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Welcome to our H1 results conference call. I'm here with Rodolphe. We are very happy to have you with us and we will start now. What we'll do is I will start with the key highlights, then Rodolphe will give you a bit more details in terms of the divisions and activities performance. Then I'll go through the key numbers and we will open for Q&A. Maybe before we start, I invite you to go to page two and read the Safe Harbor Statement. So I give you a few seconds to do that. And then I propose we start with slide three. LVMA showed good resilience in the first half of 2025, recording 40 billion in revenue, down 3% on an organic basis, with disparities by region, as I will explain later. In term of profit, the profit from recurring operations is 9 billion euros, down 15% versus the first half of 2024, although operating margin remains excellent at 22.6%, which is 150 basis points above the first half of 2019. Finally, very strong financial situation with the free cash flow increasing to 4 billion euros and gearing at 15.2. Turning to slide 4, a few qualitative comments on the key highlights of this first half. The start of the year has been disrupted by several layers of micro uncertainties, as you are well aware, as well as currency swings impacting short-term performance, albeit with a pocket of resilience. More specifically, we saw solid local demand in Europe and in the US and a tangible sequential improvement when it comes to mainland China in the second quarter. In addition, we saw a very abrupt currency swing in Q2, which eroded the purchases of American and Chinese consumers abroad, and especially in Japan, where we faced a very abnormal growth of 57% in the same period last year. In this context, we focused on the qualitative development of local clientele as well as on the following priorities. Continued emphasis on product innovation coupled with the start of new creative chapters in certain maisons. Selective investments in retail projects to continue to build long-lasting competitive advantages for our maisons. And on cost, we capitalize on current context to initiate long-term structural efficiencies beyond short-term mitigation efforts in order to maximize also profitable through when the headwinds subside. Rodolphe will now comment on numbers and initiative by business group and I will come back on financials in more details after that.

Thank you, Cécile. We'll start with brains and spirits. Turning to slide 7, the Wines and Spirits Business Group recorded €2.6 billion in revenue in the first half of 2025. This represents a 7% decrease on an organic basis versus the first half of 2024 and an 8% decrease on a reported basis after taking into account a negative 1% currency impact. Broken down, champagne and wines generated 1.4 billion euros in revenue in the first half, representing a 2% increase on an organic basis. Revenue was unchanged on a reported basis after taking into account a negative 2% currency impact. Cognac and spirits delivered 1.2 billion euros in revenue in the first half, a 15% decrease on an organic basis. and a 16% decrease on the reported basis, after taking into account a negative 1% currency impact. Finally, profit from recurring operations reached €524 million for this business group, down 33% year-on-year, with the operating margin for the division coming to 20.3% in the first half of 2025, slightly above the second half of 2024. On slide 8, the first half performance of champagne and wines benefited from improving trends in the second quarter in Europe, driven by stronger selling for champagne, and in the US by improving trends at Veuve Clicquot and Dom Pérignon, as well as continued international expansion of rosé wines. Champagne also benefited from improved selling in Japan in the second quarter. Moving on to brand initiatives, Moët & Chandon celebrated the 75th anniversary of the Formula One Championship as its official partner and collaborated with Phalle Williams for the global launch of a limited edition collection to elevate the birthday celebration experience. Ruinard and Veuve Clicquot gained market share on their key markets and Veuve Clicquot continued to support its value strategy with the launch of La Grande Arme 2018 Vintage. Dom Pérignon launched a new brand platform and unveiled a communication campaign highlighting its values and ties with artists. In cognac and spirits, the uncertainties related to tariff weighed on cognac demand in the U.S. and China, although Hennessy's depletions were better than selling in the U.S. Hennessy also highlighted the versatility of its VS quality to enhance cocktail recipes with a communication campaign called Made for More. Elsewhere, a new marketing campaign for Glenmorangie featured Harrison Ford and the Maison's distillers. Turning to fashion and leather goods, on slide 10, revenue reached 19.1 billion euros for the first half of 2025, down 7% on organic basis and down 8% on a reported basis after taking into account a negative 1% currency impact. Profit from recurring operations reached 6.6 billion euros, down 18% year on year, notwithstanding good control of operating expenses, which were further reduced compared to the first half of 2024. As a result, operating margin reached 34.7%, well above long-term average of about 30% in the first half. Moving on to slide 11, which details performance by brand. Louis Vuitton continued to display its pioneering mindset and exceptional craftsmanship through a wide array of initiatives, including a new collaboration with Takashi Murakami, as well as spectacular fashion shows from Nicolas Ghesquière and Pharrell Williams presented at the historic Cour d'honneur du Palais des Papes and the Centre Pompidou. The Maison also unveiled a unique new space in Shanghai, drawing amazing interest well beyond the city itself and highlighting Louis Vuitton's ability to express its DNA, the art of travel, through a wide diversity of differentiating experiences. Louis Vuitton also continued to innovate in its core leather lines and announced the launch of La Beauté Louis Vuitton, its new cosmetic segment, with first products available this autumn. Lastly, Louis Vuitton kept building on its involvement in major sports, including as official partner of the Real Madrid. We're going to Christian Dior. The brand began a new chapter in its history with the arrival of Jonathan Anderson as head of creation for men's and women's couture and accessories with the debut men's show achieving more than 1 billion views on social media. This follows the presentation of the final collections designed by both Maya Grazia Chiuri and Kim Jones for women's and men's respectively. Dior also saw good success of new bag innovation, including the D-Journey and Dior Toujours, which was complemented with new shapes, and the unveiling of its new high jewelry collection, Dior X-Key, designed by Victoire de Castellane. Moving on to share some highlights of our other brands. Loro Piana continued to perform well, capitalizing on its icons and exceptional fabrics, including a new one blending wool and silk. Céline enjoyed a successful debut show by its creative designer, Michael Ryder, just a few weeks ago, as did Givenchy's new creative director, Sarah Burton, whilst Loewe announced Jacob McCullough and Lazaro Hernandez as the Maison's new creative directors. with their first runway show upcoming in October. Loewe also celebrated the 10th anniversary of their puzzle bag with a number of limited edition designs, while Fendi saw the successful launch of the Mama Baguette, a larger soft leather version of the icon created by Silvia Vento and Yves Fendi in 1997. Fine Neri Mova continued to elevate its retail network, inaugurating a new flagship store on New Bond Street in London, and Berluti announced its partnership with French actor Victor Belmondo. Moving on to perfumes and cosmetics, on slide 13, revenue remained stable on an organic basis at 4.1 billion euros and decreased 1% on a reported basis after taking into account a negative 1% currency impact. Profit from recurring operations came to 425 million euros, down 4% year on year, leading to an operating margin of 10.4. Now to slide 14 and to look at some specific brand highlights. Parfum Christian Dior remained resilient and maintained its leadership in its strategic markets with good growth notably in China, Americas and the Middle East. The new eau de parfum version of the iconic J'adore and the launch of Dior Homme, reinterpreted by Francis Courrignon, contributed to this resilience, along with the Collection Privé high perfumery line, enriched with a new Bois Talisman scent. In makeup, the Maison enjoyed the global success of its forever foundation, as well as rising demand for the latest additions to the juridict and backstage ranges. Parfum Christian Dior also pursued its sustainability initiatives and committed to rewilding large natural habitats in partnership with the Worldwide Fund for Nature. A few comments on our other brands. Guerlain benefited from strong growth in Europe, the US, and the Middle East, as well as from good performance in key franchises, such as Rouget in makeup, L'Art et la Matière, and Aqua Allegoria in fragrances. Also doing well in fragrances were Givenchy, with its three key franchises, L'Interdit, Gentleman's Society and Irrésistible, as well as Maison Francis Courgeant and Acqua di Parma, which opened the door of its newest flagship, Rue Saint-Honoré in Paris. Parfum Loewe also delivered significant outperformance. Finally, in makeup, Benefit successfully launched Bad Girl Bounce mascara, one of its historical bestsellers, and consolidated its leadership in brow care. next turning to watches and jewelry on slide 16 where revenue for the first half of 2025 reached 5.1 billion euros unchanged on an organic basis and down one percent after taking into account a negative one percent currency impact profit from recurring operations came to 762 million euros in the first half of 2025 down 13 percent year-on-year EBIT margin reached 15%, improving sequentially compared to the second half of last year. On slide 17, we showcase some of the initiatives of our watch and jewelry maison, starting with Tiffany, whose iconic lines, Tiffany T, lock, hardware, knot, continued to achieve strong growth and to rise in the mix. The maison also continued to move forward with its store renovation plan, with nearly one third of the network now featuring the new store concept and outperforming. and enjoyed the recent opening of its latest flagship store in Europe on Via Monte Napoleone in Milan. Tiffany also unveiled its latest high jewelry collection, Sea of Wonders, inspired by Jean Schlumberger's aquatic designs. Bouguerie kicked off celebrations of the Year of the Snake in China with a unique art exhibition in both Shanghai and Seoul, inspired by one of its most iconic and successful designs, Serpenti. Bouguerie also continued to capitalize on its very strong legitimacy at higher price points with its polychroma collection in high jewelry and a new record for the world's thinnest tourbillon watch with the Octo Finissimo Ultra Tourbillon, marking its 10th world record in fine watchmaking. The Maison will also unveil its new flagship store in Milan on Via Monte Napoleone and its newly expanded manufacturer in Valenza. Finally, Chaumet and Fred continue to innovate on their iconic lines, B is for Chaumet and B for Chaumet and Force 10 for Fred. In watches, Beyond Tagovia's return to Formula 1 as official timekeeper in 2025 and title partner of the Grand Prix de Monaco, the Maison complemented its Formula 1 line of watches and launched a new design-to-win marketing campaign, taking inspiration from one of its most legendary ambassadors, Ayrton Senna. And finally Hublot celebrated the 20th anniversary of its Big Bang collection and then its 160th anniversary. Now, moving on to our last business group, Selective Retailing. On slide 19, you can see revenue reached €8.6 billion, up 2% organic and flat reported after taking into account a negative 2% currency impact. Profit from recurring operations rose to €876 million in the first half of 2025, an increase of 12% year-on-year. with the operating margin rising 110 bps to 10.2. Final slide of our business group, turning to slide 20, Sephora had a good start to the year with solid growth in Americas, Europe, and the Middle East, supported by the excellent performance of its store network, where Sephora continued to gain market share in ski geographies, as well as in more recent ones like the United Kingdom. all product categories contributed to growth with notable momentum in fragrances and Sephora of course continued to cultivate its selection of exclusive brands as well as its commitment to diversity and inclusion. DFS showed improving profitability in the first half of 2025. It undertook a series of measures to reduce costs and streamline its operations, including the decision to close the Galleria in Venice and finally Le Bon Marché, once again posted revenue growth driven by its differentiated range of products. and rich array of cultural events. The group also strengthened the organization of its department stores by implementing a shared governance structure for La Samaritaine and Le Bon Marché. This concludes the business group presentation and I will now pass back to Cécile for financial results.

Thank you, Rodolphe. Moving on slide 22, first half revenue reached 40 billion euros, down 3% on an organic basis and down 4% on a reported basis, including a negative 1% currency impact. If we move to slide 23 on the geographical balance, you can see that our regional mix remains well balanced, with Europe 25, US 25, Asia is down 2 points to 28, Japan is down 1 point to 8%, and other markets increasing 2 points to 14%, which I will explain further on the next slide so that you understand the geographical move of the performance sequentially. Moving to slide 24, here you have a good illustration of the regional disparities that I highlighted in my introduction, and it deserves a bit of observations. Europe and US are flat, whereas trends in Asia are much more negative, which is not particularly surprising in the context of a downturn in China, but it's worth highlighting. The impact of currencies I was mentioning in the introduction on tourism is very visible and requires a few explanations. In the West, the impact of tourism is measured but visible. Euro strength penalized touristic purchases in Europe in Q2, whereas the US region improved modestly. In Asia, the impact of tourism is much more significant as Japan benefited from exceptional demand last year driven by the yen weakness and we saw the reversal of this in Q2. Outside Japan, Asia improved in Q2 driven by local consumption. Turning to slide 25, which summarizes organic revenue growth by business group, a few comments here. Wine and spirit and fashion and leather goods are both down 7%. In the case of wine and spirit, it is mostly driven by demand in cognac. In the case of fashion and leather goods, by Asia and weaker touristic business. Perfume and cosmetics are flat. Here, too, there are significant contrasts between local markets, which are positive, and travel retail, which remains negative. Watches and jewelry are flattish, with modest growth in jewelry offset by watches. The contrast with fashion and leather goods come from Asia and Japan, where jewelry brands face much easier comps. Europe and US are not very different. Finally, selective distribution delivered 2% organic growth, driven by Sephora and with DFS improving sequentially versus the second half of 2024, but remained of course impacted by tourism. Slide 26, organic growth in Q2 was close to the first quarter at group level, but with two big moving parts. The first one we discussed is fashion and leather goods, which faced more difficult comps than group average in Japan in Q2 last year. And this market explains most of the sequential slowdown. Two divisions improve sequentially, wine and spirits mostly driven by better selling in Champagne in Q2 and selective distribution driven by better trends at both Sephora and DFS. Let's now move to operating income by division on slide 27. Wine and spirits saw the most significant drop driven by negative volume and mixed impact along with continued inflation in cost of goods sold. Fashion and leather and watches and jewelry are close to group average but with different situations. In fashion and leather, top-line evolution led to gross margin deleverage while we managed to contain OPEX. And in watches and jewelry, profits are resilient in jewelry. Despite continued investment in the renovation of distribution network at Tiffany, watches saw a more pronounced decline in percentage terms. Perfume and cosmetics reflect contrasted trends. Modest decline overall, driven by the brands which are more exposed to AGR and travel retail. Parfum Christian Dior was less exposed to these headwinds, given its particular, largely selective distribution strategy. Finally, selective distribution delivered a very good performance, driven by Sephora. which is growing both in revenue and profits and very tangible efforts to reduce the losses at DFS. If you comment slide 28 on the income statement, firstly, gross margin delivered as a consequence of a sales decline, including underutilization of capacity and some inflation in cost of goods sold. Operating expenses also contributed to the decline in profits but were contained with a 2% decline in marketing and selling expenses and a 5% decline in G&A which reflects the discipline in cost in the current context. I will comment the financial results on a specific slide. Maybe stop on the tax rate which increased by four points to 30.9%. 100% of this increase is connected to the booking of the first part of the surtax in France. So we've booked 317 million. The overall amount is a bit more than 700 and everything will be paid at the end of the year. Finally, minorities decline in line with profit at MH, partly offset by the reduction of losses at DFS. Slide 29, a few comments on operating income constituents. As you can see, perimeter impact was very negligible. Currencies had a negative 225 million impact, reflecting limited transactional and translation impact from currencies, but also the anniversary of relatively significant aging gain in H1 last year. In the second half of the year we will have higher transactional and translation impact if we extrapolate of course the rates that we have today and we should benefit from stronger hedging gain. Moving on slide 30 on the financial result, the cost of debt is broadly unchanged. The main evolution is linked to the revaluation method in mark to market of our investment financial portfolio, which led to an increase in value, but smaller than the one we had in the year before. So it creates a negative contribution to the financial results. It's not a profit or loss, it's purely theoretical and it's the way we've chosen to account for this financial investment. A few words on the structure of the balance sheet. Currencies had a significant impact on most balance sheet lines in Euro terms and this applied both to assets and liabilities. So the structure of the balance sheet is as a result quite similar to end of last year. Inventories remain under control and stable versus end of December at 16% of assets. slide 32 illustrates the very strong financial position of lvmh with as i said in the beginning a 4 billion cash generation in h1 up 29 this evolution is explained by a strong improvement from working capital offsetting fully the decline from profits taxes contributed a bit more than 500 million This is not including the French surtax that we will pay at the end of the year. And finally, investments also decreased modestly in Euro terms in the tune of 370 million euros. Overall, this leads us to an H1 where our net debt declined by almost 2 billion and Gearing now stands at 15% and we are proposing an interim dividend as a consequence that will be stable. Maybe a few words to conclude the presentation and then we will move to Q&A. If we look at H1, we can see that the performance was distorted by a macro context with a significant impact on touristic demand. Whilst the situation has weighed on our gross margin, we were able to contain the leverage on OPEX and we will continue, not with a view to do less, it's very clear that we will continue to invest, but with a view to do and manage to find more structural efficiencies. Currency moves allows us also to focus more qualitatively on our local consumers and we believe it's a healthy situation to build a closer and qualitative relationship locally with our customers and it has proven on many initiatives, it has proven important and successful. Product innovation has been and continues to be a key focus with tangible successes across all of our brands. There is more to come in retail, product offering and new creative chapters as commented by Rodolphe. Finally, we have been selective and demanding but we have kept investing in the most promising projects and you have a good illustration of this dual mindset in the delivery of the free cash flow in the first half. Investments remained elevated but we were able to generate incremental cash through lean management of inventories in particular. Against this backdrop and beyond the current macro disruption, we are very confident for the future in the ability of our Maison to continue to build desirability and build on their competitive advantages when the macro headwinds subside. Thank you very much for your attention and I propose that we move now to Q&A.

Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you wish to cancel your request, please press star 2. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. And our first question is from Luis. Singlehurst from Goldman Sachs. Please go ahead.

Hi, good afternoon, everyone. Thank you for taking my questions, Cecile and Rod. I just wondered if I could follow up on a couple of the early points that, Cecile, you mentioned at the beginning of the presentation. I think you mentioned that you're seeing a tangible improvement in China, and I wondered if you could just give us some colour around what you are seeing, particularly within the fashion and leather division, but also just broadly across the business, given the scope of the offer within the LVMH portfolio. And then secondly, I think you touched upon long-term efficiencies. And again, I wonder if you could give us some colour around, you know, where is the most opportunity, what are you looking at within that, and divisional colour would be very helpful.

Thank you.

Thank you, Louise. On China, yes, we have seen tangible improvement locally. We've seen that in Q2 mainly. And this has been driven also by some initiatives and some repatriation of the big job that we've been seeing in touristic demand from Japan. So overall, it has improved a few points in terms of growth. It's still negative, but it's high single digit negative and much improved. So that's on the part of the Chinese. What we see in China is that whenever we do and we come to create initiatives as Louis Vuitton has done, for example, you take the boat in Shanghai. Very unexpected. It's a space that is absolutely unusual, that mixes both exposition around the story and the culture of the brand, retail space, lifestyle, something that only Vuitton can do. And this is creating a lot of traffic. There are many visitors. The retail space is starting with a very strong start. And overall, it creates also a halo on the brand. So you might like it, you might not like it. We are not going to build 400 boats. But overall, we see that we are able to create connection and qualitative development on the local clientele. We mentioned China because it was your question, but it's much beyond China. Then regarding the question on efficiency, I think the context is opening a door and as a CFO, I tend to take that door in looking at how we can become more efficient structurally. And this is not in order to manage the cost, but it's really to be able to unleash some resources and continue to push investment behind our brand and behind their competitive advantage, which is absolutely key for the future and for the growth. And we have been having different conversations, so it can range from looking at different retail equations in terms of how we define the cost per square meter on the capex we do and depending on the type of store, It can be around how do we manage the relationship with the agency when we do a show and where it makes sense to have margin for the agency, where it makes sense to use our own supplier. So it's a lot of different things. Overall, there are many opportunities, I believe. It will take time, so it's not like shortcuts. And I think you should be happy that it's not easy cuts, because easy cuts tend to go for less investment. And the idea is really to create and to go for efficiency opportunities.

Our next question is from Charles-Louis Scotty from Kepler-Chevreau. Please go ahead.

Yes, thank you very much for taking my questions. The first one is on your stock network. I think the selling expenses were still up year on year in each one, but in decline in line with the organic sales growth. So a question regarding your stock network. Last year, there were still 125 stock openings across the passionless goods and watches and jewelry divisions. What should we expect in 2025? And some of your pieces have started to rationalize their retail footprint. Should we expect a similar approach for some of your brands? And could you please also, the second question, update us on the progress of the restructuring plan at Moet Tennessee and when the related savings are expected to be visible in the P&L, and shall we consider the 20% a bit margin reported in H1 as a trough for the division, or could the continued decline of cognac sales keep weighing on the profitability? Thank you.

thank you on store network there are different realities behind the different activities so you know that on tiffany we continue to renovate the network and we are done at 30 so they're still way to go. And by the way, every execution of store is the proof that it's a right investment because stores are overperforming when we open them. The latest one was very early or not. It was one week ago probably in Ginza. It's a beautiful store. I invite you to go there if you have the chance. On stores, we have a certain number of projects. If you look at Vuitton, Vuitton has been opening stores in New York, 57. We've opened Dubai. We've opened Macau for a season. And all these stores are growing strong double-digit. So it's really around execution, having them at the right place. In the meantime, it doesn't mean that we keep opening the stores and we are not managing the network. So if you look, depending on the countries, depending on the brands, there are also closure of stores that we believe are not going to create value or growth for the future. So it's a very... close management between opening and closing. There are still big projects. There will be some in H2 for Dior in New York and Rodeo Drive. But we are also very mindful in order to ensure that when we open, we close, and we are monitoring the one you don't see, let's say, very closely in terms of efficiency, productivity at the store. So we'll continue to do that, so there will be openings, there will be some closing, but all in all, we are continuing to develop our retail network. ANP is decreasing, yes and no, because what you see decrease is marketing cost, but as a percentage of net sales, it doesn't, so there is an absolute value decrease, but not necessarily in percentage of net sales. And in marketing, you have different things. So it's not all ANP, it's not all media. If you take, for example, perfume and cosmetic, you will find in your marketing expenses all the management of POSM, which is all the furniture you have for the store, plus the samples, et cetera. On that, we are going for efficiency because we believe it can be further optimized. So when you look at the number, don't go straight into shortcut into saying, okay, they cut communication. That's not the case. In term of Moët & Sy and the plan, we've been having a review of the plan that has been worked by Jean-Jacques Alexandre and the team. It's not a restructuring plan. It's a full plan to restore both the growth and the efficiency of Moët & Sy. It's not a plan that is going to deliver overnight and in the next quarter. So it's rather going to be a plan for several quarters. And I think we start to see the impact not before the second part of 26. because when you go for structural change and efficiency, you need to take the time to do it. So we don't expect any significant impact this year on that front, but we are very confident that the team has got the plan under control and is delivering.

Thank you. We will now move to our next question from Antoine Belge from BNP Paribas Exxon. Please go ahead.

Yes, hi, good evening. Three questions, if I may. First of all, it's a bit like the previous quarter. So there was a deceleration of four points in fashion and leather. In Q1, it was almost all due to the Chinese. So is that still the case? Because you pointed to the improvement locally, but also the tough comp and and the tourism. So, yeah, maybe how can we explain four points of disseration by cluster? Is it all Chinese or some other nationalities? Second question is still on fashion and leather. In the previous quarter, Louis Vuitton was doing a bit better. So, I mean, in terms of the different performance between LV, Dior, and maybe Céline, any changes? And maybe one that has been a bit more resilient and maybe another one a bit less. And finally, still on fashion and leather. So, you mentioned, I think you mentioned didn't want to use the word cost-cutting, more efficiency. So is there maybe a willingness to protect a 35% margin in that division, something that you achieved in both H2 last year, but also in H1 this year? Thank you very much.

Thank you Antoine. My English is not that good but I knew the term I wanted to use and it was efficiency. Exactly for the reason that for me efficiency is sustainable, cascading is not sustainable. So the difference is not But having said that, on your question on the sequence and the deceleration for Q2 on fashion and leather goods, let me share what we see in the different nationalities. What we see is that Europeans are unchanged versus Q1. Americans locally broadly unchanged, decelerating a bit, but broadly unchanged. But tourism decelerated for Americans because you know that we started the year with the U.S. dollar at 1.04%. And we are now at 1.17. So there was a big swing that created a slowdown on that part, but it doesn't make a big impact to the overall picture. So the bulk of the decline comes, as you said, from Asia and more specifically from tourism in Japan, which is the reversal of what we saw last year. And this is really true for Chinese and to a lesser extent to other Asian clientele. And at the same time, we saw some repatriation, meaning that Chinese local demand improved, but this did not fully offset the weaker demand in Japan. So that's the overall qualitative comment on the move in terms of nationalities. Then your question on brand performance and LV having been a bit better, is it still the same? What we've seen in Q2 is really what I explained around nationalities and geographical mix. we don't see any big change between Maison, meaning LV is still a bit better, DR is still a bit less than average, but overall we don't see a distortion in the Maison performance. What we see is really the distortion which is driven by Asia and the overall macro around Asia and currencies. On your question regarding fashion and leather goods, so first you've seen that first semester we continue to have a very high margin level at 34.7, which is a great result given the deceleration on sales. Our philosophy is very clear. We need to ensure that we invest what we need to invest behind growth, and we need to make sure that we are able to mitigate and maintain a high level of margin. Now, if you look at short term, it's very difficult to predict because it will mostly depend of top line. Because if you look at your gross margin, the mitigation of your gross margin deleveraging is pretty linked to the pace of your growth. We hope there will be good news. We have a lot of initiative. We have a bit of easier comp in China. Macro is still full of uncertainty until it's not anymore. And we continue to work on cost. So that's what I can say on margin for fashion and leather goods. But we are very committed to maintain the level of margin high.

Thank you. Next question from Tomas Chauvet from Citi. Please go ahead.

Good evening, Cecile and Rodolfo. My first question on the U.S., could you comment on the drivers behind the U.S. growth improvement beyond the repatriation of tourist spending? I mean, what were the main division or the key initiative that contributed? Was there also a slight benefit in your U.S. growth figures from the U.S. tariffs uncertainty, given you have quite a few wholesale businesses there with champagne, cognac, perfumes, or watches? So was there some advanced shipments? That's my first question. The second question on Dior, there's been a lot of management changes at the house over the last year, with in particular Pierre-Emmanuel Angeloglou, Benedetta Pretruzzo now working with Delphine Arnault, on top of obviously Jonathan Anderson for the creative leadership. Where do you see the key opportunities now that you have a full house? to adjust product strategy, distribution, communication, and do you have any further feedback from the first show that was held in Paris a few weeks ago beyond what we read in the specialist fashion press? And just finally, on FX, when you mentioned the second half outlook, so greater hedging gains expected, but at the same time, probably worsening translation transaction impact. Where does that leave you in terms of the potential margin dilution in the second half from FX? It wasn't very material in the first half. Thank you.

Thank you. Looking at the US, maybe the US performance and improvement, several drivers. First one on wine and spirit, where we had some improvement in champagne globally, but also in the US. The second one is that sequentially, we had a better performance and an acceleration of growth at Sephora. So that played a role there. And the last one, to a lesser extent, is the sequential improvement of the performance at DFS, even if they are still impacted by tourism. So all these effects lead you to the improvement because as I said on the rest, the American demand overall is broadly unchanged, a bit less, and then there was tourism but which doesn't impact US. On your question regarding advanced shipment in tariff, We don't have that. We have not pushed shipment to distributors or wholesale. We might have some stocks on our balance sheet in the US, but we have not put some advanced shipment. On Dior, I think it's a mix of a lot of things. First, your question on Jonathan Anderson, yes, the feedback were very positive. Also, you've seen that it reached 1.1 billion views after the main show. and more than 200 million lives. If you go into the stores, which I encourage you to do, and you meet with the salespeople and the clients, everyone is very excited, very impatient. So I think we all have to be a bit patient because going from the first main show until the collection actually in the stores, it will take a bit more time. Short term, we have some initiatives and catalysts. We have especially the two openings I was mentioning in New York and Rodeo Drive that are coming soon. And in terms of product, we continue to have some success on the Dior Toujours and the D-Journey that we discussed already for a few quarters. So it's a sustainable success and ramp up. very confident both in terms of product communication. You've seen that Jonathan will be in charge of men, women, in terms of ready-to-wear and leather goods. And I think it's also a good way to ensure full consistency on the brand vision, on the brand communication. So we are eager to see all that as you are and as the clients are. Then on FX, I think given the evolution during the first semester, it's indeed very difficult to predict an improvement. in terms of FX impact in margin because as you said both translation and transaction will probably be higher. We have opportunities in edging gain but probably it won't lead to an improvement between H1 and H2 so the best we can expect is the same and probably a bit more impact.

Thank you. We will move now to our next question from Luca Solka from Bernstein. Please go ahead.

Good evening. My first question is on pricing. I wonder if you feel that your major fashion and leather goods brands, Vuitton and Dior, have the right price architecture. I'm asking this because we've seen smaller, more expensive brands, take Cucinelli as an example, are growing significantly faster, but also cheaper brands like Ralph Lauren or Coach growing faster. So I was wondering whether you're experiencing possibly a need to fine-tune your price architecture in this light. My question would be on dissecting the minus 9% that you produced in fashion and leather goods in the second quarter. If you could tell us a bit more about the drivers there in terms of price, mix, and volume, that would be ideal. Thirdly, on the senior management organization, we saw that recently Michael Burke has been coming back to a role in the U.S. I wonder if you could update us on how the senior management organization is developing and on Michael's new responsibilities, please. Thank you.

Thank you. Is the price architecture right? Was your first question, Luca. What we are seeing in terms of shorter performance, let's all be clear, it's really around macro and currency swing. When it comes to price architecture, we had a lot of debate post-COVID where we had a very specific demand and there was a debate around industry pricing. For us, pricing is very clear. It needs to come. with an improvement in the product, whether it's a quality, whether it's an adding functionality. We had a meeting the other day with and they're doing some innovation on the puzzle and they were adding functionalities material. And in that case, it makes sense. And by the way, the clients are responding very well. So this is the core of what we do in price. We might do moderate pricing when it comes to offsetting some inflation or in certain case tariff, but it's not the core of it. You mentioned Cucinelli. We have the fastest growing quiet luxury brand. in the group. So we know what you're referring to. And then on more specifically price architecture, if you look at the way Vuitton execute the portfolio of product, you have the first very focused approach on elevating the brands. I remind you that some people tend to say Vuitton has a very dispersed portfolio. More than 60% is leather goods at Vuitton. So you can also say it's the most focused brand. But having said that, the brand is very much focused to elevate on their many important clients and upper level, bringing every time more sophisticated products. very high quality, very desirable, but you also need to connect with the younger generation. You also need to have some offer where you can meet them, onboard them, and then they can go through your value later. We refuse to do that with cheap bags. So the way we do it is à la Vuitton. And Vuitton's way is always the best desirability, always the best quality, And so you use accessible product category in order to do it. Perfume, small leather goods, and there are a few others. So that's really how we work on portfolio. We don't work on price segmentation. We are not Coca-Cola. But we are working on bringing the best product. And with that, making sure that the value that is in the product is recognized by our clients. So that's really what we do. And this is what we will continue because when you look at it, Louis Vuitton has continued to gain market share. And this is, if you remove the current context, something where Louis Vuitton has been leading for a while in the industry. The 9% drivers, so maybe let me put it in numbers. If you take Greater China, it's around 35% and mainlanders are down mid-teens and Greater China is a bit more. The rest of Asia, is 15% of your cells down mid to high teens depending on countries. So if you sum that up, you should get very close to nine and then Japanese played a bit of role. So that's on the mix. And then on Michael Burke, sorry, you asked about the drivers and price mix and volume. Price very moderate when it comes to the evolution of sales for fashion and leather goods in Q2. mix flat. So the bulk of it is volume, which is not surprising because if we say it's a reversal of a very specific purchase made last year by tourists, it's quite consistent that it comes from volume. And then on my call in the US, I think we are very lucky in this group to have people with a lot of experience who have been there for many years, having done different maisons, and they can go and make sure that they transmit experience and help the team. So in the case of Michael, I think everyone is very pleased to see him join the U.S. and the teams over there.

Thank you. Now we will move to our next question from Susanna Puss from UBS.

Please go ahead. Thank you so much for taking my questions. Just two. So maybe on margin, now I appreciate that obviously a bit tricky to comment ahead of the time. But in the context of the recent currency moves, I was just wondering, and I'm also looking at consensus, which expects margin for fashion ledger goods up 70 basis points next year. Can you tell us if it's actually doable to have the margin, I don't know, flat next year, or if you can at least help us quantify the potential margin headwind at current rates? And then second question, I guess just on current trends. Again, I know it's probably an annoying one, but you've just delivered 9% sales decline in fashion leather goods. I think ConsenSys is looking for roughly minus one in H2 for the division. So I'm just wondering, you know, how we should think about it. What are you seeing in terms of current trends? It's a little bit difficult for us because, as you say, there is that unwind of tourism in Japan in Q2 last year. And I think it wasn't there anymore in Q3. So if there's any way you could help us a little bit how to think about Q3, that would be very helpful. Thank you.

Thank you, Susanna. And I start with that, probably. Also, we are not going to give a precise number because given the macro, it will probably be wrong. So let's get the macro out. We still have a lot of uncertainties. Until everything is settled, it's not. So on macro, I wouldn't make any guess. in what we know and what is under our control. In terms of comparison basis, for the Chinese, it starts improving in July. So Q3 will probably recycle easier basis of comparison. Japan was indeed less growing in Q3 but still growing 20% last year. And then you have also to keep in mind that in Q4, we had a strong rebound in the US because of a surge in demand post-election. And so we will also face that comparison basis. So having said that, we still have a certain number of initiatives in all our activities and maison and fashion and leather goods and we are confident that the initiatives will bear fruit but the question is more on the macro and the speed at which it will recover. acknowledging that Chinese macro has not recovered yet and will still take a bit time. So yes, we see improvement and we are very happy. Yes, basis of comparison will ease. but Chinese macro is probably not out of the wood yet. Having said that, we are very confident because, as you know, we don't work for the next quarter, so we are very confident that once this headwind subsides, we can regroup with growth, and we are preparing that.

Thank you. Next question from Edouard Odin from Morgan Stanley. Please go ahead.

Yeah, good evening, Cécile and Rodolphe. So just two questions for me on the selective retailing, which I guess top line was a bit better than expected and it was the biggest beat in Euro terms for the group in terms of division. As you mentioned, if you could please elaborate on what you mentioned earlier, Sephora and DFS. I think you talked about Sephora doing better than expected or accelerating in terms of what you're seeing in terms of market share and how you explained that. And in terms of DFS, if I understood correctly, the losses kind of narrowed, but you're still at the break-even. So that would be helpful. So that's question number one on selective retailing. And then the second question is on scope. And, you know, I think, you know, in the late 80s, you had about 25 brands. I think you have over... 80 brands today. I'm sure you're not going to give us in terms of an indication on a brand-by-brand basis of what you intend to do, but philosophically, are we more likely to see an expansion of your kind of portfolio of brands, or are we more likely to see a reduction over the next one, two, three years? Just wondering, you know, where you see the group, how you see the group evolving in the next two, three years on that respect. Thank you.

Thank you, Edouard. So on selective retailing, I'll start with DFS because it's probably shorter. The losses are narrowing, as you mentioned. We are still not breakeven, but the work that has been done by the teams is very important in terms of putting the cost under control and closing a few destinations and galerias. So we are going towards break-even, but we are not there yet. On Sephora, Sephora accelerated in Q2. Sephora's model around exclusive brand differentiation, great experience in terms of shopping, together with the development of the network, in the UK and in some other countries is working very well. So we are very happy with the performance, gaining market share in brick and mortar nearly everywhere, resisting well on the internet, but you know that the model of C4R is absolutely to provide the right experience and exclusivity of brands. So it continues to deliver. And on top of that, they've been managing cost very well. So you also see an improvement both in the top line but also in terms of profitability. And that's a great job done by the teams there. On scope, do we intend to increase the number of brands? I think it depends on opportunities. We will probably not miss good opportunities if there are. And at the same time, we will not keep if we believe they are not a good add-on or we are not the right operator to operate them. You know, we did sell Off-White and Stella McCartney last year. I think portfolio is a living organism and I think it really depends on opportunity. So difficult to give a theoretical number in terms of... of number of brands, this is not the way we look at it.

Thank you. We will now move to our next question from Erwin Lamberg from HSBC. Please go ahead.

Good evening, Cécile and Rodolphe. Most of my questions have been answered. Well done on defending margins despite the context. Maybe two follow-ups on local versus tourism flows. I understand Japan's basis of comparison is easing. Can you maybe remind us of what happened around the Olympics in Q3 last year? I had the sense that tourism was quite active in Europe at that stage, but not really luxury purchasers. How does that help move from Q2 to Q3 with a bit better Europe potentially? So that's my first question. On tariffs, I think, Cecile, you were quoted saying 15% would be a good outcome. I'm not asking you to guess what the outcome will be, but what have you been working on mostly? Is it intercompany pricing? Is it end consumer pricing? Is it possibly developing the supply chain further for V2O in the U.S.? What are you spending most of your time tariff-related on before we get the outcome? Thank you.

Thank you Erwan. On the basis of comparison and your question on Europe specifically for Qshui, We don't see much movement in terms of basis of comparison there. The real change in Q3 will be around China. And the real impact in Q4 will be on the surge of the growth of Americans last year. But EU, we don't expect a very big impact on comparison basis. On the tariffs, I think we're working on a lot of things with or without the tariffs. And when it comes to efficiency in the model, trying to rebuild some oxygen agility in the model, It can be sought for the tariff, but it can also be sought for other situations. To answer more concretely your question, and I think we had this discussion in Q1, there are several levels. Not all our activities have access to all levers, so we could do some moderate price increase in some activities, fashion and leather goods. We wouldn't do that in Moët & Sy because we don't want to increase prices there. In terms of supply chain, there are a few activities where we have levers to optimize the flows and the supply chain versus the topic around tariffs. So Vuitton, we mentioned, we have some local production in the US. and we can increase that. If you take Tiffany, you have production in Europe and production in the US. There are ways to optimize the flow so that US serve US, Europe serve Europe. So there are different levels. It's different between brand and maison. Probably the one that will be the most difficult is Mouet because it has the less levers because you can't move the production by definition. And your prices, you can't play too much with your prices. So probably that's where there might be an impact on margin.

So we still have three questions. I suggest we take these three and then we can wrap up the call.

Thank you. Next question from Oliver Chen from TD Securities.

Hi, this is Helen Rudolph. Thank you. Regarding your operating margin containment, it's been really solid. What should we know about the fixed versus the variable key drivers and gross margin and OPEX and also marketing dollars or rate as a percentage of sales, particularly within the fashion and leather division. Second point, you made a lot of really helpful comments on innovation plans ahead. How would you compare or contrast Dior relative to Louis Vuitton and what you're doing to continue to electrify the brands and innovate at all price points? And then finally, the U.S. Sephora It's been a more competitive market in the U.S., particularly with Amazon and beauty and other players like Ulta. What were you seeing with Sephora U.S. as well? It sounds like you're very encouraged, and I know you had mentioned some of those competitive pressures previously. Thank you.

Thank you. On operating margin, it's overall on selling expenses because we gave a comment last year when we were talking about Japan around the fixed and variable in terms of rents. Except for Japan, it's more fixed than variable. A bit less so in China, but it's around half-half, so that would be for the selling cost. Japan was really an exception as to the depth of variable rent that it bears. Then marketing, it depends how you see it. If you have a specific initiative and you need to push your communication, then it will increase. But it's also partly variable. If you have less, then you probably, depending on your market, that's part you can adjust. But I think ultimately, The way to look at that, and the context is opening a door for that, is how can we create more efficiencies? And there are opportunities to create efficiencies, and it's a bit everywhere. If you take marketing, I mentioned POSM, so when you decrease marketing, it's not necessarily that, ah, suddenly you stop to communicate. When you look at fashion shows and you work with agencies to look how you structure and decouple the different pieces of the cost so as to pay margin only on the creative part and make sure that you are the most efficient possible on costs that are not related to client experience or creativity is something you can work on. So there are many ways you can work on and I think fixed and variable is a bit theoretical because the idea is really how you get the most efficiency out of your cost in order to get the most of investment behind your brand. On innovation, I wouldn't compare Dior and Vuitton, honestly. We are in different cycles, but we are very lucky in LVMH to have very best talents and very best creative directors. It's different journeys, but overall I think we are opening at Dior a new chapter as we discuss in terms of creation. the innovation that I mentioned are working well and both brands are great honestly and they don't have the same role and the same life and it's good like that. And then when it comes to Sephora in the US, Sephora is everything Amazon is not actually, because Sephora is about experience, differentiation, exclusive brand, enjoyment of shopping experience. And that's really what is Sephora and that's what we are pushing in terms of competitive advantage and that's bearing results because of the growth and the market share. So yes, there is competition, but at the end of the day, where we invest and our model is continue to deliver very strong results. So we are very happy with that.

Cecile, you said Sephora US was positive. Did I hear that correctly?

Yeah.

Thank you. We're going to move to our next question from Daria Nasleteshevat from Bank of America.

Good evening. Thank you very much for taking my questions. I have two. First question is on fashion and leather margins. Could you please help us contextualize how much pressure out of the contraction came from gross margin versus operating expenses, particularly for this division in the first half? And then my second question would be on the beauty market. Could you please share an update on trends that you saw by region or category in perfumes and cosmetics? Thank you very much.

Thank you. On the P&L, the biggest impact came from the gross margin deleveraging connected to the decline in sales, underutilization of capacity and also depreciation in inventory and in some cases still some inflation in cost of goods sold. The OPEX were contained in terms of percentage because as we mentioned, we decrease sell and marketing OPEX by around 2% and GNA by 5. So you have your order of magnitude and then you can make the calculation on the delivery. We are containing OPEX but not to the extent that it compensates the delivery of gross margin which is not a surprise. On perfume and cosmetics, we see overall good performance on local markets and on different countries then what you see in perfume and cosmetics is that perfume is the best performing categories then it would be makeup and skincare a bit less and in terms of geography the brands that are the most exposed to travel retail especially in Asia are the brands that are the less growing versus the average or sometimes having a decline in sales. So that's the way to look at it. But overall, we have Parfums Christian Dior, which is the biggest one. Given the fact that they've been choosing to be very selective in distribution, this headwind, they can resist better. And they've been doing quite some innovations in makeup that worked particularly well. So they've been performing very well in makeup in the first part of the year.

Thank you. And we'll now move to our next question from Carol Maggio from Barclays. Please go ahead.

Hi, good evening. Just two questions from my side. The first one back on lower Piana and the new flow we saw about the supply chain concern. Can you give us your take on the situation? Are you thinking of fixing this issue? And have you seen or do you expect to see some impact on the brand perception in the key markets? That's the first question. And then the second one, maybe to conclude and think about more longer-term perspectives on, again, SLG and mostly LV, how should we think about the future growth drivers of the brand revital in the future as it becomes bigger and bigger and as China also become, I think, more mature as a market. So do you still view price mix as the main driver in the future? I think you're launching beauty in the fall. Should we expect more of these new ventures coming up in the future to diversify and drive more growth in the business? So just some color on the long-term growth prospects of LV could be interesting. Thanks.

Thank you. So on Loro Piana, we were not satisfied with the situation, especially because we've been working a lot since last year on reworking on all the processes, making sure that we had more audit in place. We've done like 5,000 audits last year. And what happened in Loro Piana overall is a subcontractor of a supplier that was hidden from us. So we couldn't know, let's say. It's not that we cannot do better in terms of control, but we didn't know. And the day we knew, we stopped the relationship with the supplier. This topic is beyond Loro Piana. It's a topic that the full industry in Italy is facing, and it's something that we will have all to manage collectively with the association, with the government, as a whole. In the meantime, for us, it's very clear we are reinforcing control, we are reinforcing the way we look at the relationship and the way we are going to control, both in terms of how we do the audit, how we look at the grid of audit, But it's not a European issue. So to your point, it's not going to create and it shouldn't create an impact on the image because it's not what happened. Still we need to make sure that collectively with everyone we can solve or at least improve the situation of the industry that should be a very fair practices and clean supply chain. So we need to continue to work on that and obviously there are still progress to be done. And long term for fashion and leather goods and LV, if we look at the fundamentals of Vuitton, Vuitton continues to lead in many markets. Why? Because first, Vuitton is totally dominating the retail space. I mentioned the recent stores that have been opened, growing strong double digits. I mentioned the kind of unexpected spaces like the Louis, we like it or we don't, but you need to go and see that place. but it's unexpected, it's something only Vuitton can do. We are not going to do 400 of those, but there might be a few down the road. In terms of product, there is absolutely no topic around changing pricing or changing strategy. The strategy of Louis Vuitton is focusing on always delivering the most sophisticated and qualitative product to retain the most important client and get some other from the upper segment. And the other one is connecting and continue to recruit from the younger generation and that is not around down trading or doing cheap products but it's around using the firepower and the DNA and the desirability of Vuitton and replicating it on accessible categories. So you mentioned beauty which is one, perfume is one, small leather goods is another one. Then the third big competitive advantage of LV, and I think this audience will like it because we like numbers, it's the financial muscle and the firepower. Best productivity, best profitability, best cash generation. leading to an unparalleled firepower to invest, invent, and continue to lead. So we are very confident on the long term once we go through the short-term headwinds on Vuitton but also on our other brands. But because you mentioned about Vuitton, this is my answer. So it's not about price mix. If you look at Vuitton in the past four or five years, volume was one third of the growth in terms of drivers. So we need to really understand the fundamentals and the way this brand has been growing year after year. And I think we need to extract a bit from the quarter because volumes have been fully part of Vuitton's story and they will continue to be.

Thank you very much.

I hope it was helpful and obviously Rodolphe and the teams are here to answer any follow-ups and we'll be happy to see you all soon. And if we don't, have a great summer. Thank you very much.

Thank you.