Lanvin Group Holdings Ltd. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• New Leadership: Welcomed Peter Copping (Lanvin Artistic Director), Paul Andrew (Sergio Rossi Creative Director), and Regis Rimbert (Wolford CEO).
• Market Challenges: Faced macroeconomic headwinds and ongoing wholesale channel challenges globally in the first half.
• Strategic Initiatives: Focused on refining product portfolio, improving cost structure, and strategically expanding in new markets while culling underperforming locations. Implemented initiatives like Lanvin Lab second edition, Wolford's first Middle East store, Sergio Rossi's Dubai store, St. John's successful marketing events and new flagship, and Caruso's business development initiatives.

Segment Performance

• Lanvin: Revenue decreased by 15% to €48 million. Gross profit margin increased from 56% to 58%. Despite soft market conditions, efforts to penetrate APAC opportunity zones (excluding Greater China saw 9% growth) and improve design/planning contributed. Contribution profit remained at a loss of €9 million due to marketing investment.
• Wolford: Revenue impacted by integration issues with new 3PL, leading to shipment delays and out-of-stock situations. Revenue decreased, gross profit margin fell to 63% due to lower revenue and excess stock liquidation. Contribution profit was a loss of €8 million. Key leg wear products accounted for 38% of revenue, ready-to-wear 46%, and lingerie 15%.
• Sergio Rossi: Revenue declined by 38%, primarily due to a 60% drop in wholesale revenue affected by stagnant wholesale market and planned reduction of third-party production. Gross profit margin decreased by 2%, but contribution profit remained positive at just under €1 million.
• St. John: Revenue decreased by 14%, with North America seeing a 10% decline. Gross margin improved from 62% to 69% due to better full-price sell-through and channel mix. Contribution profit margin increased to nearly 12% from 11%.
• Caruso: Revenue had a slight decline of 1%. Gross profit margin increased from 26% to 29% due to improved in-house production efficiency. Contribution profit margin rose to 24% from 22%.

Guidance

• Second Half Focus: Continue cost efficiency initiatives, synergize cost base, and cull retail network. Invest in marketing for key brands (e.g., Lanvin, Sergio Rossi) in preparation for new collections from Peter Copping and Paul Andrew. Maximize ROI in marketing and expansion, positioning brands for growth as luxury market improves.

Risks

• Macro-economic Headwinds: Impact on the entire luxury industry, affecting top-line performance.
• Wholesale Channel Challenges: Global slowdown in wholesale environment continued to pressure revenue.
• Wolford Logistic Issues: Integration issues with new 3PL caused shipment delays and out-of-stock situations in the first half.
• Sergio Rossi Wholesale Stagnation: Stagnation in wholesale market contributed to revenue decline.

Question and Answer

• Q: How did business trend through the quarter, if there was any difference in performance as the period went on?

A: David Chan noted pressure started in the second half of last year, with a slight uptake in the first quarter, but pressure increased in the second quarter starting end of April/early May.

• Q: Difference in performance by region?

A: Eric Chan stated macro headwinds affected most regions similarly, except some markets like Japan (due to currency) and the Middle East (up-and-coming) were less impacted.