Thank you, Rob. Good morning, everyone, and thank you for joining us today.

Joining us on the call today will be Chairman and Chief Executive Officer, Jean Madar, and Chief Financial Officer, Michel Atwood. As a reminder, this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results.

These factors may be found in the company's filings with the Securities and Exchange Commission under the headings Forward-Looking Statements and Risk Factors. Forward-looking statements speak only as of the date on which they are made, and Inter Parfums undertakes no obligation to update the information discussed.

Inter Parfums' consolidated results include two business segments: European-based operations, through Inter Parfums SA, the company's 72% owned French subsidiary, and United States-based operations. It is now my pleasure to turn the call over to Jean Madar.

Jean, please go ahead.

Thank you, Devin, and good morning, everyone, and thank you for joining us on today's call. We started off the year broadly in line with expectations, with consolidated sales increasing 2% on a reported basis, reflecting growth from both our U.S.

and European-based operations, despite mixed results across the portfolio, aided by favorable foreign exchange movements. We were able to generate significant growth across several key markets, operating in a more difficult environment, while enhancing profitability.

Our results reflect the strength of our underlying business, the appeal of our brands, and the disciplined execution of our strategy across a diverse global footprint. Consolidated sales growth in the first quarter reflected strong brand execution and solid performance in select regions, partially offset by macro and regional headwinds.

North America, our largest market, increased by 7%, driven by continued category growth and innovative brand extensions, particularly from Coach. Central and South America grew 23%, supported by strong momentum in women's and men's Coach franchises and the Montblanc Legend line.

Western Europe sales were flat, driven by slow consumer demand. These results, however, were partially offset by softer performance in other parts of the world.

Eastern Europe declined 12%, driven by operational difficulties in certain markets, which disproportionately impacted Lanvin and Lacoste. Middle East and Africa declined 12%, primarily due to recent intensifications of regional wars and conflicts in the region.

Asia Pacific sales decreased 7%, driven by distribution changes we implemented in 2025 in South Korea and India, and softer consumer demand in Australia, New Zealand, which were partially compensated by strong growth in China. Moving to performance by brand, we saw solid growth from several of our larger brands.

Coach increased 30%, reflected strong sell-in following the launches of new extensions with the Coach Woman and Coach Man franchises, Coach Cherry and Coach Platinum, as well as sustained, healthy demand across most existing line. Montblanc rose 14%, driven by the launch of Legend Elixir, the first launch for the Legend franchise since 2024, and the success of the Explorer Extreme line, launched last year, and a lower sales base in last year's first quarter.

GUESS, our largest U.S. brand, U.S.-based brand, grew 11% in the first quarter, driven by ongoing success of the iconic franchise, supported by launches of new extensions within the iconic and seductive pillars.

Roberto Cavalli continued to generate robust results to start 2026, achieving a 32% increase in net sales. Our blockbuster launch from last year, Sweet Serpentine, remains substantial success, opening a lot more doors for us across the world.

The product was a finalist for the Prestige and Popular Packaging of the Year Award at The Fragrance Foundation last month, and growth during the quarter was also fueled by the latest innovation, Just Cavalli Wild Heart extension, dual-gender duo, Wild Pink and Wild Blue, and Verde Assoluto, the newest fragrance within the Uomo pillar. Other key brands reflected tougher comparisons.

Lacoste declined 12%, driven by last year's strong innovation-led growth and weaker Eastern Europe conditions. We launched a new extension late in the first quarter, called Original Aqua, for men, and we plan to launch several other extensions throughout the year to further elevate the brand.

While Donna Karan/DKNY declined 3% off a high prior-year base, we did see a 16% rebound in Be Delicious core, indicating renewed consumer demand and improving franchise momentum. The Cashmere Mist deodorant also remains an extremely successful product within the Donna Karan/DKNY brand, as it continues to be incredibly popular on TikTok Shop and Amazon.

Overall, with the global fragrance market normalizing toward historical growth rates following several years of exceptional performance, capturing market share has taken on greater importance as a key source of momentum. In order for us to do that, our portfolio offerings must both be diverse and distinguished to reach and appeal to multiple, large consumer audiences, especially in a more difficult operating environment.

In addition to launching new, exciting innovation across our existing portfolio, we are expanding our portfolio with new brands to further amplify our offerings and appeal. During the first quarter, we resumed distribution of the existing lines of Annick Goutal and reopened two store locations in Paris, with another one to open soon.

We will continue to develop the brand's reach and offering within the high-end fragrance market. Also, we are continuing to develop brand new fragrances for Longchamp and Off-White, and these launches will happen in 2027.

We expect these two new brands to help us elevate our positioning in the high-end fragrance category. In January, we announced separate, exclusive, long-term worldwide fragrance license agreements with David Beckham and Nautica.

When these brands join our portfolio, Beckham in '28 and Nautica in 2030, respectively, both will be essential for us to expand our offerings in the lifestyle fragrance space that we know quite well. Fragrance continues to stand apart within the beauty for its resilience, supported by its role as an accessible luxury and everyday form of self-expression that consumers continue to prioritize, even amid macroeconomic and geopolitical uncertainty and more deliberate spending behavior.

The category is also benefiting from powerful e-commerce tailwinds, with an increasing number of fragrance products purchased through nontraditional retailers, including Amazon, underscoring the growing importance of digital marketplaces in both discovery and conversion. Consumers are also increasingly seeking personalization, which they find through fragrance layering, as well as personalized, AI-driven recommendations.

Whether through social media, major e-commerce platforms, or physical retail, the way consumers discover, evaluate, and engage with fragrance is rapidly evolving. These are powerful channels for discovery, and we are actively leaning into that shift with a focus on storytelling that can bridge multiple channels and offer consumers immersive and consistent brand experience.

To be successful, brands must inspire desire, whether as a gateway into the world of an iconic fashion house, such as Jimmy Choo, Ferragamo, or Coach, or that of a celebrity, like the one we will do with Beckham. We are continuing to develop our portfolio to maintain desirability across all our brands.

The travel retail market continued to perform well, representing approximately 7% of total net sales, consistent with prior periods. Brands including Roberto Cavalli, GUESS, and Coach have performed well to start the year, with travel retail overall currently showing strength in Europe in particular.

We anticipate steady growth in our travel retail business going forward. Despite a dynamic macroeconomic environment, the global fragrance category remains resilient, and we are well-positioned to deliver on our goals this year.

We remain cautiously optimistic for the balance of 2026, reflecting war and disruptions in the Middle East, while capturing improving dynamics in other regions. We are confident in our ability to navigate near-term volatility, continue to operate efficiently and profitably, and drive disciplined, sustainable, long-term growth in service of our customers, brand partners, and consumers.

With respect to the Middle East, I realize that oftentimes we can fall into the trap of viewing different parts of the world primarily through the lens of how it impacts our business. Our concern for our colleagues and partners in the whole Middle East extends directly to them, their families, and communities.

We truly appreciate and acknowledge their contribution during this time of heightened conflict, and of course we pray for better days ahead. Before I close, I want to highlight that alongside operating our business, strengthening our ESG profile remains a key priority.

Our ESG strategy is now in its third year and is going strong. We have seen a great return on our investment in this program across supply chain visibility, our ability to respond to new regulatory requirements, and our external investor ratings.

These actions and enhanced measures resulted in Inter Parfums receiving its third consecutive ESG rating increase from MSCI. We now sit at BBB, triple B, and have our sights set on A.

Our goal is to continue addressing the environmental and social risks that are most financially material to our business. This approach pairs long-term return on investment-focused resiliency with ESG performance.

With that, I will now turn it over to Michel for a review of our financial results. Michel?

Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking them down into our two operating segments: European and United States-based operations.

As Jean pointed out, we delivered sales of $345 million, representing a 2% increase on a reported basis. On an organic basis, which excludes the impact of foreign exchange and the headwinds generated by the Middle East conflicts, sales declined 3%.

Excluding the 1% headwind related to the war in the Middle East, organic sales declined by a more moderate 2%. Foundations of our business remain strong and continue to go from strength to strength.

For instance, our top 20 brand-region combinations, which represents 86% of our global sales in Q1, grew 9%. Our direct-to-retail channel, which represents 43% of our sales in Q1, grew 16%.

This significant growth has had a sizable positive impact on our P&L, as the direct-to-retail channel has significantly higher gross margins, but also requires more SG&A, especially A&P and logistics. Our reported growth benefited from a favorable 4.6% foreign exchange tailwind.

While the stronger euro has continued to favor our top line, it also increases our cost base across the P&L and our balance sheet. We are continuing to implement a variety of actions to mitigate that impact and have been pleased with the results.

Delving into gross margins, they expanded by 140 basis points to 65.1% from 63.7% of sales. This is primarily driven by favorable segments, brand, channel mix, as described above, as well as lower-than-expected destruction costs, which reflect enhanced efficiencies in areas such as inventory management and forecasting.

These gains were partially offset by tariffs, which represented an expense of about $6 million during the first quarter of 2026. We are pleased with the positive effects of our tariff mitigation activities and ongoing cost savings initiatives.

Our manufacturing optimization, whereby we are shifting manufacturing closer to the point of sale, continues to contribute favorably to our operations and our cost structure. In combination with select pricing actions we took last year, we expect gross margin stability in 2026.

SG&A expenses as a percentage of net sales rose 200 basis points to 43.6%, compared to the prior-year period of 41.6% of sales. The increase resulted from a number of factors: royalty costs grew ahead of sales due to the GUESS license extension and unfavorable brand mix; we also had FX impacts, as described above; and higher logistics costs related to supply chain transitions and channel mix.

Our A&P spending was stable at $52 million, approximately 15% of sales, and we continue to invest in line with anticipated sell-out by retailers to help drive traffic across all distribution channels, which we believe are higher than our reported sales. Overall, our consolidated operating income was $74 million for the quarter, a 1% decline from the prior period, resulting in an operating margin of 21.5%, or a 70 basis point decrease from the very, very high 22.2% in the first quarter of '25.

Below the operating line, we reported a gain of $1.1 million in other income and expense, compared to a loss of $1.7 million, leading to a positive year-over-year impact of $2.7 million compared to the 2025 first quarter. There was, within these numbers, a million-dollar increase in interest income behind a stronger ROI on our excess cash.

Moving to tax, our consolidated effective tax rate was stable at 24.6%, compared to 24.5% in the prior-year period. These factors led to a net income of $43 million, or $1.35 per diluted share, representing an increase of 2% compared to net income of $42 million and $1.32 per diluted share in the prior-year period.

As a percentage of net sales, net income rose to 12.6%, broadly in line with prior-year period. Now moving to our two business segments, I will start with European-based operations.

For our European-based operations, net sales rose 2%, but declined by 4% on an organic basis. Gross margin expanded by 190 basis points to 67.4% from 65.5%, and this was driven by favorable brand and channel mix, as well as lower-than-expected destruction costs and some of the pricing that we took last year.

These were partially offset by tariffs, which represented an expense of $4 million. SG&A increased by 9% to $104 million, with SG&A as a percentage of net sales rising 270 basis points to 41.4% of sales, compared to prior-year period.

The increase in SG&A was driven by foreign exchange impacts, along with increases employee-related costs as we're building up our Korean subsidiary, and higher logistics costs related to increased warehouse fees. Royalty costs also grew ahead of sales, driven by unfavorable brand mix.

Overall, net income attributable to European operations grew 4% to $50 million for the quarter, representing a 19.8% of sales, compared to 19.4% in the prior-year period. Now turning to United States-based operations, net sales rose 2%, helped by a positive foreign exchange tailwind.

Organic sales were broadly flat. Gross margin remained essentially flat at 58.9%, compared to 58.7%, with favorable brand and channel mix, as well as lower-than-expected destruction costs offsetting the tariffs, which represented an expense of about $2 million.

Now while SG&A expense increased 3%, SG&A as a percentage of net sales remained essentially flat at 47.9%, compared to 47.6% in the prior-year period. Overall, net income attributable to the U.S.-based operations was broadly flat at $8 million for the quarter, representing 9% of sales.

This also reflected a higher effective tax rate of 19.7% in the first quarter of '26, compared to 18.1% in the prior period, which was driven by lower tax gain from stock-based compensation. March 31st, our balance sheet remains strong, with $237 million in cash, cash equivalents, and short-term investments, as well as working capital of close to $700 million.

From a cash flow perspective, accounts receivable was up 6%, and days sales outstanding was at 78 days, up from 74 days in the prior-year period, driven by foreign exchange and changes in channel mix. Despite the increase, we are still seeing strong collection activity, and we do not anticipate any issues with collections or accounts receivable.

Even amid foreign exchange headwinds on our costs, inventories declined significantly to $370 million as of March 31st, 2026, from $396 million a year ago. This represented a 17-day reduction in inventory on hand to 259 days.

By effectively managing working capital relative to our sales growth, we again significantly improved our operating cash flow. Cash flow generated from operating activities was positive during the quarter, compared to operating cash usage of $7 million during the 2025 first quarter.

We continue to expect strong free cash flow productivity in 2026. Now turning to our guidance and outlook, as outlined in our earnings release issued last evening, we are maintaining our full-year outlook.

We continue to expect sales of approximately $1.48 billion and diluted earnings per share of $4.85. Our EPS guidance does not include any benefit from potential tariff refunds.

While we remain proactive in mitigating the impacts of tariffs on our cost structure, we're also monitoring the possibility of IEEPA tariffs refunds this year, which could total approximately $17 million. These potential tariff refunds are not included in our outlook for 2026.

However, should they occur, we would likely take the opportunity to reinvest, at least partially, in support of our brands, and fuel momentum where we think we can get a strong, long-term ROI. We continue to anticipate a return to stronger growth in 2027, driven by enhanced innovation, including the development and distribution of our newest brands.

Overall, we are seeing moderating demand in several international markets, along with tariff-related pressures in our cost structures, and we are continuing to closely monitor potential inflationary impacts as suppliers adjust pricing. Nevertheless, we remain well-positioned with a strong innovation pipeline, enduring global partnerships, and a resilient consumer base that collectively reinforce our confidence in our long-term growth and value creation.

With that, Operator, please open the line for questions.

Hi, thanks for taking our question. Gross margin obviously expanded during the quarter, which was great.

Just curious looking ahead, which of those benefits do you view as structural versus more quarter-specific? Then on the category, you've obviously spoken to seeing some normalization, but you've also noted pockets of strength where we're seeing maybe above-category growth.

How do you feel about the portfolio's ability to capture those pockets of above-fragrance algo growth? Thank you.

All right. Thanks, Sydney.

Maybe look, gross margin was really a combination of everything going favorably for us this quarter. We had the impact of the pricing increases that we took last year.

We had a significantly favorable mix impact coming from our direct-to-retail channel. As the gross margins on our direct-to-retail are significantly higher than when we sell through distributors.

It was really a perfect storm. At this point in time, we expect this to kind of normalize over the balance of the year, and this is one of the reasons why we're maintaining our gross margin target flat for the year.

I would expect to see some of this mitigating, particularly over the course of the second and third quarter.

Regarding the portfolio,

yeah, go ahead, Jean, you want to touch on the portfolio piece?

Regarding the portfolio, I would like to say that our bigger brands are doing better than our smaller brands. When you look at Coach, Jimmy Choo, GUESS, Montblanc, DKNY, they are all in good shape and they will grow this year.

We definitely will look at the smaller brands and in time, we will definitely edit the portfolio. Maybe brands that are doing less than 10 million should not be part of the portfolio.

That's why we are looking at always increasing the portfolio of brands, looking for bigger brands, bigger potentials, and we're happy to have signed in the first quarter of this year two new license, one with Beckham, one with Nautica, even though they will start later on. They will be a great addition to the portfolio.

Regarding geography, we think that there is a good potential in the U.S. We see some strength in the U.S., primary department stores, Amazon U.S., TikTok U.S.

We think will perform better than other parts of the world.

Maybe just to build on Jean, we did see very, very strong growth in the market in the U.S. The market was up 7% in the quarter, and actually was very, very strong in March.

It was up close to 9%. That's really driving and fueling the momentum.

Reiterating our core portfolio, our top seven brands grew actually 8% this quarter. We have a very, very strong portfolio, and I think we have a very, very long tail that we need to continue to streamline over time.

Overall, I would say a very healthy core. Then in terms of emerging consumer segments, we are playing in some of these smaller size, trial size, probably lower price points when you think about TikTok.

We're also, as with Goutal, as well as with Solferino, we're starting to play in the higher luxury space, which we know is also historically been one of the faster-growing segments in this space.

If I can just poke in one quick follow-up, on that 9% growth you saw in March, are you still seeing that level of growth quarter-to-date, or how did the trends in April compare?

I haven't seen the April numbers yet. I think we will be getting them most probably in the next couple of days.

We're not hearing or seeing anything that seems to be limiting the growth. I think still growth in the U.S.

continues to be very healthy.

Great. Thank you.

Hi, thanks for taking my questions. It sounds like you guys feel really good about the U.S.

growth, I guess, continuing maybe even into the back half. I guess how are you guys feeling about Europe and just globally, in kind of a little bit more of a normalized fragrance growth environment?

Then also just in terms of your newness, no big launches this year, but I guess are you expecting more kind of newness to roll out in the back half versus the first half to kind of maintain that share until we get to kind of some more blockbuster launches next year and some new licenses? Thanks.

Michel, you want to answer on Europe?

Sure. Look, as much as the U.S.

continues to do well, I think Europe is more of a mixed bag. You saw our numbers for Eastern Europe.

Eastern Europe is particularly impacted by the war in Ukraine and the challenging economic situation there. There's been a dramatic slowdown in purchasing and consumption, and it's definitely impacting certain brands that have a strong presence there.

If you look at Western Europe, it's also a bit of a mixed bag. There are certain markets like Spain that continue to do well, but we're definitely seeing a significant slowdown in markets like France and Germany, which are very, very large markets.

Those are really two markets where we're actually seeing very sluggish growth, even actually some decline. The last couple of quarters have been declining in France, and that is a very large fragrance market.

Conversely, on the positive side, Latin America continues to do well. I think, as the economies improve, as the middle class expands, that will represent I think a long tail of growth in the future.

I think it's more temporary. We've had to make some changes in our distribution, both in Korea and in India, and that's kind of weighing down a little bit on our growth, but that should eventually pick up once that situation is improved.

Then Jean, I'll let you address newness.

The second part of your question, Susan, was are we going to have a blockbuster in the second part of the year? The answer is really like we have said before, this year of 2026 is not a big year for blockbuster.

We really have a concentration of new launches, new big blockbuster in 2027. We knew that.

That's why we animate the portfolio with flankers, we still have innovation, but not as big as what we will expect in 2027. It's just a coincidence that we have so many new big launches in 2027.

Actually, all our biggest brands will have a new franchise, a new pole in 2027. For a year without huge innovation, I think that we're doing quite well.

Great. Thanks.

Then maybe just one follow-up

on pricing.

I think you'll start to lap the price increases you took last year in August, and you talked a little bit about inflation too, maybe impacting COGS a little bit. How should we think about pricing kind of as we start to cycle those price increases from last year?

Are you expecting to take any more price this year?

Yeah. Look, our priority is generally to make sure that we're offering the right consumer value with our offering.

We have historically always been very, very prudent with pricing. Last year, we had to take pricing because of the tariffs, and we mostly took pricing here in the U.S.

Outside of the U.S., there was very, very little pricing. At this point in time, unless we see something dramatic happening, it's unlikely we'll take any pricing, especially in light of the innovation program.

Now we may take some pricing as we launch new lines, it's always an opportunity when you launch something new to elevate the brand, elevate the line-up, and price up, but you're not taking straight pricing on the existing lines. It's going to be more innovation pricing.

So.

Totally agree. We don't like too much pricing.

We do it when we are really forced. Pricing is not the right answer to maintain or increase sales.

We think that the retail price of our fragrance is well adapted at the prestige level or at the more democratic level. I don't see unless something like tariff happened last year where we were forced, like everybody else in the industry, we were forced to react, but today, it's not the case.

Yeah. Okay.

Great. Thank you so much for all the details.

Good luck the rest of the year. All right.

Thank you. Thank you, Susan.

Hi, just want to ask you, given that you're seeing the growth in the marketplace with demand, it's outpacing your competitors, is this consumers just trying out your products because they're seeing your advertisements, or is there some sort of loyalty to your brands that you're all of a sudden seeing this year that you weren't seeing in prior years?

Great question, Hamed. Depends on the brands.

I think it's a little bit of both. We have some loyal customers coming back when the bottle is empty, and they buy again the fragrance.

We have also a lot of curious new customers that are targeted by our digital, aggressive advertising, and they come and buy a fragrance from our portfolio. For instance, I was looking at young boys anywhere from 13 to 17 years old buying a lot on TikTok, buying a lot on Amazon, and buying quite expensive fragrances.

They have apparently the resources to do it, they find it anyway. This is very interesting for us, and we are going in the future to look at these customers.

Of course, teenagers, girls were always part of our target, but this is for us a new trend, and we're going to look at this carefully.

I would just say, this category is a category where people are always exploring, and you have people that are loyal to a fragrance, and they wear the same fragrance forever, and some of them have a core fragrance that they keep, and then they have a couple of new ones that they try on special occasions. I don't think there's any specific rule.

What's important really is to always be present when the consumer is top of mind. It's one of the reasons that we have spread out our A&P more evenly across the year.

As you recall, we used to spend everything in the fourth quarter. We're now spending more regularly, and I think that's helping us sustain demand.

It's also the importance of always looking good in-store and being present in all the right channels. I think a lot of the work we've done, and whether it's with Amazon or with TikTok, in anticipating emerging channels, I think have been quite successful for us.

That's going to be my follow-up for both your comments there, actually. Given that you're seeing some sort of efficiency in some ways or a response to your advertising online, does that make you want to change your A&P in any way, or try to put more weight towards something that you're seeing response?

I'm just trying to gauge if there's possibility of upside sales here.

Yes, Michel, you can start. Hamed,

look, I know you love asking us questions about A&P ROI, and look, the challenge with A&P is you know that it works, you don't always know how everything works. I would say I think the tools have gotten better.

Generally speaking, I think we have plenty more opportunities to spend more to get a better return, and I think it's about managing profitable growth, and it's managing the short-term, mid-term, and long-term. Certainly, and that's one of the reasons why you probably heard this in my prepared remarks, if we see more upside coming through in the form of tariffs, we will try to reinvest some of that.

We believe that there's more upside here. Again, we want to do this responsibly in terms of managing the top and the bottom line, I would say we are constantly looking at ROI.

If you look at 10 years ago, everybody was doing TV, and now everybody is doing digital, right? We're constantly evolving.

We're investing a lot right now on Amazon, TikTok. We're always looking for that edge and that ROI, and I think that's a constant optimization opportunity.

Great. Thank you.

Thank you, Hamed.

Hi, Jean and Michel. It's Fraser here from Berenberg.

Thanks for the presentation. I've got two or three questions, and I'll just ask them one by one if that's okay.

The first was just about Lacoste. I wondered if you could maybe just help us understand how you're looking at the year as a whole for Lacoste given the kind of soft start, and I understand the comment on Eastern Europe, but I guess it's quite an important growth lever for EU Ops, generally speaking, and I'm just curious if you feel like you can kind of recover some of what you lost in Q1 for that brand specifically.

You want to shoot your three questions,

Fraser?

I can answer Lacoste if you want. I'm not worried at all on Lacoste, to be honest with you.

On the first quarter, we had a difficult comparison the first quarter of this year, but I think we can recoup definitely towards the end of the year. What is important is in 2027, we're going to have a very, very important launch on Lacoste.

I saw the product, looks great, the advertising will look great. Lacoste is in very good shape.

That's true that Eastern Europe was too slow, this explains a weak first quarter, but nothing to worry. Michel?

I would just add, Q1 and Q2 last year were really insane growth. We grew 30% in the first quarter, we grew 60% in the second.

We had a huge amount of innovation. We're feeling pretty good about Lacoste overall as a brand, and some of the challenges we're seeing this quarter really related to geographic footprint and disproportionate impact.

Lacoste is primarily strong in Europe, and as growth slows down, it's impacting the brand disproportionately, but the brand is very healthy, and I think we're feeling really good about it. Perfect.

Thank you. The second question, if I may, was just to ask a little bit how kind of orders trended through Q1, maybe putting Middle East on one side, which is a kind of exceptional circumstance.

Do you feel more positive on the rest of the countries now than you did in say January or February? I know that's something that I think the kind of EU Ops management team had commented on at one point, that maybe orders improved a little bit as the quarter went on, putting on one side the Middle East.

Thank you.

I can try to answer that. We put our guidance for 2026 in what, November 25, when we said that we'll do $1.48 billion.

We have not changed our guidance, even though there is a big conflict in an important region, the Middle East, which represents 7% of our sales. It means that we think that we will be able to find some growth outside.

That's also a good thing to have conservative guidance at the beginning of the year, because we sell in 120 countries, and with so many geopolitical threats that we can absolutely not control, we do not have to lower guidance, even though there is some difficult times in important regions. As of now, business is doing well, the orders that we receive are online with our projections.

Michel, you want to add something?

I would say orders have been broadly in line with our expectations. We did, obviously, the dip in the Middle East happened really in March, and impacted March disproportionately.

We do expect that quarter two will also be impacted disproportionately behind this, today, if we think about Q2, we're seeing Q2 as being, I would say, flattish versus last year also. I think, until we see how this thing settles and eventually repicks up, I think we're going to continue to be prudent.

That's clear. Thank you.

Then just the third and final question on my side was about the kind of direct-to-retail channel. I know you've taken in-house Korea because you kind of had to, but are there any markets where you feel like you're close to reaching a scale where you could potentially insource those?

I think you might have referenced those in previous analyst calls, but just be interested to hear more about any projects currently you're working on there.

Go ahead, Jean. No, go ahead.

No, please, Michel.

I would say we're very happy with the partnership. At the end of the day, the question is, what are you looking for?

Are you looking for gross margin, or are you looking for total shareholder return? I would say that I think in a lot of the markets where we're currently present, we've got great distributor partners, many of them that we've been working with actually for many years.

I think we're quite pleased with the level of progress and the return on investment. There's always opportunities, particularly as we grow, to consider certain large markets, but the question is, what do you get for it?

You'll get maybe a better gross margin, but you'll also get more expense, you'll have more inventory to manage, you'll have more accounts receivable. At the end of the day, the way I look at this is, where am I going to get the best TSR?

I think that with the footprint we have, I think we have the best TSR, and if something else comes up at some point in time which makes more sense, we may consider it, but at this point in time, we're not really looking to convert distributors to affiliates. Jean?

Totally agree. Korea was an opportunity, we took it, but we can reevaluate, but nothing will force us to change from distributors to subsidiaries.

Absolutely.

Super clear. Thanks to both of you.

Great.

Thank you, Fraser.

Pleasure.

All right. Thank you again for joining us today, and thank you to our teams also for their continued dedication and agility in navigating in this uncertain environment, and also helping us drive the efficiencies and supporting our ongoing success.

I'd like to mention that I'll be participating in the Jefferies conference in Nantucket on June 16th and 17th. If you'd like to participate, please reach out to your sales representative at Jefferies for information.

If you have any additional questions, please contact Devin Sullivan from The Equity Group, our IR representative. Thank you, and have a great day.