Earnings call transcript: OVS SPA Q1 2025 sees strong product growth

OVS SPA reported its Q1 2025 earnings, revealing a slight underperformance in sales compared to expectations, yet demonstrating resilience in a challenging market. The company’s stock saw a decline of 1.21%, closing at €3.482. With a market capitalization of $829 million and impressive one-year returns of 34.66%, OVS continues to focus on strategic initiatives, including the expansion of its beauty category and the acquisition of Golden Point, which is expected to bolster future growth. According to InvestingPro analysis, the company maintains a "GOOD" overall financial health score, supported by strong profitability metrics and consistent dividend growth.

Key Takeaways

• OVS sales were slightly weaker than expected, but better than the market’s -2% decline.
• EBITDA saw a slight decline, yet full-price sales grew positively.
• The company is acquiring full ownership of Golden Point, expecting significant synergies.
• OVS plans to open 160 new stores, enhancing its market presence.

Company Performance

OVS’s performance in Q1 2025 highlighted a challenging retail environment, with sales slightly below expectations. However, the company outperformed the broader market’s decline. OVS is aggressively pursuing growth through strategic acquisitions and store expansions, aiming to become the second-largest player in the underwear market.

Financial Highlights

• Sales: Slightly weaker than expected, outperforming the market’s -2% decline.
• EBITDA: Declined slightly to €1.5 million.
• Net Debt: Stable with a leverage ratio around 1.34-1.35.

Outlook & Guidance

OVS remains confident in its growth trajectory for 2025, with Golden Point expected to contribute €50-60 million in sales. The company targets €140-150 million in net sales over the next 2-3 years, with positive EBITDA anticipated for Golden Point by 2026.

Executive Commentary

"We have a combination of positive tailwinds," said CEO Stefano Geraldo, highlighting the company’s strategic initiatives and market opportunities. Geraldo also noted, "We expect to improve the performance of the company in the second half," indicating optimism for future quarters.

Risks and Challenges

• Market Fragmentation: The underwear market remains fragmented, posing competitive challenges.
• Seasonal Sales: Beachwear sales are limited to four months, affecting revenue consistency.
• Economic Conditions: Broader economic pressures could impact consumer spending.

Q&A

During the earnings call, analysts focused on the financing of the Golden Point acquisition and its expected synergies. The company clarified that the acquisition would not materially impact working capital and highlighted potential gross margin improvements.

OVS SPA’s strategic focus on growth and market expansion, despite current sales challenges, positions it for potential long-term success in a competitive retail landscape. The company’s strong gross profit margin of 57.82% and P/E ratio of 17.47 reflect its operational efficiency. For deeper insights into OVS’s valuation and growth potential, including exclusive financial metrics and expert analysis, visit InvestingPro.

Full transcript - OVS SPA (OVS) Q1 2026:

Chorus Call Conference Operator, Chorus Call: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the OVS First Quarter twenty twenty five Financial Results and Golden Point Bill Update Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions.

At this time, I would like to turn the conference over to mister Stefano Geraldo, CEO of OBS. Please go ahead, sir.

Stefano Geraldo, CEO, OVS: Thank you, and good afternoon to everybody. The first quarter, a bit weaker than expected, in our opinion, good. Considering, first of all, the tough comparison with the first quarter of last year that achieved the plus 5% in sales, a better weather in April, and worth noticing that we did better than the market again for another quarter. The market recorded a minus 2%, probably on the basis of the general fragility of the consumer spending attitude given the the the custom duty imposed by mister Trump recently and the prosecution of certain war scenarios. But we had a very good start of the second q with the weather that has not been favorable again, but in spite of this, generated a mid single digit growth, which is even improving thanks to an excellent performance of sales during the month of June.

So after five months, almost five months of year 2025, we are fully confident about another year of growth. One aspect, I think, is worth mentioning, and we made a reference in our press release, is that finally, after twenty year when I I have seen almost only and always headwinds. We have a combination of positive tailwinds, which will generate a positive contribution to the gross margin. And I refer to weakened weak dollar. I refer to weakness of supplier.

We start losing turnover in The US market and looking for new turnover in Europe and weakness also in some raw material cost, like linen, just to mention one. Last asset, which is important to comment from our our side, is the decision that we have taken, and I’m very happy with this decision to convince the owners of Golden Point that given our right to exercise our first call option, That’s that brought us to 51% of the company. We convinced them that it was better for the company to accelerate the the the full control of the company and to buy also the remaining 49% as of now. This because after twelve months of combined joint operation, we found the confirmation of the grounds on which the relaunch of the brand was based. We can say that we spent twelve months learning, and the learnings are so interesting that we believe we know what to activate in order to anticipate and take full advantage of the potential of this brand and this company.

Having said that, I hand the word to Francesco for a more detailed explanation. Thank you, Stefano. I would start on page number four with the key income statement items, Highlighting, I said, a a growth, still a positive sign on sales after the excellent performance of 02/2024. Further growth that was driven by, mostly by two categories, women’s wear, where we are expressing our strength in terms of creating the collections, particularly this 2025 was characterized by the launch of the Le Co pen collection that had a very good performance in the store and which is also accelerating now in the summer period having a clear summer taste in its DNA. Furthermore, we have a certainty, which is beauty, which is more or less the the the third year in a row for which we can comment growth growth results.

And we are also working in order to expand in our store the space dedicated to this category that is also characterized by safe density more than double versus the the normal the normal apparel. Overall, the EBITDA result is slightly declining versus last year, €1,500,000. And this is basically due to some mathematics that affect the first quarter. That is a quarter which is the weakest among the four in terms of sales while the s g and a are more or less constant. And so the unavoidable, let me say, plus 2% increase overall on on the base cost cannot be absorbed by a zero fixed growth in in terms of net sales.

This decline also then translates into a profit before tax, which is slightly lower than last year, more or less by the same amount. But the positive news, as I said by Stefan, is that this delay versus last year has been fully recovered in the initial part of the the the q two with the May still with without, let me, a stronger a favorable weather and the June that I mean, finally, summer ish weather outside sees enough a further acceleration in in the growth rate. Page number five provides some some further view on the breakdown of the sales. We see a good performance in DOS while franchising is slightly declining mostly because of phasing effect. So we are not worried at all on the overall year.

This phasing effect on franchising affects a little bit OPIM, which is our brand more exposed on this channel. But as said, overall, the the the performance is a plus zero six in the quarter and it’s plus much higher in the year to date. Another thing that worth mentioning is that this growth that we are experiencing up to now is also growth that happens at full price. And so this has also positive impact on on the gross margin. While last year, 02/2024, when the weather remained bad or winter ish until at the June, of course, we managed to defend ourselves in terms of state, but only the month of July with some more pressure on on discounts.

So these provide a a picture a good picture for for the full year. On page number six, have the picture of the the net debt the net debt, sorry, which is more or less in line with last year. And, hence, also the leverage ratio, net financial position on on EBITDA is stable, dancing around 1.34, 1.35, and which is a level of absolute, also, flexibility in order to to to manage the cash in the most appropriate way. Of course, the net financial position as of April 30 is a peak in terms of cash absorption because of seasonality. A seasonality that is more and more increasing year after year, but that then is compensated by a very positive seasonality generally in q four.

And so we can confirm our target for a cash generation north of 70,000,000 for full fiscal year 2025. Page number seven, as already commented by Stefano, we provide an outlook for the year, which, again, is expected and with a positive sign on all these elements, EBITDA and cash generation. And we are also we have a good outlook in this case also on 02/1926. Because sometimes having also a a a longer visibility as working on December 26 to give us these positive elements on the dollar, on the line, and the raw materials and on the bargaining power. But in case on that, we can come back in case of further questions.

I move to page number nine to provide some more space, I think, for the key topic of today meeting, which is, of course, the acceleration in the Golden Point deal. As most of you may remember, last year, we signed an agreement that and this is a progressive involvement in more steps of of OBS, that gives us more or less a dispute of of of time in a second step that they can translate in the full acquisition, and I will come back on that to express all the reason behind. The first element that is confirmed is a strategic approach to the market. Underwear is still a very fragmented market. There is a clear leader, but not a clear second player.

OBS has a very good market share in in the in the segment. And together with Goldenpoint, could really reach a critical mass to start becoming the number two in in the market and and start that for even a further growth. As said, we had already purchased the first 3% in July 2024 with a an agreement with the the the property of the of the company that allowed us to have one year of of learning together with them, and we learned many many things. On page number 10, a couple of of elements. The first one is the synergies on cost, which is fully confirmed.

We work together to the mid to to the good part of the full winter twenty five, and we are further increasing for the summer twenty six. And we can confirm a general 15% reduction of course, the price, which means a 3% gross margin increase. This review, basically, with some math, the fact that the gross margin of Golden Point is already in the range of 70%, which is 10 points higher, more or less, of what we can achieve on on normal apparel, given also by the fact that we are dealing with small car cases and sales with a sale assistant that helps the the the the customers. But it’s a it’s a good starting point, of course, to grow and have a good marginality in in this business. The second element, which is maybe the the core of the relaunch of Golden Point is the assortment improvement.

We Golden Point is confirming his absolute strength in the beachwear. But beachwear is a a category that has a sales over four months in the year. So we found the opportunity to provide also the the expertise of what he has on underwear and nightwear. And results were very promising, more or less with a 30% growth in each category already in this year that is a transition year fall in in in order to have the the full, let me say, assortment reshaped in in 02/1926. On the other side, we learned some also by some mistakes that were made in the course of the year on other categories like leggings and outerwear and other footwear that was, for instance, sold in Golden Point.

We think that we have all the elements because so that in a couple of years, we can really bring a significant increase in the sales versus the the previous the previous level. And furthermore, the third element is also the introduction of accessories and beauty corners that are performing very well in OBS, and also the pilots that we run this period in Golden Point are confirming that they would a very good performance. Page number 11, beyond what we plan to do on the current network of almost 400 stores, so already very relevant network located in also in in in prominent places, both in the city centers and in Topshop in mall. We still have some room for network improvement and development. The first is that together with our top design, we developed a new image that is more contemporary, more appreciated with our customers, but at the same time, technically more efficient because of the capacity of having the the the the the visibility of the product is increased, also it is possible to store more more products and so increase the potential of the of each store.

Today, we refurbished about 10 stores with this new image, we are recording a double digit increase on on these stores. The other element is the store the the the network growth. One strength of OBS is our network of partnering franchising, and we are leveraging these assets in order to accelerate the growth of Golden Point, not only with directly operated stores that we keep for tier one location. But together with this partner, we are able to open about fifty, sixty stores per year. And so we have a clear plan to grow to open about a 160 stores that and the first step or the first 22 openings already took place in in in summer twenty six.

These would, of course, give economy of scale to to the business and so increase its profitability bottom line. Page number 12 is a quick view of the deal structure. So we, as I said, had an opportunity. We pushed somehow in order to accelerate gaining the full control of the company also to be more in charge, more direct in this relaunch of the of the brand, which, of course, is a is a an element that require all our attentions. And we reached also an agreement with more favorable terms versus the previous one giving the chance to current shareholder to monetize immediately its its investment.

And some some figures of what this acquisition will mean on 02/2025, that is six, seven months, ideally, from the July 1 until the end of the year. Sales should be in the range of $5,060,000,000 with a positive EBITDA also capturing the most positive part of the year. And at year end, the the net financial position impact should be in the range of $2,530,000,000. Here, of course, is not the the the the reason of our acquisition. The reason of our acquisition is what we expect to achieve in two, three years.

That is a $140,150,000,000 net sales give driven by both the the the the growth on the like for like and network expansion and its market productivity profitability at the DGDA level in line or even higher than one of of our parallel of OBS. As said before, we have today a a leverage ratio of 1.34. So this acquisition, which is not in the actual material, were fully financed by our lines without any particular capital structure. So leave the work with the questions, sir, and ready to answer.

Chorus Call Conference Operator, Chorus Call: Thank you. This is the Chorus Call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press and one on the touch tone telephone. To remove yourself from the question queue, please press and 2.

We kindly ask to use handsets when asking questions. Anyone who has a question may press and 1 at this time. The first question is from Andrea Bumsa of Bankacros. Please go ahead.

Stefano Geraldo, CEO, OVS: Hello. Good afternoon to everybody. Very quickly, is it possible for you to give us, say, some pro form a figures for ’25 of Golden Point in the sense that you you already anticipate with the 24 as I said that the pro form a this year is slightly below expectation, and Keith may also explain the lower price. But let’s say, at the at the announcement of the dealer, the employment of making around the medium, we still confirm of that lower this year. So in order to understand the basis from which to calculate calculate the the the the sales expansion in two, three years time.

And the second question is, what are the topics requirement for the network expansion of Golden Point? And finally, if I may, let’s say, on on the same perimeter for the of all the s excluding Golden Point, if you are confident with the current consensus for ’25. You very much. Thank you very much. The the last question is without central Golden Point.

Hello. Hello. And thank you for your questions. Okay. The the year ’25, which is undergoing, started a bit lower than expected, but considering that weather didn’t facilitate the achievement of good results and given the exposure of the company to the the the the beachwear, What I what we can tell you is that we believe that the year end result will be in line with our with last year.

Result in terms of sales with more or less 100. One once one year before, they were $9,092,000,000. So in 2024, the the the turnover was about $90.92, and this year is gonna be about, we believe, about 100. The summer season started extremely well, so much higher than last year. What didn’t perform according to our expectation was basically the leggings, which were entirely prepared by the the the existing management.

And what we have been able to adjust because it has been already part of our activity, which has been described by Francisco at the underwear. And the nightwear performed extremely well. So the the the the the 10,000,000 more can be of turnover can be seen as a mix of some new openings, some closure of store, inefficient and nonperforming store, a slightly positive like for like, mostly generated by underwear and bitrate now and nightwear and penalized by ladies. In term of CapEx, some CapEx has already been made by during the former period to re re rejuvenate and refurbish some store. About 15 or 17 store has been refurbished.

We did get very good results compared to the other store of the network. On average, more than 15% sales increase compared to similar store in similar catchment areas, which hadn’t been refurbished. In the future couple of years, we expect in two in two, three year, we expect to to to spend another 15 to 20,000,000 CapEx basically to refurbish stores with with good expectation of sales increase, and this will be done in three years period. Regarding the outcome the outlook, which I gave and also Francisco gave about the full year, the outcome and the outlook is without the turnover of the current policy, if this is the case. So as of today, we believe that given the results, sir, which we have achieved as of now, given the expectation that we have for the rest of the summer season, and given the good project that we have in pipeline for the second part of the year, particularly the very good performance of Lekopan, which is the first time our customer will see in autumn winter, we have no reason not to believe that the year will be another good year without and before Golden Point.

Then having been said by consensus that we will consolidate the better part of the year of Golden Point results, which start from June, but we will consolidate starting from July. I think that there will be a positive EBITDA effect that will compensate the additional net financial position that will be incorporated as we or as as we said in the range of more or less than $20.20, 55,000,000. Okay. Thank Stefan. Thank you very much.

Can you remind us what’s the seasonality of the deployment? I mean, we know that it’s profitable in the second half, But does it mean that if we if we if we sum up the first one, the first half is breakeven? Or how is it it’s the the performance of the, let’s say, this year? I believe it will end up with zero this year as a result of maybe four, maybe five, maybe 6,000,000, I don’t know, in the second half, and negative four to six million in the first half. Typically, the first quarter for this company is a disaster.

The second quarter is okay. The third quarter is very good, super good. Then the fourth quarter is good because because of Christmas. And given our strength in Nightware, which is receiving its booster during winter season and the third and fourth fourth quarter particularly, we believe that we will be able to improve the performance of the company in the second half compared to the past and also to introduce as a for the first element of visibility that we have already achieved a satisfactory performance of underwear, which is more important also in the first part of the year. So we will rebalance the seasonality even if the company will remain mostly impacted in positive terms by the sales of summer for the weaker and winter for the midwear and pajamas, basically, and nightwear.

And thank you very much. And the very last one, the past, you mentioned that you could pay the the consideration with the treasury share. Was that the case? And if you can help us understand what was the consideration of absolute amount. We prefer that to go play money with us.

So the the the the price that we agreed that that we didn’t disclose for confidentiality reason that we promised, and we received the request from the family as a condition to finalize the deal in the in this way, which is extremely favorable for us, was not to disclose the price. And we prefer the to arrive at a final price, give a liquidity to the family that’s covering this Liquidity now for for other purposes and no treasury share is involved. Thank you very much. Thank you. Thank you.

Chorus Call Conference Operator, Chorus Call: The next question is from Domenico Gilotti of Equita. Please go ahead.

Stefano Geraldo, CEO, OVS: Good afternoon, everybody. First is a clarification on on London Point. So just to understand, the 25 to 30,000,000 additional debt, is this including for the payment plus the working capital requirements to supply the the store with the new collections? How should we look at this number that you have mentioned? And second, if I if I look at 2026, so should I expect that sourcing is the main driver for improvement in profitability in Golden Point together with the sales density?

Regarding the first question, I would say that the answer is no. The the the net financial position represents the company’s financial position, including all the working capital needs. So we don’t expect major working capital movement generated by this. On top of that, in the consolidated balance sheet of of the asset, you have to consider the price of the acquisition. It be extremely favorable compared to the former one, which was a visit, which is, as we said, they’re not material not material given the size of our company and given the size of this amount.

Yeah. Probably ’26 Then regarding ’26, I think that the first driver of profitability for Golden Point will remain the like for like growth driven by all the segments where we have already identified a huge potential for the growth. Maybe the the the only one that will we don’t expect to improve that much is the the bit where the company is already performing well, but in shops, knifewear, underwear, and knitwear, we fit and leggings, we feel comfortable that we will be able to improve materially the like for like. Other other value generation will be will be closer, will be generated by opening store. But as you said, that’s probably the second most important will be the gross margin improvement, thanks to the favorable external condition that we mentioned before regarding OBS, which are also true in light of the similar sourcing model sourcing countries in other point.

Okay. Thanks. And a follow-up on this. So you are mentioning to the dollar weakness. I presume that clearly you have you had already hedged the second half of this year.

So you are you have now good visibility instead of better condition for the spring summer twenty twenty six. So is it correct that you have already basically It correct. And given the present level of dollar, within the flexibility provided by our internal control process control procedure, we are buying the dollar heavily also for the second half of the year. So the average the average dollar ratio compared to last year is really, really better. In this moment, there are more than five points of advantage, hopefully, we will end up even with more.

So we could achieve, like, something like 30,000,000 advantages in cost of goods sold, which we don’t expect to be given away in terms of price competition. There will be some of obviously, some risk that maybe other competitor might became more aggressive. But given our present good sales momentum, which is in place since several years and a good image that the brand is enjoying in light of the consumer, we don’t expect that we need to give up give away most of this advantage. So, hopefully, next year, we’ll be able to increase our gross margin and our EBITDA materially thanks to this positive effect. Okay.

Last two questions are on on q one results. Particularly, you were mentioning clearly the labor cost. So I’m trying to understand what was the underlying trend in Q1 and what should I expect for the full year because I if I remember where there will be some smoothing in the second half. And on the free cash flow, actually, it was a bit so the absorption was stronger than usual. You were mentioning that seasonality has increased.

So I’m trying to understand why is this happening at this level? I start on the second part of your question. This is the last quarter when we compare the effect of shorter with last year with the year before. So, basically, in this quarter, we still see the increase of sourcing that we made one month in advance compared to the average because we didn’t want to enter in the risk of receiving later deliveries that could could have impacted negatively change. We expect that in in at the end of second quarter, this disadvantage in term of our stock level will be entirely recovered, and that’s why Francesco spoke about seasonality.

In this case, it’s a combination of seasonality and the last quarter with the the short effect, which is comparing with the before short choosing. The stock increase is good in term of quality, in term of aging. We we have good staff, and we are already decreasing the level of stock as of today because in the last forty five days after the the quarter, which I said has not been that strong as we maybe expected because of the reason that I mentioned. But we are already scaling down, if I may say, the stock level in detail. So we expect that by the July, we don’t have any more of this effect.

Even because in July, we expect to generate more cash than last year because we are realizing that the market is polarizing there between consumers that want to buy jumbo, want they want to buy Lego pen, they want to buy sweat item at more than €100 each, and they don’t care about sales. And consumers, which are mainly the older part of the asset consumers that are generating high traffic in the month of the sale. And because we don’t want to lose them, we plan to be probably more aggressive than last year in during the sales period in order to make happy those customers. And because we have a very solid gross margin, we can easily invest part of our advantages in higher pressure on on discounts during the sales period to take advantage of this traffic. Mhmm.

And labor cost? Cost. Sorry. Labor cost is basically it’s a plus 3% generated. As I believe we told you, our our comment has been already consistent, I think.

We are now facing the last year with the the labor cost increase effect. There will be a small tail probably also in 2026, but very small. So we we expect for a full year 2025, plus 3% increase as as expected. And in the first year of q, we had this plus 3%. Maybe if you have seen some cost increase, maybe it refers to energy cost, which increased compared to last year in the first q, but now are, again, normalized.

Okay. Thank you. Thank you.

Chorus Call Conference Operator, Chorus Call: The next question is from Luca Bacocoli of Intesa Sanpaolo. Please go ahead. Mister Bacocoli, your line is open. Please go ahead. Mister, maybe your line is muted.

We don’t hear you. The next question is a follow-up from Andrea Bonsa of Bank of Akros. Please go ahead.

Stefano Geraldo, CEO, OVS: Hi. Thanks again. If I may, on Golden Point, I think you mentioned in the past that one of the problems of this chain was that they expanded in expensive location with some very expensive shops. That still the case? Or or I’ve I’ve been these shops are closed.

If you can comment on that. And looking at the sorry. ’26 forecast. The asset is breakeven more or less this year in EBITDA. How much shall we expect in terms of progression for ’25 sorry, for ’26?

And the the target that you mentioned in your presentation of reaching group average profitability is that referred to basically ’27. Is that correct? The question regarding the the cost of the rent, don’t think I never told the that the rent are expensive. Clearly, there are top locations which are expensive, obviously, because the rent goes in line with the quality of the location and because most of the location of Golden Point are excellent, if not good, on average, the the price of the meter is high, but it’s not higher than the value of those locations. So there is not an issue of location cost.

Some store, we are closing because they are not performing well. Maybe they are too small like Costa Del Carmenuela. If you go in Costa Rica De Manuel, you cannot even work inside the store, so better to transform into a jewelry maybe. But those stores to be closed are exceptions considering the total number of stores. Regarding the expectation for 2026, EBITDA, if I catch your question.

No. The EBITDA expectation is positive. We believe that it could be maybe five, maybe six, maybe eight, but it will be positive depending from the aspect that we mentioned, but we we we expect a positive EBITDA in year ’26. And regarding the achievability of our group typical profitability, might be ’27, might be ’28. It’s too early to be to be said.

Hopefully, once every initiative will be completely rolled out with the new store the new refurbished store in place and all the synergies achieved, I expect that because the point of my and should generate even in higher profitability compared to the group. But, you know, today is too early to to tell as it has been achieved because all the job has to be done. Thank you very much.

Chorus Call Conference Operator, Chorus Call: As a reminder, if you wish to register for a question, please press star and one on your telephone. Once again, if you wish to ask a question, please press and one on your telephone.

Stefano Geraldo, CEO, OVS: Okay. Given that no more question is coming, we thank thanks everybody for attending this conference call, and looking forward to meeting and seeing or listening and speaking with you after summer. And I wish a good holiday once you will do it to all of you. Bye.

Chorus Call Conference Operator, Chorus Call: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.

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