Brunello Cucinelli (Milan:BC) Q2 2026 Earnings Call

0:00 Good evening and welcome to the presentation of the First Half Results twenty twenty six H1 twenty twenty six Results of the Fashion House, Brunello Cucinelli. Speakers will be Brunello Cucinelli, the Executive Chairman and Creative Director Luca Lisandroni, CEO Ricardo Stefanelli, CEO Dario Pipitone, CFO Moreno Charapica, Co CFO, Senior and Pietro Arnabaldi, Investor Relations and Corporate Planning Director. In order to receive help from an operator during the conference call, you can press star followed by 0. Now I'd like to give the floor to Brunello Cucinelli. The floor is yours. So here we are. Good evening. It's slightly hot here. Actually, are pushing 40 degrees Celsius.

0:49 So good evening and welcome to all of you. I'm sure you're all a bit exhausted because it's been a full week of reporting, but I'm particularly pleased in general. It is the first time we are presenting the full half year results as of July 30, because we've always broken down in two, but we were able to do so and we are particularly pleased. So I want to thank the team who made this possible. So the call will play out as follows: I will take you through the key highlights, Dario, our CFO, will provide more details, more colors, Then I will share our detailed view on the final outlook for 2026 together with good visibility on 2027 as we have almost completed the SpringSummer twenty twenty seven menswear and womenswear order collection.

1:46 And honestly, it concluded with excellent results. Luca will then provide you with a global overview of our markets. Ricardo will speak to you briefly about factories, they're all fully operational and also he will talk about the new European regulations concerning the disposal of end of life garments. Finally, I will discuss our wonderful e commerce project and our Calimacus platform in which my friend, Bartenio, at Salesforce has invested, describing it as innovative and capable of rethinking digital experiences through AI. Let me read out. So excellent results, which allow us to slightly raise our revenue growth estimates for the full year.

2:34 We therefore expect growth at constant exchange rates of between plus 10% and plus 11% in 2026 compared to an initial estimate of 10%. In the first half, the very significant increase in revenues is accompanied by an improvement in profitability and by the confirmation of a solid balance sheet structure. Revenues as June 30 at equaling EUR749 million, up 13.3% at constant exchange rates and 9.5% at current exchange rates. Retail channel up 19.3% at constant exchange rates with a double digit increase across all reference markets and a very positive second quarter plus 18.6% constant exchange rates.

3:28 The wholesale channel also confirms a solid trend in both quarters with a rise of 2.7% at constant exchange rates as of 06/30/2026. Growth widespread across all geographies with revenues at constant exchange rates up by 20% sorry, point 6% I said that I would not read the decimals, but I'm reading them with a 20.6% in The Americas, 5.3% in Europe, plus 14.1 in Asia and particularly significant the contribution of China. Well, is 13%, mind you, this is very important to remember. EBIT equaling CHF 128,200,000, up 12.6% compared to the first half of twenty twenty five with a margin of 17.1% rising from 16.6% as of thirtieth of June last year. Net profit equaling EUR78.2 million, plus 2% compared to June 30 with an incidence of 10.4% of revenues.

4:34 Investments standing at EUR57.2 million with an incidence of 7.6% compared to CHF63.5 million last year, incidence of 9.3%. Commercial investments are on the rise, whereas production investments decrease following the full completion at the end of twenty twenty five of the new factories and of the expansion of the Solomeo headquarters. The greater part of the investment plan envisaged for 2026 was carried out in the first six months of the year. Net financial debt for the core business equaling million compared to GBP197 million at 06/30/2025. We confirm the expectation of quite a significant reduction in debt by the end of the year compared to the levels of 12/31/2025, supported by the cash generation expected in the second part of the financial year and by the timing of the 2026 Investment Plan, concentrated mainly in the first part of the year.

5:39 Then sales campaign, this is another important point. So SpringSummer twenty twenty seven sales campaign, the collection of orders for men's is close to completion and that for women's is currently underway with extremely positive feedback for both collections. So aware of the solidity of our business model and of the pleasant atmosphere that we continue to feel around our brand, we envisage a healthy revenue growth of around 10% for 2027. Significant recognition of the technological value on the international development potential of the artificial intelligence platform developed by Solomay AI called Calimachus with important investment by Salesforce, world leader in AI based CRM solutions.

6:33 Now, my quote. So we closed the first half of the year with results that we view as truly, truly outstanding. We have the impression that the brand is enjoying exceptionally favorable momentum across the world with our boutiques embodying our stylistic identity, our way of working and also our way of engaging with others and the lifestyle in which we have all This genuinely rewarding way of working allows us to experience the variety of true luxury to which we have always aspired exclusive yet gracious, a luxury defined by products outstanding quality, exceptional craftsmanship and genuine exclusivity.

7:21 Order intake for men's and women's SpringSummer twenty seven collections has been excellent. Equally encouraging has been the start of sales for the FallWinter twenty six collections now available in our boutiques. Encouraged by these highly positive indicators, we are raising our guidance for full year 2026, increasing our expected growth from 10% to ten-eleven percent. We also remain highly confident about 2027 when we anticipate delivering healthy growth of around 10%. Now Dario will give you the finest details. Thank you Brunello. So I would use the analyst presentation analyzing the main financial economic performance in the first half. As already anticipated by Brunello when commenting on the press releases, revenues amounted to EUR 7 and 49,400,000, up 13.3% at constant exchange rates and 9.5% at current exchange rates.

8:32 We reported very solid growth across all geographies and across both distribution channels. Thanks to the strong revenue performance, and Luca will comment this more in detail later, the income statement on Slide 17 shows an overall balanced structure in terms of margins and costs, with EBIT increasing by 12.6%, growing more than proportionally compared to revenues and reaching million corresponding to a margin of 17.1% of revenues. Net profit €78,200,000 or 10.4% marginal revenues. The first margin at 75% of revenues increased by 50 basis points compared to the previous period in terms of revenue incidences. Improvement is mainly attributable to the sales mix achieved during the period.

9:29 As to the channel mix, we refer to the positive contribution of the growth of the retail business whose incidence in the two time periods went from 63.7 in 2025 to 66.7 in June 2026. As far as geographies are concerned, the positive contribution mainly comes from the growth reported in America and Asia, which are the regions characterized by a markup structure that is more supportive of the first margin. It is however important to underline that this effect becomes neutral at EBIT level due to the related commercial costs which in these same regions are also proportionally higher. Operating costs, excluding depreciation, increased by 8.7 compared to the first half of the previous year and reflect the continued growth of our Fashion House.

10:30 So Slide 19, to have more color on the main costs, rents, personnel and communication. So we can say that personnel costs as of 06/30/2026 amounted to million, representing an increase of 10.2% with an incidence in line with 06/30/2025, 18.5%. Our Human Resources amounted to 3,543 full time equivalents, an increase of two sixty FTEs compared to June last year. This increase is down both to the targeted expansion of our retail network following the opening of new stores, store expansions and Casa Cucinelli realized from the second half of last year until June 30 and to the development of our production structure, both in terms of direct manufacturing personnel and the teams managing and coordinating our extensive network artisans and supplies of precious raw materials.

11:41 Rental costs net of the effects deriving from the application of IFRS 16 amounted to EUR117.3 million up 12% compared to EUR104.7 million of last year. This increase is mainly ascribable to the new and selected openings as well as expansions carried out during the second part of the year and some contract renewals. And then to conclude communication investments amounted to EUR45.8 million, up 3.1% compared to EUR44.4 million last year with an incidence that went from 6.1% of revenues last year to 6.5% this year.

12:30 The planning of our marketing activities foresees, as Brunello was saying, a greater concentration of events in the second half of the year. Therefore, we expect the related incidents on revenues at year end to be higher compared to the figure reported in the first half. To conclude with depreciation and amortization, as a result of all this, EBIT amounted to EUR128.2 million, up 12.6% with an operating margin of 17.1% compared to 16.6% last year. Following this improvement in operating profitability, Answer Financial Management showing net financial charges of EUR18.4 million due to a significant reduction in foreign exchange gains with together with a tax rate of 28.8% which we consider a healthy level for an Italian Italy based company. Net profit at 06/30/2026 amounted to EUR78.2 million, 10% of revenues.

13:37 Before completing the income statement, I would like to briefly return to the comment on financial management with the support of Slide 20, where we have included the usual breakdown highlighting. The component that we could define as recurring, which is the basis on which we can project our expectations for the year, a component related to the foreign exchange fluctuations and an additional component including the effects deriving from hedging activities and equity investments. The ordinary and recurring component amounted to EUR20.1 million and showed a slight increase compared to the previous year, the million, mainly due to higher net financial charges related to the characteristic net financial debt, which we will comment on in more detail later.

14:29 Now Slide 21. Now I will comment the main balance sheet items, some comments on net working capital, investments and net financial debt. Net working capital, including net current other current assets and liabilities amounted to EUR 3 and 17,600,000, corresponding to 21.6% of rolling last twelve months revenues as of 06/30/2026 compared to EUR 22,600,000 year and EUR 22.2% last year June and this 22.2% this time about 2025. Looking at the individual components, trade receivables show a slight increase of 6.8%, mainly ascribable to the natural evolution of the business and the timing of some shipments related to the fallwinter twenty twenty six collection.

15:21 We consider our trade receivables to be extremely healthy, both thanks to the quality of our overdue receivables with the level of receivables outstanding beyond ninety days showing a significant reduction compared to both December and June and due to the very limited levels of losses recognized in the income statement, which were virtually negligible during the first half of the year. Payment terms towards suppliers, collaborations and external consultants remained unchanged with trade payables amounting to EUR171.6 million, slightly lower compared to previous periods. Inventory incidence on rolling last twelve months revenues stood at 28.6%, substantially in line with both June 30 and December thirty first, twenty twenty five, twenty eight point two. This is a level that we view as healthy and consistent with the ordinary requirements of our business model.

16:21 Net other current assets and liabilities showed a negative balance of EUR42.4 million at 06/30/2026 compared to EUR9.7 million at 12/31/2025. This change is mainly ascribable to the fair value measurement of derivative instruments used to hedge foreign exchange risk and related fluctuations as well as changes in the balance of tax receivables and tax payables. Moving on on investment on slide 22. As of 06/30/2026, 57.6% of our revenues vis a vis 9.3 of the previous year and represents the majority of the investment plan expected for full year 2026 and they amounted to EUR57.2 million.

17:13 In detail, million in significant commercial investments increasing compared to EUR32 million last June. Then CHF11.6 million in industrial investments, showing a significant reduction compared to CHF25.2 million at 06/30/2025, mainly as a result of the completion of the twenty twenty four-twenty twenty five two year investment plan aimed at strengthening our highly artisanal production capacity. And this plan will provide us with the production spaces and premises required to cater for our growth over the next ten years. The remaining approximately EUR 8,000,000 almost entirely related to important technology investments. To conclude, characteristic net financial debt on Slide 23 amounted to EUR225.1 million vis a vis EUR197.2 million last year.

18:10 The increase is down to the changes in net working capital during the first half of the year together with the concentration in the first half of the year of the investment plans for 2026 as previously mentioned and the payment of dividends mainly carried out during the second quarter for a total amount of EUR73.7 million. Thank you very much for your attention, Brunello. You have the floor. Thank you. Well, now let's come to the final 2026 outlook and I'd like to remind you that we always would like to focus on absolute luxury segment as to what we're going to say pertains to this segment.

19:04 In light of our first half results, which exceeded our expectations and considering the excellent momentum of our brand, we are raising our year end estimates and we expect growth at a constant exchange rate to be between 1011% compared to an initial guidance of 10%. Foreign exchange as of the end of the year it is expected to be around 1%, but throughout our history as a listed company since 2012, the average impact both positively and negatively has been approximately 0.5%. EBIT is expected to improve reaching around 17%. Investments are expected to be around 6% as all of our production related investments have now been completed and this is going to be true for the next three year period, investments in image and communication will remain consistently between six and seven percent per year. Over the next two years, however, we will be presenting the movie in many different countries.

20:09 However, the full production cost of the film was entirely expensed over the previous three year period and we're very happy with that. Net financial position is improving accounting for eleven-twelve percent of revenues compared to 14% in 2025. Let's now move to the outlook for 2027. We provide you with this outlook because we already have collected orders. Anticipating what Luca and Ricardo will share with you soon, we'd like to give you our initial view for 2027. Having almost completed menswear the and womenswear order collection with excellent results and having received the feedback and the collection both from our valued multi brand partners as well as from national and international press, we expect another year of healthy growth of around 10%.

21:12 Well clearly assuming no change in our strategy. As you can well understand, for the time being we are very happy. Now Luca has the floor. Thank you very much. I welcome you all. As Dario said, we believe we've just closed another very good quarter. Sales growth has remained very consistent throughout individual months with a well balanced performance both across geographies, products, categories and for a perfect balance between menswear and womenswear and these are factors that reinforce our confidence that our growth is solid and sustainable.

22:00 I can also say that sales in July have continued to follow this very positive trend. Luca, pay attention to your pace for the translation. As we review our first half results and mindful of all the recent announcements made over the past few days, I will try to be even more concise than usual so as to leave more time for your questions. I'd like to draw your attention onto three figures that are particularly meaningful to us. Well, first, retail performance plus 19% in the first half and plus 18% in the second quarter. Excluding the impact of The Middle East, the two quarters were virtually identical, both delivering very strong performances. Second, the outstanding results achieved by our online boutique following the launch of the website were 7% of total revenues, again thanks to Callimachus.

23:00 We see direct e commerce business that accounts for approximately 7% of total revenues and we also see an indirect effect on brick and mortar stores with an increasing number of existing and new customers coming to the store with pictures drawn from our website. And then we have the performance of China and The Americas, both of which recorded growth of more than 20%. Let's now get into the details of that. Well, as far as retail is concerned, this season has been truly important for us. The collection had an outstanding quality as we said earlier this year.

23:47 The retail network that remains young and dynamic both in terms of locations and people and which in our view continues to offer significant and healthy potential for organic growth. Comparable store sales were very strong. As for new store openings and store expansions, will they have fully met our pre opening expectations and I'm referring not only to the openings completed early this year, but also to those taking place in 2025, which have had a more meaningful impact on this first half performance. Among these, I'd like to highlight the Paris and Los Angeles boutiques that have quickly established and have become the most important stores in our network.

24:39 Then as a reminder, the new website has created a significant value, the new functionalities have made a strong contribution delivering an experience that is increasingly effective, engaging and aesthetically refined for our visitors. All key performance indicators have been positive, the number of visits continues to increase, the average time spent on the site has nearly doubled, the number of orders has increased and the average order value has increased as well, with our digital customers purchasing behaviour becoming increasingly similar to that of customers shopping in our physical boutiques. Let's come to geographies now, China first. As you know, China accounts for approximately 13 to 14% of our total revenues, however the absolute contribution of our retail business in the region is becoming increasingly material quarter after quarter reaching levels that are comparable with those of our major geographies.

25:37 We also believe that this is a particularly important moment for us in China for three reasons: First, according well, apparel is growing at roughly twice the pace of accessories and there is an important article Business for Fashion and a study carried out by McKinsey and this report highlights that Chinese luxury customers that are increasingly seeking high quality products that are recognizable only to a small and knowledgeable audience, so they are focusing on high quality products but for a small audience, very exclusive.

26:25 If we look at ourselves, at our brand, we think that our brand and remains perhaps more than anywhere else young, fresh and synonymous with authentic luxury. So we believe that the coming decade will be very important for us in China. We have often spoken about significant opportunities that we see in this market that start materializing in this country. Our focus continues to be on China. So 2026 is the year of Shanghai with the opening of Cucinelli in September and for the expansion of our boutique at Faiza 66 which is already one of our most important stores in Asia and in 2027 we will instead strengthen our positioning in Beijing with the expansion of our China World boutique and another important opening.

27:25 Let's now come to America. There are three trends: an increase in average spending on luxury, a growing concentration of spending at the very top end of the luxury segment and the emergence of new luxury destinations with a broadening up of footprint. We opened new boutiques in Nashville and Naples reflecting the trend of the American luxury market becoming increasingly widespread and locally driven. From a strategic viewpoint these opportunities are very attractive because it enables us to serve new groups of customers while strengthening our high end brand positioning and the relationships with our customers. Our boutiques continue to perform very well across North America.

28:14 Neiman Marcus, Saks and Bergdorf have definitely moved beyond the period of financial uncertainty. With them we closed a very positive first half both in terms of our sell in performance and more importantly our sell out performance to end customers. The second quarter was stronger than the first, supported by a gradual improvement in product availability across the stores and especially thanks to customer loyalty that is very strong across all the three department stores and so we are confident about the central role that these department stores play within The US luxury market Payments on time, operations smooth. So these are the three major highlights: digital, China and Americas and retail.

29:09 So we attach great importance to the performance of our wholesale channel and to the results achieved in Europe. We closed the first half with a growth in Europe of 5.310% in European retail, further confirming the strategic importance and the strength of this region within our business. 2.7% growth for wholesale in the six year period in line with our expectations and in line with our idea of creating value over the long term and our customers are in good shape, they are modern and fully understand how strongly we believe in the contribution they make to the long term strength and longevity of our brand and so they are equally aware of the high standards we expect from them both in the physical stores and on the digital platforms. One final important piece of information as far as sales are concerned, so it's a good growth both value wise and in terms of volumes.

30:17 If we focus on the value wise growth, well we see that the search for high quality garments, exclusive garments on the one hand is important and also the recognition of our brand in this high end segment. When we look at our product offering there are some categories like menswear and womenswear, tailoring, maids for leisure, outerwear, dresses, couture, knitwear and pants, trousers and skirts, we see that there are important opportunities for the future. A couple of words on the income statement as Dario commented on: we are very pleased with the improvement in profitability.

31:15 Casa de Modo is going through a phase of healthy expansion managed with great discipline. As you can see, the increase in the first margin outpaced the growth in rent and personnel costs and so this confirms that gradual investments released the growth in revenues thus managing costs. So we think our company has become stronger but at the same time has remained lean. Then the foreign exchange impact 1.5% in the second quarter and we aim at reaching full neutrality in the second half.

32:08 We look at the second half with confidence, we said July has been very successful, we're very confident in the products offering that will be delivered to the stores in the second part of the year and we also had very positive feedbacks on the fallwinter collections upon presentation. We also have a store opening plan besides Casa Cucinelli and the expansion of the Place 66, we will open The Grove in Abu Dhabi and we will expand Geneva boutique. As for events, will go on with family events, are special occasion for us. We will also have important events, three. One in September, the official opening of the Saint Honore boutique in Paris accompanied by the French premier of the film. In October Shanghai with the screening of the film following the enthusiastic reception that Brunello received at the Shanghai International Film Festival and last but not least in December Brunello's tributes to the world of cinema in Los Angeles. We will also go to Tokyo in October.

33:29 Well with that I'd like to say that we really look forward to closing another record year for our company, so record high revenues, but a year which is also rich in value and meaning for our brand. Thank you very much, thank you. Ricardo. I will be very brief. I have three updates for you. Over the past few days we successfully completed the delivery of our FallWinter twenty six collections with outstanding punctuality and exceptional level of craftsmanship that has always distinguished our work and this is thanks to the efforts by the creative team, workshops and in house tailoring workshops and the 400 Italian artisan workshops employing approximately 9,000 people.

34:29 With them we have a direct relationship without any intermediaries and we work with them on a daily basis. During our daily interactions we meet them twice a year and in mid September we will once again meet them to share our production plans for 2027 and this takes place during every season, this confirms production model with a high level of craftsmanship on the one hand, so we have great flexibility and speed. You know how important speed especially in replenishment, well, for the replenishment of important items.

35:17 Second update as far as the industrial investments are concerned, we concluded everything in 2025, we're very happy and we are extremely pleased with the workplaces that we've created, around people and around the quality of their work. These spaces will provide us with the production capacity required for the next decade. And you know that we are particularly pleased to continue receiving job applications for manufacturing workflows and this confirms that the place of work and a fair consideration are the key elements for blue collars.

36:02 Last but not least, a short reflection on the new European legislation and we are favourable because the new regulation prohibits companies in the textile industry from destroying the unsold garments, we embrace this regulation with great conviction, not so much because it changes the way we operate, rather because it recognises a principle that is deeply rooted in our values, that is the idea that a garment has a value that must be preserved. Well, historically we've always allocated approximately two-three percent of our production to donations in support of people in need throughout the world.

36:48 Building relationships with small organisations around the world, even small organisations this is very important. During the COVID pandemic we did something particularly meaningful and special By donating the Unfold product from our boutiques, we launched the Brunello Cucinelli for Humanity project. This initiative continues today and currently accounts for 4% of our garments. In addition, a further four to 5% has always been allocated to purchases by our employees and their families and we offer a significant discount of the retail price giving them the opportunity to wear products that they would otherwise not be able to purchase. Here too we are strongly convinced that a high quality garment should continue to be experienced, worn worn and passed down over time. So we're very pleased with this new European regulation, which we see as an important step towards the culture of quality responsibility, product longevity, values that belong not only to our Casa de Moda, but also to the culture of Italian craftsmanship.

38:00 Thank you very much. Well, I believe we still have five minutes, so at least we have five minutes, fifteen minutes for questions. This Calimitas is very important, a very important project for us. We held a conference, press conference the other day, and Palimaplex is a platform that redefines the digital experiences in the AI era. And we basically signed an important investment agreement from Salesforce in Italy and Europe. You know, it's an important investment for them. But I'd like to read what Mark Benioff said, the chair and CEO of Salesforce. So Brunello has always believed that technology should elevate humanity, and this belief is at the heart of Calimicus.

38:54 We like this very much. The team has developed an innovative platform that reimagines through AI the digital experiences combining conversational capabilities, business context and real time personalization to create entirely new ways for companies to engage with their customers. So we are proud to collaborate with Brunello and the Solome AI team paving the way for a new generation of artificial intelligence powered experiences. Then, of course, where the transaction falls within the scope of the Italian golden power needs to be submitted to the, presidency of the council of ministers.

39:46 Now, to summarize, we believe that our brand is currently experiencing a very positive tempers, a moment of great global momentum. Perhaps we can say that at this particular moment, our brand is truly cool, and, you know, this is the way fashion works. We are positioned in true luxury, and you should never this is important. You should never expect us to introduce entry level, entry price products. Everything continues to revolve around the single brand, Brunello Cucinelli, no second brand, third brand acquisitions or nothing. So now I would like to talk about luxury for a minute. When I started this journey forty eight years ago and until approximately twenty five years ago, the market was traditionally divided into luxury, the number two upper middle segment, middle segment and lower segment.

40:38 Then, during one of the first medias of luxury held in Milan about twenty five years ago, attended by my esteem Sergio Loropiana, a stylish friend who is moreongo with us, Muppi Solari, a wonderful owner of the wonderful boutique on L'Amonte Napolione and another Italian entrepreneur and myself. And the topic was luxury. At one point, this entrepreneur took the floor and said that he had acquired a knitwear fabric in Umbria, producing sweatpants at €20 and he defined this as accessible luxury. You see, myself and the other attendees, we basically all looked at each other a bit puzzled, but that's the way he called it. From that day onwards, the discussion revolves around three different categories: absolute luxury, aspirational luxury, accessible luxury always with this Pyrenees that is sometimes very questionable.

41:33 So to conclude on this extremely important topic, we believe that true luxury is a product that is of exceptional quality, the result of outstanding craftsmanship and exclusive in its distribution, and I believe that the theme of exclusivity is central for the future. Finally, the image of Stolomeo is of the utmost importance to us, as it embodies our vision of how to live and work and we hope it conveys a sense of authenticity, simplicity and spirituality. A place company where one can enjoy an experience that is above all deeply human. You should consider that we have about fourteen, fifteen thousand visitors every year.

42:19 And you see, I'm busy even on Saturdays and Sundays. I see them strolling through the village. So before concluding, I would like to recall that during our April call, we spoke of the wonderful atmosphere felt throughout Milano, Codecioni, you know, shared by buyers and journalists alike. And because there was this desire about these new proposals across many brands following the 26 collections. Now, you know, we all discussed this topic. After this busy week of half year results presentations, which have given us energy and renewed conviction, we have the feeling and want to share it with you that overall we are moving towards a positive phase, one that lifts our spirits and gives us fresh momentum.

43:21 So how do we work and what about our current situation? Our total focus must be on the product always and this product must be new, contemporary, modern, and youthful. And it needs to have a right balance between price and value while fully acknowledging that we create garments that are costly and at times very costly. Everything goes out of fashion quickly. It has always been written so in every dictionary even those dating back to the seventeen fifties. And as you know fully well, we do not believe in evergreen products Because even the navy blazer this season is one and a half centimeter longer than the previous season and it is not an evergreen.

44:09 With this awareness, we will focus and equal serenity. Knowing that true creativity arises from mutual esteem, respect for others, the courage to listen or to differing views. If there is this, we can definitely say that that's where true creativity is. We can now open the floor for questions. You should also know that we never adopted the work from home or working mode because we believe that when otherwise you lose collective creativity, there is a blurred boundary between private and business and work life and young people do not learn at all. And now we have time for questions.

45:05 Chorus Call operator speaking. We will now start the Q and A session. Please ask your questions speaking into your microphone. Whoever wants to ask a question, press star followed by one now. The first question is from Chiara Baptistini, JPMorgan. Thank you and good evening. So my first question is on the update of the guidance up to 10%, 57% for the year.

45:56 Given how the first half performed, does this show a slowdown in the second half of the year? And also given the positive comments in the industry, I was wondering how did you come up with this guidance? And how is the second half of the year going to perform? The second question on the second quarter performance in Asia, because in my calculations, I see a slowdown in growth, 11%, without considering the impact of ForEx. It was 18% in the first quarter.

46:42 I heard the comment on China that is still growing So can we have some color about this slowdown? And the third question is a higher level question about your discount policies, especially on third party platforms. So I was wondering if you can share with us how you monitor the goods sold at a discount in order to counter excessive discounts. Thank you. So as to the first question, you see there is the the war going on. You don't know how things will be going, so we prefer to move this way because every day is different.

47:32 Luca. As for Asia, Tiara, we should consider the effects of the war and we see no slowdown in the rest of the Asian continent. You should consider that as far as The Middle East is concerned, it gave a positive contribution in the first quarter and it couldn't do in the second quarter. But we did see in the second quarter, there was a good progress towards a recovery, also favored by a higher spending of the local customers. As to the platforms, Brunello Cucinelli it is an old story because you see we have the multi brands that maybe what they throw put in their platform is maybe from 5,000, €3,000 for a big sized blazer.

48:25 What is important is that even if you sell one of our items at a discount, it always ranges very high. So never sell something for a €100, €200, always a very tiny discount. So the number of pieces at a discount is very scanty. And since we believe that multi brands are the true guardians of our brands, I will never step back. So we all keep up with strategy because our multi brands are, generally speaking, one hundred and ten years of heritage, which means that BCUCF multi brands are much more long lived than retail stores. Thank you.

49:14 Next question by Andrea Andone, Intermontecim. Brunello. You have given a lot of useful details. I have two curiosities. The first one is on the deal with Palimachus. What I'm interested in, have you already envisaged possible improvements for the solution you devised and whether your new partner can also represent a help in adding a technology contents or if you have any plans in this regard.

50:01 The second question, if you can go going back to The US, strong numbers there and at group level, you talked about new customers, developing an interest in the brand and new cities. If you can give us an idea, because you're already quite well positioned, but do you still see room for growth in the coming twelve months? So I'll answer your question on Kalimakos. Calimacus really has been a disruptively positive change in how your approach to our product has changed and the image has changed.

50:49 It has been a game changer. You see, they are number one in the world, my friend says, for the web site. You see eight people, eight people team worked on this website. And so we told Mark, if you want this website, we can help you doing visual merchandising. But if you can with a 1,000 team people, alpha, you can definitely help. So we are really pleased because it represents the first investment in Italy, quite a significant sizable one in Europe, and innovation for the website because the website had been conceived the best in the way for the last few decades. That's a serious endeavor and also enjoying daily relations with them as we we've had this since 2015.

51:37 Well, this has given us the opportunity to learn a lot. You see, Mark would come up to us and say, what can I buy? I want a shop. And I would say to Francisco Bottigliero, the person in charge of Helimagus, we basically suggest a few things that he bought into a successful businesses, and so he as sometimes he comes for us to ask for advice. So thank you for your question. Luca speaking. Because this really gives us an idea to the reiterate a a concept. There is no mature market for us. We are not too widely distributed. This is important. I think that America is the greatest example of this because it is a market historically very important for us and we keep growing in a very continuous manner.

52:27 They very much appreciate the high rate of craftsmanship because always in, you see, in the knitwear, we have a Couture knitwear, on average, it's €15,000 for a retail item. So, we said it entails quality, style, and then there is a very undivided attention to where you manufacture your goods, how you behave in your stores, and for us, Andrea, is the most important thing. So we see a bright future ahead of us. Of course, if we have to you see the best future in the next three to five years is China. We currently have 13.5%. We have just a handful of schools, so there is room for growth there.

53:21 As you know, I always say you should speak slowly but I did not. Next question from the English conference, Maria Mehta, Bernstein. Please. Good afternoon and thank you for taking my questions. I have two. First is a follow-up from the previous question on The Americas. I was wondering if you could break down the growth coming from existing compared to new customers in the first half of the year versus last year. And then second, obviously, the movie has now been made available across more geographies. Have you or your wholesale partners seen any immediate impact on brand momentum or visibility in the sort of geographies where the movie was already launched?

54:07 Or is it more of a long term umbrella effect for the brand? Thank you very much. Thank you, Maria. Let me start from the movie. Well, we won the first Golden Globe and unfortunately, I had to travel the world, but it seems as if well, in Shanghai, it was failed and Canada, America well, the success is even higher than we expected because clearly, well, the movie describes a very important topic, the topic of work, of respect and also the topic of the origins and poverty as well, so the movie is giving us a lot of advantages and as we did earlier, well the costs have been already paid across the past three years and so we will benefit from it in the following three years.

55:23 As for customers, we are at about 400,500,000 customers, very few and we have a lot of younger customers, a lot of 40 year old men and women, so people who want to dress well and know very important personalities. We do not sponsor anyone, they are just friends buying garments. We are very happy with that development. Well, of course, I do not share this idea of quiet luxury, it's not quiet at all because you have to combine, mix and match colors in different places. So we are very happy, thank you.

56:30 There are no further questions. There is a question from the English conference, Natasha Bowenet, Morgan Stanley. Please. Hi. Thank you for taking my questions and congratulations on the great set of results. The first is regarding your Q for H1 Q2 results. Can you quantify the spacing contribution versus like for like in the first half? And then just keep us maybe give us an update on your store opening plans for the second half and next year. I believe you're converting to five Neiman Marcus stores to retail in the second half. And then my second question would be, please, if you could give us some color on order books and what your wholesale guidance is for this year and next?

57:16 Thank you. Natasha, go ahead with your questions again. Again, so in English because we cannot hear the translation, so go ahead with the English questions. Can you repeat the questions, please? Sure. I was asking if management could quantify the spacing contribution in the first half versus like for likes and then update us on the store opening plans for the second half of this year and next year. And I believe they are converting five Neiman Marcus stores into retail in the second half of this year. And then my second question was asking about to have some color on order books and what the wholesale guidance is for this year and 2027, please.

58:14 The next question from the Italian conference, Paola Carboni, Equita. Yes, I also would like to ask a question. Good evening. As for the wholesale channel that shows a significant gap compared to retail also like for like. Considering So the more rigid approach that you have at discounts and the management of unsold garments, will this lead to decrease in the channel? I was wondering where we are in terms of target and when can we expect this wholesale channel to drag again mid single digit.

59:18 Well, the SpringSummer collection is already growing very significantly. However, most importantly, Paola, the judgment on of the collection by them is very important It was the fact of knowing that collection has been charged with accumulating means that in our stores are from from January 1, but between the thirtieth, we will be selling beautiful collections. And, you know, knowing that we are going to sell beautiful collections is very important and then we never know what is going to happen. That's the true judgment of our collections. Well, for the winter collection, we asked for paying a bit more attention to the network.

1:00:04 Although, again, we don't think you will find a garment of ours for 200 or €300 on the network, so we're very happy. But as I said earlier, our multi brand stores have an average age exceeding one hundred years and I believe our brands will not survive over one hundred years. I don't know, Paolo, if I've been exhausted. Yes. A follow-up question. Compared to the total growth guidance of 10%, 11% at constant exchange rates, how do you see the wholesale channel by the end of the year? And can you give us more details on the conversion plans for spaces?

1:00:58 No, there are no such processes. We just ask, well it's better to buy 1% less than being on the network and also the guidance that we provided is consistent. We cannot hide the fact that things are going very well for us, but we shall not forget that group is in another country at all, so we have to be sincere and serene and working in a certain manner. Thank you. Next question from the English conference, Charles Louis Scotty, Kepler Cheuvreux. Please. Yes. Good evening. Do you hear me? Because it seems that there is some Okay, cool. Thank you very much.

1:01:51 Three questions for me, please. The first one, and sorry in advance, but I will focus on the region that is seeing the slowest growth. But over the past few quarters, Europe seems to have been lagging behind The U. S. And Asia. Could you confine that this is purely due to the wholesale business and that DTC trends are actually just as strong in Europe as they are in The U. S. And Asia? My second question is on margins. The margin improved significantly in the first half. Can we extrapolate the 50 bps improvement to the full year? And if I remember correctly, you had also booked €8,000,000 provision related to Saks last year. What is the current status of that provision?

1:02:38 And what should we expect in terms of its impact on the H2 twenty twenty six margins? And finally, regarding leverage, could you provide a bit more detail on the pace of the expected debt reduction embedded in your budget? And how quickly do you expect the net debt to decline over the coming years? Thank you very much. Thanks a lot, Charles. Starting by Europe, are, as I told you before, extremely confident about the health of our business in Europe. We are growing retail plus 10, and we consider a very good achievement. Considering that we have a predominant part of the European demand that is related to domestic customers and in any case we have in the first semester a positive add on brought by international tourists.

1:03:31 Regarding the provision for tax, we posted €8,000,000 at the end of twenty twenty five and is equivalent to the debt that we left. So no impact on the second part of the year. Regarding the debt Well, clearly, we've concluded we've closed big industrial investments for ten years. So in the next five to ten years, are expected to collect money because in the past few years we also invested 9% to 10% per year, but 6% doesn't mean that we are not going to invest that much.

1:04:17 So it's again quite a good amount but we no longer have the investment and that's why we think and we expect the following five years to be years of collection, so that is going to decrease by nature. Thank you very much. Next question? Melania Grieco, BNP Paribas. Good evening everyone. I have just one question.

1:05:03 So as I understood the space has contributed to the performance of retail in the first half of the year. What about the second half of the year? Can we expect a similar the space might count in the light of the new openings. I think we have an opening plan that is pretty balanced. We had a contribution from new openings in this first half. It was higher than expected And of course, now we are going towards a half where we believe that we have a great balance between organic growth and rest. Yes, you see the openings slippage is always the same, two, three towards the year, three, four expansions, that's it.

1:05:49 We would like to try and survive for the next one hundred years, always based here in the valley. I don't know whether we will achieve that, but we do plan for the longest of times because we do not believe in extreme speed, and we want to safeguard and preserve exclusivity because for us is about is that's that's what really is the key feature of that. Thank you, Melania. Thank you, and have a good holiday. Thank you. So have a nice holiday. For those of you who are going on holiday, we are very pleased that we have this call at this time of the year. I'm very, very delighted with the reporting system in general in our industry.

1:06:42 You know, very, very pleased because truth of all, I am very pleased. You can tell that we there is a recovery. There is positivity there. You see, there was a demand. There was in also in the reporting season results in the market. Well, yes. That's the and this consensus. But we can do. But then there is a positive vibes in the market, company, with an interesting creativity. So thanks again and enjoy your holidays. Thank you. Have a nice evening. Goodbye. Chorus Call operator speaking. The conference call has ended. You can now disconnect your phones.