Today's fireside chat with Lanvin Group. I'm your host, Doug Lane, and I'm head of consumer products at Water Tower Research. Today, I am pleased to be joined by James Kim, who's the head of investor relations at Lanvin Group. James, thank you for joining us today. Doug, thanks for having me. Great, great honor, and excited to discuss Lanvin. Well, we're excited to learn about Lanvin today. Before we get started, I would like to point out that the company's safe harbor statements can be found in the events section on its investor relations website. So, James, the company's put together a portfolio of five iconic luxury brands that are quite diverse, both product-wise and geographically. How do you plan to make the whole greater than the sum of the parts? Maybe we can start with marketing synergies that you can take advantage of throughout the group. Sure. So, you know, it's not really rocket science, and maybe I'll flip over to the collection of brands and the timeline also. It'll give maybe a little bit of context. So the platform, Lanvin Group, was founded in 2017, 2018, really with the intention of taking advantage of global luxury consumption and its accelerated growth, particularly in the Asia-Pacific region. I think if you look at some current studies by, you know, some of the larger consulting groups, they'll cite that, you know, 60%-70% of global luxury consumption will come from APAC, with 30%-40% of it coming from Greater China by the year 2030. And then when we were thinking about the various luxury brands that... And where they're domiciled, you know, you find most of luxury being produced and created in Europe. And most of the platforms, whether it's LVMH or Kering Group, they're all based out of Europe. Obviously, North America has its brands like Ralph Lauren and Tapestry and Capri, but there was none that were based out of Asia. And, you know, the group was founded with two brands, initially, St. John and Caruso. St. John, which is an iconic American luxury brand, often dubbed the First Lady brand, as many of the presidents' first ladies have worn St. John. And then Caruso, which is an Italian men's sportswear brand. And both of those had been assets that were within a private equity portfolio managed by Fosun Group, a large Chinese asset manager. Fast-forward to 2017 and understanding the tailwinds and the acceleration of global luxury consumption in Asia, the thesis was brought to the board of Fosun, and the decision was made to move ahead with a platform build that would headquarter the platform in China, in Shanghai, but have representative European brands of the highest caliber. So we went on a search in 2017 and into 2018 for a flagship brand that could, you know, be the crown piece of the platform, and we landed upon Lanvin, which is a French heritage couture brand. It's actually the oldest couture brand in the world. And you know, as an example, Lanvin sits in a sphere that includes all the top French luxury couture names. We have one of the 16 board seats on the French Haute Couture Federation. We also have a warehouse archive that is or an archived warehouse that is subsidized by the French government alongside two other very prominent French luxury brands. So the provenance of Lanvin is. It's unrivaled in a sense. And so we fell in love with the brand. We made it our crown piece. And then further to that, we realized that we now had three brands that were focused on ready-to-wear, and we wanted to diversify a little bit. So immediately after, we acquired Wolford, which is the pre-eminent skinwear brand. It sits kind of in its own category because there really is no competitor at our price point that is delivering the type of leggings, athleisure wear, hosiery, that Wolford does, and it was a great addition to the overall platform. From there, the last acquisition that we've made to date is Sergio Rossi, which is a shoe- a women's shoe brand, based out of Italy, 50- or 60-year heritage. And that really kind of rounded out the group up until today, with the intention of being a broad spectrum, not just ready-to-wear, but accessories, handbags, leather goods, skinwear, et cetera. We felt that once we got to that point between us and Fosun, a decision was made to take the overall group public through a de-SPAC transaction in 2022. Now, going back to your first question about the synergies and kind of how we put it all together, I think the nuance with the high-level easy answer would be to say with regard to any brand, being plugged into an institutional platform will help, not just from back office synergies in combining, you know, finance and legal and HR, but also from the standpoint of in the case of Lanvin Group, we own manufacturing for four of our brands. And so what that allows us to do is not just collaborate between the brands, but as an example, St. John is, you know, one of the pre-eminent knitwear manufacturers. So if Lanvin wants to do a product capsule in knitwear, we can have St. John produce. Many of the shoes that are branded Lanvin are actually produced by Sergio Rossi. Caruso produces nearly all of the menswear for Lanvin brand. So there's a lot of kind of cross-pollination that occurs, and that's at the base level.... Right? Beyond that, then if we want, you know, specific collaborations between the two brands, that's also, you know, very exciting, 'cause it generates brand heat. It really brings, you know, two different brands that have specialties, in the case of Lanvin, in ready-to-wear, in the case of Sergio Rossi, as an example, in footwear. You know, it really you can kind of cross-pollinate these ideas and brands and designs, and it really opens up the world for us in terms of, you know, the products that we can manufacture and sell. So, I think the synergies are limitless, in a sense, and there's a lot of room for us to grow and continue to build upon the collaborative nature that we have with our brands. No, that's a great overview and background on how Lanvin Group came to be. I'll try to do better pronouncing it, Lanvin Group. It is a young public company, as you mentioned. It's not even two years old yet in the public markets, so this is a good time to get up to speed on the name. You know, you talked about the geographic diversity. What is the approximate breakdown here between the major markets, North America and Europe and Asia? Sure. So, EMEA, mainly Europe, 'cause we don't really have a big Middle Eastern presence at this point, but Europe dominates currently at about just a touch under 50% of overall revenues. Then we have North America at approximately 35%, and then the balance is really Asia-Pacific. So from our standpoint, we view this kind of stack of geographies as being upside down, in a sense. Mm-hmm. We would, you know, I think our aim is to one, really expand into the largest market, which is North America, first, and then also understanding that China and APAC are the fastest-growing in terms of luxury consumption. We really want to slot that in as number two, and then maintain what we have in Europe. So I think what you'll see, the evolution as we go forward is, you know, we will continue to expand our presence in North America, really kind of accelerates, you know, some of the growth in APAC, and you'll see us kind of maintaining, you know, improving a little bit in Europe. And then with that said, kind of the equally important, but the opportunity that I haven't spoken about, is the Middle East, where there's a strong affinity for our brands. And we've just started to kind of crack that nut. We opened our first Lanvin boutique in Riyadh in December of 2022. And I've spent actually quite a bit of time there over the last six months, speaking with strategic partners who can help us open retail doors in the region. And it's an exciting time. There's a lot of development and growth going on in the region, and we think there's a great opportunity for all of our brands to start opening boutiques in the Middle East. Hmm. No, that makes sense. You know, you talked about North America still being a huge opportunity. You would think that brands this, you know, established and iconic would already have pretty good penetration in North America. Where do you see the opportunities in North America, where maybe you're not today? You know, honestly, Doug, it's, it's actually everywhere, and that's the funny nuance about Lanvin Group and its, and its brands, and the story here. So, you know, I'll- if you compare it to some of the larger platforms that exist today in terms of luxury brands, because each of our brands were built into the platform previously from independent owners, none of these brands over the, you know, last, let's say, medium to long-term period of time, did not have the benefit of an institutional kind of backer or the resources, you know, not just from a synergy standpoint, but from a capital resource standpoint, to really grow and expand. Mm. Which is interesting, because when you think about... Particularly when I'm in Europe and I speak to people about Lanvin, as a brand, you know, the brand name belies the actual size of the business. Everyone knows the brand and loves the brand, but they don't believe when I tell them how small the brand actually is from a footprint standpoint. You know, Riyadh, I think, was our 31st or 32nd store globally. When you compare that to some of the other notable brands in our industry, they have a few hundred stores globally. And so when we speak specifically about North America, you know, I think we've done a reasonable job on the wholesale side. But when it comes to opening boutiques, you know, we currently have four full-price boutiques in the U.S.: two in New York, one in Florida, and one in California. So you know, just looking at the geography, obviously, we've completely missed the Middle East. We don't have stores in any of the large Texas cities. We could expand further into California. We, again, we only have one store there. And, you know, this is kind of part and parcel of these brands not having had those resources when we acquired them. Now that we've kind of gone through much of the synergistic kind of heavy lifting and, you know, cost structure right-sizing, we're now in a position with the merchandising blueprint that we want for our stores. We're very excited, because the store economics have improved dramatically over the last couple of years, and we're now in a position where we can start targeting all these markets. You know, honestly, we should have, you know, maybe two stores in Chicago. You know, we should have two stores in Dallas and Austin. So there's a lot of opportunity for us to now go into these markets, and we now have the blueprint to do that. So a very exciting time going forward from here, because we feel that, you know, there's an ability for us to really start to accelerate the expansion of all of our brands. Hmm, that makes sense. But, you know, a lot of the American fashion brands, like Ralph Lauren, have really gone to an omni-channel kind of strategy, where I think Ralph Lauren these days is over half DTC, so maybe you could choose, drill down a little bit on your DTC strategy, your DTC strategy- Yeah particularly in this? Doug, that's a fantastic point, because that's the other kind of wrinkle or nuance to our story. You know, we're not one of the large platforms, so we don't have the capital resources to invest billions of dollars into e-commerce or social media or marketing rather. So we're very tactical. We really leverage digital marketing. And so when it comes to omni-channel, that's been one of the big efforts that we've had over the last couple of years. Again, these brands pre-joining the group platform didn't really have an e-commerce presence. I can give you an example for Lanvin as a brand. When we acquired it in 2018, they were doing about EUR 800,000 of sales globally, e-commerce on their brand.com site. Last year, I believe they did north of EUR 20 million. And this evolution, it's not rocket science, right? It's just get a proper brand.com site, get the proper, the platform and the software to be able to do it, and the resources. And, you know, those are the kind of nuts and bolts, kind of low-hanging fruit that we really saw when we put all these brands together. I kind of digress, but, going back to the omni-channel side of it, so we've been developing kind of regional platforms. As an example, we created a U.S. digital platform to effectively house all of the e-commerce business for all of our brands in North America. And this wasn't the case as of, you know, three years ago, where each of the brands was shipping independently. You were having product being flown from Paris to different locations in the U.S. and then being returned and back and forth. So now with the U.S. digital platform, we have a singular warehouse in New Jersey. We run off the Shopify platform, and so all of our brand.com sites now have a centralized location where we can distribute from in North America. And as an example, St. John, which was the first brand to be plugged into the U.S. digital platform, grew their e-commerce 14% last year. So we're very excited about that side of the business, and we think there's ample opportunity there. It's also a way for us to market and distribute in a very cost-effective way, understanding that our platform is still very young and very small, and, you know, it takes a lot of resources to do that, and so we're being very tactical. But very excited about what we can do. And just, do you have a ballpark, or do you release how much of your business is direct-to-consumer versus through your wholesale channels and boutiques? Yes. Currently, overall, we do 60% DTC, which includes e-commerce and 40% wholesale. And we're gonna edge up that balance, probably focusing more on the DTC side, as we evolve. But we still want to maintain our wholesale accounts. They are very important, you know, key, key accounts for us. They also help. We can leverage them for our marketing, in a way, because it's a little bit of a kind of kit and caboodle way to distribute our products. So we value our wholesale partners, but at the same time, we do want to emphasize our DTC and increase that as a proportion of our business. No, that makes sense. I assume it's higher margin? Yes. Yeah. One thing I noticed, as I'm learning your company here, is that you still report independent P&Ls for each of your five brands, as well as, of course, a consolidated P&L. So, I guess, what I want to drill down on is there opportunity for business synergies, cost synergies, where you could really just sort of- those lines begin to blur as you develop this platform? Yeah, to a degree, yes. But what we really kind of bifurcated, I think from a cost perspective and a synergy perspective, what we want to do here. The most important thing for us, for managing these brands is that they have to maintain their heritage, their brand DNA. As an example, Lanvin has to be a Parisian-based, Parisian luxury ready-to-wear brand. Same thing for Sergio Rossi with their shoes in Italy. You know, they have a fantastic production facility in San Mauro, Italy. So these elements are key, not just for the product element, but also for marketing. Mm-hmm. So we want to preserve that, and so what we've done is we've allowed the brand management teams to really drive kind of the front office side of the business. And what we're trying to do is really more from a passive standpoint, synergize the back office, whether it's HR, finance, legal, et cetera. But to your point, there are other synergies that we are developing alongside that. So if we can source better, if, as an example, because much of St. John's apparel is knitwear, if we need specific yarns that can also be used at Lanvin, you know, we can help... we are helping develop kind of single-source suppliers for certain products, and there's abilities to synergize that. To that note, what I also want to make a point that we do have a JV currently with a fabric research and development group based in China. We've created a JV that's a fabric sourcing business. So to the extent, you know, we want to source the best fabrics, regardless of where they're from. The concept here is not that we are exclusively gonna source from China and then manufacture everything in China. That's not the intention. We need the manufacturing to be in Europe to maintain that heritage. Mm-hmm. But from a sourcing standpoint, we want the best of breed in terms of cotton, cashmere, silk, et cetera, and some of those fabrics are generated from China better than anywhere else. But what we've done is we've opened this JV to allow our brands to then tap into that fabric sourcing center and say, "Hey, if I can buy better quality silk from this center than I do independently, I can go ahead and do that." And I think what that's shown, let's say, 12-18 months, is that there are some significant cost savings with regard to certain types of fabrics. So we're very excited in terms of those type of synergistic opportunities that we have for the brands. You're out there, I think, with a target of being EBITDA breakeven by 2025. So obviously, you're not there yet, although the trends have been steadily improving, if I'm not mistaken, since you came on- Right ... and you've released subsequent quarters. So maybe take us down through the P&L, and, you know, where are we, and where do we need to be to get to EBITDA breakeven? You know, gross margin, marketing spending, SG&A spending, those kind of areas. Sure. I mean, you know, I'll go into a little bit, a little bit in more high-level detail. But, you know, I think the most important thing is we've done a lot on the product side to really kind of reinvigorate the brand awareness as well as the sales. And, on top of that, then we've kind of met that with improvements in the cost structure. So one of the numbers I like to point to, or metrics I like to point to, is Contribution profit- Right ... and that's just a gross profit less selling expenses, selling and marketing expenses, and we dub that as our variable margin. So are we sourcing, are we producing, in the most efficient manner? And our contribution profit margins have, you know, improved significantly since over the last 3-4 years. Very excited about that. To your point about what are we targeting, when I step back to the gross profit margin, you know, we are not gonna be a 70+% gross margin-type business. I think you see that in some of the luxury brands that are much more skewed towards leather goods and accessories. For us, because our DNA for many of our brands is in the ready-to-wear segment, we have to preserve that. And so when I think about where we should land in terms of, let's call it optimal gross profit margin, I think it's 63%, maybe 64%. And we're well on our way, having landed at 59% last year, up from 56% the previous year. So, you know, I think we've done a lot of the work from the cost efficiency side and production efficiency side, again, pointing to the contribution profit margin. So I'm confident that the gross profit margin will get to where we're targeting, you know, in the short term. And so now what we really need to focus on is accelerating the top line and driving growth to really start to scale up the business and then the profitability. The one other thing, which I guess I have the slides up, so I'll point out, which I love to see, is I look at this chart, and I look at the gross profit euro numbers going up to EUR 251, improving from EUR 238. I look at the contribution profit going up EUR 11 million, and I see most of that dropping to the adjusted EBITDA line. So what this tells me is that we've done a good job of really kind of honing in on the cost structure and the fixed costs, and now it's a matter of if we turn on the spigot and improve the top line, most of those dollars will drop to the bottom line. So when I then refer to adjusted EBITDA positive in 2025, fully confident that, you know, as we continue to improve the gross profit margin, you know, incrementally up to the 63%-64%, and we couple that with accelerating sales, fully confident that we'll get there in 2025. There's been no pulling back on marketing spending, if I remember right. What is your marketing spending, trending around these days? We're a little bit on the higher end versus the rest of the market. I think it's north of 15% of sales, and by and large, a lot of that is because we do want to over-invest in Lanvin as a brand. Mm-hmm. I'll get into that in a minute. I think generally speaking, we tend to be very tactical about how we're spending our marketing dollars. But as an example, part of this is, you know, something we have to grow into or scale up into. And my CFO always makes a great comment about this because when we first acquired Lanvin as a brand, as an example, the brand was doing EUR 40 million in sales. And yet, we were required to do, you know, four fashion shows a year, each at EUR 2 million apiece. Mm-hmm. So that's EUR 8 million. So 20% of your sales are going to, just the fashion shows, right? Mm-hmm. Not even other marketing. So that's an example. The point of that is that there are certain requirements, I think, on the marketing and selling side that you have to deal with. But you know, I think, you know, as you scale up, a lot of that kind of starts to shrink. So I think if you look at our sales and marketing budget today, it is gonna seem a little bit higher than what comparable companies are doing, but really, it's because of our size, and we're not yet at that point where we're getting those scale economies. We will be there soon. Then the second piece of it is that we do want to continue to over-invest in Lanvin because we really feel that it's a brand that can cover the spectrum of products. You know, I can't really say that for the other brands in our portfolio, but when I think of Lanvin, similar to some of the other large luxury houses, you know, we can have product categories that extend from cosmetics all the way to the, you know, couture ready-to-wear. You know, we've started filling in those holes with regard to shoes, sneakers, you know, jewelry. You know, we still have room to add in at lower price points. And so we want to continue to maintain this over-investment in Lanvin so that we can start to really reach those demographics that Lanvin historically had not been reaching. Younger demographics, you know, customers that are kind of outside the scope of, you know, luxury ready-to-wear, that are looking maybe for more urban wear or kind of a mix. You've seen a lot of that over the last couple years, and so, you know, I think our last creative director, Bruno Sialelli, did a great job in developing that demographic for us. But there's continued ability for us to expand the demographic, and that's why we maintain this over-investment in Lanvin selling and marketing. No, that makes sense. I guess the next logical topic is, how are you gonna finance all this growth, where you just came public through the SPACs, you do have equity market available, but you're still running negative EBITDA, so I gotta believe that you're still relying on external financing here for at least the next couple of years. Maybe you could just fill us in a little bit on what your financing strategy is. Yeah, and that's a great segue, because I do wanna bring up this chart before I forget. So, you know, Fosun Group as our largest shareholder, they've continued to fund us, as well as some of our capital partners that are in this chart. And so, you know, there is an opportunity for us, you know, now to go to the public markets, having publicly listed. The other aspect here is we do not have a lot of debt at the group level. Mm. So there's, you know, financing opportunities. We have a robust asset base. As I mentioned earlier, we own production in four of our brands, so we own production facilities as well as the real estate that underlies them. But I wanna point to this ecosystem chart, because, you know, Fosun, as I mentioned, has been a great resource for us, you know, continuing to fund and develop our platform since before turning public. But each of these brands and... Or sorry, each of these companies in this ecosystem are not just operating partners for us in their particular faculties, but also, they're investors. So they're shareholders in our company. So I'll make a couple notes here. As an example, on the left side of this chart, you'll see Itochu, which manages all of our distribution in Japan for us. They're a shareholder, so they not only have a operating agreement with us to, you know, distribute our brands in, in Japan, but they're also shareholders. On the exact opposite, on the right side, you have Hyundai, through Hyundai Department, through their group, Handsome. They do the same thing for us in South Korea. Bottom left, I think this is the, one of the greatest examples that we have. Listed under product development, Stella International is the pre-eminent sneaker manufacturer in the world for all the luxury brands. I won't name them all, but if you, if you are into luxury sneakers, they produce them. I believe it's 11 factories all throughout the APAC region. They are the largest. They're a shareholder. Whenever we need, we decide we want a new kind of sneaker product drop, we go to them, and they help us develop that project. So, this symbiotic relationship has really kind of helped us develop, I think, faster than had we done this all alone. And that goes again back to the capital resource aspect as well, with Fosun and the likes of Primavera and Meritz also being strong capital resources for us as investors. So there's that side of it, and then we also have the optionality to go out to the public markets or, you know, debt markets as well, and I think, I... You know, I'm not concerned about, you know, finding capital resources to be able to get us to, our next phase here. Okay, that's very helpful. Well, I think we're coming up on time here, James, so I wanna thank you for joining us, and it's been a great overview and introduction to the Lanvin Group. Thanks everybody who is participating in our conference. To learn more about the Lanvin Group, please visit the investor page on their website, lanvin-group.com. And thanks again for joining us. Please note- Thank you, Doug. Thanks, James. Please note that the views expressed in the Fireside Chat may not necessarily reflect the views of Water Tower Research LLC, and are provided for informational purposes only. This Fireside Chat may not be distri-