Full Year 2023 Lanvin Group Holdings Ltd Earnings Call

Participants

Eric Chan; Chief Executive Officer; Lanvin Group Holdings Ltd

David Chan; Executive President, Chief Financial Officer; Lanvin Group Holdings Ltd

Siddhartha Shukla; Deputy General Manager; Lanvin Group Holdings Ltd.

Silvia Azzali; Chief Executive Officer; Wolford AG

Andy Lew; Chief Executive Officer; St. John Knits Inc.

Tracy Kogan; Analyst; Citi Investment Research (US)

Doug Lane; Analyst; Water Tower Research LLC

Presentation

Operator

Thank you for joining us, and welcome to the Lanvin Group's Fiscal Year 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
Now, please take a moment to review the disclaimers. During this presentation, the Company will be making certain forward-looking statements, including but not limited to future performance and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties and other factors, and they are not guarantees of performance.
For today's presentation, I would like to introduce Eric Chan, CEO of Lanvin Group, David Chan, Executive President and CFO of Lanvin Group. Siddhartha Shukla, Deputy Chief Executive Officer and Silvia Azzali, the CEO of Wilford, and Andy Lew, the CEO of Saint John.
With that, I would like to turn it over to Mr. Eric Chan to start the presentation.

Eric Chan

Thank you for joining us today. Since joining the group in 2023, I have had a chance to meet some extraordinary people. As I've always said, the managers drive companies and their teams drive results and thoroughly impressed by the effort of our managers and our teams to maintain the growth and continue to forge the path of profitability in a challenging market environment.
For 2023, we contribute our trend of growth by achieving revenue of EUR426 million compared to EUR422 million for 2022, representing a growth of 1%. Our three year compound annual growth since 2020 was 24%, with all our brands maintaining double-digit growth over the three year period. Our gross profit for the year increased to EUR251 million was our margin improved to 59% versus 56% in 2022. We continue to optimize our cost structure in 2023 with multiple initiatives and expect improving results throughout 2024.
In 2023, our brand continue to raise awareness and stocked brand heat with targeted marketing campaigns, powerful collaborations and effective service offering. We believe that three fashion just not just a product but an experience in lifestyle, if you will. As such, we have focused on creating and Anteon's for our clients that goes beyond the point of sales to the experience of living with our brands. We state those motion into our clients in 2023 and in parallel, we made significant progress in enhancing our delivery vehicle from improving our retail footprint to the kickoff of our U.S. digital platform.
Over the past few months, I have visited many of our new location with each visit. I find myself increasingly excited about the growth of our retail base and the opportunities that exist to expand at the opening of our first B2B long-time project in Reno. So a lot has come better, a better time with the brand keeps that has been generating throughout the loan funds for the launch and no sign that the regions actually shared enough of our brands than I do at NetSuite is much we can accomplish in the winter. Just Therefore, I am pleased to say that we are developing with another two of our brands to introduce new projects in the Middle East in 2024.
Moreover, as David will discuss later in 2023, we continue to leverage our strategic partnership ecosystem. We have piloted with the best in class operations of distribution, retail profit development and material sourcing around the world. We continue to seek new strategic partners to develop our ecosystem and improve our product offerings and service. All of these facades drove our financial results. As you will hear, our financial performance continued to improve in 2023, I was most impressed by our revenues during the Chinese New Year, we were able to adapt to changing market environments and changing trends. Although headwinds may persist in 2024. I'm confident in our ability to stay on track and to achieve our goals.
With that, I'd like to turn it over to our CFO, David Chan.

David Chan

Thank you, Eric. And I'd like to thank everybody for joining us today and David Chan, Executive President and CFO of Lanvin Group.
Before we get into the results. I want to make a few high-level points. I think back to the beginning of on group and our journey and how far we've come, what sometimes gets forgotten is that we have embarked in 2018, we were starting a new platform with a distinctive concept of being an Asia-based global luxury group. We were, in essence a startup since 2018, we have put together a strong ecosystem of strategic partners with help that help us with production, distribution and development. Furthermore, we have built since energetic platform that each of the brands contribute to and benefit from. We've also built a backbone of the Group share service that benefit all our brands.
Most importantly, we've put together a Brazilian group of managers and team members to continue to deliver growth regardless of the challenges they face in 2023, we continue to build our platform by delivering growth in challenging environment, transitioning the creative strategy at our flagship brand and further driving margin improvements throughout 2023, we continue to make changes and add in the elements necessary for each profitable to reach profitability. Among our 2023 achievements. We establish a fabric centered that jointly created with a strategic partner that has a world-class fiber development company. Additionally, we started the U.S. digital platform to enhance our e-commerce offering and logistics in North America for our brands. All that to say, when I review our group's 2023 achievements and results, it gave me confidence that we remain on track to reach our profitability goals.
With that, I'd like to discuss Page 4 and 5 of our presentation. The group grew its revenue despite macroeconomic headwinds. The key highlight was the Longmont brand's ability to improve its growth trend in the second half of 2023, while market condition grew steadily worse. Additionally, we showed a strong growth in A-Pac region with nearly 8% growth and greater China growing by 9%. One of the key pieces of our DTC channel, e-commerce posted a gain of 3% with the growth with group leveraging its U.S. digital platform, an indication that our digital strategy is paying off. Furthermore, we continue to improve our retail footprint, improve store productivity, putting our fleet of doors in the best position they have ever been in to facilitate our expansion strategy as an example that I highlight in 2023 was the opening of Landmark middle first Middle East boutique, and we are we were extremely excited to open our first location and region have plans to open additional boutiques for all our brands in 2024.
Another key achievement in 2023 was the reacquisition of Landmark brands, Japan license and trademarks. The strength of loan volume in Japan is a testament to the power value of the brand. We're excited for the opportunity to drive further development of long bond brands in Japan.
Overall, the story of 2023 for Landmark Group was about our persistent in delivering growth and improving profitability. The overall growth for the Group, an improvement in the quality of our revenue allow us to improve our margin with gross profit margin improving by over 200 basis points contribution profit margin improving by 255 basis points and adjusted EBITDA margin increasing by near 200 basis points. Our brands made significant progress in 2023.
And with that, I'd like to turn to page 12 and introduce Siddhartha Shukla, the Deputy CEO of Lanvin and discuss some of the long ones highlights.

Siddhartha Shukla

Yes, thank you, David. For long about 2023 was indeed a fruitful year, continued transition with a persistent focus on long-term brand and business building after several years relative instability. Concrete actions have been executed systematically from the inside of the organization out and establishing first, a clear brand vision and business strategy. Second, a strong infrastructure of talents to support development and innovation. And third, a diversified global business that has stabilized and is now poised for growth in a market context where the global wholesale and digital multi-brand channels were quite strained and in contraction, the House was nonetheless able to improve its sales trend in the second half, as David mentioned, with targeted product and marketing campaigns executed via direct channels despite a softening top line versus 2020 to 7 points negative.
The company delivered operational efficiencies through a calculated rationalization of expense levels, improved gross margin at plus eight points versus the previous year due to a favorable channel product mix and a focus on full-price selling, all of which sequentially improved loan funds contribution profit in April as part of the new merchandising strategy, the House announced a creative reorganization to be powered by singular vision framed by the rich heritage of France's oldest couture house and our founders and loans on the concept of the Chico's team, the ultimate sheet alongside the foundation of men's and women's ready-to-wear collections to new vertical organizational structures were established, one fully dedicated to leather goods and accessories and the other to the advent of long-term lab.
The final step in this holistic reorganization will come with the imminent appointment in the second quarter of 2024 of a new artistic director for the collections. It still means that leather goods and footwear business saw important progress driven by key product initiatives in the second half, notably such as the relaunch of the iconic ballerina flats, the curb sneaker collaboration with the surgeon and the pencil box campaign featuring global brand ambassador Chenyi. All of these products have now firmly become long bond icons.
The first edition of loan by lab was successfully launched in the fourth quarter with the acclaimed Grammy winning artist future, an experimental space for the cultural expression of the brand, London lab has already proven to be a dynamic international platform, confirming loan bond outside brand equity and far-reaching influence the second addition of lumber lab, a monumental public sculpture by the Austrian contemporary artist. Irwin worm has just been launched in a six city tour across Mainland China as concerned network expansion, the retail footprint saw a net increase of five new boutiques, including the brand's new concept flagship boutique on Madison Avenue in New York. And as David mentioned, its first freestanding boutique in the Middle East in Riyadh, Saudi Arabia, 2024 promises new openings in Cannes, Galeries Lafayette in Paris and the debut of digital marketplaces with select retail partners around the world. Thank you all for your time.
And with that, I will turn it back to David.

David Chan

Thank you. Lanvin accomplished a lot in 2023, and I'm eager to see what we can achieve in the coming 2024. Now I'd like to introduce Silvia Azzali.

Silvia Azzali

Thank you. We had solid this year award from and I'm happy to share the remarkable achievement of all further in the year 2023, despite significant challenges, our commitment to improving profitability announced last August has yielded fruitful results, marking a pivotal moment in our journey. It means an improvement of more than EUR10 million compared to 2022. This year marks the culmination of our significant restructuring efforts initiated in 2022 and underscores the dedication and resilience of our team in navigating turbulent market condition and executing strategic initiatives with precision. And I am saying that because our journey to this significant improvement was not without its obstacles we navigated through challenging market conditions characterized by geopolitical tension and inflationary pressure.
And last but not least, an extreme warm weather can be made until November, which significantly delayed the start of the fall season that for represents more than 60% of our sales because of all of that, Woodford achieved a modest 1% same-store sales growth in 2023 following three consecutive years of double-digit growth. Particularly noteworthy was the double digit increase of 11% in the wholesale revenue attributed to strategic collection alignment by our new Artistic Director.
Now tactical shift and the acquisition of significant new wholesale customer. The Asia Pacific region report an impressive 32% growth while the region faced macroeconomic challenges. Contrary to wholesale retail faced pressure with an overall lower overall decline by 3%. As say, the second semester sales were soft as impacted by unexpected adverse weather condition and tension in the golf area, which dampened sentiment among European and American consumers.
Despite this challenge, we are pleased to highlight successful new openings, including IFC. in Hong Kong. It pop-up store in Istanbul and the refurbishment of the larger Miami, Frankfurt Airport and Milan. These flagship stores now showcase our new store concept wall for lounge signed by now Takashi reinforcing our commitment to elevating the retail experience for our customers globally. Even though sales were soft in the second half of the year, we improved our profit profitability without on the cutting costs in 2023, workforce celebrated several significant achievements that reinforced our brand presence and refinance in the market.
Our company will grow starting February, successful partnership with number 21, and John Thompson, CHI and the launch of our new website in November, all contributing to bolstering our digital footprint and announcing the customer experience. Digital safe, one-team stable 19%, showcasing the resilience of our brands last thing that makes me especially proud is the introduction of our Revolutionary War ligase for their underscored our commitment to innovation, driving an impressive 137% growth in live games compared to the previous year and solidifying our iconic W. collection as a cornerstone of our brand strategy through strategic restructuring efforts, we significantly reduced our area touch costs, resulting in a reduction of operating expenses by EUR9.6 million, while continuing investing in strategic assets like omnichannel people story innovation. Looking ahead, we remain optimistic about the future with a solid foundation in place to achieve in 2023. We are poised for continued success in 2024 and beyond.
Thank you for your time. And with that, I'd like to turn it back to David.

David Chan

Thank you, Silvia. I'm pleased to pleased with the steady growth and process our progress has made in 2023. The new leggings are truly one-of-a-kind and represent a wall for is all about.
At this point, I'd like to introduce Andy Lew, the CEO of St. John, to discuss some of their 2023 achievements. Andy?

Andy Lew

Thank you, David. I'm excited and eager to share our 2023 results as well. As mentioned, some of what 2024 has in-store for St. John's While 2023 started strong, many global businesses hit headwinds in the back half of the year. We are proud to have maintained DTC revenue growth for the fiscal year year was truly transformative as we updated our supply chain to improve operating efficiency. The transition continues to unfold smoothly as we focus on the highest standard, which our clients not only deserve but candidly expect from us, we continue to refine our wholesale partnerships such as Norstan, given our relationship to an alternative style where we control inventory align up, allowing us to better showcase the breadth of our assortment and work with DSAs in each location.
We are increasing this model in order to directly control our businesses with our clients. Top of mind, we launched our foundation collection at the very end of 2022, creating must-have Essentials as the building blocks of one's wardrobe perfectly paired with our more classic pieces within its first full year, the question has grown to 23% of our overall business. We've since added evening and additional color ways to expand that category. Our retail team thought 10 of our top or job stylists sell over $1 million. Each of that four were over $2 million. This aspect of clienteling is a big focus as we open 44 new boutiques in 2023 with additional relocations ahead. Our own your power campaign was a first for us and creating a powerful message focused on digital and streaming by partnering with Hollywood's Shunda rights.
We're able to not only work with an existing client, but to say John van to speak to who we are today, severs celebrity stylist and consultant. Karla Welch has been an incredible collaborator with the team from shoot designs, events and brand awareness that help drive sales collaborations such as our recent ET Parker at St. John handbag, capsule important ways to further diversify our product offerings through price points and categories. We purposely cut the launch event instead of focusing on the digital campaign shoot on actress lean MR to bring in new demographic increase here.
As we look ahead, we are updating our e-commerce platform to Shopify to make us more agile on the features to improve the online experience. Not only does this benefit St. John's. This provides a synergistic platform for all of Loveland Group in its e-commerce and distribution in North America, having been with Saint John, a part of the long bank group since 2021. I can tell you we haven't had a significant e-commerce presence in North America. The development of our U.S. digital platform is a big help for not only Saint John, but also for the group. We now have an efficient way to centralize logistics, improve customer experience, which all of our brands, which helps all of our brands in the long run.
We are also thrilled to be reestablishing new flagships in key U.S. cities, Madison Avenue and New York Brighton way in Beverly Hills and Post Street in San Francisco, but these are major shopping destinations which adds to our retail footprint. We are working diligently to build philanthropic partners and a community around our boutiques. These events in alignments have been key to that engage current new and lapsed clients. These efforts will strengthen our business in North America so that we can then focus on growing in the rest of the world and explore new partnerships at St. John, we are committed to empowering company women to look and feel the best through luxurious style software designs and unmatched quality. We feel lucky to have long run group behind us on this mission.
Thank you, and I'll give the floor back to David.

Question and Answer Session

Operator

We will now begin the question and answer session to ask a question please press star then one on your touchtone phone. If you're using your speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two at this time, we'll pause momentarily, simpler. Our first question comes from Tracy Kogan from Citi. Please go ahead.

Tracy Kogan

Hi, good morning. Thanks, everybody, and I was wondering if you guys could talk about performance year to date in 2024 since we're so far into the year and maybe kind of characterize that performance by region. And then I have a follow-up. Thanks.

David Chan

Hello. Pardon me. I joined about Dave and Eric signed back in.
Sorry, Tracy, we I got dropped off. So we actually now done that's maybe another maybe 10 minutes to for the reports. So maybe hold off on the Q&A session. Just put a little bit. Sorry about that.

Presentation

David Chan

Okay. So thanks, Andy, for introducing John. So I'd like to move to Sergio Rossi as Sergio Rossi, 2023 was also a transformational year with the hiring of a new CEO, Helen right to lead effort at the iconic brand. In addition, to new leadership. The brand expanded its customer demographic by revitalizing its brand image and with a strong product launches that included the iconic Mermaid and Steve Rossi collections. The brand also initiated new events to enhance customer engagement and grow brand awareness and target campaigns in key geographic regions. These efforts led to revenue growth of 70% in North America, a key region of growth for the brand.
Additionally, e-commerce grew over 5% and like-for-like growth by revenue growth was up over 6%. Additionally, Sergio Rossi's white label offering, which is that its third party production business remain a focus of the brand's industrial facilities in 2023 with the intention of making it an increasing piece of the revenue mix during 2023. The brand began to strategically emphasize and enhances white label business to promote year round capacity utilization, improved volume and productivity and take advantage of its unique production capabilities.
Next I'd like to discuss some of the achievements of Karusel in 2023. The brand had a strong year of growth and margin improvement. Crusoe achieved a significant milestone of just to adjust the EBITDA breakeven for the 1st year by driving strong results in its Mizone business, improving its service offerings and Made to Measure business through the expansion of its production capabilities and specialized teams and improving supply chain strategy in a period of offer scarcity in a men's sportswear industry. Additionally, the brand launches the e-commerce business of First 2Ku. So these changes, Deckers has implemented a significant and provide extremely strong foundation for the brand's growth and profitability in the years ahead.
Moving ahead, without all our achievements in 2023 behind us, I'd like to highlight our outlook for 2024. We expect continued macro economic challenges this year, but we're confident our strategy will lead to continued growth and profitability in 2024, our strategy will remain the same, focusing on improving and expanding scales as profitability. We plan to approach the market to tactically to capture opportunities in the same fashion we did with each of our brands in 2023 with our methodical and tactical strategy. As I mentioned, one of our core brands achieved adjusted EBITDA breakeven in 2023, and we expect two additional brands achieved that goal in 2024, taking tactical steps allow Karusel to expand its production capability to capture additional market shares and drive profitability we will continue to take the same approach with all our brands.
Furthermore, we plan to focus on development of our strategic ecosystem. I've talked about our ecosystem a lot in the past and continue to emphasize it as a point of differentiation for land bank group. We have strategic partners throughout the world to help us with variety of business facade from production to distribution, we plan to add more partners to facilitate regional growth, improve logistics and expand product categories. In 2024. We're fully engaged in our near term goals, but we are also looking at bigger picture of what our brands and our platform can be and will continue to align our strategies to achieve balanced SaaS and brand growth and profitability.
Now I'd like to touch on some of details of our financial results starting on Page 20. As I mentioned, we continue to drive growth year-over-year with our compound growth annual growth rate since 2020 at 24%.
On the next page, you will see that we continue to strategically target regions where we want to emphasize our growth, including North America, the Middle East and Asia. I mentioned earlier that we opened our first landmark boutique and Ria. This is just the beginning of our expansion into the region, and we have plans to add additional lump on door bankrupt doors in the Middle East. Our brands have significant awareness in the region. And as I mentioned, we have plans to work with strategic partners to accelerate our footprint development. Furthermore, we view A-Pac and in particular Greater China as an opportunity to gain market share. The penetration rate of our brands are still small. And as evidenced in 2023 of new near double-digit growth in Greater China was a testament to our ability to take market share.
Another highlight for the region in 2023 was the reacquisition of LAP-BAND Japan license in March. Lombard's business in Japan was twice over the past two decades, and they were very pleased to able to we were very pleased to be able to reacquire devices and treatments. We now have the ability to further drive development and growth in Japan, and we're excited for opportunities that are available in countries moving to Page 22, we continue to pursue growth in our D2C channel through retail expansion and growth in e-commerce. We have taking a tactical approach to the wholesale channel as we view it as a staple of our distribution strategy, but one where we need to refine our partnerships given the challenges that the wholesale channel is facing industry-wide, the group Revenue by channel was generally flat, but the group did have an increase in other revenue from the reacquisition of Monster pen license and associated royalty income.
Next, I'd like to quickly touch on our retail footprint with the changes in our product mix and product offerings. In 2022 and 23, we have established a blueprint for our boutiques moving forward. This require additional the rationalization of network. And we'll see on page 23 that we further reduce our footprint in a process of cooling, the fleet of prepare about to prepare for our expansion strategy, while rationalization of network is ongoing process, one thing to note is that we began to expand Walmart's footprint in 2023 with a total of five net new stores one additional point I'd like to make is that while our total base of stores decreased by 12, we maintain our DTC channel revenue at a steady level, a testament to our improving unit economics.
Moving on to page 24, I'd like to discuss the Group's improving profitability, which achieved record gross profit margin for the group lending and 59% for the year for EUR281 million, up from 200, EUR38 million at 56% margin in 2022. This was driven by a combination of changes in our product mix and balance of accessories versus ready-to-wear and changes in our distribution channel mix.
In 2023, the group continuous effort to focus on margin enhancing product categories as a basis for the future. Additionally, with continued efforts to efficiently manage variable costs, including selling and marketing, the group's contribution profit nearly doubled from EUR13 million to EUR24 million at the margin of 6%. You can see that that this is to focus on our variable margin has yielded the desired result with nearly all the gross profit and contribution profit gains falling due to the adjusted EBITDA line. Adjusted EBITDA continued to improve in 2023 with a margin improvement nearly 200 basis points.
Furthermore, as I mentioned earlier, Karusel achieved breakeven adjusted EBITDA in Q1 23 and two additional brands are expected to achieve adjusted EBITDA breakeven in 2024. While the Group has focused on rightsizing the cost structure. We are seeing our results increasingly improve from optimizing the product and channel mix. 2020 three's performance makes us confident that we're nearing the inflection point where we can focus more on expanding our scale to accelerate our path to profitability.
Next, I'd like to touch on working capital efficiency on page 26. As you can see year-after-year. We continue to improve our working capital efficiency in 2023. For the first time, we had a cash conversion cycle of less than 100 days throughout this webcast, I've emphasized our focus on profitability, but want to be clear that we view cash flow efficiency as an equally important objective.
To recap, in 2023, we continued on path we outlined in 2018 with growth and significant improvements in profitability and cash flow efficiency. We continue to pave the wave of our future and are optimistic for continued improvement into 2024.
Now I'd like to highlight some of the brand-level financials. Starting with London. Brand underwent a creative transition in 2023 in the face of softening global luxury market. However, as the market condition worsened, management was able to improve its sales trend in the second half. Through our successful product launches and marketing campaigns, the brand landed at a revenue decrease of 7% of the year for the year, an improvement of 11% decrease in the first from a from a improvement from the 11% decrease in the first half of 2022. Most of the decrease came from the wholesale channel with wholesale facing difficulties. Industry-wide lumber show its Brazilian with ability to improve its gross profit margins significantly from 50% to 58% by enhancing its product mix and heavy emphasis on accessories as well as better full price sell-through. Gross profit increased by EUR4 million in 2023. And as you can see, most of that drop to the contribution profit.
Moving to Wolford. Since Sylvia provided details on financial result, I'd like to only point out a few additional highlights. Wolford has had the most significant change to its retail footprint with introduction of the new legging and continued emphasis on a leisure product being the future of the brand well for name is some phenomenal technology and product development. Returning to the strategy has proven successful. And with that change, we started modifying the merchandising blueprint in 2022, leading to the changes in Walter's footprint. So far, the strong uptake in both of these product lines have improved the quality of our revenue and profitability, which makes us confident that we will make the right strategic decisions.
Next, I'd like to discuss the financial results for Sergio Rossi. Revenue decreased by 4% to EUR60 million due to a decrease in white label third-party protection sales, which the brand includes as wholesale revenue. Conversely, the DTC growth grew with Sergio Rossi brand, increasing revenues, in particular in A-Pac, leveraging brands post pandemic momentum and by improving its marketing efforts, the brand saw growth in Greater China as well as double-digit growth in Japan, Japanese wholesale accounts.
Sergio Rossi improve its gross profit margin and contribution margin and its brand revitalization marketing efforts and product launches. And John 23 contributed to higher margin sell through brands do have room to improve by streamlining the supply chain and production efficiency with a key focus on accelerating speed to market with this product. As I mentioned, starting in 2023 efforts were made to enhance and emphasize the RevAssist white label business, and this will be an important façade of the brand going forward.
Moving on to St. John, as Andy mentioned earlier, significant progress was made by the brand in 2023 from operation, no efficiencies to marketing improvements. The brand drove 5% growth, land at EUR90 million for 2023, D2C revenue grew 7% and more impressively, the brand saw e-commerce growth by 14% with a use of group's digital U.S. platform. We do think John, as a good test case for our U.S. digital platform, and I'm pleased to see such strong results. The DTC growth led to gross profit margin improving 62% in 2023. Additionally, the refining of this wholesale partnerships also contributed to better gross margin.
Finally, I'd like to discuss Karusel covers or had an impressive 2023. The brand was able to improve its production efficiency and expand its production capability to take advantage of the advantage of the offering scarcity in the market. For men's sportswear, revenue increased significantly by 30% to EUR40 million in 2023 further improving its growth trend from 2022, which was also impressive 25%.
Gross profit was up by EUR4 million to EUR11 million from EUR7 million and a margin of 28%. And contribution profit margin improved significantly as well as going from 18% to 24%. Karusel drove as this impressive improvement through its Maisons business, which grew by double digits in 2023. The brand showed and the ground showed that the groundwork has been laid to expense scale, improve operating efficiency and production capability yielded significant results as such to also achieve breakeven adjusted EBITDA in 2023, a significant milestone. We anticipate continued growth in revenue and profitability as crews have further developed this business and capture additional market share.
At this point, I'd like to have Eric provides some final remarks.

Eric Chan

Thank you, David. To close this out call, I would like to highlight some of the key takeaways. First, in 2023, we enter a challenging macro economy environment. We expect the headwind will persist in 2024. However, the residence that our brands and our teams showed in driving our financial results in 2023 is a testament to our resort and also to the strength of our brand.
Second, there is a significant room to grow in many of our geographic regions. So we will continue to focus on balancing our regional growth to take advantage of opportunities at both our retail doors and online. Certainly, we continue to drive profitability improvement throughout our organization and are able to show the fruits of our labor through our improving gross profit margins and our increasing contribution profits Lastly, we are nearing an inflection point and we have laid the groundwork for accelerating to footprint growth and market share gains. And now we have the ability to capitalize on the operating leverage we have built in our group to amplify our profitability. My team, along with our brand managers, remains resolute in our mission to grow our brand and drive to profitability and cash flow efficient. Both our group and our brands have a provenance and heritage second to none. And I'm proud of what we have accomplished in 2023, and we are collectively on a journey, and I'm very optimistic about our future. Thank you.

Question and Answer Session

Operator

We will now begin the question and answer session. To ask a question. You may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time we'll pause momentarily to assemble our roster. Our first question comes from Tracy Kogan from Citi. Please go ahead.

Tracy Kogan

Hey, thanks, guys, and I will ask the same question I asked earlier, which was I was hoping you could give us a sense of how your business has trended year to date and maybe talk about and regionally and then I have a follow-up. Thanks.

David Chan

Yes, I can. Thank you, Tracy, for a question of time. And I think our business is like a lot of other brands. I would say in the macroeconomic we are you know, in 2023, I think we'll end it pretty have risen Brazilian results. But in Q1, we do see a on a, I would say, a general kind of a softness in the market, including some of our brands, right? So I think this is that's why I mentioned a little bit in our in our script in our We Are all our brands are really just to have to shift some of the strategy why weather is creating products or marketing that is more tailor-made to this particular kind of a kind of macroeconomics that we were facing.
So to attract entice Certen audience, right. So maybe I don't know if Eric or maybe I mean, even even maybe more represented brands for the long bond rate is that the very we saw a kind of a trend coming for the broader luxury market in the second half of 2023. That's why we've shifted our strategy some to some of the capsule and marketing maybe sit. Cindy can give a little bit more examples on this to Tracy's question and including some of the product launch or kind of collaboration we did in the second half of the year, which continued into the 2022 and 24.
Right. Sid, you want to you want to take this a little bit. It's the first in short.

Siddhartha Shukla

Yes. I mean, I think I think what I would say is that and this spend fully aligned with what you've said, but I say, despite that, we remain very optimistic that we have a year of hard work. Some of our key initiatives are going to bring some share that we know exist and it's just about being more surgical and drilling into those opportunities. So particularly with the launch of loans unlike last year, which continued into this year, as you mentioned, David, into Q1 and Q2. We see strong selling from that as well as more of our core commodity icon businesses in the relaunch of women's formal shoes or even then leather goods, where we've seen a remarkable despite the global environment, a remarkable resilience and even on a regional basis, very promising signs of growth in leather goods. So I still feel very optimistic that we have opportunities on a channel and product level to unpack and that we'll be able to do that before the end of the year.

Tracy Kogan

I think you just meant that the London lab you had a second second drop of the London lab, and I'm wondering what you're seeing from that. And in his London lab, is that a higher margin business because it's more fashion-forward? Or how does that how does that shake out overall on the margin side?

David Chan

Yes. Sid, do you want to take that probably easier?

Siddhartha Shukla

Sure, sure. And so two parts of the question. Indeed, it was phased in three drops. And so the second and third drops took place in the first quarter of the year, and we'll continue selling through the first quarter sorry, through the first quarter and they will still sell to the first half. And the important thing about lab is that there's not a single recipe to it. It's really about an acknowledgment of long term being a cultural brand as much as it is a fashion brand. We see that throughout the marketplace and lab is in place for us to situate those projects and make sense of them. They certainly can provide very interesting sources of revenue, but they're not necessarily only about that.
The second, the second edition of loan bond lab, which I also mentioned is an artistic project, which absolutely supports our business, but in a very different way and through an experience as opposed to an actual collection of specifically on the first edition, Tracy, and as that was linked to a very renowned artist, it's true that it provided a nice source of additional revenue in the year and also some cultural affinity is that the brand absolutely owns two demographics beyond sort of the traditional <unk>, sophisticated occasion wear driven demographics that London is known for. And so we see that performing well, notably because as the projects have a dynamism built into them of this project, the first edition was with a musical artist who has just dropped an album that has three songs trending in the top 10 in the billboard charts. And that obviously is important to us because it drives a lot of heat and attention to what will be the second and third waves in stores now.

Tracy Kogan

Great. Thank you very much for my follow-up. My follow up, David is just on CapEx. It was up significantly this year and I was just wondering what the drivers were. I mean, I know you have more you had more store openings this year and so I wasn't sure if it was that or if there's more IT or all of the above? And then just wondering what you're targeting for tax for 2020 for Exelon?

David Chan

Yes. I think we still want to keep it pretty consistent. I think at the single digit percentage of the sales, I think we a lot of the effort that you see will be still coming from rationalization. What you see in 2020 towards the end of 2023, kind of we have a net loss of stores, right? Because that will be we will we'll continue to see that. And then as I mentioned before, a lot of these action will be seen in well for because we are we are seeing a wall for, especially with the with the success of these leisure wear and the lagging, we're moving more and more, we need a bigger kind of a different type of stores front to introduce Walter to our customers.

Tracy Kogan

Got it. Thank you, guys. Good luck.

David Chan

Thank you.

Operator

Firstly, again, if you have a question, please press star then one on. Our next question comes from Doug Lane from Water Tower Research. Please go ahead.

Doug Lane

Yes, hello, everybody and just wanted to stick on the margin trends here. They've been heading in the right direction, pretty much across the board, which is good to see. I just wondered if David, stepping back here. Do you have a target for a group-wide breakeven on EBITDA margin? And maybe if you could discuss a few key initiatives underway to get there?

David Chan

Yes. Thank you, Doug, for the question, we do know we I think we are if you follow us a couple of years ago, right? We were we're aiming for a EBITDA adjusted EBITDA breakeven by 2024. However, there is a delay, I would say now we are we looking for a cash breakeven at a group like Y level by 2025 and the reason being is really the we didn't foresee a kind of macro economic well kind of a headwind starting in the second half of 2023. So that's one way to look at this.
And then in terms of the in terms of the kind of where the key initiatives that you mentioned, I mean, obviously, if you see our on product mix for at Group level.
Okay. If you don't have a long bond is only probably one of the few brands that we have is a sensory capabilities. However, we are we are focusing more and more on the accessory and leather goods business, especially when set out tops mentioned during the during his speech, we created this division, particularly focus on this category. So that means you can see that this group, this is the group strategy and initiative to really to drive the higher gross profit margin by having less seasonal products and less ready-to-wear ready related to products to improve the inventory turns of OTBR. and the merchandising strategy.
And then that second part of the initiative would be is there going to be the channels. We are very selective. Now if you ask all the CEOs on the call, we've been very selective in terms of our wholesale partners are and then we are really focusing on the D to C model, our especially our retail and obviously the dot-com business that will control. And these these channels will yield better gross profit margin in general. So we have a little bit more inventory pressure. However, we do believe in the mid to long term better for the brands.

Doug Lane

Okay. Then carbon?

David Chan

Yes, sorry, sorry about that. Maybe one last thing. And then I so not just to focus on the op margin and top line. Obviously, this will have a couple of these factors with the macroeconomics, the group has as and Sylvia speech or even Andy speech you a sense of each brand is still doing their job in terms of making sure the cash efficiency and operating cost efficiency still being rationalized. So on one hand, we are building our revenue and changing product and changing channel mix. But on the other hand that we're trying to rationalize that cost. So these two kind of main our overarching thesis will yield. We believe in it we do the right way, will yield our positive EBITDA and positive cash flow in the next 18 months.

Doug Lane

Okay. That's very helpful.

David Chan

It sounds like you're looking at the recent trends, the marketing and selling expenses have sort of settled into this low to mid 50% range and it's really at the cost of goods and the G. and A., where the opportunities are is that we're leasing continue to see deleverage on the cost front yes, I do believe so because unfortunately, we our brand is of came out of our restructuring in 2018, right? We continue to invest in our brand, the easier ways to cut our marketing and cut our selling expenses and weak become breakeven sooner. But I think that that is pretty damaging for our brand equity. So we continue to we'll continue to see our investment in the brand, marketing and selling expenses.

Doug Lane

Okay. That's helpful. Thanks, Dave, and thank you.

Operator

There are no more questions in the queue. This concludes our question and answer session. And the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.