Moncler S.p.A. (OTCPK:MONRF) Q1 2023 Earnings Conference Call July 26, 2023 12:00 PM ET
Company Participants
Elena Mariani – Strategic Planning & IR Director
Remo Ruffini – Chairman & CEO
Gino Fisanotti – Chief Brand Officer
Roberto Eggs – Chief Business Strategy & Global Officer
Luciano Santel – Chief Corporate & Supply Officer
Conference Call Participants
Melania Grippo – BNP Paribas
Oriana Cardani – Intesa Sanpaolo
Luca Solca – Bernstein
Edouard Aubin – Morgan Stanley
Thomas Chauvet – Citi
Louise Singlehurst – Goldman Sachs
Susy Tibaldi – UBS
Geoffroy De Mendez – Bank of America
Andrea Randone – Intermonte
Liwei Hou – CICC
Paola Carboni – Equita SIM
Operator
Good evening. This is the chorus call conference operator. Welcome, and thank you for joining the Moncler First Half 2023 Financial Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask question. [Operator Instructions]
At this time, I would like to turn the conference over to Ms. Elena Mariani, Strategic Planning and Investor Relations Director of Moncler. Please go ahead, madam.
Elena Mariani
Good evening, everybody, and thank you for joining our call today on Moncler Group’s first half 2023 financial results. As usual, let me introduce you to the speakers of today’s call, Mr. Remo Ruffini, Moncler Group’s Chairman and CEO; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Chief Brand Officer; Luciano Santel, Chief Corporate and Supply Officer.
Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. Finally, I remind you that the press has been invited to participate to this conference in a listen-only mode.
Let me now hand over to our Chairman and CEO, Mr. Remo Ruffini.
Remo Ruffini
Good evening, everyone, and thank you for joining the Moncler Group first half results conference call. I’m very proud to say that for the first-time in our history, our revenues in the first half of the year exceeded EUR1 billion. This is a remarkable milestone achieved, thanks to the contributor of all our teams with our energy, our creativity and our hard work. The first six months of the year, group sales rose by 24% at constant currencies and accelerated in Q2, thanks to the DTC channel, which remain at the core of our strategy. Looking at our operating performance, first half EBIT reached EUR218 million with an operating margin above 19% and we have delivered a solid performance in all economics and financial metrics. I see a future with a lot of opportunity for both our brands.
At Moncler, we are delivering on our promise to develop all the three dimensions of our brand, strategy that already helped us to grow about 30% in the first part of the year. I see a great potential for Moncler Grenoble, the first full spring/summer collection was particularly well received and prove that Grenoble is becoming relevant all year around. Moncler Genius started a new chapter in February as a co-creation platform. With Genius, we are always looking for new ways to engage with our communities, especially the younger generation. We keep investing also in our main collection. And this year, we have successfully launched our first ever former summer campaign. Gino will talk more about it.
At Stone Island, Carlo and I are excited for the start of the second phase of evolution under Robert Triefus that just arrived. We are working to increase the relevance of the brand worldwide, always remain connected to its unique history and DNA. We are enforcing our team, and we have hired new talent, particularly in the marketing and the digital area. It will be a journey. As you know, in our group, we always try to do the right thing at the right time with no shortcut. As a group, we operate in a very dynamic fast evolving sometimes complex environment. What is sure is that we will continue to execute our brand first strategy, and invest in our organization, in our people to enable our brands to express their full potential.
Let me now leave the floor to Gino, Roberto and Luciano for more comments and results. Thank you very much.
Gino Fisanotti
Okay. So thank you, Mr. Ruffini, and hello, good afternoon, good morning to everyone during the call. So I think, as Mr. Ruffini mentioned, this wasn’t just another quarter for us, was a special one. And if we start talking about Grenoble, as we mentioned, this was the first time that we were able to put in place our all-around strategy. This is the first time we start the year with the beginning of spring/summer ’23, which, as we mentioned, was very well received in this idea of having more lightweight systems and layering system into the product.
And then, of course, before — just before the end of the quarter, we present for the first time our pre-fall Moncler Grenoble collection. Again, as an early fall launch, we’ve seen an incredible way to not only engage with customers, but the collections have been extremely well received. If we move on into the second dimension of the brand, as we discussed regarding Genius. We — of course, we see a lot of good momentum on this on the back of the event that happened in London at the end of February.
And I think on the back of that, we were able to launch successfully two collections during this Q2. The first one was regarding Alicia Keys at the very end of March, something that performed well and was particularly, for us, very well received in Asia as well across both for men and women despite the story and the whole collection was inspired in the 90s, when New York was seen a good reception for this in the Asian markets.
Then, of course, the second launch was a little bit more than 45 days ago regarding the FRGMT Collection with Moncler Genius. We have the opportunity to introduce a narrative around Love Is Human, something that we started in the London event in February. And I think in this case, we’re able to even work and have the opportunity to have a Korean celebrity inside the campaign who was able to help us to drive an incredible engagement, especially when we talk about social media both in the Western world and in the Asian platforms around the globe. So really good momentum on the back of Genius and the efforts that the team have been put in since the beginning of the year.
Then if we mentioned the third dimension of the brand, I think Mr. Ruffini just comment about this. I think we are happy to see our efforts in terms of leveraging the momentum of the brand way beyond winter. I think what we have seen on the main collection and the orchestration of our efforts regarding summer is the appetite and the desire of customers our brand just way beyond winter. I think what we’ve seen is an opportunity of how customers are adopting different classifications beyond our jackets, not only on lightweight propositions, but even some of other classifications like cut & sewn or even beachwear and more that was presented.
I think the reception of the campaign was strong, not only just in terms of customers, but we’ve seen a good take from media, even from the organic point that I started talking about how Moncler is moving way beyond winter. So with that in mind, I think we always want to make sure that we give a clear update regarding the three dimensions of the brand that we are focusing all our efforts again.
If we move to the next slide and more into the digital side, I think, again, a bit more good news here. I think as we discussed multiple times, it’s not just about the good momentum we can see on the revenue side, but it’s more about how we can leverage digital to truly engage customers in a different and in a more deeper way. This is why we’re seeing good results across what we call Moncler members, which are customers that are logging with us that are able to follow up in a more one-to-one relationship and have a more effective way to connect with them.
Same thing regarding the traffic. And then more importantly for us is about when we look at PDP or product views, which is the real interest from customers regarding our product. One thing to mention regarding traffic, I think it’s important to keep calling out that a good way to look at the health of the brand is looking at how much of that traffic is not only paid traffic, but it’s even organic traffic in terms of looking for the brand and finding .com as a care destination.
Then a few other call out, I think, as I mentioned before, really strong performance on the social side, especially compared to last year. Of course, the intensity of the work that the team is putting together have been doubling down and paying off in terms of what we’re seeing in terms of results across the board.
And then last but not least, I think the team is starting to put extra emphasis not only in terms of .com and traffic, but I think in terms of the performance of certain items like newsletter, paid media, et cetera, that is, of course, helping us to have a very efficient way to drive our business.
So with that overview, I will let Roberto continue to give you a bit more information and details about the quarter.
Roberto Eggs
Thank you, Gino. Good afternoon to everybody. I’m happy to drive you through the results by geography and by channel for both Moncler and Stone Island. I’ll start by Moncler with the revenues by geography. In H1 Moncler brand revenues reached EUR935 million, which is a plus 29% compared to the similar period in 2002.
Q2 recorded a 32% growth versus 2022, which is an acceleration versus the 28% of Q1. This is mainly due to the improvement that we recorded in China and in Asia. Asia, which includes, for us, Asia Pacific, Japan and Korea and Q2 accelerated to 55% — plus 55% growth versus 2022.
APAC recorded a strong sequential improvement favored by an easy base of comparison as we had some closure last year due to the COVID both in April and May. Japan and Korea continued to record solid double-digit growth, while for EMEA, revenue increased by 30% in 2022 in the continuity of what we have seen during the quarter one where the business increased by 29%.
Clearly, during the second quarter, the demand has been driven by tourist outside region, mainly Chinese, Korea and Americas, while we have been still strong — still — sorry, double-digit growth on local but a kind of normalization on the locals. Americas declined by 5% in Q2 due to the impact of the Nordstrom conversion in the wholesale channel.
The DTC channel continued to record solid double-digit growth. And excluding Nordstrom impact, growth in Q2 would have been low single-digit positive for the region. We move to the revenues by channel. Moncler D2C reached EUR757 million in H1, which is a plus 37% compared to 2022. This is a comp growth of 35% for H1, which — with a solid contribution from all the regions.
In the second quarter, D2C grew by 45% versus 2022, supported by strong double-digit growth in all the three regions with Asia outperforming the other region. The direct online China also continued with good strong double-digit growth. Wholesale revenues rose to EUR177 million in H1, up 2% versus 2022.
In the second quarter, revenues were flat year-on-year impacted by the Nordstrom conversion in the U.S. with the performance in the other region remained solid. Excluding the impact of Nordstrom conversion, the wholesale China would have grown mid-single digit year-on-year compared to 2022.
Let me walk you through Q2 highlights for Stone Island. In the Q2 highlights before talking about the brand and some of the marketing initiatives, we need to talk about also the recruitment that we had and the fact that we are entering now in the second phase as explained by Remo with the recruitment of Robert Triefus, but also we have recruited a new CMO and new digital officer.
Clearly, we are still in the transition phase, moving to a D2C business with a strong focus on retail excellence. The focus will be also for the next months and years on the visibility of the brand, increasing the share of voice, increasing the level of engagement and enriching the product offer.
This being said, let’s look at what have been the key initiatives for the quarter. First of all, we — you know that Stone Island, we have a strong commitment to research and experimentation and this was showcased again during the Milan design week with the installation of the Prototype Research Series 07, which is a special thermochromic technology with a liquid crystal heat-reactive ink used for a limited edition of 100 pieces that were sold out in just a few hours.
Stone Island also staged at the Barcelona Festival with a strong visibility. And we were present at the Glastonbury Festival with the English rapper Dave who performed in front of more than 200,000 people at the Glastonbury dressed in the Spring/Summer ’23 Stone Island Shadow project look, which was also giving strong visibility to the brand.
If we look at the results by geography, Stone Island grew by 5% to EUR201.6 million in the course of H1. The performance of Q1 was — Q2 was in line with the performance of Q1, but with a different mix by geography. Asia, which includes Asia Pacific, Japan and Korea like for Moncler, grew 13% year-on-year due to a solid performance in the Chinese Mainland and Japan and some perimeter effects following the 2002 wholesale to DTC conversion in Japan that took place in August last year.
The Korean market was softer, also due to the impact of the ongoing changes in the business model where I have opportunity to talk about that. EMEA grew 8% in Q2 versus 2022, driven by a positive contribution from both channels both D2C and also the wholesale business. Americas saw a decline of 31% in Q2 as wholesale performance continued to be impacted by a softer business trend and a more cautious approach for the department store as a result of this volatility.
In terms of results by channel, we see a wholesale channel for H1 at minus 4%. In the second quarter, revenues in this channel grew 2% despite the impact of the Japanese conversion that was mentioning before, took place in August last year and the strict volume control that we have that we adopted in the management of this channel. But this is also valid for Moncler.
We’ll have also opportunity to talk about our wholesaler approach during the Q&A. The revenues in the DTC channel reached EUR73 million in H1, which is a plus 23% year-on-year. In Q2, the revenue of the channel grew by 9%, mainly due to solid double-digit growth in EMEA, Asia Pacific and Japan, but with a more softer performance in Americas and in Korea.
Let me drive you — also through the opening of — that we have had in the second quarter. As you know, it’s always more softer timing for us in terms of opening we concentrate most of our openings during Q3 and Q4. We are reaching now 257 DOS for Moncler and 74 DOS for Stone Island.
And if you look at the picture, I wanted to outline this time, not so much the opening, but more all the effort that has been done in terms of enhancing the visibility of Moncler and the, let’s say, the elevation that we are working on and the new client experience we are proposing, you have the beautiful picture of the store in Zurich in Bahnhofstrasse located between two key brands, two luxury brands. We more than tripled the business.
I’m happy to see that the growth is following the growth of the number of square meters that we have. This is a 600 square meter store on two levels with the first one with the garden that we are going to animate both in summer and winter. And in the following picture, another emblematic move that we have done in Shanghai Plaza 66, where for the first time we are having visibility on the ground floor. It’s a store that is developing on three different levels. And also here, we have more than doubled the surface of the store with the visibility on the ground floor and we also hear sales that are following the increase of the square meter that we have.
Let me hand over the word to Luciano for the group income statement. Thank you.
Luciano Santel
Thank you, Roberto, and good afternoon, everybody, and thank you all for attending our call today. Well, we’re now at Page 16, where we report our group P&L that shows a very good top line, just commented by Roberto. Very good top line, thanks to a very strong DTC business. which drove a very healthy gross margin, 110 basis points higher than last year.
Interesting to note that, our selling expenses are lower on a percentage basis than last year. And this is because the strong DTC growth was mainly an organic growth, enabling our stores to improve their productivity. G&A slightly better than last year, still on a percentage basis, of course, but nothing particular to comment.
Marketing. Important to highlight that we spent in the first half of the year double than last year with [indiscernible] on revenues of 8.9%, 350 basis points higher than last year. This is due to the concentration — sorry this is due to the concentration of some important marketing activities in the first half of the year.
First, our greatest event in London in February, but also Grenoble activities and as Gino said before, our first-ever Moncler summer campaign. Notwithstanding this high spending we still maintain for the year-end, our original guidance of about 7% marketing spending in line with last year, with still an important amount of marketing to be spent in the second half of the year, but with the lower incidence on revenues.
EBIT operating margin slightly behind last year, 19.2% against 19.6%, but after the impact of the higher marketing spending we just talked about. Below the line of operating margin, not in particular to comment except the taxes, not adjusted for this year because taxes this year are back to normal, 29.6% tax rate. But important to remind you, but I’m sure you know that last year, taxes reflected the one-off positive impact of the Stone Island brand value alignment, which made our taxes unusually positive.
Okay. Let’s move now to Page 17, where we report CapEx. CapEx in the first half of the year represented 6.1% of revenues much higher than last year. But last year, you may see by the chart that there was some kind of timing effect in fact at the end of the year, we spent 6.1%. And for this year, we still expect total CapEx for the year remains the region of 6% on revenues. Of course, are more or less equally distributed between distribution network and in structure.
Page 18 now, net working capital, net working capital is still a very healthy percentage at 8.6%, a little bit higher than the 8% we reported last year due to the higher inventory compared to last year, higher inventory that is totally due to an anticipation of the production cycle for this current season decided to better serve our markets, our stores and our customers.
Okay. Page 19 now, where we report a net financial position, EUR470 million net cash down as compared to the ’22 year-end that was EUR818 million, mostly due to the EUR300 million dividend payment.
Page 20, balance sheet and nothing to comment, honestly, Page 21, cash flow statement, nothing particular to comment. But of course, should you have any question on any items we have not commented, please ask the question you are very, very welcome.
Thank you for your attention and we are now ready for your questions.
Question-and-Answer Session
Operator
Thank you. This is the chorus call operator. We will now begin the question-and-answer session. [Operator Instructions] The first question is from [indiscernible] with HSBC.
Unidentified Participant
Yes. Good afternoon, everyone. Three questions, if I may. The first one is could you comment on the trends in July ’23 and how they differ from Q2 if they do? Second question is the growth in Mainland China and with the Chinese cluster in Q2? And my last question will be for Roberto. Roberto, would you be kind enough to remind us the nature in terms of your contract with Moncler? Thank you very much.
Roberto Eggs
Thank you, [indiscernible]. I think the three questions are for me, by the way. So let me start by the trends in July. As you have seen, we have had an exceptional exit in Q2, driven by, let’s say, a lower base of comparison for the Chinese market. So clearly, we are going to see on China itself a normalization during Q3. While we see also a very strong rebound of the tourism that is positively impacting the initial results of July. This being said, as a word of caution, you know that the year is long and what we see in July may not be what is going to be reflected at the end of the year. But let’s say, for China. I will say kind of normalization in the growth internally and the strong growth that we see in the tourism outside region.
Just to give you a flare of what it represents last year. During H1, we had more than 80% of the consumption that was a consumption — that was a local consumption throughout the different regions as an average. Currently, we are at two-third local consumption and one-third on tourists that are traveling to other regions. So clearly, we see here a very strong rebound of mainly the Chinese traveling first to neighboring region like Hong Kong and Macau that we start seeing also Chinese traveling to Japan and to Korea.
Regarding Europe, we are still at half of the travelers from China compared to 2019. But they represent already now the first nationality in Europe and this is something that didn’t happen since the start of the pandemic in 2020. If we look at the results of the Chinese cluster, so the Chinese that are inside China and outside China, and we make the comparison compared to 2021, which is a more meaningful comparison because as I mentioned last year, April and May, most of our stores were closed in China. We have been growing more than 50% compared to 2021.
So with an acceleration in Q2. So we see that the effect of having the Chinese traveling is helping to grow the Chinese cluster. If we talk about the other region, they continue to perform very strongly. So we have Japan that is performing well. Korea, a little bit less locally, kind of normalization in the consumption normally, even if we are still double-digit growth, growing double digit, we see them starting to travel and especially to Europe, they represent today the second nationality at the same level of the American.
Talking about Europe, the normalization on the consumption of the local clients. Let’s say, they are still double digit, but not at the same level at the start of the year. And clearly, the growth that we have seen with this plus 30% for Europe has been driven by the tourist outside region, Americas, Korean and Chinese. Japanese are still very soft in terms of traveling.
If we talk about the Americas, we have had a double-digit growth on the D2C business. And clearly, the performance that you see at minus 5% is mainly driven to the change of business model that we’re operating currently in the U.S. change of business model regarding the wholesale. You know that with Europe, Americas is one of the strongest region in terms of wholesale. I would say was because we want to elevate the brand perception, and we want to get more control about the market. So they started with in May with Nordstrom, where we change it to what we call a hybrid model.
By hybrid, what we mean is that we are co-owning the salespeople that are pushing and that are presenting and selling our product. And we are working with Nordstrom on a soft personalization that is enhancing also the brand perception, and they are benefiting from all the activity that we are doing in terms of clienteling and also on our system of auto replenishment. So clearly, this will drive the performance. But usually, when we change business model, the impact will be seen after two semester on the retail, while you have a negative impact on the short term. Because, obviously, they have not been buying the fall/winter. So this will have a negative impact for the quarter three and quarter four for our wholesale business.
At the same time, for the U.S., we are close to sign a deal with Saks. It’s to a point that it’s just something formal for regarding the store on the Saks Fifth Avenue. This will also — it will be converted during the last part of the year in Q4, we are getting also control of the most important store of the Saks network, and we are advanced — in advanced negotiation regarding saks.com. So this will also have further negative impact on the wholesale business, but clearly a positive impact in terms of the way we are guiding the brand, the way we are managing the brand, the way we are elevating the brand on the American market.
So now we have the — basically the second player with Nordstrom, the third year with Saks and the fourth player with doing this that are directly controlled with us or to be controlled by us. And we have very good relationship with Neiman store that will remain in wholesale as our #1 account. You wanted also me to — if I remember well, the second question was the growth?
Unidentified Participant
Yes, in Mainland China in Q2.
Roberto Eggs
But I think I answered on this by explaining that we have sequentially increased our performance on the Chinese cluster with the growth compared to 2021, that is above 50%, so a strong growth. So nothing more to say the balance — yes this is for Q2, this is for H1 to be more precise. It was slightly above 50% during Q2 slightly below 50% compared to 2021 in Q1. The balance between how much will be local consumption, how much will be a consumption-driven outside of China? This, honestly, is difficult to tell. But for us, we are monitoring the weight of the Chinese globally in the — in China and outside China.
Regarding your last question, say that my contract is aligned with the mandate of Executive Board member that I have. It’s a contract that has been renewed already in the past, and I’m fully committed to Moncler and to the Moncler Group.
Unidentified Participant
Thank you.
Operator
The next question is from Melania Grippo with BNP Paribas. Please go ahead.
Melania Grippo
Good evening. This is Melania Grippo from BNP Paribas Exane. First of all, congratulations on a very strong quarter. I have a couple of questions. First is on the gross margin. So you increased it strongly in the first half. Could you please give us a little bit more detail behind this increase? I understand due to the DTC channel strength, but also if we can expect a similar increase for the full year.
And also my second question is on the Grenoble line. If you could please give us some granularity on the performance of the Grenoble summer line versus the main collection? And finally, on footwear, if you can also tell us on how the category performed as opposed to, for example, your total retail? Thank you.
Luciano Santel
Okay. Melania, thank you for your question about gross margin. Yes, you’re right, gross margin was very good. Honestly, it was good, mainly due to the channel mix because as we said before, we grew a lot in the DTC in the retail — physical retail and online. And of course, you know that we deliver a higher gross margin in our DTC business. Of course, what is also very important to highlight something I said before, is that notwithstanding the growth in our DTC business, our selling expenses were lower on a percentage basis. And this is a very, very strong and very good sign for our business. About the end of the year, still difficult to predict.
I can tell you that the DTC business is growing for sure, more than the wholesale business also for the reasons Roberto just said before to the first question. I mean we are focusing more and more also to convert some of our wholesale business to the DTC business. And for this reason, you may expect the gross margin to keep growing. Of course, on the other side of the coin is that as we grow the DTC business, the retail business, we have also normally higher selling expenses. This was not the case in the first half, but this is something that you may expect. Thank you.
Gino Fisanotti
Melania, how are you? Gino here. Again, just for add more two things. I think you asked us a bit of Grenoble. I think, as I mentioned at the beginning, this was the kind of the first year cycle that we are showcasing Grenoble all year around, a bit more into the details. Of course, we really experienced a very strong sell-through on the spring/summer collection that we launched this year. Last year was the very first we did spring/summer. So this year, we have a double-digit growth against that last year. The newness of this year was that we have pre-fall as well at the very end of June, as I mentioned at the beginning of the call.
I think we are seeing a very good start. Again, we are just at 25 days into that. I think what we’re seeing is a really strong reception in terms of the product — the full collection, I would say, but even in terms of how the product is performing and this need of having product essentials, I would say, for the outdoors. And we’ve seen a very strong reception pushing Europe, China and the U.S., where we are seeing a little bit of a good momentum in terms of the outdoor activities as well. So that’s what I will share regarding Grenoble.
Regarding footwear, I think we are — our sales are up high double digits in Q2 right now. And I would say that probably the biggest driver is what we discussed in the past probably 12 months about our main focus on Trailgrip and the full family of Trailgrip is performing really well. We are, of course, satisfied with those results, and those results are coming up from both sides, both DTC and wholesale. I think the other big thing for us in terms of footwear is the opportunity, of course, to not only connect with our current customer, but it’s becoming a source of engagement and connection with new customers.
But I will always say the same probably we get bored about this, but they’re coming on footwear. We just — we don’t even have a year of the new product. So despite that we’re having a really strong initial results, I think it’s important for us to grow this business in the most authentic way possible. So that’s what we’re doing. And definitely, we are happy with the results we’re seeing. And more importantly, with the consumer demand and the acceptability of the product in the market.
Melania Grippo
Thank you.
Gino Fisanotti
Of course.
Operator
The next question is from Oriana Cardani with Intesa Sanpaolo. Please go ahead.
Oriana Cardani
So yes, good evening. Thank you for taking my two questions. The first half concerns the growth profile in the first half, what is the contribution of price/mix, volume or organic growth? And can you quantify the perimeter effect? And the second question concerns the evolution of online business. So what is the current weight of online business on retail phase? Thank you.
Luciano Santel
Okay. Thank you. For your about — the first question. I mean our growth in the first half of the year was more or less two-thirds volumes and one-third the price. Did I answer your question? Okay?
Oriana Cardani
Sorry?
Elena Mariani
Oriana, sorry, we couldn’t hear you very well. So what’s your question talking about the volume versus price contribution to the comp? Did I get it correctly?
Oriana Cardani
Yes, sure. This is the first question. And if you can also give us the perimeter effect on the total group?
Luciano Santel
Yes. I mean that the space — okay. Space contribution, I mean you see looking at the numbers that, there are about 3, 4 points difference between our comp growth rate and our total growth in the DTC channel. So this is more or less the space contribution actually to be to be honest with you, it’s higher than that because our outlet that are not reported that do not contribute to our comp performed worse than the regular stores. I mean, still well but less than our regular stores. So you can say that our space contribution was higher than 4%.
Roberto Eggs
If I may just add something, the performance on the outlets has been weaker also because we have had a very good level of sales during the last season. So it’s more a matter of product availability for the outlet channel more than desirability of the brand. As you know, we don’t manufacture for the outlets. We just a channel to get rid of the excess stock. So the excess stock was lower. So for us, the growth which is still low double-digit growth is not in line with the rest of the D2C just for a matter of product availability.
Oriana Cardani
Okay. Thank you very much.
Gino Fisanotti
Regarding – hello, good afternoon. I think regarding the question on digital. I think the first thing I have to say is, of course, the online business is continue to grow double-digit growth. I think both on the first half and in Q2, this is broadly in line with the DTC growth that we have been sharing during the call today. I think in terms of the total weight, I think we will only give this reference at the end of the year. So I think we know we finished around 16% of the total contribution in last year at the end of 2022. So we keep continue growing, we will definitely show at the end of the year the growth coming online, but I hope this gives you a full — more or less a picture of what’s going on in-house performing.
Oriana Cardani
Okay. Thank you.
Operator
The next question is from Luca Solca with Bernstein. Please go ahead.
Luca Solca
Yes. Good evening. And my first question is possibly for Remo. There is a new C-level executive joining the company, Robert Triefus. This seems to be quite a significant development. I’m wondering how do you define success with Stone Island? And when you looked at Robert in the eyes, what goals and what’s the hard achievements did you discuss with him and you put in front of him, so that his contribution can be seen as a significant step forward for the Stone Island project. Is that just a broad-based mandate to giving him or are there any one, two or three things quite matter of fact, things that has to be achieved in the next two or three years for this to be considered success?
My second question goes back to retail space productivity. There’s been a progressive increase in retail space productivity that you’ve been talking about. I wonder if you could give us any sense of how retail space productivity is at this point relative to 2019? And how the gap between Stone Island and Moncler is being bridged if at all?
The third question relates to the third quarter. And well, just asking you if our logic is right here, there seems to be quite a significant rebound in tourist inflows to Europe. You were talking about two-third of Chinese demand appearing in the Main London and one-third, which is more than, for example, [indiscernible] last night in abroad. I wonder if we are wrong to assume that the third quarter is actually going to benefit from tourists buying fall/winter products ahead of the season. And if there’s anything sort of off with this logic, it should be a very a good third quarter, given also that you have quite a significant price gap between Asia and Europe. Thank you very much indeed.
Remo Ruffini
Hi, Luca. So starting for the beginning of the story, as I mentioned before. Stone Island was an amazing brand for us in [indiscernible] was very close of our mentality in our vision. I soon realized that the company was very concentrated on wholesale, the culture and the mentality was very wholesale in the sportswear company. Then in the first couple of years, we really turned the company into — we try to control all the distribution that was my priority to not have any more distributor or franchise, whatever is a third party. And this is the job we did in the last 24 months.
Now starting the second phase, and we decided a few months ago to hire guys very concentrate on brand, very concentrate on the future of the brand, very concentrated on turn the company from wholesale to DTC. Changing the culture in the company is one of the most difficult things, but we feel now in the after two years that we are underway. Having said that, the mission we have on the table, we talk every day with Robert Triefus, one of the most important things, as I said, is wholesale turn to DTC. The second point is really turn this company from low approach into a brand approach that for me, it’s really totally different approach, a totally different view of this brand.
And third point is, I think we want to really take the company more in the premium world I don’t want to say [indiscernible], don’t want to say any level of distribution are more in the premium world. We start already. We start already to rebuild the store, to have new stores, to have a new retail excellence, to have new approach. But the second phase is just now because Robert just joined us, and I think we have a clear project in front of us, a clear idea in front of us. We are very optimistic that we can develop a journey in the next, like, I don’t know, two, three years.
But I think we have quite a good possibility even if the market, as you know, now is not 100% on the sportswear. Let’s call sportswear a good approach is much more sophisticated. But what we feel is Stone Island is reading in the good segment because the sportswear by the most sophisticated brand in this area. it means in terms of product, we are quite happy. We have to fine tuning a little bit a problem and little bit a quality, but mostly is to change the face versus the communities and try to attract other communities and new communities all around the world. Thank you.
Roberto Eggs
Good evening, Luca. Roberto speaking. Let me walk you through your question regarding retail space productivity. The first half of the year has been good. We are above the record year of 2019. So I would say, quite satisfied with, let’s say, key performance indicators on the retail side that are all good. We increased the traffic in the stores. There was a slight decrease in the conversion, which is usually what happens when you have a double-digit increase in terms of traffic. There has been no resistance on the price increase. We have heard from Luciano that two-third of the growth is coming from volumes and one-third from the price. UPT has continued to increase. So I think the basic to do better than 2019 are there.
As a reminder, this was a record year at EUR36,700. So I think we are confident that we can do better than the record year of 2019. Now you know our ambition will see by the end of the year, how close will be of this ambition. We are working very hard on this for the second half of the year. And clearly, also the tourism is going to help, so which makes me make the link with your third question which was, what do we expect from the third quarter? And what will be the impact on — of the twist?
Maybe just a smaller, so I would like to rectify now I don’t know if I miss communicated it. But when I was talking about globally, we have two-third of consumption that is local and one-third that is tourism. I was not referring to the Chinese, I was referring to the total tourists. So I was referring to the Americans, to the Korean and to the — and the Chinese. So and we have seen a significant increase of Korean and Americans. This is counterbalanced by a softer and, let’s say, growth that we have seen locally on this nationality.
So kind of normalization of the consumption in Korea, in Europe and the Americas. So I think both — on the global is more positive than negative, but I would not assume that we’ll continue to grow strongly on the local plus the tourism. I think we’re going to see a softer performance on the locals and probably tourism that will be continuing to increase by how much is we don’t know yet. So this will be needed to assess during the course of the second half.
Concerning the KPIs on Stone Island, we are still at the phase of — at the start of this transition phase. We have been moving the main markets into a D2C approach with Korea, with Japan, with the U.K. We are in the process of doing this with China in December of this year. There is also in the pipeline, the internalization of the online on which we are working very, very hard to be able to do it by August next year. So this is still a working process and really a change of business model, a change of culture inside of the company.
So I think we’ll be able to communicate on metrics when this transformation will be done and we’ll start working on the second phase, as I was mentioning before, which is increasing the visibility, the brand positioning, the engagement and the product strategy and this will start being visible in quarter four of this year, and this is where Robert and his team is currently concentrating.
Luca Solca
Wonderful. Thank you very much indeed and good luck to Robert and congratulations. Thank you.
Operator
The next question is from Edouard Aubin with Morgan Stanley. Please go ahead.
Edouard Aubin
Yeah. Good evening. So one follow-up for Roberto and one question for Luciano. Roberto, sorry if I missed it, but in terms of nationalities for the Americans and the Koreans. Could you please give us the year-over-year growth for Q2 and how it compares to Q1. So again, apologies if I missed it, but I’d be interested to know, number one. And then my question for Luciano also, if I’m not mistaken, at constant marketing spend, I think your EBIT margin expanded by about 300 basis points year-over-year. So I guess, you know where I’m getting to. So is — given that your marketing spend is going to be only slightly up on a full year basis, doesn’t see your guidance of about 30% EBIT margin for the year looks quite conservative on the back of the beat in H1. Thank you.
Remo Ruffini
Good evening, Edouard. Regarding the nationalities, as I was mentioning, all the main nationalities, the top 10 nationals have been growing the digit. We have seen softening a little bit on the U.K. and Germany during this period, so which is not as strong as the Asian nationalities. Also, the Japanese are double digit, but let’s say, a low double-digit growth for Japan. What we have seen is above 40% for Korea. And as always mentioned, for China, the growth has been above 100%. But — this is linked to the base of comparison that was very low again. I think what is a more meaningful comparison is 2021 where for H1, the growth compared to 2021 has been above 50% for the Chinese nationalities regarding U.S., we have been growing above 20% for H1.
Luciano Santel
Yes. Hi, Edouard. Thank you for your question. This is a very nice conversation on our operating margin and potential operating leverage. I mean you’re right in the first half of the year, if we normalize our marketing spending our EBITDA margin would have been significantly higher than last year. But again, we still have the second half of the year, which is much more important in a very complex and uncertain scenario. So I mean any estimate to increase our operating margin, honestly, is very, very aggressive.
And on the other side, I have to tell you that it’s not at all in our mind because as we said other times, I mean, our target is to touch hopefully, the 30% margin and no more than that because, again, our first priority is to keep investing in this company to keep investing in the brand that is not only investing in the product, in the design, it is investing in marketing, it is invest in distribution, but also investing in our organization, in people, in talent.
So this is the reason, sorry to say it again because you may be tired to listen to me. But these are really an important part of our strategy. This is not because we don’t like to do more than 30%, but it is because we believe that there are things more important for our long-lasting business and long lasting brand, then the higher than 30% margin. So again, your mathematical calculation is totally correct. But again, this is not our target.
Edouard Aubin
Thank you.
Operator
The next question is from Thomas Chauvet with Citi. Please go ahead.
Thomas Chauvet
Hi. Good evening, everyone. I’ve got two questions, please. The first one, Luciano, could you come back to the inventory increase of 35% year-on-year, if I’m not mistaken. You said it was deliberate. How does that tie up with the normalization in DTC growth that is implied by consensus in the second half, but also difficult wholesale markets. Stone Island retail slowing down quite a bit in Q2. Could you also say perhaps how much of the total inventory of EUR487 million at the end of June is Stone island?
And secondly, could you comment on what you’re seeing at the bottom of the price pyramid, particularly in the U.S. I think earlier this year, you said there wasn’t much difference in terms of sales by price points. Are you seeing any change there with maybe sneakers or some of the entry-level outerwear or knitwear a bit weaker in some geographies as some of your peers have been experiencing in the second quarter in particular. Thank you.
Luciano Santel
Okay. Thank you, Thomas for your question about the inventory. Inventory growth is quite important. Honestly, we don’t report the numbers by company. But in any event, of course, a vast majority of the inventory is in Moncler. And this is, as I said before, totally due to the decision to anticipate our production cycle. This is something we decided together. We believe that was good for the markets. Of course, on the other side, we increased a little bit our net working capital. But I mean, at the end, I think that the decision was a wise decision for the business and for the brand. I mean, the inventory is a vast majority, the current fall/winter inventory.
So inventory that we just started to ship out to the regions. Something important to add, even if I’m sure you remember, our allocation policy is that I mean we allocate only a part of the inventory to the regions and to the stores. And then we monitor their trend and based on the trend we reallocate other inventory depending on their business trend. So again, nothing honestly important to highlight simply in anticipation of the production cycle. That means that, I mean, it’s a finished product for this current season but also work in progress and raw materials.
Roberto Eggs
Yeah. On your second question, Thomas, regarding the pyramid on pricing, we have not seen a material change also because when we talk about spring/summer structurally, our price pyramid is also lower than the one of fall/winter. We see we sell much more knitwear during that period. It’s also a period where we sell more to men than women compared to the winter season. And we have not seen a material change in the mix of the buying.
Clearly, we see also — and it’s a little bit too early because we are selling the fall/winter only since a couple of weeks. We know that there is a demand for less logo and more refined product that we have in our edit collection. And clearly, this is going to be something that has a higher price point. So I’m expecting our price/mix to go slightly up during the fall/winter season, but not something that is material.
Thomas Chauvet
Thank you, Roberto. And maybe just on pricing. Are you — do you think you’re able to pass on another 10% price increase on the next spring/summer collection? I know it’s a bit early but you’ve done a 2 times, 10% pricing on that spring/summer collection. Do you feel the current environment is set up so that you can pass on that pricing again at the start of ’24?
Roberto Eggs
Yeah. We have just finished the spring summer campaign and the price increase that we have is not as high as in the past, as you know, the price increased 2 times, 10% for spring/summer winter of the last season. were linked to an increase of cost — production cost and in terms of material costs that we have fully embedded in the pricing without lowering the margin. This has had no impact on the — for Moncler on the, let’s say, on the results, as you have seen growth is mainly driven by volumes for this first half of the year. So we don’t have — we have a lower price increase for the next spring/summer, and we have not seen resistance material resistance on that during the same campaign.
Thomas Chauvet
Thank you and all the question.
Operator
The next question is from Louise Singlehurst with Goldman Sachs. Please go ahead.
Louise Singlehurst
Hi. Good evening, everyone. Thank you for taking my questions. I just have two, if I can do, please, just to follow-up. Obviously, fantastic results in the first half. You must all be absolutely delighted with the momentum. Can you tell us about the cohort mix and the difference between what you’re recruiting as a new customer and also the existing customer, i.e., the penetration of increasing loyalty across those existing customers. And particularly with reference to the actions or the benefits from Genius and also the new product categories, which are coming through?
And then my second question I wonder if you can talk to us about how you measure the success of Genius and all the activities in the first half in the marketing. Obviously, we can see that very clearly in the sales momentum, but I presume I’m thinking more longer term, I presume there is a benefit with a longer tail from all the initiatives that you’ve put in, in the first half, and that will benefit the next six months, 12 months, what you’ve seen historically with marketing spend? Thank you.
Gino Fisanotti
Louise, thank you. Gino here. I think let me start from probably the second one. I think, of course, we can share multiple data regarding Genius. And I think during the Q1, Elena and the team did job sharing a little bit of the numbers. Of course, sometimes it’s more difficult to truly quantify the real impact of certain things. But what we see to connect to your first question is, first of all, yes, we see a real impact of Genius on the brand already by looking at some of the information we shared already earlier today in terms of the demand we’re seeing for the brand.
Of course, when you look at the revenue growth, of course, when you look into the traffic into the stores when you are looking to the traffic online, all the level of engagement we have seen on digital platforms. So I think normally, I personally always say the same. I think one great way to look at the return on investment of things like this is to look at the health of the organic traffic that the brand has, I think, in a world like today, where sometimes you can be have it dependent on paid media. I think when you look at the organic traffic of the brand, it’s a really good way to look at that. So I think that’s the way we like to see the impact of it and that opportunity.
Connected the reason I start with the second question is because connected to Genius or connected to the opportunity to drive engagement with the new customers. I think this is something that we engineer, right? Everything was by design. I think what we want to do is invite new communities into the brand and open up authentic ways for new customers to connect with us. I think what we’re seeing, which was something that for us is important is we’re seeing still a strong loyalty from the current customer or the current community of customers who have been Moncler lovers for some time now, what we’re seeing, of course, and this is more segment by segment.
Of course, we’re seeing great introduction into new customers when we start looking about footwear, and we start looking into classifications outside outerwear when we look into some of the Genius collections like, again, and we will report more things as we go, not only what we saw in FRGMT, Alicia Keys that we’re seeing today with [indiscernible]. So again, I think I want to go back probably to the most simple part of this is by design when we shared with you the opportunity to have one brand with three very clear dimensions. The dimension of the brand, of course, connected to the opportunity to have complementary audiences that really want to be meaningful too.
And I think what we are seeing is that the return of that strategy is starting to pay off in terms of not only the revenue because revenue at the end is a consequence of what we do in terms of the different level of engagement that we have with current customers and new communities, depending on the three dimensions that we’re talking about.
Louise Singlehurst
Great. Thank you.
Operator
The next question is from Susy Tibaldi with UBS. Please go ahead.
Susy Tibaldi
Good evening. Thanks for taking my question. The first one on wholesale. Can you give us a little bit of an indication what we should expect for the third quarter? Because it’s quite important for wholesale and now you’re doing these conversions. So should it be similar to what we have seen so far around flattish.
The Second question for Luciano again, going back to the point of margin. I think what we have seen very clearly in this H1 print is that you are seeing very, very good operating leverage — sorry, on the selling costs. because you’re having great sales density, sales productivity, and it sounds like you expect these trends to continue as well. So I think on the selling cost leverage is probably — is going to come through eventually.
So I guess, the one line where you are increasing a bit of investment is on the G&A costs. So is there anything specific that we should be aware of any specific hiring or any specific projects that you can flag? And then also on Ireland, for next year, given that we are entering the second phase of the brand evolution, is that when we should also expect a more meaningful start of the store rollout globally? Thank you.
Roberto Eggs
Susy, thank you for giving me the opportunity to better explain the strategy that we are putting in place in terms of wholesale. I think we are now at the level of maturity for Moncler that is pushing us to be even more confident to fully push our D2C business and to be very, very selective when we talk about wholesale. We’ve seen a transformation of the wholesale during the pandemic, and I think we need to elevate — continue to elevate the brand perception.
And this is valid for Moncler, but also for Stone Island. Stone Island is more linked to the change of business model and as it was explained by Remo, but we want to go more D2C. So we have started to be more selective in the number of stores that we have in the selection of stores. And this will continue not only for this year but for the few years to come. and really concentrated on the ones that are adding other image or additional clients that we won’t get through the online or through our DTC approach.
So concerning the U.S. market, this is a big transformation of the market overall because we are basically taking our destiny in our hands with the second, the third and the fourth player working with them getting control about the assortment, getting control about the distribution, leveraging on all the assets that we have been able to develop with our D2C. I was mentioning before, the auto replenishment, but not only sharing data.
So this is going to come and have medium term a positive impact in terms of brand elevation, presentation of the product, data collection and ultimately, as a consequence, additional sales that we’ll see on the D2C. Concerning the impact on the short, medium term, we are talking about Q3 and Q4, I think we can expect the wholesale channel for this part of the year to become mid- to mid-high single-digit negative overall for the full year.
So a stronger impact in Q3 and Q4 with an impact that is going to move from a business that is currently flattish to something that is going to become mid to high single-digit negative. This will depend on the speed of conversion that we have currently that we are currently negotiating with Saks and the approach on being more selective in terms of wholesale distribution.
I think maybe also the advantage to answer on Stone Island for Stone Island, clearly the focus, as it was explained by Remo is to move from a logo approach to a brand approach. So what you can expect in terms of focus for the company. It’s not only the retail part and investment. We do the store. This is something we have started to do, but it’s more something that is going to become something that is more visible and where we are going to further increase the reach of the brand, the engagement of the brand the visibility of the brand, and we are also working on the product.
So it’s a mix of elements and not only investment in retail, we’re doing — we’re very happy about the new concept. This is clearly something that is embedded in what we’re going to do in the next year, but it’s all these element of visibility and engagement with consumer that we are going to concentrate and this will start in Q4 and then accelerating in 2024.
Luciano Santel
Yes, Susy about your question on our operating leverage. Again, mathematically, you’re right. I mean we developed very good results in the first half of the year with a very high productivity of our stores due to the organic growth. So should we continue this way, you may be right. However, I have to tell you again, that, I mean, we are focused more on the investments in our brands than reaching a better EBITDA margin. Of course, we normally talk about organization.
But if I can add some color. I mean, we have two brands. And both the two brands need a lot of attention and attention means people able to manage the complexity of our business. I’m talking specifically about Stone Island. Stone Island is an amazing brand, and we have to fully exploit the potential of this brand. In order to do that, we have Robert on board, that has been on board for a month. We have a strong team. We are building in marketing, in digital and in all the different areas of the business. These are investments, okay?
So Stone Island is just an example, but I can make many other examples for Moncler. These are the investments we are talking about investments. Investments a very important and not to change at higher EBITDA margin this year, but to maintain a strong, healthy EBITDA margin for the next 10 to 20 years. So this is the simple question. But again, mathematically, you are right.
Susy Tibaldi
Okay. Thank you.
Operator
The next question is from Geoffroy De Mendez with Bank of America. Please go ahead.
Geoffroy De Mendez
All right. Good evening. Thank you for taking my question. I have three of them. So the first one is on the level of net cash. I think you’re close to EUR500 million at the end of H1, which is not too far from where you were before you made the acquisition of Stone Island, in 2020. So I was just wondering what you’re thinking in terms of capital allocation if external growth is something that you would still be considering or if it’s just too early to think about this at this stage? That’s question number one.
The question number two is maybe for Gino. On the focus away from outerwear, which you’ve been talking about a lot during the Capital Markets Day a couple of years ago. Clearly, you’ve made the launch of shoes and now this summer campaign, which seems to be doing quite well. So just an update on where you are on the trajectory? And where we could see the first half of the year growing as a percentage of total sales once the transition has been done because your Q2 is good, but it’s still just 11% — or like about 10% to 15% of sales is still a small quarter.
And then just on — last question is just on the store growth for the Moncler brand. If you could just remind us what been doing in Q2 and what we should expect for the full year, that would be helpful. Thank you.
Luciano Santel
Yes, Geoffroy. Thank you for your question. I mean, about cash. I mean, you’re right, we have a remarkable amount of cash, honestly. This is something we like. We’re not disappointed. Honestly, what we like is cash generated of our business, not just having cash, but let me answer your question. I mean you are right. At the time we had this kind of amount of cash, we decided to make a debt acquisition. But honestly, as I’m sure you know, you remember, the acquisition was not driven by the amount of cash, but it was driven by the fact that will have since ever that brand.
And at the time, we were able to connect, I mean the two families and to make it happen, we were very happy independently on the cash available. Right now, I mean, we have a cash, but honestly, we don’t have any specific project other than the two important projects on our two brands that are Moncler and Stone Island. So honestly, right now, we don’t have any — I mean, any idea, any thought and even less any project to make other acquisitions. But it may happen. It may happen in the future. But again, not — whether or not we will have a cash needed to make the acquisition. But whether or not we find a strong brand like the two brands we have in our portfolio.
Roberto Eggs
Good evening, Geoffroy. Regarding the expansion of Moncler, I clearly mentioned at the beginning that big part of the focus also is in expanding existing stores and we have had very nice projects this year with Miami Bal Harbour with Paris Galeries Lafayette, Zurich [indiscernible], we have Shanghai Plaza 66; Beijing China World, and we have some exciting projects coming for the end of the year, especially with Vienna flagship. What we have been doing in terms of opening this year, we opened at the start of the year, there was the opening of London Heathrow with the restart of the traveling.
I would say that again, airports are gaining some relevancy for us where we have between conversion from wholesale to retail and the contract of [indiscernible] just been signed this week. We are talking back from [indiscernible]. We’ll start managing that from this week on. These are important investments that we are doing and there are a couple of other airports that are foreseen until the end of the year. We had also some openings at the start of the year with Shinsegae and Hyundai in Korea. And we have 10 — roughly 10 additional projects that will materialize until the end of the year that are evenly spread between Europe, Americas and China. So this is for the end of this year. But again, not only focusing on openings, but also very much on expanding and moving the level of the existing network to another level.
Gino Fisanotti
I think the second question was more regarding the focus on new opportunities. I want to — again, I know on some boring, but I want to go back to a little bit to the strategy and to the beginning of the conversation. I think definitely, I think is clear on this conversation that we are experiencing a good brand momentum. I think what we are seeing here is a clear focus and an exercise by all teams regarding the three brands I mentioned the three brand priorities who I’m not only helping us to stay more focus, but clearly, it’s driving both brand and business results.
I think definitely the opportunity we’re seeing here is to really serve the brand desire and the brand demand we see all year round. I think it’s not necessarily that we are focusing out of the three priorities. I think what we’re looking is within the three priorities, the opportunities that we can do to have a strong relation with customers. So summer, of course, you mentioned that what we’re seeing is a strong double-digit growth on new categories for us like knitwear, cut and sew and others, as we would just mentioned. I think footwear, I made the comment before about the same thing.
We’re seeing high double-digit growth this year compared to last year, but I always want to put the caveat that we are a journey that we just got started. And then, of course, I want to make sure that it’s not either or outerwear is something that we will always obsess, right? And it’s part of the DNA of the company and we will never trade of things for us, what’s important is to keep adding more opportunities for customers to have a really meaningful brand — meaningful relationship with this brand.
And that is what we’re trying to do. I think it’s connected to what you said, what you hear last year. So I think what we’re trying to do is to become best-in-class in delivering everything we have been promised a year ago in terms of the strategy. And every opportunity that you’re seeing there is connected to the three dimensions we have discussed last year as well.
Geoffroy De Mendez
Thank you.
Operator
The next question is from Andrea Randone with Intermonte. Please go ahead.
Andrea Randone
Good evening, and thank you. Just a couple of questions. The first one is if you can provide us some comments about the space contribution you are expecting for the full year? I mean you mentioned a greater number of openings in the second half. And so if you can help us? And the second question is just about Korea. Some other players are providing different comments from you. So if you can just spend a few additional comments on your brand positioning in the market that seems to be very, very good. Thank you.
Luciano Santel
Yes, Andrea. Thank you for your question. I mean space contribution, we don’t change our guidance, that is a mid-to-high single-digit growth space contribution. Of course, as I said before, talking about the first half, you may not see exactly the number I’m talking about at the end of the year as much as at the end of the first half because it may depend on the ultimate performance in this first half of the year, [indiscernible] performed well, but less well than our regular stores. And this made the usual calculation between comp and the total growth of the TTC business lower than the space contribution. So space contribution, again, considering that the majority of the stores will be opened in the second of the year. At the end of the year, it is still expected to be mid-to high-single digit.
Roberto Eggs
Good evening, Andrea. Regarding Korea, yes, we have had a very strong first half of the year. And to be honest, fantastic growth throughout the pandemic since 2020. Korea has been the market that has been growing the most. I think we have very much enhanced the visibility of the brand in the course of the past three years and the brand perception in Korea is really excellent. I think also there is a cultural fit of our product with the Korean consumers that are making these [indiscernible] working very, very well. This being said, we expect on the second half of the year some normalization of the consumption locally and some softening of the local demand because we start seeing Korean traveling mainly to Europe and to Japan. So we believe that the cluster will continue to be obviously positive, but probably a softening of the performance on the local market.
Andrea Randone
Thank you very much. Very clear.
Operator
The next question is from Liwei Hou with CICC. Please go ahead.
Liwei Hou
Good evening, gentlemen. Thank you for taking my question. I have two. The first one is, it is really impressive you have managed to record the same growth at constant rates and also current rates. Apart from our hedging activities, is there any particular reason that we managed to do this, given our high exposure to China and Japan whose currencies have been depreciating. I think this is particularly outstanding?
And the second question I have is regarding our vertical integration. I think recently our peers focus on ready-to-wear have made some moves in acquiring Kashmir suppliers. I understand that’s not in our D&A due to Kashmir but is there anything that you are contemplating right now to further differentiate ourselves, not only from a design perspective, but also from a fabrics and raw materials perspective. Thanks very much.
Luciano Santel
Okay. Thank you for your question. About your first question, I mean you’re right. I mean there is no big difference between our reported growth rate and our constant effects growth rate, and this is exactly thanks to what you said. I mean, we have a very strict hedging policy that permits us to protect our operating margins and, of course, to maintain a pretty stable our revenues independently on the FX trend. Of course, this was the case for Japan for sure, but for China also. So I mean, nothing to add to what you said that is totally correct.
About our supply chain, I mean, you’re right, maybe brands are moving to make acquisitions. I mean I have to tell you that, I mean, the most important not acquisition, but investments that we made also last year. It was in the building of the second production facility in our production area in Romania in the second building that is now up and running and we aim to double our production capacity, and this is for outerwear only. But we also keep making some small acquisitions of some smaller suppliers still in outerwear, we made the two acquisitions, small acquisitions at the end of last year, just to give you an example.
Talking about other categories, honestly, I mean, we are looking at the market. So we are looking at the potential interesting acquisitions in other categories like knitwear, for example, to be honest with you, while we wait to find something interesting. I mean we keep investing in our own factory. And right now, we have a quite important factory with about 30 machines for knitwear and so we keep investing in this facility in Italy to make this facility stronger and stronger and not only from the production point of view, but honestly, from the [indiscernible] point of view because while we built this facility over the past seven years right now, we have developed a very strong [indiscernible]. And so we will keep investing in this facility, but we keep looking also at what may be interesting in the market. Thank you.
Liwei Hou
Thank you very much. Very helpful.
Operator
The next question is from Paola Carboni with Equita SIM. Please go ahead.
Paola Carboni
Yes. Hello. Hi. Good afternoon, everybody. I have only one question left is about Stone Island and its retail performance. I understand that we are still in the transition phase. You don’t comment about same-store sales or not even overall retail performance of Stone Island too much yet, which is clearly understandable. I just wanted a few comments from your side, if possible on two aspects. First of all, the kind of elasticity you are seeing from some island customers, to the price increases you have implemented in the last few seasons, if you are noticing any kind of different attitude in this respect from island consumers compare clearly to Moncler, where you commented about virtual no resistance.
And secondly, if you can elaborate a bit on what you have been implementing in Korea. So just to take this market as a first example of your actions in developing the retail operations for the brand and what you have started to see here in terms of evidence of the benefit of your actions. Thank you very much.
Roberto Eggs
Good evening, Paola. Let me answer on the Stone Island part and the work that has been done. You’re right. I think it’s a little bit too early to, let’s say, to comment on the retail caps, which is something that naturally will come when the transition phase will be over. I think for Korea, we have had a kind of double transition. We even had twice the relaunch of the retail excellence because we had a market that was not only managed by an importer, but this importer had a range of franchisees that we’re managing the store.
So we first trained them when we took over back in 2021 and we have seen that only a few of them who will have the capability to work in a larger organization with a client-focused approach. So we change most of the team at the end of last year, beginning of this year when we did the relaunch of retail excellence. Clearly, this is going to take some time to materialize in terms of positive impact on the market. But we have seen a real change in the attitude of the team and I think for me, one of the KPIs that I may be able to disclose, which is data collection because elements all the — let’s say the elements on which we are working and we have been working for Moncler in the past, started by knowing your clients.
So if you don’t know your clients, if you don’t have a solid database, all the work in terms of clienteling is useless because you don’t know what you are talking about. So this is where I’ve seen currently the very positive response from the Korean market and the teams that we have reached now in just a few months data collection rate that is at 80% — 85%, which is honestly not far from the one we have with Moncler. So we start having the base on which we can start investing.
One of the chance that we have on the current market is that basically between [indiscernible] we’re gathering 90% of the presence on the market. So we’ll start doing the investment in terms of visibility they can be very concentrated and having a meaningful impact on the short term. But this will require a few more months and this is where the team and especially robust is currently working.
Regarding the price impact, I think the positive news is that the price impact for the next spring/summer for Stone Island is much, much lower, almost meaningless as we have been able to develop our collection in a meaningful way without impacting the price clearly being, let’s say, a brand that is positioned in terms of average price lower than Moncler, the price increase on some markets a little bit more, let’s say, the reaction of the business on Stone Island has been much more driven by the price rather than the volumes, which is showing that the impact is not like Moncler where we have been able to work on the brands for the past 10 years or even more and where we didn’t have any impact on the price here. The volume that we see, the growth that you see has been mainly driven by price increase.
Elena Mariani
Okay. Thank you very much. Thank you very much for the call — for the question, sorry. We do have a few questions that came through from the webcast. And so I’m just going to read a few of them. I’m just going to focus on the ones that have not been answered. So I think on inventory, we talked about it. So moving on to this question for Gino. How do you see your return on marketing developing given significant investment by peers in the market?
Gino Fisanotti
Again, I think we more or less touch on this. I keep saying, I think the level of focus and precision we’re trying to have regarding the strategy is definitely help us — helping us to be a bit more effective and efficient in the way we do marketing. I think I don’t believe necessarily that it’s all about investment, it’s about the meaning of the brand and what we say and how we interact with customers out there.
And I think what we believe is that we have the right strategy in place and it’s working so far. So I think what we’re trying to do, of course, is to obsess every single detail of the way we engage with customers and that’s hopefully will keep us driving a strong brand position and a strong business result on the back of how we are maximizing every investment we do. It’s just not about more money and money is about the meaning of what we say and the way we invest against the strategy.
Elena Mariani
Okay. And then could we give further color on Stone Island versus Moncler EBIT margin?
Luciano Santel
Yes. I can give you some color, but not numbers. I mean, I can tell you that Stone Island, as we said at the very beginning, delivers an EBIT margin that is more or less in line with Moncler, but with some differences. For example, the marketing budget as I told is still is behind what we are spending in Moncler. So I mean, overall, long term, we expect the EBIT margin to be aligned with the Moncler considering higher marketing spending, but also higher gross margin.
Right now, I can tell you that in the first half of the year, this is something that may be unexpected, but the EBIT margin of Stone Island is higher than what we report for Moncler, but this is simply because the seasonality of Moncler is much higher than the one for Stone Island. But again, overall, I mean, our target is to maintain a similar equivalent EBIT margin. But I mean, with the comments I just made.
Elena Mariani
I don’t know if you want to add anything on Roberto in the key areas of focus and then positive or negatives that he had filed. I think we have already elaborated on it, but if you want to add any further color.
Roberto Eggs
We are mentioning that one of the very important points, not to repeat what I already said is also the online integration because the online integration will allow us to move into an omni-channel approach, moving from retail excellence to omni-channel excellence. So we have already our plans for the first half of next year to get the team prepared in terms of software in the stores and in terms of change of habit to leveraging, like we have been doing for Moncler and move from a retail excellence approach to an omni-channel excellence approach. And clearly, the internalization of the online will be an asset, on which we are going to work for the next one year.
Elena Mariani
And then one final question, I guess for Roberto whether we have seen any impact from the recent heat waves across the globe?
Roberto Eggs
Well, as you know, yes, we have seen extreme heat ways, but study reports also that there is an increasing variability in the extreme weather as we have seen this winter where we had a very cold weather in North America and in Asia. So I think what is important is that in terms of collection, we have been working and we have now both for our spring/summer and for winter collection, both warm and light offerings.
And as it was explained prior by Gino, we are working also on the multilayering, which is something that is adding functionality to our outerwear, where we can work three different type of pieces, both together or the light warm piece together. It is also increasing the price average of the outerwear. So it’s having a lot of functionality and it’s something that clearly is one of the assets and elements that we have been developing to counterbalance these extreme weather condition that we have seen this week also in Milano with extreme weather condition.
Elena Mariani
Okay. Fantastic. Thank you very much to everyone for participating in this call. Let me just give you a quick reminder of the next release. Our Q3 results will be on October 26 after market close and our quiet period will start on September 27. Please feel free to contact me for any follow-ups. I’m around tonight if you need any clarifications on anything that what was set today. Thank you again. Have a great evening and we wish you a wonderful summer break.
Operator
Ladies and gentlemen, thank you for joining. The conference is now over and you may disconnect your telephones.
