MILAN — “Go beyond” is a mantra for Moncler chairman and chief executive officer Remo Ruffini, one that has inspired the group’s latest communication campaign, and in releasing first-half results on Wednesday, the performance went beyond even management expectations. “I’m convinced that our capacity to go beyond — to explore new frontiers and break new ground — is what steers and guides Moncler, quarter after quarter, toward new heights that I, for one, find exceptional,” Ruffini said. “The results we are releasing today once again, not only beat market expectations, but even our own estimates.”
All channels and markets helped boost the strong performance of Moncler in the first half of the year. In the first six months ended June 30, net profit climbed 47 percent to 61.6 million euros, compared with 41.8 million euros in the same period last year.
Sales rose 21 percent to 493.5 million euros, compared with 407.6 million euros in the first half of 2017. At constant exchange rates, they grew 27 percent.
According to the Thomson Reuters consensus, analysts expected sales of 483 million euros and profits of 57 million euros.
Ruffini said “numbers always need to be read in context, looking past the mere digits. And that’s what makes me even more confident today about our future. The launch of the first Moncler Genius collection has been acclaimed a success in all markets and in all channels we operate in, and the company managed to meet all the given deadlines. We’re working to strengthen the brand and our entire value chain further, and we are pushing ahead with major projects, which I trust will enable us to live up to the motto of our campaign — beyond limits, expectations and generations.”
During a conference call with analysts after trading hours in Milan, where the company is publicly listed, Ruffini said he was “very proud of the energy generated inside and outside” the company and “these exceptional results,” praising his team for the successful launch of the 7 Moncler Fragment Hiroshi Fujiwara, the first drop of the Moncler Genius project, which registered strong results across all distribution channels. In the second quarter, revenues rose by 26 percent at constant exchange rates, benefiting also from this launch.
Ruffini said all markets, including Italy, showed a performance “above expectations” and that he was impressed by China and Japan’s double-digit growth.
He struck a cautious note regarding the second half of the year, as he said “we are all aware of how challenging the base of comparison is, but we must remain confident.” This confidence is also boosted by the “many important projects” ahead, including the drop of the second Genius project, Noir by Kei Ninomiya, rolled out on July 24 at Ginza’s Dover Street Market.
Moncler set the brand’s refresh button during Milan Fashion Week in February with a major installation at Palazzo delle Scintille, introducing its “Genius” series of collaborations with a slew of different designers — with pieces trickling out each month. This followed the end of Moncler’s seasonal partnerships with Thom Browne and Giambattista Valli on its Gamme Bleu and Gamme Rouge runway lines.
Ruffini also emphasized Moncler’s retail projects. During the call, Roberto Eggs, chief marketing and operating officer, said more than 15 directly operated stores are expected to open in the full year, and some 15 expansions and relocations planned, including important projects like units in New York in SoHo and in London on Sloane Street.
Asked to comment about the Fragment launch, Eggs said the increase of traffic in stores was 10 percent upon the roll out and 20 percent after two weeks, it had reached more than 50 percent of volumes in the first week and that it was also “positive on non-outerwear categories.” He also said that, while the collection was expected to target men, 50 percent of sales was made by women. “It was a surprise,” he said, adding that 45 percent of customers were not regular Moncler clients. “The impact of Fragment was 10 percent of sales in the period,” he remarked. Eggs reiterated the relevance of the Genius project in terms of communication of the values of the brand and its strength in “talking to a different clientele. We knew that Fragment would be one of the most successful commercially,” while other drops will be “more couture,” underscoring that Moncler is “not planning big volumes” but expecting they will “drive traffic in stores.”
Of current trading in general, Eggs said the first two weeks in July were in the line with the second quarter, although there has been “a slight slowdown of tourists in Europe but a slight increase of Chinese in nearby Singapore, Hong Kong and Japan.”
In the first half, revenues in Italy rose 9 percent to 63.3 million euros representing 12.8 percent of total sales, mainly driven by the strong growth of the retail channel.
In the Europe, Middle East and Africa region, revenues grew 15 percent to 147 million euros, accounting for 29.8 percent of total. The company said France, the U.K. and Germany in particular recorded very good performances.
In Asia and the Rest of the World, revenues increased 32 percent to 210.4 million euros, or 42.6 percent of total. At constant exchange, they rose 42 percent. In particular, Japan significantly accelerated in the second quarter also thanks to the successful launch of 7 Moncler Fragment Hiroshi Fujiwara.
Moncler continued to register very good performances in China, driven by double-digit organic growth. Following the Chinese government decision to reduce import duties, since the beginning of July Moncler reduced its prices in China by 3.5 percent on average, similarly to some of its peers, such as Louis Vuitton, Burberry, Hermès and Gucci. Revenues in South Korea recorded a solid increase, with an acceleration in the second quarter, mainly due to the organic growth of the existing stores’ network. Eggs spoke of launching Moncler online in South Korea by the first half of 2019. Also, he pegged the launch of pop-ups in China following the arrival of Genius on Tmall. In general, he said the online channel starting last year accelerated, growing at twice the pace of the growth of the retail channel and that, in a couple of year, it could reach 15 percent of sales from the current 8 to 9 percent.” The company is integrating the database of Yoox Net-a-porter and in the second half of 2019, it will “assess if it is better to go alone in 2020 or to continue with YNAP. It is a decision that we have not taken yet,” Eggs said.
In the Americas, revenues grew 17 percent to 72.8 million euros, accounting for 14.8 percent of total. At constant exchange rates, they climbed 29 percent, with a double-digit growth also in the second quarter.
In the first half of 2018, retail revenues grew 26 percent to 376.8 million euros thanks to a robust organic growth and to a further development of its directly operated stores.
Like-for-like sales grew 27 percent.
The wholesale channel was up 8 percent to 116.7 million euros driven by good results, in particular, in North America and Asia-Pacific.
As of June 30, Moncler counted 209 directly operated stores, an increase of eight units compared to the end of December 2017, and 65 wholesale shops-in-shop, an increase of six units compared to the end of last year.
Advertising expenses were 36.3 million euros, representing 7.3 percent of revenues, stable compared to the first half of last year.
Adjusted earnings before interest, taxes, depreciation and amortization rose to 123.9 million euros, compared to 97 million euros in the first six months of 2017, resulting in an EBITDA margin of 25.1 percent compared to 23.8 percent in the first half of 2017. The increase is mainly linked to the improvement of the gross margin and the good control on retail selling costs.
Operating profit increased 35 percent to 85.7 million euros.
As of June 30, the net financial position was positive and equal to 243.9 million euros compared to 130.2 million euros at the end of June last year.
Capital expenditure totaled 34.5 million euros in the first six months of 2018, in line with the investments made in the same period of 2017. Luciano Santel, chief corporate and supply officer, said retail investments equalled 18.5 million euros, compared to 27.5 million euros in the first half and that corporate investments totaled 14.1 million euros compared to 5.5 million euros last year, including expenses to reinforce Moncler’s logistics hub in Piacenza, the acquisition of the industrial building in Romania, and the reinforcement of the IT and omnichannel platforms. The hub in Piacenza is a three-year project, he said, with a budget of a total of 15 million euros by 2020. “It’s the extension of the logistics hub, we are growing the top line and we need more space and capacity to support the business growth, which is higher than planned,” he explained. A second building has already been erected, he said. “We are investing in automation to respond faster and faster to market demand and in view of an eventual online business after [South] Korea’s first [project]. We must act now to be ready in 2020, it’s very important.”
Santel expressed satisfaction on the pricing and hedging policies, which protected gross margins.
Cash flow in the first half of 2018 was positive and equal to 66.3 million euros, compared to 39.6 million euros in the same period of 2017. Asked about the potential use of this cash, Ruffini said it was one of his “biggest dreams to have a healthy company, a strong brand and reputation, with a very solid financial situation.” He said he could see channelling funds “if there is an opportunity to invest in the industrial part for the supply chain and a stronger brand. If we make more cash we could improve the payout or if we see an opportunity on the market,” that could also make sense for Moncler, which “needs a lot of energy” to build up in the luxury sector.
In the first half of 2018, Moncler distributed 70.5 million euros of dividends compared to 45.5 million euros in the same period of 2017. In the same period, the group completed a share buy-back program for 73.4 million euros. As a consequence, net cash flow in the first half of 2018 was negative and equal to 61 million euros, compared to a positive cash flow in the same period last year of 24.4 million euros.
Moncler is forecasting a scenario of further growth in 2018, based on strengthening the brand, focusing on customers, globally developing and consolidating key markets, selectively expanding product categories and through sustainable business development. Asked to elaborate, Eggs said Moncler benefited from “a year of exceptional weather that started early in September and ran until the end of March.”