MILAN — Moncler’s chairman and chief executive officer Remo Ruffini looked to Albert Einstein on Wednesday while commenting on the 18 percent drop in the company’s first-quarter revenues, impacted by the coronavirus pandemic.
Einstein in 1929 said that a “crisis can be a blessing to any people, to any nation. Crises bring progress.”
Indeed, Ruffini believes “crises are moments of learning, they oblige people or companies to reflect, to look inside, to analyze deeply strengths and weaknesses to choose the essential, to find new energy and to act. Now is the time to act, to restart, and we have to do it while remembering what these weeks, and months, have told us. I feel an unbelievable energy in me, in my team and in all Moncler people.”
Although Ruffini does not generally participate on the call with analysts after the release of quarterly figures, this time he thought it was important to do so.
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“In these days, in which we are all far apart, being together has become even more important,” he said — reiterating the word together several times — “facing these difficult moments, reacting to them, supporting our community” and adapting a way of working, “shaping our new future.”
The executive expressed confidence in coming out of this situation “stronger than before.” He said 2020 “will be remembered as the watershed between the ‘before and the after.’ We have faced an unknown challenge, we understood that we are a truly global society and that we need sharp, deep and coordinated actions. This is what we have done in Moncler.”
Ruffini asked his teams to “go back to basics,” to think even more in digital terms and to further engage with the Moncler community, both internally and externally. He said he had created a task force to face the crisis and started “an energy plan.” To be sure, Ruffini himself sounded energetic and said he couldn’t wait to get back to his office, despite the recent 40 days of intense work from home, “planning new ideas and adventures.”
He admitted this year “will be difficult. We all know this. But Moncler will not find shortcuts to improve short-term results. We have skills, we have talent and financial strength, and we know that it is better to suffer today in order to be stronger tomorrow.”
Ruffini, who waived his compensation for the year and withdrew the payment of dividends this year, touted the power of the Moncler brand and the company’s clear strategy, financial strength and motivated employees, who will continue to find their “inner genius, all together.”
“Our yesterday crafted our today, our today shapes our tomorrow, our future is carved today. We are ready to face this challenge with the same energy, the same emotion and rigor that we had at the beginning of this journey,” the ceo said.
Responding to an analyst about the future of the Genius project — which involves drops on a rolling calendar and working with a lineup of different designers each season — Ruffini admitted the world has changed and that the brand’s strategies need to evolve, but underscored that they are “not wrong. We have to keep the relation with our customers and understand their mood.” He said no decision will be taken now. “If I feel good about Genius we will continue, if not, we will change, following our customer and our community.” He was adamant Moncler should “not push customers in stores in the next month or quarter because we have to recover. We must think of the brand in the long term.”
In the three months ended March 31, the measures adopted globally to contain the COVID-19 spread affected the performance of the company. Sales were down 18 percent to 310.1 million euros, compared to 378.5 million euros in the first quarter of 2019.
Retail revenues were down 19 percent to 236.3 million euros, compared to 291.4 million euros in the first quarter of 2019.
Wholesale revenues decreased 15 percent to 73.8 million euros, compared with 87.1 million euros.
“After 24 quarters of double-digit growth, it is not easy to face a significant reduction in revenues, nor to have more than half of our store network shut clown, nor to experience extensive logistics and supply chain disruption. We promptly secured all essential processes and took action to reduce the risk of unsold stock,” said Ruffini, expressing his pride in his employees.
“lt is on such challenging occasions that the essence of a brand manifests and l believe that, indeed, our energy and uniqueness have emerged stronger than ever. ‘Brand first’ and ‘cash is king’ are the mottos that have always guided Moncler’s financial choices and allow us today to look toward the future — though a difficult and uncertain one — with greater confidence.”
In the period, Italy registered a 25 percent revenue decline to 34.5 million euros, accounting for 11.1 percent of total sales, impacted by the complete closure of all nonessential activities in the country starting from March 9 and by a significant reduction in traffic in the weeks prior, also due to COVID-19.
In the Europe, Middle East and Africa region, revenues decreased by 6.4 percent to 101.2 million euros, representing 32.6 percent of the total. Although negative in both channels, the performance was better compared to other regions. ln particular, the retail channel benefited from a more gradual closure of stores and excellent results in the first weeks of the quarter. Germany and the Middle East outperformed the average of the region.
In Asia and the Rest of the World region, revenues decreased by 22.5 percent to 132.7 million euros, accounting for 43 percent of sales. Japan and Korea outperformed the rest of the region, thanks to solid local demand and, in particular in Korea, to less negative effects associated with the spread of the virus.
Hong Kong continued to record very negative results and Macao was also soft. Mainland China has been significantly affected by the containment measures to limit the spread of the coronavirus since the end of January and throughout February, while it began to show initial signs of recovery in March and April, said chief corporate and supply officer Luciano Santel during the call. Korea was less impacted and saw strong local demand.
“China was the first severely impacted by the virus and the first that reopened stores, and now it’s in much, much better shape,” said Santel. “All stores are open and are showing very encouraging signs of improvement in China. I am confident the situation will recover in China.”
Pressed by analysts to elaborate, Santel said China was “proving positive” but added it was too early to add more. “The signs are better day after day,” he said, although the Chinese consumer is suffering and is not traveling.
He did caution that April and May are the least important months in terms of business for Moncler given the brand’s strong focus on outerwear.
In the quarter, the Americas recorded a 22.1 percent decrease in revenues to 41.7 million euros, representing 13.5 percent of sales. Both the retail and wholesale channels suffered in the region. “There are reasons to be concerned, big players are suffering or supposed to close,” said Santel of possible department store bankruptcies in the U.S.
All nonessential projects, including a few retail ones, have been postponed, with a 30 percent reduction in total capital expenditures. Regarding marketing costs, some advertising campaigns and events have been suspended while budgets for traditional media have been reduced. ln addition, discussions with all landlords have been opened in order to renegotiate rents. ”It’s an open discussion, very, very difficult and tough,” said Santel, noting that the company can rely on a cash pile of 700 million euros.
Santel said that to preserve the brand ‘s integrity and limit the inventory risk, Moncler immediately acted to reduce the production of the fall/winter 2020 collections.
Bestsellers will be carried over to spring/summer 2021, “very selectively to avoid moving a problem from one year to the other,” said Santel. Also, the company plans to keep the spring/summer collection longer in stores well into August and September.
“The wholesale channel is facing the same situation, and we stopped deliveries immediately to minimize the impact of inventories. The easiest solution would be to push [merchandise] to the outlets next year, it would maximize sales and profits but it would be a disaster for the brand. We will never do it,” said Santel.
The plan is to deliver the Moncler Genius collections by Simone Rocha and Richard Quinn in May, pushed from March and April, and the Fragment line in June, although things may still change, said Santel.
Globally, revenues from the retail channel were down 18.9 percent to 236.3 million euros.
The e-commerce channel posted “very good growth in all regions,” said Santel. Digital and e-commerce remain priorities and strategic projects and respective investments will continue also in 2020.
The wholesale channel was down 15.3 percent to 73.7 million euros. This performance includes the effects of delivery postponements and other actions undertaken to limit the risk of overstocking.
As of March 31 there were 213 directly operated stores, an increase of four units compared to the end of December last year. There were also 64 wholesale shop-in-shops. In the first three months of 2020, Moncler opened its first store in Kiev, Ukraine. At the end of March, 111 stores were temporarily closed and an additional 19 stores have been temporarily closed in the first three weeks of April due to the pandemic. In January and February, 12 retail stores were closed in Asia for an average of 30 days, while 109 retail stores, mainly located in the EMEA region and in the Americas, did not operate for an average of 15 days in March.
The company plans to open 12 or 13 stores in the year, postponing some. A big store was meant to open in Beijing in October, but this has been postponed to 2021. A store in Paris on the Champs Elysées may open by the end of the year, but the construction site is closed now, said Santel.