Kering Sa Ord

Welcome to the Caring 2025 First Quarter Revenue Conference Call and Webcast. Please be advised that today's conference call is being recorded. As a reminder, all participants are in listen-only mode. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Armel Pollou, Group Chief Financial Officer. Please go ahead, madam.

Good evening to all of you, and welcome to Caring 2025 First Quarter Revenue Call. I will be reviewing our performance, and we'll be joined by Francesca Berrettini, Deputy CEO in Charge of Brand Development, and of course, Claire Roblet, Head of IR and for the Q&A session. Starting on slide five, our revenue in the quarter came close to 3.9 billion euros, down 14% reported and comparable. Scope and FX were brought in neutral this quarter. As anticipated, the start of the year was challenging. No need to remind you that we are navigating in an uncertain macro environment with low visibility and this does not support consumer confidence. Traffic was weak across most regions. Against this tough backdrop, our retail performance showed a limited sequential deceleration compared to Q4. Softer trends were observed in Western Europe, North America, and Japan, while they were consistent in Asia-Pacific. In this context, we remain totally focused on what we control and on the single-minded execution of our strategy. We made significant progress on many fronts, including deliveraging our balance sheet, notably through the transaction with Ardian for Paris Prestige Properties, which was finalized at the end of the quarter. We closed a number of stores, and we further increased our vigilance in terms of both CAPEX and OPEX, to cope with an environment that is even harsher than anyone could have anticipated just a few months ago. Moving on to our quarterly revenue in more details on slide six. By segment, there are not a lot of changes to highlight. Bottega Veneta keeps performing extremely well, despite high comps. Kering Eyewear and Kering Botte are providing steady growth, while other segments remain in negative terraces. By region, our revenue breakdown registered some year-on-year changes. Asia-Pacific accounted for 31% of the total, down 3 points. Western Europe, North America, and rest of the world each gained 1 point, respectively at 28, 23, and 10% of revenue. And Japan, at 8% of revenue, was stable. On slide 7, let's review the top line by channel and region. Retail, accounting for 73% of revenue, was down 16% comparable. Western Europe and North America were down 13%, a limited deterioration compared to Q4-24. Looking at the spending by nationalities, the slowdown was less pronounced, especially for the U.S. consumer. In Western Europe, both tourist and local trends decelerated versus Q4, but softness with locals had the biggest impact. Americans and Middle Easterners were still the most supportive nationalities, nicely up in the quarter, while all major Asian nationalities were down. In North America, market polarization persisted. Bottega Vedetta, at the upper end of the sector, continued to perform very well, on a demanding com base, with retail up 19% comparable in the region. Conversely, Gucci suffered more. Japan continued to decelerate sequentially, down 11% comparable in Q1. The comparison base is also tough, and tourism spending kept weakening due to the less attractive pricing gap. Performance with locals was still subdued, but not more so than in Q4. Asia-Pacific declined 25% comparable, fully in line with Q4. Greater China trends improved a touch sequentially on easier comps. Improvement is mostly led by mainland China. A little over 70% of Chinese spending occurred on the domestic market, and the bulk of offshore consumption remained in Asia-Pacific, including Japan. All in all, revenue from the Chinese cluster was down 27%, a bit better than in Q4. The rest of Asia was more constructed. In Korea, trends were still challenging, as they had been in Q4, although with significant discrepancies by brands, while Singapore decelerated. And finally, the rest of the world was up 1% comparably, driven by the Middle East. Our footprint at 1,788 stores showed a net decrease of 25 units compared to year-end, including five outlets. As we had announced, we are stepping up our plans to make our distribution even ever more exclusive. Our brands are optimizing their networks, concentrating on fewer but higher quality locations. Gucci's store count decreased by 10 net units compared to Uran, and the net drop at Saint Laurent and Bottega Veneta was 1 and 4, respectively. For their part, our other houses closed 11 net stores. In addition, Creed opened one store during the quarter. Wholesale and other revenue, accounting for 27% of the total, was down 9% comparable in the quarter. At our luxury houses, wholesale was down 23% as we continue to downsize this channel on top of unsupportive market conditions. By contrast, wholesale was up 2% at Keringeware and Bote, while royalties and other revenue jumped 11%. Let's now move to our houses, starting with Gucci on slide 8. Revenues stood at 1.6 billion euros, down 24% reported and 25% comparable. The same decline applied to the retail channel. You will find the usual details by region in the appendix. Gucci continued to suffer from weak traffic, only partially mitigated by an increase in AUR on the back of successful recent handbag introductions. Carryovers still drag down Gucci's performance, making our efforts to accelerate the rejuvenation of the offer across categories and price points all the more imperative. On top of recent injections, such as the Softbit line, Gucci has planned a wealth of initiatives in the coming months. The Art of Silk events reaffirm Gucci's leadership in this category, while celebrating the house's rich history and deep connection to the world of art. Re-styled versions of some of our key lines, such as Marmont and Ophidia, are upcoming. As you know, we have recently announced that Demna is joining Gucci in July as new artistic director. Wholesale was done 33% in the quarter, in line with our plans, as the house implements its roadmap to enhance the quality of third-party distribution. Royalties and other revenue were up 2%. Turning to Saint Laurent on slide 9, revenue in the quarter was 679 million euros, down 8% reported and 9% comparable. Wholesale was down 24% as the brand continues to rationalize its distribution. retail was down 8% comparable, only a touch below the trend in 2004. The brand proved resilient in Western markets, and its spring-summer 25 collection was very well received across categories, confirming the growing appetite of customers for novelties and innovation. This supports Saint Laurent's ongoing strategy of further refreshing the offer especially in leather goods across all price segments. Its 425 fashion show was once again widely acclaimed, all about shapes, colors, and powerful silhouettes. On slide 10, Bottega Veneta continued its remarkable performance. Revenue was 405 million euros, up 4% reported and comparable. Growth increased. was fueled by retail, up 7% on very demanding comps. Western Europe, North America, and Middle East all posted strong double-digit increases. In Asia-Pacific, the drop was limited, thanks in part to positive trends in Korea. Bottega Veneta is reaping the fruit of its consistent value strategy as strong creative and cultural contents generate high brand desirability. Growth is healthy and well-balanced, stemming from all product categories and driven by AURs. Younger customers, as well as VITs, contributed to growth. The house pursued the elevation and consolidation of its distribution, While it opened a handful of stores during the quarter, it shrank both its DOS network down 4 units net and its wholesale with revenue down 13%. On slide 11, revenue of the other houses was down 11%, both reported and comparable, at 733 million euros. Retail was down 9% comparable and wholesale down 17%. Our soft luxury houses posted mixed performances. Balenciaga delivered robust growth in leather goods, fueled by the success of recently launched handbags, but the house is not immune to weak traffic conditions. Still in the early stages of establishing its new creative vision, McQueen's recent fall-winter 25 fashion show was well-received. The house is making progress in scaling down its operations, including a substantial streamlining of its store network. Brioni posted very healthy growth with retail up double digits, driven by Western Europe and North America. Jewelry grew once again this quarter. Bouchon's performance was solid on top of Icon's, and the house is successfully developing in the U.S. Pomelato had a strong quarter, sustained by novelties and animations around its iconic noodle line. And at Kivin, the enriched collection, blending Chinese heritage and modern aesthetics, resonated across Asia-Pacific, driving greater brand appreciation. On slide 12, I will make a few comments about the Killing Eyewear and corporate segment, including Killing Boutique. Comparable sales of Keringai Ware were up 2% thanks to a solid performance across the brand portfolio, even if Maui Gym faced more volatile market conditions in the US. Sales of optical frames were particularly positive, and Europe was the best performing region. As you have seen, Keringai Ware has continued strengthening its manufacturing footprint, securing technical expertise and high-quality craftsmanship to support its leading position in luxury eyewear. Moving to Kering Bote, Cree continues to deliver strong performances and is reinforcing its presence in feminine scents. The early March launch of Eladaria, a fresh floral fragrance that fills a gap in its portfolio, resulted in promising sell-outs. Bottega Veneta's high fragrances are performing nicely and preparation for Balenciaga's collection of scents is moving ahead. To conclude, before we take your questions, I would like to reiterate that we are all tenaciously focused on executing our strategy. Clearly, the current uncertainty and volatility in world affairs does not make our task any easier. But the global environment does not detract from our determination to reach our goals, starting with Gucci. We are pursuing our deliberating efforts and are working on all the factors that we do control, first and foremost, cost and investment, at group level and in each of our brands. We are doing it smartly, with the discipline and agility needed to continue supporting our top line and improving our organization for the future. The reduction of our retail footprint clearly demonstrates our result. And now we are ready to take your questions. Operator?

Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one 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 key. Please ask your questions as distinctly as possible and put on mute all devices apart from the phone you are using to ask your question. First question is from Chiara Battistini, JP Morgan. Please go ahead.