Kering Sa Unsp/Adr

Good day and thank you for standing by. Welcome to the Caring 2026 Third Quarter Revenue Conference Call. Please note that today's conference is being recorded. I would now like to hand the conference over to Armelle Poulou, Chief Financial Officer of Caring. Please go ahead.

Thank you. Good evening to all of you and welcome to Caring's Third Quarter 2026 Revenue Call. I will be reviewing our performance and we'll be joined by Philippine Duchon, head of AIR, for the Q&A session. We'll start with the key highlights of the quarter. Against an uncertain macroeconomic backdrop, we continue to roll out our reconquering plan, tackling, step by step, the changes needed to build a more resilient and integrated group and giving us the agility to better navigate these increasingly challenging environments. First, Our houses keep on deploying their strategies, with product execution being the clear priority. This was for example visible through the recent fashion shows which gave each house the opportunity to translate strategic choices tangibly. Second, we continue to strengthen our leadership with appointments at Bottega Veneta, Pomelato, Dodo and at group level. These moves reflect our focus on building leadership depth, combining the recruitment of external experts with the promotion of internal talents. Finally, as part of our long-term commitment to nurturing the craftsmanship and talent that underpin our House's industrial base, our caring Academia Perle HLNC launched its first full academic year, welcoming more than 1,500 students across programs developed with our houses and seven partner schools across Italy. Taken together, these actions mark continued progress on our roadmap. I will now turn to our financial performance in more detail. On slide 5, group revenue in the quarter reached €3.3 billion, down 1% on a comparable basis, and flat as reported, Reflecting the positive impact of the US dollar and the Chinese yuan, partially offset by a negative impact from the Japanese yen. There was no scope effect. The quarter reflects phasing effects at Gucci, together with a more pronounced seasonal effect at Kering Eyewear, a demanding comparison base as last year's sequential progression from Q2 to Q3 was particularly strong, and more challenging macro trends. Traffic remained the main constraints across the group. However, other retail KPIs were supported by various initiatives reflecting solid engagement from clients visiting our stores. As anticipated during our H1 call, Gucci's performance in Q3 is impacted by the phasing effect of our collections before benefiting from the ramping up of our ongoing work on products. In the meantime, The group can rely on the strengths of its portfolio with Saint Laurent, Bottega Veneta and Brioni as well as Kering Eyewear and Kering Jewelry which continue to extend their strong trajectory. Overall, against the current macro backdrop, we remain focused on the levers within our control and our priority is clear, execute better, move faster and remain relentlessly focused on desirability, product, and client response. Moving on to our quarterly revenue in more detail on slide six. The performance remains uneven. By segment, Kering Fashion and Leather Goods was down 3% on a comparable basis and down 1% as reported, with Gucci down 6% on a comparable basis and 4% as reported, as the house continues its turnaround. Kering Jewellery increased by 11% on a comparable basis and by 12% as reported, supported by strong performance at Boucheron and Pomelato. Kering Eyewear grew 4% on a comparable basis and 6% as reported, confirming the resilience of its business. Corporate and other decreased by 5% both on a comparable basis and as reported reflecting the end of rental income following the real estate deals despite the continued strong performance of January 1735. Overall, our geographic mix stays well balanced with the main shift being a lower contribution from Asia-Pacific amid mixed regional trends. Mainland China is our major headwind as consumer confidence stays subdued and customers are increasingly selective, while South Korea continues to grow. On slide 7, let's review the top line by channel. The split by channel remains stable with retail, which represents 75% of revenue, down 3% on a comparable basis. Within retail, e-commerce grew 3% year-on-year on a comparable basis. and represented 11% of retail sales, a rather stable proportion. Traffic remained under pressure overall in our stores. This was partly offset by better conversion across most houses, supported by stronger product execution and improved client engagement, together with higher average unit retail price and average ticket. These indicators point to healthier product dynamics and reinforce our focus on product transformation. Our Directly Operated Network now counts 1,614 stores, a net reduction of 105 stores since the end of last year, including 25 net closures at Gucci. With this, we have reached our objective of 100 net store closures before year-end. The group now anticipates at least 125 net closures for the full year 2026. Alongside closures, we continue to open stores in selected locations. At the same time, we keep focusing on maximizing the productivity and appeal of our existing network with store refurbishments, strengthening the expression of each house, and elevating the client experience. Wholesale and other, increased by 3% in line with the previous quarter. When zooming in on distribution speed per segment, carrying fashion and leather goods retail sales declined by 4% on a comparable basis. This sequential slowdown reflects a more challenging environment, a less supportive contribution of Gucci, and lower traffic this summer, especially in mainland China. Wholesale increased by 1%. Kering Jewelry was driven by the strong retail performance of our jewelry specialists, posting 18% growth, while wholesale declined by 5%, affected by software performance in mainland China and retailization in the Middle East. Kering Eyewear, whose revenue entirely derives from wholesale, keeps on enjoying positive momentum, with revenues increasing by 4% on a comparable basis. Moving on to retail regional performance on a comparable basis on slide 8. Western Europe was flat and posted its third quarter of sequential improvement, with both local and tourist spending improving sequentially, driven by Saint Laurent and Bottega Veneta. In North America, trends have softened this quarter after several quarters of strong growth. Performance remains strongly positive for most houses and the region posted a 1% growth on a comparable basis despite normalization in consumer demand. Japan eased this quarter, posting 4% growth, boosted by the dynamism of our jewelry houses in the country. Tourism dynamics became less supportive than in Q2. Asia-Pacific declined by 8% in the quarter, with the low traffic in mainland China being the main headwind, partly offset by continued strong momentum in South Korea. Nevertheless, in-store indicators were more encouraging. The dedicated China plan remains focused on rebuilding visibility. I will get back to this in more detail later. Finally, the rest of the world declined by 5%. The Middle East continued its sequential recovery and posted a positive growth in Q3. Let's now move to carrying fashion and leather goods on slide 9. Revenues stood at 2.7 billion euros, down 1% as reported, and 3% on a comparable basis. Excluding Gucci, the segment grew by 2% in retail, with Saint Laurent, Bottega Veneta and Brioni enjoying momentum. This broad-based contribution highlights the strength and diversification of our portfolio, helping to partially offset Gucci's current transition. Before turning specifically to Gucci, let me first say a few words about the other brands within the segment. At Saint Laurent, the house keeps benefiting from strong traction driven by sustained growth in North America and Western Europe and engagement from VICs and core clients. Bottega Veneta continues to outperform supported by sustained brand desirability, solid traction across key markets, and continued strong momentum in leather goods with successful product introductions. The house also advanced its diversification strategy, notably in ready-to-wear, while benefiting from strong engagement among VICs. This performance confirmed the methodical roll-out of the house strategy unveiled at the Capital Market Day, with growth increasingly driven by value. At Balenciaga, performance was more challenging as the house worked through its creative transition. Leather goods remained the engine of the house, while ready-to-wear and shoes remained key areas of focus. Basket size improved, both in value and units. McQueen continued to execute its repositioning and the reset of its retail network. The house is refocusing its identity as a British tailor, and its latest show in London further reinforced this renewed focus on its British roots. Finally, Brioni maintained its solid growth trajectory, supported by its highly personalized approach to client relationships and the strength of its bespoke offer. All sales and other revenues were up 4% on a comparable basis. Royalties and other revenues recorded very strong performance, driven by the beauty and eyewear licenses of our fashion houses. Focusing on Gucci now on slide 10. The house recorded sales of 1.3 billion euros in the sub-quarter, down 4% as reported and 6% on a comparable basis year on year. Retail ended down 7% as reported and 9% on a comparable basis. This performance reflects several factors. An 11 percentage points tougher comparison base this quarter and a less pronounced newness effect than in Q2 partially offset by the first benefits of our ongoing work on product development from creative teams to retail excellence. On phasing, Primavera started to reach stores in mid-July and was fully deployed in September, with advertising rolling out from late August. The collection contributed positively to newness. Being fashion-forward, it primarily speaks to a fashion-led clientele. It is now being complemented by Gucci Core, which is more focused on the core wardrobe and will begin to reach stores in November. Traffic remains a main constraint across regions, with mainland China our key headwind. That said, conversion, average tickets, and average price continued to improve. This quarter was primarily about execution. We continued to reshape the product architecture, sharpen category priorities, and improve pricing and perceived value, while bringing new collections into stores. Handbags are at the forefront of this work with a richer offer and a clearer price architecture. Ready-to-wear and shoes remain key areas of focus. The recovery will be gradual over time as we keep on working towards progressively translating improving dynamics into traffic and sustainable growth. Wholesale and other revenues were up 35%, Allsell, which represents around 9% of sales, or €120 million in the quarter, was up 45% on a comparable basis, reflecting a low comparison base and order book effects as new collections came through. On slide 11, Kering Jewellery again delivered a strong performance, reaching €239 million in revenues. Sales were up 12% as reported, and 11% on a comparable basis. Sales in the directly operated network increased by 18%, while wholesale and other revenues decreased by 6%, both on a comparable basis and as reported. This segment is benefiting from a growing retail footprint and the first effects of the integrated platform supporting synergies. Boucheron possied another strong quarter, driven by the continued strength of its iconic collections, Quatre and Serpent Bohème, and good performance in Japan and South Korea. Pomelato also benefited from positive momentum, supported by strong traction in Japan, thanks to the Nudo, Iconica, and Together collections. Performance at Dodo and Kilinu was mixed, though the houses continued to advance their product initiatives notably with Kylian's successful launch of Wooloo Purple Jade. Beyond the quarter, carrying jewellery is confirming its role as a structural growth engine for the group. The category benefits from strong underlying fundamentals and from the disciplined way we are scaling it across houses and regions. We are also investing in the communication of our brands. With strong desirability, A growing retail footprint and an increasingly integrated industrial backbone, we are confident in jewelry's ability to increase its contribution to group revenue over time. We will present our key priorities for the jewelry business during a Caring Jewelry Day, which will take place on the 2nd of December in Paris. Moving on to slide 12, let's focus on the revenue of Caring Eyewear, which which posted another quarter of solid performance. Sales reached 373 million euros and were up 6% as reported and 4% on a comparable basis, reflecting strong demand across the portfolio and the anticipated more chronic seasonality effect during the second half of the year. This performance highlights the strength, resilience and scalability of the iWear platform across geographies. Growth was supported by a combination of several product launches, including Maui Gym Fall-Winter 2026 collection and the continued roll-out of the activations supporting Lindbergh's 40th anniversary. Commercial and marketing momentum remained strong, supported by a successful Spring-Summer 2027 sales campaign and media investment across key brands and targeted activations. Beyond the quarter, Eyewear is demonstrating again the relevance of our integrated model. With its diversified brand portfolio and recurring demand profile, Caring Eyewear is a highly attractive and reliable growth engine for the group. On slide 13, I will make a few comments about the corporate and other segments. This quarter, revenue from corporate and other amounted to €27 million, down 5% as reported and on a comparable basis, primarily reflecting the end of rental income following the real estate transaction, despite a very strong double-digit growth delivered again by January 1735, highlighting the continued progress in brand development and desirability across key markets. On slide 14 and before concluding, I would like to step back from the quarter and show the steady progress we are making on our transformation, brick by brick. Clearly, the performance of the third quarter is not where we want it to be. But beneath the top line, the actions we have taken are becoming increasingly visible. First, at Gucci, our priority is to rebuild desirability. Creative renewal is underway. The store show in Milan at the end of September brought the house strategy fully together, building on Primavera and Gucci core presented earlier this year. The collection stood out for the diversity of its look, products, and style across both men's and women's. We have also sharpened the organization around creativity with product, merchandising, marketing, and retail now working more closely together. At the same time, we are increasing media investment, strengthening communication, and intensifying clienteling in Q4, making sure our actions resonate more strongly with clients. We are already seeing tangible results with improvements in conversion, average tickets, and average price. Traffic remains a missing piece. We are also working on retail excellence. deploying our new store concept, optimizing the network, and stepping up Salesforce training. Second, in China, we are tackling the challenge head-on. On the operating model, we are adapting our organization and leadership with more decisions now taken locally. On client relevance, we are putting Chinese clients more firmly at the center of our actions Stepping up outreach to top clients, timing major product moments around local locations, and conceiving campaigns in and for China rather than adapting global ones. As part of this effort, I am pleased to announce the launch of a content factory in China for China. And on the network, we remain disciplined. We are optimizing our stores while investing in refurbishment and restyling. Formats and visual merchandising are the levels we hold on traffic itself and we are using them first where footfall has fallen most. Third, we are enhancing the offer across the houses. Product and price architectures are becoming clearer, quality is being upgraded and we are reducing the number of SKUs. Buying is becoming more responsive to actual demand. also support our objective to reduce fashion and leather goods inventory by around 1 billion euros by year-end. And finally, on efficiency, we are building an integrated group. Our shared industry, client, and tech platforms are increasingly supporting the AOCs for manufacturing and procurement to client engagement, forecasting, and inventory management. On change management, we are embedding a stronger culture of execution with clearer accountability, faster decision-making, and a collective mindset. And on cost discipline, we are further reducing our cost base without compromising investment in our houses. CAPEX remains disciplined, and we confirmed full-year OPEX below last year, with H2 2026 below H2 2025. Before turning to the outlook, a word on creative leadership, which sits at the heart of our model. At Saint Laurent, we are opening a new chapter from a position of strength, with the house back to growth, a clear strategy, and solid momentum. At McQueen, we will build on the repositioning already underway, sharpening the house focus on what makes it distinctive, British tailoring, Women's Redditware and Occasionware. In both cases, our approach is the same, the creative vision fully aligned with the Clear House strategy and supported by the strength of the group platform. We look forward to sharing more on creative leadership soon. So, while the benefits of the transformation are not yet fully visible in our revenues, the actions behind them are well underway. To summarize, our focus is on rebuilding desirability, improving retail productivity, and translating these changes into healthier and value-creating growth. As you know, we continue to operate in an uncertain geopolitical and macroeconomic environment with limited visibility in some of our key markets. This is waiting on our short-term revenue trends. Nevertheless, We continue to prioritize the quality of our revenue with several of our brands showing strong momentum and the recovery at Gucci gradually taking shape. On profitability, we confirm our objective of improving recurring operating margin in 2026. This will be supported by the continued implementation of our efficiency measures while maintaining strong investment in the desirability of our houses. Today, our focus remains firmly on the execution of our strategic plan with agility, discipline, and flawless execution, concentrating on the levers that are within our control. We are clear-eyed about the work still ahead. Q3 reinforced the necessity of our transformation, but it does not change its direction. Our priority is to translate the progress we are making across our houses and the group into sustainable growth, stronger profitability, and cash generation. And with that, we are ready to take your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to the first question. One moment, please. And your first question today comes from the line of Anne-La Biesemuth from HSBC. Please go ahead.