Mostly Trapping

Moncler Has A Great Growth Strategy
Jun 24, 2019 11:29 ET

(Reprinted from above link)

Summary
Moncler is focusing on growing their online brand and would like to see double the online revenue in the coming years.

Moncler is furthering their presence in the retail airport sector, which has been growing at an incredible pace.

The retail sector is still under a microscope and Moncler may be penalized by the market if they cannot effectively execute their growth strategy.

Intro:
Often seen worn on celebrities, Moncler (OTCPK:MONRF) caters the upper echelon of the income bracket where their jackets sell for over $1,000. They have been expanding into multiple new regions and plan on further penetrating the global market. They currently have a concentrated effort on Europe and the Greater China Area, but they are dedicated to entering two new countries per year and furthering themselves as a global brand.

Management also has a key focus on driving up retail sales by expanding their online presence and entering more airports to expose themselves to a broader customer base. Because of Moncler’s concentrated efforts to grow organically, I believe that they should see a significant increase in their bottom line.

Airports:
Moncler currently has 13 airport locations open throughout the world and is planning on expanding that to 30 locations by 2020. Many of the projected store openings are in Europe and Asia, which are currently their biggest customer bases.



Source: Q1 2019 report

I like the move to open more airport stores in Asia because this is the world largest luxury goods market accounting for 33% of total revenues according to Bain & Company. It would be nice to see Moncler expand further into the United States as it is the second largest luxury goods market, but they seem to be more concerned with addressing Eurasian demand.

They grew 9% in their America’s division, which is slightly below their quarter over quarter growth of 22%. Moncler cited that their Soho, New York store was a key component to the increase in revenues but does not give a detailed description of how they plan on generating more sales in this region.

So back to the airport stores. It is actually an incredibly lucrative industry with duty-free goods expected to be a $64 billion industry by 2020. On top of this, it allows Moncler to be exposed to a crowd of people, mainly international travelers, who typically tend to be higher net worth individuals which are Moncler’s target clientele.

Apparently, airports foster an environment that is conducive to buying goods with one example being Ray Ban’s parent company, Luxottica’s. They sell higher-end sunglasses that caters to a slightly different customer than Moncler, but out of 3,000 stores, their 155 airport stores were their best performers. With this, airport sales as a market are projected to grow over 70% in the next four years.

This shift to a more retail airport approach should allow Moncler to reach a globally diverse customer base that coincides with their target audience and should allow them to generate more revenue.

Online:
A major trend among retailers has been to focus on driving traffic to their online platform. Not only is it more convenient for customers, but it also allows stores like Moncler to sell their product at a higher margin. They plan on doubling their online revenue in the coming years and will attempt to do this by implementing a new site by 2020. Although they do not give direct numbers for online growth, management claims that this division “will strongly outperform”.

This will continue to grow as Moncler begins to sell their products in two new countries per year. With this, they will have a functional site where customers can purchase the product directly from Moncler. They plan on expanding into India, Columbia and a multitude of a few small Asian countries by selling their product wholesale. This will allow Moncler to test these markets without the inherent risk of building a large retail store and will later be able to decide if they want to pursue said market.

Uncertainties:
In the retail space, many brands have been hit extremely hard due to concerns over slowing of growth and Moncler could easily fall prey to this if investors get any whiff of slowing growth. Brands like PVH and Canada Goose got rocked on these concerns falling over 30% each after just alright guidance.

Right now, with the secular trend that is fading away from retail stores and more towards online shopping, I like Moncler’s strategy to pursue higher traffic into their website. Also, major retailers like Nordstrom and Macy’s may be seeing lower foot traffic so I like to see Moncler taking a larger step into the retail airport sector. This is great for brand awareness and Moncler also benefits from the broader trend of more people purchasing items in airport shops. Not to mention that these duty-free stations mainly target international travelers who tend to be wealthier individuals.

Conclusion:
Although the retail space is rocky right now, I like how Moncler is pursuing growth in the retail airport sector as it is poised to grow rapidly over the next few years. Although I would like to see them step up their efforts in the United States and Canada, I like how they are focusing on the largest luxury goods market in the world, which is the Greater China Area. In all, I believe in Moncler’s growth model and believe that if they are able to execute their strategy, they should see significant bottom-line growth.