Good evening to all of you. I am pleased to welcome you to this call and review our sales in the first quarter of 2015. First, I will provide you with a bit more background. Then Jean-François Palus, the Group Managing Director, and I will answer any questions you may have. Slide three summarizes our revenue trajectory in the quarter. Total group sales were up more than 11% as reported, boosted by positive FX movements. On a comparable basis, group sales came nearly flat. Revenue growth was satisfactory at Puma, which achieved performances overall in line with its revenue guidance. Trends in luxury were softer than in prior quarters and for several reasons, were far from representative of what we expect in the balance of the year.
To begin with, several headwinds disrupted the first month of the year, starting with the 2014 high comps arising from anticipated purchases in Japan ahead of the VAT increase. Excluding this impact, retail in our luxury division would have been up 3%. In addition, the luxury environment did not improve in Asia Pacific in the quarter. Pricing differentials became steeper as the euro weakened, impacting nearly all brands in that region. Finally, as anticipated, Gucci experienced negative short-term momentum ahead of the launch of its new creative vision in H2. I will come back on this later on. Moving to our luxury activities on Slide four. Before delving into a detailed analysis of our performance, let me elaborate on FX. As you see on the bridge, FX has had a massive tailwind impact on reported sales growth, boosting overall revenue by 11 percentage points.
The division also recorded a 2 percentage point impact from scope from the consolidation of Ulysse Nardin. Let's look at our sales on a comparable basis, starting with retail up 1% and accounting for 71% of luxury revenue. This was achieved on top of very demanding comps as Q1 2014 retail sales were up 13%. In Q1 2015, retail recorded significant discrepancies across regions. Trends were buoyant in Western Europe, up 14%. The region showed significant acceleration from the previous quarter. This was the case across all brands, propelled both by a positive contribution from tourism and by the local clientele. North America also achieved a satisfactory performance, up 3%. Asia Pacific was negatively oriented during the quarter. The context remained tough for the luxury sector in mainland China and was further complicated by widening price gaps.
Ongoing weakness in Hong Kong and Macau, which together account for 12% of the division retail sales, weighed on revenue. This was somewhat offset by an increased share of overseas spending by Chinese clients in Europe, as well as in South Korea, Australia and Japan, among others. Japan, for its part, was down just 4%, despite the significant one-off impact of pre-buying ahead of the VAT increase last year. Leaving this factor aside, growth was very positive, around 10% through February 2015. At the level of the division, wholesale was down 11%, clearly not normative or representative of expected future trends. This outcome reflects several short-term impacts and different patterns across brands. I will detail this later. Let's now turn to Gucci's performance on Slide five. Reported revenues grew 4% and were down 8% comparable.
As anticipated, the quarter was impacted by a combination of one-off and macro elements and obviously does not yet reflect the broad range of strategic initiatives being implemented by the new leadership. The sharp decline in wholesale, down 14.23% mostly stems from our decision to more drastically curb this channel, especially in Europe, as the new management takes this opportunity to upgrade distribution and avoid a resurgence of the parallel market. Retail, representing 83% of revenue, was down 4% in the quarter against a demanding comparison, up 6% in Q1 last year. By region, you have in mind the high growth posted in Japan last year, when retail revenues were up 32%. This is a driver of this quarter's reversal, as Japan remained a very strong country for Gucci, with the first two months of this year up high single digits.
Asia Pacific suffered from weakness in key markets, especially Hong Kong and Macau. By contrast, South Korea and Australia were very dynamic, benefiting from increasing tourism. North America posted a contrasted start to the year, whereas Western Europe confirmed its rebound, driven both by local clientele and tourism on the back of the weaker euro. This is underscored by the jump in retail in the eurozone of more than 10%. Finally, Gucci store counts decreased by three net units in the quarter, in line with the strategy to consolidate the network and focus on organic growth. On slide six, we give you more insight into how the different plans at Gucci have been set and are implemented. Our objective is clear. Building on the brand's well-established elevation strategy, act consistently but quickly to support and sustain new momentum.
First, Alessandro Michele, the new Creative Director, has defined a clear statement for Gucci. The creative vision will be consistent with the values and DNA of the brand, but will convey a more modern, contemporary interpretation. This intention first took shape in the women fall-winter fashion show in late February and will gain more visibility with a cruise collection. This collection will be presented in June, with first deliveries starting in late September, early October. Marco Bizzarri has conducted a 360-degree review of the organization to simplify and accelerate decision-making, increase transversality, and save the omni-channel opportunity, allowing a seamless customer experience. The new organization is already in place. A single omni-channel structure has been set up and key positions have been strengthened, notably with the worldwide retail team supporting regions and driving retail excellence. A new Chief Merchandising Officer has also been appointed with a reinforced and expanded remit.
The merchandising function is instrumental to the brand image and business. The new executive will work more closely with the creative teams to build a relevant offer, giving a clear message to customers. The strategy will encompass introduction of new products together with discontinuation of some lines and refocusing of the offer by reducing the number of SKUs. In terms of price range, as we mentioned for the handbag category, our goal is to achieve better balance across segments with, for example, introductions in the core segment, where GG will be upgraded and some newness in the higher price range. Action plans are also dedicated to store efficiency. First, with retail merchandising, product mix will be managed to ensure that products are always at the right place at the right time, but also with the right penetration.
Clustering of the network will be fine-tuned to better differentiate the assortment depending on location, clientele, and traffic mix. Second, visual merchandising will be reviewed and enhanced to support products and sales with a clear message. Third, regarding the retail network, a refresh concept will be applied to existing stores and upcoming openings. It will encompass new finishes for floors, counters, displays, while retaining the overall structure. All these action plans are in place to allow a rollout in the second half. Retail Excellence programs are currently being redesigned. It is a broad subject, going from brand values to their translation into retail experience supported by tools and processes. The objective is simple: to propose a unique experience and create uplift in sales productivity.
It implies assessing and training our people to have the best staff in stores and to provide them with the best support in terms of CRM, business intelligence, and clienteling. The Monte Napoleone store in Milan is serving as a pilot. The new Retail Excellence program will be rolled out in the coming months ahead of the arrival of the cruise collection in our stores. Last but not least, communication is also being revisited to convey the new brand message across all touchpoints. It will address advertising, online and offline, the new website, but also new packaging, for example. As you see, we have been moving fast with the new creative and executive teams. The roadmap is specific and supports our confidence in Gucci's renewed momentum in the second half. On slide seven, a few comments on Bottega Veneta, whose reported revenues were up 16% and 3% comparable.
Bottega Veneta faced a tough base, with total revenues up 15% and retail up 18% in Q1 last year. This quarter, Bottega Veneta, whose exposure to Japan and Asia Pacific is close to 60% of sales, posted a positive retail performance, up 2%. In Japan, sales grew double digit until early March, so the slightly negative trend here is clearly the consequence of the VAT anticipation reversal. In Asia Pacific, the brand was impacted by its exposure to some key markets, such as Hong Kong and Macau, which together account for 19% of retail sales. At the same time, Bottega Veneta posted very positive developments in other Asia Pacific countries. Western Europe benefited hugely from higher tourism purchases, driven by the currency situation, resulting in a 34% increase. Local clientele also sustained the trend in the region.
In North America, where it's still building greater brand awareness, Bottega Veneta posted unchanged revenues. Our objective is to intensify brand penetration, working on all distribution channels as developing key U.S. wholesale accounts is instrumental in driving brand visibility. This strategy is paying off, as witnessed by the strong 10% increase in Bottega Veneta's mature market sales, encompassing both retail and wholesale. On slide eight, you find a recap of Saint Laurent sales. Saint Laurent posted a 34% increase in reported sales, or 21% comparable. This was driven by an impressive 22% growth in retail, which represents 64% of revenues. As a reminder, retail sales had grown by 72% in Q1 2014. Revenue growth remained very evenly balanced across all channels. Saint Laurent kept posting outstanding developments in wholesale, up 20%, underscoring the very positive appreciation of the spring-summer 2015 collection. In retail, all regions achieved double-digit growth.
Sustained momentum continued across historical markets. Western Europe and North America, which account for more than 60% of sales, posted increases close to or above 30%. Japan remained very solid despite a 74% surge in sales in Q1 last year. In Asia Pacific, while still up double digit, sales were more volatile from one country to another, and the brand was not completely immune to developments in Hong Kong and Macau. By product category, growth was once again well-balanced, driven by the cruise collection and first deliveries of the spring-summer collection. Moving on to slide nine. Our other luxury brands had revenue growth of 14% as reported, but were down 4% on a comparable basis. Sales trends differed between retail and wholesale, with retail up 8%. Wholesale was down 13%, weighed down by watches, a category that remained under pressure.
Our couture and leather goods brands were driven by a solid 16% increase in retail, a growing part of their operations. Balenciaga delivered double-digit increases consistent across retail and wholesale. Stella McCartney and Alexander McQueen were also sustained, especially thanks to retail. Loewe experienced a soft start to the year, once again curtailed by its exposure to the Russian clientele. Trends in hard luxury reflect the stiff comparison with last year. In jewelry, Boucheron revenue declined from its very strong Q1 last year, which had been lifted by anticipated purchases of bridal jewelry in Japan, combined with sales of high jewelry. Performances were more resilient at Pomellato, thanks to good performance at Dodo. Watches encountered adverse headwinds, starting with the massive appreciation of the Swiss franc. In addition to tough comps, Girard-Perregaux dealt with ongoing caution of distributors in Asia-Pacific.
Integration of Ulysse Nardin is proceeding smoothly, but its exposure to the Eastern European clientele affects the brand in the short term. Before I move on to sport and lifestyle, I'd like to say a few words of update on some of the topics that run across our luxury businesses. First of all, our plans regarding eyewear are on track, and we are now expecting to see the first sales of Kering Eyewear products in the fourth quarter of this year and not in 2016 as initially forecast. We are happy with the pace of development in this area. We are also moving forward when it comes to the development of online and e-commerce. As we told you last quarter, one of our priorities is to expand our cross-channel and ultimately omni-channel capabilities.
Before the end of the third quarter, Gucci will have launched a new best-in-class front-end platform, enabling a timely rollout of new functionalities in this field. The transparency provided by the Internet also has an impact on sales in stores, as a significant portion of customers travel, buy products outside of their home markets, and whenever possible, will purchase in the market where it's most advantageous to do so. From that standpoint, sharp currency moves in the quarter had an impact on sales as some of our clients delayed purchases. We are actively monitoring the swings in tourism flows that are dictated by currency changes, and in particular, we are preparing for the impact of an increase in inbound tourism in Europe in the next months. However, at this stage, it's still difficult to quantify the net impact of this dynamic.
This brings me to the all-important question of pricing and what we are doing to adapt our pricing across geographies in an environment of rapidly changing exchange rates. We are addressing this in a balanced way. On the one hand, we don't believe that a pure wait-and-see attitude is a realistic option considering growing price transparency. Conversely, we are not convinced that a rigid harmonization or uniformization of prices across all markets is the way to go. We are looking at the situation brand by brand and market by market and working on all levers at our disposal. Adapted pricing strategy can be part of the answer for some products in some regions. It can be combined with other options, such as tactical review of the collection structure, along with, if relevant, internal actions to smooth the price differential impact.
Taken together, currency swings, tourism flows, and internet transparency are rapidly creating a new landscape for global brands, and as a group, we have the resources to turn this into an opportunity. Let me now review the quarter at Puma and our sport and lifestyle businesses as we move on to slide 10. The division's reported revenues were up 13%, one three, and 4% in comparable terms. Puma had a satisfactory start to the year, with 4.5% growth driven by the footwear category, up 8%, accounting for nearly half of brand sales. Accelerating a trend started in the second half of last year, footwear momentum is driven by innovative performance products. The Ignite running training shoe, launched in early February, will contribute to ongoing growth in this category. Puma is also benefiting from the work that has been ongoing to regain visibility and shelf space with key accounts.
Illustrating this, Puma opened its first European lab at Foot Locker in Milan this quarter. Apparel sales were also solid, despite the high comp of Q1 last year, when Puma delivered the Football World Cup-related merchandise. In the meantime, Puma is carrying out the implementation of its action plans, not just on products, but also on organizations, sourcing, and efficiency, in line with its transformation roadmap. At Volcom and Electric, the quarter was down 5%, with weakness across certain wholesale accounts in the U.S., but also impacted by some delivery shifts. I thank you for your attention. I've tried to provide as much lighting as possible on what has been, for a host of reasons, a rather atypical quarter. Jean-François and I are now available to answer your questions.
Thank you, sir. If you would like to ask a question at this time, please press the star or asterisk key, followed by the digit 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. Again, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. We will now take our first question from Helen Brand of Barclays.
Hi, good evening. My first question is just a little bit more clarification in terms of pricing. Maybe if you could just give us the price differentials versus Europe in mainland China, Hong Kong, and perhaps a little bit more widely in the U.S. and Japan as well. When you talk about harmonization globally, what are your initial thoughts in terms of perhaps price increases versus price cuts region, and how do you think about the impact on margins from those price adjustments? Secondly, if we could just talk a little bit about the Gucci retail performance in Asia, which was very weak, down 10%. Would you be able to give us a split between Hong Kong and mainland China within this? A little bit of guidance on what you're seeing from the Chinese consumer globally, when we also include tourism trends.
Has this slowed down since the end of the last year? Finally, in terms of Gucci on the total retail performance, down 4%. What was the split there between perhaps volume and price mix? Obviously, we're talking about some perhaps more entry price point products at Gucci going forward. How do you see the drivers of growth between volume and price mix going forward? How do you have confidence, perhaps in that retail performance improving into the second half?
Good evening. This is Jean-François Palus speaking. We think that what is more relevant is not the absolute price gap, but the change versus last year. This change stems from roughly 10 basis points in Japan up to something like 40 basis points in China, and the U.S. being in the middle. This is what we have to deal with. Again, like Jean-Marc said, we are implementing a series of action and the objective and the compensation aim at preserving the gross profit margin.
Okay. Good evening, Helen. About the retail performance of Gucci in Asia Pacific, we won't provide you more details about the split of the minus 10%, but we can say that globally, the performance in Greater China deteriorated compared to the end of the year as the situation has continued to improve in Korea and Australia, which have benefited from shift of Chinese clients. Let's say also that the situation in Singapore and Taiwan stabilized, but not yet with a significant improvement that is comparable to the one we experienced in South Korea. As regards more globally speaking, the Chinese customers, what we can say is that for Gucci brand, the sharp increase of sales to Chinese tourists in APAC and in Western Europe has so far not fully offset the weakness of the Greater China market.
However, based on the recent trend witnessed in Europe, we remain confident that sales to the Chinese cluster should turn progressively positive. As regards the split of the -4% in retail between volume and price mix, it's not an information that we will provide. Going forward, I think that we have been sufficiently clear that with the product mix evolution, we have probably reached a sort of situation where we would, in the future, rather benefit from volume increase rather than pure product mix. It will depend also, as you can imagine, on our decisions regarding the pricing.
Okay, thank you very much.
Our next question comes from Ashley Wallace of Merrill Lynch.
Hi. I just have a few questions. First of all, just on the weak trends at Gucci in your wholesale division. Given commentary made towards the end of last year was that the rationalization process was coming to an end. Can you give us a little bit more information about what's changed there? Then just on Bottega, it obviously saw a considerable slowdown in the first quarter. All things equal, should we be expecting that that brand will remain under pressure for the rest of the year, given its overexposure to Asia, or is there anything brand specific that is going to result in a re-acceleration of growth? Thanks.
Okay. Thank you, Ashley, for your questions. About the wholesale rationalization, you're right to point out that last year we were anticipating rather stabilization. Let me just remind that when we talk about wholesale, we are talking about department stores in the U.S., we are talking about franchises, and we are talking about multi-brand distribution. It's true that we have more or less finalized our program of buying back some corners with wholesale accounts. We have also achieved our goal in terms of conversion of franchises to retail operations. It's true that in that context, where there is a growing parallel market, we have decided to amplify and to accelerate the rationalization as regard the multi-brand distribution. That's the reason why at least two-third of the shortfall in terms of decline of the wholesale sales was driven in Europe by the European distribution network.
We have at least something like 15% additional impact deriving from the conversion of some doors in the U.S. during the last quarter with Neiman Marcus. Mainly, the objective was seizing the opportunity also of this transition in terms of management and creative management, also to cut more the distribution in Europe. As regard Bottega Veneta, again you know the exposure of the brand to Asia, and especially to Hong Kong and Macau. Hong Kong and Macau represent approximately 19% of the sales of the brand. I think also that there is a timing effect between the decision of buying abroad and the act of purchasing abroad. We see now that we have in Europe acceleration in terms of purchases by tourists, whether Chinese or American. It should benefit to Bottega Veneta brand, and we see very positive signs at Bottega Veneta in Europe.
In some other Asian markets, it's true that the situation in Greater China is still complex. After a tough winter in America mainly because of the weather conditions, but also due to a decline of tourist traffic, we see also a very promising start in the month of April. Also, we are very confident that the Spring/Summer 2015 collection, which is now on the shelf will be more successful.
Thank you.
Thank you, Ashley.
Our next question comes from John Guy of MainFirst.
Yes. Good evening, Jean-Marc. Just a couple of questions from me, please. First of all, with regards to the Japanese impact, if we strip that out and if we also strip out the wholesale rationalization, could you confirm what the impact effectively would be, ex those two moving parts for Gucci during the first quarter? We just got some color in terms of what the wholesale impacts were, but I just wanted to be a little bit clearer around that. Could you also talk around the Gucci new online strategy? I think you said that product launch, that front-end facing platform would be ready before the third quarter. Could you talk about what type of investment will be required to make that happen? You also talked around with Gucci, I think, a net three store closures during the quarter.
Do you have any visibility at the moment in terms of where you think the store count will end over the course of the half or even for this year for the Gucci brand? Maybe just one follow-up on the wholesale for Gucci, just so I'm clear. You mentioned that at least two-thirds of the shortfall was driven in Europe by the multi-brand rationalization, then you said 50% of the conversion impact due to the Neiman Marcus. I think there were three stores which started in the fourth quarter of last year. When we effectively roll that all together out of the 23% decline, could you just give us a number in terms of what effectively has been driven by these ongoing rationalizations and when you think they will actually stop? Thank you.
Okay. Thank you, John, for this question and implying the sort of pro forma calculation as is a lot of certain conditions. It's difficult to say. What we have commented is that the impact due to the situation in Japan was at least two points for the division. You can imagine that considering that last year, the performance of Gucci in Q1 2014 was something like 32%. It's at least also two points or even slightly more at Gucci level. I think that I don't want to elaborate on what would be the impact of something normative on the wholesale, because you see that now we have several quarters in a row where we have some actions about wholesale rationalization. I think that we should see a progressive normalization along the year. At this stage, it's too soon to provide you a precise figure on that.
[Inaudible], I leave the floor to Jean-François to comment about the strategy online for Gucci.
For Gucci online, we are developing right now a new technical platform that will be up and running in the course of Q3, and that has been tested already. This platform will bring us some new capabilities and will be more integrated through the digital realm. It will also address specific issues, for instance, the Chinese market which today is something that is not really up to standard for Gucci, and this will become a reality. As to the capital expenditure that this will require, they will be curbed, as you know, in 2015, and they will be encompassed in the envelope that we have budgeted, which is roughly in the same amount as last year.
Coming to your question about the store network. It's true that at Gucci level, we have a net of minus three, which is a combination of six closures and three openings, with closures mainly in Asia-Pacific. It's something which is consistent with the trends at the division level, where we have something like minus eight units net on the total store count. Clearly, the objective this year is rather a stabilization of the store count and especially at Gucci. You know that we have also some issues, as we mentioned, regarding the installation of a refresh concept, and it will be one of the priorities of this year. You can imagine that in terms of rollout, we prefer first to define what will be the precise refresh concept before rolling out.
We need to define also in which locations we will open new stores, especially in a context where you have this move on these major changes regarding the tourism flow. As we had the occasion to comment before, we have less than 10% of the sales in Japan, and till now relied with customers coming from outside, which are not Japanese. It means that we need to think also about the network to welcome properly the Chinese tourists wherever they go in Japan, in Korea, or in Europe. Now regarding the wholesale. We have converted in Q4 four doors at Neiman Marcus with the impact that I mentioned of something around 15%, one-five.
Globally speaking, it's true so that we have deliberately decided not to ship some products this quarter in order to avoid a disappointing sellout for our wholesale accounts with products coming with the old design, with the design by Frida. It's also a decision to curtail some deliveries to our wholesale accounts in order to safeguard also the sellout at their level. Again, I think it's very difficult at this stage to provide you more color about the performance to be expected, at least for Q2, because in Q2, we still have the previous collections in place. Rather in H2, we start to ship the new collection designed by Alessandro because the first one fully designed by Alessandro Michele will be the cruise collection, and at that moment, we expect rather a recovery.
Okay, great. That's cleared. Thank you very much indeed.
Thank you, John.
Our next question comes from Antoine Belge of HSBC.
Yes, good evening. It's Antoine at HSBC. Three questions for me. First of all, on Gucci, I understand that you're quite reluctant to try to establish pro forma figure from the minus 8%. Do you think that Q2 sales at Gucci at constant ForEx will be negative, even though the minus three impact % from Japan will actually reverse? If that's the case, I think we are bound to see a huge impact on margins. How should we think about that, all this wholesale decline particular on their impact on margin, knowing that it'll be come on top of the FX headwinds you already flagged at the analyst meeting. Second question on Bottega. I understand also the exposure to Asia, et cetera. What about the diversification that you're trying to implement?
Is it, in your view, working as planned, or is there a bit of a resistance from clients to buy other products than your iconic handbags at Bottega? Finally, a question on one brand, which is no longer in the scope, but that you discontinued last year, Sergio Rossi. Where are you in terms of disposing of that brand and what kind of losses could we expect this year? Thank you.
Hello, Antoine. I counted four questions, in fact, but I will answer to all these questions. The first one is a good try to have some more information about current trading at Gucci and at group level. You know that, which generally we don't provide any information on current trading. What we can say is, however, as we said previously, the start of the year for all the brands and also for Gucci, was very well-oriented in Japan besides the comps effect. Consequently, in April, trends in Japan are still positive on top of easy comps. We observe also an acceleration of tourism flows in Western Europe with a very positive impact on our business. In America, after a very cold winter that has affected somehow the business, we see since the end of March, an improvement mainly with local customers.
As regards with China, business there are complex, we don't see major improvements and rather additional shifts of Chinese customers to other destinations. As regards the retail, what we can say is that at this stage, April is quite well-oriented, and we have also a push in terms of Internet sales. Concerning the margin and the profitability, as you know, it's a call mainly about the Q1 figures and the revenues. I won't elaborate on this. I think I will just reiterate the fact that margin would be under pressure because of the hedging impact, and especially during the first half. You know us quite well. We'll do our best to protect as much as possible the profitability of the brand despite the difficult conditions we face at Gucci. For BV, I think we are well on track with the plan.
I think it's true that the situation in Asia Pacific has completely confirmed, but also made more complicated the need to accelerate the development of the brand in the natural market with the local clientele. Just as an indication, in America, our customer, we have 60% of the sales in North America with local clientele to be compared to something like 80%, 85% with all the brands. It does illustrate the full potential of the brand with the local clientele. That's the reason why we are pushing also more the distribution of Bottega Veneta within the department stores, because we believe that to increase the visibility of the brand in the U.S., we need to push the brand with the major accounts. We have a double-digit growth in this account in the first quarter. Regarding the diversification, it's well on track.
We see the very positive results that we have in Monte Napoleone, where we are able to show more products, not only leather bags, some plain leather bags, and also apparel and shoes. These categories are doing extremely well. You know we have also a program of rolling out some more flagships to be in a position to expose our brand, and the next one to be open will be in New York City. I think things are going quite well on this side, we must say and recognize at this stage, this is still a non-significant share of the revenues.
Okay.
Thank you, Antoine.
Sorry, maybe just a follow-up on, what's your most recent holding in Puma? Thank you.
Okay. For you.
First, regarding Sergio Rossi, the disposal process is well underway, and we plan for a consumption of the transaction before year-end. Regarding the stake at Puma, didn't change since the beginning of the year, so we remain at something like 85%.
Thank you.
Okay. Antoine.
Thank you. Our next question comes from Rogelio Fujimori, RBC.
Hi. Thank you for taking my question. For Gucci, could you please discuss your performance in handbags versus ready-to-wear and shoes in the Asia, ex-Japan, perhaps? For Gucci, we understand what happened in Q1 in wholesale and that we should expect gradual normalization. What should we expect in Q2, given your action plan, another quarter of double-digit decline? Finally, the third question on your point on review of marketing strategy and updating all customer touchpoints, should we expect an increase in spending as a % of sales? Thank you.
Good evening, Rogelio. We don't provide any information about the breakdown of the sales between the different categories. We don't provide any information about the split. What we can say is that we are still working on the small leather goods and travel luggage categories, which globally continue to underperform, compared to the other categories. We are very happy with the recent launches in the handbags categories. The same for your question about Q2, and what would be the evolution of the wholesale sales in Q2. As I mentioned before, clearly, the launch of the new collections designed by Alessandro will hit the shelves rather in second half. The improvement that we have already commented is rather expected for the second half.
Regarding marketing expense, they will not change as a whole and we will work on efficiency. As a result, there will be no change in the weight as a % of sales.
Great. Thank you very much.
Thank you, Rogelio.
Thank you. Our next call comes from Thomas Chauvet of Citigroup.
Good evening, Jean-Marc, Jean-François. Two questions, please. The first one on pricing. When you look at Bottega Veneta up 34% in Europe and down 9% in Asia, that's quite extreme. Are you not a bit concerned that you need perhaps to take immediate action to reduce that price gap? More generally, I haven't really understood what you intend to do globally at the group in terms of pricing. That's my first question. Secondly, the slide six on Gucci's action plans I think is interesting. I'd like maybe a little bit more color on three things. One is, what are the quantitative objectives you've assigned to Mr. Bizzarri in terms of sales growth, profitability? Are you still hoping to return to mid-single digit growth at some point?
Two, are you confident that this action can produce tangible effects on the top line as early as 2H15, as you seem to suggest on the slide? Three, would this action plan entail any major impairment of assets, inventory write-down or anything exceptional and material we should be aware of that could impact the accounts in 2015? Thank you.
Regarding the price gaps, particularly for Bottega. Bottega has already implemented some actions, those actions are, in fact, segmented. They are first segmented by the nature of products, segregating newness versus permanent. They are different as per product segments. We have high-priced products and low-priced products. On the newness, what we plan to do and what we have begun to do is to increase prices in Europe, reduce them in China. On permanent, there we have, in fact, two subcategories, what we call the iconic products, where we have launched some products. In fact, the first one being in China, a product called Olympia, which is one product, one price policy. This product has been launched in China on the 1st of April with great success, it will be launched worldwide on the 1st of May. With the same price all over the world.
We have, for the iconic products that are lower priced, we will still have an increase, but only a price increase in Europe. For those also permanent products that are non-iconic, we will still also have an increase of price in Europe. As you may see, Bottega has already implemented some actions to mitigate the price gap impact, and we are very satisfied with a huge impact, particularly in China, for the Olympia bag in April.
I'm not sure that I can comprehensively and fully answer your question about Marco Bizzarri objectives. You will understand that, in such a process, you have not only quantitative objectives. You have a lot of different factors, and I won't provide you with the whole description of the incentive scheme of Marco Bizzarri. What is clear is that Marco Bizzarri brought to the brand his determination, his vision, and that we have very motivated people, passionate by the brand. It was also one of the rationale for choosing Alessandro Michele, who has a great passion and a great knowledge of this brand. We have now a combination of three key executives, Marco Bizzarri coming from the group, but from another brand, Alessandro Michele with a good knowledge of the brand, and now, the head of merchandising coming from another group.
I think this combination should be very successful, and we are very confident about the capacity of the management to improve the situation. Again, they have presented a plan with some actions that should be beneficial for the rest of the year, starting from H2, as shown in the presentation. We have a very fair question about the risk of impairment. As always, change in creative team can be a disruptive process short term, but I think that we are used to manage this. As early as H2 2015, trends should be more normalized. Regarding potential one-offs or items to be booked below the recurring EBIT, this is globally a question to be called for the H1 results. However, I would like to remind you that by applying what is called the retail method, we have consistently had a rather cautious approach as regarding inventory depreciation.
Okay. No, thank you, Jean-Marc. More generally, if I could phrase it differently, I understand. I'm not that interested in the incentive schemes of Mr. Bizzarri, but more about you've identified some issues at the brand. You've described in one slide a lot of actions that are taking place as we speak. What do you think this could do to the top line, to the profitability of Gucci in the second half of the year or perhaps next year or in the more medium term, compared to, I think, two very difficult years that you have just experienced in terms of trading? It's more about trying to give us a sort of guidance, if you could, about what this action could do to the P&L.
Thomas, you've known us for long, you know that we don't give any guidance. What we can tell you is that we are very confident that Gucci will be soon back to where it belongs, which is a very iconic brand, very profitable and fast-growing.
Thank you.
As a reminder, to ask a question, please press star one on your telephone keypad. Our next question comes from Hermine de Bentzmann of Raymond James.
Good evening. Three questions for me, please. The first one, still on the slide six of your presentation, especially on the product on merchandising. Could you please give more details of in which category you expect to increase the number of product, and where do you expect to reduce the number of SKUs? Can you maybe be more precise on that? Second question, I'm very sorry, it's on margin. We understand the hedging impact. Considering all the action that you have taken at Gucci, I guess your cost will increase significantly. Can you maybe detail also the impact we could expect from these actions on the margin? Lastly, on Puma, I think the management of Puma was expecting a flattish H1. Q1 is above this guidance. Do you still expect H1 to be flattish?
That mean a softer Q2, or do you think that Q2 might be better oriented? Thank you.
With regards to the merchandising, we will have the occasions in the next presentation to come back to the achievements. Clearly, we believe that at this stage, we have too many SKUs, with some of them with low productivity. In all categories, we believe that there is a need to clean up a little bit the offer to be more focused. Globally, there is a clear intention in the retail to reduce the assortment, but also to work better on the visual merchandising, as we explained. I think also one of the key issue is about the iconic GG, which is clearly part of the Gucci heritage and DNA, something we actually need to be proud of. What matters is to ensure right balance between GG and other styles.
Globally, we have more or less reached in the handbags category, the right balance between logo and non-logo. The point is rather now to be sure that GG is not only synonymous with entry price, but that we can actually come up with a more modern, lively, and luxurious reinterpreted approach of the GG. That's something that Alessandro Michele and his team will be keen to focus on in the coming collections, and just a good illustration of what can be achieved with a smart interpretation of a logo is the job done by Hedi Slimane at Saint Laurent with the YSL Cassandre logo. We will work on this to have also in the core segment of the price, some better interpretation of Gucci.
We'll continue to work also on the small leather goods and the luggage category that I mentioned, which was still down, and that dragged down the performance of the brand. Finally, we saw some improvement in the ready-to-wear category, which sales were up during the Q1 thanks to the initiative launch this year. We cannot say yet that Gucci is back on the stage of fashion, so we need to continue to work on this. I think that Alessandro Michele made a very clear statement for the first show. Now, as regard what could be the impact on the cost structure, I think that we went through the past years with quite good monitoring of the cost. In luxury, it's not always a question of increasing the cost. It's sometimes also a question of better allocating the cost.
I think a good illustration of that is the plan in terms of CapEx. We have emphasized the importance of improving the online platform. This will be done with a stable envelope of CapEx. As we regard the other action in terms of OpEx, it could be more or less the same situation with a good control of the operating expenses. We are not in a situation with a request from Gucci management to increase significantly the cost to achieve this goal. For Puma, Jean-François?
Well, for Puma, considering the order book and also the improvement in the sell-throughs, we bank on a Q2 that will be roughly like a Q1 in terms of growth. We plan for a better H2.
Okay. Thank you very much.
We will take the last question.
The next question comes from Melanie Flouquet of JP Morgan.
Yes, good evening. I have, sorry, a few questions. I will make them quick. The first one is on the U.S., your reading on the U.S. situation. Do you believe this is actually only the weather, or there is something else going on because we have mixed numbers coming out of the U.S. across the names. My second question is on current trading. I know you said you are not commenting on current trading, but I had the impression that you were hinting that there had been an improvement in April with some delayed purchases from tourists in the first quarter that came into April. My third question is whether you have an idea of how big this parallel issue actually is in terms of your percentage of sales. How much do you think it actually generates in China?
My last question, sorry, is as you look at your business at Gucci brand, you did minus 4% in retail. Wholesale, we understand, might be a different issue. Retail is minus 4%, Fashion and Leather Goods and Louis Vuitton did around plus 1%. What's your reading on whether there is something, everybody has the tension that are currently happening on the Japanese issue, the parallel trade, the price gaps. Why is Gucci underperforming? Thank you.
Thank you for your questions, Melanie. I think that in U.S., I mentioned the weather conditions, but not only. I was mentioning that situation in April was improving, especially with local clientele. Just also to insist that because of the appreciation of the USD, for sure, there was an impact on the tourism flows. That the reason why also probably Bottega Veneta suffered a little bit more compared to some other brands because of its exposure to tourism in America, which is higher than the average in the industry. I think that we had a combination of effects during the first quarter. Weather is an explanation, but also tourism flow, and especially in the region, where the weather was better, so meaning in Florida or in California, where we had not, of course, this weather issue. We had an issue with the tourism flows.
This is globally the feedback we have from our brand. For example, at Saint Laurent, which is resonating very well with the local clientele, we had not this issue in Florida or in California. I think that I already elaborated on the current trading, just saying that globally at this stage, April was improving with clearly, as you mentioned, some delayed purchases in Europe and still in some other Asian countries like Japan and South Korea. We see also that we expect to see also more American people traveling to Europe to buy, and we have some figures about the reservations in the hotel showing that we can expect a wave of American tourists coming to Europe. As regards the shortage due to parallel market, we won't quantify the impact. I know that some figures are circulating on the market.
We don't know who has elaborated these figures. We are unable to quantify this. It's an issue for the industry. It's an issue for our brands. We are facing these issues by working on the distribution, by safeguarding the exclusivity of our distribution, by accelerating the launch of a website in China or in Chinese with the possibility to pay in Chinese currency. We are monitoring also the distribution of our products in China. The issue is not to quantify what is the shortage on our sales.
Regarding the Gucci, in absolute terms, Melanie, you know this industry very well. You perfectly are aware that this industry has a slow metabolism, that lead times are quite long. We could not expect, and you could not expect that the actions that are being implemented by the new team, which by the way has been onboarded only as of the 1st of January this year, could have an impact on Q1. This is not what we expected. We are very confident. We are very pleased with what the team is doing with the new organization, the new ways of working, and the new ideas that they have. We are confident that this will bear fruit in the near future.
Thank you very much.
Thank you for your questions and your interest in Kering. As you have seen, the first quarter of the year was, for many reasons, both internal and external, quite atypical. Many of these factors will not have a similar impact already in Q2 and in the rest of the year. We are also encouraged, as said by Jean-François, that Alessandro and Marco are doing the right things at Gucci, and that the second half will be more positive. We wish you a good evening and look forward to speaking to you again in July. Thank you.
That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.