Bonjour. Good morning. Welcome to the presentation of Kering's annual results. In several respects, 2017 was a phenomenal year for Kering, and especially for our houses. I don't know of any other group of our size that saw such substantial annual growth in 2017, which is to say that last year we created over 3 billion additional EUR in revenue, EUR 2.3 billion in luxury alone, and we did this in a fully organic fashion. We generated over 1 billion EUR in additional operating income in 2017. Above and beyond Gucci's spectacular development in all of its markets, Saint Laurent continued its sustained growth. Bottega Veneta continued its redeployment. Balenciaga is very much making good on its promises, and all of our other luxury brands have also grown. We can say that 2017 was a year when we demonstrated very clearly the power of our business model.
It's a year where we very clearly became number two of the luxury world. We can say that our vision now influences the entire industry. 2017 will also be the year of the completion of our transformation into a luxury pure player. You know, at the beginning of January, we said we intended to pay out to Kering shareholders most of our stake in Puma. We have a sound financial structure with the generation of cash flow, which is quite substantial. We felt it made sense then, for Kering shareholders who supported us for the years of Puma's recovery to reap the benefits of the substantial potential of the Puma brand. We can say that growth at Puma is just at its beginning stages.
We're going to further step up attention resources that we earmark for our luxury brands so that they can boost their development and value creation, further strengthening them thereby. In 2017, we achieved things that would've been unimaginable just a few years ago. This is a success that we owe first and foremost to our 44,000 employees. Together, all of us have very much made good on our signature, empowering imagination. We're talking about a boundless imagination, an imagination for both creation and execution, an imagination which has really enabled us to take flight. I'd like to hand the floor now to Jean-Marc, who will run us through our 2017 results. After that, Jean-François will explain to you the ways and means the Puma operation is being carried out and our group's new profile.
I'll take the floor once again to talk to you about our intentions, our strategy, and of course, we will field your questions after that.
Ladies and gentlemen, good morning. As François-Henri Pinault just indicated, 2017 is a record year for the operating performance of Kering. Revenue stands at close to EUR 15.5 billion, up 25% on a reported basis. Currency effects are unfavorable to the tune of EUR 221 million, weighed exclusively on the second half because they were slightly positive in the first half. There is no scope effect on the year. Organic growth, like-for-like and at constant currencies, reaches over 27%. It is the best performance of the group since the acquisition of Gucci. Let me state here that Kering Eyewear contributes 2.2% organic growth at constant currencies. Trading was very strong with sales at EUR 352 million in contribution to consolidated revenue of EUR 272 million after elimination of intragroup sales and royalties received by brands. Group revenue remains well-balanced in terms of geographical distribution. It has changed somewhat year-over-year.
Europe and Asia Pacific gain a few points at the expense of Japan. Essentially, these two regions now represent 33% and 27%, respectively, of revenue, thanks to comparable growth rates in excess of 32%. Japan at less than 10% of the total, but saw accelerating trends throughout the second half. Lastly, North America, which contributes to 21% of the total, is up 23% and delivered a good fourth quarter. Recurring operating income is up at EUR 2.95 billion, a remarkable performance of 56% up over 2016. In absolute terms, that is an all-time record for the group. Operating margin reaches 19%, up 380 basis points over 2016. At EUR 2.32 billion, free cash flow doubles over 2016, with a CapEx level maintained at around 5% of group revenue.
In accordance with our capital allocation priorities, we have devoted the bulk of this cash generation to reducing our net debt down over EUR 1.3 billion and stands at around EUR 3 billion. That is a ratio of 0.9 times EBITDA. This year, we really did deliver on the priority given to organic growth. For the group, it was both sustained and constant throughout the year. For luxury, annual growth stands at 30% like-for-like. The second half growth is even slightly higher than that of the first half, in spite of a more demanding base effect. As to sport and lifestyle, performance was very steady throughout the year, with like-for-like growth of the order of 15%, Puma up close to 16%. The strong increase in revenue was accompanied by an even greater increase of ROC, up 56%. Contributions of luxury, sport, and lifestyle are respectively up 50% and 90%.
The corporate and others line shows an increase over 2016, notably of an increase of the long-term incentive plans, reflecting the rise of the Kering share price in 2017. The contribution of Kering Eyewear is slightly positive for the period after amortization of the indemnity paid to Safilo. All in all, ROC is sharply up. You have the corresponding changes on the slide in millions of EUR. Turning now to greater detail of our businesses. In luxury, increase of revenue 27.5% on the like-for-like basis is hampered by negative Forex effects of over 2 points on the year, with an inversion in the second half that is penalized by 6 points. Comparably, annual growth is of 30%, showing a very strong outperformance versus the sector. The revenue of the luxury division exceeds the EUR 10 billion market, EUR 10.8 billion.
Business was driven throughout the year by excellent sales momentum in our stores, up 35%. Trends very strong in Western Europe, Asia-Pacific, North America. Online sales are up by 73%. Sales to third parties are up 17% on the year. Q4 continues with these trends, with our own store retailing up 36%, driven by acceleration in North America and Japan, and strong momentum in Western Europe and Asia-Pacific. All in all, in Q4, luxury is up 31%, growth slightly higher than that of the full year. Full year, as for Q4, growth is driven both by local customers and tourist visitors, a trend that is reflected across all main regions in terms of nationalities. On the scope of our three main brands, they are all up, both on the year and in Q4 in particular.
The spending of the three largest groups of nationalities, that is Chinese, European, and American visitors, are up 40% in 2017 and maintained excellent momentum in Q4, in spite of a high basis of comparison. For Chinese customers specifically, trends remain buoyant, both in continental China and even more so for tourist purchases in the rest of Asia and in Japan. Western Europe remains a popular destination, but the bases of comparison were higher at the end of the year. The ROC of luxury activities sharply up EUR 2.9 billion. This is due to the high level of operational leverage at Gucci and Saint Laurent. A slight increase from the contribution of other brands and the stabilization of the earnings of Bottega Veneta. The operating profitability stands at 27%, up 410 basis points, and 490 basis points in the second half.
Investments stand at EUR 487 million, up 28%, represent 4.5% of revenue, a ratio unchanged that confirms the attention given to organic growth and to targeted and selected store openings. Let us now look at the key figures of our luxury brands. As per usual, you will find additional information in the annex. Let us start with Gucci, whose revenue has topped the EUR 6 billion mark. 42% on a reported basis and close to 45% like-for-like. Q4 is up 43% in spite of a more difficult comparison basis. The outstanding performance reflects the continued success of the creative proposal of Alessandro Michele in all product categories, in all regions, all customer segments by nationality and by age. Own retailing is up 47% full year, 45% Q4, driven by very strongly positive performance in Europe, North America, Asia-Pacific.
Japan posts notable acceleration in Q4, demonstrating the continued success of the brand with local customers, but also its appeal to tourists. In addition, the focus on digital is rewarded with online sales up 86% on the year. Sales to third parties are up 35% full year, 29% in Q4. With a level of retailers that remain stable. This outstanding organic growth went hand in hand with an increase in 69% of operating income and stands at EUR 2.12 billion. Operating margin has reached a record level of 34.2% up 550 basis points, of which 640 basis points in the second half. This increase benefited from an improved gross margin linked to discontinued store markdowns and reflects the leverage effect from high growth of like-for-like stores. This leverage is materialized, whereas the brand is investing massively to drive its growth over time.
These efforts focus on its distribution network, so as to meet the requirements of greater in-store traffic and accelerate the rollout of the new store concept. Its advertising aimed at making it as consistent and targeted as possible at a time when the touch points with its customers are increasing, and its information system in line with accelerated digitization of our industry. Contained OpEx reflect once again, the priority given to organic growth. 152 new concept stores at the end of year. Total number of stores slightly up, including the acquisition of five franchise stores in Thailand in Q4. In 2017, the teams of Bottega Veneta continued the implementation of the action plans initiated back in 2016. Revenue is up 2% like-for-like and flat at EUR 1.18 billion on a reported basis. Full year, wholly owned distribution is back to growth, up 4% like-for-like.
With good performance in Western Europe, driven both by tourists but also by local demand. Sales in APAC are up 3%, driven by continental China but also Korea, Macau and Singapore. Business in Japan saw an acceleration throughout the year and also benefited considerably from the dynamism of Chinese demand in the second half. In Q4, the trend improved sequentially with an increase of 6% in retail marked by a strong rebound in North America that needs to be underscored. More globally, good business trends achieved with local customers. By product category, the dynamics is driven by footwear, ready-to-wear, whose weight increases in revenue, as well as leather goods. The very good reception of new products and the animation of iconic lines.
The brand also worked to guarantee its exclusivity in 2017 through the continuous increase in the weight of full price sales in stores, the optimization and renovation of its network of stores with a streamlining of its sales to third parties that is nearing its end in Q4. Thanks to strict cost control, while continuing to have targeted investments in advertising to support the redeployment of the brand, the unfavorable leverage effect is contained. ROC is almost stable at EUR 294 million, an operating margin that remains maintained at 25%. Investments were devoted particularly to renovations and targeted openings of stores in key locations to improve both the visibility of the brand as well as customer experience. For Saint Laurent 2017, is once again an outstanding year. The brand is posting growth in excess of 20% for the seventh consecutive year and tops the EUR 1.5 billion revenue mark.
Growth was driven throughout the year, particularly in wholly owned retailing, that is up 27%. Double-digit performance across regions, thanks to the success of permanent collections and new products. Wholesale growth is 20% full year. In Q4, momentum remains excellent with like-for-like growth of 23%, driven by wholly owned retailing and e-commerce. Operating income is sharply up in excess of 40% at EUR 377 million. The margin is up 310 basis points, thanks to strong leverage. The brand is continuing to deploy all the necessary investments for its future growth, be it in retailing or advertising. Operating margin exceeds for the first time the 25% threshold. Operating expenditure up 26% in line with the opening and renovation plan for stores. In 2017, the growth of other luxury brands amplified throughout the year, reaching 18% in the second half, having reached 10% in the first half.
Revenue stands at EUR 1.9 billion, up 14% like-for-like. Wholly owned sales drove growth with an increase of 26%, when wholesale improved 7%. Couture and leather goods are sharply up 18%, led by Balenciaga, delivering a record year, achieving the best growth of all the group's brands in Q4 and in H2. In addition, our jewelry brands delivered excellent performance, and the watch brands saw a return to growth. ROC comes in at EUR 116 million, slightly up. Current operating margin 6.1%, with a dilution focused on the first half in H2. The strong operating leverage of Balenciaga allows the margin to increase in spite of the investment efforts devoted to jewelry. CapEx up 20%, primarily devoted to the expansion of the Balenciaga retailing network, that of Alexander McQueen, Boucheron, and Pomellato. Let's turn now to the results of our sport and lifestyle activities.
Above all, I'd like to highlight the performance of Puma, whose growth trend in terms of revenue and operating income in 2017 is quite remarkable with an acceleration and a turnaround in profitability. Since the results were published yesterday, I'll try and be brief. Puma delivered an increase in sales like-for-like 16% full year, 14% reported basis. Its revenue exceeds EUR 4 billion with strong and balanced trends in H1 and H2. Forex effect becomes negative in H2 with an impact of minus five points on growth. The momentum is very strong across all distribution channels. Growth is uniform between emerging and mature markets. The largest product category, footwear, is driving performance with an increase of 24%, buoyed by the success of new products. Operating income of Puma, EUR 244 million, doubles almost on the year. The margin is close to 6%.
The expansion of gross margin, very good containment of operating expenses amplifies the leverage effect whilst maintaining the investments that are necessary in advertising and sponsoring. Moving on now with a few comments on the other items contributing to net income. Other non-recurring income and costs represent a total expense of EUR 242 million, essentially depreciation of assets, no impact on cash for EUR 219 million, of which EUR 185 for the impairment of intangibles within other luxury brands as well as Volcom. Other non-current expenses limited to around EUR 70 million and partly offset by capital gains on the sale of a building. Net financial expenses stand at EUR 242 million as against EUR 202 million in 2016. The cost of financial debt, EUR 128 million unchanged over 2016. Indeed, the decline of the amount during the period was totally offset by unfavorable rate effects.
The reimbursement of treasury bills at very low rates, whereas long-term bond debt rate remained almost stable. The financial cost of bonds is higher than that of treasury bills, but thanks to the bond issues these past few years, the group has secured its financing over time at relatively low rates. Lastly, strong cash generation whose yields are almost zero in a context of negative rates in 2017 has once again strengthened this impact. Other financial expenses and income represent a net cost of EUR 114 million, up 56%. This increase is largely due to the increased hedging cost because of growing differentials of interest rates between the Eurozone and other regions. Corporate income tax stands at EUR 591 million, sharply up given the increase of our pre-tax earnings. At December 31st, 2017, the effective tax rate stands at 24% as against 25.1% in 2016.
However, restated for non-recurring items, the corporate tax rate stands at 23% as against 20.5% in 2016. This increase is partly due to the growth in trading in countries where the tax rate is higher. It's also linked to a revamping underway of organization of flows linked to supply chain to adapt the brand operating model to the development of omni-channel and to reduce lead time. The opening of the Gucci ArtLab is an illustration of that. This operational reorganization is set to lead in the coming years to a gradual increase in the tax rate, partly offset by the decreases in tax rates in position in several countries. All in all, net income group share comes in at EUR 1.79 billion, up over 119%. Net income of group for continued activities, excluding non-recurring items, reaches EUR 2 billion, up 56%.
Let's turn now to a review of free cash flow from operation that stands at EUR 2.3 billion, almost double that of 2016. This sharp growth rests on cash flow from operations up close to 60%. That's over EUR 1.3 billion. That's a change correlated to the significant earnings improvement, good control of WCR in relation to business, and a gradual increase of taxes dispersed, and OpEx that remained stable as a percentage of revenue. Free cash flow from operations related to EBITDA stands at 67%, one of the best industry ratios. Stock levels have level rise, reached a low point. Many group brands and WCR will have to be reconstituted to a certain extent in 2018. Furthermore, given the 2017 earnings, the tax paid out is set to increase significantly in 2018.
Turning now to net financial debt, that stands at just over EUR 3 billion at the end of 2017, down over EUR 1.3 billion. The net debt to EBITDA ratio coming below 1 time, so 0.9 times EBITDA. At annex, you'll find more detailed information on our financial structure and balance sheet. Let me end with a brief word of the dividend in cash for 2017. The board that met yesterday will propose to the AGM on the 26th of April, the payment of a dividend of EUR 6 per share, up 30% over 2016. To this cash dividend, there is obviously a dividend in kind as part of the Puma transaction that Jean-François will discuss in a moment. As you can see, we are very much too attached to conserving over time balanced payout ratios, both in respect of the recurring earnings of the group as well as free cash flow.
A down payment of EUR 2 was already put out for payment on the 17th of January this year. Subject to the approval of the AGM, the balance of EUR 4 will be put up for payment on the 6th of May 2018, with the timetable synchronized with that of the dividend in kind. Thank you for your attention, and I'll hand over now to Jean-François.
Merci, Jean-Marc.
Thank you, Jean-Marc. Good morning to one and all. Before commenting on the distribution of Puma shares, I'd like to talk to you specifically about the process, which has turned Kering into a luxury pure player. 10 years ago, PPR was a retail group. 17% of its sales was luxury. At that time, about two-thirds of our sales were in Europe. In 2017, luxury made up over 70% of Kering's revenues, two-thirds of our trading taking place outside of Europe. In 2018, all of our revenues will be from luxury. Over a 10-year period, this means we really changed the way the group looks entirely. Its financial and operational model, its operating organization, role of central functions, as well as its know-how. We're very much ready for the new challenges of luxury in the future. François-Henri will talk to you about this.
Luxury has been the main growth of driver and earnings in recent years for us. Between 2008 and 2017, luxury revenue increased more than threefold, coming close to EUR 11 billion. This growth is well above overall market growth, which underscores the quality of our brands and our business model. At the same time, recurring operating income increased basically fourfold. Operating margin went from 23% to 27%. We're especially well-positioned in all segments and product categories that constitute personal luxury. Over 50% of our revenue comes from leather goods, whereas together, ready-to-wear and footwear represent approximately one-third of the total. Currently, our jewelry and watches brands are still of modest size, but we've got very ambitious growth plans for Boucheron and Pomellato. Our brands are at varying stages of maturity. That's a strength for our group and demonstrates our potential.
On the screen here, we've listed our main brands based on the size of their store network, the proportion of retail in their revenue, and their relative sizes. Gucci and Bottega Veneta are the biggest group with a well-developed network of stores, though this doesn't mean their potential is more limited. Far from it. On that point, Gucci has very clearly demonstrated that in recent years. At the center, you can see Saint Laurent, which is our second brand in terms of size, but its network needs to be further enlarged and extended. That's what we intend to do. We'll be tapping into the brand's potential, all the while growing its revenue with the same number of stores. Balenciaga and Boucheron are brands that are seeing substantial acceleration. They're different, and François-Henri will explain this to you in greater detail. We have younger brands.
In terms of development in retail, we've got great hope in Alexander McQueen and Pomellato, and we're very pleased at the work that's been done by their teams. Gradually, our smaller brands will reach a critical mass, which will then further improve the group's profitability. After the payout of Puma shares, Kering will have a new financial profile and will become one of the absolute top-ranking luxury companies. On the slide, we're giving you the main financial figures in 2017. This is pro forma, which means it's a restated, taking into account Puma's contribution.
Above and beyond the mechanical impact on revenue and operating income in absolute terms, you'll also observe that this operation will substantially improve our operational operating margin, excluding Puma, would have gone up by 490 basis points. Net income group share, excluding non-recurring items, goes down by around 6%. You also see the conversion rate of operating cash flow goes up significantly as well. Excluding Puma, net financial debt at the end of the year would have been higher by around 12%, since the deal doesn't lead to any cash in for Kering, whereas it deconsolidates Puma's net cash position. This increase in our debt will be offset by the dividend paid by Puma to the tune of 50%. The amount of EUR 12.50 per share corresponds to the amount paid to Kering of EUR 162 million.
All in all, the payout of Puma actions is an operation that creates value for the group because afterwards, Kering will see profitability of its capital employed going up by approximately 400 basis points. This initial analysis of Kering of the future really does underscore the importance and the appropriateness of our decision to complete our change into a luxury pure player. Let's talk about recent history for Puma, starting in 2013, when we put in place the current management team at Puma. Since that date, Puma has been executing its plan called Forever Faster, which has led to a resumption of growth in revenue, up by around 40% over the period, going beyond the level of EUR 4 billion in 2017. Operating income increased almost four-fold over the period, thanks to sound improvement in gross margin, careful management of communication investments, and a good control of operating expenses.
Operating margin went from 2.1% in 2013 to 5.9% last year. This trajectory of profitable growth also meant a strong increase in stock market cap, growing by EUR 2 billion between end of 2013 and end of 2017. The Forever Faster plan is based on five strategic pillars. Firstly, to strengthen the attractiveness of the brand, which is of global renown and is especially attractive. Secondly, to develop ever more innovative products in the area of performance and sports style. Thirdly, improve quality of retail wholesale. Fourthly, to have a product offering that's distinguishing for women's products. Fifthly, optimize the organization and improve competitiveness. By reestablishing its clear anchoring in sports and clarifying its positioning, Puma has once again resumed its really special impact and is very much one of the most beautiful brands in the world. Rightfully so.
Once again, the brand is very much appreciated and respected by athletes, by retailers, and by its fans worldwide. At a time when sports is also a lifestyle, Puma has created a different positioning in the area of footwear and casual garments, which is becoming an ever more important segment in all continents. To further strengthen this universal attractiveness of the brand, Puma reinvented its communication policy using several partnerships with athletes and really legendary teams. Usain Bolt, Antoine Griezmann, Arsenal, the Borussia Dortmund, the Jamaica athletics team, and others. Puma also works with icons from culture and fashion. These are ambassadors that make it possible to reach a younger trend-setting audience. The brand works with Rihanna, The Weeknd, Cara Delevingne, and Selena Gomez. To talk about products. Puma revamped its approach to design to develop new and different models, more relevant, more desirable, and more commercial.
The brand also plays a great steward innovation, for instance, using technology included in soles to improve return of energy or NETFIT, which is a system of adjustable laces. The brand is also using some very strong, well-known lines, IGNITE, FIERCE, CREEPER, TSUGI, and BASKET HEART, which have really fueled sales in 2017 and are a very sound commercial basis for the future. SUEDE, an iconic model for the brand, is celebrating its 50th anniversary in 2018. It's got a really strong and long-standing image. 31% of Puma's revenues are in Western Europe, 26% in North America, 24% in Asia Pacific, and 11% in Central and South America, which means there's a very good balance of geography for sales. Puma makes over 80% of its revenues in wholesale. The brand improved quality of its distribution by strengthening its relationship with the main strategic retailers worldwide.
The more there's an increase in sell-through, as is in the case in recent years, the more Puma partners are prepared to place more Puma items on display in their stores. Puma continues strengthening its wholly owned stores network as well through new openings as well as refurbishments. The brand launched the site puma.com with a more modern format and easier to navigate on mobile devices. In 2017, online sales at Puma grew by over 50%. Women customers are a priority for Puma. The brand is particularly well-positioned where the gym meets the runway. In 2017, the women's product offering outperformed and contributed to the strengthening of the brand. There's tremendous momentum using some iconic products that bring together both authenticity and performance and credibility of style, supported by effective communication campaigns using ultra-visible ambassadors and specific in-store approaches as well.
Puma has made tremendous progress, the brand's still far from having reached all of its potential. You'll have understood Puma is especially well-positioned to reap the benefits of the tremendous potential for growth in the medium and long term when it comes to the sportswear marketplace as a whole. Asia is still just about 25% of Puma's sales. The brand is famous in Asia and widely appreciated, which means it's got substantial potential for further growth. For instance, in China, it's improving its presence and gaining market share. Puma can further optimize its e-commerce sites and network of wholly owned stores to boost sales that are directly to the consumers. That'll further increase brand visibility and will have a driving effect on third-party sales as well.
Puma continues having innovation at the very core of its strategy with a constant flow of novelties that are distinguishing in all product categories for both men and women. In the category of performance, the brand just added two new football shoes, the ONE and the Future. The brand's visibility will also be increased through new sponsoring, such as in soccer. This year, the Olympique de Marseille, Borussia Mönchengladbach, and the AC Milan, some of the best-known clubs in the world, will become part of the number of teams sponsored by Puma. Equally, the success of some of our ambassadors, such as Formula One champion Lewis Hamilton, further increased Puma's brand awareness. Puma has substantial options to improve its operating profitability. For instance, in terms of gross margin, by drawing the benefits of improvements in sell-through and reaping the benefits of improvements provided through product development and sourcing improvements.
If we're talking about the operational leverage, it'll continue simplifying operations, organizations, modernizing information systems, and optimizing supply chain, all the while maintaining the requisite level of investments in marketing and communication. Yesterday, when Puma announced its 2017 results, Björn Gulden gave the outlook for the current year. Thanks to a very good order book, once again, Puma should see a substantial improvement in its revenue and operating income this year. Beyond 2018, Puma will be really building on the power of its brand to continue gaining market share and improving operating margin. We can say Puma's momentum is very positive, the outlook is very favorable, and the management team is best qualified to make it possible for this brand to reach its tremendous potential. Let's come back to the specific operation of distribution of shares and talk about some of the technical aspects.
If the AGM approves the resolution, Kering shareholders will receive one Puma share for 12 Kering shares that they hold. For those who have a number of shares that aren't a multiple of 12, will receive a balance payment in cash. After this payout, Puma's float will be significantly extended, going to 55%. Artémis will become a direct shareholder in Puma to the tune of 29%. Kering will maintain a stake of approximately 16% in Puma's capital. Kering has committed to hold its stake for six months after this payout. Artémis has committed to hold for 12 months and intends to continue to be a long-term strategic shareholder of Puma. Puma's governance will be changing, shifting from a board of administration structure to a structure with an executive board and a supervisory board, and its composition will reflect the new Puma shareholder base.
The ways and means are explained in the specific press release, which we distributed this morning. Information is also going to be forwarded to individual shareholders in the very near future. Specific points on the calendar and upcoming dates. March 20th will be when Björn Gulden and his team present to the markets in a detailed fashion their strategy and ambitions for Puma. That investors' day will also entail roadshows to London, Paris, Frankfurt, and New York. The quarterly publication for Q1 of Puma and Kering will take place on 24 April. Kering's AGM, which, among other things, will vote on the distribution of on 26 April, if the AGM approves the payout of those shares, the payment will be made on 16 May.
I draw your attention to the fact that the cash balance of paying the dividend, EUR 4 Kering will be paid on that same date. We're convinced that this operation of paying out Puma shares will be creating value for both Kering and its shareholders. As you see, our standing as luxury pure player will be further strengthened. We'll be in an even better position to continue on our ambition to continue growing and developing our houses, and we have the resources to make good on that. We're absolutely confident in Puma's potential, its ability to continue its growth and improvement in its profitability. With the 16% capital stake, which we will maintain, we will reap the benefits of that potential. We want to give a sound shareholder base to Puma, all the while ensuring the initial continuity so the company can best manage its new status, new position.
Our shareholders will have an opportunity of direct exposure to growth of one of the most iconic sports brands, a brand which we've really very much gotten back on the right track under the management of Björn Gulden. For Puma, we're talking about a new stage in its history, all the while preserving stability. This payout will make it possible to continue with its strategy and execution smoothly with no change in course. Puma is being led by a galvanized management team, a highly talented team that demonstrated their ability to put this brand back on a track of profitable growth. Lastly, for existing and future Puma shareholders, we feel this operation is also very much a positive one. Puma's stock market standing will improve. Its float will increase significantly. Puma will therefore have an increased visibility and greater stock exchange liquidity. Thank you for your attention.
I'll give the floor now to François-Henri.
Thank you, Jean-François. As you can see, we're close to completing our transformation into a luxury pure player. I would even venture to say the purest of luxury players. As I said in my introduction, our outperformance in 2017 demonstrates the strength of our model, and I'd like to return to that briefly. We live in a world that is digital, hyper-connected, globalized, that blurs differences. The individual, on the other hand, needs to affirm what makes him distinctive. New generations have only known this world. They're therefore particularly sensitive to the need for differentiation. Today, their behavior significantly influences all age brackets. Our mission at Kering is to contribute to making sure that each can express what makes him unique through the products and experiences that our brands offer.
The tradition and craftsmanship excellence that many luxury brands have relied upon for decades is no longer enough. We can no longer rest solely on the achievements of a brand. The new luxury consumers, the millennials, or the Generation Z that follows, care little for the idea of brand heritage. It's more the interaction with the brand that counts here and now. Luxury today must express a genuine creative vision, and it's the sincerity that allows one to stand apart in a world where everything is similar. The powerful brands are those whose creative universe is based on imagination and on an original and consistent perspective on the world. I don't view luxury that could not be sustainable and attentive to society, the environment in which it is part of for the long term. This, for us, is a source of inspiration and innovation. This engagement is an opportunity.
It's also an opportunity for our group to generate efficiencies. We are in a promising sector with favorable demographics. Our strategy involves capturing the full luxury potential through the organic growth of all our brands to grow faster than our markets. Outperformance relies first and foremost on the specific dynamics of each brand, its creative universe, and its product innovation, sales efficiency with creative merchandising, and optimal performance levels from comparable stores. Bespoke customer relations to be developed and the focus on omni-channel, seamless move from channel to channel. Other than above the potential of each brand, if we outperform our markets, it's thanks to the power of the group and the synergies that it makes possible. I'll return to these performance boosters. Let me first of all review the strategy and the outlook for some of our houses.
The best illustration of our organic growth strategy is, of course, Gucci's track record. The brand has returned to the position it deserves, both in terms of influence as well as terms of size. It's one of the world's most respected brands that interacts with its customers in a fully genuine and convincing manner.
Gucci fully executed the strategy that it presented in London back in June 2016. The house perhaps gave the impression that it was easy. In fact, it required a very delicate balance between art and science. Before the staggering growth in revenue of the brand to meet significant growth in volumes, to ensure optimal availability of products, and ensure outstanding qualities at every level, we had to perfect the organization, making it lean and efficient. At the same time, to build its future growth, Gucci has developed the requisite capabilities to better analyze, grow, and retain its customers, and to interact constantly with it. Gucci was able to enhance creativity to give greater emotion to the brand. It's outperforming its market by targeting millennials, this new generation of luxury consumers.
The passion and the joy with which customers today turn to the brand demonstrates the profound engagement they have with Gucci, whatever their social status, their nationality, or their age. The group creates a privileged access, emotional with its customers. Its universe is inclusive, immersive, and open to collaborative creations. By way of an example, I'd like to mention the Gucci Garden in Florence, or the many collaborations of brands with designers for capsule collections or with retailers in the form of online or physical pop-ups. These initiatives are conveyed and amplified through social networks. Last year, the number of Gucci follows on Instagram, by way of an example, increased close on 70%, and its website saw exponential growth in visits. In December last year, the Gucci site received 5 million visitors, way ahead of other luxury brands.
The house is strengthening further the productivity of its stores. It's made them the spearhead of its commercial presence and its distribution in retailing is even more distinctive, with an exclusive full-price policy in all its stores. Strengthening of in-store teams was continued in 2017 and will, of course, remain a priority for this year. Our supply chains and our manufacturing capability are constantly changing in order to improve quality and reliability, to reduce the time of presence of products in our stores, to favor our bestsellers in-store lines, and to showcase our new products. These manufacturing lines and logistics supply chains demonstrated their worth last year. The opening in the coming weeks of the Gucci ArtLab in Florence will intensify this process still further. We'll sanctuarize our know-how and strengthen innovation in terms of materials and new manufacturing technology.
Having regained through amazing creativity and great management discipline, the place that it can lay claim to, the house is ready for the next steps. Its growth is well-balanced across all product categories. Ready-to-wear, that underpins the desirability of the brand, is leading all the other segments, notably leather goods. By geography, as you saw, the growth in sales is uniform. Having behind it an unprecedented growth trajectory in luxury, the desirability of the brand has never been so high. With Bottega Veneta and Saint Laurent, we have two other houses that represent over EUR 1 billion in revenue and whose potential for organic growth is equally significant. The improved performance of Bottega Veneta in Q4 that Jean-Marc mentioned is encouraging. Bottega obtained good results in the U.S. at the end of the year.
The winning over of new local customers in the U.S. and Europe will happen over time and is well underway. We're confident that we've well identified the areas of improvement of the house. Our effort in 2018 will entail continuing the implementation of these initiatives specific to the brand. In terms of products, Bottega Veneta is moving towards a better sales balance between its permanent models, the seasonal reinterpretation of existing lines, and new products. Its goal, of course, is to focus primarily on new products. At the same time, the house is refreshing its permanent sales. We're happy to see that the sales of models that have been the focus of advertising have responded very positively.
Furthermore, to increase the share of millennials who are underrepresented in the brand's customer base, Bottega Veneta is enriching its offering in small leather goods and has ramped up swiftly its advertising and digital presence. The store renovation program affected in 2017 some 20 units. This year will affect some 30 stores, that's a tenth of the total.
The inauguration last week of the Madison Maison, whose format was rolled out for all recent openings, should give renewed impetus to Bottega Veneta retail. The Tokyo Ginza new store, planned to open at the end of the year, will continue and amplify this trend. To celebrate the opening of its New York flagship, Bottega Veneta exceptionally held its autumn/winter 2018/2019 event in New York rather than in Milan. We plan to continue this to reconquer the American market. Merchandising programs, continued digital investments, and the increased use of powerful CRM tools going forward will allow Bottega Veneta to accelerate the positive results this year that we attained in 2017, particularly in Q4. As you can see, I'm confident in the future of the house with the support and backing of the group. Regarding Saint Laurent, you'll all remember the ambitious objectives. We presented them to you last June.
These objectives should enable the house to go beyond the mark of two and then three billion EUR. If we look at Saint Laurent's performance in the second half of last year, we very much see that that will be true. Saint Laurent still has the capacity to further extend its stores network. It has many other things it can leverage to boost its potential for growth. First of all, thanks to the firepower of its brand, extension of product lines, and further mastery of its know-how. This is why we're very confident Saint Laurent is very much on the right trajectory, a good win in terms of operating margin, you saw this, and also growth in its revenue. The next house in the group that goes beyond the mark of one billion EUR, as I said, will be Balenciaga.
It may actually get there faster than expected, considering the pace it's already headed in. When I meet with potential designers for our houses, I like for them not to talk too much about products as such, but more about their creative vision regarding their creative universe. With Demna Gvasalia, her innovative vision is so novel, and I immediately realized she was fully in sync with contemporary times, with the expectations of customers who very much want novelties, and also very much in sync with Balenciaga's genetic makeup. Balenciaga's excellent performance in 2017 shows that we were right. The house is benefiting from the millennials' purchasing power and influence. As other houses of the group, we're giving Balenciaga the resources to turn this vision into a commercial success. Balenciaga's potential is gigantic, particularly in leather goods and accessories.
With a selective strategy for store openings and a strong impact in wholesale, I have no doubt whatsoever as to Balenciaga's ability to reach its targets. Boucheron is a good illustration of how we're implementing the group's strategy in the specific area of jewelry. Boucheron's been very successful. We can see this year it's celebrating its 160th anniversary, and these successes are based both on heritage and the boldness of creative stances in our house. Boucheron also saw substantial investments in communication worldwide last year, focusing especially on digital and social networks to further increase the visibility of Boucheron and impact a younger customer base as well. The recent event, Vendôme-rama, held in January in Paris, got people looking at the brand anew, both locally in Paris but also online.
To celebrate its major anniversary, Boucheron is refurbishing its townhouse, which you know is its historical showcase located at 26 Place Vendôme. All the decorative elements in this mansion that you'll see finished in September will also be the sort of leitmotif for the refurbishment of their global store network. As you can see, we're investing in every area, products, stores, communication, with an eye to further boosting Boucheron's organic growth as well as its contribution to our watches jewelry division to underpin group growth. Lastly, a few brief words regarding Alexander McQueen, a house with a strong identity that has extended to new categories. It's a house that came of a tremendous artisan's knowhow, especially in ready-to-wear, and the house gradually built legitimacy in footwear as well, as well as other product categories.
These categories are fueling growth, and in 2017 helped it strengthen its product offering, especially in leather goods. With the support of the group, the brand's been investing in extending its global store network and integration of new communication tools, again, to reach a broader and more diverse customer base. It's also extended its relationships with its main wholesale partners in all markets where they operate. You can see our houses have tremendous further potential for growth, further amplified as Speeded up by our integrated development model. For our brands to be able to really focus on their essence. Kering directly manages all functions that can be pooled. Purchasing, logistics, information systems, and many other activities have been pooled at Kering. This sharing of these facilities makes it possible to cut costs and make use of best practices developed group-wide.
Over the last five years, we strengthened our policy of sourcing raw materials, for instance, through the acquisition of tanneries and extension of their capacity. That's not the only thing vertical integration entails. Beyond centralized logistics, you're familiar with our fashion houses and other goods houses. We've also pooled prototyping for ready-to-wear in a dedicated entity, and we're constantly seeking ways of further growing our efficiency and operational organizational systems. We're putting together cross-business expertise. One of the main areas here is Kering Eyewear. Think of frames and eyewear. This is a central type of accessory for image and strategy of our brands. Now we've insourced these activities in most of our houses, which means we can ensure the quality that we demand of all of our houses, and also ensure production and quality of distribution products as well.
A few weeks ago, we announced the appointment of Grégory Boutté, who's here, who becomes the digital managing director and customer relations director for the whole of the Kering group. His mission statement will be to carry out the digital transformation and lead the development of e-commerce functions, CRM, and management of group data in its entirety. Lastly, if we look at the various performance accelerators, the most powerful of them all is certainly the excellence of our great talents. Talent that we manage worldwide. We focus on the fulfillment of Kering employees, gender equality, mobility. These are very much pillars of our corporate culture, and we feel this culture is especially open and strong. For a group that very much counts on creative spirit and imagination as a foundation for success, talent development is a major asset of ours.
For most of our brand CEOs are men and women whom we've promoted from within the group, and I can say the same thing regarding many other functions at Kering as well. Shifting, transferring from one house to another creates a positive atmosphere of emulation and competition, and a group that is very much present in the culture of all of our houses this way. In another point, we're talking about a state of mind, probably more difficult to actually define and say in words, but which is equally important. Kering is a group where we never forget the importance of people. We always keep a level of humility and even a touch of a reverence sometimes. Over these recent years, we've substantially increased our brand prominence. Kering is the guarantor of the consistency of our brands, their expression over time.
This has meant a constant and ongoing interaction at many different levels. We can say that we are always pushing the various houses to surpass themselves, think differently. We feel that this way of doing things is what brings the momentum and is the key to success, key to our success. Our ambition is very much to be the most influential and most innovative luxury group worldwide in terms of creative boldness, social and environmental responsibility, as well as economic performance. Our objectives of value creation and our financial ambitions, which guide and validate our operating strategy, remain unchanged, of course. Our priority continues to be organic growth for all of our brands, with growth rates that we want to be substantially above those of industry averages. Most growth this year, again, should come from our existing stores.
Our operating margin, once again, in 2018, should benefit from growth in our stores, particularly Gucci, Saint Laurent, Bottega Veneta, and of course, Balenciaga, all of these houses. We also continue to have strong operational financial discipline. This year, yet again, should lead to substantial generation of cash flow. As Jean-François said to you, our profile as a pure player will also make a major impact in terms of return on capital employed. Lastly, we intend to continue giving an attractive return to shareholders, increasing the dividend this year as a demonstration of that. We're going through a decisive stage during our period of change, and now more than ever before, we're convinced that our strategy, our assets, our talents are very much aligned with long-term market trends. Of course, we know there are unpredictable world events.
There are various political risks, economic and financial risks, which of course, could have an impact on our performance in a temporary fashion. If you look at the complementarity of our houses, our footprint, the diversity of our customer bases, and the strength of us as an integrated group, all of this, once again, should mean that this year we'll be able to outperform markets. Thank you for your attention. We'd like to answer your questions now.
Yes. Thank you. Good morning. It's John Guy from MainFirst. I've got four questions, I'll be as fast as I can. Congratulations on the results. They're excellent. Your vision in terms of moving from 2008 to 2017 and the transition from retail to luxury. I remember, if we go back a little bit more, you were a wood and finance company, and you continue now to morph into a pure play luxury player now into 2018. When we think about the record free cash flow that you generated, the EUR 2.3 billion, what's next going forward? Is it just an ongoing focus on the organic growth and the opportunities that you've just mentioned? On a pro forma basis, you'll have probably over EUR 10 billion in terms of acquisition firepower. Do you see any other opportunities to continue to add to the portfolio going forward? That's my first question.
Inventory-wise, inventory was up at just under 11%, EUR 2.7 billion. Strong working capital management. Inventory only up just under 11%. Can you talk about maybe capacity constraints in terms of stock or in terms of budgets for growth for 2018? Third question, how do you view your relationship with Yoox Net-a-Porter given the changes that we've now had with Richemont and that acquisition going forward? For Gucci, I guess from September last year, the teams have probably had to go back and revise their three and five-year plans given the success of Gucci. Is EUR 40,000 per square meter an achievable target in terms of productivity by 2020? Thank you.
Thank you. I'll answer in French. You have simultaneous translation. Speaking to your first question on group's organic growth in terms of acquisitions, as I said earlier, our priority, as has been of late, is organic growth for a simple reason. As you saw, we demonstrated this in 2017. We have a potential for organic growth, including at Gucci, let me stress that's very considerable. What's more, we have the quality of our brand portfolio, having brands with different degrees of maturity to generate growth through organic growth of our brands within the portfolio, such that acquisitions are absolutely not necessary for Kering short, medium, long-term in order to generate growth. That's something that must be absolutely clear. Jean-Marc, on the second question, perhaps.
Yes. Allow me to establish a link with the point on cash flow. It's not innocent, the fact that we mentioned free cash flow over EBITDA, 67%. It's a rate that's at an all-time high, very high also versus the sector. We had a year with sales that were higher than those expected, higher than what we expected, such that we managed to adapt the production tool so as not to miss too many sales. That was anticipated at Gucci. As we commented to you last year, there was a plan to boost manufacturing capacity at Gucci. Indeed, at Balenciaga today, it's an issue that arises because we also have growth that must be supported by a ramp-up in manufacturing capacity.
We have an issue there on the brands that's, I would say, less maneuverable at this stage than Gucci that has this ability to manage its supply network. More globally, if we look at the group's performance, there's a minimum inventory level to have to serve to meet demand, be it in the depth or the breadth of the offer, both the number of SKUs and within SKUs, sizes and colors. We reached a low point in terms of inventory days, we're going to have to rebuild those inventories, hence my point on cash flow generation next year. In terms of constraints, clearly, there are manufacturing constraints, but I think the group has adjusted well, particularly Gucci. A comment was made about Gucci ArtLab, which is a center of excellence in terms of product development prototyping that will allow, going forward, to significantly reduce lead time.
Turning now to the agreements with Yoox Net-a-Porter. It covers our online sales business for couture and leather goods brands except Gucci, that are operated by a JV, Yoox Net-a-Porter, the JV that we control called Elite, the deal currently underway with Richemont changes nothing to those operations and our agreement and our contract. To your fourth point on
Sales density. Yes, as you saw last year, Gucci grew significantly, exceeding EUR 30,000 per square meter. It's an average that's in the good average of the industry. That's not outstanding. You need to bear in mind that Gucci only renovated 152 stores out of the 510 store brands. We can have look to a significant improvement of sales performance per square meter of Gucci through the ability of our teams to make the brand very attractive and through renovations. Renovations go hand in hand with increased productivity of the store. Gucci still has very significant potential, notably in its sales per square meter. We won't set a target or even a date, because every time we don't, we deliver sooner, but we're pretty ambitious on that metric.
Jean, three questions, if I may. You've just said that M&A is not a priority.
Are you going to change your net debt to EBITDA from one to below one midterm? Can you give us an update on your pricing policy after the Gucci announcements a few months ago? We can move into other brands and maybe a question linked to that. What do you anticipate in terms of margin impact of currency changes? If Forex remains unchanged, what negative impact do you expect? Will you use price hikes to offset that? Thank you, Thierry. I'll try and answer all those points. Financial disciplines aimed at returning to a ratio of one EBITDA, with once Puma exited, the pro forma ratio that we'll have at the end of the year, also including the payment of the dividend of EUR 12.50 of Puma. It's not dogmatic that needs to remain within the range of one to two.
It was a goal that we set ourselves to remain in that 1-2 range. Obviously, we're going to review market opportunities, market trends, but as already stated and restated, the priority is above all organic growth, deleveraging, ensuring the payment of dividend balance versus the payout policy that we followed for several years. There's no dogma here. We can fall below 1x EBITDA, but it's not an absolute criteria to remain at 1. Pricing, I'll be very prudent and surprised. You know the prices have been adjusted at Gucci and in some of our other brands at the time of the Cruise collection launch and also the spring/summer collection with price increases in certain regions, certain products. Gucci was an across-the-board price increase. Many regions say the Eurozone. I have the currency changes that are heightening or clearly will weigh on 2018.
You're absolutely right to point out the probable impact on margins. I'll return to that in terms of our hedging policy. This will bring us to possibly reconsider the pricing for the upcoming collections. Having said that, no decision has been taken at this stage. It's neither the time nor the place to comment or mention or preempt decisions that are taken by the brands on a case-by-case, region-by-region basis. It's clear that now we can have a differential between the Eurozone and other zones that must be readjusted. As regards to the currency issue, I know that this will crop up sooner or later at the conference. Let me respond immediately. The hedge for next year is at 113 to the USD with flows that are already very hedged. If I take another key currency where we see a change, we're at 125.6 for the JPY.
You can see that we've managed with those rates and given spot rates to protect as far as possible the group's margin. There will be pressure on sales if currencies were to remain as they are. As you've seen, if you look at the differential between like-for-like growth and reported growth in Q4, we can envisage variations in that proportion. Now the impact on operating margins should be contained in light of what I just said about hedging policy.
Thank you. [Axon BNP Paribas] Three questions, if you don't mind. What are the measures you've considered to protect the exclusiveness of Gucci as perceived? Gucci is showing substantial growth, very strong momentum. Might this be an opportunity to reduce some of the factory outlets business or possibly reduce its exposure to wholesale? I understand full well it stands at 15%. Gucci's revenue is around EUR 1 billion. Their prices and promotions. My question is whether you intend to move more into the retail business. A question on digital and China. We can see that there's very concentrated traffic in that market. Initiatives Alibaba, Tencent, were especially interesting for developing of Toplife and Luxury Pavilion. Are you now considering for that market other digital expositions? Think of Gucci indirect. Will there be further initiatives such as JD and WeChat?
A last subject, a little bit delicate, but I'd like to understand it. Regarding tax considerations in Italy, ongoing. What clarifications could you give us in terms of the change in rate of taxation? Are you including the contested amounts that the tax authorities are contesting in Italy? Are you including these in the figures that we've seen today? Thank you. Thank you very much. To answer the first question, which is decisive for a luxury brand, generally speaking, even more decisive for that brand if it's growing exponentially, which is Gucci's situation. Understand that since 2017, we've enacted measures sacrificing the short term. We didn't seek growth just for the sake of quick growth. We got rid of in-store discounted sales. We reduced the wholesale channels in a very big way. There's a whole array of measures we're taking to protect the exclusiveness of the brand.
We're not going to stop wholesaling, though. Remember, when we say wholesale, this also includes travel retail, multi-brand stores and department stores, plus some franchise holders, not very many of them, though. We're talking about all of that. Wholesaling needs to be something that's very much complementary to our own stores network. Otherwise, it wouldn't be right. Necessarily, this will be further reduced. Certainly, measures have been taken to protect the brand, particularly discounted sales. We've drastically reduced those sales as per last year. We'll continue doing this, again, to protect the exclusive nature of the brand. The digital strategy and specifically in China, as I know you saw, we signed a partnership agreement with JD.com for Toplife. First major brand and luxury to be in Toplife is Saint Laurent.
Our strategy in China will be in direct with our brand, but in a market where we can't only be alone with our own separate websites. Alongside our website, we'll have the exclusive Toplife site that we selected. First there's know-how, first of all, and also backed by WeChat and Tencent. There are several group brands that are then going to be joining this year, Toplife, to develop online sales in China. I'd also like to specify, we have a partnership, we'll further develop a partnership with Farfetch, which has a special approach in China, which may well be very interesting for our brands. Jean-Marc, on the tax question. There's no such thing as a sensitive question. Let me just say, it's important to make a distinction. There are two separate possibilities.
On the one hand, you have the search and seizure that you refer to, the search by the Italian finance police in the Florence and Milan offices of Gucci after the beginning of an investigation on Gucci taxation. Gucci Group said they were confident in the transparency and appropriateness of their transactions and their tax position. The brand is working hand-in-hand with the authorities, and we're not just saying this, it's not just posturing, it's a fact. There are information exchanges, and the brand is cooperating fully with the tax authorities in Italy. We don't need to say anything specific after the search. The investigation is underway, and I'm not going to comment on the investigation itself, which is just at a preliminary stage. The figures that may have been out there are based on conjecture by journalists.
There's no specific amount that's been given by the Italian tax authorities so far. They're at the beginning of their investigation. I won't make any further comment. I would just say that it is true. In this situation, we can't actually provision the risk, since we're at the beginning of an investigation. There aren't sufficient facts, tangible elements that we could use to actually do specific provisioning for the risk. However, as every year, maybe more than other years, we've been very cautious in ascertaining our tax position and evaluating our positions. That's the first point. Second point, for those who are carefully listening, you know this is nothing new that we're saying. This is something that we've been saying for quite some time. We began considering the group's operating model and taking tax into account.
Our operating model at Gucci Group, and now the group, dates back to around 15 years ago. It was crafted based on physical distribution and selling, not taking into account new areas in the business, dimension, omni-channel, responsiveness, lead time, and so forth. For instance, product developing more concentrated at Gucci and so forth. There's structural changes in terms of flows within the group. All this is also going to have an impact on tax rates. As we already mentioned last year, though I'm not sure that everyone heard this who was listening. I know some analysts did factor this into their models. We're expecting a gradual change in the tax rate. Very gradual. Current tax rate this year, around 23%. This is very difficult to ascertain because the tax administrations, the governments, have decided to revise their tax rates.
For instance, the U.S., France come to mind. In the medium term, I think a first stage will be to have a current tax rate on the order of 25%.
Antoine.
Tall gentleman, third row. The end of the row. Thank you, from HSBC. I have three questions. After this fantastic year, you explained you have no concerns regarding the brand or production. Could you talk to us briefly about the beginning of the year, though? I know a basis for comparison becomes more difficult. Gucci growth, is it still as it was in Q4? Any dip anywhere? If so, in what geography? Second question, Bottega Veneta. We saw a recovery, slight improvement in Q4. Do you think 2018 will be a further transition, or might there be further acceleration in the top line and the margin? We have to see further investments to boost these new product lines? A last question. You mentioned under the smaller brands, the ones that you have great hopes for. Are there maybe some brands that you conceivably might divest?
There were rumors, for instance, regarding Stella McCartney. Thank you, Antoine. Regarding the beginning of the year, as you know, we don't give any actual forecast. I can tell you that January, which is this unusual month this year, you realize the Chinese New Year is offset by two weeks. Nevertheless, we can say the trends are right in line with Q4, so very good. Regarding Bottega Veneta, you observed, yes, there's been an improvement in Q4. Very substantive work was carried out last year. It's begun bearing fruit. There'll be a major year this year, particularly with major store openings. Yes, we're expecting a year of improvement for Bottega Veneta. We feel very much open field. We're quite confident here that they'll resume a pace of growth that's very much in line with the overall growth of the market.
Regarding small brands, as you're calling them, our group's strategy is one that's very much based on a portfolio with differing levels of brand maturity. You see, we're fortunate. We've got Gucci and then Saint Laurent and Balenciaga, Bottega Veneta, McQueen coming in line. All of this is part of the very sound operations of this group. It's important to have a whole brand portfolio. We don't intend to divest anything whatsoever within the group. You heard rumors on Stella McCartney. It's a 50/50 joint venture. That's been the case since 2001. We established it with Stella in 2001. Over the past 10 years, it saw fourfold increase in its size. Its profitability has been absolutely as it should be. Like any joint venture, every year, there are talks with Stella regarding the future, possible focuses, and so forth.
That's where the rumors come from, due to the talks we have regularly with Stella. Of course, if there were any decision one way or another, the market would be duly informed. That's not the case today.
Mario Ortelli of Bernstein. Three questions, if I may. The first one is about Gucci. Gucci has the ambition to be a fashion authority, and in the last two years, really accomplished this result, defining the trends in the market. In your presentation, you mentioned the importance of the role of creativity for Gucci going forward, but also the importance of a well-balanced mix between permanent collection and newness. Can you give us an idea today which is the share of permanent collection and newness in the case of Gucci, and how do you expect will evolve over time to give a sustainability and continuity to the brand? The second question is about how do we see Kering in the long run. You mentioned that you're focused on organic growth, that you've got brands at a different maturity stage.
We think that you have got clear plans of how they will evolve over time. What we will expect regarding your mix by product lines and brands? Nowadays, for example, you are 52% in leather group and then it's in jewelry. In two years, how will evolve this mix? Considering also the operating leverage, which kind of margin should we expect from Kering going forward? Last but not the least, you mentioned a lot about digital synergies. One of the most important things in luxury is an intimacy with your customer. What are you doing with all the data that we are sourcing with your CRM? Can you share with us what excites you the most of the opportunity in using these data to increase your sales and your margin over time? Thank you.
Thank you. Yes. Regarding Gucci, I'm very confident in its ongoing development. It's a very sound, strong brand. As I said, what would be risky is if that growth were focused on just a few items or one category or a couple of geographies. Today, Gucci's growth is extremely sound. Like-for-like stores, full price, all categories with no exception, all geographies, no exception, are growing. There isn't a huge ready-to-wear bubble for Gucci at all. That's Gucci's business model we're talking about that's been implemented, that's provided us with this. Its desirability is tremendous. Through ready-to-wear, yes, creative and ready-to-wear, that then spreads out and impacts all categories. It's the luxury house where all categories have a very strong relationship from a style point of view. This is something new in luxury. Currently, you can readily recognize a Gucci bag.
With a lot of brands, if you remove the logo, you don't recognize the product. We're very powerful. The creative universe of Gucci covers all product categories. Thanks to this, our growth has become quite homogeneous for leather, ready-to-wear, footwear, small leather goods. This is very sound at Gucci. As I said earlier, it's important at the same time, in parallel, as opposed to what maybe was said a couple of times, we didn't just look for sales at any cost. We were even cautious. We didn't actually seek out a type of revenue that we didn't feel was appropriate in terms of the exclusiveness we want for this brand. That's why I'm highly confident in the appropriateness of continuing to develop this brand. Now, Kering, I'm not going to give you the figures. I did this once way back when, it was not a success.
With Gucci, we did it the other way around. We surprised it the other way around, let's be more cautious here. Maybe age brings caution. Let me say this, though. As Jean-François said, the transformation to a pure player will mean our profile, especially in terms of profitability, will be different. As you saw, Gucci's growing, we very much intend for it to continue growing. Saint Laurent has grown quite a bit in operating margin and should continue growing. Balenciaga, no doubt about it, will continue growing in terms of operating margin. What I can say to you, in the short, medium, and long term, our operating margin will grow. There's no doubt about it. Size of the group will grow as well, I can't give you the actual specifics.
Especially all the efforts we're making, I announced to you transformation of our marketing department into a digital and customer relations department led by Grégory Boutté. Grégory, who spent almost all of his career in the digital world, in startups, at eBay. As from last year, we set up a global group platform, a Salesforce platform, which will concentrate all of our customer data, stores, customer data, client services, internet data, and so forth. We can have a highly developed CRM activity group-wide that'll benefit the brands if their size isn't sufficient for them to have that particular skill, and also to support and help coordinate the major brands. We're developing this know-how or this expertise. It's going to have a major impact. For instance, as for last year, we started developing a tool for our store sales associates called Luce.
We did this together with Apple. It's leading edge and ahead of the pack in the entire market today. Major efforts also made in data analytics. We are currently hiring data scientists in the group that are working for all the brands. They'll be in Grégory's team. Grégory, as I said, covering e-commerce, CRM, as well as all data management for the group in its entirety. We're investing in this in a very big way, financial resources and also talent, investing in talent. This is an asset we've already got that'll be further confirmed in future years. Number three. Madam Susanna?
Hello. Susanna from Berenberg. I have three questions, please. First of all, on maybe Gucci again. What was the exact increase in productivity of retail stores? Can you just remind us how many stores you renovated in 2017? More or less, what is the total number of the stores in the new concept? Secondly, on Balenciaga, you mentioned the strong sales growth and profit growth. Is there any chance you could share with us roughly the sales number and maybe EBIT margin for the brand? Finally, I have a question on the new segment of the luxury market, which is growing quite rapidly, and it's the secondhand market. Given the recent partnership of Stella McCartney with the U.S. resale site, The RealReal, is there any chance you could share with us your thoughts on that market segment?
Do you plan to somehow address it by each brand, or maybe would you consider actually some actions by the entire group in there? Thank you very much.
If I could perhaps just say to Mario, after Mario's point about the carryovers, that what's very healthy is that traditionally in leather goods, at least at Gucci, there was 16%, two-thirds of the offering on carryover with an animation of the carryover, of course. After that transformation phase
Full year, more specifically in the second half, we returned to carryover levels both in sales and in offering. It's also the case, more surprisingly, in footwear because of the repeated success of a number of footwear models, we managed to install a carryover level very similar to what we have in leather goods, which is a fairly untouchable carryover rate, naturally lower in the ready-to-wear. What's interesting is that we're setting up a sort of garment center where we can install carryovers. That's increasing in ready-to-wear with a mix and match so that a woman can both have carryover, a dress that she can find from one season to the next, and also new products. Important to state that because we're over and above the fashion development there. We have carryovers that are meeting with repeated success for several seasons.
The network of stores, as I indicated, 152 stores with a new concept, a total of 529. We're not quite at 30% of the store with the new concept. 66 renovated during this year, the plan for next year, for 2018 rather. For 2018, the plan is to renovate about 90 stores. As you know, Gucci, it's one of the avenues to control and contain it, exclusivity is not seeking to massively open new stores. A bulk of the CapEx will be devoted to store renovations. With 90 stores in 2018, at the end of the year, we should be at around 45% of the network with a new concept.
It's important to state at the same time that in stores with the old concept, there are schemes with furniture, with some visual tools that make it possible to give or to replicate the new store aesthetics in the slightly older part of the network, that gives an additional 20% or 25% of the network with this touch of the new concept. Also on the productivity front, when we look at like-for-like growth on the year, the growth of stores with the new concept is far more significant than that of stores with the old concept. Turning to Balenciaga, I'm going to disappoint you because I can't give you the figures. We don't disclose figures, just some information that we were able to disclose.
I believe, as Jean-Marc said, it's the brand that has grown the fastest within the group in Q4 and in H2 also, with 40% growth in the year, 60% in Q4. As I said, January in line with Q4, you'll therefore deduce that it's going very well. I can't say anymore. We have to let them work. All this is recent. We have to consolidate all that. As at Gucci, it must happen across categories, across geographies, but we're really headed in the right direction at Balenciaga. The operating margin is double digit. Jean-François asks me to mention that. Turning to the third question, very interesting question because we're working actively on what we call the disruptive scenarios. We put in place an innovation team last year at Kering level, relying on our two major brands, Gucci and Saint Laurent. We're working in partnership with various scenarios.
There are disruptive scenarios on materials. Question, as I said this morning during an interview, if in the near future we could no longer use leather, is the solution offered by new technology? That's the type of disruptive scenario we're working on. To answer your question more specifically, we have the same type of work ongoing on new business models. I mean, the second-hand, as you say, we're working in particular, Saint Laurent in the lead with The RealReal. We're testing things with The RealReal, but also what I call the subscription models. I don't like the kind of rental models. I mean that it's a sort of subscription is given to a certain type of product. It exists in a mass market universe. Today, it doesn't exist in the luxury universe. Question is, can we consider those models in a luxury universe?
If so, what is the implication? We're testing that with the partnerships outside the group. It's happening. It's led by Grégory for almost a year now today. [For Leopold]
Hello. I've got two questions. First of all, on CapEx. Second, last year, you really emphasized CapEx. Apparently, a lot of investments did take place. That would also explain why things are going well. What can we expect for the upcoming year? Might there be a reduced CapEx as a percentage of sales? What's your budgeting? What are your expectations? The second question, more general on customers. Apparently, the U.S. is doing better in Q4. The Americas apparently may be coming back to the forefront. What are you seeing in China? It was a very good year last year. Maybe things slowing down slightly. What are your expectations? What are you seeing in the field? Any possible downward changes?
First of all, on capital expenditure, as you know, Jean-François said this, pro forma, it is true, the level of CapEx in sports and goods is lower as a percentage of sales. Excluding Puma, if we look at this pro forma, the group would be more in the neighborhood of 5%-6%, which is pretty comparable if you look at the major players in the industry. That's what the competitors' figures are looking like. This doesn't mean necessarily we'll be at 6%. That's not the point. We do think today, also taking into account what I said about stores expansion, also taking into account the investments for making information systems. We have to maintain these efforts to invest between 5% and 6% of sales in CapEx. That's probably the right percentage. If we need to step things up, we will.
If we need to slow down, we are able to. We've got a very good handle on CapEx. For forward looking, it's managed centrally. It's not each brand that does as it sees fit. There's a dialogue that's ongoing throughout the year. It begins during the budget phase, of course. It's a dialogue that not only has to do with the upcoming year, but the upcoming three years. We know the overall trend and to make trade-offs from one brand to another. This is why for several fiscal periods now, we've been adhering to this discipline. I feel that we've established a process to manage capital expenditure, enabling us to continue to have this ambition of 5%-6% of sales and to adjust to take into account changes in sales. To talk to you now about customer changes. It was a good year.
Thinking about three main brands, equally true for the other brands in the group as well. It was a good year regarding Chinese customers. Some people might say the last quarter slowed down slightly. Let me say, first of all, it would be a tiny dip. First of all, you've got to look at a three-year trend. As from Q4 2015, we started seeing a resumption of Chinese customers, especially sped up towards the last quarter of 2013. We see over the several-year period, it's the last quarter that's seen very good growth in Chinese customers. It's true there's a little bit of volatility here. There's some shifting of Chinese customers from one region to another. Our brands now are agile enough to deal with these shifts. It's true the last quarter, especially December, was a little bit less buoyant to sales to Chinese customers in Europe.
There was a shift of Chinese customers, especially towards Japan. In the last quarter, we even saw Taiwan looking better with the mainland Chinese customers. Singapore, ditto. Macau and Hong Kong, we know once again, things are headed in the right direction when it comes to mainland Chinese customers. All in all, Chinese customers looking good continues to be the case. American customers, we saw acceleration basically throughout the year, particularly return sales to American tourists. They've traveled more and purchased more outside the U.S. It's interesting. It's good. Our brands saw very good results with local customers in the domestic market as well. We can say the department store markets has seen ups and downs, but our retail stores, no negative. Regarding our major brands, huge successes. We know that our figures are looking good for our major brands, department stores as well. U.S.
Customers looking good during the year. Things still are looking good for this year. The lady toward the edge there.
Bonjour. Okay. Yes. I'm from Kepler Cheuvreux. Two questions. First thing, you told us you expected to outperform the industry. Could you tell us what your forecasts are for the industry growth 2018? The second thing, one of your competitors slowed product availability in December so they could be prepared for the Chinese New Year. Did you also have to take those steps for your brands? When you say outperform the market, yes, well, we're gauging market growth, which we feel should be in the neighborhood of 6%-7% this year. Again, our basis is Bain & Altagamma polls. If that's the baseline, our brands will substantially outperform the market. I'm absolutely convinced of that.
We have to realize on the other point, our brands, particularly our Italian brands, you have an artisan's production system. It's much more flexible than in France, which is why Gucci has been able to produce such growth without, for one moment, wavering on quality demands. It's because of their network of suppliers, subcontractors, and quality control, which they've had up and running for many years now, Gucci. That specifically gives them their ability at Gucci to be highly responsive, able to contend with higher growth, all the while abiding by drastic quality requirements. We have no concern to have to slow down to be able to deliver subsequently. We know that Chinese New Year is in mid-February. It's upcoming. We're ready. All of our brands are ready. There's no concern whatsoever.
Let me just build on an answer Jean-Marc gave a few moments ago, having to do with working capital requirements and so forth. We forgot to underscore the following. We made major investments in all brands. Number one being Saint Laurent, I might add. We invested in tools to manage sourcing, state-of-the-art tools at Gucci, Bottega, Balenciaga, and Saint Laurent. We've got this ability currently to be highly responsive. You realize we're in an industry, a few years back, we had to deliver beginning of the season, all orders to our own stores and outside retailers. Now, centrally, we keep 50%-60% of those orders and only ship these to stores as sales are made.
That gives a better inventory quality, inventory level, completely different from inventory management previously, which is one of the reasons why we've been successful in coming up with substantial growth rates for Gucci and Balenciaga, specifically thanks to this system of reorders, which is a top performance system. Compared to previous practices, this has meant we've been able to completely change the way we do things. Marion Bouchert, number three, will ask a question. The next person.
Raymond James. 3 questions, if I may. The first on Gucci. You're very confident on the top line. The OpEx behind the brand is high. What operational leverage can we expect this year? Secondly, on Bottega Veneta, you mentioned resumed growth in the sector, a number of store openings. Can we expect a stable margin in 2018, or will it decline further? Could we have a word on eyewear? What are your growth expectations and the profitability profile of the division? I'll answer your first point on profitability. I've read comments on the operational leverage of Gucci, that in 2017 is not in the range of the scale expected. If we look at the industry overall, there are operational leverages. They exist, but you can see the numbers of other peers in the sector. There's a cost today to sustain the business and grow the top line.
Major investments, as you know, both in advertising, in digital, in tools, in store animation. We've always said that there's a need to support drive growth, and growth sustainability is also linked to our OpEx at every level, and also on the supply chain. Now, of course, today, there's still strong operational leverage at Gucci, and it's true that starting from 34.2% EBIT margin this year, we can anticipate operating leverage growth this year if the top line unfolds as expected. There are the currency impacts, and at the margins of profitability, they are there, but they have to be factored. The margin growth at Gucci, we're confident we're capable of growing the Gucci operating margin. You mustn't expect operational leverage as high as this year.
I think we'll be very vigilant in allocating the OpEx where they need to be allocated in order to deliver this growth over time, this profitable growth that you regularly call for. It's important to continue to invest in that respect. You know Jean-Marc well. He likes to surprise people. As to Bottega Veneta, well, we had an improvement last year. We're beginning to see the fruits of the work put in. Just to recap the challenges at Bottega Veneta. EUR 1.2 billion revenue, very loyal customer base that we have to offer them new products. The issue for the house was that these new products didn't exist in sufficient numbers, and in a network store where the average size of the BV store is quite small.
There was in-store difficulty when we leave the stores, establish their ranges to showcase the iconic products, the bulk of the business versus the new products. Last year, we revamped all the merchandising systems. Today, it's the brand of the in-store replacements to showcase these new products. Huge product development work done at Bottega. Now, I said earlier, is that we're getting feedback on new products. Where we focus, we get immediate feedback in store, and that's the Bottega. That's the first focus, to reignite emotion appeal with existing customers. It's not enough to continue to grow, and the brand has potential. Second issue is broadening its customer base through the new stores, such as the one in New York, we had that in Milan and in Ginza, to give enhanced visibility to the brands. Very important for these new customers.
Of course, we're adding digital native advertising, shifting from one world to another. Bottega, you may have seen the new campaign solely on digital with extracts for an offline advertising. We've totally upended the system. We're addressing far more broadly, a far more diversified customer base at Bottega. We're working on these two fronts, both in terms of the brand appeal of the brand. The stores that we're opening, the flagships, will give a big boost to the brand also in terms of business. We're confident for Bottega Veneta to return to a pace of growth that's normal as of this year. For Kering Eyewear, business will continue in 2018 under two impacts. The brands of the group, they'll grow because 2018 is, in fact, only the second year of Gucci under the new model. We have strong growth potential in store for Gucci.
Also fine plans for the other brands, Saint Laurent, Puma, in the licensing contract will continue even after the distribution from McQueen to good growth prospects for our own brands. Added to that will be the input of the Cartier sales that are looking very good because we did some launches that were very successful with very full order books. Fine growth prospects. EBITDA will grow. As Jean-Marc indicated, we still have the amortization of the Safilo indemnity that is capitalized that will weigh on EBIT. EBITDA will grow. Next question, which will be either the last open up.
That's from Jefferies. I'd like to ask questions on two topics that you already touched on, but I wonder if we can have a little bit more detail on, specifically on the supply chain at Gucci. You've been quite open in inviting new partners in Italy to come and work with you. You have a website that's dedicated for that. How significant is that? Do you have a lot of new partners now on them? Because in the end, when you're managing this kind of volume growth, it's a challenge. I guess I'm trying to understand what the risk component there is. The other topic that we have touched on already is, of course, the one channel that is growing. Take Gucci as an example. Sorry, I always come back to Gucci.
One channel that is growing faster than Gucci at the moment is actually Gucci pre-worn, pre-loved, secondhand, however you want to call it. That's getting really big. If I'm looking on The RealReal, we have 24,000 units of Gucci pieces on it. This is a conceptual question. Does it come a point where, in order to protect the brand profile, you need to get involved, if not directly, but indirectly, in terms of authentication, making sure the presentation of the product? Because I suspect that if we have a conversation a year's time, they're going to have 50,000 pieces of Gucci on there. It's getting too big for you guys not to really get involved, I suspect. Thank you.
Jean-Marc touched on this concept of Gucci ArtLab that was prepared over many months and will be coming on stream very soon. This concept is precisely what you mentioned to revamp the network of artisans, of craftsmanship, the Gucci network, to integrate some and to keep others on the subcontracting basis, but in a different way. Rather than growing the risk, it's going to reduce the risk because first of all, we're going to integrate more, and we'll control more. This is something that will allow us, whilst maintaining this agility that François-Henri mentioned earlier, will allow us, once again, to have greater proximity and greater responsiveness with the artisans, with the craftspeople. For us, this is quite the contrary. It's a reduction in the industrial risk.
Just to pick up on the point of the pre-worn or secondhand, we're not at all on the back foot or being defensive. We're cooperating with [inaudible] to train them in authenticating the products. We see this in terms of sustainable development of our brands. It's very healthy. The fact that we can recycle products today benefits the brand. The RealReal, 80% of products are re-spent in the same brand. It's also a repurchase factor that's very interesting. We're testing this proactively with them because it's a form, or at least a service. It's more of a service for our customers that can have a key perception in terms of value added. That's why we're collaborating with them actively. I don't believe there are any more questions, I think. Well, my thanks to you all. Thanks for your questions. Thank you for the interest shown in our group.
We look forward to seeing you again soon to give you an update on our business and give you further information on a particular segment that you'd like to know more about. Have a good day.