Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the Moncler 9 Months 20 16 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. Paolo Dorante, Investor Relator and Strategic Planning Director of Moncler. Please go ahead, madam.
Thank you, and 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 Sante. 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 9 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.
In addition, 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 4, 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 9 months 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 1st 9 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 DAS 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 5 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 currency. Within the America region, Canada continued to outperform, albeit from a small base.
Our performance in EMEA, including Italy, remained 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 ex in 2015, as you remember, and the impact of the doors selection in the wholesale segment. Let's move now to Page 6 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. All sales also performed well, driven by the fall winter 2016 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. We will now analyze in more details in Mainland China, our 2nd largest market in the region, continued to perform strongly, mainly driven by sound organic growth. Japan, which we start with a focus on the Asian region.
Japan, which in the first sorry for this. Japan, which in the 1st 9 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 yen 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 2nd 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 SaaS in Q3. Turning now to the Americas on Page 8 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 win. 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 9, Europe. We continue to see good performance in almost all our European markets. If we look more closer at the most relevant ones, the UK 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 this in June this year.
Although 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 question, 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 7 DAS opening the quarter. So far in October, November, we have opened 1, as we were saying, our flagship in New York. And we have 3 further stores still to be opened before year end, of which one was previously expected to be opened in 2017. We can confirm that we have some 12 doors secured for 20.70 and some important relocations including our plans to enlarge the Milano Monte Napoleone store and to relocate the Hong Kong Garbo City store in Canton Road. In addition, we are planning to open 10 shopping shops, mainly North America.
I will now leave the floor to your questions. Operator, can you please open the Q and A session?
Yes, madam. Excuse me, this is the Chorus Call conference operator. We will now begin the question and answer session. The first question is from Fred Spiers of UBS. Go ahead, sir.
Hey, good afternoon. Three questions for me, please. The first one, Italy. I'm seeing that down slightly. Could you maybe give us a sense of how much the wholesale account 2017?
Next question was on Japan. I appreciate all the reasons for what's happening in Japan specifically, but could you give us a sense perhaps on how Japanese consumers globally are behaving for you? And then 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, I mean, the business was slightly down in Q3, mostly because of the wholesale business, as you said, but simply because I mean 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.
But again, we're still selecting the number of those 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 dose, but on the other side we are still selecting the number of those, not that much, but still some work to be done in 2017. Japan, I mean, 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 I mean in our Hawaii stores, we have 2 stores in the Hawaii and important part of their business is made with the Japanese customers. Okay.
Regarding your last question, 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 basis than on really on quarterly basis. So we will not share with you on a quarterly basis, but for sure the work that the Retail Excellence is doing with the Monclerana and not only but also with the iPhone tools is doing some good results. And actually one thing that we are very happy is that our local customers, as I was saying also comment in the presentation, is increasing. So we have growth, we have seen growth overall on our local customers that is very, 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 is growing for you? Thanks.
I mean, we don't 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.
The next question is from Elena Mariani of Morgan Stanley.
The first one is on the quarter. I was just interested 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? And 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 first half?
And also whether you're seeing maybe a reacceleration in the 1st weeks of Q4, given that the weather has turned actually more favorable to you? And finally, if you on consensus, do you think you will be able to achieve the €1,000,000,000 sales mark in 2016? And any indication on whether you also see the current margin projection as people. I think that consensus at the moment is in EBIT margin, I'm just expecting right now, of approximately 28.8% for the year? Thank you very much.
Okay. Elena, thank you for your question. About our comp, I mean, as you know, we don't report a comp on a quarterly basis. But just to give you some more color. In Q3, number one market has been Mainland China.
Mainland China very, very strong. In under the APAC region, Hong Kong pretty well. Korea well, very well. Japan, as I said before, more difficult, more difficult mostly for the what I said before, I mean the appreciation of the yen and the slowdown in the inbound traffic mostly from China. Europe well, very well, mostly U.
K, again, for the different reason, I mean, the same reason, but different from Japanese yen for the depreciation of the GBP pound, but not only U. K, also Germany very good, very well. About North America, well, pretty well. Canada, better than United States. So this is just to give you some indication of our comp.
About the pricing, price harmonization, I mean the appreciation of yen and depreciation of GBPound occurred at the very end of June, as you know very well after Brexit. At that time, our full winter collection was just was already on the floor. So we made the decision not to adjust our prices. So our prices are now in our stores has remained the same. Of course, we face we are facing now more competitive prices in the UK.
On the other side, we have a price gap between Japan and Europe which is very high this season. But we have decided not to do anything for this season. But 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 full winter 2017. Of course as you know, we don't we tend not to change price is of carryover products, we tend to maintain the prices as much as possible flat, but 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, very high. About Q4, I mean October as you know, as you said started very well.
So we are very happy with October and then in the just the 1st week of November, which is behind us was good, it was very good. So I mean the Q4 start was definitely encouraging. About consensus, I think that looking at the sales results of the 1st 9 months, the €1,000,000,000 you mentioned is not unreasonable, of course. Having said that, sorry to say it again, but at the end of September, we still have 50% of our retail business to be done. And so it is definitely premature to anticipate how much we can do for the year end.
But honestly, I can tell you that the €1,000,000,000 sales is reasonable. On the other side, about the profitability, let me please mention EBITDA, but EBITDA, EBITDA, of course, consistent each other. I think that the operating margins indicated under the consensus are consistent with the top line. So if we will be able to make the top line, I think that EBIT and EBITDA are absolutely reasonable.
Okay. 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 in?
Chinese are stable overall, so in the 9 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 Ramborg from HSBC New York. Just wanted to ask a question on retail. Looking at the combination of like for like and space expansion, it seems that things are slowing a bit.
So 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. And then just secondly, there's this oddly timed news on Bloomberg saying that one of your competitors is looking to IPO in the bow 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?
[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. Erwan, in terms of Retail, I just want to mention that there is a slowdown. But also, if you look at the number of stores open over the past 12 months year to date, the end of September, there is a slowdown. So it's absolutely, let's say, that the retail evolution in the 1st 9 months is in line with our expectations. I think it was in line with market expectations, but so 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't say the name Canada Goose IPO. Canada Goose is a fantastic brand. We always said that. It's a, I would say, position absolutely different from us. It's a different proposition, a different also business approach as far as we can understand.
But 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, the retail.
I mean, retail, our strategy is to maintain our retail network very, very selective. So honestly, I have not talked about cannibalization. I think that the strategy we have developed this year and the strategy that will be further implemented the next year, We will see bigger stores for sure. But 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. And so I mean, 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 of bigger stores.
But again, we don't see any dilution, any risk of dilution of our sales density.
Okay. Thank you very much. I wanted to come back, because the sun was impacted, on how you feel about consensus. Again, I understand you have the bulk of retail sales ahead, but did you say it was not unreasonable what the consensus has? [SPEAKER
CARLOS ALBERTO PEREZ DE SOLAY:] Yes. I said that it is not reasonable. That means that it is reasonable. But 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. And so any anticipation of what we can or cannot do is definitely premature.
But looking at the sales in the 1st 9 months, I can tell you that, yes, that target is reasonable.
The next question is from Celine Cherubin of Investecia. Please go ahead.
Sorry, can you talk a little bit loudly? Can you hear me? Can you hear me?
Okay. Sorry.
Two questions, please. The first one is regarding the performance of byproduct category. Can you give us more details regarding knitwear, shoes and maybe first results of your new eyewear collections? And 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, but we have been investing a lot in the other categories and the first of all specifically in the midwear 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 run out of stock in some in many in each items, which is not good for business, but very good from the perception of the product from consumers point of view. So it is doing much better.
We have invested a couple of years ago in a small production unit in house which was and this is still instrumental to develop the know how on this specific category. And so I mean we believe in it a lot and in full based on the 1st few months of this season, and knitter category is doing well, very well. And when I'm talking about the knitter, actually I'm putting together traditional knitter and the so called Katarsson, which is the jersey. About eyewear, honestly, I mean, we are very happy with the agreement with Marcoline and I mean the first, the very first segment capsule of the collection was on the floor at the end of September, early October. But the first, it is still very early.
2nd, 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 of shoes, but again, I wanted to get focused on the very important, the most important category which again is knit. About stores and new opening for next year, as Paolo 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 1st store ever in Australia, which is reported under the APAC region.
Another store will be in the mainland China. We have some stores in Europe. We have a couple in North America, 1 in Canada, our second store in Toronto. So these are more or less the regions. I mean, the stores will be distributed more or less in all different regions.
The next question is from Piraha Ladhani of RBC.
Yes. 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, but there was no mention of travel retail there.
So 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 underpenetrated. 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. Total Retail is a very important focus area for our business. But please remember that our strategy is it must be very, very selective. So honestly, I mean, for 2016, we have opened an important travel retailer store in Incheon Airport in Korea. For 2017, early 2017, we will open, which is including the 12 stores I told you before, we will open a travel retail store in Doha, Qatar, the Doha airport.
Actually, this will be reported under the wholesale business because it will not be operated directly by our sales. And these are the openings we are targeting right now. Of course, we are looking very closely at this business channel. But again, we are not in the hurry to open many stores. We want first to target in a very, very selective way the best travel retail locations.
Brilliant. Thank you.
The next question is from Ms. Paola Carboni of Equita SIM.
I have three questions. First one, you have new openings for 2017. Can you share with us them, if any, would be a flagship store? Secondly, the U. S.
Market, particularly on the customer stores, your performance in the wholesale channel here since 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, so excluding the fact that you are clearly enlarging your presence there? And the third question is about your comments on sensor sales growth of Q3 October November. First of all, I wanted to make sure that you were actually referring about same store sales when commenting on October November. And 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 the flagship stores, in the 12 stores we have secured, there are no flagship stores. But the question your question is very important because something that we I mean, Paolo mentioned actually in the introduction, but it is important to highlight is that in part an important part of our retail development for 2017 includes some extension and relocation. And the 2 particularly important will be the extension of our retail store in Milan, the Amonta Napoleone, which will be expanded and will become much bigger and much, much more visible than now. And 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 Harbor 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 3 times bigger than the existing one, much more visible of course needless to say with the 2 entrances, 1 in Canto Road and 1 still on the back of the store inside the part of the shopping mall. So these are 2 important, very important projects. If I can tell you even more important than the 12 new stores because we are touching 2 important stores in 2 very important cities cities for our business. About U. S.
Department stores, our business, I mean, as you know, has been doing pretty well with the department stores, the name, the few names we do business with. For this season, I mean the spring season was good. I think we already made the comments on the spring 2016 during the last conference call. For the current full winter season, business is doing better and I mean the sell through to the extent we know it because of course they provide this information to us but as far as we know is better than last year. So we are happy and they are I think they are happy.
About the comp, again we don't provide numbers. I mean I gave you some colors in the different regions. I mean, again, China very good. And all the other regions pretty good. Japan more difficult, definitely more difficult, weaker.
October started well. I can tell you that October better than September for sure and the 1st week of November even better than October. So I mean this is the color I can give you. I mean of course you know that comp like for like is very important. But one of the reason why we don't provide the number on a quarterly basis is that we believe that the short release of the period you look at the like for like the less meaningful it is.
So again we are confident about our business spend, about our comp store sales, August September weaker, October better and November even better. But I mean, we are taking a picture of the very first week of November. So I've been confident. Yes, we are confident. And but I mean, we still have some work, 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 SpringSummer 'seventeen orders you got from department stores?
Yes. I mean, last week, summer 2017 order campaign has been completed 100%. Actually, I mean, we already started deliveries because in the United States specifically, the very first deliveries are end of October. So as we speak right now, you can find in some department stores the first deliveries of our springsummer 2017 collection. Orders were good.
So I mean, I don't have a specific comment. I mean, the comment overall comment on our campaign is good. Honestly, growing, of course, the spring season is not particularly important. I mean, it's much smaller than the following season. But again, it is a fair and encouraging indication of the perception of our brand in the different regions.
So I mean, the order campaign was up against last year.
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, but to really improve our penetration. Moving more towards shop in shop concept that is giving us very good results. So we have a few that are doing very well.
Gerlanti, at this moment, there are no questions registered.
Perfect. I'm sure that a lot will be asked later. But in any case, first of all, I would like to 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. So our fiscal year 2016 results will be published on February 28.
The conference call will take place on the same day. And our quiet period will start on January 30. We are at your disposal. Any follow-up question you have tonight or tomorrow, we are here. So 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.