Lanvin Group Holdings Ltd (LANV) 2024 Q4 法說會逐字稿

Thank you for joining us and welcome to the Lanvin Group's fiscal year 2024 financial results conference call.

(Operator Instructions)

Please note this event is being recorded.

Now please take a moment to review the disclaimers. During this presentation, the company will be making certain forward-looking statements, including but not limited to future performance and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and other factors, and they are not guarantees of performance.

For today's presentation, I would like to introduce David Chan, executive President and CFO of Lanvin Group and Andy Lew, executive President of Lanvin Group. I will now turn it over to David to start the presentation.

Thank you and welcome to all the participants. I'm David Chan, executive President and CFO of Lanvin Group. Today, we'll take you through a comprehensive view of Lanvin Group's performance in 2024. The strategic actions we have taken to navigate a challenging environment and our road map for 2025 and beyond. The key topic today is to share how we overcame these hurdles and laid the groundwork for sustainable growth. 2024 was a year defined by macroeconomic turbulence, shifting consumer behaviors and industry-wide softness. Yet within these challenges, we achieved critical milestone that positioned us for recovery.

For physical year 2024, a global revenue was EUR329 million a 23% decrease from fiscal year 2023. This decline reflects broader industry trends, particularly in EMEA and Greater China, where macroeconomic pressures weighted heavily. Nevertheless, we took proactive measures to reduce GNA expenses and improve working capital management. We also consolidated our store network to optimize our retail footprint and concentrate on our core business units. These efforts, along with the appointment of Andy Lew as executive President, whose expertise and brand transformation are expected to drive strategy implement implementation and bring transformative initiatives to our group. And its leadership combined with new creative appointments along Bao de Rossi signals a new era of innovation and growth.

Let's take a deeper look at our 2024 results. Despite the 23% decline in revenue with effective cost control inventory management, we managed to maintain a stable gross margin of 56% compared with a gross margin of 59% last year. While contribution profit and Adjusted EBITDA face challenges, we are encouraged by progress in operation efficiency. GNA expenses were reduced by 15% year over year, a testament to our streamlined cost structure.

We've also reduced directly operated stores focusing on core and high potential markets such as EMEA for Loan and Sergio Rossi and North America for St. John. We've made significant strides in cash management, with 32% improvement in operating cash flow from 2020 to 2024, driven by reduced inventory days and tighter receivable management. These results demonstrate our dedication to operation excellence and financial discipline.

Since 2020, Lanvin Group has delivered 10% keger, underscoring the resilience of our diversified portfolio, our brands Lanvin, Wolfer, Sergio Rossi, Sing John Nitz, and Caruso, each contributed to the group's performance. Leveraging their distinctive strength and strategies to grow our global footprint.

Let's turn our attention to slide 7, which highlights the revitalization efforts across our brand portfolio. During the past years, we have made significant strides in aligning them for sustainable growth, starting with Caruso, a luxury catering powerhouse in St. John, the iconic American luxury brand, both show strong improvements. Caruso's contribution profit increased to EUR8.8 million in 2024, up from EUR3.2 million in 2022, a reflection of our success in refined distribution strategy and growing demand for Caruso's playful, elegance and bespoke tailoring. Similarly, St. John's contribution profit grew from a loss of in 2020 to EUR8 million in 2024, thanks to strategic investments in brand repositioning and digital infrastructure. We're confident that these steps will further amplify margins in the coming years.

Lanvin, our crown jewel saw revenue increase to EUR82.7 million in 2024, more than doubling from EUR35 million in 2020. This growth was driven by continued investment in increasing the brands like desirability and reinvigorate rating its Parisian heritage. While appealing to a new generation of luxury consumers.

Wolford, Austrian legwear and ready to wear innovator, also made strides. We adjusted the product mix to position Wolford as a full lifestyle brand, expanding beyond leg wear to cater to the growing demand for versatile, high-end essentials.

Finally, Sergio Rossi launched a global retail expansion since 2022, shifting from heavy reliance on wholesale and to enhanced margin control and brand equity. While the top line is facing challenges, our foundational improvements set the stage for development. These achievements underscore our ability to focus on long-term strategic priorities while undergoing short-term challenges.

Let's now turn to slide 8, which outlines our journey towards profitability. Over the past year, global headwinds, including inf inflationary pressures and shifting consumer behaviors, impacted our top line performance.

However, we reposition, responded decisively by sharpening our focus on operation efficiency and cost discipline. There are three key pillars of our turnaround plans, which includes, first gross profit resilience. Despite revenue declines, we maintain strong growth margins, reflecting discipline pricing and reduced promotional activity.

Second, opEx streamlining. We continue to reduce operating expenses since 2022, a testament to our commitment to leaner operations.

Last but not least, is break even optimization, with narrow up breaking in point through rigorous cost management, ensuring a position to capitalize on revenue recovery.

In 2022, our OpEx, which includes marketing, selling, and GNA expenses, stood at EUR378 million by 2024, we reduced this to EUR326 million a 14% cumulative saving over two years. Equally important is our improved cash management. Net cash used in operating activities improved by 27% since 2022, decreasing from negative EUR81 million to negative EUR59 million. This was achieved through tighter working capital controls, including reduced, reducing inventory days to minimizing excess stock and accelerating receivable collection.

In 2024, we welcome new creative leadership with the appointment of Peter Coffin as artist director of Lambo, and Paul Andrew as creative director of Sergio Rossi. Their vision and creativity are already making significant impact on our brands, seen in the positive reception of Lanvin's debug show under Peter Coppin in January.

I will now hand over to Andy, who will provide insights into our achievement in '24 and strategic priorities in '25.

Thank you, David. I'm Andy Lew, and I'm honored to serve as an executive President of Longmont Group, and I'm thrilled to share our brand level achievements in 2024.

Starting with our iconic flagship brand Lanvin as mentioned by David, in June 2024, we announced Peter Copping as artistic director, marking a pivotal moment for the brand. Peter's fresh, creative vision has already reinvigorated Lanvin's DNA, blending timeless elegance with contemporary art artisserry.

Lanvin has also launched the ties series, a bold initiative that bridges couture and modern culture.

This was further amplified by our collaboration with choreographer Benjamin Milpe, whose work brought a dynamic performative edge to our campaigns.

Financially, Lanvin demonstrated remarkable resilience. Despite market pressures, we maintain maintained a stable gross profit margin.

Through discipline, cost control, and inventory optimization. The highlight was Peter Copping's debut fashion show in Paris, a triumphant return to elegance that garnered a global acclaim and set the stage for a fall 2025 collection.

Now let's shift our focus to Wolford. Wolford is crafting compelling brand campaigns and product narratives that not only highlight its unique value proposition but also elevate its positioning within the luxury market. Those marketing campaigns highlighted Wolford's unique value proposition, collaborations like the EOX Wolford capsule collection, emerging Italian flair with Austrian precision not only expanded our audience but also reinforced cultural relevance.

Lastly, Wolford is enhancing the brand experience through a refreshed web shop identity and optimized retail and wholesale distribution, ensuring a cohesive and premium brand presence across all touch points.

Turning to Sergio Rossi. In July, Sergio Rossi appointed Paul Andrew as creative director, a visionary move to redefine Italian footwear. Paul's fall 2025 collection, set to debut in Milan, blends architecture, boldness and timeless craftsmanship.

Sergio Rossi also optimize its retail network, focusing on key markets like EMEA and Japan. Efficiency continued to be a priority for Sergio Rossi with factory structuring measures aimed at improving production lead time and productivity, all while reducing costs.

Additionally, Sergio Rossi has expanded its wholesale development by opening franchise stores in the Middle East and Taiwan through local partnerships expanding its global footprints.

St. John's 2024 strategy centered on focus and agility. We streamlined operations proprietor North America, upgrading flagship stores in Beverly Hills and New York. These spaces now showcase our news collection, which varies classic knits with tech fabrics and a modern edge.

Our new whole session model developed with our partnership with Nordstrom, improved marketing control and brand consistency. Digitally, the revamped e-commerce platform is already showing improvements and convergences.

Lastly, the shift in asset light model, including the sale of non-core products, enhance our operational flexibility.

Finally, Crusoe amplifies resilience despite a challenging luxury landscape. Not only did Crusoe achieved its revenue growth in its proprietary brand business, but margin improvement was also a standout. Positive net profit and robust cash flow underscored the success of Crusoe's strategy.

Brandon Peel is growing for Crusoe, thanks to high standard yet efficient content creation, credible collaborations and trade events that resonate with their customers. Effective prototype and fashion showpieces management have also played a crucial role in the success.

Proceeding to page 22, I am pleased to present our strategic priorities for 2025 Initiatives to design to drive growth, agility, and profitability across the portfolio.

First and foremost, leadership and organizational excellence. We're building a dynamic leadership team, combining industry veterans with fresh perspectives to foster innovation and rapid decision making. Our new European headquarters, based in Milan, will enhance regional oversight streamline operations and distraction relationships with key stakeholders.

Second, creative momentum. The appointments of Peter Copping and Paul Andrew, mark a new era of artistic vision. Their collections will reinvigorate brand relevance, supported by 360-degree marketing campaigns from runway shows to social media activations.

Third, opal operational efficiency remains a cornerstone. We'll continue optimizing store networks, prioritizing high traffic locations, and refining inventory management and pricing strategies to improve cash conversion cycles and reduce working capital.

Fourth, market expansion. We're committed to key cities while tapping into high-growth luxury markets. In the Middle East, new franchise stores. As an example, Sergio Rossi and Dubai Mall and partnerships are key initiatives for us.

Additionally, we'll also continue to explore emerging categories to diversify revenue streams. At Lanvin Group, we view challenges as catalysts for transformation with the refreshed leadership team, strategic market focus, and unwavering commitment to craftsmanship, we're confident in our ability to deliver sustainable growth and restore profitability in 2025 and beyond.

With that, I'd like to turn it back to David to go through some of the consolidated and brand-level results in 2024.

Thank you, Andy. The year 2024 was marked by significant macroeconomic challenges, yet two brands within the online group portfolio demonstrate notable resilience. St. John and Caruso stood out amid broader declines, leveraging strategic regional focus and operational agility. St. John's emphasis on North America, coupled with his premium positioning and successful partnership with Nordstrom, helped stabilize performance.

Similarly, Caruso. Though facing a mild revenue drop, achieved double-digit growth in its own brand business, driven by strong demand for its playful yet elegant collections and made to measured offerings. These assess partially offset pressure seen in other brands. Lanvin, grappling with creative transitions and softer luxury demand, saw revenue decline while Sergi Rossi impacted by EMEA wholesale softness and reduced third party production.

Wolford is also negatively influenced by logistics integration starting from Q2 2024 to put this into perspective. In terms of group level adjusted EBITDA '24, we estimate that the integration of Wolford Logistics had an impact ranging from EUR14 million to EUR18 million and the creative transition. Impact of between EUR5 million to EUR10 million. Stripping out these transitional costs, our 2024 adjusted EBTIDA is estimated at negative EUR64 million to negative EUR73 million range consistent with our 2023 results. This stability is notable, given the significant slow demand environment in 2024, underscoring our ability to maintain operational discipline amid external pressures.

I will now provide with more details on Jan 2024 financial results for each grant. 2024, as we mentioned, was a transitional year for Lanvin. Revenue declined 26% to EUR83 million reflecting softer luxury demand and creative leadership gaps. While wholesale faced pressure, retail network optimizations and D2C resilience mitigated the decline.

In the same time, Lanvin stabilized margins through disciplined actions. Gross margin improved to 59% supported by pricing, discipline and inventory management. GNA expenses were reduced by 14%, underscoring operational efficiencies.

The appointment of Peter Copping as artistic director marked a turning point his acclaimed January 2025 fashion show has already reignited industry interests with new collections set to launch in the second half of 2025. We're confident that Peter's creative vision and targeted investment will drive momentum in 2025.

Moving on to Wolford, Wolford navigated significant challenges in 2024, with revenue decline declining 30% to EUR88 million. Macroeconomic volatilities, logistic disruption, and wholesale softness EMEA waited on results.

Looking ahead, Wolford's 75th anniversary in 2025 will be a catalyst. We are streamlining product launches, stabilizing operation, and leveraging digital channels to reconnect with loyal customers. Wolford also has established a new management board to aim at sustainable future growth for the company.

Now I'd like to discuss Sergio Rossi. So, Rossi faced headwinds in '24 with revenue down 30% to EUR42 million. EMEA market declined 35%, mainly due to wholesale conditions and planned reduction of lower margin third party production. Greater China market declined 35% due to the challenging retail market. Japan market showed a slight decrease of 8%. Key action included administrative expenses reduced by 18% through cost control, and appointed Paul Andrew as creative director, whose first collection aims to revitalize wholesale partnership in 2025.

While gross margin fell to 43%, wholesale channel enhancement and targeted regional partnership will stabilized margins. So, Rossi's focus on operational efficiencies and fresh designs in 2025 will be critical to recovery.

Moving to St. John, St. John's demonstrated resilience in 2024, while revenue declined 12% to EUR79 million strategic focus yielded critical wins gross margins surged 6% points to 69% from 63%, driven by full price sell through and a successful partnership with Nordstrom. North America outperformed, contributing 94% of the revenue while intent that the international markets were streamlined to reduce complexity.

In 2025, St. John will deepen its North American focus emphasizing Southern California heritage through storytelling and knitwear leadership. Enhanced digital capability is targeted to further amplify customer engagement.

Finally, I'd like to discuss Caruso's results. Caruso's navigated a tough luxury landscape with agility. Revenue decreased 7% to EUR37 million. The Caruso brand business grew double digits, fueled by the strong demand for its playful, elegant collection and made to measure offerings. Gross margin held steady and 29%, with contribution profit margin stabilized to 24%.

In 2025, Caruso's will expand distribution and amplify marketing efforts. Caruso's craftsmanship and service excellence position it to outperform even in a challenging market. At this point, I'd like to have Andy provide some final remarks.

Thank you, David, for the review. In closing, I want to emphasize that Lanvin Group's strength lies in our diverse brand portfolio and deep connections with loyal customers. Each brand, Lanan, Wolford, Sergio Rossi, St. John, and Crusoe brings unique heritage and craftsmanship, the foundation of an enduring luxury appeal. 2024 tested our resilience but has also sharpened our strategy. While challenges persist, Lanvin Group is emerging leaner, more focused, and better positioned to capitalize on luxury's long-term fundamentals.

As we enter 2025, we do so with optimism. Peter Copping's new collection, Wolford's anniversary campaign, and Paul Andrews's vision for Sergio Rossi are just the beginning with a revitalized team, we're poised to turn this pivotal moment into a decade of growth.

Thank you for your time today. Now, I'll hand it back for questions.

Thank you, David and Andy, for that comprehensive overview.

We will now open the floor to questions.

(Operator Instructions)

This concludes our question-and-answer session and concludes our conference call today.

Thank you for attending today's presentation. You may now disconnect.