Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler nine months 2016 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 to everybody, and thank you for joining our call today. I'm Paola Durante, and I'm here today with our Chief Corporate Officer, Luciano Santel. As you know, starting from Q1 2016, Moncler decided to align its reporting to the new Italian European directive, eliminating quarterly financial reports. However, on a voluntary basis for Q1 and nine months, we continue to publish an interim management statement providing information on sales trends. Before we begin, I would like to remind you 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.
Let me also highlight that this presentation may contain certain forward-looking statements, which 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. Finally, let me remind you that we have invited members of the media to participate in this call in a listen-only mode. Let's now go to the presentation to page four, where we will make a few general comments. We are very satisfied with Moncler sales performance, which continued double-digit growth in Q3, notwithstanding a volatile environment. All regions and channels contributed positively to the nine-month results. We are particularly pleased with the results achieved in China, South Korea, and Europe.
International markets now account for 83% of our total sales versus 81% in the first nine months of 2015, while the retail channel contributed 63% of our consolidated sales versus 60% in the same period in 2015. Our retail store network reached 186 doors at the end of September, today 187, including also the new flagship store in New York on Madison Avenue that just opened, and where we will host a launch event next week. Moving now to page five of the presentation, I will make some comments on our revenue breakdown by region. We have achieved strong results in all regions and are especially pleased with our performance in China and Europe, mainly Northern Europe. Looking at each individual region, we achieved good results in Asia, with all markets contributing positively to this performance. During Q3, Korea recorded even stronger results.
China continued to outperform the average of the region, while Japan showed a deceleration. The Americas region posted a +18% growth at constant currency. Within the Americas region, Canada continued to outperform, albeit from a small base. Our performance in the EMEA, including Italy, remains solid. In the quarter, we saw good acceleration in the U.K. as well as a continuation of the good performance in Germany. France, on the other hand, remained weak for the reason we all know. Italy was in line with expectations, notwithstanding a demanding base for comparison in the retail channel, given the Expo in 2015, as you remember, and the impact of the doors selection in the wholesale segment. Let's move now to page six of the presentation. Both channels showed good performances.
Retail sales rose 20% at constant currencies, driven by positive comp store sales growth and by the contribution of newly opened stores, some of which are achieving results ahead of our expectations. Wholesale also performed well, driven by the fall/winter '16 collections, both in outerwear as well as in our non-core product categories. During Q3, wholesale sales were mainly driven by Germany, the U.K., and North America. In mainland China, our second-largest market in the region, continue to perform strongly, mainly driven by sound organic growth. Moving to page seven of the presentation, we start with a focus on the Asian region. Japan, which in the first
Japan, which in the first nine months of 2016 accounted for some 40% of sales from Asia, continued to deliver double-digit reported growth, although at a lower level than in H1. This deceleration is largely due to lower retail sales growth, given that also following the JPY appreciation, fewer travelers visited and shopped in the country, while at the same time, more Japanese customers traveled abroad. As we were saying, Mainland China, which is our second largest market in the region, continued to perform strongly, mainly driven by sound organic growth. We also achieved very good results in all our other APAC markets, which are Hong Kong, Macau, and Taiwan. Korea delivered strong double-digit growth with an acceleration in Q3, reflecting the work done since we took control of the region, and also a somewhat easier base of comparison given the impact of MERS in Q3.
Turning now to the Americas on page eight of the presentation. Both distribution channels have contributed to the performance. In particular, our retail revenues have been good, largely supported by the stronger than expected performance of newly opened stores, such as San Francisco, Hawaii, Ala Moana, Vancouver, and Las Vegas Wynn. We are also pleased with the initial feedback we have received regarding the flagship in New York, although clearly it is early days. While coming from a low base, given our limited exposure in Canada, the country continued to outperform. Let's finally move to page nine, Europe. We continue to see good performance in almost all our European markets. If we look more closely at the most relevant ones, the U.K. performed strongly in Q3, driven by both distribution channels.
Germany continued to produce a solid performance both in retail and wholesale, while revenues in France have been negatively impacted by the reduction in travelers following the event in Nice in June this year. We recently started to see some signs of improvement. Local demand remains good. In Italy, the slowdown in the quarter has been largely due to the higher incidence in this quarter of wholesale sales versus retail. Wholesale sales in Italy have been influenced by the doors reduction, while organic growth in both channels remains good. Before opening the floor to your questions, let me just briefly comment on our store network, page 10 of the presentation. At the end of September, our retail store network reached 186 units with seven doors opened in the quarter.
So far in October and November, we have opened one, as we were saying, our flagship in New York, and we have three further stores still to be opened before year-end, of which one was previously expected to be opened 2017. We can confirm that we have some 12 doors secured for 2017 and some important relocations, including our plans to enlarge the Milano Monte Napoleone store and to relocate the Hong Kong Harbour City store in Canton Road. In addition, we are planning to open 10 shop-in-shops, mainly in North America. I will now leave the floor to your questions. Operator, can you please open the Q&A session?
Yes, madam. 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. The first question is from Fred Speirs of UBS. Go ahead, sir.
Hey, good afternoon. Three questions from me, please. The first one, Italy. Seeing that down slightly, could you maybe give us a sense of how much the wholesale account rationalization has impacted the number in Q3, and is there also going to be more to do on this front in early 2017? Next question was on Japan. Appreciate all the reasons for what's happening in Japan specifically, could you give us a sense perhaps on how Japanese consumers globally are behaving for you? The last question was around repeat customers. One of your big focuses has been on increasing the level of customer transaction data that you're capturing. Just interested if you could share any detail around how the baskets of repeat customers are comparing to their previous baskets. Thank you.
Okay. Good morning, everybody. Good afternoon, everybody. About Italy, business was slightly down in Q3, mostly because of the wholesale business, as you said, but simply because the rationalization of our wholesale business in Italy is still undergoing. We now have about 350 stores, which is not far away from the ideal target. Again, we're still selecting the number of doors, and this is the main reason why business was slightly down, considering that wholesale business in Q3 is by far the most important business, much more than the retail business. About 2017, we don't expect the wholesale business in Italy to grow, because again, on one side, we are increasing the penetration of the existing doors, but on the other side, we are still selecting the number of doors. Not that much, but still some work to be done in 2017.
Japan?
Overall, Japan in Q3, was probably the more difficult region for some reasons. One was the appreciation of Japanese yen and the consequent slowdown in the inbound
Business. I mean, the tourists are coming from outside, but from China mostly. Japanese customers mostly buy in Japan. They also buy abroad, and the region where they buy more is in North America, and specifically in our Hawaii stores. We have two stores in Hawaii, and important part of their business is made with the Japanese customers.
Okay. Regarding your last question on repeated customers, Fred, as you know, as we said, these are kind of KPIs that we monitor, but that will have an impact more on a yearly base than on a really on quarterly basis. We will not share with you on a quarterly base, but for sure, the work that the retail excellence is doing with Moncler, and not only, but also with the iPhone tools, is doing some good results. Actually, one thing that we are very happy is that our local customers, as I was saying, also comment in the presentation, is increasing. We have growth. We have seen a growth overall on our local customers. That is very important.
Thanks. Just on Japan, it was more a question about the Japanese consumer globally for you, whether or not that's a number you can see, and just to understand whether that number's growing for you. Thanks.
Honestly, we don't report, we've never reported this number. I mean, the Japanese customers are important. Most of the consumption is in the local market in Japan. Overall, the contribution of Japanese customers in Japan and in the other international countries is more or less in line with last year.
Okay, thanks a lot.
You're welcome.
The next question is from Elena Mariani of Morgan Stanley. Please go ahead, madam.
Hi, good evening, all, and thanks for taking my questions. The first one is on the quarter. I was just interested in knowing on the like-for-like and pricing in the quarter. I was interested in knowing whether you've taken any price actions, so price increases, perhaps in the U.K., or price decreases in some other regions, and whether you're continuing your global harmonization across the different countries. Secondly, an indication, I know you don't disclose the like-for-like by quarter, but an indication whether the trend was more positive or more negative versus the H1. Also whether you're seeing maybe a re-acceleration in the first weeks of Q4, given that the weather has turned actually more favorable to you. Finally, on consensus, do you think you will be able to achieve the EUR 1 billion sales mark in 2016?
Any indication on whether you also see the current margin projection as before? I think that consensus at the moment is in EBIT margin, I'm just checking right now, of approximately 28.8% for the year. Thank you very much.
Okay, Elena, thank you for your question. About our comp, as you know, we don't report a comp on a quarterly basis, but just to give you some more color. In Q3, number 1 market has been Mainland China. Mainland China, very strong. Under the APAC region, Hong Kong, pretty well. Korea, very well. Japan, as I said before, more difficult. More difficult mostly for the, what I said before, I mean, the appreciation of JPY and the slowdown in the inbound traffic, mostly from China. Europe, very well, mostly U.K. Again, for the different reason, I mean, the same reason, but different from Japanese JPY for the depreciation of the GBP. Not only U.K., also Germany, very good, very well. About North America, pretty well. Canada, better than U.S. This is just to give you some indication of our comp. About pricing, price harmonization.
I mean, the appreciation of JPY and depreciation of GBP occurred at the very end of June, as you know very well, after Brexit. At that time, our full winter collection was already on the floor. We made the decision not to adjust our prices. Our prices now in our stores has remained the same. Of course, we are facing now more competitive prices in the U.K. On the other side, we have a price gap between Japan and Europe, which is very high this season. We have decided not to do anything for this season. Of course, we have planned to adjust our pricing strategy for 2017, which has already been done for the spring season 2017 and is under process for the fall/winter 2017. Of course, as you know, we tend not to change prices of carryover products.
We tend to maintain the prices as much as possible flat. Of course, the way we build our pricing policy about the novelties, about the new product, is in order to reduce this price gap that now is in the current season between Japan and Europe, is very high. About Q4, October, as you know, as you said, started very well. We are very happy with October and in just the first week of November, which is behind us, was very good. Q4 start was definitely encouraging. About consensus, I think that looking at the sales results of the first nine months, the EUR 1 billion you mentioned is not unreasonable. Of course, having said that, sorry to say it again, at the end of September, we still have 50% of our retail business to be done.
It is definitely premature to anticipate how much we can do for the year-end. Honestly, I can tell you that the EUR 1 billion sales is reasonable. On the other side, about profitability, let me please mention EBITDA, EBIT, mean are of course, consistent each other. I think that the operating margins indicated under the consensus are consistent with the top line. If we will be able to make the top line, I think that EBIT and EBITDA are absolutely reasonable.
Okay, thank you. One small follow-up. What about the Chinese cluster? Was it up or down in the quarter on a global basis, if you have that information? Thank you.
Chinese are stable overall, so in the nine months, but also in the quarter.
Okay, great. Thank you very much.
The next question is from Erwan Rambourg of HSBC. Please go ahead, sir.
Yeah. Hi, good evening. Erwan Rambourg from HSBC in New York. Just wanted to ask you a question on retail. Looking at the combination of like-for-like and space expansion, it seems that things are slowing a bit. I don't know if it's linked to the like-for-like slowing or the space contribution slowing, but I'm just wondering if that has you rethink maybe your plans in terms of future store openings, because it could be the case that gradually you're seeing a bit more cannibalization than you used to see in the previous years. Then just secondly, there's this oddly timed news on Bloomberg saying that one of your competitors is looking to IPO in the down jacket space. I'm just wondering, are you seeing this space being more and more crowded, or do you think you can still continue to outpace the market you're in quite comfortably?
Yes. Erwan, in terms of retail, I just want to mention that there is a slowdown, also if you look at the number of stores open over the past 12 months, year to date, at the end of September, there is a slowdown. It's absolutely, let's say that the retail evolution in the first nine months is in line with our expectations, I think also in line with market expectations, absolutely no cannibalization from stores that we are seeing. Absolutely not differently or not at all compared to the past. In terms of Canada, you didn't mention the name, but I can say the name Canada Goose IPO. Canada Goose is a fantastic brand. We always said that. It's, I would say, position absolutely different from us. It's a different proposition, a different also business approach as far as we can understand.
I don't think the space is crowded at all. I don't know if Luciano wants to comment more on the first part of the question on the retail.
In retail, our strategy is to maintain our retail network very selective. Honestly, I've not talked about cannibalization. I think that the strategy we have developed this year and the strategy that will be further implemented next year, we will see bigger stores for sure. Based on our experience and based also on the experience of this year, we don't see any dilution of the productivity of our stores. I think that the increasing space is something we want to continue because we strongly believe that the presentation of our collection and also for the visibility of our brand, we need in some specific and select locations, bigger stores. Again, we don't see any dilution, any risk of dilution of our space density.
Okay. Thank you very much. I just wanted to come back, because the sound was impacted, on how you feel about consensus. Again, I understand you have the bulk of retail sales ahead, did you say it was not unreasonable, what the consensus has?
Yes. I said that it is not reasonable. That means that it is reasonable. Again, let me clarify that what I said is also that at the end of September, we still have ahead 50% of our retail business. Any anticipation of what we can or cannot do is definitely premature. Looking at the space in the first nine months, I can tell you that, yes, that target is reasonable.
Okay. Thank you.
You're welcome.
The next question is from Celine Cherubin of Natixis. Please go ahead.
Sorry, can you talk a little bit loudly?
Yeah.
Can you hear me?
Yeah. That's much better. Thank you.
Okay. Sorry. Two questions, please. The first one is regarding the performance of by product category. Can you give us more details regarding knitwear, shoes, and maybe first results of your new eyewear collections? The second question relates to your store openings for 2017. You mentioned that 12 doors are already secured. Can you give us information regarding the locations of those doors? Many thanks.
Okay. About product categories, I mean, as you know, our outerwear category still represents the majority of our business. We have been investing a lot in the other categories and first of all, specifically in the knitwear category, which in the spring, did very well. We made some comments during last conference call. I don't know if you remember, but I mean, we said that good or bad, but we ran out of stock in many knitwear items, which is not good for business, but very good from the perception of the product from consumers' point of view. Knitwear is doing much better. We have invested a couple of years ago in a small production unit in-house, which was, and is still instrumental to develop the knowhow on this specific category. I mean, we believe in it a lot.
In fall, based on the first few months of this season, knitwear category is doing well, very well. When I'm talking about knitwear, actually I'm putting together traditional knitwear and the so-called cut and sew, which is the jersey. About eyewear, honestly, I mean, we are very happy with the agreement with Marcolin, and I mean, the very first segment capsule of the collection was on the floor at the end of September, early October. First, it is still very early. Second, I mean, we don't expect, at least at the beginning, a significant and important volumes from this category. Of course, we can talk about the other categories, shoes, but again, I wanted to get focused on the very important, most important category, which again is knitwear.
About stores and new opening for next year, as Paola said at the beginning of this call, we have secured 12 stores now. I mean, the 12 stores are more or less spread out over the different regions. Some in APAC, Asia Pacific. One will be our first store ever in Australia, which is reported under the APAC region. Another store will be in mainland China. We have some stores in Europe. We have a couple in North America. One in Canada, our second store in Toronto. These are more or less the regions. I mean, stores will be distributed more or less in all the different regions.
Thank you very much.
The next question is from Piral Dadhania of RBC. Please go ahead.
Yeah. Hi there. Thanks for taking my question. I was just curious if you could provide some update. I know you just gave the store opening plan for 2017, there was no mention of travel retail there. Obviously as your network starts to look more mature, I know that the strategic initiative that you presented last December focused on the potential for travel retail, which remains under-penetrated. Could you just give us an idea of how many stores you have in that channel currently and whether that's still a focus area for you going into next year? Thank you.
Yes. Travel retail is a very important focus area for our business. Please remember that our strategy is, it must be very selective. Honestly, for 2016, we have opened an important travel retail store in Incheon Airport in Korea. For early 2017, we will open, which is included in the first stores I told you before, a travel retail store in Doha, Qatar, the Doha Airport. This will be reported under the wholesale business because it will not be operated directly by ourselves. These are the openings we are targeting right now. Of course, we are looking very closely at this business channel. Again, we are not in a hurry to open many stores. We want first to target, in a very selective way, the best travel retail locations.
Brilliant. Thank you.
The next question is from Ms. Paola Carboni of Equita SIM. Go ahead, madam.
Yes. Hi, good afternoon, everybody. I have three questions. First one, you have new openings for 2017. Can you share with us, if any, will be a flagship store and where? Secondly, the U.S. market, particularly on department stores, your performance in the wholesale channel here seems very good. I would like to understand in your day-by-day relationships, how things are going and what is maybe a kind of same store sales performance here with same space. Excluding the fact that you are clearly enlarging your presence there. The third question is about your comments on same store sales growth of Q3, and October and November.
First of all, I wanted to make sure that you were actually referring about same store sales when commenting on October and November, if you can please elaborate, not clearly on the number, I understand, but on the change of pace, if any, you have seen in Q3 versus H1 and October, November versus Q3. Thank you.
Okay, Paola. About flagship stores. In the 12 stores we have secured, there are no flagship stores. Your question is very important because something Paola mentioned actually in the introduction, it is important to highlight, is that an important part of our retail development for 2017 includes some expansion and relocation. Two particularly important will be the expansion of our retail store in Milan, Via Monte Napoleone, which will be expanded and will become much bigger and much more visible than now. The second relocation, which is also even more important than the Milan one, will be in Hong Kong, in Kowloon, where we have our number one store of the retail chain, which is the Hong Kong Harbour City store. That will be relocated in the same shopping mall, but with the main entrance on Canton Road.
The store will be at least three times bigger than the existing one, much more visible, of course, needless to say, with two entrances, one in Canton Road and one still on the back of the store in the inside part of the shopping mall. These are two very important projects. If I can tell you, even more important than the 12 new stores, because we are touching two important stores in two very important cities for our business. About U.S. department stores, our business, as you know, has been doing pretty well with the department stores, the few names we do business with. For this season, spring season was good. I think we already made comments on spring 2016 during the last conference call.
For the current full winter season, business is doing better, and the sell-through, to the extent we know it, because of course, they provide this information to us. Sell-through, as far as we know, is better than last year. We are happy, and I think they are happy. About comp, again, we don't provide numbers. I gave you some colors in the different regions. Again, China, very good. All the other regions are pretty good. Japan are more difficult, definitely more difficult, weaker. October started well. I can tell you that October better than September, for sure. The first week of November, even better than October. This is the color I can give you.
Of course, you know that comp like-for-like is very important, but one of the reasons why we don't provide the number on a quarterly basis is that we believe that the shorter is the period you look at the like-for-like, the less meaningful it is. Again, we are confident about our business trend, about our comp store sales. In August and September, weaker, October, better, and November, even better. We are taking a picture of the very first week of November. I've been confident. Yes, we are confident. We still have a lot of work to do.
Sorry, just a follow-up, if I may, on the U.S., you said. Can you also give us a flavor on the Spring/Summer '17 orders you got from department stores?
Yes. Spring/Summer '17 order campaign has been completed 100%. Actually, we already started deliveries because in the United States, specifically, the very first deliveries are end of October. As we speak right now, you can find in some department stores the first deliveries of our Spring/Summer 2017 collection. Orders were good. I don't have specific comments. Overall comment on our campaign is good. Honestly, growing. Of course, spring season is not particularly important. It's much smaller than the fall/winter season. Again, it is a fair and encouraging indication of the perception of our brand in the different regions. The order campaign was up against last year.
Maybe if I can just add one thing on shop-in-shop, that we said next year we target to open some 10 shop-in-shop. This would be mainly in North America, where we are really working on the wholesale channel to work with the existing customers, to really improve our penetration. Moving more towards a shop-in-shop concept, that is giving us very good results, and we have a few that are doing very well.
Perfect. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your touch-tone telephone. For any further questions, please press star and one on your telephone. Florence, at this moment, there are no questions registered.
Perfect. I'm sure that a lot will be asked later. In any case, first of all, we would like to thank you for participating in this call. I don't know if you have seen, but just to let you know, we just published our 2017 calendar, which is on our website. Our fiscal year 2016 results will be published on February 28th. The conference call will take place on the same day. Our quiet period will start on January 30th. We are at your disposal. Any follow-up question you have tonight, tomorrow, we are here. By the time, thank you very much for being with us tonight.
Thank you. Bye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.