first half of this year, the same number we reported last year, but with a totally different composition. Last year, the vast majority of this number was allocated in the retail channel because of two important projects we implemented last year, Milan Monte Napoleone and Hong Kong Canton Road. For this year, the number is EUR 18.5 million, we can say back to normal, but quite unusual, different from last year, is the amount EUR 14.1 million we report in the corporate line, which includes some important projects. First of all, we spent this year much more in information technology than last year.
Also we started an important project in our logistics hub in Piacenza, that is planned to be worth about EUR 15 million in three year, this year, 2019, and 2020. We started this project in the first half of this year, and we reported about EUR 4 million in the first half of the year. Last but not least, we included the acquisition of the industrial building in Romania, where we operate our production facility in Bacău. Let's move now to page 12, where we can see our net working capital. Nothing particular to comment. 5%, slightly better than the 6% we reported last year. Very good credit control, very good inventory management. Nothing more to add.
Let's move now to page 13, net financial position, which at the end of June was EUR 244 million, about EUR 114 million better than last year, than one year ago, and EUR 61 million less than what we reported at the end of December 2017, because in this first half of the year, we distributed dividends for over EUR 70 million, EUR 70.5 million, and we implemented a buyback program for EUR 73.4 million. We can fly over page 14, balance sheet, unless you have questions later, and move to the very last slide, very important, cash flow statement, where we can see how we generated the cash and how we absorbed the cash. Of course, the majority of our free cash flow, EUR 66 million, about 70% higher than last year.
The majority of this free cash flow has been generated by operating income, also a very good net working capital, as we said before. Also something important to outline, a better number than last year in change in other current assets. Again, mostly due to the tax cash benefit coming from the patent box agreement. Again, the agreement we signed last year in December with the tax authority. Free cash flow, again, EUR 66 million. Below the free cash flow The dividends paid for EUR 70.5 million, much more than last year, and the change in equity that this year is negative because of the buyback program. Last year was strongly positive because of the equity injection coming from the exercise of our stock option plans. I'm done for the presentation, and we are all ready now for your questions. Thank you.
Operator, can you open the Q&A session?
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 touch-tone 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 of HSBC. Please go ahead.
Yes. Hi, good evening. It's Anne-Laure Bismuth from HSBC. I have three questions, please. Regarding the performance of the retail like-for-like of 27% in H1, it implied a 6% contribution from new space in H1. I remember that the contribution from new space for the full year is expected in the high single digits. Should we still expect an acceleration in H2 in terms of contributions from new space? Also, is it possible to have the difference of the evolution of the retail like-for-like between Q1 and Q2? What we have had in mind is that the Q1 like-for-like were up around 23%, it would imply a negative contribution from new space in Q2. Is it possible to have a broad idea of the evolution between Q2 and Q1? My other question is about the current trading and the performance in July.
Is it continuing on the same trend? Finally, on the Genius project and the Noir collection launch in July, is it possible to have more details about the rollout and et cetera? Thank you very much.
Okay. Hi, Anne-Laure. About your first question, the new space contribution. Honestly, the 6% that you come out with is not correct, Anne-Laure. This is a technicality, the new space contribution accounts for about 11%, 10.7% precisely, of the total retail sales growth. The contribution of comp stores, which technically is at 27%, accounts for the rest, for the other 22%, it is calculated on a base of comparison that does not include all the stores that last year were expanded, like Milan Monte Napoleone, Hong Kong, Canton Road, and Galeries Lafayette. We mean just to mention the most important ones.
These stores are not comp this year, in the first half of this year, they have significantly contributed to the new space contribution, which again, was 11%, in line with our indications and honestly, based on our current visibility, in line with what we still expect for the year-end.
Q1, Q2.
Q-
I can comment on the current trading and the Genius Noir, if you want to. Good afternoon, Anne-Laure Bismuth. Regarding the Genius Noir launch, I think it's a little bit premature to give any figures as we started to sell it with the opening this morning at 10:00 A.M. I can give you some more highlights if you would like to, on the Fragment launch. Just to make the difference between the two, as you know, Fragment was a full network launch, so it included closely to the full network that we have with the exception of the store in the mountain, so roughly 175, 180 stores. Noir, it's a much more selected network of roughly 70 stores. Regarding the Fragment launch, which we have been very happy about the impact on the results.
We have seen, first of all, an increase in the foot flow of our stores that have been good. It was an increase prior to the launch close to 10%, and after the launch, during the first two weeks after the launch, this increase in the foot flow was of about 20%. We clearly have seen that the launch or the countdown that we organized with the windows, all the push we had on social media, brought some very positive results. What we have learned also from Fragment is that the first week when you have such an exclusive product is essential. More than 50% of the volumes are done during the first week. That means we will have to monitor all the new launches to see, depending on the patterns of sales, if all of them are the same.
Clearly the more commercial one, the more streetwear one had a huge impact on the first days. The second point is that these launches have also a positive impact on the non-outerwear category, as the weight for Fragment was two-third outerwear and one-third non-outerwear. Above the average that we have for non-outerwear, which is around 20%-22%. The other surprise that came was the fact that we talk a lot about being genderless. What we have noticed is that 30% of the sales that are done for Fragment, which is a main collection, have been bought by women. Of course, more on the knitwear, on the tricot side, but this was also a positive surprise. The other one, which one of the target was to acquire new clients and new consumers, this is also something that has been successful.
About 45% of the new buyers were new clients that were not Moncler clients before. The actual number of existing clients, 55, is also quite high because I think we have been doing, with our CRM team, a very good work in terms of clienteling and in-store action that have been driven traffic, but also sales to existing consumer that we have identified as being people interested in the Fragment launch prior to the launch. Finally, on the impact, because I'm sure that this could be a potential question on what has been the impact of the Fragment launch during the period. It has been of roughly 10% of the sales during that period. This has been also a positive result.
Regarding the current trend and the current trading for the first two weeks of July, it's more or less in line with the result of the second quarter. With a slight slowdown in the tourism in Europe that we have noticed, not only us, but also through the data that you can get through Global Blue. We have seen a decrease in the tourist in Europe, but at the same time, we have seen a slight increase since a couple of months in the tourist of Chinese in the other neighboring country, mainly Singapore, Hong Kong, Japan and Korea.
Yes, Anne-Laure, this is Luciano again. The other question you asked was about like for like Q1 and Q2. Of course, as you know, we don't report like for like comp by each quarter. What I can tell you, which is what we told you and the market when we reported the first quarter, is that like for like in first quarter was very strong. We reported another very strong number in the first half, with not many differences, honestly, between the Q1 and Q2.
Okay, thank you.
The next question is from Frederick Pierce of UBS. Please go ahead.
Good evening, everyone. Thank you for taking my questions. I have three questions, please. The first was around by category, just trying to understand a bit about how the gross margins are trending by category. Second was around your S&D cost leverage in H1, up very nicely. Clearly, some of that coming from the organic performance. You also mentioned more efficient management of the retail network. Just wondered if you could give us some specific examples there. My last question was around the operating margin outlook for the full year. Consensus is looking for around 20 basis points EBIT margin expansion from you this year. Be very interested to hear if you could explain what would need to happen in H2 for you to deliver EBIT margin expansion higher than that for the full year. Thank you.
Okay. Fred, the first question was the trend by category.
Yeah, how the gross margin for outerwear and for non-outerwear have been trending. Thank you.
Margin, please. Yes, hi, Fred. About gross margin by category. As you know, gross margin in the outerwear category is still much higher than the other categories. The other category, and specifically the categories we have invested more over the past few years, like knitwear, gross margin is getting better and better. Gross margin in knitwear is still slightly below outerwear, but much higher than what it was only two, three years ago. Because we have invested in our production in-house, we have gained credibility on the market. So, right now, gross margin is slightly less, but not significantly less. In other minor categories, minor because we are still not credible, not as much as the other categories, gross margin is still lower.
Honestly, there is no reason why, in the future, by investing in these categories, investing in technicality, in technical people, what we are doing now, what we did, for example, last year for shoes, there is no reason why gross margin can get better and better. To get close, I don't think never will be equal to outerwear, but to get closer and closer to outerwear gross margin. Of course, this is a gross margin, needless to say that these categories are very important strategically, and not only strategically, but because they are helping us to increase one of the most important metrics of retail, which is the units per transaction, and ultimately to improve and to make stronger our operating margins.
The second question, Fred, was on selling expenses. Am I right?
Exactly.
The line was not clear here.
Exactly. You mentioned in your press release, more efficient management of the retail network contributed. I was just wondering if you could give some specific examples around that, please.
Yes, Fred. Selling expenses, as you see, were very good, and with an unusual decrease in the percentage as compared with last year. You know that normally as our retail business grows, our selling expenses grow as well because we open more stores, and we report additional retail expenses. Because this year, in the first half of the year, the majority of our retail growth has been driven by organic growth, and we have experienced a lower impact of our retail fixed costs like rent, like payroll is not fixed but is not a variable 100%. So we got the benefit of such organic growth. This is the reason why you see a very strong % better than last year.
Of course, this is not, and should not be considered as an indication for the year end, because it's again, mostly driven by such extraordinary organic growth that is not something we can even think about in the second half of the year, of course. Operating margins. Looking at consensus about operating margins is consistent with the top line. Of course, the top line expressed by consensus is very challenging, difficult to predict. From the financial mathematical point of view, it makes sense. Everything is still to be developed. The second half of the year will be very challenging. Because of the comp. The base of comparison in Q3 is very tough, and in Q4 is extremely tough because last year we did extremely well in Q4.
Again, difficult to say from the financial point of view, from pure technical point of view, operating margins expressed by consensus make sense. Again, the top line, everything's still to be done.
Understood. Thank you.
The next question is from Piral Dadhania of RBC. Please go ahead.
Yeah. Hi, thanks. It's Piral here from RBC. I just have one question, and it relates to your planning for Genius. Obviously, a very successful initial launch, but as we look towards future Genius collection launches, should we expect you to commit to higher volumes? What kind of growth should we expect in that? Obviously, it feels like this first collection has exceeded your expectations. Is your own internal planning now looking for more contribution from Genius as we look forward? If you could put any numbers around that would be very helpful. Thank you.
Yes, sir. Good afternoon, and thank you for the question. I think we receive a lot of these type of question after the explanation when we disclose the project around Genius, and I will just repeat what we said in the past. We remain consistent with the approach of Genius, which has been born as our first digitally native project, a project that is more of a communication project around the brand, around the values of the brand, around the different typology of what is making Moncler what it is today. Still very much around the outer wear, but talking to different type of audiences, different type of clientele, and the objective remains the same. We knew that by starting this Fragment, we will be starting with one of the designer that will be the most successful, commercially speaking.
We have some others that are more couture project, but where we are not planning to have big volume. I think it's a mix of both, but most of all, it's really a communication project and also to drive traffic in the stores. If people buy Genius products, it's excellent because we have been doing a right work in terms of communication, in terms of clienteling and CRM action. Also it's an opportunity when they come in the store to sell the new collection, is what we have seen happening also during the launch of the first Fragment drop.
Okay, great. Thanks. Maybe just to follow up then in terms of corporate campaigns. Mr. Ruffini comments in his initial remarks around Moncler Beyond being a new corporate campaign. Could you perhaps give us a bit more color around what the ambitions are there? Is that an internal initiative, or is there anything further you might be able to add in relation to that? Thank you.
I think with this corporate campaign, what we want is to communicate around the different values of the brand. It's also something where we think there is potential to get even more involvement of our people, those people recognizing themselves because it's a campaign that is going beyond generation, beyond origins, beyond passions, and what is making people move. I think it's something that is deeply talking to the different generation, and we have had fantastic feedbacks on it. It's something that is completely complementing the approach on Genius, which is something that is more around the product. Here, we have something that are more around the values of Moncler. It's also something that is great to be communicated to do with a very simple message on the channels where we are now focusing our investment, which are the social media channels and the outdoor advertising.
We have been moving, in my opinion, much faster than what we had foreseen also in terms of splits of communication budgets. We were thinking to come to this split of one-third social media, one-third outdoor, one-third traditional media in a couple of years. Basically, what we have seen is that things are evolving so fast that this is going to happen already this year. The shift to a more digital communication and digitalization is something that is happening already now for Moncler. This campaign, as well as the Genius one, are completely sustaining this new approach.
Great. Thank you, Roberto.
The next question is from Edouard Aubin of Morgan Stanley. Please go ahead.
Yeah, good evening. Just three questions on online for me. The first one is, I believe that you have in-sourced your online operations in Korea recently, as Korea was not part of the scope of the agreement with YNAP. I was just wondering how the in-sourcing is going and how quickly you could move to a full in-sourcing of your operations worldwide. That's number 1. Number 2, in the release, you talk about the growth rate of online being higher than the retail growth rate. Should we assume that online could be close to 15% of your sales in 2018, or is that too high? And then lastly, in terms of impact on your profitability, my understanding is that the e-commerce was margin neutral up until now for you. Could it become margin enhancing relatively soon for Moncler?
Yes, Edouard, it's Roberto. I will try to answer your first question, and then maybe on the profitability part, I will share the answer with two channel. First, from the online, what we disclosed during the Capital Markets Day was our plan to launch our Korean e-commerce with full omni-channel capabilities by H1 2019. We have started the project. It's a project where we have also chosen which type of platform we're going to use, which is going to be based on Salesforce. We have also a company, Accenture, that is helping us in the integration and the launch of these new very important projects. Everything is running as planned, with the launch that is going to be taking place probably at the end of Q2 next year with the launch of the fall/winter 2019 season.
I would like to add also that this is one very important project. There is another very important project for this year, which is the launch of a pop-up store with Genius in China, with Tmall in the Luxury Pavilion. If successful, and we are working to make it a success, the idea is then to open at the same time as the opening of the e-commerce in Korea to launch a flagship store with Tmall at the beginning of Q3 2019. Regarding the weight of the e-commerce, we have been growing at a faster pace on e-commerce already in 2017. What we commented there also in February was the fact that we grew at twice the pace of the growth of the retail channel. As you see, our retail channel is also growing faster. We cannot double the weight by doubling the speed of growth.
It's going to take probably a couple of years to reach 15%. I think this year, moving from the 7% of last year, we'll be going around something around 8.5%-9% by the end of this year if the trend continues. Regarding the profitability, it's true that we commented in the past that this channel is not a margin dilutor, is not a margin enhancer. In order to see maybe one day a positive effect of having a full internalization, I think we need to work. The objective for the time being is to have the full control of the vision of this one client vision throughout all the touchpoints, and it's something that we started to do by integrating the database of YNAP at the end of last year.
Regarding the decision to go alone or not, as we said a few months ago, what we want is to be in the position, probably in the second half of next year after the launch of the e-commerce in Korea, to assess if we are better off going alone, and this could be the transition phase at the end of 2020 or to continue maybe with a different business model with YNAP. Decision has not been taken yet.
Okay, great. Thank you.
The next question is from Omar Saad of Evercore ISI. Please go ahead.
Thank you. Great results. I just wanted to ask one question. Actually, a follow-up.
Omar, sorry, we cannot hear you. Can you talk a little bit close to the mic, please?
Yeah, is this better?
That's much better.
Little better? Okay, great. I wanted to ask a follow-up on Moncler Genius. I'm wondering, it's such a differentiated way to bring products to the market through those collaborations. Are you seeing your existing customers through your CRM really respond to those offerings, or is it bringing new customers into the brand? If you are bringing new customers in the brand, what type of customers are they, and are they very different profile than your existing customer base? Thanks.
Hi, Omar. I just restate maybe briefly what I need to comment at the beginning. Far we have just been launching. It's the first drop of Fragment, we are today launching the second one, of Noir. For us, we are still completely in the learning phase. Very open to leverage on what we are going to learn for all future launches, I think this is the approach. Each launch will be different, there will be learnings from each one of them in order to do even better when we have the second launch. Regarding the first launch, the only one that I can comment is the launch of Fragment. As I mentioned, 45% of the clients were new ones, 55% were existing ones. I see both figures as being positive.
First of all, really bringing younger generation with the launch of Fragment, with new customer, was something positive. Also the fact that through our CRM and all the efforts that have been done over the past two years and a half in gathering now a database of more than 1.5 million clients, adding clienteling action being done every single day by more than 1,000 client advisors, has helped us to identify potential people, existing consumers, clients interested into the Fragment offer. We organize throughout the world initiatives with in-store events the evening prior to the launch, where we have been starting to pre-sell Fragment. This is explaining also the very good and positive result of the first week, because we have been leveraging on one of the strengths, one of the pillars of Moncler.
The approach was to have more people as an in for the launch of Fragment. For the launch of Noir, it's a collection with a higher price, different philosophy. It's something that is going to be much more on a one-to-one basis, where we have already meetings scheduled in our different stores where we have the Noir offer with the clients that we think are the right one for Noir. It's going to be something where probably the start of the sales is going to be a little bit more slow for Noir, and it's going to be more on clienteling action.
That's very helpful. It should be very interesting to watch these developments. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. The next question is from Flavio Cereda of Jefferies. Please go ahead.
Hi. Thank you. Yes, good afternoon. Great results, of course. Quick question ideally for Mr. Ruffini, if he's still around. It's noticeable that in spite of your best attempts by significantly increasing payout and the share buyback, you can't really seem to avoid to start accumulating cash at quite an alarming rate. I was wondering whether you look two, three years down the road, you'd be sitting on a very substantial cash position. Any ideas what you're likely to be doing with this cash? Thank you.
As you know, we know each other since a long time. It was my biggest dream, one of my dream, to build up a very healthy company with a very good cash and we are at the point. We have, I think, a strong brand, a strong reputation in the market. We have a very solid financial situation. Having said that, I think last year we started to have a different buyback. We have buyback of our share. I feel this could be the strategy. Anyway, it's a safe strategy, again, to have a very strong company. Having said that, if it's something happen, some opportunity in the future, for sure, we have to invest a lot of money more in the industrial part to improve our supply chain. That, I really feel, is the key for the future to build up a stronger brand.
It's not only for build up more quality, but as you know, we're growing. I want to really have the same quality from the first pieces, my productions with the last one. Means, I don't feel it could be, for the next couple of years, a big problem and if something, if we feel
We make more cash than what we think. I think we have to think about something different. We can improve the payout, or let's see if there come some opportunities in the market. We never close the door on any opportunity, but my feeling is really very strong that I think Moncler need a lot of effort, a lot of work, a lot of energy, because I think we have more space to build up a very strong brand for the luxury industries.
Yes, you're right. I remember conversations we were having years ago on this, It was quite a different position then. It must be immensely rewarding to be in the position that you're in today. Congratulations again. Thank you.
Okay, thank you.
The next question is from Paola Carboni of Equita. Please go ahead.
Yes, hello. Good afternoon, everybody. Can you hear me? Hello?
Yes.
Yes. Okay.
Yes, we hear you, Paola.
Hi. I have a few questions. The first one is on your working capital improvement. If you can elaborate on this, maybe how much did the impact the different timing in wholesale deliveries for Fragment and therefore whether this improvement is sustainable also on a full year basis. Second, if you can comment about the sell-through you enjoyed for the first Genius drop, so for Fragment, if this was consistent with your expectation. Then, if you can comment a bit more on the project you mentioned for your logistic center in Piacenza. The very last point is on your outlook for the second half. You flagged some prudence, generically mentioning more challenging comps. Actually, I have in mind several, and you mentioned also several initiatives which should underpin your top line for the second half. Basically, July was also consistent with second quarter trend.
I was wondering whether, is there any different element to consider when you suggest prudence for the second half? Thank you very much.
Okay. Hi, Paola. This is Luciano. About networking capital, honestly, I don't have so much to add. The networking capital is very healthy, as it was in the past, as it was last year, with a slight improvement, but not particularly significant. Of course, the % is a little bit lower, also helped by the top line that has been particularly strong. What I can tell you is that we are very happy with, as I said before, the credit control, the inventory management, and the receivable inventory are the two most important components of working capital. Of course, talking about inventory, as you know, over the past couple of years, I would say our sell-through has been getting better and better with the % close equal to and even better last year, 70%, which is a very high number.
This is the main reason why I don't think there is any other extraordinary or timing element that can explain our working capital. Very good, very healthy. Hope to be able to maintain such a healthy situation in the future.
Hi, Paola. It's Roberto. Regarding Fragment, the result of the launch is completely in line with the expectation we had. I think also in terms of buying level of sell-through is exactly what we were expecting. We're really looking forward to our Fragment being launched in the second drop, as you know, is on the 2nd of December, with a design that is a little bit more wintery, a little bit more puffery, we are quite confident with it. Just maybe one comment on the outlook, I don't know if Luciano wants to add something for the year-end. Remember that, I think this was part of the comments done by Remo at the beginning of the conference call, is the fact that we have had an exceptional year in terms also of weather condition.
If you remember well, winter started early September last year, it was cold in all region, until end of March, beginning of April. In April, we're still selling the fall/winter collection, which I'll explain also why the level of inventory in a way was low is because we went through an exceptional level of sell-through for the fall/winter collection. If you can assure me that we will have the same exact weather condition, we will be able to do probably a better forecast. I think in this we need to be prudent because climate condition like the one we had last year are probably difficult to replicate. We remain prudent on that.
Okay, Paola, about our logistics hub in Piacenza. This is a project that is expected to last for at least three years, this year, 2019, and 2020, with a total budget of about EUR 15.15 million. This project is about the expansion first of the logistics hub, because we are growing. The top line is growing, as you know, we need more space. We need more capacity to support the business growth that is honestly even higher than what we may have planned a couple of years ago, only last year. We are building a second building. Actually, the second building has already been developed. Now we are investing in automation. Automation, of course, for the picking of the product, for moving the product inside the facility. Everything is about to have a bigger capacity and also to become faster and faster in the reaction to the market demand.
With a view at our eventual online business that, as Roberto said, is planned to start in Korea first, and in the future, we will see. We totally understand and we are totally aware that we have to react now to be ready in two years from now. This is the main reason why we are investing in this project, which is very important.
Okay. Thank you very much. Just that point, if I may, can you give us a flavor of how much was the Forex impact at the gross margin level, if possible?
The Forex impact on gross margin was not material. The Forex impact is material because you have seen our top-line impact, 21 against 27%. The impact on gross margin is there. What is important to highlight is that, as I said during the presentation, is that our gross margin by each individual channel is totally in line with last year. This is the result of a pretty good pricing policy and a pretty good hedging policy, because as you know, at the time we develop our pricing policy, of course, we look very carefully to protect our gross margins. This is not the only objective we have, but it's one of the most important ones. At the time we define our pricing policy, we hedge the most important currencies.
Everything did pretty well over the past season, and the gross margin, again, is totally in line by each individual channel, totally in line with last year. Under the effects of last year, would have been even better. Of course, we have to look at what it is now.
Okay. Thank you very much.
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Thank you. Thank you, operator. Thank you very much to everyone for participating. As usual, I'll just give you a quick reminder for next release, which is Q3 2018 interim management statement. That will be released on October 24th, as usual, after market close, and the conference call will take place the same day. Quiet period will start on September 25th. If there is any follow-up, feel free to call us today. Tomorrow, myself and Anita will remain at your disposal. In the meantime, we wish you a very nice summer break, for those of you that have not already had one. Thank you, and speak to you soon.
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