OVS SpA

MIL:OVS

Earnings Call Transcript 2020-Q4

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS Full Year 2019 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Stefano Beraldo, Chief Executive Officer of OVS. Please go ahead, sir.

[Stefano Beraldo, executive]

Good afternoon to everybody, and thank you for being with us. During this call, which comes later compared to the normal because of the COVID, we preferred to postpone the final approval of the financial statement from the Board of Directors once it was much clearer than it was one month ago.

A couple of things, reopening date and financing situation. So as you can have seen from the press release, today, we are in a better situation compared to where we were one month ago because we had the opportunity to start realizing what is the behavior of customers after the reopening of the stores and also we are in a better situation compared to the strengthening of our financial structure, thanks to the steps which have been made in order to get the approval of the new financing, which we need in order to overcome the temporary working capital explosion because of the lack of sales during 2.5 months.

So basically, I think we don't need to stay too much on the historical level of profitability, if not because of saying that as predicted, more than 1 year ago, the company was in the right direction in order to come back to the historical profitability. And I think that what we learned during the soft 2018, because from a weather point of view, 2019 has been still a very unfavorable year. But what we learned is that the market, which was full of stock, was kind of demanding retailers to start changing their habits. I am convinced that we guys -- we retailer, either frustration or family value player like us, we bought too much. In general, all of us, H&M, Zara, OVS, we bought too much merchandising. And 1 year ago -- 1.5 years ago, I decided to reduce heavily the intake privileging quality of sales other than like-for-like at any cost, which in a declining market, means following miracles instead then trying to generate real value for the company.

So happy to notice that even if Q1 '18 has been negative from a weather-related point of view, our like-for-like has been more than this. So it's been negative, but much less negative compared to the market. And the quality of the like-for-like has been much better because we made a higher gross margin, lower discounts. And the result has been a good generation of cash flow, as you can see from the several pages where we have numbers in the presentation and higher EBITDA level in spite by the EBITDA demanding here.

I would walk you through Page 5, if you don't mind, where we can see that as expected, we increased our EBITDA in spite of our first half that has been heavily negative. And many of you were correctly skeptical about the ability of the company to overcome in the second half of this situation. But we were pretty much convinced that in the first half, we had to complete our dismissal, call it, of the excess of inventory that was originated 1 year ago. And this caused us higher than normal markdown, but we were at the same time, convinced that because of the decision to reduce the buying, the intake in the second half, the situation should have been entirely reversed in our favor.

And this happened with a like-for-like that was almost 0, basically, and with a great increase in either profitability and also cash generation, as you can see from the bridge analysis, which is reported in Page 5. This, coupled with an important cost-saving plan put in place starting from the end of 2018, basically, generated this EBITDA increase. In normal situation, this EBITDA increase should be only part of what could have been achieved in a normal 2020 because in a normal 2020, we should have repeated, more or less, the second half, and we should have improved the first half because we were not in the position to be obliged to markdown heavily as we did in 2019.

Unfortunately, what happened in 2020 is under the eyes of everyone, and this generated the need to drastically take care of this. And this is why, instead of continuing making comments on Page 6 and 7, which is actual figure, and in Page 9, I would simply dedicate a few more minutes on the overlook because I believe that instead of spending too much time in analyzing all the figures. People is asking what is happening this year. And what is going to happen to our business model once this tsunami will be over.

And I think that first, I want to start with some information for you. I think that during this period, the company has been able to demonstrate to us, first of all, and to our shareholder, several things. One is that OVS is part of the institutions. So OVS is not one of the -- one out of the many midsized retailers playing in a still big market as Italy is. OVS is an institution, is the biggest and the most relevant company, also in terms of ability to orientate and to suggest our policymakers to take appropriate decisions with reference to our segment.

So I've been several times involved in opening, creating, facilitating roundtables. I invited several members of the government. I invited lawyers. I invited bankers. I invited entrepreneurs, working together in think tank situations, many and several results has been achieved. The most important result is that, thanks to this, we have been able to let the government understand that kids is not a segment, which is driven by inputs like other buying, but is a prime -- good, is something that you buy because you need. It is more similar to the food then to the session. And thanks to this, because we have 20% of market share in kids. We have been able to convince the government to anticipate the openings of kids store and also of full format store provided that they had kids inside. And I decided immediately to open not only kids store, what it was efficient to open, but also full format.

Thanks to this, we have been able to send our logistics guy to take the goods -- the spring goods out of the store. And in spite of the lockdown to utilize this period to replenish with summer goods the store. The result has been twofold. On one side, the kids store started immediately to generate good sales -- good sales levels. The first 2 weeks, we were a little bit, maybe in line or even below the breakeven, but the third, fourth and fifth week, we had a consequent -- a consecutive growth and we generated, all in all, about EUR 25 million of increase in sales compared to the sales that we should have suffered with the lockdown.

Unfortunately, the government decided to postpone the lockdown in Italy by another 15 days. So this improvement of EUR 25 million has been conserved by the decision of keep-closure for another 15 days the other store. But in the meantime, what happened, as I said, is that we have been able to completely change the merchandising in favor of a summer merchandising.

What happened last week, when the full format store has been reopened, and I think this is very important because it demonstrate the positioning of OVS, which is totally different from the positioning of other players. And I don't want to say that it is better or worse, but it is simply different. We are a family, value for money, kids, contemporary company and our positioning is good for all inhabitants, not for the coolest or the richest or the poorer, but for real people, they need to buy every day because they need, not because they want to make a browsing, selecting, the most fashionable or high-catching goods.

The result has been much higher than we believed because we started the first day with a minus 70% traffic and plus 60% like-for-like sales. We had 70% lower number of customers, but we have a huge increase in average ticket and we doubled the conversion rate. So almost every person that was in the store decided to buy. Starting from that, the traffic improved. Yesterday, traffic was minus 20%. Conversion rate, plus 30% compared to last year, average ticket plus 20%, 25%.

So gradually, situation is going to normalize. But the full week, after the opening, we had, on average, a plus 50%, 5-0, compared to the last year. I don't think this is going to last, as I noted in my comments, I think that this is the need to replenish the wardrobe and not the pleasure to spend time buying and buying. But all in all, we see that the behaviors are very, very, very simple. People is entering the store, buying, they don't care too much about the virus. They wear the mask. They wear the gloves. There is a high level of [ sanitization ] tools in the store and

[Audio Gap]

comfortable.

We closed the fitting room from the first day. We have been the only company in Italy who consumed, this is to my knowledge, the fitting room. I preferred to lose some sales, but to let my customer understand that we are -- we take a lot of -- we pay a lot of attention on the safety of our customers. And this -- I think that on the medium term, is going to be very positive. So basically, I think that the perspective of the company, once this nightmare will be over, is that it is clear to me that our company is less impacted by the risk of fashion, less impacted by decision of buying, which are driven by inputs. And this is likely, if I'm not wrong, in line with our strategy, which is to pay more attention to sustainability, to higher quality, sometime also higher prices, provided we have higher quality.

I think we are working, I'm not saying that we are already there, but we are working hard in order to be able to attract also the trading down that I believe we will -- will happen in the market. People that were formally used to play more, maybe not even, let's say, ignoring obviously because they were preferring other premium brand. But once they realize that in OVS, you can buy it the same park, the same channel that you buy normally paying it 3x more, and the quality is the same, I think that with our visual merchandising with Massimo Piombo as an artistic adviser, with the better stores that we had, I think that we are properly placed in order to interact and to satisfy this new kind of need, more driven by sustainable decision than from purely fashion or fast-fashion decision.

I think that in 3 months of lockdown, we made a huge improvement in all the digital activities. We mentioned that some of them. The only one, just from sake of time, and then I'm open to your questions, that I want to mention is that we started, and we are the only one in the market, like many times happens. The first to launch something that's in Italy is still not present. It is in light of an instrument, a software, an application where you can buy today and you pay in 3 months with no interest and no cost, thanks to the cooperation with compass and the accelerator from a digital point of view of a software called Nusa, which is a -- [ really a ] startup.

I think that OVS is properly placed in this new era, to continue doing what we do well, which is to consolidate in the Italian market. Unfortunately, there will be other companies suffering and eventually other network of stores. And I mean, network of store because we are not looking at companies in this moment. We are looking simply to consider that if the market will offer us some opportunity to amplify our network, thanks to weak stores, which will be forced to close, we will look at them in the future.

Priorities in the short term will be cost reduction, lowering our breakeven point, reducing the impact of rents as the battle with the lenders has started. And I tell you, it's a battle because lenders has to realize that the value of the real estate is not any more than one that they support only 1 year ago. But I think that we are already realizing that some of the lenders are already understanding this. Just an example, he is not the biggest, but he's very reputed. The owner of Arese, which is the biggest, I think, European shopping mall, near Milan, which is Mr. Marco Brunelli, decided to be the first to say that rent-free for the lockdown period and only variable renter on the remaining months.

[ At the Rina, ] [indiscernible], which is another shopping mall, decided to do the same. And now we are negotiating and discussing with lenders in order to be able to bring them to this principle. No rent on -- during the lockdown and variable rent during the remaining months.

Couple of words regarding the financial structure. As you can easily calculate the missing, basically totally that aren't over for 2.5 months, means losing EUR 200-and-something million. And even if we could benefit from the Cassa Integrazione, which is the provision of the state in favor of labors because according to the rules, you need to absorb all the holidays still not made by the personnel. You have a profit and loss advantage, but in the short term, you don't have financial advantage because you have to continue paying these people. And because the state is very late in providing the money for the Cassa Integrazione, we had to pay our employees.

So lack of turnover and personnel to be paid, coupled with stop of the payment to the range generating -- generated pension in the working capital. But I want to underline the following: the tension has not generated any problem with the suppliers. And this is another important value in my opinion. We are not suffering any action of supplier against the company. Suppliers are aware that OVS is -- I crossed my finger very solid, and they don't challenge the OVS. They had no -- there was no critic situation or a manageable situation.

Everyone preferred to wait to give the company the time to start reopening stores and we are finding agreement with all about extension of payment turning order, even after the reopening to pay them down on a gradual basis and also with some discount that we are achieving because they realized that they cannot be [indiscernible] suffering in this situation, they have to suffer as well. And we are finding good agreements with many, many of our Italian and international suppliers.

Last comment on the banks. I think that the day after the -- it was clear that the situation in Italy, and after Italy also in Europe, was unmanageable. I personally started my discussions with Cassa Depositi e Prestiti making all the preliminary steps in order to ask for the support of the state as a guarantee because the law was already telling that the state was about to issue a legislation about this. So we have been the first probably to approach this, even if we were not in the worst position because the strong balance sheet and the buffer of liquidity, we still have an important buffer of liquidity. But we want -- we decided to be the first to ask for this measure, just to create the necessary safeguard in case the lockdown should have been prolonged. So as we got, we are waiting in hours the final step, which is the decree of the government because all the banks approved the extension of new -- granting of a new credit line with a warranty of such.

Interesting to notice, sorry if I'm long then I stop, even Cassa Depositi e Prestiti, CDP, which is a state-owned organize, decided, and this is not in the law. It is an independent decision. They decided because they liked that. They appreciated the company. They decided to invest and to buy a ticket -- to have a ticket in the new financing, not to buy, to have a role in the new financing. The cost of the new financing will be lower compared to the old one, and the maturity will be 4.5 years.

And I think that in hours, it's not in -- maybe in days, but probably in hours, there will be the signature on the Taranto, and OVS will be, again, I cross my finger, the first Italian company to benefit from this mechanism, which is limited to the biggest companies, which requires a very long process, a very complicated process, but all this process has been made with a clever behavior, both from OVS team and from the state and the environment and all the institutions.

So I think that OVS demonstrated -- is demonstrating that even in tough times, we are reactive, we are credible, and I think that the business model of the company evolved into digital, more and more, but still based on physical, we continue to be the one which we know and the one that with the necessary adjustment, will enable us to continue generating cash, obviously, not in this very tough year, where we gave you some indication of profitability, but in 2021, when all the working capital constrain that we suffered in 2019, we became cash because all the goods that we didn't sell in spring and our customers didn't have a look because most of the goods remained in the general warehouse will be carried forward as we move in the next financial year.

So thank you for your attention. And I'm now available for your questions.

[Operator]

[Operator Instructions] The first question is from Andrea Bonfa with Banca Akros.

[Andrea Bonfa, analyst]

Very quickly, I would like to know, Stefano, if I may, what's your expectation in terms of peak on net debt this year? And if that is going to be likely at the end of July? And if that will be within the extra, let's say, financings that you were able to negotiate with CDP. This is more or less the first question. And the second one, I'm pleased to know how you can -- you organize, let's say, your purchasing? What's your view of the next spring/summer season in the sense that you got the destock of unsold spring items. I'm wondering, are you able, without any problem, to resell them next year, which I presume, will allow you to quickly deleverage into the early part of next year? So if you can, for the time being, elaborate on these 2 points.

[Stefano Beraldo, executive]

Thank you for the question. I -- unfortunately, it's -- I'm not in the position to make a comment on the first question. It's too difficult for me to predict because according to our worst-case scenario, we were in the position to ask for the EUR 100 million incremental credit line just to overcome the peak of this year, and EUR 100 million was more than enough. What is going to happen? I don't know. Because in the first week, we are selling 50% more than last year, while I expected 50% less than last year.

So today, I'm really not in the position to have an opinion about a peak. Too early. Maybe 1 month from now, if you will speak with us, we have a better idea. But honestly, too difficult. If you asked me this question 10 days ago, I should have, maybe given you a number that was probably EUR 50 million, EUR 60 million, EUR 70 million worse than the one that I gave you today, but maybe next week, it's going to be a disaster. Maybe there is a new lockdown or in some region of Italy, there will be another -- so I prefer not to speculate on something not under control. What I can tell you is that even in case there is another disaster from a safety point of view, I would be able to continue, assuming that my vendors are not willing to pretend OVS to pay what we cannot pay. So they will be patient like they have been.

On the other side, let me tell that independently from the peak, whatever peak we have this year, because the peak will be only determined by goods that we don't sell this year, but because of the SAEs Arese, and it's not Gucci, so Gucci is much cooler, obviously. But in this period, I guess, Gucci has a worst problem. And I'm not talking about how cool or how nice is their assortment, but clearly, if you base your positioning on the last fashion stories, it's going to be very difficult to sell again at full price 1 year later. But because 90% of my assortment is more similar to Uniqlo in men, for instance. Sao Paulo, down jacket, Chinos, you know my assortment.

My assortment, I can sell, and this goes to the second question. I can sell entirely next year as new. And if you add on this, the fact that 40% of my assortment is kids. So the perspective of kids is that I can sell what I have not sold this year, with no reduction in sell-through in one year from now. So same margin, same sell-through for kids, same margin, same sell-through for men, maybe something to suffer in women because even OVS has a 20%, 30% of fashion content in women, but women impact for 25% of our sales because of kids. 20% or 25% is 4%, 5%, on which maybe we make 30%, 40% discount. So we are speaking about peanuts.

So the second question, I think, is answered by saying that all the spring goods, which we didn't sell this year, will be sellable at full price in 1 year from now. And the evidence, you somehow have also, if you look at the 2019 figure, because in the first half of 2019, we have been able to sell at a slightly lower price, this is true, goods, but the difference is that the goods which we sold in the spring of '19, had already been seen by customer 1 year before because they were goods that were acquired in excess of the need because of the unfortunate Swiss move so there were more volume of the same style. But this time, in 2021, we will sell style that in 2020, our customer had never seen. So the answer is full reverse effect of working capital as negative this year, almost entirely as positive next year.

[Andrea Bonfa, analyst]

Okay. If I may, I mean, how much of this, let's say, of this approach is linked to competition behavior? I mean I presume, but first of all, this is a unique situation, which I never -- you never experienced, nobody has ever seen. How much will you, this decision, to resell this year collection into next year from competition? I mean for what you see and what you know, Zara, H&M, all the other will do the same? Or what's your thinking behind this?

[Stefano Beraldo, executive]

I don't think Zara will do the same on women because first -- but this is what I believe, not what I know. What I know for sure is that the biggest underwear player in Italy, which is not listed, so I can tell you something, which is not creating damages to them, I think which is the Calzedonia group, they told me that they will do the same thing either. So they will not throw away their goods this year, and they will carry back, carryforward to next year. Same will be done from the second that keeps brand in Italy, namely Original Marines. These are the only 2 solid information I have from competitors. But I can tell you, my feeling is that most of brands have enact in this way, unless they are too much exposed to fashion. So you can easily understand that H&M is more a support to fashion than OVS and more to women than OVS.

So if I am the CEO of H&M, I can't promise the same thing OVS is doing. And if I'm the CEO of Zara, the same. I will carry forward my kids, but I will not carry forward 100% or 90% of my women. Maybe I carry forward 30% of my women, the more basic, the more fashion. And they have fashion, obviously, but to the extent that you have a fashion garment, it's going to be very difficult to carry forward. But I'm sure that a lot of players in the market, including Zara and H&M, will select the highest possible amount of goods to be carried forward to next year.

[Operator]

The next question is from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

My first question is on the sales process how is it changing today. You were commenting that you are not opening the fitting room. In general, so how is the sales process disrupted by the situation?

And second, is a question on the gross margin. And I'm understanding that you're trying to protect the gross margin at the full price sales, I'm trying to understand if already in the last part of this spring/summer season you see the need for higher discounts. So we will see in the second quarter, basically, some deterioration in gross margin? Or if the reaction on the top line is protecting you from this kind of situation.

And third is on the cost side. I want to double-check. So you are referring to the mitigants that have protected the P&L, but not fully protected the cash flow, but from a P&L perspective, if I understood properly your comments in the press release, most of your employees were basically under Cassa Integrazione or using the holidays. So this is not an area that is affecting your P&L, could you confirm this -- the level of mitigant?

[Stefano Beraldo, executive]

Well, I'll start from the last question, maybe. You draw kind of extreme conclusion. What I told is that we have an important mitigant in the Cassa Integrazione. What I can tell you is that we put in Cassa Integrazione all the store managers, which is 85% of our total cost, I don't know, but more or less 85% of our total personnel cost. Even if during this period, we utilized part of them in order to provide support to the reverse logistic activity. So we have been, I think, one of the most efficient company because we realized what the competition was doing.

And if I compare my store in the first days with Zara stores, for instance, Zara stores were not ready, as I was with the summer goods. But this has been the result of our relations with presenting. And we asked for many permission to enable logistic companies to visit our store and we ask our store personnel, maybe instead of 8 people per store, we used 2 or 3 people per store to provide support to reverse logistic operation. This means that I couldn't benefit 100% of the Cassa Integrazione because I decided to utilize more efficiently these people to provide the right new goods to the store in order, once opened to realize that we can do this plus-50%, which I didn't expect, but at least if I shouldn't have done this activity properly, we couldn't see plus 50%. And then 50% of the headquarters remained active in smart working. Which has been tough working because I can tell you that I worked 18 hours a day and my top team spent their life working, which has been extremely tough during the 2.5 months. So basically, there has been an important contribution in Cassa Integrazione, but you cannot calculate 100%. Maybe you can calculate 65%, 70%, probably.

Then on rent, everything has to be negotiated basically. We rose all the contracts, all the payments, but the tough job comes now. So also, this is why I don't have a full visibility on EBITDA and cash at year-end. The question regarding the sales, how tough has been the sales operation and how much has been impacted by the new majors? I can tell you very much that at the end of the story, not in a way that generated a real problem to sales because with the exclusion of the first days, when I decided to keep the fitting room closed only for 5 days. Because in the meantime, we secured -- we provided also in the few stores that were not having it, steamers that we use to hygienize the goods.

Even if I'm also working in order to introducing the store in [ hygiene ] based mechanism, which will grant us forever to all our customers that we give always independently today from a virus tomorrow from [Foreign Language], I don't know the English term for this or we'll see from the bacterias, I want to tell all my customers that every time they wear something in the fitting room, and they don't buy, I want to secure them that this garment will be hygienized with -- today with the steam, tomorrow with the hygienize. Because we had less traffic and people more inclined to buy, the restriction didn't penalize too much the behavior and the orientation to buy. Clearly, we have higher operating costs for this to manage the stores. And this is one of the arguments that we are using with lenders in order to convince them to provide us appropriate discounts in the next coming months.

The second question. So I think I answered to the first and the third. I guess second was on gross margin.

[Domenico Ghilotti, analyst]

Yes. Just a follow-up on this. So you are saying that basically, you do not expect -- so you can manage also with this new procedure -- safety procedure, a reasonable level of productivity per store. So it's not preventing...

[Stefano Beraldo, executive]

No, no, no. Even because starting from yesterday, we decided to open also the fitting room. So it was more a marketing behavior. My decision was more marketing behavior. And I tell my, because my team was eager to open the fitting room. Because in 95% of my store, I already had the steamer, but I didn't want to tell the story of the steamer without being prepared to tell also the big story that every, every single product will be hygienized. So it took a few days to get this decision. But it was more a marketing decision. Today, all the fitting rooms are open. And there are not real limitation to the customer if they want to buy.

Regarding the gross margin, the answer is different. It is not that because of the good sales we are experiencing in the first week, we will not make discounts. I decided and we decided not to enter in discounts in advance. We decided that it was stupid, if I may say, after 2.5 months of store closer, to discount goods in the expectation that people will buy simply because of a discount.

I read what happened in the U.S. In U.S., there has been a lot of information regarding behaviors of retailer that tried to discount and the fact that if people doesn't want to buy, they don't buy. And they don't buy OVS because of the discount. Maybe they buy a car because of a discount, but OVS -- if they don't want to enter in a store, they don't buy and they don't enter. But if they need the goods, they buy because they need. And because of the asset sales stuff that people made, like the supermarket. And if you notice, the supermarket, they increased their price during this period. They didn't decrease price. We decided not to do.

Obviously, I spoke with several, several players. I prefer not to tell that I spoke with H&M. So I'm not telling that I spoke to H&M. But I spoke with all the Italians. And all of us, we have the same impression. No discount and I was the one that kind of guided, if I may say, this trend. And likewise, I agreed, together with the association of small storekeepers that we will postpone the sales in Italy, starting from the end of July, not from the beginning of July. And this has been decided between co-commercial, big, small association. So we don't need to waste our product and to sell even because if you -- then I stop. But if you want to recover, thanks to markdown, what we are losing in terms of margin, you need to increase your volume by 30%.

But if there is appetite in this moment to buy, they buy because the appetite, not because of the discount. The discount you have to do when you are too late and you have too much goods, but I have not too much summer goods. I have simply too much spring goods. Spring goods, they don't want to buy in any case today. So better to carry forward to next year.

[Domenico Ghilotti, analyst]

Very clear. A follow-up on the structural changes created by COVID. So we have probably seen people trying for the first time from online purchases. I presume. Do you think that this has changed the penetration of online? And do you think this is a, say, sensible impact on your business? Or you're still convinced that it is not really the game changer?

[Stefano Beraldo, executive]

No, no. I think it's a game changer, unfortunately. I think that the learning curve of normal customers about knowing and using the e-commerce has improved. I discussed with McKinsey Boston Consulting and Bain, everyone has his own opinion. But basically, all of them are aligned and thinking that if the penetration was like 20% -- sorry, 10%, 12%, it's going to increase by 3%, 4%, 5% in 1 year. So I think that we have a likely increase in the use of e-commerce from Italian customers. And this is why the most important innovations during these 2.5 months of lockdown has been made in digital.

So we introduced WhatsApp in the store. We introduced the possibility for every Italian customer, neither confident in using e-commerce nor reluctant who have a direct relation with our store manager, we are offering -- if you click in our website now, you can find the address and the name of the store manager you can talk with. And he will be happy, she will be happy to walk you through the store with -- we gave a business WhatsApp agreement to all of them. So if you don't want to move from your home, and you don't want to use the normal e-commerce, we teach you how to use e-commerce like using our e-commerce like a catalog. And then you can make an order and you can decide to pay with the credit card or with Nusa, buy now by letter, or you can pick up in the store in 4 hours.

We introduced this service. If you live in Taranto, you place an order in Taranto because you like the stuff that you see in the stock that you see in Taranto, you can make your order and come in the store and in 4 hours, we can provide you the goods. Or if you want a home delivery, in 48 hours you receive a home delivery. So I think that digital and e-commerce will become more important. But the good news, in my opinion, is that OVS is OVS. OVS is not Coca-Cola that you can buy, physical, digital, whatever. OVS -- if you want OVS, you need to buy OVS, either digital or physical. You cannot replace OVS with, what, with Amazon. OVS is OVS. Like Benetton is Benetton or Zara is Zara. So if there will be an increase in the utilization of e-commerce, maybe not entirely, but at least in big extent, OVS customers will continue to buy OVS digital instead of physical.

[Domenico Ghilotti, analyst]

Okay. And just a clarification on the -- very last question on the buy and pay 3 months new possibility that you introduced. So is it correct, the credit risk basically is passed to your consumer credit?

[Stefano Beraldo, executive]

Yes. It's normal. Yes, exactly.

[Operator]

[Operator Instructions] The next question is from Marco Baccaglio with Kepler.

[Marco Baccaglio, analyst]

Yes. I have a question, you are writing in your press release that you are targeting a breakeven net profit level for 2020. I would like to ask what kind of revenue level this scenario that you are making is assuming.

[Stefano Beraldo, executive]

We assume to lose more than EUR 350,000 to EUR 350 million.

[Marco Baccaglio, analyst]

EUR 350 million sales compared to last year?

[Stefano Beraldo, executive]

We expect to end up with EUR 1 billion. More or less.

[Operator]

The next question is from Francesco Brilli with Intermonte.

[Francesco Brilli, analyst]

Just a quick question on this scenario. So if we assume that more people than usual will remain down in the summer period because they were forced to use their vacation because they did decide not to go on [ with it ]. Does this again, positively affect its level of sales in compared to a normal period in the summer in new stores. And then the second question is on online, which share of online you're seeing now as the new normal of yes in the coming periods. You said that it's growing double digit, it was also a function of the stores being closed. So -- which is that the new normal that you have seen from this channel?

And then the last question is on the new instruments that you introduced, I was just curious, from an accounting perspective, the sales in which periods are booked. But at the beginning -- at the payment time of the purchase. And the very last one is on the Cassa Integrazione finding I saw in the press that someone is just reducing the time that they are using this instrument. Can you please provide some color on the timing you will be using at the Cassa Integrazione?

[Stefano Beraldo, executive]

Okay. So the first question was relating what I think will be the behavior of Italians during the holiday period. I believe they will come back to restaurants, hopefully, to [indiscernible], hopefully, first of all. So we hope that part of this business will benefit from this. And also in second-ranking, we believe that there will be more Italians in the Italian town which means less sales made to tourist and more sales made to Italia.

For instance, I am in this moment in diamante. Diamante yesterday was minus 40%, while the network as a whole was plus 10% yesterday. But this is because 50% of turnover of this store was generated by tourists. And tourism is clearly the missing factor. But because 90% of the turnover of the old network of OVS is to Italians, hopefully, your assumptions is going to be correct. And also, this is why I insisted, and I got the approval that this year, the sales period will start 3 weeks later because we believe that at least we want to have the full price from the Italian market, not only OVS because otherwise, it wouldn't work in place for the full month of July.

Then the question regarding penetration of e-commerce, I think that you never know what is the new normal in a constantly changing environment. So I don't know what it is. What I know is that we need to be ready to follow. And sometimes to anticipate the evolutions of the customers and the behaviors. And clearly, as you noticed, the tribal 0, the figure that we experienced in terms of sales increase with e-commerce has been generated by the lockdown, let me make a comment. I think that during the lockdown, I had the opportunity to study to read and also to work a lot, as I said.

One very interesting information, I read reading the financial statement of Mothercare, which is the U.K. kids brand. And I needed to know as much as possible about my competitors, even if out of -- they are out of Italy because we have 400 stores out of Italy. And they are performing well -- very well after the lockdown, also in France, Spain, the crease is booming. And reading the disclosure to the financial statement of Mothercare I learned that CEO of the company, and the company is suffering hugely, announced that the e-commerce of Mothercare is strongly declining in correlation to the closure of the physical stores. And he said that in all the catchment areas where he had physical store and he has been forced to close, the store, the like-for-like of e-commerce sales dropped heavily.

Giving confirmation of a trend, there is a strong coherence and fitting and synergy between physical and digital. People will be more and more used to buy online, to select and buy -- sorry, to select online, to buy online and to pick up in stores. People doesn't like to ask for a prime delivery if they needed to buy Polo at EUR 90 or start from the kids at EUR 9. They prefer to browse. And then to go to the store. I think that the evolution will be this way. What is the new normal? I don't know, but I think that we will grow materially in e-commerce in line with the growth of the value players' e-commerce sales.

Then you asked about Nusa. The booking of sales will be made once the sale is done, which is moment 0, moment 1 when the transaction takes place. Then the customer became some vector to compass. So basically, the transaction for us is done. But we are in early days, and we are not -- I don't want you to imagine that starting from today, we -- our sales are boosted by this. It will take time. Italians are a bit lazy in adopting new solutions, are a bit skeptical about giving their credit card and dematerializing their credit card. Nevertheless, we think, being the first in Italy, we will be able to teach and to help our customers more and more confident about this instrument. But the answer I think I gave you.

And there was a fourth question that I don't remember. Cassa Integrazione. Well, my goal is to have flexibility. In this business, we need to be as more flexible as possible. I'm asking there, and I'm also obtaining from my HR team to introduce new, more flexible use of people even infra day, I hope. But we cannot ask Cassa Integrazione Infra Day. Basically, today, we have about 70% of our store staff back to the store, even if we are selling 30% more. So we cannot continue forever in this way because there is already -- there are already tensions in the stock replenishment, et cetera. And next week, I will have more people in the stores. So we will move from 65% back-to-work to 85% back-to-work. And even in the headquarter, we were 50% back to work and now we are 75% back to work, more or less, so.

[Operator]

The next question is the follow-up from Domenico Ghilotti with Equita.

[Domenico Ghilotti, analyst]

I have a question on the performance of the kids store. Probably you mentioned it, but I didn't catch that. So because, clearly, the full format just reopened, while we have a bit of more the historical numbers on the kids. So can you give us a sense of what has been the performance for the kids format?

[Stefano Beraldo, executive]

Yes, you are correct, I didn't mention that, on average, I can make a mistake of 10% probably. But on average, the 600 -- 500, 600 kids stores that we opened in Italy in the last 6 or 7 weeks now. They performed, on average, 130%, 140% more compared last year. I have to remember that last year, as I told, May was a disaster. If you can look in my declaration, May was rainy and colder. And we have lost about 20% like-for-like last year in May.

This is why I try not to speak on the monthly performance of the company because month -- one month is not enough to just -- to judge one season. We needed to evaluate a full season. But our budget for this year was about 15% more May -- compared to May last year, and the kids store reacted incredibly well. And this is, again, the demonstration of what I told. This is a primary goal. It's a real goal that you need to buy because you have a newborn and you need to dress. Anyway, the answer is about 130%, 140% higher compared to last year.

[Domenico Ghilotti, analyst]

So meaning basically -- so if I understand probably meaning that -- so you had the possibility, let's say, to recover part of the sales that had been just postponed due to the closure. So people rush in some way to buy and to renew the growth of the kids?

[Stefano Beraldo, executive]

Yes. But you are speaking about 15% of the total turnover -- 20% of the total company -- the total turnover of the company, unfortunately...

[Domenico Ghilotti, analyst]

Yes. Not just to understand the reaction of the consumer.

[Stefano Beraldo, executive]

Yes, yes. No, was like that. I think that we spent 1 hour. Unless there are other questions, we can close our discussion, hopefully.

[Operator]

There is another question from Luca Bacoccoli with Banca IMI.

[Luca Bacoccoli, analyst]

Great. Just one question on rent negotiation, just to better understand how the liquidity could evolve throughout the very complicated situation because that of a partner involved. But what could be a reasonable target on rent renegotiation for you? So 50% which are going to accept lower rents, 30% or something in between?

[Stefano Beraldo, executive]

I can tell you what I would be happy. I would be happy with rent-free for 2 months, and 50% rent reduction for the remaining months. This would make me happy, but the difference in life between what makes me happy and what happens is sometimes very small when I speak about my family or, is sometimes very high. But I tell you, the battle will be this one. The result of the battle, I don't know.

[Operator]

Mr. Beraldo, there are no more questions registered at this time.

[Stefano Beraldo, executive]

Okay. Thank you to all of you for your patience and your time. Thank you. Bye-bye.

[Operator]

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