Moncler SpA

MIL:MONC

Earnings Call Transcript 2022-Q2

[Operator]

Good evening. This is the Chorus Call conference operator. Welcome and thank you for joining the Moncler First Half 2022 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] At this time I would like to turn the conference over to Ms. Alice Poggioli, Investor Relations, Senior Manager of Moncler. Please go ahead madam.

[Alice Poggioli, Investor Relations Senior Manager]

Thank you. Thank you, operator. Good evening, everyone and thank you for joining our call today on Moncler Group First Half 2022 Financial Results. Let me introduce you the speaker on today's call. our Chairman and CEO, Remo Ruffini; Roberto Eggs, our Chief Business Strategy and Global Market Officer; Gino Fisanotti, our Moncler, Chief Brand Officer; Luciano Santel, our Chief, Corporate and Supply Officer.

Before starting the presentation, I need to remind you that this presentation may contain certain statements that are neither reported financial results, nor other historical information. Any forward-looking statements are based on Group current expectations and projections about future events.

By their nature forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate.

Let me also highlight that given the nature of our business, interim results can be influenced by seasonal effects and therefore cannot be taken as a proxy for full year trends or results. Finally, I remind you that the press has been invited to participate in this conference in a listen-only mode. Let me now hand over to our Chairman and CEO, Mr. Remo Ruffini

[Remo Ruffini, Chairman & Chief Executive Officer]

So good evening, everyone and thank you for joining the Moncler Group First Half Results Conference Call. We have closed the first half of the year with very, very good results. In the first six months, group revenues rose by 46% and accelerate in Q2 in almost all regions versus the pre-pandemic levels. We see very good performance in Europe. Japan performance is also strong and Korea remains best-in-class.

By the way I just come back from a business trip to Korea and Japan. And I saw firsthand how vibrant these markets are. China, which has suffered from lockdowns in April and May, accelerated significantly in June. Looking at our operating performance, first half EBIT reached €180 million with an operating margin close to 20%. And we have delivered a solid performance in all economic and financial KPIs. The results are even more meaningful, if you consider that the first six months have been marked by strong instability, linking to the ongoing conflict in Ukraine, COVID restriction in China, worldwide pressure on logistic and strong inflection headwinds.

Moncler keeps driving strong brand engagement in communities around the globe. The launch of the Grenoble Day-Namic collection was particularly well received. In short, Grenoble potential to become relevant for the luxury outdoors all year around. In May, we held our Moncler retail summit, the first in-person event for a long time. I found all store managers very motivate, full of energy and passion and focus on the role they play in shaping a unique customer experience.

Stone Island is taking direct control of this market. Following the establishment of Korea joint venture, we are now going to directly manage the DTC business in UK. In a few weeks we will set up a joint venture in Japan. As you know I strongly believe in having direct relationship with the market with the customer without fitter.

We are approaching two important milestones, 70 years of Moncler and 40 years of Stone Island, but anniversary are always a good time to take stock of what we have achieved so far and what can be improved in the future. We are going to celebrate our history but we are also planning new projects.

As I always say, there is no future without past but there is no past that is enough to ensure a bright future. Moncler has always been and will continue to be an ever-evolving brand searching the extraordinary with remaining true to it's DNA. Over the past four years, Moncler Genius has moved us to higher peak and we will continue to play a key role in supporting the brand towards a new and inspiring concept of luxury.

Stone Island in its history has always been proudly faithful to its brand and product purity and is now making stronger its relation with subculture and its communities, accelerating an already great momentum. We live in the era of uncertainties where company needs to know how to play for the long game and be always prepared to face new challenges this means flexibility is a must. I'm confident that we are ready to face the most important part of the year for us, leveraging on our operational flexibility and solid brand vision with no shortcut, making our group stronger and always working hard to ensure the best days are the one ahead of us.

And now, let me hand over to Gino, Roberto and Luciano, for additional update and for your questions. Thank you very much.

[Gino Fisanotti, Brand Officer]

Okay. Hello, good afternoon, and good night to everyone. I will kick-off this session with the brand highlights. I would say overall this was a quarter that is traditionally not the strongest in the brand front in terms of our investment in Q2, but this was a very important one for us for a few reasons.

One is because we spend a lot of efforts and time to focus on optimizing and making our investment more efficient, especially on the performance marketing side. And of course, we are getting -- as we get ready for the next 18 months. But I think for us, it was a big opportunity to start getting better becoming an all-year round brand and that's why we were trying to be more efficient test and learn a lot about our summer season in Q2. So, we will talk a little bit about that.

And then, on the other side, I think it's the first quarter will start to -- or the first half we are starting to report against the three brand dimensions from the brand side. So that will showcase the efforts we're making and making sure that we drive Moncler Collection, Moncler Grenoble and Moncler Genius equally all year around.

So, with that said, I want to start with a few things on the brand and the overall brand side. I think the first one is regarding the statement we made in support of women's rights. I think we were one of the very first brand not even luxury brand, one of the very first brands around the globe that we were having a strong and clear point of view about something that we believe is important for us. And that was not only important in terms of the statement outside, but it was about helping even our own employee base and support them, especially in the US even in this moment in time.

Then secondly, we work in our partnership with Daniel Arsham and the Lewis Hamilton Foundation during the Monaco Formula One race. I think this was something that starts as a small project between the three parts and we gain a lot of strong, I would say, PR coverage and consumer reaction to this, which was really good to see.

And then, last but not least, I think the last time we discussed, we talked about the launch of our perfume, especially in our retail doors and additional distribution. And I think now, for the past three weeks, we added the launch of our perfume into moncler.com. I will say just as a reference the perfume performance, have been really strong, especially led by the EMEA market, but I think performance has been really good so far.

Then moving into the different dimensions of the brand. Of course Moncler Collection for us, as I mentioned before, we are starting to make sure that we elevate our -- I would say, not only our brand voice, but the elevation of awareness of our summer product and our summer collection.

So, we did this working in this case with some young upcoming photographers in some of the additions of summer voices that include people like very known -- well known now -- by now like Gabriel Moses or Gray Sorrenti from New York, and that will give us a little opportunity to share our summer products to the eyes of different people around the globe.

And then, last one not least, as I mentioned, we were focusing on trying to elevate our product awareness to dotcom, so we were having some special programs that we have been driving through moncler.com during the last two months.

Then in terms of Moncler Genius, again, we have two main launches during this past quarter. One is, of course, Gentle Monster, and I think again, this is something that has been really strong, not only just about the business but from the brand perspective as well. The team, have been executing some pop-up spaces even on Asia as well with the strong performance across the board.

And then, last but not least, again, JW Anderson have a very strong, I would say, message to the last collection we just launched it. And we received a lot of positive news, especially from partners, media and even in terms of some of the key influencers and people having organically or not organically, were in our product like Lewis Hamilton that you can see there.

Last but not least, I think Mr. Ruffini just mentioned this about Grenoble. I think we just launched our early spring summer and now this week, specifically today, the early fall/winter collection on Grenoble on this, what I see on one of the question, Activewear summer collection.

I think as Mr. Ruffini mentioned, this is the new segment for us. We believe in Moncler Grenoble as a critical pillar of the brand all year around and providing the solutions for the outdoors. And towards the reception and the customer reaction to this collection have been really strong as Mr. Ruffini mentioned already a few minutes ago.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Thank you, Gino. Let me continue with some of the Stone Island brand highlights for the first half of this year. First of all, the focus we had on UK, where we start taking control on the market for all the DTC operations. So, we signed an agreement to taking over the e-commerce since the end of June. So, it's now three weeks that we are running the business on the e-commerce directly. And we start taking also control about the physical stores that we have in London in Brewer Street and also the direct accounts like [indiscernible]. So UK is on the right track and we are finalizing the agreement with the partner.

Regarding the different collaboration we had. We had two important ones one with Supreme the other one with New Balance. Well Supreme is something that is well established between Stone Island and Supreme as it is the seventh collaboration that we have been working on with them with the selection of products that is highlighting the Stone Island Compass logo with creativity from Supreme and synthetic fur coats hoodies T-shirts and very, very good results that the collection was sold out only after a few days from the launch.

Even for a New Balance. It's a partnership that we have signed for three years. This is the second launch that we have with new colorways on that is based on the 574 models with some technologic elements that are really incredible like the full-length carbon fiber which gives energy return when you walk and some upper breathable mesh. And this collection also was sold out in just a few days as the request was very, very strong so is something that is giving some very good signs for the future.

Regarding the [indiscernible] Milano Design Fashion Week we always took the opportunity with Stone Island to show some elements regarding research. And this time we blended this event in -- during the [indiscernible] also with some online sales. So, we developed 100 number of jackets that we call Prototype Research Dévoré with Kevlar Core which is mixing carton with Kevlar and a little bit like you see it sometimes on Tmall where you see this fantastic, in just a few seconds all the elements are sold on Tmall here. It was the same on our online just after a couple of minutes, the 100 jackets were already bought by fans of the brand by our communities.

Let me move now to the H1 total results and starting with the consolidated figure of Stone Island and Moncler and then moving on to Moncler in more detailed figures and Stone Island in more detailed figures. First of all, regarding group revenues. On H1 we reached €918 million which is a plus 46% compared to 2021 with Q2 revenues. This of course is taking into account the consolidation of Stone Island only starting 1st of April. So Q2 revenues reached €328 million which is a plus 26% compared to 2021.

Regarding Moncler revenues, €724 million which is a plus 27% compared to 2021 for H1 revenues and €250 million for Q2 revenues which is a plus 23%. Stone Island, as I mentioned consolidated since the 1st of April 2021. H1 revenues €194 million which is a plus 33% versus 2021 six months proforma and Q2 at €77 million which is a plus 35%.

The group EBIT reached €180 million with a margin on sales of 19.6% compared to the €92.8 million with the margin at 14.9% on margin in H1 2021. So, a significant improvement on the group EBIT level. Same for the group net results €211 million with a margin on sales of 23% versus €58.7 million and 9.4% on margin in H1 2021.

Finally, the group net financial position and Luciano will comment this further later on. We reached €356 million of net cash compared to the €729 million at the end of December 2021. Let's move to the revenues by geography on Moncler which is probably more familiar on this type of chart.

The H1 Moncler revenues reached €724 million which is a plus 27% versus 2021 and plus 28% compared to 2019. Q2 reported a 23% growth versus 2021 and plus 30% compared to 2019. The acceleration versus pre-pandemic level was in all regions, excluding APAC we'll come back more in details regarding the result of APAC.

Asia which includes APAC, Japan and Korea in Q2 reported a plus 18% versus 2021 and plus 30% compared to 2019, driven by outstanding performance from Korea and strong double-digit increase in Japan. APAC was negatively impacted by the lockdowns in China Mainland in April and May, while June improved significantly with the reopening of all stores and we reached double-digit growth on China during the month of June.

EMEA revenues increased in Q2 by 32% versus 2021 and 18% compared to 2019, driven by solid demand from locals and especially North American tourists that has become for -- during the quarter the first nationalities for Europe, but also very strong growth on all local nationalities with special mention for France, Middle East and Germany that have been the main contributor to this growth. Americas reported a solid performance in Q2 with plus 17% versus 2021 and a strong plus 65% compared to 2019.

Let's move to the revenues by channels. Moncler DTC revenues reached €556 million in H1, which is a plus 31% compared to 2021, plus 29% versus 2019. The comp sales has been up 19% in H1 notwithstanding the negative performance of Chinese Mainland.

In the second quarter DTC revenues reported plus 27%, compared to 2021 and plus 24% compared to 2019, driven by strong local demand in all markets with Korea and Japan outperforming. Direct online continued to strongly perform in all markets.

Wholesale revenues rose to €166 million, which is plus 13% compared to 2021 and plus 25% compared to 2019. The second quarter grew in line with the H1 performance at plus 14% versus 2021 and plus 48% versus 2019 driven by a good performance of the spring/summer collection.

Gino, maybe on the online and digital?

[Gino Fisanotti, Brand Officer]

Yes. Thank you, Roberto. First of all, I think, again, I think the digital direct team keeps doing a great job. I think as you can see here the performance of the first half have been really, really good lead by two -- I would say, two main KPIs. Of course, traffic has been up to 20%. And for us as we probably discussed in the last quarter and even during Capital Market Day, the importance for us in terms of logging customers into our own dotcom is critical in terms of not only engagement, but retention and this number is of course still on a small base, but it's 150% up.

And of course, the other big important thing is in terms of the engagement of the product page views, which is up 60%. Keeping in mind, these numbers of course the revenue growth should not be a surprise. It's the direct consequence of those aspects. And I think to build on what Roberto just mentioned, I think, we have seen really strong results in Q2 and summer products as we discussed before. This was one of our key focus as we start the quarter, so it was great to see that.

The other big aspect of the great evolution of the work by the team is when we talk about the paid media mix. I think this first half we've seen e-commerce transaction coming from social channels up 80% versus last year. And this is again talking about optimization and efficiency in terms of how we use our resources to, of course, drive awareness and drive traffic to then, of course, convert that into revenues for the brand.

Last but not least, again, we'll continue our focus on China. I think we are seeing really strong performance across the different launches and collection through WeChat and the mini programs that we are executing with the team over there. And then last but not least, I think, we mentioned this before. We are -- we started already our journey with Tmall with a soft launch right now for the last two weeks. And then the former I would say what we call the official launch will happen on October 1st, but we already just started just kick off our journey with Tmall as we speak.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Thank you, Gino. Let's move to the result of Stone Island with the revenues by geography. Stone Island revenues reached €194 million during the first half of 2022, which is a plus 33% compared to 2021 pro forma with Q2 up 35% in line with the general trend of the first semester, but 35% versus 2021. This has been supported by a sound double-digit growth in all regions.

EMEA which is the main region of the brand with -- last year 78%. This year 71% of the total business grew 23% in Q2 versus 2021 in line with Q1 performance. Italy, France and Germany represent 40% of the brand's revenue. And these three areas outperformed the average of the region in Q2.

Asia which includes like for Moncler, Asia-Pacific, Japan and Korea reported 107% versus 2021 in Q2 driven by the internalization. So going DTC Korea was managed by an importer is now directly managed by us through a JV, and clearly this now has been moving from the wholesale business into a retail business. Solid double-digit growth performance was reported also in Japan, while Asia Pacific has been penalized by the COVID-19 restriction in a similar way as we have seen for Moncler. Americas grew 39% in Q2 versus 2021 driven both by retail and wholesale.

Let's move to the revenues by channels for Stone Island. Stone Island wholesale business, which is still the vast majority of the business was 80% last year, it's 69% this year. The performance grew 8% in Q2 versus 2021 driven by all the main market notwithstanding the conversion into retail of the Korean market occurred at the beginning of the year. So clearly without this internalization of the Korean market into a retail business model, the growth would have been a double-digit growth.

Stone Island DTC revenues grew 106% versus 2021 with a solid double-digit growth in EMEA, Americas and a triple-digit growth in Asia driven by Korea. Korea DTC business after the internalization is performing well, with KPIs that are now improving. We have also launched a retail excellence project in Korea. And Stone Island direct online continued to report a solid double-digit growth e-commerce directly managed by us since the end of June.

If we move to the openings that we have had in terms of store network during the Q2 the changes that have appeared not so many. We have been opening the Sydney Airport for Moncler and we have been closing Paris Printemps du Louvre at the end of June knowing that we were switching lesser Moncler, which was a wholesale business for us with DFS. We moved this [indiscernible] on the 1st of July into a retail business.

Stone Island had no change in the quarter. If we look at the total number that we have at the end of June 238 Moncler stores 54 Stone Island stores and 99 wholesale shop-in-the-shop for – in total for the two brands 64 for Moncler 35 for Stone Island. The plan as you usually know for Moncler is a strong opening phase that we have usually in Q3 and Q4 before we start with our full winter season.

We have planned and confirmed six openings in Q3 for Moncler, with three relocation expansion. And in Q4, we'll have eight openings plus seven relocation and expansion. So, a very busy program in terms of expansion of the retail network. Finally before the group income statement you can see the picture of the opening of the Sydney Airport. I pass the word to Luciano.

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. Thank you, Roberto, and good afternoon and good morning everybody. Thank you for attending our call today. Okay. We are now at page 14, where we report our consolidated income statement income statement which consolidates two of our brands Moncler and Stone Island. Top line €918 million already fully and in that commented by Roberto with a 48% growth rate which is not a fair comparison with last year, because as you may remember last year we consolidated Stone Island starting from second quarter starting from April 1, and right after the closing of the transaction.

So the more faring and comparable growth rate would have been 29%, which is still a very, very good growth rate. Gross margin 73.8% slightly below last year, but this is because we are consolidating in 2022 two business models Moncler and Stone Island and that are still different from the visual point of view.

Moncler is mainly retail business model. Stone Island still mainly wholesale business model with lower gross margin. But just to let you know gross margin for the both brands and for the distribution channel is in line with last year even better a little bit better than last year. Selling expenses 34.3% better than the 37% we reported last year.

But again, there is a comment we have to make about this lower incidence. I mean, last year, the incidence was particularly high because important to remind you, but very – I mean, I'm sure you – you remember that last year in the first quarter of the year we faced a lockdown in Europe with over 60% of our stores closed. So this impacted negatively our top line and that's why the selling expenses were particularly high.

And this year also we faced a lockdown in China but – in the second quarter mostly but less severe than the lockdown in Europe last year. G&A again 14.4% better than last year but still with about 25% growth rate in expenses in G&A mostly allocated to our organization to people talent and know-how that we tend to bring in order to support our growth and the complexity of our growth digital, but not only supply chain, retail, logistics information technology whatever.

At the end EBIT, 19.6% better than last year, when we reported 14.9% and slightly better also than what we reported in 2018 that was 18%. I mean, you can see in the note in the head note in this slide the numbers of 2019. Honestly, this number this result is better than 2019 but with different marketing spending. In 2019, we spent more in marketing. But I mean overall still a good result and in line with our target for the year-end that is to match the EBIT that we reported 2019 that was 30%. So still a lot of work to do but in the first half good so far so good. Below EBIT, below the line for this first half of 2022, an important comment about the taxes, because you see in this slide an unusual positive number in taxes. That is totally due to an operation, we did at the very end of June, which is the application for the Stone Island brand realignment at its book value.

This realignment that is allowed by the tax law implies, tax saving of €92 million that based in compliance with the accounting principles, has been entirely reported at the time of the application and so in the first half of the year. So that's why taxes are positive. Of course, on the other hand, important to remind you that the low complies for upfront tax payment of €124 million, which is not visible in this slide, but will be very visible in the slide when we will comment the cash and the cash flow. So at the end the net result over €200 million €211 million almost four times, what we reported last year but again due also to this extraordinary tax rate.

Okay. Let's move now to Page 15, where we report CapEx. CapEx presented in the first half of the year only 4% and only €36.5 million. Let me highlight, only because as Roberto said, we opened only one store, net one store in the first half of the year but we still have to open about 15 in the second half of the year and all the relocation extension, and so a lot of work and a lot of investment, we will see in the second half of the year.

We still target for this year, a total CapEx of about €160 million. So still over €100 million and €120 million to be spent in the second half of the year. Last year we spent a little bit more, but the difference is totally due to a key money we paid for €11 million, we paid in the first half of the year for the expansion of our Flexi [ph] store in Roma Piazza Di Spagna store that has been opened after then with very good results.

Okay. Let's move now to Page 16, where we reported a working capital. Working capital with an incidence of 8%, which honestly is very good. Also considering that this number these incidents incorporates the two business models again Moncler and Stone Island, and Stone Island which is still mostly wholesale business model of course has by nature a higher working capital. So Moncler only would have been even lower.

We still maintain our target, for the year-end for a high-single-digit incidence in working capital. I don't think we can match the 7% of last year, but probably something more but simply because last year as you may remember I mean, we suffered the unfortunate I cannot talk, that made us to move to postpone the payment to our suppliers for over €30 million to January. I mean, the comparable let's say normalized, incidence of net working capital would have been about 8%. But again, I mean it's not -- it's not a big difference. It's still a very good number. And again, all the components of working capital are good first inventory, that as you know is our let me say, obsession, because we are very close -- we monitor very closely, our inventory position.

Let's move now to Page 17, where we report our net cash net financial position which is €356 million against the €730 million, we reported at the end of the year. So with a significant material cash absorption, due to some specific facts. I need to remind you, one is I mean, distribution of dividends for €156 million, but also share buyback we implemented in the first quarter of the year for €48 million.

And what I just told you about the upfront tax payment for the application, we did for the Stone Island brand realignment for €124 million. In addition something important that is, let's say organic, but for this year they're quite unusual is the growth of taxes we paid for over €30 million. And this is due to the mechanism. We pay taxes in Italy, but not only that is based on the results of the year before.

So in 2021, we paid a very, very low amount of taxes because it was based on the unfortunately very weak results of 2020. This year there is a discount of a rebound effect and the result of last year were very good. So we are paying much, much more taxes and precisely over €30 million more than last year. So these are the main reason why our cash position is significantly lower than at the end of last year.

Balance sheet page 18, honestly I don't have a comment on this unless you have a question. We will be more than happy to answer later.

Page 19, cash flow statement. Honestly nothing to add, because we report in this slide exactly what a number what I told you over the past few minutes. So very strong operating results. A change in net working capital that is higher than last year. But because last year we consolidated Stone Island again at the beginning of April and the unusual very high change in other liabilities, which incorporates the tax assets, which will be recovered over the next five years to -- again to the realignment of the Stone Island brand.

Page 20. Last but not least, our commitment on sustainability under the brand name, which is Born to Protect, we presented in the last spring/summer 2022 the second collection of Moncler Born to Protect with very, very good results. Something important to highlight is also the launch of the mini collection or small collection by Stone Island, totally made with production scraps.

And something also important to highlight is that Moncler is step-by-step season after season increasing the use of recycled and lower impact material in order to achieve by the end of 2025 our 50% target.

And last again, but not least very important, a congratulation for our sustainability team because we achieved a second place ranking in the Moody's ESG Solution. Important to remind you that I mean, we have been first place in the Dow Jones ranking for the last three years now. I mean, we achieved this place, which is -- we are very proud of.

Okay. Thank you for your attention. I'm done for the presentation and now we are ready to answer your questions. Thank you.

[Alice Poggioli, Investor Relations Senior Manager]

Operator, can you please open for Q&A? Thank you.

[Operator]

Certainly, madam. Thank you. Good evening, this is the Chorus call conference operator. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Susy Tibaldi of UBS. Please go ahead.

[Susy Tibaldi, UBS]

Good evening and congratulations for very strong results today. So, firstly, I would like to get your views on the current trends in the market. It appears that despite the macro headwinds, the luxury consumer is still spending, which is leading to some very good numbers. So do you agree with this? And I would be interested to know if you have started to see recently any changes in trends or in consumer behavior or maybe among your wholesale partners? And are there any regions, which maybe worry you a bit where you expect to see the first cracks in consumer confidence? And how are you preparing for this internally?

Secondly on tourism and the tourism flows. Would you be able to disclose what percentage of sales came from local and what percentage from tourists in Q2 in Europe? And the reason that I'm asking is because we are heading into Q3, which is a much bigger quarter and historically was always quite exposed to tourism in Europe. And so do you think that we could see a boost given that for the past two years we had virtually no benefit from tourism. And so maybe we could see a bit of pull forward of spend into Q3 at the expense of Q4?

And then lastly on China. If I heard correctly, during your opening remarks, you mentioned that in June you were growing back to growth at double digits, which if I heard correctly that's -- I mean it's a very, very strong number compared to what we have heard so far from other players. So I was just interested to see like, how did you achieve such a strong result given that there's still ongoing restrictions? And has this positive trend held in July? Thank you very much.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Hi Susy, thank you for your question. I think they are mainly related to me, so I'll try to do my best to answer. On the current trend, I think we are pretty much in line with the -- what have seen at the end of June. So China that was after two very difficult months of April and May that was rebounding double digit at the end -- during the month of June and we continue on a similar trend now.

I think it's mainly the response of consumer and the attractiveness of the brand that has been working. It's also July now is the start of the season for the fall and winter. And we are -- and this of course is always linked to possible lockdowns or not.

But if there are no additional or new lockdowns and so on we are quite confident regarding China for the second half of the year. We have seen that as soon as the stores have been reopening we have been able to welcome our clients in the store.

There is also positive responsiveness on the soft launch that we are doing with Tmall. So all the reason to believe that our strongest period if there -- again, if there are no lockdowns that China could be positive for us in the second half, as it has been for the first half of the year, because even if the second quarter has been negative our overall performance on the semester on China is positive.

We have seen also a good performance on Taiwan and Hong Kong, even if on a lower basis than what we were used to have especially for Hong Kong. Macau, we expect the reopening now at the end of July. So if they will reopen and we start seeing again travelers from China there, I think it could be also a region that is back to positive.

Korea has been, I'm repeating myself but the most resilient market for us throughout the pandemic again double-digit growth during the first semester, strong double-digit growth in the second -- in Q2.

What is remarkable with Korea that is probably the region that has been embraced the most these new ways of selling with private appointment and distance sales as this represent now 30% of the sales we are having in Korea, similarly to Japan that has 20% of the sales that are done now through private appointment and distance sales.

What we have seen with Japan is a positive second quarter. There is now, talks on the market about the sixth waves of COVID. So I will be maybe a little bit prudent on Japan even if so far the start of the second half is good. Australia has been good also.

Americas if you look globally in terms of growth comparing to 2019 that is a year that is more similar with 2022 especially regarding the wholesale. The Q2 has been an acceleration compared to Q1.

Even if we compare it 2021, it's not looking the same but I think here is the balance with the wholesale which represents 40% of the turnover. That is a little bit misleading but the performance very strong.

We need to see now with all the worries that are in the market regarding inflation. If this will penalize us in the second half but so far also the performance on the Americas is good. Regarding Europe, it has been I think not only for us but for most of the luxury brands the positive surprise of this first half of the year.

Here we have been growing 48% in Q1 32% in Q2. This may look like a slowdown but the base of comparison is not the same. In 2021 we had half of the store closed in Europe in Q1, and only 25% in Q2.

So if we normalize it the growth has been consistent between the two is true that this has been helped a lot by tourism especially with Korean that, are back to the level of 2019. And this was the positive surprise that we don't talk much about, but Korean are back not the Japanese and especially the Americans where the wait of the Americans for Europe is now -- is a record has been 10% of Q2 sales.

Well usually they were more around 5% to 5.5%. So the weight of the Americans is really up. And when you look at the Americans nationality we have seen an acceleration between the two semester, but a lot of them have started to buy in Europe.

I think you may also remark or a question regarding the weight of tourism in EMEA. So the tourist intra-Europe they are back. We are at a similar level than the one we had pre-pandemic. What is still lacking the Asian tourism? As I mentioned, the Americans they are even doing better than in 2019 as a percentage of sales.

Japanese are missing and the Chinese are missing. So roughly 30% of the tourism of the -- in the total weight are missing, but this is overcome by the very good performance that we're having on locals where we are growing double-digit growth on all nationalities during H1. So we are counterbalanced.

And just for the second half of the years, as you know especially for Moncler, the most important quarter is Q4, especially on the retail side. And both on the retail side and in wholesale this is the quarter where we are selling mostly to locals a little bit less to tourism.

Q3 is a little bit different but Q3 has not the same way for us as Q4. So I'm quite reassured about what I see now in terms of tourism in Q3. And it's less relevant for the last quarter of the year where we need to focus more on the locals.

[Susy Tibaldi, UBS]

Excellent, thanks a lot, very clear.

[Operator]

The next question is from the line of...

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Oh, sorry Susy, there was a question on wholesale. I didn't answer on the trend on the second half. I will give more guidance for the full year results both for Stone Island and for Moncler where we are expecting a high single-digit growth versus 2021 for the full year.

So, probably a slight slowdown compared to the first half of the year. But you know that this is the one that is the most important one. So, we're expecting high single-digits for the full year as a guidance.

[Susy Tibaldi, UBS]

Perfect. Thanks a lot.

[Operator]

The next question is from Anne-Laure Bismuth of HSBC. Please go ahead.

[Anne-Laure Bismuth, HSBC]

Yes hi. Good evening. I have two questions please the first one is on the like-for-like performance. So, like-for-like were up 19% in H1 implying contribution from new space of 12% in H1. So, I was wondering if it's fair to assume a low-double-digit contribution from new space for the full year? And would it be possible to have the evolution of the like-for-like in Q1 and Q2?

And the second question is about the marketing spend. So you are planning to reach 7% for the full year. So as a percentage of group sales which would imply stronger increase in H2. So -- and you are planning a lot of initiatives around the 70th anniversary of the Moncler brand and the 40th anniversary of Stone Island. So, can you come back on or give some details about all these initiatives that you are planning for H2?

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. I mean the 19% plus 12% more or less space. Of course it's difficult to predict what it will be for the year-end. But for sure space will be important and it's reasonable to predict a low double-digit maybe 10% maybe 11% because of course we have as I said before many new openings we have many expansion and relocations.

And also we have some stores that have been opened -- that have been opened at the end of last year. So, this is let's say a fairly reasonable assumption. About marketing. Of course--

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Maybe some guidance also on the productivity part stores or the sales density which is another way to look at the contribution. Well we closed last year with an unexpected good €31,000 per square meter. And we are positive in believing that we could reach a low-double-digit growth on the €31,000, so probably something in the magnitude of €34,000. So, not so far from the one that we had as a record year in 2019 and with some margin for progression for next year if we don't have further lockdowns.

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. I leave the comment on marketing to Gino, but I mean one question was about the marketing budget which is as usual and lower 7%. Of course we spent much less in the first half of the year but I mean you will see fireworks in the second half of the year.

[Gino Fisanotti, Brand Officer]

Anne-Laure thank you for the question. I think as I mentioned at the beginning I think we leveraged especially this past quarter very much an optimization of everything I discuss and that's why we were seeing some strong results across the board even in terms of the market investment in terms of the return of that investment. But definitely to Luciano's point we keep looking for that 7%.

Of course our second half will be way more stronger I was saying top of investment. Definitely as you mentioned 70th anniversary will take stage I will say as we go into September, October, and November but that will not be the only thing we'll be doing. So, you will see from us of course a very strong 70th anniversary celebration that will be not just about marketing I would say it's about the entire company celebrating this with the consumer in terms of product in terms of communication in terms of brand experiences.

So, there'll be a lot of things happening for that. And then of course we'll have additional launches from Genius and we have big expectations about our high-performance collection within Grenoble for the end of the year. So, we have a pretty packed I will say second half and we expect to be this way even for the following months after the second half. So, that's the idea.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Regarding Stone Island we are not yet at the level of 7%. We are still catching up in a qualitative way. But we have also let's say similar firework that is foreseen at the end of 2022 for the 40 years celebration. So, it's also something we are working on and there is also the project of launching a new store format with the opening of our stores in Chicago on which we are working. And that will be then deployed with different formats based on the one of Chicago also for some of the openings that are foreseen already early 2023.

[Anne-Laure Bismuth, HSBC]

Thank you very much.

[Operator]

The next question is from Chiara Battistini of JPMorgan. Please go ahead, ma’am.

[Chiara Battistini, JPMorgan]

Hello. Thank you for taking my questions. First one on the gross margin for the first half. I understand the dilution from the full consolidation of Stone Island. I was wondering whether there is anything else that we should be thinking that had an impact on the gross margin in the first half? And if not, then should we be thinking about gross margin broadly flattish in the second half year-on-year given the consolidation is then done.

Second question on Stone Island and the UK as you're about to take it direct. I was wondering if you could give us any color on how you're thinking about distribution of Stone Island in the UK, or that is going to change now it's going to be under you?

And also on brand representation and marketing messaging, how are you thinking to change? How the brand is proceeding in the UK, if at all? And finally, sorry, clarification on the space contribution in H1 and also the guidance for the rest of the year. I think the actual number of stores is increased by 6% year-on-year. So the bridge to get to the 12% is simply average store size or anything else that we should be thinking of? Thank you.

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. Hi, Chiara. About your question about the gross margin I mean gross margin as you've said correctly is the decline as compared to last year only because of the combination of the two business models that are still different from the distribution point of view. So as I said, gross margin by each brand and by each respective distribution channel are in line and even better than last year.

So I mean this makes us confident to achieve -- to match the gross margin -- the same gross margin the equivalent gross margin for the year-end. So this is our current target. Of course I mean there is nothing in particular to add to this comment. I mean, the gross margin is totally under control again even better than last year. Also I mean -- our inventory position is pretty good. I mean after the write-down we did over the past two years and particularly in 2020. So the impact of obsolescence is very low. So, I mean, I can tell you that the gross margin is very, very healthy.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Regarding Stone Island, UK as we mentioned already when we had the first call of the announcement that we are going to, let's say, to partner up with Stone Island UK was on the -- already on the radar screen is the most important market that we have in Europe together with Italy. So it was important for us to take control as much as we can on the direct-to-consumer operations.

So this is going to be the case at the end of this month for the [indiscernible] Brewer Street. And we -- since beginning of July we started to manage the website and realign the image and the way the brand was exposed. Clearly, when it was managed by the partner there were some differences. So basically, we are working now on the realignment of the brand image and the communication with all the tools that are developed for all the markets where we're already D2C.

Same for the Korean market. So this is the main changes that we are operating now for the brand on the UK market plus also the management of the most important key accounts in wholesale that we plan to convert in concession in the course of 2023. So this is still up for discussion with this partner but Alyx and Selfridges are partners we would like to become also a concession in the course of the next 18 months.

[Luciano Santel, Chief Corporate & Supply Officer]

Yes, Chiara about your last question about space. I mean space has been, particularly, high level 12% actually due to the openings of 2021 -- second half of 2021 in particular some examples because many, many stores but some very important. One is Rodeo Drive in Los Angeles, which was not a new opening, but it was an important expansion and relocation in much bigger space much more visible.

The relocation of Chicago, the new opening of Milan Galleria and the expansion I just mentioned before of Roma Piazza di Spagna. Just to mention four, but really very, very important for their contribution.

[Chiara Battistini, JPMorgan]

Okay. Thank you very much.

[Operator]

The next question is from Luca Solca of Bernstein. Please go ahead, sir.

[Luca Solca, Bernstein]

Yes. Good evening. I was wondering whether you could share with us you're thinking about the digital and the digital distribution in particular. I seem to find an emphasis on direct digital distribution. And yet you were among the very few top brands to embrace multi-brand platforms like Farfetch for example. How is your thinking evolving when it comes to brand.com relative to marketplaces or relative to e-concessions? What role do you expect that the brand.com will take going forward?

My second question relates to retail productivity. You were very kind to give us €34,000 per square meter benchmark. I wonder, as I see that Stone Island is indeed bearing quite significantly and fast to direct-to-consumer and retail. How the retail space productivity gap is sort of reducing between Stone Island and Moncler? And whether you are satisfied of the progression in retail space productivity at Stone Island and if you have a workable store concept which you can use as a model for the various markets?

Then I have a question on pricing and the price increases. With the weakness of the euro, one gets European prices to become even more attractive for overseas tourists. I remember that you were working to reduce your price gap between Europe and some of the overseas markets, including China. I wonder how you're proceeding on this and how you see this gap evolving going forward. Thank you.

[Gino Fisanotti, Brand Officer]

Okay. Thank you very much for your question. I think, on the first question about digital, I think, again, as you know, I think, the brand keeps trying to serve customers and consumers in the best way possible across the market -- sorry. Okay. Okay. Sorry, it was the noise.

So I think we will keep trying to serve customers and consumers across the entire market as we have been doing. I think, the main -- and again, I think, there's great examples from Moncler in terms of the -- even the way we maximize relations with Farfetch or Mytheresa, Luisaviaroma, et cetera.

But I think when we go into the direct question, I think, for us it's important to understand how we can become a best-in-class digital player within moncler.com. I think, we are working heavily and not only be better about serving the demand, but even retaining that demand through exclusive services and benefits.

For us dot-com is not just a transactional place. It's a relationship-centric place with customers. That's why, for us, loving customers is so important. And we believe that our success, especially in today's digital environment, is when we value relationship over transactions, right?

I think, we want to make sure that customers feel that moncler.com is a destination. It's not more than just a transaction. It's a place where they can have the very best from us and they can have access to exclusive things. So that's what we're aiming for. But of course, we believe that everyone plays a critical role in the market to serve the customer in the best way possible.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Luca, thank you for your question. I understood that you got the €34,000. It's clear in your mind now, let's work on those two to achieve it, or even to overachieve it. Regarding the difference and the gap between the productivity, between Stone Island and Moncler, remember that the retail footprint of Stone Island is still relatively small and we have 54 stores at the end of June, out of which 28 that have recently been converted and were managed since end of last year by our importer in Korea.

So we have started now to implement the retail excellence project. They are not all the elements. They are -- we're working now on the new client experience that is also tuned with the new retail format we are developing with Chicago.

So there will be a second wave of retail excellence at the beginning of next year. We will start refreshing and changing some of the stores, key stores that we have on the Korean market. But so far what is good is that the, let's say, the acceptance of this cultural change that we are bringing in Stone Island has been positively accepted that we have start building a database on which we can start working.

We had 25% of the client recognized prior to the launch of retail excellence in Korea. We are now at 80%. So I think there is a base on which we could start working on. We are still not at the level of Moncler, but we are confident that the level of productivity of Stone Island could get close to the one of Moncler.

I think it's still a little bit premature to discuss about figures. We need to experiment. We need to test. And especially, we want that the store becomes a place where our community can live and experience the brand and not only being a transactional space. So we need to blend it both. And I think the lessons we are going to learn from the opening of Chicago is going to be very, very helpful.

Regarding the price increase, well, first of all, about the acceptance as we are starting to bring these for winter collection with the 10% price increase that we have had on the market. We don't have negative reaction so far from the end consumer.

And for us, the first test was of course when we did in December last year the fall/winter campaign for our 1,000 accounts in wholesale, because they are also the one comforted with the consumer, the end consumer and their acceptance was there. So I'm not too much scared on that.

And of course, when we talk about 10%, is something that is blended and it's not exactly the same across the different region. It has been a lower price increase in Asia, just to continue to go in the direction of this let's say decrease of the price gap between Asia and Europe and Europe and US. So price increase slightly higher in Europe and a little bit lower taking also the effect of the exchange rate and the weakness of the euro to try to mitigate it. So we are improving step by step the price gap and reducing the price gap with the other region.

[Luca Solca, Bernstein]

Thank you very much. Have a great time.

[Operator]

The next question is from Geoffroy De Mendez of Bank of America. Please go ahead.

[Geoffroy De Mendez, Bank of America]

Yeah. Thank you very much for taking my questions. I have three of them. I wanted to come back on the comment on China for the month of June so up double-digit. I was wondering if you could give us a sense of the whole quarter or maybe April and May, if it was down like 40% like most other companies are planned? And linked to that question given China has improved in June. Can you give any indication for the exit rate of the quarter for the Moncler brand? You did 23% on a three-year basis for the whole quarter. Are you closer to high-20s or 30% for the end of June? And what do you think potentially pricing could bring on top of that for Q3? So that's sort of first couple of questions. And then not related to that on Stone Island, you did 35% growth on a year-on-year basis for H1. If I look at consensus numbers, I think they are expecting 11% for the second half of the year with €380 million of revenues. Any reason why it would slow down so much in the back half of the year, or you think something closer to €800 million is more reasonable? Thank you.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Let me answer on the first part of your question. To be honest, I didn't really get the second part. So we'll ask the help of my colleagues on this. But regarding China, yes, as I mentioned, the exit in the month of June has been good. As soon as the stores have reopened and this is really started by Beijing and then Shanghai later on, we have had a double-digit growth, low double-digit growth on the month. I would prefer not to comment on April and May, but just to give you a flavor as I mentioned before totally H1 for China has been positive for us. So we have been able with the result of June and the positive month of January, February and March to overcome the loss and the negative performance of April and May. And the current trend is similar to the one we have seen during the month of June to an exit that is let's say the start of Q3 that is more or less in line.

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. About your second question on Stone Island. As you said €380 million, we may do better, yes, not that much honestly. I think that maybe a little bit better, but considering also that again the business is a wholesale business model mostly. I mean, we have a pretty clear visibility of course, what we may do better, but it is unpredictable now is on the retail side. And so it's difficult to predict now. But I think that €380 million is achievable and maybe something more yes, not that much. Thank you.

[Alice Poggioli, Investor Relations Senior Manager]

Okay. Geoffroy, there was a part of your question that we didn't understood this. I want to repeat it because there is a little bit of background noise sorry.

[Geoffroy De Mendez, Bank of America]

Yeah. Okay. Thank you, Alice. Just on the Moncler brand for Q2, you did 23% growth on a three year basis for Q2. And I was wondering if you could give an indication of the growth of the exit rate for the Moncler brand. Given China has helped accelerate all this I was wondering if you could give us a sense on the Moncler brand rather than just China?

[Luciano Santel, Chief Corporate & Supply Officer]

Okay. I mean the 23% which is of course the average of the quarter. As we said before, the exit rate in June was better than the previous two months for China for sure, because I mean China was very weak and negative starting from mid-March, April, May heavily negative. In June, it was a positive even slightly double-digit, low double-digit. So this is -- I mean the exit rate I can comment. I mean the other regions nothing specific in particular to comment honestly.

[Geoffroy De Mendez, Bank of America]

Okay. Thank you.

[Operator]

The next question is from Paola Carboni of Equita SIM. Please go ahead, ma'am.

[Paola Carboni, Equita SIM]

Yes, hello, hi. Good afternoon, everybody. I have a few questions. The first one is – sorry to come back on this about China. Is it possible to have a sense of how far June was from the normal speed of this region, up until January and February, for example? The second question is on gross margin. You commented earlier in the call I just wanted to be sure I got it right. Should we assume gross margin to improve actually in H2 year-on-year, given also the growing contribution from pricing? Is this a fair assumption?

Second point is – sorry third point is on Stone Island. I don't know if you can provide us some indication on how the brand is performing on a like-for-like basis in its stores? I appreciate that it's a low panel of stores clearly because it's a small number. But at least in Europe, these are quite established. And so this could be a good representation of the underlying trend of the brand. And with respect to this I was wondering what the exposure is for Stone Island to tourism in Europe?

And the last point instead sorry on the fears of slowdown of macroeconomic slowdown, which is trading particularly about Europe, I'm wondering whether you are feeling any change in sentiment to start with from your wholesale accounts both at Moncler and Stone Island? And also if you are somehow changing your attitude in terms of buying and how you are planning your budgeting for the next seasons to be more prepared for any slowdown? Thank you very much.

[Roberto Eggs, Chief Business Strategy & Global Market Officer]

Okay. On China, I will be quite short because I think we gave already a lot of insight since the beginning. But let me say that the result of June was close not up to the level of Q1 because we are still in the recovering phase. There were still a lower traffic and so on but the double-digit growth that we have been experiencing is not that far from the result of Q1. So I think that the consumer confidence came back for the Chinese and they went back to store much faster than what we were expecting. So this is regarding China.

On the Stone Island productivity and Stone Island, I think it's – honestly it's premature. We want we are in the process of – we are trying to do in 12 months, what took three years for Moncler to put in place in terms of retail excellence, changing the client experience, develop a new format. So you need to give us a little bit of time. But the first result as I mentioned were promising.

Regarding Europe, personally I don't see a slowdown. I make a comment to say that the comparison of Q1 with 2021, we had half of the store closed in Q1. We had – sorry 25% of the store close in Q1, 50% in Q2. So the fact that we have a figure that is slightly lower in terms of growth with this 32% is related to the fact that we had more store closed in Q1 last year compared to Q2. So this is the explanation. And to give a clearer view on the growth, if you compare it to 2019, the growth in Q2 for Europe has been an acceleration in Q2 compared to Q1 2019. So Q1 2019 Europe grew – compared to 2019, Q1 we grew at 11% and 18% on Q2. So we have seen an acceleration and not a deceleration. So the result of – compared to 2021, they are a little bit misleading and linked to the number of stores that were closed last year Q1 and Q2.

[Luciano Santel, Chief Corporate & Supply Officer]

Hi, Paola. About your question on gross margin, the impact on gross margin of our price increase. The answer is no, no impact because the price increase is totally driven by the production cost increase. So the decision to increase prices of about 10% is because – I mean to offset the production cost increase, raw materials, transportation, energy whatever. So no impact, no positive impact on gross margin at all.

[Alice Poggioli, Investor Relations Senior Manager]

Okay. Thank you to everyone. Since it's pretty later tonight. I think we can stop here. Of course, we remain available if you have any other questions, we all IR team. Just a quick reminder that our next release will be on October 26 after market close and a conference call will take place at the same date. Quiet period will also start on September 27. Really thank you for attending this call and we wish you a really nice summer break. Thank you.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.