Good morning. Welcome to Kering's presentation of full year results along with Jean Francois Berguy, Group Managing Director and Jean Marc Duplex, Chief Executive Officer. It's a pleasure to welcome you again this year. 2018 was an excellent year for Kering and all of our houses. Last year, we evolved in an overall context that was fairly buoyant, though the difficult the situation became a little more difficult to interpret later on in the year.
In that type of environment, last year, we were able to generate €2,800,000,000 in additional revenue versus 2017. This is up by 29% on a comparable basis. In terms of EBIT, we were able to generate EUR 1,300,000,000 additional EBIT versus the previous year. That's also exceptional growth, 47% on a comparable basis. Now of course, this level of performance enabled us to generate exceptional cash flow last year.
And then a very important point we need to observe, this growth was sound, very balanced, which now constitutes a very sound foundation for future growth in this group. This success, these results, we owe them to the achievement of the vision we have of a modern luxury group, multi brand luxury group, also to the implementation of our strategy in each of our houses throughout the group. And of course, we also owe this to exceptional execution by talented teams who have been with Kering for many years now. And of course, of course, this is thanks to a very strong financial discipline and Jean Marc is the guarantor of that. I'd like to use this opportunity to emphasize the contribution by the 35,000 employees of the Kering Group Worldwide.
We all share the self same ambition. The ambition means we intend to make Kering the most influential group worldwide in terms of creativity, environmental responsibility, social responsibility, also in terms of innovation and of course, in terms of financial performance. To that end, we share the same group corporate culture. 2018, therefore, was a year of strong value creation. The group's share price went up substantially last year, which, of course, is the reflection of structural growth in our profitability.
This happened in an overall stock market, which was down. Our shareholders last year also benefited from a onetime payout of Puma shares, which took place last May as well as an increase in the dividend. Now I'd like to give the floor to Jean Marc, who's going to present to you in detail our financial statements for 2018. Afterwards, I'll come back to talk to you about our ambitions, looking at every house and also the group as a whole. Then Jean Francois will wrap up the presentation, talking to you about the many cross business projects we're working on, particularly in the digital realm.
These are true platforms for growth in our various houses. Jean Francois will talk to you about those. Jean Marc has the floor.
Ladies and gentlemen, good morning. As you'll have understand, my task is to present to you in detail the figures for the year. So with your permission, I'll remain at this rostrum so as not to forget any figures in this long litany. 2018 in every respect has been an outstanding year in terms of operating and financial performance. Revenue comes in at close on €13,700,000,000 up 25% on a reported basis.
Let me remind you that the 2017 figures are restated to provide a vision at comparable scope, excluding activities disposed or were currently being disposed following IFRS 5. We restated the figures excluding Puma, Volcom, Stella McCartney and Christopher Kane. The ForEx impact is unfavorable of the order of €258,000,000 and weighed exclusively on the first half. Organic growth at comparable scope and ForEx, therefore, reaches over 29%. Group revenue remains well balanced geographically.
Western Europe and Asia Pacific, each account for about a third of revenue and in 2018 recorded high growth levels, respectively, of 24% and 34 percent comparable. Japan is at around 8% of the total with here again very good momentum, growth reaching 24% comparable. North America that contributes 20% of the total is 38%. Lastly, the other countries that include notably the Middle East account for 7% of our sales, up 23% on the year. Recurring operating income stands at close to €4,000,000,000 up 47%.
Over 2 years, the group's operating income has more than doubled. This is a quite outstanding performance for a group of our size. The operating margin reaches 26 28.9%, up 400 basis points over 2017. This improvement demonstrates the impact of operating leverage in our business, allowing us to reach profitability that places us amongst the best in our sector. Free cash flow is close to €3,000,000,000 We wanted to maintain a significant level of investment at around 6 percent of group revenue.
We've devoted the bulk of this free cash flow to reducing our net debt that has been halved by taking as opening debt the pro form a debt that is to say excluding the net cash of Puma, the debt ratio thereby reaches 0.4x EBITDA. This year, I believe we've been able to combine in an exemplary manner organic growth and profitability. Group revenue recorded sustained growth throughout the year on basis of comparison that were high, and this since the second half of twenty sixteen. For Luxury, the annual growth rate is 29% comparable. As you can see in the center chart, we've been achieving for 2 years growth rates way above the industry.
And for 8 consecutive quarters, growth above 20%. The growth in revenue went hand in hand with even higher growth of recurring operating income and therefore profitability. Our Luxury activities in 2018 have reached record levels. Revenue reaches €13,200,000,000 That's an increase of 26% on a reported basis. ForEx accounting for over 3 points in the growth.
The directly owned stores that account for 77% of revenues saw their sales increase by 31% on the year. Growth was sustained across regions, notably North America and Asia Pacific. Online sales are up 71%. Sales to 3rd parties are up to 24% on the year. On the basis of high levels of comparison, Q4 trends are continuous: Directly owned stores, up 25 percent strong momentum in Aspact confirming a return of Chinese demand.
All in all, in Q4, Luxury is up 23%. Full year 2018 growth was driven both by local and tourist customers, although we see a slight downturn in tourist spending towards the end of the year, notably Europe, on the aggregated scope of our 3 main brands. All nationalities are up on the year and in Q4, with the exception in the latter months of Russian and Middle Eastern customers, in particular, the spending of the 3 major nationalities, that is to say European, Chinese and U. S. Customers, are up 20% to 40% in 2018.
For Chinese customers specifically, the trends remain buoyant in Q4, essentially in Continental China and the rest of Asia. Recurring operating income of luxury activities is up 45% at €4,200,000,000 This performance is due to an improvement in the gross margin, very strong leverage at Gucci, Saint Laurent, Balenciaga. By leverage effect, we mean the level of absorption of operating expenses related to sales increases. Buttega Veneta is in a repositioning phase, and we continue to invest in order to develop our growth drivers. Operating profitability stands at 31.6%, up 4 10 basis points, the same increase as that achieved last year.
Investments stand at €610,000,000 up 30%, representing 4 point 6% of revenue, a stable revenue that reflects our determination to continue our policy of targeted and selected store openings. Let's now turn to the key figures of our Luxury Brands. For the most curious amongst you, you will find additional items at Amex. Let's begin with Gucci, whose revenue after top thing €6,000,000,000 in 2017 comes in above €8,000,000,000 in 2018. Growth level at 33 percent on a reported basis and 37% comparable on basis of comparison that are very high, was the case in Q4, that records an increase of 28% comparable.
This performance is therefore continuous over time, thanks to the continuous success of the creative offer in all product categories in all regions with all customers by nationality and age. Directly owned distribution is up 38% full year, 29% Q4 with very sustained trends across regions, notably Aspark and North America. This growth is very healthy. It's performed at comparable store basis and at full price. The focus on digital results in online sales, up 70 percent full year.
Sales to 3rd parties up 31% with a level of number of distributors that is globally stable. This revenue increase impacts fully recurring operating income that is up 54% and largely exceeds the €3,000,000,000 mark. The impact, a very positive impact of the gross margin and the very favorable leverage effect, allows the operating margin to continue to grow strongly, whereas the brand continues to invest. It reaches 39 percent on the year, an increase of 5.30 basis points over 2017. Once again, this is new profitability record, contained operating investments that related to revenue represents 3.8%.
Once again, this year reflects a priority given to the continued rollout of the new store concept. For Saint Laurent now, 2018 is another year of sustained growth. Revenue up close 19% comparable after 7 consecutive years of growth, above 20 percent, the brand thereby reaches €1,700,000,000 of revenue with an increase of 19% of its directly owned stores and twenty 1% of sales to distributors. The power of the Saint Laurent aesthetic in ready to work continues to drive the desirability of all product categories, notably that of accessories in Q4. The momentum remains very consistent with comparable growth of 19% driven by directly owned stores.
In e commerce, operating income is up close to 22% to reach €459,000,000 and the margin is up 120 basis points. The critical mass of the brand allows it to benefit from very strong operational leverage while continuing the investments necessary to its growth in terms of distribution and advertising. The operating margin tops the 26% threshold. And as we've already indicated on several occasion, its increase is henceforth more gradual. Operating investments are maintained at around 5% of revenue.
In 2018, Bottega Veneta has reached a new milestone in its re positioning with the appointment in June of Daniel Lee as Creative Director. In this context of transition, the brand received a delivered a mixed year with a revenue that is down 3% comparable. The downturn was focused on directly owned distributions where the brand is penalized in Europe by the decrease in tourist spending in Europe without offsetting in other regions. On the quarter, the trend is improving sequentially but remains negative. However, after 2 years of reorganization aimed at working with the most qualitative partners, sales to 3rd party distributors are slightly up on the year in Q4.
Recurring operating income stands at €242,000,000 Profitability at 21.8%, down 3 20 basis points over the previous years. This dilution stems primarily from the contained increase of certain operating expenses. They relate to the leverage and operations of store as well as advertising and marketing expenses as part of initiatives, putting the brand back on a growth track. Investments were devoted to renovations, selective the customer experience, but Francois Henri will return in greater detail on the key items of the brand's repositioning. The growth of other houses is very sustained in 2018, revenue exceeding for the first time €2,000,000,000 up 32% comparable.
Directly owned sales drove growth with an increase of 44%, becoming the 1st distribution channel. Wholesale business is up 24%. Balenciaga and Alexander McQueen are the main drivers of this growth. Our jewelry brands deliver solid performance and watchmaking production signed their 2nd consecutive year of increase, thanks to a substantive effort on their offering, allowing them once again to present very innovative offerings at the last SIHH. Recurring operating income of the other houses comes in at €2, 15,000,000 more than doubled.
Operating margin stands at 10% in excess of 10%, thanks to the size effect of Balenciaga, whereas we're continuing major efforts at Boucheron Alexandre McQueen. CapEx up 42%, primarily devoted to growing the distribution network in order to fully tap the potential of these brands. As you know, the Corporate and Other segments incorporates the activity of Kering Eyewear that has delivered a remarkable performance in 2018. The contribution of Kering Eyewear to consolidated revenue stands at €391,000,000 up 46% comparable on the year. This figure represents a total volume of sales of €495,000,000 The year was marked by many successes, in particular the launch of Cartier, the very significant growth of Gucci as well as the presentation of the first collections of Balenciaga and Montblanc available since the beginning of 2019.
Cost of Corporas and Others concern the cost of long term incentive plans, whose increase is purely and simply indexed on the absolute and relative performance of the Kering share price. Excluding this item of compensation, there contained increase of 7.5%, thanks to the increasingly positive contribution of Kering Eyewear as well as the financial discipline that we've set ourselves while implementing the ambitious transformation projects that Jean Francois will present in a moment. Investments by corporate linked to this transformation plan stand at €218,000,000 They comprise the payment of the last installment of the compensation due to Safilo, an increase under the impact of the modernization of IT, increased logistic capabilities of the group, including the new Kering Eyewear Hub in Italy. I'll now continue with a few comments on the other items of net income, other non recurring operating income and expense amount to a net expense of EUR 2,200,000 essentially asset impairments without impact on treasury for EUR 140,000,000 EUR 88,000,000 pertaining to the impairment of intangible assets. Other non recurring products and income are also comprise restructuring charge.
Net financial expense, euros 207,000,000 is against 2 €20,000,000 in 2017 net financial debt, euros 77,000,000 decrease of 30%. This improvement is due to the reduction resulting the reimbursements and restatements readjustments over 2 years. Other products and financial charges represent a net expense of €130,000,000 and the ineffectual part of currency hedges and as well as the partial buyback of the bond coupons. The tax expense comes in at €868,000,000 up 58%. The effective tax rate, 24 0.7% related to recurring income, is against 24.2 percent 22.6 percent in 2017.
The increase in the effective tax rate on the recurring income applies in part to the evolution of the country, mix also to the profound repending over the past 2 years the organization and supply chain. This transformation is aimed at applying the operational model of brands to the group. As we've indicated, this operational reorganization leads to a gradual increase in the tax rate. Our best estimate is that this effective tax rate on recurring income will trend short term to reach about 25%. In this respect, I'd like to remind you as part of the tax investigation opened in Milan in 2017, an audit team of the Italian tax authorities finalized a report at the end of January.
This pertained to the results of 1 of our subsidiaries for the years 2011 to 2017 with an estimated amount of taxes that might be claimed at the order of €1,400,000,000 We contest the conclusions of this report both on the grounds as well as on the amounts. We're confident, but we will continue to cooperate fully with the Italian tax authorities, and we will communicate in a very transparent way on the progress of this procedure. At this stage, we do not have the necessary information to record a specific accounting provision based on a reliable estimate of the tax exposure. Of course, we continue to implement a strict monitoring of our tax positions, and we've adopted a prudent approach in the assessment of our tax exposures, notably those related to the transfer pricing policy. All in all, net income group share stands at €3,700,000,000 It more than doubled over 2017.
It, of course, includes the net income of discontinued activities for close on 1 €100,000,000 essentially comprising the accounting disposal capital gain linked to the distribution of Puma Shares. We, of course, look at net income of continued activities, excluding non recurring income that reaches €2,800,000,000 up 49%. Let's now move to operating free cash flow that stands at close on €3,000,000,000 up 34%. This increase rests on cash flow from operations of €4,400,000,000 up 40%. That's over €1,200,000,000 incrementally a change that is, of course, linked to the significant increase in earnings and, of course, good containment of working capital requirements.
In respect of increased activity, taxes disbursed are sharply up. And as mentioned, group investment are also up. All in all, the group has devoted €1,400,000,000 on these two items. That's an additional €500,000,000 over 2017. Operating free cash flow related to EBITDA stands at 67%, one of the best ratios in the industry.
Turning now to net financial debt that comes in just above €1,700,000,000 at the end of 2018. That's a reduction of half over the 2017 basis restated. This deleveraging has been made possible through strong cash flow generation, whereas the group has continued constantly its policy of return to shareholder, which is the dividend paid up 30% as well as the share buyback program. The net debt to EBITDA ratio stands at 0.4 times. On this page, you will find more detailed information on our balance sheet and financial structure.
As expected, the total amount of invested equity is down following the exit of Puma. Also good management of working capital requirement. Operating WCR stands at around 18% of revenue. A final word. I think you were expecting this on IFRS 16, that standard that comes into effect as of the 1st January of this year and will impact our financial statements as of June 30.
This standard, complex in its drafting, onerous in its implementation, will considerably amend the predictability of our accounts and numerous performance indications. Its application will only concern some 45% of our leasing contracts, making more difficult the comparability of one store with another, one region with another. That's why we'll be publishing next year in 2019 alternative performance indicators in order to ensure for all continuity in following our results. For information, the estimated impact on debt on the 1st January 2019 is of the order of €3,700,000,000 But this figure will be further refined and a utilization right will be booked on the asset side. For those of you who require for information, you will find that in the our financial report published this morning.
Thank you for your attention. And now back to Francois Henri.
You're already familiar with our strategy, so I won't delve into it in greater detail. I've already presented it to you several times. But I would like to emphasize our vision under this model. Its center is a creative universe, which is very strong, comprehensive in all of our houses. That's our vision, which is enabling us to generate our own organic growth, going beyond general market trends.
This is the vision, which is the basis for the financial performance that Jean Marc just talked you through. Each of our houses has potential for organic growth, which is quite substantial, specifically thanks to their creativity, as I just mentioned. The creativity is often fairly edgy, but is always unique and enables us to create trends in the luxury market. Furthermore, we're talking about the expression of this creativity, which is our narrative. It's consistent throughout our houses, a consistent narrative.
It is sustainable over time as well. It's this continuity of expression, this way of expressing our creativity, which substantially strengthens customer loyalty to all of our brands, enabling us to generate this extra growth above and beyond general market growth. Another very important factor in our performance is our corporate culture, which is very strong and genuine. This is one of the foundations of our performance, especially the sustainability of this performance. Our performance model is a development model based on platforms to support growth.
This gives us a competitive advantage, advantage for all of our brands. I won't go into further details. Jean Francois will run you through details later. Now let's give an update on potential for growth of some of our major houses. We'll start with the biggest one, of course, Gucci.
You saw this during Jean Marc's presentation. Gucci saw a 2018 was yet another exceptional year in terms of growth, and a very important thing is that this is very sound growth and very balanced growth. Let's begin by talking about products. In merchandising, we're refocusing on 2 very important things. Firstly, the balance between what we call the carryover lines and the new lines, the novelties that we provide every single season.
Here we've reached a balance of 70% carryover lines compared to the novelty lines. This balance will continue over time. We find this as a perfect equilibrium between these 2 product categories, enabling us to really make sure we've got sustainability, long lasting performance. I'd hasten to add that when we say carryovers, this doesn't mean they just remain unchanged. These are lines that, of course, build on confirmed successes of novelties that are launched every season.
Now this is a balance. We've got a balance between carryovers and novelties. We've also got an overarching balance between the various categories of products. Here as well, we've reached a balance. Here you see the percentages.
We feel this is optimal, and this will be long lasting and here as well enable us to further strengthen our overall performance. I'd also specify under products, in spite of the growth at Gucci for more than 3 years, we've got potential for growth in all product categories with no exception here. I'd add to that point, We've got product categories that we want to boost, that we feel our positioning isn't yet strong enough And there are also new categories. I'd mention just two examples by way of illustration. In terms of categories to boost, there are perfumes and beauty.
In this area, perfume and cosmetics, we're going to achieve further performance gains. We won't just keep current levels of activity in this area. Now in terms of new categories, next June, we'll be launching the category of haute jewelry, high jewelry, Gucci. This is another category, which beyond the extra growth, it will provide us with will even more importantly be further strengthening the very high end positioning of the House of Gucci. Now to talk about commercial effectiveness.
Here we see our retail metrics and our phraseology. We've got very substantial growth drivers here. We have to fully understand that over the past 2 to 3 years, most of the houses growth has come through increased traffic in all our stores. That's enabled us to really build a huge customer base, which has grown quite significantly. This is the customer base and there are 2 other elements where we've seen substantial improvements, retention rates and conversion rates.
In other words, having that traffic actually generate sales and we're working on that in all the Gucci stores. These are the items, retention and conversion that are very important and we've already made progress. And in 2018, we reached commercial effectiveness. We measure this in terms of sales per square meter, reaching slightly going beyond €40,000 per square meter last year in 2018. And our ambition here is to go well beyond this threshold in the RV to a metrics in this performance.
Now to talk to you about our store network to Gucci. As you know, we've got a mature network of stores. Our priority isn't to extend the network. In terms of number of stores, there should be fair stability in number of stores, it's been the case the last few years. However, our priority will be to further enhance the quality of the stores' network.
We're working on this in terms of store size and also improvement of store location. I'd also like to specify, at the end of last year, in terms of renovating stores and bringing the new concept, we've renovated just under 50% of our stores. It should take another 2 to 3 years to refurbish all of the stores in our network, and I'm really underscoring this point because the new store concept is enabling us, 1st of all, to display more products compared to the previous concept To present them better, display them better, this also boosts category cross selling and can significantly enhance the performance of Gucci. The renovations constitutes further potential for growth that we can tap into. Two points under distribution that I wanted to emphasize here.
We've got special potential here as well. I'm thinking of travel retail specifically, duty free travel retail broadly. Gucci is still underrepresented. We made progress in this area last year. And our intention, of course, is to make further significant progress in Travel Retail.
First of all, by in sourcing existing points of sale to manage them ourselves, thereby enhancing efficiency, but also to open new points of sale, particularly in airport locations. Last point, e commerce. Jean Marc alluded to this earlier. As you saw, the year was an exceptional one, 2018 growth of 70% in e commerce. We're very much on track to meet the objective of Gucci to go beyond €1,000,000,000 in e commerce sales in the medium term.
Now let's look at our customers. We can say that all ages of customers contributed to Gucci's performance last year. Now of course, there's extra performance from the millennials under 35 years of age. This is very important in the short and medium term for Gucci. Also regarding the millennials, I've read a lot of things about the millennials.
There are 2 very important points we have to remember, retention rates and average ticket. This age category, the millennials, has the same average retention rate and average ticket as other Gucci clients. We're also making substantial progress in terms of enhancing customer experience, improving customer relationship at all points of contact. Thanks to new tools that we're rolling out to our entire network. You may have seen these in the stores already.
Furthermore, by using new technology, specifically artificial intelligence, I won't go into this in greater detail because here is what Jean Francois will be giving you more information on this. I'd also like to tell you the proportion of Chinese customers, you know that for several years now, they've been the biggest customer segment to Gucci. The proportion of Chinese customers remained stable last year at Gucci. And then more broadly more generally speaking, proportion of various nationalities in our revenue it's quite balanced at Gucci, representing all nationalities that are contributing to growth in Gucci Business. I'd like to come back to 2 points quickly that we talked to you about last June when with Marco, we did the Investors Day.
Marco brought up 2 very important subjects. Firstly, our digital presence. And on that point, I would like to say to you that we've continued making progress in line with the objectives Marco outlined for us, particularly regarding Gucci's penetration rate in social networks, indeed impressive. If you look at last year, the proportion of digital in Gucci Communications spend will continue increasing this year. This is the core of the communication strategy today at Gucci.
Marco also brought up an important point regarding the house's strategy, I. E, greater internalization, insourcing of the supply chain. Here as well, we're very much in step with our targets. This makes us it makes it possible for us to better adapt to volume growth, as you've seen substantial volume growth at Gucci. Furthermore, this enables us to significantly cut lead times, time to market for our products.
Now of course, all of this is being done by further increasing our quality requirements, which we have in every product category. Now in talking about Gucci, we can say that we're very confident in Gucci's ability to continue outpacing market performance. We, of course, confirm the objectives that we outlined for you before the summertime. To talk about Saint Laurent now. Here as well, we're in a very good position to meet our objectives that were also presented to you not in June of 2018, but in June of 2017 during the Investors Day by Francesca Benettini held with you.
Now to talk about Saint Laurent products. Here, we really reap the benefits of a unique stylistic style positioning, which shows the very exceptional power of the house's heritage, all the while with uncompromising modernity by their new artistic director there for 3 years now. Of course, Saint Laurent has a vast creative universe and the expression, the communication of its creativity has been entirely consistent over time as you've been able to see for yourselves. Thanks to this, Saint Laurent has maintained extremely strong desirability of this very creative category of products and also bring all categories forward such as accessories. At Saint Laurent, we can say for 7 years running now, their performance has been more than 20% growth per year.
Now commercial effectiveness performance of Saint Laurent now in terms of revenue per square meter is fairly high. And we can say here as well, we're benefiting from work that we're doing group wide for our brands, I. E, developing tools to further improve customer experience and, as I said earlier, to further use new technology once again, to further improve in store experience. At Saint Laurent, however, we've got a priority to extend the network. The Saint Laurent network is far from having rich richer here.
We're ahead of our road map in terms of store openings. We'll continue stepping up the pace for store openings. This, of course, as well will ensure future growth and performance at Santa L'Oreal. Communication. Here as well, Saint Laurent has increased its presence and effectiveness of its digital footprint.
We can say that this is now a key point in its communication strategy. Among other things, it's made it possible for Saint Laurent to really substantially increase the impact of many of its magnificent events, increase the impact of these events online. For instance, think of the spectacular fashion shows at the foot of the Eiffel Tower twice a year. This year as well, just as at Gucci, the proportion of budgets earmarked for digital spend at Saint Laurent will be increasing substantially. Now let's talk about Bottega Veneta.
Jean Marc said to you earlier, this is a house that we are transforming radically, an in-depth change in its development model. It's a house that we're currently changing into a comprehensive culture leather house. It's not the separate thing as previously, and so we consider we're doing this using the very substantial creativity. We've already talked to you about this. We're developing it further, especially in the ready to wear category.
It's a creative wager with the arrival last year of Daniel Lee to head their artistic department at the house. Danielle's creative power will enable us to further increase visibility and especially desirability of Bottega Veneta, which of course will boost all product categories furthering the development and growth figures. Specifically, customers, BAV is fortunate to have a very loyal customer base. Now the challenge for us today will be to maintain those customers, carefully care for them very actively and then even more importantly, further develop the customer base for this house in terms of demographics and also in terms of geography. Specifically, we'll achieve this by using this exceptional creativity of Janielle, of course, in ready to wear categories but also in the accessories categories.
Now to talk to you about the retail network. Bottega Veneta has a real plus point. Its network is at a good level of maturity. We've had the experience in the group. When you have this size network of distribution and you've got to transform and relaunch a house, it's a real asset to have this size network.
The priority here as a Gucci will be to address quality of network, to the store size. Our stores will be intending in the longer run to display all product categories. Also, we're focusing on quality of store location. I'd mention a new store concept will be developed starting this year by the Bottega teams. This concept in the future then will be rolled out to all the stores in the network.
Of course, we have waited for the arrival of products in the stores. End of last year and I think this year, we already made substantial investments in the new communication plan for the house, especially here using digital media, all the digital media. You may have seen the first campaign done by Daniel and his teams that came out about 2 weeks ago now, very different campaign, high impact campaign. I'd also like to specify the fallwinter pre collection presented in the showroom in December January was very well received by the fashion professionals. It's an important sign.
They appreciate the collection and there was a very good order intake. All these efforts, of course, should mean that 2019 will be a great year for Bottega Veneta. I specify that these products that are in the showroom, we delivered to the stores starting in the beginning of May. So the actual reflection of the repositioning in the figures will only be clearly perceived through the end of the first half and especially in the second half of 'nineteen. Now let's talk about our other houses.
I'd like to begin by talking about houses operating in Couture and Leather Goods. Now of course, we're thinking of Balenciaga and Alexander McQueen. Here as well, you can see that we're stepping up development and growth for these houses, turning them into global houses. First of all, I'd like to talk to you about Balenciaga. Last year, Jean Marc said this to you in his presentation, Balenciaga's performance was truly exceptional in terms of development.
It's a house that will go beyond substantially beyond the EUR 1,000,000,000 mark this year. Its potential is quite substantial indeed. For instance, last 2 years, we put a priority, 1st of all, on the most creative ready to wear products in footwear to breathe the momentum into the brand. This year, our priority will be leather goods. We're expecting new lines now to be launched in the markets.
This is a very important point for future growth. Men's products launched 2 years ago. Now the offering has a great deal of potential for further development. Store productivity, of course, the house was starting from a fairly modest level of productivity. There was a great deal of growth in productivity last year, and we can say that there's still a lot of merchant for further productivity increases in the future.
And the size of the network is an important point here as well, of course. This is a brand that's very much developing, 156 stores currently. This is going to be added to quite substantially. We're increasing our efforts to open new stores at Balenciaga. To move on to Alexander McQueen, here as well, we're making investments to step up and amplify the momentum for growth, which had a beautiful 2018.
We've developed a new store concept to be rolled out to the network. It's a concept that you can see at the Bond Street store, the 1st store to open last summer in London and this is a concept that we rolled out to all the other stores as well. Here you can see size of the network is fairly smallish. So of course, we'll be increasing the number of stores fairly substantially in the future, and we're stepping up the store openings program at Alexander McQueen. To move on to jewelry, Ward alluded to this briefly.
We've been investing in Boucheron for some time now. Last year, you saw a great example, among other things, the reopening of our flagship at the Place Vendome, spectacular reopening, the Hotel de Noce. I'd invite you to go visit it. In jewelry, I can say that this is certainly a unique experience. It's a tremendous exceptional showcase to display our products, especially our haute, javalier products, but also its high image high impact for international image at Boucheron.
And you can see just a few examples here. I'm not going to mention all of them, but you see the great potential of our houses. Now of course, the vision for each house is very important. You're all aware of this, but it's not the only way to understand our group. As I said to you earlier, the performance we achieve is also very substantially dependent on the quality and complementarity of our portfolio of brands.
This is a portfolio of an important point, which has a strong backbone, which is Gucci. You need a backbone, all major groups that perform well in luxury have a backbone. This is the case at Kering with Gucci. This is a backbone, which furthermore, we're getting stronger and stronger all the time. Surrounding that backbone are all the other houses that are going to be continuing growing and providing growth in future years.
Now of course, we have our major names, Gucci and Saint Laurent, that still have significant potential for growth. In addition, they'll be generating substantial cash flow. Currently, we've reached basically a normative level of CapEx and OpEx, and we can say this is going to be substantial source for resources group wide. And as you've seen, we've got substantial growth drivers, major ones. I mentioned earlier Bottega, Balenciaga, Alexander McQueen and Boucheron.
I could also mention Pomellato and Kiline in jewelry. Last year, they had a beautiful year of growth. Here as well, we're making further investments in boosting development at these houses. I'd also like to make a special mention for Kering Eyewear. You saw it in Jean Marc's figures.
Performance at Kering Eyewear has been exceptional, especially last year. This further demonstrates the ability we have at Kering to bring to the fore new concepts, innovative concepts and then roll them out worldwide. We've also got special know how when it comes to transforming and relaunching houses. I mentioned a moment ago, BV, it's also the case of Brioni. We're currently evolving Brioni's growth model, substantial changes there to bring that Maison back to sustainable medium- and long term growth.
Now in the area of This gives us an exceptional positioning in fine watchmaking. So we can really tap into meeting the long term potential in this industry, which has very much been the throes of change in recent years. It's a great way of observing the industry from this position. In the medium, we're working addressing both the medium and the short term. We're increasing manufacturing synergy between these two houses.
And of course, all the while, we're paying careful attention to maintain the unique market positioning. From beyond our houses, I briefly alluded to this during my introduction. My view is that our group's culture is essential in its performance, and it is based on a belief that I have that we all share at Kering, and that is that companies that can sustainably perform at top level performance are also the companies that have a very strong culture and this is the case at Kering and we're very proud of that fact. Our group culture is alongside the culture of our houses. They're mutually beneficial.
And this culture is based on a deeply held belief of ours. Regardless of company size, the company any company has to have a reason for its existence that goes beyond simple economics. And that's why over 10 years ago now, well over 10 years ago, we've placed great emphasis on corporate social and environmental responsibility. They're at the very core of our strategy. This is why we don't hesitate to act such as in our founding our caring foundation to counter violence perpetrated against women and we often take positions on major societal questions that are very important to us.
Our culture is based on managerial values, boldness, being steadfast and vigilant. Also, innovation is very much at the core of our corporate culture. We've been able to be proactive, look ahead to upheavals in our industry and turn these upheavals into true opportunities for our houses. You'll have understood ours is a culture that makes us more nimble, stronger and more innovative. We all believe in it.
It's also a culture that's being recognized in the outside world. We saw this recently with the publication of the new Corporate Knights report ranking Caring 2nd company across all industries in terms of being most responsible in the world. I'll hand over to Jean Francois now, who will be talking to us about the progress we've made in transforming this group. He'll be talking to us about some cross business initiatives, which he's implementing with his teams. Thank you.
Ladies and gentlemen, good morning. Thank you, Francois Henri. As you said, the attractiveness of our brands and the desirability of their products is more vital than ever. But that's no longer enough. Indeed, in an environment that is perpetually changing in order to continue to gain market share, we must offer our customers an exceptional experience with Omnichannel Services, with ever greater product availability, with a constant brand dialogue and constantly evolving the product offering.
We must also improve our processes, our systems, our tools in order to boost operations efficiency and profitability by helping our sales forces to increase transformation rates by boosting loyalty, by improving sell through, by maximizing inventory turnover and by optimizing operating costs. That's why since 2017, we've launched a number of major transversal transformation initiatives. They will complete in 2021, and I'll present the 5 major projects. The first Eagle is at the heart of our customer focused digital strategy. We want our brands to have full control of their e commerce activity.
We also want them to put in place a fully fledged omnichannel approach to strengthen the relevance of their merchandising for online sales to become more self reliant and flexible in developing functionalities in order to facilitate on the one hand the alignment of sites with the full digital ecosystem and retail integration. We're also implementing key synergies by developing an e commerce tech platform. And in this respect, you'll note that some of the tech solutions are similar to those used by Gucci to develop its own platform in parallel. We're also building a bespoke B2C logistics organization. We're also improving the customer relationship management scheme, and we're extending the area of responsibility of our e commerce expertise centers to assist the houses and also to pool best practices and tools.
All this will improve our online sales, will boost our operational efficiency and consequently improve the financial contribution of e commerce. Houses will be able to extend the product assortment and offer an exceptional experience as well as better availability and superior service. They will have a 3 60 degree vision of the customer consolidated and real time and will be able to establish a special continuous quality relationship with customers. Furthermore, pooling and maximizing inventories will boost sales opportunities but will also swiftly reduce WCR. Lastly, our gross margins will increase and our cost base will be optimized.
Consequently, the contribution of e commerce for Eagle will be neutral as of 2021 and accretive subsequently. 2nd initiative aims at improving the relevance, the quality and the commercial effectiveness of the interaction that our houses have with customers in and outside the store. In store, Lutche is an application that we developed in conjunction with Apple. It improves the in store conversion rate whilst facilitating the work of sales staff. It boosts the effectiveness of our clienteling initiatives and generates an increase in the average ticket.
Lumiere is a sales force tool that uses more relevantly and effectively all our customer data in order to better orchestrate CRM campaigns. This tool generates higher contact rates and heightened conversion rates. Furthermore, the enrichment of our customer data allows us to increase our precision in our advertising campaigns. Lastly, Kering Signatures is aimed at internalizing, professionalizing and moving up range, upscale our customer service by offering a unique entry point to all our houses. All our brands are implementing an effort in this direction with varying degrees of pooling depending on the regions.
This third initiative is aimed at providing us with additional expertise in Pioneer areas. Firstly, as Francois Henri indicated, in artificial intelligence, where we can make progress on a few use cases that we identified last year such as targeting high potential customers, product recommendations or forecasting reassorts. So last year, we developed a number of proof of concepts to check that this potential progress was achievable. I'll present to you now the POC identifying high potential customers.
One of
our houses wished to establish an opportunity to meet customers who'd only made one purchase explorers, a long term relationship for this explorers a long term relationship. For this, they decided to invite these customers to the store to offer them a gift and allow them to discover the collection. A meeting is viewed as successful if it gives rise to a purchase in the next 3 months.
In order to target the customers with whom this additional investment was most likely to succeed, our team led by Gregory crafted an algorithm making it possible to gauge the potential for each client based on transactional data. Then we selected 14 stores from our 3 main regions. So regarding 7 stores of these for 7 of these stores, the customers were identified using the algorithm. For the 7 other stores, the customers were identified by the sales staff. Then next, we measured the percentage of Explorer customers who did make a purchase in the house within the next 3 months.
The rate of repurchase of customers identified by the algorithm is almost twice as high as the repurchase rate of customers selected by sales associates and 3x greater than the customer explorers who had not been called, contacted. So you can well imagine this project was accepted and as other projects, it's now being rolled out. Next, we're also developing other projects with the houses to look at the potential for use of artificial intelligence. A second area where we're doing a great deal of work is in CRM. We want to really perfect our customers' omnichannel experience and especially improve the targeting of our customer relations operations.
We're assisting the houses to fine tune their CRM strategy and optimize implementation of their campaigns. In the 3rd area, the area of innovation as such, we are focusing our efforts on developing and perfecting new materials and manufacturing processes. We're testing innovative models like leasing, renting, subscription, previously owned items or home services. Furthermore, we're also looking at using technology to really change and transform our processes, such as at Kering Eyewear that intends to use blockchain to certify its lenses and frames. The 4th initiative is designed to adapt our logistic capacities, 1st of all, to be proactive, anticipate growth in volumes and also to improve the meeting of our needs in terms of omni channel availability as well as collections management.
We're going to make a quantum leap in our logistics. First of all, by and this is a priority tackling some operational difficulties. Secondly, by reconfiguring, fully revamping the logistics system and also modernizing our tools, More broadly, we're revamping our processes and our operational models, taking onboard best practices from Luxury but from other industries as well. The financial considerations are quite substantial and our ambitions are quite substantial as well. In the longer run, unit logistics costs will go down significantly, inventory levels will go down significantly and lead times, B2B and B2C lead times will be cut.
The last initiative, modernization of information systems, is not only making possible all the other initiatives, but also will make it possible for all of our business areas to make progress and further improve their operational efficiency by adapting to strong volume growth, by using more performing technology, by increasing efficiency, by using real time better quality reconciled data and also all the while enhancing cybersecurity. Value for money of our IT is going to improve. Our tools will be less complex, better adapted, more scalable. Our services will be more responsive, more efficient. This will reduce risk of business discontinuity and risk of systems obsolescence.
In the end, this will help reduce costs. As Francois Henri illustrated for us, all of our houses have a great deal of leverage for further growth. Our platform for progress, as I just explained it to you, will help us further improve efficiency. It's going to help us step up growth during times of expansion and also make it easier to quickly adapt during less favorable times. This model, along with our financial discipline, makes it possible for us to have a sustainable high level of profitability.
We continue adhering to a balanced policy in terms of capital allocation, ensuring we have a good trade off, a sound balancing among houses. We make a constant effort to deleverage and we also have a straightforward shareholder return policy. On that point, yesterday, the Board of Directors gave the go ahead to a proposed dividend of €10.50 which is up 75% compared to the previous year. You'll remember in 2018, we saw the nonrecurring payout of Puma shares. So now we are coming back to a normalized payout rate of around 50%.
Lastly, we have a current share buyback program, which is underway. At the end of last week, we had acquired 532,000 Kering shares at an average price of €396. As you can see, we are very much able to adapt to our environment and our markets. We invest appropriately with a long term view. Therefore, we will be in a good position to move on possible opportunities for external growth that would create value if there are.
Just as for our operational strategy, our financial targets remain unchanged. Growth in revenue above outpacing the industry and improvement in operating margin. Thank you.
Before we begin the Q and A session, just a few roles when you ask your question. Kindly state your name and your affiliation. And as
MainFirst. Three questions, please. First of all, with regards to Gucci, you've talked about managing a soft landing in 2019. You've seen some very strong leverage in the 2018 year. If you're happy with consensus at around 10% growth, it looks like the implied leverage is quite low for 2019.
Why is that the case? Is it a question of stepping up the investments? Or do you think that there's room to exceed the 40% margin as early as 2019? My second question is around M and A. You've talked about focusing on organic growth, but you've also talked about not waiting for the market to consolidate itself.
You won't look for a brand that will cannibalize your existing portfolio, but also want something potentially of a reasonable size. Could you talk a little bit more about what the parameters on size may actually mean in terms of category, in terms of revenue, that would be very helpful. And then my final question is with regards to the Puma holding that you still have in Kering, that's roughly 15.8% still. That's probably non core now. The lockup expired in November 2018.
How long will you hold on to that? Thank you.
We'll answer in French. Our English is very poor. Mine, in particular, my English is very poor. I'll start with the first question before handing over to Jean Francois. Francois Henri, so on the question of the growth of Gucci and the operating leverage.
As Marco has indicated for a long time during the Capital Market Day back in 2016, but once again more recently, given the basis of comparison, there's an ambition that remains unchanged to outpace the market and to grow twice as fast as the market. I think the growth drivers that were mentioned by Francois Henri, both in terms of product category as well as initiative around the work undertaken on merchandising, marketing, advertising and the use of tools mentioned by Jean Francois to deliver better productivity lead us to believe that we have this ability at Gucci to outperform the market. So twice as fast as the market today, there's an assumption that the market's going to grow. If I believe the experts who can assess things, that we'd be around 5% to 6% growth rate. So we can assume that expected growth for Gucci going forward is perfectly realistic at this stage.
Now we've been many to mention that we're in an environment that's more challenging today, more complex. We have to see if the market is going to respond as it's expected this year. In that context, as you've seen, we did better than expected on profitability, I believe, significantly better at 39.5%. So if market conditions were those we expected and that Gucci delivered that growth, as mentioned, it's highly likely that in 2019, Gucci will be in a position of reaching this threshold of 40% profit margin or even better if we remain in that growth trajectory that we expect. As you've seen for 2 or 3 years, allow us the pleasure to surprise you pleasantly each and every time.
That was for the 10%. As M and A, as you've seen today, we have the significant financial wherewithal increasing steadily. So we're in a position, of course, to seize opportunities. Let me remind you that the priority of the group, and I said this in my presentation, is organic growth of our houses. It's very significant.
We're far from having level maturity levels including Gucci. So it's 1st and foremost on that that we're focusing. Now of course, if opportunities were to arise and once again consistent with our portfolio rules in terms of positioning, the stylistic code of the houses. We'll, of course, see the opportunities that arise. Not only do we have the financial resources, Jean Francois, we have platforms that can receive houses and to seize the potential quite rapidly.
So once again, we don't need that to grow far from it. You've seen very strong years of growth without M and A. We have the means. We have the resources. If the opportunity meets realistic price.
Obviously, we're not going to indulge in a price race as we've never done up till now. Jean Francois on Puma perhaps. Puma. Puma is a brand that works very well. As you know, they'll be presenting the results in 2 days' time.
We're very confident in the brand trajectory. And so there again, as we've said, we're very pleased to be a Puma shareholder. Nevertheless, we'll be flexible and will be and agile too will be able to respond to opportunities that might arise.
Next question, please. Yes. Marfan Beige, HSBC. Three questions. First of all, you talked about market growth.
Currently, we get the impression there are 2 markets, at least in the area of soft luxury, getting impressions of Gucci and Louis Vuitton and then the others. How do you explain that in spite of size, these brands manage to grow much stronger than overall market growth? Is it because of what Jean Francois was saying, developing CRM data scientists and so forth. Another more short term consideration to achieve 10% when you just reached over 30 5%, 36%. How's the landing?
Could you tell us what about the beginning of the year? How has it begun? Have you seen big changes in certain regions or among certain nationalities? And then my third point on Bativ Beneta, encouraging signs, yes. Can we take it that revenue may grow this year and then maybe further and but maybe further investments this year?
So the margin of 22% in 2018 may go down further? Or do you feel that's a floor to some degree? Thank you to Antoine. Now yes, there is a market difference, asymmetry in terms of growth. Groups such as multi brand groups tend to be growing faster.
I think it's the multi brand model that's reaping the benefits. We've got a very balanced portfolio. We mustn't forget size, as I see, isn't the main point. Also, there's creative risk taking that's important. As you saw at Kering, Saint Laurent, Gucci, Balenciaga now, we've taken creative risks, measured risks, but substantial risks, which are reaping benefits, now being rewarded by the customers.
That's what luxury is all about as I believe luxury sometimes forgot that component. Luxury is 1st and foremost about creativity before being about marketing. Now of course, as Jean Francois has explained, in addition, our contribution is group wide platforms. As I said, these are growth drivers for the houses. They're ever more important.
As Jean Francois was explaining, we are now gaining ground or ahead of the loop, setting up the platform. We talked about customer experience. We're also working on supply chain improvements. So we can say that we've got this expertise when it comes to execution, And we're growing this expertise quite substantially in all the houses. That's why I mentioned earlier the backbone idea.
It's essential to have a major brand. All these groups that are major ones always have a major brand. That's where you can create the experience, you can create your best practices, test them out, have them tried and true and then send them out to the other houses. That's the key part of being a multi brand group such as Kering. Onto expectations for 2019 in Gucci.
We also have cautious budgets. We always like to beat our own targets. The beginning of the year has been good, in line with Q4 and well above. We have to be conscious, of course, we know the Chinese New Year is 2 weeks earlier this year compared to last year. And as always, the run up to the New Year's, January reaps the benefits of that run up to the Chinese New Year.
So it's difficult to draw full year conclusions in this space. I mean, the beginning of the year is good, very good. Bottega Veneta, Francois Henri, remind us that this the first collection presented at a fashion show will be during the Milan Fashion Week on February 22nd. Products will then arrive later in the year. So we can say we're still in a period of transition.
Turning around revenues, improving revenues should actually start happening once we've continued making progress in our in store work, continued investing in marketing communication and the products have arrived. So we're talking about a phasing toward the 2nd part of the year. And you're absolutely right, there's an investments phase that's slated. We've always said so. We said we'd be able to bring the brand back on track, reorganizing structural changes to underpin the relaunch.
We mustn't expect profitability for the brand to improve in 2019. Possibly, if we view it's necessary to further support this, there could be a dilution to further support the relaunch. There might be further slight dilution in profitability. Next person, please, wearing red.
Thank you for taking my questions. It's Susanna Puj from Berenberg.
Can you speak louder, please?
Yes. Is it loud enough?
Perfect.
It's Zuzanna Puj from Berenberg. I have three questions, please. The first one on Gucci, sort of a bigger picture. I think it's very interesting you mentioned the plans to launch the high jewelry category. And I was wondering if you could share with us a little bit more detail on the development of that sort of high end business at Gucci, so exotic skins.
Because one of your bigger, slightly bigger competitors has actually managed to build up over the last couple of years almost like a EUR 1,000,000,000 business from that business that we actually don't see on an everyday basis. It sort of happens behind the closed doors. So can you share with us a little bit more on your plans and high end business for Gucci, high jewelry and how this could contribute to growth in the near and the long term? Secondly, on e commerce, it's quite impressive, 6% of sales, and you also have further plans how to develop that. But can you tell us also how big is the e commerce business with 3rd party platforms?
And also if you plan to change the way you work with some of them, meaning you would maybe have a preference for shop in shops rather than actual wholesale accounts online? And finally, question on M and A, but slightly, I would say, asked differently. Is there any specific category where you feel you're underpenetrated as a group but would be quite difficult to develop by one of your brands, meaning you would have to actually acquire something? Thank you.
Well, as I said earlier, we have new categories that are arriving. We have won high jewelry. You need to bear this in mind that is following the success at fashion jewelry at Gucci that has progressed hugely over the past 3 years and supplements the setup with a very high end high jewelry offer with the same creative spirit that of Alexandro Michele will, of course, contribute at the high end jewelry to boost performance and Gucci, but in terms of image will be a key contributor. As always, we're very vigilant, making sure that the average prices are steadily increasing, which is the case at Gucci even if, as I said earlier, the bulk of the growth was driven by traffic increases, which is just the result of the attractiveness of the house at global level, and we now have work to do. We have potential there to generate growth through improving the value component of the house.
So in all categories, we're working the high end items. You have the example with jewelry, but you mentioned the special precious skins. It's work done in each category to increase the average price in each category and have a growth model that is balanced between growth through volume and growth through value. It's key for luxury brands, and we're working flat out at Gucci, and we still have a lot of potential to tap at Gucci. Jean Marc, a word on e commerce perhaps?
Well, several points in your question about e commerce on penetration in our sales. In fact, it needs to be assessed brand by brand. And here, we have a very marked diversity. The strongest penetration is at Balen and Boucheron has barely begun. So I mean, it's really practically nothing.
However, all our brands are rolling out very significant efforts to grow their online sales with the Eagle project for brands Saint Laurent, Bottega, McQueen and Balenciaga. And Gucci has its own initiative, so this is something that we're pushing a great deal. To the second part in connection with that, it's an ecosystem. So the both sales on our own sites but also sales in these on the sites of our distributors, on the specialized sites and the verticals, in particular in China. And so we have approaches that are tailored to each of these situations with one constant concern, which is brand protection.
It's absolutely key for us to protect our brands, be it in terms of exclusivity or in terms of pricing. And so we adapt depending on the region, depending on the distributor. We try as much as possible to have the greatest control over distribution on certain sides where on a concession basis. So really the priority is that exclusivity and brand protection. On the third part of your question, are there categories that would require M and A?
If the question is on categories over and above the jewelry, leather goods, jewelry, no, it's not on the cards for Kering today. We have high potential today by brand. If the question regards the universe that we're involved in today, we consider that we have the necessary know how. It was the case we didn't do it through M and A, but through creation. It was the case of the Eyewear category 4 years ago where we considered that the internalization became necessary if we wanted to continue to grow that category, that it's a very important category in terms of accessing the brands.
What I said earlier that we're set to do far better in the perfume and beauty universe. We're working with our partners L'Oreal for St. Laurent, Coty, for Gucci, BV, Balenciaga in order to do a lot better, notably at Gucci, where this license remains extremely modest.
Question number 3. Go ahead, sir.
Luca Soca from Bernstein.
We've heard a lot of great ideas on development and growth, Gucci, opportunities in cosmetics, fragrances, distribution through travel retail, also jewelry. I was wondering, though, there are opportunities. Have you already factored them in? Are they included in performance metrics regarding Gucci's leadership? I think the targets we heard in Florence are being met beautifully.
I suspect new objectives need to be found for Marco's teams. I was wondering about the LUKA effect. Now Bottega Veneta, let me just say that I'm getting tremendous feedback on the pre collection. Now you did say that on the one hand, there was a focus on the positive points, but then Jean Marc seems to me was more cautious in talking about Bottega's opportunities. Do you have an eye to taking WCR risk to support Bottega's growth in H2?
Apparently, it would appear to me there's a major opportunity for a rebound. Then thirdly, it's fascinating to see all these developments, basically sort of scientific developments that you're using to craft a platform and a method at caring, which will help you stand above the competition. What's the challenge, center versus houses, to come up with new ways of doing things, reinvent the way of doing things? I, for instance, really like the idea of conducting these experiments and demonstrating to the teams as a better way of doing things. Are you considering inventing new ways of doing business this way and moving in that direction?
Mr. Luca Carreuil. Thank you, Luca. And I've pertain to Gucci. You'll have understood at Gucci, the medium term, sometimes short term ish targets are often reached before the medium term.
That's a surprise effect we like to have both within the group and outside. So yes, we're ahead of our road map, more per €2,000,000,000 in revenue last year. Of course, we're resetting objectives. We did this regularly, very precise in a very precise fashion. Of course, we're not going to leave it at that once we've met an objective.
So absolutely, yes, Marco and his teams have internal targets that have been adjusted, taking into account achievements at the house. Now, yes, on Bottega, you're right, feedback on their pre collection, both from professionals in the industry, their perception, but also in terms of order intake, feedback has been great. Yes, there's a market segment that's very interested in this style of creativity. There's strong demand for this, which isn't yet met by the brands. Bottega has a true market opportunity and it's moving on that.
And you've seen that. Furthermore, Danielle isn't just going to leave it at ready to wear lines, but is also if you saw the showroom, you saw this, is also working on accessories lines that are being changed in a big way. We've got great expectations of this work, this repositioning, expecting major medium term effects. Now here's fault. This house has great potential.
We're not just doing this for the current year or for next year. We're doing this for the next 10 years. It's a house which will grow substantially. So yes, we're not just we're not doing this to hold back growth of the house and holding back reducing open to buy. We will establish requisite resources to make sure there's product availability throughout the store network.
This is part of the OpEx and CapEx to be done in the type of relaunch. We have also said this during our communication. Henceforth, we've stepped up investments in the house. We said this, again, because the potential is quite substantial indeed. So we're remarking the requisite resources that are in line with that potential of Bottega.
Jean Francois will come in. Yes, on this point, it's a subject that's very similar to what we do in all other areas. In other words, at the corporate level within the group, we've got a center of expertise which provides services to the houses. It's provided for them on their behalf and together with them. And just to add a point what Francois Henri said about group of culture, we've also got a culture of winning.
When we show something demonstrated to brands and we persuade them that they'll win out. They take it on board right away. It's a winning situation as opposed to if we show them something that they're not sure there'll be a winner, then they drag their feet and that can happen too. So that's what it's all about. It's an ongoing dialogue, a to and fro.
It's a question of collaboration, working together, and this works very well indeed. As Francois Henri said, Gucci very often is the spearhead. They've got teams. They've got time to work on certain projects that McQueen might not have the time or Brioni might have the time to do so. But once the brands are absolutely persuaded that seasonality is good for them, then things really move ahead full steam.
Next question from over there. Yes. Morgan Stanley. Just Francois Henri, just to pick up on BV. In your introduction, you said you wanted to grow the brand from leather and Couture to Couture et Maroquinery.
I think the mix is 95.5%. Without giving me the figure, maybe a time line for the transition. Back to Boucheron, you've externalized loss in 2018, given the investments that you made. The delta that you'll have in 2019, will it be significant in terms of the group or negligible between 2018 2019?
As
As regards BV, our model is the model that we've applied at Saint Laurent, Gucci, at Balenciaga. It's this creative model. As said in my in the terms I used earlier, the most creative categories in our business are the ready to work categories. That's where we create the brand desirability. It's not measured through the weight of ready to wear on revenue that's pretty modest at Gucci.
It's far from being the prime category. However, in terms of desirability, it's the great category. It really is that that drives the house, the storytelling and builds customer loyalty. That's why BV won't remain at 5%. I can guarantee you that it's going to grow spectacularly because the base is very modest, but it won't represent 50% of the brand either.
A threshold of around 15% at BV is quite realistic to have this desirability that will drive all categories. As I said, Daniel doesn't just deal with ready to wear in our creative model. The creative director oversees all product categories. It's a model that we apply to all our houses, and that creativity will also be rolled out, as Alessandro did in the accessories categories. He's already begun to work on the accessory lines.
That through this creativity, with its overall setup, that will push the house to new heights, no doubt about it. On for Boucheron, we have a plan, a strategic operational plan that provides for a considerable investment phase and this plan also set to deliver an improvement next year. This improvement will be very significant for Boucheron, but not at group level, not yet.
It's Louise Singlehurst here from Morgan from Goldman Sachs. Apologies. A Freudian slip. Another question in English. I apologize for my lack of French this morning.
But Jean Francois, could you talk to us a little bit more about the digital side? And I know Marco was talking about virtual concessions or e concessions last summer at the Capital Markets Day. But what that means in do you And can you also talk about the use of 3rd parties and how they may also help with you in terms of CRM and data collection for the broader ether of the group? Thank you.
First of all, on e commerce, as I mentioned earlier, the guiding thread, the light motif in the entire ecosystem is the brand preserving absolute exclusivity of the brand. Now versus in terms of our online distributors partners, this is a major concern we bear in mind, which means that we must control various components such as purchasing, pricing and, of course, end of season prices. But there are other qualitative elements in this control, site aesthetics and so forth. Therefore, yes, as Louis said, we have models, the conventional wholesaling models, concessions and so forth. But we are inventing, preparing alternative models, sort of hybrid kind of models, which would include a way of operating that would be better suited to e commerce, which is very quick, very interactive, enabling us, therefore, to maintain exclusivity, protect brand and be better suited to the overall environment, and we're very much working on this.
Also, I mentioned it's not a customized approach, but let's say it's tailored to each of the partners. We don't work with jd. Com in the same way as we'd work with YOOX NET. So we adapt and tailor all of those adapted.
Next question from over there, please. Kepler Cheuvreux. I've got two questions. The first on Saint Laurent. Do you see a particular reason why you might not be able to reach your long term margin target of 27% as of 2019, given the changes that we've seen in 2018.
And on Gucci, so the very good start to the year. Of course, you're urging caution given the timing of the Chinese New Year. Could you nevertheless say if you've seen the same dynamism in January into early February for U. S. And European customers?
And it's just a week into February. For Saint Laurent, yes, I mean, I absolutely I mean, I see no particular obstacle that would prevent us from reaching the margin targets that we have for the house. I even consider them somewhat prudent, but targets are there to be reached. No, quite frankly, I'm very confident in the ability of the house and its teams to deliver the profitability target short, medium, long term for Saint Laurent in particular. We're going to have threshold effects in terms of size.
You've seen at Gucci the impact of threshold effects on profitability of our houses, and of course, we'll have that with Saint Laurent. For Gucci, as I said earlier, the very good start to the year, in line with Q4 trends in terms of customers, very strong momentum from the Chinese customers, American customers trending. Well, Jean Marc, do you want to come in on Jean Marc's always the moderating influence on the discussion here. No, I'll officiate in that capacity. I think that what we've seen at the end of Q4 is indeed greater moderation in terms of consumption of European customers that remain positive, but more modest growth that was also linked to very high basis of comparison.
Its European customers were the first to adopt the new Gucci aesthetic, so very much in the lead there, European customers. And what we've said is this persistent weakness that we have mentioned previously from Middle Eastern customers, but start to the Chinese customers leaving aside the base of comparison effect. If we look proportionately over 2, 3 years, Chinese customers trending very well as well as Asia and trends with U. S. Customers sustained.
That's true for Gucci or for all brands. Just back for a moment to Saint Laurent. So the Capital Market Day target was 27%. Francois Henri repeated rightly that the brand clearly has the potential to reach that level. The question more that you put concerned 2019.
The development model of Saint Laurent today is the following: in store productivity is already high, and so there we have like for like growth that's very robust and it's important to say, and that was in Francois Henri's presentation, we need to consolidate the brands in certain regions, certain distribution channels while the brand isn't sufficiently developed. Francois Henri mentioned travel, retail for Gucci. It's even truer for Saint Laurent. So we have a combination where we have very profitable stores that will continue to grow with very robust growth, but not double digit for the existing stores and store openings that, by definition, initially slightly dilutive. That's why this combination is such that we've always been very upfront, transparent, stating that growth would be far more gradual in terms of profitability.
We maintain the growth track, and the target of 27% remains fully valid midterm. Is it as of 2019 that it will be reached? It's a little too soon to say.
Rogerio Fujimori from RBC. I have three questions on Gucci. I was just wondering if you could comment on the level of marketing spending on Gucci in the second half and particularly Q4. Is more or less in line with sales growth? The second is that you opened, I think, a net number of 11 stores for Gucci in 2018.
Should we expect a similar number in 2019? And my last question is on Chinese e commerce growth for Gucci. It should be a material contributor in the Asia Pacific story in the next, say, 2 years, Chinese e commerce for Gucci? Thank you.
Yes, you know yes. Well, if we look at the brand trajectory, there was a target to support growth by reinvesting part of gross margin gains in marketing communications. Now not only reallocating budgets toward digital, as Francois Henri said, and we see the return on investment here considering digital penetration that Gucci now has. But in addition, we've continued investing in 3 60 degree spending. So we continue with the investments and these efforts, but the brand can't spend more than it's able to do so through its teams.
So we're in a conventional situation whereby after a stage when communication and marketing spend were fairly variable, they're a lot less variable now. And this is why our view currently is that we have an arrangement that's up and running, a system that's there that's highly structured, enabling us to support communication efforts. In 2019, we'll continue investing in this line item of spending. However, it's like many other spending line items and costs at Gucci. We've reached a level of maturity, a normative level.
So yes, we'll continue investing in a relevant fashion appropriately as we always have. In the year, depending on how sales develop, we may invest possibly a little bit more to support sales. But at any rate, it's no longer the same situation as we saw, especially in 2017. We all have observed operational leverage that was a little different from what you were expecting. And in 2018, it was more significant leverage, but it's because we're reaching a given level of organizational maturity and maturity in terms of spend.
Now store openings, a net number of 11 openings, if you take into account closings and openings, net of 11 openings, yes. Plus, there were some conversions of doors, points of sale that previously been operated in a wholesale fashion. Actual real store openings, slightly under 11 actually, if you look at the overall geography coverage by Gucci stores. Next year, pretty much in line with what was presented by Marco Bisserie, basically an idea of refurbishing existing stores. I'm surprised you didn't ask a question about this, ask how many stores have the new concept.
Let me tell you, 43% of the stores now have the new concept. So you don't need to ask a question if you have that one. We'll continue with refurbishments. Now store enlargements will continue as well, also relocations. Actual percentage of growth in stores, you mustn't expect significant growth in number of stores.
It will be same order of magnitude when it comes to store openings. Your last question, I think, if I understood it, was on presence and penetration in China? Internet, yes, e commerce. Well, two points. Firstly, it's important to make this point, the store network in China has not been increased, hasn't grown, and we're actually reducing it.
That's been the case in recent years. So we can say that we're stabilizing in terms of network of stores in China. So there, we don't have any plan either to significantly open a large number of stores in China. There will be openings as part of our discussions with owners and mall developers in China, in China and Hong Kong, Greater China. Geography coverage, though, should remain basically the same.
However, we'll continue investing in the e commerce platform, certainly Gucci, which has developed beautifully in 2018. We haven't yet reached maturity, similar to level of maturity in some other countries. Currently, we're below average in terms of online penetration. I'd remind you, for brands such as Gucci, it's around 6% to 7% retail sales conducted online, well below that in China though because we're still developing that activity. But growth rates are such that quickly things will be developing in our various plans, indicated by Jean Francois.
There's also work that's going to be done on logistics, make it possible to cut lead times, product availability in China because sometimes what can impede development of online when brands develop organizes directly, It's a question of logistics that can be an impediment. So we've already made a step forward and working with a Chinese partner, particularly on fulfilling, so prep and shipping of packages. But we also need to send out more inventory to the regions, have the flows who are more present. This will be one of the prerequisites for step up of online presence. But in terms of platforms, platform efficiency in China, for Gucci, we're very satisfied already with the developments in 'eighteen.
I'd like to specify in Jean Marc's answer. When we talk about Gucci penetration in Chinese e commerce, which is below the 7% we have worldwide, it's a market situation. It's not a special weakness at Gucci, all brands. Currently, the Chinese market, when it comes to luxury products, is fairly modest. This will catch there will be catch up effect in all likelihood in the medium, long term.
Penetration rates will be similar to what we have elsewhere, 7% globally, 15% in the U. S. We're not there yet, And it's the case for everybody else as well. We're preparing that. We're getting ready for this, so we can reap the benefits of that catch up effect in e commerce for Chinese customers and luxury products.
Next question please. SocGen. Can we just return to the KPIs that will allow the Gucci to reach €10,000,000,000 in revenue. There are 2 that you mentioned in June. E commerce, you mentioned earlier, over €1,000,000,000 objective in revenue.
Are we still with that points to reach €10,000,000,000 in revenue. Are we still with that target? And how much has been achieved since 2017? You said that each point brought in about 8% retail sales. Is the has the ratio been verified and confirmed?
Another question. During the press, you discussed at length inventory controls could be down. We're at 10% WCR revenue lower than previous years. Is that set to decrease further? As regards to e commerce, I mean, it's part of the reset of the targets.
You saw the performance in 2018, 70% growth given the outlook that we have, particular what I just said about China. Indeed, we're setting this midterm target of topping the €1,000,000,000 mark on e commerce, the Gucci platform, slightly above what was presented. On the conversion rates, we don't publish our conversion rates in a detailed manner. We've progressed last year quite significantly. What's important once again is to clearly realize that the bulk of growth over the past 3 years is through volumes, through traffic and volumes, far more than through improved conversion rates or through retaining customer retention, that is customers who bought in 2 consecutive years, how much in 2017 or 2018 versus 2017, we're making strides there.
We consider it's part of 2 KPIs where there are room for maneuver in terms of improvements, very significant at Gucci, But in a first phase of development, as we've just seen, it's all about meeting this influx of traffic to process the traffic or the conversion rate will not the conversion will follow. So we're expecting significant improvements in conversion rates that have increased. We'll continue to grow also customer retention rates. Our cross selling, of course, between products is also a key factor where there's potential. There was a third point in your question.
On inventories on the stock level, yes, Jean Marc perhaps? Well, just on inventories, you take a ratio, the end a year end ratio that obviously is that we derive from looking at the balance sheet and the P and L. But what we're interested in is average inventory over the years, the relevance of inventories. Today, what we're aiming for is to accelerate the lead times, as Jean Marc pointed out, so that products arrive at the beginning of the season and as soon as early as possible in the season so that the inventory is of good quality and as long as possible. So that not only it's optimized, but that it's sold at full price.
So all that will reduce the stock inventory turnover ratio through better forecasts, better sales forecasts and through optimized supply chain and increased conversion rates. So there'll be a decrease in stock inventories. Thank you. We're it's getting on, so we're going to end the Q and A session. I'd like to thank you for your presence, those of you who traveled from afar, to be with us tomorrow.
I hope you've seen our confidence in the group's future performance. And we'd like to surprise you throughout the year. And we will continue with the teams of Claios to keep you informed of the group's performance every quarter. Thank you. Have a good day.