LVMH Moët Hennessy - Louis Vuitton, Société Européenne

[Audio Gap] Jean-Jacques Guiony, our Chief Financial Officer. Thank you for joining us.

We have some remarks to make about LVMH's revenue for the first quarter of 2014. As in previous periods, these revenue figures are reported in accordance with IFRS, including recently implemented IFRS 10 and 11.

After these remarks, Jean-Jacques and I will be happy to take your questions. But before I begin, I must remind you that certain information to be discussed on today's call is forward-looking and subject to important risks and uncertainties that could cause actual results to differ materially.

For these, I refer you to the Safe Harbor statement included in our press release. Turning now to Q1 revenue.

Hopefully, you've all had the chance to read our release, which was issued yesterday in both French and English. As always, the release is available on LVMH's website, www.lvmh.com, as are the slides that we're using to guide today's conversation.

Starting with Slide 2. The group's performance in the first quarter reflected a positive start to the year despite an ongoing challenging environment in Europe.

Loro Piana was consolidated into revenue for the third time this quarter. There was also a negative currency impact due to the euro's strength, in particular against the yen and the dollar compared to last year.

Despite this, we delivered 6% organic revenue growth. Overall, our performance reflects ongoing progress in the U.S.

and Asia, with strong growth in Japan, due in part to the buying ahead of the April sales tax increase. And against some challenging backdrop in Europe, we are pleased to continue to demonstrate resilience in that region.

Now as for the business highlights. Louis Vuitton continued to build on its creative momentum, and the other fashion brands continued their development with exciting shows, new stores and new innovative products.

The following growth of the Selective Distribution businesses also contributed to the group's overall performance during the period; while the Wines & Spirits was impacted by the current destocking in China, which was in part offset by the brand's strong progress in the U.S. Turning to a more detailed snapshot of revenue for the group in the first quarter, Slide 3.

First of all, I should say that the 2013 figures have been restated to reflect the application of the IFRS 10 and 11 on consolidation. These IFRS redefined the concept of the control of entities, and so now jointly controlled entities are accounted for using the equity method.

You have more details on Page 126 of the document référence. In the 2014 first quarter, total revenue rose to EUR 7.2 billion, up 4% on a reported basis compared to the year-ago period.

This reflects the 6% rise in organic revenue that I previously mentioned, along with a 3% perimeter increase relating to the consolidation of Loro Piana, offset by a negative 5% currency impact. Our geographic revenue mix continues to be well balanced across regions, as you see on Slide 4.

In the first quarter in Europe, Asia, including Japan, represented 40% in revenue; Europe, including France, 27%; while the U.S. and others, 33%.

The weight of Asia is down 1% compared to last year, primarily due to the strength of the euro and the other markets were up 1%, while all the other regions remained similar to last year's first quarter. Turning now into the revenue, in terms of revenue -- in terms of organic revenue change by region compared to last year's first quarter.

Our revenue rose a significant 32% in Japan, due in part to the increased spending we saw prior to the implementation of the sales tax increase, which took effect on April 1. We saw a 4% increase in revenue in Asia, excluding Japan, which has been notably impacted by the current destocking in Cognac.

Dollar revenue in the U.S., excluding Hawaii, increased by 5%, while Europe was up 1%, demonstrating continued resilience in the still challenging environment. Looking now at revenue by business groups.

I'll start with the Wines & Spirits on Slide 6. Compared to last year's first quarter, organic revenue was down 3% for the quarter.

In addition, there was a negative 5% currency impact for a total revenue of EUR 888 million on a reported basis. By category, Champagne & Wines reported revenue of EUR 339 million, up, though only slightly, on a reported basis compared to last year's first quarter.

This represented an organic revenue growth of 7%, which was almost entirely offset by a negative 7% currency impact. Cognac & Spirits organic revenue declined 9% and was further impacted by a negative 4% currency impact, resulting in revenue of EUR 549 million compared to EUR 629 million in the year-ago first quarter.

A brief -- a bright spot for this group in the first quarter was the increase in champagne volumes, which were up 3% despite this traditionally being the smallest quarter of the year for this business. To give you some more color on our Champagne & Wines, we saw balanced growth across volume, price and mix and continued strong demand for Prestige cuvées.

We also saw a rapid progress in Japan by implemented price increases for sparkling and still wines in the first quarter. Turning to Cognac & Spirits.

Hennessy volumes were down 4%, impacted, as I mentioned, by the current destocking going on in China, which is affecting the higher-end cognacs in particular. While there are certain segments, such as the younger nightclubs or MAT [ph] that remained dynamic and demonstrate the future growth opportunity in this market.

We also saw solid momentum in the U.S. where volumes grew by double digit, both in sell-in and sell-out, as well as the continued strong growth -- volume growth in -- of other spirits.

Looking now at Fashion & Leather Goods. This business group was up a solid 9% on an organic basis.

On a reported basis, including a 7% positive perimeter impact relating to the acquisition of Loro Piana last year and a positive 5% negative currency impact, reported revenue was up 11% compared to last year's first quarter and reached EUR 2.64 billion. To give you some highlights of the quarter in this business, Louis Vuitton continued to demonstrate good progress, building on its creative momentum.

I will touch on a few highlights from the period. The brand launched new Monogram models such as the Montaigne, which has been very well received.

And the creativity of the brand is also exemplified in the ongoing development of its leather lines, notably the Parnassea. And last but not least, by any means, the first show of Nicolas Ghesquière received very positive reviews from media around the world, and there is much excitement about his designs and vision.

The Fashion & Leather Goods group performance also reflected positive development at a number of the other brands. Céline continues its targeted store network expansion, including a new London boutique; while Fendi, these leather goods enjoyed a strong success, opened its first store in Munich.

In several other brands, including Givenchy, Kenzo and Berluti continued their developments. As you know, we acquired Loro Piana last year.

We are pleased to report that the brand had a very strong start to the year in Q1 2014. Turning to our Perfumes & Cosmetics business group, Slide 10.

Revenue was up 5% on an organic basis. On a reported basis, revenue reached EUR 941 million, up 1%, after a 4% negative currency impact compared to the year-ago first quarter.

Looking at the highlights in this group. Parfums Christian Dior, we saw strong performance in its iconic J’adore and Miss Dior perfumes, with continued good progress of its Addict makeup line.

Dior Homme Cologne, launched a year ago, also continued to roll out in the first quarter. Guerlain also contributed to a positive performance in the first quarter through the lunch of La Petite Robe Noire Couture perfume and the solid momentum of its Abeille Royale skincare line.

Parfums Givenchy celebrated the first year of Gentlemen Only. Benefit continued to demonstrate strong momentum and opened its first French boutique in Paris during the first quarter.

And to finish up in this business group, both Fresh and Make Up For Ever are continuing to make rapid progress especially in Asia. Now looking at our Watches & Jewelry business group on Slide 12.

Organic revenue was up 5% in the period. Including, however, a negative 5% currency impact, reported revenue in this group was EUR 607 million, just about even with the first quarter of last year.

Taken together, consistent with the recent trends, the group's Watches & Jewelry brands continued to generate good performance, most notably from sales generated in their own stores where retail sales grew by double digit. That said, watch multi-brand retailers took a more cautious approach in the first quarter.

On the other hand, at the recent Basel watch fair, the brand's innovative new models were well received. Some examples are TAG's Monaco V4 Tourbillon; Hublot's Classic Fusion Firmament, which dial is made with the densest and rarest natural element, osmium; Zenith's El Primero lightweight being good examples.

The quarter also saw solid performance from our jewelry brands. To give you some more detail, Bulgari celebrated its 130th anniversary with the reopening of its emblematic Via dei Condotti store in Rome and the introduction of a new watch collection inspired by its Roman and jewelry roots.

Both are off to a good start. TAG Heuer opened a new store on Fifth Avenue in New York.

And Hublot, which continues to deliver strong performance, kicked off the new partnerships related to the upcoming World Cup in Brazil. Finally, the Selective Retailing group reported a strong 10% rise in organic revenue, on top of a 17% gain during last year's period.

This growth was partially offset by a 5% negative currency impact. Meaning that on a reported basis, rose -- sales rose by -- revenue rose by 5% to EUR 2.22 billion, up from EUR 2.11 billion in the year-ago period.

To give you some detail behind these numbers, DFS generated good performance in the U.S. where it benefited from renovation and expansion projects in its L.A.

and New York airport concessions. The brand also demonstrated continued strong momentum in Asia, particularly in Hong Kong and Macau.

The 3 Hong Kong international airport concessions were right from -- at the end of 2012 continued to be strong drivers of performance in the region. During the first quarter, DFS, after a creative proposal, also secured their renewal of a liquor and tobacco concession at Singapore's Changi Airport.

At the same time, spending by Japanese travelers was impacted by a weaker yen during the period. Sephora delivered further market share gains across all regions, sustaining its momentum in the Middle East, Asia and North America, where online sales have been strong.

And during the quarter, it rolled out Marc Jacobs makeup line in Europe, which outside Marc Jacobs stores is being sold exclusively by Sephora. So overall, with the exception of Cognac in China, all brands delivered good performances across the board in the first quarter, which is particularly encouraging in light of the ongoing economic uncertainty in Europe.

The group plans to continue to advance its objective of increasing our leadership position in the global high-quality products market by focusing on our commitment to innovation and quality products, which reflects the highest degree of craftsmanship and knowledge, and selective store network expansion in markets where we see good opportunities for our brands. Thank you.

And with that, I'll now take the questions that you might have.

I've got 2 question. The first one on Cognac.

Given some of your competitors are suggesting depletions around Chinese New Year in Q1 had been weak, including the -- in the lower price segment. Is it fair to say that destocking has been perhaps a bit slower than you would have expected?

Should we expect this Chinese trend for Hennessy to continue in the next few quarters? So something like probably minus strong double digit is probably was the case in China in Q1?

Secondly, on Louis Vuitton, I think we all need a bit of help here on understanding. On the one hand, Japan and the other region.

Firstly, on Japan. It looks difficult to imagine that a 3 percentage point tax hike could have had such a big effect in demand compared to the huge pricing that you have passed on over the last year.

Can you try to disassociate the impacts of that VAT tax hike from the pricing and tell us what pricing was placed also perhaps in Q1 this year in Japan? And on the other region, could you indicate what was fashion and leather in Asia, Europe and U.S.?

I know you don't like to give that, but it's probably useful for us given the distortion of Japan. And comment in those 3 regions on traffic conversion, and what are the pricing and mix effects.

All right. So let's start -- thank you, Thomas, for this important question.

So I will start with Cognac and I will try to summarize a little bit the situation on Cognac in China that we try all to get a good understanding of what's going on from both sell-in and sell-out viewpoint. Starting with sell-in, to understand the current trends, one, as you go back to last year's period in which, as you remember, unlike our competitors, we were actually replenishing inventories at our clients, basically the primary wholesalers.

At the time and we pointed out several times, we pointed this out several times, our sell-in numbers were significantly higher than our final clients' sell-out numbers. Today, we have the exact opposite, actually.

Our clients have been destocking for a while and continue to do so, and I will try to give you some perspective to that. Our sell-in numbers are, therefore, poor, not only they suffer from our clients' destocking, but they compare to unusually favorable numbers last year.

So hence, we have about a 30% drop in volumes in Cognac business sell-in in Q1. The trend is more or less the one that we anticipated.

The magnitude, particularly in X.O is probably a bit worse than what we thought. Nevertheless, we note that the inventory level are now with our client, with primary wholesalers.

The inventory levels are now pretty low. We are talking about a few -- I mean, 10, 15 days, something like that.

So they are pretty low. So we may expect a much lower, what I would call the double-squeeze impact, and the comparison basis will be different in the months to come because we will have had less replenishment of inventories last year in Q2.

And on top of that, there will be less destocking of inventory this year from our clients. So this double squeeze should progressively disappear.

So we expect Q2 to be under some pressure but not at the same magnitude. And probably the last quarter are fresher on our sell-in numbers in China.

That's for sell-in. As far as sell-out is concerned, where do we stand?

Actually, the situation is complex but, nevertheless, quite favorable. Let's start with the difficult part, which is X.O.

X.O, roughly speaking, on -- from a sell-out viewpoint is down about 20%. This obviously comes from the impact -- the remaining impact of the anti-extravagance measures being currently implemented in China.

It explains the bulk of the drop. If you can look at the other categories, V.S.O.P.

and V.S, I mean, what we call Classivm in China, we are slightly up for V.S.O.P. and strongly up for Classivm.

So we are pretty pleased with the business. Obviously, not all the segments will perform the same way.

Some segments are performing very well, like the modern on-trade and the off-trade to a certain extent. Some like the Chinese restaurants, for instance, are not doing well at all.

But all in all, a fairly lackluster performance for X.O but the rest of the business is doing fine. So overall, total sell-in figures are likely to remain under some pressure for the next few weeks, while underlying demand and sell-out numbers seem to be holding up reasonably well.

So that's the situation for Cognac. Your question about LV.

Well, the few things I can say on Vuitton, first of all, that the growth, as always, I mean, the growth in LV doesn't differ materially from the growth in the Fashion & Leather division. So that's the first point.

Secondly, as far as Japan is concerned, you've seen that the growth for the Japanese business for the group in Q1 was 32%. It's more or less the case for all businesses, all brands.

It's not unique to Fashion & Leather. It's the case for Watches.

It's the case for Perfume & Cosmetic, et cetera. We have definitely seen in Japan in Q1 a big upsurge in business, which origin at least partly comes from the fact that the tax consumption rate has increased actually on the -- as of the 2nd or the 1st of April, 1st of April.

So there' has been some impact. And definitely if you look at the Japanese business, which was growing 10% last year, it's growing 30% more or less this year.

Definitely, I don't know whether the bulk of the difference or all the difference or more than the difference is explained by this VAT situation. But definitely, it had some impact.

As far as LV is concerned, if we look at other geographies, the business in Europe was mid-single digits, as well as in the U.S. We had a business in Europe, which was affected, particularly, again, by the Japanese tourists, but also by other Asian nationality tourists, excluding the Chinese.

The Chinese did very well -- the Chinese tourists did very well in the first quarter of this year. But all of the other nationalities did poorly in Europe for Vuitton.

Hence, the fairly mid-single digit -- I mean, the mid-single-digit growth rate for Vuitton in Europe. The U.S.

is more or less the same. And Asia, excluding Japan, is close to double digit.

So we had a good business for Vuitton in the course of the quarter in Asia, particularly in China where we have the good business, not only, as I mentioned, with the tourists. But also domestically, we saw numbers that were higher than the one we had seen before.

Jean-Jacques, any notable price rise for Vuitton or for Cognac or any major business that you have touched on that you want to highlight?

That I want to highlight? No.

I mean, you know that the first quarter of the year is a quarter in which we implement the bulk of the price rises. We had a 6% or 7% price rise, price hike in Japan in the mid of February that you knew about.

There was 3% price increase in Cognac in the U.S. There was 3% more or less across the board for Vuitton in the mid of February as well.

I mean, there were normal price increases, I would say, in the course of the quarter.

You had talked about, for the Watches & Jewelry business, sales in owned stores versus the overall retail outlet. Can you speak also to -- for the Fashion & Leather Goods and for the Cosmetics, how sales performed at company-operated venues versus larger retail?

Yes. Well, it's fairly large question so I will try to make it short -- to make the answer short.

As far as Cosmetics are concerned, I mean, it's a very difficult question because the development of owned retail for Cosmetic is actually just starting. So basically if you compare a network, which is actually just starting with newly opened stores to existing network, the like for like -- I mean, the numbers are very difficult to compare.

So it's quite difficult. For Watches & Jewelry, where the network is more established, I would say that on average over the past few years, we've seen growth being higher in our own network than what it was with third-party retailers, particularly when it comes to Asia, but also it's true in the U.S.

The 2 comment I could make as far as Fashion & Leather is concerned, the dynamic is not exactly the one owned stores versus wholesalers because as for most of our brands, we are progressively retrenching from doing a lot of retail -- a lot of wholesale business. So the dynamic of the 2 is obviously entirely different.

Okay. But are you seeing at least in terms of where you've been changing the dynamic or the stores where you're still present seeing a benefit from that then?

Yes, of course. Yes, we do it because we think it's a better expression of the brand that we can sell more in a more profitable way and ensure better brand expression for the clients.

So it's really a combination of various factors. But definitely, this is something that makes sense.

It shouldn't be the only way to distribute our product but, nevertheless, something that makes sense.

First, can you perhaps elaborate on the slower trends that you're seeing in Asia x Japan, whether it was tied mainly to weakness in the wholesale channels, just from retailers being more conservative with orders, and then how inventory levels generally are trending there? And if the retail channel is still pretty robust in the region?

And then just secondly, on Sephora, can you provide perhaps the first quarter comps for the U.S., Europe and China, and then also talk about your store expansion plans for this year? And then just lastly, in Fashion & Leather Goods, can you give us an update on Céline?

What's sort of the growth strategy now between sort of ready-to-wear and leather goods, and sort of where you see the biggest opportunity for growth?

All right. So Asia, I'm not so sure where your question comes from actually.

So I will try to understand it by saying that you look at the numbers, it's 4% for the quarter, which is much lower than what we've shown in the past and to some extent show a slowing down. The reality is different.

I mean, the 4% that we show for the first quarter of the year is definitely impacted by the Wines & Spirits business. Without the Wines & Spirits business, we are double digit -- growing double digit in Asia.

So definitely, the Asian business in the first quarter of the year has proven extremely robust. It's very much the case for Fashion & Leather, as I said before.

I mentioned Vuitton. It's the case for Cosmetics, and it's the case for Selective Distribution where we have had very strong numbers.

The difference in this market between wholesale and retail, frankly, I could not really elaborate. The bulk of our fashion business goes through retail in this area.

And the bulk of our cosmetic business goes through wholesale in this area. So basically, these are different trends.

I cannot really comment. The number of Sephora, Chris, would you...

Yes. The comparable store growth for Sephora in the U.S.

is still double digits, around 10%. For China, it's a high single digit, almost at double digit and the Europe is low single digit.

Okay. And your third question on Céline, I will not elaborate a lot on this.

But I would say 2 or 3 things: One is that still today, Céline has a network, which is probably smaller, what I would say smaller than the brand, actually, or Céline would deserve a retail network which is bigger than the one they have today. Obviously, this isn't done in 5 minutes, and we need a little bit of time to deploy the network.

But definitely, the main strategy is to develop the retail network of Céline, so that's for -- in terms of distribution. As far as products are concerned, we are obviously very pleased with the handbag business we have with Céline.

But definitely, we feel that ready-to-wear and shoes, in particular, could be very strong contributor to growth in the future and a lot of emphasis will be put on these 2 categories in the years to come.

Yes. I have several questions, actually.

First of all, regarding Louis Vuitton, could you be a bit more precise regarding sales trends in China and to Chinese customers in Q1? And could you also say something about the new product launches that could be on the cards for Vuitton?

Second, seeing about Cognac. If I correctly understood, you indicated that volumes were down by 30% in China in Q1.

Could you tell us what was the sales trend in value? And also could you remind us your sales split between X.O, V.S.O.P.

and V.S in China? And last question, in the U.S., could you tell us a bit more about sales trends for the Cognac business in Q1, please?

Okay. I missed your question, Catherine.

Q1 trends.

Q1 trends in U.S., right?

For volume.

Yes, exactly, in Q1, in value and in volume, too.

All right. LV, let's start with China.

So the customers -- the Chinese customer altogether is growing about double digits, with high -- very high single digit domestically and double digits in local currency outside China, so a very strong business with the Chinese customers in the first half of the year. I will not really comment on new products.

I mean, this is something pretty sensitive. So I will not elaborate on these.

You know the philosophy and we intend to launch more product in soft leather in the months to come, and you will see some introduction of product in Q2 and mostly in Q3 and in Q4, but I will not elaborate. On Cognac in China, your question was about value and volume drop.

It's more or less, the same. I mean, it's minus 30% in volumes and 27% or something like that, if I'm not mistaken in value.

I mean, there is not a big difference. In terms of spread of the business, in volume terms, the V.S.O.P.

business is about 70% of the business. The X.O business is 20% to 25% and the rest is the fast-growing V.S business, I mean, the newly introduced quality in China.

I'm just talking about the Chinese business. And as far as Q1 in Cognac in the U.S.

is concerned, we grew the business in volume about a little bit more than 10%. So we had in both sell-in and sell-out, so we had a very, very strong quarter for the business in the U.S.

in Cognac in Q1.

And in value, it was around 13%?

It was a little bit more than that. We implemented a price increase in the course of the quarters, which was probably a bit more than that.

Around 15%?

Probably around 12% or 13%, something like that.

Most of my questions have been answered, but just another question on the U.S. market.

I think a strong deceleration this quarter compared to Q4. Can you maybe elaborate on that, considering that Cognac is -- seems to be holding well in this country.

So is there any division that have decelerated in the U.S. in Q1?

Well, as always, in Q1, it's always the cosmetic business that decelerates. I mean, I've seen -- I don't really know why, but I've seen many, many times, Q1 being softer in the U.S.

in Perfumes & Cosmetics than it was in the preceding quarter. So we had a reasonably soft -- it was exactly the same last year, but we had a reasonably soft Perfume & Cosmetic business in Q1.

Fashion & Leather was not also as strong as it was in the preceding quarter. The main reason is phasing of wholesale business at Donna Karan and Marc Jacobs.

I mean, the phasing of shipping of goods was not exactly the same. It's never the same.

But it was not exactly the same as it was in the preceding quarter, so we had a little bit less business than we anticipated because of this phasing issue, but it's not a big deal, obviously. We'll recover that later on in the year.

So there were a few interesting [ph] things like that, which explains why the U.S. market is a bit softer, but we think that Q1 is always a very -- a tricky quarter to analyze.

And we -- it happened many times in the past, we start the year on a fairly modest tone and to end up on a much higher one afterwards. So I would be quite cautious of my comment at this point in time.

Okay. Just another question on Selective Retailing.

Can you give an indication of DFS growth versus Sephora?

Well, DFS and Sephora were along the same -- I mean, we have 10% on the division and both of them are around 10% organically for the quarter. So no real differences between the 2.

Antoine Belge of HSBC. Three questions.

First of all, on Louis Vuitton. I think last year, you mentioned that as of the full year, the price/mix effect was 8.5%.

Could you maybe comment on that? And I think you've highlighted that you were very happy with the new Monogram lines.

Could you maybe elaborate? It seems that you changed a bit the design, but actually the consumer is -- are now buying again that type of product.

And quite a few comments will be useful. Second question relates to Bulgari.

Could you maybe comment retail versus wholesale and in terms of product launches, how you see the year? And finally, maybe an update on your hedging policy for the yen and the dollar.

And also how you are -- how should we think about costs such as advertising in the year, where FX are going to be a big headwind. Have you changed your attitude towards cost management?

I will have a hard time answering your question because I couldn't hear you very well. So I understand that you have a question -- your first question was on price/mix for Vuitton, which is a question I normally don't answer, so that will make it easy.

We have some pricing -- some price increase obviously. So price is a component of the growth we had at Vuitton in Q1, but I will not elaborate on the various components of the growth.

So second question, if I'm not mistaken, was on Monogram and the fact that we are pleased with new introduction. We have actually some bags like Métis, Marais, Montaigne, Pallas, which are Monogram lines, which have been introduced this year or introduced later on last year, which are doing very well.

So we are quite pleased with the business we do with Monogram. This has been the case for quite some time, and Q1 is no exception to that.

Certainly, on Bulgari, in retail versus wholesale, I mean, the retail business did better than the wholesale business. The wholesale business is biased toward watches, and basically jewels did better than watches in the first quarter of the year.

So there is no surprise that the retail business did better. Nevertheless, we had a fairly strong comparison base last year with a lot of high jewelry sales at Bulgari, particularly in Asia, which have not materialized this year to the same extent.

We had some high jewelry sales, but not to the same extent. So the comparison base was quite tough.

But as you know, I mean, this high jewelry business is not particularly predictable and it happens at anytime -- at any point in time in the year. But all in all, it was a fairly strong -- the underlying business of Bulgari in jewels and in retail, excluding high jewelry, was very strong during the first quarter.

And finally, on hedging, we have hedged about between 25 and -- I mean, that's for -- sorry, on 2014, we have hedged about 80% of our sales. The hedging rate is about 1 32 for the dollar, and same thing for the yen with an average rate of 126.

So at current market rates, fairly favorable hedging policy in place.

Okay. So just maybe one follow-up.

You didn't mention weather as a negative impact on the U.S. Can you confirm that it was not the case?

Weather. You mean the storms and snow and things like that, which never happens in Q1 in the U.S.

normally? I never mentioned that.

So don't expect me to mention weather as an excuse for the business.

I appreciate this is just a sales update. I'm just wondering if you would care to take -- to make any comments on the margin outlook for the first half with regards to a couple of areas.

Firstly, if there are any technical factors for Champagne that would either increase or decrease the margins. Secondly, the -- what looks like a negative mix effect in Cognac.

Thirdly, whether or not you think that DFS Hong Kong may be breakeven or profitable in the first half. I recall you saying it was I think EUR 20 million loss-making in the first half last year.

And fourthly, whether or not Loro Piana is going to undergo any sort of reinvestment or repositioning that might mean that last year's margin is not reflective of maybe this year's margin.

Well, maybe I shouldn't answer. I will do it anyway, but I shouldn't answer.

I mean, this is Q1 number. This is sales number.

And I normally don't answer on margins. So nevertheless, I will give you a few comments on this.

Champagne, no. There are no particular technical things that should affect margins in H1.

Mix in Cognac, yes, we are selling less X.O than we used to, so we'll have a negative mix impact on margins stemming from lower X.O than anticipated. DFS breaking even in Hong Kong, too early to say.

I mean, we are doing well today, but we have already under our belt the Chinese New Year, which is the most favorable period from a traffic viewpoint at Hong Kong airport. And obviously, we pay the same rent month after month, although the business is obviously fluctuating depending on the season.

So it's too early to say. And Loro Piana, we have no particular reason to -- I mean, we are investing behind the business, obviously.

This is why we bought it. But the impact on margins shouldn't be particularly significant.

That's very helpful. Jean-Jacques, I will ask you 1 question about sales then.

The Louis Vuitton sales to the European customer, could you just say whether or not you've seen a quarter-on-quarter improvement in that trend?

Yes, we saw. The sales in Europe was domestics ones -- was up, which if I remember correctly, was not the case.

It was basically flat last year. And this time, it was up.

So we see a slight improvement, don't take me wrong, but a slight improvement with European -- at Vuitton in Europe, so with the domestic customer base.

This is Vick Mohan in for Omar. I was wondering if you could talk a little bit about the luxury ready-to-wear business?

And if you see this as a growth driver going forward? And also a little bit about global tourism trends and how you think tourism is going to look for the rest of 2014.

Well, I will answer on tourism first. We are reasonably hopeful as far as tourism is concerned.

We've seen a fairly difficult first half of the year not with the Chinese, as I said, but with other nationalities, probably coming from the fact that the Russians traveled less in Q1. There were some issues with Ukraine.

We -- some Asian countries, particularly Thailand, et cetera, were subject to a little bit of unrest. So all these had some impact on the business.

But the underlying business seems to be holding up reasonably well. I mean, the Chinese travelers are doing okay.

So basically, there should be 3 different things: One is the Chinese will continue to do well. Two, the Japanese which are deeply affected by the drop in the yen, which -- signs of turning around, the Japanese should be also -- should be negative.

And three, there is a little bit of a pool of unknown with the non-Chinese, non-Japanese nationalities, which have been affected a bit by various factors in the first quarter of the year, but -- which we may expect to recover some speed in the last part of the year. So all in all, we think the -- as always, tourism -- the global tourism trend should play in our favor.

Your first question, sorry...

The luxury ready-to-wear business as a growth driver.

Luxury ready-to-wear business, well, it's -- definitely, it's an important -- a very important business for us, not necessarily in terms of global numbers. They would count, depending on the brands, in between 15% to maximum 30% of the total business.

But in terms of image and in terms of traffic generator, this is a very important business. The collections are being renewed at the very least 4x a year.

With some brands, it's more 6x than 4x. These are opportunity for clients to come back to the stores.

So it's very important that we are projective in this business with a very solid proposition to our clients. So in numerical terms, it's not a very, very big business, but it's a very important business as a marketing tool, I would say.

My first question is regarding Fashion & Leather Goods. If I take out the potential Japan ramp-up sales, is it correct to assume that Fashion & Leather Goods was running at plus 5% organic, excluding that impact?

Is there anything that you think would be a structural upward shift in the Japanese that could mean that this could last rather than the VAT -- the pre-VAT ramp-up? My second question is on actually, excluding this, if it is 5%, the big surprise still remains China.

So there was other markets that were already softer. But China was up high single digits from being flat before.

So I was wondering whether you can comment on what you see going on in that market and why you think it has picked up. My third question is on the mix.

Can you actually quantify how the mix at Louis Vuitton is changing year-on-year and quarter 1? I know this is very specific, but just to get an idea of the trend, even Monogram seems to be picking up again.

And I wondered whether you would care to comment on the sequential trend within the quarter and a little bit about March?

Okay. You're going to be less lucky than usual always, my answers to your questions, because I don't intend to answer much -- to most of your questions.

Well, x Japan, for what it means, the 5% is more or less correct. But what does it mean is the key question, and I don't know.

I mean, it's very difficult to assess what happened in Japan in Q1, whether this is entirely structural, partly structural, will disappear immediately or not. It's way too early to say.

So I am very reluctant to go on commenting trends without Japan or with Japan, et cetera. I think it's pure speculation at this point in time.

It's really the same with your question on China. Definitely, China is showing stronger numbers in Q1.

If you take out Cognac, you will -- probably will be close to double digit if not higher than that, higher than the 10% mark at least. So it's favorable.

A quarter never makes a trend, so I'm also very reluctant to comment on this. I'd rather have it this way than the other way around.

But nevertheless, I find it extremely difficult to analyze it for you and, two, to extrapolate these for the quarters to come. So we look at the business, we try to do our best to improve it.

Number seems to be a bit better, but it's way too early to make it a trend. The mix on LV, I've already not answered the question to Antoine before, so I will not answer it this time.

And the sequential view on the quarter, March was a bit stronger than the other 2 months, but Japan was also a bit stronger. The growth gathered speed a little bit in Japan in March as well.

So it's probably -- the March improvement is probably connected to a significant extent to an upsurge, a further upsurge in the Japanese business in March.

Just to confirm, you said that for Fashion & Leather, for Louis Vuitton, it was close to double digit, right, the China? Double digit is for everything x Cognac and close to double digits for?

Yes, that's what I said.

I wanted to ask, you said that the U.S. business of Cognac is very strong.

Are there specific strategies you've taken? And have you opened any new particular retailers or distributors that are selling strongly for you?

Not particularly and not recently, but the strategy that has been implemented by Hennessy in the U.S. for the past few years is definitely paying off.

As you know, in the U.S., we are not distributing our products ourselves. The 3-tier system obliges us to go through partners, local partners to distribute our products.

So our strategy in the U.S. are mostly marketing as opposed to distribution -- are mostly marketing strategies.

And definitely, the marketing strategy that we have implemented, which is both of a push and a pull strategy are paying off. I cannot really elaborate and go into details with our fairly detailed and complex marketing strategy that couldn't be implemented exactly in the same way, whether you're talking about California or the Northeast of the U.S.

But definitely, the consistency in which Hennessy's team and MHUSA team have implemented, the marketing strategies of Hennessy for the past few years have enabled the business to grow fairly fast and fairly significantly over the past few years because it's not only 1 quarter that is growing fast in the U.S. We've been enjoying a significant growth in the V.S business in the U.S.

over the past 3 years. I mean, we had a recession that started way early in 2007 in the U.S.

2007 to 2009 were pretty tough years for us. But it is the time when these marketing strategies were decided and implemented.

And from 2009 onwards, we've registered a fairly substantial growth in the U.S. So that's all to the credit of the Hennessy team locally.

Is that more home consumption then, do you believe?

It's both actually. But the market obviously in the U.S.

is more home consumption. I mean, the off-trade market is much bigger than the on-trade market in the U.S., so it's mostly home consumption, yes.

Great. And then just quickly, I know you're saying it's still a difficult environment in Europe and, obviously, the financial crisis is something that's going to take a while to undo.

But at the same time, we are hearing some positive comments on various consumer companies. Are there any bright spots that you would like to highlight or color that you'd like to give us in Europe?

Frankly, our numbers in Europe are reasonably flat. I mean, we are plus 1%.

We've been plus 1%, 2% for the past 24 months more or less. It would be a bit surprising on my side to highlight bright spots with such numbers.

I think we are not doing that bad after all, because being slightly positive in the current environment is not too bad. But nevertheless, I see no particular reasons to cheer up.

The macro, well, is apparently improving in some countries. It's a bit early to see that -- the direct translation of that into our businesses and marketing strategies, so it's really too early to say, frankly.

Is there still -- do you believe that tourist shift from Europe to the U.S. continuing?

Tourist shift from Europe, we don't really see that. I mean, if you're talking about Asian tourists shifting from Europe to the U.S., we don't really see that.

You have mentioned a new creative momentum going on at LV. And in particular in regards to the new designer you hired, Nicolas Ghesquière, one, what are your expectations in terms of the new collections?

And when are they -- when do you expect them to actually reach out to the stores?

I find it extremely hard to answer this question. I mean, we --- I don't intend on these calls to get into the details of the products and marketing strategies of the brands.

So I find it very difficult. I mean, Nicolas Ghesquière had his first show with us months ago, very well received, with a lot of new products, a lot of different things, a different energy, a different message being sent to the client.

We all think this is highly positive. This will derive progressively as always in this business into products that we will be selling into our stores, not only show products as the one you've seen, but products that will be definitely selling in the stores.

This is something -- this is a process that will unfold over the next few -- over the next few months. But I would -- there is nothing different from what we do with him than what we were doing before with Marc Jacobs.

I mean, the process is exactly the same. We try to build -- to get the best of the creativity of such an outstanding artistic director and to use these strengths to derive products that will be selling well.

So that's exactly the same logic. Okay.

Well, thank you for your questions. I will like just to make a few remarks to conclude this conference.

First of all, I would like to stress the overall quality of our sales performance in Q1 of this year. We are growing about 6%, as I said, in a fairly adverse business environment, such growth being more or less in line with the type of growth we experienced last year if we take out the onetime contribution of the Hong Kong air concession -- the Hong Kong airport concession.

So basically, some -- we have consistency in the level of growth we are experiencing. Secondly, I want to highlight the currencies, which are proving to be quite a serious headache this year, biting about 4% in our overall growth for the quarter.

Although the market actually allows sales, expect some currencies to strengthen, the U.S. dollar in particular.

This is becoming long overdue, and currencies are definitely taking their toll, both in terms of sales growth and, obviously, in terms of profit. Certainly and finally, I have to admit that our numbers for the first quarter are not that easy to read and are significantly impacted by exceptional factors, such as the Chinese cognac situation on the negative side and the Japanese consumption tax on -- and the impact on business on the positive side.

Fortunately, these 2 factors are more or less of equivalent magnitude and offset each other, thus not impairing the significance of our reporting numbers. So that's basically all I wanted to say.

Thank you for attending this call, and I look forward to discussing with you the first half numbers at the end of July. Thank you.

Bye-bye.