Kering Sa Ord

Thank you. Good evening to all of you and welcome to Caring's 2023 Altshare Results Call. Jean-Marc Duplex, our brand new CEO, will go over the operational and financial highlights of the first half in a moment. But before I give him the phone, it's important for me to go over the rationale of the changes in our organization we announced last week. As you saw, I made a series of major decisions that will have a profound impact, and I want to make sure that they are well understood. As you have also seen, we've just announced that we are buying a 30% stake in Valentino, and I will also say a few words about that. So, why did I decide to modify our organization, and why did I want to do it now? As I told you at the time of our full year results, we had some reasons to be satisfied, of course, but we had also reasons to be disappointed with our performances and starting with Gucci. I heard many calls for new brand leadership, some kind of musical chairs at the end of our houses, but what we needed in reality was much more than just moving people around. I wanted to change the way we operate for the long term. In fact, in the past decade, we tripled the size of caring as we leverage our brand's visibility and visibility to build their scalability. And then, having achieved that, we will continue, of course, to leverage the visibility and visibility of our brand, but at the same time, reinforcing the exclusivity is our top priority. and this requires another set of skills at group level to guide and to support the brands. Over the past 10 years, we've made great progress in becoming an integrative luxury group. This transformation, however, is not yet complete, and we can still improve the way we see our houses so then they can reach their full potential. So, in a nutshell, the rationale of our reorganization is the following. It is to elevate the operational expertise at the group level. It's about enhancing our stewardship of our houses. And it is to empower them to focus on their core know-how. And I'm certain that this reorganization is a decisive step, not only in getting our performance back on track in the short term, but more importantly, to capture the growth of the luxury world for the next decade. So, in their new roles as deputy CEOs, Francesca Belletini and Jean-Marc Duplex instilled the group and its houses in an efficient, coordinated, and determined manner. Francesca has done a great job in her tenure at Saint Laurent, transforming it into a luxury powerhouse overseeing a successful designer transition, and building a winning management team. And by the way, Saint Laurent has been the most consistent growth story in the group. So from no harm, all brand CEOs will report to her. In over a decade, Jean-Marc has taken more and more responsibilities in addition to his core finance brief, and he demonstrated that he has the right leadership skills to let all the group cooperate, as well as financial functions. Francesca and Jean-Marc will report to me, and together we will conceive the strategy of the group and its houses. We will direct its execution and oversee their performance. And I'm looking forward to working directly with both of them in this new configuration. Then, I have decided that Gucci needed a change in leadership for this new period. Marco will lead the group on September 23rd, after Sabato de Sarno's first fashion show. Jean-François Pallu has been, as you know, by my side for several decades now, and he knows the group better than anyone. He also knows Gucci perfectly, and he has worked with many Gucci executives over the years. So, by teaming up with Francesca, it will be immediately operational to ensure a smooth and efficient new chapter at Gucci. Jean-Francois will drop his board responsibilities and he will be moving to Milan in September. Over the next month, we will iron out some of the details of this setup. I am confident that this team and this organization represent what the group and all its houses need to face the challenges and opportunities of the global luxury landscape. This being said, I wouldn't want you to believe that we pressed the pause button as we were working on this arrangement. In fact, H1 has been a busy period on many fronts. We pursued our investment in our houses' desirability, in their visibility, and in their exclusivity. Their fashion shows, their events, were among the most viewed in the sector, like, for instance, the Saint Laurent Men's Show in Berlin that you can see here. We organized a number of events to raise our profile in Asia, including the Gucci's highly-uploaded Cosmos exhibition in Shanghai and its cool show in Korea. or the Bottega Veneta repeat show in Beijing that happened last week. We reinforce the top end of our product offer, notably in high jewelry collections at Gucci, at Boucheron, but also Pommelato, showcasing you the unique creativity and heritage of these houses. And we further raise the quality of our distribution and client experience. For instance, here you can see Bottega Veneta's recently reopened store. This is in London on Sloan Street. And this store was qualified by a fashion publication as a library of good taste. Tightening our control over our supply chain is also a priority. And we have made strides in this area as well. We've moved, like, the acquisition of UNT by Caring Eyewear, or the opening of Bottega Veneta's specialized atelier near Padua in the heart of the Italian shoe manufacturing area. Of course, a major highlight of the first half was the launch of Caring Botte and its first concrete step with the acquisition of the famed House of Creed, the iconic iron fragrance maker, which will propel our entry into the world of beauty. Finally, we remain at the forefront of the sector in terms of sustainability commitments. Here we publish the second edition of our biodiversity strategy, reinforcing our deforestation and conservation-free policies. And we also became one of the early companies selected to pilot the world's first science-based target for nature. And this busy period did not stop at the end of the first half. We are thrilled to have reached an agreement with Mayula to take a 30% interest in the equity of Valentino. The agreement could lead to carrying reaching 100% ownership of Valentino no later than 2028. And this is part of a broader partnership agreement, and we will explore potential opportunities that are aligned with our respective strategies. Valentino is a house that we have always admired. It's an amazing Italian name rooted in haute couture and known all around the world. We are very proud to be able to support the brand innovation strategy that successfully implemented in the past few years. We are also delighted to work once again with Jacopo Venturini, whom we know well, and his team that has been running Valentino for the last few years. I think I don't need to go over the details of the deal, which are included in the news release, and summarize on this slide. Just I want to mention that we're hoping to close this operation by the end of this year. We are honored to have been chosen to work alongside Mayula on the development of Valentino, as well as on other potential opportunities. And now I will hand over the mic to Jean-Marc to review our 2023 first half performances. Thank you, François, and good evening to all of you. On slide 10, our review in the first half stood above the €10 billion mark at €10.1 billion, up 2% reported and comparable year-on-year. The two-point positive SCOP impact from Maui Gym broadly offset the negative FX impact. In Q2, revenue was also up 2% reported, but with a higher comparable growth, up 3%, SCOP contributing permanently for an additional 3%, while FX was 4% negative. In the first half, Our total revenue breakdown by region changed quite substantially year on year. Asia Pacific accounted for 37% of total, up three points. Western Europe and Japan both gained one point, respectively at 27 and 7% of revenue. All these gains were at the expense of North America, accounting for 22% of revenue, down 5 points. I will discuss the dynamics driving the geographic mix. On slide 11, we provide the breakdown of revenue by segments for Q2 and H1. Comparable growth in Q2 was higher than in Q1, driven by better governance and caring hardware, as well as some improvement at our other houses. On slide 12, let's dive into Q2 top line by channel and region. Retail accounting for 77% of review was up 4% comparable or 8% excluding e-commerce. Online channel penetration decreased to 12% of retail sales and infection after the stellar growth observed in 2019 as customers return to install shipping. In addition, the online channel is more exposed to aspirational product categories. Another feature of the second quarter is the confirmation of the recovery in tourism. Worldwide, tourism accounted for nearly 25% of sales, with Western Europe and, to a lesser extent, Japan over-indexing. Both North America and Asia Pacific were more skewed to locals. Turning to the regions, Western Europe moderated sequentially, up 4% comparable in Q2, on a very demanding income base, on the back of some softness with locals. The world was largely skewed by tourism, mostly American and Asian, with a gradual return of men and Chinese, although they are still standing 60% below Q2 2019. Conversely, North America remained under pressure, down 23% comparable, a picture that is not very different from Q1. Traffic was not supportive across most brands and sales were particularly impacted on entry price points. The U.S. cluster Fared slightly better, down less than 20% in the quarter. Momentum in Japan was sustained with a retail of 26% comparable, a trend similar to one. Growth ensued by tourism, mostly in Asia, notably from greater China. Moving to Asia Pacific, the region accelerated sequentially up 22% comparable in the quarter. Greater China with the key driver up more than 50% with a strong rebound in mainland China and very high growth in Hong Kong and Macau. Some of our housing performed better than others with YSL and Balenciaga standing out. The rest of Asia was less supportive partly due to tough outcomes, but also to persisting softness in Korea. And finally, the rest of the world was up 5% comparable, mainly due to the Middle East. Ulsan and other regions were down 1% comparable with very different situations. An 11% decline from our luxury houses as we continue to enhance the exclusivity of their distribution, a strong performance at Caring Eyewear at 21% excluding the scope impact from Maui Gym, and a 13% increase in royalties and other revenue. On July 13, a global view on recurring operating income, pre-cash flow from operations, and net debt in another year of investment for the group. Recurring operating income was 2.7 billion euros, a limited year-on-year drop. Elite margins stood at 27% and maintained a very high level of profitability, although lower than last year. This reflects the ongoing reinvestment in all oranges to nurture their desirability to their current trajectory or prepare for the next phase of sustainable growth. Our free cash flows during real estate acquisition and disposal rose by 4% to 2.1 billion euros after more than 500 million euros in capex in the first half, a year-on-year increase of nearly 50%. Capex to sell stood at 5.2% compared to 3.6% last year, with some H1, H2 savings. In the first half, we also acquired prestigious buildings in Paris, securing prime location for our houses near Place Vendôme and on Abbey Mountain, and sold the building in London. Taking this into account, CapEx was close to 1.9 billion euros and free cash flow just above 820 million. Operating working capital for its past stood at 16.8% of last 12 months' revenue, broadly in line with the ratio at year-end 2022. Net debt, excluding lease liability, ended at 3.9 billion euros after the increase in dividend paid and real estate acquisition. Let's now look at good shoes. in which we continue to invest during this transition phase. Starting from slide 15, H1 revenue at 5.1 billion euros was down 1% reported and up 1% comparable. Q2 comparable growth was similar to Q1, with retail also. In line with the house strategy, retail was again driven by higher A1 through a combination of immense collection structure and price increases across categories. Best performances came from handbags, travel, and immense offer. Conversely, men and the entry-level segment wear drag, as well as e-commerce, which, as you may remember, had reached very high penetration in North America. All sales were up 2% in the quarter, royalties and other revenues up 8%. On slide 16, recurring operating income came at 1.8 billion euros, a 35.3% margin. The increase in the cost base was driven by star expenses and design. In addition, the chief pursued active communications initiatives to amplify brand visibility, investing in client and store experience elevations, as well as in high-visibility campaigns and events. Gucci held three fashion shows in the first half, including a spectacular display in Korea in May, and reinvested substantially in Asia with the Cosmos exhibition in Shanghai. The house is, of course, getting prepared for the September fashion show of the new creative direction. Capacity sales stood at 4.5%, a 50% increase year-on-year, partly on the same mean more stood toward the first half this year. This strategy then changed. Selective expansion, network enhancement, and investment to improve the efficiency of operations and control over the supply chain. For the store network, I would highlight the opening in New York's backpacking district and the relocation of the Milan Galleria store to a beautiful larger location. Canon delivered a robust first half, a testimony to the house's desirability and consistent execution. Turning to slide 18. Revenue in H1 was close to 1.6 billion euros, up 6% reported and 7% comparable. Retail drove growth and now represents 80% of revenue. The second quarter was solid, up 7% comparable. Retail grew 8%. Product-wise, and ready-to-wear posted the highest performances, notably thanks to the strong success of spring and summer collections. The house also launched fine jewelry as part of its continued elevation and development strategy. It's a category where Saint Laurent is more than legitimate, building on its legacy and DNA. By region, YSL performed well across the board. North America was challenging as the house kept its very disciplined approach in a market that was difficult and somewhat promotional. The house also applied its distribution strategy consistently, although it was down 7% in Q2, deflecting continuing retailization and downsizing the number of accounts. You can see on slide 19, recurring operating income came at 481 million euros, leading a margin of 30.5%. Growth margin was boosted by favorable channel mix and pricing initiatives, both from pure increases and improved product mix. The house enjoyed positive operating leverage and kept reinvesting with three fashion shows in the first half, and higher communication intensity. CapEx also increased from a relatively low base in H1 2022. This is a year of investment for the house, with selective openings, including a shoe and mask. You might be aware that Saint Laurent is preparing for a major flagship opening of the Champs-Élysées in Paris toward year end. Some resources were also dedicated to strengthening production capacity and operations. Delta-Galleta kept reinforcing its position in the ultra-high-end universe. As you see on slide 21, comparable sales were up 2% in H1, with revenue at 833 million euros. Here again, retail was a growth driver, up 6% in the half year and 7% in the second quarter, posting a sequential acceleration. By region, The house proved resilient in North America and performed well in Western Europe and Japan. It did not yet benefit from strong tailwinds in Asia-Pacific. It is now accelerating its initiative to enhance its visibility in China, as you have seen with the beautiful repeat show held in Beijing last week. Product-wise, demonstrating the appeal of Pilaf, Icon, and Munis, leather goods and ready-to-wear were the best-performing categories, with significant increases in AUR. Ongoing rationalization of third-party distribution resulted in a double-digit decline in all Fed institutes. Slide 22. Recurring operating income was 169 million euros, controlling an EBIT margin above the 20% level on higher gross profit margin. Bottega Venica continued to invest in stores, communications, and activations to amplify brand resonance and visibility across markets. CAPEX was up on initiatives to upgrade the store network, including relocations, regroups, expansions, conversion into retail, and issue openings. Our other houses had a soft but increased sequentially thanks to growth in retail and sustained performance of our children's houses. On slide 24, you see that the revenue was down 5% in reported and comparable terms in the first half at 1.9 billion euros, with a decline limited to 1% in the second quarter. Retail was up for whole houses in both quarters, but accelerated intuitively. Balenciaga's gradual recovery was driven by Asia-Pacific. Alexander McQueen performed well in his core ready-to-wear category. Tim Brimley was nicely up on a healthy mix of review from formal wear, leisure wear, and bespoke. Ocel was still down sharply on the rationalization strategy and a challenging U.S. market. Our jewelry houses, Dufront, Pommelateau, and Killing, were up strong double-digits in both channels, reflecting the appeal of their creations and the investments we have made to broaden their visibility. We are extremely pleased with the development of our jewelry activity quarter after quarter, and with their growing contribution to the group's top line. Slide 25. €224 million recurring operating income was down from a very high base. EBIT margin was 12.1%, quite in line with H2 last year. That's when we first recorded the full impact of our stepped-up investments in the brand's retail expansion alongside hotel rationalization. We kept shooting their long-term growth. Erevis is translated into some negative leverage at Balenciaga and Alexander McQueen in the short term. CapEx is allocated to selective store opening further enhancing penetration in key and new markets. Caring Eyewear on slide 27 delivered a record first half with 869 million euros in revenue up 51% including the contribution of managing or 16% comparable. For Q2 only, comparable revenue was up 21%. All grants continued to be successfully developed, and the integration of margin is going on smoothly. 10 hours EBIT contribution improved again materially, yielding a 21.5% margin thanks to both benefit of scale and accretion from margin. It's worth keeping in mind, however, that some investments to further develop and expand my regime are ahead of us, and that there is a seasonality network with revenue and profitability most towards the first half. Care Incorporates costs were well controlled. CapEx was 93 million euros, a limited increase year on year, as we have reached a quite normative level to support our houses in IT and logistics upgrades. This is excluding, of course, the acquisition of the buildings previously mentioned. Now, looking at the remaining lines of the P&L on slide 28. Net financial charges amounted to €204 million, or €134 million excluding interest on these liabilities. Cost of net debt stood at €40 million on higher debt levels and interest rates. All the financial expenses were 94 million compared to a 57 million income last year. The major part of this swing comes from recognition in H-122 of a fair value gain on Puma exchangeable bond derivatives. Corporate tax was 692 million euros, a 27.1% tax rate on the recurring income. Root net income from continuing operations adjusted for non-recurring items reached 1.8 billion euros. Free cash flow and net financial debt are on slides 29 and 30. In the first half, in excluding real estate, we generated over 2.1 billion euros in free cash flow. The change in working capital is negative, but to a lesser extent compared to H1 last year. as the various components of operating working cap are indeed well under control. We provided the presentation excluding and including real estate impacts. On slide 13, at June the 30th, net financial debt was 3.9 billion euros with a healthy net debt to EBITDA ratio of 0.5 times. In the first half, we paid 1.7 billion euros in dividends, a 15% increase. So, to conclude, while there is no hiding that we are not yet where we want to be, I also want to echo François-Noël's confidence in the future. We continue to generate considerable cash flow and enjoy a very healthy financial situation. We are investing in the long-term success of our brands and increasingly in their exclusivity. The acquisition of Crib that provide the cornerstone to our expansion in beauty, and the investment in Valentino that we announced today marks new milestones in the development of the group. We have the right people and the right culture to face today's environment. And we just announced a major organizational change that will make us stronger, faster, and more effective. And now, we are ready to take your questions. Operator?

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 touchtone 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 Thomas Chauvet with Citi. Please go ahead.

Good morning, everyone. Thanks for taking my questions. Firstly, on Gucci and the transition, the appointment of Jean-Francois Palus as interim CEO and his relocation to Milan seems like a strong sign of determination to implement some changes at Gucci. Could you elaborate on what's you know, will be the key priority for him and the Gucci team until a permanent CEO is appointed? What do you want perhaps to speed up as part of the strategic plan you presented a year ago in Paris? And how long would you expect the CEO transition period to last? Second listing on Gucci and the numbers, if we look at stage two, 23 consensus. It's about plus 7, I think, constant effects for the revenue. EBIT margin down 100 bps. Is that, Jean-Marc, a sensible scenario in light of what you're seeing in July? And then would you expect the management transition at Gucci to drive a bit of a maybe a slight reset of 24 expectations, which are also expecting a bit single-digit revenue growth and some margin expansion? And finally, on Valentino, very interesting acquisition of a 30% stake. What potential are you seeing in this brand? How does it fit in the group portfolio? Would you then have 100% of the capital? And on that point, the option to buy the remaining 70% by 2028 could lead Mayula to become a shareholder in Caring. So what do you think Mayula would bring to the group if they were to become a I don't know, 5%, 6% perhaps shareholder in caring as opposed to caring buying the remaining 70% with new debt. And you're talking also about potential joint opportunities. Are you mainly thinking about eyewear and fragrance?

Thank you.

Thank you, Thomas. So I will start with Gucci. I'm not sure I have the first question because you were very difficult to be heard. It was probably about if it would change the strategy presented in the past few months, including the digital market there. Okay. All right. So to start with the organizational changes at Gucci, of course Gucci as you all know is our main asset, so it was for me important to be pragmatic and very efficient in making sure that the transition phase and the relaunch of the aesthetic of Gucci was very well orchestrated and very efficient day one. I asked Jean-Francois to take the temporary custody of Gucci. First reason, of course, is I trust very much his judgment, and I know that I can rely on him to take the right decision. Jean-François is someone that, as I said, the Gucci organization inside out. He knows all the executives already. He's been running the group on my side for many years, as you know. So I know that he's going to be immediately operational. And that was, again, my key concern, to have immediate efficiency and the new appointment to make sure that, the relaunch and the amplification of the vision that Sabato de Cerno will bring to Gucci through this new aesthetic will be immediately operated at Gucci with the organization. So Jean-François will, of course, as has already started on that priority, the relaunch of the aesthetic and making sure it's not just the fashion show, but also the months after the fashion show where we have a full program of amplification that he's working on right now. Don't forget that in the new organization, Jean-Francois will team up and has already started to team up with Francesca to make sure that all the components, all the areas of expertise are covered immediately at Gucci, product-wise, image-wise, communication-wise. And this is the case. So Jean-Francois is assessing the organization, looking at where we still have weaknesses to be corrected immediately, assessing the capability of our key leaders in Gucci, which is already partially down. And, of course, the top priority is to restore the momentum of the top line of Gucci going forward through the relaunch of the aesthetic of Gucci. And on that, again, my point here was to appoint someone that could be immediately operational at Gucci. Having in mind that having a seal coming from the outside, which was another option, of course, that I considered, would have, considering the size, the complexity of Gucci, and the phase of relaunch of Gucci, would have taken an adaptation of several months if not a year, and I didn't want that. So I decided to go to that direction of this transitional period with Jean-Francois that I know that will be immediately very efficient starting in September. Then the length of this period of transition, Jean-Francois is not here to stay forever, as I mentioned in the communique of the organization. We will assess the organization. We will put back Gucci on track regarding the growth momentum of Gucci. We will assess the management team, the organization, and of course, Jean-Francois, with Francesca and myself, we will define the right profile for the CEO to recruit for Gucci, and we will start the search starting in September, October to make sure that we take the time to have the right person at the right moment to lead Gucci for the years to come. I will jump on the question about the margin and the reset. By starting first, you say that the macro environment, Google speaking, for the industry is quite uncertain. That in the case for all the brands, of the group, and starting with Gucci, we remain focused on implementing our long-term strategies, including short-term pain, like typically the All-Celeron Translation for Tufts and Brands, and some other decisions regarding Gucci. So, yes, definitely 2023 is a transition year with soft-review trends so far for Gucci. H1 margin may be, in a way, a good proxy for the full year. That does imply a slight margin improvement in H2 year-on-year. But I want to be clear that we support all initiatives that the new management and the new design team at which you would like to launch in H2 and going forward to reignite the brand for the long run. So I don't know if it's per se a reset, but we will support all the investments needed. And as already stated, the potential of the brand in terms of revenues on a big margin is immense and intact compared to what we had the occasion to present. But the trajectory to reach that objective might not be linear and comprise some phase of investments. Okay, so then you mentioned, of course, the operation that we just announced about Valentino. So as you saw in the communique, you have the exact size and profitability of Valentino as of last year. So the potential, as we look at the brand from the outside, of course, is very important. And it's more importantly, very complementary with our brand. It's an iconic Italian brand. It's rooted in haute couture, in a very high-end, very sophisticated segment, which is the point that is very complementary with the rest of the portfolio. And with the discussion we had with the management and with the shareholder, we know where the The brand can improve in the future, so we are very confident in the capability that we will have partnering with Mayula. Don't forget that we start with 30%. We will bring our expertise to the management to make sure that we can speed up the growth and the development of Valentino going forward. So the brand is, for me, typically the brand that we were looking at respecting the criteria, as I always mention, when it comes to our M&A strategy with our portfolio. And the potential of this brand is, in our opinion, quite significant for the next years to come. And I'm aware to specify that we're also very pleased with the management that we met. Of course, we knew Jacopo when he was in Gucci, and we are very, very pleased with the management and the team around Jacopo that is leading Valentino right now and for the future. When it comes to the investments that we're making and the fact that Mayula May become a shareholder of Caring. Of course, they have the opportunity, and I mentioned the opportunity for them to buy on the market to strengthen the relationship with us. In the second phase of the path to control, if we were to pay partly in shares, there won't be any dilution due to that operation going forward. And then again, it's important to re-mention because it was the spirit from day one of our discussion with Mayula. Of course, the collaboration, the partnership starts with Valentino, but then we will broaden the opportunities that could arise in front of us, and we will work together to see if those opportunities are aligned with our respective strategies to work together on some opportunities. It's too early, of course, to say what would be those opportunities, but it's For me, it has to broaden our scope of looking at the luxury market in the future.

Thank you.

The next question is from with HSBC. Please go ahead.

Yes, good evening. I have two questions. The first one is coming back on the management changes. So given that Mr. Salu is here to ensure the transition at Gucci, Can you share with us what are the criteria you are looking at for a new CEO at Gucci? Do the candidates have to be well-known in the luxury industry or are you willing to give a chance to a newcomer? My second question is about the new target that have been shared by the former CEO at Gucci of sales reaching 15 billion sales and an EBIT margin of 41%. Is it still valid? And my last question is about Francesca Bellucini, who has been appointed as Deputy CEO. Who is going to lead the Saint-Laurent Fund going forward? Thank you very much.

Thank you for your question. Regarding the first question, part of my decision to rely on Jean-Francois to define that, but again, short-term, we restore the top line, the momentum, the growth of Gucci because the potential is completely intact, and I'm very confident that When it's coming up in September, we brought us back on the path of growth at Gucci. So that's the first thing. And then, of course, we will, by the in-depth assessment of the organization, of the leadership, we will define very precisely what is the right profile for Gucci so it could come from the industry or not. We will really, with Francesca and Jean-Francois, analyze the different criteria that we want to consider. For me, all the options are open. Again, the CEOs in our industry that are already experienced at that size are very, very few, so it's also a good reason to open to the external world. I won't want to rush that. It's not the main concern today. Again, I have a very strong team. inside Gucci and now under the responsibility of Jean-Francois to restore the growth and reposition Gucci in terms of aesthetic in the coming months. With the help and the support and the expertise of Francesca, we have all in place to restore that momentum of the top line in the short term. Then, of course, I will work very actively with Jean-Francois and Francesca again on finding the right profile to lead the brand for the next years to come. Concerning your question about the ambition for Gucci, I partly answered previously to Thomas. I think that, obviously, first of all, the strategies that have been defined by Marco, we have fully endorsed these strategies, and I already mentioned the question with the now about execution and speed of execution and efficiency of the execution, but the strategy is still, I think, relevant when it comes to exclusivity, facility store openings, and so on, and also rationalization. So there is no change on the side. And obviously, also to give a second reminder, I would like to do, in the past few years, we have always delivered our ambitions and our objectives for Sanner Hall, for Gucci, for Bottega. So I think there is no reason concerning the scale of Gucci and the brand position that we should not reach the 15 billion euros mark and the profitability going with that level of sales. As I said before, I think the trajectory will not be linear and we are not afraid to invest, if needed, whatever the impact on the profitability short term. To answer your question regarding Francesca, so to be clear, with no ambiguity on that, I asked Francesca, on top of becoming the deputy CEO of the group in charge of all the brands, I asked her to keep direct responsibility of Saint Laurent. This is very important for me. So she will remain the CEO of Saint Laurent. This is very clear. Why that? Because, first of all, she has built a very strong leadership group inside Saint Laurent. She has very strong teams in place. Of course, following the appointment, we've been working with her to streamline our organization to make sure that she has an organization that enables us to be very efficient on both sides, and this is the case already. And on that, I'm very, very confident that things will work very well. Again, maintaining a leadership of Stella Hong will allow her, and this is very important for me, to stay grounded in operations, which is a very important factor to steer the development of all our brands. Don't forget that Francesca has 20 years of experience inside the group. She has worked for three different brands over those 20 years, and she has worked directly with me for the last 10 years. So I know her very well. I know how she works. I know how she can work. And I'm very confident in the capability to run the deputy CEO position, which is, of course, different from running a single brand. I know so well that it was an obvious for me, an obvious situation to offer this position. And I have no doubt of the efficiency of this organization going forward with Francesca leading not only all the brands of the group, but keeping a very strong foot in Saint-Laurent in the coming years.

Thank you very much.

The next question is from Edouard Aubin with Morgan Stanley. Please go ahead.

Yeah, good evening. So three for me, and thank you for taking my question. So just to come back on Valentino, So, first of all, congratulations. Essentially, you had no M&A or little M&A over the past 10 years, and you have two in about a month. But San Antonio is a great brand, but, you know, which experienced a bit of pedestrian growth in the past four to five years. Are you going to be able to generate synergies right away, you know, given that they're going to have a minority stake? And I don't know if you can comment, but is the reason for Myola to move forward the fact that, you know, they might have found it difficult as an independent mid-sized brand, you know, to grow, and therefore, you know, that they could, you know, clearly benefit from the scale benefit of the caring group. So that's number one. Number two, on the management change, sorry to come back on that, but one of the rational, not the fact that, or maybe the fact that, you know, Jean-Francois, you know, and Francesca, who's based in Paris, to strengthen, you know, kind of caring groups, direct supervision or involvement of Gucci, which might have been an issue or not. I'd be curious to have your view on that. And then number three, in terms of if you could please provide some indication by nationality and the Chinese last year on the two-year stack. So apologies if I missed it, but between Q1 and Q2 and then the Americans on the year-over-year stack, that would be helpful. Thank you.

Thank you for your question. So regarding the Valentino, of course synergies are very important. The positioning of the brand is different from what we have. This is the main interest of the move, of course, but of course, we will bring synergies on the table. Of course, going forward, it could be real estate, it could be organization logistics, it could be human resources, of course, if necessary. The fact that the group will be supporting Valentino is a very strong element of the decision of Mayula to partner with us on the future of Valentino. On that, I'm very, very confident, and the discussion we had with the management of Valentino during the process of the acquisition reinforced our confidence in what we could bring to Valentino in the coming years, not only to continue to develop strongly the brand, but also to reinforce significantly its profitability. Just on that point, I would repeat and remind that we are starting with a 30-person shareholding. We will get board representation and standard government's right commensurate with its 3-person shareholding. Of course, when you mention a partnership and collaboration, it does encompass some initiatives to help RENITICO to develop further that you can easily imagine that, of course, we will be at full speed in terms of synergy when we have the full control. And when it comes to the motivation of IOR, you can imagine that we cannot elaborate on that. So you asked also a question about the new organization, not only at Group Label, but at Gucci. So as I said, if I... take some perspective here. My top priority in November was to push and to speed up the aesthetic change of Gucci that was necessary, considering that the top priority was there and then my focus was on the design team and of course on the creative direction of Gucci at the time. This is why I started by changing the artistic direction because couldn't see the change coming up. As you know, when we do that, the time lag to recruit to put in place, to organize a fashion show, and then to produce and deliver the new aesthetic in stores in a year. So I had to make sure that we would do that as much as we can. So we were able to define the right profile very carefully with the team at Gucci and with the team at Caring in finding Sabato. Sabato has been recruited. Sabato has been arriving. Gucci was fully operational starting in May. He already traveled to the key market. China is right now in America. He's working very closely already with the merchandising team, the communication and marketing team of Gucci to prepare the show and the amplification of the show going forward. So that was really the first concern that I had then. I did consider that we needed also a new vision considering this new chapter of Gucci. Gucci is a company, never forget that, that grew very fast in a very short period of time. So I think there was a lot of positive elements in bringing a new leadership at Gucci. And this is the role of Jean-Francois to really be, as I said, also I want it to be very efficient, very pragmatic. I don't have years in front of me. I want to put back Gucci on track with this new aesthetic. And this is what Jean-Francois will bring by, as I said, knowing Gucci very well, knowing all the persons, all the key executives of Gucci very well, not only in Milan, but also in the regions. And of course, Jean-Francois coming from the group. There are some fields where his expertise is not yet sufficient, and this is where Francesca, as deputy CEO of the group, will support him and help him when it comes to the product field, when it comes to the image or communications field of expertise. So this is why we have there a combination that is, for me, ideal in such a transition and a relaunch of a brand of the size of Gucci. So I'm very confident. We're not changing the growth strategy of Gucci. The elevation strategy that we started in 19 is continuing. We are speeding up on that. It's not yet where we want to be. Of course, it takes more time to build. But we need a strong fashion engine to restore the growth and the top line of Gucci going forward.

Hello, Edouard. This is Claire for the question on the cluster. So year-on-year, so versus 2022, the Chinese cluster is up 60%, so 6-0 for the group. Of course, you know that Chinese consumers have resumed traveling. So just to give you an indication, I think in Q2, roughly 25% of the Chinese spend was abroad, so not on the domestic market. And compared to 2021, so on a two-year stack, we were up the same thing at group level around mid-single digits, with quite wide, I have to say, performances depending on the brands. As Jean-Marc mentioned, you have two brands that are really performing with the Chinese cluster, namely YSL and Balenciaga, and two brands for different reasons, which are a bit below for sure in terms of growth with this cluster.

Perfect. Thank you, Claire.

The next question is from Lucas Solka with Bernstein. Please go ahead.

yes sir good evening and uh congratulations on securing yet another fantastic italian brand but they say that there's no italian luxury conglomerate but with valentino in milan and the palatial had called it you had called it in the land uh there's at least a french italian conglomerate to their uh brothers uh congratulations to your mark and his new position nice

question is on how to interpret the changes at Gucci.

I can only imagine how difficult it must have been to replace the CEO of the largest brand in the group just ahead of a major new fashion chapter that is going to open with the Kachok show for Sabato in September. What didn't work in

or execution at Gucci and how long is it going to take to fix it?

Or are we to understand that there were roadblocks there and with this change actually things are going to be sped up. So is this a situation where we have to wait more or where we have to wait less, I wonder.

My second question is on the overall organic growth performance of the brands.

We've been focusing a lot on Gucci, clearly, and the market has been focused on Gucci. But if we look at the organic growth of other houses tonight, and Laurent, and so on, they seem to be suffering a gap between some of the other peers.

If you step back, what is the reason for this gap?

And is there possibly a need to invest more to support these brands from a marketing viewpoint and confront competition that is possibly taking more of the limelight? I wonder. And then third, your strategic vision for beauty.

I was wondering how we can become the platform to execute on your beauty conditions. I thought, but maybe I'm wrong, that you would need scale in order to play beauty because this is a very fragmented retail environment to local scale, to organize supply chain properly and so on.

But I would be very interested in getting your vision on how this brand can be a platform for these new ambitions and how things could potentially compound from this initial first step.

Thank you very much indeed.

Thank you, Luca. Thank you for your comments, your initial comments for Jonath and for me. My first question was about the change at Gucci and how difficult was that. Well, no, we have succession plans. My role is really to always make sure that I have the right executive at the right place at the right moment. So even though it was the biggest brand of the group, We have a succession plan that we review annually, every year, of course, and I just decided, considering that was happening in the phase of transition, that instead of making a regular recruitment for a grant that was on the growth path, which was not the case considering the aesthetic transition, that I needed a different setup to make sure that we were playing efficiency, urgency of the situation to restore the growth momentum of Gucci. Of course, Marco has brought a lot to the group, but again, it's a new chapter. We need a new vision, a new leadership to accompany the new the new chapter of the brand, and this is the decision I took. I wanted to make it properly because you don't transform a $10 billion brand like that. You need to make sure that the setup that you're bringing is the right one for the company, which I'm absolutely convinced that we took the right decision there, and we'll see the results in the short term. Then you asked about the new fashion chapter, considering how long this could take. Again, Gucci is a fashion authority, so the deservability of Gucci has been rebuilt over the last 20 years on the strength of its creativity going forward. It was the case with Tom Ford, it was the case with Alexandre, so we are bringing a new aesthetic to bring back in a very short period of time the momentum to Gucci. Of course, it's never the first fashion show. The first fashion show will establish the new vision. We will start the amplification of that. This will have already an impact. And, of course, the second and third fashion shows will be very key, as usual, as you understand and as you saw in the past in many luxury brands. So, no, it won't take time. I'm pretty sure that we will resume, because again, it's a change of aesthetic. It's not a change of full organization at Gucci. It's not a change of strategy at Gucci. It's just we are reigniting the creative engine, which is the key engine at Gucci, still building on the side the more elevated part of the brand, which is building up very well we have very good results but of course it's not yet at the scale that we need uh to be more balanced between the fashion side and the elevated side of the of the chip um thank you very much for your compliment um i think that um obviously we cannot uh you know contest what just you said about the uh performance of our brand compared to the market and the peers Let's start with a more qualitative assessment of things that our brands are as desirable and as creative as ever. You may have seen the fashion shows, the exhibitions, and you see that there is still a very strong brought equity for all the brands. Some of our brands are doing pretty well, sometimes above the market. If I think about Caring Eyewear, if I think about our jewelry brands, our jewelry brands are clearly overperforming the market, especially Boucheron. When it comes to the other brands, first of all, we have two specific issues that you know very well. First, Gucci, and you mentioned it, but also Balenciaga. Balenciaga, I believe, there is a rebound. After last year's controversy, this is a gradual rebound. Very strong rebound in Asia-Pacific. Still some improvement, some room for improvement in the U.S. or in the U.K. while in continental Europe, we see that the bond is regaining traction. But obviously, there is a drag from desert controllers last year. Now, if you look globally, first, we had some brands with high exposure to all-cell in the context where we have skilled this all-cell rationalization, plus, clearly, the richness of the U.S. department store distribution impact the performance. Now, if we look at the retail performance, There is also drag from online. It's true that we are very, I think we were convinced that we needed to develop the online business and we have now the right setup to completely embrace the full potential of that segment. But it's true that this is a context where online is suffering. So without online, you see that we've gained few points in terms of growth and quite materially for some brands. Now, there is also a question of distribution and brand presence. You know that San Juan and Betagalenta are much stronger in North America and are more likely to build their visibility in Asia, or sometimes are still doing their visibility in Asia. So when China is the main engine of growth and luxury, we do a lot of unique performance. The distribution can last forever and can turn around pretty fast. Last but not least, all this elevation strategy, which is to rebalance our brands between timers and fashion in a context where there is a weakness of the more aspirational segments. Clearly, there is a hit on the performance, and we see that our brands are performing very well in the higher price point segments. We have very solid results and achievements at Gucci, at Panoram, and, of course, at Bettega Veneta. And to be honest, we didn't want to deviate from the from the strategy we have in terms of price discipline, in terms of elevation strategy, full price sales, and then if you know that at Gucci, in the combination, you're still the weight of outlet business in Medicaid, but overall, we have still two quick disciplines in terms of pricing with less promotional activities. So that would explain, according to me, the performance gap. Now, regarding CREED, I will pass the microphone to François. Thank you, Jean-Marc. So, you asked me about the CREED acquisition and how this acquisition could help the caring birthday platform that we want to build. First of all, let me remind you that Creed is the largest independent luxury fragrance player with a revenue last year that was above 250 million euros. So the scale is already very significant. As you know, it's a very high heavy-duty margin. And the positioning of Creed, this is important, is a very high-end segment of the cosmetic market or the fragrance market. And this segment is the fastest-growing segment of the industry, growing at a CAGR of 15%, and it's forecasted to continue at that pace. Not only CRED is already scalable and bringing a scale to Caringbote, the scale is quite important, it's meaningful to build something consistent in this area. Again, what CRIT is bringing short-term immediately is two things. Product development capabilities, they are very strong at that. They have proven that. And the second element, they are bringing immediately a distribution network that we don't have to build. The experience that we had with CaringEyeWare, the success of CaringEyeWare was highly correlated with the capability we had to build a distribution network worldwide to reach directly the point of sales. And this has took us many years at Caring Eyewear. And thanks to CREED, we will reduce very significantly the time to build those distribution capabilities that we need to distribute our products. But that's CREED for Caring. But CREED itself, you have to have in mind that we have significant growth opportunities there. If you take the geography of CREED, the exposure that we have in China and more broadly in APAC, It's very limited today. The $250 million are mainly built in Europe and in America. So this is a huge potential for growth for Pryd, still remaining in the positioning of the high-end segment of the fragrance business. In terms of categories, Creed has been developing very successfully on the men's segment. They have developed some women's fragrances, but we have room to grow there going forward, and this is what we intend to do with the team of Creed, to push also on the women's lines. In terms of channel distribution, there is a very significant potential there on two areas. One is duty-free channel. Creed is almost absent on the duty-free channel as of today, but also on e-commerce. Creed is very, very limited in terms of development on e-commerce, and he sees two areas also of potential for the brand. So not only has a really significant scale, but we have strong growth opportunities for CREED, and it will bring, as you understood, capabilities that we're going to have to build going forward, and I'm very, very confident that it will speed up our capability to build caring voices going forward.

The next question is from Charles-Louis Skosty with Kepler Shabrou. Please go ahead.

Yes, good evening. I have three questions, please, to follow up on Sabato de Sarno and Gucci. Could you please help us understand how fast will be the ramp-up of the share of Sabato de Sarno news collection to Gucci total product assortment? It will present its first collection in September, but I suspect it will account for a modest share of total product at the beginning. So when do you think it will start becoming relevant at the brand level? On the deal with Valentino, can you confirm that the option you have is a call option, and do you have a right of first offer over this asset? And also, Merula has other luxury assets, notably Balmain. Is this something you could consider as well as part of the joint opportunity you mentioned in the press release? And third question on the price you paid for this stake. If I'm not mistaken, The EBIT was 147 million euros last year, with 1 billion net debt, including IFRS 16. So it would suggest something like 46 times EBIT last year, if you think this multiple makes sense. And I'm also curious to know on what basis the valuation for the remaining 70% will be set, if already decided upon. Thank you.

Okay. Regarding the first part of your question and the arrival of Sabetto and the rampant cadence of his new product offering, so as you mentioned, the show is in September. product will hit the stores in q1 next year and when you heard me about the amplification how important is the amplification uh just after the first show it's all about that making sure that we give visibility of the product even though the availability is not yet here we give a strong visibility in the key flap sheet for instance on some key products uh faster than others uh having the right window that is the right campaign because that new aesthetic will also have an impact on the existing product of which it would be wrong to think that we will only sell when all the products designed by sabato will arise in store you will have an image that if the amplification is rightfully down which is one what jean-francois with the support of francesca student location marketing communication and Manifestation Elemento and National Lean are working on, to make sure that we have an immediate impact on all the product categories, on all existing products, as soon as the aesthetic is brought to the market. So we expect to have an impact, not just when the product arrives, but before that, thanks to this amplification. Yeah, just to conclude on that first question, don't forget also that in the past few years, the brand has worked to also install some iconic products, especially in handbags. So you don't forget, I imagine that two-thirds of the products in handbags, at least on the leather goods, were a carry-over line. And, of course, we won't change overnight the carry-over lines. And in the end, it's part of the game. every year and of course it would be gradual but at the same time we want to see quite rapidly some impact with a clear new aesthetic being presented. I don't want to enter into detail of the agreement with Merula. I think that it's quite clear that we have, for the single trench, there are some multiple exit windows through options until 2028, with the latest window being so precise in 2028. There is a call, and I want to elaborate more because, as you can imagine, it's quite confidential in terms of deal. Balmain is not part of the deal and it's not contemplated at that stage that there will be something around Balmain going forward. When it comes to the price, you may know that, or you know perfectly that Valentino, being not a public company, You have a few data about Variantino, but some of them have been made public regarding the performance of 2022. You were mentioning the ADEPs, but typically this type of operations that we are looking at is at the EBDA, and you may have noticed that the EBDA was closer to €350 million in terms of EBDA recurring, and it's really the basis for the valuation that we have mentioned, the valuation of 100%.

Thank you very much.

The next question is from Assam Bej with BNP Paribas Exxon. Please go ahead.

Yes, good evening. Three questions. First of all, I think you mentioned that Valentino was quite unique and complementary to the portfolio. In my view, it's a couture brand, and Saint Laurent is also. If I'm a bit naive, I'd like to understand a bit the specific positioning or hear a bit more about how Valentino is really that different from a brand like Saint Laurent. My second question is coming back on the previous question of who cares about the number of performance that you do. the more normalization of certain bonuses in the US.

In the US, the retail performance was down 21%, so the impact of wholesale is high, so not so much about Esclash. I don't think it's more online than any other brand. So, yeah, I mean, you should be worried or whether it's something exceptional to see a further deterioration down 21% in

is quite substantial.

And finally, regarding Gucci, if I understood correctly, the margin for the full year, you said H1 was a good proxy for the full year, but in the previous earnings call, you had mentioned that in March, Gucci retail was at 10% like all the other brands, and then you landed at 1%, so I would expect that in June and probably July on Teflon comps, because there was no COVID in China in those two months, that the Wuxi brand at the worldwide level must be running negatively. So if that's the case, and peace comes from that, is it even a good thing to be maintaining the margin? I'm actually maintaining the slightly decline, but at a time where, you know, as you mentioned, these analysts estimate they could be invested even more than we thought. You know, we're talking about teams including marketing. So, yeah, that's where I don't really understand. I was not expecting to maintain a 35% margin this year.

Thank you, Antoine. So coming back on the first part of the question regarding Valentino, the complementary or not with the portfolio in particular in Saint Laurent, already if you look at the campaign and the products, you can already see that the positioning is quite different stylistic-wise. The inspiration in Saint Laurent, the silhouette and the attitude is at the heart of the inspiration of the brand. The sophistication of Saint Laurent is very different from the sophistication of Valentino, as you mentioned, coming from Haute Couture, which is not the inspiration at all of Saint Laurent. And when you look at the customer of the two brands, it's very rare that we have an overlap among our customers. I look at that with Saint Laurent, of course, that our customers are very, very few of them customers of Valentino at the same time. So it's really two different positioning. One is haute couture, inspiring, ready to wear. The other one is the vision of Antony and through the coat, the symbol of Saint Laurent, of the vision of the world that is coming through the attitude and the silhouette of the Saint Laurent woman that is driving the positioning of Saint Laurent. One is much more on the cocktail slash red carpet type of positioning. The other one is really different from that. So for me, there is absolutely no overlap with Saint Laurent when it comes to Valentino. Thank you for your challenging question, Antoine. You never said that there was not a... the situation in the U.S., and we don't say that everything is coming from outside, far from us. We know that we provide always a very transparent and candid view about the situation. It's true that there is a transfer deceleration for Saint-Laurent and North America, but Saint-Laurent, like the other brands, is in a process of elevation. We have already mentioned the ambition that the brand has to increase the share of DIC in its total business, which is precisely the case. I can tell you, and I can really confirm you, that the figures are showing that we are going fast in the IM segment. The context is that In the past few years, if you compare the size of Saint-Laurent in 2018 or 2017 and the size of Saint-Laurent today in the US or in North America, Saint-Laurent has dramatically increased its footprint in terms of cells, not necessarily in terms of network, but in terms of cells, which is the cell density which is incredibly high still today. And it's true that it has been made through the expansion of online, through the capacity of the brand to engage with more aspirational clients, but we are at a time when some products which were not targeted, but which were very successful with aspirational clients. Today, with the elevation of the brand, are above the equivalent of 2,000 euros. So it's true that in this case, we are leaving some among the most aspirational clients. To be honest, also, I can confirm also that the U.S. market being very challenging with the department store and with some tiers being very promotional, we decided not to have some modern activities in the U.S. and it was to the detriment of the business. Your last question also is the question which is coming quarter after quarter, as if we are making the choice to protect the EBIT margin at any price without being conscious that we need to invest. The point is that, as you said already, is that first we need to be sure that the investments we are making are paying off, that we have the right level of investments with the right level of the quality of initiatives that are productive and are paying back. I can tell you that in the past few years, we have increased massively the resources allocated to Gucci. We know perfectly that we have increased a lot the budget allocated to stores, to communication, and so on, and we will continue to do so. But it's not because we will open temples, we will have a lot of events. If we are not well-prepared, well-anticipated, it will not... produce a positive impact. That's the reason why we are changing also the organization to be sure that we have the right people at the right level in all the different layers, that all the initiatives we have will pay off, and of course, as we said before, and I think I was very clear, If there is a need to invest more, we won't hesitate. And if there is a path of research to be made, we will do it. But as long as Jean-Francois has not given back the sentiment and feeling and determined an action plan together with Francesca and François, it's useless to tell you what will happen and to speculate on what will be our decision.

Okay. Many thanks, and I'm regarding my comment about Gucci being negative in June and so far in July.

Antoine, I think we're not going to comment on a monthly basis, so I take the opportunity to say we're already having one hour and a half of conference almost, so we're going to take the two last questions.

Thank you.

Thank you. The next question is from Chiara Battistini with JP Morgan. Please go ahead.

Hello, thank you. Thank you for taking my questions. I have one follow-up on Gucci and the management transition. And I was wondering, in terms of the appointment of the permanent CEO, is there anything you need to see for that to happen in terms of maybe inflection of the organic growth or any positive signs? Or you're going to transition to the permanent CEO once you have identified the CEO, even if the brand is not showing inflection? And on the elevation strategy of Gucci, is it just a matter of driving the mix up and introducing and pushing the higher end of your product portfolio? Or do you think there is a bit of cleanup also to do on the volumes and maybe on the more affordable side of the product portfolio? And one question on Japan. That was very strongly included for Gucci and also generally better versus my expectations for all houses. Can you just remind us how much of Japan is now tourism and any indication on the Japanese class specifically and whether you are planning further price increases in Japan for the second half of the year? Thank you.

Thank you for your question. I will start with the management transition at Gucci. Again, my key priority was efficiency in putting back on track Gucci in terms of top-line growth. particularly when we are approaching the relaunch of the new aesthetic of Gucci, so I'm not going to go back on that. I didn't want to have another transition because I was bringing, at this moment of transition, a new CEO coming from the outside, discovering the company or even discovering the industry. So that was, for me, not an option. So we need to go through this transition, making sure that we are back on track. And then as soon as this is done, we will fine-tune the organization, fine-tune everything that needs to be reinforced. It could be product development. It could be supply chain also. And then we will, based on that, brought on board, bring on board a new CEO and a company that is full speed going forward, where the priority is the development of Gucci above the market growth in the coming years. So this is when I will launch the search. Again, you understood that we have, for years, niche brands, a permanent search, a permanent succession plan, not only with internal candidates, but also with potential external candidates. So we already have a short list of potential people that could be suited. I don't want to rush that. It's not the priority today. The priority, you understood, is to rebuild the momentum of the brand. But as soon as we're ready, we already have some very clear idea of the profile that should be leading Gucci for the next 10 years. The elevation strategy has a lot of different angles to look at it. Clearly, the point is not necessarily to elevate the brand by alienating The aspirational clients is just a question of being relevant in all the different clusters in terms of price and clientele. You know that we already mentioned to you that all brands and species achieve or very concentrated on a quite narrow range of price points. I think there is, and on that point, we are making good progress in the more elevated part of the collection. It's still doing quite okay in the core offer, and we need to continue to develop the entry price segments where maybe we are missing relevance in certain cases in the offer. It's true that in H1, and it's particularly true in Q2, The growth was driven, first of all, by price, by EMR. Volumes were negative. It doesn't mean that there is no cleanup to be made. In this sense, it's typically what Maria and Cristina de Monta is doing at Gucci, which is a simplification of the offer with a reduction of the SKU in certain cases. And what is even more important, it's about distribution. So I mentioned previously that, of course, it's not in the transition year we will start to rationalize further the distribution. We made a huge effort in the past few years about alter, but I can tell you that going forward, there will be also some additional cleanup in terms of distribution, and that will contribute also to ground elevations. I will pass the mic to Claire as we go to Japan. It's true that Japan is doing extremely well. Before giving you some indication about tourism versus locals, it's important to see that if our brands are successful in Japan with tourism, and also locals, it means that they are still very desirable, Gucci and the other ones. So it's a good sign that our brands, to bounce back on previous questions, are still demonstrating desirability and relevance in the market.

Yeah, thank you Jean-Marc, and hello Chiara. So the mixed-tourist locals in Japan in Q2, Turkey is roughly 30% of the mix, so more or less back to where we were in 2019 before COVID, so 70% locals. You're right, Japan is quite attractive in terms of pricing. If I have a look with the currency movement, of course, Japan is more or less on par with Europe in terms of prices. So it's clearly the cheapest area now to shop in Asia. I will not comment on upcoming price increases, but there is for sure a question open on Japan whether or not to adjust the prices. keeping in mind that there is good momentum with curates, of course. It's a bit softer with locals in Q2, but the comp was very high with locals in Q2 last year. So that's a good question that I will not provide indication on what we're going to do on the pricing there.

Great. Thank you.

And the last question is from Louise Singlehurst at Goldman Sachs. Please go ahead.

Hi, good evening, Francois-Marie and Jean-Marc. Thank you for taking my questions. We've obviously had a lot of information and understanding just how busy you've been in the first half, so I'll keep them brief. Just going back to the Gucci and the management change and the transition, we've obviously had a lot of information and background already, but just to confirm, and given, I guess, the operational focus that we've seen from Jean-Francois over the years, can we just check that there's nothing more operational or that needs a bit more focus at Gucci that we might be underestimating from the outside or anything that needs to happen. I don't know, it's supply chain distribution that could impact the growth profile above and beyond obviously the brand performance. And then the second question for Jean-Marc, just going back to the margins, I suppose the surprise at the moment is the level of investment that's going into Gucci given the fact that we're waiting for a lot of the new product. Optimistically, can I ask whether this is a smoothing of the margin profile, i.e., Despite the investment up ahead, we shouldn't see a step down in margins next year or else equal for the brand and the new product coming through. And then actually, I will ask a third one very briefly, just going on the Valentino deal. I wonder if you can just talk about timing. Why have the stars aligned in 2023 or whether there's been going on for a long time? Thank you.

Thank you for your question. So to answer the first one about the management change of Gucci, as I said, Jean-Francois is immediately operational. I should have started my different comments over the different questions, but we have a very strong team in place at Gucci. As you know, we made some key changes last year in merchandising, in communication. So Jean-François can rely immediately on very operational and very skilled people at Gucci. Of course, there's always room for improvement. I know, for instance, that in the elevation strategy of the brand, we need to raise the game in terms of quality of the products for instance there's also probably more agility to find in our supply chain to be able to go to for the time to market that is better than we are doing now. Never forget that we scaled this brand in a very short period of time, so this has been achieved brilliantly by the team. But, of course, we need to strengthen that and making sure that we can continue to go further. The potential of Gucci is, in my opinion, in the foreseeable future, above $15 billion. So Jean-Francois will, of course, work on the product development side, supply chain side also. For the time being, the focus is, as I said, on the forefront of the brand, which is the new aesthetic and the amplification of that new vision in all the touch points of the brand, in the stores, in the campaign, in the events. making sure that we're not waiting another six or eight months for this aesthetic to be established. So the amplification strategy that is being put in place just after the show would be absolutely key. And all the teams merchandising communication under the leadership of Jean-Francois and the support of Francesca is already working actively on that. Before answering your two last questions, I would like first to apologize because I understand that we have still a few people queuing to ask questions. I think Francois has been very generous with his time today. But clearly, as usual, the IR team will be available to make any follow-up, so sorry again. And we try to be as comprehensive as possible in our answers. When it comes to the margins, I can just repeat what I said before in the sense that, first of all, it's a little bit too soon to say what will be the profile of the margin going forward, starting with H2 and even more for next year. I think that I want to be clear again on the fact that there is no obsession on our side or a sort of dogma to increase by a few bits margin. That's not the final issue. We are very lucid. We have a new organization in place, and we will work because we know that the competition not only the big competitor, but globally in the market, you have a lot of investments. You will have noticed that we are not afraid to invest in the supply chain as we did this semester. We are not afraid to invest when needed in the real estate or to gain some locations, not only by buying assets, but also sometimes by negotiating some rent. We are not afraid to also engage with celebrities and ambassadors. We are not afraid to organize big events. So if we need to go further, and once again, if we need to hit a big margin of good shield gain for a while, we would do it. But still, with this objective, which is, I think, quite realistic, to reach the 15 billion euro mark with a profitability that would be closer to the 40% margin. Last point regarding Valentino, I want to be very clear on the fact that we have started to discuss very recently, and we went quite fast on the discussion, and the reason why we announced today, because we wanted to sign a deal before the summer, and it was part of the scheme of the discussions to go very fast. To complete that on the M&A strategy, and that's my role at the group level, I keep relationships with many of our colleagues on the luxury market. I see them regularly. We had contact in the past years with Mayula, even though they were not selling nothing, but It's also by entertaining those good relationships with potential companies that could fit in the portfolio that things happen. So we were proactively working on some targets and this is how it happens. So thank you very much for participating in our call and for your interest in caring. I hope that Jean-François and myself I've convinced you that all our action and initiatives contain the seeds of our future success. The recent changes in our organization, also the credit acquisition, and now our investment in Valentino, all open to an exciting new chapter in our history, and we are very, very enthusiastic about the coming period. I wish you a pleasant evening and a very nice summer. Thank you very much.