Good day, and welcome to the 2016 First Quarter Sales Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jean Marc Duplex, Group Chief Financial Officer. Please go ahead, sir.
Your line is open.
Review our sales in the Q1. Starting with Slide 3, you have the summary of our performance. Consolidated sales were up nearly 3% as reported and up a solid 4% comparable to a total of more than €2,700,000,000 In a challenging environment, this performance is a testimony to our focus on driving organic growth. It is a result of the in-depth work we are doing to consistently ensure the best alignment between the value proposition of our brands and market trends in their respective segments. I will start with a quick comment on the difference between our comparable and reported growth rates in the quarter, which is entirely due to FX.
We had no change in the scope of consolidation with the exception of the Electric brand, which was sold during the quarter, but is not material. You can see that for our Luxury division, the FX impact turned almost neutral. In Spartan Lifestyle, FX became a headwind due to Puma's exposure to certain emerging currencies, notably in Latin America and Russia that are strongly depreciated against this euro. In comparable terms now, luxury activities achieved 2.6% revenue growth, a commendable performance in this environment. Sales of the Sport and Lifestyle division were up to 7% with Puma confirming its sustained growth trajectory.
Some comments about Luxury on Slide 4, where you can observe that growth was consistent and steady in both retail and wholesale, up 3%. Focusing on retail by regions, Western Europe and to a lesser extent Japan were still the key drivers up 10% 5% respectively though in both markets tourism flows were somewhat weaker. Asia Pacific was stable still penalized by Hong Kong and Macau. Conversely, across all brands, we experienced encouraging growth in Mainland China. In North America, trends reflect the strong dollar.
It's worth noting that some purchases relocated to Latin America, which proved a strong performer during the quarter. As regards royalties, as this topic is primarily related to Gucci, I'll touch upon it in a minute. Regarding our directly operated network for the division as a whole, we had at the end of the quarter 12.59 stores, a net decrease of 5 units since December. Let's now turn to Gucci on Slide 5. Gucci posted comparable revenue growth of 3%, with retail up 3% and wholesale up 10%.
By region, retail was up a strong 20% in Western Europe. In Italy, France, Germany and the UK, notably, local customers responded very positively to Alessandro Michele's cruise and springsummer collections. In Europe, Gucci also benefited from steady demand from tourists across all key clusters. In Japan, where the brand is making rapid progress in reaching a new and younger base of local clients, the relative slowdown is in part attributable to less dynamic tourism flows. In the Americas, the new collections resonate especially well with our customers and we achieved higher performances in those stores where the weight of shoes and ready to wear is significant.
But the U. S. Did suffer from the strength of the dollar among other factors. This was partly offset by customer purchases back in their home country. In Asia Pacific, Hong Kong and Macau continued to negatively impact the quarter, while we are encouraged by the growth achieved in Mainland China.
For their part, Australia, Singapore, Malaysia and Korea had very positive trends in the quarter. A few comments now about product categories. In ready to wear on shoes, Newness, which represents an important share of each collection, posted strong growth. In handbags, the new styles and lines such as Dionysus, Padlock, Marmont and Silvi are delivering great results. As you know, we are still in the transition phase when it comes to leather goods, where the weight of carryover is more significant and where the progressive ramp up of newness will enable Gucci to refresh the base and gradually replace underperforming lines.
Overall, Alessandro Michele's collections represented on average approximately 50%, five-zero of Q1 revenues, but with some discrepancies across categories. For the Q2 in a row, wholesale is positive, up 10%, confirming the industry enthusiasm for the brand's new creative vision. Together, revenue from retail and wholesale was up about 4%. Looking exclusively at Gucci's core categories of ready to wear, leather goods and shoes, growth even exceeded 5%. Royalties were lower this quarter, reflecting the transitions underway at our 2 major licenses as well as the timing of launches.
We expect this situation to gradually normalize in the coming quarters. You will find some examples on Slide 6 of exciting new developments at Gucci including collaborations with department stores such as Berndorf Goodman in New York and some visuals of new collections. The fall winter fashion shows presented during the quarter were once again acclaimed, clearly reinforcing the house's creative hallmark. After receiving a similar accolade from the British Fashion Council last November, the Council of Fashion Designers of America announced that Alessandro Michele will receive its international award in June. A total of 13, 13 additional stores were either opened or refurbished under the new concept with very favorable impact.
At the same time, you can see that the number of DOS has decreased by a net 3 in the quarter. Finally, Gucci's completely redesigned and replatformed website introduced in North America at the end of last year was launched in EMEA on Australia mid March and will continue to be rolled out through 2016. Moving to Slide 7, Bottega Veneta faced strong headwinds in Q1. Revenues were down 8% as current tourism flows penalize retail performance. You know that the brand is the most exposed in our portfolio to Asia and to Chinese customers.
In Western Europe, North America and Japan, tourism flows were impacted by either security concerns or exchange rates. Protagavellita mitigated this impact, thanks to positive growth in Mainland China and the rest of Asia. However, the brand was still dragged down by Hong Kong and Macao. To recapture more of this clientele locally, the brand adapted the pricing of key carryovers at the end of the quarter to narrow the gap with other regions. In this tighter environment for the brand, our action plans aimed at diversifying and rebalancing the product range and footprint are yielding positive signals.
1st, looking at the clientele, there is healthy demand coming from European local customers who still have to grow in the base, but are responding well to the new products and styles. 2nd, regarding merchandising, the shoes category in which the brand is investing to broaden its range posted a good performance in the quarter. In leather goods, the new styles are also performing very well, allowing the brand to rejuvenate its offer and raise the share of newness so as to reach a better balance between carryover and new items. And 3rd, during the quarter, the boutique Avenida directly operated store network contracted with 5 net closings, of which 4 in emerging markets illustrating our active adaptation of our retail footprint. You will find some examples of this progress on Slide 8.
Newly introduced shapes and functions such as the Olympia crossbody bag, the bucket and Monaco bags represent a growing part of the business in addition to iconic products presented with new craftsmanship embedding key elements of Bottega Veneta's DNA. The Olympiadag, which was introduced in the early fall 2015 collection is one of the best selling styles. In the shoes categories, a wider range of products in women's is driving performance in casual and flats in particular. New introductions in other segments are planned in the coming months. On Slide 9, you will find a recap of Saint Laurent sales, which showed continued outstanding momentum.
Once again, the brand demonstrated volume growth, up 27% comparable. Retail was up an impressive 31% and wholesale advanced 18%, 18% comparable. Performances remained excellent across all regions and product categories, reflecting the success of both permanent styles and the springsummer collection. The brand announced in early April the name of its new creative director, Anthony Vaccariello, who will present his first collection for springsummer 2017 next October. The succession was well prepared.
The brand enjoyed strong foundations and successful teams. And we are highly confident as we open this new chapter in Saint Laurent's history. Moving on to slide 10, revenue from other luxury brands was down 3% comparable. Aside from some continuing divergence between soft and hard luxury, some of our brands in both segments, namely Balenciaga and Boucheron, share a stronger retail exposure to the French market, which as you know was weaker during the quarter. In this context, retail was stable, while wholesale was down 4%, primarily due to watches.
Our soft luxury brands were up driven by retail with strong performances at Stella McCartney and Alexander McQueen. At Balenciaga, the first collection of Dymna Vasilya, which will hit the stores in early H2 was extremely well received. At Briony, we are making progress with the reorganization of production capacity as the brand still faces top line headwinds with some key customer clusters. The appointment of Justin O'Shea as new creative director was announced it will allow the brand to strengthen its positioning. In our Luxury, the quarter once again showed contrasted situations across categories with Jewelry outperforming even though Boucheron copped with a high comparison base.
In watches, the performance suffered heavily from market conditions, but the refocusing of the product offer and communications at both Belize Nardin and Gerard Perrigo is welcome and appreciated by retailers. The feedback from Baselworld 20 16 a few weeks ago confirms that we are heading in the right direction. Let me now review the quarter at Puma and in our Sport and Lifestyle businesses on Slide 11. Comparable revenue was up 7% in the quarter, this growth being adjusted of electric's contribution. In reported terms, growth was 2.6%, the bulk of the difference coming from weaker emerging country currencies versus the euro and the rest from scope.
Puma had a strong start to the year with comparable sales up 8%, showing once again a successful delivery on its action initiatives. Revenue was positive across all categories led by footwear with comparable sales were up 10%. In running and training, the Ignite platform was further expanded in the quarter with 2 new launches. In women, we continue to see good momentum both in sell in and sell out fostered by the very successful collaboration with Rihanna. All key regions registered similarly positive performances in the quarter.
Sales growth was especially noteworthy in Asia Pacific, driven by China. The strengthening of Western Europe started in the Q4 of last year was confirmed in Q1. Trends were also good in North America for the Puma brand. A word of conclusion. First of all, it is important to stress once again the power of our multi brand model, which enabled us to deliver the solid top line performance in a context that has proved challenging for all industry players.
As we told you in February, at the time of our full year results, we are as determined as ever in executing our long term strategy. Our absolute focus is on organic growth, notably through improved store productivity and on tightening even more our financial discipline across the group. As you have seen, the active management of our store network resulted in net store closings in the quarter and we are maintaining tight control of our operating expenses as well as capital expenditures at all brands as well as at group level. So taking all that into account and despite the environment, we remain confident in our strategy and in our short term prospects. Claire and I are now ready to take your questions.
Certainly. Thank We'll now take our first question from Antoine Belge of HSBC. Please go ahead. Your line is open.
Yes, good evening. It's Antoine Belge of HSBC. Three questions, please. First of all, with regards to the market environment in Europe, there's a big contrast between Gucci up 20% and Bottega down 17%. And especially with regards to tourism, it seems that your comments are not the same for the 2 brands.
Could you be a bit more specific to explain this big delta? And especially maybe it seems that especially since the mid March, we've seen a further slowing in tourism from abroad. And what's your outlook for the Q2 there where there is a strong basis of comparison in terms of tourism? The second question is relating to Asia. I mean, could you maybe comment a little bit, especially on Mainland China sequentially, what you've seen for your main brands?
And do you expect some kind of impact due to an increase in import taxes for people who are traveling abroad and coming back to China. And so it seems to be there is increased control at the border. And finally, obviously, Gucci had a very volatile performance in 2015 with especially just looking at retail, so leaving wholesale aside. You did plus 3% in this Q1 versus minus 4% last year. So the basis of comparison is then 10% in the Q2.
So should we already factor in that sales cannot be positive for retail in Q2 at Boucher? Or do you think that the basis of comparison is not that relevant? Thank you.
Thank you, Antoine, for your 6 questions because you have 2 questions in each. First of all, concerning the market environment and what you asked about tourism, I think it's worth reminding the high exposure overall across the regions of Poteet Gaveneta to tourists, which is far higher than Gucci. Gucci, Balenciaga, Saint Laurent have generally higher exposure to local clients. And it's true that, especially for Gucci, the new collections have resonated very well with the local clientele across the region and especially in Europe. So the growth in Europe is particularly driven by the local purchases when it was still up with the tourists, but with a slowdown compared to the last quarter to the Q4.
For Bottega Veneta also, the trends were very positive in Europe for well positive for Bottega Veneta in Europe with local clients. But it's true that also because of the price point of Bottega Veneta, there was probably the brand has more suffered from the decrease of tourism flows and especially from the Chinese tourists, which were more particularly impacted. I think also that Bottega Veneta is penalized by this by its exposure to the Asian clients. When the basis of Gucci in terms of tourism also is broadened also with Middle Eastern and South American and American. So it does explain why there is such a difference between the two brands.
Concerning the tourism flows, it's of course very difficult to predict. You have seen like me the recent figures of Global Blue. We had said also that we were expecting that the impact of the terrorist attacks in Paris would be rather during the Q1 and not at the end 2016, and it has been unfortunately confirmed. So we will see, but I think that what is important for us is we have seen rather an acceleration of the trends at Gucci and some improvement also at Bottega Veneta during the second half of March. And we see still some very encouraging signs with a mix of positive signals with local clients and tourism.
So, let's see what will be the evolution. And what is important also, as you will have noticed, is the redirection of the Chinese tourists on the local market with quite significant improvement across almost all the brands of the group and especially the 3 major ones, which are all positive in Mainland China. More specifically concerning Mainland China and your question about the recent measures, you're right to say that China is implementing some changes to its tax regulation. So far, none of them has an impact on the shipping of goods into China by luxury companies, by our brands for physical distribution. So the changes apply either to private individuals buying online for delivery in China or to individuals buying goods abroad and bringing them back into China.
So it should especially deter Daigou on all the parallel imports. And finally, may contribute to rebalance the consumption domestically. So it's clearly too early to go to what will be the impact, but we see that rather positively because it should help the business in Mainland China. Finally, concerning your point or your question about the volatility of Gucci you have noticed in Q2 last year or more globally in 2016. I think that you know perfectly that 2015 was a transition year and we cannot, of course, modelize the evolution of the business in 2016 based on what we saw in 2015.
As I said before, we had very positive figures in March and with an acceleration rather in March beginning of April at Gucci. So we are quite confident that regarding Retail, we have obviously positive trends. Even if, of course, you're right to mention it, the comparison basis will be tougher, especially, let's say, during June, where we had some very positive impact of the discount period in Asia and in the U. S. And as I said in my previous speech, wholesale, we have quite also good figures.
We expect good figures concerning the orders we have already in the books. So all in all, I think that we should have maybe a more balanced or breakdown of the sales between Q1 and Q2 that should be more balanced than initially expected.
Thank you very much.
Thank you. We'll now take our next question from Thomas Chauvet of Citi. Please go ahead. Your line is open.
Good evening, Jean Marc Claire. I have three questions, please. The first one on Japan, can you and that's valid for Gucci and Bottega Veneta. Can you explain these very weak numbers? I mean, I know the yen is getting stronger and you seem to suggest that tourist flows are softer.
I mean, Chinese tourist flows into Japan were up 60% year on year in Q1. I know it's moderating, but it's still very, very strong. So can you perhaps talk about local versus tourist demand? And are you still seeing tourists, but the conversion is poor because they do the price arbitrage and it turns out to be on a stronger yen less advantageous. Secondly, on Gucci, I would like to know how you are exposed with Michele's collection in the Q1 and maybe in the next few quarters by product category?
I think you gave a percentage of penetration of 50%. How do you see that evolving across the various categories in efforts on productivity, including some efforts on control on OpEx this year. But in light of the probably weaker than expected start to the year and perhaps these are broader industry headwinds that you have to face, are you taking already as of April or end of April some specific action to try to protect in both H1 and the full year the profitability? Thank you.
Thank you, Thomas. Regarding Japan, it's true that we saw quite a significant slowdown in terms of growth of tourism flows. The accuracy or the revaluation of the currency had an impact that further during March, not at the beginning of the year. But at the beginning of the year, there were probably less traffic globally. So finally, January February, less traffic and March, less traffic because of the evolution of the currency.
So all in all, 11 is the tourist cluster is still up in Japan for Gucci and for Beauty. It's not sufficient to reach the growth we had posted in the past quarters. I think considering the price gap, we have still probably some issue with the local clientele for Bottega Venitas, still suffering from the rather high price point and especially the exposure to carryover lines. For Gucci, I think we are in a transition phases and we are gaining a younger clientele. I think that the clientele in Japan was more conservative when it comes to Gucci brand.
So I think that we have not benefited from the same boost as in the past from Zolokoy clientele. So we expect that it should normalize. And again, we see very positive signs for Gucci brand currently in Japan with the local customers. So we should see a gradual improvement that should help the business, but it's true that, again, we have seen rather redirection of Chinese tourists to some other destinations or to Mainland China. As stressed before, we had conversely some very good figures in Korea, Singapore and Malaysia, but probably less in Japan, and there was probably some price arbitration.
Concerning the Michele collection, I think it's important to remind and to confirm that the new products are performing well across categories and even bit better month after month. Now as you know and you have reminded it, the overall environment for the industry has not really improved in Q1 compared to Q4. So it has not helped, of course, the performance of the carryover lines that have not yet been replaced. So what is true is that the trends at the end of the quarter have accelerated because also we have this ongoing transition, which is not too cool according to the categories of products. It's almost done in terms of transition in shoes and ready to wear, where we are close to 90% of substitution, but we are lower for the moment in the handbags category.
And you can imagine that we won't provide you any detailed figures of growth category by category. But again, when we look at the cluster of the new collections, it's overall very positive. And the share of newness should, of course, continue to increase, and we should be more than 50% of quarter in Q2, closer to twothree of the revenues. So let's comment on the budget process. No, I think that I appreciate that you mentioned the global environment because I think that the performance of the group is very solid.
When you consider the global environment, it's true that we are we have a performance probably below expectations at Bottega Veneta. But if you combine Bottega Veneta and Saint Laurent, which are now the same size, you see that in average, it's a very solid performance again. For sure, however, the there is a very difficult environment. As soon as or in the budget process, we have always sort of plan B to anticipate any deterioration of the business. So we are working now with the brands to implement, if needed, the plan B.
Obviously, we have not to consider this with Gucci, which is totally on track with the plan. And in fact, the performance of Gucci is totally aligned with our expectations. Regarding Saint Laurent, you see that the performance is very solid again. So we will consider some additional actions to protect the EBIT. We will consider additional actions to monitor the CapEx and eventually to close some doors.
And of course, we are ready because we have this plan B to cut some additional OpEx again to protect the EBITDA and we will continue to review continuously our store network in order to close underperforming stores.
And just if I may, a quick follow-up, Jean Marc. When you're talking about Gucci improving at the end of Q1 and in April, are you talking about total Gucci retail sales or are you just talking about Michele's collections? So that's a comment on total Gucci, right?
It's a comment about the total business of Gucci overall in the retail network.
Thank you. Thank you.
Thank you. We'll now take our next question from John Guy of MainFirst. Please go ahead. Your line is open.
Yes. Good afternoon, Jean Marc and Claire. Thanks very much for taking my questions. Just the first one with regards to Gucci for Hong Kong Macau versus Mainland China, could you give us at retail, could you give us a little bit more color in terms of the rate of decline in Hong Kong and Macau versus a more resilient performance in Mainland China, please? Also with regards to Bottega, you talked about pricing adaptation and change.
How much did you effectively harmonize prices for Bottega during the Q1? And what did that effectively contribute to the organic decline? And then with regards to watches and jewelry, can you give us I know you said that wholesale was down 4%, but could you give us, I think jewelry, for example, in Q4 was up 11%. Appreciate that that's probably slowed given the higher DOS impact that, for example, Boucheron has in the French market. But could you give us some color in terms of how the jewelry business performed by brand and as a group during the Q1?
Thanks very much.
Thank you, John, for your questions. It's true that to make it simple and to make it short, we have not seen any improvement in Hong Kong and Macau. Macau deteriorated to a lesser extent compared to Hong Kong, but overall, it's quite consistent with the very negative trends we have posted during Q4. Conversely, as I said before, trends are positive for all the brands in Mainland China. Let's say that I won't give you any precise figures, but it's overall plus 7% on the division.
So considering the weight Gucci, you can imagine that there is a quite substantial contribution of Gucci in that figure. Among this, let's say that we continue to see the same trends as we had during last quarter, meaning the improvement in Tier 1 City, a very solid improvement, I must say, some stabilization in Tier 2 cities and in some cities an improvement as well. And Tier 3 cities are still suffering. I think it's also the result of the work done in terms of rationalization of the store footprint. That's the reason why we will continue to review this regularly in order to maximize the performance in the region.
So all in all, still very contrasted situation on Hong Kong and Macau still deteriorating and improvement in Mainland China. And what I say for Gucci is I think something which is shared by the other brands overall. Now coming to Bivi and the price adjustments. So it's true that during the quarter, Bottega Veneta released new prices on some selected items, so mainly carryovers because this was the segment in which we have not adjusted the price, so keeping a very significant gap between Asia and Europe. So we have released new prices for Hong Kong, China and Macau.
Changes took place, let's say, during the second half of March, Robo Inc. This prices adjustment brought a decrease of retail prices of by approximately 10% to 13% depending on the country. So of course, as this price adjustment occurred during the last part of the quarter, It's probably too early to give you any details on the impact of those changes. But the rationale of the decision was very simple. It was to reduce the spread and bring it back to the spread, which was already applied for newness to something more normative.
And for us, it's very instrumental to recapture more of the clientele locally on both carryover and newness because as we have already commented, newness category newness segment is performing quite well at B. That's where that's mainly where we have adjusted prices at BV. So we will comment further during Q2 what will be the impact on the business of busy in the region. Now regarding the split or the trends that in jewelry and watches, in fact, our jewelry brands have been growing in Q1, but on a less than in trend than in Q4. You know that the distribution of our jewelry brand is principally through retail channel.
We have you mentioned that Bourgeois had been affected by a decrease of traffic, and it's clearly due to the terrorist attacks in Paris last November. And of course, Beaufort is quite a high exposure to the French market because also many foreigners coming to Paris to buy Bouffron products. Now concerning the so all in all, watches clearly have suffered once again from the market conditions and EVV suffered from the market condition. It's true that at the same time, we have streamlined the offer, so we have also decided to have less products. This rationalization of the offer of the merchandising was really key in our 2 brands, Judith Nader and Jean Perrigo.
So I think it's a good time for us to continue to work on these two brands to have more synergies. We have a lot of initiatives in terms of distribution, in terms of supply chain for these two brands. We have also worked on the communication, and you will see in the coming months new advertising campaigns on these two brands. But the bulk of the decline for this segment is really due to watches.
Jean Marc, thank you very much, indeed. That's really helpful. Maybe just sorry, really two very brief follow ups. Just one on Gucci, licenses and others. I mean, that's roughly 2.5% of Gucci sales, clearly down over 30%.
I mean, that's effectively due to the transition that you have at the moment with Safalo and Eyewear moving in house and also the Coty transition. So can we just expect that's more of a technical impact at the moment and will effectively resolve itself once those changes have been made? And on my calculations, just when you were talking about the 10% to 13% price decline within Bottega across Hong Kong, China and Macau, that looks to me like it could be roughly a 200 basis point impact on the organic. Does that seem about right?
Yes. Concerning the royalties at Gucci, you're totally right. Royalties at Gucci cover 2 different product categories, eyewear on one side, as you know, and which, as you know, we will internalize the license of incurring eyewear on the 1st January 2017 and Procter and Gamble on the other side. And there is clearly a transition, a transfer period between Procter and Gamble and Coty. So you are flagged as the 2 main licenses.
Of course, we expect the royalty stream to be probably still down in the next quarter because of the transition, but gradually to a lesser extent because there was also a phasing in terms of launches of some products at P&G. So I think that the figure for the Q1 is not representative of what we can expect for the full year, even if we don't believe that we should see an increase of this of royalty revenues this year. So as it's really a transition year for our 2 main licenses. Regarding your comments on DVE, I think that I won't elaborate on that. It's a Q1 revenues conference call.
Let's say that we have mentioned in the past that we should see a benefit in terms of comparison for with 2015 due to the hedging, which won't have a negative effect this year. We have said that we would expect some dilution on constant currency basis because of all the initiatives we have in Bottega Veneta. And for me, this price adjustment was part of the bulk of initiatives we have at Bottega Veneta to rebalance the business and to recover. So I don't expect anything negative compared to what we had in mind and what we had planned.
Thank you very much. That's very helpful.
Thank you. We'll now take our next question from Helen Brand of UBS. Please go ahead.
Hi, good evening, Jean Marc. Couple of questions for me. Firstly on Gucci, can you just talk us through what the trend was with the whole Chinese cluster in the quarter and the U. S. Cluster and how that compared to Q4 and perhaps the exit rate there given your conversations about that improving?
Secondly, just on Bottega Veneta, it looks like you did it sort of mid March time in terms of the price adjustment in China. So we have had probably over a month in terms of that price cut going through. I guess, can you talk about whether you've seen any associated pickup in volumes, particularly in Hong Kong, perhaps also again in Mainland China since you did that price cut? Perhaps you could talk to the Chinese cluster for BB within that retail number down 10%. How much was the Chinese cluster and has that have you seen that improved since the price cut?
And then finally, if I may, just coming back to Gucci and the comments around the percentage of newness across the categories. Within the leather business, can you just talk to what the percentage of newness is within the leather business now? And how what percentage are you actually targeting for newness? And when will we get there within the leather category?
Helane, thank you for your questions. Unfortunately, you have asked a lot of questions on which it will be difficult for me to provide any answers because you have very detailed questions. We don't comment generally the split of sales by cluster, even by products. And regarding BV and the price adjustment, as I said, it was made it was implemented at the during the second half of March and rather at the end of March for one of the countries I mentioned. So it's really too early and it would be foolish to provide you any color on this on the evolution of the business.
We will see rather over the Q2 how the business will evolve. The only one comment I will make is about the American cluster. Globally, what we can say that overall, the American or the sales to American customers were up during the quarter for many of our brands and also for Gucci. But again, with a lot of volatility with a very peculiar situation, as you know, in the U. S.
Due to a quite uncertain environment.
And just on in terms of the leverage, you won't give us an inkling in terms of the percentage of the newness and where you're targeting that to get to?
As we said, we were expecting to have around almost 100% of our sales or at least our offer at the end of the year with new collections. So it implies that almost all the different categories will have been revisited. Concerning that we are we have more or less done the transition in shoes and ready to wear and that we expect and it's a figure that we have already communicated that in Q2, we should be around 2 third of the sales with new collections. You can imagine that the transition is ongoing and that it will be a progressive ramp up until the end of the year. Okay.
Thank you very much.
Thank you, Helane.
Thank you. We'll take our next question now from Mario Artelli of Bernstein. Please go ahead. Your line is open.
Good afternoon, Jean Marc and Claire. The first question is about the performance of Gucci in Western Europe. You mentioned Jean Marc that was particularly good because the domestic clientele was more focused on buying the new product of Alessandro Michele. But an explanation of this good performance could have been done also because you made more change of store format in Europe in comparison to the other geographies. And if I may on the store format, what is the advantage in sales for a square meter that is giving to Gucci in comparison to the previous store format.
And now you have got already a rollout of many stores. So probably you have got some data. The second thing is always about the stores. We have seen a Q1 with 3 net closure for Gucci and 5 net closure from Bottega Veneta. Can you give us an estimate of how what will be the net openings for Gucci and BV at the end of the year?
What the brands are targeting? Thank you.
Mario, for your questions. And once again, very detailed questions with request of very precise figures. But few comments, however, regarding the trends in Europe for Gucci with local clientele. Before talking about the store concept, it's important to remind also that in the sales to European clients, there is a more balanced breakdown between the different categories. And of course, the success of ready to wear and shoes has helped the performance of Gucci with local clients when, of course, the Asian customers prefer to focus first on accessories and leather goods when the transition is still ongoing.
So this is probably one of the explanation with a lot of also our more fashion forward customers in Europe. It's true also that among the refurbishment and the new openings of our new concept, there was not a priority given to Europe, but it's a fact that we have some major stores which have been refurbished. It has clearly helped the business as we had the occasion to say about Napole in your store with probably before talking about figures, general environment, which is more favorable for which is more positive, both for the sales associates and the customers, which is more friendly, more welcoming. Of course, I can confirm that we have a higher productivity today in our stores with a new format. But of course, you can imagine that I won't provide you any more color about the improvement, and I will provide you any figures.
Maybe Mario, I will answer on the store network. I think nothing new there for Gucci. We already mentioned that it's a consolidation phase. So globally, the store plan should have moved that much during the year. And for BV, it's about the same story.
It's a year clearly of consolidation. There will be some openings and some closings, and that was already the case in Q1. Of course, not in the same geographies, but globally, the store count should not move a lot.
Can you give us an idea of the opening and closures in which geographies are mainly focused? If there is a geography with more closure and another with more openings for Gucci and BV for this year?
Well, BV is quite clear that the closing will be more skewed towards Asia Pacific, that's for sure. And with more openings in Europe and in the U. S. And for Gucci, it's going to be more probably, I would say, more balanced. There would be more of a I mean, we are not in the subject of rebalancing anything for Gucci.
It's more having the right location everywhere. So that's less of a geographical issue.
Thank you.
Thank you. We'll now take our next question from Harmin Stevedevansman. Please go ahead. Your line is open. Hi, good evening.
I have just a very quick question on Gucci. Can you preside the weight of carryover products now in the on bag sales? And you've mentioned several newness during the presentation. I was wondering which bag was the best performing currently. Thank you very much.
Thank you, Armin. We don't provide, of course, any figures regarding the carryover weight in the offer of Gucci. We have said at the time of the elevation process for the brand that we are quite happy with the balance between carryover and newness. We were quite happy with the average selling price. So it's still the case.
The question was more to rejuvenate the carryover line. So we have introduced units that will become carryover because they are in some cases sort of reinterpretations, resenting of the carryover lines in a fresher way with probably more qualitative or more quality in terms of production. So we don't disclose these figures, but it's not for us a driver of the performance, and we are rather looking at the substitution of the carryover lines with new carryover. Regarding the newness among the best performers, clearly, we have the deal with this, which was introduced now a few months ago, let's say, last summer or beginning of last summer. And a very we see also a very rapid development of the padlock and also of the CVV, which is according to us, one of the next hit bag for the brand.
Okay. Thank you. Thank you.
I will take probably the last question now.
Certainly. Thank you. We'll take our next question from Julien Esteb of Barclays. Please go ahead. Your line is
Just I've got some questions on the implication of margins, if possible. Obviously, there has been some extreme volatility within petitekvaneta. Can you do things to that can actually sort of protect the margins if should the trading continue at this level? And also when you take a look geographically, there have been some quite significant shifts. And I just wondered if there were any implications for having more revenue coming out of Mainland China and the sort of leverage against that against leasing sales in a higher fixed rent region within Europe, whether that would have implications for margin as well?
Thank you.
Thank you, Julien, for your two questions. You can imagine again that I won't comment specifically on the evolution of the margin at BV. We knew that considering the trends we saw last year at Bottega Veneta and the situation with the Asian clientele, which is not new to us, that we will have to take some decision in 2016, which are fully encompassed in the plan we had for BV and in the budget. So overall, I think that for the moment, despite the evolution of the sales during the Q1, we are confident that we have all the actions in place, first of all, to improve the situation gradually over the year and to protect as much as possible the EBIT margin, taking into consideration that we have been very transparent for now several months about the fact that looking on a constant currency basis, we would expect a dilution of margin at BV. So concerning also the hedging impact, rather a form of stability.
So for the moment, we are working with the management in that direction. You're right to point out this all this shift in terms of consumption. And obviously, it's very difficult to appreciate the impact. Of course, last year, because of the transfer of some sales to Europe, there was an impact on the gross margin, on the EBIT margin, but it was not the most material one. So finally, the geographical mix has always an impact.
It may be positive or negative. But for us, it's not the driver of the main changes we may cope with in the EBIT margin. We have other factors that can impact more the margin like, of course, the currency, like the store expenses or the communication expenses. So all in all, Geography Comics may have an impact. Of course, we prefer to see more business in China, and it's for us very positive to recapture the Chinese customers in their home country where obviously you know that we have higher margin.
But at the same time, it's important to penetrate better the clientele across the regions in Europe, in the U. S. So all in all, the importance for us is to grow in a balanced way in all regions, and it's exactly what we are doing.
Okay. Many thanks, and have a good evening.
Thank you. Thank you all for your attention. So talk again for the next for the during the call for end of July for the presentation of H1 revenues and H1 figures. Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.