Brunello Cucinelli SpA

MIL:BC

Earnings Call Transcript 2018-Q1

[Operator]

Good evening. Chorus Call operator speaking. Welcome to the presentation of the First Q '18 Results of Brunello Cucinelli group. [Operator Instructions] Speakers will be Mr. Brunello Cucinelli, CEO -- President and CEO of the company; Moreno Ciarapica, CFO; and Pietro Arnaboldi, Head of Investor Relations. [Operator Instructions] Now I'd like to give the floor to Brunello Cucinelli. The floor is yours.

[Brunello Cucinelli, executive]

Good evening and welcome. Before we start this call, which somehow is light and very intense at the same time, I'd like to -- we would like to really thank you for the esteem and high regard you always hold us in. Thank you very much.

So we would like to schedule it as follows. I'd like to dwell on the main highlights, then the CFO, Moreno Ciarapica, will drill down a bit more, give you some more color. Then I'll resume the floor and give you quite a good visibility on 2018 then just an overview on the 2019 and '20, and then we will be talking about markets, product and also about the very important and fascinating world of the web.

We have the whole staff here. We have Luca and Riccardo, the 2 young co-CEOs. We have Dario, the younger junior CFO and then Francesco, who is the CEO of the Internet. Although as you know, jokingly, I always say that I am the super CEO of the Internet because I have to say this Internet, with each passing day, it becomes increasingly fascinating.

So seriously speaking, before we start, we would like to convey to you our positive feelings. In particular, my positive feelings vis-à-vis the construction of the new Italian government, which should -- is about to happen in the next couple of days because we are a serious nation that is really, honestly, on the way up. We are a true manufacturing nation.

So I think that Italy -- well, I have to say, you should really quite happily invest in our country because you will not be disappointed. And I think this is quite a good claim for our Italy. But I'm really, really pleased because the fact that we do not have a government in place, well, it's not a good thing -- well, it's true that I'll be turning 65 soon, and this will be the 65th government of our Italy. But you see having a government is always best.

So I'll now read out the figures. It's EUR 148.3 million net revenues plus 9.1%, current exchange rate, and 12.2%, constant exchange rate vis-à-vis the EUR 136 million last year, 2017. Then there is an increase of sales in all international markets amounting to 10.2.

Both in the domestic markets growing by 4.4%. Then revenues increasing in all geographies: Italy, plus 4.4%; Rest of Europe, 14.9% plus; North America, plus 2.2% but it is a high single-digit increase at constant exchange rate; Greater China, 31.2%; Rest of the World, 5.3%. As usual, we keep repeating the same thing, we grow pretty staggeringly in China but the baseline is very low, so that's why we -- that's such a growth.

Then there is growth in our distribution channels: retail 9.8%; monobrand wholesale, 12.9%; and very important, multibrand wholesale, 7.9%. So this is how I describe the quarter. We are very, very satisfied with our business in the first month of the year. And considering the current sellout rates of the 2018 Spring/Summer collection, the excellent sales campaign of the 2018 Fall/Winter collection and the high quality of sales, we can confirm our expectations for double-digit growth in both revenues and profits next year.

A most heartfelt thank you to all our employees who, with their work, help us fulfill our longed-for desire to work and live in the utmost respect for human privacy. Privacy protects our intimacy. We need a fair amount of privacy in order to strike a balance between public and private life and to promote our well-being.

I decided to hint at human privacy and I'd like to dwell a bit more on this later on because this call will not be too long. So I'd now like to give the floor to Moreno, the CFO, that will give you some further detail and then I'll resume the floor.

[Moreno Ciarapica, executive]

Thank you, Brunello, and good evening, ladies and gentlemen. I would now like to drill down on the developments related to the application of the new IFRS 15 accounting principles. The principle has been applied by the Brunello Cucinelli Group since January 1, 2018, the date on which it entered into force using the full prospective application method.

Slide #3 basically shows the reclassification of results of the first quarter last year, and then they are compared to the results of the first quarter 2018. In detail, the application of IFRS 15 has entailed a new accounting standard for some types of contracts, namely, those, in our case, concerning the sales in multibrand locations operated under the concession formula. In the department stores, 6 shop-in-shops in Canada and 15 in Japan. Pursuant to this principle in these geographies, the group sells its products through department stores that, from the accounting point of view, acts as agents, charging the group for the service provided, i.e. the rent of spaces.

Up until December 31, 2017, the revenues from the sales generated by these contracts were accounted for on the balance sheet net of the costs. The application of IFRS 15 has brought about a different accounting as revenues from sales, our reported growth and subsequently the services rendered by the department stores, are shown separately among the operating costs. Following the reclassification, the revenues of the first quarter 2018 moved from EUR 134.1 million to EUR 136.0 million.

Let's now move on to Slide #8 and analyze the impacts of the application of this principle on the full year and on the revenues of 2017. That, I'd like to remind you, amounted to EUR 503.6 million. The new -- so this value will now go up to EUR 511.7 million with an increase of EUR 8.1 million. The cost of rent accounted for in the SG&A will increase with the very same value, thus leaving unchanged the absolute value EBITDA amounted to EUR 87.5 million.

The percentage margins EBITDA of 2017 slightly changes but it has the same absolute value EBITDA compared with the revenues base that is higher following the accounting change. For the same reason, the expected percentage margins EBITDA 2018 changed subsequently slightly but not the absolute value ones.

To conclude, the application of the accounting principles does not impact growth rates expected for 2018 as we have normalized and adjusted the 2017 value as a reference base. And it does not impact the absolute value EBITDA and estimated profit. As far as the currency developments are concerned, I would like to highlight the negative effect of exchange rates of EUR 2.1 million in the first quarter 2018, reporting a growth at current exchange of 9.1% and 12.2% at constant exchange rates. Change in ForEx developments may basically impact performance in the U.S. and the Rest of the World, both growing high single digits at constant exchange rates.

I'd like to remind you once again our currency hedging activity enabling us to maintain in 2018 healthy levels of income and profit even when ForEx is volatile. Our currency hedging policy has always had as its purpose that of neutralizing ForEx fluctuation on the absolute value of EBITDA. For this reason, when price list of collections are defined, estimated revenues are hedged net of cost in foreign currency.

So there is a share of revenues, which is more or less the same as the estimated cost in foreign currency that is not hedged for, and it is subject to a ForEx fluctuation. The ForEx impact is mainly linked to this part of the revenues. This choice is in line with the objective to maintain the absolute value of EBITDA unchanged because the impact of ForEx on the unhedged revenue share is offset by the same impact of currencies on costs.

Thank you very much for your attention. I'll give the floor back to Brunello.

[Brunello Cucinelli, executive]

So first of all, I'd like to give you a pretty good visibility on 2018 since 4 months have already elapsed, and the result was pretty good. The product displayed in stores is very tasteful, it's very young and we think it is very, very important. The fall/winter orders performed very well, and I'd like to say that the performance of deliveries, production of the winter collection is perfectly in line with the plan. Deliveries are always very, very important in our industry.

So what we are particularly pleased with is the fact that for fall/winter, in our stores, we will be exhibiting and displaying items and garments that received positive feedback from multibrands and press alike.

Now I would like to give a brief overview of the large important topics of the March conference call. So we envisage a double-digit revenues growth this year, and considering the excellent quality of sales, EBITDA should be slightly more than proportional. Then a net financial position close to 0, and this is also very important. And another important thing that Moreno mentioned is the fact that we set and fix exchange rates because we want to have an industrial profit. This is the case when we started 40 years ago in Germany with a very strong Deutsche Mark. Every 6 months, we could have had important, more appealing profits but we wanted to set exchange rates that you only have industrial profits.

So considering the sound -- solidity of this industry, our dividend will go up from 35% to 40% of profits next year. As far as 2019, 2020 is concerned -- plans, investments, expectations -- I would like to confirm everything that we said in the March conference call. To that, we'd just like to add the following: we envisage that the dividend for the next 2 years, '19 and '20, should be -- should stabilize around 45%, and the second year, around 50%. And that 50% might -- could represent a fair balance vis-à-vis the equity of the company and the cash of the company.

So I'd now like to really highlight the topics that we discussed in March. So the value of a young, useful contemporary product, the fact that we have fresh goods in the boutiques every 3 months through capsule collections. This is very important. It's very important to have young people in our teams, both for the product and managers. Managers are around 40 in our company; products, 36, 37 for men and 39 for women; and also salespeople, sales assistants in stores are important, especially for menswear. They must be young, chic and they must have this Italian heritage and style of dressing well.

Visual merchandising, and we always mention it, must always be very appealing and enticing and especially for menswear. Because for womenswear, it's easy. One year, you wear your short skirts, the pencil skirt, long skirts and everything changes. Whereas for menswear, tiny details make the difference.

You see, I have the impression that menswear needs innovation and by innovation, we mean just tiny, slight changes that make your look contemporary. But these changes basically entail changing and combining colors properly, choosing the proper length of the blazer between 73, 75, just tiny details, just a couple of centimeters but they do make the difference. Honestly speaking, we think that for our company, the future for our menswear is bright.

And another important thing is exclusivity. We keep hammering on this because -- and then I'd like to tell you what happened about a month ago in China. Actually, I wanted to tell you now. There were about 100 young people, 36, 37 on average. And if you -- and if you had hidden their faces, you would have thought they were European, American though they were Chinese. What we were impressed the most by, I was talking to Luca and Riccardo, is that the group director said in China, these well-off gentlemen and ladies, they're looking -- they're on the lookout for special goods. So what does it mean, special guide items? It means that you would nearly feel the desire to have everything tailor-made for you.

Another important topic is the safeguard of our brand. We have always tried to look after it in the physical world but we have to do it on the web, too. And as far the online world is concerned, the physical management of the boutique is going very well -- of the online boutique is going very well. We like to take craftsmen-like care of it and we're very happy with the choice that we made back then.

As far as openings are concerned, we confirm 3 to 5 new stores a year on average. In this case, this year, we have already had the Dubai Mall and Las Vegas yesterday. We will have an important extension in Monte Carlo with an exceptional fantastic buy, it was a bargain -- no, it's not true. Monte Carlo is really very expensive. And then August, we'll be opening in Beijing in the China [ world ], the famous mall. So these are our openings for the year.

Now I'd like to speak -- to spend 5 minutes and talk about this important, important topic that we call human privacy. We discussed this when we met in person, too. This idea that we have always striven for. We have always tried to behave in a special way with our customers, a very graceful way, trying to respect people, trying as much as possible not to be intrusive and not to hassle them, especially with the people we only meet, bump into once in a while.

Honestly speaking, I think that it is just right to enjoy human privacy. Privacy protects our intimacy. We need a fair amount of privacy that it creates some sort of balance between public and private lives because they're both necessary. I think that true luxury nowadays will be to lead a life that is unbeknownst to our smartphone that is our travel mate.

So just an example, last week, a very important client of ours placed a goods order, $93,000, sent the money and then the day after, they said, "I'm sorry, we have some family issues. I have to leave." And the answer was hopefully, the creation might rescue you, might help you. So this should be the way with which we approach these people. Because if you hassle me, I'm convinced that I will stop buying your brand.

I have to say, as I said, I'm 65, and 40 years ago, it all started. And you know how it all started? I started reading some words by Theodore Levitt, and some of you might know that he was a great marketing man. And in this book, Marketing Imagination, he said that customers are gods. Now of course, there is a difference between talking and doing, but we keep thinking that customers should be our gods.

So I wanted to tell you that we have always supported the very same thing. If you hassle me, if you intrude upon my privacy, I will stop coming and shopping at your brand. We see, we are all very busy. We carry this disease inside us all, with this underground background noise, IT noise, and we keep looking for serenity, peace and silence. So this is the great topic in this year, at least for our company.

A few days ago, Marc Benioff, our esteemed CEO of Salesforce, came looking for us, and with this company, we enjoy a great relationship both from the business point of view and the human point of view. And he wanted to invite me, for the second year in a row, to that fascinating meeting they organize in San Francisco. This year, it will be held in September, Dreamforce. And last year, as you know, we spoke on the stage of the Yerba Theater of a great topic, technology and humanism, how to mix and match them and it was a fascinating venue. And this year, we want to keep talking about these very hot topics of human privacy.

And in the November conference call, I hope I have a chance to tell you about this appointment although it takes a long, long time to go there. It takes 1.5 days to go there and it will happen immediately after the Milan Fashion Show. But it is a great opportunity for reflection, for pondering on things.

So I wanted to really devote, spend some time of our conference call on this because you should know that we are really, really focusing on this special relationship with our customers and our potential customers. So at the end of the day, as usual, the analysts, journalists, investors, I would like to thank you all immensely.

But we would like to also convey our positive feeling towards the coming roles, both in terms of our company and our hope is that this company can survive for a few centuries. Thank you very much. We are here for any questions you might have, but we really were keen on talking to you about this. Thank you.

[Operator]

First question from the Italian call, Paola Carboni, Equita.

[Paola Carboni, analyst]

I have a question on something that came up at the very beginning, concerning the idea of having fresh goods in the boutiques every 3 months with capsule collections, which is a pretty common trend in the industry. But I don't think we ever mentioned it in the past. So I was wondering whether you can spend a few more words on this, on how this will be implemented and also on the supply chain, how it will respond to this need.

[Unknown Executive]

Well, we have always done this since when we started our business 40 years ago. We would always design some small capsule collections in cashmere for Germany where we -- and now it's the same for this market now where we basically sell cashmere 12 months a year because of the cold climate there. So about 30 years ago, we decided with our subcontractors -- well, the company never closes for holidays, and they never closed either so there is some sort of shift for taking the summer holidays because if everybody closed in August for 20 days, there would be many, many issues in our industry because it is an important month. So we got this organization in place and it has been there for many, many years. So every 3 months, we design a capsule collection to refresh the window. So every 2 months, 3 months, you always have fresh windows, new products but it's nothing new there. It's not that we have pushed it harder recently, Paola. This is very important. This has always been the case. We deliver winter at the end of May so the beginning of June, you can really start. Especially the Germans, at the end of May, they already have, basically, winter windows usually for Pentecost. Yes, it is a pretty limited collection but if you go to the store, you see 5 new mannequins, 5 new styles and you can change the color, the style. So maybe you can step into the store twice a season. So the first time you step into a store, the first question is always, "What's new?" So this has always been a way to behave, so to speak. So we have the 2 major collections, 2 pre-collections and then the capsule collections.

[Operator]

Next question by Francesca Di Pasquantonio, Deutsche Bank.

[Francesca Di Pasquantonio, analyst]

I have 2 small questions. The first one has to do with your approach to pricing, whether following the currency volatility, you thought it advisable to change your pricing policy and what kind of price rises you are implementing? Is it in line with the past or maybe different? And the second question is whether you can tell us something more about new products that you might present in Pitti.

[Unknown Executive]

Yes, very interesting. As far as prices are concerned, we do never change anything during the season. So we set the exchange rates on 10th, 15th June. We go to Pitti Uomo, the menswear collection comes out, we set the exchange rates, and then when it will be sold around from December 1. From then on, no price change. This has always been in our corporate culture that we think is quite graceful and correct. So as far as any anticipation or products, we see -- we like the collections that we are going to Pitti with. Hopefully, Francesca, they will be appreciated. But especially for menswear, and I was saying before, you see -- I regret the fact that they say the menswear is struggling. It is not true. The fact is that we, men, we all have 20 suits, 20 blazers. And if we want to buy something new, we really want to be fascinated, and to do that, I need to have young sales assistants, well-dressed assistants in the stores that shows me the blazer or the double-pleated trousers. You see this is what makes the difference. And I really wanted to show this to you and to draw your attention to this. For visual merchandising, this is important, too. Otherwise, it is difficult to sell. And then men, what do men do? Men tend to mix and match. They wear maybe last season's blazer with a new -- this season's trousers. So for menswear, we do have a huge opportunity. I should not be saying this, but we are seen as a contemporary, innovative and young for menswear. We are a reference brand, not a fashion-oriented brand so we are very hopeful for the future, confident about the future. But we need young people, Francesca, young people working on the product. And when you work with 30-, 40-year-old staff, then it's always different.

[Francesca Di Pasquantonio, analyst]

A follow-up question on this. Am I wrong or boutiques are always -- well, womenswear product tends to prevail. There's more selling surface dedicated to womenswear in terms of...

[Unknown Executive]

Well, as you know in terms of items, 40, men and 60, women. In terms of value, 67, women because the average price is higher and 33, men. That's the ratio. Whereas in boutiques, the display is 65-35. That's right. It's always been the case. Then of course, there are some markets where menswear is stronger and it might go up to 45% but there's a difference. Menswear works very well in shopping malls. So we have to say that what is shown basically matches the sales. But then, of course, in the warehouse, there's a lot of selection. So there is a lot of selection of menswear in the warehouse. But there's a lot of possibility for menswear because men need to be contemporary. I know that you women do it too, but which 50-year-old man would like to look 45, millennial forever? Well, yes, this is very important. So we see fashion represents just a small business, generally speaking, and what prevails is the European, the Italian style men that needs to be fresh. Yesterday, I went to an important meeting with young people. I was wearing jeans but at the same time, I was wearing a tie and a double-breasted blazer. So I was wearing jeans but with a tie because I'm a 65-year-old man. But at the same time, I don't want to look 65, I'd like to look younger. And then you become more chic. So in the company, we did something very important. We have set up visual merchandising schools for menswear so that everybody can really understand the taste. It's difficult to explain but then you can see it. At Pitti, you see, we have no professional models at Pitti, just our staff is there. And if you see the staff well-dressed there, with all we want to show is the Italian style. I can wear any handbags, but my pochette, my pocket square can make the difference, it's my accessory. For menswear, 60% of the items are -- the garments are bought by wives and spouses. But you know how many women call us and say, "I want my husband to look younger"? I know. It is -- sounds funny but this is a serious thing. And we have many, so to speak, advisers for taste in our company. You are a billionaire. You go to a party on a Saturday night and you wear a suit that makes you look instead of 50, 60, and -- whereas, women tend to be more trendy. But you see for us men, it is very important to wear the in-season blazer. But I don't want to be boring. What I mean by that is that it is not a question of price for menswear because the thing is that every morning, when we go out, we want to be fully groomed and you need to look fresh in the morning, in the evening, all the time.

[Francesca Di Pasquantonio, analyst]

These are really the remarks that are helpful to us.

[Unknown Executive]

I'm pleased.

[Operator]

Question from Mariana Horn, Berenberg.

[Mariana Horn, analyst]

I have 2 questions, please. The first one is you could give us some more color on what you have been seeing in Europe, especially from tourism consumption. Although I know that you're not as indexed as some of your competitors, but it seems that you have seen a very strong performance in the region, so if you could share with us what you have seen. And then the second question is, and I know you don't disclose profits quarterly anymore but if you could give us an indication of your expectations for profits either for the full year or for H1.

[Unknown Executive]

Mariana, let's start from the last of the 2 questions. As far as profits are concerned, as we wrote in the quote, the quality of the sales of the first 4 months is very, very good. So we are confident and happy with our profitability so we expect a very interesting year. So this is what we wanted to say. As far as Europe is concerned, well, I think that Europe is brimming with tourists. But what happens in Europe is that we are now selling the product to local consumers. This is the trend. Because in Europe, the world you see looks better so consumption is back for menswear, for womenswear. So I see a good mood around. Yesterday, the question was, "Do you believe in Europe or don't you?" in the recent past, whereas I'm a strong supporter of [ vacancy ]. Also, I came back from China, I said -- well, these esteemed Chinese, they want to come to Europe. They want to buy European products -- French champagne, German car, Italian furniture. Europe, I think, is -- has a golden century ahead. But we have to make special handcrafted goods. And in order to do that, we need people who know how to work, how to use their hands, that are very skilled with their hands. We have to make unique products and I keep saying the same. My neighbor years ago, his wife forced him to go to Paris every 2 weeks to shop at Chanel, Hermès. And you know why? Because she wanted to sport the Paris Chanel bag. You see shopping in Milan or Rome is not the same as buying or shopping in your home country. This has always been the case. It is a fascinating trend for me that I'm 65. If I want to buy a cask of champagne, you see it's better to buy it in Paris than here. So [ lead ] confidence in Europe. But I'm always talking about the high end of products, exclusive products and that are not too well distributed in -- on the web because I have this idea that the web massified. So everybody is looking for exclusive tailor-made products and price is not an issue. So I'm very, very confident for Europe.

[Operator]

Next question from the conference call in Italian, Giuseppe Marsella, BNP Paribas.

[Giuseppe Marsella, analyst]

I'd like to draw inspiration from the change in the accounting principles.

[Unknown Executive]

We can't -- can you speak up, Giuseppe? We can't really hear you.

[Giuseppe Marsella, analyst]

Is it better now?

[Unknown Executive]

Yes.

[Giuseppe Marsella, analyst]

I'd like to draw inspiration from the change in the accounting principles to ask a question on distribution. I think that the presence of monobrand stores is 0 in the travel retail channel. I'd like to know whether you think you want -- whether you want to change the approach in the future.

[Unknown Executive]

Since there were no openings in the first quarter because the number of DOS stores is unchanged, a 9% store is a very healthy growth, much more than what we expected. So I don't know why there should be this growth. If I understood properly, so you want us to tell you what we think of travel retail?

[Giuseppe Marsella, analyst]

Yes. I think that today, you have a very limited presence.

[Unknown Executive]

Well, Giuseppe, I want to tell you something. First of all, you see airports, at least for us, it is not easy for us to see an airport, the airport as a luxury environment. And then we specialize in apparel. So in airports, you usually buy things without a size. Maybe you buy a pen, a bag, not something that is tied to a size. And then I've always grown up with this idea that whatever you have at the airport, you see, it's not really exclusive luxury. It is a chance that we have obviously, but as things stand, we would like to not think about it now because airports is not really the kind of distribution we're looking for.

[Operator]

Next question from the Italian conference call, Alberto D'Agnano, Goldman Sachs.

[Alberto D'Agnano, analyst]

I have a couple of questions on China. The first one, now that you are still growing and you have been in the region for quite a few years, have you learned something different compared to the customer needs? Do customers have a different taste than Europeans? For example, Chinese customers, on average, are younger, so maybe you would change and suit -- make your offer more suitable to the region when you want to grow more there and to adjust your offering. And then China, your growth strategy. Does it -- would you keep on doing wholesale with local partners or now that you are more familiar with the markets, are also thinking of opening more local stores? And then just a brief comment on the increase of the payout, if you can repeat the long-term target and what drove us to revise it upwards.

[Brunello Cucinelli, executive]

Yes. I'll start from the dividend policy, the last question. You see, we thought that since the company is sufficiently capitalized, also drawing inspiration from the companies we use as a benchmark, and with the high esteem and respect, we imagine that reaching 50% fixed every year in a couple of years, would be just fair. So the idea is not that of reaching 60%, 70% or 80%. I think it is a fair balance between capitalization and dividend policy. As far as China is concerned, you see, I want to talk to you about the great value between wholesale and retail. Now we have 25 wholesale accounts, very high quality in China. And I'm pretty convinced that over the next 5 to 10 years, in China, there will be 500 beautiful wholesale locations because if you are a Chinese shopper and if you shop online, nobody knows about it whereas -- and if you are talking about a no logo garment. If you are a wealthy Chinese, you want people to know that you shopped in the beautiful store in Shanghai. You walk out of the store and you have your carrier bag with Shanghai. Then the driver come -- pulls up with the Mercedes and the -- this is an example that is true to everybody. I bought a watch for my daughter in Perugia and then Pietro went to the very same store. And the shop owner said, "You see, Brunello bought the very same watch for his daughter." So the people need to know that the transaction happened and so this is very interesting. And then, the most tradesman -- trade-oriented population in the world, that is China, will develop some sort of multibrand stores. Another important topic that's pretty important has to do with taste. In the dinner party that we had, there were about 100 people, 12 of us, and I can guarantee Alberto, this was in China, that if we had hid our face, you wouldn't be able to tell which one was Chinese or not. You see there's a lot of information and they are all fascinated by this taste. They don't say -- and I remember, Americans, 25 years ago, they would come to the store and they wanted very wide straight trousers. And we said to them, "No, we -- I'm sorry. We don't do that. We can't -- we don't know how to do with that." And some clients were angry but the idea was we didn't want to sell very wide-legged trousers. And now they want to dress the same as we dress. They want us to organize the visual merchandising this way. That's why it is important to mention the schools that we were talking about before, especially for menswear, because they are fascinated by this Italian way of dressing, a special blazer, the right length for trousers. So for taste, they're fascinated by us. For the multibrands, we still have 50-50 of our revenues, multibrand and monobrand. Something I haven't told you is now that we are entering this part of the world, this is 15% of our revenues. In the next 10 years, we might definitely go up but with an Italian taste, without distorting our collections. Maybe you see a sizes change but this happens already in Japan. But for taste, it is them -- they want us not to change anything and I've always thought that you need to really never change your mind. You must provide them with different weights. So for example, according to the climate. But when we came back to China, we were fascinated because they have changed virtually overnight. And this is good news for Europe because they're fascinated by our way of life. Let's carry on this way. What I'm saying is let's invest in skilled hands making special products because I think we won't have any difficulty in selling them. Difficulty will be making them because they're not interested whether the blazer costs $6,000 or $7,000. They want it to show that it has a taste, that it is handmade. And 5 years ago, nobody published or posted anything. Now whereas it happens and -- because of the online world. I don't know if I answered your question.

[Alberto D'Agnano, analyst]

Yes. It was very clear.

[Operator]

The next question from Flavio Cereda, Jefferies.

[Flavio Cereda-Parini, analyst]

I am a young and cool husband because I have a couple of blazers of yours. So last week, I had a chat with the person in charge of the largest multibrand in the U.K. And without mentioning any names, we were talking about what brands that work and brands that don't, and he mentioned 3 -- 4 names of brands that do not work and 3 are Italian, and a couple of them are your direct competitors. But the objection he was saying was that they're so old, there is no evolution, they don't know how the market is moving. So my question is since you have relationship, a high-level relationship with the multibrands, have you noticed that you are being offered larger spaces because some Italian famous brands have stopped selling and so you are offered their spaces?

[Unknown Executive]

So it is a fascinating question because that's precisely what we were talking about menswear before. So first of all, last night, I watched the Milan game. But besides that -- of course, besides the joke, this is the problem with menswear that I was mentioning before, meaning when we say that menswear is struggling, it's not true. The only difficulty is in the taste, and I'm very, very happy that we are seen as a young company from the taste point of view. Then I'm very happy that many companies are somehow copying us or trying to replicate us because we copied Ralph Lauren 25 years ago in terms of visual merchandising. So menswear needs to be fresher. And you see, these names are Italian because menswear are Italian. The revenues of menswear is Italian. The best companies for menswear are Italian. And of course, we don't mean fashion-oriented. But it's not easy. Because the tiny details that counts. That's what I said before. You might have 10 blazers in your wardrobe. And if you're 50 in the morning, you want to wear a blazer that makes you look 40. Alberto was saying before that Chinese customers are young. Yes, but now we have young Americans, young Germans. And for menswear, there is this trend to wanting to look younger. And for womenswear, you have thousands of possibilities to look fresh, whereas for menswear, it is more difficult. You must look chic, not ridiculous and you must -- the very same outfit must be -- must last from the morning to the evening. And how can you be chic and refined, we must work on this on a daily basis but this can offer us great possibilities.

[Operator]

There are no further questions at the moment, Mr. Cucinelli.

[Brunello Cucinelli, executive]

Very well. So I'd like to thank you all very much. As usual, I'd like to say that I devote 70% of my time to product, so thank you very much. Whatever you need, we are available. Thank you for your esteem. Thank you.