Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler first quarter 2018 interim management statement 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, Investor Relations and Strategic Planning Director of Moncler. Please go ahead, madam.
Thank you. Good afternoon. Good morning, everybody, thank you for joining our call today on Moncler's Q1 2018 interim management statement. As usual, for Q1 and Q3, the call is hosted by myself and by our Chief Corporate & Supply Officer, Luciano Santel. Before commenting on our revenues results for Q1, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor are they historical information. Any forward-looking statements are based on Moncler's current expectations and projections about future events, are subject to risks and uncertainties that could cause results to differ, even materially, from those expressed in or implied by these statements. In addition, let me remind you that we have invited members of the media to participate in this conference in a listen-only mode. Moving now to page three of the presentation.
Let me just make two comments. In the first three months of the year, Moncler posted another strong set of results. Consolidated revenues were up 28% constant currency, with all regions growing double digit and impressive results achieved in particular by the retail channel. As you know, Q1 benefit from three extraordinary positive factors: A longer, therefore, also stronger Chinese New Year, a cold and little bit longer winter season, anticipated Easter. These three factors should be considered as extraordinary. Before going into the details, let me also remind you that, as usual, I will comment looking and considering constant currencies performances. Let's move to page four, revenue breakdown by distribution channel. Both channels showed strong performances. In particular, retail sales rose by an outstanding 35% driven by exceptional organic growth and by the contribution of new space.
All regions contributed to this organic growth, with APAC and the Americas being the best performers. Wholesale also performed well, driven by the spring/summer collection's good results in outerwear, but also in adjacent categories, and by the newly opened shop-in-shops. Wholesale results have been particularly strong in North America, China, U.K. and Germany. Let me also comment that our e-commerce posted a good double-digit growth in both channels. Moving now to page five of the presentation, revenue breakdown by region. In Q1, global expansion continued with international markets growing 31% and accounting for 87% of total revenues. In the quarter, also our domestic market reported a sound and solid double-digit growth. Let's now move to the following pages for a detailed analysis. Page six. We start with the focus on EMEA, including Italy. Europe and Italy combined reported a solid 16% growth.
In EMEA, we continue to see excellent performances in France, U.K., and also in Germany, all growing sound double-digit, driven by local demand and travelers. Italian revenues achieved very good results, largely driven by the retail revenues, which have also benefited from the enlargement of the Montenapoleone store and the opening of a new DOS in Florence, both opening occurred in 2017. Talking now about Asia, page seven, which, as you know, includes APAC, Japan and Korea. Asia recorded an outstanding 39% growth, with China's mainland and Hong Kong being the strongest performers. We are extremely happy with the results of our flagship store in Hong Kong, Canton Road. In any event, all stores in Hong Kong have showed excellent results. Japan and Korea continue to post a sound double-digit growth, largely driven by organic performances. Moving to page eight. Looking now at the Americas.
Revenues in Americas increased 34%, with similar performances in U.S. and Canada. Both distribution channels posted double-digit growth. Retail business has been driven by sound local demand and improved presence of travelers and more favorable weather conditions. Wholesale business has been supported also by very good sell-through results, both in fall/winter and spring/summer. Finally, let's briefly comment on our store network. At the end of March, our retail stores reached 205 units. In the quarter, we opened four locations, including our flagship store in Dubai. Finally, we confirm that we have some further 11 locations secured for 2018. Therefore, total new openings this year should be around 15, one-five, with a similar number of relocations, some of which being very important. As you know, in fact, we are all working on some important enlargement and relocations.
The two most important are New York Soho flagship, which will be a flagship, and the new London's Sloane Street store. In addition, we confirm we should open at least 15 new shop-in-shop in 2018, in the wholesale business, including some important locations in airport. One, Munich, has already been opened. I hope we gave you a good overview on our revenues results. I will now leave the floor to your questions, that Luciano and myself will take. Operator, can you please 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 Antoine Belge of HSBC. Please go ahead.
Yes, hi. It's Antoine Belge at HSBC. Three questions, if I may. First of all, with regard to the 35, this is stellar growth in retail. I think you had guided to a low double-digit contribution from a new store this year. Was it the case in the quarter, meaning that then the like-for-like would have been a bit above 20%? Second question, I think you mentioned three external factors that boosted the performance. Is there a way, and I know it's difficult to maybe quantify this effect? Thirdly, when there is such a stellar growth, probably ahead of your expectation, especially maybe because of the long winter, is it going to translate into operating leverage, or are you going to find ways of reinvesting that into some of your initiatives that you highlighted at the Capital Markets Day? Thank you.
Okay, thank you. Thank you, Antoine. About your first question, mathematically you're right. Of course, we don't report our comp, our like-for-like. As you stated, our space growth expectations in the first quarter was in line with our expectation, is in a low double-digit growth rate. The consequence is that our comp was very good. Much better than what, of course, we originally planned and expected. The three factors, it's very difficult, quite impossible to tell you how much also might be the weight of each factor. I think that there is a fourth factor that is important to highlight, which makes us very happy, which is the strength of the brand that was, and still is, the most important driver, and what makes us confident for the future, of course.
The three external factors, I think that the cold and longer winter probably has been the most important one. Also the second, for sure, was the timing of the Chinese New Year that this year, much more and much better than last year, was particularly favorable for Chinese traffic.
The third one is the operating leverage on investment.
Yes. Of course, as you said, and as we confirm, the majority or an important component of our growth rate in retail was driven by organic growth. That may let you believe correctly that we may have some important impact on our operating margins. Of course, it is still a Definitely very premature to anticipate our operating margins. For sure, as you said correctly, a good portion of the margins we may develop will be and are being invested in the organization and of course, in our A&P budget. A&P, which this year more than ever, this year, which is the year of Genius, the year of our Genius project, we are planning to invest a lot in communication for Genius project.
Not more than what we other times have said. For sure, our A&P budget this year will be, on a percentage basis, not lower than the 6.7%, but for sure, much closer to 7%, most likely. This year, for sure, our A&P expenses will be very high, but again, the project is extremely important for the brand.
Many thanks. Maybe just a quick follow-up. I think you mentioned e-commerce up strongly. Was the growth of e-commerce above the 35% retail growth?
E-commerce grew double digit, very good double digit, and totally on the same line with our growth rate in retail. We are happy, Antoine, but we also believe and we also aim to do better. In any event, our own online business, the result, the growth rate was consistent with the average of retail.
Thank you very much.
Yes. I don't know if the question was also about our online business with the wholesaler, with retailers, that was very good too. Again, very good double-digit growth rate.
Thanks for that.
The next question is from Janet Kloppenburg of JJK Research. Please go ahead.
Good evening, everyone, thank you for taking my question. Congratulations on some great sales numbers. I was wondering if you could talk a little bit about the components of the like-for-like increase, perhaps if price or product mix had a factor of any significance that you could talk about. Also, I know that you're opening about 15 stores and relocating a similar number. I'm wondering if you could give us an idea of your square footage growth outlook for this year, because I think it's accelerating, and what the relocation opportunities in terms of size are as we look forward. Lastly, I was wondering if you, given the strong comps, like-for-likes that you recorded, if you could give us a picture on current trading trends. Thank you.
Okay. Janet, thank you for your question. Like for like, the most important component of our comp growth was volumes, about two-thirds, and one-third was price. Important to highlight that the increase in price was driven by price mix and also by the fact, of course, we're talking about only three months, only one quarter, but in this quarter, our full price results were very strong because of the reasons I told you before, and you know very well. The weather was-
Yes
was cold. Volumes still represent two-thirds of our organic growth. About new openings. Again, in our pipeline, we see about 15 new stores. One important was opened in the first quarter, Dubai Mall. Another important, because it is the first store in Norway, will be the store in Oslo. Another store that will be the first store in Mexico, will be Mexico City, that is expected to be open in the second half of the year. Another one in your country, in San Francisco, Bloomingdale's, which is the first concession store in a department store. Another one that is expected will be a flagship store, will be our second store in Singapore in Marina Bay Sands. These are the most important openings of the year.
Again, this year, as much as last year, I would say that the most important projects are under the relocations and expansions project. We have two important relocations I want to highlight. One is in New York, SoHo. We are relocating-
SoHo.
SoHo, yes. We are relocating our existing store still in Prince Street, but on the other side of the street, in a much bigger space, the former J.Crew store. The other important location will be in London-
Yes
Sloane Street. Then many others, one in Copenhagen, which is not a big city, but honestly, very important for our business. Also we are relocating the store in much bigger location, but also much better location. Space growth, again, our average, our rule of thumb, our guideline is still in the region of low double digit.
Okay.
Yeah.
Thank you. Just on local, on current trends.
Yes.
Can you talk at all?
Current trading April. April is doing well, honestly. Can I say back to normal? In April, all the regions are performing pretty well, some better than others. Honestly, Europe, worse than others, but I think that Europe is impacted by the Easter timing that hurt our business in March, and to some extent is impacting our business in the first couple of weeks of April. Overall we are doing well. Again, back to normal.
Okay. Thanks so much. Congratulations.
Thank you. You are welcome.
The next question is from Piral Dadhania of RBC Capital. Please go ahead.
Hi. Good afternoon, Paola, Luciano. I was just wondering, with one month to go until the launch of Genius, whether everything is in place there, and whether you could give us an update as to how planning is going for that, and anything else we should be thinking of as we start to preview the second and third quarters for the year. Thanks.
Yes. You're right. The first drop of Genius is coming shortly. We are very anxious and excited for the first drop. That will be Fragment, designed by Hiroshi Fujiwara. The date is June 14th. All the machine is working very hard to make it happen. Everything is doing well, and again, we are expecting that this date, that will be very important because it will be the first drop, and also probably one of the most significant from the commercial point of view because Fujiwara Fragment is more a streetwear design and less conceptual than other collections. This again, needless to say, is a strategically very important project for the brand. As you may know, is not so material from the volumes from the business we plan to develop under this project. This project, also the results of our campaign, were very good.
In any event, the amount of business we plan to develop under the Genius project is not particularly significant as compared to the rest of our business. Again, strategically from the brand, from the communication point of view, from the design, from the product, is an extremely important project. We will keep you updated.
Brilliant. Thank you.
Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Paola Carboni of Equita SIM. Please go ahead.
Yes. Hi, good afternoon, everybody. I have a question more on your organization, let's say. I'm really impressed by the fact that you delivered such a strong organic growth, in spite of you keep saying that you plan your business with a 5% same store sales growth. I'm joking now, but just to understand, how further you went in terms of replenishment capacity and overall organization of the supply chain. Thank you very much.
Yes, Paola. Thank you for your question. You are right, with such important organic growth, we may run the risk to run out of inventory. Actually, our inventory position is very low for the full season because, again, most of our performance in the first quarter was driven by the full season. Our inventory was very low. I can tell you that our sell-through, which is one of the most important metrics we look at for the retail business, was probably one of the best ever. Of course, this makes us happy. You are right, we plan our business to meet the single digit by delivering much higher comp. We may run this risk. Honestly, considering the results, considering the sales we delivered in the first quarter, I think that our retail machine worked very well, very efficiently.
Talking about auto-replenishment, you touched a very important point, because our auto-replenishment system did very well and permitted us to allocate product very efficiently to the stores that more than others needed the product. Another important point is that our supply chain, I can't tell you that it is very flexible, but it's getting better and better, more and more flexible. We keep adjusting, not every week, but for sure every month. We keep adjusting our inventory plan, in this case right now for the upcoming fall season, of course, because we are in the mid of the spring season. We keep adjusting our plan based on the current trend. I think that the machine behind the business is not perfect, but is getting a little bit better. Honestly, we are not worried about this.
Okay. Sorry, just a follow-up, if I may. I don't know if I missed during the quick presentation at the beginning. Can you elaborate a little bit on the performance by category and also within outerwear, how much of this impressive Q1 performance was driven by kind of evergreen items, and how much instead from your more seasonal items? Thank you.
In the performance by category, we keep seeing a trend which is not sharp, which is not fast, but very consistent and very continuous. A trend of a slight decrease of our outerwear contribution, and a correspondent increase of our other categories contribution, specifically, as you know, our knitwear and cut and sew. Of course, knitwear more in fall/winter and cut and sew more in spring. This trend is something that we constantly see in all the season, in last fall/winter, in the current spring season. About the contribution of evergreen or permanent. It is still in the region of one third of our volumes as much as in the past. Not more, not less.
Okay. Thank you.
Okay. Thank you.
Once again, if you wish to ask 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 Mélanie Flouquet of JPMorgan. Please go ahead.
Yes. Good evening. Thank you for taking my lead question. Sorry. I was wondering whether you could help me understand. Usually by the end of the fall/winter 2017, how much inventory of fall/winter would you have for the next fall/winter? How far ahead do you commit on your inventories for the fall/winter collection of 2018/19? Thank you.
Sorry, Mélanie. Do you mean how much we have leftover?
You're commenting that you have particularly low inventory in the fall collection at the end of the season because you had an amazing collection. That means that you're carrying usually some evergreens already in your inventories for the next fall/winter, I imagine. Usually, how big is that component? And can you adjust up if you need it from a production standpoint, if you need it toward the end of the year?
Yes. The leftover is the other face of the coin of our sell-through. First of all, our sell-through was, as I said before, very strong, and probably the best ever. As you may know, we plan our business with the sell-through of 70%, which is very good. We normally make it maybe a little bit less, maybe a little bit more. This year, fall/winter 2017, was definitely more than 70%. That means that the 30%, which this year was less than 30% leftover, will be carried over to our outlets. This is for the season product. Of course, part of the leftover, as you stated, is related to permanent or evergreen product. Not that much, honestly, because on permanent, on evergreen product, this is the category We make more efficient our auto-replenishment system.
That allows us to deliver and to produce everything, but only what we need in the stores. Honestly, the leftover, even if that leftover is good, because it can be carried over the season after, but normally is very low and much lower than the seasonal product. I'm not sure if I answered correctly your question, but please, if you have another question.
No, you have. In effect, you have a low level of leftovers, but mostly for outlets. Is that right?
Yes. This may not be good for outlets next year, honestly. Honestly, we prefer these results than the opposite, as you know.
Yeah. Perfect. That's all clear. Thank you very much.
Thank you.
Once again, if you wish to ask a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Mr. Santel, there are no more questions registered at this time.
Thank you very much for participating. To give you a quick reminder of the upcoming release, first-half results will be published on July 25. A conference call will take place on the same day. Our quiet period will start on June 26th. For any follow-up call or question that you might have, feel free as usual to call both Anita and myself. For those based in the U.K., we wish you a good bank holiday on Monday. Thank you. Talk to you very soon. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.