LVMH Moët Hennessy - Louis Vuitton, Société Européenne

Hello. I'm Chris Hollis, Director of Financial Communications at LVMH, and with me is Jean-Jacques Guiony, Chief Financial Officer.

Thank you for joining us. As always, we have some brief remarks to make about LVMH's revenue for the first quarter of 2012.

Consistent with previous practice, these revenue figures are recorded in accordance with IFRS. After these remarks, Jean-Jacques and I will be happy to take your questions.

I must remind you that certain information to be discussed for today's call is forward-looking and is subject upon risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the Safe Harbor statements included in our press release.

As always, the release is available in both French and English on LVMH's website, www.lvmh.com, as all the slides that we're using to guide today's conversation. With that, I'll begin.

So as you -- on Slide 2, as you heard, Bernard and I mentioned at our AGM earlier this month the first quarter has been another positive for the Group. In fact, we saw a better performance in Q1 compared to the fourth quarter of last year, which was itself a strong period of revenue growth.

LVMH once again delivered strong double-digit organic revenue growth in Q1, which was fueled by number of sources, including the continued excellent performance of Louis Vuitton, driven by the enduring excitement about the brand and the innovation which supports it. It's also driven by revenue gains across all key regions.

The U.S. and Asia were both excellent contributors.

Japan performed well as we passed the anniversary of last year's terrible earthquake. And in spite of the mixed trends across Europe, the Group saw a steady growth in this region, too.

We also saw a positive currency impact in the period, reflecting the strength of the dollar against the euro compared to last year. With that, let's now turn to the specifics, starting with Slide 3, which is looking at revenue for the Group for the first quarter.

Total revenue rose 25% on a reported basis to EUR 6.6 billion from EUR 5.25 billion in the year-ago period. This reflects a 14% rise in organic revenue and a 4% positive currency impact and a 7% perimeter increase mainly due to the addition of Bulgari, which we consolidated in the Group in the middle of last year.

This is particularly encouraging as it comes on top of the group's 14% rise in organic revenue in the last year's first quarter. As you know, having a balanced geographic mix is essential to our strategy and has served us well for many years.

This is reflected in the breakdown you see on Slide 4. To quickly go through this breakdown, Europe, including France, was 29% of revenue and has given up 1% to Asia, which, including Japan, now represents 39% of revenue.

It should be noted that the relative weight of Asia is a little higher this time of the year due to the impact of Chinese New Year. Finally, the U.S., including Hawaii, as well as the rest of the world, represents 32% of revenues, stable compared to last year.

Now for the change in revenue by region compared to last year's first quarter, in local currencies and on a same-structure basis, which is on Slide 5, the first thing to note is that we recorded double-digit growth in all the regions. Asia saw a 17% rise in revenue, coming on top of a 24% rise in the year-ago quarter.

The U.S., including Hawaii, was up 16%. Europe was up 10%, and Japan was up 12%, making a recovery from being down 9% last year due to the impact of the earthquake.

Given the enormity of the event in Japan, the business there rebounded faster than expected, which is testament to both the resilience of the Japanese people and the commitment of our teams on the ground, whose dedication enabled us to stabilize and grow the business in spite of the challenging events. Moving on, I'll break down our revenue by business group.

I will start, as always, with Wines & Spirits, which had a very strong quarter, as you can see on Slide 6. Organic revenue rose 16% in the period, coming on top of a 17% rise last year.

Total revenue in this business group rose to EUR 926 million from the EUR 762 million in the first quarter last year. This marks a 22% gain on a reported basis and includes a strong organic revenue growth of 16%, as well as a positive 6% currency impact.

Breaking this down, Champagne & Wines saw a 12% gain in reported revenue, EUR 349 million over the EUR 311 million in the year-ago period, now represents a 9% increase in organic revenue and a positive 3% currency impact. Cognac & Spirits saw a 28% gain in reported revenue of EUR 577 million compared to the EUR 451 million in the year-ago first quarter.

This represents a 21% organic revenue growth increase and a 7% positive currency impact. Turning to Slide 6, looking first at revenue by region in this business, in local currencies, you can see that most of the gains came from Asia, which was up a strong 24%.

Japan, again, reflecting the recovery, was up 25%. And Europe was up 16%.

Looking at the Champagnes & Wines business first, specifically, volumes in Champagnes were up 5% in the quarter, which is traditionally the smallest quarter in the year for this business. As I mentioned, there was solid performance, both from Europe and Asia, and there were continued progress in the brand's Prestige cuvées.

We also implemented price increases across our main regions in March for our champagne brands. I should also note that it was a very good start -- also a good start to the year for our Wines, especially the higher-end ones.

For Cognac & Spirits, Hennessy volumes were up 9% and all qualities performed well in the period. We also saw a strong positive impact from price increases in this business.

The growth trend Hennessy had been experiencing in China continued. For the growth -- for the group's other spirits, there was strong volume growth in the period, driven by the higher-end products from Glenmorangie, Ardbeg and Belvedere.

This is a quarter which is impacted by many factors, most notably the timing of Chinese New Year, the restocking and destocking following the previous year's fourth quarter demand and the price increases that are usually implemented during the quarter. As a result, it is generally considered a volatile quarter.

Having said that, we are pleased with the numbers and are satisfied with the stock levels and the depletions that we have seen to date. Now for Fashion & Leather Goods, which was once again a strong performer, this business saw a 17% increase in reported revenues, rising to EUR 2.4 billion from EUR 2 billion in last year's first quarter.

This includes a 12% increase in organic revenue on top of the 13% rise in last year's first quarter and a 5% positive currency impact. Looking at the highlights in this business group on Slide 9, the main growth regions were the U.S., up 18%; Europe, up 12%; and Japan, up 11%.

So good, robust growth reflecting the diversity of our clientele and their sustained ongoing desire for our brands in all major regions around the world. This is, of course, particularly true for Louis Vuitton.

We saw double-digit revenue growth in the period, driven, as always, by the combination of craftsmanship, creativity and innovation that is its hallmark. This is evidenced in some of the key successes in the period, such as the historic Monogram and Damier lines continuing to be top sellers due to their enduring appeal, as well as the addition of 15 new colors to the Epi line, which also drove considerable demand.

The brand also continues to be celebrated by the fashion and design world, including a new exhibit showing right now in Paris titled Louis Vuitton Marc Jacobs at Les Arts Décoratifs, which has been widely publicized and acclaimed. If you've not seen it, I encourage you to do so.

It runs through September 16. Louis Vuitton also continues to selectively enhance its store network to be an exceptional showcase for its product.

One stunning example is the opening earlier this year of its first Italian maison in Rome. It's the brand's 14th maison, and it's built on the site of the iconic Etoile, Rome's first movie theater, and was designed to reflect the heritage of its site and of Italian cinema.

The other fashion brands also continue to show good progress. Fendi is a good example of this as is Donna Karan.

And some are performing exceptionally well, most notably Céline, which has become a revered fashion industry leader in just a short time under the creative direction of Phoebe Philo. Now moving on to Perfumes & Cosmetics, revenue reached -- this is Slide 10, revenue reached EUR 899 million, up 12% on a reported basis from EUR 803 million in the year-ago first quarter.

This includes a 9% rise in organic revenue on top of an 11% rise in the same period last year, as well as a 3% currency impact. To give you some more detail, in local currencies, revenue in the Perfumes & Cosmetics business is up 15% in Asia and up 27% in the U.S.

As you know, growth in this business across our iconic brands is driven by a combination of the enduring appeal of historic products, new launches that generate excitement and marketing that reflects the exceptional quality and innovation behind our products. Reflecting this, Parfums Christian Dior, our largest brand, continued its momentum, driven by its perennial leader, J’adore, Dior, as well as Miss Dior and Dior Homme fragrances.

In U.K., in particular, it was also a good performer. Guerlain saw the successful launch of La Petite Robe Noire perfume, while its Orchidée Impériale skincare line continued to deliver a solid performance.

Parfums Givenchy, the advertising campaign for Very Irresistible Electric Rose featuring the actress Liv Tyler has been very well received. Kenzo recently launched Kenzo Homme Sport in Europe, extending the reach and presence of the iconic Kenzo brand.

Finally, this business saw a continued strong momentum from Benefit and Make Up For Ever. Now turning to our Watches & Jewelry business, Slide 12.

Revenue in this group rose to EUR 630 million from EUR 261 million in the third quarter last year. This, of course, reflects the addition of Bulgari to our business, which we began consolidating as of June 30, 2011.

Excluding the impact of Bulgari, organic revenue increased 17%, which comes on top of a 20% rise in the third quarter of last year, and continues a stream of positive growth for the group's Watch & Jewelry brands. This is now, of course, being augmented with the addition of Bulgari, which is also performing strongly.

The reported results in this business group also reflect a 5% favorable currency impact. To give some more detail, Europe experienced the strongest growth at 29%, followed by Japan at 21%, Asia at 18% and U.S.

at 12%. Combined, the Geneva/Baselworld [indiscernible] resulted in record orders for all of our watch brands, reflecting the compelling attraction of our timepieces to a discerning trade audience.

And while we continue industrial integration, there is sustained excitement and momentum across all of our Watch & Jewelry lines. TAG Heuer introduced LINK Lady with its new brand ambassador, Cameron Diaz, in a partnership that will also serve to benefit a number of programs that helps empower women.

Hublot has continued success for its Classic Fusion line and introduced about new watches and its new in-house alloy, Magic Gold. Zenith also continues its success for its classic El Primero Open model and introduced a new watch by Pilot Aéronef.

Bulgari had robust growth in all categories around the world. Its Serpenti jewelry collection was particularly successful.

And they introduced the Octo Maserati and the Diagono ceramic watches, above all, which were very well received. And Chaumet and Fred both experienced double-digit growth.

Finally, the Selective Retailing business continued its outstanding performance. This is Slide 14.

On a reported basis, revenue is up 28% in the period, rising to EUR 1.8 billion from EUR 1.4 billion in the year-ago period. This reflects an 18% rise in organic revenue on top of a 17% gain last year, as well as a 4% currency impact and a 6% perimeter impact due to the consolidation of Ile de Beauté since June 2011.

Similar to last year, in the first quarter, Asia showed the strongest growth, with revenue up 26%, followed by the U.S. at 18% and Europe at 10%.

All on Slide 15. As DFS expanded its product offerings and services for customers, we see strong momentum continue in the flow of tourists, especially to Asian destinations, which resulted in excellent performance in Hong Kong, Macau and Singapore.

Before the end of this year, Hysan Hong Kong Galleria will open to further solidify our presence in the region. Sephora has continued to deliver solid comparable store growth and revenue growth, resulting in market share gains in all regions.

Here are some highlights. Sephora recently opened -- began opening stores in Mexico and will soon expand its Latin American presence, with new brick-and-mortar locations in Brazil, where it already has an online presence through LVMH's acquisition of Sack's in 2010.

Later this year, it will open its first store in Scandinavia and other new markets. Sephora.com has continued to experience rapid growth due to its position as a premier source of offering beauty on the Web.

And overall, Sephora continues to position itself for leadership in the prestige beauty sector through both its selection of brands and the information and innovative services it offers clients, which continue to describe the store performance. To wrap up then, the year is off to a very good start with strong demand across all our business groups.

While the uncertainty in the European economic environment improves, we'll continue to focus on executing the core strategies that have always driven our success, the commitment to innovation and quality products driven by currencies and entrepreneurial teams and selective store network expansion in key markets. As we do this, we'll continue to tightly control our costs in order to maximize productivity and profitability.

Taken together, we expect these strategies to increase our leadership in the global high-quality products market. So with that, Jean-Jacques and I are ready for your questions, and I'll pass it back to Stephanie.

I have 3 questions. First, Europe obviously had a nice rebound in the first quarter, and I was wondering if you could talk a little bit more about the regional complexion there and if it was driven more by stronger tourist spending in the first quarter relative to the fourth quarter.

And do you think, perhaps, some of the slower trends that we've been seeing out of China could be attributed to more Chinese spending abroad, just given the more favorable currency dynamics? And secondly, just on Sephora, I know the China business there is slightly above breakeven now.

I was wondering if you could give us, perhaps, a sense of timing on when China could become potentially as profitable as the U.S. and France businesses and if you could provide the Sephora comps for the U.S., Europe and China.

Okay. So on the Europe rebound, I think 2 main factors there.

One, you mentioned is tourist flows, which have proven extremely strong throughout the quarter. They were already strong in the first quarter of the year, but the first quarter which coincides with Chinese New Year was particularly strong, so it explains part of the rebound.

I would say that secondly, in Q4, as you may remember, we had some one-offs last year due to the comparison base with the same period, Q4 of 2010, particularly in the yacht business. We had big transactions in the fourth quarter of 2010 which did not replicate in 2011 and therefore, weigh on the total performance of Europe.

Obviously, the first quarter of 2012 is not affected by that. That's the 2 main reasons for the rebound you mentioned in Europe.

As far as Sephora is concerned, as you said, I mean, the business is roughly breaking even, or be slightly positive. And when you talk about 10 to 12 years for France and for the U.S.

to reach the type of profitability they have today, we opened China 5 or 6 years ago, so I would anticipate that within 5 or 6 years, we should be in a position to show similar type of margins as the ones we have in Europe or in the U.S.

I have 2 questions, please. First of all, could you give us more color about the price increases that you passed on for the Champagne and the Cognac businesses?

And maybe is there some trends -- some different trends by region? This was my first question.

And my second question was about the Fashion & Leather Good business. Could you give us more information about the shelf growth in Asia x Pacific?

Because it seems that maybe we could have slight deceleration there, just to see if it's correct or not and how things -- what were the trends in Asia-Pacific and Asia-Pan in Q1?

Okay. So on price increases in Cognac and Champagne, I will not be too specific for competitive reasons.

But what we implemented, as always, in the first part of the year are 3% to 4% type of price increases, across the board. What I mean by that is that it was implemented not only in Europe but in the same way in the U.S.

and in Asia. One exception to that, which is Moët et Chandon in the U.S., where we increased prices for Moët Imperial by about 15% as we thought that the positioning of the brand in the U.S.

justifies such a big price increase. Second question about Fashion & Leather growth in Asia.

The figure is around 10%, I would say. So it's a bit lower than what we're used to see.

We feel that it's mostly connected with the tourist flows, which went predominantly to Europe. Due to currencies, price differential are extremely high these days in between Asia and Europe.

And we had a shift in the business from Asia to Europe, so that's the main reason for this.

And could you tell us what is the price difference today between Asia and Europe, more or less?

I can only comment on Vuitton. But Vuitton is showing 45%, 47% premium to French prices in mainland China, for instance, and about 30% when it comes to other countries in Asia.

An important factor to bear in mind is that due to the recent weakness in the yen compared to the dollar, yen prices are actually lower than what they are in most countries in Asia, which means that the tendency for Japanese customer in Asia to buy Louis Vuitton goods is much lower than what it is. It's as high as ever in Europe, but it's lower when it comes to Asia.

Just a couple of questions, if I may. First of all, is it possible to give some indication on pricing at Vuitton over the last -- that you've had in the first quarter?

And secondly, coming back to tourism, and I think you traditionally said around 50% of European sales come from tourists. Given the sort of big shift that we've had, is that an increase to the percentage?

I think with also China expected to be around 30%, so if it's possible to give an update on that, it would be great.

Okay. Pricing at LV in Q1, with the normal price increases mostly in Europe, we have not taken any action anywhere else, so it's in Europe 2.5% to 3%, and that's all.

As far as tourism is concerned, yes, we mentioned a 50% share at Vuitton, it's only at Vuitton, of tourist business in a percentage of total. The rise in tourism business has been higher than the rise in domestic customer base, so its proportion has increased to some extent but not in a very spectacular way.

Three questions, please. The first one on Fashion & Leather.

When you talked, Jean-Jacques, about a shift from Asia to Europe, I mean, it's quite a big shift. Are you thinking of a more structural shift, or is it just temporary?

I didn't quite understand that. Secondly, on Cognac, what was the timing and the magnitude of the price increase?

The 3%, 4%, was it a comment just on Champagne, or is it also for Cognac? Because it looks like it was probably stronger on Cognac.

And can you remind us what was the timing and the magnitude of the price increase in Cognac last year? Was it in the same quarter or later?

And finally, on M&A, could you just remind us the stake you have in Hermès today? And do you have any comments on last night's surprising press speculation that you might be interested to enter the German perfumery channel with Douglas?

Okay. Well, the shift I'm mentioning is something that we've seen in Q1.

We don't expect, obviously, this to be permanent. It's mainly connected with price differential that are above our normal target and obviously causing customers to shift their purchases when they have the ability to do so from mainland China, from Asia into Europe.

The decision -- no decision have been taken yet as to what we should be doing with the price structure. Obviously, we are very much in a wait and see attitude in this respect.

And should the franks and the dollar, for instance, do not stay where it is today, obviously, the price structure would be affected if the dollar was to be softer. So I'm not saying that we anticipate the dollar to be softer, but anything could happen on the currency font and things could come back to a more normal structure in terms of prices, particularly if the currencies were to move.

But by no means do we feel that this is a permanent move. As far as Cognac price are concerned, the comment I made is on both Champagne and Cognac.

So we had prices -- price increases for Cognac in the U.S., which is something that we haven't seen for quite a while, and in China, just to mention the 2 most important areas for the Cognac business. On the M&A front, Hermès, no change in the position that we have in the company.

And Douglas are in this market with more, and we don't comment market remorse.

Could I ask a couple of questions, please? Firstly, could you give us the U.S.

performance in Wines & Spirits for the quarter? Secondly, could you talk about the exit rates in Fashion & Leather?

What was the performance in March and in early April, please?

Sorry, I didn't catch your second question. Which rates...

The exit rates of Fashion & Leather organic growth through the course in March and early April, if you can comment on that as well?

I'm sorry, I don't get your question.

What do you mean by exit rates? Sorry, we're...

The exit, the trading, your organic growth rate. Maybe you could just talk about the pattern through the quarter and if you have any comments on early April.

Okay. So let's start with Wines & Spirits in the U.S.

We are slightly positive in the U.S. in Q1, with Champagne being a bit down.

I already mentioned a big shift in prices, a big push in prices at Moët, which is our biggest brand in Asia. Obviously, we made sure before the price increase, which was implemented early March, not to sell, how can I say the full year before the price increase.

So we retained volumes ahead of price increases. But obviously, this is a soft period in the year.

With such a big price increase, we have a very soft business in March, and we may expect for the next couple of months to have a very soft business at Moët. It will take a little bit of time for our customers to get used to the new pricing structure.

Otherwise, Cognac & Spirits were pretty good, had a good quarter in the U.S. Nevertheless, bear in mind that the first quarter, as I always say, is not the easiest to read, particularly in the U.S., due to these price increases being implemented in the 1st of March and distributors trying to buy before and we, trying to sell after the price increase, obviously.

On the Fashion & Leather, I mean, you're asking a very precise question. That's through the March growth in the U.S., so I find it pretty difficult to answer to that.

For the -- you have the figure for the full quarter, which were pretty strong, I have no reason to feel that March figures were any weaker compared to that, so I think we were in line.

I was wondering whether you could give us Perfume & Cosmetics in Europe -- sorry, whether you could also make a further comment on Fashion & Leather Goods in general, which, I believe, came in lower than expected, so even despite the transfer that you're referring to into Europe from Asia-Pacific, whether you are seeing some region being weaker than expected and to explain the deceleration from plus 16 to plus 12. And thirdly, whether you can actually share with us your depletions on Wines & Spirits, because you did comment that there was a selling effect, or how is the sellout looking like?

Okay. Well, Perfume & Cosmetic is slightly positive in Europe.

Fashion & Leather, I'd like to comment on the deceleration that -- I mean, 12% growth for this business in Q1 -- remember that in Q1 last year, we had 13% growth, so it's not very dissimilar. I don't view this as a deceleration, so I cannot really comment on what I think is a pretty strong performance for the business.

Depletions, I can give you the figures, but they are not particularly easy to read because of the price increase I mentioned. I mean, a lot of purchases were made by end customers, so basically the trade to the distributors prior to this price increase.

So traditionally, in February, we have very high depletions. And traditionally, in March, when we increase prices on the 1st of March that we normally do, we have very weak depletions.

So it is exactly what happened. So overall, the trend is not too bad or at its worse.

Again, it's very difficult to read. We are slightly positive for Champagne despite the various movements I mentioned.

And we are quite positive -- I mean, double-digit positive for Cognac in the first quarter of the year. That's for the U.S., obviously.

For China, we are, in volumes, double-digit growth.

But so your comment that the inventory level is satisfactory. How do you assess this if you can't base it on the depletion trend?

I'm sorry, I missed your question.

You commented during your presentation that the inventory level was satisfactory. So how do you assess this if you said depletion is round [ph] to read at that precise point in time?

Well, the inventory level is a fact. We know that it has to be below a certain threshold.

And it is below this threshold everywhere basically, so we have no particular worry that in coming months, selling would -- or sellout will be mature than selling due to the level of inventory. So the level of inventory is no source of concern at this point in the year.

A couple of questions for me, please. First of all, with regards to the record orders that you talked around at Baselworld, could you maybe give us some additional color on the order books, especially for TAG and for Bulgari?

And my second question, just around the comments that Mr. Hollande has been talking about increasing the tax on luxury goods in France from 19% to 30%.

Have you got a view on that, please?

Okay. Order book is a very difficult question on watches for both brands, particularly at TAG where Baselworld and Geneva are not that important.

I mean, it's much more important for Zenith and Hublot. So the order book is okay, given the francs, the orders that we took at both fairs, but it lacks significance for the big brands and particularly for Bulgari and for TAG Heuer.

As far as taxes are concerned, I think the comment made yesterday were a bit confused, I would say. My understanding -- I mean, our understanding is that there is no such thing as a high level of VAT.

I mean, either you are to reduce rate or to normal rate. So there is no such thing as a high level of VAT.

So we hardly see how this could be implemented. And even Mr.

Hollande was pretty cautious when saying that's something that we might be looking at, but he's not sure that it makes any sense. So we are not -- at this point in time, we are not particularly concerned with this move.

I just have -- actually, just one question, actually. So it's a similar question to the question on Wines & Spirits but just on Watches & Jewelry in terms of if you can give us any color on sell-in versus sellout because I think it rather is interesting that your numbers were a fast year-on-year growth rate in Q1 than it was in Q4.

I wonder if you have any color on what inventory levels are like for Watches & Jewelry?

Well, the Q1 in Watches & Jewelry is traditionally a quarter where selling is higher than sellout because we deplete -- I mean, distributors deplete inventories at the Christmas season, and they replenish inventory in Q1. So traditionally, our level of sell-in is higher than the sellout in this period of the year, which is kind of quiet from a business viewpoint.

So this year is no exception to that. Nevertheless, the sellout figures that we monitor is not always easy, but the sellout figures that we monitor are pretty good and not that far away from sell-in figures.

So we think we have a normal replenishment of stocks, but the level of inventories within the trade, be it in the U.S. or in Europe, are at a normal level.

One simple question for me. Given the special figures in Japan, I was wondering if you could tell us how much Japan accounted for global sales of Louis Vuitton brand in Q1?

And am I correct to assume that the Louis Vuitton brand grew in line of the 12% growth for total group in Japan in Q1?

Sorry. I was -- so it's Vuitton, let me check the figure, I don't have it in mind.

Chris?

It's 15%.

Mainland Japan, I would say, domestic sales in Japan -- and sorry, while looking at this, I missed the second part of your question.

No, it's just -- Jean-Jacques, the Louis Vuitton brand grew more or less in line of the 12% reported for the total group level?

It's a bit below.

Two questions for me, please. First one is with regards to Bulgari, I was wondering if you can provide us some data regarding the performance of the business on a standalone basis?

I'm guessing it's not included in the 17% organic growth, which I guess is your, I guess, e-business, I mean, pre-existing Watches & Jewelry. Can you comment on how the brand has fared if you compare it to the Q1 before you owned it?

And secondly, I was wondering if -- coming back on the volumes of Wines & Spirits, your stance has been pretty consistently that volume growth is under-constrained due to, let's say, reduced capacity. And I was wondering if you could give us a little more color on this matter.

After Q1, that's a surprise, favorably in terms of the volumes, Cognac growing 9% in volume and Champagne 5%. It's rather above what we had in mind, so can you comment if this is something that is sustainable actually or if it's really special for this quarter?

Okay. Bulgari Q1, the division is 17%, as you said.

I mean, Bulgari figures are not included in the division's organic growth figures. Bulgari figures are a bit below that but not very far away.

As far as growth in volumes in Wines & Spirits is concerned, I think as far as Champagne is concerned, the 5% we had in Champagne is sustainable. I'm not saying that we will obviously do it, but it's sustainable from an inventory viewpoint.

The 9% for Cognac would be stretched from an inventory viewpoint, but I don't think that it's really sustainable for the rest of the year. We should end up the year with a lower figure than this, in my view.

Just 2 questions to finish up with them, please. Firstly, just on Wines & Spirits, just going back onto the prior question.

I know, Chris, you highlighted about 3 or 4 reasons why Q1 is so volatile. Can you just give us any idea in terms of the pricing impact and the pulling forward of orders just to give us a bit more of color of growth going forward throughout the year?

And then secondly, just in terms of China, there's been lots of talk about gift-giving and potential pullback in expensive items. Do you see any risk with Cognac or the other brands across the group?

Okay. On Wines & Spirits, I mentioned the magnitude of price increases for 2012.

The big impact will come from the full year impact of price increases passed on to customers in 2011 already. So we expect for both -- for Champagne to have something like 3% throughout the year.

When we get the anniversary of last year's increase, we should have the impact of this year's increase. So roughly speaking, we should have 3% throughout the year.

As far as Cognac is concerned, it's a bit more complex, and it depends whether we'll be implemented -- or we'll be implementing or not further price increases in the rest of the year, so it's hard to say for the time being. The impact of prices in Cognac is a mid-single-digit figure, and we would expect that -- to get that for a significant part of the year, with fading away in the latter part of the year.

And the gifting in Cognac, no, we don't expect this to have a significant impact. I mean, the gifting issue in China is, in our view, more geared towards, as you said, expensive items, so not necessarily what we do in China.

The bulk of our business is Wines & Spirits, Vuitton and Dior, so we don't feel particularly concerned with the [indiscernible] being on the gifting business in China.

First question will be on Sephora. Could you give us the like-for-like for both the United States and Europe?

And the second question will be on the Fashion & Leather Goods. Obviously, you mentioned that the travel retail grew significantly.

But could you give us a flavor on the overall trend for the local demand, mostly in Europe, once again, for the Fashion & Leather Goods?

Sephora like-for-like is 14% in the U.S. and 5% in Europe.

So overall, that's about 10%, so it's a pretty strong figure. As far as Fashion & Leather, obviously, we cannot answer for the whole division as we have a variety of situation, including wholesale, license, et cetera, so it's impossible to answer.

As far as Vuitton is concerned, we have a contrasted situation with North Europe, including France, local customers been growing, but South Europe, mainly Spain, Italy and Greece being quite negative. So overall, we have a slight growth in the domestic business, in domestic demand in Europe.

And the bulk of the growth obviously in Europe comes from touristic flows. As far as Asia is concerned, we have a double-digit growth in the demand from Chinese customers, although as we mentioned before, a shift occurred from Mainland China to other parts of the world.

Some areas in Asia were pretty soft like Taiwan and Korea, for instance, from the point of view of local demand. And finally, the business made with Japanese customers was also up double digit.

Locally, we were up, but the bulk of it took place also in -- outside Japan. So if you look at Vuitton, for instance, in terms of local demand, the 3 main client base, American, Japanese and Chinese, are growing double digit in the first quarter of the year.

Locally, what's local sales?

No, I'm talking about global demand, local demand, whether they are buying at home or buying outside of [indiscernible].

I have 2 questions, one on the Cosmetics division and the other on Selective Retailing. On Cosmetics, the U.S.

shipment growth of 27%, which is sell-in, our data shows that consumer takeaway was more around 18%. If you can explain the disconnect between these 2 figures.

Shall we expect yourselves in the U.S. to accelerate, I mean, retail sales to accelerate in the second quarter, or shall we see shipments to trail retail sales in the U.S.

because of the pipeline fill that seems to be happening in the first quarter? And the second question has to do with the travel retail channel.

It seems like, from what I understood earlier in the call, Sephora organic growth was 10%, so that means that DFS grew well ahead of that. And whether that means that you are gaining share, or is it that the channel is accelerating?

And if you can comment what are your expectations for travel retail growth going into the second quarter, that would be excellent.

Okay. U.S., well, first of all, I cannot confirm the sellout figure of 18%.

As of today, I don't have the figure at the end of March, so I cannot really confirm. The first 2 months were pretty strong.

They were higher than that, but I don't have the figure at the end of March. I would make the same comment as the one I made on Watches & Jewelry in the U.S.

I mean, globally, but it's very true in the U.S., the first quarter of the year is replenishment, inventory replenishment quarter, and traditionally, sell-in is higher than sellout in the first quarter of the year. But we see very, very good demand, as shown in Sephora with the figure of 14% like-for-like growth, so we see very strong demand for Cosmetics in the U.S.

And our brands are benefiting from that both in sell-in and sellouts. But I wouldn't mention abnormal level of stock replenishment.

We are doing business as usual there. As far as travel retail is concerned, I should be more precise on the figures.

The 10% figure I mentioned for Sephora is not organic. It is like-for-like.

You have to add up to that the opening of stores to end up with organic figures. Organic share growth for Sephora in the first quarter of the year was pretty close to the average for the division.

So the travel retail business is also, by definition, pretty close to the average for the division, which are very strong figures.

First, I wanted to ask -- you mentioned online sales being particularly strong in Sephora. Can you comment on the other divisions then maybe give us some color on what you're doing as far as trying to grow the online sales and how important you think this could become?

And then my second question is just on the Watches & Jewelry division. Could you comment on the inventory cycle length and when the costs -- what time -- the timing of the flow of cost of goods into the actual product that you're selling?

I know some of the other companies have quite long inventory cycles.

Right. On the online sales, the bulk of our business takes place at Sephora, where we have the largest business there.

So both at Sephora and Sack's, as Chris mentioned before. For the rest of the group, it's a growing channel.

We cannot really elaborate on our strategies there. I mean, they are quite confidential, but we feel that it's important to be involved on the Internet and on the various channels on the Internet.

We are growing these segments pretty fast, both as a selling tool and as a marketing tool, which both dimensions are extremely important when it comes to online business. As far as Watches & Jewelry inventories are concerned, I mean, the answer is yes.

I mean, it's quite capital- or inventory-intensive business, as we all know. And so as far as the image is concerned, the integration of Bulgari is obviously having some impact on our overall level of inventories in the division.

It varies a lot. I mean, when comparing inventories to sales, for instance, it varies a lot from one segment to another.

For low- to medium-price or entry- to medium-price segments, the inventory intensity is not that high. But when it comes to high-end jewelry, obviously, we could have inventories which would count in a number of years of sales.

I have 2 follow-up questions, sorry. The first one is on mainland China for Louis Vuitton.

I understand the overall number is double digit for the Chinese consumer base. But could you give us Mainland China and the growth rates you've experienced in Mainland China and whether if you saw a slowdown, you've seen a reversal of the trend in March when the Chinese New Year was out of the equation?

And the second question is on the outlook in your release. You talked about targeted investments and focus on cost cutting.

I was wondering whether you had at all changed your CapEx expectations for this year and whether your cost-cutting focus was bigger than it was 3 months ago.

So the comment I made was on the growth for Chinese customer base buying it at home and buying internationally, which is double digit. But Mainland China sales are not double digits.

They are lower than that.

Could you tell us what they are and whether this reversed in March? That was exactly my question.

No, no, no. I mean, we normally don't disclose any figures on Vuitton.

I think it was pretty precise on all the trends at Vuitton. The big shift, as you know, were in January and February because Chinese New Year taking place 2 weeks before.

Obviously, the pattern was not the same in January and February. But overall, as I said, we had lower figures for Mainland China than we had for the whole Chinese customer base.

The outlook in our release, no, we have not changed our outlook. We think in the current environment, we have to be flexible, and that's what we mean by that.

Yes, a follow-up question, if I may, on the Louis Vuitton network. Could you give us the number of the Louis Vuitton store openings at the end of the first quarter 2012 versus 2011?

And the same number for just Mainland China, please.

No, we don't disclose the figures for Vuitton stores. While we had 2 opening, one in Rome and one in Japan, in Tokyo.

And we had a few closures, particularly of small stores in the U.S. The number is slightly below what it was at the end of last year.

As far as China is concerned, there is no change in the number of stores in the first quarter of the year.

Okay. So if there are no more questions, a few closing remarks.

While we are very pleased with reported figures, I mean, the environment is yet a bit more challenging than what it used to be, but our businesses and our business model help us to balance changing conditions. And I would like to highlight 2 or 3 key features of the quarter.

First of all, all our regions are growing double-digit in local currencies. I do not think it happened many times in the past.

Secondly, all our business -- or nearly all our businesses are growing double digit organically. And certainly, all key -- our Louis Vuitton clienteles are also growing double digit, Americans, Chinese and Japanese.

I think this exemplifies a bit what happened in Q1. So it's a great start for the year, which I think bodes well for the rest of the year.

Overall, no reason to be pessimistic, but at the same time, keeping flexibility and agility are the, in my view, the 2 keywords in any uncertain environment. So thank you for your attention.

That's all for today, and I look forward to discussing with you first half figures at the end of July. Thank you very much.

Bye.