Good day, and welcome to Kering's Q3 2015 Revenue Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jean Marc Dupless, Chief Financial Officer of Kering. Please go ahead, sir.
Good evening to all of you. I'm pleased to welcome you to this call to review our sales in the Q3. First, I will provide you with a bit more background on our numbers. Then Jean Francois Palleu, Caring Group Managing Director and I will answer your questions. On Slide 3, you can see the summary of our performance both this quarter and over the 1st 9 months.
In Q3, group consolidated sales were up 12% as reported and up more than 3% comparable very similar to the overall trend achieved in the first half. Over the 1st 9 months, group revenue was up 15%, 15%, as reported, bringing the total to more than €8,400,000,000 Our Luxury division posted solid performances, up 3.1% in the quarter, a slight acceleration compared to the 1st high front rate. This is an achievement with regard to the sharp contrast experienced across the various regions attributable to currency moves and their impact on consumer spending patterns. Looking beyond short term volatility, all of our brands remain focused on consistently executing their strategy and implementing action plans to foster organic growth. From this perspective, Gucci's rejuvenation is well on track with strong positive signals.
Our sport and lifestyle revenue was up 3.4% in the quarter with comparable sales now up more than 5% year to date and nearly 4% in the 3rd quarter, Trima revenues are in line with full year guidance demonstrating that the decisive execution of the brand's turnaround plan is delivering as expected. Starting with Luxury on Slide 4, FX still provided tailwind in Q3 boosting reported revenues by 8 percentage points. The division also recorded a 2 percentage point impact from SCORP due to Ulysse Nardin. Overall, luxury activities were up 14%, 1 4%, reported in Q3 and slightly above 3% in comparable terms, driven by solid retail up 6%. In retail, the major highlight of the quarter is obviously the sharp geographic shifts with Western Europe and Japan as key drivers up 29% 26% respectively.
The two regions were fueled by sustained tourism. In Western Europe, Chinese and American clients were leading the way. And in Japan, the strong trend of Chinese tourists continued. Local consumers confirm their support in Western Europe. On the flip side, North America had a soft quarter, especially with tourists from Latin America and to some extent with locals.
The strength of the currency combined with a weaker consumer sentiment that should not last are the main explanatory factors. Finally, Asia Pacific remained a very unsteady region due to pricing differentials, currency movements and additional deterioration in Hong Kong and Macau. A few words on wholesale, which represents 28% of our luxury revenues. It was down just 3% in Q3, marking a further sequential improvement driven by Gucci. Let's now turn to Gucci on Slide 5.
In Q3, Gucci posted revenue growth of 9% with comparable revenue almost unchanged. Retail was up 1% and wholesale was down 6%, a much smaller decrease than in the first half as expected. This quarter was still a period of transition as the pieces of the cruise collection designed by Alessandro Michele just started hitting the shelf mid September in selected stores. Consequently, the weight of the new collections in Q3 revenue was very limited at less than 10%. But what is most important to note is the excellent initial performance of the cruise.
I'll come back in a few seconds on everything that Gucci achieved and on the positive signals we have, but before a few comments on Q3. By region, retail was especially buoyant in Western Europe and Japan, up 27% 24% respectively, an acceleration compared to Q2. In Europe, performance was driven by tourism from Asia and North America combined with solid demand from local clients. Japan confirmed its attractiveness for visitors notably from Mainland China. In North America and Asia Pacific, the comments I just made are also valid for Gucci.
Wholesale improved substantially despite a double digit reduction in the numbers of doors in Europe, meaning that the underlying trend is starting to benefit from the renewed appeal of the brand. Now an update on the actions and the momentum at Gucci. You will find pictures of recent realizations on Slide 6. Following the enthusiastic reaction generated by the collections presented in H1, the teams have worked to step up cruise deliveries, which were available in key destinations by mid September. The arrival of the collection was supported by impressive store window displays and a striking advertising campaign.
The new design of the Montin Napoleone flagship in Milan was unveiled during Fashion Week to great acclaim and is setting the tone for the new retail environment. At the same time, the contemporary vision for the brand was deployed in several shop in shops at fashion concept stores such as Dover Street Market in London and Tokyo and Collette in Paris. Gucci redefined and clarified both its product assortment and its merchandising messages. Reinventing the logo and the brand's key assets, new lines such as the GG Bloom Project, LineaA and Padlock had a strong start. We are particularly pleased to see new customers buying these products, many of them younger and first time clients of the brand.
The dialysis for its part is already well on its way to becoming an iconic bag and its appeal will be amplified, thanks to continued innovation and creativity. The renewed or refreshed store concept will be progressively rolled out starting in key locations and will have been applied to slightly more than 30, 30 stores by year end. All customer touch points are being updated consistent with Gucci's customer centric vision. In addition to exquisite new packaging, the brand has launched a fully redesigned website building on its pioneering digital presence. The site blends beautiful design, rich imagery, engaging storytelling and exclusive brand content with a smart user experience.
It will further bridge online and offline through innovative capabilities, ultimately allowing a seamless omnichannel journey. The new site has been live for a few days now in the U. S. And will be rolled out in the coming months in Europe and Asia. In conclusion, we are extremely pleased with the initial response to Alessandro Michele's creative vision.
Our confidence is reinforced by the reception of the recent SpringSummer 2016 fashion show, which was unanimously recognized as a hallmark of the season further confirming the outstanding momentum of the brand. At the same time, all the drivers to improve our store productivity are identified and in 9 short months, the teams have put the key elements in place to get Gucci on to the next level of growth and success. Moving to Slide 7, Bottega Veneta posted 4% comparable growth in the quarter with contrasted trends. Retail was up 4% hampered by the brand exposure to Hong Kong and Macau, which together represented around 14%, 1 4 percent of revenue. More generally, in Asia Pacific, due to its price positioning and to the pricing differential, Gotagavadida faced headwinds, while in North America, the brand was impacted by muted tourist traffic.
Conversely, Western Europe was strong, thanks to both tourism and local clientele and Japan clearly benefited from Chinese tourists. Wholesale was up a solid 6% in Q3. To further drive growth, a range of action plans are in place. Architecture across regions is progressively fine tuned, thanks in part to the introduction of new lines and collections. The strengthening of the shoes and ready to wear categories is making progress and we are reinforcing the development teams around Thomas Meyer.
The brand demonstrated good growth in the quarter in both men's and women's shoes and we expect this to accelerate in the coming seasons. Finally, Bottega Veneta is capitalizing on its privileged relationship with its customers to deploy new initiatives in stores and online and to extend its presence with key accounts especially in the U. S. On slide 8, you will find a recap of Saint Laurent sales, which showed continued outstanding momentum in Q3. Once again, the brand demonstrated brand growth, up 37% as reported and 27% comparable, exceeding the 24% growth posted in H1.
Performances remained excellent across all channels, regions and product categories. Retail had its strongest quarter to date, up 32% despite very high comps. Wholesale advanced 17%, 17% comparable with double digit growth across all key markets and doors confirming continued overwhelming reception of the brand's collections. All main regions were up sharply. Particularly notable was the performance in Mainland China suggesting rising brand Hay It.
As you would expect, trends were more contrasted in Hong Kong and Macau. Natural markets for their part were again instrumental in Saint Laurent's performance led by Western Europe and Japan. All product categories continued to post very strong double digit increases reflecting the success of the brand in achieving sustainable growth, thanks to both carryover pieces and newly introduced lines. Moving on to slide 9. Our other luxury brands had revenue growth of 17% as reported and were down 1% comparable.
Trends again diverged sharply between retail and wholesale. Retail confirmed a steady double digit growth, while wholesale was down 9%, primarily due to watches and to Briony. Our soft luxury brands grew sharply propelled by retail up 12% with Balenciaga, Alexander McQueen and Stella McCartney all posting very strong growth. In hard luxury, the quarter once again showed contrasted situations across categories with jewelry outperforming. All 3 jewelry brands achieved double digit growth consistent in both retail and wholesale.
Baux Milato delivered outstanding performances and Boucheron confirmed the success of both its jewelry and high jewelry lines. Killian sales were also very positive in the quarter. In watches, the headwinds that had impacted the first half persisted in the quarter. Both Eulisnada and Gerard Perrigo faced ongoing weakness in certain of their markets respectively Eastern Europe and Mainland China. However, we are seeing early signs of improvement in mature countries and we hope to solidify this as the brands leverage their work on products, image and distribution.
Let me now review the quarter at Puma and in our Sport and Lifestyle businesses on Slide 10. The division's reported revenue was up more than 8% and 3.4 percent comparable reaching the €1,000,000,000 mark. Overall, Puma's performance in the quarter is in line with full year guidance calling for mid single digit growth. Revenue was positive across all categories led by footwear, whose sales were up 4%. The franchise in running and training around in the quarter with additional launches and new ships hitting the market.
Aside from Western Europe, all key regions registered positive performances in the quarter. Sales growth was especially noteworthy in North America where Puma fully benefits from improved traction with key wholesale partners initiated several quarters ago. Sales also Pacific, led by China and India, together representing about 9% of revenues. Western Europe was slightly negative in the quarter, primarily phasing of deliveries following a strong Q2 with further good growth in running and training. 1 year into the Forever Faster campaign, we are more than ever in the top line as well as successfully refocused brand positioning and marketing, strengthening our market shares at leading wholesale accounts.
At Valcom and Electric, the quarter was softer compared to Q2. This primarily reflects the combination of an overall tough market in action sports, especially in the U. S. And high comps at electric. From that perspective, Qualcomm's resilience in wholesale broadly flat despite the adverse environment is commendable.
A few words of conclusion on slide 11 before we take your questions. The global environment in our sector has become even more complex in recent months, but we are well positioned to face these short term disruptions. Once again, our multi brand model demonstrated its efficiency, notably in soft luxury, where altogether our brands delivered 4% comparable growth in Q3. Our organization allowing us to better support our brands and foster the synergies is a differentiating factor, particularly when markets are tougher. It is what enabled us to adapt our brand's pricing structure in response to currency swings and to reach additional efficiencies through deeper integration of the supply chain.
We are making headway with cross brand projects, notably in digital. We expect that our caring eyewear initiative will start generating revenues earlier than initially planned. The rejuvenation of Gucci is a great example. The speed with which the brand has been able to regain its stature as a fashion authority is a testament to the power of its organization. Finally, we are intensifying our financial discipline across the board.
So all told in this environment, we remain highly confident in our strategy and in our short term prospects. Jean Francois and I are now ready to take your questions.
Thank you.
Questions. Thank you very much, Jean Marc and Jean Francois. First of all, just with regards to Gucci and thinking about the weighting that you flagged, less than 10% of Alexandros collection was effectively in store. Could you then break out effectively how much that particular element grew within the retail business during the Q3? That's my first question with regards to Gucci.
The second is also on Gucci and thinking about the price mix elevation on bags. It looks like some of the new bags, for example, whether it's the GiGi Supreme Canvas or the GiGi Blooms, Continental Wallet, for example, are seeing significant price mix uplifts of anywhere between 30% 80% compared to some of the old iconic bags of similar size. So I'm just wondering how you see this price mix elevation evolving and what do you think that the contributions could be to organic growth in 2016? And thirdly, with regards to Gucci wholesale, I mean, if we think about Saint Laurent and we think about the cleaning of the Saint Laurent business a few years ago, I appreciate that the directly in store network is obviously lower as a percentage brand, saw significant double digit growth through the wholesale channel. What should we reasonably expect for Gucci wholesale now that we're entering into a period of a much cleaner channel?
And I think that the double digits closing of doors in Europe will start to effectively annualize into next year. Thanks very much.
Good evening, John, and thank you for your questions. First of all, yes, we have highlighted the fact that the new collections hit some of the main flagships only mid September so that at the end of the day, there was just a very limited number of SKUs available in the network as a whole. What we can say is that on top of the
very enthusiastic
reception you saw in the press coverage, the sales are very encouraging with the new collections. We have seen some strong double digit growth in the new collection and especially in the end bag. I would add also that you may have observed that the Dionysus bag was already available mid June mid July, sorry. And since then also, the evolution of the sales is very positive. However, it's important to remind that, of course, the share of the new collection in the sales will increase during Q4.
But even during Q4, it should not exceed more than half of the sales. Now coming to your point about the price mix validation. In fact, you're right to point out some introduction of bags with quite high price points. But overall, what we can say is that we have a quite good range of price points. The Dionysys bag, which is already a bestseller bag, the price is ranging from $1500 to above $2,600 But when we look at the G, the Linea A, the new line, which is more an entry price line, it just starts from for standard size at $9.80 And if you think to some smaller sizes, you have prices rather below around €800 or below €800 So overall, we are now totally satisfied with our positioning.
And I think that the teams have been working hard to fill all the different price points with innovative and also desirable products. So we aim at continuing exploiting opportunities in the price range that we are not properly covering before and to achieve still a good balance growth between volume drivers and a higher end part of the offer. So that at the end of the day, we consider that the average selling price, as we have told during the H1 call, should remain quite stable. Now concerning the wholesale. I think that I would like just to make a summary of the or to elaborate a little bit more on the performance in wholesale.
So as for the retail part, the new collection has been delivered from mid September. And going forward, we see that there is a very good appreciation of the new collections by the buyers, especially with key partners in Europe and U. S. And we have mentioned the fact that the brand has notably recovered strengthened collaboration with key premium wholesale accounts. But I remind you that at the same time, we have reduced the number of doors to ensure higher exclusivity.
So it was a reduction of more than 10% in the total number of wholesale doors, mainly driven by Europe if we compare spring summer 2016 to last year's spring summer collection. So overall, based on these comments, Gucci Wholesale should in Q4 should most likely be still down quite in a comparable range as Q3. And going forward, I think that you can see that the growth of Saint Laurent in Allstate is more or less aligned with Retail. So we can expect that going forward in the long run. It should be more or less the same as the retail for Gucci as well.
And globally, the order book is quite good, and we see that as very encouraging.
Thank you very much, Jean Marc. Maybe just one follow-up on that. If Gucci wholesale in 2016 is going to run pretty much in line with Gucci Retail, what are your expectations for Gucci Retail if you think about the Q4 reaching, I guess, no more than 50% of scale with new collection? I'm assuming by the first half of next year, we should have pretty much 100%. So, if we think about the timing and phasing and scale of the new collection into the 2016 year, I mean, is it fair to assume that high single digits to even low double digit Gucci Retail is actually achievable?
So let's start with the reminder. This is a conference call about the Q3 performance. And you know, John, perfectly that we don't provide any guidance for the following year.
Thank you very much.
Well done.
Thank you. Our next question now comes from Luca Solca of Exane BNP Paribas. Please go ahead.
Yes. Thank you very much. Good evening. A couple of questions connected to the eyewear business, if I may. You say that you are progressing on this front.
I wonder if you could give us more details on what is going on, on that front, where you expect the most important value from this initiative to come from and what do you see as the turning point in the development of this business? On another subject, digital, you announced the improvement of the Gucci website. Gucci, I think, tall, at least from our research, in terms of digital execution. Further improvement is very good news. I wonder if you could go through the logic of having a 2 system approach in digital and whether you see this as the mainstay of your strategy.
And I'm referring to the fact that you develop Uchi in digital independently while you have a partnership, a joint venture actually with YOOX NET A PORTER and if you see any development on that front? And thirdly, I would wonder if you could comment what is going on in the U. S. Market despite the significantly sharp contrast versus the other regions, which I think is very interesting. Everybody seems to be focusing on the Chinese, but there's something in America other than, I wonder, tourist arrivals because of the stronger U.
S. Dollar that it's possibly worth taking note of. Thank you very much.
Good evening, Luca. This is
Jean Francois speaking. Regarding Caring Eyewear, we are indeed very satisfied because progress is ahead of our expectations and so that we have taken significant orders, some of which have been already delivered. And so again, the reception is really quite good from all the channels of distribution. So again, we are very pleased and confident. About the prospects, we think that next year, Saint Laurent and Bottega will make the most of this initiative because they were those who took the bigger the biggest orders.
And so they will benefit from that next year as early as next year. And of course, in 2017, the integration of Gucci will give us a real kick and will have a real impact on our performance. Regarding e
commerce,
what we have done is that we have realized a few years ago that Gucci was really way bigger on the Internet than the other brands. And they were really way in advance in e commerce. We wanted to develop for the other brands something, but in the meantime, we didn't want to slow down Gucci because the other brands were lagging behind in terms of systems, but also in terms of capabilities. So we didn't want neither to, again, slow down Gucci nor to take too much risk for the other brands to bring them to the same speed as Gucci. And that's why we chose to gradually improve with the help of YOOX.
So we went to the YOOX solution and doing that we have improved significantly. We have increased our sales. We have also gained know how for the brand at a different pace than Gucci and that's why we chose this solution.
Zomer, Dupleix again coming back to your question to the U. S. Market. First of all, there is an obvious explanation for the softness of the U. S.
Market, which is about the decline in terms of tourist traffic with regard to the currency situation. Purchases by Chinese and Japanese tourists were obviously down and the same for the South American tourists. As a reminder, for main soft luxury brands, tourists may account for up to 30% of sales in the region and obviously more in some key destinations, which have been most impacted due to their strong touristy clientele as Miami or New York City. For the local customers, there has been a clear shift first of purchase in Western Europe during the summer season, possibly combined with the weaker consumer sentiment, maybe partly related to the stock market turmoil in August. So far, we have not made any additional explanations.
However, we don't see any reasons for the situation too large considering the macro environment, which is still quite solid in the U. S. And what we have observed rather in September is that some customers came back to the stores in the U. S, some loyal customers, which were maybe in Europe or which didn't purchase during July August came back to the stores late September, but it's too soon to gauge what will be the precise evolution in the U. S.
Thank you very much.
Thank you, Luca.
Thank you. Our next question comes from Thomas Scoveau of Citibank.
Citi. Three questions, please. The first one on the Gucci store network and the refurbishment. Can you give us some color on how the Via Monta Napoleone store under the new concept has been performing? And more generally on the 30 stores you're planning to refurbish, what kind of sales uplift are you expecting?
Secondly, this is the Q2 where we're seeing an extreme divergence in geographic sales trend, especially at Bottega, Veneta and Gucci. Can you perhaps recap how you're tackling the price gap issues and also discuss maybe parallel markets? I was also wondering how you deal with inventory management now. I assume you need to carry more inventories in Europe and Japan and perhaps suffer from excess inventory in Greater China. And thirdly, on your relationship with YOOX, the YOOX NET A PORTER merger was approved earlier this month.
So I was just wondering whether the change in ownership in YOOX with Richemonta 50% shareholder changes anything to your position, either giving you an opportunity perhaps to exercise the YOOX JV call option earlier than expected? Or perhaps would you consider a good use of cash becoming a shareholder in YOOX NET A PORTER? Thank you.
So about the Gucci store network. So as you know, slightly above 30 stores should be refreshed or reopened with a new concept by year end to be reflecting Alessandro Michele Creative's vision for Gucci. Noticeable projects include some key locations in leading destination cities, of which several shops and shops in key department stores. The priorities that we defined to address directly operated stores that are the most significant drivers of image and revenue. And we will continue to roll out the concept in 2016, even if it's too early to share more indication with you about the numbers of stores to be refreshed or reopened with a new concept and for the geographical mix.
What we can say that the first one that has been reopened or refreshed or reopened with a new concept is the Montaigne Apollonia one, and in which we have a dramatic increase of sales considering that we had only one half of the surface reopened. So it's very encouraging. However, it was at the time also of the fashion show. So we need to assess after the fashion show what is the trend, but it shows that the reception by our customers is very positive and also and maybe it's also very important to mention that by our sales associates, which are we are very positive about the new concept. And I think that the motivation of our people in the store is really at the maximum.
And just as I mentioned also about the store network because you raised the point. As a reminder, we have not increased, as you will see, significantly the number of stores at Gucci level. It's only plus 15% since the beginning of the year, considering that we have within this number some buyback decided last year in South Africa and in America. Regarding the price gap, I think that we have already answered that question in the past call. And in fact, there is no nothing new that should lead us to change our mind and our position on that.
Our view has not changed. And neither the solution is to be implemented, which is still the objective to progressively come back to a more normative price differential. I think there is a first stage, which is to come back to the normative gap we had in the past with Mainland China around 30%, 35%. Then we will consider if additional steps are to be made. However, I will remind you what we have decided.
I think it was there was several ways to address that depending on the maturity of the brand and also the opportunity we had to introduce new lines. So for the less mature brands, we had the opportunity to reduce the prices in China and to increase the prices in Europe. For the more mature brands, we have to tackle the issue differently also considering the situation of Gucci. And that's the reason why we have said the opportunity to introduce new collections to progressively reduce the gap. I'm not sure to have completely understood.
I think you had something about OpEx. Can you just precise what you have in mind?
No, not about OpEx, but just how do you manage inventories? I mean, when you say nothing has changed in the price gap, I mean, can you I'm not sure if it's sustainable to have 30% growth in Europe and Japan and double digit decline in the U. S. For the long run. So I'm sure you are shifting inventories maybe from regions to another or thinking differently perhaps about how to optimize inventories in this context?
Let's be clear, Thomas. What I said is that we have not changed our position regarding the price gap, which was the objective to have an approach aiming at reducing the gap with different approaches depending on the brand. Now regarding inventories, it's something that we have worked on now for several quarters. We have not waited for the present situation to adapt our policy in terms of replenishment and not only replenishment, but also allocation of products on the different markets. As I had the occasion to explain in the past quarters, we have implemented in the 3 major brands with the objective also to implement such systems in our other brands some software or approach allowing us to switch to a push model rather to be in a pull model as it was the case before.
So you know that let's say that depending on the brand that we have now 70% to 80% of the assortment, which is allocated centrally with the capacity of keeping some central warehouse to allocate along the season product by region based on past data and also information about the sales trends. I would add also that because we have some carryover, also it allows us to or we can keep some carryover inventory in the regions without major risk. After that, you have another question in your question, which is about the inventory situation. What I can tell you is that we are working very hard to monitor this indicator, and our brands are reacting very positively to the pressure we put on them on this very important topic. And I believe that we have made some good progress during the second half.
We were disappointed, as you know, by the cash flow generation during H1, and we are making progress during H2 with an improvement of the cash generation.
Okay, Thomas, good evening. Regarding the merger between YOOX and NET A PORTER, I dare say that the change of ownership does not change anything, neither for our JV nor for the trading of our brands with Net A Porter or Mr. Porter. So and on top of that, we don't consider to become shareholder of YOOX Net A Porter.
Thank you. Very clear.
Thank you. Our next question now comes from Antoine Belge of HSBC. Please go ahead.
Yes. Hi, it's Antoine at HSBC. Three questions, if I may. First of all, regarding Bottega Veneta, we've seen a bit of a volatile performance over the course of this year and understand the exceptional exposure to Greater China. But like for instance in Q2, Greater China was not very good and you had better results.
But maybe leaving aside this, what is what are the things that you are trying to implement currently to develop the brand beyond the Intrizzieto? And where are you standing in terms of diversification? And how is that received by the consumer? Because it's not easy sometimes to convince consumer to be buying other type of products for a given brand? My second question is actually relating to a bit more short term.
I think some of your peers have mentioned that October had been a bit better. I think you mentioned that some of the impact that you see in Q3, especially the psychological impact of equity markets could be a bit of temporary. And so maybe some comment on Golden Week and also the fact that the basis of comparison is becoming easier as we anniversary the Hong Kong demonstration last year? And finally, on currencies, it seems that for once they seem to be willing to stabilize. So what's your hedging policy for 2016?
And also, you had a special situation in H1 with actually quite a big headwinds from currency on margins. What can we expect for 'fifteen? And then at least qualitatively for 2016, could you confirm that these headwinds should actually become tailwind for you margin wise in 2016? Thank you.
Thank you, Francois, for your questions. It's true that as regard Bottega Veneta, the brand's geographic exposure that precisely overweighs 2 important markets with Hong Kong and Macau, which together represent approximately 14% of revenues, is not optimal at this point in the cycle. This is something you know very well and that we have already commented a lot in the past. In our view, this does not change anything to the great ambitions we have for Bottega Veneta going forward, quite the opposite indeed. Part of the plan we have for Bottega Veneta is precisely to foster category expansion and increase the geographic reach of the brand, precisely with the aim of better balancing the drivers of growth between Asia and non Asian markets.
From that perspective, we find good reassurance and encouraging signs not only in the resilience of the Chinese cluster at BV, also in the Q3, which grew double digit in every market outside of the home Asia Pacific region, but also in the very promising and rising contribution of some clusters such as the European and Americans. These two clusters still represent a fairly tiny portion of PV sales, let's say around 15% on a combined basis worldwide. But we are positive worldwide in the quarter with, in particular, very strong growth of the American customer base in Europe through the quarter. That said, I think that as I said in my preliminary remarks, we are working in reinforcing the creative team working with Thomas Mayer to be sure that we will be able to propose to our clients what they can expect in the in some of the categories like shoes, in which we have a very good development. We need to continue to work on the ready to have collection.
We have to acknowledge that. But I think that we have said a few years ago that it will come a time when we will need to make a plateau in terms of profitability at Bottega Veneta in order to invest in the brand. And so we will continue to invest in the brand, again, by reinforcing the structure to be sure that we deliver to the market best quality product. Now coming to October. It's so John was trying to have some view about next year.
So you are more on the debt in your ambition, just trying to know what's going on with October. However, think that we see rather a sequential improvement week after week. So I think that the first week of October was not so good. The 2nd week was improving. And you made a comment or you had a question about the Golden Week.
So again, you know that we don't comment current trading, but what we can say specifically for the Golden Week is that the trends have started fairly smoothly for the 1st week and then have regained a better momentum in the 2nd week. Europe and Japan have remained, any case, on a very dynamic trend for the whole period. So I think it's a smooth start, but it's improving gradually. Now about hedging, which is still something very technical and which we try to be as clear as possible, which is not easy. Based on the current FX rates, hedging should be broadly neutral in the fiscal year 'sixteen, but still negative in H2 'fifteen with current spot rates still well below the average hedge rate of fiscal year 'fifteen, although to a lesser extent than in H1.
Going forward, we also see the benefit of a more flexible hedging policy in place as we have introduced, as you know, a limited component of optional based hedging strategies, although less than 20% of our total hedging. This could gradually mitigate the adverse impact from hedging, starting as early as Q4 with full impact in fiscal year 'sixteen.
Okay. Maybe just a follow-up on what you just said regarding this other options. I think one of your competitor mentioned that plain vanilla options were too expensive. So is it more like via option tunnels that you're hedging yourself?
This is a true approach, also considering that plain vanilla options are particularly expensive on some currencies. So that's the reason why we have applied a hedging an optional hedging strategy only on the currencies on which we have more visibility and for which the options are not so expensive.
Thank you very much.
Thank you. The next question now comes from Julian Easthoft of Barclays. Please go ahead. Your line is open.
Thank you very much and good evening everyone. I thought I'd start off by asking the first question about how lumpy the Q3 actually was between July, August September. Was there sort of particular volatility between the various different months? Because I think it's been quite difficult for us to understand sort of the trading patterns generally. And the second question I have is on watches.
If I get the numbers right, the Katurin leather goods were up 12 and jewelry was up 11, which must have meant that watches must have been down by a huge amount. Is it possible just to sort of give us an indication on that because clearly a loss fits destocking and hopefully that will come to an end at some point. And seriously just coming back to Gucci, there was always up until, obviously, a year
or so ago, there was
a lot of talk about logo, no logo. I just wondered how they the whole logo thing has gone now, because it's clear from your window displays that the logos are very much back in prominence. So it would just be interesting just to get a bit of an update on that. Thank you.
Your question is on the different trends between or the trends between the different months of the Q3 is totally irrelevant. As you know very well, we never comment in detail on trends on a monthly basis. This is especially true in a period where volatility is high and would make these comments risky, if not irrelevant. I already mentioned in my preliminary remarks that Q3 had been marked by sharp diverging patterns across the regions with very solid trends in Western Europe and Japan being largely offset by more negative ones in Asia Pacific and North America. But I can say that this was particularly true during the summer holiday season, so July August, due to travel flows.
In September, there is, by definition, a sort of slowdown, somehow a sort of slowdown in terms of tourism traffic. So to some extent, September showed narrowing performances across regions. I think that you try to do math on the performance of other brands. So it's 12% for the soft luxury brands. We were pointing out only the 3 brands, Balenciaga, Stella McCartney and Alexander McQueen in retail, not taking into account wholesale, which was on which we had some more muted figures also because of the cautiousness of, first, our wholesale partners and also because of some seasonality in the deliveries.
So we don't provide figures about the watches. We have mentioned that Jewelry was overall performing quite well and quite in line with the market, I would say. So watches were the performance was still negative with, I would say, a slight improvement compared to Q1 and Q2 and some very positive signs. We acknowledge that there are there is still a situation of high inventories with the distributors across the regions. And of course, because of this some groups may benefit from scale effects, which is not the case of our watch business, which is still relatively small on the market.
And that's precisely why we are working on developing the synergies between our 2 watching brand in order to have a better impact on our distribution. And your point was about logos, so on NeloGo and especially at Gucci. So you know that we don't provide any more the split between logo and non logo because we believe, first, it's no more relevant now that we have reached what we've considered a right balance between logo and non logo. But you will have observed that with this iconic Gigi is clearly part of the Gucci heritage. That's the signature of the brand, something we actually need to be we need to be proud of it.
And what matters is to ensure the right balance between Gigi and other styles. So therefore, what also matters, as we have said before, is to ensure that Gigi is not synonymous with enterprise products so that we can actually come up with some more modern, lively and luxurious reinterpreted approach on this iconic logo. There are already the clear directions to Brasel logo. It has been enriched with more refined details, additional functionalities and in some case, customized. So you have already observed the first illustration with the Dionysus bag.
It is a fashion forward, higher interpretation of the iconic Gigi pattern that was introduced in July, as I said before, and further enriched with the Koos collection. And I invite you to see the Jiji Bloom line and the Linea A as well as the padlock, which are all the newness introduced recently, July September, illustrating this strategy to have a right balance between Gigi and other times.
Okay. Thank you very much.
Thank you. Our next question now comes from Warrick O'Gee of Deutsche Bank. Please go ahead. Your line is open.
Good evening, everyone. Three quick questions for me, please. Firstly, what was the performance of the Chinese cluster for Gucci in Q3? Question normally gets asked earlier on. I think I missed it.
Was it up, down, single digit, double digit, please? Secondly, in the European region for Gucci, I wasn't quite clear whether you meant that Europeans had strengthened during the quarter. Was that what you were saying? And how small is the European mix versus tourism in that region now? And finally, your final slide refers to CapEx discipline.
Just wondering whether you could give some guidance for the full year, please?
I won't be too specific on the Chinese cluster. First, as a reminder, for the division, and it's important to stress that on a year to date basis, the trend with the Chinese customers is positive on the Luxury division, albeit showing increased contrast in performances of the Chinese cluster overall according to the different regions during Q3. In Q3, on a worldwide basis, sales to the Chinese cluster decelerated across most of our brands compared to Q2 'fifteen. So it's the same for Gucci. But Q2 had been extremely strong, and you know especially why for Gucci with the clearance policy.
So overall, for the division, it became slightly negative in the quarter as the rebalancing of purchase in Europe and Japan did not fully offset the deterioration witnessed in Hong Kong and Macau and the temporary drop in South Korea still because of the NERS syndrome. I would also that in Mainland China, the trends are still also negative, and we don't see so far any major improvement. So the comments I made for the division is also valid for Gucci. Concerning the sales of Gucci in Europe, yes, we have commented in the past quarters that the sales to the local client there was improving, and it was a demonstration that Gucci had regained traction with the local clientele of the mature markets. It was first the case in, as you know, in Japan or in the U.
S. And now we are quite happy to see that it's also the case in Europe with our European clientele, which represent the locals are representing approximately 40% of the clients in Europe, of course, with some differences between the cities and also between the countries because you can imagine that in Spain or in Germany, the share of local clientele is higher compared to Italy and France. And that's the reason why also France and Italy were partially booming for Gucci during Q3. Regarding CapEx, we have mentioned the point about CapEx because it's true that we believe that to in the stages of consolidation of the market and where the trends are probably more volatile, we need to increase or to be more disciplined, not only in terms of CapEx, but also in terms of working capital control. And it comes to the question also of Thomas Chauvet.
So as a better grip on the inventory control and on the CapEx is, to our view, absolutely key. So we still have in mind to have a constant CapEx envelope at group level, stripping out currency related inflation, which is which has contributed to the CapEx increase during the first half, stripping out also carrying eyewear and the indemnification to Safilo and some projects born at corporate level like the real estate one. So we are having a very strong focus on allocating and making priorities in our operating investments, being more stringent on store openings in terms of criteria and brands, not only Gucci, all the brands have a clear road map and objective in terms of return on cash flow generation.
Thank you, Jean Marc.
So we'll take the last question.
No problem. This next question comes from Thierry Kuta of Societe Generale. Please go ahead.
Yes, good evening, everyone. I may have 3 questions. Let's make them short. First on Saint Laurent, we've had again a spectacular performance.
Could you
give us some granularity on the constant currency growth and notably maybe some sense of a split between volume mix, price and selling space? Secondly, on BV, you mentioned 2 times the success of footwear. I was wondering if leather boots was still close to 90% of total sales or if it had started to come down? And lastly, on Gucci, you highlighted the initial success of the new bags. I was wondering if you could update us on the revamping of the small leather goods and luggage lines and on the timing of initiatives in those two fields, please.
Thank you, Thierry, for your question. Of course, we can elaborate a little bit more on the progress on the evolution of sales in Saint Laurent on a constant currency basis. But you had more or less the data presented on the slide. So as you know, it's quite it's very well balanced between the regions. Let's say that in emerging markets, the And in mature markets, it was 20 close to 29.
So overall, it gives us 27% growth at Saint Laurent. And I think it's almost positive. It's positive on all markets and notably also still in China. And I mean, I don't think that I have more to say about San Juan because as I said during my preliminary remarks, it's a very well balanced growth between categories, between newness and carryovers. So I think that nothing to add about Saint Laurent.
Regarding BV, you know that the share of leather goods is very high or no. And I think the success of the footwear or the shoes category is there, but it's not sufficient to change so far significantly the breakdown of sales. What I would rather highlight is that it's a commercial success. It's very well received by our final customers and also by our wholesale partners because as I mentioned during my preliminary comments, we want to penetrate better the U. S.
Market through the wholesale partners, and we have a very good reception of what we are doing in this category with our wholesale partners in the U. S. As regards the small level goods, this is a category on which we are the intention at Gucci, yes? This was your question about small evidence at Gucci. You remember, it was not a very strong category in the past quarters.
In fact, we are still working on this ongoing process to redeem or to work on the small level goods and the luggage category in which we have started to reduce the number of SKUs. We have tried to refocus and to be more consistent applying the same rejuvenation spirit as in handbags, but we are probably sooner in the process. So we'll continue to upgrade the perceived value of the Gigi lines by adding some differentiating features, improved appearance and details in this category. But again, we are sooner in the process in the journey. So we would see the benefits of this revamping rather later and more probably in 2016.
Sorry, you said not probably in 2016 or probably in 2016?
Probably in 2016, starting in 2016.
Thank you.
Thank you. That will now conclude today's question and answer session. I would now like to hand back to the speakers any additional or closing remarks. Thank you.
Thank you very much for your questions and for your interest in Kering. In a complex, rapidly changing environment, we had a good quarter, illustrating the benefits of our broad footprint and multi brand model. We look forward to reviewing our Q4 performance with you in early 2016. Before closing this call, I would like warmly to thank Edouard Crowley, who has been the right hand man of our Investor Relations department for 4 years now. He is taking on a new function within Kering and moving to New York to join the Thomas Meyer brand.
His replacement has been hired and will join Claire's team in mid November. I know that Edouard's contributions were much appreciated not only by Turing but by all of you, and I'm sure that you will join me in wishing him success in his new job. Thank you again, and have a good evening.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.