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 Duplaix, 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 third quarter. First, I will provide you with a bit more background on our numbers, then Jean-François Palus, Kering Group Managing Director, and I will answer your questions. On slide three, you can see the summary of our performance both this quarter and over the first nine 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 first nine months, group revenue was up 15% as reported, bringing the total to more than EUR 8.4 billion. Our luxury division posted solid performances up 3.1% in the quarter, a slight acceleration compared to the first half run 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 third quarter. Puma 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 four, FX still provided tailwind in Q3, boosting reported revenues by eight percentage points. The division also recorded a two percentage point impact from scope due to Ulysse Nardin.
Overall, luxury activities were up 14% 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 at 29% and 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 confirmed 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 five. 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 shelves mid-September in selected stores. Consequently, the weight of the new collections in Q3 revenue was very limited at less than 10%. 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% and 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. Also 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. An update on the actions and the momentum at Gucci. You will find pictures of recent realizations on slide six.
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 Via Monte 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 Colette 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 Blooms Project, Linea A, 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 Dionysus, 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 stores by year-end. All customer touchpoints 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 omni-channel 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 Spring-Summer 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 nine 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 seven, Bottega Veneta posted 4% comparable growth in the quarter with contrasted trends.
Retail was up 4% hindered by the brand exposure to Hong Kong and Macau, which together represented around 14.14% of revenue. More generally, in Asia Pacific, due to its price positioning and to the pricing differential, Bottega Veneta 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. Pricing 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 Tomas Maier.
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 eight, you will find a recap of Saint Laurent sales, which showed continued outstanding momentum in Q3. Once again, the brand demonstrated underlying 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 heat. As you would expect, trends were more contrasted in Hong Kong and Macau. Mature 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 nine. 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 Brioni. 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 three jewelry brands achieved double-digit growth consistent in both retail and wholesale. Pomellato delivered outstanding performances, and Boucheron confirmed the success of both its jewelry and high jewelry lines. Qeelin sales were also very positive in the quarter. In watches, the headwinds that had impacted the first half persisted in the quarter. Both Ulysse Nardin and Girard-Perregaux 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 divisions reported revenue was up more than 8% and 3.4% comparable. Reaching the EUR 1 billion 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 the Ignite platform was further reinforced in the quarter, with additional launches and new shapes 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 rose sharply in Asia Pacific, led by China and India, together representing about 9% of revenues. Western Europe was slightly negative in the quarter, primarily on phasing of deliveries following a strong Q2, with further good growth in running and training. One year into the Forever Faster campaign, we are more than ever confident.
The turnaround is a reality. Across all categories, we have reinjected product innovation in the pipeline, as well as successfully refocused brand positioning and marketing, strengthening our market shares at leading wholesale accounts. At Volcom 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, Volcom'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 Kering 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. All told, in this environment, we remain highly confident in our strategy and in our short-term prospects. Jean-François and I are now ready to take your questions.
Thank you. If you would like to ask a telephone question, please press star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Once again, please press star one to ask a telephone question. We will take our first question today from John Guy of MainFirst. Please go ahead. Your line is open.
Yes, good afternoon. A couple of questions. Thank you very much, Jean-Marc and Jean-François. First of all, just with regards to Gucci and thinking about the weighting that you flagged, less than 10% of Alessandro's collection was effectively in store. Could you then break out effectively how much that particular element grew within the retail business during the third quarter? 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 GG Supreme Canvas or the GG Blooms Continental Wallet, for example, are seeing significant price mix uplifts of anywhere between 30% and 80% compared to some of the old iconic bags of similar size.
I'm just wondering how you see this price mix elevation evolving and what you think that the contributions could be to organic growth in 2016. Thirdly, with regards to Gucci wholesale. 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 direct-to-store network is obviously lower as a percentage of sales, and the brand scale is obviously smaller. After a couple of years of really cleaning up the brand, we 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? 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 collection. We have seen some strong double-digit growth in the new collection, especially in the end bag. I would add also that you may have observed that the Dionysus bag was already available mid-July, and since then also, the evolution of the sales is very positive.
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. Coming to your point about the price mix elevation. In fact, you are right to point out some introduction of bags with quite high price points. Overall, what we can say is that we have a quite good range of price points. The Dionysus bag, which is already a bestseller bag, the price is ranging from EUR 1,500 to above EUR 2,600. When we look at the Linea A, the new line, which is more an entry price line, you start from standard size at EUR 980, and if you think to some smaller sizes, you have prices rather below, around EUR 800 or below EUR 800.
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. 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-e nd part of the offer. That at the end of the day, we consider that the average selling price, as we have told you in the H1 call, should remain quite stable. Concerning the wholesale. I would like just to make a summary or to elaborate a little bit more on the performance in wholesale. As for the retail part, the new collection has been delivered from mid-September.
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. We have mentioned the fact that the brand has notably recovered, strengthened collaboration with key premium wholesale accounts. I remind you that at the same time, we have reduced the number of doors to ensure higher exclusivity. 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 spring-summer collection. Overall, based on these comments, Gucci wholesale in Q4 should most likely be still down, quite in a comparable range as Q3. Going forward, I think that you can see that the growth of Saint Laurent in wholesale is more or less aligned with retail.
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. 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 fourth quarter 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%. If we think about the timing and phasing and scale of the new collection into the 2016 year, is it fair to assume that high single digits to even low double-digit Gucci retail is actually achievable?
Let's start with the reminders. 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'd 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, the digital, you announced the improvement of the Gucci website. Gucci, I think, stands 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 two-system approach in digital and whether you see this as a mainstay of your strategy.
I'm referring to the fact that you developed Gucci 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. Thirdly, I would wonder if you could comment on 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 is possibly worth taking note of. Thank you very much.
Good evening, Luca. This is Jean-François speaking. Regarding Kering Eyewear, we are indeed very satisfied, because progress is ahead of our expectations. We have taken significant orders, some of which have been already delivered. Again, the reception is really quite good from all the channels of distribution. 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 biggest orders. They will benefit from that next year, as early as next year. 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. 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. That's why we chose to gradually improve with the help of YOOX. 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 brands at a different pace than Gucci. That's why we chose this solution.
Jean-Marc Duplaix 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. 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, obviously more in some key destination cities which have been most impacted due to their strong touristic 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 a weaker consumer sentiment, maybe partly related to the stock market turmoil in August. So far, we have not many additional explanations.
However, we don't see any reasons for the situation to last, considering the macro environment, which is still quite solid in the U.S. 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 and August, came back to the stores late September. 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 Chauvet of Citi. Please go ahead. Your line is open.
Good evening. Thomas Chauvet, Citi. Three question, please. The first one on the Gucci store network and the refurbishment. Can you give us some color on how the Via Monte 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 second quarter 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, 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.
I was just wondering whether the change in ownership in YOOX with Richemont, a 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.
About the Gucci store network. 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 vision for Gucci. Noticeable projects include some key locations in leading destination cities, of which several shop-in-shops in key department stores. The priorities have been defined to address directly operated stores that are the most significant drivers of image and revenue. 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 is that the first one that has been reopened or refreshed, reopened with a new concept is the Monte Napoleone one, in which we have a dramatic increase of sales, considering that we had only one half of the surface reopen. It's very encouraging. However, it was at the time also of the fashion show. We need to assess after this fashion show what is the trend. It shows that the reception by our customers is very positive, and maybe it's also very important to mention that by our sales associates, who are very positive about the new concept. I think that the motivation of our people in the store is really at the maximum. Just as a mention 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 +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. In fact, there is nothing new that should lead us to change our mind and our position on that. Our view has not changed. Neither the solutions 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%. We will consider if additional steps have to be made.
However, I will remind you what we have decided. I think there was several ways to address that, depending on the maturity of the brand and also the opportunity we had to introduce new lines. 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 had to tackle the issue differently. Also considering the situation of Gucci, and that's the reason why we have saved 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 really about OpEx, but just how do you manage inventories? When you say nothing has changed in the price gap, 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. 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 three 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.
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, or we can keep some carryover inventories 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. 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. On top of that, we don't consider to become a 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 question, if I may. First of all, regarding Bottega Veneta, we've seen a bit of a volatile performance over the quarter this year, and I understand the exceptional exposure to Greater China. Like, for instance, in Q2, Greater China was not very good, and you had better results. Maybe leaving aside this, what are the things that you are trying to implement currently to develop the brand beyond the Intrecciato, and where are you standing in terms of diversification, and how is that received by the consumer? It's not easy sometimes to convince consumer to be buying other type of product 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 as you see in Q3, especially the psychological impact of equity markets, could be a bit of temporary. 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. Finally, on currencies, it seems that for once they seem to be willing to stabilize. What's your hedging policy for 2016? Also, you had a special situation in H1 with actually quite a big headwinds from currency on margins. What can we expect for 2015 and 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, Antoine, for your questions. It's true that as regard Bottega Veneta, the brand geographic exposure that precisely overweighs two 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 views, it 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 third quarter, which grew double digits in every market outside of the home Asia Pacific region. Also in the very promising and rising contribution of some clusters, such as the Europeans and Americans. These two clusters still represent a very tiny portion of BV sales, let's say around 15% on a combined basis worldwide. 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 Tomas Maier, to be sure that we will be able to propose to our clients what they can expect 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-wear collection. We have to analyze that. I think that we had said a few years ago that it would 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. 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.
John was trying to have some view about next year. You are more modest in your ambition, just trying to know what's going on with October. However, I think that we see rather a sequential improvement week after week. I think that the first week of October was not so good. The second week was improving. You made a comment or you had a question about the Golden Week. 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 first week, and then have regained a bit of momentum in the second week. Europe and Japan have remained, in any case, on a very dynamic trend for the whole period. I think it's a smooth start, but it's improving gradually.
Now about hedging, which is still something very technical on 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 fiscal year 2016, but still negative in H2 2015, with current spot rates still well below the average hedge rates of fiscal year 2015, although to a lesser extent than in H1. Going forward, we should 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 2015, with full impact in fiscal year 2016.
Okay, maybe just a follow-up on what you just said regarding these other options. I think one of your competitor mentioned that plain vanilla options were too expensive. 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 the reason why we applied 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 Easthope of Barclays. Please go ahead. Your line is open.
Thank you very much. Good evening, everyone. I thought I'd start off by asking the first question about how lumpy the third quarter actually was between July, August, and September. Was there a sort of particular volatility between the various different months? Because I think it's been quite difficult for us to understand the trading patterns generally. The second question I have is on watches. If I get the numbers right, the couture and leather goods were up 12% and jewelry was up 11%, which must have meant the 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 lot of it's destocking, and hopefully that'll come to an end at some point. Thirdly, just coming back to Gucci.
Up until, obviously, one year or so ago, there was a lot of talk about logo, no logo. I just wondered how the whole logo thing has gone now, because it's clear from your window displays that the logos are very much back in prominence. 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 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. I can say that this was particularly true during the summer holiday season, July and August, due to travel slows. In September, there is, by definition, a sort of slowdown, somehow a sort of slowdown in terms of tourism traffic. To some extent, September showed narrowing performances across regions.
I think that you tried to do math on the performance of all the brands. It's 12% for the soft luxury brands. We were pointing out only the three brands, Balenciaga, Saint Laurent, and Alexander McQueen in retail, not taking into account wholesale, 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. We don't provide figures about the watches. We had mentioned that jewelry was overall performing quite well, quite in line with the market, I would say. Watches, 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 is still a situation of high inventories with the distributors across the regions.
Of course, because some goods may benefit from scale effects, which is not the case of our watch business, which is still relatively small on the market. That's precisely why we are working on developing the synergies between our two watches brand in order to have a better impact on our distribution. Your point was about logos or no logo, and especially at Gucci. 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 consider a right balance between logo and non-logo. You will have observed that the iconic GG is clearly part of the Gucci heritage. That's the signature of the brand. Something we actually need to be proud of it. What matters is to ensure the right balance between GG and other styles.
Therefore, what also matters, as we have said before, is to ensure that GG is not synonymous with entry-price products, that we can actually come up with a more modern, lively, and luxurious reinterpreted approach on this iconic logo. There are already clear directions to raise the logo. It has been enriched with more refined details, additional functionalities, and in some case, customized. You have already observed the first illustration with the Dionysus bag. It is a fashion-forward, higher interpretation of the iconic GG pattern that was introduced mid-July, as I said before, and further enriched with the cruise collection. I invite you to see the GG Blooms line and the Linea A, as well as the Padlock, which are all the newness introduced recently, July and September, illustrating this strategy to have a right balance between GG and other styles.
Okay, thank you very much.
Thank you. Our next question now comes from Warwick Okines of Deutsche Bank. Please go ahead, your line is open.
Good evening, everyone. Three quick questions from 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? How small is the European mix versus tourism in that region now? Finally, your final slide refers to CapEx discipline. Just wondering whether you could give some guidance for the full year, please. Thank you.
I won't be too specific on the Chinese cluster. As a reminder for the division, it is 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 2015. It is the same for Gucci, Q2 had been extremely strong, you know especially why for Gucci with the clearance policy. Overall, for the division, it became slightly negative in the quarter as the rebalancing of purchases in Europe and Japan did not fully offset the deterioration witnessed in Hong Kong and Macau, the temporary drop in South Korea, still because of the MERS syndrome.
In mainland China, the trends are still also negative, we don't see so far any major improvement. The comments I made for the division are also valid for Gucci. Concerning the sales of Gucci in Europe, we have commented in the past quarters that the sales to the local clientele were improving, 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., now we are quite happy to see that it's also the case in Europe with our European clientele, which the locals are representing approximately 40% of the clients in Europe.
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. France and Italy, were particularly booming for Gucci during Q3. Regarding CapEx, we have mentioned the point about CapEx because it's true that we believe that in this phase of consolidation of the market 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. It comes to the question also of Thomas Chauvet. Have a better grip on the inventory control the CapEx is, to our view, absolutely key.
We still have in mind to have a contained CapEx envelope at group level, stripping out currency-related inflation, which has contributed to the CapEx increase during the first half. Stripping out also Kering Eyewear the indemnification to Safilo, some projects born at the corporate level, like the real estate one. We are having a very strong focus on allocating making priorities in our operating investments, being more stringent on store openings in terms of criteria, brands, not only Gucci, all the brands have a clear roadmap and objective in terms of return on cash flow generation.
Thank you so much.
We will take the last question.
No problem. This next question comes from Thierry Cota of Société Générale. Please go ahead.
Yes. Good evening, everyone. I may have three 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? Second, on BV, you mentioned two times the success of footwear. I was wondering if leather goods were still close to 90% of total sales or if it had started to come down. 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 questions. 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. You have more or less the data presented on the slide. As you know, it's very well-balanced between the regions. Let's say that in emerging markets, the growth was around 22% on the quarters, and in mature markets, it was close to 29%. Overall, it gives us a 27% growth at Saint Laurent. I think it's positive on all markets and notably also still in China. I don't think that I have more to say about Saint Laurent because, as I said during my preliminary remarks, it's a very well-balanced growth between categories, between newness and carryovers. I think that nothing to add about Saint Laurent.
Regarding BV, you know that the share of leather goods is very high overall. 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 regard the small leather goods, this is a category on which we have the intention at Gucci. This was your question about small leather goods at Gucci. You remember it was not a very strong category in the past quarters.
In fact, we are still working, and it's an ongoing process, to revamp or to work on the small leather goods and the luggage category, in which we are starting to reduce the number of SKUs, and we are trying to refocus and to be more consistent at applying the same rejuvenation spirit as in handbags. We are probably sooner in the process. We will continue to upgrade the perceived value of the GG lines by adding some differentiating features, improve appearance, and details in this category. Again, we are sooner in the process, in the journey, we will 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.
Okay.
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 for 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 fourth quarter 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 four years now. He's taking on a new function within Kering and moving to New York to join the Tomas Maier 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 Kering 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 now conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.