Good afternoon. This is the Coresco conference operator. Welcome, and thank you for joining the Montclair 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.
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. Good morning, everybody, and thank you for joining our call today on Moncler's Q1 2018 interim management statements. As usual, for Q1 and Q3, the call is hosted by myself and by our Chief Corporate Officer and 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 other historical information.
Any forward looking statements are based on Moncler's current expectations and projections about future events and 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 3 of the presentation. Let me just make 2 comments. In the 1st 3 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 particularly by the retail channel. As you know, Q1 benefited from 3 extraordinary positive factors: a longer and therefore also stronger Chinese New Year, a cold and a little bit longer winter season and 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 cost and currencies performances. Let's move to Page 4, revenue breakdown by distribution channel.
Both channels showed strong 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 springsummer collections good results in outerwear, but also in adjacent categories and by the newly opened shopping 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 5 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 6, we start with a focus on EMEA, including Italy. 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 Monte Napoleone store and the opening of a new doors in Florence, both opening occurred in 2017. Talking now about Asia, Page 7, 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 Canto Road. In any event, all stores in Hong Kong have showed excellent results. Also, Japan and Korea continue to post sound double digit growth, largely driven by organic performances. Moving to Page 8.
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 fallwinter and springsummer. 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 4 locations, including our flagship Therefore, total new openings this Therefore, total new openings this year should be around 15, 15 DOS 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 2 most important are New York Soho Flagship, which will be a 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 airports. 1 Munich has already been opened. I hope we gave you good overview on our results, revenues results.
I will now leave the floor to your questions that Luciano and myself will take. Operator, can you please open the Q and A session?
Excuse me. This is the Coresco conference operator. We will now begin the question and answer session. The first question is from Antoine Belge of HSBC.
Yes, hi. It's Antoine Belge at HSBC. Three questions, if I may. First of all, with regard to the 35% versus stellar growth in retail, I think you had guided to a low double digit contribution from a new store this year. So was it the case in the quarter, meaning that then the like for like would have been a bit above 20%.
2nd question, I think you mentioned 3 external factors that boosted the performance. Is there a way? And I know it's difficult to maybe quantify this effect. And 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 Market Day? Thank you.
Okay. Thank you. Thank you, Antoine. About your first question, I mean, mathematically, you're right. Of course, we don't report our comp, our like for like.
But as you stated, our Space growth expectations in the Q1 was in line with our expectation, is in a low double digit growth rate. So the consequence is that our comp was very, very good, very good and much better than what, of course, we originally planned and expected. The 3 factors, it's very difficult, quite impossible to tell you how much also might be the weight of this factor. I think that I mean, there is a 4th factor that is important to highlight, which makes us very, 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. But the 3 extraordinary factors, I think that the colder longer winter probably has been the most important one.
And 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 first one is generating leverage on the investment.
Yes. Of course, as you said and as we confirm, the majority or an important component of our growth related 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 definitely very, very premature to anticipate our operating margins. But 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 and P budget. A and 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 this for Genius project, not more than what we at the time said.
But for sure, our A and 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. So this year, for sure, our A and P expenses will be very high. But again, the project is extremely important for the brand.
Maybe just a quick follow-up. Just I think you mentioned e commerce up strongly. And was the growth of e commerce above the 35% retail growth?
E commerce grew double digit, very grew double digit and totally on the same line with our growth rate in retail. So I mean, we are happy, Antoine, but we also believe and we also aim to do better. But in any event, our own online business was the result of the growth rate was consistent with the average of Retailer.
Thank you very much.
And yes, and I mean, I don't know if the question was also about our online business with wholesale, with retailers. So that was very good, very good too. And again, very good double digit growth rate.
Thanks a lot.
The next question is from Janet Kloppenburg of JJK Research. Please go ahead.
Good evening, everyone, and 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? And also, I know that you're opening 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's the relocation opportunities in terms of size are as we look forward? And 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 twothree and onethree was price. Important to highlight that the increase in price was driven by pricemix and also by the fact, of course, we're talking about only 3 months, only 1 quarter. But in this quarter, our full product results were very strong because of the reasons I told you before, and you know very well.
I mean, the weather was cold. And these are again but the volumes still represent 2 third of our organic growth. About new openings, again, we in our pipeline, we see about 15 new stores. So one important was opened in the Q1, Dubai Mall. Another important because is the 1st store in Norway will be the store in Oslo.
Another store that will be the 1st 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, San Francisco, Bloomingdale's, which is the 1st concession store in a department store. And then another one that is expected that will be a flagship store, will be our 2nd store in Singapore in Marina Bay Sands. So these are the most important openings of the year. But 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 2 important relocations I wanted to highlight. 1 is in New York. So we are allocating so 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.
And the other important location will be London, Long Street. And then many others, one in Copenhagen, which is not a big, bigger city, but honestly, very important for our business. And 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.
Thank you. And just on local on current trends?
Yes. Current trading April, I mean April is doing well, honestly, but can I say back to normal? I mean 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 helped our business in March and to some extent is impacting our business in the 1st couple of weeks of April. But I mean overall, we are doing well, but again, back to normal.
Okay. Thanks so much. Congratulations.
Thank you. You're welcome.
The next question is from Peralta Dania of RBC Capital. Please go ahead.
Luciano, I was just wondering with 1 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 2nd and third quarters for the year?
Yes, you're right. I mean, Genius the first drop of Genius is coming shortly. We are very anxious and excited for the 1st drop that will be fragment designed by Hiroshi Fujiwara, and the date is June 14. So all the machine is working very hard to make it happen. Everything is doing well.
And again, we are expecting that this data that will be very important because it will be the 1st drop and also probably one of the most significant from the commercial point of view because Fujiwara fragment is more stricter design and less conceptual than other collections. So I mean this again, needless to say, is a very, very important strategically very, very important project for the brand. But as you may know, it's not so material from the volumes, from the business we plan to develop under this project. And so this project, also the results of our campaign were very good, very, very good. But in any event, the amount of business we plan to develop under the Ingenious project is not particularly significant as compared to the rest of our business.
But again, strategically, from the brand, from the communication point of view, from the design, from the product, is an extremely important project. And we will keep you updated.
Brilliant. Thank you.
Thank you.
The next question is from Paola Carboni of Equitasim. Please go ahead.
Yes. Hi, good afternoon, everybody. I have a question more on your organization, let's say. So 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. So I'm joking now, but just to understand how farther you went in terms of replenishment capacity and overall organization of the supply chain?
Thank you very much.
Yes, Paolo, thank you for your question. I mean, you're 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 Q1 was driven by the fall 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. But you are right. I mean, we've been our business mid single digit by delivering much higher comp. We may run at this risk.
Honestly, considering the results, considering the sales we delivered in the Q1, I think that, I mean, 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. But another important point is that our supply chain, I can't tell you that is very, very flexible, but it's getting better and better, more and more flexible. And so we keep adjusting every not every week, but I mean, for sure, every month, we keep adjusting our inventory plan. In this case, right now for the upcoming fall season, of course, because spring, I mean, is I mean, we are in the mid of the spring season.
And we keep adjusting our plan based on the current trend. So I think that the machine behind the business is not perfect, but it's getting a little bit better. And so I mean, honestly, we are not worried about this.
Okay. And 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 ever clean items?
And how much instead from your more seasonal items? Thank you.
The performance by category, I mean, we see we keep seeing a trend which is not sharp, which is not fast, but very consistent and very continuous trend to of a decrease, a slight decrease of our outerwear contribution and a correspondent increase of our other categories contribution, specifically, as you know, our Nittel and Cattellsson. Of course, Nittel more in fallwinter and Cat El Son more in spring. But this trend is something that we constantly see in all season, in the last fall winter, in the current spring season. About the contribution of, yes, evergreen or permanent, I mean, it is still in the region of 1 third of our volumes as much as in the past, not more, not less.
Okay. Thank you.
Okay. Thank you.
The next question is from Melanie Fluke of JPMorgan. Please go ahead.
Yes, good evening. Thank you for taking my late question. Sorry. I was wondering whether you could help me understand usually by the end of the fallwinter 2017, how much inventory of fallwinter would you have for the next fallwinter? And so I'm just and how far ahead do you commit on your inventories for the fallwinter collection of 20 eighteen-nineteen?
Thank you.
Sorry, Melanie, do you mean how much we have left
Because 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. But that means that you're carrying usually some evergreens already in your inventories for the next fall winter, I imagine. So usually, how big is that component? And can you adjust up if you need it, if the production from a production standpoint, if you need it, towards the end of the year?
Yes. So the leftover is the other phase of the coin of our sell through. So first of all, our sell through was, as I said before, very strong and probably the best ever. As you may know, our plan 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 for winter 2017 was more, was definitely more than 70%. That means that the 30%, which this year was less than 30% left over, will be carried over to our outlets. This is for the seasonal product. Of course, part of the leftover, as you stated, is related to a 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.
And so 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 I if you have No,
no, you have. So in effect, you have a low level of leftovers, but mostly for outlets.
Yes. I mean this is I mean this may be may not be good for outlets next year, honestly. But honestly, I mean, we prefer these results than the opposite, as you know.
Yes, perfect. That's all clear. Thank you very much.
Thank
you.
Mr. Santel, there are no more questions registered at this time.
Okay. So thank you very much for participating. Just 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, and our quiet period will start on June 26. For any follow-up call or question that you might have, feel free as usual to call both
on Arista and myself.
And for those based in the U. K, we wish you a good bank holiday on Monday. Thank you, and 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.