Business Breakdowns
· Chris Davies
So I think they're only just getting going there, really. There's a long, long runway to explore there. It's worth touching on Asia and China because this is a really important part of the business. I mean, Asia was about half of the group's revenues last year. China's been a bit of a difficult market recently for lots of brands. We're starting to see some real signs of recovery coming through for Moncler, but the long-term is really what matters to us. And what we see from Moncler is a huge commitment to that market. Obviously, the Shanghai event was one event, but it was massive. Every year they have this Genius presentation where they put out the hint of what they're doing—they actually moved that to China for the first time, again breaking the mold somewhat. So they're going to be doing a lot more of that. They're going to invest heavily in China, but we're still in the foothills of growth there. And they've got a really interesting organization in China which is really digital-first, it's really client-oriented. They actually see it internally as run in quite a unique way. They've got somebody representing that business on the exec committee as well. And one thing they said to me was: we could learn something from what we do in China in our other businesses. So China and Asia more broadly I think is going to be really interesting. And Stone Island—this is possibly the second act. It's what comes next. And we talked about a lot of the growth drivers there, the growing direct-to-consumer. Your price points could be growing over time. I can see how that brand possibly splits into different pillars itself. So, for example, they've got a range called Ghost, which is more of a subtle, quieter version of the brand, which is not a quiet brand, Stone Island by any means. So I think there's room there and you're starting to see some of that come through. So if you look at last year, for example, for Stone Island as a whole, the top line actually shrank 1%. Now, if you look under the bonnet or the hood, as you North Americans say, Asia grew 23%. And again, Stone Island's barely got going there. It's much, much earlier than Moncler is. Direct-to-consumer across the board grew 23%. Wholesale fell 19%. So that shift is ongoing and it's still in the midst of that unfolding.
· Chris Davies, Matt Reustle
But it's going to end at some point and the baton will be very much passed to retail and then it'll be over to them to really drive growth. So it'll be interesting to see how that works. But I can see that really starting to come through as they build up their business in Asia, they build out a business in North America. I think that's going to be really interesting as well. [00:00:00] S0: And within that context, I mean, what risks stand out to you? When you think about main risks that exist within the business, what stands out for Moncler?
· Chris Davies
[00:00:00] S1: Yeah, I think with any fashion business you have to have a healthy skepticism about long-term sustainability of the business. Fashion can be quite violently cyclical. So we mentioned Gucci a few times. They had some incredible years under Alessandro Michele as creative director. That came to an end a couple of years ago. So they've had a really, really difficult period. I think there's that cyclical element to it now. I've got quite a lot of faith in Moncler because they've got genius. Because they're constantly staying relevant and fresh. That you can actually fend that off. The obsession with avoiding the boredom of your clients. I think that's really quite powerful. Another thing that worries me is when you are, as a lot of these genius collaborators are, operating at the edges of experimental fashion, there are dangers. We've seen various examples of this over the years. I don't want to pick on Gucci all the time, but it's one that comes to mind. If you go back to 2019, they introduced a sweater that was criticized for basically resembling blackface. So this sweater which came up over the mouth and it almost had this gap for your mouth and these red lines where your lips would be. And they did this during Black History Month, which in hindsight, of course, was an extraordinarily silly thing to do. I'm sure they wouldn't do that again if they had their time over. You could actually look at Moncler itself. There was quite a controversial collection back in 2016 when Thom Browne, who was a designer that they were working with at the time, basically had these models wearing what looked like military or camouflage-inspired clothes at a fashion show not long after the terrorist attacks in Paris in November of that year, which were absolutely terrible. People died. It was awful. So that was regarded by some people, a lot of French people, as really very distasteful. So that's a risk as well. I'll give you two more. One would be the supply chain. We've talked about this. But there is huge risk here if you get this wrong. And there's been lots of scrutiny in the press recently, particularly companies like Dior getting into hot water because their manufacturing arm was implicated in labor exploitation. And it became clear that there were big flaws in their audit and oversight process; that's a big risk. And the other one I guess would be Ruffini.
· Chris Davies, Matt Reustle
He is so important to this story. Now we've met a number of people around him over the years, some very impressive people like Luciano Santel, who is his right-hand man. Roberto Eggs, Gino Fisanò. There are lots of really impressive people who've come to Moncler from other really big brands over the years. It's a really deep bench, it's an experienced bench, but there is a kind of magic stardust to Ruffini and he is important and I think if he got hit by a bus tomorrow, I'd probably be quite worried. Fingers crossed, of course, he is in great health for many, many years to come. The question for us would be around succession. I think he said at the end of last year, I would love it if my sons would take over the business. And I think one of his sons actually does work at Stone Island. So it might happen at some point, but it's clearly a risk. He's important, he matters. He's a massive driving force. [00:00:00] S0: Key man. [00:00:00] S1: Yeah, exactly. It's key man risk. Exactly. [00:00:00] S0: Well, this has been fascinating. Diving into a new niche of the luxury market. We finish the conversations with the key lessons that you can take away—what stands out from Moncler as a key lesson that you might be able to apply elsewhere?
· Matt Reustle, Chris Davies
[00:00:00] S0: Well, this has been fascinating. Diving into a new niche of the luxury market. We finish the conversations with the key lessons that you can take away—what stands out from Moncler as a key lesson that you might be able to apply elsewhere? [00:00:00] S1: That's a great question, I think. Protect your brand. The brand should be basically at the center of everything you do. Every decision you make should be forcing you to ask yourself: what does this do to my brand? And this is what Ruffini is obsessed with. I remember seeing an advert actually at an airport recently, a different brand. It was a watch brand, Patek Philippe, and the tagline was something like, you merely look after it for the next generation. You never actually own it. I think that's true for all luxury brands. The stewardship is so important because you're passing this on to either the next generation of the family or at some point maybe professional management. And you've got to be absolutely sure that you've done everything to strengthen that brand, to avoid it being caught up in scandals, besmirched in some way. So that to me is one of the vital lessons here. It's being obsessed with the quality of the brand and being willing to actually not do things. What are the things that we are willing to give up in order to maintain the brand equity? Give you the example of Richemont buying back all of that inventory. They described it as an investment in the brand, not a loss.
· Chris Davies, Matt Reustle
[00:00:00] S1: That's a great question, I think. Protect your brand. The brand should be basically at the center of everything you do. Every decision you make should be forcing you to ask yourself: what does this do to my brand? And this is what Ruffini is obsessed with. I remember seeing an advert actually at an airport recently, a different brand. It was a watch brand, Patek Philippe, and the tagline was something like, you merely look after it for the next generation. You never actually own it. I think that's true for all luxury brands. The stewardship is so important because you're passing this on to either the next generation of the family or at some point maybe professional management. And you've got to be absolutely sure that you've done everything to strengthen that brand, to avoid it being caught up in scandals, besmirched in some way. So that to me is one of the vital lessons here. It's being obsessed with the quality of the brand and being willing to actually not do things. What are the things that we are willing to give up in order to maintain the brand equity? Give you the example of Richemont buying back all of that inventory. They described it as an investment in the brand, not a loss. [00:00:00] S0: I love it. It's a great lesson that certainly applies here and to the broader luxury market. This has been fascinating. Chris, thank you very much for joining us. [00:00:00] S1: Thank you, Matt. Cheers.