Hello and welcome to the SMCP Q2 Sales Publication Conference Call. My name is Molly, and I'll be your coordinator for today's event. Please note that this call is being recorded, and for the duration, your lines will be on listen-only. However, there will be an opportunity to ask questions, and this can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any time, please press star zero, and you will be connected to an operator. I would now like to hand the call over to Célia d'Everlange to begin today's conference. Thank you.
Thank you. Good morning, everyone. This is Célia d'Everlange at SMCP speaking. Thank you for being with us today for SMCP Q2 sales publication. I'm here with CEO Daniel Lalonde and CFO Philippe Gautier. As usual, we will go through the presentation, and then we'll have the Q&A session. Before I hand it over to Daniel and Philippe, I invite you to go through our usual disclaimer on page two, and I think we can start now, Daniel.
All right. Thank you, Celia, and good morning, everyone. Thank you for being with us this morning. I'll begin with a quick overview of Q2 2020 and an update on the COVID-19 situation, and Philippe will detail our sales performance by region. As you've seen from the press release, Q2 2020 sales have been, as anticipated, strongly impacted by the COVID-19 pandemic. However, the performance is overall in line with our expectations, even slightly better. In Q2 2020, SMCP sales were down 45.8% on a reported basis and down 47% on an organic basis, i.e., excluding De Fursac and at constant foreign exchange.
This performance includes a gradual improvement throughout the quarter on the back of store openings, the continued recovery in mainland China, which returned to positive growth in June, and last, a strong acceleration in e-commerce with 32% of sales growth, starting from a high base of 15% penetration at the end of last year. All of these elements are obviously encouraging. Business trends are moving in the right direction. However, we remain cautious as the recovery continues to be slow and gradual. While our conversion rates in brick and mortar were higher than last year, traffic remained weak, notably penalized by a halt in tourism. In parallel, the group opened eight DOS in Q2, in line with our ambition to be particularly selective this year and focused on Asia. On page five, a couple of comments on the current status of our store network and cost mitigation plan today.
So first, on stores. Throughout the quarter, we benefited from the gradual reopening of our stores, from 20% of stores open at the end of April to 97% at the end of June. The U.K., the U.S., and Singapore remain closed for most of the quarter. Overall, 99% of our directly operated stores are now open, with few stores still closed in the Americas. This is good news, even if there exists a risk of further local shutdowns. On sales, the combination of e-commerce and store openings has resulted in a gradual improvement in sales over the period, from minus 70% in April to round about minus 30% in June. However, the lack of tourism continued to weigh on our performance. As you know, we've also decided to launch a strong action plan addressing our cost structure, aiming to mitigate the impacts of COVID-19.
I'd like to give you an update on where we stand at the end of H1. So first, on CapEx, we have reduced it meaningfully, according to our plan. We have also prioritized essential projects, such as digital, which is and will be a key driver of growth for the future. We've also reduced the pace of openings from round about 35 DOS last year in H1 to only plus two DOS in H1 this year. Second, on OPEX, we have optimized our costs by optimizing personnel costs, commercial leases, and reducing discretionary spending to a minimum. On rent relief, we have made good progress for the first part of the year, and we are now having discussions with our landlords to find solutions for the recovery phase. All in all, in H1, we were able to variabilize 50% of our cost base.
Inventories, we reduced purchases in Fall/Winter 2020 collections by more than 30% and applied several adjustments to the mix of the collections. We have also further secured our cash position through the obtention of a French state-guaranteed loan amounting to EUR 140 million and additional flexibility on our financial covenants for 2020 and for 2021. Last but not least, our key priority remains ensuring the safety and health of our teams, our customers, and all of our partners, so strong progress on costs. We have already secured a big part of our plan. However, we also continue to innovate and launch new initiatives to enhance the desirability of our brands. On page six, a couple of initiatives that have been undertaken in line with our roadmap, so first, on digital, we achieved a strong e-commerce performance across the globe. This is the result of successful initiatives to support sales.
One example is in China, where we posted excellent results for the 6/18 Tmall event. Sales were up 40% versus LY, and we reached more than 2 million visitors and boosted Claudie Pierlot's visibility, leveraging key influencers on live streaming. In parallel, we pursued our omnichannel roadmap with the launch of unified commerce. Our ambition is to offer a seamless customer experience and complete our omnichannel services with the ship-from-store and two-hour delivery option. We have just started with Maje France by mutualizing our global inventories and developing the first ship-from-store service. So far, the results are promising. Second, on sustainability, a key priority for this year and beyond, we will present our strategy in a couple of months at our Investor Day. It is based on three pillars: products, planet, and people.
Circular economy is definitely one of the levers that we want to activate by leveraging the expertise of secondhand platforms. On the right part of the slide, one illustration is with Maje. Since its program first owned last year, the brand has continued to commit to an eco-responsible approach. For Fall/Winter 2020, Maje is looking to address the subject of product circularity in all aspects. A collaboration with Vestiaire Collective was initiated a year ago, and the brand continued this partnership in an even stronger form by making it part of its campaign message. And thirdly, on page seven, our Q2 openings. As you can see, we have opened fewer stores than last year, only plus two DOS in H1, including several closures in France, versus plus 35 DOS last year in H1.
Our approach today is more selective and based on optimizing and enhancing our French network and opening selectively in international markets, mostly in Asia, as we are prioritizing and focusing on like-for-like growth. Here are three exciting projects that launched in Q2: a Maje flagship store in Saint-Honoré in Paris, which is featuring a new store concept using less furniture, more vintage furniture to promote a more responsible consumption. A Sandro dual-gender store in Beijing. Our new concept green store using natural materials, stone plaster wall finishes, some natural stone, and of course, LED lighting. And Sandro Shanghai, our first travel retail store in the domestic airport of Shanghai, Hangzhou Airport. First results are very promising. This was a perfect timing to open it as government actions to foster local consumption are significantly supporting domestic travel retail channel.
Thank you, Daniel, and good morning, everyone. I will now comment on our regional performance on page nine. In France, and in EMEA, sales were down respectively 49.6% and -51.1% on an organic basis, in line with the group average. The performance reflects a gradual improvement throughout the quarter, in line with stores reopening, even if tourism flows remain absent throughout the quarter. In Europe, the performance was partially contracted from one country to the other, reflecting various degrees of local shutdowns and levels of exposure to tourism. Among top performers, we can note Germany at around -10%, the Netherlands, and Switzerland. Among bottom performers, we include Italy, the U.K., and Spain, which posted a decline of more than 70% in the quarter.
In France, trends improved throughout the quarter, even if June was impacted by some negative calendar effect, as the summer sales were postponed by three weeks to July 15. In parallel, tourism remained totally absent, which notably explained the outperformance of the province area compared to Paris. In parallel, digital in Europe recorded a strong performance in Q2 with plus 39.7% of sales growth. Finally, we continue to make good progress on our French optimization plan, with four closures in H1: two relocations, Strasbourg and La Vallée Village, and one closure in Poitiers in Q2. In the Americas, sales were down minus 69.8% on an organic basis, showing a greater impact from the crisis, as a lot of stores remained closed until the end of June, notably in the New York area, which is key for us. The situation there remains difficult as the region is still fighting the pandemic.
That could result in some potential store closures, such as recent decisions in Florida and in California to close some stores and their owners. In parallel, e-commerce displayed a strong acceleration versus Q1 in North America at plus 21.4%, as we saw some of the operational issues we had seen in Q1 and saw more online demand. Turning now to APAC performance on page 10, sales were down 19.1% on an organic basis, showing a sequential improvement throughout the quarter. Performance reflected a good resilience. In mainland China, minus 3.4% in Q2 2020, and some contrasted trends in the rest of Asia. In mainland China, the group recorded a gradual improvement throughout the quarter, returning to growth in June with a positive like-for-like growth. These early signs of recovery are encouraging, even if the performance remained contrasted by cities.
While the south of mainland China already benefits from positive trends in many cities, the north remains challenging, as some cities are still facing risks of local shutdowns. In the north, the performance was double-digit negative in June. Beijing, which represents a big part of Northern China, was on double digits in June, as the city was back in the lockdown with strict measures imposed. However, for a couple of days now, the situation is improving, and all our stores are now back open in Beijing. In the south, the situation is completely different. The performance was double-digit positive in June, with 13 cities out of 15 being positive. In parallel, mainland China benefited from a strong performance of e-commerce, +17%, mostly driven by successful operations on Tmall, as mentioned by Daniel.
As for the rest of Asia, SMCP recorded contrasted trends, including a good resilience in South Korea and Taiwan, which was positive in Q2, and tougher markets really in Hong Kong and Singapore. In Hong Kong, the government announced the expansion of pandemic measures. Several new cases were reported, and borders remained closed to tourism. In Singapore, the situation improved recently with the reopening of our stores, so thank you for your attention, and we're now happy to answer your questions.
Thank you, Philippe. Operator, I think that we have some questions.
Thank you. If you'd like to ask a question, please press star one on your telephone keypad. Please ensure that your line is unmuted locally. You'll then be advised when to go ahead with your question. The first question comes from the line of Antoine Belge, calling from HSBC. Please go ahead.
Yes. Hi, good morning, everyone. It's Antoine at HSBC. Three questions, please. First of all, you gave a bit of commentary about the exit rate by region. Is it possible maybe to be a bit more precise and maybe give the global exit rate for the months of June and if you've seen a further improvement so far in July? Second question relates to the operating loss we could expect for H1. Is it possible maybe to give a range with maybe at least some detail about the gross margin decline, inventory depreciation, etc.? And finally, maybe on De Fursac, it's still not in the like-for-like base, but is it possible to have some kind of a comparable store growth on a pro forma basis?
And maybe, is it possible to have an update on this acquisition and what you've been doing, and to what extent COVID-19 is postponing maybe some of the initiatives you had planned for that acquisition? Thank you very much.
Okay. Thank you, Antoine. Listen, I'll take very briefly question one and three, if you like, and I'll give the second one to Philippe. So you mentioned more detail on the global exit rate. I think I mentioned, but I'll bring myself in earlier in the call, so our global exit rate in June was around minus 30, all coming from minus 70 in April. So in the right direction. And as we pointed out, it was positive in China, mainland China, and even positive on a like-for-like basis in mainland China. So the trends are going in the right direction. As for July, obviously, I can't say too much. I can just say that the trend from June keeps slightly improving, but I remain cautious, obviously, on what can happen here until the end of the year.
On the De Fursac, I'd say a comment to start more broadly on what we've seen in the men's markets in general. We've seen that men are a little bit less out there shopping than women, even when the store reopens. So I think there's a slight difference in performance by category, men versus women, on a global basis, and particularly in Europe, where it's been slightly weaker. Has this affected our plan for the De Fursac? Yes, of course it has, because part of our plan for the De Fursac, it's a beautiful brand. As a market leader in France in men's accessible luxury, what we wanted to do is obviously expand it geographically. And we have some - we had to take a little bit of a pause in the new store growth. But we have our roadmap that we feel very comfortable with in terms of expanding in new markets.
We already secured some locations, so we're very happy about that, but there's been a slight delay. In terms of what we're doing with the brand as well, we're using, I'd say, the tailoring routes, but to inject them much more into an urban casual wardrobe for men, and that's been something we've been working on since day one, so to develop a much more compelling and larger urban casual offer, which I think corresponds to the market today, but still with the tailoring routes, and that business has been improving. And then in terms of integration, etc., within SMCP, our approach has always been to have a very light touch. I want to keep what's made the Fursac successful, letting them have this, giving them this independence, autonomy as a small startup, let's say.
Obviously, where the group can help in terms of business development, in terms of maybe store build-out, etc., we're doing that. I'm not seeking to completely integrate it in. I want to keep its spirit alive. That's been the approach so far. Like I said, overall, we've had a slight delay in the opening plan because of COVID, but we've been able to secure some great locations for the future. Philippe, you might want to take some words on question two, whatever you can say.
Yeah. Hello, Antoine. We're not going to comment too much on the idea, as you know, that's the focus of the call on September 4. What we can - to give you a little bit of color on your question on the gross margin, I think what we can say, we're not dissimilar to the overall market.
Clearly, the market has been much more promotional during the lockdown and just after the lockdown. And then you have the impact on the inventory. So that results clearly in some pressure on the gross margin, be that in terms of higher discount or some additional inventory depreciation. So that's an impact on the EBITDA. I would say the other element is in terms of cost. So earlier this year, we have talked about our action plan in terms of cost reduction, and we have been completely on track with that. And the indication we have given is to say that we can variabilize more than half of our cost, be that store cost or SG&A, and that's through the action that we have been mentioning, particularly rent relief, temporary unemployment, and optimization of our structure. So I would say that's an indication that we can provide you today.
Okay. So, I mean, on the gross margin, I mean, we've seen quite different outcomes for different players depending on their product mix and sort of percentage of seasonal products. So, no way you can guide slightly.
What I can tell you is that we have an impact, and then we have explained also what are the mitigation actions that we are putting in place. Yeah, there is an impact, but we have also some ways to manage part of it.
Okay. Thanks for your answers.
Thank you, Antoine. Do we have another question?
Yes, we do. The next question comes from the line of David Da Maia, calling from CIC. Please go ahead.
Good morning, David.
Hi, good morning. So my questions have already been asked by Antoine. So maybe a quick one on e-commerce. Your online sales grew by less than 20% in H1 on my calculation, which is significantly lower than some of your peers. How can you explain this underperformance? Because we saw some big increase in e-commerce sales from some of your peers in H1.
How much did you say? Sorry, for H1?
Yeah. Less than 20% in H1 for e-commerce sales growth?
No, so in H1, it was 32%. 32% was Q2 H1.
Because if I remember correctly, in Q1, it was flattish.
Yes, exactly.
Yeah. So I think a couple of things. First of all, we're very satisfied with the performance of e-commerce. I think you really have to look at the base as well, right? Our penetration last year of e-commerce sales was 15%. So it depends what your starting point is. It's very important to take that into account when you look at performance in H1. And listen, we're very happy with the performance in e-commerce. We think we have a very robust plan. We know it's an accelerator for the future. This is what I think COVID has taught us all, that it was very important before, and it's going to accelerate. And our plan overall is articulated around three building blocks. The first is e-commerce itself, which is mainly done through our websites. A big part of their business, more than 50%, is done through our sites.
The remaining is done with partners, with department store partners and peer players. We have been investing a lot, and wisely so, I think, on omnichannel services. As I mentioned earlier, we just launched Unified Commerce, which is a service that not many companies have today. It's been a two-year journey, and we're very happy to launch it. And the last part of our roadmap is to digitalize our processes, like digital merchandising and e-learning. So listen, I'd say overall, I'm very happy with the performance of e-commerce in H1, and in particular, in light of the 15% penetration as of last year.
And understood that. What's the share of e-commerce now in your total sales in H1 2020?
Yeah. I mean, I can give it to you, but I don't think it's a very relevant number because you're looking at an e-commerce penetration when a lot of physical stores were closed. So I think it's not a normal rate at this point in time to give. I think it's misleading. It's obviously very high, but I think the question is more relevant probably.
Yeah, quite irrelevant. Yeah, yeah.
Yeah, I think so, just because most stores were closed. So probably in H2, I'll give you a number at the end of H2 for sure, which will be a more fair base. But obviously, it's very high, but it's not sustainable at this point in time.
Okay, understood. Thank you.
Okay. You're welcome.
Thank you, David. Do we have another question of your author?
Yes, the next question comes from the line of Christoff Schmitz, calling from The Carlyle Group. Please go ahead.
Yeah, hello. It's Christian at Carlyle. Thanks for taking, well, first of all, in the call, and thanks for taking the question. I have a quick question. Could you maybe comment a little bit on your liquidity position right now and then how you see it develop over the second half of the year? And in particular, I'd be curious to understand what your current thinking is about the maturities of your CP and kind of whether you think you can refinance those, and if not, what your alternative fallback plan is for that. Thank you.
Sure. Thank you for the question, Christian. As you know, we've negotiated successfully a state-guaranteed loan, so-called PGE in French, of €140 million. In the same time, we also negotiated the covenants. We have a covenant holiday for 2020, and we have the needing of the financial covenants for 2021, which I think is a great outcome. In the meantime, it means that we have this new liquidity, which is provided by the PGE. In the meantime, we have reimbursed our new CP. At this stage, we have reimbursed all our new CP, and we have this new PGE in place. Based on that, our cash position is over €200 million, which is, I think, really comfortable to face any potential risk in H2. I think we are in a good position.
As you may know, the logic of this state-guaranteed loan that was more to provide some headroom and further flexibility as we exit the crisis. So I would say we are in a good spot thanks to this negotiation.
Thank you.
When you say, sorry, when you say you were, sorry, one question. When you say you were above EUR 200 million in liquidity, you were at EUR 200 million in liquidity at the end of the first calendar quarter. Does that mean you burned the entire EUR 140 million of the state loan already?
No, no, no. If you remember, we had a situation of EUR 200 million in March, where we had drawn already all the RCFs, as well as having a large portion of new CP outstanding, which is kind of an unusual situation. So what has happened is that in the meantime, we have basically reimbursed the new CP, and we have this new line of PGE in place.
So you've repaid all of your Commercial Paper? Sorry, I'm.
Exactly. We repaid all our commercial paper, and we have this new PGE line in place, which is the reason why we stay with the net cash position over EUR 200 million.
No, no, no. That makes sense. That obviously is much more positive. Can I ask one more question? I guess there's been a little bit of news about your shareholder. I was just wondering what the level of discussion and communication is between you and your shareholder and whether you have any comment on what was going on there.
Yeah, so in terms of our shareholder, obviously, we're talking about Ruyi. Yeah, I'd say we have frequent conversations, one this week, for example, with them, as is normal in a relationship, clearly. Listen, I can just say that they're busy. They're busy with their core business on production and also on their financial situation. I certainly can't talk for them, but I know that they're responsibly trying to reimburse their debts that are outstanding, so that's basically all I can say at this point in time. They've been a strategic shareholder to us. We've had a good relationship since 2016, I'd say, as normal as can be between a strategic shareholder and us.
Thank you. Okay, right. We have another question.
The next question comes from the line of Kathryn Parker, calling from Jefferies. Please go ahead.
Good morning. Just checking you can hear me okay?
Yes, very well. Good morning, Kathryn.
Good morning. Great. So my first question is on the level of discounting, whether you can give any more comments on how that's trended year on year, and perhaps if there are major differences in your different regions. And then my second question referred to an article in WWD this morning from Daniel. So the first one is on the physical store network and the opening pipeline, where I think it was said that you now expect to do half the number of physical stores versus your previous expectation. And I wondered if you could give some more clarity on that and whether it applies to the rationalization program in France stepping up, or whether it's just a reduction in the number of openings and which markets that would apply to. And then my third question is also from this article.
So you're interested in speeding up the production time, and I wondered if you could give some more details on that and whether you would consider internalizing some of your production or how you're looking to achieve the faster replenishment? Thank you.
Okay, well, thank you, Catherine. Thanks for reading the article. You're well briefed. Listen, I'll try to answer your questions. I think you need to maybe take a little bit more specifically the discount question, but maybe I'll start with that just by a quick context, so obviously, when our stores came out of when they started reopening, primarily in Europe and North America, our stores reopened in an environment where we were already in traditional mid-season sales already, and then followed pre-sales in most markets, and then, as Philippe mentioned earlier, the real sales started in France anyway, so mid-July, so my point is, when we reopened, we started already in a promotional period overall in most markets, so that's kind of the backdrop to that question, and I'll let Philippe answer it in more detail. Okay.
Your first question on maybe the store network, maybe I'll answer it a bit more broadly. What I was trying to mention, again, going forward, without being very specific, because we'll be much more specific at investor day, is that what's changed in this crisis? I don't think there's been some things that we're not aware of. It's just that some factors such as digital purpose, brand purpose, sustainability have all accelerated in an incredibly meaningful way. If you weren't there before, it's going to be hard to get there. We've been planning these things for a very, very long time, and I think they will accelerate, which means that we can see in the future, since we've built our network, our physical network throughout the two countries, we have a decent amount of coverage, I would say, overall.
There's still some white spaces left in key markets. China is one, as I mentioned. But more and more, we'll be focusing on developing our digital platforms. I mentioned the three-pronged approach to our digital roadmap. We're going to be accelerating that, and we have been for some time. And it will have a slight impact on the number of physical stores that will develop in the future, simply put. So we had a cadence in the past of 80-90. I don't certainly want to give a guidance today because we'll get more specific at investor day, but I wanted to say that we anticipate less stores than 80-90 potentially in the future because we're accelerating digital. Now, does that touch upon the France optimization plan?
Yes, it does a little bit as well because, as you know, we've launched about a year ago a plan to optimize our physical store network already, and we've been optimizing, I'd say, on a net basis, maybe 10-15 stores a year, simply because when we entered, and France is our original market, back then, digital was a very small part of our business. So we, I'd say, introduced our brands in smaller cities through physical stores. That is not the way forward. So that's why we've been optimizing our French network, and we'll continue to do so this year and next year as well. So that has an implication in terms of less stores, but not only that. Overall, we're being more selective in our physical stores and with a greater focus of those stores in Asia, particularly China.
Last, in terms of production, I think I was misquoted because I don't want to reduce the time to create the collections. We have a very strong creation process, just like luxury brands do. That's important, and that takes three or four months, and we want our creative teams to feel energized and to not force the process. However, my goal is to reduce the time it takes to replenish, and that's a key success factor. If we can replenish (I'm already pretty fast now from five, I said, to nine weeks to replenish product within a season), that I'm very interested in minimizing that because it means that we can become more agile, and that's a big project that we have in the company, become more agile and maybe have less initial buys and chase the best sellers. That's a very important part of our plan going forward.
So it's reducing replenishment time, but not the creative time. And Philippe, I don't know if you wanted to say a few words on discounts.
Sure. So if you recall, last year, we talked a bit about our discount policy, which is in general to be lower in discount than the overall market, and we have been successful doing that. And that has resulted roughly in a discount rate of about 30% on average. So this year, there is clearly more promotional pressure on the market, so we have been a little bit more tactical, and that's where the discount rate has increased a bit, but that does not change the overall strategy. So that's what we can say.
In terms of the situation by region on discount rates, it's not really different from what you would expect or what we have seen in the past, meaning that the most promotional market continues to be the U.S., and the next big promotional market is Asia, Europe, and France being somewhere in the middle. So nothing really changed there.
Thanks very much.
Thank you, Kathryn. Do we have another question, operator?
Yes. Before we take the next question, please be reminded if you'd like to ask a question, please press star one. The next question comes from the line of Chiara Battistini calling from JP Morgan. Please go ahead.
Good morning. Thank you for taking my questions. The first one would be on North America. If you could expand a bit more on what you're seeing there because it's the market that is underperforming versus the others? I was just wondering whether you're seeing anything, just any weakness in your brand, the perception with the consumers, if there is anything brand-specific, or it's just really the environment being particularly tough. And also, if you could remind us of how much of your sales in North America are to usually tourists. So last year, of course, before COVID.
And then the second question, and I appreciate it's very, very, very early, but I was wondering whether you've already started planning in terms of supply for next year, for 2021, anything you can share already in terms of how you're thinking about next year, whether you think a full recovery could be done next year or it's going to be more gradual. I appreciate that very, very early still to think about that, but any color on that would be super. Thank you.
Thank you, Chiara. Listen, I missed the first part of your question. You were talking about North America. Is that correct?
Yes. North America.
I see. Okay. I get it. Listen, I'll say a few words, and I'll let Philippe complete as well. Listen, I think right out, North America is no, not at all. I think our brands remain, we just have Sandro and Maje in North America. I see it through the benchmarking in some department stores where we rank, and even up through last year, and the numbers I've had this year in some key department stores within a panel of roughly 20 brands in accessible luxury, we're very consistently in every store in the top three, maybe top four sometimes, and often number one. So there's a very strong brand appeal of Sandro and Maje in North America. What we're seeing today, in my view, is clearly a market environment. Again, have stores reopen prematurely? Probably. Yes. And that's been, I would say, a government-led decision.
As I mentioned as well, there's a lot of issues in North America on COVID, and stores have reopened, closed again in Florida, in California. So I think the market environment that you know very well is extremely complicated in North America. For me, it's almost 100% of a market issue as opposed to a brand issue because I know our brands are very desirable and have a relatively good performance in North America. Philippe, I don't know if you wanted to add anything.
Yeah. Chiara, maybe just to put in perspective, it's important to recall that during the quarter, we had our stores in North America closed about two months and a half on average. So we still had about half of our stores closed in the middle of June and then started opening very gradually. Still had 17% of the stores closed at the end of June.
Clearly, New York was the latest market, last market to reopen. And you know that the traffic in New York is really extremely low. At this point in time, we have about 4% of our North American stores which are closed, as some stores were closed in Florida and California. We'll continue to monitor the situation. Now, on your question on tourism, if we talk specifically about Chinese tourism, we're talking about 15% of the overall, around 15% of the overall sales in the U.S. Now, we do have also other nationalities as well, and then you could have also Asian Americans, depending whether the people are traveling or if they are living in the U.S. So these different categories are expected. So clearly, there is a really big, big shock, external shock on the North American market, and we will continue to monitor that closely.
Did you have a, Chiara, you had a question on supply? I don't know if we answered your third question.
No, it's just, yeah, no, it was more how are you thinking about next year if you already started planning for next year? If you're at the moment thinking about next year as a full recovery or a gradual recovery versus this year. I appreciate it, early.
Yeah. Listen, I think it's a departure point. I think we're not looking, as I mentioned in my Women's Wear Daily article, I guess, this morning, not looking to replicate or to get back to the situation of 2018 and 2019. That's not an objective for us. The objective is to accelerate our business model on purpose, on sustainability, on digital roadmap, among other things, and those are really the important things going forward. Now, do we see how we see 2021? Well, obviously, that's a big question. I think the market has been, if you read what's out in the market, I think the big factor, I'd say, is tourism. Tourism will be a key driver, and it depends when all the tourism flows continue. We've been able to, though, Chiara, in the past six years, build a very balanced business by brand, but also on a geographical perspective.
And that's been a big strength of the group as well because we have a meaningful footprint in Asia, in China, in Europe, obviously, and in North America. So that even if the consumer stays at home or stays local, we're able to capture that in the local markets and not benefit from, obviously, the tourism flows. But I think next year will be challenging as well. I think we see. It's hard to say. There's just simply uncertainty built into the model as we see stores reopen in California, then they close. So I think we're living in a very uncertain environment, but we feel very confident that we have the right formula, the right strategy for the future.
That's not necessarily going to be exactly as it was in the past because of these things I just mentioned, and we're really accelerating, again, purpose, sustainability, and our digital roadmap going forward. But I expect that there will be some uncertainty for a little bit of time, like other groups have reported as well.
Thank you very much.
You're welcome.
Thank you, Chiara. Do we have some questions, operator? I don't think so.
We have no further questions in the queue.
Okay. So thank you very much. We look forward to speaking to you on September the 4th for our half-year results. And in the meantime, we wish you a nice summer. Thank you.
Yep. Thank you, everyone.
Thank you.
Bye-bye.
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