Moncler Genius RTW Fall 2019

MILAN — Moncler continues to grow at a double-digit pace, but chairman and chief executive officer Remo Ruffini feels the company is “almost like a start-up,” touting a new energy within and without, in the relationship with its customers and in the stores.

“We changed our business strategy and, after one year, we are very satisfied. There is energy in the stores, in customers, it’s like a new company, a start-up,” said an upbeat Ruffini as the company posted a 33 percent rise in net profits last year, reaching earnings of 332.4 million euros, compared with 249.7 million euros in 2017. “I don’t want to be pretentious, but the brand perception, the product, it’s all new and everyone feels happy. The Moncler Genius project helped us with different products and ideas and talk with different generations, we attracted young kids and they bring energy. We always work with quality in mind, for better product every day, we have very good distribution, the best locations, and we started to relocate some stores two and a half years ago to find better locations.” Ruffini also quoted Thomas Edison: “Vision without execution is hallucination.” The executive expressed his pride in the achievements of the company five years since the listing on the Italian Stock Exchange and 15 since his acquisition of Moncler. And the company forecast more growth in 2019.

Ruffini addressed analysts during a conference call on Thursday at the end of trading in Milan, after the company reported a 19 percent rise in 2018 revenues, which totaled 1.42 billion euros, compared with 1.19 billion euros in 2017. At constant exchange, they climbed 22 percent. Revenues in the last quarter rose 20 percent, despite the challenging comparison base.

Chief marketing and operating officer Roberto Eggs said Moncler Genius, with collections from Pierpaolo Piccioli to Simone Rocha, “is a fantastic communication opportunity, the first digitally native product we have.” Responding to an analyst, he said he could not talk about the impact on sales, but said the number of impressions or visualizations was up 43 percent and that the number of unique visitors was up 59 percent since the launch. “This would not be possible in a traditional way.”

During Milan Fashion Week, Moncler presented the new chapter of the Genius project, and Eggs said it was a “tremendous success” with 500,000 people attending. Occupying an entire street by the central railway station in Milan, the event was open to the public last Sunday and Eggs said it drew 10,000 visitors. “We are also business, and our objective is to reach high-single digit with Genius, not far from 10 percent,” he said.

In 2019, Eggs said Moncler will open “two new houses of Genius,” one in Europe and one in Japan, where all the collections will be under the same roof, similarly to the New York SoHo and Aoyama units.

In the 12 months ended Dec. 31, adjusted earnings before interest, taxes, depreciation and amortization totaled 500.2 million euros, compared with 411.6 million euros in 2017, with a margin of 35.2 percent, mainly linked to the gross margin improvement and to the strict control on selling costs, in particular on the retail division.

Operating profit was 414.1 million euros compared to 340.9 million euros in 2017.

Ruffini underscored the solidity of the company, praising his team and how it had implemented the change in its business model, supply chain and distribution. “We know that economic and geopolitical uncertainties may make the path steeper in the coming months, but I believe that it is precisely when there are difficulties that we can become stronger. We will continue investing in Moncler, a unique brand that is able to speak to many different consumers around the world, in an always open and inclusive manner.”

Eggs defined 2018 a “fantastic” year with all regions growing at a double-digit clip.

In Italy revenues rose 12 percent to 167.8 million euros, accounting for 11.8 percent of total and accelerating in the fourth quarter, lifted by both its retail and wholesale channels.

In the Europe, Middle East and Africa region, revenues grew 16 percent to 407.6 million euros, representing 28.7 percent of total. In the last quarter, Germany and the U.K. continued to outperform driven by “outstanding growth” in the retail channel, while sales in France slowed down due to the “yellow vests” protests.

In Asia and Rest of the World revenues increased 24 percent to 616.1 million euros, accounting for 43.4 percent of total, and despite a tough comparison base. Mainland China continued to drive growth in the region while Japan’s growth slowed in the fourth quarter due to a late start of the winter season.

In the Americas revenues grew 16 percent — or 23 percent at constant exchange rates — to 228.4 million euros, representing 16.1 percent of total and accelerating in the last quarter. Very good results were achieved in Canada and in the U.S., in both the retail and the wholesale distribution channels.

Asked about the performance of the company in the first quarter, Eggs said that, despite a “very high base of comparison,” a change in the Chinese New Year dates, and a warmer winter, he was “very happy with the results in the first seven weeks of the year.” He trumpeted the performance of Mainland China, boosted by local spending and a double-digit growth in China. France has been slowed down by the “yellow vests” protests with lower traffic every weekend and the U.K. has been impacted by Brexit “in the air” and less tourist traffic.

In 2019, the company plans to open 15 additional directly operated stores, renovate 15 stores and add 15 shops-in-shop. “We have signed with Bloomingdale’s to change in New York from wholesale to concession. This is the first time for Moncler,” said Eggs, adding that four openings are in the cards, in cities such as Los Angeles and Washington.

In February, Moncler opened a boutique in Singapore, one of its largest in Asia and a second unit in Sydney.

In 2018, revenues from the retail distribution channel reached 1.08 billion euros compared to 892.4 million euros in 2017, representing an increase of 22 percent boosted by organic growth and the further development of its directly operated stores.

Like-for-like sales were up 18 percent.

The wholesale channel was up 11 percent to 333.6 million euros compared to 301.3 million euros in 2017 — a growth that Eggs said was “the highest since the IPO. There is a lot of energy in wholesale.”

Eggs said new markets opened in 2018, including Mexico, the Middle East and Norway.

As of Dec. 31, the company counted 193 directly operated stores, an increase of 12 units compared to the end of December 2017, and 55 shops-in-shop, an increase of nine units.

Last year, consolidated gross margin reached 1.09 billion euros, or 77.4 percent of revenues. “This is the first time ever we pass 1 billion euros in gross margin,” said chief corporate and supply officer Luciano Santel. He cited, however, a negative effect of currencies, impacting for 14 million euros.

General and administrative expenses were 127.8 million euros, equal to 9 percent of revenues, in line with the previous year.

Marketing expenses totaled 99.5 million euros, representing 7 percent of revenues compared to 6.7 percent in 2017, also lifted by the launch of Moncler Genius.

Tax rate was 19.3 percent in 2018, compared to 25.6 percent in the previous fiscal year, largely due to the fiscal benefits related to the Patent Box signed in 2018 also by Moncler’s subsidiary Industries SpA.

Capital expenditures rose to 91.5 million euros in 2018, compared to 72.5 million euros in 2017, driven by investments for the development of the retail network, for the expansion and relocation of some important stores, for the reinforcement of the IT platform and for the expansion and automation of the Italian logistics hub. Santel said he expected capital expenditures to total 100 million euros in 2019. He also revealed that Moncler is setting up its own online platform, starting in South Korea.

Free cash flow in 2018 was positive and equal to 362 million euros, compared to 244.3 million euros in 2017.

Eggs said Moncler Genius is an opportunity to increase customers’ loyalty and that sales density in three years has grown by 20 percent, reaching 36,000 euros per square meter.

As of Dec. 31, net cash position stood at 450.1 million euros, compared with 304.9 million euros at the end of December 2017.

The company proposed a dividend of 0.40 euros per share, equal to 100 million euros of total dividends.

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