Opening New Flagships In Shanghai And New York Will Strengthen Global Brand Presence

Key Takeaways

• Strategic expansion in China and the U.S. aims to boost brand visibility and drive revenue growth in key markets.
  
• Emphasis on high-end offerings and digital expansion could enhance net margins and improve operational efficiencies.
  
• Uncertain macro environment, regional price gaps, and Stone Island challenges may hinder Moncler's revenue and margin growth.

Catalysts

Designs, produces, and distributes clothing and related accessories for men, women, and children under the Moncler and Stone Island brand names in Italy, rest of Europe, Asia, the Middle East, Africa, and the Americas.

• Moncler's expansion in China, including ground floor location improvements and the success of the Genius show in Shanghai, could enhance brand visibility and drive DTC revenue growth in the APAC region.
  
• The upcoming 5th Avenue flagship store opening in New York in 2026 is part of a broader strategy to increase brand presence and drive revenue growth in the U.S. market.
  
• The focus on high-end product offerings, like the successful Moncler Grenoble campaigns and collaborations with designers, can elevate brand perception and potentially enhance net margins by focusing on premium-priced items.
  
• Digital expansion and improved omnichannel capabilities, such as the internalization of Stone Island's e-commerce operations, may bolster future sales growth and improve operational efficiencies.
  
• Continued retail excellence and productivity improvements in both existing Moncler and Stone Island stores, alongside selective new openings, aim to drive sales per square foot, ultimately supporting earnings growth.

Moncler Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Moncler's revenue will grow by 5.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 20.6% today to 20.4% in 3 years time.
• Analysts expect earnings to reach €746.3 million (and earnings per share of €2.74) by about July 2028, up from €639.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.5x on those 2028 earnings, up from 21.4x today. This future PE is greater than the current PE for the GB Luxury industry at 22.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.26%, as per the Simply Wall St company report.

Moncler Future Earnings Per Share Growth

Risks

• The macro environment remains uncertain, which could impact consumer spending and thus Moncler's future revenue growth.
  
• Moncler's wholesale revenue decreased by 7% in full year 2024, reflecting challenging market trends and distribution upgrades, potentially affecting overall earnings.
  
• The space contribution to growth is expected to be closer to mid-single digit rather than high, affecting expansion plans and potentially capping revenue growth.
  
• Price gaps between regions, especially Europe, China and the US, remain a concern, potentially impacting net margins if not adequately managed.
  
• Stone Island's brand repositioning may extend with wholesale still forecasted to remain in negative due to elevated distribution efforts, impacting immediate earnings.

Valuation

• The analysts have a consensus price target of €59.274 for Moncler based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €70.0, and the most bearish reporting a price target of just €47.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.7 billion, earnings will come to €746.3 million, and it would be trading on a PE ratio of 29.5x, assuming you use a discount rate of 11.3%.
• Given the current share price of €50.68, the analyst price target of €59.27 is 14.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.