Good afternoon, this is the Chorus Call conference operator. Welcome and thank you for joining the OVS First Half 2025 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 Mr. Stefano Beraldo, CEO of OVS. Please go ahead, sir.
Good afternoon, and thank you for being with us for this six-month conference meeting. first of all, very good result for the first half in general, in spite of a normal, basically not supported by, not particularly supported by good weather. I cannot say weather has been adverse, but weather has been normal, negative, particularly during the month of April, during which we have lost much more sales compared to what we expected and compared to last year because of a very rainy and cold month. Driver of the growth has been the like-for-like, and within the like-for-like, once again, the women's segment is the best-performing one.
I n the three years in a row, for three years in a row, women are generating sales at a higher rate compared to men and kids, driven by Piombo, but even mostly this time by the new entry, which is Les Copains. During the first half, Les Copains entered for the first time in our collections. T he good news is that Les Copains didn't replace, even partially, the sales of Piombo, but generated additional sales with the style and the product talking to a different taste in women compared to the one that appreciates Piombo normally. I t's important to notice that with Les Copains, we introduced a second real brand in our portfolio of brands.
The price of Les Copains is a bit higher, as it happens also for Piombo compared to the average of the collection, generating also higher margins. T his is one of the reasons for the higher margin in the first half. So good, very good women's, very good all the brands: Piombo, Les Copains, even the Angel performed very well.
Once again, very good performance of the perfumery, of the beauty segment. By the way, in Milan, yesterday, today, and tomorrow, there are thousands of people in and outside our store where we have a masterclass and hostess presenting and attending the Milan Beauty Week with a lot of buzz around our three Milan stores, namely Via Torino, Via Dante, and Via Garibaldi. Very well also, the other brand, Stefanel, recovered compared to last year, and UPIM confirmed the very good result achieved last year. Last year was exceptional, the performance of UPIM with a +7% in the first half. This year, basically, UPIM coupled the performance result of last year, establishing a new baseline for the future growth. Good, the international, very good gross margin, partially thanks to what I said about Les Copains, but also in general because of better sourcing.
As usual, I would say strong attention to cost control in spite of some inflationary component and the third year of adjustment in the labor cost due to the agreement of two years ago, the general contractual agreement. Good results in all the refurbishment with an average of plus 10% in the refurbished store. The first month of Golden Point, which we consolidated for the month of July. July is a particular month, very favorable for Golden Point with higher sales and the highest profitability in 12 months, so impossible to replicate for 12 months the good performance of July, but we are happy because we believe that the time spent in understanding the organization of the company will allow now to start looking at good performance also in this newly acquired company. The contribution of Golden Point to the turnover is EUR 15 million.
So for the one of you that want to have a complete idea of the growth in the six months, we grew more or less 2% organically, and another 2% has been achieved by adding the performance of Goldenpoint. W e are happy with these results, which confirm what is happening in the last several years. I don't remember anymore. E very year we are improving top line, some operating leverage, gross margin. As we said, we started well the second half. August has been very good. September will be a bit more difficult because last year, September generated a very strong increase in sales due to unusually cold weather. A ll in all, we believe that we have all the correct instruments and activities in order to continue to deliver well also in the second part of the year.
So thank you for this, and I hand the word to Francesco as usual.
Thank you, Stefano. I will drive you through the presentation, starting with page number four, where we have the P&L reported that has already been described by Stefano, sees an increase in sales of 4.1%, 2.2% excluding the impact of Goldenpoint. And looking to the last column, the change percentage, we can easily see the progression in the operating leverage effect with gross margin growing 6%, EBITDA 14%, and then net income plus almost 32%. A situation in which the growth in sales drove a healthy growth in profitability at all levels. Also, the consolidation of Goldenpoint gave an additional boost to a semester that even in the organic view was very strong. On page number five, we can see, in fact, the split with the addition of these proforma values that are the results of the semester excluding Goldenpoint.
We can see the growth in terms of sales of 2.2%, and the EBITDA sales was much more robust with plus 9 from 89 last year to 97, and then with the addition of the EUR 4 million provided by Goldenpoint. In terms of business units, OVS is growing both in terms of sales and in terms of EBITDA, with an EBITDA margin that in our main business unit reaches 14%, which is in line with the best standard of the industry. On the other side, UPIM that had a much more difficult comparison given the last year's excellent performance in the first quarter and the first semester is matching in terms of sales, but then is absorbing the inflation on costs. I t's worth mentioning that the EBITDA of this semester is nonetheless EUR 2 million higher, 12% higher than the one in 2023.
It's a long-term growth trajectory that is confirmed also now. Now, I move to page number six with some more details on the working capital, which is basically flat versus last year, with an improvement in trade receivable. On one side, there is some accounting effect. Last July, there were still some receivable versus Coin that then was written off in the second part of the year. I n general, with an improved profile of cash in versus our franchising business. Inventory on the other side is growing, and this was because last year we were still in the process of anticipating purchases due to the longer shipment time. We completed this anticipation by October last year, but this is the last moment in which we see in the comparison the increased inventory due to this anticipation.
It's worth mentioning that now we have between EUR 40 million and EUR 50 million of structural additional goods at sea, so structural higher inventory that will be released as soon as the Suez Canal would open again, and of course, this is uncertain in the future, but it is something that we expect to take place with a material positive benefit on cash generation. Trade payables are in line with last year, driven by business growth a little bit. Page number seven, I have the view on capital expenditures that starting from the bottom line, the total are declining. As said in the previous years, we had some exceptional investments, and we can see these on the two blocks of IT and logistics that are normalizing, let me say, to a standard level, while we did not stop our investments on openings and especially refurbishments.
Also, thanks to the fact that the return is important, the newly refurbished stores this year are increasing their sales by more than 10% versus previous year. On the right side, you can see now a picture of a newly opened store of UPIM in Merano, and we will come back on that later because the result of this new format UPIM Gallery is extremely promising. On page number eight, there is a summary of cash flow that, first of all, is cash absorption, but this is due to the normal seasonality. That is a high absorption in Q1, some cash positive in the second, and globally a result which is slightly worse than last year, but as said, we are completing this building up of the stock in transit, and this is the reason, and by the way, the single Q2 results showed an improvement versus 2024.
We are closing the gap, and we are confident that the full year cash generation will be in line, at least in line with the consensus. Page number nine reflects the picture of the net financial position as of 31st of July with a leverage ratio of 1.4 at single point level, 1.3, 1.26 on the average 12 months. And this includes about EUR 10 million, 4% of the share capital retained as a treasury share. I then move to page 11, sorry, to quickly comment or refresh what was already said by Stefano in terms of the current trading. August sales grew double digit thanks to an always stronger performance in the second half, in the second month of the sales.
Now September, which is of course just the start of the full winter season, that is impacted on one side by weather fluctuations, but looking to the average of the results of the past years shows a significant growth. A gain, a well start of the good start of the season. We also highlighted this point on these three stores, Lecce, Merano, and Biella, that were recently opened by UPIM under this UPIM Gallery new format, and they are delivering excellent results, about EUR 15,000 per day in terms of income per store. All in all, we are more than confident that we will achieve at least the consensus in terms of profitability and cash generation. I leave the words to the questions you may have.
Thank you. 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 telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Andrea Bonfa of Banca Akros.
Hello. Good morning to or good afternoon to everybody. I got a couple of, let's say, small questions. One is related to the impact of openings if it was material in H1. And the second one, for what I remember anyway on this point, openings should have been more relevant in H2, but please correct me if I'm wrong. And the second one, you mentioned that the first half results were helped by lower purchase costs. I'm wondering if these lower costs, lower purchase costs are an anticipation of what you mentioned for 2026 thanks to the US dollar and, let's say, the difficulties of your traditional Far Eastern supplier, or how shall we, let's say, interpret this aspect? Thank you very much.
Thank you, Andrea. No, the opening effect is not material. T he real like-for-like is about 2%. B asically, the combination of the lost sales due to the refurbishing period and the increase of sales generated in the first weeks is about equal to zero. B asically, no material effect on this number from the refurbishing. E ven we do not expect material effect in the second half from the refurbishment activity. The good news is that all the refurbishments are, in any case, generating a new perception of the branding of the customer base located nearby the stores. It's a good maintenance activity that is necessary to continue keeping fresh and interesting the image of the store. W e made many, many important refurbishments during the last two years in Milan and Rome.
In this moment, we will continue dedicating some CapEx to rejuvenating the network, even because mostly because the new image is more in line with the higher quality of the merchandising that we are introducing from time to time in our stores. Regarding the question about the cost reduction, the answer is no. The cost reduction is not generated by an anticipated effect of the U.S. dollar that we will entirely benefit in year 2026.
Yeah, thank you very much, Stefano. If I may, is it possible to quantify, let's say, the amount of shops maybe in square meters or in percentage-wise that you are, let's say, refurbishing on a rolling basis or in particular this year versus last year? I s that 5% of your surface, is 10% or 70 a year?
No, we'll be less than 1%. We'll be between 0.5% and 1% of our total surface.
Okay. Thank you very much.
Thank you.
The next question is from Francesco Brilli of Intermonte.
Thanks for taking my question. A couple of questions from my side. First of all, if you can describe the movement in the change in net debt compared to the end of last year below the operating free cash flow and what we should expect going forward for the second half of the year? And the second one is more on the international sales you mentioned, which are performing well. If you can add some color on the performance by geography and the plans you have outside Italy going forward? Thank you.
Okay. I hand over to Francesco to the first question. Francesco.
Yes. Below the reported cash flow are, of course, the dividend distribution, more or less EUR 27 million, and the buyback that took place in the period, and the last element on which we have a non-disclosure agreement is the consolidation of Goldenpoint that, of course, is bringing the last element to the movement from the, if I'm not wrong, EUR 145 million at the end of the year last year and EUR 293 million. As of now, as said, most of it coming from seasonality, and we expect the full year cash generation to be above last year. That was 69, and so in line with the consensus.
Okay. On international sales, I said good because we are basically generating a small increase in profitability at EBITDA level. A lso, we are planting new seeds for international growth out of Italy with promising results in two countries, Japan and Mexico. We are about in Japan, we already opened more than 10 corners on a wholesale agreement base, so without taking any risk with the biggest shopping mall chain in the country called, I forget the name now. Okay. I forget the name now. I will come back later with the name. Aeon. A-E-O-N. The corners are performing well, and it is the first presence in the market. We opened just Kid Corner inside this department, inside a big chain of department stores with more than 200 department stores. We opened in 10, 12 of those 200.
If the result on a yearly basis will be good, there is a good potential for further growth. Similarly, we are about to open our first 50-60 corner, men, women, and kids inside a department store in Mexico, basically replacing the Benetton corner that were selling in this format. Also, in this case, we are talking about franchise agreements, so wholesale, basically. The name of the chain is Sears. Sears is an important brand which in the United States is suffering, but in Mexico, the brand of Sears is in very good shape, and the owner of this brand is the Slim family, the richest and most successful business family in the country. I t's a promising activity. If the corner will do well, there is another stream of revenues without risk to be taken in that country. Th ese are the two most important initiatives.
We are about to open. The press reported also the news that we will open our first store in Delhi. In this case, we will open in a country that we believe is the most promising for our positioning. Indian population is changing habits. They dress in Western style more and more, particularly in the big cities like Delhi and Mumbai. We believe that our prices and our range of items and our being Italian are success factors that we hope we'll be able to leverage in order to perform in this market according to the potential of our brand. If the store will work well, there will be a big potential of growth, obviously, but let's operate step by step with limited risk. Only one store.
Probably we will open a second store, and then we will learn about the market in order to understand if there will be the possibility to leverage also this country.
Thank you. Thank you.
The next question is from Luca Orsini Baroni of Orsa SRL
Hello, Stefano. One question. You have made a fantastic 60% gross margin in this first part of the year. Do you think that this 60% gross margin is a level that you can sustain for the entire year and also in 2026? Because it's very high.
Ciao, Luca. P robably in the second half, the gross margin will be a bit lower as a normal part of our seasonality. W e believe that in the full year, compared to last year, the gross margin will be a little bit higher, all in all. I t will remain higher. M ost importantly, with reference to the second part of your question, we are confident that by the next year, we will be able to retain in the gross margin at least part of the advantage that the more favorable dollar exchange rate will imply.
Okay. I have a second question on the business. You have highlighted these three new shops of UPIM. Can you just tell us a bit more what you're trying to achieve with these new shops? What is the difference, and what makes them different?
Basically, UPIM is already an affordable-priced department store with perfumery, with home decoration, and apparel. We are introducing in UPIM some external brand to provide the UPIM customers other opportunities besides the house brand generated by UPIM. And in this moment where there is a lot of brands which are struggling to find traffic, and bridge brand, not luxury brand, obviously, UPIM is demonstrating that it is very interesting for mid-market brands which customers are still looking for as a right place to be present. I n the three stores, instead of in the three stores that Francesco mentioned, which are bigger, between 1,500 and 2,000 sq m, instead of offering 100% of house brand in the apparel segment, we are offering like 80% of house brand, and we are introducing another 20% of external brand. And the result has been extremely favorable.
Besides that, we increased the attention to the beauty, to the perfumery in UPIM, and this is, again, generating excellent results. B asically, the idea is that in the prime location in downtown UPIM, we became more similar to an affordable-priced department store than to a purely apparel format.
Okay. That's very interesting and keep up with the good work, and that's all for me.
Thank you.
The next question is from Gianmarco Bonacina of Kepler Cheuvreux.
Hi, everyone. Thank you for taking my questions. Quick follow-up on the gross margin again, particularly the gain you booked in the first half. We understand that nearly 70 basis points out of the 100 basis points gain were linked to the like-for-like performance. With a ballpark estimate, if I'm not mistaken, we can infer a channel impact derived from the DOS performance compared with franchising that is impacting around 20 basis points. It leaves around 50 basis points that I cannot explain. You mentioned before the pricing of Les Copains and Piombo. Is this the main reason behind this gain? Is there more behind that? If so, can you maintain this pricing power going forward? Thanks.
Not easy for me to enter such a deep-dive analysis that you are requiring. I cannot say if 70 or 60, this is too small for me to be able to give you a precise answer in terms of differences. ll in all, you are right in assuming that the element that doesn't match with your math are the contribution of Les Copains. Les Copains has been generated entirely by our internal team with a lot of synergies. C ompared to the collections that we sold before introducing Les Copains, we have been able to command a higher price thanks to the Les Copains brand at a very affordable cost due to the synergy. Les Copains generated about 20-25 million of sales, those 20 million of sales are impacted by a higher gross margin.
I don't know if this accounts for 20 basis points or 25. This I don't know. A lso, we lowered the markdown in July compared to last year, which is another element that maybe you didn't keep into account. Also, this year, we started with a higher quantity of new merchandising compared to last year, where we reported some leftover of the year before with a lower margin. T hese other two elements maybe can help you to build up the entire reason for the gross margin increase.
Yep. That was super helpful. And if I may.
It can be.
Tell us how was the impact of the beauty sales as a percentage of the total sales?
Yes, you can, but I don't have the answer immediately.
Or maybe.
No, no. Francesco is writing to me the number. Francesco, tell the number.
8% in OVS and about 10% in UPIM, which has a longer history as a department store, while OVS, it increased. It doubled basically from 4% in 2021 to 8% nowadays, and it's still growing double-digit versus last year. Of course, no more 30%, but still a plus double-digit versus 2024. All right. Many thanks.
Thank you.
The next question is from Domenico Ghilotti of Equita.
Hello. Hi. Good afternoon. Actually, I'm a colleague of Domenico. It's Paola Carboni, still from Equita. I'm going with a few questions. My first one is about revenue growth. If you can share with us your growth target for revenues, excluding Goldenpoint for the year, and where are you now versus your expectation, your budget? And at the same time, what we should expect as a contribution from Goldenpoint from July onwards? Is it maybe some EUR 70 million reasonable amount? So I don't know. Where do you see a pro forma, let's say, amount of revenues for Goldenpoint for the full year, 2025? Another question is about inventories.
If you can come back on your comments at the beginning about the impact of the inventory still, let's say, linked to the Suez Canal issue, and let's say, how long should it take for this to normalize? A lso, whether do you see any risk of extra inventories more linked to the business? And my third question, if you can comment or update us, let's say, about the M&A opportunities you see. There has been probably in the press the name of Kasanova. I don't know if you have any specific comment on that or a more general comment on the opportunities for you in the future. Thank you.
Okay. The first question regarding the sales. The sales, the revenue growth for the group, we will continue. We expect our middle single digit growth. B asically, what is incorporated in most of the consensus analysis we are confirming this is without and also with Goldenpoint. I n some research, already Goldenpoint effect has been included. R egarding profitability, as of today, the consensus expects to generate EUR 13 million increase of EBITDA compared to 2024. We achieved EUR 8 million of EBITDA increase today. We believe that the remaining 5, which the consensus expects the company to be able to generate, are solid. W e confirm what we have seen to be the level of consensus. Regarding the contribution of Goldenpoint from July onwards, in terms of sales, maybe EUR 60 million.
In terms of EBITDA, maybe one, maybe zero, because July is by far the most important month for the profitability. And maybe more. This depends from the success of our actions in the product development, which has been undertaken months ago, and the visibility of which will be taking effect starting from October this year with a new collection, which has been 50% of them has been already made by our team. In terms of inventory, no, we don't see any risk of further building up of inventory. Vice versa. The Suez effect, which is also another part of your question, is somebody that nobody can say can predict when it will be over.
What I can tell is that when it will be over, there will be EUR 40-50 million cash generated to the company because this is the amount of the merchandising in transit in excess of the normal transit time. M&A, yes, we are considering. We are looking at Kasanova, as some press described. This is not a secret, but we are still working. Maybe it's worth spending one minute telling you why, in case we will take over Kasanova. We are considering to do it. First, because they have an excellent network of stores, small stores, mostly good shopping mall and downtown, so prime location mostly. We have so many formats now from Stefanel to Goldenpoint, from Croff to Piombo, from OVS Holiday to other OVS Kids or UPIM Kids.
We have such a number of formats that can benefit from existing location that we might take over for basically not for free, but for a very reasonable amount. Second reason, we have about EUR 30 million of turnover generated by Croff, which is a format which is still too small to generate an appropriate level of sourcing efficiency, and which is mostly exposed to textile. Vice versa, Kasanova is very strong in hard goods and kitchen goods. T here is a clear combination of know-how between the two companies that one merger might generate good synergies to the advantage of UPIM with the hard goods and to the advantage of Kasanova with the textile know-how that we have. T his is why we are looking at this company, which is struggling.
Obviously, in case we should go ahead, it will be only because there will be a massive debt reduction in order to take over a company. I'm not saying debt-free, but almost debt-free.
Very clear. Thank you very much. The next question is from Luca Bacoccoli of Intesa Sanpaolo.
Hi. Good evening. Good evening, everyone. Can you hear me?
Yes.
Okay. Good. A few questions from my side. The first one is a follow-up on the free cash flow. You said that this year should be above last year's EUR 9 million. I was wondering if this target includes Goldenpoint or not, and what should we expect from Goldenpoint on a standalone basis in terms of free cash flow generation? The second question is the guidance of the CapEx because it seems that you're still investing, as you explained, on refurbishment of the network. W hat is the guidance for the full year for the total CapEx? Because we were expecting to see a quite sharp drop starting from 2026. The other one is on hedging.
If you can provide us an update on the hedging strategy as of today and based on what you've already done, what lower cost should we expect in 2026 following through the gross margin? Thank you.
Free cash flow will be about EUR 70 million. This is what we expect. The contribution from Goldenpoint will be nil, basically. The CapEx will be between EUR 70 million and EUR 75 million, and the hedging has been made 80%-85% of the first half has been hedged. 40%-50% of the second half has been hedged, so there is still room to hedge another 25%, more or less. The exchange rate is obviously much favorable. The total advantage might be very big. How much of it we will keep in order to increase gross margin and how much of it will be given to the customer, still not disclosable because still we didn't take all the decisions, so we want to see how the market evolves, particularly in the second half. Some benefit will remain in the gross margin. How much of it, it must be seen in the future.
Okay. Thank you.
Thank you.
The next question is a follow-up from Luca Orsini Baroni of Orsa SRL
Hello, Stefano. On the buyback, what is your target for this year and next? And when are you going to cancel the shares again?
Yeah. Difficult question. The second part of your question, Luca, is very difficult because we just canceled the share a few months ago. W e want to continue. It will depend from the cash generation. It will depend from acquisitions. W e will continue to keep a balance sheet properly balanced between debt and assets. W e believe that the present structure is appropriate, and the cash generation will continue to enable us to continue distributing dividends and also sustaining the buyback program.
Okay. Perfect. Thank you.
Thank you.
As a reminder, if you wish to register for a question, please press star and 1 on your telephone. The next question is from Francesco Brilli of Intermonte.
Yes. Thank you. Just a follow-up on the gross margin, mainly for the next year. O n top of the benefits you just mentioned, and we will see from the hedging on Forex, what's the scenario? What are you seeing on raw materials and so on the sourcing side? So are you seeing some opportunities and you already had the possibility to tackle some of these in terms of lower costs of raw materials? And if there are some lower raw materials which the price is getting lower and lower, so we will see, excluding Forex, some additional advantage for the cost of the inventory next year?
There is some advantage on the linen as a raw material, but all in all, I would say that we expect a steady behavior from the raw material side. More interestingly, we are noticing some opportunity from countries which are penalized by the heavy duty imposed by the U.S. government, which are disadvantaging areas of the countries from which we source, which are looking for new customers or for alternative customers. Mo re than a raw material opportunity, I see an opportunity to take advantage from this unusual problem created to vendors by the U.S. government. V endors are looking for new customers and are coming and sitting to the negotiations with an attitude which is clearly weaker than the one that they had one year ago. S ome advantage from this behavior, we believe, will be achieved.
Okay. Very clear. Thank you.
Thank you.
For any further questions, please press star and 1 on your telephone.
Okay. G iven that it has been. There was something more. Sorry.
No, I confirm there are no more questions.
Okay. Thank you. Thank you, all of you, for attending this meeting and for your questions. I hope to see or meet you soon or at least during the next conference. Thank you and good afternoon.