L'Oreal Co Eur Ord

Welcome to the conference call regarding L'Oréal's 2023 half-year results. The conference is about to begin. I now hand over to Ms. Françoise Lobin. Ms. Lobin, please go ahead.

Thank you, Alessia. Bonjour à tous. Good morning to all and welcome to this webcast and conference call for the release of L'Oréal's first half 2023 sales and results. Let me introduce today's participants on the call. We are together with CEO Nicolas Hieronymus.

Good morning, everyone.

CFO Christophe Babul. Hello, good morning. And Global Head of Corporate Finance and Financial Communication, Laurent Schmitt.

Good morning.

The agenda of today's meeting is as follows. Christophe Babul will start with a presentation of the financial figures of the first semester. After this financial review, Nicolas will cover the main developments of our business in this first half and share with you his views and strategic perspectives. After this presentation, you will be able to raise your questions. The press release, which was sent out yesterday and the slides shown this morning, can be found on our website, lorealfinance.com, and on the L'Oréal Finance app. You will be able to access a replay of this call on the same website later today. and the French and English versions of the half-year financial report will be available at the beginning of next week. Timing-wise, we expect to close this call by around a quarter past 10. I wish you a good conference, and let me now hand over to Christophe.

Thank you, Françoise. Ladies and gentlemen, good morning. L'Oréal showed another remarkable performance in the first half, on top of a high 2022 base of comparison, in a globally buoyant beauty market. If I had to summarize the past first half in three key figures, I would highlight first the continued strong like-for-like growth of 13.3%, the operating margin of 20.7%, an increase of 30 basis points, The 11.2% increase in earning per share, excluding non-recurring items, to 6.73 euros. Sales increased by 12% and exceeded 20 billion euros for the first time over a half year. Foreign exchange had a negative 2.4% impact over the period, with currencies evolving differently. The Mexican peso and, to a much lesser extent, the US dollar and the Brazilian real appreciated against the euro. whereas most other invoicing currencies were down. More detail on our invoicing currencies and their evolution against the euro can be found in the appendix of this presentation posted on our website, lorealfinance.com. The change in scope of consolidation was a positive 1.1%. It is mainly due to the acquisition last October of the American dermacosmetic skincare brand Skin Better Science and of the impact of hyperinflation accounting in Argentina and Turkey. On a like-for-like basis, growth came to a strong 13.3%. As you can see on those two charts, like-for-like growth accelerated from 13% in the first quarter to 13.7% in the second quarter. However, the currency impact, which was still slightly positive in Q1, turned negative to minus 5.5% in Q2. Therefore, on a reported basis, sales were up 14.6% in the first quarter and 9.5% in Q2. Note that extrapolating end of June currency rates, or 1 euro at around $1.09 until year end, will lead to a negative impact on full year sales of around 5%. On this chart, you can see the different components of growth. rose almost 5%, contributing slightly more than a third to growth. In a more inflationary environment, particularly in developed economies, the significant value component, which combines price increases and mixed improvements, therefore had no impact on volume. The increase in volume is all the more remarkable as it follows an increase of nearly 7% in the first half of last year, a pretty unique position amongst our peers. Let's take a look at sales by division. Like for like, they all grew strongly. The professional product division continued its momentum at up 7.6%, driven by the success of its omnichannel strategy. The consumer product division, whose growth accelerated to 15%, achieved its best half year on record. L'Oréal Luxe accelerated quarter after quarter and posted growth of 7.6% at the end of June. And lastly, L'Oréal Dermatological Beauty continued to lead the pack with an increase of 29%. Momentum remained very dynamic in all regions compared to a year 2022, which was already showing very strong growth. With an 80.2% like-for-like increase, Europe, which is our largest region in size, recorded remarkable growth. L'Oréal strengthened its position in the vast majority of markets. Business grew by more than 10% in the major markets, in particular in the German-Austrian-Swiss cluster, the UK, France, Italy, as well as in many other countries such as Poland, the Nordics, and Turkey. In North America, momentum remained very strong at plus 13% in the bullion market. In North Asia, growth came to plus 3.9% with contrasted trends. In mainland China, growth in the second quarter returned to mid-teens ending the first half at more than 7% in a market that is gradually recovering. In travel retail, momentum slowed under the actual effect of a high comparison basis in the second quarter last year due to oil invoicing and this year of a drop in sales in certain markets such as Korea and Hainan. In emerging markets, L'Oreal continued its very dynamic pace of plus 23.6%, both in Sapomena and in Latin America. Let's now look at categories. Skincare, our largest category, which represented more than 41% of our sales, grew 14.6%. Makeup continued to rebound at plus 11.1%. It accounted for 20% of our sales. Hair care was very dynamic at plus 15.8%, growing in double digits both in professional and in consumer products. Growth of perfumes remained remarkable at plus 21.8%, and hair coloring advanced by 7.2%. Let's move to the profit and loss account. Gross profit increased by 13.8% to 15.3 billion euros. Gross margin improved by 120 basis points to 74.3% of sales. The objective of restoring the gross margin to its 2021 level was therefore achieved in the first half. The change in the scope of consolidation had a negative 20 basis points impact on gross margin. Currency effects, including conversion and transaction, were posited by 60 basis points. The underlying improvement in growth margin therefore stands at plus 80 basis points. The positive value effect, which combines price increases and mixed improvement, more than offset the additional increase in input cost. Research and innovation expenses advance by more than 15% to 622 million euros. They now represent 3% of sales versus 2.9 in the first half of last year. Advertising and promotion expenses also increased strongly by 15.3% or more than 900 million in value. They amounted to 32.5% of sales, 100 basis points above last year's level. We have therefore continued to invest significantly in media advocacy and influence at point of sales and in consumer experience to support the growth of our brands. SG&E expenses were up 10.9% in absolute value but continued to decline by 20 basis points as a percentage of sales. This demonstrates the continued strict cost discipline and increased efficiency of our organization thanks to the creation of clusters and of shared service centers. In total, operating profit increased by 13.7% to over 4.2 billion euros. The operating profit margin reached a new record for a first half at 20.7% of sales 30 basis points higher than that of H1 2022. So you see our virtual circle is in full swing. At this stage every year, we point out that the L'Oréal Group is managed on an annual basis and that the division's profitability in the first half cannot therefore be extrapolated for the full year. By division, at the half-year stage, the profitability of the professional product division was unchanged at 21.2%, The consumer product division improved its profitability by 100 basis points to 21%. L'Oréal Luxe margin came out at 23.2%, down 80 basis points. And L'Oréal Dermatological Beauty increased its margin by 70 basis points to 28.4%. Non-allocated expenses, consisting mainly of corporate and fundamental research costs, were stable at 2.3% of sales. Overall, the operating margin improved 30 basis points to 20.7. From operating profit to net profit excluding non-recurring items. The net financial result was negative by 45.3 million euros. For the full year 2023, you should expect net financial expenses to the tune of 100 million euros, all other things being equal. Turnoffage dividend amounted to 421 million euros, down 10% compared to 2022. It should be recalled that in 2022, Sanofi had paid an additional dividend in kind in the form of Euro API shares for an amount of 74.5 million euros. The ordinary dividend, therefore, increased by almost 7%. Income tax amounted to 1 billion euros, representing a tax rate of 21.9%, slightly below that of H1 2022, which stood at 22.5%. For the full year 2023, all other things being equal, we can anticipate a tax rate slightly below 24%. Net profit, excluding non-recurring items, amounted to 3.6 billion euros. Diluted EPS, excluding non-recurring items, stood at 6.73 euros, up by 11.2%. No doubt you have seen that we are launching a share buyback program for an amount of 500 million euros. To help you in estimating your EPS for the full year and taking into account the share buyback, I would recommend that you base your calculation on a deleted number of shares of around 537 million. We will now complete the review of the P&L account. Non-recurring items, net of tax, amounted to a negative 257 million euros, compared with a negative 31 million euros in H1 2022. This year, the other income and expenses of 321 million euros mainly included asset impairments of 270 million euros, including 250 million for goodwill on heat cosmetics business, and 20 million for the Declare brand. Limited restructuring costs of 25 million euros, mainly related to Ambition France, our project to reorganize entities in France, and philanthropic donations and costs related to acquisitions for a total amount of 24 million euros. After taking into account all non-recurring items, net profit after non-controlling interest came out at 3.33 billion euros. Gross cash flow increased by 14.5% to 4.4 billion euros. As every year during the first half, the working capital requirement increased this year less than in H1 2022. Capital expenditure of 724 million euros represented 3.5% of sales. For the full year, it should be reached around 4% of sales. Net operating cash flow exceeded 2 billion euros, up more than 50% year-on-year. And after payment of dividends, acquisitions, and reductions of the lease debt, residual cash flow was negative to the tune of 1.7 billion euros. The balance sheet remained robust, with shareholders' equity of 28 billion euros, or more than half of the total balance sheet. In May 2023, the group issued a bond for a nominal amount of 2 billion euros in two tranches of 1 billion each with maturities of two and five years. The proceeds of this bond will be used for the acquisition of ESOP, which is presently being finalized. At the end of June, net debt amounted to 4.8 billion euros and to 3.3 billion, excluding financial lease debt. The gearing ratio stood at 17.3%, and the financial leverage of NEP debt over 12 months rolling EBITDA at 0.5 times. The financial situations remain healthy. I thank you for your attention.

Good morning, everybody. As you've seen, we've delivered a very strong first half, and I'd like to walk you through some of my personal highlights before I share with you why we remain confident for the rest of the year and beyond. In the first half, our sales increased by 13.3% like-for-like, and we crossed the 20 billion euro threshold for the first time in a half year. Since the beginning of 2019, our organic top-line growth has amounted to 8.2% on a compound annual basis. That puts us well ahead of the global beauty market over that same period. In an environment still marked by considerable inflationary pressures around the world, our growth was driven by a strong contribution from volume, up 4.9%, and value, up 8.5%. We estimate that the beauty market grew by close to 10% in the first half. So we outperformed again, which is obviously fantastic news. But what makes me especially proud is that this comes after not one, but two years of exceptionally strong share gains. In terms of channels, both were dynamic. Offline stayed a strong comeback. We grew 14% in a market that was up nine. Our online sales grew 12%, slightly ahead of the market. Let us take a look at our divisions. All four were growing, but two were in what I would like to call hyperdrive, the consumer product division and L'Oreal Dermatological Beauty. Consumer products achieved its best half year on record. It grew 15% like for like and significantly outperformed the dynamic mass market. Growth was not just strong, but also well balanced. All major brands grew in double digits, all categories advanced, boosted by strong innovations. All regions were up, with Europe and emerging markets especially impressive. Illustrating the division's ability to, at the same time, democratize and premiumize, I want to emphasize the contribution from both volume and value. With 29% like-for-like growth, dermatological beauty delivered another outstanding performance, well ahead of the dermocosmetics market. All regions advanced strongly, with a particular shout-out to emerging markets and Europe. Growth in Maine and China was three times that of the market. As you know, our brand portfolio is highly complementary, and all global brands recorded double-digit growth. The two billionaire brands, La Roche-Posay and CeraVe, remained extremely dynamic. The newly acquired Skin Better Science was off to a very strong start. L'Oreal Luxe was up 7.6% and has been improving quarter after quarter. My key takeaways are the remarkable bounce back in China with high teens growth in the second quarter and the double-digit growth in all other regions. It is worth mentioning that year-to-date, the division's market share in China is equal to that of the number two and three combined. By category, we continue to outperform a very dynamic fragrance market thanks to many of our designer brands. In skincare, Helena Rubinstein continues to grow at high speed. Professional products grew 7.6%, cruising ahead of the market. Particularly remarkable was the strong momentum of the two leading brands, L'Oreal Professional and Kerastase, which were supported by successful innovations like Metal Detox, the new Inoa, and Symbios. Mainland China and India continued to be very dynamic. Sales were up in all channels, salons, salon-centric, e-commerce, and the selective channels. Now let's talk about categories. They all grew double digits, led by fragrances at plus 22%, skin care at plus 15%, hair care, hair at plus 13%, and makeup at plus 11%. When it comes to the regions, I'm pleased to say that all five grew in the first half, making for a very broad-based performance. Another way to look at the power of our balanced geographical footprint, the top five growth contributors by country. The USA, China, the Germany-Austria-Switzerland cluster, France, and Mexico represent each one of our regions. Our two emerging markets were particularly strong, with identical growth of plus 24% in Sapmina and Latin America, growing around 1.5 times faster than the market. They represent 15% of our business, but contribute a quarter to our growth. Our business in Europe advanced by an impressive 18%, five points ahead of the markets. The region contributed over 40% of our total growth. Momentum was broad-based, including in some of our key markets. In North America, we grew plus 13% with a strong contribution from both price and mix. All divisions advanced. Growth was in double digits in consumer products and dermatological duty. As you may know, we launched Lancome on Amazon earlier this year, redefining luxury beauty on the platform. In North Asia, we grew plus 4%, implying a very encouraging acceleration from plus 2 in the first quarter to plus 6 in the second quarter. As you can imagine, there are many moving parts behind this second quarter performance. Most of them linked to what we call the Chinese consumption ecosystem, which includes notably mainland China, Hainan, and Hong Kong, three markets between which consumption is becoming increasingly fluid. So what is happening in that Chinese ecosystem? In mainland China, we are seeing clear signs that consumption is recovering. Consumer confidence is improving, restaurants are full, local travel is resuming. The recovery has been a bit slower than expected, but let's be honest, three years of COVID will take a bit of time to be fully digested. Appetite for beauty remains strong, both offline and online. In the second quarter, beauty growth recovered to plus 6.5%. As you remember, it was still negative in the first quarter. And how did we do? Our growth accelerated strongly from broadly flat in the first quarter to meet teens in the second quarter. Our innovations resonated well with consumers. We introduced new brands like Valentino, Prada, and Takami, and we entered lower-tier cities. We significantly outperformed the market and continued to gain shares. In itself, that's very impressive, but I'm particularly proud of this achievement by our Chinese teams as it comes after two years of very strong share gains, further cementing our clear leadership position. We had a very successful 618. Lancôme and L'Oréal Paris were the number one and two brands, and we had another six brands in the top 20. I want to highlight that our growth outside 618 was equally strong, signaling that the market is gradually getting back to normal. In Hainan, however, there's been a clear deterioration between the first and the second quarter. As you know, in mid-May, the authorities started to exercise much tighter control over the Daegu trade to preserve what they call Hainan's golden brand, and travel retail operators have consequently refocused on the individual traveler. This has had a severe impact on industry-wide sellouts. We're obviously not immune to this. We estimate that if the current policy remains the same, it could lead to a couple of months of inventory reduction, keeping in mind that our absolute priority is the protection of our brand's equity within the Chinese ecosystem. To put our exposure into context, Hainan represents less than 3% of our business, the total Chinese ecosystem around 23%. So mainland China has always been our focus, and we believe that the new paradigm in Hainan should have a positive impact on sell-out in the domestic market. This plays in our favor, given how strong our market share is in mainland China. As we have seen on Douyin recently, there has already been a partial transfer of purchases to the domestic market. All in all, our first half sell-through in the Chinese ecosystem amounted to plus 10%, and was indeed well ahead of the market at plus 2.6%. With this, let's now move to our financial performance. You have heard me speak about our virtuous circle many times, and we have really seen it in action in our first half. Our operating margin increased 30 basis points, and that was after we spent an additional 100 basis points on our brands. To me, what makes our virtual circle so unique is that it's constantly fueled by our obsession with valorization. Every time we launch a new product, we do it at a premium to the existing range. Why? Because our unrivaled R&I backbone ensures that we make it better for the consumer and that the consumer is willing to pay for the added value. Let me share with you two examples. You might be surprised that they are both from our consumer products division, which most of you probably least associate with valorization. Well, you're wrong. The first one is Garnier Good. It is two times more expensive than our existing color ranges. The second one is Elvive Bond Repair. Its price per milliliter is three times above that of our existing hair care products. And they are both very successful. I would like to highlight that our financial performance came with a solid extra financial performance. In early July, L'Oréal was recognized by Standards and Sport Global for its sustainability performance with an ESG rating of 85 points out of 100. L'Oréal ranked among the world's most gender equitable companies by Equilip. More than ever, we are focused on our sustainability transformation and committed to our net zero trajectory. So, you've seen that in the first half, Our growth engine fired on all cylinders, and our virtual circle was in full swing. Of course, we can't deny that we are facing a few headwinds for the second half. Currencies will be less favorable, as mentioned, Hainan, which we addressed earlier, and price will make a smaller contribution to total value growth as last year's increases are starting to roll over. Despite that, we are very confident in our ability to maintain very good momentum in the second half, and let me give you five reasons why. First, we really believe that consumer demand for beauty remains and will remain very solid. You saw how strong the markets were in the first half of the year. And as we are entering the second half, we do not see any sign of down trading in the Western world. Our consumers are relatively affluent and always on the lookout for high quality, indulgent beauty products. Emerging regions remain equally dynamic. Another way to gouge consumer interest in the beauty category through the level of search queries and social conversations around the word beauty. On Google, we saw an increase of 14% across all categories and regions. Fragrance was up as much as 26%. And on TikTok, beauty is the number one topic. Second, our 36 international brands have strong innovation plans for the second half and the holiday season. This will allow us to keep winning in the beauty market that is forever premiumizing. Some of the launches that I'm particularly excited about include the new male fragrance from YSL and the extension of Prada in makeup and skincare. Super Stay from Maybelline, Absolute Repair from L'Oreal Professional, the daily UV protection from CeraVe, and much more, particularly in makeup. Needless to say, they will all come with strong valorization. Third, We continue to reinforce our digital leadership, which has always contributed to our outperformance. Let me give you three examples. We are the global number one in beauty share of influence last year and managed to increase our lead by five points to over 26%. And we were the first movers on TikTok in China and the Western world. You may also have seen that in cooperation with Microsoft, we debuted Ready in a Click three weeks, two weeks ago. This is a virtual makeover from our brand Maybelline New York, which gives 300 million Microsoft Teams users access to a digital makeup bag that contains all the must-have products needed to create up to a thousand different looks. We're confident that the users will want to buy the looks in the real world. And of course, we're exploring the possibilities of Gen AI and the metaverse. Fourth, we stay true to our R&I roots. R&I is at the very heart of L'Oréal and has been for the last 114 years. Last year alone, who spent over €1 billion on RNA and continued that trend in the first half of 2023. In the spirit of seizing what is starting, we have built a unique biotech and green ecosystem for beauty over the last two years. In the first half alone, we invested in Debut, a US biotech company, through our VC fund board, and announced the partnership with Baker Labs, the biotech incubator at Berkeley. Earlier this month, in cooperation with Verily, We launched the world's largest and most diverse skin and hair health study, and there's more to come. Hand in hand with our digital transformation, RNI has extended it to what we call beauty tech. As we showed at VivaTech, this will allow us to serve four major trends, personalization, sustainability, inclusivity, and improved company-wide efficacy. Last, but definitely not least, are engaged teams. Our strong performance in the first half would not have been possible without them, and I want to say a big thank you for all their hard work. I'm glad to share that in our yearly employee satisfaction survey, our engagement rate has reached 78%, six points ahead of the industry norm. L'Oreal's culture and the commitment and agility of our teams are a truly fantastic competitive advantage in today's world. Before I conclude, let me remind you that our brand portfolio will soon be enriched by ASOP, In the global luxury market, IZOP is uniquely positioned. The brand stands out with its sensorial product, distinct packaging, and unique retail philosophy. We expect the acquisition to be completed in the second half. Let me remind you that the first-time consolidation should have an estimated dilutive impact of around 25 basis points on L'Oréal's operating margin on a 12-month running basis. In conclusion, We had a very good first half. As always, there were many good surprises, a few not so good ones, but with our 13.3% LIFO-like growth, our continued market share gains, our new record operating margin, we have proven that we know how to make the most of the good surprises and how to swiftly deal with the not so good ones. Despite the remaining uncertainties of the economic landscape, we are confident that we will deliver another very good performance in the second half. And we look beyond 2023 with great conviction. We operate in an incredibly dynamic market. We have created for ourselves an unrivaled, well-balanced footprint by category, channel, or region. It is this balance that has allowed us to weather turbulences in our industry well many times over. Our virtuous P&L will continue to fuel our growth while helping us improve our margins. Thank you very much for your attention, and I would like now to open up for questions.

This is the operator. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Please use your handset before asking your question and set your microphone on mute once you ask your question. The first question is from Bruno Montagne from Bernstein. Please go ahead.

Hi, good morning. Good morning, Bruno. Good morning. Some of your numbers are really fantastic, but it's confusing, right? Historically, we were used to Lux growing very fast, China and the US, and now it's good old Europe and its mass market consumer division. So it's a bit of a world upside down in terms of what's driving growth, but the end result is always the same. It's high growth. So my question really is, is this kind of rapid shift into new of where you're getting your growth? driven by the markets or would you say it's really driven by L'Oréal itself? in the way it deploys its A&P and growth resources. So is it the market that caused the shift to where the growing commerce? Really, you guys optimizing whatever you can get to growth. And the second related question to that is, Nicola, you sort of talked in the past about how you manage A&P on a global basis to be able to go and chase the growth, whatever the growth is. Could you explain a little bit more, you know, the frequency and the speed at which you redeploy A and B growth? Let's say if you do suddenly see China going on lockdown, how long does it take you to react? And can you explain a little bit how you're able to activate growth so quickly? Is it brand advertising? Is it activating more new innovations, more new launches? I'm just confused about how quickly you can redeploy resources to keep finding that growth. Thank you.

Well, thank you for this great question. I think, you know, as you pointed out, the strength of the L'Oréal model is precisely its balance and something we've worked hard on. You mentioned Europe, but we also announced that we were concentrating on the emerging market, and they now represent 25% of our growth. We are trying to be as balanced as possible so that we can seize all ascending currents and be a bit more prudent when the weather is a bit tougher in some parts of the world. So we do that constantly. And clearly, when we see the appetite of consumers for dermatological beauty, we are ready to overinvest there. When we see that the emerging markets' economies remain extremely dynamic and their currency is very strong, we can accelerate there. And so we try to seize opportunities. I think that's the magic of of the L'Oréal model, and we try to make the most of it. We see that, if you remember back a few years ago, consumer products and divisions were struggling a little bit, so it took some time to fix the brands, the innovation portfolio, the footprint, and now when we see that it's ready to roll, we invest behind it. And the way we do it, to answer your questions about... about flexibility is that we have, without entering into too many secrets, but we have monthly meetings between Christophe Babule, myself, and our head of business finance, and we look at the evolution of the markets, and we either increase or drop the expected profitability of some parts of the business to give more fuel or less fuel to customers. to others. And clearly, we can do it very quickly. Even if we take this year, we knew that the first quarter of China was going to be difficult because of the inventory we had and because people were sick, so we cut. And the decision was done very quickly to cut media investment or social media investment from our Chinese team. And on the flip side, because we were seeing that the Chinese market was indeed going to be accelerating in Q2, with 618 approaching, we re-increased the president of China, of the L'Oréal China, re-increased its investment on second half. So a lot of our fuel is media, is social media. and it's very flexible. I have to say even that social media is even more flexible than the good old TVs where you had to commit long in advance. So it gives us a lot of flexibility, not 100% because you have some point-of-sale materials that you can't just eliminate, but we are very flexible, and that allows us indeed to accelerate where the growth is.

And if I may complement regarding the growth by regions, I have to highlight that today the region that is growing the fastest, I mean the market, is still Europe at 13%. So ahead of America, the market is growing as well, but at 11%. And in North Asia, only at 4%. So that's also the reason why our growth is in Europe.

Thank you.

The next question is from Celine Pannuti from JP Morgan. Please go ahead.

Good morning, everyone. Thank you for taking my question. My first question would be on North Asia, a few moving parts there. So could you please, I think you said in Q1 that the Asia travel retail was flat. What was Asia travel retail in Q2, and could you give us with the moving parts in terms of South Korea and Enan? should we expect the sell-out and the sell-in both to be negative in the second half of the year? My second question is on, sorry, and following just on China to mainland, you said was accelerating from minus two to plus six and a half in Q2. What is your best guess for the second half? Just, you know, I saw in one interview that you alluded to the middle class being a bit more regarding in terms of the price points, just how you feel about the mainland China demand unfolding in the second half. And my second question is North America. You mentioned that the market was still quite good at 11%. We saw that your performance decelerated from, I think, 16.5% to close to 10% in Q2. I just want to understand whether this is really what we see in terms of the fading of the price points or what's going on that led to such a deceleration quarter on quarter. Thank you.

Okay, Céline. I'll start with North America because, indeed, it's quite easy. We do not see any slowdown in America. The difference of selling between our two quarters is very simple. It's that in Q1, the comparative for last year was a COVID lockdown comparative. We still have lots of stores that were closed. not all reopened, so there was an extra boost. Plus, there was, as I said in the previous call, a little bit of reloading from luxury retailers, notably in fragrance in North America. But if we look at our sell-out performance, it's pretty consistent. We had a great Prime Day recently in North America. And we overall see... You know, a pretty good optimism in America. I think yesterday the GDP for Q2 was announced and higher than expected. The level of employment is really high. It means that people are confident that they will not lose their jobs. Level of employment is 66%. For women, it's 77%, which is, you know, our number one prime target are women. Of course, we don't have a crystal ball to predict the future, but North America, in our products, we do not see a slowdown, and we see consumers that want to buy beauty, whether they're Gen Z or working people. As far as North Asia is concerned, you are right to say there are lots of moving parts. On the one hand, you've got a change of I would say, a change of paradigm in travel retail. As you rightly pointed out, in the first quarter, the Korean operators reduced their buying, and particularly their trade with Daegu. And as I explained, in May, the authorities in China decided to put a strong pressure control over daigus and of course that has a strong impact on sell-out particularly because during the years of lockdown where there were there was barely any any traveler that was going to a real traveler that was going to travel retail that was probably the way to keep the the retailers So there's a change of paradigm. Short-term, it will be negative, but mid-term and long-term, it's very positive, because in the end, this is market that's going back to mainland China and will contribute to the acceleration, I believe, of mainland China, where we have both better shares, lots of fuel. I mentioned the share we have in L'Oreal Lux, which is close to 33%. So it's going to be a different profile for the months to come. So slow down in travel retail, probably a couple of months of destocking, but I guess there will be continued acceleration on the mainland Chinese market. Giving you a number is very difficult, but what is true is that you had a 6.5% growth on China. on Q2, May and June were good. 6-18, the 6-18 festival in terms of total GMV, that's before returns, but the overall market was at plus 25. So we see that consumers that probably take some time to see the confidence go totally back up, it's picking up, but not yet at the pre-COVID level. They're going back to beauty. And what I can say is that they also, the Chinese consumers are more rational about their beauty purchase that they were before COVID and they are really looking for efficacious product for performance. And again, that's for me a good omen for the L'Oreal products, which as you know, are always created and based on efficacy. I don't know if Christophe, you want to add something to that?

No, I think we can be very reassured to see a Q2, I mean, the market growing at more than 6% in China. you remember that Q1 was still polluted by COVID issues. And on top of that, from what I hear and I see, at least from the political stance, there is a wish to push for more consumption. So it's now about us, you know, to keep exciting our consumers with fantastic new products and launches, which will come very soon in S2. So

And I must say I'm very happy to see that if we look at sell-out in China in Q2, we're almost two and a half times the market. And it's important because I remember, Céline, we had a little conversation in Cagney where you were wondering whether we would still be able to keep winning share in China considering that we had benefited from our strong e-commerce footprint when stores were closed. Well, I must pay tribute to my Chinese teams because they continue to do so, and let's hope it continues.

Thank you. The next question is from Olivier Nicolai from Goldman Sachs. Please go ahead.

Hi. Good morning, everyone. I've got two questions, please. First of all, historically, on marketing spent as a percentage of sales, it's been around 31%. Now, you step up marketing a lot in H1 to 32.5%. That's up nearly 900 million euros year-on-year. Is it linked to the phasing of product launch, or is it a good proxy for the years? In other words, essentially, should we expect an acceleration in H2 EBIT margin driven by gross margin improvement, particularly as luxury will continue to rebound in H2 and presumably your input costs are going to be coming down? Second question is on Europe, which was clearly the main surprise today. So could you give us, first of all, an idea of the volumes growth you had in H1 out of the 18% sales growth? And then also, can you give us a bit more details on which category was the main driver for the growth? Is it Suncare, for instance, as per your comments related to the Vichy brand or La Roche-Posay? Thank you.

You want to take the first one? Yes, I will take the first one. So, yes, we've been... Pushing hard in terms of investment. This is to the fact that, first, as you know, the market is very dynamic, so it's the good momentum to invest. And also, we have still to develop many of our brands in new markets. This is something that we have already seen in the past, the Ceraves, the Valentino, the Prada. Cerave still is 60% of the sales are in the US, so there is still a lot to do and a lot of investments to do in new markets to push the brand. So that's one of the reasons, but the same for other brands and mainly in luxury. So we are using this momentum to, yes, prepare for the growth of the future.

And traditionally... Our EBIT margin is unbalanced between first half and second half.

Maybe you can comment on that. When it comes to the EBIT margin, there is a pattern, of course. As you know, there are high investments in the second half, mainly due to big promotions to Christmas to 11-11. So there is usually a gap between first semester and second semester to be 0.5 up to 100 basis points. So, we just follow the usual pattern in terms of profit share between S1 and S2. Be reassured that, of course, we will keep increasing our margin because this is a market that is growing at more than 10%, I have to say. There is space, of course, to keep improving our bottom line.

And as far as Europe is concerned, in terms of value-volume components, out of the 18%, there's 7.4 in volume. So a very strong growth in volume, which means that consumption of our categories, or at least our brands in our categories, has remained very solid. So there's both a strong valorization effect, which is quite new for Europe, a great volume growth. And of course, we've had a better sun care season this year, particularly both in mass market and in dermatological beauty. But it's really across all categories. We have a great momentum in makeup. Maybelline is really flying. NYX, whom you may have seen, is a has done a great partnership with the Barbie, the movie, which is the hottest movie of the moment and has really sold off on that. We have a great performance also in hair care with the success of Elvive Bond Repair. Hair color is a bit soft, but we intend to reignite it with good from Garnier. And skin care is also good. So it's not just... It's not just sun care. It's across the board. And I have to say, it's a really good balance of innovations. We had a great vintage of innovation this year, and I hope that the second half will be as good and confident about it. We're also progressing in fragrance. And what's interesting, I think, in the volume value strategy is that, of course, we've taken price increases across the board to offset some of our You know, the input cost that impacted us. But we've been, I would say, using our RGM tools, we've been relatively sound and wise on the catalog of products that have been increased, but I would say below the input costs that we took. But all the new products have been really, and as I showed in my presentation, dropped at super premium. So we're in this dynamic where if you want the great new product, you will pay more, and it attracts people, novelty lovers. But if you want to stay loyal to something that you've always been able to afford, you still can do it. So that's been proven to be a pretty good recipe. And when I compare with other... mass market players, I see that the balance between volume and value in mass has been pretty good.

Thank you very much.

You're welcome.

The next question is from Ian Simpson from Barclays. Please go ahead.

Good morning, everyone. A couple of questions from me. Firstly, in terms of the components of greater China growth in the second quarter, You've very helpfully given us mainland China. I just wondered if we could have kind of Hong Kong, Macau and Hainan just to get a sense of how those things fit together. And then secondly, I wondered if we could dive into some of your emerging markets. So you've done a great job turning around Mexico and Brazil in recent quarters. I wondered what levers you've pulled to get those performing as well as they now are. And perhaps a quick update on India as well would be great. Thanks very much.

Okay. On Greater China, or what we call the Chinese ecosystem, we have given you the The sum of the parts, the sell-out on our sell-through, the market was at 2.6 and we're at 10. And we're not going to break it down in little pieces, but China is very positive, Hong Kong is very positive, and on Q2, travel retail was negative. And that gives the total that you've seen. And I think it's, again, I think it's a good rebalancing of our ecosystem. And by the way, I want to add to this that we continue to have very good performances in other North Asia countries. Japan is at plus 18, which is great. And we are at a smaller base, obviously, there. But we have very good performance. And as far as the emerging markets... our concerns. We indeed are very happy with our performance there. Latin America was a good, we had higher shares than in South Asia, for example, but it's true that the market was not easy. And here it's really a win across the countries. First of all, with two strong countries that are Mexico and Brazil, where we are indeed gaining shares, with a strong mass market performance, a very strong LDB performance, so dermatological beauty is doing fantastic. And I would add in terms of countries, before maybe going more back to divisions, but that we also had created a new cluster, and we've regrouped countries where we had probably several subsidiaries, but little business. We've regrouped them into a cluster, a bit like what we've done with Germany, Austria, and Switzerland. We created the cluster that's called CERAN, which is Colombia, Ecuador, and the region, which goes up to Peru. And this is becoming a strong third growth engine for the region. And that's... That's overall very positive for Latin America. And the other good thing about Latin America is that we have currencies that are holding very strongly versus the euro. So overall, you know, in Latin America, the second quarter at plus 25 after a strong Q1 at plus 22 is very promising. And as you heard, Mexico was... number five growth contributor for the first half. And as I've run this country a few years ago, I'm very happy and proud to see Mexico up in the lead. Strong, strong performance from makeup also. I wanted to mention Maybelline is doing great in this region. If I take the other part, which is the Sapmina region, it's also doing great with, you know, plus, again, plus 25 in the first half. All countries are growing. Very, very, very strong in Australia and New Zealand. India is in line with the average. India is doing good. The first half is at plus 20, and we're gaining share. And we're very excited by the prospect in this market. The economy is very solid. There's an appetite for for beauty and e-commerce is, as we said, a good contributor to this growth. TikTok has expanded into Southeast Asia, you know, with their TikTok shop model after the Douyin model in China. And of course, we've transferred all the know-how from our Chinese teams very quickly to our Sapmina teams in Singapore. And that allows us to to make strong inroads in e-commerce in these parts. Again, Maybelline, Garnier, and what's interesting in Southeast Asia is that we see luxury studies starting to go strong, and particularly, again, same, a very strong interest in fragrance, with Libre, Y, Prada, Mugler, that seems to be having a good moment.

Thank you very much.

You're welcome.

The next question is from Guillaume Delmas from UBS. Please go ahead.

Thank you very much. Good morning all. Two questions for me, please. The first one is on your outlook. Nicolas, you've indicated that you have not seen any changes in consumer behavior so far. But at the same time, you're calling out the two headwinds of high demand and the price effect gradually annualizing. So putting all this together, are you basically pointing towards a clear sequential slowdown in your like-for-like from the elevated 13% plus in H1, but you still remain very confident that you will outperform a beauty market probably growing high single digits in the second half of the year? So that would be my first question. And my second one is on ANP, because you've added another 900 million euros. I mean, you're almost on track to reach 14 billion euros in ANP spent this year. That would be double your ANP budget of 2016. And arguably, during these years, using digital precision advertising, you've had far more bang for your bucks. So what I'm wondering here is, have you considerably during these years increased your share of voice, or is it more down to the cost of doing business that has increased? And I guess the other question on this is, is there a glass ceiling? So, I mean, at a point where you would start getting diminishing returns on your incremental A&P spend. Thank you.

Okay. I will let Christophe. Christophe loves the outlook question. So, I will... I will leave it to him, and I'll answer on the media.

So the first question was about... I'm not pointing out to a significant... No, I want to reassure you, because, of course, all that we have mentioned in the presentation of Nicolas is, of course, already well embedded into our trend. So what is important is, first, I want to stress the fact that Hainan is less than 3% of the net sales of the group. So if there is a slowdown, it won't impact dramatically the growth of L'Oreal. What we are monitoring, because there are always some one-offs that are polluting the visibility of the growth, we are still monitoring the CAGA growth over the four years. And if you look at the figures, you will see that we are constantly a bit above 8% growth now. And this is, I would say, our roadmap is to keep, you know, with this trend, the long-term trend of growth around 8%. So, of course, depending on the one-off in some markets last year, probably the growth will be a bit, bit slower than S1. What is important is to keep, you know, this cargo above 8% in the coming quarter. So that's the... The first point, regarding the price, there will be, of course, a slight impact because part of the price increase came in the second half of last year, meaning that in the second half we'll have, in terms of price effect, maybe a little bit less than at the first half. But this is already in our trend, so it won't impact the reason of the growth of the group.

And in the end, you know, what's interesting, and I remember we had debates, and I guess you guys were right when I was saying the beauty market was going to grow 4%, 5% on average. It's true that this year, because of, in fact, the effect of prices, and I have to say of very strong appetite from consumers for beauty, the beauty market is going, you know, it's going at plus 10 at the end, or close to plus 10 at the end of six months. it probably will slow down a little bit, but not really much. So I think it's going to be a great year for beauty, which is to some extent explainable, because on the one hand, you've got always this trend to want to have some indulgence when the times are tough. Plus, we're in the world, and we see that in several parts, including in the USA, where beauty is very dynamic. When you've got high interest rates, people tend to be a bit shyer, more shy, real estate, cars, you know, expensive items, and typically this benefits beauty. So, yes, we have a few headwinds, and I think it's important for me to flag them to you in total transparency. But overall, I remain very confident and very optimistic. As far as – do you want to add something, Christophe?

No, no. We're getting to the second question.

Yeah, we're getting to the second question. That's always a tricky one because – It's either too low or too high, but I'll give you my perspective. The big difference with 2016 is that we have much more brands. We have, of course, our big billionaire brands that we have to continue to support, and there is a lot of productivity happening, even though there's more and more fragmentation in media, but it's better targeting, so it's okay for us. And we are really getting more and more productive on that, as I told you in a previous sequence We have invested and we are developing our own AI-powered ANP allocation tool, which is right now in pilot mode in a couple of countries, which gives spectacular results in terms of increase in ROI, both short-term and long-term. So we have these existing brands which we have to continue to support and where the percentage of of fuel related to sales is globally stable or going progressively down thanks to productivity. But we are bringing in new brands. And these new brands, if you take Prada, if you take Valentino, if you take Payers, they need to be supported. And that's what we do. It's preparing the billionaires of tomorrow through stronger investments. And then we'll enter soon, we have a new model with Aesop, which will be much less media dependent and more retail investment. But even for that brand, we see in the world of today that managing the influencer game is very important. And the fact that we have a 26% share of influence, which is kind of twice the size of our Global market share shows that our teams are getting better and better at mastering this game, which is not an easy one because it's constantly evolving and moving. So there are also new instruments to play with that relate to media. But overall, you will see productivity over time. But as we add brands, we also have to add fuel for the new brands.

And in S1 also, we have been investing more in brick and mortar since the business now is back to high growth. So that's also an area we've been investing more in last year.

Very clear. Thank you.

You're welcome.

The next question is from Fulbjörg Katzl from Berenberg. Please go ahead.

Yes, good morning, and thank you for taking my questions. I've got two. The first one is on travel retail. So it sounds like you think that this channel has rebase permanently. My understanding is that travel retail was a very profitable channel for you and also an important channel for consumers from smaller cities in China to discover products while they're traveling. So I was just wondering how will you reach some of these consumers now? Would you need to invest more in physical presence in higher tier cities? And if so, could this have a dilutive effect on your gross margins? And then my second question is on the premiumization theme. We've seen luxury brands underperform mass for a few quarters now. So I just wanted to get your thoughts if this marks a new era in beauty and if these trends are here to stay. So my question is, you know, has the product quality gap narrowed between mass and prestige products? You highlighted in the presentation the valorization that you had, for example, on Garnier and L'Oreal Paris. Or maybe has the cost of living and the economic uncertainty perhaps tilted in favor of mass versus prestige brands? So just interested in your thoughts on these topics as well, please. Thank you.

On travel retail, travel retail remains a fantastic channel both for business and to showcase our brands and we'll continue to use travel retail as such. And it's always been its purpose, by the way. You know, right now, the worldwide traffic is at plus 56% versus 2022. Very dynamic in the West, in Western Europe, and it's beginning to pick up in North Asia with Chinese traveling to Thailand and to other parts. So it is definitely a showcase for our brands. The only thing is that, as we said, I think the COVID, the lockdowns have kind of fostered An unusual development of this Daegu business, which is now being brought to normal levels. We do not know exactly what the Chinese authorities will want to do in the future, because rules can change from one day to another. So we'll adapt as we always do, but very clearly, we will continue to invest in travel retail, which, by the way, contrary to what you say, has a lower gross margin today. than the traditional business to much duty-free prices. But we will indeed continue to invest. And if you look, if you go to airports, if you go, I will go to Hainan next year again, but if you go to airports, whether it's LAX airport or whether it's the new terminals of Roissy-Charles de Gaulle or Dubai airport, you will see, you should see fantastic display of our brands. And it's indeed a way for, as you rightfully pointed out, for China, a way for consumers of Tier 5, 6, and 4 cities to discover our brands. They are overrepresented. And they also buy on Douyin, the same people. That's why I think there is a limit of transfer within Douyin. And we, by the way, continue to open counters, brand presence in China. in these new, more remote cities. On the first half of 2023, we have opened 50 new doors in either a new tier 4, 5 cities, or in new neighborhoods in existing cities. So there is still a lot of brick-and-mortar depth to be gained. So overall, no, travel retail will... will continue to play its role, but now it's being, I would say, normalized, and I think it's a good thing for us. As far as premiumization is concerned, you know, it's always been the game for L'Oréal to invest in quality and to sell quality at a higher price, which doesn't prevent us from having very affordable brands, like, you know, even in Maybelline, you have a The new mascara, which is Surreal, which may be sold at 13 euros, but you still have Great Lash, which is a good old-timer, which is 5 euros less. And we're trying, and that's, I think, the strength of our model, to be able to offer products to all purchasing powers, even though the L'Oreal customers are more on the middle, upper-classes, And that's probably why we are more protected from the impact of inflation in ourselves than others. But I think the great thing behind this is that we see, and that's probably one of the side benefits of COVID when people have had the time to pamper themselves, is that people really want, when they're going to spend money, they really want quality. And the rise, the development of hair, of sophisticated premium hair products is a strong sign. It's the results of this trend. It's also another interesting element is the fact that hair is longer, women have longer hair, and hair is more racially mixed. If you take the USA, it's spectacular to see If you take the Gen Z of the USA, 50% of the Gen Z in the USA is considering themselves as non-white, i.e., they have more mixed hair, curly hair, etc., and this hair is much more demanding. Therefore, hair care is super important for them, and they want the best. So we continue, of course, to serve them. But it also applies for Prestige. Kerastase, our Kerastase brand, I think, is growing. It's growing at double digits. I don't remember if it's 17% or 18%. And so it's not a transfer from selective to mass. It's everybody upping their level of demand. And so the mass consumer wants the best of mass and the professional consumer wants the best of professional. And we see it across most categories.

Thank you so much for that.

You're welcome.

The next question is from Sarah Simon from Morgan Stanley. Please go ahead.

Yeah, hi. I've got a couple of questions. First one was on marketing. Can you give us an idea of how much of your AMP is now on social and digital versus more traditional media and how that would compare with, say, five years ago? And the second one was on competitive brands. And I'm thinking about sort of the many small players that you see popping up all over the place. Are you seeing that the increase in interest rates is having any effect on the level of competition from those guys now? And the third one was just on competition. I think the perception has been that mass market would have a lower margin, but you've talked a lot about valorization and premiumization. Do you see the sort of mass market brands trending towards Lux, or do you think that in the end there will still be a distinction between the two? Thanks.

Okay, so social media, you have the exact number, Christophe, I guess. I see you with the chart in front of you.

Yes, so just to give you a broad understanding of how we spend, but most of it is still, of course, on the media advertising. And as you know, it's 75% driven by digital media. So this is still the main investment we do. When we look at what we call advocacy media, which will group social media and some smaller kinds of media, it's smaller but it has been a bit increasing, and it's in the range of a bit less than 20% of the total. So it's now quite important, it's not the major one, but it's still increasing a little bit, mainly, by the way, in emerging markets. where e-commerce is booming and young people are pretty much looking at what's happening in the social media.

So overall, a bit more than 70% of our media is digital. And then we are, as always, constantly adapting and changing a strategy to adapt to the rise or fall of different networks. And it's true that the big phenomenon of the last couple of years has been the explosion of TikTok, which is not only a phenomenon in China, but also in Southeast Asia, and of course in North America. If you look at the incredible success of Cerebellum, a brand continuing to grow at 38%, it's because it's a great brand. It's a great brand that's recommended by dermatologists, but it's also the brand of L'Oreal that has mastered the codes of TikTok the best. and all the other brands are trying to learn from them. So it's really, I have to say it's fascinating because you can, as well, our brands have very different targets. We're getting better and better at targeting, and I'm making sure we have not only the right influencer, the right channel, but also the right tone of voice to be successful is an art, and I'm trying to make sure that my teams are getting better and better at that art, and that's very positive. As far as indie brands or small brands are concerned, they are always both a challenge and an opportunity. They're a challenge because indeed, and that's not new since the open platforms and the rise of e-commerce and social networks, we've seen the explosion of small brands. Many do not last. A few... are very successful and they are fierce competitors. When I say they are an opportunity, it happens that they are also the ones that are pushing us to adapt and transform. When we see the first appearance of indie brands, it forced brands like Lancôme or L'Oréal Paris that were the establishment to become a bit more agile, to learn to work with these influencers we're talking about, to adapt their tone of voice. And when you see some of the stuff they do now, I think they're getting better at it. And then if you have the benefit of both scale and in the agility, you can be very, very, very strong. And actually, if we look over the period of the last 45 or even 10 years, we see that our biggest brands have often almost always grown faster than the average of L'Oreal because when you have the benefit of scale and this new technology, you know, tricks of the new trade, you can be pretty good. And as far as profitability, you know, we are trying to improve the overall profitability of the group. We always play – we have four instruments to play with. My – of course, my aim, and I'm always pushing each division to – to improve regularly their profits. But as it was debated in the prior question, we always try to adapt our investments to the opportunities. So when there's one that needs more fuel, we will allow them to either stop growing their profitability or temporarily drop it. Some others will take it up. In the end, I'm very happy to say that today, the fastest growing division of the group is the most profitable one. It's L'Oreal Dermatological Beauty, and that's good for the overall performance of the L'Oreal group.

Thanks. You're welcome.

The next question is from Robert Ottenstein from Evercore. Please go ahead.

Great. Thank you very much. First a question of clarification. You mentioned during the prepared comments that China was I think 23% of sales, Henan 3%. Can you give us precisely which year or period that referred to and then in that year how big Korea and Daegu overall would have been. So that's the first question. And then the second question, if you could give us a little bit more sense of your strategy in China skincare, you know, focusing on Helena Rubinstein, the role that Aesop is going to play, Corita, and how that how the evolution of the China skincare strategy is going. Thank you.

Okay. Well, on the numbers, 23% was the full Chinese ecosystem, which includes mainland China, Hong Kong, and Hainan. Okay. So it doesn't include Korea and doesn't include, of course, Taiwan or Japan. So I'm not going to break it down. As far as the weight of Daegu, frankly, it's very hard to know because it's managed by the operators themselves. So it really depends on the brands, on the periods. And I think the important message here is that for us, and that's something we explain many times, and I guess we are reaping the fruits of it today in our Chinese performance is that we have always, always, always worked at favoring and at protecting the Chinese domestic market. We have a specific working group which is called CCCT, which includes our travel retail teams and our Chinese teams managing to make sure that the level of prices, the type of promotions, done in travel retails were never detrimental to the Chinese business and that's why we valorize so much our travel retail business. So overall, we feel we've done the right thing for China and that's why our share continues to increase in L'Oréal Luxe China. As far as skin care is concerned, even though there are lots of opportunities in China in fragrance, which is booming, in hair care that's premiumizing, it's true that skin care is by far the number one category. And we intend to grow it with all our divisions, well, at least the three divisions that are in skincare. So clearly, and I will finish with luxury and to answer specifically your questions, we have dermatological beauty is still quite small in China, but it's going three times the market. And we see that La Roche-Posay has some good tractions, and we believe, and SkinCeuticals is also very strong in China. That's the country where the brand is sold not only by derms, but also in stores and boutiques and counters. So it's a luxury medical brand in China. L'Oréal Paris is also very strong on skincare, including men's skincare, where we have big men expert business in China. But what is true is that L'Oréal Luxe is our number one weapon or division for skincare gains. And there, it's true that we are pushing, because that's what Chinese consumers want, we are pushing the most premium brands because it's about the quality of the product and it's about also the experience that you can provide at a counter. On Elena Rubinstein, for example, we do not just have nice counters. We have cabins where consumers can come and have treatments like they would do in a spa. This is either in a department store or in a separate room. That's what we do with Carita. Carita is very early days, so today it's very, very small. But we have great ambitions because this idea to have a super luxurious, aesthetic-inspired skincare brand is very promising. So today Carita has just opened a couple of counters. And he's providing services in a few spas of hotels. I want to mention, and I'll finish with Aesop, I want to mention Takami, because Takami is a Japanese brand. You know, it's a brand that happens to be the Takami serum is the number one skincare item in Japan. And we've just begun to roll it out in China. I went a couple of months ago in China to see the first counters, first beautiful blue counters of Takami. And it starts very, very well. So this is another very high-tech, premium, incredible brand. And, of course, Aesop, which you rightfully mentioned, which is not just a skincare brand because it's about, you know, they have many categories. But it's a brand that's just in its early days in China. And again, it's very aspirational, very premium. And the experience you have in stores, as I'm sure you've already been in one, are very unique. And last time we went to Shanghai with Christophe, that was before signing the deal. We had the pleasure to visit him. the Aesop store in Shanghai, and it was like packed with Chinese consumers, both male and female. And I think that's one of the very interesting things, both in skincare, but particularly for a brand like Aesop, is that it's not just for women. It's really across genders, and that, of course, doubles the market potential. So very optimistic about Aesop.

The final question is from Tom Sykes from Deutsche Bank. Please go ahead.

Yeah, thank you. Thank you for your time this morning. So just briefly, could you remind us, please, when are the toughest sell-in comps for you in Hainan, please? Because it won't just be... A question of when you're up against the tougher comps as well. And then just thank you for putting the comments about volume and number of units. Just to be clear, I suppose, on the accounting. So units literally is that if you sell two times 50 versus one times 100, you'll see an increase in volume because the number of units will have gone up. And I suppose just to that, are you seeing anywhere a trend towards smaller unit size? And is that something that may have some seasonality as well, thinking particularly about Europe, maybe travel mini sizes, and whether that sort of helped at all? Please.

OK. So these are two complicated questions, because I'm not sure I got all the math of the second one. So I don't know if you can help me or Christophe.

Maybe we can start with the first question. I think it was related to the growth in Hainan and travel detail. You know, it depends really on the local situation. Today we have this problem of crackdown decided by the Chinese authorities, of course. The overall market is down, pretty down, as Nicolas said before, in the tune of minus 30% in the past two months. So it may last one month, two months, we don't know. And obviously it will have probably some effects in the coming months. But again, we are not that much worried because most of our business by far is mainland China. This is a standard we have been always defending. What is important is the mainland Chinese consumer And here we have a growth that is about 15%, so it won't impact the overall result that we have shown before on the Chinese ecosystem.

The second question was about... About units, what I can tell you is that we are not seeing a reduction in size of units. We are... Aside from some emerging countries where we sell many sachets, we are managing our price-volume ratios according to the brands, according to the initiatives. Specifically, if I take L5 Bond Repair, because it's a highly concentrated formula and therefore an export medium, it's a smaller packaging than the traditional SD, but it's a bit of an exception. Most of the products we sell are... are sold at the same type of size, and so we also, in some categories, bring a lot, and that's probably something. I take the opportunity to mention it, even though it might not be exactly answering your question, but we invest a lot in refills, because part of our sustainability transformation and roadmap is about reducing significantly the amount of plastic. Of course, we're transferring all our plastic to recycle progressively, but also we're trying to entice consumers to shift to... to even lesser packaging with refills. So when it's in mass market, like shampoos, you have refills that are bigger than the basic size of the shampoo. And if I take the refills we're pushing in fragrance, all our new fragrances are refilled. Therefore, less glass, no pumps, less packaging. They're also a bigger size than the traditional basic standard product of the fragrance that allows consumers both to have a price saving and to be able to refill several times. So that would be the only case where I see small format differences between our, I would say, our usual business and what's happening today. But in the greater scheme of things, it's not a big, there's no big change in our activity. It's just that our growth Our growth in units is the result of, I think, the quality of our innovations and sound pricing.

Many thanks indeed.

You're welcome.

Gentlemen, there are no more questions registered at this time.

Well, thank you very much for your attention and looking forward to our next exchange.

Thank you very much.

Thank you.

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may disconnect now.