Earnings before interests and taxes fell to a loss of 35.5 million euros compared to an operating profit of 102.6 million euros in the same period last year. This includes extraordinary costs related to the COVID-19 pandemic of about 40 million euros, comprising of extraordinary inventory write-downs of about 30 million euros and donations to the city of Milan of about 10 million euros.
In the period ended June 30, consolidated revenues were down 29 percent to 403.3 million euros, compared with 570.2 million euros in the first half of 2019.
Moncler underscored that the second quarter suffered the temporary closure of more than 50 percent of its stores for about two months, along with a significant reduction in traffic in the opened stores, with a revenue decrease equal to 51 percent.
That said, the company noted double-digit growth in Mainland China and in the online business in the second quarter.
Remo Ruffini, chairman and chief executive officer, said that “2020 will remain deeply impressed on our collective memories. We have lived through difficult months which have led us to reconsider our priorities, projects, and expectations. We had to define what was essential and what could have been left for tomorrow. We learned to deal with uncertainty and the inability to predict the future. But we have also reflected and worked together to redefine and even add further brightness to our long-term vision. Moncler has always been a brand in constant evolution, this is our nature. Now, however, I believe that the changes required by the current situation should be radical and swift. Therefore, I feel that the internalization of our online business as well as the creation of a new structure to support an increasingly growing digital culture is a strategic and necessary decision.”
Earlier that day, Moncler revealed it was bringing its e-commerce in-house, at the end of the contract with the Yoox Net-a-porter Group after nine years. Ruffini said that he was aiming at doubling the share of its online business in three years.
“Today, for the first time since the beginning of the beautiful adventure with Moncler, we are announcing a negative result in the first half,” continued Ruffini. “This is a direct consequence of the health emergency that we have been experiencing and that, unfortunately, persists in many other countries. It is difficult to know how the second half of the year will evolve. I believe, however, that what we are facing will continue to have a significant impact for several months on, at least in some parts of the world. But this does not change my vision. As I have said several times before, we should never make compromises. I asked my people to make decisions with rigor; and now, more than ever, is the time to do so. And I know that Moncler will be even stronger.”
During a call with analysts, Ruffini acknowledged it was “not easy” for him to comment on the negative figures, but “there are things that are not planned in life and business,” highlighting the importance of being “agile and flexible, pushing the limits,” while evolving the digital channel, “a crucial pillar” for the company. “We need to quickly accelerate. It’s now or never. This must be a revolution in our digital culture, not an evolution.” He concluded on a positive note, saying that “the desire for beauty and uniqueness will never change.”
Sales in Italy were down 39 percent to 42 million euros, hurt by the lockdown and the lack of tourists, in particular in the second quarter.
The company opened a new boutique in Capri in July.
In the Europe, Middle East and Africa region, revenues decreased 23 percent to 130 million euros. In particular, in the second quarter, France underperformed compared with the regional average, while Germany and Scandinavia outperformed, benefiting from less stringent measures. Paris, like Milan, was dented by the lack of tourists, said chief marketing and operating officer Roberto Eggs during the call.
In Asia and the Rest of the World, revenues dropped by 27 percent to 181.6 million euros. Korea outperformed the rest of the region, mitigating the negative performance of Japan, Hong Kong and Macau, the areas most affected by containment measures against the virus. “Mainland China showed a strong pace of recovery in the second quarter, recording double-digit growth rates, and June was very good,” said Eggs. Korea, “which never really closed during the pandemic,” also performed well, he added. “Unless there is a second wave, business in Asia is solid,” he added.
The company in the period entered new markets with the opening of a store in Kiev, for example. Eggs said 10 openings are planned for the rest of the year, including a banner in Barcelona in December and one in Paris on the Champs Elysées.
The Americas marked a decline of 40 percent to 50 million euros with a similar performance in both channels. In particular, in the second quarter, the results in the U.S. were heavily impacted by the pandemic. The performance in June was “encouraging,” said Eggs, with a faster recovery than in Europe.
“We don’t expect a recovery of travel in 2020, but rather a gradual improvement in early 2021, and believe there will be more opportunities with local travelers,” said Eggs.
In the first half of 2020, the retail distribution channel was down 31 percent to 300.5 million euros, compared with 437.1 million euros in the same period of 2019, incorporating the effects of the closure of more than half of the directly operated stores network for about two months in the second quarter. E-commerce continued to register positive double-digit growth rates.
Like-for-like sales were down 38 percent.
The wholesale channel recorded revenues of 102.8 million euros, compared with 133.2 million euros in the first half of 2019, a decrease of 23 percent , including the effects of containment measures to manage the risk of unsold stock. E-tailers continued to show double-digit growth.
As of June 30, Moncler’s mono-brand store distribution network comprised 213 directly operated stores, an increase of four units compared to Dec. 31 and 63 wholesale shop-in-shops. As of June 30, nine directly operated stores were temporarily closed.
Chief corporate and supply officer Luciano Santel said that while the company succeeded in cutting production of the fall collection, 95 percent of the spring 2020 collection had been produced by the time COVID-19 hit, so part of this will be carried over into spring 2021. He added that he did not see additional writedowns in the second half of the year.
The company has renegotiated all of the rents and some of the leases will have an impact on 2021.
General and administrative expenses totaled 79.8 million euros, equivalent to 19.8 percent of revenues, compared to 84.8 million euros last year, as the company contained costs.
Marketing expenses totaled 44.3 million euros, representing 11 percent of revenues, showing an increase compared with the first half of 2019, when they accounted for 7.5 percent. This change reflects the planned investments in the first months of the year in particular for the launch of Moncler Genius.
As of June 30, the net financial position was positive and equal to 595.1 million euros, compared to 395.7 million euros at the end of June last year.
Capital expenditure totaled 36.7 million euros compared with 41 million euros last year. This includes investments for the development of the distribution network (20.4 million euros) and for general infrastructure (16.3 million euros). The latter mainly relates to information technology and to the development and automation of the logistics center.
Santel said the company channeled 15 million euros into the new online platform.
At the end of March, Moncler acquired a 39 percent stake in the Korean subsidiary Moncler Shinsegae Inc. from its Korean partner (Shinsegae International Inc.) for 15.7 million euros. As a result of this acquisition, Moncler now controls 90 percent of Moncler Shinsegae Inc.
As reported, in June, Moncler revealed it had signed a worldwide exclusive license agreement with Interparfums SA expiring on Dec. 31 2026, with a potential five-year extension and the launch of the first fragrance line expected within the first quarter of 2022. In July, Moncler renewed its licensing agreement with Marcolin Group, first inked in 2015, through Dec. 31, 2025.
Earlier this month, Moncler signed a financing credit line with Intesa Sanpaolo S.p.A. for a maximum amount of 400 million euros, with a rewarding mechanism linked to the achievement of two sustainable targets related to the carbon neutrality and to the use of renewable energy. This committed credit line expires in 2023 and can be renewed for additional two years.
Considering the uncertainties derived by the pandemic, the company’s management said it was difficult to forecast the rest of the fiscal year, while adding that it will be negatively affected.