Lanvin Group Holdings Limited (LANV) on Q4 2024 Results - Earnings Call Transcript
Operator: Thank you for joining us and welcome to the Lanvin Group's Fiscal Year 2024 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be opportunity to ask questions. 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 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.
David Chan: Thank you, and welcome to all -- 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 lay 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 milestones that position us for recovery. For fiscal year 2024, our global revenue was €329 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 G&A expenses and improved 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 implementation and bring transformative initiatives to our group. Andy's leadership, combined with new creative appointments Lanvin, Sergio Rossi signals a new era of innovation and growth. Let's take a deeper look at our 2024 results. Despite a 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 faced challenges, we are encouraged by progress in operation efficiency. G&A expenses were reduced by 15% year-over-year, a testament to our streamlined cost structure. We have also reduced directly operated stores, focusing on core and high potential markets such as EMEA for Lanvin and Sergio Rossi and North America forcing St. John. We've made significant strides in cash management with a 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 operational excellence and financial discipline. Since 2020, Lanvin Group had delivered 10% CAGR underscoring the resilience of our diversified portfolio, our brands: Lanvin, Wolford, Sergio Rossi, St. John Knits 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. Our luxury tailoring powerhouse in St. John, the iconic American luxury brand both shows strong improvements. Caruso's contribution profit increased to €8.8 million in 2024, up from €3.2 million in 2022, a reflection of our success in refined distribution strategy and growing demand for Caruso’s playful elegance in bespoke tailoring. Similarly, St. John's contribution profit grew from a loss in 2020 to €8 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 €82.7 million in 2024 more than doubling from €35 million in 2020. This growth was driven by continued investment in increasing the brands like desirability and reinvigorating is puritan heritage, while appealing to a new generation of luxury consumers. Wolford, Austrian legware and ready-to-wear innovator also may strides. We adjusted the product mix to position Wolford as a full lifestyle brand expanding beyond legwear 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 enhance 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 inflationary pressures and shifting consumer behaviors impacted our top line performance. However, we have repositioned – responded decisively by sharpening our focus on operational efficiency and cost discipline. There are three key pillars of our turnaround plans, which includes: first, gross profit resilience. Despite revenue declines, we maintained strong gross margin reflecting disciplined pricing and reduced promotional activity. Second, OpEx streamlining. We continued to reduce operating expenses since 2022, a testament to our commitment to lean operations. Last but not least is breakeven optimization. With narrow our break point through rigorous cost management ensuring our position to capitalize on revenue recovery. In 2022, our OpEx, which includes marketing, selling and G&A expenses stood at €378 million. By 2024, we reduced this to €326 million, a 14% cumulative savings over two years. Equally important is our improved cash management. Net cash used in operating activities improved by 27% since 2022, decreasing from negative €81 million to negative €59 million. This was achieved through tighter working capital controls including reduced reducing inventory days through minimizing excess stock and accelerating receivable collection. In 2024, we welcome new creative leadership with appointment of Peter Copping, as artistic Director of Lanvin; and Paul Andrew as Creative Director of Sergio Rossi. The vision and creativity are already making significant impact on our brands as seen in the positive reception of Lanvin's debut show under Peter Copping in January. I will now hand over to Andy who will provide insight into our chief in Jan [ph] 2024 and strategic priorities in Jan [ph] 2025.
Andy Lew: Thank you, David. I'm Andy Lew and I'm honored to swerve as Executive President of Lanvin Group and I'm thrilled to share our brand level achievements in 2024. Starting with our iconic flagship brand in 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, timeless elegance with contemporary artistry. Lanvin has also launched the Character Study series a bold initiative that bridges [indiscernible] and modern culture. This was further amplified by our collaboration with choreographer Benjamin Millepied who's worked on a dynamic performative edge to our campaigns. Financially, Lanvin demonstrated remarkable resilience. Despite market pressures, we maintained a stable gross profit margin through disciplined cost control and inventory optimization. The highlight was Peter Copping debut fashion show in Paris, a triumph return to elegant garnered global claim and set the stage for our fall 2025 collection. Now, let's shift our focus to Wolford. Wolford is crafting compelling brand campaigns and product names 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 collaborating like the Etro X Wolford capsule collection, emerging Italian flare with Austrian precision, not only expanded our audience but also move cultural relevance. Lastly, Wolford is enhancing the brand experience through a refreshed web shop identity and optimize 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 the view in Milan planned architecture bonus and timeless craftsmanship. Sergio Rossi its retail network focusing on key markets like EMEA and Japan. Efficiency continued to be a priority for Sergio Rossi with factor restructuring measure 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 footprint. St. John's 2024 strategy is centered on focus on jointly. We streamlined operations to prior North America, upgrading flagship stores in Beverly Hills and New York. These spaces now showcase our unique collection which marries classic knits with tech fabrics and a modern edge. Our new whole session model developed with our partnership with Nordstrom, improved margin control and brand consistency. Digitally, the revamped e-commerce performance already showing improvements in conversions. Lastly, the shift to an asset-light model including the sale of noncore products enhance our operational flexibility. Finally, Caruso amplifies resilience despite challenging luxury landscape. Not only did Caruso achieved its revenue growth in its proprietary brand business, market improvement was a standout. Positive net profit and robust cash flow underscore success of Caruso's strategy. Branded deal is growing for Caruso, thanks to high standard yet efficient content creation. Credible collaborations and trade events that resonate with your customers. Effective prototype and fashion show pieces management have also played a crucial role in this success. Proceeding to page 22, I am pleased to present our strategic priorities for 2025;initiatives 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 operation and attraction relationships with key stakeholders. Second, creative momentum. Appointment 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, operational efficiency remains the cornerstone. We’ll continue optimizing store networks, prioritizing high-traffic locations and defining 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 diversified revenue streams. At Lanvin Group, we view challenges of catalysts for transformation, put 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.
David Chan: Thank you, Andy. The year 2024 was marked by significant macroeconomic challenges yet two brands within Lanvin Group portfolio demonstrated notable resilience. St. John Caruso stood out in the midst, broader declines, leveraging strategic regional focus and operational agility. St. John's emphasis on North America coupled with its premium positioning and successful partnership with Nordstrom help 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 a measure offerings. These assess partially offset pressure seen in other brands. Lanvin grabbling with creative transitions and softer luxury demand saw a revenue decline, while Sergio 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 in 2024, we estimate that the integration of Wolford Logistics had an impact ranging from €14 million to €18 million. And the creative transition impact of between €5 million to €10 million. Shipping out these transitional costs, our 2024 adjusted EBITDA is estimated at negative $64 million to negative €73 million, a range consists with our 2023 results. This stability is notable given the significant slower demand environment in 2024, underscoring our ability to maintain operational discipline amid external pressures. I will now provide with more details on 2024 financial results for each brand. 2024, as we mentioned, was a transitional year for Lanvin. Revenue declined 26% to €83 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 in inventory management. G&A 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 second half of 2025. We are 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 declining 30% to €88 million, macroeconomic volatilities, logistic disruption and wholesale softness in EMEA weighted 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. Sergio Rossi faced headwinds in 2024 with revenue down 30% to €42 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 actions included administrative expenses reduced by 18% through cost control and appointment of Paul Andrew as Creative Director whose first collection aims to be vitalized wholesale ownership in 2025. While gross margin fell to 43%, wholesale channel enhancement and targeted regional partnership will stabilized margins. Sergio Rossi's focus on operational efficiencies and fresh designs in 2025 will be critical to recover. Moving to St. John. St. John's demonstrated resilience in 2024, while revenue declined 12% to €79 million strategic focus yielded quicker wins. Gross margin surged 6 percentage points to 69% from 63% driven by full price sell-through and a successful partnership with Nordstrom. North America outperformed, contributing 94% of revenue, while international markets were streamlined to reduce complexity. In 2025, St. John will deepen its North American focus, emphasizing its 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 navigated a tough luxury landscape with agility. Revenue decreased 7% to €37 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 at 29% with contribution profit margin stabilized at 24%. In 2025, Caruso 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.
Andy Lew: 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, Lanvin, Wolford, Sergio Rossi, St. John and Caruso, 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 Andrew'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.
Operator:
