Kering Sa Ord

Good morning to all of you and welcome to Kering's 2023 Full Year Results presentation. 2023 was a mixture for Kering. Market conditions began to deteriorate as many of our brands were evolving their operating models. And of course, as a consequence, our performance did not match our expectations. Against this backdrop, well, we made a series of far-reaching decisions, both to speed up the transition and to seize opportunities for the long term. As you've seen in the news release, I have decided together with our executive team that despite the current uncertain environment, well, we should not reduce our investment in the future. Our top priority is to continue to enhance the exclusivity and the desirability of all of our houses, and of course, first and foremost, Gucci. This will cause some pressure on our result in the short term, and I am absolutely determined to make this short-term pain pay off in the long term. So this morning, I will first go over last year's key takeaways and our priorities for 2024. Then Armel Poulou, Caring Chief Financial Officer since last September, will then review our 2023 operational and financial highlights. And then finally, together with Francesca Bellettini and Jean-Marc Duplex, Caring Deputy CEOs, we will be available to answer your questions. So let's start with a few key 2023 numbers. Our revenue came just shy of 20 billion euros, and our recurring operating income resulted in a margin of over 24%. Cash flow remained strong at 3.3 billion euros, excluding the real estate acquisition and disposal that we did last year. We globally employ 49,000 people around the world, and we enjoyed the highest environmental, social and governance ratings, and this is rewarding the pioneering efforts that Kering has made from the start. In line with our long-standing strategy, we dedicated much of our 2023 efforts to nurturing the desirability and exclusivity of our houses. We continue to invest in creation, to invest in communication, distribution, and in our ateliers and production setup. So let's start with a look at our collections and their creations. At two of our culture houses, new creative directors were hired last year with the goal to re-energize the collections while it is very important staying true to their respective DNA. Sabato de Sarno joined Gucci in May and presented his first collection last September. And Sean McGuire was appointed at Alexander McQueen in October. His first collection will hit the runway next month. Both Sabato and Schoen will give a new impetus to these very different but highly influential brands. Our houses staged some of the most visible celebrated shows in the year's fashion calendar last year. In addition to Gucci, the spring-summer 2024 shows of Bottega Veneta and Saint Laurent were acclaimed high points in the Milan and Paris scene last September. Intense creativity characterizes all of our houses as evidence across their collections in art as well as soft luxury. For example, Bouchon's audacious More is More collection that was launched last July challenges the traditional understanding of what high jewelry is about. Bottega Venetas and Yamo line of handbags represent a modern take on the understated but relevant luxury, and that is part of the brand's idea of what we call creativity in motion. Saint Laurent women's ready-to-wear collection, shown in Paris in September, continued to affirm the prominent positioning of this magnificent house. Turning to communications, 2023 was a year of in-depth reassessment of each of our houses in order to best convey the desirability and exclusive positioning. They leveraged the full range of instruments at their disposal to effectively engage with their existing and potential clientele. So powerful campaigns have been launched and even more are in the making focusing both on the brand's value and culture and on specific icons and new products. In addition, our houses carry out a steady stream of events ranging from intimate VIC engagement to large exhibitions such as Gucci Cosmos that was held in Shanghai and in London last year. And those events aim to strengthen the bonds with a broad base of customers and raise the understanding of our brand's heritage and cultural relevance. Providing the most gorgeous setting for our collections is an imperative to support the brand desirability. And of course, it guides our distribution strategy. In line with this priority, we've had a very active 2023. We significantly enhanced our retail network in key markets with selective openings as well as important transfers, extensions and upgrades in prestigious locations. We focused our new store openings on cities or districts offering the highest potential in terms of traffic, of course, but also in terms of disposable income. And in addition, we opened a few resorts like Aspen for Bottega Veneta or Capri for Saint Laurent. We also opened new flagships such as Saint Laurent's largest store to date on Paris Champs-Élysées, showcasing the brand's new store concept in what has become a prime luxury avenue. After years-long renovation, Gucci returned to its Via Montenapoleone flagship in Milan, which represents a good transition to a new store concept that will come in the future for the brand. Other highlights of the year include the reopening of a radically transformed Bottega Veneta store, and this is on Paris Avenue Montaigne, Or I could mention also Boucheron's cut-in-edge Ginza flagship in Tokyo, which is the second in size after the Paris Vendôme store. In addition, we are pursuing our wholesale rationalization strategy, focusing on the most exclusive partners across the world. Creating products of absolute quality is another essential requirement of all of our houses. and this entails exercising a stringent control over our entire supply chain. In this regard, we have taken several steps last year to further integrate our product development and production, expanding existing ateliers, opening new facilities, and also acquiring some of our suppliers. For example, Saint-Laurent relocated and expanded its atelier maroquinerie in a 28,000 square meter site outside of Florence. A specialized Bottega Veneta shoe workshop went on stream in the Veneto footwear district. It was last June. Boucheron acquired a Paris atelier specializing in high jewelry while carrying high wear, but UNT, a manufacturer of high precision components. we intend to retain flexibility in our production. And greater integration, in particular of key activities such as product development and research, enables us to strengthen in-house training to secure valuable skills and to sharpen our craftsmanship excellence. In the past few years, while sustaining core collection and the business of all of our houses, we also invested in new categories and client experiences at some of our brands. Bottega Veneta's success in fashion jewelry is particularly noteworthy, as is Gucci's continued foray in aisle jewelry. Saint Laurent, for example, established a movie production unit working with such renowned directors as Pedro Almodovar or Paolo Sorrentino. And this is to magnify the brand aura in new directions. You have all seen how taking our eyewear activities in-house gave us direct control over a crucial entry-level category that we turned into a full-fledged element of each brand's aesthetics and image, featured in the ads and shows. So we have grown Keying Eyewear in a meaningful way. In 2023, we added Maui Gym, so today Kering Eyewear weighs 1.5 billion euros in annual revenues, making it the world's second largest luxury eyewear maker. Beauty, and notably fragrance, is another key adjacent offering that some of our houses must control and offer directly. It is an attractive business, particularly at the top end of the pyramid. After long and careful consideration, we stepped up the pace of our development in beauty last year, first with the creation of Kering Beauté and then with the acquisition of Creed, a beautiful brand, highly profitable and with great recognition among high-end consumers. We have always been open to welcoming complementary houses to our stable of brands. And Valentino, a house with a long-standing Italian haute couture positioning, had long been on our radar screen. And we are obviously very pleased with our acquisition of an initial 30% stake and we look forward to the next steps in our journey together. Sustainability remained at the forefront of our strategy in 2023 as we keep pursuing our targets. We also last year defined new key milestones for the future. The year was pivotal in transitioning our model to address the environmental crisis with a dual focus on nature and on climate. We became one of the 16 companies worldwide piloting the science-based targets for nature program. At the same time, we launched a new call for projects through the Caring Regenerative Fund for Nature. On the climate front, we announced a new objective of reducing by 40% in absolute terms our greenhouse gas emissions for Scope 1, 2 and 3 by 2035 from a 2021 baseline. Our efforts are earning us recognition from the most demanding ESG ratings. Earlier this week, we were awarded a AAA score from CDP Worldwide, the Carbon Disclosure Project, which is a clear testimony of our dedication to climate, water and nature initiatives. Innovation remains paramount. Alternative and sustainable materials are making ever greater inroads in our collection. And for example, last year Balenciaga launched the first coat made from mycelium leather developed by an Italian startup in which we invested. In conclusion, everyone should be aware that this transformation will continue to reshape the way we do business, the way we support jobs, the way we develop skills, and even the way we create value. Before turning to our 2024 priorities, I would like to share with you a brief video showcasing some of the year's highlights at our houses and activities. Easy year. So now turning to 2024, as I told you earlier, our overwhelming priority is getting Gucci back on track. And I will talk to you about how we are doing this, of course. And I will also give you a bit more insight on one another major 2024 project, which is the operational launch of Caring Boutet and the integration of Creed. So let's look at Gucci first. Taking Gucci to its next stage is the main focus of our attention under the leadership of Jean-François Pallu. In less than six months, he has made gigantic headways in assessing where we stand and designing the roadmap for the next years. Among the world's handful of mega brands, Gucci enjoys a very strong awareness, a unique positioning spanning luxury and fashion. Its influence has always come from a subtle blend of craftsmanship, Italianity, heritage on the one hand, and modernity and fashion authority on the other. In the past few years, however, Gucci has not kept pace with its peers. In fact, it was slow to evolve its brand aesthetic in the wake of the pandemic. Its communications messages lost focus and blurred the brand's perception. The necessary balance between fashion and exclusivity, which supports the house ability to attract a broad range of consumers, was a little bit diluted. But however, Gucci retained all its strong awareness, which is a very solid base for every new start. Of course, Gucci belongs in the Premier League. Gucci is a cultural icon the world over. We leverage its unicity, its solid grounding in luxury and fashion to reach our ambitions. We are executing sharply on an evolving vision of what the house stands for. We aim to be relevant across everything the brand does, and I don't mean just products and collections. In fact, creativity and agility must be at work everywhere and not just in the studios. We are putting in place a new operating model that fits its 10 billion euro status. The organization has always had its eyes on the next collection. Well, of course, we want to retain this agility and at the same time strengthen our ability to plan ahead, to expand our time horizon to the next 12, 24 months and beyond. We have significantly reduced the weight of wholesale, but we haven't fully moved away from what I call a wholesale-driven mindset. Here we need to always push retail and clients at the core. Now we are moving faster, we are cutting down time to market, and defining a new paradigm for production and merchandising. Gucci is bigger than any individual. The creative director as well as the corporate leadership are custodians of the brand and the house. They need to work together, respecting rules and balancing competences. And today, with Sabato de Cerno, we have a great designer who puts his creative ability at the service of the brand to make it shine. Of course, none of this will happen overnight. The assessment stage is nearly complete and the implementation phase is on the way. The new collection will gradually be arriving in stores starting this month in February. The new operating model is being implemented at headquarters but also at regional level and new talents are joining the brands in key functions. With each step, Gucci's new vision is taking shape. The strategy we are implementing rests on four pillars that you will see flourish in the coming months. Enhancing consideration first means being consistent with the brand image in everything we do and staying grounded in a well-defined creative universe, adhering to the brand key attributes while at the same time re-establishing the core role of leather goods. As you have started to see, communication aims at creating emotion, cultivating desire and amplifying the brand narrative. But there is a lot more to do. Gucci is a cultural institution, so it must leave and breathe luxury in everything it touches. Another major pillar of the strategy is to enhance exclusivity at the level of product and collection, better monitoring the contribution of each individual SKUs, reducing special projects, completing the offer from the entry point level all the way to ultra luxury products, and curbing availability on certain items. In distribution, we are conducting an exhaustive review of our footprint, and we will start to close a few outlets as early as this year. A key imperative, of course, is never to compromise on quality, both in terms of products through the entire development and manufacturing cycle and of stores where a new concept fully identifiable and unique to the brand itself will eventually be rolled out. Quality of in-store experience is another area of focus and part of a broader skills improvement process. We are revising the entire structure, transforming processes and deploying resources more effectively so that our organization is truly adapted to the scale of the house. Enhancing efficiency also requires the right talents at the right place. The arrival of Massimo Vian as Chief Industrial and Supply Chain Officer is an important step in this regard, and there will be more announcements in the very near future. To assess our progress along this journey, Jean-François and his team have defined a set of KPIs relative to every dimension of the business. So as you see, we are moving with determination to get to the inflection point. Now turning to Kering Beauté, the steps we've taken in 2023 to get our beauty business up and running are laid out in more details here. We have the team in place, we have a strategy ready for implementation, the first prototype of perfumes, and now the platform and production setup to get onto the next stage as early as this year. Beauty represents a sizable opportunity for top fashion players and one that we have not fully harnessed to date. It is steadily growing and sizable market. And of course, the most natural relevant starting point is with fragrances. This is a category whose essence should be fully aligned with the DNA of the brands. So to begin with, our focus is squarely on the summit of the fragrance pyramid, which is high-end and then prestige. Fragrance magnifies the visibility, the desirability of luxury houses over a greater universe, driving recruitment and widening the accessibility to the brands. So as you see, we have a straightforward roadmap for 2024 and the coming years. Then in CREED, we bought a century-old first-year brand that has a huge potential ahead of it, and we will drive it forward in terms of categories, particularly with women, for instance, or in terms of geography, particularly in China, where it is underrepresented. We are also starting to leverage the expertise Creed has accumulated over all these years in terms of sourcing, in terms of distributor and retailer relationships, logistics, or in marketing and sales. So as a result, we will be ready to launch our first fragrances for Bottega Veneta in our own stores and selective doors before the year is over. And then Balenciaga and Alexander McQueen should be the next in line. and we will continue to scale up the business. We are convinced that we are following the right strategy here and we are building the right platform around CREED to reach our ambitions with Caring Bote. Our 2024 operating priorities are quite straightforward. Our capital allocation priorities are unchanged. Our healthy financial situation provides us with the resources to re-establish good ship remnants, to get carrying bodies off the ground, and to smartly support performances across the group in a tougher environment. So we will continue to invest in all our activities with an eye on the long term. However, short-term pressures might lead us to privilege certain houses or certain projects. The Board has approved our recommendation to maintain the 2023 dividend unchanged at €14 per share. And this decision is an acknowledgement of our healthy financial situation and above all, a testimony of our confidence in the long term. And we retain the flexibility to look at opportunities that might arise, even if the health and potential of our existing houses is our top focus. In the past year, we have also taken advantage of changing market conditions to secure prime and coveted sites for our brands in some of the world's most desirable locations. That being said, when it comes to retail, I want to make it very clear that we do intend to remain primarily operators and not landlords. So to conclude, we are at a pivotal moment in our journey. In our first 10 years as Kering, as an integrated pure player in luxury, our top priority was to scale up our houses and we successfully raised their visibility and desirability. We also engaged in a very selective M&A activity and as a result, over this period, we built a powerful group. We triple annual revenue from our luxury businesses. Organically, we quadruple sales from jewelry, getting close to the 1 billion euro mark. We also developed adjacencies in eyewear and now in beauty, worth close to 2 billion euros in revenue on a full year basis. We also enjoy a solid retail presence around the world. And here in 10 years, the share of our own network in our revenue has gone from 17 percentage points, excluding carrying eyewear. As you know, carrying eyewear is essentially a wholesale business. And if you include carrying eyewear, we still improve by 10 points the weight of our own stores on our revenues. So over the decade, we spent over eight billion euros in capital expenditures, excluding real estate acquisitions. And our communication expenses grew slightly faster than our revenues, bolstering the visibility of our houses. I have no doubt that the strategy that has gotten us where we are in the space of 10 years is the right one, even if the recent period has not been up to our previous track record. We've been able to scale up our houses to get them to the level of influence they deserve, to turn them into serious, relevant contenders in the universe of fashion and luxury. Now we need to make them even more visible and desirable. To unleash the full potential of all our activities, our number one imperative is to further cultivate our brand exclusivity. And it is from this perspective that we assess all customer touchpoints across our houses, collections and products, communications and stores. Our new organization, announced last July, improves its interaction between our houses and the corporate functions. And this is key to reaching our goals and secure the path to long-term growth of the group and all its components. And now I will ask Armel Poulou, our CFO, to review for you our performance in 2023. Armel, the floor is yours.

Thank you, François-Henri. And good morning to all of you. Let's start with some highlights of our financial results on slide 21 and 22. Full-year revenue came just short of the 20 billion euro mark at 19.6 billion, down 4% reported year-on-year and 2% comparable. To bridge comparable and reported figures, we had a 2% positive scope impact as Maui Gym was consolidated over the whole year versus only three months in 2022 and Creed was included for the last two months of 2023. FX represented a 4% headwind, a significant swing versus the prior year. Looking at our geographical mix, the major change comes from the weight of North America, down 4 percentage points to 23% of total. Conversely, Asia Pacific was up 3 points at 35% of full year revenue. The weight of the other regions did not move much. I will review the trends by regions later. In Q4, revenue was down 4% comparable and 6% reported, with a one-point positive scope impact and a three-point negative impact from FX. 23 was a year of significant investments in our future growth. At 4.7 billion euros, recurring operating income was down 15%. Full year operating margin dropped 320 basis points to 24.3%. The positive impact of the execution of our strategy, notably higher AURs, was partly offset by further investment in product quality and inventory management. To support our brand's strategies and visibility, we sustained operating expenses, notably in communications. The H2 margin at 21.3% was further impacted by negative top-line trends despite good cost control. At 3.3 billion euros, our free cash flow generation, excluding the impact of real estate transactions, was healthy, a touch higher than 2022. Including real estate, it is close to 2 billion euros. CapEx, excluding real estate transactions, at 1.2 billion euros, increased by 15%. It supported the development and enhancement of our housing stores and production capacities. The capex-to-sales ratio was 6.3%. Our operating working cap stood close to 18% of revenue, a contending increase compared to the prior year. Net debt was 8.5 billion euros at your hand after an active year on both the M&A front and in terms of real estate. In addition to CREED and the Valentino stake, we acquired prestigious buildings in Paris, securing prime locations for our houses near Place Vendôme and on Avenue Montaigne, and sold a building in London. and we paid 1.75 billion euros in dividend, a 15% increase year on year. On slides 23 to 25, a deeper dive into revenue. First, by channel, retail contributed 78% of total revenue, with the balance coming from wholesale, royalties, and other. Saint Laurent, Bottega Veneta, Balenciaga, Boucheron, all generated more than 80% of revenue from retail, while Gucci exceeds 90%. In the full year, retail was unchanged in comparable terms, with contrasting trends between the two halves, up 4% in H1, down by the same percentage in H2. In Q4, retail was down 2% comparable, a 4% point sequential improvement on an easier-come base. Included in retail, e-commerce dropped sharply, down 18% comparable in the full year. It accounted for 12% of retail sales. Not including the integration of Creed, our houses added 89 net units to their store count. Our footprint expanded on a mix of increased penetration in recent or well-established markets and conversion into directly operated stores. Wholesale and other revenue was done 11% comparable in 2023. Consistent with our move towards greater exclusivity, together with the challenging situation in the US, wholesale was down a material 21% for our luxury houses. The shift towards increased control of distribution does entail a dose of short-term pressure. Focusing on Q4, wholesale and other revenue were done 12% comparable. For our luxury houses alone, wholesale decreased by 22%. For their part, carrying eyewear and royalties posted very good performances, up 10% comparable in the full year. Now, turning to retail trends by geographies on slide 24. In the fourth quarter, Western Europe remained in negative territory, down 8% year-on-year, a slightly better trend than in Q3. Local demand, accounting for roughly 55% of the total, was still a drag but less material than in the prior quarter. Purchases by tourists were a touch below last year, the positive trend from certain nationalities, notably Chinese, not fully offsetting the drop from American visitors. Looking at the full year performance, Western Europe was roughly unchanged, although tourism spending was still 10% below pre-COVID levels. In North America, after nine very challenging months, Q4, down 11%, showed an improvement on easier comps. Most of our houses were still impacted by lower traffic. For the full year, North America was the most challenging geography, down 18% in retail, with the US cluster pretty much in line with the region. Japan posted a good fourth quarter, up 13% year on year, yet with a sequential deceleration. Weak local demand was more than offset by strong tourism spending, representing close to 40% in Q4 and mostly coming from other Asian countries. On a full year basis, Japan retail was up 23%. Asia Pacific recovered mildly in Q4, up 8% on the undemanding ComBase. Greater China accelerated sequentially, but the magnitude of this improvement was somewhat underwhelming. The Chinese cluster, up 35% year-on-year in Q4, posted a nice sequential acceleration. Trends in Korea, although still negative, also improved in the quarter. For the full year, retail in Asia-Pacific was up 10%. Finally, rest of the world was broadly unchanged in both Q4 and the full year. On slide 25, you will find our revenue by segment for Q4 and the full year. In Q4, the trends were comparable across our houses, down 4 or 5%, but with quite different dynamics by region or channel. Revenue from the clearing eyewear and corporate segment was up both in the quarter and full year, on comparable as well as reported terms, which include the consolidation of Maui Gym and Creed. I will now comment on our individual houses, starting with Gucci. Revenue for the full year came close to 10 billion euros, down 6% reported and 2% comparable. Retail, also down 2% comparable, accounting for 91% of sales. Wholesale decreased by 5% and royalties were up 11%. In Q4, retail was down 4% comparable, with trends improving in North America and Asia Pacific. Product-wise, Gucci showed good resilience in leather goods and women's ready-to-wear. The quarter was marked by a host of events following Sabato de Sarno's maiden fashion show in September. Gucci unveiled its inaugural evening wear collection, Ancora Notte, at the LACMA Film Festival. Milan's Monte Napoleone flagship reopened in December after a full renovation, blending tradition with contemporary design, celebrating the essence of the city and made in Italy. The very first creations from the spring-summer collection are just starting to hit the shelves, with a gradual ramp-up due to take place in the coming months. Not including any deliveries from this collection, wholesale was up slightly. Gucci posted full-year recurring operating income of 3.3 billion euros, a 33.1% margin, 2.5 points below last year. To sustain its future performance, Gucci pursued its investment in such key areas as stores, communication and clienteling, prompting operating delivery, especially in the second half. CAPEX was up, supporting Gucci's exclusivity focus through a mix of refurbs, reopening and relocations, including landmark stores in Milan and London. The net store count increased by 10 units. Starting from slide 29, some highlights on Saint Laurent. At 3.2 billion euros, full year revenue was down 4% reported and 1% comparable, a contrasted performance on a very high comps 2022, having been a remarkable year. The drop came from wholesale, down 22%, with rationalization well underway. For its part, Ristel was up 4% comparable and represented 81% of revenue. Focusing on Q4, retail was unchanged. Saint Laurent enjoyed strong performances in Asia Pacific and Japan, while Western Europe and North America, though still negative, improved sequentially. By product category, leather goods were fueled by the appreciation of new launches and ready-to-wear fall and winter collections were very well received. Wholesale was down 39% comparable in Q4, reflecting both the impact of rationalization and our cautious approach towards the US market. Recurring operating income was €969 million, yielding a 30.5% margin. Gross margin was up on channel mix, and the house continued to invest in brand and client experience to support its elevation strategy. CapEx was up with 28 net openings this year. Store investments were aimed at deepening Saint Laurent's penetration in various markets and for the opening of landmark locations, including the Champs-Élysées flagship. The house also inaugurated a new leather goods atelier outside of Florence. Now, moving to slide 32 to review Bottega Veneta's performance. Bottega Veneta's full year revenue was 1.6 billion euros, down 5% reported and 2% comparable. Here as well, the drop in revenue is entirely due to wholesale as continuing rationalization translated into a 24% comparable decline. Retail, accounting for 82% of sales, was up 4%. In Q4, retail was solid, up 5% comparable. The house posted strong growth in North America and was resilient in Western Europe, both with locals and tourists. We achieved encouraging performances in mainland China, where Bottega deployed sizable investments to amplify brand resonance. Firmly positioned in the ultra-high-end segment, Bottega's growth was driven by the high desirability of leather goods and ready-to-wear collections, consistent with the impressive reception of its recent fashion shows. Bottega's sound growth is fueled by a continued increase in AUR on a healthy mix of existing and new clients. Wholesale was down 37% in Q4, in line with the strategy of exclusivity. Recurring operating income was 312 million euros, a 19% profitability, two points lower than in 2022. Gross profit margin was up on product and channel mix, as well as pricing. However, the timing was right for Bottega Veneta to reinvest in collections, communication, stores and client experience to strengthen its momentum. CAPEX is up on store network upgrades. Openings remain highly selective and including some revitalization. The focus is still on strategic relocation and store enlargement. From slide 35, our other houses which had a challenging year. At 3.5 billion euros, revenue in 2023 was down 9% reported and 8% comparable. Wholesale was 29% down as our main soft luxury houses continued to tighten control over distribution, but also faced lower orders. Retail, accounting for 72% of sales, was up 3% comparable. In Q4, retail was up 4% comparable, with all houses up except Balenciaga. Trends in wholesale were consistent with the full year. In soft luxury, Balenciaga went through a complex year with sharply contrasting trends, down materially in Western markets and up significantly in Asia Pacific and Japan. Q4 was no exception on the retail side, although both Europe and North America showed some improvement on easier comps. Ready to wear and shoes perform well, especially for men. The House recently resumed more visible initiatives, with a fashion show in Los Angeles, new campaigns, and new ambassadors. Alexander McQueen also had a challenging year, and Q4 stemming from the heavy impact of wholesale. Retail was positive on the back of its core ready-to-wear offer. The house is getting ready for a busy 2024 with Schoenmacher's first show and refreshed communications. Brionif's very solid performance during the year and in Q4 was fueled by its bespoke and formal offer together with the appeal of its leisure wear proposition. Our jewelry houses continue to show strength in Q4, ending another year of double-digit growth with total revenue close to 900 million euros. Delicately combining tradition and creativity in its high jewelry and jewelry offerings, Boucheron delivered another year of high growth, consistently reinforcing its position, notably on Asian markets. Pomellato pursued its steady growth trajectory and Kilin posted another strong performance. Recurring operating income of the other houses was €212 million, a steep year-on-year decline resulting in a margin of only 6%. With unsupportive top-line trends and lower wholesale revenue, Balenciaga and Alexander McQueen had less capacity to absorb their fixed cost structure, which has expanded as they shifted towards more retail. By contrast, results were solid for our jewellery houses. CapEx was up 12% as our houses continued to enhance their direct presence. Now, turning to Kering Eyewear and our corporate segment, which includes Kering Bote. On slide 39, revenue at Kering Eyewear passed the 1.5 billion euro mark this year as expected. Comparable revenue was up a solid 10% in the full year. Reported revenue was up 35% thanks to the material contribution from Maui Gym. Q4, up 6% comparable, confirms the successful development of the category and portfolio of brands. Revenue for the segment as a whole was 1.6 billion euros as we consolidated CREED from November onwards. Recurring operating income of the segment as a whole was minus 7 million euros, a notable year-on-year improvement. Gain High Wealth Operating Income stood at 276 million euros, delivering a strong profitability at 18.4%. This level is not fully normative at this stage, as some reinvestment will still be needed to further expand the global reach of Lindbergh and my regime. Guérin-Beauté had a slight positive contribution, the integration of the highly profitable creed more than offsetting startup costs. As for corporate costs, they were stable year on year. CAPEX stood at 1.6 billion euros, mainly comprising the acquisition of three prestigious buildings in Paris for 1.4 billion euros. We have summarized the remaining lines of the P&L on slide 40. Other non-recurring operating result was negative 103 million euros, a 91 million improvement compared to 2022. The gain on disposal on the sale of a building in London mitigated various impairments, reorganization costs and M&A related expenses. Net financial charges amounted to 410 million euros compared to 260 million euros in 2022. They included interest and leases liabilities for 150 million euros. Excluding this, financial charges were 259 million euros compared to 136 million last year. Cost of net debt at 108 million euros was up on the back of higher average outstanding debt. We issued three multi-trench bonds under very favourable financing conditions in higher interest rate environments. But conversely, we benefited from a higher income on our deposits. Other financial charges were €151 million, mostly including the ineffective portion of hedging and other FX-related impacts. Restated for the recognition in 2022 of a fair value gain on Puma exchangeable bond derivatives, other financial charges decreased by €44 million. Corporate tax amounted to 1.2 billion euros at 27.4% tax rate on recurring income, consistent with our normative tax rate. Group net income from continuing operations, excluding non-recurring items, exceeded 3 billion euros, an 18% decrease year on year. A few comments on free cash flow on slide 41. The slight improvement in free cash flow generation, excluding real estate, at 3.3 billion euros, came from a more limited change in working capital due to tighter inventory management and from lower income tax paid. Including real estate acquisition and disposals, free cash flow was close to 2 billion euros. On the bridge on slide 42, you can observe the main components underpinning the change in our net financial debt. We paid 1.75 billion in dividend and devoted close to 5.5 billion to financial investments, mostly Creed and Valentino, with a few minor investments in strategic suppliers. We continued to trim our stake in Puma and were down to 0.4% ownership at December 31st. Our net debt at year end stood at 8.5 billion euros, a net debt to EBITDA ratio of 1.3 times. A quick look at our balance sheet and financial structure on slide 43. Total asset and liabilities increased by 7.5 billion euros and we consolidated CREED as we consolidated CREED, our new real estate properties and equity accounting accounted our 30% stake in Valentino. Our net debt to equity ratio stood at a healthy 53%. At 4.5 billion euros, our inventories remain broadly stable in value year on year, but decrease significantly in quantities, down 12% as a result of tight inventory management across our houses. Operating working cap was a bit higher than last year, close to 18% of revenue. My final comment will relate to the dividend on slide 44. The board of directors has proposed a dividend of 14 euros per share. The payout is consistent with our longstanding policy as a percentage of recurring net income and illustrates our confidence in continuing to generate significant cash flow. We paid an interim dividend of 4.5 euros last month, and the balance should be paid in May, pending AGM approval. This ends my remarks, and I will turn the mic over to François Henry.

Thank you, Armelle. As you see, we intend to pursue our long-term strategy with serenity and determination, and of course, despite the tougher conditions on the market that we foresee in the near future. Of course, we will remain very agile, very vigilant before engaging any OPEX or CAPEX, but we will make sure that our houses get the full support they need for their journey. So now we are ready to take your question.

Thank you, Mr. Pinot. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star and 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. This will only take a few moments. If you wish to cancel your request, please press the pound key. Once again, please press star and 1 if you wish to ask a question. Please ask your questions distinctly. and put on mute all devices apart from the phone you are using to ask your question. Your first question comes from the line of Chiara Battistini with JP Morgan. Please go ahead.

Good morning. Thank you so much for taking my questions and for the extensive presentation. I have three, please, if I may. Firstly, if I can go back to your outlook for EBIT to decline year-on-year in 2024, I was wondering whether you could provide a bit more color on how to think about this between top-line expectations and spend. And would this be driven all by Gucci, or how should we think about profit development by brand? And directionally, I guess it will eventually depend on top-line, but what order of magnitude are you thinking year-on-year in terms of the EDT client versus 2023? My second question on Gucci, I was wondering if you could provide an update on the CEO search and whether you have launched the process and where you're standing in that process, please. And finally, just a clarification on the Chinese cluster. You mentioned, I think, in the presentation that the Chinese cluster was up 35% year-on-year. Can you please remind us how that looks on a two-year basis and how that compares to the Q3 two-year stack, please? Thank you very much.

Thank you for your question. I will start the answer on your first point, and I will let Jean-Marc to elaborate a little bit more. But as you understood in my presentation, all our brands are on a journey to raise their exclusivity after spending 10 years in building their desirability at a very high end level. And we are capitalizing and leveraging on the strength that was created through what we call our creative leadership. to transform that into long-term relevance in all the brands. This is what we call, of course, the elevation strategy of the brand. So as a consequence, our brands, the way it has been built, we are very strong in the aspirational segment of customers. And we are building on that to improve and to increase the share of the high-end customer segment in our portfolio across the brand. So that's overall where we are. And of course, when we are implementing this strategy in an environment that is less supportive for the aspirational customers, this has an impact and puts some pressure on the results. You saw that last year. And As we foresee the near future of the economic environment across the board, this will also keep some pressure on the result of the group in 2024. But we are very confident and we also saw in the high-end segment that we have in all the brands that are still small for sure, but we see a good result, good momentum in growing those segments. So this is overall what put pressure on the EBIT of the group last year and probably this year. and I will let Jean-Marc to give more flavor about that.

Good morning, Carol. I will try to be short but at the same time very comprehensive because, as you can imagine, we feel that there will be a lot of moving pieces in 2024, starting with a very uncertain environment economically but also in terms of geopolitical environment and also we remain very humble we are very determined to execute the strategy in the right way but of course in the curse of the execution of strategy you can have some hiccups so this is about the environment. Now if we look globally at group level on the revenue side As you can imagine, wholesale will still remain a drag for some brands in the group, with the exception of Gucci, and especially in H1, with high teens of a decrease in wholesale revenues in H1, and in H2 something maybe with somehow a form of less deceleration, but uneven across the brand. When it comes to retail, we can expect for the year a quite modest growth of the retail revenues and with an improvement which is more skewed towards H2 and also a gradual normalization when it comes to e-commerce especially also in H2. The drivers of the growth will be principally through the mix with the work we are doing in terms of elevation of the offer across the board, but starting with Gucci. We don't expect significant price hikes for next year. and when it comes to volumes contribution we will remain prudent even if we could expect some improvement along the year with a pickup in terms of traffic. Now let's look at the gross margin. The gross margin of course you have some elements that could play positively on the gross marginal evolution. I think about the channel mix for some of our brands the ones of course that will see a decline of the wholesale revenue. Geographical mix also could help and also we are working to improve the sell-through which is always clearly a boost for the gross margin but conversely At that stage, where we are, we should not have a very positive impact of the mix of FX and hedge. So that should not help the margin on that side. And we are making a lot of investments in the supply chain. We are working on the quality. We remain very vigilant also about the policy of depreciation of inventories. So as a result, we could see some pressure on the gross margin up to 0.5 points approximately. Now let's look at the OPEX. I think that on the OPEX there is a clear determination on our side to control the CAPEX and to be very vigilant and we are tracking with discipline and rigor all the OPEX that would not be efficient and on which we would not get some return. But still we want to invest to support the strategy of our brands in terms of elevation, in terms of exclusivity. So that will impact store expenses. Store expenses, we have more activities in the stores. We have embarked also in the P&L because of the past investments, especially in some flagships, depreciation and rent. And you will have observed, by the way, that the dilution in terms of EBITDA is slightly less than the dilution on the EBIT margin. So it could have an impact of 0.5 to 1 points on the overall profitability. And we continue to fuel the growth thanks to advertising and promotion expenses that will continue to increase. We should be above the 8% ratio compared to sales. So it could add something like up to 0.5 points on the EBIT margin impact. So overall we can expect a high single digit increase on the OPEX side. Of course I won't guide you through what will happen brand by brand. What we can say is that what I said for the group is particularly relevant when we look at Gucci. While at Bottega Veneta, we feel that there is clearly some traction in terms of heat and desirability around the brand. We are very positive about the brand and we see that we get some return on the initiatives we have implemented since 2022. So we need to support further. Balenciaga here again, François mentioned it, we want to make the brand more visible after this year which was more challenging. We see some gradual regain in terms of traction, 2024 should be a pivotal year, so that's the reason why we continue to invest in Balenciaga. McQueen, there is a very promising transition that we will support, of course, through A&P investments and still some work on the store network. And last but not the least, Saint Laurent has had a remarkable journey of growth of the top line six times in the last 10 years and also of the operating profits. But we need to muscle further its organization, its communication strategies to make it ready for the next milestone.

So regarding the question about Gucci, we'll let Francesca to answer that.

Good morning, Chiara. There is no search for a new CEO of Gucci, Jean-François Palou is the CEO of Gucci. What we want to work together on is to build a very strong team under Jean-François. This strategy has already started with the appointment of Massimo Vian on January 15. We need a strong team to execute the strategy that we have in mind, and this is where we want to focus. It's never up to one single person, even when he is a CEO. So together with Jean-Francois Palou, we are going to build a very, very strong team at Gucci, and you will see the next talents joining in the coming months.

Thank you, Francesca. Maybe on the Chinese cluster, Armel?

Yes, so on the Chinese cluster, so as mentioned, the performance was plus 35% on Q4, which translated into plus 34% on the full year, with a continued recovery of outbound travel. Nevertheless, on a two-year stack, the performance turned negative in Q4.

Thank you very much. Sorry, turn negative from, I think it was low single digit, if I'm not mistaken, or mid single digit in Q3?

Turn negative to high single digit in Q4, which translates in a low single digit growth on the full year. Okay, perfect.

Thank you very much. The next question comes from the line of Susanna Putu with UBS. Please go ahead. Thank you for taking my questions. I'll try to keep it brief. So just, I guess, a follow-up on the margin. We've provided a lot of details, so thank you for that. But maybe just to clarify specifically on Gucci, I think consensus has 32% margin for Gucci for this year. Do you think that is achievable? I mean, if there's any color around that you could provide, given that we are trying to understand if this could be the bottom of Gucci's margin or not. My second question is on inventories. If I look correctly, I think we've reached sort of the highest level since 2012. So is there any chance you could explain to us, you know, how you plan to sort of lower that level of inventories? I think especially in the context of some comments that have been made about perhaps closing some of the outlets. Yeah. And then finally, my third question, you mentioned the exposure of some of your brands to the aspirational consumer. Would you be able to maybe comment if there's any way actually to maybe to quantify to what has been the percentage of your exposure to the aspirational consumer last year versus perhaps I presume it would have been the peak in 2019 as a percentage of sales, of course. Thank you.

Thank you. So I will let Jean-Marc to start, and Francesca will answer on the aspirational consumers.

Thank you, Susanna, for your three questions. I was expecting I had been quite clear on the margin evolution, but I will try to be a little bit more specific on Gucci. So I think François-Henri made it very clear it's another year of investment. for Gucci. Francesca mentioned also the fact that we will have some new talents joining soon the company. This is a strategy which needs to be implemented with a long-term vision and not in a stop and go mode and with a short-term vision. So clearly what I mentioned before regarding the top line of course in the case of Gucci there is no more wholesale rationalization but as you know the share of the Sabato collection will increase along the year so we cannot expect a major inflection point too soon in the year so the retail growth should be quite moderate in the case of Gucci and especially in H1 The pressure I mentioned on the gross margin previously will particularly apply to Gucci, where also with the support under the helm of the new supply chain director, we will continue to work on the elevation of the quality on the supply chain with some investments to support the suppliers, so with some impact on the gross margin. Of course, Gucci is engaged in a plan of right-sizing its structure, but I think, obviously, considering all the moving pieces I've mentioned before, I think, globally speaking, what we can expect without mentioning any EBIT margin, because, of course, when it comes to the top line, it's very difficult to predict what will happen. But I think what we can say is that the EBIT in absolute terms of Gucci could decline by at least something like mid single digit overall in 2024. So I think I'm quite clear when I mention this in terms of absolute terms. There is a question about the inventories, but I think... you said it Armelle during your speech, in volumes there was rather a decline in terms of units held in inventories. So in fact the teams across the different brands did a terrific job to optimize the buying to manage the oldest inventories and this discipline will continue to apply in 2024 and even more. We have already worked with Francesca, with the brands, to determine what could be the best open-to-buy policy for 2024. Of course, here again, what I mentioned before is that this improvement of sell-through should happen rather along the year and more specifically in H2. We have applied a quite consistent policy in terms of depreciation, and if I look at the inventories in terms of percentage of sales, the variance in gross value is not significant this year, and if I look at net value, you see that we are almost stable. it's important to mention that because of the evolution of our offer, the cost of our products has increased. So that's the reason why you have an increase in value, but a decrease in terms of So, as regards the management of our inventories for next year, it's important to remind first the proportion of the carryover that we have in our collections, especially at Gucci, and some of this carryover will remain. There is no discontinuation which is scheduled. First of all, two, the work done this year has led to, let's say, a rejuvenation of the inventories, meaning that we have not the same proportion of very old collections as we had before. And point three, we mentioned that we will start to reduce the number of outlets as soon as this year at Gucci level, but it does not mean that we will not let's say redirect some of the products that we have in the outlet network that we will keep that will be gradually reduced in the coming years but still we have sufficient outlets so far to manage the old inventories without discounting the price of course in the full price stores.

I take the question on the aspirational client. As you know, the strategy of Gucci has been to build a brand with a very strong fashion leadership. And this is what has fueled the growth of our brands over the past 10 years and has allowed Gucci to triple the sales, Saint Laurent to increase the sales by six times. Of course, the aspirational client is the most prominent part of our client base. But what we have been focusing particularly on the last few years Building on the desirability of the brands and the elevation strategy is to increase the number, the value, and the share of our top customers. The share of those top customers, of course, is lower than the one of the aspirational. Our goal for the future is to continue to grow both with the aspirational part growing less than the top and the top growing very fast. The results of 2023 in this respect are very promising. And what you see being the decrease in revenues is due by the fact that the aspirational consumer has been the one most affected by the current economic situation in all the different geographies.

Thank you. And if I could just follow up, and I'm sorry for being so pushy, but I guess it's just part of our job. So do you think 32% margin from Gucci, that consensus is reasonable or could it be lower? I'm sure you had some sort of expectations, which you may not want to share with us. But just to get an idea.

You do your job, definitely, Susanna. So that's the reason why I tried to provide you a very comprehensive answer. We said that the revenues should not increase significantly for next year at Gucci. and I think it's quite wise to start and to have this assumption for next year and hopefully we will do better and I'm sure that we will have the occasion to come back to that but the reception of the new collections of Sabato are definitely very very encouraging But anyway, I think the plan so far is quite a modest increase of the sales for next year and more concentrated in H2. And as I told you, we expect for the EBIT in absolute terms, in euros, a decrease of at least mid-single digit. So if you make your math, I think you will find more or less what could be the level of profitability for next year.

Thank you. The next question comes from the line of Aurélie Hassan Dumoutier. Please go ahead.

Good morning, everyone. My first question is on 2025, I'm sorry. But do you think that the investment in 2024 would be enough to have a profitable trajectory in 2025? In other words, would it be fair to assume a return to a growth in 2025? I know it's a tough one. But I'm just asking that to make sure that all consensus contributors are on the same page. So that's my first question. My second one is maybe if you could share some views on how did January start. And my last one would be on the U.S. One of your competitors has delivered a very upbeat stance for 2024 for the U.S. being an election year. and probably being favored by lower interest rates. What is your view on the U.S. consumer 424? Thank you.

All right, so 2025, it's far away, but it's true that we expect, of course, depending on the economic environment, but we do expect and we see first, as already Jean-Marc mentioned, that some good sign of attraction and traction, particularly on the new collection that is coming up. As I said in my speech, the product of Sabato for Gucci will hit the store starting this month progressively. And let's say in June, uh the the total assortment will be installed will be uh uh from sabato so it's a progressive sign but already what we've seen uh um in uh in different openings where we put it some new new products it's a very good sign of of traction coming up so yes we expect uh uh Already this is a sign of recovering a different segment where we want to invest. Francesca mentioned the high-end customers. We already have a good sign of growth in all the brands. So that's something that we will capitalize on next year. And if the economic environment is not degrading in 2025, we could expect also some traction on the aspirational consumer where, as you understood, we are very strong. And of course, this will benefit all the brands if this economic environment is good. But again, Francesca mentioned it and it's important. We will grow faster and we're already growing faster on the high-end segment that we are increasing compared to the aspirational consumer. So that will rebalance the portfolio of customers in all our brands going forward, and particularly next year in 2025.

Of course, Aurélie, as usual, I will not comment so much on the current trading. And what I'm going to say is not particularly brilliant because it's quite obvious that the start of the year is quite complex to analyze as there was a different timing of the Chinese New Year. from the 22nd of January to the 10th of February. So it does not help to analyze the performance, at least in the region. And as a result, also considering that we had two years of growth in China at the time of the Chinese New Year, and quite substantial growth in 2022, and still in 2023, January was positive in China, the combat is quite demanding. So the consumption trends in APAC globally, in China, but also in APAC, are not particularly supportive so far for the start of the year. When it comes to all the other regions, so let's say North America, Europe, the rest of the world, and Japan, we don't see significant changes compared to Q4 23, although 2024 started on the more muted trends.

I take the question on the American customers. Of course, we learned it because every four years we have elections. And when in the US there are elections, there is uncertainties, and particularly on the aspirational clients. As I already explained, still represents most of the revenues for all of our brands, even if the top segment is growing faster. So it's a cautious approach, the one that we have for 2024, and it is more cautious on the aspirational client segment for all of the brands. Still, on the upper part of the clients, we still see encouraging trends. Some brands, like Bottega Veneta, for example, are having a very, very strong last quarter in the U.S., gaining market share. And for all of the other brands, the trend in the Q4 is improving versus the previous one, driven by the attention of all of the teams on the higher segment of the consumers.

Thank you very much.

The next question comes from the line of Edward Aubin with Morgan Stanley. Please go ahead.

Yeah, good morning. Thank you for taking my question. So three questions for me. So, François, you mentioned in your prepared remarks, you know, you talk about Gucci, the challenge, or I guess the opportunity, depending on how you look at it, you know, to balance, you know, the balance between brand elevation and the brand remaining fashion forward. Some of the critics in the fashion critics in the press, you know, have said that, you know, to elevate the brand, you know, the Gucci went maybe a bit too minimalist. kind of moving away a bit from its roots and might have the following trends rather than setting them. Why do you think that's not fair? So I'd be curious to have your view on that. That's number one. Number two is on Balenciaga. So the brand had a really stellar growth over the past decade. Obviously, 2020 was a different scenario. How optimistic are you that this year already will mark an inflection point, or do you think that could happen maybe more next year? And then just to follow up for Jean-Marc, just on the ANP, I missed the comments Jean-Marc made, but if you could come back on the percentage in 22, 23, and 24, sorry, just to understand to what extent ANP already went up or not last year and what you're expecting for 2024. If you could repeat that, it would be helpful. Thank you so much.

Thank you for your question. So regarding Gucci, we have the expert of the elevation strategy implementation with Francesca. So I will let her comment and answer your question and also maybe on Balenciaga. And then Jean-Marc will answer the third one.

Good morning, Eduard. Well, the strength of Gucci is exactly to have this duality in its DNA. A strong heritage and luxury component and a very strong fashion authority built in its veins. So when you judge a journey to elevation, you never look at only one collection or one show. You look at the brand and you look at all of the investments made by the brands. what Sabato de Sarno and the team have been doing goes exactly in this direction. The collection has been very well received. You see also the traction that you are having with celebrities, the same for the advertising campaigns. And if I give some hints about a few injection of products that have been made of Sabato de Sarno collection, very small, but for example, for the opening of our boutique In Monte Napoleone, well, its product went sold out immediately. And the strategy of the brand is to continue to push both the duality, heritage and fashionability. And you see it already quite well from the first fashion show with the revitalization and enhancement in quality of both an iconic handbag like the Jackie and also the moccasin, a territory that belongs to Gucci and that Sabato and the team have interpreted with a very, very strong fashion authority. I can confidently say that we are very optimistic about the future of Gucci. We are focused on making it work with confidence and with patience. Regarding Balenciaga, the brand has been incredibly strong over the last 10 years. Of course, it has been hit by a crisis that would have had probably major consequences, even bigger than the ones that had on Balenciaga on most of the other brands. I like, I'm optimistic by nature, and I like to look at the positive things that are happening. If we look at the crisis that has hit Balenciaga in 2023, first of all, it's mostly the Western country, namely Europe, America, and the Middle East, and mostly the aspirational clients of the brand. The brand has been very strong in Asia, Actually, in countries like China, it overperformed most of the competitors gaining market share, and it has increased, like most of our brands, its number, value, and share of business with its top customers, confirming the desirability of the brand. So I think that we can be confident. Remember that also the brand, for most of the year, didn't amplify its communication as much as before because of the crisis, and therefore Those results have been obtained without investment in communication that very recently resumed with the signature of major contract with great ambassadors, the fashion show in LA, incredible advertising campaign, and the launch of this keyword collection towards the end of the year that has been very positive. So we are confident. We will continue to invest in the brand. And I think that this should more or less answer your question about when a full rebound should happen.

Thank you, Francesca. And if I may, I will add that the performance of Balenciaga in retail was, compared to what happened to the brand, quite sustained. It's slightly negative, without disclosing too many figures. It's only slightly negative in our stores, with a good level of traffic and, as Francesca said, very strong performances in many regions, and encouraging signs at the end of the year. I won't elaborate too much on the A&P side, and I won't give you any detailed figures, 22, 23, 24, but I think exactly what Francesca said. Typically, in 23, Balenciaga has not invested so much in terms of advertising and promotion and events. Some brands continue to enhance their communication strategy. I think about Bottega. And as we said, this is a year to amplify the communication around the new collections at Gucci, to have a more comprehensive approach in terms of communication with different tones of communication. along the year for Gucci. So all in all, what I said is that the communication budget will increase at group level, high single digit or even double digit, will depend of course on the phasing of the campaigns and what we will decide with Francesca, also looking at the evolution of the top line. But we keep some ambition on that side. It means that last year we were at group level again, slightly below 8% in terms of A&P to sales. And this year for 2024, we plan to be significantly above 8%.

Thank you.

The next question comes from the line of Luca Solka with Bernstein. Please go ahead.

Yes, good morning, and thank you for taking my question. I understand that the wholesale exposure of Gucci has been reduced and rationalized, and it's now a great quality. I wonder what the spring, summer, or the books you when you look at how like-for-like high-quality wholesale accounts have been reacting to the new creativity that Sabato has brought to the house. As a second question, as we have Francesca on the call, I'm interested to understand her role and how she's giving a contribution to to the various houses, what are the elements that she focuses on so that she can help colleagues and the heads of the various brands to perform. And maybe again for Francesca, we see that Ceylon has produced an incredible performance in the past few years, but more recently when we look at retail growth, it seems to be underperforming leading brands in the soft luxury space. So I wonder what is your diagnosis of what is potentially missing at Ceylon and how growth could be reinvigorated going forward. And then last but not least, I wonder if you could give us a sense of how exposed for Fry Gucci would be as you're transitioning from one creative leadership to the other in percent and how you expect that this is going to be reduced in line with the improvement of distribution that you have performed focusing the business on full price retail. Thank you very much indeed.

Good morning, Luca. I think I'll take all of your four questions. So I start with wholesale exposure. Well, in 2020, in the group we defined as part of the elevation strategy, the rationalization of our exposure to wholesale. And you saw from the result that Gucci is the brand that is the most advanced into this journey, with their revenues being over 90% exposed to retail. So as part of increasing the exclusivity of the brand, we have decided not to offer most of Sabato de Sarno collection to all of our wholesalers, but actually to let a very few number of them to buy into the collection. So it wouldn't be proper to answer on how much is the portfolio of orders of the wholesale because it would be irrelevant. On a very small basis, it's of course positive. Regarding my role, well, my role encompasses both position. When I've been offered the position of becoming deputy CEO of carrying in charge of the development of the brands, this was together with remaining CEO of Sandoran. I am not the CEO. the CEO of the other brands, but I am working with the CEOs and the teams of the other brands to execute the strategies that we have identified. And actually, the fact that I have a dual role allow me to speak the same language as a CEO, keep my feet solidly on the ground because I'm facing every day the same issues and problems that they have, And at the same time, it allows me and all of us to identify much better than before opportunities and threats, and in particular, what could be something that is specific to one brand as opposed to something that is coming from an industry trend, so allowing me to be actually even a better CEO for Saint Laurent where, by the way, I have a very strong team that I have rationalized and therefore I have less direct reports than before. So my role is to work with the CEOs and with the caring functions in order to ease up the execution of all of our strategies. This leads into the Saint Laurent performance. Well, What I was saying before regarding the growth and the aspirational clients has been particularly strong at Saint Laurent, where the focus of myself and Anthony has been into increasing the desirability of the brands. When you increase the desirability of the brand, you bring into the brand a lot of new ideas. aspirational clients that are attracted by that. So the recent performance of Saint Laurent, by the way, in retail is positive and in particular positive if you consider that inside our revenues of retail there is also e-commerce that after booming for the past few years has been decelerating for the whole industry. You understand that the situation of Saint Laurent is pretty solid, that our strategy has been correct. Our growth in the share of top customers is super, super strong. And we continue to intend executing our elevation strategy with no compromise. Even this year, we have continued reducing our exposure to wholesale. Like you see, in the last quarter, our wholesale revenue went down by 39%. And actually, we think that this is creating even stronger basis for a future growth. Regarding the exposure... Maybe we can ask, if you don't mind, Luca, could you repeat your question and rephrase it?

Because we are not sure to get it completely.

Yes, absolutely. And thank you, Francesca, for all of your answers. When it comes to the last question, I was interested in understanding how exposed Gucci could be to off-price as you're exiting the collections and the inventory, I presume, of Alessandro Michele and what you aim as correct exposure at the center sales. in the off-price channel for Gucci, knowing that this would be consistent with the upgrade in the quality of distribution, which is focused on full price, reducing wholesale significantly. I just expect that you would be reducing off-price as well. But I'm asking the question to confirm that. Thank you.

Yes, Luca, this is the intention of the company, the intention of Jean-François, the team, and all of us. Of course, when you have a change in a creative leadership, you are left with a few seasonal products that the company has already started to deploy. Like Jean-Marc said, actually Gucci will close a few of their outlets and we will deploy those products into the remaining outlets that are more than enough to fulfill this role. We will selectively launch the collection of Sabato exactly to protect them and not to be exposed to an eventual markdown policy on those collections, which is very, very important. And our focus will be to reduce the exposure of the brand vis-a-vis discounted sales. So be in that outlet or markdown. Like Jean-Marc was telling you when he answered the question regarding inventory, if you look at the value of our inventory, it went up in value but down in volume. He also said something very important, that in a lot of our brands, this inventory is done by carryover or lookalike carryover. So the strategy that Jean-Francois Sabato and the team have to continue revitalizing the icon will help actually deploying and cleaning, if you want to say this word, this product at full price without the need of discounting our iconic products of the brand. So it will be very balanced. We have to be patient in that, but don't expect massive discounting of previous collection because it also took a little bit of time in between what the previous creativity and the one of Sabato.

Thank you very much.

The next question comes from the line of Thomas Chauvet with Citi. Please go ahead.

Good morning. Thanks for taking my questions. I have three, please. The first one on Europe, or rather the local European consumer. A number of your fashion peers have seen a deterioration between Q3 and Q4 with the locals. It seems, however, that Saint Laurent, Bottega, but also Balenciaga had better fourth quarters. Was it driven by locals? Was it driven by tourists? And how, more generally, the locals are responding to the brand elevation exercise at these brands? Secondly, on beauty, could you talk about how Gucci Beauty has performed in 2023 under the management of your licensed partner? Yes. Are you expecting the status quo this year in terms of the relationship with that partner? I'd be curious to know also how the CREED integration has worked for that division. What are the key learnings you've had already on that acquisition? And finally, on real estate, Mr. Pino, you've said earlier you intend to remain a brand operator rather than landlord. Could you perhaps come back to the key acquisitions Kering did in 2023 in Paris? I heard also there was one in January in New York that was in the press. Are these long-term investments? What's the rationale? Are they financially or maybe strategically accretive? And what do you think is the potential envelope for real estate acquisition in the future, next three to five years? Is it $5 billion, $10 billion? How far do you want to go in terms of location and what would be the budget allocated to real estate going forward? Thank you.

Thank you. Armel, maybe you start. Yes.

So the trend in Europe was slightly better in Q4 versus Q3, but still negative at minus 8%. So the local demand was still soft, but improving quarter on quarter. Tourist spending was slightly down versus last year, with a drop from Americans and Middle Easterners that was not completely offset by the positive trends with Chinese.

Yeah, and the business locally in Europe, like Carmel is saying, has been affected by the aspirational clients again. So it's mostly due to a lack of traffic, but all of our brands, again, also in Europe, are increasing the business with their high-end customers by recruiting new and also doing a fantastic job in retaining the ones they have.

So beauty and real estate. Jean-Marc, maybe?

Yeah, sure. Good morning, Thomas. Hello. Beauty, I think it's true that this year was a quite distant year for the Gucci license. Unfortunately, with not new launches of products or flankers are not enough. but it's a quite decent year. However, I will not speculate on what will happen considering that the terms of the license with Coty are confidential. Obviously, for us, the focus so far is about the development of the caring beauty platform, with, of course, the integration of Creed, and I will come back to that because you asked the question, and also the development of the products of the three main licenses, which are now fully internalized, Bottega Veneta, Balenciaga, and Alexander McQueen. and we expect to launch the first very high-end fragrances of Bottega Veneta during the year. The focus is about that and once we will have reached a critical scale with the caring Botte business, it will give us more comfort of course to consider all possible options regarding the beauty business of our brands that are still outsourced. When it comes to CRID, I think obviously, as said by Armel, we have only two months of consolidation of the cells, so it means that the integration is quite recent. We are working to implement all the synergies we can deploy, and recently we were able to help Creed to negotiate a store in Paris and we were able to go fast and to have all the leverage we can get from the group. And conversely, the Kering Botte teams are working very closely with Creed to work on the future development and launch of the Bottega Balenciaga fragrances. especially when it comes to the supply of the different ingredients in terms of quality, all about the sourcing. So obviously we are very pleased with the first steps we made in terms of integration of Creed and the synergies we see, the potential of development of the brand. We expect that for next year Creed should exceed already 300 million euros of sales. let's talk a little bit about real estate because there is a lot of speculation around that you know perfectly that in that industry to get key locations whether through a rent or an acquisition it's super important it's key and we are the teams in all the brands are working every day to improve to work on the the store footprint to optimize the store footprint The privileged business model does remain the rent and just put it in perspective. We have, as you can see in the report, something like 1,800 stores. I make it very rough in terms of figure. So far, with the buildings we have already, if I think about the Hotel de Noces, Place Vendôme for Boucheron, or Tokyo Motesando for Saint Laurent, and if I think about the potential openings we may have with the buildings we have recently bought, we are talking about something like 10 point of sales. So this is not the first business model we have. But of course, When we buy an asset, it's because we think that it's in an iconic place, in a strategic place, and it's generally in order to have a flagship store. And that's the reason why we are not rushing to buy everywhere, and we are very selective, and we are targeting some cities where we believe that all brands deserve to have a flagship and a landmark flagship locations. What I can tell you is that the purchases we made recently had steered a lot of interest of our competitors and I think that were among the top locations we could target. Going forward, I think that in terms of structure, our preference will always go to a model where we can co-invest with financial partners as we did for a building for Bottega Veneta in Tokyo. And we want, going forward, remain disciplined, agile when it comes to real estate, and to contain the exposure we may have to real estate. So I will not quantify what could be the pipe of purchases or acquisitions we would make. As rightfully said by François, we are not acting as a landlord, so we have not a strategy of acquisition. buying every year a certain amount of real estate assets. So we will continue to be very selective. We have time, we are the strong balance sheet and we can afford to wait before buying some new assets and we can wait before setting up a structure where we could co-control these assets with financial partners. We will work in that direction but without any rush. Thank you.

The next question comes from the line of Antoine Belge with BNP Paribas Exane. Please go ahead.

Hello. Good morning to everyone. Three questions. First of all, I think Francesca mentioned that you are no longer or not yet looking for a good CEO. Is it a bit of a change or is it more that... Maybe we misunderstood what interim CEO meant. It could be actually a longer period that we had anticipated and a bit of thinking about potential future leadership and Gucci and what quality is required. My second question relates to the decline in operating profits. You were so kind as providing this mid-single-digit decline at Gucci, but I also understood from all the very qualitative details that seems to be a bit more broad-based that it's hard to say that the group EBIT as a whole should also be down in the same vein, a mid-single-digit with all Saint-Laurent, Bottega, those were the others, adding all further margin decline year on year, or is it maybe one or two banks that could see an increase in margin this year? And my third question is on the U.S. market. When you look at the different brands within the portfolio, which one do you think has the best position, at least for this year, in the U.S., especially if that market provides maybe good news compared to recent trends? Thank you.

Thank you, Antoine, for your question. So I will start with the question on Google. It's true that I mentioned last July by as we say in French that it was an interim. So in fact, what I wanted to do, and you will understand very well, and we worked on that with Francesca, is to have a clear assessment of where we were at Gucci in terms of leadership, in terms of organization, to see what was the best move. for the brand. So, and we worked with Jean-Francois very deeply in the first few weeks of September up to the end of the year to really see that we will need and the top priority was to put in place a strong executive team inside the brand. And Jean-Francois has proven to be a great leader for that. So I've decided in the course of the fall period to confirm Jean-Francois Asseo to build that strong organization like Francesca mentioned. We already announced the first hiring and you will see some strong one coming up. to really put that in place, to move forward and to put in place at the same time the new vision of Gucci with Sabato and the elevation strategy that is behind the scene at Gucci. So that's why the word that was used in July, but we are very happy with the first few months of Gucci. Jean-Francois is really leading the show and doing a great job in reorganizing, putting in place the teams and setting the right priorities and the roadmap for the next few months and the next few years.

Antoine, thank you very much for having stressed that I had been kind enough to provide a lot of colors about the EBIT. I'm not sure that I could give a lot more. What I can say is that if I go a little bit further without being too detailed, all jewelry brands, as you can see, have an amazing trajectory. We are very confident with the development of these brands. Mechanically, whatever the reinvestments we are making in these brands, they are becoming more and more profitable. Kering Eyewear, as you saw, had a great year in terms of results, was highly profitable, but as we had already explained, there is a need of investment, especially in Maui Gym. We are not yet at full speed in terms of re-launch of MAUI Gym expansion, of MAUI Gym outside of the historical markets where the brand was very strong, so meaning principally the Anglo-Saxon market and the US. But you may have observed that there is currently a massive advertising campaign around MAUI Gym. So I invite you, by the way, to look at the movie. And as a result, the EBIT margin should be diluted, but hopefully with an increase of the top line. Now, if I think at the other brands, I think the magnitude of the decline is principally driven by Gucci, as I mentioned, for the other brands. I told you that we would continue to invest in these brands, but I will not qualify specifically what would be the trajectory in terms of a bit.

In terms of the US market, like I already said, our trend for Q4 is improving for all the brands. All the brands are improving their business with the top customers, and all the brands are suffering with the aspirational customers due to the economic situation of the country that is affecting more the aspirational segment. So in terms of brand desirability, all brands are very well positioned, and so we should expect more or less the same. And the fact that the brand is growing more or less versus the other comes from easier or more difficult comps of the previous year.

Thank you. Maybe just a quick follow-up. Are there brands for which you expect to open stores in North America in 2024?

Should I want to take? The portfolio of stores in the US of our brands is quite well developed. So we don't expect a lot of numbers of new openings. We have invested quite a lot in the market in all of the brands. You could see eventually some relocation of enlargement of stores. A recent acquisition in New York shows to you what the strategy is going to be. So again, the US market is going to be quite stable also for that.

Thank you very much.

The next question comes from the line of Charles-Louis Scotti with Kepler Chevro. Please go ahead.

Good morning. Thank you for taking my questions. I have three. The first one is a follow-up on the wholesale. Could you tell us what kind of retail penetration do you target for your brands in the longer term? and within what time frame. I'm just trying to figure out whether we should expect multi-year wholesale headwinds for your brands other than Gucci, or if post H1, the wholesale cleanup will be completed. My second question is about the new store concept for Gucci on the Montenapoleone. I'm just curious to hear if you saw any improvement in the main retail KPIs, such as the UR, unit per transaction, or the average wallet. with the new store concept? And also, could you tell us what is the share of the store network at Gucci already under this new format? And if you plan to roll out this new store concept globally, and if yes, what could be the capex required to do so? And my third question is about the beauty business. It seems that you are adopting a very selective description strategy for your upcoming fragrances launches. How should we reconcile that with your ambitions to quickly scale up the beauty business. Are there some brands in your portfolio where you plan to adopt probably a much less selective distribution strategy? Thank you very much.

So I take the first two questions. Regarding wholesale, like I explained, we decided the rationalization of wholesale in 2020 with different journeys for all the brands. And all the brands are on track with that. The brand that is the most advanced is indeed Gucci, with a share of retail being above 90%. It will grow further in the future. And for all the brands, the trajectory is to go towards the high 90%. In how long, it will depend also on the market. You know that when you talk about rationalization of wholesale, it takes time because with the partners, you need to also give notice. And so it's not that the moment you decide not to include anymore one wholesaler into your portfolio, this is happening immediately. And it goes hand in hand with the strategy of retailization of some of the point of sales. So certain point of sales from wholesale will be transformed into retail. And this is a strategy that is agreed with our major partners. multi-brand partners. So the trajectory will be different by brand and also the pace, but you will see all the brands little by little trending towards becoming more than 90% exposed to retail. With regards to the Monte Napoleone store concept for Gucci, this is a transitional new store concept that the brands has decided to implement in order to enhance the product better And if you have visited the store, you can see that this is what is happening. It's not only for a new store concept that we follow KPIs, but we follow it for all of our stores, starting from the traffic, starting from the skew efficiency, or the exposure of the different product categories that you are supposed to have. And then, of course, changes by cluster. So it's not because you do a new store concept that you target different KPIs. Actually, you use the KPIs to develop your store concept in the best possible way. The brand is going to have a new store concept that is in the process of hiring a major architect, and this selection should be completed by more or less June of 2024. And then you can expect that in about 18 months there will be a reveal of the new store concept under the new creativity. But the one in Monte Napoleone that is also present, for example, in London, or in Miami for the man's store, is going to be the one that we're going to use in the transition. And from the first feedback that we have in terms of qualitative feedback, but also KPIs, it serves a job.

Maybe I will add something on this concept. I see that in your question, there is probably something around what will be the percentage of the network with a new concept, what will be the level of capex, and so on. So just to clarify... every year there is refurbishments in our stores. That's part of the game. There is relocation. If I look at the CapEx envelope, besides the real estate acquisitions, you have something like 60% at group level dedicated to retail. And in that envelope, among the 60, half of it is about refurbishment and relocation. So there won't be a specific push to have this new concept everywhere. It will be very gradual as usual. And I think that Francesca could confirm that when you start to rejuvenate a brand, what is important is communication, it's about the way you treat the client in the stores, it's about the products. And then the stock concept can be installed gradually without rushing and investing massive capex. So it won't change the capex policy we have at group level or at Gucci level.

I will answer on the beauty question. So first of all, as you know, the luxury beauty market and more specifically, the luxury fragrance market is roughly 40 to 45 billion of size, of which there is two key segments, the high-end segment, which is roughly 15% of that, and the rest, which we call prestige segment. Of course, the scalability, the huge volume are on the prestige segment. But it's a market also that is wholesale driven. Even though we have brands with a high desirability in the eyes of the consumer, we need also to be desirable from a retailer standpoint when we launch our fragrance. So the strategy that we have built is first of all for the brands that Jean-Marc mentioned, Bottega, Balenciaga and McQueen to start with, to start the launch on the high-end segment with very desirable, very sophisticated products using the know-how and the experience that we have acquired through Creed to address this very specific segment of product and the distribution channel that is behind it. and we will create the desirability for our products for the other networks of distribution for the prestige market where we will then scale the brand. So it's a two-step strategy for the beauty market and we think that's the right way of doing it to not to rush as an extra brand on these huge, highly, there's a lot of brand in this segment. So starting by the upper hand makes more sense for us. So that's one answer, which means patience to do that, and we are ready to build that in a very serious way. And at the same time, the other element of scalability short-term, of course, is Creed. As I mentioned in my presentation, this brand is very well positioned in this high-end segment. And by the way, this segment is forecasted to grow by 10% to 15% CAGR in the next three to five years, whereas the Prestige segment is already around 3% to 5%. being there and having Creed one of the key player there where the penetration of Creed for instance in China or in Asia is quite limited so far or you've seen probably the launch of the very good women fragrance in the recent month that is a success as a launch that's also another element of potential growth for Creed category on top of geography that will scale also our activities in the coming years and So patience to build a consistent business with the existing brands and scalability through CREED in the coming years.

Thank you very much for the answer.

The next question comes from the line of Thierry Cota with Societe Generale. Please go ahead.

Yes, good morning, everyone. Thank you for taking my questions. I'll stay on your two questions. First, business model comparison between Gucci and Saint Laurent. On your reporting and on my estimates, both brands have similar EBIT margins, notably in H2 last year, similar gross margins, similar capex to sales ratios, and sales per square meter. However, one is three times the size of the other, and you target very different EBIT margins in the medium to long term where you were targeting around 33% for Saint Laurent and over 40% for Gucci, if I remember well. So on which cost line is Gucci less efficiently managed than Saint Laurent in your view? and could be more efficiently managed given its relative scale. And along with express spend, is there a policy of cost-cost efficiencies that could drive goods to margin well above that of Saint-Laurent in the long term, in your view? And the second question is around M&A. We've seen press articles mentioning that Peppistry could partly finance its acquisition of Capacly by selling Jimmy Choo and Versace. So would you be interested or not in adding new luxury names in your portfolio? And there will be any comment on these two. And on the other segments, on beauty, you just discussed Creed at length. Do you have the right setup now or do you need more assets to scale in the ultra-luxury segment? and let's see how literally could you do some M&A or is that not a target or not doable?

Thank you. I will start with the first question and also with just mentioning that after you, we will take, after Thierry, we will take just one last question or three questions as usual, except if we have an anarchist that would accept to just ask two questions. So your question is not an easy one, Thierry, and of course I won't detail, if you don't mind, the full P&L of Saint Laurent and Gucci, but my answer will be quite simple. I think that the structure of Gucci has been designed for a brand that is above 10 billion euros, while the structure of Saint Laurent of course, has been developed and increased step by step and has been adapted to the size of the brand. And that's the reason why I mentioned before that 2024 for Saint Laurent, it's a year where we will continue to muscle the organization to target the new milestone and you know that one of the milestones that Francesca described two years ago was the 5 billion euros mark. So first there is a question of absorption of the structure cost overall, and it's not a specific line. I could mention typically information systems. In terms of ratio, information systems cost at Gucci are above the one of Saint Laurent, but we could review all the lines and we would have more or less the same situation. On top of that, in terms of sales density, while Gucci had the highest sales density historically in the group, more recently because of what happened at the brand and waiting for the rebound of the brand today, we have a sales density which is on par or slightly lower than the one of Saint Laurent. So if we compare now to the square meters and the cost of these square meters, of course it has an impact on the EBIT margin. So I think all this contribute also to this difference in profitability. I would also mention that in terms of product mix, clearly so far the product mix of Saint Laurent is more favorable so far. And what we should not forget also is that at the beginning, when you start to rationalize your wholesale distribution and you retailize, there may be some dilution at the beginning. So with more than 90% of retail distribution for Gucci with the recent internalization of some e-tailers accounts, it may have also diluted a little bit the profitability. Is that the reason why? It may explain why we are this profitability which are very close for these two brands despite a difference of size.

Regarding the question regarding the M&A activity of the group, as I said, the strategy has not changed. Our top priority remains to invest in our brands to grow organically at brand level. So we have always had a strategy in terms of portfolio. that is very selective. If you look at the last 10 years since we became caring, what we did, it's a very limited addition that are very complementary with the case of Valentino, which brings a higher segment of customer, a higher positioning in the market. The priority remains the brand. So we will, again, be very selective if some addition could make a lot of sense for the structure of the portfolio, for reinforcing the portfolio in terms of, for instance, timeless brand that could complement the portfolio. Of course, we will look at it. But again, priority is not there. In beauty, we made this acquisition as a pillar of our strategy, as I explained, for the Keying Beauty project, but also for the brand itself, Creed. So we don't intend to make a significant acquisition in beauty. We have now to work and to develop creed with the potential that the brand has going forward and also use, as I said, the synergies that are in front of us to speed up and put on the market our own brands in the beauty market.

Thank you. And just on Harvard Tree, is there any comment you could make?

Sorry?

On Harvard Tree, is there any Opportunity you would look for or do you want plan to expand or just focus on the on the point that you have?

I jewelry we're doing we're doing very well and it's very interesting as a question because that's the demonstration where I segments are growing very fast because we are growing very strongly we are even over performing most of the competitors in the last two or three years, so we're doing well, of course the scale is roughly 1 billion and we will continue to invest in the brand and Boucheron will enter the U.S. market this year. So it's another step of the journey of Boucheron, successful journey so far. So we will continue to invest in that direction in our three brands to continue to scale them because the potential is very high. Thank you.

The next question comes from the line of Louise Singlehurst with Goldman Sachs. Please go ahead.

Hi, good morning, everyone, and thank you for squeezing in the question. It's great having you all on the call, and I'm conscious of time, so I shall speak to one question, if I may. It's really about just going back to Gucci and the strategy going forward. If we think about the last kind of big growth era, there was a very specific focus on the millennial, the Gen Z, the younger customer. Can you just talk about Tabata Sassano's remit or the task ahead? Presumably this is about a lot more rounded across a broader spectrum of the cohort group from entry through to high end, but also that age group. And I just wondered about the strategy ahead for him and if that clearly means a big capture of new customers to the brand rather than just focusing on the existing. Thank you.

I take this question. It's always very interesting, and I like to answer to questions regarding the age of the clients, because there's no brand that is a strategy targeted to a specific age, but it's a strategy targeted to the desirability of the brand. When you work on the desirability of the brand, you attract... several segments of customers. And of course, like I said before, the growth of Gucci over the past few years and the fact that Gucci has multiplied its revenue by three was driven by aspirational customers of all ages, millennial and not. There is not an age that identifies the aspirational clientele. Of course, you need to remain relevant with the younger generation because if you will, your brand and they are, your future, but you don't have to have a specific strategy targeted to them. What I said that we are going to do is to grow all of the segment of the clientele at the entry, medium, and high end, and with a great focus on the higher end because it's a part that with the teams you control, the most because it's mostly done by repeated clients and they spend the most into your stores. But at the same time, by working on the desirability of the brand, we expect all the segments to grow. The strategy of the team is going to be to focus on the desirability of the Gucci brand and the duality of the Gucci brand that is incredible to attract clients of every age and of every kind.

All right. Thank you. Thank you, Francesca. You had the last answer to the question. I would like to thank Francesca, Armel, Jean-Marc. I hope you like my new team. I'm very proud of them. Thank you very much to all of you. Thank you to all of you behind the camera. Thank you for your question. Thank you for your interest in caring. It's been a long call, so I have no doubt that you will have more questions. And of course, as usual, I will redirect you to Claire Roblet to answer your question. And Jean-François, myself, and Jean-François, we'll see. Jean-Marc, myself, we will see you during some road shows. So we look forward to our next discussion with you, our next meeting with you. Have a great day. Thank you very much.