LVMH Moët Hennessy - Louis Vuitton

Good afternoon everyone and welcome to today's conference call. I'm Rodolphe Feuzin, Director of Financial Communications and with me is Cecile Cabanis, our Chief Financial Officer. Cecile will start with key highlights of the first half of 2026. I will then share details on performance by business groups, after which Cecile will comment on the financials and conclude. And then we'll be happy to take your questions. Turning now to our announcement, our release was issued a short while ago in French and English and is available on LVMH website, lvmh.com, as are the slides for today's call. The habitual safe harbor statement is included in our press release and on slide two of our presentation. Let's now move on to today's topic, our first half figures, and passing over to Cecile.

Thank you Rodolphe. Hello everyone, thank you for attending the call and I will dive right into the results starting on slide 3. LVMH delivered a very solid set of results in the first half and a sequential acceleration on organic growth in the second quarter. Group revenue rose 2% organic in H1 at €38.6 billion with Q2 up 3% organic. Operating margin reach a very high level of 22.5%, very good outcome as we remain focused and disciplined. Profit from recurring operation closed at 8.7 billion, reflecting a significant negative currency impact. Net income was in line with last year. Finally, another semester of strong free cash flow delivery reaching more than 4 billion euros. Let's turn to slide 4 with a few qualitative comments on the semester. Overall, the first half of 2026 confirms the strength and resilience of our model. Middle East conflict impacts H1 top line growth by a negative 1 point. Both Q1 and Q2 suffered from this point. So if we exclude that, organic growth is rather 4% in the Q2. Revenu Momentum accelerated sequentially in our three largest divisions fashion and leather goods, selective distribution with watch and jewelry at double digit growth in Q2. Our key geographies posted sequential acceleration. US, Japan and Asia all posted mid-single digit growth for the first half. These results were supported by amongst other product innovation and creativity which deliver tangible results in the first half, the strengths of our icons and outstanding experiences in retail. The first half also demonstrates our continued attention to operational efficiency. Rodolphe will now comment on the numbers and key highlights by business group and I will then comment further on the group financials.

Thank you Cecile and we'll start with wines and spirits on slide 7. The wines and spirits business group recorded 2.6 billion euros in revenue in the first half, up 5% on an organic basis and flat on a reported basis after a negative 4% currency impact. Broken down, champagne and wines generated 1.4 billion euros, up 7% organic and up 2% reported after a negative 5% currency impact. And cognac and spirits delivered 1.2 billion euros, up 3% organic and down 1% reported after taking into account a negative 4% currency impact. Profit from recurring operations for the division rose 11% year-on-year to 582 million euros and operating margin rose 210 bps to 22.4. Moving to slide 8, wines and spirits improved markedly in the first half of the year. The 5% organic growth achieved in H1 was predominantly driven by volume growth, reflecting improving demand for our products. In Champagne, volume, price and mix all contributed to growth, and all maisons accelerated in the first half of the year, with strong momentum in Europe and Japan. Mix improvement was driven by the outperformance of Prestige Cuvée. For Rosé Wines, volume growth came from Chateau d'Esclan in the US and Minuti in Europe, and for Chandon, growth came from the US and Asia. In Cognac, Hennessy volumes also returned to growth in H1. US demand remained soft and depletions are still negative, but this was more than offset by improving demand elsewhere, notably VSOP in China. The launch of a new ready-to-serve format in the US, Hennessy Very Special Cocktails, had limited impact on volumes at this early stage, but highlights our commitment to innovation. Finally, Spirits also performed well, driven by Belvedere and Glenn Morangi. Going forward, we expect the division to grow at constant currencies in 2026, albeit not as much as in H1 and we expect full year EBIT margin to be closer to 2025 levels due to cost phasing and to the delayed adverse impact of currencies in this division due to profit in stocks notably. Turning now to fashion and leather goods. On slide 10, revenue reached 18.1 billion euros for the first half, down 1% organic and down 5% reported after taking into account the negative 4% currency impact. Q2 growth amounted to plus one organic. Profit from recurring operations came to 6.2 billion euros down 7% year-on-year and operating margin contracted 60 bps to 34.1 although in both cases the decline is more than entirely attributable to currencies. Turning to slide 11, two broad comments on the division. Firstly, virtually all brands accelerated sequentially in Q2, including Louis Vuitton and Christian Dior. Secondly, local demand outperformed in both Q1 and Q2, but offshore demand, which was negative in Q1, turned flattish in the second quarter. A few words on the largest brands. Louis Vuitton celebrated the 130th anniversary of the monogrammed canvas with success, consistent with its ambition to communicate on some of its most distinctive attributes, know-how, history, and travel. And Christian Dior accelerated sequentially, driven by continued excitement around the unveiling of Jonathan Anderson's new creative vision, with good response to bags and to ready-to-wear. L'European 9 Rimowa continued to enjoy above average growth while Céline and Fendi improved sequentially compared to the second half of 25 and to Q1 26. Moving on to perfumes and cosmetics, on slide 13 revenue reached 3.9 billion euros flat on an organic basis and down 4% on a reported basis after a negative 4% currency impact. Profit from recurring operations declined 2% year-on-year to 417 million euros whilst operating margin improved 20 bps to 10.6%. Now to slide 14, which details product innovation across our maisons. The perfumes and cosmetics business group continued to see good performance from its historic maisons, in particular Parfum Christian Dior and Guerlain. By category, fragrances outperformed, although again Dior and Guerlain enjoyed good momentum in both makeup and skincare. And looking at key markets, whilst travel retail remained a headwind, Asia and Japan enjoyed a good momentum. Finally, our Maisons remained focused on maintaining their selective distribution strategy with tangible and measurable benefits on brand desirability. Next turning to watches and jewellery on slide 16 where revenue for the first half of 26 rose to 5.2 billion euros up 9% organic and up 3% reported after taking into account a negative 6% currency impact. Profit from recurring operations rose to 831 million euros in the first half of 26, up 9% year-on-year, and the operating margin rose to 15.9%, up 90 bps year-on-year. I'm now on slide 17. Jewelry recorded an excellent performance in the first half of the year, including double-digit growth in the second quarter and positive growth across all key regions driven by the US, Asia, and Japan. Tiffany continues to progress in its elevation strategy with iconic lines, new store and high jewelry all are performing materially. Focus remains on developing our iconic lines and hardware and not in particular enjoy exceptional growth despite very tough comps. And meanwhile Tiffany is also progressing with the ongoing renovation of its retail network with approximately 40% of the network now renovated. Bourguery also continued to enjoy strong momentum, notably in retail, with strong growth across jewellery, high jewellery and watches. And again, growth was broad-based across all key regions and driven by the continued success of Bourguery's icons Serpenti, Diva and B01. Our watchmaison also unveiled several exciting innovations in the first six months of the year. Now moving on to our last business group, selective retailing on slide 19. You can see revenue came to 8.4 billion euros in H1, up 5% organic and down 2% reported after taking into account a negative 5% currency impact and a negative 3% perimeter impact due to the disposals at DFS. Profit from recurring operations came to 893 million euros, up 2% year-on-year, resulting in a slightly improved operating margin of 10.6%. And turning to slide 20, a few words on Sephora, which enjoyed good performance across key markets, including the US, Europe, Middle East, and China, and all categories recorded positive growth, with makeup and hair care outperforming. Sephora also continued to invest in its retail network and to expand into new markets with Belgium and Croatia open in the first half of the year amongst others. Le Bon Marché continued to see good growth in the first half and finally we have continued to progress with the sale of DFS assets which led to a negative one percentage point perimeter impact at group level in Q2. This concludes the business group presentation and I'll now pass back to Cecile for financial results.

Thank you, Rodolphe. You can breathe now, I guess. And now let's discuss H1 2026 financials in more detail, starting with slide 22 with the revenue bridge. First half revenue reached 38.6 billion euros, up 2% on an organic basis, down 3% on a reported basis, given first a strong negative 5% currency impact, mainly US dollar, Japanese yen and Korean won, and a negative 1% perimeter impact due to the disposal of DFS activities in Greater China. Organic growth accelerated two points in Q2 to 3%. Slide 23 details the geographic breakdown of revenues in euros. Our regional mix remains well balanced, with Europe 25%, US 25%, Japan 8%, Asia gained 1.29% and other markets, which include the Middle East, fell 1.13%. Slide 24 highlights regional trends with growth across all key markets in Q2. In the first half, growth came from Asia, the best performing region, up 6%, followed by Japan, up 5%, and then the US, up 4%. Europe declined modestly 1%, penalized by lackluster touristic demand. Tourism improved, however, in the second quarter, driven by Asian clientele, which explained the sequential slowdown in Asia and the improvement in both Europe and Japan. The sharp acceleration in U.S. offshore demand in Q2 came on top of a tangible improvement in local demand, leading to the sequential acceleration in the U.S. market, up 6% in Q2. Turning to slide 25, which illustrates the tangible acceleration of organic growth in our largest divisions. Fashion and leather goods return to growth in Q2, driven by the acceleration of US and Japan. Watches and jewelry enjoy the strongest growth in H1, with 9% organic, including double-digit growth in Q2, driven by very strong performance at both Tiffany and Bulgari. Selective distribution also grew 5% in H1, supported by a continued strong momentum at Sephora, as Rodolphe presented, while the sale of DFS assets negatively impacts the division's reported growth. On wines and spirits, revenues grew 5% organic in each one, a very good outcome supported by improving consumer trends. And finally, perfume and cosmetics where revenue momentum is stable with a good performance by our historic Maison. Let's now switch to operating income on slide 26 with the bridge of operating income versus last year. As you can see we enjoy nice EBIT growth of around 4% in organic terms and a negligible perimeter impact but this was more than offset by a significant negative currency impact totaling nearly 700 million euros. Slide 27 details operating income by division. Wines and spirits delivered a very strong performance with double digit EBIT growth driven predominantly by champagne and wines but also a nice improvement in cognac and spirits. Watches and jewellery also delivered a significant increase in operating profit, driven by strong growth in jewellery and opex discipline, with continued investments in Tiffany's transformation. Fashion and leather goods operating income decline is entirely driven by currencies. At constant currencies, EBIT margin improved modestly and operating income was flat. Operating margin remains very high at 34%. Finally, perfume and cosmetics and selective distribution operating profit evolution is close to flattish with selective distribution improving slightly. Now, on slide 28, a few comments on our income statement. All in all, the net profit group share closed at 5.7 billion euros in line with last year. If we go line by line, so revenues I already commented. Gross margin evolution is in line with revenue evolution which is a good outcome with the rate of gross margin actually improving by 30 bps versus last year at 67.1%. The negative currency impact is fully offset by organic margin expansion across division on the back of improved top line and in addition there is a modest positive perimeter impact from DFS assets sell. Operating expenses were actively managed with a 2% decline in marketing and selling expenses. GNA was kept flat reflecting continued discipline on cost. Other income and expenses are slightly positive on the semester, nothing major to report there. And this leads to an operating profit for the group of 8.7 billion euros already commented earlier. Financial results for the first semester improved strongly versus last year and I will provide more details in the next slide. And finally, tax rate remained at a very high level of 30%, reflecting this year again the impact of the French surtax. Moving on slide 29, positive change, as I was saying, in net financial result of 300 million, which includes on one side cost of debt and interest on lease liabilities, which both saw a small improvement. The cost of ethics derivatives decreased by over 100 million. It's not so much the cost of the hedge but rather it's the impact from the amplitude of currency move that was more contained this year versus H1 last year where the amplitude was huge. Lastly and again we have a strong positive impact from the re-evaluation method in mark to market of our financial investment portfolio. that led to an increase in value larger than the one of last year. However, a reminder that this impact is purely theoretical and does not reflect any profit in reality. Turning to slide 30 regarding the structure of the balance sheet, currencies once again had an impact on most balance sheet lines in Euro terms. Both assets and liabilities and consequently the structure of the balance sheet remain very similar to last year. One point I didn't comment is equity slightly up reflecting the share buybacks that we completed at the end of June. Slide 31 illustrates another strong momentum on free cash flow generation in H1, closing at 4.1 billion euros, with the modest decline in cash from operating activities entirely offset by operating investment evolution. Slide 32, net debt to equity ratio. As you can see and compare to H1 2025, our net debt declined by almost 2 billion and gained, edged down 3 points to 12%. I will end my comments on the figures with the interim dividend which has been fixed at 5.50 euros a share and will be paid in December 2026. Maybe before moving to Q&A, a few words to conclude this presentation on slide 34. So what you've seen is that despite continued instability in the macro environment, trends improved across all geographies in H1 and where wealth is created, consumer appetite for luxury and for our products in particular is strong. Secondly, the outperformance of our most iconic products illustrates the desirability of our brands and shows our strategic initiative bearing fruits across diverse businesses. So based on these successes, we will continue to adjust to evolving consumer expectations with distinctive stores and experiences, attention to perceived value, and increase brand desirability and innovations. Finally, while we continue to invest selectively, it's important to note our financial discipline which continue to deliver tangible results as evidenced in each one. Thank you very much for your attention and we are now ready to take your questions.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Charles-Louis Scotti, Capitale Chevreux.

Yes, good evening. Thank you very much for taking my questions. I have two. The first one on fashion and leather goods. Is there any chance you can give us a bit more granularity of the performance by brand and especially on Dior? I'm curious to know if the brand returned to a positive course in Q2. And it also seems that The growth at Dior was constrained by difficulties in ramping up production capacity related to the internalization of production and maybe the change in designer. Could you confirm whether this is indeed the case? And if so, if you can estimate the growth of Dior, what kind of growth Dior could have achieved without these production constraints? And then my second question is on the performance by geography, particularly Asia, excluding Japan. This was the only region where growth deteriorated sequentially in Q2. And I would have expected the demand in Korea to accelerate and the region also to benefit from, to some extent, the repatriation of Asian spending because they travel less in Europe. What is the main driver behind this slowdown? Is it China? and if you can elaborate a little bit on the change versus Q1 and what factors wait on demand locally. Thank you very much.

So it's two very exhaustive questions. Thank you Charles-Louis. To start with on fashion and leather goods and your question around giving more granularity on the brand. What we can tell you is that Vuitton and Dior are both in positive territories in Q2. Vuitton is consistent with the average, Dior is a bit above. You have Loro Piana and Rimowa still outperforming. When it comes to Dior, all clientels were up in H1 with double-digit growth from the Americans and Japanese in Q2, all accelerated. You have leather goods and women ready-to-wear outperforming based on the big success of Jonathan Anderson's first release collections. And so it's only after two quarters and probably more to come. Has there been some issues in supply chain? I think whenever you start with a creative renewal and you are in a transition, it's a bit more complex for your supply chain. I will not give any theoretical figure. What we see, I think, is telling us that we have made great results and that the trend is positive and accelerating. So I think it's what matters. When we look at Asia, you write to mention that Asia is decelerating in Q2. But if you look at clientele, Asian clientele's spending is unchanged quarter on quarter. Same for Chinese. However, Asian clientele did spend less in Q2 in Asia and more in Europe and in Japan. That's also why in the graph I was showing you, you see an acceleration at the same time in both Europe and Japan. It's also interesting to see that in Japan tourism is more diversified that at some stage with Americans, Koreans and Chinese are gradually recovering. So that's for Asia and for Chinese.

Thank you.

The next question is from Anne-Laure Bismuth, HSBC.

And now we don't hear you. Yes, hi, good evening. So I have two questions. My first one is on jewellery and watches, which did record a very strong acceleration in Q2. So what's the performance between categories within that segment? Was the sequential improvement mostly driven by jewellery or watches also sequentially improved? And have you seen any particular strong performance of that division in South Korea and what is the exposure? And my second question is about wine and spirits. So given the signs of recovery in H1 that we have seen through that division in H1, how directionally should we think about this division for the remainder of the year?

Thank you, Anna. On watches and jewellery, the growth momentum was mainly driven by both Tiffany and Bulgari on jewellery. We've seen a very good performance. I mean, both in Q2, Bulgari and Tiffany grew mid-teens. with very strong performance on icons. The acceleration when it comes to geography was both America, Japan, but also Korea as you mentioned. And on Tiffany, it's really around all the part that we transform because we have now 60% of the business which is transformed growing much quicker than the legacy that is still negative. We have some icons like hardware growing 75%, and that is nearly 50%. So there are a lot of successes and a lot of momentum within the icons. Same for the Renovati store. It's really for Tiffany the transformation agenda that is bearing fruits and success with the strength of the icons becoming even stronger quarter after quarter. In Bulgaria we've seen success on really all the icons. Geographical span is very even when it comes to success as well. There has been new lines launched like Vimini which is off a good start. High Jewelry has a bit overperformed as well. So it's really across the board that we've seen that. Watches are a bit negative still in Q2. But if you take watches as a category, adding Bulgari, Tiffany and Vuitton, it's likely growing for the period. So that's where we are. On wines and spirits, we are very pleased with the results, which is really a big work from the teams, reaching 5%, which is really an improvement in momentum for the champagne and wines in particular, Prestige Cuvée. also and improvement of demand for cognac in China that is offsetting a still soft demand in the US. Rodolphe mentioned when he was commented on his slide that we still do expect growth for the remaining of the year but probably a bit more moderate so that's what we can give as a direction for Wine and Spirit.

The next question is from Thomas Chauvet, City.

Good evening, Cecile and Rodolphe. Thanks for taking my question. I have two. The first one, could you come back to the second quarter fashion leather performance by nationality? I think you said the Chinese were more or less in line with Q1. Could you comment on the other nationalities on a global basis, please? And second one, on the FX impact on margin, If I'm not mistaken, in February you guided for, and that was very useful, thank you, for an FX headwind on EBIT for this year, broadly similar to last year, close to 1 billion, and that was going to be very H1 weighted, so you were right with over 600 million in H1. Given what's happened to FX in the last few months, particularly the dollar and the renminbi appreciation, how do you think about Thank you Thomas.

So to answer your question on clientele dynamic for FNLG in the second quarter versus last year, the bulk of the growth came from the Americans who are up a high single digit. Koreans also contributed but obviously it's a smaller base so the impact is more marginal. You had a negative impact from Middle Eastern but not higher than Q1 as the longer duration of the impact was offset with improving sequential and gradual trends. And then European, Japanese and Chinese were flattish. So that's for the clientele in Q2. On FX impact, so H1 was around 70 bps, so as you said it was in line with what we had projected. We do expect that on the revenue part, we could have a slight positive impact from FX going forward on revenues. However, probably offset by a perimeter impact because there are more operations that are going to get closed in H2. However, on the margin, we still expect approximately the same impact that we had in H1. especially if you take wine and spirits given the stock duration and the time lag between the time you put it in stock and you release it you are still going to recycle impact from last year and you already had your edging gain so there's a bit of a time impact it's a bit technical but that means that on the margin probably we are looking at the same the same impact for H2

The next question is from Antoine Berge, BNP Paribas.

Yes, good evening. It's Antoine Berge at BNP. Three questions, if I may. First of all, I'd like to come back on the performance on the Chinese cluster, so flat but unchanged, quarter on quarter. If my memory doesn't fail me, last year, the Chinese cluster went from down maybe 9% to down 18%. Isn't it a bit disappointing that, on easier terms, China is not improving? And also, if you could comment on the litigation between Louis Vuitton and this tea company, is it having any impact? Second question is about overall H2. On this idea that the ComBase will become tougher, the recovery of the group started in Q3, so how should we think about that? Are you confident that maybe, I mean, you were mentioning that you could expect sort of sequential improvement at Dior, so any or so pipeline initiatives at Vuitton, And finally, on the margin, first of all, congratulations, because the margins were well above consensus, especially this idea that with a flat organic growth in H1, you managed to have a flat margin at constant currency. So is it the result of a special effort, because you knew that H1 would still be a bit under pressure, or is it something a bit more structural? Because if growth comes back, I guess maybe investment will come back as well. And a clarification, because I think Rodolphe, on one of his periods, mentioned something you confirmed on the top line, which would be that maybe H2 growth would be a bit less than in H1, but did I understand correctly that the margin over the full year would be rather flat-ish year-on-year versus up in the first half? Thank you.

Thank you Antoine for all these questions. So on the Chinese cluster, net-net, what we've seen in H1 is that Chinese local and touristic demand has been flattish. We have been seeing an improvement of offshore demand over the Q2, so you have local demand outperformed in Q1 and onshore demand outperforming in Q2. We are not challenging the fact that the basis of COMP was easier in Q2, but when it comes to Chinese, we need to look at it and especially we need to remember that the easier basis of COMP of Q2 last year was linked to exceptional growth in Japan in 2024, which was recycled. So I think it's important to have that in mind. What we are seeing is that Chinese local consumption is high by historical standard. What we are already seeing is that Chinese demand is increasingly clustered around shopping events. So it's important to follow that in order to have the right trends. On your question of litigation, I'm sure you agree that IP is an absolute key asset for us and we diligently protect our brands. Our Maisons handle trademarks infringement in many countries very regularly, including China, but not only. This case received media attention. It's still a legal process, so I will not comment more than that. On the combates of Q3, maybe I should have linked it to the previous one. So first we are only a few weeks in July and July is a small month so I will not comment on trends for H2 because it's much too early. The comb base in H2 is optically tougher than H1 but it's also on the base of easier combs in H24 so overall it's quite similar. and on the rest I already commented answering previous questions on what we see for the FX. On margin, we take your congratulations, thank you very much. There has been of course an effort on discipline and particular cost attention in order to come to this result and we are very happy to have managed it And then I think you were referring to a comment of Rodolphe on wine and spirit regarding the full year margin. So indeed you understood it well. We believe that overall full year margin in wine and spirit will be comparable to last year. Bear in mind what I was explaining on FX as well. which will impact H2 especially in wine and spirits in terms of margin heat.

The next question is from Erwan Rambour, Goldman Sachs.

Hi, good evening and congratulations on the margin. I hope you can hear me. Three short questions. Firstly on Sephora. I was wondering if you could maybe help us understand what part of the growth is linked to like-for-like in the different regions and what part is maybe linked to the impact of openings. How much does that weigh? Secondly, I had a question on Tiffany. You were saying you've revamped 40% of the store base. I'm wondering what's next. and presumably revamping the store base was weighing on margins. I suspect that with the type of growth you're getting, margins are going higher. Does that change your cadence in terms of revamping other stores? How should we think about that prospect? And then thirdly, if I understand correctly, Céline and Fendi are probably still negative. Can you tell us about the prospects of, When that might improve for those two brands and what it would take. Thank you.

When we look at the growth, it's probably half-half in terms of expansion. It's not only country opening, it's surface expansion and like for like. We've seen a very sustained growth in all markets, including the US, especially on exclusive brands. You remember we had the launch of Rod, which is still going very well. In terms of country openings, we have opened Belgium, Croatia and Ireland. So we'll continue and we have continued to open in the UK, which is a market that is going very well for Sephora. Tiffany. So on Tiffany, yes, the transformation and the stores, as you mentioned, is weighing on the margin because it increased the selling cost. It's not the only one. You can imagine as well that the transformation of the portfolio with the decrease in silver is also creating a short-term headwind on the margin. But you're right to say that with the increasing growth and the performance of the icons and soon, let's hope, the decrease in gold price, we will be able gradually to get leverage in order to improve the margin. We have not changed the program when it comes to store renovation and we'll continue to do the reason that we discussed several times overall. Thank you very much. On Celine and Fendi, we see progress quarter to quarter. On Celine, there has been some innovation in soft bag like the soft triangle and other format that are doing very well. Shoes are doing well, ready to wear is doing well, so it's really progressing. And Fendi started later. We had the show of Maria Grazia again early July, but we see improvement already. So we are very confident that these two brands will continue to make progress.

The next question is from Edouard Aubin, Morgan Stanley.

Yeah, good evening. Thanks for asking my question. So, two quick ones. Just to follow up on the margin trajectory for fashion leather goods, Cecile, just you managed to have XFX flat margin on the minus one, you know, constant FX decline in H1. Hypothetically assuming that you would be in a situation to grow Top line by mid to low to mid single digits as consensus is currently expecting. Should we therefore assume that you should be able to propose some operating leverage excluding FX in H2 for fashion leather goods? So that's question number one. And then on the perfume and cosmetics division, so the division was basically again more or less flattish for the H1, which has been a pattern of low growth in the past few years. And I think, Pilo, some of your prestige peers, how do you explain the relatively sluggish top-line performance for the division in the recent quarters? Thank you.

Thank you, Edouard. So on the margin, hypothetically, on your assumption, maybe I'll come back to the message that I repeat often, which is For the group, probably once we reach 3-4% growth, we are starting to get operating leverage. So it's true that H1, we managed to do it with less than that, with extra effort on discipline and cost, and it's a great result, but it doesn't make it a rule. So we continue to, my message is not changing and stays. On PNC Flat, what I would say is that we have made a choice with perfume and cosmetic and some of our brands to be very selective in distribution, to pay a lot of attention of promotions. There could be some areas and opportunities of short-term growth but for us it probably would mean damaging the brand equity and we want to build to continue to build the brand desirability and equity for the long term so we've been working hard in order to be very selective on distribution and we are still impacting impacted as a result by travel retail performance

The next question is from Olivier Chen, TD Cowen.

Hi, thanks very much, Rudolph and Cecile. Regarding the U.S., we've seen really good momentum here, as well as you have seen that, too. What's happening with the tourism in the U.S. versus local? And the equity markets have been strong here, but what should we know? Because it was a rapid acceleration that you saw. Second, Cecile, on your comments on China shopping events getting more clustered, what does that imply for how you're thinking about longer term? You've done a great job with The marketing and selling expenses were impressive in how you manage those. How are you balancing your management of that versus long-term and what should be done to perpetuate that? And then finally on artificial intelligence, we're seeing a lot of innovation there and a balance in terms of magic versus logic. And Vuitton's had a rich history of managing inventory quite tightly, but what are your philosophies or frameworks towards approaching AI and personalization and supply chain? Thank you.

Thank you Olivier. So on US, the good momentum in Q2 was both. So we had a great momentum in local and an acceleration of tourism on top of that. That's why you see the US market growth accelerating between Q1 and Q2. In Q1, we still had some impact from tourism linked mainly to exchange rates, but the trend has reversed in the second quarter. On China, my comment is not... Deriving to having any kind of structural conclusion, it was rather to comment that we should be careful with very short-term trends. as you might have some weeks where it moves but you have also purchased that are more clustered so you need to ensure that you have sufficient period of time in order to really analyze the demand but but for us there's no specific things we are already as you said both in terms of experience in store both in terms of ensuring that we have brand activation at those moments I think we'll continue to do what we've been doing and that has been quite successful. Balancing cost versus marketing, it's obviously something we are very vigilant around and we make sure that wherever we need it we invest in the brands. When you go for a creative renewal, for example with Jonathan Anderson, you invest in your brand, you activate and that's very clear. So it's really not a marketing or margin. Where we are going to find efficiency is, you mentioned on your AI question, it's on sales rules, improving your sales rules, for example, time to market, improving the brief, lowering your stocks will have tremendous impact in terms of profitability. and can also help you reinvest. And then we are looking really around costs that are not cost where it's investing for the clientele service quality that we will never bargain. You can trust us on that. Then on AI, There are several initiatives on AI because you can really leverage it in many areas. I think on some calls we were discussing about clienteling and how you can really make the relationship and the conversion much more efficient. On supply chain you write that there are also opportunities both for demand forecast but also prototyping and time to market that we can leverage. So we are really using and by the way also on corporate function and cost management. So we are really leveraging all of them in all our Maison.

The next question is from Luca Solka Bernstein.

Yes, good evening. Luca Solka from Bernstein. Maybe stepping back and looking at the fashion and the goods division, and in particular at the core brands Vuitton and Dior, it's been unprecedented that for a few quarters, seven quarters or so, Organic growth has been as low as we've seen and sometimes negative. I wonder what your analysis, what your diagnosis is of what is causing this? What is it that is missing in the market? What is it that is missing in your execution, you think? And where do you stack against some of your competitors? Would you say that at the moment in these categories you're getting market share gains or you're losing market share? One of my One of the doubts is that you're actually, as the rest of the industry, missing middle-class consumer demand. Price increases post-COVID have made some of the products more difficult for them to buy. The lackluster and polarized consumer demand environment is causing middle-class consumers to be on the back foot, and core mega brands like Vuitton as well as their managers have to deal with this thing. How are you adjusting pricing and assortment as a way to address this issue, assuming that you're sharing this diagnosis and this hypothesis of the underperformance? Thank you very much.

Thank you, Luca. So maybe, because Dior and Vuitton is not exactly the same, to be concrete on what we're seeing, I will take one and then the other. On Dior, you might have listened to some interviews of Delphine Arnault and Jonathan Anderson that they had in the first half. We are aiming to build lasting momentum. Lasting momentum is not meaning you don't yield short-term benefits. But the reverse is not true. So today we are very encouraged by the short-term results. I mentioned a few of them. Endure, all key clientele are up in H1. Double digit for Americans and Japanese in Q2 that all accelerated. We have very strong ready-to-wear for women performance and very strong momentum in bags, both on the newness that have been proposed by Jonathan Anderson, but also on some other lines that he has reinterpreted. including icons like the Lady Dior so we've made a lot of progress the collections are super successful what we are offering is getting success and there will be more to come it's two quarter that we started the creative renewal On Vuitton, you know that we decided this year to put the 130 years of monogram as a key feature. And what we are seeing is that it's leading into good momentum for the monogram. and both in the iconic shapes like the Alma and the Speedy that are back to growth but also in some new shapes that I will talk about on your comment regarding clientele pyramid. We have launched a new Monogramme Emblem collection that is also doing well. We have a good momentum on ready-to-wear women jewelry and perfume. You know that we've been opening some very unique experiential stores and flagships that are doing very well. and lastly maybe something you know less is the kind of ephemeral initiatives that we had like the Hotel in London which also happened to be a commercial success. So that's for Vuitton. On the question regarding are we missing middle class, I would make two comments. The first one is that, and I think it's a good news for our industry, is that wherever there is wealth creation, which we have seen in the US, which we have seen in Korea, there is a strong appetite for luxury and a strong appetite for our goods all across clientele. and the second because you're right we said and we've been discussing this we said that it's very important to continue to nourish the pyramid so both the very exclusive client and the aspirational because we need to continue to recruit and if you take Vuitton it's not a new strategy per se and what we can take some example in H1 if you take H1 you have the P9 which is very expensive very exclusive where The waiting list is continuing to grow. So that would be for addressing the very exclusive high-net-worth individuals. And then we've launched some new forms of bags, like the Squires and the Multipass, which are successful and will be addressing a more aspirational part of the clientele. And then we have all the double-entry strategies we already We've made great progress. I think it's good that we are back in growth and we have plenty initiatives that are resonating well with clients.

The next question is from Victoria Petrova, Barclays.

Thank you very much. My first question is on the comps. I think it was asked, but can you repeat if Louis ship should inflate comps for China in the third quarter or it's immaterial? And also from our conversation during pre-close, it looks like MENA has been improving through June. Could you provide any color on the exit rate or how we should think about MENA In the third quarter, what's your base case scenario? And finally, is there any specific phasing on costs overall, but also related to watches and jewelry division on the refurbishment of Tiffany stores? Thank you very much.

Thank you. So on the comps in Q3, what I commented is overall we have an optical more difficult basis of comp than what we had in Q2. But because it's mirroring easier comp in 24, actually it's probably quite comparable. On Middle East, indeed, we had one point of impact in the first quarter, which was only on one month, where we commented that the month of March was down 50% plus. We have still one point of impact in the second quarter but over a longer duration. So we have seen regular and gradual improvement. Also we are exiting the quarter still negative but much more muted than when we entered the quarter. It's still very much unknown as to how this is going to develop, so we continue to monitor the situation carefully. And then on the cost overall, you've seen our income statement, so you've seen that we've been very disciplined in Making sure that the costs are managed actively both in marketing and selling but also in GNA. On Tiffany, we were able to improve the margin despite several headwinds because you had the price of gold, you had also the increase in selling expenses from We'll take another two questions.

The next question is from Jean Danjou, Auto PHF.

Good evening, Madame Cabanis. Good evening, Rodolphe. I have two questions. The first one is on China and cognac. It seems that the demand is improving in China, but you mentioned it was at the low end with the SOP. Could you maybe If you think this is a structural improvement and at last a recovery or if it is more short term. And then the second thing, there is obviously a big gap in growth between fashion and leather and then the jewelry part, nearly 10 points. I wonder whether some geographies explain most of this gap, for example, US and Korea, or is it evenly distributed between geographies? Thank you.

Thank you. On China cognac, so yes, Rodolphe commented on the improving trends. We have also seen improving trends in Ixo, and overall, to your question on is it short-term or is it going to last, what I can answer is it's not sell-in, so it's not like we're stocking. We are sell-in and sell-out that are quite aligned and the stocks are Much healthier than they used to be. On the difference between fashion and leather goods and watch and jewelry growth rate, there's probably not one big explanation and one size fits all. But in terms of geographies, if we look at watches and jewelry, where it accelerated the most is U.S., Japan, and Korea indeed.

The next question is from Chiara Battistini, JP Morgan.

Good evening, thank you very much for taking my questions. I just have a couple of follow-ups actually. The first one on back on fashion and leather goods, I was wondering if you could share with us the price mix and volume dynamics for Q2. And the second question very quickly, did you have any tough refund for the US duties at all and should we expect anything to come on that front? Thank you.

Thank you, Chiara. So price, vol mix for FLNG, if you look at Q2, it's 1% growth. If we exclude Middle East impact, it's 2% growth. We have moderate price, so you can assume that vol mix overall was flat, no big moves there. And in terms of U.S. duties, we got some refunds, but it's only a few basis points to the margin at this stage. So, unfortunately, much less than the currency, very significant impact, negative. And I think we stop there, Rodolphe. Thank you very much for all your questions, for your attention. Again, it was a very solid set of results so we are happy for that. And for those I will not see, I wish you a very good summer.