Kering Sa Ord

Good evening to all of you and welcome to Caring's revenue call for the first quarter of 2024. Let's start on slide 4. As we pre-announced last month, Caring had a revenue of €4.5 billion in the quarter, down 11% reported and 10% comparable. The bridge between comparable and reported revenue includes a 2 percentage point positive scope impact from cruise consolidation and a 3 percentage point negative from FX. Our Q1 performance reflects the well-flagged normalization of the growth in our sector, amplified by our own long-term strategic decision to elevate our houses, notably in terms of distribution as we scale down wholesale. We told you that we were expecting a year of two halves with growth back-end loaded, but the start of the year has obviously been far softer than we had anticipated, especially at Gucci. Retail trends were affected by weak insert traffic across our houses and across many regions apart from Japan. The drop in wholesale for its part reflects both the rationalization strategy and this channel's difficulties in the U.S. By region, retail trends in Western Europe, North America, and Japan turn out to be pretty much in line with Q4, as we had commented during our earning calls in February. In Asia-Pacific, on a more demanding phone base, Market conditions prove challenging and volatile, with differences across brands. In this environment, we remain focused on the implementation of our long-term strategy and prioritize the investments in our houses to nurture desirability and exclusivity. Turning to slide 5, a quick review of the breakdown of revenue by segment and regions. Both Saint-Laurent and the other houses posted a 6% comparable decline in the quarter. Bottega Veneta and the carrying eyewear and corporate segments were up 2% and 9% comparable, respectively. Taking these four segments together, the revenue was down 2% comparable, very much in line with the trend in Q4 last year, even a touch better. Conversely, Gucci had a very challenging quarter, down 18% comparable. At group level, all regions gained shares in our revenue mix at the expense of Asia-Pacific, whose weight dropped to 34% of the total. On slide 6, let's move to revenue by channel and region. Retail accounted for 74% of the total as a consolidation of CREED and the steady growth of carrying eyewear, both predominantly wholesale businesses, led to a slight decrease of retail in the revenue mix. In the quarter, retail declined 11% comparable on a broadly stable store network with only 10 net units added, which slightly reduced its store count. In Western Europe, retail was down 9%. Neither local demand nor tourism spending was supportive, although there were clear contrasts by brand and country. North America remained in negative territory, down 11%. Here also, with diverging trends across brands and price positioning, the higher-end segment performing somewhat better. Japan was up 16%. The market is propelled by strong tourism spending from China and other Asian countries, which represented 39% of revenue in Q1. To counter the persisting weakness of the yen, our houses implemented some price increases, but tourists can still take advantage of the attractive price differential. Asia-Pacific declined 19%, mostly driven by greater China. Korea was still negative but showed signs of improvement on the undemanding conveys. The Chinese cluster spent close to 28% outside of its domestic market in the quarter. About four-fifths of this spending remained in Asia, including Japan. The increase in overseas spending was not enough to offset the domestic drop and revenue from the cluster decreased. was down close to 20%, here again with significant disparities across brands. And finally, the rest of the world was up 6%, driven by the Middle East. Wholesale and other revenue was down 7% comparable, or in dynamics you are familiar with. As we had anticipated, wholesale revenue from our luxury houses dropped 20%. This was mitigated by very solid performances at Kerigayware and in royalties, up 8% and 16% respectively. Let's now review our houses, starting with Gucci on slide 7. Q1 revenue was done 21% reported and 18% comparable. Retail was done 19%. The bulk of the decrease stemmed from weak traffic with the main drag coming from Asia-Pacific. To a lesser extent, average tickets impacted by the regional and products mixed also contributed to the decline. By product category, the decline was more pronounced in leather goods while ready-to-wear, especially women's, was up in all regions but Asia-Pacific. The introduction of the new collections starting with early pieces from the fashion show and followed by additional developments, was ramped up in selected stores according to plan from mid-February on, then gradually expanded to a broader network from March onwards. On average, new collections represented less than 7% of sales in the quarter. Market reception was very encouraging. From the new iteration of the Jackie Handbag to the Signoria line, as well as the re-web model in shoes. In women's ready-to-wear, emblematic designs in outwear, nightwear, and coats sold well. Introduction of newness is instrumental to generate interest and nurture brand desirability. It will allow to fuel carryover sales in the short term, and more importantly, enrich the offer and build future growth pillars over time. The debut of Ancora, was marked by a host of communication initiatives, clienteling, and in-store activation across regions. Gucci also continued to invest in campaigns and iconic products, from the horse-built 1953 Loffel to the Balenciaga lines, with fresh luggage size providing impetus for a new wave of visuals. Let's take a look at the rest of the group, which had a rather resilient quarter overall, starting with Saint-Laurent on slide 8. The house comparable sales were 6% lower. Retail was done less than 4% against a very solid Q1 last year. Sales were stable in Western Europe and up sharply in Japan on booming demand from tourists. In North America, the relative withdrawal of aspirational customers continued to weight on Saint-Laurent's performance. In all these regions, trends improve sequentially. Asia, starting with Greater China, was impacted by depressed traffic and the challenging business environment. Across all markets, Saint Laurent's affirmation of its legitimacy with high-end customers continues to make progress. It houses deepening relationships with existing clients and recruiting new customers to the brand through targeted retail strategies. Shoes and leather goods proved resistant, notably thanks to the success of new collections. Wholesale was done 25%. In addition to implementing our strategy, we remain particularly selective when it comes to U.S. partners. In the coming quarters, Saint Laurent will work on enriching its offering across all price points, broadening the appeal of its main slides and further enhancing quality, particularly in leather goods. A new website, ad campaigns and high visibility at the Cannes Film Festival should all support the house image and positioning. Turning to slide 9. Bottega Veneta delivered a very good performance in the quarter, particularly in its stores. Retail revenue was up 9% in comparable terms. Women's handbags achieved strong double-digit growth. The house did exceptionally well in North America and the Middle East, boosted by local clients, while tourists supported growth in Western Europe and the Asia-Pacific region was resilient. Bottega Veneta's appeal with high-spending clients, leveraging its ultra-high-end positioning, was reflected in a sharp increase in average tickets. Its conversion rate was also up in the quarter. The House Winter 24 collection, presented in late February, received wide acclaim and was ranked among the season's top shows by the leading fashion authorities. During the quarter, Bottega Veneta opened its new store in the Galleria Vittoria Emanuele. All sale was done 25% in the quarter as we continue to implement our selective strategy. All in all, Bottega's solid performance confirms the success of an elevation strategy we are carefully nurturing and executing over time. We have a strong momentum since the beginning of the year should be extended in the coming quarters fueled by major initiatives to establish its presence and visibility for the long term, notably in the all-important China market. On slide 10, a summary of the performance of the other RACs. In total, revenue was down 7% reporting and 6% comparable. Drag down by wholesale, down 25%. Retail posted 3% comparable growth. Starting with our soft luxury houses, Balenciaga retail trends improved sequentially in Western Europe and Japan, while North America recovered up double digits on EasyComps. In Asia-Pacific, the house showed good resilience. Balenciaga enjoyed solid momentum in ready-to-wear and successfully launched Rodeo, a new handbag line in the higher-end segment. The Oscar ceremony provided the opportunity for Balenciaga to showcase its rich heritage and know-how, recreating an original gown from 1951, as you see on this picture. At Alexander McQueen, the highlight of the quarter was a new brand campaign, followed by the inaugural show of the new creative direction. Initial products will progressively hit the stores through drops starting from July. Leveraging these changes, Kering decided to initiate an in-depth organizational review and reset at Alexander McQueen. Brioni posted very healthy growth across regions, driven by both bespoke services and leisure wear. For jewelry, it's another quarter of double-digit growth. The performance of Bouchon stands out, especially in Japan and Asia-Pacific. Growth was fueled by its iconic jewelry lines, 4, celebrating its 20th anniversary, as well as Serpent Bohème. Omelatto enjoys robust momentum in retail, also driven by Japan and Asia-Pacific. Very recently, the brand launched Pompom Dot, a colorful, reversible collection. And finally, Killing continued to strengthen its presence in its domestic market and in Japan, with the opening of four stores. Let's conclude this review with Killing Eyewear and Corporate on slide 11. Revenue was €536 million, up 24% reported and 9% comparable. Killing Eyewear's revenue stood at €463 million, up 8% comparable. a strong start to the year across key brands in both optical and sunglass frames. Europe and Asia-Pacific were the main regions contributing to the performance. An important focus was put on Maui Gym, with investments in branding together with a global communications campaign and the launch of a new collection. Kering Bote benefited from Creed's consolidation, which posted a performance in line with our plans, thanks to both iconic bestsellers and its most recent launches. After the success of Carmina, launched last year, Creed added a new line to its feminine fragrance offer, Queen of Silk, whose global rollout will take place in the second quarter. The teams are reading the introduction of Bottega Veneta first fragrance, scheduled in the second half. Before getting to the question and answer session, I would like to reiterate the determination and commitment of every one of us to overcome the current challenges and build the conditions for sustainable growth. We knew 2024 was not going to be an easy year under the best of circumstances. For reasons that have largely to do with the China market and with the strategic realignment of our houses, the first half of the year is already proving even tougher than we expected. Regardless of the environment, we have decided to continue investing in our brands. But we are even more selective, even more demanding, when it comes to assessing the return on every investment we make in products, in stores, in communications. This being said, While we are ready to take far-reaching initiatives, we will not compromise with the protection and development of our brands for the long term and their ability to rebound, even if it entails short-term pain. As a result, operating the leverage and our continuing investments, even conducted cautiously and intelligently, will definitely impact our fuller habits, at a time where our top line is under pressure. At the year end, we have indicated that we expected the EBIT decline to be particularly marked in the first half. As you have seen in the release, on the basis of top-line trends, we estimate that the year-on-year EBIT decline in the first half could be in a range of 40% to 45%. And now, Claire and I are ready to take your questions.

Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 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 star and 2 key. Please ask your question as distinctly as possible and put on mute all devices apart from the phone you are using to ask your question. The first question is from Aurelie Husson-Dumoutier of HSBC. Please go ahead.

Yes, thank you very much. Good evening, everyone. I have three questions, please, all on Gucci. The first one is, could you come back on the phasing of the new collection being displayed in stores from the 7% that you mentioned in Q1? And is the return to growth as of Q3, which is what the consensus currently expects, realistic considering this phasing? My second question is still on the growth at Gucci. What do you think of the minus 6% organic that the consensus expects for Gucci in full year 24? And my last question is on margin. If my calculations are correct, you expect an operating margin of circa 24 to 25% for Gucci in H1. And my question relates to H2 and whether we can keep the assumption of 30% that you initially had for year 24, assuming a modest phase growth. It is just to make sure that we are all on the same page when it comes to H2. Thank you very much.