EUR 850.00 For Business Accounts Only

Morningstar | MONC Updated Star Rating from 01 Mar 2019

We are maintaining our narrow moat rating for Moncler as the company reported strong full-year sales in line with our expectations but ahead of consensus estimates. We expect to increase our fair value estimate by a mid-single-digit percentage to reflect the patent box agreement that will lower the effective tax rate for the company over the next five years to around 24%-25%.

Comparable-store sales in 2018 increased 18% versus the 17% we anticipated, while overall retail revenue was up 26% at constant currencies, in line with our expectations. Wholesale growth was 13% at constant currencies, ahead of our 10% forecast. EBIT improved to EUR 414 million, which was below the EUR 436 million EBIT we forecast but beat the consensus expectation.

Moncler Genius increased attention to the brand among existing as well as new clients, contributing around 5%-8% of traffic increase to stores during the year. While a relatively small contributor to sales (management expects Genius collections to contribute up to 10% in revenue), the project so far has had spillover effects to the rest of the collections, as around 50% of clients coming to buy Genius collections are also interested in buying main collections, according to the management. Of the new clients attracted by the Genius project, 20%-25% are coming back to buy either another Genius or the main collection. Further, successful ideas from the Genius collections can be used as inspiration for the main assortment. The share of repeat purchases has also increased to over 40% versus 34% in 2015. We previously argued that a brand focused on a narrow niche with rapidly expanding footprint can enjoy fast growth in expansion phase but higher cyclicality when the first wave of buyers in the new territories wears off. We believe that with the Genius collections, management is addressing this risk.

Despite the continuing store expansion program (increasing footprint added around 10%-11% to revenue growth), thanks to strong comparable sales and strong full-price sell-through (improving gross margins across channels), the company delivered positive operating leverage for the full year, with operating margin rising to 29.2% versus 28.6% a year ago. Sales per square meter increased to EUR 36,000 from EUR 35,000 last year. Non-outerwear categories continued to expand and now contribute 24% of revenue.

Geographically, Moncler saw good growth across regions, mainly driven by local rather than tourist consumption. Growth accelerated again in the fourth quarter in Italy, which grew 12% for the full year versus 8% in the first nine months; Europe, the Middle East, and Africa, which delivered 17% growth versus 15% in the first nine months; and Americas, which gained 23% in the full year versus 19% in the first nine months. Asia and rest of the world saw deceleration in the fourth quarter with a 28% full-year gain versus 39% growth in the first nine months.