Lanvin Group Holdings Ltd (LANV) 2025 Q2 法說會逐字稿

Thank you for joining us, and welcome to the Lanvin Group's 2025 first half 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 Andy Lew, the Executive President of Lanvin Group; and David Chan, Executive President and CFO of Lanvin Group. With that, I'd like to turn it over to Andy Lew to start the presentation.

Thank you, and welcome, everyone. I'm Andy Lew, the Executive President of Lanvin Group. The story of our first half is navigating a tough climate while preparing for a stronger future. We operated against the backdrop of persistent global macroeconomic and geopolitical uncertainty. Performance at some of our brands was tempered by creative transitions as the market awaited new collections and by overall sector softness.

Despite these challenges, I'm proud to highlight that St. John demonstrated remarkable resilience growing its core North American market despite the volatility. Most importantly, our strong cost discipline and accelerated retail footprint optimization began to deliver visible improvements in the second quarter.

A positive trend we are focused on continuing. Our strategy is built for the long term, and we are confident that the foundational work we completed in the H1, particularly with our new creative leadership positions us to capture demand as conditions improve.

Turning to page 5. Let's review the brand level achievements in the first half that are shaping our future. At Lanvin, Peter Copping made his much anticipated return to Paris Fashion Week this January, earning strong global acclaim for his debut collection, which celebrated the House's timeless French elegance.

At Wolford, the brand reinforced its essentials positioning with the In Your Own Skin campaign, further defining its identity around modern essentials that balance refined design with enduring relevance. Separately, Wolford also completed a capital increase in H1 to provide additional support for its strategic transformation.

For Sergio Rossi, the first half was above anticipation. The brand unveiled Paul Andrew's first collection, massively emerging tradition with modern innovation, a collection we expect to drive fresh commercial traction in the second half. St. John successfully revived its most iconic archival designs and collaborated with golf brand Malbon on a sport-lux capsule, blending classic knitwear with modern aesthetics.

And finally, Caruso, added new first-tier Maison accounts while maintaining strong relationships with existing clients, and generated excellent press coverage at Pitti Uomo. Our priorities for the remainder of the year are clear and action oriented as outlined on Page 6.

First, we have strengthened brand leadership to ensure disciplined execution. At the brand level, teams have been reinforced with several key appointments, including a new Deputy CEO at Wolford. At St. John, we promoted internal talent to the roles of Chief Commercial Officer and Chief Operating Officer alongside the appointment of a new Chief Merchandising Officer.

These promotions not only recognize the strong capabilities within the organization but also underscore our ability to expand responsibilities from within, while positioning the brand for its next phase of growth.

Second, we continue to drive efficiency by streamlining operations and optimizing our retail footprint. In the first half, we rightsized 29 underperforming stores and will continue a comprehensive review of our network while further evaluating brand image and retail productivity.

Third, we remain focused on protecting free cash flow through disciplined working capital management and rigorous cost control. And finally, we are deploying targeted marketing initiatives to boost traffic in conversion with the launch of the highly anticipated collections from both Lanvin and Sergio Rossi in the second half of 2025. Expected to inject renewed growth momentum across the group.

With that, I'll hand it over to David to take you through our financial and brand level performance.

Thank you, Andy. I'm David Chan, Executive President and CFO of Lanvin Group. I'll be walking you through our first half financial at group and brand level.

Page 7 provides a snapshot of group's financial performance. Our revenue in the first half was EUR133 million, down 22% year-on-year, reflecting softer market conditions and the planned creative transitions.

Gross profit margin declined by 400 basis points to 54%, primarily due to the sell-through of prior season inventory. Contribution profit margin and adjusted EBITDA margin decreased by 7% and 14%, respectively as lower revenue impacted operation leverage. However, these effects were partially mitigated by cost actions. Importantly, these measures preserve flexibility and position us to capture momentum in the second half of this year.

Page 8 highlights the sequential improvement we saw in the second quarter, which supports our confidence for the back half of the year. Most brands show encouraging signs of recovery in the second quarter. Lanvin and Sergio Rossi's DTC revenue grew by 46% and 16% quarter-over-quarter, respectively.

Wolford's gross profit margin expanded by 1,673 basis points and Caruso saw revenue growth of 11%. These results demonstrate that our operational initiatives are gaining traction, while St. John maintained steady performance throughout the entire first half.

The revenue bridge on Page 9 shows the evolution of our top line from 2021. The ongoing macro industry-wide challenges were the leading driver of the revenue decline in first half 2025. In the context of a broader luxury market slowdown and creative transition, the group has made a proactive decision to advance its strategic repositioning across geography and product assortment.

Last year's logistic issues also had a residual effect on Wolford's performance, but the business is now in recovery. Looking ahead, the additions of new creative talent at Lanvin and Sergio Rossi will be the key driver for growth in the second half.

Page 10 breaks down our revenue by geography and channel. From a regional perspective, all key regions saw declines with EMEA and Greater China facing the most significant headwinds, while APAC resulted -- also reflected our planned strategic repositioning. By channel, both DTC and wholesale were down. Specifically, we saw major softness in wholesale for EMEA and cautious consumer sentiment in Greater China.

On Page 11, we delve into our margin performance. The 400-basis point reduction in gross profit margin was driven by several factors. Sell-through of prior season inventory with creative transition, underutilization of production capacity and product mix changes.

Contribution profit was pressured by lower revenues. Though we took measures to reallocate marketing investment towards higher return initiatives, critically, all brands aggressively pushed G&A cost reduction measures to offset marketing weakness. The decline in adjusted EBITDA to negative EUR52 million was a result of this negative operational leverage, though our cost discipline helped prevent a larger drop.

Page 12 and 13 detail our successful efforts in rightsizing our operational expenses. Since first half 2023, we have made significant strides in reducing G&A expenses across the board. As you can see on Page 13, Wolford reduced brand level G&A by 27%, Sergio Rossi by 25% and St. John by 35%. This disciplined approach to managing our cost base is fundamental to navigating the current environment, improving our path to profitability.

At Lanvin, G&A expenses were EUR17 million in first half 2025, up from EUR14 million in first half 2024, but still 15% lower than first half 2023. The year-on-year increase primarily reflects investment in creative development, specifically research and sample costs related to Peter Copping's debut collection. These are strategic investment aimed at positioning Lanvin for long-term growth. Excluding these planned spend, Lanvin's underlying cost base are -- also reflects improved efficiency.

Our retail optimization strategy is nearing completion. As shown on Page 14, we are ongoingly upgrading our store network through disciplined new openings in flagship locations and rationalization of underperforming stores.

In the first half, we streamlined 29 stores, creating a more focused and productive footprint. This sharper portfolio not only significantly improves the efficiency of our operations but also positions us for stronger brand equity and sustainable value creation.

Looking ahead, as I outlined -- as we outline on Page 15, our focus remains on driving cost efficiencies, marketing optimization and brand enhancement. We will continue to implement our action plan to further reduce cost and improve margins. Our approach to marketing and footprint review will be highly tactical, focusing squarely on ROI.

And finally, we will build the brand story and desirability at Lanvin and Sergio Rossi with their new creative leaders which we believe will be a powerful catalyst for growth. I will now move on to the brand results for the first half of 2025. Lanvin's revenue in the first half declined by 42%, primarily due to weak wholesale demand in EMEA where clients adopted a wait-and-see approach ahead of Peter Copping's debut collection.

Despite this, EMEA retail remained highly resilient. And in the second quarter, the successful launch of our marketplace model drove a 46% increase in DTC revenue and supported a notable rebound in North America e-commerce.

Gross margin also improved sequentially from 52% in the first quarter to 57% in the second quarter, reflecting stronger retail dynamics and early benefits of our optimization efforts. For the half year as a whole, gross margin decreased by 366 basis points year-on-year, primarily due to product mix changes and our ongoing retail network optimization.

While the revenue decline pressured contribution profit, diligent cost saving initiatives cushioned the impact and we continue to invest in Peter's vision, which is integral for -- to our long-term strategy. Looking to the second half, our initiatives are focused on a powerful launch of Peter Copping.

We will execute a global integrated marketing campaign for the debut collection, amplify reach through targeted social media and e-commerce activations and drive in-store traffic with refreshed visual merchandising and clienteling events. We'll maintain cost discipline. We're reinvesting in -- savings into product innovation, flagship location and strategic digital partnerships.

Moving to Wolford on Page 18. Revenue was down 23%, reflecting the residual impact from last year's third-party logistics transition. However, within this figure, is a very positive story. The wholesale channel demonstrated strong growth of 14% in the period, driven by our strategic emphasis on partnership. The DTC decrease of 35% is a result of our active rightsizing of our retail network.

Gross margin for the half year decreased due to the under-absorption of fixed cost -- production cost during the recovery phase and the planned liquidation of excess stock to improve inventory health. Encouragingly, the second quarter showed strong progress, with gross margin improving from 49% in the first quarter to 65% as inventory clearance was completed and production efficiency strengthened through higher capacity utilization.

Another key achievement was an 18% reduction in G&A expenses, underscoring Wolford's commitment to operational discipline. Looking ahead to second half, Wolford will celebrate its 75th anniversary with a dedicated brand push that builds on essential focus. The campaign will spotlight iconic products at the core of its branded DNA while further optimizing the assortment. We will also continue to explore expansion opportunities in emerging markets, particularly in Middle East and APAC building on momentum from the recovery.

On Page 19, we look at Sergio Rossi. Revenue fell 25% as customers held off on purchases in anticipation of Paul Andrew's first collection which is set to hit the market in the second half. We were encouraged, however, by a strong quarter-over-quarter rebound in Q2. The retail sale was up 17% and e-commerce was up 10%.

Gross margin decreased by 9 percentage points due to markdowns related to product mix changes and underutilization of production capacity. The second half will be the transformative period for Sergio Rossi. The focus will be on leveraging Paul Andrew's new collection to reinvigorate the brand.

We plan to expand the wholesale channel by proactively seeking new partners, continue driving cost control to improve operational efficiencies and reinforce our presence in core regions while making a targeted push into the US market.

Turning to Page 20 for St. John. The brand demonstrated exceptional resilience with revenue remaining nearly flat in a volatile environment. Its core North American market, which accounts for 98% of revenue, grew by 4%. The wholesale channel rose 11%, reflecting successful strategic key account partnerships, notably with Nordstrom.

The brand maintained a stellar gross margin of 69%. Supported by consistent full price sell-through, contribution profit margin was also steady, decreasing by only 38 basis points. For the remainder of the year, St. John will continue to refine its key channels to improve conversions and boost sales. We will stimulate the e-commerce channel with newly onboarded talent, creating more seamless product mix to enhance design and merchandising processes and optimize the supplier mix to mitigate geopolitical risk and improve cost efficiency.

Finally, let's review Caruso on Page 21. Revenue declined by 11%, primarily due to a slowdown into Maison business which is undergoing a broader reset phase in the luxury market. Importantly, the proprietary Caruso brand showed continued growth in order intake.

Gross profit margin remained resilient at 29%, and contribution profit saw only a slight decrease amid the market headwinds. In the second half, Caruso will support the relaunch of selection the AAA Maison lines through collaboration with their new creative directors.

The brand will also focus on acquiring new wholesale accounts in expanding markets like USA, Benelux and DACH, and will continue to optimize its cost structure to improve operational efficiency.

At this point, I'd like to have Andy provide some final remarks.

Great. Thank you, David. The first half of 2025 continued to present significant headwinds for the global luxury sector. Despite these persistent challenges, our focus remains unwavering. We maintained strict cost discipline, advanced our strategic creative transitions, and laid the groundwork for future growth.

While top line results reflect the difficult market environment, we are encouraged by the clear signs of recovery we saw in the second quarter across several of our brands. Our brands are taking decisive actions tailored to their unique market positions, and we're confident in their plans for the second half and going forward.

Thank you again for your time and support, we will now open the line for questions.

We will now begin the question-and-answer session. (Operator Instructions)

There appear to be no questions at this time, and this concludes our question-and-answer session, which also concludes the conference call.

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