OVS SpA

MIL:OVS

Earnings Call Analysis

OVS Shows Strong Q3 Performance with Growth and Positive Outlook

OVS reported a robust 13% increase in net sales for Q3, translating to an EBITDA growth of EUR 14 million. The total sales for the year are projected to exceed EUR 1.6 billion, with an EBITDA close to EUR 196 million and margins above 12%. In addition, the company expects revenue growth near last year’s figures for November to December despite higher sales last year. They are actively pursuing growth through acquisitions, particularly in enhancing their brand network. Concerns over inventory delays are expected to stabilize with improved logistics, while labor costs are anticipated to rise by around 3% next year.

A Strong Quarter Amidst Challenges

The latest earnings call illustrates a promising trajectory for the company, highlighting a remarkable growth of nearly 13% in net sales compared to the previous year. This surge was driven by favorable weather conditions, leading to increased customer footfall in stores and a notably high conversion rate — a rarity when foot traffic increases. The company managed to transform this sales growth into an impressive EUR 14 million in EBITDA, translating to a robust plus EUR 12 million in profit before tax. Overall, this quarter is marked as one of the strongest periods in the company’s recent history, reinforcing investor confidence.

Collections and Brand Performance

Significantly, the company reported positive performance across its brand spectrum. The Upim brand continues to perform exceedingly well, achieving higher sales this year than OVS itself. The strategic focus on the women’s segment has resulted in substantial upticks, particularly with the Piombo and B.Angel brands targeting millennials and younger demographics. This shift towards enhancing offerings in beauty and women’s fashion is paying dividends, driving traffic and sales within the stores.

Growth in Key Segments

Franchising has shown a recovery as well, evidencing a growth of 4% following a flat performance in the earlier half of the year. This aligns with the normalization of delivery delays that plagued earlier shipping periods, restoring operational efficiency. In the context of overall sales, the fall/winter collection’s appreciation contributed to a high single-digit growth in both OVS and Upim, with OVS reporting an EBITDA margin close to 13%. Investors should note the emphasis on margins as a crucial factor in enhancing overall profitability.

Future Outlook: Growth Expectations

Looking ahead, management remains optimistic about continuing growth, forecasting revenues to close the year with figures above EUR 1.6 billion and an EBITDA around EUR 196 million. They indicated that the EBITDA margin is likely to stay above 12%. The company projects that the upcoming months will maintain sales trends similar to last year, with expectations of solid performance during November and December. This stability is backed by sustained positive customer interactions and strategic markdowns planned for January, aimed at clearing inventory for fresh spring collections.

Operational Efficiency and Working Capital

On the operational front, the company has also managed its working capital prudently, with an improvement in trade receivables as partners fulfill their dues following a successful quarter. However, they are still contending with higher inventory costs due to logistical delays, particularly those stemming from the Suez Canal. There’s an anticipation of a potential cash benefit of EUR 15 million to EUR 20 million, contingent on resolving these shipping delays by January.

Strategic Shareholder Engagement

The management highlighted a proactive approach towards shareholder value with a resolution to consider a 10% cancellation of shares to better align with the company's intrinsic value. This effort demonstrates a commitment to maximizing returns for shareholders while maintaining the flexibility for future investment opportunities and other strategic initiatives, including buybacks if deemed appropriate.

Preparations for Future Acquisitions

The company also expressed strong interest in expanding its footprint through strategic acquisitions, particularly eyeing portions of the Conbipel network for potential store openings in key locations. This growth strategy could add significant turnover, projected at around EUR 40 million from new stores. The management plans to capitalize on opportunities that arise from changes in the retail landscape, showcasing an adaptive, forward-thinking approach.

Conclusion: A Robust Positioning

In conclusion, the company’s financial health appears robust with strong growth indicators across its product lines supported by strategic brand management and operational adjustments. Investors should note the optimistic financial outlook and the direction towards sustainable growth that could yield positive returns in the near future.

Earnings Call Transcript 2025-Q3

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS 9 months 2024 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Stefano Beraldo, CEO of OVS. Please go ahead, sir.

[Stefano Beraldo, executive]

Thank you, and good afternoon to everybody, and thank you for being here for this conference. Well, I try to be very synthetic, given that the figures are the best comment, I think, for what is happening and what happened in the third quarter. I think it was one of the strongest quarter ever in my nowadays longer presence in the company, driven by like-for-like, driven by exciting project in merchandising, which are delivering great result.

Driven by not only OVS, but also by Upim. And worth mentioning that Upim is continuing to post the highest ever -- during our -- during the period -- from the period after we acquired this brand and this company. Because the year-to-date result of Upim remain even higher than OVS as of today. So very good news for all our brands, also for Stefanel, which is strongly recovering in the second half, thanks to a new style, responsibility given to an internal manager, which is a talent.

And super happy to confirm that the strategy of dedicating more focus, more space, more effort to the Women segment is generating most of the good result of the period. Speaking about OVS, the combination of Piombo, which is now -- which has been able to establish itself as the preferred brand to the millennials, together with the great success of B.Angel, which is dedicated to the younger generations. And the combination of those 2 women brand with an extraordinary high performance in the segment of the beauty, which we, I think, invented 7, 8 years ago.

And after years of fine-tuning, finally, we found, I think, a great match between affordable price and original introduction of a new brand called [ in the brand ] house brand are generating traffic increase and the capability to attract the most important share of customer base, which is women. Not only mother, but the women, which are coming in the store, buying for themselves, our product.

I think that this will continue. There are new ideas for next year, and the women will continue to be the segment of business to which we will dedicate the utmost of our effort to continue in this trend. On -- regarding margin and cost, everything is basically working in the right way. So very nice quarter.

And I hand the word to Francesco for a more precise comment to the figure. And obviously, I'm here for the final Q&A session. Thank you.

[Francesco Leoncini, executive]

Thank you, Stefano. I would start on Page #5 with the Q3 income statement figures. Net sales are growing almost 13% versus last year. This was driven, as I said, by the favorable weather that brought a strong footfall in our stores, but that was combined with a very high conversion rate, which is not, let me say, common. When footfall grows, generally, we see a decrease in conversion rate. But this time, the conversion rate was still high. This is a strong sign of appreciation of the collections, both in all our brands.

A positive mention is deserved to Stefanel, that thanks to the new creative leadership in the Q3, starting, let me say from September from the new collection has experienced a high double-digit growth versus last year and is providing the sign or higher [acceptation], higher precision from the customers. The growth in sales, then thanks to the operating leverage, transformed into a plus EUR 11 million in terms of EBITDA and then goes down until the profit before tax. And so highlighting a double-digit growth on all profitability indicators.

I move to Page 6. The strong performance of Q3 builds up on an already growing first semester. And so bringing overall, an increase of EUR 74 million in terms of sales, plus almost 7%. That again translates into plus EUR 14 million in terms of EBITDA and EUR 12 million up to profit before tax. Making mathematical exercise, adding up the Q4 of last year, will comes to sales figures above EUR 1.6 billion in EBITDA, close to EUR 200 million, EUR 196 million. And also an EBITDA margin above 12%. So again, it provides a thorough and a nice picture of the full year.

On Page #7, we provide some detailed views with all positive sign, the most important being the growth on franchising after first semester that was flattish because of delivery delays in deliveries. Now that the situation has normalized over the 9 months, we see even here, plus 4%. And then as said, we see a high single-digit growth in both OVS and Upim sales, thanks to the appreciation of the fall/winter collection. And EBITDA margins growing again in both OVS and Upim, with OVS close to the 13% incidence of EBITDA on total sales and Upim, above 10%.

I move on Page #8 on the financial side. So starting with the working capital. On trade receivable, again, I refer to what we said 3 months ago, where we had an increase in trade receivable and we commented that we voluntarily supported our partners with longer payment terms. And now we see that was a right choice because the trade receivables now that also our partners experienced a good sales in the Q4 -- in the Q3, completed all the payments, and we are in line with last year with decreasing DSO given the increase on the other side on turnover of the channel.

On inventory, we see a plus EUR 17 million. And this is due exclusively to the longer transit time that we still experience on -- due to the closure of the Suez channel. Unfortunately, this does not have yet a clarity on when the situation will normalize. But at the moment, it has a negative impact that is absorbed in the picture as of 31st of October by the increase in trade payables and on which we are working close to our suppliers in order to have the best management of this situation.

On Page #9, we have the picture of our capital expenditures, which are still slightly above last year. As said, we anticipated the expenses, investments mostly in the first semester, where we had EUR 9 million difference. Now the gap is closing. And by the end of the year, we should be more or less at the same level, completing the relevant investments that we made over the last 3 years for the automation of our distribution center in Pontenure and for the launch of a circular economy cycle on garments in Puglia.

On Page #10, we have a summary of the cash flow over the 9 months. The seasonality of our business is that we absorb cash until the end of Q3, and then we have a strong generation in Q4. But this year, the overall profile was EUR 8 million better than last year. This is due on one side to the EBITDA improvement, EUR 14 million. And partially, it's absorbed by the higher taxes that we paid in 2024 after, let me say, the end of the past year losses effect that we had until 2023.

On Page #11, there is the picture of the net debt, which is improving versus last year. But overall, we -- in terms of leverage EBITDA, we are well below the investment grade, so between 1% and 1.5%. So it's a situation of no tension despite the relevant investment that we made in terms of dividend distribution and shares buyback that took place over the last 12 months.

I move to Page 13 for a snapshot on the outlook. As commented by Stefano, the sales trend in November-December is in line with last year despite building up on a robust Q3. So we do not have a reverse effect on current sales trend. And we expect to close the quarter with -- in line with last year and overall, near growing versus 2023.

Many of you saw on the news some comments on potential acquisition. We take opportunity of this call to confirm our interest in a portion of the network of Conbipel and also, in general, in evaluating opportunities to grow -- to increase our network -- the network of our brands with proper locations that would, again, bring up an additional operating leverage to our figures.

On Page 15, I leave the word to the CFO, Nicola Perin, to comment on the other relevant elements of this call, which is the cancellation of treasury share.

[Nicola Perin, executive]

Thank you, Francesco. So the Board of Directors resolved to convene an extraordinary shareholder meeting on 19 February, 2025, to cancel 10% of share capital by -- cancel the treasury share and to grant a mandate to the Board of Directors to cancel an additional number of treasury share up to 5.5%.

The approval of the cancellation proposal will be conditional on obtaining the favorable vote of a majority of the shareholders attending the shareholders' meeting, excluding TIP, in other words, with the so-called whitewash mechanism. The resolution has been in order to maximize the shareholder returns. The company does not exclude the possibility to invest in the future, cash generation expected to grow in the next years in additional share buybacks, while always maintaining an adequate payout through dividend payments.

And so I'll leave the word to Stefano.

[Stefano Beraldo, executive]

Okay. Thank you, Nicola, and we completed our presentation. So we are ready for your Q&A. Thank you.

[Operator]

This is the Chorus Call conference operator. [Operator Instructions] The first question is from Francesco Brilli, Intermonte.

[Francesco Brilli, analyst]

Can you hear me?

[Francesco Leoncini, executive]

Yes. A little bit noisy, but yes, speak slowly.

[Francesco Brilli, analyst]

Yes. 3 questions from my side. The first one is on investments and CapEx for the year. I was expecting something -- higher run rate in the 9 months. So if you can provide the full amount you think you will land at the end of the year in terms of investments? The second one is on the working capital, also given the EUR 30 million stock in transit we saw in the presentation on the inventories. Can we consider the working capital is a normal level at the end of the year and it will be absorbed, or it will be still in the fourth quarter, this effect?

And the third question is on M&A. If you can provide some additional indications on the ongoing discussions for that portion of the Conbipel network and then the possibility of adding some stores of those dismissed by Benetton. So if you can provide a rough number in how many stores do you think are worth to be taking into consideration?

And in case how much time do you think it will take to put them up and running once you will acquire them? And I was curious also, if you have already an idea on how many revenues could be made out of these stores?

[Stefano Beraldo, executive]

Okay. So the first question regarding CapEx, I tell you that we expect for the full year, an amount between EUR 90 million and EUR 95 million. And as we mentioned several times, finally, we are finalizing the 3-year period of higher CapEx compared to the recurring ones driven by the completion of the special projects that has been mentioned a few minutes ago. So we believe that in the next coming year, we will stay on a level of EUR 15 million, EUR 20 million less compared to this level for ordinary CapEx.

Your question regarding working capital, cannot have a precise answer. Basically, we are suffering this 30 days more or less delay generated by the prosecution of the Suez crisis. We suppose that for this time of the year, things might have end up better. But unfortunately, this is not the case. So we are still forced to order our goods with 30 days higher period. So basically, we are forced to see EUR 30 million of goods traveling across the world before they arrive in our store, more than in normal period.

So when this EUR 30 million -- or part of this EUR 30 million because part of this EUR 30 million is also covered by payables. But when the net amount between the EUR 30 million goods and the higher payable will transform in cash -- if in January, the Suez crisis would be solved, starting from the second part of the year, we would see a benefit of about maybe EUR 15 million, EUR 20 million. But I cannot be more precise.

Regarding M&A, we have been basically forced to comment to the newspaper because we were surrounded by several questions about the Conbipel deal, the possibility of buying Benetton stores. So we preferred to give some clarity, telling the market that it is true, like it was true years ago. And every 3, 4 years, the Conbipel dossier comes out. And every time we confirm our interest for a lower number of stores because in the meantime, we continued our process of opening stores.

In this moment, we are talking about a number of stores which is between 25 and 30. Very good location, on average, 800 square meter each. So we have in mind that most of these locations will be transformed into Upim, should we be assigned with the portion of the network that we requested. And few stores will be converted into OVS. You can assume that 25 stores, 800 square meter might generate EUR 40 million turnover, more or less, with an appropriate profitability in line with the Upim profitability, which, as you have seen, is increasing year after year.

Regarding Benetton, the situation is totally different. There is no discussion with Benetton regarding portion of their company, portion of their network. The discussions are generated by independent entrepreneur, Benetton franchisee. In some case, they are selling a different brand. They are Benetton franchisee, but also other brand franchisee. And given that some of them has been noticed by Benetton about the decision to stop delivering goods and to execute the warranties that they gave to Benetton in exchange of the credit risk that Benetton undertook once they became customers.

They are trying to survive. And so they are offering -- some of them, they are offering to us the possibility to replace the brand Benetton with the brand OVS. And we have a discussion -- advanced discussion with some of them that, in my opinion, we start generating new OVS stores, Stefanel stores, Goldenpoint stores, CROFF stores in the next -- after the first 6 months of the next year. So we might start seeing an increasing of our network, thanks to Benetton former franchisee starting from the second half of next year. Maybe some new store will be even opened in the first half of this year. And we have a couple of regions of Italy where this might happen. We don't have in this moment, other material M&A activity on our radar.

[Operator]

The next question is from Daniele Alibrandi from Stifel.

[Daniele Alibrandi, analyst]

Congrats for the results. I have 3 questions. My first question is on current trading. Can you remind us the relative importance of the months of December and January for your trading on a normalized basis? Because my impression is that the flattish or slightly positive growth which is embedded in your guidance and consensus is a bit, I'd say, the worst case scenario, but maybe I'm wrong.

The second question regards the shares cancellation and also the potential opportunity to restart the buyback later next year or in the coming years. Just wondering if maintaining a portion of the shares in your book is something that is of your interest as you can use it as an exchange paper in a deal or not?

Last question is a little bit more high level. Because the group has clearly changed for the better in the last few years, basically has evolved from a pure vertical value apparel retailer to a multi-brand platform. You mentioned to relaunch the, say, overlooked brands. Your positioning now is more clear. You have also the leverage of the financial structure. So I was curious to hear from you, what do you expect for the company in the next 2 years, I'd say? And 2026 from a growth point of view, expansion opportunities and also from a leverage point of view, given the opportunities that you highlighted before?

[Stefano Beraldo, executive]

So first of all, I start from your third question, from the beginning of your last question. What I expect from you is that you might became our investor letter because you described our position in a great way. But unfortunately, I'm happy with...

Sorry, if I smile about this. But becoming serious. First of all, current trading, I hope you are not wrong, but I think you are wrong. The fourth quarter of last year was already a good quarter. So honestly, given that we are still have in front of us 1.5 months, it is too early for me to try to give more confidence on the possibility to increase the top line of last year in the last quarter.

As of today, November has been okay, has been more or less flat, means a plus 1%. December is undergoing. We are a bit late compared to last year, but only for calendar reason. We have 2 days more before Christmas, Monday and Tuesday. And we are -- we know that we will recover the small gap that we are -- I don't say suffering, that we are -- we have in evidence as of now. So I expect that December, which will be in line with last year, maybe plus 1%, something like that.

January, it will depend very much from the markdown strategy. We are inclined in this January to be aggressive in markdown because we want to clean the stock because we have a lot of new ideas for the product of next autumn/winter. So better we start with fresh ideas. And maybe we will increase a little bit the markdown, but this has to be seen even because we decide the markdown on the ongoing performance of sales. So we don't want to decide today what we do in January. Let's see what the market is asking.

So I think it is appropriate for us to continue to try to help you give an indication that EUR 196 million seems a good number. Obviously, if something will be good, the EUR 196 million will be exceeded. This is what I can tell.

Share cancellation. You already gave the answer once you made the question. So basically, we decided to ask our shareholders to cancel 10% of the shares. This in order to better align the amount of share to the real book value of the stock. It is also true that keeping on hand some share can be useful not only in order to comply with the performance share plan that are outstanding even because those might be served by new capital increase eventually, but also for -- maybe for some opportunity that might arise in terms of share against equity in case of M&A.

So I think this gives our Board, if you will, approve it, the appropriate flexibility in trying to utilize at best this maneuver. I think that as of today, the way we manage the buyback, the dividend distribution has been appropriate and I think has been used in order to maximize the interest of our shareholders. So I think we will continue with this approach as also Nicola, our CFO, said before.

Then when we speak about high-level strategy platform, yes, you captured all the main aspect of our present strategy. I think that we are kind of unique example of a multi-brand and multi-channel platform. We can play with our brand. Some of them I think has become a real brand like Piombo.

Some of them will become a brand like hopefully, like B.Angel. Some of them are already brand, like Les Copains. And we will start -- you will start -- our customers will start seeing Les Copains in OVS corner starting from next spring/summer. So there is a strategy which enable us to place our brand inside and outside our stores. For instance, in this moment, we have Stefanel in German department stores. We have Piombo in French department store. And hopefully, shortly, we will have also in a Spanish department store.

So we have a new category of products like beauty, which we tried to establish with the first opening on a stand-alone store in Italy, even also a stand-alone channel independent from OVS, and the first results are extremely encouraging. So the idea is to continue with the strategy to be a multi-brand platform, more active also out of Italy. We are happy to tell that within all the positive like-for-like that we mentioned, either different brand, different channels, different product segment, men, women and kids. In this year-to-date period, we also had a very solid like-for-like in international sales.

So the idea is to continue to grow and doing it through our channels, to our new brand without forgetting Goldenpoint, where we are working harder in order to start opening also new store, refurbishing old store and hopefully incorporating the company before the -- or more or less, at the mid of the next year. And I stop, because otherwise, I became...

[Daniele Alibrandi, analyst]

Just a follow-up. The growth we've seen in Stefanel is this was the case also in Germany? More related to Italy?

[Stefano Beraldo, executive]

No, no. The growth in Stefanel is like-for-like. In the first half, we suffered a negative like-for-like with old creative director. In the 6 months of the first half, the like-for-like was negative by about 10%. In 4 months of the second half, we already under -- cover the -- not under cover, we exceeded the negative performance, and we have now year-to-date positive like-for-like, mid-single digit. And if we continue like today, we will end up the year with a very solid high single digit or maybe even double-digit growth is Stefanel full year.

On the top of it, we are performing very well with Stefanel also in Germany and in other foreign countries. Just to mention, we -- in this moment, we have about EUR 10 million of turnover in South Korea with the Stefanel brand on which we collect only royalties. So it is not a turnover. You don't see this turnover in our number. But this is only to say that we believe that once we might be able to really put in place the right assortment, and we feel that we are in the right direction now with Stefanel. This might be a good surprise for us.

[Operator]

The next question is from Andrea Bonfa, Banca Akros.

[Andrea Bonfa, analyst]

Most of my questions have already been answered. Stefano, if I may, I got just some, let's say, curiosity in the sense that as far as the potential for growth into next year, in your ranking, how would you list the main element? Will it be the easier comparison on the first half, which is for sure, the month of May? The consolidation of Goldenpoint or the potential like-for-like growth from all your assortment initiatives, if I can summarize all your efforts in your product range.

[Stefano Beraldo, executive]

The first element of our growth -- expected growth for next year is, for sure, the relatively easy comparison in the first half. So this is the first. The second is hopefully driven by the good quality of the new projects that we are still putting on the game, like -- first of them, most important of them hopefully, will be Les Copains. Also, the sport is starting giving us good indications. And also the prosecution, I don't think at the same pace of growth that we had this year of the beauty. The growth of the beauty has been approximately accounted for almost 50% of our total growth. I don't think we will continue to grow like 30% per year, but hopefully 10%, 15% growth in perfumery also in '25 will be achieved. So these are the 3 main elements for our growth like-for-like.

On top of it, we expect some growth from new openings as usual, mostly Upim now other than OVS, but still, there are opening. For instance, 3 days ago, we opened one of the newest -- one of the best, sorry, and biggest OVS store in the new shopping mall of Pompeii in Campania, which is a region where our brand performs extremely well. And the first day is -- are generating very good sales. All the best players are located in this mall, and we are very happy with the first results. So there is an increase on perimeter of OVS and mostly Upim to generate sales.

There is the consolidation of Goldenpoint, obviously, and this will account for a much higher amount because Goldenpoint turnover on a full year is about EUR 95 million, EUR 100 million. So if we consolidate the second part of the year, we have another EUR 50 million EUR 60 million -- EUR 50 million increase. And also with the best profitability because, if we start exercising our call option in maybe in June, we take advantage of all the seasonality of summer, which is the most important for the company, given the market share in the swimwear.

International, we will continue to grow because we signed several new agreements recently. Not only traditional franchisee, but also some bigger customer, which is considering OVS as one of the -- maybe a game changer for them. So might be that next year, in the second part of the year, we have in place some new store in countries with the possibility to open dozens of the corner inside big mall or big department stores. So these are the main elements.

[Andrea Bonfa, analyst]

And Stefano, if I may. How is Goldenpoint doing? I mean we potentially might be a strong element of growth. So in the first year or, let's say, in 2025, if you consolidate that asset for 6 months and potentially EUR 50 million to EUR 60 million sales, will the asset be with a positive EBITDA?

[Stefano Beraldo, executive]

Yes, it will because maybe I've been not clear enough, but the best period of the year for Goldenpoint is starting from August. And if we consolidate, we will -- no, sorry, starting from July when the peak of the swimwear season takes place. So if we consolidate Goldenpoint from June, July, we will take advantage of the best part of the year. And given that we expect a positive EBITDA for the full year next year, most of it will be generated in the second part. So the answer is that it would be either accretive or neutral from a profitability point of view, and it should imply like EUR 50 million, EUR 60 million turnover increase overall.

[Operator]

The next question is from Domenico Ghilotti, Equita.

[Domenico Ghilotti, analyst]

I have a question on the cost base. So starting from a review of Q3 numbers or 9 months. So what was the underlying trend for the personnel costs, in particular for the gross margin in Q3? And if we look into the Q4, you are suggesting flattish sales and flattish EBITDA. I'm wondering why the additional -- so the cost inflation that we are seeing in Q3 is not translating into Q4. Is this a matter of phasing? And what should we expect also going forward in 2025 in terms of intake price and labor inflation?

[Stefano Beraldo, executive]

Okay. In the third quarter, the cost increased about 6%, more or less. 50% of this amount, so like 2%, 3% generated by the new labor agreement that took place in the second part of this year. And another 2%, 3% generated by basically, the increase of store network. So compared to the 12% growth of top line, this 6%, you can consider has been translated in gross margin -- in EBITDA, thanks to the operating leverage.

In the last quarter, what might happen is that even in a case of flattish turnover, we still have the 3% labor increase, but we can reduce the number of hours that has been requested during the third quarter to sustain the high level of sales. So we have 2%, 3% of cost that we can kind of maneuver during the -- from time to time, basically, in order to try to sustain cost -- labor cost as more aligned to sales as possible. Obviously, some disadvantage might be generated. But given that the mass of cost is high and we have other costs to work with, I don't expect any surprise in cost in the fourth quarter.

For next year, we see -- from the cost side, we see a combination of more or less. But still existing effect of labor cost increase, another 3% next year. We have a small advantage on the dollar as of today because we covered the 100% -- we hedged 100% of the first half and 50% on the second half with a modest advantage on year '24. So no problem or a small advantage from the exchange rate perspective.

On the other side -- and this is something on which I'm working. I consider that every company once experiencing a period of good growth and profitability like this year might be incurring some excess of fact, maybe. So next year, I will be very, very hopefully clever in identifying eventually, some inefficiency and making some savings that still, I have not planned, but I think that there will be some cost reduction in some areas associated with cost increase in other areas where we have a new project that worth to be assisted by the proper level of focusing and commitment.

But all in all, longer story to tell that we don't see anything material on the cost side. Hopefully, we will take advantage of the normalization on shipments. But still, this is in the hands of the politicians other than in our hand.

[Domenico Ghilotti, analyst]

Okay. And if I may, on the shareholder remuneration, just to have the feeling on what is your preferred capital allocation. If I look at the free cash flow generation between buybacks or resuming the buyback after the cancellation or increasing the dividend payment. So do we have any preference that you can share at the moment?

[Stefano Beraldo, executive]

I think that we will continue with the dividend policy, first of all, because this is more in line with normal practice. On the other side, I think that it will depend from many things, also the evolution of the share price. I think that our value -- in terms of the value of the company might work also to continue buyback. In case we assist to sudden activity of short-term investor that decided to sell short, for instance, just to react to this to help normalize the level of the share price or simply because we have in mind other opportunities in order to use the share for other purposes.

But all in all, I think that we will continue with trying to have appropriate combination of those 2 measures. And we believe that there is still possibility for the share price to increase. That's why we are still ready to buy shares. As of today, we bought shares at a price of...

[Unknown Executive]

2.17.

[Stefano Beraldo, executive]

2.17. So I think that we made a good adoption of the power that our shareholder gave us with the reference to the buyback.

[Domenico Ghilotti, analyst]

Okay. My last question is just a follow-up on Stefanel. So can you help me or remind me, so what is the size today of the Stefanel, so this year, let's say, or the Stefanel and the level of profitability you are starting in 2024?

[Stefano Beraldo, executive]

Today, the size of Stefanel is about EUR 25 million. And the profitability is still modestly negative, recovering in the second half and hopefully we're gaining a positive start into next year. I have to say that we might have increased heavily, the number of corner and new store named Stefanel during 2024 because we had a strong request from our partner to offer them a new format. So you know that we had more than 100 franchisee with hundreds of stores, mostly of them are kids store. And some of those franchisees already has been authorized by us to open some new store under Stefanel brand. Which for them, represents a formal diversification.

I have been prudent. I decided not to open if not a few of the many request that I received during the year because I didn't feel comfortable -- I mean, 7, 8 months ago about the quality of the assortment. Now I am comfortable about the quality of the assortment, and we are recruiting a lot of candidates for new openings. So I suspect that next year, Stefanel will -- I prefer to say, should generate a good sales increase in terms of like-for-like, but also a good sales increase because of new openings.

[Operator]

[Operator Instructions]

[Stefano Beraldo, executive]

Okay. Given that no more question is coming, we thank you, our team. Thank you all for this -- for attending this conference. And obviously, we wish you Merry Christmas to all of you and your families. Thank you.

[Operator]

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