Moncler: Namesake Brand Remains Strong as Stone Island Hits Road Bump
We are increasing our fair value estimate for narrow-moat Moncler MONC to EUR 46 per share from EUR 41 to factor in strong 2022 results and higher expectations for 2023 growth.
For the first quarter, sales trends remained strong (up 23%) but were polarized: The Moncler brand delivered 28% constant-currency growth while Stone Island grew only 5%. Moncler brand revenue was strong across regions, with 29% growth in Europe, the Middle East, and Africa, helped by double-digit demand growth from locals and tourist buying (mainly U.S. and Korean visitors, as Chinese visitors have yet to return), and 32% growth in Asia (sequential acceleration from 14% in the fourth quarter and one of the strongest showings among peers so far). Sales in the Americas were less strong, up 9%, but still better than most luxury peers. Moncler is less penetrated in the Americas (less than 20% of sales versus 30% for the industry), which may give it a longer runway for growth compared with peers. Brand momentum remains strong, supported by a marketing budget at 7% of revenue, spent on (among other things) the Moncler Genius event in London, attended by over 12,000 people and watched by 1.6 million on livestream.
By contrast, Stone Island seems to have hit a bump in the road, with still-strong growth in Asia (up 28%), a 4% increase in EMEA, and a 20% drop in Americas sales, a result of weaker buying from wholesale channels and less brand recognition compared to Moncler. Stone Island is moving to direct-to-consumer channels (a move Moncler has already successfully implemented), as wholesale still accounts for 68% of sales. However, the shift to retail is an expensive undertaking with its fixed cost structure and may be margin-dilutive if the brand desirability and sales densities don’t improve. We think Moncler’s leadership has enough credibility to implement this shift successfully. New Stone Island CEO Robert Triefus, hired from Gucci with over 15 years of experience there, will lead the execution.
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