Kering Sa Ord

Welcome to the Caring 2025 Third 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. Welcome to Caring's 2025 Third Quarter Revenue Call. I will start with comments on the period, and we'll be joined by Jean-Marc Duplex, our COO, for some concluding remarks before we take your questions. Starting on slide four, The quarter ended with a series of bangs in the form of highly rated fashion shows and presentations with three debut collections at our four main brands. At Gucci, Demna's La Familia looks and his presentation through a short movie, Tiger, stand out as a bold creative statement. Reimagining Gucci's quotes through a modern-day prism, the collection reflects the varied facets of Gucci's personality incarnated by A-list performers. At Bottega Veneta, Louis Trotter's inaugural collection opened a new chapter, overlaying a confident vision to the house's artisanal heritage. Her subtle reinterpretation of the intrecciato motif and other house codes resonated strongly with audiences. Pierpaolo Piccioli gave the fashion world a refined version of Balenciaga, balancing couture, craftsmanship, with modern designs and accessories. Last but not least, Saint Laurent staged another powerful show set against the Eiffel Tower. The collection reaffirmed the brand's core identity and showcased a fresh dimension through spectacular silhouettes and innovative materials. All four collections drew wide acclaim and attention, boding well for their rollout in H1 2026. Bottega Veneta, Saint Laurent, and Balenciaga were among the most viewed runway shows with significantly higher live stream and replay views versus last year. Gucci, despite not presenting a runway show, achieved exceptional media visibility and generated record engagement and positive reaction across digital platforms. On slide five, you will find the key figures for the third quarter. Revenue was done 10% reported and 5% comparable, with a significant 5-point negative FX impact. The 5% comparable revenue drop comes after a 15% decline in Q2. Of this sequential 10% point improvement, only about half is attributable to the easier comp base. Looking at retail dynamics, all regions contributed to the sequential improvement. North America and Western Europe posted the best underlying momentum. In terms of KPIs, the drag from traffic moderated with some regions doing better than others. Continued increase in AUR driven by mix as well as higher average tickets provided some buffer to the drop in volume. I would also like to mention that full price stores performed best. our brands continuing to gradually reduce their outlet footprint and assortment. Online revenue for their part started to stabilize. On slide 6, you have Q3 revenue by segment. All our segments improved sequentially compared to Q2. In terms of magnitude, Gucci and the other houses posted the best improvements, although starting from a lower point. Bottega Veneta confirmed its positive momentum on a high-con base. Saint-Laurent's performance started to recover. The improvement in eyewear and corporate reflects an acceleration at getting eyewear. Our Q3 revenue breakdown by region evolved from 2024. As a percentage of the mix, Asia-Pacific dropped two points and Japan one point. Rest of the world was stable, while Western Europe and North America gained one and two points respectively. On slide seven, let's move to the Q3 top line by channel. Retail, accounting for 74% of revenue, was done 6% comparable, a significant quarter-on-quarter improvement. Our footprint at 1,758 stores showed a net decrease of 55 units since year-end, of which 14 net in Q3. This excludes grid integration of its China distribution back in Q2. Gucci was the largest contributor to our network optimization plan, with a net decline of 8 units in the quarter and 26 over the first nine months. As you know, our strategy concentrates on fewer but higher quality locations. It also entails gradually downsizing our presence in outlets, with two additional closures in Q3. Wholesale and other revenue, accounting for 20% of the total, was down 2% comparably. Wholesale revenue at our luxury houses dropped 11% in Q3, primarily due to the strategic downsizing of this channel and softer order intake. While these factors continue to weight on performance, their impact is progressively moderating. In absolute terms, wholesale dropped more than €330 million year-to-date. We are in line with our planned trajectory for the year that implied a minor decrease in H2. We are comfortable with our current all-set setup and number of doors and do not expect any material impact from rationalization in 2026. This decline was partly offset by growth in wholesale at Carignay Ware and Botté of 5% comparable and by a 1% increase in royalties and other revenue. On slide 8, a closer look at comparable retail performance by region. Overall, It continued to be affected by soft tourism spending, while domestic consumption demonstrated greater resilience. In Western Europe, Q3 improved sequentially, down 7%. Local demand, accounting for 40% of the total, was the key driver. Tourism spending also improved from Q2, but to a lesser extent. North America, down positive, up 3%, from a 10% decline in Q2. sequential improvement occurred across the board, with Saint Laurent and Balenciaga back to growth, Bottega confirming its strong momentum, and Gushis dropped now just 3%. Looking at the American cluster, it was nearly flat in Q3, marking a notable improvement over Q2, although a bit less than the region. Japan, down 17% comparable in Q3, improved on the back of easier comps, but was still the region most impacted by weaker tourism spending, while local conception proved a touch better than in Q2. Asia-Pacific declined 10% comparable in Q3, a nine-point sequential improvement. Better trends in the region were driven by mainland China, Hong Kong, Macau, but also Korea. However, the overall improvement is in line with the easier comparison base. The Chinese cluster was done 18th, substantially better than in Q2 and H1. In the quarter, more than 30% of spending by Chinese customers took place outside of their home market, and close to 80% of their overseas spending remained in Asia, including Japan. Finally, the rest of the world swung back to growth, up 2% comparable in Q3. Moving to our houses, starting with Gucci on slide 9. Q3 revenue was close to 1.35 billion euros, down 18% reported and 14% comparable. Retail was down 13%, 10% points better than Q2, driven by North America and Western Europe. AUR was up across categories, mainly through mix, supported by unit introduction in handbags, An average ticket also increased, partially offsetting a milder drop in traffic. Laser goods started their recovery. The injection of novelties, initiated last year and accelerating since, has begun to pay off, particularly in handbags, where we are seeing promising early signs of stabilization. This rejuvenation should gradually strengthen Gucci's carryover base. From the emblem line to strategic revamps of Marmont and Ofilia, and the highly successful launch of Giglio in May, alongside MiniGG and recent introductions such as Beatrix and Sienna, Gucci's product offering has been significantly strengthened, enhanced in terms of quality, and rejuvenated across all price points. With the La Familia presentation in late September, Gucci has started regaining its fashion authority reaching broader audience, including younger customers, and refreshing existing relationships, notably with top clients. As you know, the looks were available only in 10 stores for two weeks, so this will not change the revenue profile in Q4. Women's and men's ready-to-wear accounting for the bulk of the sales. La Familia also supports traffic in stores and cross-selling opportunities for the fall-winter lineup. The full Familia collection, We hit the whole network from January onward. Wholesale was down 25% in the quarter. Turning to slide 10, Saint-Laurent. Saint-Laurent Q3 revenue was 620 million euros, down 7% reported and 4% comparable. Retail was down 2% comparable, but was up, excluding outlets. North America turned positive, and Western Europe was only down 3%. The house confirmed its high desirability and new collections were very well received with both ready-to-wear and shoes up double digits. In leather goods, the revitalization of key lines such as the Lulu and recent additions to IKAR are yielding solid results. The acceleration in innovation and the fine-tuning of the product architecture are firmly on track. Wholesale was on 16% in the quarter on phasing and further impact from rationalization. On slide 11, Bottega Veneta's revenue came close to 400 million euros, down 1% reported but up 3% comparable. Retail remained a key driver, up 5% comparable, supported by sustainable digit growth in North America despite high comps and positive trends in Western Europe and the Middle East. APAC was nearly unchanged, and Japan was moderately down. Growth was fueled by locals and high-end clients, as well as a continued AUR increase. Credit wear and shoes were the fastest growing categories, and the launch of the Campana handbag delivered promising results. The value strategy, combined with strong cultural content and an efficient mix of global and local communication campaigns, continue to reinforce the brand's positioning. The acclaimed debut show of Bodega's Veneta new creative director paved the way for a next stage of progress at the house. All sales declined 9% on a comparable basis, fully in line with the selective distribution strategy. Our other houses here on sign 12 had revenues of over 650 million euros on a comparable basis, they were up 1% with retail unchanged and wholesale up 5%. In soft luxury, our houses also delivered sequential improvements. Balenciaga sharply reduced the gap with last year, thanks notably to positive sales growth in North America, but all regions and product categories did better. Compared to Q2, McQueen reduced its year-on-year shortfall with sales of women's ready-to-wear up and a reinforced handbag line-up. Briony sales were up, boosted by solid double-digit retail increases in key regions. Jewelry was a particularly bright spot this quarter, up double digits. Bouchon's expansion in the U.S. continued to pay off, and they housed positive retail and wholesale performances in other regions as well. Pomelato also had an excellent quarter, helped by retail, up in most regions, with strong showings of kilo lines and a new high jewelry collection. Dodo recorded another solid performance, and Kivin achieved impressive growth rates across Asian markets. On slide 13, a focus on Kering Eyewear and corporate, with segment revenues of nearly 450 million euros. At Kering Eyewear, comparable sales were up 7%. All regions, apart from Japan, turned in positive results, with particularly good performances from Maui Gym and Lindbergh, as well as Cartier. The expansion of the portfolio continued thanks to the contract with Valentino, which will lead to a first collection of solar and prescription frames for spring-summer next year. At Gangbote, Creed's quarter primarily reflects differences in the calendar of product launches. The new Oud Zarian fragrance reached the network in early September and is well received. The other highlight of the quarter was the introduction of the Balenciaga collection of 10 high perfumery women's fragrances that recorded a hefty sell-out level. This wraps up my comments on the quarter, and I will turn the phone over to Jean-Marc for a few words of conclusion.

Thank you, Armelle. Hello to everyone on the call. As you have seen, the third quarter has been quite an interesting period, during which we started seeing positive signs of inflation. Some were helped by easy comps, others clearly reflect early impacts of our actions. Numbers are one thing. Another, the acceleration of our initiatives to regain our footing, and more broadly set our strategic priorities for the coming years. On that front, We have not been sitting on our hands. Lucas Arrival has reenergized the organization. He has met with dozens of managers across the group and across regions. And we are all working together on developing our strategic plan for the next years. As you know, we should unveil it in the spring of 2026. I don't think I will be spoiling the announcement of that plan when I tell you that our number one priority is to reignite the top line. From that standpoint, the progress we made this quarter is encouraging, as is the response to the collections and launches that Armel mentioned. Clearly, work on the product offer of all our houses ranks high among our strategic priorities. On top of that, as we told you we would last February or last July, we are accelerating and amplifying our cost and efficiency initiatives. We are further right-sizing the store network and focusing on durably improving sales density. We are enhancing the productivity of our marketing investments, and we are using every available lever to reduce our cost base. Solid progress has been made on all these fronts, and we are keeping the pace. We also concentrate on cash generation, and we have launched a group-wide task force headed by Armel to sustainably optimize inventory and working cap management. Our task is to implement structural solutions to the group's challenges and reduce our sensitivity to cycles. In this endeavor, there are no sacred codes we are assessing every aspect of our houses, from brand positioning to client excellence, as well as the role the group should play in such areas as supply chain, tail-through optimization, or customer relationship management. Speed is of the essence, but we are also fully aware that some of these actions will take longer than others. In the meantime, as you have also seen, we have been able to deliver on some key strategic initiatives. The announcements we made on Sunday to join forces with L'Oréal to boost the beauty potential of our houses represents a major step forward. This alliance with a global industry leader, a firm with which we share values and have a long-standing working relationship, secures the growth of our brands into beauty at an attractive valuation. As part of the alliance, Creed also gets to integrate into a bigger portfolio, demonstrating the unique attributes of this house and ensuring its next stages of growth. Finally, our plan, joint venture with L'Oréal in luxury longevity and wellness, enables us to combine our strengths in an area that is sure to reach new milestones in coming years. The deal with L'Oréal will also have a highly positive impact on reducing our debt leverage, another top priority. Pushing back by two full years the exercise of the put option for the remaining 70% of Valentino enables us to focus on our existing activities at a time when they require our full attention. We are continuing to explore real estate transactions along the lines of what we have already done. As in any negotiation, it would be premature to put a date on them. But we are absolutely confident in reaching a favorable outcome sooner rather than later. So, a lot has already been done. We will not stop here. We are looking forward to the coming months and to sharing our progress with you. Before we take your questions, I have an important announcement to make. This conference call, number 48, is the last one under Claire Roble guidance, as she will soon be taking new responsibilities within the group. Claire's successor will be announced shortly and will be joining us in the coming weeks. I wish to take this occasion to give Claire a warm thank you for the 12 years she has spent leading caring financial communications. She has done a spectacular job in good and in less good times. We intend to maintain the very high standards she has helped establish and to continue earning the trust of the financial community. Claire, thank you from the bottom of my heart. And on that note, we are ready to take your questions. Operator?