LVMH Moët Hennessy - Louis Vuitton, Société Européenne

Hello, everyone, and thank you for joining us for LVMH's First Quarter 2024 Revenue Announcement. I'm Rodolphe Ozun, Director of Financial Communications at LVMH.

And with me is Jean-Jacques Guiony, our Chief Financial Officer. I will start by taking you through the highlights of the company's performance for the first quarter.

And after these remarks, Jean-Jacques and I will be happy to take your questions. As a reminder, certain information to be discussed on today's call is forward-looking and is 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 and on Slide 2 of our presentation. Turning now to our announcement.

Our release was just issued a while ago in both French and English and is available on the LVMH website, lvmh.com, as are the slides for today's call. We begin on Slide 3.

For the first 3 months of the year, the group delivered 3% organic revenue growth on a particularly challenging comparison basis. Growth was supported by all regions, except Asia, ex Japan, which we'll explain in further detail later.

As far as divisions are concerned, you should be familiar with most of the themes highlighted on this slide. Many were already visible at the end of last year, notably a resilient performance from Fashion & Leather Goods and, to a lesser extent, Watches & Jewelry, destocking in Wines & Spirits and a strong performance from Sephora and our Perfumes & Cosmetics brands.

Turning to Slide 4. You will see that the first quarter revenue reached EUR 20.7 billion, up 3% on an organic basis and down 2% on a reported basis after adjusting for a negative 4% currency impact and a negative 1% perimeter impact, predominantly resulting from the disposal of Starboard.

Turning to Slide 5, which shows our geographical revenue mix. Most regions are unchanged, except Japan, up 2 percentage points in the mix to 9%, and non-Japan Asia, down 3 percentage points to 33%.

The reason for this is explained on Slide 6, where you can see the incidence of Chinese purchases abroad with a positive impact on Japan, which remains one of the fastest-growing touristic destination for Chinese tourists and a negative impact on non-Japan Asia since Chinese demand growth is currently driven by tourism outside of the region. Europe and the U.S.

were broadly consistent, with group average up 2 percentage points each. Now we'll turn to the business groups, and we'll start, as usual, with Wines & Spirits on Slide 9.

The Wines & Spirits business group delivered EUR 1.4 billion in revenue for the first 3 months of 2024. This represents a 12% increase on an organic basis versus the same period last year and a 16% decrease on a reported basis after taking into account a negative 5% currency impact and a positive 1% perimeter impact related to the acquisition of Provence rosé wines, Minuty.

Broken down, Champagne & Wines generated EUR 680 million in the first quarter, representing an 8% decrease on an organic basis and a 15% decrease on a reported basis after taking into account a positive 1% perimeter impact and a negative 8% currency impact. Note that the above-average currency impact here reflects the devaluation of Argentina's pesos, to which we have a small exposure through our Wine business.

Cognac & Spirits delivered EUR 736 million in Q1, representing a 16% decrease on an organic basis and an 18% decrease on a reported basis after taking into account a 2% negative currency impact. On Slide 10, the performance of Champagne & Wines was led by lower shipments in its largest market, Europe, due to large stock replenishments in the first quarter of the year, while Japan was penalized by the unfavorable phasing of price increases and equally challenging comps.

Meanwhile, we saw the continued international development of Château d’'Esclans. in Cognac & Spirits, Hennessy was impacted by the cautious restocking of retailers in the U.S.

and by soft local demand during the Chinese New Year. Although, in both cases, the sellout is better than the selling, and U.S.

depletions continued to recover. Turning to Fashion & Leather Goods on Slide 12.

Revenue reached EUR 10.5 billion for the first 3 months, up 2% on an organic basis. After taking into account a negative 4% currency impact, revenue decreased by 2% on a reported basis.

Moving on to Slide 13, which details performance by brand. Louis Vuitton, once again, had a good start to the year.

Nicolas Ghesquière celebrated a decade of consistent innovation as artistic director of Women's Collections, with a Fall-Winter Show held in the Cour Carrée at the Louvre. While Pharrell Williams took Louis Vuitton on a journey to the American West for men's Fall-Winter Show and debuted vivid new colors for the emblematic Speedy Bag.

The brand also hosted the first exhibition -- the first edition, sorry, of the Louis Vuitton Watch Prize and opened a new store and an immersive Visionary Journeys exhibition in Bangkok. Christian Dior's creative momentum was illustrated by the good progress of Maria Grazia Chiuri and Kim Jones' ready-to-wear collections with close to 390 million views from -- for the livestream show of its 2024 Women's Winter Collection.

Dior also unveiled a new flagship store in Geneva. The store was designed by Christian de Portzamparc, who had also designed Dior's Seoul flagship in 2019.

It's absolutely stunning and well worth a visit to the Rue du Rhône where it is located. To give some highlights of happenings at other brands in the first quarter.

Celine unveiled Hedi Slimane distinctive Bibliothèque Nationale Collection. And Celine Beauté announced the launch of its first lipstick, Rouge Triomphe, in the second half of this year.

Loewe continued to benefit from the success of JW Anderson's fashion shows and unveiled its first major exhibition, LOEWE Crafted World, which is currently open in Shanghai. Fendi on reached its heritage Selleria line, which is now almost 100 years young.

And Loro Piana continued to expand in leathergoods with the Extra Pocket and Bale bags. Finally, Marc Jacobs celebrated its 40th anniversary.

Rimowa unveiled a new leather wrapping technique for its distinct suitcase line. While Berluti took inspiration from its historical store on Rue Marbeuf for its B Volute line.

Moving to Perfumes & Cosmetics on Slide 15. Revenue reached EUR 2.2 billion for the first 3 months of 2024.

This represents a 7% increase on an organic basis and a 3% increase on a reported basis after taking into account a negative 4% currency impact. Looking at the brands specifically on Slide 16.

Parfums Christian Dior enjoyed broad-based growth across geographies and all of its product categories, makeup, in particular, driven by the relaunch of Rouge Dior, but also fragrances and skincare, where Sauvage, Capture and the successful reinterpretation of Miss Dior by Parfums Christian Dior significantly contributed to growth. Among other brands in this group, we again saw good momentum across geographies and product segments.

Guerlain saw the successful extension of its star product lines, Abeille Royale in skincare and Aqua Allegoria in fragrances. Parfums Givenchy enjoyed particularly strong progress of its Irresistible fragrance and Prisme Libre makeup line.

While several Maisons expanded their regional footprint, including Fenty Beauty, which recently entered China through a partnership with Sephora. Now turning Watches & Jewelry on Slide 18.

Revenue reached EUR 2.5 billion for the first 3 months of 2024. This reflects a 2% decrease on an organic basis and a 5% decrease on a reported basis after taking into account a negative 4% currency impact and a positive 1% perimeter impact related to the first integration of jeweler -- jewelry producer, Pedemonte.

For the key highlights of the division on Slide 19, Tiffany progressed towards its objective to increase the weight of its most distinctive product lines in the mix with the outperformance of the HardWear and Knot collections, as well as a 360-degree campaign showcasing the Maison's icons, which is displayed on this page. And Tiffany also continued to roll out its store concept inspired by The Landmark New York, where it launched its first exhibition, Culture of Creativity.

Bulgari enjoyed continued momentum in high jewelry and benefited from the rejuvenation of its B.zero1 line as well as category extensions across several major collections, such as Bulgari Bulgari, Serpenti and Octo watches. We're also excited to have announced the appointment of Bulgari's first-ever Creative Director for leathergoods, Mary Katrantzou, and also the creation of the Bulgari Foundation dedicated to preserving cultural and craft heritage.

Chaumet unveiled the design of the 2024 Olympic and Paralympic game medals adorned with fragments of the Eiffel Tower and saw particularly strong growth in high jewelry, while watchmakers Bulgari, TAG Heuer, Hublot and Zenith presented a wide range of innovation at the LVMH Watch Week in Miami. Now turning to our final business group, Selective Retailing, on Slide 21.

Revenue reached EUR 4.2 billion. This reflects an 11% increase on an organic basis and a 5% increase on a reported basis after taking into account a negative 2% currency impact and a negative 3% perimeter impact related to the disposal of Starboard.

On Slide 22, Sephora had an excellent start to the year, with market share gains driven by strong growth across North America, Europe and the Middle East, along with continued store expansion, especially in North America. Sephora also implemented the global unification of its brand signature, We belong to something beautiful.

And at DFS, the recovery of revenue remains gradual as tourism recovery remains uneven. The retailer continued to move forward on its strategy and held a signing ceremony with Sanya Group, marked the official commencement of the DFS Yalong Bay project in Hainan to be opened in 2026.

Finally, Le Bon Marché continued its strong momentum, driven by exceptional curation of products and animation. A few final remarks on this quarter to conclude this presentation.

Firstly, to put some context on the revenue growth. The organic increase achieved in Q1 puts the average growth rate over the past 5 years at 10% for the group and 16% for Fashion & Leather Goods, implying significant market share gains.

Secondly, LVMH continues to benefit from the diversity of its brands and its carefully crafted regional balance. They've served us well in recent years, and still do, in the complex and economic geopolitical environment, which continues to prevail.

Finally, we will continue to invest selectively in our store network, the breadth and quality of which also proved a differentiating factor in recent years, whilst we also -- we will also endeavor to protect profitability. This concludes the presentation.

Jean-Jacques and I are now available to answer your questions. [Operator Instructions]

Thank you. And the first question comes from Chiara Battistini from JPMorgan.

First question on the Fashion & Leather Goods and nationalities trends. I was curious to get some more color on how Chinese, Europeans and Americans behave within that number.

And notably, for Europe, I see the group number for Europe. I was wondering if we could get the color between the tourists versus locals for Fashion & Leather Goods, specifically.

And the second question's on Japan. That was very strong.

Could you give us more color on much how pricing contributed to that number, please?

Thank you, Chiara. On the nationalities for Fashion & Leather, I would say that not much happened.

If you look at Americans, Europeans, Japanese, I mean, basically, the trends that we've seen since Q3 last year, so slightly negative overall, are exactly the same in Q1 of this year. The big change is Chinese, the Chinese client base, the Mainlanders client base, for 2 main reason.

The first one is that Q4, where the numbers were pretty high, was boosted by a very easy comparison base in Q4 2022, with the lockdowns taking place in -- more than the lockdowns, I mean, the pandemic situation taking place in Mainland China in Q4 2022. So this was a high boost to the growth in the Chinese client base in Q4.

And secondly, we are anniversarizing a pretty strong business last year in Q1, following the end of the zero-COVID policy. And we are quite pleased to report that, overall, the Chinese, the Mainland Chinese client base in Q1 was up about 10%, slightly below 10% for Fashion & Leather.

So there are differences between brands, but overall, the growth was about 10%. Your question about Japan, there was, obviously, some price impact, as we said last year, that we repeatedly increased prices in Japan to offset the strength -- the weakness in the Japanese yen.

Overall, the price impact was about 7% in the first quarter of this year.

The next question comes from Erwan Rambourg from HSBC.

Can you hear me?

Yes.

Yes, we can.

Well done on delivering growth despite the context. Three quick questions on watches -- sorry, on Wines & Spirits.

I think you said Champagne was down 8% organically, Cognac down 16%, but depletions were a bit better. I'm just wondering if you can tell us when you think you'll be done with this sort of adjustment in terms of timing, and maybe give us the level that you see in terms of depletion year-on-year to measure the gap between the two.

Secondly, a question on Louis Vuitton. I think in good times, you basically managed to upgrade consumers from canvas to leather.

This is not a terrible time. You are growing, but it's -- I guess, it's a tougher time.

Are you seeing the role of canvas being more important in the short term? And how do you think about feeding maybe access price points to maybe rebuild the bridge to an aspirational consumer who might have been a bit under pressure?

And then lastly, at the group level, I'm wondering if you could talk about the role that you see for the Olympics. Does it -- should we expect any important impact in terms of sales or margins for any of your brands?

Will it move the needle for some of your assets?

Thank you, Erwan. So on the Wines & Spirits situation, in Cognac, sell-in/sellout, obviously, quite different situation, whether you're talking about the U.S.

or China. In the U.S., there was further destocking in Q1, which, to be frank, we did not expect.

But the good news is that depletions and overall consumer consumption was about flat in the first quarter of the year in Cognac, which is the first time in about 18 months that we see the business stabilizing. So it's encouraging, although we were a little bit surprised that there was further destocking, and therefore, the sell-in was not as good as the sellout.

The level of inventories in the U.S. is quite low or was quite low at the end of February.

I don't have it at the end of March, but I see no reason why it would be different. So the level of inventories is reasonably low, so this bodes well for the rest of the semester.

So for the first time in many, many quarters, I'm reasonably hopeful, as far as Cognac is concerned, in the U.S. In China, the situation is a little bit different.

Our sellout numbers during January and February, so by and large, Chinese New Year, were down double digit in China. Our sell-in numbers were worse than that as we wanted to avoid, at all costs, the buildup of inventories.

So we monitored that fairly tightly. Obviously, as far as Wines & Spirits is concerned, we don't get the same precision in analysis that we get in retail businesses as these are not our own data.

But we feel -- when we look at depletions, it seems that the offtake -- the off-trade segment is doing much worse than the on-trade. The on-trade is not fabulous, don't take me wrong, but the off-trade is doing much worse.

And conversely, we see that duty-free business in Asia is picking up quite significantly. So there are probably some connection between the two, although it's more difficult to assess than it would be for Fashion & Leather in retail or in any retail business.

So that's the situation globally, more hopeful in the U.S. and wait and see as far as China is concerned.

With regards to LV and your analysis of good times leather and bad times canvas, frankly, it's not as simple as that. I mean these 2 categories have their own dynamics, mostly based on new product introduction.

We have had very successful product introduction in leather over the last couple of years. We have had canvas product introduction that was successful last year and this year.

So they have their own dynamics. We don't have a specific strategy as to the share of canvas versus leather.

We try to -- the breadth of the brand, as you know, is quite large, and we try to satisfy the various segments of the customer base by offering products at different price segments and in different materials. The question on whether we could try to design product that would be more suited to the aspirational customers' needs, frankly, I don't think the situation of aspirational customers in the Western part of the world is connected in any way with the offer.

The question is inflation, which is taking its toll, with a particular intensity on this group of customers. And we see the same thing in the U.S.

and in Europe. And it's quite interesting that we don't see it in China.

The reason why we don't see it in China is that there is no such thing, at least, for the time being, as inflation in China. So I think as long as inflation will be a factor for this group of customers, we will not do miracles.

And basically, we expect only a gradual improvement with this population in the coming quarters. Olympics, your third question.

Well, Olympics will be complicated to manage, obviously, from a supply chain viewpoint in Paris. As we've seen in other capitals in which we had Olympics in the past, like Beijing or London, I mean, it's not a major boost to the business.

Probably people have other things in mind, but it's not a catastrophe either. I mean it's usually quite neutral, although it makes our life a little bit more complicated when it comes to supplying products into our stores.

The next question comes from Rogerio Fujimori from Stifel.

I have 2 questions. One, on Asia Pacific, down 6%, I was wondering if you could give us some insights on how each product division performed relative to this group average.

And for your jewelry, Maisons, could you talk the same comment you've made in terms of sales by nationality in the performance of jewelry versus watches?

Thank you, Rogerio. So Asia Pacific, is on average, minus 6.

Wine & Spirits is below that. And Perfumes & Cosmetics is above.

Otherwise, I mean, Fashion & Leather in too far, a little bit better than the 6%. On jewelry, we've seen differences, obviously, between our brands.

But all in all, I mean, the American customer is a bit negative, but not that negative. Whereas, we've seen some swings and some volatility with Asian customers, and particularly Chinese customer, even within the first quarter.

So the situation there is not that easy to analyze, particularly considering that we have implemented price increases during the first quarter, which are making the analysis quite complex. So sorry, but I won't answer.

Probably at the end of Q2, this question will be easier to address.

And magnitude of the price increase? Sorry, Jean-Jacques, what was the magnitude?

It's 4% to 6%. I think it's 4% to 6%, depending on the product.

Thank you, Rogerio. The next question comes from Zuzanna Pusz from UBS.

I have 3, if that's okay. So first of all, I know this is probably a question you won't like.

But is there any way you could maybe comment on the exit rate for the Fashion & Leather Goods division? I'm specifically asking because I think there's an expectation that, given still the tough comparables, Q2 could be similar to Q1.

So I was wondering if you could share any comments on that. Secondly, also, Fashion & Leather Goods, maybe you can comment on margin expectations for the full year or H1.

The realized current results was very helpful. So reported revenue is down, so if there's any comments you could make?

And finally, on the Chinese consumers. So it was very helpful you shared with us you're up 10%.

But any chance you could tell us what Mainland China -- or at least what percentage of business is happening onshore and offshore?

Thank you, Zuzanna. You know I love the question on exit rates.

I usually don't answer, and I won't. But the only thing I can say is that there was the usual volatility between January and February linked to the Chinese New Year being 2 weeks difference from 1 year to another.

And March was close to the semester. So there were fluctuations, but nothing really significant as far as the month of March is concerned.

On the margins for Fashion & Leather, I have no particular comment to make at this point in time. We'll see what happens in coming months.

Obviously, we are working on that. We have an objective of stabilizing margins for the full year, as we said during the January conference, and I have no other comments to make.

On Chinese on and off, onshore and offshore, we are very close to Q4 average, i.e. something like 37%, 38%.

Obviously, higher than the average for 2023, where we saw gradual increase in the share of tourists in the total, but it seems that Q1 is stabilizing at the same level as in Q4. Obviously, when we look at where the Chinese, the Mainlanders are shopping, it's a little bit different from what it was last year.

If we compare Q1 to Q1, for instance, last year, the Mainlanders were shopping 90% in Asia, whereas, this year, it's less than 80%. So it explains why there is a little bit of pressure, obviously, on Chinese sales, but also on Asian sales in this division, which is not particularly significant.

I mean, as far as we are concerned, what is significant is that the Chinese cluster is growing by 10%. Where the business happens is not necessarily a source of concern on our side.

The next question comes from Ashley Wallace from Bank of America.

I have 3 questions as well, please. Within Fashion & Leather, could you help us understand the price/mix and volume drivers within the 2% revenue growth number for the division?

And then my second question is on Perfume & Cosmetics. A few weeks ago, Ulta called out a broadly slowdown in the U.S.

beauty market, and so it was across all categories, including premium. Can you please confirm if this is something that you're also seeing?

Or if possible, it would be great if you could give us some high-level regional comments on Perfumes & Cosmetics. And then my last question is actually about the DFS project that you're going to be opening in Sanya.

Has it now been confirmed that Hainan will become a tax-free province in 2025? And how big do you think that opportunity can be for you, given there are already some pretty big incumbent players in that market?

And then connected to this, should we also expect to now start seeing many more directly operated stores open in Hainan for the group?

Thank you, Ashley. So functional price/mix volume, the bulk of the growth was coming from price.

I mean there was a 2% price increase. And mix and volumes offset each other but were not big numbers.

So as you know, as our competitors are pretty short on details on this particular question, I give you a broad view but not the full details. As far as the U.S.

beauty market is concerned, well, when we look at it, I mean, we don't see a major source of concern. The business has been pretty strong with Sephora and with our Perfumes & Cosmetic division during the quarter.

The Prestige business is doing well. So we have no particular signs of slowing down.

Obviously, we were growing very strong double digit last year. It will not last forever, and it will normalize at some point.

But the various categories we are operating in, particularly makeup, hair care at Sephora, are doing very well. So we have -- you've seen the numbers, I mean, they are pretty strong.

And Sephora's numbers are higher than the selective distribution average numbers. So we have no particular fear for the quarters to come.

This being said, I mean, this type of growth do not last forever. It happened in the past.

And at some point, there is a slowdown or normalization in the market. We don't hear that particularly.

But for the time being, we have no source of alarm as we speak. And on DFS, Sanya, no, we don't have confirmation yet.

The timetable confirmation is unclear to me, but I think it is in the course of the next year, if I'm not mistaken. We have no reason to believe that it will not happen.

As far as the competition is concerned, well, there is one sizeable project already under construction. And our project is the second one.

The other projects are, I would say, not of the same magnitude of these 2 project in the south of the island. So we would expect, given the size, the global size of the market, that these 2 projects, including the one from DFS, will dominate the market, which will progressively turn, if not into duty-paid or at least in a model that will be not very different from what happens in Macau or Hong Kong, for instance.

So we are very hopeful that our project will make -- will be one of the 2 leading projects in Sanya and in Hainan going forward.

The next question comes from Thomas Chauvet from Citi.

I hope you can hear me. Two questions, please.

The first one on the U.S. You've historically provided a useful outlook for the U.S.

Mr. Arnault sounded also quite appeased about the U.S.

luxury market at the full year results earlier this year. He was calling out the presidential election perhaps as a catalyst.

Could you share his optimism about this market? Could you just, perhaps on the back of Q1 and what you've seen in April, tell us how you think about the shape for the rest of the year, particularly perhaps between the upper-income and low-income demographics?

Are you seeing any major differences? Secondly, on Fashion & Leather, you commented on canvas versus leather.

Could you perhaps comment also on styles? The media has defined over the last year this idea of quiet luxuries, what's going to look better than fashion-forwards?

Are you seeing major differences in growth over the past couple of quarters between your more fashion-forward brand and the more classic aesthetics? And does that also -- is translated into perhaps higher-end price points doing better than lower-end price points, particularly in leather goods?

Thank you, Thomas. U.S.

outlook, not my favorite question, obviously. What we said about the U.S.

market is, actually, you have 2 U.S. markets.

One is the market for aspirational customers, which I commented a bit already, where we see these customers being -- depending on the brands and the categories, but a sizable portion of the business, due to inflation, are certainly under some form of pressure. And we register disappointing numbers there, and it's been going on for a while.

The only thing I would say about that is that when you look, for instance, at Fashion & Leather, we've been experimenting a slight improvement in the numbers over the last 3 quarters. I'm not saying this is there for good, and we'll be showing double-digit numbers in the near future.

I'm just saying that there is a gradual improvement in the situation, which obviously comes from a less-impactful aspirational customer in the total of the business. So our scenario would be a continuous strength from the top-end customers and a gradual, a very gradual improvement, from the aspirational customer.

As far as the presidential election is concerned, you have a variety of situations, some being positive, some being negative, so I wouldn't dare making any comment on the outlook and what influence it could have on our business. On Fashion & Leather, difficult.

Basically, what you're talking about is different styles attracting different people, which is exactly what we try to do within brands or within our portfolio of brands. Everybody is talking about quiet luxury now, fine.

Quiet luxury works well. I mean if you look at the numbers of Loro Piana, for instance, they are clearly a testimony that quiet luxury is doing well, and really, the brand is moving from strength to strength.

In other businesses, we discussed Chinese clients with Fashion & Leather, which is still doing very well. Not all our brands are embracing the quiet luxury trend.

So we need to do different things to different people, and it's up to our marketing and product team to be able to capture the different trends. And this is what we try to do.

But we will not, all of a sudden, convert a business that is almost EUR 50 billion into just quiet luxury. I mean it has to be more diverse than that.

But obviously, if quiet luxury is there to stay, well, we'll deal with that as we already do.

The next question comes from Antoine Belge from BNPP Exane.

Three questions. First of all, Jean-Jacques mentioned that Loro Piana was doing very well.

So as an overall division, Loro Piana which [ dipped plus 2 ], were there some negative trends from brands? And good comments, especially on Celine, who currently [ trending ] designer and then Dior [indiscernible].

Second question is more about your...

Sorry, Antoine. I missed a word out of 2.

So I didn't get your question, sorry. That's...

Slide on the brand performance.

We can't hear you. I mean communication -- can you -- if you want, we take your questions later, if you don't mind, and you try, but we can't get it.

Yes. Okay.

I was asking about division or -- sorry, brands division -- by division between the...

Go ahead, go ahead. It sounds to be better.

Go ahead.

Okay. So within Fashion & Leather were the brands that posted a negative trend since you said Loro Piana was very strong.

My second question is about -- I mean, would you say Q1 was in line with your expectation? And do you think that the normalization that you mentioned on a lot of your slides would be something that should maybe last 1 or 2 quarters but not more?

And finally, with currencies down 4% in Q1 on the top line, plus delayed impact of hedging from last year, was the outlook for the impact of currencies this year if the currency don't move from the current level?

Okay. Are there negatives?

Not to surprise you, I will not answer. But basically, what I can say about Fashion & Leather is that, usually, there is a little bit of volatility of dispersion around the average.

This time around, not much. I mean, Louis Vuitton, slightly above.

I said slightly. And we have Dior slightly below.

I said slightly. Otherwise, I mean, we have a variety of situation.

As I said, Loro Piana is doing very well. I will not mention names.

We have a division to avoid -- to communicate on global numbers and to avoid finger-pointing. So that's the idea.

So I will not give you further details than that. Normalization.

Is normalization compared to the past? Then when we had a -- we had very, very strong growth for a number of years, which was quite unusual, I would say.

As far as the future is concerned, my crystal ball stayed in my office. I mean, I don't know.

I mean, I will not dare getting into forecast on something which is basically impossible to forecast. I mean we see a diverse economic situation, diverse impact on customers.

The link between macro and micro in our business is not easy. We clearly see that inflation is taking its toll.

Otherwise, I mean, there are other situations. We'll see what happen.

I cannot be more precise than that for a very simple reason, I don't know. Thirdly, your question on currencies.

Well, the -- it depends very much on the U.S. dollar because the U.S.

dollar has improved quite significantly over the last couple of days. So if you call me next week with the same question, maybe I will have a different answer.

So I will not get into that. I mean, we expect globally that currencies will have, overall, during the year, a slight negative impact on sales.

If everything stays the same, minus 4% in Q1 it will be sometime before we cross the level for the yen and the renminbi that we are -- where we are today. So particularly the yen and the renminbi will create further pressure on currencies, but diminishing as the year goes by and probably a slightly higher impact on operating profit as we don't have the cushion that we got last year from the currency hedging.

So the normal pattern of something like minus X in sales and usually something like 2x in impact on operating profit, which is usually what we get. It's not a scientific relationship.

But if you take 10 years back, I mean, that's more or less what happened.

The next question comes from Edouard Aubin from Morgan Stanley.

Jean-Jacques, on the Sephora, 2 questions. The first one is, could you just come back or explain why you're gaining share, particularly in the U.S.?

I mean, what's kind of your secret sauce, number one? Number two, I saw that you withdrew -- Sephora announced that it was withdrawing from Korea and then entering the U.K.

Is the Sephora business model better suited for the West, at the end of the day, than in Asia? I mean it looks like progress in China has been quite slow so far.

So if you could comment on that. And then lastly, if you look at Swiss watches, so we had Watches & Wonders last week in Geneva.

Comments were generally quite cautious about the trajectory of the category for the remainder of the year, with a number of market participants expecting the market to be flat to down. What's kind of your view on this product category for the year?

Thank you, Edouard. So Sephora in the U.S., I would mention 2 things.

One is the fact that we suffered more than the others in the pandemic. The reason being that our store format is very much biased towards downtown and shopping malls.

Some competitors are more exposed to suburban malls, which were favored by the client base during the pandemic. So we had a tough time during the pandemic, and exiting the pandemic is playing the other way around.

So we benefit from that. People are back in the center of towns.

They're also back in the shopping malls, and we benefit from that where the bulk of our stores are present. The second thing I would mention is that we have always, particularly in the U.S., put the emphasis on merchandising, which has always been the key strengths of Sephora in the U.S.

And we never gave up on that. We are still at the forefront of innovation in terms of brands, in terms of product, and that's probably why -- the main reason why people are coming to Sephora.

Sephora is not just engaging into a transactional relationship with his or her customers, it is also a place where people discover, try and do other things than they would do in a traditional store. So we have always put a lot of emphasis on that.

And it's no mystery to you that the head of merchandising is also now -- is now the head of the Sephora business, no mystery. I mean she's been spearheading this effort in terms of merchandising for many years, and she is uniquely qualified to be the head of the business going forward for that reason.

Korea is it -- well, the reason why we closed Korea was that there was no winning strategy there. I mean we reviewed that many, many times.

It's a very competitive market. And the merchandising advantage was not entirely obvious in Korea, which is not so easy to penetrate with non-Korean brands.

So there was no winning strategy, so we decided to exit. I wouldn't draw the conclusion too quickly that this is significant of the fact that Sephora is not working well in Asia.

There are markets, particularly like Singapore, where we are doing well. China, we are extremely hopeful that the merchandising effort that we are doing today will pay off at some point.

Obviously, if we keep on competing at full price with discounted product in China coming from Daigou or parallel trade, this is not going to work. But we have other idea about this market, and we are extremely hopeful that Sephora will develop a strong presence there, playing the differentiation factor, not the mainstream but the differentiation factor.

As far as watches are concerned, well, the -- I confirm that we are not particularly optimistic. I mean we don't expect a catastrophe, but what the messages that we got from the clients at Watches & Wonder were the same as the one that our competitors got and that you reported.

So we don't expect a fabulous year, not necessarily a bad one either, but not a great year.

The next question comes from Luca Solca from Bernstein.

I have a question on Japan. There's quite clearly a spillover of Asian consumers and Chinese consumers going to Japan because of the [ weekend ].

I'm wondering where does Japan stand in terms of pricing relative to standard geo-pricing gaps that you would want to have in that region? Despite price increases in Japan, it does seem to be that Japan continues to be able for being given weak yen.

The second question, looking at this sort of spillover in the other direction. You have properly pointed out the Chinese consumers spending more abroad than initially anticipated.

Looking at your retail network pipeline into China and the number of projects that are underway, are you comfortable with the number of stores is not going to be attuned to the number of Chinese consumers that you expect to shop in the Mainland despite this trend to buying overseas. And last but not least, you were pointing out that Tiffany is redeveloping in other product segments, most importantly in the design jewelry collection.

I wonder, how big is today the stone-driven? This is the one focused on lab-grown diamonds.

And so the 5% to 6%, how much of a concern in your mind would be lab-grown diamonds' growth in that market?

Thank you, Luca. So Japan prices are still significantly below Chinese prices on average.

I mean it depends. It varies a little bit from one brand to another.

But we are selling at a 10% premium to the European prices when China sells at 20%, 22% premium. So there is a sizable difference between the 2 markets.

And despite the frequent price hikes that we have mentioned already last year, the drop in the yen has been causing prices, once converted in other currencies, to look interesting compared to other geographies in the region. Your second question about China network.

Obviously, this is a question that we -- that sort of agitated us for -- that has been agitating us for a while. But bear in mind that during the pandemic, we more than doubled the local business in China without really opening a lot of square meters.

There were only so much we could do during the pandemic years to enlarge properties that we had. And frankly, we didn't do much in 2021 and 2022.

Progressively, some projects are being opened and will help us sort of limit the saturation of some existing stores. When you double or even more than that the business without adding square meters, obviously, you reach a very high profitability and productivity, which is a good point.

But in terms of client service, at some point, it becomes necessary to enlarge the network to diminish productivity but to do a better job with the client. This is exactly what we are doing.

I think what's going on with the Chinese customers visiting our stores outside China is not a surprise. The magnitude of it is not a surprise.

We are where we expected to be. So I think, all in all, I mean this is well under control, and we have no particular headaches on that.

Your question on Tiffany, I had a little bit of a hard time hearing you on that. Your question is about the stone-driven business and the threat caused by grown-lab diamonds to this business, if I understand correctly.

We view lab-grown diamonds as a different business. I mean the origin -- I don't have to insist on the fact that the origin of the diamond -- the lab-grown diamonds is different than the natural ones.

And we are playing more the complementarities than the competition between the 2. There are certain things you can do with lab-grown that you cannot do with natural diamond.

I mean the ability to put together shapes that wouldn't exist or that wouldn't be achievable through polishing and cutting is something we can do with lab-grown, we cannot do with natural diamonds. So there are probably, moving forward, we'll keep, obviously, the natural diamonds for their value.

I mean, the connection with love, I mean, the diamond is forever, et cetera, is extremely important. And if it was created 10 minutes ago in a lab, I mean, the message and the emotion is not exactly the same.

This being said, there are plenty of things we can do with lab-grown diamonds in terms -- particularly in terms of shape and -- that we couldn't do otherwise. So we'll try to figure out in the years to come what goes where.

And we don't see that as a threat but as things that could actually cohabitate within the same brand to do different things.

The next question comes from Louise Singlehurst from Goldman Sachs.

I'll stick to two, if I could, please. Just firstly, in terms of how we think about the cluster and the nationality and, obviously, the regional growth because a lot to take, in my mind.

I guess it's quite difficult for us to think about the forecast when you're seeing Asia Pac minus 10%, minus 6%. And then you're seeing Fashion & Leather, the Chinese cluster up 10%.

Just taking a step back, I wonder if you could help us think about the clusters, where you find it hardest to kind of read the trends? Is it U.S.

aspirational? Is it the Chinese cluster?

That sounded as though you're seeing less volatility in the Chinese cluster, given the comments about the U.S. aspirational.

And then my second question, I wonder if you can give us any indication about the way that you're thinking about the cost and the budgeting. I know this is a sales call, but there was obviously some extra cost saving that came in at the second half of last year, and then we have a very good finish to the year.

But I wondered if that cost-saving mentality across the business has continued into the first half or any additional incremental action has been taken?

Thank you, Louise. Well, obviously, the Chinese cluster is, by far, the most -- was, by far, the most difficult to forecast.

The main reason being that the comparison base in 2023 was very biased due to the ups and downs of the pandemic and the zero-COVID policy in China, the ups and downs of some opening. I mean, for a while, only Macau was the non-Chinese or non-Mainland market to be open and accessible to Mainlanders.

And then there was Hong Kong, and Japan came at a later stage, et cetera. So the basis in 2023 is far from being easy.

The percentages are biased by the 2022 reference. And even in 2023, it was not a level playing field.

I mean it took a while for the market to stabilize. So at the end of the day, we are quite happy, as I said, with the growth with the Chinese clients in the Q1 of this year.

The level of -- as I said, also, the level of nondomestic business is where we expected it to be. Where it happened, as I alluded to at the beginning of this conversation, was a bit different.

I mean the fact that there would be some pressure from the Chinese customer shopping outside Asia was not expected. The global level could have been expected, but where it happens is totally impossible to predict.

So that's where we are. Again, we are totally agnostic as to where the business with Mainlanders takes place, whether it is in China, whether it is elsewhere in Asia, whether it is outside Asia.

So we -- I would say, we don't care too much as we get the business, and we do get the business. Your second question is about cost savings.

Well, I'd rather not answer any question because if I start, I mean, we'll be there for the rest of the evening. So I'd rather not answer any question on cost and margins.

We'll discuss that in July when we release our H1 numbers. And for the time being, let's stick to revenues, please.

The next question comes from Charles-Louis Scotti from Kepler Cheuvreux.

I have two. The first one, within Watches & Jewelry, were there great disparities in terms of the brand performance between Bulgari and Tiffany during the quarter?

And more specifically at Tiffany, could you share with us more details on the brand performance across the different regions or nationality? And then my second question on pricing.

It seems that you have not increased price across Fashion & Leather Goods brand since October, November last year, except on some very specific SKUs. We have seen that some of your competitors have remained quite aggressive this year with mid- to high single-digit price hikes.

Of course, you never comment on what's coming price increases, but could you help us understand what will be your pricing strategy for the Fashion & Leather Goods divisions going forward beside, obviously, the FX-driven price adjustments?

Thank you, Charles-Louis. So Watches & Jewelry, are there disparities between brands?

The answer is yes. Same reason that we have been -- that we mentioned a few times already.

The breakdown of Bulgari and Tiffany by geographies is not at all the same. So they are -- there is almost half of the business for Tiffany being done in the U.S., with a high exposure to the aspirational customer.

So obviously, this has been taking its toll in the last 4, 5 quarters, as we explained many times. Bulgari is much more exposed to the Asian customers, and the Chinese one, in particular, which has -- which remained positive in the first quarter of the year.

So at the end of the day, we see meaningful differences the two, not necessarily on a country-by-country basis, but overall mix being so different, it generates a very different growth at the end of the quarter. Your second question about pricing.

Remember what I said during the conference in January. We try to avoid it as much as we can.

I mean pricing is -- could be there if we have to offset inflation or if we have to offset fluctuations in currencies, and we try to limit the use of pricing for that purpose only. Otherwise, I mean, the main source of growth in our brands is mix, as I said many times, which is not increasing prices, which is selling more expensive items on average.

So our philosophy on pricing has not changed. We use it when we have to use it, but the -- as little as we can.

The next question comes from Charmaine Yap from Redburn.

My question is on Fashion & Leather, again, in terms of weakness of the aspirational customer. But isn't it also a function of brands increasing prices rather quickly?

Some of your iconic products, Louis Vuitton, have increased 30%, 40% over 2 years or doubling in 5 years. And as market leaders, a lot of people follow suit.

So do you think you've gone a bit too much too soon and, hence, the aspirational customer are priced out? Or do you think insufficient product innovation, the entry price points?

And also, if we add on the mix component at Vuitton, which you have always mentioned in the past 15, 20 years, would you think that there's another brand that can now fill in the gap that Vuitton has left? Maybe, I don't know, perhaps Loewe can fill in that gap a little bit more?

And in terms of e-commerce, relating also to Fashion & Leather, can you comment on the penetration? Assuming it's a drag, how has the drag trended across the quarters?

Is it less of a drag now? And how do you view this channel given the shift back to -- traffic to stores?

Good question on aspirational customer. Obviously, price have increased, no doubt.

We had repeated price hikes coming either from currencies, but more importantly, from inflation that we had to reflect. And sometimes, we anticipated a little bit, taking advantage of the strong demand to avoid doing too much too late.

No doubt that the aspirational customer has to adjust to that new normal. It's not going to take 5 minutes.

We know that. But we also know, as you -- as was pointed out before, that most of our competitors have been doing the same.

So I'm not particularly worried as to the acceptancy of the new level of price from aspirational customers. It is just that it is going to take time as we can see on the market.

So no worry, but be patient. Your second question was on mix.

Sorry, I missed that.

E-commerce a drag?

No, e-commerce was not a drag. I mean e-commerce could have a lower growth rate than it used to have, but it's a function of availability of product.

If products are being sold in stores, we see no necessity to put a lot of them on to the e-commerce and vice versa. So basically, I would view the fact that e-commerce is growing less than stores as a good sign of the healthy -- the health of the store channel, which is, obviously, by far, the most important for us.

The next question comes from Chris Gao from CLSA.

I have two questions. Firstly is regarding the Chinese national spending.

Since we're now seeing 10% Y-o-Y growth on Chinese for Fashion & Leather Goods, just want to follow up a bit on how does Chinese spending on jewelry and watches compared with the number in soft luxury? Do you still see market share gain of your jewelry brands among Chinese national?

And the second question is about your performance by price point perspective for your hard luxury. So right now, for your overall consumer, do you see faster growth of high jewelry versus entry level?

And how does that look like among Chinese specifically? So how much do you expect your price/mix could be helping with the hard luxury sales?

Or maybe a final -- a small follow-up is regarding your advertisement planning for Tiffany. We noticed quite a few store revamp ongoing for Tiffany during our Europe road show and Mainland China road show.

And we also noticed Tiffany's great advertisement investment on Ctrip, which is a good move with ideal traffic right now on the online side. So I'm just wondering if you can share more about the seasonality of your brand investment for Tiffany this year and if there's any change of your expectation on jewelry and Maisons operating leverage after your 1Q results?

Thank you, Chris. so the Watches & Jewelry was a bit below China -- Fashion & Leather.

For the Chinese cluster, I will not go into details that it would be basically revealing more or less what we do with individual brands, which I don't intend to do. Your question about aspirational versus top-end customers, whether it's relevant in Asia, as I said, not too much.

I mean in -- we see less of a difference probably because there is less inflation. We see less of a difference between the various groups of customers or the various groups of products or the different price points.

It's much more homogeneous in Asia and particularly in China than it is in the Western world where we see a clear difference between top end and entry price. It's not the same in Asia.

Your question about Tiffany and the store revamp and advertising, obviously, we are making a big push in both branding and distribution, as we said many times. This is part of the strategy that we are implementing moving forward.

So there is no particular seasonality there. We are extremely determined to push the brand and its business, particularly in Asia.

So we are making a sizable investment into this part of the world, which is obviously very important going forward. And there is no particular seasonality.

We really have a clear feeling that whenever we revamp a store in Asia, this is the place in the world where the yield is the highest. I mean we usually get pickup in sales that are quite significant and are better than any other region in the world.

So we obviously push that as much as we can, but there is always so much we can do in terms of store revamping on a yearly basis. So no particular seasonality, but this is money that is worth investing.

The next question comes from Liwei Hou from CICC.

I have three questions. First of all, apart from Vuitton, what do you think will be the next growth driver for Fashion & Leather Goods, which has exceeded EUR 42 billion last year and Dior is slowing down?

So it's my first question. And the second one, 10% growth for Chinese cluster Fashion & Leather Goods, will you say it's more polarized towards high-end clientele versus before?

And the third one is, given our commitment to protect margins, would that mean we have a more controlled investment in the first quarter, i.e., we are prioritizing margins over top line and did not, at least, the full potential of revenue growth?

Thank you, Liwei. The next growth drivers for Fashion & Leather are in order of magnitude, Vuitton, Dior, Celine, Fendi, et cetera.

I mean we -- the main strength of this portfolio is the portfolio itself. The fact that we have many brands and all of them can play their part in the growth of the business as they have done in the past.

And the first rank will be Vuitton. It's by far the largest of the group, and it's on Vuitton that we are counting, moving forward, to develop the business.

And there have always been questions as to the ability of Vuitton to grow further. I've been 20 years with the group, and I've heard that since I joined.

And this brand has always been able to reach new frontiers in the past. And we hope to do exactly the same with Dior with a different positioning, but the same extraordinary potential moving forward.

Second question is the 10% growth polarized towards high end in -- with Mainlanders. The answer is no.

As I said, I mean, we don't see that this discrepancy between entry price and top end in -- with Chinese clients in the same way as we see it in the Western world. So the short answer is no.

And thirdly, the question on protecting margins and whether this could have some impact on revenue growth as we underinvest in the business. This is not FMCG.

I mean, I will not directly answer the question, but this is not FMCG. The link between marketing and investment -- marketing investment and sales is not immediate and totally mathematic.

I mean, basically, we invest behind the brands to boost desirability. Boosting desirabilities are naught and not a science.

If it was a science, it would be purely quantitative, and we will just put money at all times behind the brand, and that would trigger some increase in revenues. It's unfortunately, or fortunately, I don't know, I would say fortunately, not as simple as that.

And the last question comes from Paola Carboni from Equita.

I have a very quick one on Champagne. If you can comment a little bit on the inventory situation here and what are you seeing on final demand?

And secondly, also very quickly on Sephora. If you can give us an idea to what extent growth is being driven by ongoing store network expansion, namely in the U.S., and to what extent this should continue to be a driver?

So what is your target here or your strategy here in terms of network expansion for Sephora?

Okay. So on Champagne, I mean, you've seen the numbers.

They are not fabulous. I mean we definitely have a weakness in demand, particularly in Western Europe, where we see quite a severe weakness, particularly off-trade, less so on on-trade.

We've seen that in the past. I mean, from time to time, there could be a severe drop in the business, and it comes back.

But for the time being, that's a tough situation to manage. On Sephora, the bulk, the vast majority of the growth comes from like-for-like.

There is obviously a little impact from additional stores, but not a major one. Bear in mind that the Kohl's association we have, I mean, the business we do with Kohl's, we don't count the sales that are done with Kohl's.

I mean, we get revenues from that, but we don't consolidate the sales that we do there. And it's a bulk of the store count expansion over the last few years, so it has no impact whatsoever or very limited impact on revenues.

Thank you. Thank you for attending this call tonight, and we look forward to discussing with you full H1 numbers at the end of July in the middle of the Olympics.

Thank you so much. Good night.

Thank you.