OVS SpA

MIL:OVS

Earnings Call Transcript 2024-Q4

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS Full Year 2023 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]

Hello, good afternoon. Thank you. Basically, this is -- we forget about the result of the full year '23, which has been a strange year, characterized by unusually negative weather conditions, which impacted negative both first half and also second half with a very rainy beginning of summer with 1.5 months April and May, which have seen a sales challenged by rain and cold weather -- and where the recovery has been able to take place only during the month of July and August when characterized by lower margin because of markdown of the typically seasonal markdown period.

And we started the second half with a similar adverse challenge by the weather because summer last year has been very long until mid-October temperature in Italy were by far above the seasonality average -- the seasonal average temperature. This again caused loss of sales during a very high-margin period because in the month of September and October, we did not have sales typically. And the recovery has been made during the month where the quality of margin, let me say, is lower because the sales improvement took place in January and February.

So basically, in spite of this adverse weather condition, which, in my opinion, has been the main reason for a negative market performance. Market has been down by 2.5%. We have been able, again, I think for the -- I don't remember which consequent year to outperform the market, with this plus 1.5% that can seem a small amount. But given what we have been forced to lose during the month, which I mentioned having been impacted by the negative weather should have been much higher in presence of normal weather condition. Having said that, about sales, all the remaining KPIs has been positive, [ terrific ] improvement. EBITDA improved not that much, but only because of the reason which I mentioned.

So I think that we can be satisfied about what happened to the EBITDA, given what I explained before. Good cash flow generated during the year in spite of being in the peak of our extraordinary investment generated by digital improvements, logistics improvements, rollout of -- beginning of the rollout of the smart cash counters, also thanks to a positive contribution to a good management of working capital. We have already told in our press release that we are very happy about the current trading, which, again, is a bit strange because we performed very well in the beginning of the year in spite of the late deliveries generated by the [ Suez ] difficulties.

And the sales has been very good because we sold more than expected, our former season product during the month of February. And also, we are benefiting from what has been until 2 days ago, a very warm beginning of April. All in all, nevertheless, the current trading is very encouraging also with reference to the good momentum that our brand is benefiting from. And in principle should be a good indication also for the positive mood that we have with reference to the rest of the year.

As usual, I hand over to Francesco Leoncini to give you more color and more detail on our results. Thank you.

[Francesco Leoncini, executive]

Thank you, Stefano. I will start from Page #5 to recap the evolution of the results of OVS Group along the year. As also commented in previous calls, Q1 OVS has started very well with a robust Q1 with sales growing by 12%. And this is particularly important when looking to the current performance that amounts on already double-digit growth last year. Q2 and Q3 were strongly penalized by the adverse weather. And now we can comment Q4 that sees a positive sales increase by 1.7%, about EUR 7 million that translate into about EUR 5 million EBITDA increase.

Also thanks to the better profitability that for winter '23 has versus for winter '22, given the -- and, let me say, of the raw material price increase. So overall, and then move to Page #6. We have a growth of 1.5% in terms of sales and a couple of million euro EBITDA increase from EUR 180 million to EUR 182 million in the year. The net result is then slightly penalized by an increase in D&A and financial charges. But overall, in a picture where the business is growing.

As you can see then on Page #7, with the split by brand and by channel. By brand, we can see that the performance was quite homogeneous between OVS and [ UPIM ], both increasing by 1.3%, 1.4% with stable results in terms of EBITDA margin. While looking by channel, we see the growth of about 3% in the DOS channel and a slight decline in the franchising sale.

This decline is mostly due to delays in the deliveries of the month of January and so also on the shipment from our side to our partners due to the Suez Crisis -- to the benefit of 2024, when we expect that during the year, we will have a sort of normalization of this event.

On Page #8, we complement the very positive trend of working capital that overall declined by 10% and generates about EUR 15 million of cash. On one side, we have this reduction in trade receivables, partially due to the shipments, but also to the fact that we perfectly managed to absorb some delays, some -- that we granted some payment and extensions that we granted to our partners at the end of October. And this is, I think, a very key element in the relationship that we have because we are able to support our partners when needed as they had to -- after a tough September, October due to the weather, but also being able to bring things to normality as soon as possible.

The inventory is starting to reduce versus last year. We are not yet at full potential because due to the bad weather, we have some left over. But as commented many times, this is just a time effect because the ability to sell even previous season products is very strong in OVS.

And so we expect also a very good result in the 2024 year on this point. Trade payables, apart from the effect of stock are increasing together with the business. Page #9, on investments. 2023 and 2024 represent the peak of the effort of the company on the supply chain and digitalization side. We have almost completed the automation of our Pontenure distribution center. We are going to start in 2024 at the investment in our [ Bari, Puglia ] [ point ] dedicated to refurbishment and circular supply chain.

While on the digital side, we are converting all our cash systems in the stores with up-to-date omnichannel tools that will increase our ability to dialogue with the customers. Another area of investments also in terms of increasing versus last year are the refurbishment, always with very good results for the [ one unit ] that are in Milan, I invite you to see the new store of Via Dante that was renewed a couple of weeks ago. And that shows the potential of the new format.

Page #10, the cash flow basically collects all the information in a confirmation of the EUR 64 million cash generated last year. And so for a third year in a row, OVS is delivering good results in terms of cash generation. 2021, I remember, was above EUR 120 million, also due to the effect after the COVID.

But all in all, we have this capacity to deliver robust results despite the fact that we are still in a suboptimal conditions due to the negative weather that we suffered during the year.

Page #11, put the light on what we -- how we did use this cash during the year. And as last year, we used it mostly to deliver these values to the shareholders either in -- under the way of dividends. And as you know, we also delivered -- distributed an extraordinary dividend during the month of February. And we have also the proposal looking forward to 2024 to the shareholder meeting end of May to increase dividend from $0.06 to $0.07 per share and also investing in buyback.

So overall -- and I move to Page 12, the change in the net financial position is positive but not so big also due to the fact that we have already delivered to the shareholder this amount. And by the way, the level of the end of the year is already below the EUR 160 million amount that we raised with the bond -- with the sustainability-linked bond last -- in 2021.

The leverage ratio is further declining to 0.8% in a very low value. I move to Page #14 to comment -- to start the comment a little bit on the current trading. And then of course, I expect that on that topic, there will be some questions. As said, this 75 days of 2024 can be split on one side, the first couple of months, during which we suffered some delays for the incoming Spring/Summer '24 goods.

But we -- the company was more than able to offset the missing goods with prolonging the sales and also using previous year products. So we had already growth even in the difficult of February, March. And then in these 15 days of April, we had even a double-digit growth due to the positive weather this time was -- with a positive effect.

So with a very good start of the year -- over the year. The -- we expect -- so overall, in 2023 on one side -- 2024, sorry, on one side, this positive effect and also the momentum that was mentioned by Stefano in the beginning to sustain positive growth along the full year. On the other side, as mentioned, we are close to finalize an agreement on the new national contract for labor that will bring some increase.

But overall, this should be less than the improved sales and gross margin. We are going ahead on the Goldenpoint project that we started -- communicated with the final agreement on the investment on the second of April. And on that, I think there will be more to come in the following calls. I'll bring back the words to Stefano or to questions.

[Stefano Beraldo, executive]

Thank you, Francesco. I think now the question time is open.

[Operator]

[Operator Instructions]

The first question is from Francesco Brilli of Intermonte.

[Francesco Brilli, analyst]

[Foreign Language]

[Stefano Beraldo, executive]

Okay. I'm not sure if I have to answer in Italian because I don't know if we have only Italians to attend into this conference -- In case there are...

[Federico Belluati, analyst]

English.

[Stefano Beraldo, executive]

No, no, no. I try for the benefit of time. I think I suggest that I will repeat very shortly your question with my answer, everyone would understand in any case. And eventually, you will correct me, eventually. Basically, you asked some comment about the impact of cost and working capital and on cost, you ask basically what is going to happen to cost of labor, given that you have seen a modest increase in year 2023?

And we announced that we expect a major cost increase due to the ongoing negotiations, which retail companies are having -- are interpreting with their union. We expect, as we said, a cost increase. And in terms of percentage, we believe that we are going to have like a 0.5%, 0.6%, 0.7% increase of incidents of cost of labor or sales. This obviously will depend also from sales because if sales will remain sustained. In terms of trend, this percentage might decrease.

So there is also the sales variable that will impact. What is interesting to note is that, in any case, we expect a cost of labor increase, not higher than maybe 5% to 7% compared to the year before. On rent, the second question was focusing on rent. You noticed that we had some rent increase in terms of incidence of rent on the sales. This is right. But this is mostly because sales has been lower than what we expected because of the reason that we explained in the beginning of the call related to the lack of sales during the difficult months impacted by weather, adverse weather condition.

Basically, what is happening and what we can expect that should happen in year '24 is that we will increase our rent in line with [ ISTAT ]. So there is a kind of a 3%, 3.5% rent increase depending from [ ISTAT ], while they call it inventory, if I may say, the stock of savings that we have been able to achieve will be maintained. So basically, year after year, we continue to renegotiate the annual effect of the rent savings in order to maintain the impact of rent stable with the exception of [ ISTAT ] , obviously, which expect to be in the range of 3.5%.

Last question was on working capital. And on working capital, as you noticed we had this positive contribution to the cash flow generation due to EUR 50 million, EUR 60 million of working capital improvement. We expect to be able to have a slight further improvement for year '24 due to the fact that still we believe we have some tale of inefficiency in our inventory, much smaller compared to the year before, but we believe that another EUR 5 million, 10 million of inventory reduction compared to -- I mean, in terms of same perimeter we should expect. So a slight contribution on working capital is expected also in year 2024.

[Operator]

The next question is from Daniele Alibrandi of Stifel.

[Daniele Alibrandi, analyst]

I have 3 questions today for you. First one on CapEx. I appreciate your comments regarding the development of CapEx over the next few years should peak in '23, '24. I was wondering where do you see stabilizing in 2025?

And if you can give us some understanding on how these 2 special projects that will be completed this year can help you from an operative performance going forward? Should we expect a structural lower working capital intensity? This was my take, but just to check this with you.

Second question on Goldenpoint, can you give us an understanding of the key financial of this company in terms of special profitability and how and to which level you could improve this? And the third one, where do you see profitability in terms of EBITDA evolving in 2024?

[Stefano Beraldo, executive]

Okay. CapEx. Year '24 will be the last year, characterized by special projects. we are finalizing the -- as Francesco mentioned, the distribution, the diffusion of our new smart cash counters, which will improve our CRM abilities, our multichannel competencies and our capacity to entertain a proper dialogue with every single customer based on his/her habits as a customer behavior.

And the other important project that was regarding the improvement of the logistic system in order to provide more flexibility and efficiency to the system is basically over. And the last project regards the establishment in Puglia, as Francesco mentioned, of segment of our digital innovation activities and also of the refurbishing and activities related to the possibility to improve our capacity to properly carry over our unsold product to the next -- to the following year, basically increasing the life -- the life span of our merchandising.

All these projects will be finished during the year '24. And consequently, we do not expect to enter in '25 and following year in the same level of CapEx. We believe that we can have like a EUR 20 million lower CapEx if you want to normalize the expected CapEx for year '25 and following years.

And in terms of the second part of your question, when you ask what is happening in terms of improvements of our operation, thanks to this investment. The only thing I can say is that as far as [ concerned ], the improvement on the planning and distribution of product, shortening the delivery times and improving the quality of our distribution system, putting the right product in the right store in the right moment, we are already benefiting from the initial results of those projects.

The second question was related to Goldenpoint. The company has [ mean ] profitability today in terms of EBITDA, but most of these is because the company decided to open a small number of nonperforming store with a second brand called [indiscernible] , which we obtained -- we decided together with the ownership that will be closed.

And the closure will be charged to the former ownership. So we will not have any cost -- we did not suffer any cost because of those closures. So once this nonperforming stores will be closed, we speak about 10, 12 stores, not more. We remain with 380 beautiful stores in great location across Italy, good location in shopping mall or good location downtown with already a very good sales [ density ] if we compare with our kids store, for instance, the sales density of the Goldenpoint store is 40% higher.

The intake margin of Goldenpoint is already before our synergies much higher than the kids intake. And this is a common practice. So I mean that all the underwear chains are operating business with higher intake and higher gross margin compared to kids or general apparel brand.

Why do I compare with kids? Because as some of you might have noticed, we opened hundreds of kids store in our history. We have now more than 600, 700 kids stores. And when we look at the metrics of Goldenpoint, we speak about small stores, similarly to the kids store, stores that might be operated also in a very efficient way by franchisee partner like we do with our kids store. Our plan basically is based on 3 main pillars.

One is we are happy with noticing that the quality of the brand, the quality of the locations and the quality of the merchandising in term of beachwear are fully satisfactory. What we know is that the company is missing in terms of merchandising in all the other categories where we can provide them value-added like socks, like nightwear, like lingerie and like knitwear.

These are the areas which accounts for about 60% of the sales of this company where we are already aware that we can bring a stronger value-added, thanks to our capabilities. This is the first pillar. And thanks to this, we expect to increase sales like-for-like almost about 20%.

Second pillar will be cost synergies. We have already double checked the cost of the goods that are sold by Goldenpoint compared to our cost of goods, and we have almost a 10% advantage in the cost that we will transfer to the benefit of this chain.

Third pillar is that we will open many, many new stores. And most of those stores will be opened by the same entrepreneur, which are already happily partner of OVS with OVS kids. So we are already realizing that all across Italy, there are more than 200 stores that can be opened in the next 3 to 4 years.

We are very confident also based on present negotiation and discussions with our partner that dozens of those stores will be open also in year 2025. So next year, we will start already opening new store. And maybe even in the second part of this year, we will open some new stores. So 3 pillars for our strategy, which basically drove us to the conclusion that EBITDA that we can expect from this company will move sharply from where it is today to more than EUR 20 million in not more than a 3-year time without material CapEx because most of the CapEx will be held by a franchisee partner.

So a very interesting story. It's worth mentioning that OVS is already #2 or #3 operator in market share in underwear. So underwear is not something which is new for us. In beachwear, I think we are #2. In nightwear, we are #2 in socks, we are, I think, #1 or 2.

So basically, we are already a material player in this battleground, and we were missing a stand-alone brand. So I'm convinced that with this brand and how or [ know-how ] we have another -- we add another strong leg to our table.

Last question was a more tricky question. You want to know where we end up with our EBITDA in year 2024? We are mid-April. We are in the third month of the year. So I think it's very early to make an assumption regarding EBITDA for the full year because unfortunately, we don't have a portfolio of orders. Our boss are the clients, and they decide what to do based on the success of our collection.

And unfortunately and sometimes fortunately, our boss is also the weather. If we had to consider statistics, I expect that this year, we should have a normalization of weather. So I expect a good contribution for this external condition. I'm sure that our momentum is great because we are attracting new customers, thanks to the many, many new things that we are making in our assortment, in our stores that we are improving in terms of image, in terms of [indiscernible] , in terms of collections.

We are doing super well with Piombo, but we are doing super well also with B-Angel, which is the brand that we launched many, many years ago with Elio Fiorucci, which has been revitalized, redesigned and now managed from a very good internal managers -- manager. So we are very confident that we will continue attracting younger customers like we are doing today. All those things should generate a positive impact on sales.

Then we have some headwind as [ Suez ] with the increase of the rent for the shipments and with the delay in deliveries, we have some headwind relating the labor cost increase. As we mentioned, we have some tailwind because we have the full year with a lower cost, thanks to the normalization of the post-COVID stock cost increase, while year 2023 has been characterized by only the second half with lower cost.

So in 2024, we have a full year with lower cost. What will be the combination of all these aspects, it will be -- in principle, might be positive. So we expect that it should be positive. Obviously, there is a variable of sales, which is only partially depending from us, but we are relatively optimistic.

[Operator]

the next question is from Andrea Bonfa, Banca Akros.

[Andrea Bonfa, analyst]

My question has been almost all answers, I got a final -- a couple of final detail if you allow me this is special. One is, let's assume that the weather pattern is normalized, would you say that you can maintain the 5% growth that you are experiencing in the first part of the year?

This is my first question. The second one, is there any update on how is Stefanel performing, which is now not mentioned anymore. So just these 2 points.

[Stefano Beraldo, executive]

Okay. Well, on the first question, as we said, the answer is yes, it might be possible. We have some new openings this year as well. So some 1.5% of sales might be generated simply by the new openings another 2%, 3% of sales might be generated by like for like.

So if weather would assist us and the Suez issue will not deteriorate, which I don't believe because we are already planning in advance in order to avoid the Suez crisis. That will impact on cost, but not anymore on delivery time in the second half of the year. We're achieving the 4%, 5% increase in sales, you asked at 5%, that is technically possible.

Then the second part of the question was on the Stefanel. Well, Stefanel, we don't mention because it is still immaterial in our global results. The good news to me and obviously, even in this case, I need from you guys a good luck, is that finally, I am convinced that we have found the solution, which means we have found the right quality of the assortment.

I am very optimistic regarding the product development, which I have seen during winter regarding the next autumn winter collection. I'm very positive. What I've seen it makes me optimist. And I think that the second half, we will see Stefanel able to perform much better than how it's performing today. Today, basically, the performance is stable while our assumption was to see a sales increase, but the quality of our collection has not been in line with our requirements.

And we have been forced to undertake organizational decisions with a change of the most important player in this game, which is [ the style and product director ]. So we changed that. We promoted an internal person, which is super good. I'm very optimistic about -- I'm very positive about it.

[Operator]

The next question is from Domenico Ghilotti of Equita.

[Domenico Ghilotti, analyst]

A few questions. The first is just -- just to understand how much in your view you have lost in 2023 in terms of sales compared to a normal year just to have some kind of color on that. Then more broad question is related to your market share. So we have seen that you gain another 20 bps.

Can you comment in general on the market dynamics, who is gaining market share, who is losing market share if the online players, pure online players are recovering speed or not? And in particular, looking at your categories, how are you reacting to -- in the kids segment where you probably lost a little bit of ground compared to the past.

[Stefano Beraldo, executive]

Okay. The first question is simple. We estimate that we have lost between EUR 30 million and EUR 40 million. In terms of our market dynamics, we are growing more than other or similarly to others. We are going similarly to Inditex similarly to the Primark.

And we don't see any other company growing like us, probably a small company called Terranova, which is growing well. Then we continue to see negative performance on the [indiscernible] side, on the H&M side, on other player side. Among the small players, which are still growing, we have this Pepco group from Poland, even if the part of their growth is slowing down heavily, and they are starting closing some stores in the north of Italy.

They are still opening in the South of Italy. We don't see a positive figure from the e-commerce player with the exception of [indiscernible], which is starting comparing in the [indiscernible] screen of [indiscernible]. The market share is still very low, but they are growing. We don't know how much because we don't have the figure of [indiscernible] 1 year ago.

In terms of our performance versus the market in kids, we are indeed recovering market share. So this year, we increased our market share in kids also because we decided to partially remodulate our price strategy that last year generated price increase -- a material price increase. This year, we decreased slightly some pricing in the entry level and the result has been a recovery versus the market.

If I'm not wrong, the market increase this year lost 3% -- 5% Francesco told me, 5%. And we are basically minus 1 point something. So we recovered the market share. And we don't see basically new trends in the market. I forgot to mention also [ Mango ], which is doing well. But basically, these are the players which are doing well. And all these brands are strong in women.

And we are very happy because we are improving in women more than in men and more than in kids. So it means that we are partially we are continuing to partially replace the space dedicated to kids in favor of the space dedicated to women. And now the total turnover of women became similar to the turnover of kids, and we expect that in the next couple of years, there will be a switch between the 2 categories with women continuing to be the one that is supposed to grow the market.

[Domenico Ghilotti, analyst]

Okay. And maybe just a follow-up. So if you can give us also some updates on the other special projects that you launched. You were mentioning beauty accessories, the sports or the outwear and the GAP opportunities?

[Stefano Beraldo, executive]

We are very happy with I would say with all, there are different degrees of execution in the project. We are -- we have almost finalized our change, our improvement in the model of beauty care -- beauty segment.

With the introduction of new brand, with the introduction of [indiscernible] brand, with the introduction of a house brand. In this category, we have been able to totally revitalized one segment, which is attracting the youngest customer girl, mostly, obviously, with the makeup also to the benefit of B-Angel, which is the natural apparel segment dedicated to this category of customers.

In the sport, which we introduced basically during last winter with the launch of Altavia with Deborah Compagnoni, we are very happy. We achieved our target. We are positive already in the first season, which was not in our budget. Honestly, we supposed we had lost some hundreds of thousands of euro. But at the end of the season, we can say that the [indiscernible] has been higher than expected, and we are cash positive on it since the first season.

Now we are in the -- in this moment, we are on air with a campaign regarding tennis, padel, biking and hiking. So the result of this will be seen in the next coming months. On accessories, we are still working on what I believe we became visible in this -- starting from the second half of year '24.

And with GAP, we are not excited I'd be in New York in a couple of weeks to discuss with the CEO, an improvement in margin and commercial condition or I will review my priorities. We are not losing any money with GAP, but we are not making money. So basically, this is not a place where I want to stay forever. So basically, either they will change some commercial condition, which will enable us to be more aggressive there or we will not invest too much effort in this.

[Operator]

The next question is from Federico Belluati of Kepler.

[Federico Belluati, analyst]

My question is on [ current trading ]. Basically, you [indiscernible] , the one-off April, which has high temperatures and the one of some delays in the whole sale, which went from Q4 2023 to Q1 2024 basically. So can you please give us more color of the size of these 2 effects, please? That's it.

[Stefano Beraldo, executive]

Well, the negative impact basically is due to the fact that we are missing EUR 30 million, 40 million of our goods in our shelf that we expected to have in the store now. So the fact that we are achieving positive like-for-like in spite of what can be like 6%, 7% of merchandising that we miss in terms of total intake means that there is a good momentum, and people are visiting OVS.

And if they don't find what we expected to be able to offer to them, they are happy buying something else. The second aspect regarding the weather is that the beginning of April until a couple of days ago, has been characterized by unusually hot temperature. This [indiscernible], but to tell you in a different way, we have been positive every week of the period, either because our customers appreciated our sales during the month of February, either because our customers appreciate our collection, spring collection in March or either because our customers are buying because they need lightweight garment because it was very hot in the beginning of April, but turn in each of the way, it means that the company -- the brand is attracting customers and we are working well. Difficult for me to elaborate more.

[Operator]

The next question is a follow-up from Francesco Brilli of Intermonte.

[Francesco Brilli, analyst]

Now in English and apologies for before, I was just lost in thoughts. And a quick follow-up. I was just curious if you have some initial evidence or highlight that you want to share with us on the openings made abroad for Piombo stores in U.S. and Europe?

[Stefano Beraldo, executive]

What I can tell you -- I'm happy that you made the question because this is something which to me is very important from a strategic point of view. I don't remember if I told you guys that we decided to open 3 stores to be flagship in 3 countries where the target was not to open stores, but to be visible by the department stores because we believe that in those 3 customers, opening stand-alone store in those 3 markets, sorry, opening stand-alone Piombo store should be too expensive, but it was indispensable in order to become interesting to the eyes of the buyer of the department store in the same 3 countries.

What happened is that in France, where we opened one store in Rue de Téhéran, we have been able to enter in [indiscernible]. Now we are in [indiscernible] Paris and in [indiscernible], [indiscernible] , with [indiscernible]. And the sales are twice as big than the budget. So we are super happy.

We are about to enter, I hope, and I cross finger in El Corte Ingles in Spain, where we opened one store in [indiscernible] with Piombo again. And I have a couple of meetings with department store in New York in a few weeks from now and crossing finger, we are able to enter in one of them, but this is still too early. So basically, opening stores as a major as instrumented to be observed, to became interesting to the eyes of the customer store manager seems to be positive.

[Operator]

The next question is from Luca Bacoccoli of Intesa Sanpaolo.

[Luca Bacoccoli, analyst]

Just to follow up from my side. The first one regards the impact of the Red Sea disruption on logistics. So I was wondering if you can quantify the impact expected on 2024 in terms of higher cost and/or lower sales. And the other one regards the strong start to the year.

You mentioned that you were -- you managed to grow the top line in selling the autumn winter collection. And I was wondering if those sales were done through a heavy discount and if we should expect some margin contraction at least on the first part of the first quarter this year.

[Stefano Beraldo, executive]

Okay. On short, what I can say is that we have 2 different effects. One is simply purely going directly to the cost because we have a cost increase. We estimate that we are in the range of about EUR 5 million in terms of cost increase because of air freight, because of increase of the weight transport, et cetera.

In terms of delay, we are suffering in this month about a EUR 40 million delay of goods. Fortunately, a crossing finger, as of now, this delay is not impacting our sales materially. So needless to say that with these items in the shelf, our sales might be higher. But again, touch wood this time, this delay until now done or seem to impact -- to effect too much our sales.

In terms of gross margin, I have to say that we have a better intake, first of all. And so we start from a better point, thanks to what I said before. Then obviously, as you correctly noticed, because we increased during the month of February and the beginning of March, as we said, the sales of former season goes, we had to incur in normal discount on a slightly higher number of items.

So the combined effect is higher intake, a bit higher discount. And I tell you, we don't expect to have a negative margin effect in the gross margin of first Q. Maybe it will end up stable compared to last year. And on the full year, we are positive. We believe that we had a slight gross margin increase.

[Operator]

The next question is flat from Domenico Ghilotti of Equita.

[Domenico Ghilotti, analyst]

Follow-up, just a clarification when you said EUR 5 million additional cost in [ Suez ] ,you mean year-to-date, you mean your projection for the full year. So what is the time line for this indication. And the other question is on Piombo.

So can you share with us where we stand today in terms of the contribution and mix between the different categories or women, men and Kids and Piombo.

[Stefano Beraldo, executive]

Okay. The effect of the [ Suez ] EUR 5 million will be basically 60%, 70% to the charge of the 2024 profit and loss and the rest will be incorporated in the year-end goods, so will be to -- also to the charge of 2025 year. On Piombo, you are curious to know about the breakdown between men and women. Let me say that we have now total amount, I'm looking at the figure, 100 -- what is the amount there?

[Francesco Leoncini, executive]

EUR 100 million.

[Stefano Beraldo, executive]

EUR 100 million, EUR 100 million, yes. And it impacts about 12% of the total women's sales. About 20% of the total men sales and about 1.5% on the kids sales.

[Domenico Ghilotti, analyst]

And the trend has been very supportive on the women's.

[Stefano Beraldo, executive]

The trend is good. The term is positive. In this moment, like-for-like, we are positive, largely positive on women and positive on men.

[Domenico Ghilotti, analyst]

But I mean, in terms of penetration, so you see probably room for women to reach the contribution of men? Or is the brand that you see structurally?

[Stefano Beraldo, executive]

Maybe not that high, but the room to increase the penetration of Piombo, either men and women is still material. So every time we -- for instance, in this moment, if you visit our store, you will see a new project called Piombo Contemporary.

You can call a sort of quiet luxury approach in spite to mild and softer colors and fitting more appropriate for men and women, which are looking for a more quiet and less colorful approach sort of inspiration to Cucinelli, VENIA, this kind of brand.

You will find in the store now. And I can tell you that this project is performing extremely well. You have a picture in Page 8, you have a picture of what I mean with this reference. And in the store, you will find under the Piombo Contemporary label. We also have another project. You can see also on the web, for instance, which is Piombo -- we call it Piombo -- it's like a minimal style. In this moment, I forgot it...

[Francesco Leoncini, executive]

Piombo Selection.

[Stefano Beraldo, executive]

Selection, Piombo selection. We call it Piombo selection. So from this example, you see that there is still a lot of room to improve this brand, which we own. And we use this brand to justify better fabrics, better finishing and also higher prices. And hopefully, we will continue in this trend.

[Operator]

[Operator Instructions]

[Stefano Beraldo, executive]

Okay. So I think the conference is all. We spent together 1 hour. So thank you for your question, and I hope to talk to you soon during the next quarter results presentation. Thank you, and good afternoon to everybody.

[Operator]

Ladies and gentleman, thank you for joining the conference, It's now over. You may disconnect your telephones.