All right. Okay. Good morning to all of you, and welcome to our Kering Investor Day, of course, dedicated to Gucci. Well, first, I hope that you enjoyed the tour of our Old Bond Street flagship store, and I hope you like the presentation that you had from Jacopo Venturini and his team, and that you really now have a better appreciation of what is Gucci's renewed universe. I'm also very pleased to see so many of you here today and particularly some familiar faces. Your presence here today shows the importance of the Gucci house for Kering, of course, but also for the world of luxury. Gucci is more than just one of the largest and leading luxury brands. It's a very special house. Its creativity, its universe set it apart from all the top names in luxury.
Are you aware that it is here at The Savoy that about 100 years ago, Guccio Gucci started to imagine this amazing enterprise? Well, ever since those days, Gucci has been really unique. Its ability to take risk, to set trends, have positioned it at the forefront of luxury. Because Gucci is so distinctive, it was a natural foundation on which to build our luxury group. The multibrand group we envisioned from the start could only have at its core a brand with Gucci personality and resonance. Of course, as the relative contribution of our other brands gets rebalanced over time, well, Gucci will remain our anchor. Gucci has inspired much of what we have accomplished elsewhere. In many respect, it is the most advanced incarnation of our strategy. Gucci is a company that has a huge organic and value creation potential.
It's a company that thrive on creative freedom, a company that nurtures talent, and it's a company that cares deeply about the way we do thing and not just about the things we do. About 2 years ago, when Gucci started to showing sign of losing its edge, my focus has been to put the brand rapidly, firmly back on track. Our first priority was to rebuild the conditions for a steady top-line growth. To do this by leveraging the existing strength of the house, its universe and formidable image, its store network with the best location around the world, its outstanding people, and the distinctive skills of the artisans making its pieces. I had no doubt that the only way to get there was by reestablishing Gucci status as the ultimate fashion authority, leveraging its creativity and its unique heritage.
At the same time, the industry was starting to show sign of slowing down. In that environment, I knew that we needed to make our assets reach their full potential, having the buildup phase behind us. This was particularly true when it came to increasing the productivity of our store network. At Kering, we had groomed the right talent to mastermind with me the reinvention of Gucci. The succession was seamless. Marco Bizzarri had been with the group nearly 10 years. Over that time, he has successfully led Stella McCartney, Bottega Veneta, and our couture and leather goods division. I had worked closely with him during all these years. I knew deep down that he was the right person to take Gucci to the next level. Also I was certain that he would do it, as usual, with speed and determination.
You've certainly heard me saying that for a luxury house, one of the key success factors is a close bond between the CEO and the Creative Director. For the creative role, we decided to look inside and outside the company. However, we realized early on that Alessandro Michele, who had been with Gucci for more than 12 years, knew the house inside out, but more importantly, that he had both an absolute passion and knowledge for the brand and an amazing inspiration to bring it forward. Of course, it didn't take us long to decide to give him the total creative freedom. The appointment of Marco as CEO and Alessandro as Creative Director, and I must add, the incredible talent present within the company, created an exceptional combination to jump-start the Gucci Renaissance. We're lucky to have several members of the executive team Marco put together with us today.
In addition to Jacopo Venturini that you met this morning in the store, we are joined by Micaela Le Divelec . Micaela is the Chief Consumer Officer of Gucci. We have with us Robert Triefus. Robert is the Chief Marketing Officer, and we have Alberto Valente, the Chief Financial Officer of Gucci. The Gucci reinvention was conducted at an amazing speed. It started with revolutionary collections delivered in a matter of weeks. At the same time, Marco and his team established a new organization, leaner and more agile. They fostered the emergence of a younger and open culture, and they started revisiting all customer touchpoints, starting with, of course, our retail network. What has happened in the past 16 months is a beautiful journey, and I will let Marco guide you through it. Make no mistake, this adventure did not happen by chance.
It owes its effectiveness and its speed to the force of our group. In fact, no single brand could have done it by itself. Let me tell you what we have planned for you today. What are some of the constituents of success in the world of luxury? First, creativity, which enables the brand to blend heritage and constant reinvention to anticipate what people will want to wear today and tomorrow. Of course, the right organization to deliver the creative vision with an excellence in execution. From what we have lined up for you today, you will see that we have brought all this together at Gucci. You've seen our reinvented universe taking shape in the new store concept this morning, and Marco will discuss our plans, our ambitions for Gucci. This afternoon, we have a surprise for you.
As you know, Alessandro presented Gucci 2017 Cruise collection yesterday in the cloister at Westminster Abbey. We thought it was a good idea and probably a great opportunity to ask him to share with you his creative vision. I'm certain that you will really enjoy that day. Now, I will leave the floor to Marco Bizzarri, CEO of Gucci. Thank you.
All right.
Yeah.
Thank you. Right. Your turn now. Okay. Excuse me. Good morning. Good morning, everybody. Thank you, François-Henri.
You're welcome.
Little bit of pressure now. Today, I'd like to go through what happened in Gucci briefly in the last few months, giving you an idea what we are doing today and our ambition and also sharing with you some results in the recent months. At the end of the presentation, you will have time for question and answer. Hopefully, we try to answer most of the question beforehand, but in that case, we are there for you. The idea is very much to give you a brief outlook on what we feel is going to be the market in the coming years. For sure, you are more than me aware of what's happening, but I think it's a good idea for me to share my thoughts. What I would like to go through, what happened in 2015 in terms of Gucci.
The idea behind the change in the strategy, it was very much to go back to emotions, to a dream, being in the fashion industry. Emotion, we think, is very, very important. Without that, it's very difficult to attract customers, especially today. We didn't start in terms of strategy through figures, but we start from something that is more intangible because we think that still brand equity in our industry is very valuable. We will go through today what we are doing, the execution of the dream. Some results in our shops, in some new shop concept, old shop concept, new product, new collections, et cetera. Our ambition in the following years, between 5 and 10 years. Briefly on the market. We expect the market overall in the industry to slow down. I think the El Dorado is totally finished.
We are going to enter in a market share game going forward. We think that the store expansion, the increased footprint, the price increase that happened to improve the business in the last few years is finished. We think that as well, geo-pricing becomes more and more important, price transparency as well. It doesn't mean that price gap will not exist going forward, but I think that the 60%-65% that we enjoyed a certain point, both in Japan or in China, are finished. Luckily, because of the view change of the collection in Gucci, we had the possibility to rebalance these price gaps. In the past, we didn't do any kind of price reduction because we thought that we were going to cheat the customer that were buying the previous product, the same product at a different price.
I think that the normal paradigm of the luxury industry, meaning of absolute luxury, aspirational luxury, et cetera, is going to be blurred going forward. People are going to buy and pick in different segments and different brands. We really believe that the multi-brand formats will have a relaunch in the future. There are people that are entrepreneurs outside that are very bright, that are able to attract a new clientele, that talk to different customers. I think that the collaboration with them becomes key. We don't feel that the full retail business model is going to be the one that Gucci will follow in the future. I think a balance that we have today in terms of mix is going to continue.
Of course, we will work only with the best, the ones that are able to talk to a customer maybe we don't have today, but we start to have today. The idea of categories, especially for a big brand like Gucci, is very key. We cannot be the best in one single product category. We need to aim to be the best in all the product categories if we want to continue, if we want to gain market share. I will go through it later in the way which we believe is going to be the way. E-commerce and off-price, outlet channel will keep on continuing to be very strong. I will show you later what we feel is going to be the strategy for Gucci in that respect. Market consumers. Millennials are going to influence consumers going forward at any level.
Today, approximately in the industry, millennials, if we try to segment the millennials below the 34 years old segment, that represent 50% of the total business for any company in the luxury industry. In Gucci, this share is approximately 40%, so we have room to improve. These consumers are very demanding. The reason why we often say that the millennials prefer to buy in wellness, in hotels, et cetera, because they look for emotions. They look for something that maybe the luxury industry was not able to provide in the past. That the reason why we thought with Alessandro that the best way to try to engage these people was to really create emotion in the brand again.
That the reason why, as François-Henri was saying, we wanted Gucci to become again the fashion authority in the industry and taking a lead that maybe we lost in the previous past. Sustainability definitely is a growing value for this consumer. Going forward, we remain a solid value, especially to attract talent. Younger generation, they prefer to work with companies that have sustainability at the center of their business. In our business, as you know, people are key. It's not rhetoric. The difference of execution in a company depends from the team that you have. If you're able to get the best, you get longevity and long-term added value in the company. That the reason we really want to make sure that we have the best people in our company, as we have.
Transparency becomes more and more key because of the digital, because of the authenticity that is become more and more important. Authenticity is a key word going forward in this business, in luxury. You cannot cheat customers anymore. You cannot increase price for the sake of it. You need to give value. This is the way, the moment we reprice product, we always try to understand which is the right price for that particular product, despite the cost of the product itself. This is the way in which we believe that we can guarantee to deliver added value and to have the added value that Gucci deserves, but without being too greedy. Price fairness becomes key going forward for Gucci, also in the industry. As said before, I think this aspirational, absolute luxury consumer is going to be blurred going forward.
This is something that is happening while we speak. Market consumers, where we stand in terms of Gucci. Gucci is one of the top three in unprompted awareness. Strong brand, long heritage, 95 years old of history. Showed, in the past, enormous flexibilities in terms of ups and down. You remember the Tom Ford era, et cetera. This capability of the company to react to changes has been showed across the years, and is typical and is very much about the values of this brand. There's a rich history, a lot of legitimacy. That is absolutely important, but legitimacy, like timeless, doesn't mean to be stuck in time. We love our heritage, we love what we have been, but we need to think about the present and the future. The way in which as well Alessandro is thinking about his collection is particularly clear.
The way in which he links different ages, different eras, and talking to a client, to the customer that is looking at the future, I think is the best way to express what I mean. That is exactly the way in which we try to foster the culture in terms of people in the company. Organization is, again, is extremely flexible organization, and that is a key strength. The capability of Alessandro to make a show last year, the first show in 5 days, is give you the clear idea on how much the structure behind is strong. To redo a presentation in 5 days can be done only if the structure that you have behind is super strong. If you have the artisan and the sample makers and the designers that are able to provide you something that is unique. This, for me, is a great asset.
In the same way, the capability that we had last year to deliver in big anticipation, the Cruise collection starting from September, in order to give a flavor of the collection of Alessandro before any normal delivery timing, shows as well the capability that we have as a company and organization from a production standpoint to react quickly and to make sure as well that the collection that we do can be done in a different way very rapidly. You had the chance to go through the shop with Jacopo and his team and to look at the new product of Gucci. There's no comparison in terms of craftsmanship, creativity versus the past. You can imagine the difference impact that this could have in the supply chain. It's a complete different product.
The ability of the supply chain to react to make this product quality perfect in such a short period of time means that the structure that we have is able to react very quick. The distribution, I think as François-Henri was saying, I think we have the best location in the world. We have the right footprint. We don't think we want to open new shops. I think we are going to be in the right location. We're going to close some shops. We're going to open in terms of opportunity. Overall, I think that the footprint is the right one going forward. I would like to outline the fact that Gucci started as a first mover in the e-commerce.
We are leaders in the digital strategy, not just in terms of e-commerce, in terms of commerce, but also in terms of digital approach that the teams of Robert have really fostered in this amazing way in the recent times. Again, sustainability, both Gucci, but as well Kering, through François-Henri, was the leader in this industry in terms of sustainability. You know all this data, just for you to give you an idea of the structure in terms of sales by region, sales by channel, sales by product. You have all this information in the paper, so I don't want to go through it. The only reason why I show this slide is because we don't expect major change in the mix, both in terms of retail and wholesale and in terms of sales, in terms of region.
The balance in the different regions is quite even. I think we are fine. Of course, in the U.S., as you may remember, we decided to bought back some wholesale accounts from our major department stores, especially Saks and Neiman Marcus, where now we manage as leased departments. They are part of the DOS that you saw here. The comparison versus other brands cannot be as easy. I think the move that we did in the past has been the right one because we can really control the best stores in these department stores. You see the data in Asia Pacific, they are all blended. This figure that is normally released. The question about China tells you immediately, you know we have approximately 60 shops in China, and we don't intend to open new shops.
We are closing some shops in China, especially locations that were supposed to be good. The reality, as you know, because of the El Dorado Chinese in the last few years, we opened in malls, some of them were supposed to be good, and they are not. We are very flexible and quick to decide to close. As we decided to close other shops worldwide. We closed Brera in Milano, the main shop in Milano. We are going to close Madison shop in N.Y. because these shops, they didn't represent the new Gucci first, and also they were losing money. The two conditions together brought us to decide to close the shops beginning of this year. This is something that we always look at, of course. The profitability of the shops worldwide is something that we tend to look at very carefully.
Luckily, we have just nine shops worldwide that are losing money. (Buying 500 shops), I think is a very good result, and they deliver very good profitability. I give too much information to Mark? It's like This is, I think, an important slide. In the last few years, Gucci lost market share. This is the compound annual growth rate that you see below. Try to imagine what the companies behind the flags. The reason why Gucci lost market share, despite the fact it was growing between 2011 and 2015, was mainly due to the fact that at a certain point, the weight that has been given by the company, by the brand to (edit it to past) and the rest has been too heavy.
The fact of being ashamed to have a logo and to present and to communicate that the difference between the products, the selling logo, not selling logo, etcetera, to me was too much in the sense that Gucci needs to be totally proud of the logo that he has. The logo to me is like when you start to do a fashion show, it's like any fashion show, you put a coin in a safety box, and you create equity and brand value. It's something that you need to be absolutely proud of having it. Of course, again, timeless and looking at the logo in the past is not the way in which we think we need to talk to the new consumers.
Logo needs to be seen in a way much more contemporary, much more modern, to play with the logo and not just to try to use the logo for aspirational customer. Logo should be as well worth at the top of the pyramid. It's the way in which you saw the product during the tour with Jacopo and the team. This idea of losing or giving more weight to heritage instead of fashion has been, for me, going against the value of the brand. trying to follow a little bit the trend of the heritage, the kind of sophistication myth. That means that if you are sophisticated, you don't wear logo. I think that to me is not sophistication. Everybody wants to show properly what he buys in a proper way, as long as it doesn't look old.
What's happening today through the Gucci consumer, that they're taking back from the closet the old Gucci because they feel more proud now to wear Gucci, and before they were not wearing it. I think that is something that is happening, and it's absolutely clear. That's the reason why when François-Henri gave me the possibility to run Gucci, we decided that Gucci needed to go back to be a fashion authority in the industry. This is what we're going through today. dividing between 2015 and 2016. The beginning is we need to get back emotion in this brand or even in this industry, because, of course, for the size of Gucci, the possibility to influence the fashion trend is quite big. It's quite unique.
We go through how we foresaw the brand, how we reposition the product offer, where we are today in terms of transition of product in all the product categories, and of course, how we updated the old communication touchpoints. That was 2015. Remember, when we started to redo the show in January 2015, the only way to communicate the change of positioning were the shows. There was nothing else. The product was exactly the same. The communication was with the product of the previous creative director. For eight, nine months, overall, there was no single tangible in the market possibility to look at the new Gucci. That's the reason why we were talking so much, because think about our people in the shops.
They see all the change, they see the shows, they see this dramatic change in positioning aesthetic, and then they go into the shop and every single morning, they see exactly the same things. They think, "These people are crazy. What they are doing?" The internal communication became absolutely key. The reason why I traveled everywhere in the world, I was talking to everybody. I tried to express the strategy, et cetera, was a way to make the people embracing the change. Internal communication at that time was as important as external communication, because we didn't have all the possibility, all the tools. We didn't have the product at that time. We didn't have the communication. At the beginning, it was very much to recreate emotion. After that, of course, the product started to arrive. All the activities were getting back together.
The 2016, how to deliver this dream, the execution. Internally, we said that 2016 is the year of retail. The year of retail because it's quite incredible what's happening today with when new consumers, especially fashion influencers, opinion leaders, they go into our shops, they know the brand much better than our sales staff. They're completely obsessed about Alessandro. They're completely obsessed. They know everything. Think about how we need to express to all these 525 shops worldwide, to all these 6,000 people that we have, the change in positioning. How they need to know about the brand, how they're going to embrace about this change. This, to me, is the most difficult part, because all the rest is made through a team of respected people that decided how to define the position of the brand. It's almost written in four walls of an office.
Spreading out this message for 6,000 people is the change in culture that we are trying to do. Because if we're able to make this shift, we create longevity in the change, and we create longevity in this kind of edge of innovation that we have. We will go through what we are doing in terms of different activities. Can I have the pen? Thank you. Today, we are approximately here, but it is moving quite fast. From the moment we printed, it's already moving a little bit. In our business, even if we say that it's very difficult, it's a simple industry. We just need to create emotion.
We need to get back to the brand, fashion influencers, opinion leaders, artists, celebrities, that we don't want to pay, but they need to come to us to ask for the brand. That was what's happening. Of course, it takes a little bit of time. When I read, which is the percentage of the product we have in the shops worldwide, that is absolutely key, because without the product, we don't go anywhere. There's another variable that is very, very key as well. Consumers needs to know what happens. In the fashion industry, we knew about the change 12 months ago. They knew about Alessandro. They knew about what's happening in Gucci. If you ask the consumers, they don't even know what happened. It takes time. Word of mouth is important.
That is why we start the communication well in advance, because it takes time to spread the message. It's like a wave. The combination of our location of product in the shops, the combination of the people that talk to their friends and say, "You know what? I went to Gucci. The products are amazing. The people that are in the shops are so energetic, so joyful," so nice, hopefully. That creates what we need to do. The business acceleration that we are seeing in the last few months is quite incredible. I will go through some ideas of results, if I may. This, I think it's important for you. That is from January 2015 to May 2016. This is a full price sales of Gucci. You don't have any percentage, but you can guess.
2015 has been an important year for Gucci because we did this turnaround in a situation of declining sales. The capability we had as a company to manage the revenues through an important markdown activity, the previous collection, both in June and December, was absolutely key in order to maintain cash flow generation, to maintain the revenue, and especially to protect Alessandro from critics. Of course, it's too easy to say, the financials are not there. Alessandro's transformation is not working. In reality, Alessandro's transformation didn't work because it couldn't work without having all the touchpoints together. We can judge about Alessandro's transformation only today or from today onward, of course. What we are seeing, from March, we saw a rebound in full price sales. At the beginning was kind of high single-digit, and then April increased and May as well.
Of course, we are facing a comp of last year with a lot of markdown. To me, what is important is the business is sound or healthy or not. These results are quite encouraging because we are very confident that the strategy that we put together 15 months ago is correct. The other thing that let me mention about the Q1 results, that we did a +3%, that it was better than most of the competition or the competitors. Let me outline. I read that we had easy comp in the Q1 2015. You don't have an easy comp when you have -7%. That is one of the worst comps possible. When in our fashion industry, when you start going like this, it means that you lose attraction. You lose attraction with your customers.
To rebound so quickly, to me, an easy comp is flat. It's +1%. This is an easy comp. -7% is a very difficult comp. It means that the brand lost attraction. The fact that you rebounded, for me, is a great sign of recovery of the brand and acceptance from the consumers of the new change. 2015. Recreating the dream. I touched some of the points already. Envisioning Gucci, what we decided to do. As François-Henri was saying, we wanted to reestablish our position as a pivotal Italian luxury fashion brand, leading the industry by setting the tone with innovative runway collection and groundbreaking creativity. The idea was to put back again as the most awaited show of the fashion weeks. That was not given because it was not the case before.
To do so, I needed a creative director that was embracing completely the business positioning. The moment in which I (met Alessandro met) François-Henri, we really understood that the ideal business position that we had in mind was then given the possibility through him to express at the maximum what we intended in terms of modernity today. This is what I meant before. We are very proud about our past, about our heritage. These are the frames that were in all the buildings worldwide in Gucci. Florence, Milan, Rome, all the offices in the different regions, New York, et cetera. The very first day, January 7, 2015, when I joined the company, I asked my team, the people, to take them out everywhere. When I arrived in the shop, in the building, everybody was taking out the frames and painting the walls.
The reason was internal communication, again, is absolutely important. If I want to deliver a message to my team that putting emphasis on the heritage is not anymore the case, that we need to become a more fashion company, the sign that we need to have, the sign that we need to give needs to be very much aligned. That was the first sign where, of course, it's very intangible if you want, but everybody started thinking that the way in which Gucci was going to be managed in the future would have been very different. This one is a manifesto that we wrote together with Alessandro when we joined. When I first met Alessandro, I asked him, we are in a total agreement in terms of wording, definition, but fashion for you can be different meaning for me. Everybody's talking about fashion. Everybody's a consumer of fashion.
What exactly means in terms of image, aesthetic, cause, et cetera. Alessandro started to put together a document relating images to the wording. If you see, these are the pictures that Alessandro sent to me to express his idea of aesthetic. If you go through it, you can really see that the communication that started afterwards really embraced this kind of aesthetic. Alessandro had perfectly in mind what he wanted to do already back in January 2015. That is quite striking, considering that he's been in the company 12 years. He's doing aesthetic that was completely different. The possibility we have to enjoy the knowledge of Alessandro in terms of archives, in terms of cause, was something that was impossible to achieve with anybody else. These are the moments of last year, 2015, recreating the dream, the emotions.
The moment of the appointment, the first show of Alessandro, that divided completely the social. If you ever used to go through Instagram or through these kind of digital tools, there were people that were loving him, other people like me, please get Frida back. Of course, again, when you do this kind of change and this kind of rupture, you need to be ready to criticism because people, they take a little bit of time. Fashion needs to set trends. It's part of the DNA of the industry to set trends. If you become too marketing driven at the beginning, you lose exactly what is the purpose of fashion, and people and consumer get bored.
I think we needed to do it in terms of Gucci because part of the values of the brand, but I think we needed to do it because fashion was losing a little bit, the kind of speed that it was normally having. From there, Alessandro started to make the shows. We had the fall and then we had the consecration for me that happened in New York last year. Cruising New York for me was a consecration of the ideas of Alessandro. Continued. Finishing in September with the opening of the first shop with the new concept in Montenapoleone, that really gave the maximum expression of the idea of Alessandro. Let me tell you something about this concept.
I saw the first result of this concept in Milan, and of course, we didn't have in September most of the product of Alessandro yet, because of course, we bought product in a kind of safe way at the beginning because we didn't know the impact with the market. We didn't know if we were risking too much in terms of inventory. We bought properly for the best 50 shops in terms of revenues. We allocated this product for these shops. One of them were Montenapoleone. The combination between the product and the shop concept was quite impressive. The difference in results between this combination and the rest was very, very high.
I thought, and I spoke to François, "François, we need to really push the new concept, the new rollout, because the difference in performance is so high that we cannot afford to slow down." When we started to see that all the products were arriving in the shops properly, even in the concept that was the previous one, in making some cosmetic changes, some of the tables that you saw today in Old Bond Street. Some hands, some hats, some carpets, some small change, cosmetic change. Minor investment, minor CapEx. We saw that the difference in performance between the two was very limited.
For that, now, I don't think the same that it was five months ago, six months ago, because we need to be, again, with so many changes, we need to be flexible and be willing to change our mind as well, very quick, because we are learning as well from mistakes or different opinions. Now I don't have any more the pressure to invest so much in terms of CapEx. I think that we can do amazing results as well in rolling out the concept in a more steady way, and maybe reallocating the cash in investing in product and making sure that the product is not missing in our network worldwide. Something that always impressed me to look at these pictures, Alessandro, in 15 months, has been recognized as the most valuable designer in the industry. He got the British Fashion Council Best Designer of the Year.
He will get on Monday, the CFDA, that is in the U.S., Best Designer of the Year as well. Most of the shows, Alessandro has been ranked first or second in the last few months. All this idea of creating emotion, recreating attention on the brand, I think has been achieved in such a relative short period of time. Also, I think the most important thing is that Alessandro is Gucci. Don't know how to express that. There are many creative directors that try to be in competition with the brand. They want to show and to put in the brand something that is just them. Alessandro is blended with the brand. The reason why he didn't leave in 12 years, despite the fact that aesthetic was completely different from the one that he had, because really, Alessandro personified the values of Gucci.
You will see this afternoon, the way in which he speaks, the way in which he foresee the brand and the values. The fact that Alessandro is such a humble and normal person that we really much need in this industry, and this is the reason why we can foster a culture of respect and empowerment in the company as well. We started to engage (in This is Marc Jacobs). Many celebrities that were able to start embracing, from Anna Wintour for Beyoncé, Sienna Miller, Madonna, Jared Leto, Ryan Gosling. This was the different way to endorse and to start to be on the celebrity stage. The product. We can create the dream, but without the tangibles of the product, we cannot go anywhere. One of the most key decision that I took despite, of course, having the possibility to appoint Alessandro, was to hire Jacopo.
That is merchandising direction. All the others were with me already. Merchandising director in our industry is absolutely key. We always want to say, the merchandising is one with the creative direction, but that is something you cannot write on the paper. If you don't find people that have the same sensibility, that they work together in a seamless way, you will never achieve that. The moment where I see Jacopo and Alessandro working together is absolutely a real dream, because they speak the same language. It's not a matter of being commercial, not being commercial. It's the way in which they're really thinking a vision and everything is super coherent.
That is why, because I'm very confident, even going forward, all the untapped product categories that you will see later, will be at the level of the women ready-to-wear, women shoes and bags that are enjoying such amazing results. The idea was to change the product offering in a very short period of time, taking huge risks. You can imagine, a company of EUR 4 billion, but you're changing, in 24 months approximately, 100% of the collection. Without trying, at least, without impacting too much revenues. That is an exercise that is not as easy as it seems, because, I don't remember in fashion such a complete change of the offering in such a short period of time without disrupting the results.
The idea was very much to gradually substitute the product, and making sure that the logo was going to re-become the center of the strategy, making that desirable, but also recognizable in a modern way. Almost playing with the logo that we had and rediscovering signs that we had in the past. The idea was very much to get back as a fashion influencer, especially with women ready-to-wear, we make sure that the one that created loyalty in the consumers, and these are the ones, are the categories that are literally flying, if I can use the word, Jean-Marc, but it's literally flying in the presentation. Price range. We wanted to cover all the price range. Of course, with different You will see a slide afterwards. We reduced the number of SKUs by 30%.
The idea was to start, be more focused in terms of message, be more efficient in terms of inventory management as well. Because 15 months ago, the inventory level of Gucci was quite important, and the idea was to reduce it by creating a level of inventory that was more healthy, is less slow mover and more fast mover. I will go quite quick here because you went through the product with Jacopo, but the idea was very much to try to find a way to revisit the logo, introducing signs that create this blend, unique, uncopyable. Because the way in which Alessandro is playing with the logo in creating signs that can be coming from the past or coming from the animal world, creates something that is quite unique. This is the Dionysus.
That is the first product that has been launched by Alessandro that became the best line in Gucci in 15 months. I think that is quite remarkable because the lines that we have today, still, the Soho line, that is a historical line coming from the previous creative direction, is super strong still. This one is becoming the number one. Recreating the web, inspired by the equestrian world. The Gucci web has been reintroduced across categories, and again, in shoes, bags, ready-to-wear, et cetera, to give this aesthetic and image that is very coherent and recognizable as well. The GG Running, the buckle. This was the first exit of the men's show back in January 2015. That was striking, the way in which Alessandro wanted to push on the logo. This is the way in which the logo has been presented across categories. More fashion-forward, more customized.
The graded of the leather, the GG signature that you see on the third part, that is the reinvention, let's put it this way, of the old Guccissima, but much more qualitative and much more modern. This is the way in which we create iconic pieces in Gucci. We start from the Fall/Winter 2015 and 2016 with small, medium change, and then season after season through craft machines, seasonalities, colors, or functionalities, we create. Blending as well iconic signs of the house, like the bamboo together with the buckle or the bloom that are the colors and/or the web. All of that create seasonality, create fashion-driven items, but also create iconicity. This product that was a seasonal collection at the beginning became, of course, a carryover. Seeing this change, we create iconic and we create a base for the future for the business.
Same for the Linea that is more segmented for aspirational customer. The way in which we play in terms of colors, prints, et cetera, and different functionality season after season, creating temporality. The GG signature that is creating a high-end luxury offer of the logo. The Padlock, this is an amazing success. That, again, started with a shoulder bag at the beginning, has been declined in many different version, with many different sizes. Answer it as well to question and to needs of market that prefers mini bags. Sylvie, where the chain has been completely took back from the past, from the archives, that is becoming quickly one of the best-seller lines of Gucci. As you see, the way in which we create as well is quite striking. This is GG Marmont.
We started with the leather line in the beginning. We are moving during the Fall/Winter 2016, so it is not yet in the shop. We did not see this collection yet. This one is something more driven to aspirational customer. We are going to attack, especially with the smaller sizes, the more entry price area for Gucci. I think we are going to be quite successful, and it is going to compete in a way with the Soho line going forward. We see what is going to happen to Soho, of course. The same for shoes, more fashion-oriented classic. The loafer became by very far the it of the moment, for the last few seasons, for any fashionista. Same thing for the men's shoes. Again, you see the use of the web in a more classic way, more fashion-oriented way. I wanted to show these pictures to you.
It is the way in which Alessandro, so creativity, work, merchandising. The one that you see there are the looks. The one Alessandro sees as the image-driven pieces. This one is the merchandise development. All these pieces became bestsellers. These pieces are completely aligned in terms of aesthetic to the looks. This is not a commercial collection and an image collection. The collections are completely blended together. They give the same message that is very coherent. This is because of the way in which they work together. All these SKUs, of course, are approved by Alessandro. The way in which Jacopo works with Alessandro is very seamless. Same kind of activity, as you can see. This is the price range that we introduced versus the past. Our entry price in terms of bags. Taking pictures.
All the past, we start above EUR 500 in terms of normal functionality. Of course, above EUR 500 is the entry price range. As you can see, we cover overall most of the segments with most of them, if you can see, apart from the Soho, are new lines. As you can see, it is quite impressive, the big shift in terms of offering that has been done in such a short period of time. No pictures. This one is how we see the entry price area. We work on the entry price on the smaller bags, on the chain that you can see, the chain wallets on the left-hand side. We try to satisfy entry price needs with different product categories or different needs in the same product category.
The idea is to maintain a higher perceived value for the core of the business, for the core of the brand, for ready-to-wear, for shoes and leather goods, and uses more leather goods, some of the functionality of the leather goods proposition in the smaller sizes to get the entry price, also using a lot custom jewelry, silk, watches, ties, et cetera, to offer a wide range of price points. Updating all communication touchpoints. That is the other thing that we did in 2015. As you can see, apart the picture of myself and Alessandro in the middle, the coherence that has been done in the different touchpoints is evident. Advertising campaign, the launch of the new gucci.com in October back in the U.S., then in March in Europe and New Zealand and Australia. Testimonials that represent the brand. Events, very coherent.
All the windows and packaging completely restored. All the packaging has been completely redone, all the windows. It was the way to communicate to the external world, in the streets, that Gucci was changing to attract people inside. The windows that have been done are quite in line with the aesthetic. Catalog and social media, we'll go through it there a little bit later. The idea about this touchpoint is to try to give the same message across the board and to make it happen at the same time. Again, this is key. When I was telling you what is important, it's not just the percentage of product we have in the shop, but also the way in which this message is spread out with the consumers. It takes time. Florence has not been built in a day, of course.
It takes a little bit of time. This is the change in communication from one creative direction to the other. This is some of the images of Montenapoleone. You saw the concept in Old Bond today. The concept that you saw today is already an evolution of the Montenapoleone shop. We realized in doing the first concept that despite the fact that it was super successful, the real perception we wanted to give was a little more luxurious. The use of the velvet, the use of the color, the use of the carpet that you saw today in London is an evolution of the concept that we had in the main Montenapoleone. Any single shop that we do is always reviewed properly because doing the concept in a standard squared area instead of something with corners, et cetera, gives an impact that is completely different.
These are the windows that I was telling you before. Again, a big change versus the past. Super coherent, very much remembering a world of texture and color that is typical, and joy that is coming from the collection of Alessandro. Some of the special projects that we did together with this change of aesthetic. Something that has been very much important in this change is the collaboration that we had with the most important wholesaler accounts in the world. With Dover Street Market, we took almost all the locations worldwide, we were able to create the world of Gucci in Dover Street Market. Dover Street Market is one of the most influential wholesalers that we have in the world, really driving fashion.
The idea of creating this kind of collaboration, because we needed to talk quick to a different consumer, more fashion-driven, that was able then to influence all the aspirational customers. We did so across the world in all the regions. Boon the Shop in Seoul, Antonia Milano, Colette, I.T in Beijing, Bergdorf Goodman, Shinsegae in Korea, Lane Crawford in Hong Kong and in Beijing. As I said to you before, in terms of communication, it was as important as the external communication to do internal communication. We put together a brand platform with all the value, with all the codes. We create videos of Alessandro and we pushed that. We did an internal newsletter and we visited all the regions in the first six months. I met personally 4,000 people at the very beginning because we needed to give this message of change.
This message of change, the change of culture that we wanted to achieve, to me, was absolutely paramount if we wanted to create longevity in this change. There's a video for you. 2015 is finished. Start 2016. Trying to deliver the dream and the emotions. We want to go to something more activity and figures-oriented than we saw previously. I need to tell you something else. The idea was, behind that, we gathered in Sicily back in March, beginning of April, all my management team coming from all over the world. Approximately 50 people. The idea was to really set together the strategic plan for the next few years, and the reason why we didn't that before, because in the first 12 months, we couldn't make sure that all the people understood exactly what new Gucci meant.
I wanted to really establish the code and the aesthetic and the vision before in the market with the product in the shop, before gathering all the team together. The 2015 was very much something very directional, coming from corporate, less regional-based. In 2016, to spread out the message, we decided to gather together the people, and with the use of facilitation, we were able to set what we felt, what we feel being the asset and the strategy for the future. That, to me, it is definitely key because it's the way to make sure that all the people embrace the change, embrace the strategy. They know where to go. Where we speak now in our monthly meeting, it is much clearer the way which we could share ideas and thought and strategy and activities.
The thing that we set as a target were to increase the sales density. Today, everybody, because there's no possibility to open more stores, especially for mega brands, everybody's talking about sales density. Sales density, of course, is a KPI. It's a consequence of choices of many different things. Recreate traffic in the shops, having the right product at the right time, with the right location, with the right people selling it, being able to story tell what the brand is about. It is a combination of things that are important to work together. Of course, the shop concept make an important impact, but it's not just one single aspect. When we say that, and we will go through it later, we say we could increase sales density of 50%.
We feel that we can do it because we are way below market average, so we have the possibility to do it, and the first result that we are seeing in the change in the last few months are quite encouraging, and they go in that direction quite quick. Exploiting the travel retail channel because of the trend that we see in the market. The idea is to triple the e-commerce business. The result that we are seeing with the launch of the new gucci.com are quite encouraging. The trajectory of the KPIs is very solid. We think that, of course, the channel is going to perform better than the brick-and-mortar, but is, of course, in terms of relative size, is very tiny. In e-commerce, we have today is 3% of the total business, approximately.
If you look at the penetration in the market where we are present, in the U.S., for example, we are approximately 10% or 6%-7% in the other markets. If you look at the market, because we are not present in all the market with e-commerce, but the market where we are present, the penetration starts to be quite sound. Progressively reducing the weight of outlets. Of course, that goes together with the cleaning of the old collections, but the idea is to reduce the markdown in shops and to use the outlets in order to clean the collection. The idea is to reduce the number of outlets going forward. It was important to have these outlets in 2015 and 2016 because we needed to make sure that the product that we had in the past, low-moving inventory, was able to be sold.
Going forward, we don't think that this weight should increase. Actually, it should decrease. We have untapped potential, you will see later, because we focused at the beginning, especially handbag, ready-to-wear, and shoes, watch and custom jewelry, watches, silks, fragrance. We will talk about fragrance and sunglasses short after. We have untapped potential and the possibility to reach aspirational customer and growing business. That is quite important as well. Going forward, stable gross margin, and actually increasing gross margin going forward because ideally, if we are able to create sales density, increase sales density, we are going to have a lot of leverage in terms of store expenses. That, of course, represent the most important part of the cost in our profit and loss.
Tight control on cost because if we enter in a market share game, and we are not more in the El Dorado of growing 10% each year so we can be more happy in spending money, necessarily. The point we need to be more careful going forward. We set a team in the company, led by Alberto Valente, the CFO, where we put on bid any single contract that is over one year, and we really work with supply very closely, especially with suppliers that are very important for us. We negotiate discount on a regular basis. That created a lot of saving already in 2015, and going forward will be important. We need always to remember that the weight and the size of Gucci is so important.
The possibility for the suppliers, supply chains, and also normal suppliers to work with us is quite important, also in terms of image, we need to leverage on that. In terms of cash flow, as I told you before, the way in which we manage is always to try to make sure that, remembering that Gucci is such an important company for Kering, the cash flow generation become important, and the return on capital employed as well is one of the KPI that we look the most when we set the budget target. Going through the plans in more detail. I gave you just a snapshot, we go a little bit more in detail. Talk about distribution. The idea is very limited expansion. The footprint that we have today in terms of store is set overall.
We're going to close some shop, open others in terms of opportunities, but overall, the footprint is going to be the same. Progressive rollout of the shop concept. As of today, we have approximately 40, 45 shops with the new shop concept between openings and refurbishment. We set a target of 50 new shops refurbished this year. Again, we see going forward, because I'm not anymore in a hurry to refurbish because of what we see when we do cosmetic change, as I told you before, carpets, tables, et cetera, with all the products, new products together and with the new way of having Retail excellence in our shops, the results that we are experiencing are so good and it's such a little difference versus the complete store concept that, let's see, it's going to be by opportunity.
If I decide to spend more in working capital because I want to have the product everywhere, I will make this trade-off. In retail, we are extensively pushing our Retail excellence. Retail excellence is the stratum managed and led by Micaela, the lady direct. Again, the way in which the product is presented, the energy and the joy that we want to find in our shop is as important as the product and as the brand. Today, service integration with all what we do become key. We went through in 2015, end of 2015, beginning of 2016, to an extensive change of people in our shop that were not aligned with the new culture, with the new energy, and that we go through it later. Wholesale. I think the rationalization of the wholesale channel is completed in terms of reduction number of doors.
Now we are pushing in terms of improving the quality of the buying and improving the quality of the selling. We need to remember that wholesale business has been the first reacting positively to the new change. We are experiencing very, very good results in sell-out, and you can ask to any single department store head worldwide, all the sell-out figures that we have in Gucci today are quite impressive. That, of course, creates a momentum. It creates the possibility to give a full representation of Gucci, not just in our DOS, but also in the wholesale channel. I said we are not planning to buy back any more annual sale activity. We are fine with the mix that we have. In the past, we bought back a Neiman Marcus door, Saks doors, et cetera.
We are not planning, apart opportunities arising, I think that what we have today, I think is okay. E-commerce. We are very bullish on e-commerce because we think that what we did in terms of new site and new content is quite unique. The platform that we chose, Hybris, is very flexible, and we had the possibility to really use the e-commerce as a center for digital communication, but not just digital, also communication worldwide as well. The number of people that goes in our e-commerce site is much bigger than the one that we have in traffic in our shops. We have more than 100 million people that goes into the gucci.com site. Of course, that become immediately the center of the communication tools that we have and strategy that we have in the company. Royalties.
Royalties in the first quarter of 2016 has been impacted quite heavily by the lack of royalties. It's been a one-off versus the past, versus the Q1 2015. I think Gucci 2016 is living the perfect storm for royalties because we have the change from Safilo to Kering Eyewear because the Safilo license will end this year. As you can imagine, last year of a license for a partner is not the ideal year to push and to make a proper business. Same thing for Coty. That for Bottega Veneta is selling to Coty. The worst year possible for royalty is this year. There's no doubt because the counterpart that we have, they don't have any interest to invest.
Also, in most of the cases, these two industry, the lead time of product development is longer because, for a new fragrance, it takes ages to have it now. Alessandro is working on a relaunch of Guilty that will be launched in September, and we're working with a new fragrance that we launch next year. Of course, we expect that these two areas will really make a big change starting from 2017. Coty as a partner, I had the possibility to work with them when I was at Bottega. The partner that we are going to find, I think is going to more luxury-oriented than the one we have presently. We are very confident on the Kering Eyewear activity, to push the business for sunglasses and eyewear starting from 1st of January 2017.
We are expecting the same royalties impact in the second quarter, but it's going to be back to its normal situation by the end of this year. Still, to me, long term, this is an area that has a lot, a lot of margin of improvement. This is a comparison between the sales density between Gucci and put an average of luxury giants. You can imagine where they are, in between 40,000, 50,000 per sq m. The others, 20,000, 22,000 per Gucci worldwide as an average. There's definitely space for improvement, room for improvement. We did an exercise for the top 20 shops of Gucci, and we took the best moment of sales in the previous five years. If we go back to that situation, we improve 50%, 50.
I think what we lost in certain location can be achievable if we do the right thing in the right way. This is the idea of the rollout that we have in terms of new shop concept worldwide for this year and 2015. The idea in terms of CapEx, because of what I told you before, we are not intending to invest more than 5% of the revenues in CapEx going forward. That approximately is the same level of depreciation we have in profit and loss. We try to balance, to mirror, the level of depreciation that we have in the profit and loss, in order to maintain a cash flow generation that's quite strong. Of course, to do so, in terms of split of CapEx, the most important part is to store CapEx.
We have activities as a normal base to renovation of the industrial network and to investment in information technology, because they are key in order to make sure that all the activity that we are doing in terms of reporting, but also in terms of allocation, especially supply chain, are going to be at the level that we need. This is what I was mentioning before. When I said enhancing visual tools in certain shops, you can see what we try to do, especially in Fifth Avenue. We created areas with more carpets, with more seating, with velvet. We create area with tables to give this idea of aesthetic that is mirroring what we have in the new shop concept.
It's not exactly the same, but the feeling that you have, considering the product that we have, that really gives a huge impact in terms of color, mitigated what I thought before was a bit different in terms of performances between the two shops. Retail action. For us, we have more than 500 shops. The shop director is the CEO of the shop. We can tell everything we want from a corporate standpoint, but the daily life is lived by the shop director, by the sales staff. If we are able to embrace, to make sure that these people embrace the change and understand what the brand is about, then we make really the change of culture that we need to do. We see that in many shops, especially when the new shop concept arrived in Montenapoleone, in Old Bond, et cetera.
The energy and the joy and the proudness of these people to sell a new Gucci, I think is quite tangible. We put together, also managed by Micaela, the digital tools we call Gucci Retail Portal. We upload from corporate all the content of the new brand, storytelling, new product, explanation of the product, communication, PR, editorials, merchandising tips, et cetera, upload it in a digital way. Everybody at the shop has an iPad or other tools where we could access, understand, and follow and learn. That is spread out any single morning, what we call a morning briefing, where in 20 minutes, all the people in the shop, they gather together and they go through the main thing that they need to know for that specific day. That is something that is a religion. Retail is a daily activity.
It's very much about detail, and when you think you arrived in retail, you start going down. We need to maintain this kind of push. For that, the shop director is absolutely key. That the reason why we changed one third of the shop directors in the last 15 months, because we are not aligned with the new culture. It was a silent revolution, but it happened. I told you before, in February, we took over completely Bergdorf Goodman. Keeping in mind that Bergdorf Goodman, we left or we were kicked out, one of the two, three years ago by Bergdorf Goodman. While now, they are one of the most important partners. They really embrace the change. We took over windows and the second floor of Bergdorf Goodman, and the results were quite impressive. It's been the best event for Bergdorf Goodman in years.
We are going back in the ground floor of handbags in Bergdorf. We do the capsule collection for Net-a-Porter. It was exclusive presentation. The idea was, again, try to reach a different customer, try to talk to a customer that is more fashionista, needs to understand quicker the change in perception of Gucci. This is the way of managing both the U.S., our shops, and the collaboration with Yoox Net-a-Porter is paramount in order to speed up the process of understanding. Retail, we set a proper team dedicated to travel retail, always managed by Micaela, where we are focusing much more in terms of assortment, in terms of shop concept, in terms of fixtures, et cetera. There's going to be expansion phase in travel retail, but we'll be very selective. We will be more focusing on managing that in a more appropriate way.
gucci.com has been launched, as said, in October. The idea of the new gucci.com was very much about content. Before, it was very much an e-catalog, very successful. Considering the 100+ million of consumers visiting the shop on a yearly basis, we saw that the gucci.com should have become really the center of the communication of the company and the content privilege versus the e-catalog. In reality, what we are experiencing, that all the KPIs are improving. The time spent by page is improving and increasing quite quickly, sales are going the same direction. That means that the new consumer wants to be engaged. It's not just a matter of, "I want to buy a product." "I want to know the story.
I want to know the emotion behind the product." To me, that is quite encouraging, and we see that both in the U.S. and the other region where we launched it. This is a sum of the data. The engagement is skyrocketing. Double-digit growth in conversion and average order value, and the ability to sell high tickets, item. That is key if you have the content behind. If you understand the story, if you understand the dream, then you are more willing to buy something that is not just for aspirational customers. This is the rollout we are expecting going forward. The lighter ones are the ones that are not yet attacked. This is what I told you before. The e-commerce, the website, become the center of the omnichannel strategy.
The information technology investment are going to be key in order to make sure that the inventory is going to be shared across channels. We are testing now in Europe a blended calling center in order to have just one single touch point with the customer. I think that is going to be the future despite the channel where you buy, you buy into Gucci. This is the only way which we can really serve the customer in a proper way. Product. We did an exercise to see who was the best performer for each product category, in order to understand what was the potential of the business. We saw that in any product category, there is a potential to grow. We are attacking the leader because of the size of Gucci.
In certain product category, we just need to go back where we were 10 years ago. In women's shoes and women ready-to-wear, a certain point, Gucci was the first seller in the world. We lost market share afterwards. We can go back. The awareness is there and the possibility is there. This is the offer transition. When is going to finish the discussion about what was before, what is going to be the new? The idea is overall, we can say that if at the end of 2016, on most product categories, we have a collection presented, that is a collection that is Alessandro Michele collection, because we accept that even something that was designed before is part of the new aesthetic. If you think about the Soho line. Soho line is coming from the Frida creative direction, but it has been remodeled.
You saw some products today in Boon the Shop with different bicolor, different craft of machine, et cetera. We rejuvenated also something coming from the past with the new aesthetic of Alessandro. Overall, I think by the end of this year, the transition will be completed apart from some, as I told you before, product categories like sunglasses, fragrance, and watches for the reason that I told you, the collaboration with partners, Safilo and Procter & Gamble on the other, and watches because of the lead time of the production. Overall, I think that in two years, from January 2015, end of 2016, the full offer will be completely changed. That is going to give the full impact of the work of the new direction. We still have a lot of opportunities in what we present.
In fact, in men, that is losing a little bit of percentage in terms of split versus the past, because we decided to go in a very disruptive way, very fashion-driven in the collection presented by Alessandro, and we didn't want to push too much on the more formal elegant side that is part of the Gucci value. We wanted to be clearly positioned in the beginning. If you remember, the shows, show us very much driven to something more fashion-oriented. If you see the show today, if you see some of the look of the show yesterday, some pieces of elegance, of formal, et cetera, are coming out, and the way in which we are going to communicate that going forward will be much more important.
There's a part of the business we didn't touch yet that we are going to now attack with the merchandising role, of course, and Alessandro is completely on top of it. That is going to give us the possibility to go back to a split that is more normal and more similar to one that we had in the past. There is only one market that is not yet where we want to be. Whilst in all the regions we are experiencing in the last three months, very solid growth is Japan. The reason why is that Japan, in terms of consumer behavior and change, is much slower than any other country. That is, we knew that. It happened as well in other changes that has been done in the past.
The moment we understand that they are very much, let's say, soldier, they're very much linked to follow the new perception. We did a specific activity in Japan with the product, with the communication. The last advertising campaign has been shot in Japan. This product is being conceived, called GG Ribbon, is being conceived just for Japan. It's just been delivered to Japan and become immediately the best seller. We work with visual tool display, and we think that by the end of December in Japan, the offer of the product will be completely renewed, and also with thinking in terms of product size, because Japanese, they tend to buy in smaller sizes. We expanded the offer in mini bags in different collection, especially meant for Japanese consumers.
In terms of role of products, of course, we are going to use the more fashion-oriented collection, especially women ready-to-wear, more and more as fashion influencer. Of course, maintaining product that can become basic, but basic in the sense that it's going to be renovated any way to follow the fashion, but still maintaining the idea and the aesthetic of the previous one. Women ready-to-wear, I told you about it. We went for disruptive at the beginning. We're going to more enlarge the offering going forward to attack different consumers. We think we're going to gain market share on the other product categories where we can really leverage on more iconic and more carryover parts of the collection, especially for leather goods, small leather goods, et cetera, where we have potential.
There are some areas that are still under development that will be finishing by the end of 2016, they will be delivered in the shop in the second half of 2016. That all the product categories, the so-called entry price, all the custom, all the silk, all the jewelry, watches as well, part of the small leather goods. At the beginning, we really focus on the core of the collection. We have a lot to do as well, again, that will give us the possibility to grow faster in the second semester than in the first one. Communication. The idea of communication, as you saw before, has been paramount in the change of the perception of the brand. The mantra of the company is to be the voice of self-expression.
If you look at the collection of Alessandro, you can really buy and skip from one product, from one item to the other and be coherent. This is what we want to maintain as a mantra of communication and mantra of the company. Digital leadership to be maintained. I think we are digital leaders today in the industry. We want to maintain to keep on going and working clearly both with the customer and with a 360-degree approach when we launch a product. When we launch a product, of course, any touch point is involved. Digital, social, communication, windows, allocation in the shops. Everything needs to be at the same time, the right time, to give the full impact of the launch, especially in the moment where we launch so many things.
The pillar of the communication will remain unchanged, of course, the focus could change according to needs. When we were telling you before about the ready-to-wear, this is a typical change where we change the focus according to a specific need, but the pillar of fashion influence needs to remain the same. The digital leadership for us is absolutely key. We, in the last few years, the split of digital versus the media print has been increasing quite dramatically, and we tend to increase that going forward. We will start innovative collaboration. One will come out tomorrow?
Monday.
Monday. We start the collaboration with Condé Nast. We're creating native content in order to talk through the Condé Nast magazine and sites to the millennials across the regions, and this is the one in the middle. It's something unique. Condé Nast never did something like that with any other brand in the world. Thanks to the relationship we have with Condé Nast, we were able to blend these ideas of branding and their connoisseurs and possibility to get these customers. Social media. I don't know if you are familiar with GucciGram. GucciGram is being very successful in Instagram. We launched this activity with some artists, asking them to interpret the brand at their own view and expressing their philosophy. That result in more than 11.7 million people that look at this with a lot of engagement.
That is the way for us to really give contemporaneity to the logo. The logo, it doesn't belong to a brand. The logo belong to a customer. The customer is something that is evolving. The way in which the logo is perceived is important to be shown. If you remember in the last show, Alessandro presented the Gucci Ghost. It was a collaboration with Trevor Andrew, that is this artist that was doing this Gucci fake across the board in New York. He was interpreting Gucci in his own way, very artistic way. One of the possibility was either to sue him or to embrace him. Alessandro decided to bring him in the show and created this collection, the Gucci Ghost collection, that is very unique, very much talk to a consumer of today.
To me, it's a very dramatic switch of perception and using of the logo that is very modern because it's a way in which you open yourself as a brand to a consumer that is larger, that is speaking a different language versus the past. This is what I was mentioning in terms of the GucciGram, and the idea is you can't put a limit on creativity, especially online. We were fostering this creativity on the logo in order to make it modern and to create something that is unique in the industry. Sales and operation plan. That is something key. It's something that helped us a lot in the recent past to deliver the product in the shops. This is the change of composition, if you want, of the product from 12 months ago.
Just to give you some data, the level of inventory from January 2015 to today, decrease of 25%-30%. We were able to go down to a situation much more healthy, but especially the composition of the inventory is very much sound today. We have a split between newness and carryover that, of course, is higher today, but keeping in mind that the newness of today will become carryover tomorrow because the launch of new product, by definition, are called newness. The Dionysus that was newness last year is becoming carryover today. The change of this offering is reflected in these figures.
Apart from that, we were able to generate a lot of cash flow in reducing the working capital, thanks to the fact that we instilled this new procedure of managing the inventory and allocating the inventory, especially for the high rotating items in the shop, through the sale that they are doing. It's a pull model instead of a push model. In having a central level, most of the inventory, we are able to follow an algorithm in the shops to allocate where it's needed. Decreasing the level of inventory because we are more efficient and increasing the level of sale because we don't stock out anymore. We are now facing that in the 100 most high rotating items. The idea is to go across the board, not just on the carryover, but also on the units.
The idea in the units is very much to keep that, for most part, in a central level, allocating as soon as it arrives in the region, the part that is needed to sell, and then allocating afterward according to sales and not according to the orders. That allows us as well to be more flexible, more reactive in changing our touristic flows. As you know, the change of the currency, touristic flow, they buy one side or the other. If you are able and more efficient, a central level to allocate and to maintain the stock, we are able to offset the potential flexibility of touristic flows. That is one of the main problem in creating inventory, going stock out in the regions. This is what I just said, that it's been a big project that's been launched last year, starting in October.
We have seen the effects today. The idea is very much at the beginning to define the open to buy, so the possibility for the regions to buy in the product at central level. All the targets are set centrally, budget level, budget targets, and the region react accordingly. According to sale, we need to create a supply chain able to provide the stock when it's needed. This is what I told you already. It's very much the change in perception, in activity from pull to push, to push, pull. This is what I was telling you at the beginning. The ability of the supply chain of Gucci to react to changes. That to me is absolutely clear, and we want to bet on that. When we say fashion becomes more important going forward, it doesn't mean that we are relinquishing quality or craftsmanship.
That is a given. The quality of Gucci needs to be at the top, and Made in Italy remains something that is center for us. That doesn't mean that we're going to communicate too much on that. We want to become more fashion-driven. We don't forget that our soul and our heart is very much rooted here. We just announced that we merged the shoes business unit and the leather goods business unit that were separated before. Reason why, we saw a lot of synergy between the two business units, are quite important, quite big. It's a big organizational change. It's never been together in the past in Gucci. Also is a better way to blend and to communicate the vision of Alessandro to less number of people.
We're blending offices, I think we're going to find synergies between the two things because it's quite big. Also in terms of supplier buying, I think we're going to have a good impact. Operating expense evolution. All of that depends on our capability to improve the sales density, apart the control of cost, store expenses are the most important part of our cost, of course, apart the cost of goods sold. If we're able, and amongst that, two-third are fixed. If we're able to increase sales density, the level that we can enjoy can be quite important. Still, I think the importance of become more and more careful about cost across the board because of the slowing of the market trends is become a key, and this is a mentality approach. People and culture.
That is the last one that I left, to me is by far the most important. I think it's quite rhetorical to say that people are the key driver in changing an organization, especially in industry like ours, where technological barriers are quite low, the change is made by people. We need to get the best. We need to have the best talent, we need to retain them to make sure that they remain in Gucci or they want to come to Gucci. Gucci got this top employer certification in Italy for the second time in a row. It's something we are very proud for the working condition. What we are seeing today is that whilst some months ago, it was very difficult to get talent from other brands. Now people are really encouraged. They come to visit us. They want to join Gucci.
That is great because it's the best way for us to create longevity in our brand. In terms of organization, what we did, we created this back in February last year, the omnichannel structure led by Micaela, we put under the same umbrella, same responsibility, all the touchpoint with the consumer. All the regional presidents, all the wholesale directors, the travel retail structure, the retail excellence, are under the same umbrella. Because we think that when a customer buys into Gucci, despite the channel, he's buys into Gucci. We want to treat them in the same way. We don't want to have garden protection. Merchandising. We talked about it already. It absolutely key, this collaboration between the creative direction, because it's the only way in which we can really expand and really attack different segment, different consumers.
In the regions, when we talk about regions, geographical regions, I mean, of course, U.S., Latin America, Europe, Greater China, that is China, Hong Kong, Macau, Taiwan, Japan, and Southeast Asia, so all the rest. These are, for us, the regions. We changed three presidents in the last 15 months, as well, general merchandising manager, and one-third of the store directors across the board. Again, this is absolutely important because, as I told you, there's a big change in culture, a big change in perception, a big change in brand. The brand of today is not the brand of yesterday. What we need to have is flexibility, reactivity, energy, and understanding of the change, and being able as well to take risks. This is something that you can try to have. Sometimes the people are able to evolve, sometimes they're not.
Of course, we couldn't wait too long because, I mean, nobody's waiting too long here, so. For the production, I told you before, the idea of merging the two businesses will be to merge the best practices. This is something I already told you, but the reason why I put up the slide is that we created internally this project called Agility to reduce the layers, to make sure that the people were able to take decision quick. That is, again, for me, is the most difficult thing. We talk about 11,000 people, and we used to work in the same way for a long time. We had the possibility to work together with an external consulting company, helping us to try to understand which are the simplification processes. We attacked some of the processes, like the forecast and budgeting process.
We reduced that for over one month. We were able to create a sounding board of shop managers across the board that were telling us if the corporate was asking them too many data, too many reports, forcing them to stay in the back of house instead of staying in the floor to lead the people and the staff. We have immediate feedback on the ground if these people are burdened with something that is not useful. We have immediate possibility to change if it's feasible, I mean, we took the best shop directors in the world. We set up a called Innovation Committee, that is in France is more a shadow committee, that is made by the best talents of the company, but are not the management team that is here.
They deal with exactly the same topics that we did as a management committee, with the executive committee, to see if they come out with different solutions. Being a different age and different experience, we have the possibility to compare what the people in the company that are a different age, different experience, are able to give us in terms of feedback versus what we think. We set up, and then the results are quite interesting. We see we need to change the committee and put in the new guys. The structure that you saw at the beginning, decentralized, centralized. There are some brands that are completely centralized, that allocate everything is corporate driven. Some brands that completely decentralize. The shop director decide the buy.
Gucci wants to play more or less in the middle to have the understanding of the market from the region, but decide as well certain things from corporate. We want to get the best from the two. Sustainability. We put many products from a social standpoint, new models, environmental. It is clear that sustainability is expensive. The challenge that we have, that we want to push together with Kering, is very much the fact that we want to be sustainable and create innovation way to create processes in order to make sure that the cost that we're going to sustain in the future is acceptable and not impact the profitability of the company. First results.
As you can see from my words, we saw important results everywhere, both in terms of new shop comps and the visual tools, but also in shops that are now receiving the full amount of product that we are doing. Off-sale accounts are growing very fast. It's been a successful reposition of women's footwear and women's shoes. The new gucci.com, the first results are very encouraging, especially the trajectory that we have. We saw quite a change in evolution of the average client profile. This is what I told you already. We are quite happy about the results. I told you about the result in March, April, and May. Full price results are very encouraging. This is kind of across the board.
In many shops, the results that we are having and experiencing are important, and we saw an increase in traffic recently in Gucci across the network. That is the objective of all the things that we did through emotion, attractiveness of the brand, et cetera. These are some of the red are negative, the green are positive. Result of the seasonal orders for the off-sale channel. We are seeing a rebound in terms of orders from the off-sale channels. That is starting to be happening from the deliveries of April now. In the first quarter, we had positive results in off-sale, but that was the time this is the orders. The first quarter is a fiscal moment, of course, so it's a matter of delivering. Among the first seven collection, five out of seven are collection of Alessandro.
Already in 15 months, but 15 months, in floor six months. Five out of seven are new collection. These are the top-selling collection of handbags of Gucci. Here are some results. Handbags, as of today, is +7%. April, this number is +18%. It's getting traction. Of course, it takes time, but these results are very encouraging. Women ready-to-wear, +66%. Women shoes, +46%. These are offset by some results of the carryover coming from the previous collection that are still there, that are more negative than these ones. In this transition, of course, we are managing a strong growth of the new things and the decline of some of the collection coming from the past. Overall, the more time goes by, the less old collection we have, the more full prices we have, and that's going positive.
That result that I showed to you before. In talking about clientele, if you look at the under 34, the so-called millennials, if you compare the sales to Cruise and fashion show this year versus last year, the number of millennials that bought Gucci increased 50%. Locals are growing across the board, in all the mature markets, Europe, U.S. Even in U.S., that has been struggling for a while, and also being in a year of election and all the rest that we know perfectly. From April, U.S. started to grow again quite substantially. Chinese, by nationality, they started growing, not just in the home country, but also in traveling. That is quite in countertendency versus the past. Talk about specific performance of cities. We always talk about Paris as being very negative because of the terrorist attack, because of the change in tourist flows, et cetera.
The local clientele grew 30%. Paris for Gucci is positive from a sales standpoint, because despite the fact that we're losing in the department stores because of the fall of touristic flows like Galeries Lafayette and Printemps, they are growing very fast in our flagship Rue Royale and Montaigne. The shift in Chinese spending behavior is very different. While we are losing a certain kind of consumer that is going into the department stores, we are improving a lot in terms of higher spending behavior of Chinese in our flagship shops. London is growing as a city approximately 30% from the beginning of the year, with local clientele that is coming back to buy into Gucci. The beauty is there's a lot of, as well, of previous Gucci customers that are going back to buy into the brand. To make a summary of what. Almost finished.
Two minutes. Wrap up of what we just presented. What we did. I think the brand positioning has been successfully established and today is, I think Gucci is the hottest brand in the industry. The product offered largely in transition, present in all store worldwide. At the end of the transition will happen at the end of this year on 95%. The business is going well in all regions except Japan. We have untapped potential in most of the categories, as I said to you before, because we are in a very good situation with handbags, ready-to-wear, and shoes. While we need to improve in men, that's coming in second semester, in all the categories, so-called minor categories, custom jewelry, watches, et cetera, ties, silk, that we are working on it now.
I think all the team, that is super important, all the management team and all the people worldwide are embracing the change. Everybody's going the same direction. There's no obstacle. Everybody needs to be on board because it's such a change. We need to make sure that the decision we take at corporate level are applied at regional level. Otherwise, we will never know if we do mistakes or we do right. What we miss, of course, we need to make sure that the people. It's just the beginning. Very much we see the first signs. We cannot reduce the speed or the tension of what we do. We need also to maintain this edge of innovation, this will remain key for Gucci going forward.
In using the different product categories in different ways, as I told you before, women ready-to-wear and men ready-to-wear, more fashion-driven and the rest more iconic built. We have several untapped opportunities. License for me is one of the few, but also Japan and the minor categories. Keep on maintaining this disruptive thinking, both in terms of aesthetic, but also in terms of company and company culture. That is absolutely key as well. Creative business is as important as the creative that we have in product. This for me is the only way which can really put all the things together to reach the full potential.
To give you some ambition that we set during this famous meeting in Sicily, in leveraging the drivers that I told you before, sales density, e-commerce, potential in key categories, but as well in categories that we didn't express completely until now. We think that we're going to steal market share. The idea is to reach a $6 billion business in long term. What is the long term? We can discuss. In terms of gross margin, we think that what we plan to do through the leverage that we're going to have in store expenses will be increase up to 30% in the relatively short term.
Idea is very much if we are able to leverage the leases in a proper way, and we are able to create the sales density we want to have, leverage the store expenses, the possibility to increase that is feasible. Of course, attention to cost remain an objective of the company. We don't think to open a lot of stores because, as I said, the footprint is done. By opportunity, for sure. The refurbishment, it could be 40, 50 per year. Again, because of what I said before, I really think that could be a trade-off choice. In any case, CapEx will not be below 5%, we try to mirror the depreciation that we have in the profit and loss in order to maintain the cash flow generation that we can be delivered by the EBIT. I think I went through everything.
I thank you very much for the patience. Now I ask Jean-Marc to introduce the Q&A.
Thank you, Marco, for this brilliant and very comprehensive presentation. You have a few seconds to take a breath.
Some water.
Before we start the Q&A session, I will play my usual role of sheepdog, and I will remind you few rules. The first one is that today we are talking about Gucci and Gucci only. I will ask you gently to focus your question on Gucci. You know perfectly that Claire and myself are always, not always, but frequently available to answer your questions about Kering or other brands of the group. Secondly, we have made as much time as possible to let you ask your questions. Please, if you can have synthetic and focused questions in order not to multiply the time and so that everybody who has a question can have his question.
Third, and finally, which is very important, since we will be preparing a transcript of this session, can you just state very clearly your name and your chief title when you ask your question? It will be very important for the transcript. We have now 45 minutes of questions.
If I may add, Jean-Marc, that consider we have the management team here, if there is any specific question related to product or communication, we'll ask my team to intervene so you have the chance to as well to listen directly from them. Hopefully, they will say the same thing that I said before.
Yes. Hi, Antoine Belge, HSBC. Only one question. Actually, I was a bit surprised to see your chart where you're benchmarking your sales densities versus peers. According to my own estimates, I was expecting them to be actually higher than they are. You expect them to lift them by 50%. Can you maybe give the number of what is your sales density today? If you achieve that 50% uplift, in my opinion, the margin should be well above 30%. Why be a bit shy on that front and maybe explaining also the drivers behind the increase?
Because my bonus is linked to the EBIT, I need to stay to keep the EBIT. No, I think you're right. Of course, that depends. I said +30%. I didn't say how much, I'm not shy. Just to say, I don't really know, because the leverage that you can express, as you perfectly know, depends from very different cost structure. In any case, the comparison that I did in terms of sales density, today, Gucci is at 20, approximately. 18, 22, depends from the moment, from the year. The benchmark that I took, I don't know if I can say the names. Anyway, I had the possibility to work with a consulting company that gave me all this opportunity information that are, of course, are estimates. Even if it's not 50, but it's 45, doesn't change the outlook.
The idea, when we decide to do this ambition meeting, the idea is to say where we have the biggest opportunity to increase the business. Even if it's not 50%, it's 40, doesn't change the framework. We need to target that. Actually, what we're seeing in the results of the last few months is in certain areas, it's very easy to get there. Because as I said to you, if we take the best results of certain shops of Gucci in the last six, seven years, and the loss in business we had, just going back to that situation, we increase for 50%. Just. I mean, not just, of course. All the things that we do are aimed to increase the sales density. Bringing traffic in the shop, creating buzz, right product allocation, working with the team, et cetera.
Sales density is a consequence of activity. It's 40%, it's 60%. I mean, to me, it's not the point of the meeting that we did in Sicily. It's very much to create the same vision for everybody to understand that they need to work on a daily basis in the shop because there is a potential. That is the idea. Being shy for the 30%, you are probably right, but we've just started, as I said. It's the very beginning of a journey, and it's not very easy now to define properly profit and loss in five-year times.
Yes. Good morning, it's John Guy from MainFirst. Thanks, Marco. Just a couple of questions, staying with the sales density point. With regards to, so far, the cost of refurbishment, appreciate that it's not so structural. Could you maybe give us an indication as to what the cost per sq m is on the store refurbs today?
I knew that was coming.
If we think into, say maybe finishing the program by, say, 2019, is that a fair timeline to have effectively finished the main bulk of the refurb? Appreciate it's an ongoing process. I guess, secondly, with regards to like-for-like uplift on new store refurbs, what sort of like-for-like sales uplift are you seeing at the moment on the store refurbishments? I was interested on the gross margin comment that you said around stable gross margin. If we're assuming that the retail-to-wholesale % are relatively stable going forward, but yet you're selling a greater full-price product, are we not going to see gross margin grow that way?
That's a good question. In terms of the cost, what I can say to you is that the cost of the new concept is below the previous one. That I can say to you, because despite the richness of the impact, if you remember the previous shop concept, the use of the materials, the gold, the wood, et cetera, was much more expensive than what we are doing today. Also, consider it's not finalized yet. It's not industrialized. As I told you, it's an evolving shop concept. We changed a little bit as well from the first shop concept we had in Montenapoleone. The one in Bond Street is slightly different because of the use of the velvet, the color, the carpet is much more important than the one in Montenapoleone. I think despite that perception, the cost is lower.
Again, we are working now to industrialize it because, of course, the rollout will be long and expensive. 2019 or 2020 can be an ideal year to finalize all the rollout. Again, as I told you before, it very much depends. Anyway, it will not be shorter, that's for sure. It will not be shorter. Third question is the margin. Yes. Listen, if we do everything that we say and we expect, the margin will be higher, there's no doubt. Again, it's something that we need to make it happen. We need to be careful with the carbons, be careful with the industrial structure. We do that in a very careful way.
Being so much at the beginning, a certain point, I need to be stringent on the activities and the objective that are the things that we said before, the same density activities on the shop, allocating the product in the right and proper way, the figures will follow by definition. I would prefer not to put so much stress on that, because if we are able to do what we decided to do and what we are seeing is certain results, that will grow very fast. If you ask me the results of certain new shop concept, I can tell you figures that are quite striking. Right? Yeah. Montenapoleone shop, from the beginning of the year, is +85%. Bond Street, we just opened, so there's a wow effect but it's triple digit, about 200% any single day.
If I take that as an example and I extend that among the shops, I'm going to retire in two years. Of course, we need to wait as well. We need to wait, we need to see, because of course, it's something we learn. We learn in doing. We certainly do mistakes. We say that there's a lot of confidence, if you want. The results are very encouraging in terms of the right execution of the strategy. The impact on the figures, we'll see. Of course, very difficult to say to this year. This year, we are going to have a comp effect of the markdown the previous year. There's going to be a mix effect that are not really Of course, we're building the business for the future.
I think at the end of 2017, we will see the full, if we are able to really increase the margin and the sales will increase, what we are doing or trying to do is correct. The impact that we're having, especially in fashion capital, is huge. If we are able to create this kind of trickle-down, the tier 2, the tier 3, that is already happening. Of course, taking longer because, as you can imagine, here everybody's exposed to fashion. In certain cities, not really, but it's going to happen. How long it's going to take is very difficult to say.
Thank you.
All right. This is Thierry Cota from SG . I would have two questions, if I may. First, I'd like to go back to your target of double pace of growth of this sector that you would implement. You're not the first one saying this in the slowing sector. It's often the case in slowing sectors. Everyone wants to grow faster. If we understood well, it's not going to come from geography, it's not going to come from store opening. You're going to have 20% fewer SKUs. It's not going to come from retail migration, nor from price. We saw pricing this morning of the new products pretty similar to previous collections. Is it correct to assume that it would come essentially from desirability of the brand and basically volume? If that's the case, are there any operational implications for you?
Does that explain maybe a gradual margin improvement that you anticipate? The second question, I was wondering, you spent many years at Bottega Veneta, a few months at Gucci. Are there things that you have done or discovered there that you replicate here or that you don't replicate? Thank you.
Okay. Where the growth is coming? What we are seeing today is that most part of the growth is coming from ready-to-wear shoes and higher price point, in a way, versus the categories that are not expressed completely. What we are seeing is an increase in average price sold, quite important. The growth will come. Apart from it, I'm not saying that we're doing a repositioning, say that what is bought is at a higher price point today. The cross-selling and multiple selling is little bit down because all the entry price point categories are not developed as they should. Talk about fragrance, talk about sunglasses, talk about the ties and silk, et cetera. There's a huge opportunity for improving in that specific area to improve the cross-selling multiple about the ties and silk, et cetera.
There's a huge opportunity for improving in that specific area to improve the cross-selling multiple selling. The average ticket ideally will go up. Average price sold per ticket probably will go down going forward. We expect to grow, of course, in terms of volumes going forward across the categories. That is the reason why we anticipated this merge between leather goods and shoes because I think there are best practices in both units are quite impressive, and we're not able to cross-fertilize between the two units. In the past, now with the same head, we hope they're going to have this kind of impact. Yes, we will have potentially opportunities or threat in that structure. I think it's a good problem to have, put it this way. Because there is the capability in Italy to create new production sites.
Was there another question afterwards?
Your experience and how you-
Bottega. One of the things that I learned that I replicated in Gucci is the pull model. In Bottega, this model of looking at the sales in the shops and reacting and allocating according to the sales and not just buying and allocating from the orders campaign, the sales campaign, was already in place. That gave us a possibility to get an opportunity that luckily was not in Gucci yet in that specific sense. We had an upside. What I wouldn't do? Not easy. What I wouldn't do? I don't know. It was such a beautiful experience.
Luca Solca from Exane BNP Paribas. One question on China and the Chinese. Gucci seem to be quite weaker in that market. How do you see Gucci progressing with the Chinese consumers and in China in particular? One question on licenses. You went through quite a significant change. When do you expect that from a royalty viewpoint you're going to be even with what you had before? In particular, Kering Eyewear, what is Kering Eyewear going to do to improve your situation in comparison to what you had before? Lastly, you said that minus 7% was a difficult comp. I was wondering what you thought of the upcoming comps.
Start from the last one so that I remember. Upcoming comps are going to be difficult in the sense that we're going to face a markdown period last year, quite important. I expect, talk under control, a slightly positive Q2. Again, in this kind of transition, for me what is really key is what I see in terms of full price and the kind of consumer we are getting. That to me is very important because, of course, I'm not managing for the 2016. Gucci has been there for 95 years. I hope that it will remain for another 95, and I'm not being the one to close it. In terms of China, it is absolutely correct what you're saying in terms of weakness, again, Gucci started as a first mover in China at the very beginning.
It was a starting point of the development of luxury. Also considering Chinese consumer behavior, we know that millennials and younger generation, they tend not to buy what their parents were buying. We were in kind of a structural moment of risk. On the other side, what we realized is that being so technologically savvy, the Chinese, and so exposed to digital, our ability to communicate with them with digital and social, et cetera. We did some exhibition recently in Shanghai with the exhibition was quite unique for the region, No Longer, Not Yet. That was a blending of a modern art but together with the brand and the logo. It was quite successful. We're trying really to communicate to a different audience.
What we are seeing, of course, in terms of footprint, we are closing some shops because as I told you before, I think a certain location we are not exposed as we should. We don't give the right message to the consumers. What we are seeing, and we saw in the last 3 months, there is a rebound in buying of Chinese in terms of nationality. That is, to me, is very encouraging. It is going to take, of course, a little bit of time, but we saw a rebound both in sales in China, but also in the Chinese shopping abroad, despite the recent thing that you know about the Daigou, the taxes, and the rest, especially with the certain kind of consumers, the more kind of sophisticated, the higher spending. I think I missed one question, the second one, was it Chinese?
Yep. There was a question on licenses.
Kering Eyewear
Kering Eyewear in particular.
Licenses. Okay. Technically, we cannot work with Coty today because of the antitrust problem of change. We work with Procter & Gamble. We work with them with the launch of a new fragrance that's going to be launched September 2017. We relaunch Gucci Guilty in September this year. In October, potentially, we are going to be in the full transition to the new team. As I told you, I worked with Coty when I was at Bottega. Their understanding of luxury, I must say, I don't want to talk badly about Procter & Gamble, there was a reason why they sold it. I think that the same luxury of Coty, I think, is better and more enhanced versus Procter & Gamble. If you look at the size of fragrance of Gucci, the potential is huge.
If you compare the size of Gucci versus the others, it's enormous, considering the awareness of the brand. That's the reason why I'm saying, if you do the right things properly, we have a partner who understand the potential. That is one of the reason why as well Coty decided to go for Gucci and not for others. Kering Eyewear, we expect a lot because, also being an internal counter public, going to be even tougher because as you know, if you have a licensee, you tend to be, it's a licensee, it's another, but being into the company, having the potential to leverage of François-Henri, if they do things properly, of course I will do it. The collection they are preparing is quite impressive.
Of course, the distribution will happen. Of course, the Gucci sunglasses and eyewear for Kering Eyewear, of course, is absolutely key because it's going to be the traction as well for other brands of the bunch. We are very positive. We started very well. The collaboration between the team and Alessandro is working perfectly. We'll see.
Hi, Helen Brand from UBS. First question, you've done a lot around the ready-to-wear and the shoes. We've seen really successful growth from those categories. Handbags have been a little bit slower, now starting to gain a bit of traction. How do you think about carryover product within the handbag category going forward? Are you now happy with the products that you are in? What percentage of carryover do you think? Just in terms of the SKU distribution by price point, are you now happy with the offer? Where are you seeing the biggest demand within the handbag category, at which price points at the moment? Secondly, just in terms of e-commerce, I may have missed it, what percentage of sales is e-commerce today?
Where do you think that can get to? Do you think about it in terms of working with other multi-brand online retailers like Net-a-Porter.
Yeah
Going forward as well? Finally, if I may, just in terms of.
Four questions
OpEx growth.
I forget the first
We obviously had a lot in the industry about underlying OpEx growth, up probably around mid-single digit for a lot of players at the moment. What do you think of your underlying OpEx growth, and how can you manage that maybe to be a bit lower going forward, do you think?
Okay. Start from the first of these. Carryover. Of course, the stretch of the carryover and the newness today is weird because we are changing so many things. I do expect, especially in the handbags, that the iconic part and the carryover part, will go back to the previous situation. I think a normal and a good split in our business is around 60% carryover, 40% newness. In the medium term, let's put it this way. It's not going to take a lot of time because we are very clear in mind what we want to have, and the merchandising team want to have in terms of carryover collections. Now, of course, it's a specific moment because we are changing, we are cleaning, et cetera, but overall, I think that is going to be the right split, 60/40. In terms of price distributions, I'm very happy.
We're filling all the gaps. What I told you before, we didn't focus yet so much on the so-called entry price area. What we are seeing is that the average price we are selling is quite high, higher than in the past. That's, I think because we didn't offer completely the price that we talked, that's more aspiration, but because it's a miss in the presentation, in the focus that we had at the very beginning. We filled that already, so the delivery that we going to have now from April to May, started, we are going to fill that gap as well. What's the third one?
E-commerce.
Huh?
E-commerce
E-commerce. E-commerce today is approximately 3% overall of the total revenues. 3%. If you look market by market, if you compare that on the retail sales of the market, in the U.S., probably between 10% and 11% of penetration. In certain countries like Germany and U.K., we are way above, with 15%-17%. Overall, where we are present is on the other markets is 6%-7%. We expect to grow fast in the market where we are present already, but also increase the distribution because we have kind of an aggressive plan of rollout. We do expect as well to increase our business with the partners. With certain partners, yes. I think, again, they target and they talk to a different client, and we need to have this kind of conversation with the clients, who's more fashionista. Yeah.
The final question on the OpEx.
Sure
translation.
The OpEx, Alberto.
Thank you. Thank you for the easy question. Talking about OpEx, as you saw in the graph during the presentation, definitely the weight will decrease on the total, going forward. Retail will increase, therefore selling expenses and store expenses need to increase. We're planning to increase them. Even if, as Marco was mentioning, the variable part will be only one third of the total. On one side, OpEx will increase linked to sales. On the other side, whenever possible, we negotiate the OpEx and we try to keep them as much as possible under control. Let's keep in mind that we still need to invest definitely in communication. This is one of our first objective, of course, going forward. We need to invest in retail excellence, in the team.
Overall, what I can say is that we are searching definitely for leverage in OpEx, meaning that they will definitely grow less than sales, but we will not stop investing.
Hi.
Hi.
Yes. Mélanie Flouquet, J.P. Morgan. My first question is, I suspect is for Mr. François-Henri Pinault. I suspect the role of Gucci within the group is to be the sustainable business, compared to sort of emerging and maybe more troubled children, if you have any. How do you actually, will you assess that you've transformed Gucci from a fashion buzz into indeed a sustainable business? What will be the critical part that you will be able to say, "Okay, we've achieved this, and for the next five years, this is fine, or the next even 10 to 15." That's my first question. The second one is regarding average selling price. As you say, in ready-to-wear and shoe wear, you achieved quite a lot in uplifting this. In handbags, you had quite a different challenge. At least it's my impression.
Notably with the elevation of the brand probably went a little bit too far and you need to feed back into the access price. Do you expect the average selling price in handbags to go down at all, or to be under some pressure, or flat? Can you explain maybe a little bit better what is expected out of this critical part of your business and the sustainable part of it, I suspect? The other question is actually maybe for Jacopo. It's regarding the allocation of capital employed. If I understood well, you sort of decide to reallocate capital from refurbs or aggressive refurbs back into working capital. I think you alluded to maybe reinvest in inventories. Maybe if you can share a bit with us the uplift from the getting the inventories right.
Yeah.
Thank you.
Okay. The fashion risk. We are in fashion, so the fashion risk is connotated with the industry, there's no doubt. The way which we think that we are going to offset potential and mitigate the risk of being too fashion driven oriented is the way in which we create iconic pieces and carry over. I think I showed to you through the slides, especially for the handbags, the way in which we create iconic and carry over. We believe in collections, and through the creativity that we create something, some newness. The idea of achieving a split of 60% of carry over and 40% on newness give us the possibility to create longevity to the value proposition. To me, that is absolutely key. That, trying to avoid to become boring. Because the point is that we always need a certain product category.
Any product category has a certain role. Ready-to-wear is a fashion driven collection, and it needs to remain fashion driven. The risk of fashion needs to be in that collection. If you want to be a fashion authority, you need to drive fashion into set trends. We need to maintain this risk. In other product categories, of course, we have the possibility to create something that's more stable, with more longevity, despite the fact that you need to create as well there, some fashion newness, any single season. In this kind of transition, of course, the difficulties has been to find the collection, handbags especially, that we're able to be maintained going forward. The way which we do it is through what I told you before.
The fact that five out of seven of the collections are top seller today are already collection of Alessandro, I think means that we are in the right direction. These are the carryover and the rest.
[inaudible], are you today on carryover for the rest of the-
The carryover now is much lower than in the past. Maybe, I don't know, it was a slide that was showing the shifts of the inventory today. The newness part is much more important. It's approximately around 60% versus 40% carryover. The target Because in the newness now we have some of the collections that are bestseller, that of course, we can't carry over. It's part of the transition process. Role of Gucci. Oh, Gucci. The role of Gucci, of course, is absolutely key for carrying the sustainability of it. I think the beauty of being part of a group like Kering is that we have the possibility to access so much information, so many best practices, and to have the possibility to leverage on that to be a standalone company would then not be the same.
The fact that I had the chance to work in different brands and different companies gave me the possibility to understand different way of managing or dealing with people and try to avoid mistakes that I did in the past, but always the same group. Of course, the importance of Gucci is paramount, and the reason why we tend to set the targets and the budget and all the rest, we know and we realize the importance of Gucci as well for sustaining the growth of other brands that we just bought. That to me is the way. The last one is?
Just a question on the question. Part of the strategy is built on the portfolio of luxury brand, which is absolutely key to understand the strategy of the group. Sorry, I didn't see you. Of course, in a portfolio of brands, we will have a certain amount of brands going through tough times, which went over the last 15 years into two very difficult moments, 2003, and 2014, 2015. Bottega now is going through a tough time, first time in 15 years. Saint Laurent, of course, you know. It's part of the business model of the group. What is also absolutely key to understand is that the portfolio is built to make sure that we have other pillars on the side of Gucci. Gucci has a very strong potential, as Marco presented to you. What we want is to bring three other brands above EUR 1 billion.
We already have two. We have a fourth one coming up. It's to have something, portfolio-wise, very consistent and very sustainable so that when we have some kind of a plateau in some brands, the other one are taking over and capable of offsetting the temporary tough period that we are going through in certain brands. It's the overall business model that we are building at Kering level.
Thank you. Oh, we have Jacopo, finally. No? Alberto.
CapEx.
No. No CapEx. Actually, it's on inventory, right? On the trade-off on the investment on the. It's you. I can answer. Okay. The idea of the. I don't want to create any. It was about the inventory and the buy, open to buy, trade-off between CapEx and the rest. The reason why we are not being so pushed to change the refurbishment, give me the possibility to create a stock level of the thing that we are selling much more important than in the past. That doesn't mean that I expect the inventory goes up, because the way in which we created this supply chain methodology, where we sell according to the pool, meaning through the sales of the shops, especially the handbags, doesn't mean necessarily the inventory level will go up.
Of course, it's a possibility for me to make sure that we don't stock out, because today we are learning. Seeing the women ready-to-wear that grow in 60%, 70%, it means that we are losing sales. There's no doubt. In certain product category like handbag, certain collection, the Sylvie that we launched, we bought because we thought that it was going to have a certain sales target, but the sales target was completely exceeded. We lost sales.
That's the reason why I'm saying, in this moment where we are changing so dramatically the collection, where we don't know the full potential of any collection, maybe if I need to choose to invest a certain amount of money in three, four shops refurbished, where I know that if I do some cosmetic change, the profile will be approximately the same, I prefer to put the money in the inventory in a proper way, kept at a central level, and to allocate the product where the sales are happening, to avoid the stock out. Because with this kind of increase by product category, by definition, I'm losing sales. By definition. It's too high. We couldn't buy for 70% degree. I'm not crazy. I need to buy for something that is optimistic but conservative. Otherwise, at the beginning, it's not. That is the trade-off.
Hi. Thomas Chauvet at Citigroup. I have two questions, please. The first one, I was hoping, Marco, to get your view on the pricing, the relative pricing between regions. You've talked about an increasingly price-sensitive consumer. How do you think about new prices for new products carry over? How do you plan to adjust prices? Because it's linked, obviously, to currency and to, therefore, travel, if you could give a bit of color on your assessment of what's going on in the travel retail. Secondly, on e-commerce, you're planning to triple the gucci.com business. How do you think about this business in terms of either its standalone profitability or the profitability of the brand overall? How does e-commerce help you or impact you? Gucci is very aggressive in social digital media. How do you monitor returns on those investments?
Related question, Gucci is the only brand that is one of the very few brand not part of the Kering YOOX JV. It's more advanced, clearly, in e-commerce and digital expertise. How do you think about the triggers, the catalysts for the other brands to follow the gucci.com path? Maybe just a quick comment on the YOOX relationship.
Jean-Marc, Jean-Marc.
Thank you.
Thank you. Thank you. In terms of price gap versus regions, we are in a very lucky position today because we are changing completely the product offering, so we are able to reset the price gaps. In the past, a certain point, because of the yen revaluation or the renminbi devaluation or revaluation, at a certain point, we had price gap versus Japan of 60%, price gap versus China, 55%, 60%, of course, are not sustainable. They are always the same question. We should rebalance because of price transparency, all the rest. What we see always is that what do you do? You go back to the customer that they bought the carryover before and say, "You know what?
I am going 20% back because I cannot cheat you. Note what I saw from my experience, because it happened so many times in this industry, that when you reduce the price in an industry, in a region, you have a short-term effect of 2 weeks, and then it goes back to this normal situation. The final effect, your EBIT is going to be completely hit. We always decided not to take this kind of path. Now we have the possibility to redo the price gap, and we tend to price the newness and the new collection in a more reasonable way. Maintaining a price gap versus China in between 30%-35%, that I think is normal. It is acceptable as well from the consumer in China. Hong Kong, more in between 10%-15% versus EUR. Japan, 20%-25% accordingly.
I think that reflects as well a kind of accepted price gap between regions across the board, across worldwide. In terms of touristic flows, what we are experiencing in Gucci is that we are seeing an increase in Chinese spending in Europe that is a different consumer behavior versus the past, because I told you before, is more elevated, more higher spending than in the past. There is a lot of migration in Southeast Asia and in Japan, even if in the last few months, we saw a reduction of Chinese spending in Japan. A reduction of touristic flow in U.S., especially Latin America, et cetera, because of the strength of the USD. Again, I think it is very difficult to control this flow, touristic flow, because they depend from a small change of the currency versus the past.
The only way where we can really offset that is to have internal flexibility and elasticity in terms of inventory and stock to reallocate very quick merchandise from one region to the other through the structure that I told you before. Second question was?
The profitability
e-commerce
the e-commerce business.
The profitability of e-commerce presently in Gucci, because it's a kind of a substantial business, is at the level of the best performing shop that we have in the company. We are very positive on terms of what are the returns. The investment that we do in social, digital, et cetera, that are part of the communication spending, part of the famous approximately 5% spending that we do on a yearly basis, is part of engaging and not just selling. I think it's been absolutely paramount to reposition the brand in the last few months. All considered, I think if you are able to really do what we think to do, and it's feasible to do, consider as well market trends, increase the e-commerce penetration in the Gucci profit and loss, I think the profitability will not be hurt. Instead, it will be increasing.
In terms of YOOX, I had the ban from Jean-Marc, so maybe you can ask him directly.
Just quickly on YOOX. Gucci is the best performer, always been best performer on e-commerce for the group, and we kept Gucci apart from YOOX, which was, for me, instead of letting each brand build according to its own e-commerce, having many different situations depending on the brands, we did this joint venture that we control with YOOX to bring support to the brand to make sure that they are at the best level considering their maturity. Since we did YOOX and the gap between the other brands and Gucci has reduced a lot. Gucci, of course, is always leading the race, and it's intending to lead the race on e-commerce in the group, but YOOX has been a very, very positive addition to our operation in all the brands involved.
Mélanie, I just realized I didn't answer the price of handbags. Sorry, to catch up on that. Where we are experiencing in ready-to-wear, the average price that is growing is due as well to the collection ourselves, quite rich, et cetera. In terms of handbags, I don't know if it's going to increase or not. I think the offering, the price range that we are covering is quite complete. Certainly, I don't expect it's going down because the more you create added value and brand value, the possibility to sell a good average price is there going forward. Again, in terms of what we missed recently is the more the entry price area. Now we are still experiencing a higher price point even in the handbag, just because of the mix.
Going forward, I think that the fact that we are going to offer something for more aspirational customer, we'll put that in a situation of more normality in a way.
Mark Urquhart, Baillie Gifford in Edinburgh. Hello, Marco.
Hi.
I was really interested in your comments on people. You talked about a silent revolution and the changes. Could you give us more color? Are you now
the people, have they changed their mindset? Are you still facing challenges? How is that process going? Secondly, it seems everyone is asking at least more than one question. I'd be interested to hear from Jacopo and others about why they joined Gucci. What was it that brought them? You said obviously your charisma. Why now did they join it? It'd be interesting to hear that, because you described people didn't want to join Gucci perhaps two or three years ago.
Yeah.
Some color on that. Thank you.
Thank you. In terms of cultural change, that again, to me is the most difficult things to do. I think we are very well advanced, but I think still there's a lot to do. In Gucci there are different animals. If you are in the corporate in Milan or in design, everybody's embracing the change because we are living that on a daily basis. Everybody's completely there. We know where to go, the part of the change. If you go in Florence, that is people that living in Gucci for 35 years, they see 25 presidents, more probably, and say, "Again, a new president coming to set the new strategy." It is not as easy. The reason why I decided to join, to merge leather goods and shoes goes in that direction.
The synergies are one of the objective, but the most important objective for me to make sure that the people understand that they're part of the change and merging them together. Changing a little bit the framework, internal and external framework, gives us the possibility to really inject something that is new. To create less layers and fasten the decision making process to me is absolutely key. As you know, we are in an industry where you cannot take decision with 100% of data. It is impossible. It is too quick. You need to take decision, take risk with a limited amount of information. The same should happen not just at corporate, but also in the industrial part of the business. You need to react to signs of collection that are selling quick and take a risk in buying raw materials because of that.
We are not there yet, but in the region. We are certain region that embrace the change immediately. Southeast Asia, for example, Europe, because it is close. We have all the president, Giovanni is close to the corporate, so it is being affected more than that. We had a lot of resistance in U.S. because despite the fact that they, in word, they were saying, "Yeah, we love that." They kept on buying the older collection. You like the new, but you buy the old, so what is happening? That the reason why we changed the president, communication director, all the regional director of our retail. We try to make the change for the first nine months, and then if the change didn't happen, we change the people because, again, we need to preserve the 11,000 people we have.
It is better to cut a finger than to cut an arm. That is the other way where we speed up the process of change. In terms of why the people, we can ask Jacopo that. Was it for (wonderful join), first one joining?
Good morning. I think it was a kind of for magical reason. First of all, I was wishing to work in a group that care about talent and people, and Kering is this kind of group. Second, I was wishing to work with Marco, which is the reality because I knew him since one year, and I was really wishing to work with him. When I saw the first show of Alessandro, I was completely convinced that he was going in the right direction, and it was very debated, but I really believe it was the right thing to do. I've always been in love with the brand, with Gucci. It was really for magical reasons.
Now-
Thank you
Now the reason why I think people are deciding to join Gucci easier way than in the past, I think is because of the brand. Because the brand is hot, there's a lot of changes, a lot of new energy. I think it's in terms of culture. I think what we try to foster from the very beginning with Alessandro is a culture of respect. We don't want people harassing other people. It's not the way in which fashion should or any company should be managed. We want people that are humble, modest, and they try to go in the same direction. That, you feel it, and the industry's like this. Everybody knows what's happening, so they know if the feeling is good, and the people are being treated well.
To me, it's key because again, I think the most important asset of this business is creativity. Creativity fosters only when the people feels at home, feel well, feel good. Otherwise, if you are threatened, if you have the figures any single time to be reached, it's not the way in which you can really foster creativity, give the possibility to Alessandro to create the shows that he's doing. Impossible. The two things together.
Mario Ortelli, Bernstein.
If I may. Three small question. The first one is about products. You show us what you are doing to target the Japanese clientele of that specific line. Are you doing something specific also for Chinese and American customer? Gucci is evolving in a direction in which we will see more and more regional or localized products. For example, we have seen also the limited edition of the bags for the store of Bond Street. The second one is on carryover, on continuative products. Which price increase do you put in your plan for the carryover products, two, three% a year? I'm looking to hear from you. Last but not the least, you showed us. A lot of comparison with other brands, you clearly have got the ambition to take share. From which brands are you taking share in ready-to-wear and from which in leather goods? Thank you.
Maybe it's like Kering.
Not from Kering. Not from Kering brand.
You can just show the flag now.
Okay. In terms of regional aspect, regional differences, et cetera, we don't plan to become a regional-driven company. I think the core of the offering will always be very much homogeneous because I think the clarity of the focus, the clarity of the method we give to the regions should be always the same. A small part of it needs to be tailor-made, as we did for Japan, we are going to have some specific product for certain regions, but I don't want a region to become a bazaar with all exclusive product for that specific region. By the way, we lose clarity on the brand. The fact that you have on the long term, if you go in a direction where you are too much driven versus cultural differences, you're going to be losing.
We are doing something With the project we just launched in Montenapoleone, DIY, do it yourself, where you can work on the Dionysus collection and try to make your own Dionysus. We create this kind of activity of theme of so-called made to order, that give you the possibility to create your own bag that is unique in the case, that will be in certain shops worldwide. That, for us, is the best way to create exclusivity and differences versus some collections specifically designed for a region. In Japan, we needed to do so because they were the slowest one in getting the new perception, we needed to create something that's still in line with the brand, but conceived specifically for Japan in order to speed up this process of understanding. Price increase.
Price increase, I don't know, in the sense that I didn't plan yet a specific price increase season after season. We see what happens, we see the reaction of the customer, we see if the collection is being priced too low or too high going forward. We do our test, we need to be flexible. Also as well, it will depend a little bit as well from the currency fluctuation. To give you a specific answer on that, I cannot give it to you because I don't know. Of course, we are monitoring that on a daily basis, what's happening, we know the customer reaction according to item and not items. I don't think that it will be an average increase. It will be a specific increase according to customer reaction and according to currency fluctuation. The last one is?
The last one is.
What was the taking share of?
Oh, taking share of. I have ideas. Some Italians. Some big French.
French.
No, but you know exactly what I'm talking about. I think I'm not targeting the niche. I'm targeting the biggest. I'm going against the ones that are the same level of Gucci or bigger. There's no doubt. I need to gain market share on the top layer. I'm targeting them, of course, because it's going to be easy for me to get more consumers. Of course, being a fashion brand, we're going to touch or overlap with many others. It's not my specific target. I'm going to go against the biggest.
Hi. Susanna Pusz from Bloomberg. I just have two quick questions. First of all, you were talking about bringing three of your brands above 1 billion sales mark.
I cannot properly hear.
Can you hear me? Oh, okay. Is it better?
Yeah, better.
Okay.
Thank you.
Susanna Pusz from Bloomberg. I just have two quick questions. First of all, you're talking about bringing three of your brands above 1 billion sales mark. At the same time, we know the market is slowing down, market share gains are becoming more important, so I was just wondering, how are you thinking about competition internally between the brands, so Gucci against other Kering brands? Secondly, you've mentioned decreasing relevance of the outlet channel, so I was wondering whether you could tell us what % of sales outlets are right now, where do you think it could go forward, and perhaps whether you would consider exiting it completely like some of your peers. Thank you.
I heard the last question. I cannot give you any figures on that. Of course, it will depend to the speed in which I'm able to clean the old inventories. The reduction in number of outlets will happen according to the way in which I will be able to reduce the inventory that I had from previous collections. I cannot share the %, the markdown . Overall, at the moment, I'm not planning to go out completely from the outlet channel because the idea is more to reduce the markdown in shops. If I do so, then I need some outlets in order to control what I do for the leftover of the collection. Also, the fact that they may overlapping between consumer, between the off-price and the full price is very limited.
I think with the off-price, with the old collection, I can talk to a customer that maybe will never come in our full-price shops. Also, I can start creating the desire for this customer to move to full price. I think it's going to happen in the future according to what I told you before. I think I will keep on having the outlet channel for a while, but reducing the number of doors according to the fact that I'm going to clean. The first one was?
Internal competition.
Internal competition. Most of the CEOs that are in the brands of Kering have been chosen by me when I was in the previous. The competition is definitely there. We are sending email every single day, taking picture about the customer in Gucci versus the customer in the other brands. The competition, I tell you, is very much sound, and we are very strong on that.
Thank you so much, Marco.
Thank you.
Just a word for the next steps. We're going to have a quick lunch. The management team is going to be there, so please be kind to let them have a little bit of food, they'll be there to answer your questions. As you have seen, Alessandro is going to be there on the stage with Imran Amed for a conversation. If you want to have question for Alessandro, you have a small notebook with you, so you can take a piece of it, write a question, give it to either Cécile with the yellow or Enza with the blue jacket, all Gucci ones, of course. Imran will sit with Alessandro, we will pick a few questions so we can include them in this discussion. Thank you so much. Have a good break.
[Foreign language] Thank you.
Thank you.