Good day and thank you for standing by. Welcome to the Maisons du Monde Trading Update Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during your session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our speaker today, Julie Walbaum, CEO. Please go ahead. Thank you. Good morning to all of you, and thank you for joining this call on such short notice. You have no doubt seen the press release we issued yesterday evening. As you are all very much aware, this year proves more challenging than expected. You might remember that the guidance we confirmed at the beginning of May was conditioned to the stabilization or improvement of the macroeconomic and supply chain conditions. However, those conditions have materially worsened over the last few weeks, and we now expect our second quarter to be high single digit negative. More broadly, our previous assumptions need to be updated. Inflation in Europe is now exceeding 5%, an unseen level for decades. While some analysts considered until recently that inflation would go down after summer, it is now widely believed that due to the continuing war in Ukraine and related macroeconomic disruptions, inflation will stay high until the end of the year. In relation to this, the consumer confidence index stands at a record low, further deteriorating versus the end of March, which was already at a level comparable to the first 2020 lockdown. The high inflation and the low consumer confidence level are driving overall demand for discretionary goods down, and we expect our furniture and decoration categories to be more impacted than others after two years of material spending in household equipment. This can already be observed in April as illustrated by the Banque de France furniture index, which was down 8% versus March and 15% down versus April 2019. Also, Ipsos, the market research institute, released a piece a few days ago showing that furniture and decoration are indeed the kind of arbitrage French consumers are likely to make if budget constraint. Consequently, while we anticipated that demand would stabilize and then start to progress again in the second half on the back of a more favorable comparable base, we now think that store traffic could be staying in the low range currently observed. That is materially down year-over-year. After a significant decline in H1 due to high comps, we expect online traffic to start growing again in H2, but more moderately than initially planned due to the soft demand for the category. Supply-wise, we do continue to actively rebuild our inventories. While the Port of Shanghai did come back to reasonable operating conditions, which is good news, the evolution of the pandemic in other parts of China keeps generating serious bottlenecks in secondary harbors, which still represent about 25% of our shipments, which creates extra cost as we need to redirect some of our loadings. These disruptions may also slow down our restocking plans in the upcoming weeks. We still expect to reach the inventory levels we previously mentioned by the end of this year, but the sequence may be a bit more back-ended than anticipated. On the cost side, most cost components of the gross margin, that is freight, raw materials, energy, have all risen sharply in the recent months, creating important disruption in the assessment of our cost base. Let's take some examples on raw materials. Wood is currently trading at prices 25% higher than last year, and that is up to 50% on wood types such as oak. Textile is on average 30% more expensive. Considering that for those products, raw materials make up to 30%-60% of purchasing costs, the impact of that on COGS is sizable. Obviously there is freight, which as you know, has increased four-fold on average over the last 18 months, cost of which is not weighing the same from one product family to the next. We have been negotiating hard with our carriers and with our suppliers to minimize the cost uplift, with a big push from our purchasing team over the last few weeks as we are closing end of May, that is now, the first round of our annual negotiations. This is an unprecedented context of high inflation across the board and of high volatility. Based on the careful analysis of actual numbers year to date and a revised assessment of our forecast for the year to go in the context of these negotiations, we now reckon our projected costs for the full year have been underestimated, temporarily impacting the projected gross margin model. As I said, negotiations are still ongoing to minimize cost uplift for future collections. Also, as planned, we will be implementing over the summer an additional wave of price uplift to complete our 2022 pricing program. It goes without saying that we as an executive team are committed to pull every lever to support sales first and also to minimize our cost base in order to protect our profitability. We have a series of short-term and mid-term action plans in place to boost demand in the upcoming quarters. On the cost front, we are implementing additional efficiency programs in purchasing, logistics, and transportation, as well as the containment of all central costs. Recruitments have been put on hold and other SG&A, including branding investments, have been cut or postponed. We are also monitoring our cash very closely. That said, we think it is important not to jeopardize future sales growth. In that period, we want to set forward our key strategic initiatives, such as the launch of our second warehouse in the north of France and the further deployment of online marketplace outside France. We also want to keep actively replenishing our inventories to support sales acceleration in 2023 while managing sourcing and freight constraints. In this context, we have decided to update our guidance for 2022. We now anticipate our top line growth to be mid-single digit negative and our EBIT margin to be at 5% or above. As regards free cash flow, we expect a level between EUR 10 million and EUR 30 million. Our targets regarding carbon neutrality and dividend payouts remain unchanged. This updated guidance may sound cautious, but given the high uncertainty in which we, and frankly the whole market, are operating, we consider it is a reasonable approach at the time we speak. On the longer term perspective, we stay absolutely confident in the intrinsic quality of our model. Although the 2025 target we disclosed at our CMD last November may be extended, the growth strategy remains fully valid. In conclusion, it is fair to say that the company is facing an unprecedented combination of external headwinds that challenge its short-term performance. The context is also confirming the relevance of our choices in the recent years and recent months, whether it is the further differentiation of our collections and the buildup of a strong lifestyle brand, the reduction of store openings and the deployment of a marketplace, or recently the decisions to relocate part of our sourcing to Europe or to launch a second-hand offering, finally, to build the relevant organization for Maisons du Monde. All these get, in my view, further soundness in the current context. I fully trust the agility and commitment of our teams to hold the helm efficiently in these rough seas and leverage every challenge we face to keep strengthening the company again and again. Thank you all for your attention, and we are now ready to take your questions, Regis and I. Thank you. As a reminder, to ask your question, you will need to press star one on your telephone. To withdraw your question, press the pound hash key. Once again, please press star and one if you would like to ask a question. Please stand by while we compile the Q&A roster. Thank you once again. Please press star and one if you would like to ask a question. We are just waiting for the first name. While we wait, once again, if you'd like to ask a question, please press star and one on your telephone keypad. To withdraw your question, press the pound or hash key. Your first question comes from Destin Minimo from BNP Paribas. Please go ahead. Your line is open. Hello, do you hear me? Yes, we do. Hi. Morning. Hi, everyone. Good morning. I got two question, please. The first one is on the timing. Can you please be more explicit in terms of schedule? I'm struggling to understand what happens between the beginning of May and now, why you were so confident to maintain your full year guidance at the beginning of the month, and why you're not so confident now. Second question is about the implication in terms of gross margin. Can you please detail what you could expect in terms of gross margin? You were previously expecting 100-150 BPS gross margin improvement in 2022. Can you please break down what you are expecting in terms of impact from freight cost, pricing and product mix? Next. Thank you. Sure. Thank you. I'll take your first question, then Regis will answer your second one. Well, you're mentioning our guidance that we confirmed, sorry, three weeks ago. That's right, we did confirm the guidance. However, we did qualify it back then. We said that this was provided that macroeconomic and supply chain conditions do not deteriorate, that is stabilize or improve. What happened over the last few weeks is that those conditions, well, materially worsened. If I'm just focusing on the top line, I suggest we have a look at the current trading. That is May, which has been well below our expectations, to be fair. Traffic has been materially down year-on-year and in strong deterioration versus April. If I take stores, traffic was down 35%-40% year-on-year, whereas it was only down 20% in April. That is, the data we had last time we spoke. When it comes to online traffic, in May was down 20%-25%, while in April it was sort of only down 15%. In April was already down versus March. I guess what I'm saying is that the dynamics has not been good over the last month, and the weekly dynamics is also negative. Basically this is influencing the view that we're having now on the next quarters and we no longer expect the improvement that we initially planned for in underlying demands. Basically that's what's been happening on demands. Also, the COVID pandemic is still hurting. We said that we were anticipating an improvement of the supply chain conditions, and now as we said, we have to resurrect our loadings. Secondary ports are still being disrupted. It is true that, given the slower demand, our inventories in our warehouse get replenished faster than planned as we keep inbounding containers, which is good news. That said, we are having new collections both in furniture and decoration to ship for H2. Those delays in onboarding impact Q3 sales and also margins as new collection come with a new pricing. This is also what's been happening over the last few weeks. The third and last bit is the supplier negotiation. As I said, we are ending the first round of our big annual supplier negotiation end of May. Basically the results we had from the suppliers took over the course of the month of May. We had new elements coming in over the course of this month, and that's what brought us to really update all of our estimates and our forecast and overall the cost-based assessments. These are all of the new elements that make us speak to you today with basically the updated estimates. To be fair, I think that it's sort of a unique situation for the market, for the category and for us as a company, right? This is basically an equation with 25 variables moving around at the same time. We are providing the best transparency we have at the time of date. Thanks, Julie. Stephen, to comment on your question vis-à-vis gross margin, indeed now we are contemplating a decrease of gross margin, which is circa 300-350 basis points. It's really twofold, cost and pricing. From a cost perspective, although Julie just mentioned some of the elements, on freight, because it was part of your question, we have secured prices on a certain set of volume. Most of this program are not going as planned due to COVID, so to secure minimum shipping volume, we had to renegotiate a portion of those costs. Secondly, on cost, still different components, energy, rate, but more importantly, it's really about raw material. As just mentioned by Julie, now we have a much more precise view vis-à-vis those negotiation with each of the supplier. You know, we mention it, some of those raw materials are really rising through the roof. Cotton, we did not mention it, but double price, oak is +50%. Despite really negotiating hard with all of our suppliers not to accept all those cost increases, the cost evolution is really higher than expected, higher than previously assessed. On a pricing perspective, we have implemented the first series of price uplift to compensate those extra costs. They are not materializing to the extent we were anticipating due to supply chain challenges. New collection getting implemented at a slower pace than planned. When we look really all of our analyses at the end of April, really getting in all those details vis-à-vis all those moving elements at subfamily level regarding cost, as I said, pricing effect, volume dynamics and so on and so forth, it's many components that have moved. We just reckon that our projected costs were underestimated, and now we assess gross margin to be, in this context, much more closer to the 62.5%, 63%-ish versus the 66% of last year. Thank you so much. The last question is about the pricing. You mentioned at the beginning that you could do some other price increase in H2. To what extent the pricing. I mean, what are you expecting in terms of price increase in H2? Are you afraid about a squeezing effect in terms of demand if you are increasing the pricing given the current inflationary environment? Thank you. Thank you. Well, in terms of pricing, what we can observe is that competition has increased their prices by at least as much as us and actually even more, which gives us room for some more pricing to pass on, to answer your second question. We've been assessing a lot of our products, hundreds of our products relative to competition. What we've been observing, based on this analysis, is that the price increases observed with the other players was higher than the one we've been implementing. Again, that gives us confidence in our ability to pass on this extra pricing. As we said earlier, we are basically implementing price uplift in waves of 5%-10%. This is again the sort of range we're envisaging for this summer, 5%-10%. All in all, on a cumulative basis, that would be in a low-teens% price increase, which again puts us in line with competition. Last question. What does it mean in terms of breakdown in terms of top line growth between volume and the pricing? Because I assume that the mid-tier price increase will not have a full effect on the full year basis. If you can be more precise in terms of what you expect in terms of top line movers please. Yes, sure. Obviously the yearly effect of what just Julie described is that the pricing will not bring the full value this year. Considering the guidance that we have presented this morning with a mid-single-digit decrease of our top line, it's indeed more than this in terms of volume. I think it's really consistent with all the dynamics we can see on traffic on both channels. The pricing dynamics will be much less than the nominal, the face value of it. We are probably circa five to 10 in terms of volume effect and a low-single-digit to mid-single-digit positive in terms of price. Obviously, mix is an element in this component. We are really observing each of the subfamilies at the moment. I think it's still very difficult to project precisely at category level the volume price dynamic, because it's really different from furniture to deco. As you know, the furniture availability at the moment is not really there. In the way we project the coming quarters, I think we will be much clearer at the end of the semester already on a basis of six months dynamics. Thank you so much for your precise answers. Thank you. Sorry. No, no. I was saying thank you so much for your precise answer. Thank you. Thanks. Yes, I'm sorry. We now have a question from AJ. First one on the growth margin, but we already answered it. The second one is, can you give us some color on OpEx savings in terms of areas targeted without disturbing the long-term strategy? Yes. Thanks, Angie. I think indeed it's a key element. We do not want to jeopardize dynamics of investments that really are there to support future levers of growth. Marketplace dynamic is one element, and you know that we have a very ambitious agenda on this front, with more recently the launch of a new country in this important channel for us. To the same extent, the deployment of our warehouse is really key for us in our model of logistics. Julie mentioned it, we are really focused as well on strengthening the company with important initiatives that will weigh a bit on SG&A. Not compromising on those elements, we are indeed putting in place a strict resource allocation control. The area that it will deal with are really usual classic kind of cost monitoring. It will be about branding a bit to support our initiative, but it will be about cost structure, T&E, recruitment, different elements that we are monitoring very closely on this front. Take the opportunity to say that those projects will weigh on already will be visible in H1 when the cost controlling measures that we are implementing will bring the benefit on H2. There will be a phasing element on this reading as well. Just to advise again, if you'd like to ask a question via the telephone, please press star and one. Star and one on your telephone keypad to ask a question. There are currently no further phone questions. I will pass the call back to you. Well, thank you very much again for your time and for listening at this early time. I guess what we wanted to say this morning that even though indeed the current headwinds, which is under a unique multiplication these days, is challenging the short-term performance of the company. We firmly believe in the intrinsic quality of the model. Frankly, I do think that the challenges we're facing today will have also the virtue of strengthening the model further and strengthening the company further. I do believe that at the end of the day we will be an even more relevant model in the market. Thank you again for listening, and I wish you a very nice day. Yeah. Clemence and myself are obviously available to follow up with some of you if you want, in the course of the day. Thank you very much. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.