Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Moncler first half 2017 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, Investor Relator and Strategic Planning Director of Moncler. Please go ahead, ma'am.
Thank you. Good afternoon, everybody. Thank you for joining our call today on Moncler first half 2017 financial results. First of all, as usual, let me introduce you to the executive team on today's call. Our Chairman and CEO, Mr. Remo Ruffini, Luciano Santel, Chief Corporate and Supply Officer, Roberto Eggs, Chief Marketing and Operating Officer, Andrea Tieghi, Head of Retail, and Sergio Longo, 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 are they 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 and 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. Welcome to Moncler's first half 2017 results conference call. Given the late timing of our call due to a busy reporting day, I will keep my introduction short. 2017 has started very positively, even ahead of my own personal expectation. In my opinion, we have again delivered some impressive numbers. Revenues plus 17%, with retail plus 21% and wholesale plus 8%. EBITDA plus 24%, net income plus 25%. Although the coming months would not be easy, given the higher base of comparison, today I can say that I'm proud of what Moncler has achieved so far, which once again confirmed the strength of our brand and the solidity of our strategy. Let me underline the most important element of our result. In H1 2017, Moncler achieved a solid sell-through in all region and channels.
Spring-summer 2017 collection has been highly regarded, with knitwear and shoes significantly outperforming expectations. We are also happy with the initial appreciation of fall/winter 2017 collection and the result of spring/summer 2018 sales campaign. All our core markets were up with solid double-digit growth. In Europe, all core markets were up strong double digits. Italy remained good, with retail up double digits and wholesale positive. Outstanding growth continued also in China, Korea, and Japan. Profitability and cash generation have remained robust. Notwithstanding all the investment we are doing at the new talent people who are joining the group. A new retail culture is now visible across Moncler, not only in our store but in the whole organization. With the recent relocation of Hong Kong Harbour City, we started very well. In the enlargement of Milano Montenapoleone in October, we almost completed our flagship project.
I'm happy with the performance of our flagships, which not only contribute significantly to our results, but also strongly support the Moncler brand perception. Before leaving the floor to Roberto and Luciano, let me just add one final comment. I believe that the recently announced leadership reorganization will allow Moncler to face future challenges in even more cohesive, coherent, and flexible way, and will help to create future value of our stakeholders. Let me now hand over to Roberto.
Good evening, everybody. I would like to comment the results by region. As mentioned by Mr. Remo Ruffini, the good performance on the first semester has been very strong with a +17%. With the second quarter in acceleration at +21%. All regions and channels have been growing positively. In the Italian market, our more mature market, has been growing by 7% during the first half of the year, with the second quarter in acceleration at +9%. Europe continued to perform very well at +24%, with very positive results and strong results on the U.K. market and on the French market. All regions in Asia have been growing double digits with also here an acceleration in the second quarter. We are currently trading at +17% for the first semester, with the second quarter at +29%.
Same result for the U.S. market at a +16%, with the growth both on the wholesale side and on the retail side, both in Canada and on the U.S. market. If we move to the results by channel, as commented, we have been growing at a +8% on the wholesale side here also with a slight acceleration in the second quarter and at +21% on the retail side with a comp result for the first semester at +14%. The collection has been very well received, and spring/summer has been a strong success with especially good results on a new product category like the knitwear. If we look at the expansion of our retail network, we plan, and we have confirmed 14 net openings for the year 2017.
11 of them are planned between September and December this year. Let me just mention some of the main openings that we will have this year. The first one is going to be the relocation of our store in Moscow, with an opening of a flagship store in GUM, a double opening in Rome, with the new Rinascente where we'll have a women and a men store. The first presence and the first store we are going to open in Florence is to complete the Italian opening, plus some new markets, the opening of Kazakhstan with a store in Almaty, the opening of Sweden with a store in Stockholm, the opening of the Middle East with a store in Dubai.
We are going also to open our first store in the U.S. in a department store under the U.S. approach, so directly approach. This is going to be in San Francisco with Bloomingdale's. We are going to open a second store in Toronto, and we have also the first store on the ground floor in Busan, in Korea that is planned for the end of the year. I would like to mention also two very important relocation, one of them that took place early July with the first very encouraging result. This is the relocation of Canton Road. It is now the first flagship and the largest flagship we have in Asia.
We have planned another big relocation, which is an expansion in Milan, with the largest store that we are going to have in the world in Monte Napoleone. Basically adding two additional floors on the existing store, plus an enlargement of the ground floor. This is going to be also an opportunity for us to transform our store in Spiga and to open our first store dedicated to the Enfant. So Spiga will be the first U.S. dedicated to the Enfant business. To close the description, I'd like to mention also more than 10 openings of shop in the shop that are planned for the second half of this year. With here also some new country opening. We're going to open a store with DFS in New Zealand, in Auckland. Also here a ground floor.
We're going to open Guam. We are going to open a first store in Bangkok that is going to be followed next year by a second store at the airport. We have three openings in airports that are planned for the end of the year, Paris in December, Munich, and Taipei.
Okay. Thank you, Roberto. I'm Luciano Santel. Good afternoon, everybody, and thank you for attending our call today. Let's move now to page 11, where we report our income statement. Top line, up 18%, already presented in detail by Roberto. Gross margin, 75.6%, better than last year because of the channel mix, but also better than last year by individual channel. Retail channel specifically has performed better than last year, not only regular stores but also outlets performed well with a lower discount than last year. Selling expenses, 37.8%, higher than the 37.2% we reported last year, but not as much as the increase of our gross margin, which means, as you know, this is our rule of thumb, that we have maintained, even slightly, improved the productivity of our retail network.
G&A substantially in line with last year at 12.5%. Advertising promotion 7.3%. It was 7.2% last year. EBIT adjusted EUR 73.3 million, 18% margin. Below EBIT, we report stock-based compensation line, which was formerly named as non-recurring items, but now this year and last year, it includes only stock-based compensation, which are no cash expenses associated with our stock option and performance share plans. The number is significantly higher than last year, EUR 10 million, almost at the double than last year, but this is mostly due to timing effect. For the year end, we expect a number higher than last year. That was at the end of the year, EUR 15.7 million. We expect this year a number in the region of EUR 21 million, EUR 22 million, but again, higher, but not as much as we report at the end of June.
Financial results, slightly negative, totally mostly due to negative effects impact, mostly due to the recent depreciation of some important currencies, like U.S. dollar and Japanese yen. Tax rate 30.5% against the 32.8% of last year, totally expected and totally due to the decrease of tax rate in Italy, as you probably know. On the bottom of the page, last but not least, our EBITDA adjusted, EUR 97 million, 23.8%, better, higher than the 22.6% we reported last year. Important to remember that last year, first half was weaker than the second half. You may remember that the second half was very strong and particularly within the second half, Q4 was very strong. Okay, let's move now to page 12, where we report CapEx.
CapEx at the end of June were EUR 34.4 million, higher than the EUR 28.9 million last year, but on a percentage basis, in line with last year, 8% on revenues. Most of CapEx, as usual, has been spent, has been allocated to our retail network, but still a significant portion of CapEx are invested in organization information technology. Important to highlight that we have now a better visibility of our CapEx for the year end, and we expect a slight increase as compared to what we indicated before. Last time we discussed together, we said that we expected the CapEx in the region of EUR 65 million. Now we think that they will be closer to a number of EUR 70 million.
The reason of this roughly additional EUR 5 million is associated to several different small projects, but one above all is the expansion of our store in Milan, Monte Napoleone, and our flagship store in Milan, Monte Napoleone, where we are implementing a breathtaking design, a really amazing design, but also, needless to say, more expensive than what we originally planned. These are the main reasons of the additional CapEx we expect for the year end. Let's go now to page 13, where we report net working capital. Net working capital at the end of June, very well, very good. You know that on the percentage basis, we reported 6% as compared to 8%. Very good credit control. Very good inventory control. Nothing to add. I can say that inventory management and credit management have been very positive in this first half of the year.
Let's move now to page 14, where we report our financial position, which indicates EUR 130 million net cash with a pretty good cash generation in the first six months of the year of about EUR 24 million. How and where we generate the cash is something we can see moving directly to page 16. I don't have any comments on the balance sheet, but of course, if you have any or any question, please ask the question later. Cash flow statement at page 16, I said very good. Of course, it starts with a very good EBITDA, but also a very good number in the change in net working capital and notwithstanding CapEx that, as we said, are higher than last year, we ended up with a free cash flow, which is closer to EUR 40 million and as you see, much higher than first half of last year.
Below the free cash flow, we paid EUR 45 million dividends, as you know. We also report a very positive number under the change in equity. Mostly due to about EUR 40 million, coming from the exercise of stock options that took place between March and April, for EUR 40 million. Slightly mitigated by about EUR 7 million of cash out due to our share buyback plan that was implemented at the end of June, and it is still in progress. At the end, a net cash generation of EUR 24 million. Okay, I'm done with the presentation. Thank you.
Operator, if you can open the Q&A session.
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. Can you give us an indication of the like-for-like evolution between Q1 and Q2? I know that you are no longer disclosing it on a quarterly basis, but I'm just wondering if like-for-like between Q1 and Q2 were broadly similar to the 14% that you have posted for H1. My second question is about the contribution from new space, which falls to 7% in H1. Why it has decreased to 7% and do you confirm the 10%-11% contribution from new space for full year 2017? I know that you mentioned the 11 store openings between September and December, but would it be possible to have a split between Q3 and Q4 of the store openings and the number of store opening that you plan for full year 2018? Thank you very much.
Okay. Just on the comment for the like-for-like, as you know, we don't disclose any more the results per quarter. The performance has been quite consistent between the first quarter and the second quarter. Your other question, Anne-Laure, was I think there was a question on wholesale. No.
The contribution from new space, because it was 7% in H1, and do you confirm the 10%-11% for full year 2017?
Yes, this is Luciano, Anne-Laure. About the new space, you are right. We normally indicate, and we indicated on average a growth of 10%-11%. For this first half of the year, it is in the region of 7%. As you know very well, we opened just one store in the first half the year as compared to the six stores we opened at the first half of the year last year in 2016. Which is roughly the 6%-7% you indicated. Again, I confirm that for the year end, we expect the 10%-11% additional space.
Regarding the number of store opening, if we have the split between Q3 and Q4, we had already opened at the beginning of July two stores. One of them being in Paris, it was the Galeries Lafayette Enfant. We have foreseen for September three other openings. The opening of Almaty Esentai in Kazakhstan. The second store in Toronto, and the store in Beijing Shin Kong Place, which is also a store dedicated to the Enfant. Which means you have five openings, that two have already been taking place. We have three others for the Q3, and the additional eight are foreseen between October and December, mainly in October, November and just two in December. Regarding the number, I think you had a question also regarding the openings for 2018. I think we are still working very hard on it.
You can think of something in the same magnitude of the number of openings we have had this year, which means a number that is around 14-15 new openings DOS, and also a figure between 10 and 12 openings of shop in the shop.
Thank you very much.
The next question is from Janet Kloppenburg of JJK Research. Please go ahead.
Good evening, everyone, and congratulations on a very strong performance. Just had a couple of questions. The comp acceleration, was it driven by any particular product category? If you could talk a little bit about the impact of the knitwear and footwear on the total revenue growth, was it better than expected? How are you thinking about growing those categories going forward? In other words, could they command greater presence in the stores than they have now and online? Lastly, if you could talk about your e-commerce performance and how the digital channel is doing. Thank you.
Janet, thank you for your question. Regarding the comp acceleration, I say it was in the same magnitude, it is more the global performance since beginning of the year that has been good. As you know, part of is linked also to the work that has been done during the last 18 months regarding retail excellence. The fact of delivering a different client experience in store, all what we have been developing regarding the clienteling. Now we have 80% of our store that are equipped with our app, which is Moncler. It is more important than the app, it is more the mindset of people that are now not only thinking about product, but are thinking about product and about client. We have had since beginning of the year, 29,000 clienteling action.
I think that this has probably also contributed to drive traffic in the store and probably helped on some of the retail KPIs that we have. We are not disclosing precise figure, UPT has been increasing, sales per transaction has been increasing also, the transformation rate, the conversion rate in the store has been improving. Part of the performance and the increase in the unit per transaction has been driven by the very good result on the knitwear. We took some reasonable risk last year when we decided to go for the open-to-buy regarding these categories. In parallel, we have been working on the client experience in store to support the development of this category and to have also a storytelling that was supporting this increased push in the knitwear side.
We have also been developing a strong visibility of this category in store, which has helped to have a performance that is more than double than the one of the outerwear business. This being said, the performance of the outerwear has also been on a double-digit basis. Regarding the e-commerce, here also the performance that is stronger than the one we report in total, growing also at a little bit more than twice the pace of the result that we have had globally as a company during the first half of the year. Some strong development that we have had, we have been merging the database from the retail side with the one from the digital. This has been taking place at the beginning of July. We have changed, or more Yoox has been changing the platform, moving into the IBM platform.
It's still July the month where we are finalizing this move from one platform to the other. We have been reassured by the fact that the move has been going well. There are still some fine-tuning to be done, as you can imagine. We are working now on the implementation of the omni-channel in two phase. The first one, which is the soft move into the omni-channel. By the end of this year, we'll be implementing the click and collect in store and the order from store. We have a plan for the second half of 2018 to go into a more complete version of the omni-channel, having at that time, the possibility to have the visibility of what is in stock in the store with the stock that is at the disposal of Yoox. Going into a complete omni-channel approach.
Okay, great. One more just on the gross margin. Better than expected result for me. I know some of it has to do with the swing towards the retail channel. How should we be thinking about the opportunity for gross margins to continue to leverage in the fashion that we saw in the first half? Thank you.
Yes. The first half, again, margin was very good for the reason I told you. Second half, of course, most of the result in gross margin will depend on the top line, as you can imagine.
I think that the current trend makes us confident that we can maintain a pretty good gross margin. Again, it will depend on the top line. Last year, you may remember that the Q4, we reported a gross margin for the year-end, very good. We said very clearly that most of this result was due to the very strong performance in Q4. Based on our visibility now, I think that the gross margin should be good. I can't tell you if it will be good as much as it was in the first half, honestly. First half, as much as a Q4 of last year, gross margin was particularly good.
Okay, thanks very much.
Welcome.
The next question is from Elena Mariani of Morgan Stanley. Please go ahead.
Hi, good evening. First of all, congratulations Luciano and Roberto for your enhanced roles. A few questions from me. The first one again on like-for-like. You've given already quite a lot of color, so thank you for that. Maybe, can you help us understand a little bit the split between price mix and volumes? I know that lots of KPIs you're monitoring are coming into place, but it would be very helpful to get the split. Also how you're thinking about pricing, potential price increases, for the second half of the year. Second question is around your working capital. I'm always very impressed by your inventory control, and I've noticed that your inventory position has come down. Can you give us some color around that, and how to think about it for the second half?
How are you planning it ahead of the upcoming fall/winter season? Thirdly, on the margins. Is it correct to say that the margin improvement between H1 this year versus H1 last year was a little bit less than what is visible just because last year you had a couple of negative exceptionals affecting your operating profitability? I remember that there was some additional rental expenses of stores that were not opened yet. Do we have something like this this year as well? How should we think about the operating cost evolution for the second half of the year? Thank you.
Good evening, Elena. Thank you for your congratulations. Regarding the like-for-like, as you know, in the past, we had for most of the time, a split 50/50 between price effect and volume effect. We have started 1 year ago, what we call a pricing harmonization between the geo pricing that we have mainly between Europe and Asia. As you know, we were at the time, really too high in terms of pricing, especially for Japan and China. We have been trying to reduce that gap quite successfully over the last 2 years, coming now to something that was even better than the price gap that we had 2 years ago. The results of the 14% like-for-like that we have has been driven at 90% by an increase in volume.
We have been able to further decrease the price gap between Europe and China and Japan that is now around 50, 55% for China, around 60% for Japan. While it was 2 years ago, more like +90%. A significant decrease that has been well perceived and that has had an impact in terms of increasing volume at store level, which has been then generating the like-for-like result that you have seen.
Okay, Elena, this is Luciano. Thank you on my side for your congratulations. About net working capital. Net working capital was very good. We were impressed too honestly by inventory. Honestly, I think that we had and we still have the correct level of inventory to support our sales. Our sales too has been good at the end of spring season. We are ending the spring season now, but differently from last year when you may remember we said we missed some sales in some categories and specifically in the knitware category because we were short of inventory. This year, also Roberto said that our inventory investment for this season was in line and consistent with our sales plan and sales were totally in line with our plan. Again, I think that inventory management has been very good so far.
I can't tell you, guarantee that we will be good in managing inventory well as much as we did over the past 6 months, I would say 9 months because last year, Q4 was very good too. In any event, we have a right level of inventory. Also, the quality of the inventory we report is very good. All inventory is associated with this year, current season, spring and fall/winter, and last year, only for the portion that is now in our outlet network. About profitability, last year you remember well, correctly, we said that profitability was affected by EUR 3 million additional for rent associated with stores not opened yet. This was as compared to 2015. We didn't say anything this year because we have a similar number still in the region of EUR 4 million. Last year they were EUR 4 million, EUR 3 million more than 2015.
This year we still have EUR 4 million rent for stores not opened yet, including, for example, Harbor City that was just opened early in July. The impact between 2017 and 2016 is almost neutral.
Price increase
Thank you. Can I ask you just one quick follow-up? Still on working capital. You've also shown a meaningful decrease in receivable days. What was driving that, please? Thank you.
Receivable was very unusually low because our wholesale business is growing, also our concession business in department store shopping malls is growing. It is definitely unusual to report a lower number than last year. There is some timing effect, honestly. We collected some credit earlier than last year, in June specifically. There is a timing effect. Even excluding the timing effect, honestly, the number is good. It is good because we have a pretty good control on credit. We collect, I would say, very nicely our credit.
Perfect. Thank you.
The next question is from Piral Dadhania of RBC Capital Markets. Please go ahead.
Thank you for taking my question. Could I just ask for a clarification point? Maybe I'm reading this wrong, if the retail like-for-like was 14% for the half year, my estimate was that the first quarter like-for-like was around seven, if my math is correct, I thought that the second quarter would have accelerated to in excess of 25%. Could you just correct me if I'm going wrong somewhere there, please, on the first point? My second question is just around the actions you took in the spring/summer this year versus last year. I guess I'm just curious to know, how can spring/summer develop going forward, and what is the kind of medium-term incidence on sales that it could drive? I guess these strong numbers suggest that there is a lot of momentum, and your core customer is very encouraged by the product.
I just wanted to see how much further you'll go next year in terms of your buying up front and product availability. Thank you.
Piral, I would not like to comment too much on the precise figure that you mentioned for the first quarter. Just as a general comment, I think you a little bit underestimated the first quarter. I would like to say that we grew by 25% like for like the second quarter, this is not the case. I think the two performance, first and second quarter, they've been pretty much in line with a slight acceleration in the second quarter. Regarding the action plan and the weight on the spring/summer, we mentioned it many times. I think this is one of the area of improvement that we have with a potential to do even better in the future. I think some of the action we have been undertaking regarding the development of this category, especially the knitwear, are starting to pay off.
As we mentioned in the premium already last year, we've been investing also in terms of style, in terms of developing new product, new design. We have been investing also in terms of technology where we are now close to Padova where we have our industrial headquarter invested in people, invested in know-how and acquire know-how from outside. We have pilot lines where we can develop internally. This is speeding up the level of development. I see that also we are now closing the spring/summer campaign for 2018. I must say that the collection for next year has been very well received by our wholesale client, also by our team internally. I think there are still margin for improvement on that side. We usually say that the weight between spring/summer and fall /winter is 25%-75%.
I just remind you that we are selling the spring/summer during five months during the year. We are selling the fall/ winter during eight months, there is one month overlap. This is why I'm getting to the 13 months. If you then report this back into the sales, if we would be selling six months of fall/w inter and six months of spring/summer, it will be more on one third, two third. We are still very much balanced towards the winter season, the spring/summer is delivering very good results.
Brilliant. Thank you, and congratulations.
The next question is from Omar Saad of Evercore ISI. Please go ahead.
Thank you for taking my question. My first question is, looking for an update on your customer relationships management strategies. I know you've been focusing on not just attracting new customers, but really harvesting the existing customer base. Maybe you can give us an update in how that process is going. I wanted to ask maybe a more specific question, what you're seeing on the kind of seasonal and transitional product. As a few years, several years, I guess, beyond the IPO, it seems like the brand is really starting to get some traction in non kind of core down-filled outerwear. I want to kind of hear it from you guys if that's really what you're seeing happening. Thank you.
Omar, thank you for your question. Regarding the first part, which is the CRM, as you know, it has been a very strong focus and
When I joined the company, it was really the challenge that was given me by Remo Ruffini to say we need to change the approach, and this is what we did for retail excellence. At the time, our acquisition rate in terms of data collection from new client was around 30%. We are currently at 75%. I think there is still some room to further increase it, maybe to 77%, 78%. The natural consequence of this approach has been that we have tripled the database of clients that we are following in the past 2 years. At the same time, we have developed tools for our team to do clienteling. We have implemented a welcome approach for our clients.
When they are registering for the first time, they are entering into a path of communication during the first 6 months, and then there is a specific program for the first 6 months, and then they are entering in the normal path of communication. There is much more interaction between the client and Moncler, and we have narrowed the distance between the client and the brand. I think this is also part of the strategy that is helping also to generate more solid results. We are still dependent on the recruitment and the attractiveness of the brand, and the collection and the style are playing a key role as well as communication. I think also that having now this possibility to interact more closely with the client is something that is starting to pay off. As I mentioned, 80% of the stores are equipped.
We are going to finish the rollout by the end of September this year. All stores will be equipped. We'll have more than 1,000 people interacting daily with their clients. I think we are just starting to see the potential of this tool. Regarding your question on seasonal and non-core category, I think, of course, it's one of the focuses of the company, but we are still very much thinking in terms of outerwear. What we want to communicate is we are the outerwear company. When you think about down jacket, you need to think about Moncler automatically. This being said, we see the development of this other category as being an opportunity. We have had specific development also for the change of season with also more lightweight jackets, also jackets that we call vuoto, so the one without the down. That has been very successful.
As you know, we are monitoring the change of season store by store on a weekly basis, and depending on the results of the different collection, and every month, there is a new theme with a refreshed visual merchandising in the store that is helping. I think this very close monitoring of the performance store by store, to have really been thinking about product that are there for the change of the season, that is helping to the current results.
Thank you very much. It's very helpful. Good luck.
Thank you.
The next question is from Zuzanna Pusz of JP Morgan. Please go ahead.
Good evening. Thank you for taking my questions. Firstly, I would just like to go back on the pricing element. I appreciate your comments on H1, but given where the euro dollar exchange rate is heading now, are there any plans for you to take any pricing in H2? This is the first question. Secondly, you made a reference in the statement about your organic growth rate in Italy in retail accelerating in Q2. Would it be possible to provide a bit more color on what was behind that? Lastly, are there any things that we should keep in mind in terms of savings of OpEx going to H2? Thank you.
About our pricing strategy for H2 of the year. Honestly, we are not adjusting or changing anything for this season. Of course, the depreciation of USD and JPY and all the other currencies is an element of concern for our business, as you know, as for everyone. We are not taking any change. We are not making any change now to our pricing strategy. For U.K. In the U.K., prices have been already adjusted H1 of the year. This is independent on the current, what occurred in June and July about USD and JPY. I think there was a question also regarding the Italian market, if I understood correctly. As I mentioned, it's our most mature market. It's a market where the weight between wholesale and retail is now balanced. It's 50/50.
We still continue to do some, let's say, cleaning of the wholesale distribution, which is still quite large. Even while reducing some of the accounts that we have in the Italian market, we have been able to grow positively on the wholesale side. Most and the biggest part of the growth has been coming from the retail side. We are, on the Italian market as well as in Europe, more depending, of course, on the tourist If you look at, globally, the result of Europe are driven at 60% by the flow of tourists and 40% by the flow of locals. The positive elements, not only for the Italian market, I could say the same regarding France, regarding Germany, Switzerland, and U.K., that we have been growing on the local side on a double-digit base for Europe.
We have had a good inflow of tourists, slightly above the results that are disclosed by Global Blue regarding the result of the H1. We have been growing double digits also on the tourists, still with the largest majority being Asians, especially from China. As you know, the Chinese, they represent one-third of our sales. They are stable in terms of weight in our portfolio. The good results have been coming also from other Asian countries, especially from Japanese that have really started to travel again, and from Russians that have been coming back mainly to Europe with destination to U.K., France, and Italy.
Sorry, your last question was about OpEx in the H2 of the year. Am I correct?
Yes, this is correct. Yep.
Okay. Of course, as you know, OpEx, I mean, the G&A and all the other expenses in the first half of the year was totally in line with our plan. I don't have any element, any reason why they shouldn't be in line the second half of the year, honestly. I think that based on the current visibility we have, I think the OpEx will be consistent with the first half of the year.
Thank you very much.
Welcome.
The next question is from Amelia Hammer of Bank of America Merrill Lynch. Please go ahead.
Hello, it's Amelia Hammer here from Merrill Lynch. Thank you for taking my question. I was just wondering on the performance of spring/summer versus fall/winter. Forgive me if I'm wrong on this, but I believe at the end of the quarter that you did have some fall/winter collection that comes into the stores. Can you talk a little bit about the relative performance of those two categories? I know you've been developing knitwear in these new categories, and that's been very strong growth. I'd be interested to hear that. Secondly, just on the Chinese consumer worldwide, how has that group of consumers been performing for, whether you can qualitatively or quantitatively qualify that would be great.
Lastly, just a little bit of color, if you could, on mainland China versus Hong Kong and the performance within there, because obviously Asia Pacific as a region has been very strong, but just to break down those bits. Thank you.
Amelia, thank you for your question. Regarding the performance on the third quarter between spring/summer and fall/winter is still very much the second quarter linked to the performance of the spring/summer. There is an injection of fall/winter that is starting second half of May, which is very light. When you are still in June, the vast majority of sales are still driven by the spring/summer. It's just in July where we start having, at a given point during the first two weeks of July, where we switch from spring/summer to fall/winter. By the end of July, it's usually at 90-95% completely fall/winter.
The result that you are seeing on the second quarter, they have been driven mainly by the spring/summer and also, as I was mentioning, by some products that have been specifically developed with lighter weight and so on, in the change of season to go into the fall/winter. Regarding your question on China, as I was mentioning, the weight of our Chinese clientele, which is one-third of the total, is stable, which means that they are growing at the same pace as the total growth of the company. We have seen an increase of Chinese in Europe, but not only. The performance of Chinese have been also good in Japan, they are now, especially in June, coming back to Hong Kong. Lower performance of Chinese in Korea. As I mentioned already in the past, we are not really heavily dependent in Korea from travel retail.
Usually, travel retail in Korea represents a little bit more than one-third of the sales, 40%, and 60% is the local market. If you look at our 19 stores, we have only two stores that are in duty free. Basically, our business in Korea is at 85% a local business. Even if the flow of Chinese has decreased in Korea, we have not been impacted, at least not to the same magnitude as the other luxury brands. Regarding the results of mainland China and Hong Kong, positive results on both. Of course, Hong Kong is still a region that is more difficult. We were positive in Hong Kong, as we have been always since we opened that market.
This is probably one exception, because some of the brands that are showing better results in Hong Kong, they have been probably losing a lot of business over the past two, three, four years. We have always been growing. It's slightly positive, but this was prior to the opening of our Canton Road flagship, so I'm expecting a rebound of our Hong Kong business towards the end of the year.
Just on mainland China.
Right, just on mainland China, it continues to progress very positively for us. As you know, we only have, in brackets, only 28 stores in mainland China. We always say that the correct figure for us was probably something, a figure around 30 stores. There is a couple of openings that are foreseen in the next two years. The current performance, the like-for-like performance in the existing stores has been very good during the first six months of the year.
Thank you very much.
The next question is from Paola Carboni of Equita SIM. Please go ahead.
Yes, hello. Hi, good afternoon, everybody. I have a few questions. The first one, probably a strange question, I don't know, but you shared with us clearly the idea that we should bear in mind the very tough comp base of H2, and Q4 in particular. I would like just to share with you what are your, I don't know, the actions you feel you are going to implement, which might be differential compared to last year, which can give you still additional support, notwithstanding these tough comps. I'm referring, for example, what you did last year in terms of inventory management, inventory centralization. Just to mention some initiative more on the operation side. If any, some specific product you feel particularly confident about that you have possibly stocked more than last year, and you feel might be a bit a game changer for this season.
This was probably more a qualitative question. On the working capital side, if you believe such an improvement is sustainable also on a full year basis, or if there is anything we should bear in mind. I would like a comment, if possible, on the situation of the department stores in the U.S., particularly with reference to Neiman Marcus, if you have any comment to share on that. Possibly also some color on the performance of Japan, specifically. Thank you.
Paola, I'll start with the first question regarding the comp for the second half of the year. The DNA of the brand is very much linked to the mountains. What we have in front of us, it's a mountain. The comp we had for the second half of last year, and especially the last quarter, was very high. I must say that we'll be happy if we could be reporting a positive comp for the last quarter and the second half of the year. I think we are really doing everything possible to continue. I think the basics of the business, they are solid. What has been done and what has been delivering good results for the first half of the year is something that we are going to continue. We are going to finish the deployment of our approach with Moncler.
I think the current collection is very well received. We have a firework of openings of stores for the year-end. We usually prefer to concentrate the openings on the second half of the year to start with the fall/winter season, which is much more representative of the brand DNA. I think these are the actions we are putting in place. Tight control of the inventory. The auto-replenishment system now has been completely and fully roll out. We plan for next year to increase it to some new categories. I think all is in place and is now up and running. On working capital, I think you take it.
Yes, Paola, on net working capital for the year-end. Honestly, we don't aim to beat the 10% working capital we reported last year. We target now to maintain more or less that 10%, because net working capital in the first half of the year was, to some extent, unusually very good. I think that we don't expect a deterioration in the second half of the year. Honestly, I think that a 10%
Would still be a very good percentage. We don't expect a deterioration in the second half of the year, honestly, I think that a 10% would still be a very good percentage.
Paola, as you know, the situation with the American department store is quite tense. They are facing a decrease in foot flow and turnover. As we mentioned in the past, I think the way we see our business in department store is that we have still possibility to improve our visibility in the stores through the deployment of shop in the shop, but also by moving sometimes on different floors where there is a higher traffic and probably a better adjacency. What we have been experienced on the first semester was a positive growth on the wholesale side. As you know, our business in [ are] in U.S. is, for the time being, purely wholesale, and with the opening of the store in San Francisco, Bloomingdale's will start the first phase, I think the first step into changing part of this business into a retail operation.
I think the situation is there. It's very volatile. It's something that we are following in a cautious way, but so far so good. Regarding the result of Japan, it has been especially good during the first half of this year. We had some specific product development that has been developed for the Japanese market, some lighter weight. We know that during the summer season, especially during the past few years, they have had a very high temperature with very high level of humidity. There have been requests coming from our team in Japan, and we have been developing product that are currently working well. What we have seen also in June is a return of Chinese consumer in Japan. That is, of course, positive and that is contributing to the result we have had during the first semester.
Okay. Thank you. Thank you very much.
The next question-
Sorry, just the very final one, if there is one. Sorry. It's very late for everybody, I believe.
The last question is from Flavio Cereda of Jefferies. Please go ahead.
Hi. Thank you. I think you covered pretty much everything, but I do have a question for Mr. Tieghi, mostly just to make sure he's really there and hasn't fallen asleep. What are you seeing in terms of sourcing new locations? Has the landscape changed? Is it becoming easier? Is it becoming cheaper? Have you seen any change in momentum compared to, say, a year ago or so? Thank you.
Yes. I think that it's not easy, but I think the power of the brand and the fact that now we have more than 190 stores all over the world has given us a bit better visibility. I find it a bit easier to promote Moncler within the malls in China, also with department store in the U.S. Like Roberto mentioned, we were able to open the first concession in America, in San Francisco. Also we got some good news because as you know, in China, the contracts have a three-year duration, and we're able also to get some savings on certain projects. I see a better situation than we had maybe four or five years ago.
I think it's a good momentum for us to find location also because you have to always remember that our average size, it's not that big, so it's quite easy for us also to combine stores or to get locations that are coherent with our format. I'm not sleeping. I was listening.
Good to know. Good to talk to you guys. Well done again. Thank you.
Thank you.
Ladies and gentlemen, this was the last question.
Thank you. Let me just remind you that Q3 2017 interim management statement will be released on October 24, and our silent period will start on September 25. We thank you specifically for the one that has remained until this very late, at least in Europe, and we wish you a very nice summer break. Ciao to everybody