Good evening or good afternoon. Welcome to Kering's 2020 First Half Results Conference Call.

We hope you are doing well and staying safe. I'll go through our performance in the period, and Jean-François will share a longer-term perspective before we take your questions.

Starting with Slide 4. This first half was marked by the unprecedented health crisis and its heavy toll on operations.

However, our scale, the strength of our model and of our brands, as well as our agility, enabled us to weather the situation and deliver resilient results. Revenue first.

In H1, sales were down roughly 30% in reported and comparable terms to €5.4 billion. After a decline of 16% in Q1, revenue dropped by 44% in Q2.

No region was immune, but timing and magnitude deferred. Second, recurring operating income was €952 million, down 58%.

Thanks to numerous cost initiatives, we mitigated the top line pressure and limited deleverage to 2x. Our EBIT margin was 17.7%, a robust outcome as we continued investing to drive change in a complex environment.

Third, at €566 million. Our free cash flow generation was healthy.

Our brand successfully controlled inventories. At the same time, we were highly disciplined with regards to CapEx at nearly 7% of revenue.

We prioritized projects and kept the pace of group investments in growth platforms. As a result, after a dividend payment of €1 billion, our net debt, excluding lease liabilities, was just above €3.8 billion.

Switching to Slide 5 to 7, some top line comments for our Luxury Houses during the period. Lockdown hampered our retail operations as never before.

As you see, there is a close correlation between retail revenue trends and store closures, bottoming out in April, when on average, about 65% of our network was closed. In May, trends started improving and Asia Pacific gathered momentum, while Europe and Japan reopened gradually throughout the month.

In June, 15% of our stores were still closed, the Americas being the most impacted region. What these numbers don't capture is that we are still operating reduced hours in most stores worldwide.

Neither do they capture discrepancies across brands, depending, in particular, on their relative exposure to the Americas. Of course, retail revenue was supported by the intensifying shift to digital, you see on Slide 6.

This trend is not new, and our brands are very well positioned to capture this acceleration. In Europe and the U.S., however, they were impacted by logistics disruption in April notably for those still operating through the YNAP JV.

Despite this, e-comm revenue jumped 72% in Q2 and accounted for 13% of H1 retail sales. Growth was strong across all regions.

In North America, where e-comm was already a key channel, it reached record levels. In Asia Pacific, penetration roughly doubled year-on-year with plenty more potential.

In all regions, trends kept a very strong momentum, near or above triple digits in June, despite gradual store reopenings. Turning to wholesale on Slide 7, the crisis had major impact, compounding structural trend and our own strategic decisions.

Short term, wholesale was penalized by lockdowns in production and logistics, delaying shipment of the Fall/Winter collections. The pandemic took its toll on the entire channel, but was especially negative for travel retail.

In addition, preexisting trends were exacerbated, further weakening some accounts, notably in the U.S., and we were extra cautious in managing orders. We are actively pursuing our strategy to tighten control over distribution of all our brands, starting with Gucci, continuing to cut the number of wholesale doors we all work with.

We are also proactively engaging with some of our partners regarding additional retailization, both off-line and online. Let's now turn to Slide 8 for a spotlight on our Luxury Houses.

In Q2, revenue declined 43% reported and comparable. Retail was down 42%, massively impacted by store closures, together with temporary shutdowns of logistics and production facilities.

First region to be hit in Q1, Asia Pacific was first to reopen and to improve its trend. It was led by Mainland China, of course, growing over 40% in Q2 with May and June very strong.

Things are more contrasted elsewhere in the region, both Hong Kong and Macau are still down sharply, while Taiwan and particularly Korea, are doing much better, thanks to locals. All in all, Asia Pacific is down 12% in Q2.

Trends in Western Europe were severely impacted by the absence of tourism, which accounted for nearly 65% of sales in the same period last year. Since stores started reopening from mid-May, we have encouraging signs, but clearly, this is not enough to replace tourists.

Retail in the region was down 66% in Q2. In North America, the situation is complex as stores reopened later, and we had to close some of them again.

Retail was down nearly 50% in the quarter with very positive restart signals in many stores across the region. Finally, Japan was down over 60% in Q2, reflecting the impact of store closures, the absence of Chinese tourists, and a depressed consumer environment.

Turning to profitability. Our Luxury Houses delivered a very solid first half EBIT above €1 billion, a 21% margin.

This was achieved with a moderate dilution in gross margin. Also, on top of relief stemming from the variable cost base, our brand proactively implemented initiatives to lower the fixed cost base, and this will continue to bear incremental benefits beyond H1.

Operating deleverage was thus contained to 2x, an achievement worth noting. Needless to say, this ratio varies brand by brand, depending on scale, maturity and investment stage.

CapEx in the period stood at 4% of revenue. We made some trade-offs, redefining plans and priorities according to individual situations.

The network details by brand are in the appendix. Total store count stood at 1,393 units with 12 net openings in the first 6 months.

Let's look at Gucci on Slide 9. H1 revenue was down 34% comparable.

In Q2, revenue declined by 45% with retail down 43%. By region, it's worth highlighting good resilience in North America with encouraging signs of restart in June and the recovery in Asia Pacific.

Starting in Mainland China, the trend gradually expanded to Korea full-price stores with locals and to Taiwan as well. Of course, some Asian markets, as well as all key European countries are heavily penalized by the lack of Chinese tourism.

Wholesale was down 54% in the second quarter. In addition to the factors I discussed, Gucci is implementing plans to sharply intensify the rationalization of its network.

Royalties were down more than 60%, mainly related to the Coty license. Gucci delivered solid recurring operating income at €929 million, with a margin topping 30%.

Gucci's team responded swiftly to the deteriorating environment and proactively addressed the cost base. At the same time, investments in brand and client engagement across all touchpoints are sustained to put the house in the best position to catch local rebound and to further build brand equity.

The CapEx to sales ratio is 3.2% on a stable network of store with some refurbs being postponed. Slide 10 shows highlights for Saint Laurent.

Q2 revenue declined 48% with retail and wholesale in the same ballpark. Having a large exposure to Western Europe and North America, the house actively reengages with its local consumer base.

Asia Pacific is recovering gradually and Saint Laurent invests in the region to strengthen its presence and broad awareness. Saint Laurent contained operating deleveraging and achieved a 15% EBIT margin.

Dilution was well managed, considering the brand's exposure to mature regions, where fixed costs tend to be higher. Action plans have been implemented to adapt the cost structure without impairing the future of the brand.

CapEx was down over 50% in the first half as the house focuses on key investment projects. Moving to Slide 11 with Bottega Veneta.

The enthusiastic reception of Daniel Lee's creations was further confirmed and resulted in a very resilient performance in the period. In H1, sales were only down single digit.

The Q2 revenue decline was also contained. Wholesale was up 15% as the house continues expanding its presence with top-tier partners.

In retail, down 34%. Key highlights are the positive performance in Asia Pacific, driven by Mainland China and Korea, as well as the surge in e-commerce revenue that almost tripled both in Q1 and Q2 from a low base.

Thanks to cost discipline, Bottega Veneta was able to ease the impact of operating deleverage. That being said, we decided to sustain its current investment phase, to amplify the brand's momentum and further reinforce its fundamentals.

This definitely impacted the EBIT margin. After a resilient Q1, our Other Houses on Slide 12 were hit in Q2 by store closures and for some of them, notably, Boucheron and Pomellato by their limited exposure to Asia Pacific.

Revenue was down 44% during the quarter, with retail declining 35% and wholesale down 53%, particularly impacted by watches. Thanks to its powerful brand momentum across product categories and to a swift recovery in Asia Pacific, Balenciaga contained its top line decline.

The brand capitalizes on its expanded retail presence in Mainland China and Korea, as well as its effective engagement with new and existing local clients. Balenciaga also leverages its online presence capturing upside in key markets like China and the U.S.

Alexander McQueen's performance is also worthy of note. The brand is extending its success in shoes, thanks to new line expansions, building on demand for pillars and newly launched leather goods are well received.

Alexander McQueen is activating multiple initiatives to capture local traffic, domestic tourism and support growth across categories. Its e-business is growing rapidly, as it leverages key platforms and concession models.

EBIT of the Other Houses was slightly negative, but with widely different situations across brands. Balenciaga's scale and stage of development allowed it to maintain double-digit profitability.

Work on Alexander McQueen's cost structure softened the impact of operating deleveraging. Conversely, smaller brands, some of which are more exposed to regions with a greater fixed cost base, incurred operating losses.

CapEx was maintained in the first half on network expansion at Balenciaga and McQueen, chiefly in Asia Pacific. On Slide 13, you will find our corporate and other segments.

On the revenue side, Kering Eyewear had total revenue of €243 million in H1, translating into consolidated sales of €192 million, down 27% comparable. After a very resilient Q1, Kering Eyewear saw a deterioration in Q2 due to store closures, the halt in travel retail and timid wholesale partners.

At the same time, Kering Eyewear kept innovating to promote its family of brands and further developed its portfolio adding Chloé and Dunhill, starting with their Spring/Summer '21 collections. The negative EBIT contribution of corporate and other is improving versus last year at €111 million.

Kering Eyewear's contribution was under pressure, but still positive. Costs incurred in relation to corporate LTI plans decreased and underlying costs were reduced significantly.

On the CapEx side, the increase is related to our growth platforms, as we sustained investments to modernize our IT backbone, transform and expand our logistics capacities reflecting our determination to keep our ambitious digital and innovation projects on track. Now moving on to the remaining lines of the P&L summarized on Slide 14.

Other nonrecurring operating income and expenses were €319 million negative, of which €260 million directly or indirectly attributable to the COVID-19 impact. They include €246 million of asset impairment related to Brioni and our watch brand.

Net financial charges amounted to €145 million. Excluding interest on lease liabilities, financial charges were €88 million, nearly flat year-on-year.

They include €30 million in cost of net financial debt, a slight increase related to new financing arranged to secure the group's liquidity. Other financial charges, amounted to €58 million, including, as usual, the financial component of hedging.

Corporate tax amounted to €194 million, a 28.2% tax rate on the recurring income. Group net income from continuing operations adjusted for nonrecurring items reached €569 million.

A few comments on free cash flow, balance sheet ratios and net financial debt are on slides 15 to 17. In the first half, we generated free cash flow of €566 million.

While well below last year's level, this represents very healthy cash generation in the current context. Our brands proactively adapted their open-to-buy and managed inventory.

So operating working cap was kept under control, at 24% of our last 12 months revenue, a touch above our normative level. At June 30, net financial debt was €3.8 billion, excluding lease liabilities.

This represents an increase compared to year-end due to the dividend payment in H1, but also compared to June 30 last year, reflecting lower cash generation in the period. This being said, our financial situation remains extremely solid with a net debt-to-equity ratio of 37%.

This leads me to a few concluding remarks on this extraordinary period on Slide 18, before handing over to Jean-François. Our financial priorities in the semester can be summarized under 3 key headings: First, with our brands and at the corporate level, we defined key cost reduction guidelines very early on.

All lines of the P&L were scrutinized with a particular emphasis on rents, leading to short-term release as well as more long-standing adjustments. Hiring and salary raises have been frozen across the group with benefits expected beyond H1.

We also adapted our SG&A and A&P expenses to the environment always mindful to balance near-term gains and longer-term investment in our assets. This is also true when it comes to the second bucket, cash management.

We postponed noncritical projects while safeguarding key CapEx related to our strategic growth platforms. Managing inventory levels with discipline also ranked high among our priorities with solid achievements at brand level.

Lastly, we secured additional financing under very favorable conditions with our banks as well as through new bond issues. We also benefit from prior work to build a balanced repayment schedule, and we have no significant short-term maturities.

And now I'll pass the phone on to Jean-François.

Thank you, Jean-Marc, and hello to everybody. The performance Jean-Marc reviewed, as unprecedented as it may be, shows the solidity of our business model.

Over the next few minutes, I would like to show you how the situation we have faced not only comforted us in the strategic choices we have long made, but also pushed us to move even faster with their deployment. Far from calling into question our strategy, the pandemic is acting as a catalyst.

You've seen this slide before. It shows our vision of where Luxury is heading and how we are particularly well positioned to thrive in this environment.

The reason I'm showing it again today is that our strategic agenda has served us well in the past 6 months. Its 4 pillars also provide the right framework to assess our progress.

Let's start with the new consumer environment. We have no doubt that Luxury is here to stay.

And the appetite of millennials and Gen Z customers is not diminishing. As a matter of fact, they were the first ones back in our stores as we reopened.

But trends we had flagged in the past are intensifying, not just under the influence of COVID-19, but also stimulated by the push for inclusivity and transparency, we are seeing more and more today. These trends are well aligned with our culture and core values which have been highlighted by our response to the health crisis.

François-Henri and I have often talked to you about our ambitions and measurable commitments in terms of carbon footprint and environmental impact of our activities, all along the value chain. We recently introduced a dedicated biodiversity strategy with a series of new targets.

We are emphasizing our credentials also on the product side. In June, Gucci launched the Off The Grid collection of sustainable luggage, shoes and accessories.

Other houses have projects on the drawing board. Our search for sustainability extends to new business models as we integrate the whole life cycle of our products into the ways we work.

Let me turn to our second pillar, how we embrace technology to better serve clients across an ever-growing number of touchpoints. For us, creativity is pervasive in every interaction we have with our clients, from the most mundane to the most sophisticated.

We use technology to enhance customer experience and expand customer reach. Our brands heightened their visibility and desirability across all platforms and networks that makes sense for them.

During the pandemic, Kering and many of its houses imagined original social media communications dedicated to their communities with a strong human-centric approach, tapping into the need to feel connected. The Bottega Veneta residency, the McQCreators series and Balenciaga's stay-at-home initiatives, to name a few, were widely followed and like.

In China, specifically, we deepened our customer relationships through digital and social e-commerce during the crisis and the post-COVID rebound. We leveraged all the tools in WeChat to intensify customer engagement and to reinforce the bonds our clients have with our sales associates.

On another front, we are tapping opportunities in asset digitalization, enabling us to reduce inefficiencies and preserve natural resources at the same time. We are working at all levels of the value chain, lowering the number of prototypes, reducing production waste and live streaming fashion shows, to name a few.

COVID-19 has proved a major driver of awareness and push to virtualization in this regard. Personalizing customer engagement is a key success factor in today's luxury world, and we are increasingly able to harness the power of artificial intelligence to reach this goal, notably through AI-powered product recommendations.

Next, let's look at our omnichannel capabilities at the core of our distribution strategy. Our top priority here, as you know, was the internalization of all our e-commerce activities apart from Gucci, where e-commerce is already carried out in-house.

While some parts of the project suffered minor delays, we are basically on track. In May and June, the China e-comm site of Alexander McQueen and Saint Laurent went live and McQueen worldwide migrated in early July with 44 countries on board.

Balenciaga is scheduled to switch in China in coming weeks. The gradual migration of all brands will take place this year and in early 2021, giving us true omnichannel features across the board.

We are thrilled with the results so far, with higher conversion boding well for the future. Clienteling is a major focus, not only during lockdown, but also more generally in a world where travel has come to a halt, and the focus on local clients is paramount.

We were glad we had a great palette of clienteling tools in place, and we rapidly built on the existing infrastructure. This enabled us to tighten relationships with top clients who were already well covered, but also to build stronger ties with occasional and onetime shoppers, achieving good conversion rates.

Our CRM capabilities are increasingly sophisticated as technology amplifies the power of the human touch, and are demonstrating that they can be promptly redeployed to support operations and adapted to changing consumer behavior. To offset lower foot traffic, we activated distant sales applications enabling associates in the stores to interact directly with their clients.

Bringing this to the next level, Gucci Live, the first among luxury players, lets clients visiting gucci.com, start a video call with Gucci online client advisers from their smartphone or computer and discover all the details of a product in real time. Our phygital expertise gives us the means to assess our distribution capabilities including our physical footprint as part of a whole and comforts our strategy to tighten control over every aspect of our distribution.

Finally, a few words on our ambitious supply chain projects. At our Investor Day last year, we discussed our use of artificial intelligence to support forecasting and we have made further progress along these lines, with pilots aimed at both short-term replenishment and longer-term planning.

With logistics disrupted during the quarter, and the need to reallocate inventory to regions as they reopen, these tools prove their worth, and we use the crisis to stress-test some of them. Our logistics reorganization program is on track and moving forward, though it did experience slight delays, as you can imagine.

The first section of our Trecate logistics hub in Northern Italy is on stream as is the Wayne facility in New Jersey. This has enabled us to gain flexibility and speed to move inventory directly across and within regions and to support a true omnichannel setup.

Our ERP implementation is also progressing smoothly. So we are not only pleased that all these projects were already underway when things got tough, giving us a significant head start, but we were also able to further enhance them in real-time under particularly demanding conditions.

I'd like to conclude our remarks by saying that this time around, we were in top condition entering the crisis. As a result, we were fully able to leverage the scope and scale of the group and consumer enthusiasm for our brands.

Our values are in sync with the time and we are deploying a host of initiatives and projects to support our future. With these attributes, we have weathered what we hope was the worst of the crisis, maintaining a solid profitability margin and a healthy financial condition, all the while continuing to invest in the future of our houses and of our shared growth platforms.

So despite the turmoil, we are committed to deploying a strategy that is well aligned with conditions in our sector. We have the resources required for this deployment and to seize new opportunities as they arise.

And we are confident in our ability to return to growth and higher profitability as soon as the worldwide environment stabilizes. Jean-Marc and I are ready to take questions.

Operator?

It's Antoine of HSBC. 3 questions, please.

First of all, if I did the right calculation, the gross margin in the first half was down 140 basis points, which is quite a good performance, especially relative to one of your competitors yesterday. So can you maybe explain why there was not so much inventory depreciation?

And also, if you could -- if you can be confident that the level of provisioning has been cautious enough. And also, there has not been any inventory depreciation charge below the line, below the EBIT line.

Second question, I'm looking at your nice chart about the evolution of the retail growth in Q2. So June seems to be down only 15%.

Can you give a bit of flavor by region and maybe by brands? There is sort of a comment which seems at least cautious about the U.S And finally, with the euro-dollar moving in the wrong direction to around 117, 118, what could be the -- when do you think you will get the impact on your profitability?

Thank you, Antoine, for your questions. And glad you are in a position to ask some questions this time.

I will start with the gross margin. And of course, as you can imagine, I won't comment about the figures of shares today.

To be very clear, there is no depreciation below the EBIT line. There is -- all the depreciation have been accounted for in the gross margin so in the EBIT, for all the brands.

And obviously, I think that we have for several years, a quite cautious approach when it comes to inventories, but also receivables depreciation and that's the reason why I think there was not such a variance. You're right to point out that it was below 200 basis points of dilution.

I think we have definitely a very cautious approach when it comes to inventories depreciation. I would add also probably that compared to some other, the fact that we are less internalized in terms of production also does help in that case, sometimes it could be a weakness.

Sometimes it's also a strength. And of course, we have less fixed costs due to the production capacity to absorb in that case.

But I want definitely to reassure you everything is in the EBIT. And I think that we had a very cautious approach during the first semester.

The first question was about the evolution of retail stores during Q2. You mentioned a percentage.

I'm not super clear about the percentage you mentioned, Antoine.

Minus 15%. Yes, minus 15%.

Because, I mean, looking at the chart, it seems that there is quite a correlation between the percentage of stores closed. So -- and then it says June is around 15%.

So I don't know if you start the half...

Okay. You mean -- you were mentioning about June?

Yes.

Okay, I got it. I think -- yes, okay.

So definitely, I think that what we can see in the last -- if we look at the sequence in Q2, there was definitely a sequential improvement. Already May was less negative than March that was already an achievement, thanks to the restart we saw in Mainland China since mid-April with an acceleration in May.

And in June, without disclosing the figures, let's say, that we were between minus 15% and minus 20% in average, with clearly an improvement across the board in all regions. It's clearly an improvement with the locals.

In Europe, we started to see mid-June, also some improvement with local clientele. Of course, there is still a lack of tourism.

We had also a positive trend in the U.S., in America since mid-June. And overall, APAC in June was very positive.

China was super positive. Let's say that for the full quarter, Q2, China was up approximately 40% in average.

But since May, so May and June, you are always depending on the brand between 40%, 60%, 70%. And it's a trend we are seeing in China, also the local -- the local in Korea are super positive.

Of course, there is a drag on the duty-free side especially at Gucci level because the duty-free is encompassed in the retail at Gucci. This is the only one exception in the group because it's directly managed.

But overall, I think that all the regions are showing very positive signs with the exception, of course, of Hong Kong, Macau, which are still depressed as cities. And even in Europe, so as I mentioned before, we had an improvement with the locals.

Japan, just to conclude on the regional analysis, was improving. It was -- the beginning of June was still a little bit depressed with local consumers.

And of course, with the absence of tourists. And gradually, we also saw an acceleration.

And the end of June was quite encouraging also with locals, with also a gradual acceleration across the board in all the brands of the group. As regards the USD, we tend to believe that during the second semester is a combination of exchange rate and hedging should be slightly accretive on the EBIT margin.

It's too soon to quantify, of course, the impact so we believe that considering the hedging rate we have, it should be accretive. But considering the moving pieces, the moving parts we have on the gross margin, of course, you can imagine that it won't be just -- it will be just a marginal driver of the evolution of the gross margin in H2.

Maybe just regarding the June rates, any comment to make on by brands, maybe Bottega was already very resilient. Is it maybe back to growth now?

I won't comment brand-by-brand because I think that the trends are very, let's say, coherent across the board with some differences, you can imagine, with Bottega Veneta and Balenciaga or McQueen overperforming globally. And it's true that Bottega Veneta is still leading the pack in June.

And close to be positive overall.

I have 3 questions, please. First of all, on fixed costs.

So you've done a great job containing the deleverage in H1. And I was just wondering, is there -- I mean, there was obviously a reduction in OpEx because of the sales decline and everything that has been happening, but how should we think of the cost in H2?

So will -- sort of what is the right way of looking at OpEx if you have reduced the fixed cost base to any extent? That would be very helpful.

Secondly, on online. So actually in Q2, you saw a very nice pickup, which I think shows very clearly that Q1 was penalized by the issues you had because of the logistics centers in Italy and the U.S.

But if I remember correctly, even Q2 would be still somewhat impacted because of some issues in April. So would you be able to maybe give us an idea of how online performed month versus month?

Because, obviously, I presume there would be also some change in trends when stores reopen. And thirdly, just a follow-up from Antoine's question on June.

I mean just -- I know it's still early and it's very difficult to really make any comments on Q3, but we're already in July and we've heard some comments from your peers about U.S. already sort of being flattish in June.

Then we also had some department stores saying they turned positive in the U.S. So is it possible that in Q3 as a group in retail, you may see sales decline of, let's say, mid-single-digit or maybe even flattish?

Again, I know it's a tough one, and it's still very early, but it would be also quite helpful for us to get an idea of what are the trends right now.

Thank you, Zuzanna. And if I understand it well, I need to give you the guidance on the P&L of H2 and on the revenues for Q3.

So I'm not sure that I will give you the full set of information, but let's start with fixed cost. I think that the silos actually we had as regard the cost control was just to do the right things without compromising the capacity of our brand and of the group to capture all opportunities in terms of business going forward in H2 and beyond 2020.

So overall, we have decreased the OpEx by 13% overall, which is a combination of decrease of variable cost. So on par with the revenue decrease, of course and with some actions on the fixed cost.

But at the end of the day, if you make your math, it means that brand by brand, we are between minus 5% and minus 10% on the fixed cost base. So it's a good demonstration that we have been quite disciplined.

But at the same time, we have not decided to start restructuring or reengineering process because we believe that we are not yet at that point. And going forward, I think also, H2, we will continue to invest in our brands.

I think you see the momentum of Bottega Veneta, but also how Gucci has been able to reengage with local consumers in the most important markets. So we need to sustain that recovery.

So you can expect that the dilution in H2 -- there will be a dilution in terms of profitability in H2. Don't expect that we will deliver the same profitability as H2 '19.

Of course, the dilution will not have the same magnitude as the one we have posted in H1, but you can expect still a quite material dilution considering the investments we have to make. You see that we have been able to mitigate the impact of the crisis because we have been quite strong at implementing a 360 approach, but it has a cost.

I won't comment on the monthly trends on online business, but you're right to point out the fact that the performance in Q2 was still impacted by the closure or the partial closure of some warehouses in the U.S. or in Europe.

And the logistic organization started to resume operations gradually, we were only at full speed in June. Overall, globally speaking, not only for online, but also for all the other deliveries.

So it means that definitely, there was an acceleration in terms of online sales despite store reopening. So that's very interesting because we have mentioned already during Q1 call that, one, this crisis was a catalyst for the acceleration of some major changes in this industry with the rapid development of e-commerce.

And obviously, we see that despite the store reopenings, where we have also an improvement of business, the e-commerce start continue to develop, and it's obvious in China, where we have a triple-digit growth across the board and especially at Gucci. And it's still the case currently, so that's interesting.

Now as regards the trends for Q3. As you can imagine, I won't elaborate on that question.

But I will try to help you by saying that so far, the trends we have observed at the end of Q2. So in the last weeks of Q2 are generally confirmed in the first days, in the first weeks of July, so all the different consumption patterns by nationalities, by countries we have commented during that call or during my speech are still more or less the same.

However, it's important to remind that Q3 is a very strong month in Europe and in some regions with tourism, is a very strong quarter for tourism in many regions. And that definitely, if you look at the data in terms of travel, we won't have any tourist in Europe.

So that may impact the performance in Q3. So the trends we have with locals tend to be confirmed.

But again, it will depend, of course, on new lockdown measures that could impact some cities, some districts. So it's too soon to conclude or to give any sort of guidance about Q3.

But I can tell you, the start of the quarter is very coherent with what we have observed so far at the end of Q2.

Perfect. Sorry, given that I've been already so brave with my questions, I would just follow-up on the fixed cost.

If you can remind me, am I correct to assume that 75%, what is the split of fixed and variable cost base? If you could just remind me so that we get an idea given the slight reduction in the fixed cost base.

That's depending on the brand, it's between 70% and 80%. So if you take a proxy of 75%, it does make sense.

Just 2 questions for me. The first one is to come back on Gucci.

So as you know, there is kind of an investor debate about the fashion cycle being correlated to the economic cycle and the pendulum between classic and baroque, and baroque and classic, and Gucci being obviously a very baroque brand in theory according to this thesis it would be more impacted in an economic downturn. So just wanted to have your view on this thesis.

And from a practical standpoint, have you seen any type of divergence in performance between the products you're selling at Gucci and also geographically, to that extent. So are the tastes different between what's selling in China and what's selling in the west?

So that's question number one. And question number two, on Bottega Veneta, which seems really to go from strength to strength.

So you had -- your CEO had talked about a focus on ready-to-wear about 18 months ago. If you could just -- I think if I remember correctly, it used to be about 6% of your sales only and you're aiming to go to 15%.

So if you could just give us an update on how that objective is progressing. And also in terms of Chinese nationals penetration today for the brand.

So just trying to assess what's the potential. Because as you told us in the past, Jean-Marc, I think the recovery started with the Europeans and the Americans first.

So how big this brand could be with the Chinese nationals? And lastly, maybe I shouldn't ask the question, but in the past, you talked about for Bottega Veneta's bottlenecks in production.

Obviously, the sales were down. So you seem -- you have no bottlenecks today.

But in the blue sky scenario, if the brands were to become hot, very hot again in the coming quarters, have you solved this bottleneck issue?

Your first question is not an easy one. And I will make the same answer as I did several times by reminding that beyond the baroque aesthetic you can see during the fashion show or on the communication side, there is a quite broad offer at Gucci.

Even during the latest fashion show, including the last one that was broadcasted with much success, more than €33 million -- sorry, 3 million viewers. You had some also classical pieces.

So I think there is, obviously, a very broad range in the offer with a significant share of carryover products with some best sellers where we have a good mix of baroque aesthetic and also some more classical aesthetic. So I think that we have the right offer to cover and to address the expectations of the customers.

Where you're right is that there is a sort of western-centric approach about the evolution of the taste of the consumers. You see -- you can see in the statistics that the consumer sentiment, the confidence in Asia is still quite strong despite the crisis.

There was sort of belief that maybe that there would be an impact on the Gen Y, Gen Z consumers that they will stop shopping, which is not the case. They were among the first ones to come back to the stores.

And we don't see so far in Asia, in Korea or in China, a massive move to more classical pieces. So I think that the situation is more balanced and I think definitely, what has been done in terms of style by Alessandro Michele and with the merchandising team, is the right approach.

And again, in the stores and also with all the clienteling activity we have with a very personalized approach when it comes to this clienteling activity on the CRM, the use of CRM. We can capture a broad base of customers.

I think a very precise clustering of our customers. But definitely, it's true that you may have some slight differences in terms of consumer confidence between regions with an impact on the way we are engaging with the consumers.

By the way, in terms of performance by product categories, there is nothing specific to mention. I think that it was interesting to see that all the product categories posted more or less performance is very aligned.

It means that also in ready-to-wear and shoes, we have an offer which is very consistent with the one we have in the leather goods segment. On Bottega Veneta, maybe to help you to understand what's going on here in the brand is that if we look at the split of sales or the breakdown of sales, leather goods were representing 85% of the business last year, while this semester, it is 77%.

So it means that we have increased the share of ready-to-wear of shoes quite successfully. First of all, with the women category.

We know that we have some work to do with the men category. And of course, it was partly delayed with the lockdown, but we are working on.

And you will see in the coming months, some very interesting launches in that segment. So I think that we are moving in the right direction and all the communication around the brand, all the merchandising activities, the clienteling activities already made in order to push all the categories.

Bear in mind that we have now approximately 90% of the sales, 9-0, with Daniel Lee creations and only 10% with Tomas Maier products. As regards the production and the supply chain, I think it's no more a key issue for the brand.

We may have on certain SKUs maybe still some tension in terms of production, but nothing that could become an impediment to develop further the business.

And sorry, just on B.V. on the breakdown by nationality, sorry, how do you compare with the industry?

Sorry, sorry. Yes, you're right to mention that point that I had forgotten.

I think that globally speaking, what was interesting during this first half was clearly the acceleration we saw in terms of sales to Chinese. I think that if we look at the different nationalities, the new aesthetic is clearly well adopted across all the different clusters, with maybe still an exception with the Japanese cluster, but it's not something that can be really surprising, and we had exactly the same situation with Gucci a few years ago.

So that today, the exposure to the Chinese clientele are not yet back at the level of the whole industry, but it's closer to 30% approximately. So there is still room here to improve.

And when we look at the most recent data of Bottega Veneta in China, I think that we are definitely very encouraged by the progress we made. So in Mainland China, of course.

I hope you are all well. My first question is, we're hearing a lot from companies that the Chinese consumer is rebounding, that the local consumer is rebounding across Europe and across Americas.

But clearly, in June, as you rightly pointed out, sales were still down 15% to 20%, so a very sharp improvement, but still down 15% to 20% overall you mentioned. Could you help us maybe understand a bit better by nationality what actually happened maybe at Gucci in this month of June, that would be really useful because clearly there is a lot of repatriation and traveling flow patterns that are projecting somewhat in the analysis at our end.

That's my first question. My second question is whether you could maybe expand a little bit on what happened with the Coty license for it to be so weak in the second quarter?

My third question is, I don't know if I'm right or wrong, but I imagine that you're outsourcing of quite a lot of your supply chain was fairly helpful in this environment, both from a gross margin perspective and in terms of inventories that you ended up carrying at this end of this period and the flexibility you have. What's your reading?

Obviously, you mentioned -- you made a remark that sometimes it's positive, sometimes it's negative. But how do you see this evolving through time?

How do you see your supply in-sourcing versus outsourcing sort of evolves through time? And then my last question, sorry, whether inside the firm, you have an analysis or a way to look at how much of the more recent trends could be revenge buying and therefore, not sustained?

Is there anything that yourself you scrutinized to assess that?

I will start with the first question. I think that where you're right to point out the paradox of the market today is that if we look specifically at the Chinese cluster, overall, across the board, it's still negative basically because it's just a question of math.

When you have a 50% to 60% of the Chinese clientele buying abroad in '19. And that on that part of the business, you are down to 80% to 90%, which is just the equivalent of what we see in terms of travel bookings in -- with the Chinese cluster.

You can imagine that even if you are delivering plus 60%, plus 70%, plus 80%, whatever you want in Mainland China, having in mind that Hong Kong and Macau continue to deteriorate, at the end of the day, with the Chinese cluster, there is definitely a repatriation, but it's not yet enough to offset the decline outside of the domestic market. So overall, with the Chinese cluster, definitely, if we look across the board.

So in all of our brands, there is no exception, it's still down. The paradox is that with -- in Korea, for example, or in Taiwan, the local clientele is very resilient.

It was the case along the quarter. In Japan, surprisingly, the beginning of June was still very depressed with local consumers, and we started to see an acceleration and improvement so that we ended with the last week of June at plus something low single digits still, but still positive, again with the Japanese cluster.

America is also that's sort of paradox because despite the situation, the fact that stores started to reopen later. At the end of the day, the trends were quite positive in June with local consumers so with the American consumers.

What is more challenging definitely is in Europe, where we have also positive signs with the European consumers late in the month of June, but thanks to a very hard work of clienteling, so it means that the cost to bring back local consumers in our stores in Europe or to our online stores is quite high compared to some other regions where the traffic is more, let's say, natural and doesn't need such an effort in terms of clienteling. So that would be my comments for the different nationality trends, and it's a comment that does apply to all the brands.

I think that the patterns we see are the same across the board with some differences due to the momentum of the brand. But overall, that's exactly the same.

But for instance, if you look at the American consumer base, sorry, you -- there was an element of repatriation of that consumer base as well, I suppose, over the period. In the past, you were actually giving us Gucci with the American consumer base.

Is that better than the Chinese, you would say, in June?

Yes. As regards the U.S.

consumer, I think that definitely, there was a part of repatriation, but not only because generally the American tourists we had in Europe were coming more from the East Coast. And it's not the region where our brands are performing the best.

And I think that we will see maybe more impact in Q3, because the summer is a good season for American consumers in Europe. I think we will see more impact potentially in Q3, depending on the sanitary situation in the U.S., of course.

Good afternoon, Melanie. Regarding the Coty license.

As Jean-Marc says, we had a very difficult performance in the first half year, particularly in the second quarter, and this performance did not improve the opinion that we have regarding our greater potential on this product category. And we have a license contract with Coty that is a fixed-term contract.

And we have to continue to operate with Coty in order to improve the situation and increase our sales in this category.

About the evolution or the change in terms of production, I think that what I would like to say is that in the turmoil we are going through, I think that it's very important to keep a direction, to keep the strategy as we had defined it. And I think that the internalization of the production, especially as -- on the leather goods segment will continue.

I think that the fact that we have more outsourcing maybe compared to some peers is helping the gross margin for the semester, but it should not be a driver or a rationale for changing our views. As regards the need of internalizing the production with all the benefits you know about adding more internal production in terms of agility, in terms of protection of the IP, capacity of replenishment and so on, innovation.

So I think it's absolutely to keep the strategy as it was, especially at Gucci, but not only we have some projects at Saint Laurent, Bottega Veneta to internalize more production. We have some investments in terms of production capacity.

And typically, we have mentioned that we didn't want to cut our CapEx as regards some strategic initiatives and amongst this strategic initiative, there is this need to continue to invest in the production. So it does change our views on the need to have the right balance between internalization and outsourcing.

We will continue to outsource more when it comes to ready-to-wear for -- as you perfectly know. Your last question is not an easy one on the sustainability of the trends, if I understand correctly.

I think that we are very pleased with the resilience of our brands in this context, but we remain very vigilant about the trends for H2. There are a lot of moving pieces.

The only one thing we know and we are clear about is the lack of tourism that will continue in 2020 and probably most or at least for the first half of 2021. We know and we are convinced that the e-business will continue to grow.

But besides this, it's very difficult to know, depending on the economic environment, the trade war, the pandemic, how it could impact the consumption patterns, and I will stick to my comments about what we saw in the first weeks of July, which was very consistent with the trends we observed at the end of Q2. We will take probably one last question.

Just one quick question for me. Your performance from the -- in retail in Asia Pacific by brand varies quite significantly, I mean, from minus 16% for Gucci to plus 10% for the other brands.

So what's the explanation for this one? Is it the way of the country for the brand?

Or is it more related to the performance you had in China? And then just a quick follow-up for the next one.

You were mentioning the relevance of tourism in the third quarter, notably in Europe. Could you just give us that number?

I think that -- of course, the analysis of the performance brand by brand in APAC or in China, more specifically, has to be made regarding the network of the stores in the country that Saint Laurent is still in a process of revamping its footprint in China. Saint Laurent have quite strong positions in Hong Kong, Macau.

Especially in Hong Kong. So of course, the performance of Saint Laurent may be impacted -- an impact because of that.

When it comes to Gucci, at the end of the day, as I mentioned before, there is an impact, which is relating to the exposure to Chinese tourism in the region and especially in Korea, and what is not something we can easily see in the figures is that in Korea with the local consumers, Gucci is a top brand in our portfolio compared to the others, Gucci is performing better than the other brands in Korea with the local consumers. But there is this big drag, which is due to the Korean duty free.

And on top of that, if I look specifically at China, it's important to remind that since 2016, the Gucci has tripled its size in Mainland China. So we have also comp base effect.

We had a very strong year last year in China with Gucci. And as I mentioned about Bottega Veneta, because of the momentum of the brand, the gradual adoption of the new aesthetic, there is clearly an acceleration in China and in Asia for Bottega Veneta.

Bottega Veneta has strong positions in Korea as well. So it's benefit -- the brand is benefiting from the good momentum of the market in Korea.

So overall, I think that the evolution are really linked to the maturity of the brand, the maturity of the network to different factors. But obviously, what I can say is that I'm not concerned at all by the performance of our brands in Asia.

All the brands are performing very well, including in jewelry, for example. This is a new territory for many of our brands, but we have a very strong figures with Boucheron.

And even Qeelin is positive for the whole semester, thanks to its performance in China. As I told you now coming back to your question to about tourism, last year globally in Q3, but it was more or less the same in Q2 at the end of the day, but probably slightly lower.

But in Q3, we had a peak at 70% of the sales in Europe to tourists whatever the nationality, why it was probably between 60% and 65% in Q2. So clearly, Q3 is a very strong month for tourism with all nationalities, Middle Eastern, Russian, American, Chinese, Japanese and so on.

I have 3 questions, please. The first one on the nonrecurring charges of €319 million.

So €260 million are related to COVID and €60 million are not related to COVID. Could you give us a split a bit of what was COVID related between maybe inventory, store impairment, intangibles and what brands and regions?

I may have missed that, Jean-Marc, I'm sorry. And within the €60 million that are not COVID related, what was that, please?

And the second question is a comment that Jean-François made on the financial discipline. When we think about the losses at some of the other Luxury Houses, obviously, there's pluses and minus there.

You and some of your French and Swiss peers have struggled to develop smaller brands over the year. Does COVID change your appetite for keeping these brands in the portfolio?

I'm thinking the watch and jewelry brand and maybe Brioni. And just finally, on the strong numbers you gave for online that you kindly shared with us.

Has the internalization from YNAP had any impact in June, positive or negative? Or is it all about H2 execution now at the non-Gucci brands?

Thank you, Thomas. As you can imagine, I won't let Jean-François answer about the nonrecurring items, it's my job.

So when we say directly or indirectly linked to COVID, I will be very specific in the sense that, as you may have read, there was a clear guidance of accounting regulators to say that COVID-19 should be considered as a triggering event for impairment. And in the €260 million that we have mentioned connected to COVID-19, €246 million are linked to impairment charge.

This impairment charge is concerning only the watches brand and Brioni, which is not really a surprise concerning the situation of this brand. And these are principally an asset impairment.

So brands and some tangible assets and right of use and there is no depreciation at all of inventories to make the bridge between €246 million, which is really an impairment charge, and clearly, with a strict application of impairment test. And the €260 million, the difference is €14 million, corresponding to specific donations linked to the COVID-19.

It means that, in other words, also depreciation of receivables, inventories that could be linked to COVID-19. All the extra charges, expenses linked to the purchase of masks, the purchase of gel, the purchase of gloves in our stores for our sales associates, for employees are in the EBIT of the group.

So now what's the difference between €320 million and €260 million, €60 million, you have among this, approximately €30 million of restructuring in the watches brand. So depreciation of assets and some other elements, some of them of inventories but it's linked to our restructuring concerning the complete change and the complete revamping of the business model of the watches brand, which means that to be very clear and rebounding on one question we had at the beginning from Antoine, there is no depreciation of inventories in the nonrecurring items.

Thomas, regarding the brands that you mentioned, we -- it is true that these brands, because of their size and because they are more exposed to more mature countries where the cost -- the fixed cost base is higher, they had their EBIT line under duress during this half year. Nevertheless, we think that they have their place in our portfolio of brands, and we are quite confident that when the environment stabilizes, they will have a decent growth pattern, and they will come quickly to -- back to profitability.

And about your last question, we have mentioned the fact that we have internalized the Chinese operations, the online Chinese operations for McQueen and Saint Laurent in late in June. So you can imagine the impact on Q2, also considering that in this region, we are just starting the business or we are not a significant business so far.

It's not enough to impact the performance of Q2 and it will be rather along H2 with the gradual internalization of the brands as clearly described by Jean-François that we may see some impact and some -- what we expect and what we have in mind, an acceleration and improvement of the online business of our brands.

Thank you, everyone, for joining us on the call today and for your questions. In these very trying times, we are grateful for the work we have done over the past years, which has enabled us to face this crisis in a position of strength.

We are mindful of all who are impacted by the events surrounding us. We appreciate your interest in Kering and look forward to pursuing our conversations.

In the meantime, we wish you a nice evening, a nice summer and above all, continued health. Goodbye.