Morningstar | Moncler Continues to Deliver Strong Results in 3Q; FVE Raised to EUR 23 per Share; Shares Rich. See Updated Analyst Note from 25 Oct 2018
We are increasing our fair value estimate for Moncler to EUR 23 per share from EUR 21.50 to reflect a better-than-expected nine-month sales growth rate. We now anticipate like-for-like sales in the high teens for the year (versus low-double-digit previously) and 10% growth in the wholesale business (versus 4%), but lower contribution from space. We still see shares as overvalued, trading at around a 30% premium to our fair value estimate, even after the recent price drop. Our forecast calls for an average 10-year growth rate of 6%-7% (versus 4% industry growth) and 30% average operating margin, in line with 2017 levels.Third-quarter results came in strong, even despite unfavorable weather conditions. Still, there was a sequential deceleration in all regions from the first half. In constant-currency terms, sales in Italy increased by 7% (versus 9% in the first half), sales in the rest of EMEA grew by 13% (17% in the first half), sales in Asia-Pacific by 36% (42% in the first half), and sales in the Americas slowed to 10% (versus 29% in the first half), affected by earlier shipments into wholesale channels.
The Moncler Genius project helped improve store traffic and attract both existing and new consumers to the brand. Still, management continues to see the project more as a brand-building exercise than as a significant contributor to sales (it is expected to reach 5%-10% of revenue, versus midsingle digits for the Gammes collections it replaces). Like its previously reported peers, Moncler downplayed the risks of the Chinese spending slowdown, noting the strong performance of the brand during Golden Week. Price gaps for Moncler in China are still elevated compared with peers at 40%-50%, versus 15%-26% for Kering’s Gucci. Nonetheless, management expressed confidence about the lack of negative impact from daigou activity limitations, given strong buying in mainland China and strict internal rules on the number of products people can purchase in the stores.
Moncler is a jacket and sportswear production group based in Italy. Co. directly produces and distributes its own clothing and accessories collections, through its direct boutiques and exclusive department and multibrand stores. Co. branded products range from the high fashion segment with the Gamme Rouge and Gamme Bleu collections (exclusive products and selected distribution to boutiques) to the Grenoble collection (sporting and technical garments). As of Dec 31 2013, Co. operated a network of 135 stores, including 107 directly operated stores (DOS) and 28 wholesale stores (27 shop-in-shop and 1 franchise store).
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