Good morning. I'd like to welcome you to the first presentation of the annual results of the new Kering group for 2013. A year ago, in this very room, we presented to you the last results of PPR, and we've come a long way since then. We have, as you know, adopted a new identity, a new group brand that symbolizes the completion of the transformation, the transformations that we will be discussing today. This change that we have implemented resolutely over the past few years has been conducted on the basis of a clear, determined strategy that I'll return to in the latter part of this presentation, setting out the issues and the objectives, both present and future.
The exit from our distribution assets, as we announced and as confirmed in the press release published this morning, had an important impact on our 2013 accounts. This impact is the necessary consequence of our deep determination to provide the companies that leave the group with the best chances of success. We're now excellently placed to roll out our integrated group strategy and to leverage our key strengths for the years ahead. I'd like,
1st of all, to give
the floor to Jean Francois Paolu, the Group Managing Director of Caring, so that he can set out the financial and operational past year. And then I'll return for the conclusion in order to set out our strategy and outlook. And of course, we'll answer your questions. Jean Francois? Good morning to you all.
I'd also like to welcome you as Francois Henri has just done. 2013 has been a year of profound and very exacting transformation. Thanks to that, we have set out a strong foundation for our future growth. But 2013 was, 1st and foremost, a year of solid performance for our group, and I'll begin with this. Caring posts a growth of revenue on the Luxury division has once again posted remarkable growth in its performance with a strong trend in Q4.
The revenue of the segment on a like for like basis is up 7% on the year, reaches record operating level 26%, thanks to a sharp increase in excess of 4% of its operating income. These figures were obtained in a context of tensions on consumer trends in certain repositioning of the offer at Gucci and sustained CapEx increases for all brands. The Sports and Lifestyle segment posts results that are down as we anticipated against the backdrop of the fundamental change that we're undertaking at Puma, where a radically renewed management team is devoting itself to relaunching the brand. The group has once again, in 2013, posted a very high level of operating free cash flow above €1,000,000,000 excluding the one off exceptional real estate investment that we performed in Tokyo last year. Our cash is up 8%, whereas our net operating investments were increasing 20%.
Our financial strength remains a real asset. Our net debt at the end of the year is at a ratio an EBITDA ratio of 1.7 times, thanks to the reduced rates and the refinancing strategy that we're actively implementing. The cost of our financing has improved further this year. Lastly, our recurring net income that is slightly down would post an increase, excluding valuation of financial instruments in respect of IAS 39 by only taking account of the genuinely operational items. This chart sets out the key financial data concerning our 2 divisions.
In the Luxury division, our 3 main brands as well as all the other brands posted an increase in their revenue on a like for like basis and their operating income for the year as a whole. The multi brand strategy that we're systematically implementing in the Luxury segment, which is a unique hallmark of the group, is once again producing results. The very high growth rates of Bottega Veneta of Saint Laurent and almost all our other brands strengthened the performance of Gucci, our flagship brand, which this year continued its repositioning on an up scale offering. For the division as a whole, we're particularly satisfied with the 8% sales increase in our owned stores. Excluding Gucci and Bottega Veneta, whose strategies rely on strengthening the network of owned stores.
The whole sales at Saint Laurent and other brands, for which this channel remains important, posted double digit growth. The Sports and Lifestyle figures bear the market transformation underway at Puma, but on the European market, a market to which Puma is more exposed than most of its peers. Puma kept a tight control on operating costs while maintaining marketing visibility, R and D and innovation efforts to fueling its revival. In their performance during Q4. In many respects, 2013 was a year of transformation for Kering.
We welcome new brands with remarkable potential in the Luxury division. We changed the and activities that allow Kering to leverage the growth of its brands. And last but not least, we've completed the transformation into a uniform group that is specialized in apparel and accessories on the Luxury, Sport and Lifestyle segments. A word about each of these developments in 2013. We took a majority stake in a Couture brand whose creativity and energy are recognized by all.
Christopher Kane in the Hard Luxury segment, which is one of our key focus areas. We acquired Pomellato, an innovative and profitable jewelry group that also includes the dodo brand. We also completed the integration of the luxury companies recently acquired notably Queline and Brioni. In Sport and Lifestyle, the number one priority is to revive our existing brands and above all, Puma. We strengthened its leadership under the responsibility of Bjorn Gullen, who has the necessary qualities and skill sets to revive this brand so that it can return to its previous sales momentum.
After 6 months worked a new energy, which the team around has been able to impart on the organization as a whole, testifies to the ability for change that this company has. We're confident in the implementation of its plan and its repositioning, and Francois Henri will discuss that further later on. As regards to the transversal functions, everywhere where we are present, we have a fully fledged group spirit, a sharing of means and cultures allowing us to move faster and be more effective in all areas where we can do better together than separately. So during the year, we've strengthened our business skills, be it commercial real estate brand platform, brand equity analysis or all our support functions. Lastly, the transformation of PPI into Kering was finalized at the end of the year with the announcement of the disposal of La Redoute following the listing of the group FNAAC in June and the sale of the international activities of Redcats in the first half.
We were attentive during all these disposals to fully apply our entrepreneurial responsibility and thereby take account of the interests of all stakeholders in order to ensure the future success of these companies for people and communities that depend on them. The disposal process of La Rodoute is continuing, the priority being to transform this company so that it preserves its leadership on Internet, on apparel and home products in France. As we have pledged, Keri provides the buyers with the means to refinance this transformation. Our consolidated net income for 2013 bears the mark of these initiatives. We're certain and Francois, he will confirm this, that following these transactions, we'll have the best platform to drive our future profitable growth.
I'll now hand over to Jean Marc for a detailed review of our activities and performance for the year elapsed.
Good morning, ladies and gentlemen. You all have well understood. In 2013, Kering saw strong operational performance, driven by a good increase in sales and increase in the profitability in the Luxury division. I'd like to comment on that now. This is a good illustration of the appropriateness of the multi brand business model.
All the Luxury brands have seen strong momentum, sales in the division Q4 2013 saw an increase by 2 points compared to the previous quarter, reaching 7.4% on a like for like basis. We can see growth in a uniform fashion in mature countries, upside more than 8%, driven in Oralia by North America, Japan and Japan. And then emerging countries also see an increase of almost 8%, 6%, sorry. Greater China is making up 20% of the division's sales, records growth of 4%. In 2013, the Luxury division's operating margin reached another record level of 26% for the full year.
All the main brands have improved their operating results and their profitability. Now we've been helped by some technical effects, positive impact of foreign exchange hedging. The underlying increase, nevertheless, is substantial. This is a reflection, inter alia, of positive effects due to an improvement in product mix as well as a good variety of distribution channels. At a constant exchange rate, almost all brands see an increase in gross margin.
2013 OpEx in the Luxury division grew by around 30%. This increase is due to refurbishments of stores, openings of stores, extensions of stores, about 60% of the total. The remainder was investments in industrial and logistics capacity, building new workshops, but also there were investments in IT. Now let's talk about the performance luxury brands. We'll begin with Gucci.
In 2013, Gucci reached sales up 2.2% on a like for like basis. Gucci continued with its strategy of up scaling the brand. It's been strengthening its own distribution retail network. It's been seeking operational excellence in its stores. It's also been up scaling the overall product offering.
As you know, when we entered into Asia, we're more actively rolling out this upscale in Asia after having successfully done so in North America, in Europe and in Japan. 2 indicators I think are very good as opposed to 44% 1 year earlier. This increase is bolstered by the success of new products new leather products like Banaboo Shopper and Lady Lock. In Q4 2013, leather bags made up 72% of total sales in that category as opposed to 55% for the same period last year. We're seeing a further improvement in the product mix.
Furthermore, I'd remind you of the following. The average price for handbag has gone up by 40% in the last 4 to 5 years. This is a reflection of the upscaling work that's already been achieved. Broken down by product category. Handbags see growth to strong 7% growth in our wholly owned stores.
Other major categories such as footwear, ready to wear also see good performance driven among other things by product men's product lines. Good sales momentum in the retail network, up 5% like for like, whereas wholesale sales to 3rd parties dropped by 7%. The reason for this is a deliberate choice to contain growth in sales to some distributors, also a reduction in number of points of sales by taking over some leaseholders to run these on our own, broken down by geography. The trend continues to be good in the U. S.
And Hawaii. Growth of 7%, dynamic domestic demand looking good growth 7% as well. Not to mention, in Western Europe, growth was slightly slower among other things due to rightsizing of wholesale selling in Italy, particularly in the first half. Lastly, in Asia Pacific, performance is down slightly. Continental China sees some temporary effects due to the consolidation of our store network and the repositioning of our product offerings.
Our current operating income is up. The operating margin sees an increase of 80 basis points, reaching 31.8%, which is a record level. This improvement benefits from some positive effects, such as the foreign exchange hedging. But most importantly, we've seen an improvement in the gross margin at a constant exchange rate, thanks to the product mix. This improvement has been, to some extent, reinvested to support brand development.
OpEx up 5.2%, over half of which is spend on stores, priority being given to refurbishments. We've made investments to strengthen the supply chain as well. We've seen 26 net store openings, not taking into account taking over 19 points of sale. So 2013 is the first stage in stabilizing the overall budget for brand investment. Now here you see an overview of Pote Vena's performance.
Their sales went beyond €1,000,000,000 in 2013, €1,000,000,000 mark, very substantial growth throughout the year, approximately 14% growth on a like for like basis. Q4, also very strong, up 13%. And the baseline comparisons are very high. So this is the momentum, and this just goes to show the success, the ongoing strategy of Pate de Veneta. Once again, in 2013, they strengthened their positioning as high end upscale brand.
Growth is still bolstered by leather goods, that's their core business. It has seen leather growth by 15%. Other product categories are also seeing very strong growth. This is especially true regarding ready to wear collections and men's footwear, which see growth on the order of 25 percent. Broken down by region, Puerto Veneta has seen very uniform growth, emerging countries, representing 44% of their sales, up by almost 16%, as well as mature countries, up by 13%.
More specifically, in Japan, a major market for the brand, sales have grown by almost 19% in 2013. In 2013, operating income for Botteveneta grew by over 10%, another record in their operating margin, reaching 32.5%, which is up 70 basis points. This performance is an example of the very sound momentum in gross margin, assisted to some extent by foreign exchange hedging. If you look at this and you also see the fact that we're able to absorb fixed operational costs, So this increase in gross margin has helped offset some of the dilution caused by the increased number of stores and some of the increases in rental payments in Europe and Asia. This is a buoyant context.
Operational expenditure has gone up by over 50% in this situation. Over 2 thirds of the OpEx is on stores, 25 stores opened in 2013, including several openings of iconic stores like the flagship in Milan via San Andrea in September. You have a picture of this on the screen. Furthermore, to be always better underpinning brand development, a new workshop was opened in Motobello Vincento, which is near Venice. Now I'd like to talk to you about Yves Saint Laurent's performance.
2013 will have been a year of investment in the brand and most importantly, a year of exceptional development. This year illustrates the success of Yves Saint Laurent's artistic renewal In the continuity of nomination of Heidi Fleeman in 2013, we saw the launch of new styles, the installation of a new store concept, both of which are helping really underscore this very consistent and unique brand look and feel. We can say that in Couture, there's a momentum. And if we look at the fragrances, royalties, things remain good there as well. Sales at Yves Saint Laurent up strongly, 22% on like for like Q4 was up 42%.
So the brand goes beyond €500,000,000 in annual sales. All regions are contributing to annual growth with increases on the order of 20% or above in both mature and emerging countries. All product categories seeing strong growth. Leather Goods, representing almost 45% of sales, recorded growth of about 20%, driven by the success of novelties, which very quickly became iconic, like the Sec du Jours. Furthermore, ready to wear, which makes up about 25% of the brand's sales, sees their sales rise by almost or by over 50%.
Performance of wholly owned stores is very strong. Improvement is ongoing in this trend throughout the year. Q4 saw a growth of 31%. Sales to outside retailers grew by 43% for the full year. This type of improvement really shows that there's been true creative renewal at Saint Laurent and the purchases have realized it.
Furthermore, it shows that some of the deliveries in 2013 were scheduled for 2012 to place in 2013. In 2013, operating income grows by 18% and the improvement in gross margin some extent, Plaid back in development of Oliode retailing as well as communications activities focusing on brand image. Operating margin even growth 10 basis points reaching 13.8%. OpEx very sustained throughout the year. The CapEx budget was tripled.
About 80% of investments were made in stores. We saw the opening of 20 new stores and the buyback of 6 franchise holders in the Middle East. Now let's talk about the performance of our other luxury brands. All of them are seeing significant growth in 2013, approximately 11% growth on a like for like basis. Current operating income for other brands grows strongly, 20%.
Operational profitability improved by 30 basis points. This improvement is thanks to the strategy implemented by our other brands. The target is profitable growth without not making investments that need to be made for their development. Let me quickly talk to you about the performance of each of these. Sales at Balenciaga improving, driven in the second half by a redefinition of their brand universe under the impetus of Alexander Wang.
Brioni shows good growth, both in sales and profitability. And the overall context is one of synergy with our group, and this is now benefiting the brand. Performance in Western Europe, its main market is strong. Brioni is continuing to develop in Asia Pacific after the buyback of its network of franchise holders in China. Now Alexander McQueen of Stella McCartney, British Designer Brands, record significant growth in their sales, over 20% growth for each of them.
Their profitability also improves yet again. Although they're streamlining their distribution network, Sergio Rossi has also seen an improvement in their sales gross margin rate growth at constant exchange rate. Now if we look at our watches and jewelry brands, there's a contrast performance here. Bouche France sees a beautiful year, driven by La Cather collection of jewelry as well as fine jewelry, very positive effect on profitability. On the other hand, the wind saw activity contract slightly, particularly due to the fact the over market was buoyant in watches in 2013, but also because they've had to review their distribution process for Xero Perigot in Asia.
Lastly, Pomellato Group, which includes the Pomellato and Dodo brands, has been consolidated since July 1. These brands have very sound fundamentals, and they've had strong profitability in 2013. Kering has also worked throughout the year. On the integration of other brands acquired recently like Keelene and Christopher Kane. In addition to support the development of the other brands, the budget allocated to OpEx has risen substantially, mainly due to new store openings.
Now let's take a look at the performance of our Sports and Style division. 2013 saw many changes here. Firstly, substantive work was done to further rationalize and streamline organizations. Product categories have been or are being redefined. Now Puma work has been done on product offering, and they'll start doing food in the second half of twenty fourteen.
These changes are taking place at a time when the marketplace is difficult, both the sports market in Western Europe, that's the main market for Puma, and also action sports in North America, which is the main market for Qualcomm and Electric. Therefore, the Sports and Lifestyle division in 2013 should see sales down by 2.8% on a like for like basis. That's the context. We have to pay careful attention and have paid careful attention to make specific initiatives to improve inventory levels. This has meant increased pressure on gross margins.
Operational profitability for the division goes down in spite of financial discipline designed to contain and reduce operational cost base. Volcom and Electric see trends that have nonetheless improved in the second half. Among other things, we've seen an increase in sales by 1.5% in Q4. So we can say that reduction in the textile category has been contained at Volcom. And if you look at footwear trends and Fooma's expertise, things are positive here.
At electric, the brand's repositioned to premium lifestyle accessories, launching new products such as watches for the year and all of that is very promising. Now let's talk about Puma. Sales down by 2 0.8% like for like for the full year. This trend, in line with Puma's expectations, is a reflection of a negative consumer environment, mainly in Western Europe, also due to the fact that distributors have high inventories in emerging countries. Furthermore, it's due to things challenges for Puma itself, stoppages in activities, closure of nonprofitable stores, streamlining of product offering, which is underway right now, especially regarding footwear.
That's the backdrop. 2013 saw sales to 3rd party distributors that were down by 5% on a like for like basis. But in its own network, Prima grew by 6%. Only Western Europe doesn't see that commercial momentum, but some points of sales were the number of points of sales were significantly reduced in 2013 product categories. We need to emphasize very good trends for accessory sales, up 10% on like for like, driven by performance in Cobre, Puma Golf, Dobotex and Gen Ed.
Let's talk about geography. Puma sees growth of 4% in North America. It goes down by 6% in Western Europe, negative trends in France and Italy, whereas in the U. K, sales grow. That's the situation.
Gross margin is down, to some extent offset by a drop in 6.6 percent of operating expenditure. This reduction in cost base is one of the results of work done under the transformation plan. But R and D efforts, innovation is all continued. This is essential to relaunch the brand. Therefore, operating income at Puma is down, operational margin reaching 6.4%.
So it's all about financial discipline and keeping a careful eye on how operational cash is used. OpEx for Puma was therefore produced in 2013. Let's talk briefly about our financial results, a reflection of major transformations in this group. Other operating income and expenses, a net expense of €443,000,000 This includes an impairment of Puma goodwill of €280,000,000 as well as other non recurring expenses for Puma and Volcom related to the transformation and reorganization measures enacted. Financial expenses up by €64,000,000 compared to 2012.
Two main factors going into opposite directions. Firstly, improvement by €36,000,000 in net cost of debt. This is due to the change in overall net debt of the group and also an improvement in the average interest rate for Kering, a negative effect of €93,000,000 due to application of IAS 39 standard to value the indexed bond maturity 2013. I mentioned the positive effect on the 2012 financial statements in this same call a year ago. Effective tax rate for Kering has gone up substantially due to nonrecurring operating expenditure with no related profit tax, 21.5%, as you can see in the appendices.
On the other hand, the current tax rate improved 17.4% due to the greater proportion of Luxury Brands in our group profits. Net income from discontinued activities is a net expenditure of EUR 822,000,000 for the fiscal period, including the net capital loss after paying out Snap Group shares, EUR 256,000,000 plus EUR 562,000,000 of net expense for Red Cat. This expense mainly includes the sales of various disposals during the fiscal period of the depreciation of Redcar assets plus the agreement taken by Kering to recapitalize La Ro Doute to the tune of €315,000,000 for future losses and improvement in production facilities. Net income group share of continued businesses excluding nonrecurring elements, EUR 1,229,000,000 down EUR 40,000,000 Restated taking into account adjustments for fair value of the index bond, there's a growth of 4.6% for fiscal 2013. Group operating cash flow stays at a high level above €1,000,000,000 for some for several of our brands in Tokyo, thanks to our basically stable self financing and our improvement to WCR because of very fine team management of inventory levels.
And in spite of a slight increase in taxes paid, exceptional operational cash flows grew significantly. This made it possible to finance the luxury brands in the group and acquire the building, which I just mentioned to you. Now I'd like to talk about the net debt this group. End of 2013, just a couple of quick comments here. Our debt, EUR 3,400,000,000 ratio of net debt over EBITDA is €1,700,000,000 which is within the range we have set for ourselves.
The group's gearing is 31% end of 2013, which is a display of the fact that we've got very sound financial structure. Increased net debt is due to our major changes in 2013 transformations. We have strengthened our brand portfolio. We've strengthened the positioning of Luxury division of the acquisition of majority stake in Foma Lotto Group, Christopher Kane and Tannery's to secure the supply chain. There's also been the finalization of disposal of certain things with cash out and recapitalizations for CNAC and Red Caps.
My last point, I'd like to talk to you about the dividend for fiscal 2013. The Board of Directors met yesterday when we're proposing to the AGM on May 6 to pay a dividend, unchanged, €3.75 per share. This proposal shows the Kering intends to keep a balanced payout rate, both in terms of recurring results of the group as well as available cash flow. I remind you that an interim dividend was paid, EUR 1.50 50 was already paid on 24 January 2014. If the AGM approves this dividend, the remainder of EUR 2.25 will be paid on May 13, 2014.
Thank you for your attention. I'd like to before giving the floor to Francois Henri Pinault to talk to you about the group's strategy and its outlook, I'd like to show you a few pictures of recent creations.
I'd now like to return to the strategy that we're pursuing. And in order to place in their context the results that achieved thus far and to set out our outlook for the coming years. 2013 marks the focused on value creation as was that of the former PPR. But it is based on structural changes of population and consumer trends of the 21st century. Put simply, we've moved from a risk based management model on the diversification of our businesses within a predominantly historical market to a model based on diversification of geographies in a coherent and dynamic business as illustrated by these charts.
Source of value creation. As witnessed over the past 10 years, the average annual growth rate of over 10% of our recurring net income per share. Since we've adopted our change in strategic focus, we've considerably strengthened our returning operating income by 18% per year on average and significantly improved our return on capital employed. In the Sport and Lifestyle division, which is far more recent, its contribution to recurring operating income 13 is limited, as you've seen, by the revival effort that Puma has embarked upon and whose results will allow us to generate a return on capital investment in line with our ambitions and consistent with the huge potential of this iconic brand. As you can see, Kering is fully built to derive full benefit of new consumer trends globally.
The consistency of our activities allows us to pull part of our functions and business skill sets. This is an efficiency gain that has been demonstrated in key areas such as talent management, real estate or supply chain. Certain support functions in finance and IT, for example, will be henceforth organized within shared service centers. Of course, the activities that reflect the retailing that puts them in contact with their customers or advertising and promotion that showcases and displays their distinctive universe. I won't conduct a detailed review of our brands today.
In luxury, they constitute a complementary whole. And each of these 17 brands occupy a distinct positioning placed in terms of development stage on a continuum going from the rich start up full of promise to the iconic brand admired and desired throughout the world. They mutually complement one another in the Luxury division. Their growth, pace and profitability reflect their respective levels of development in the chain. We will implement them far more systematically as soon as Puma's repositioning allows it to fully play its role as a growth platform for the division as a whole.
Short term in 2014, we have 2 priorities. 1 is to stimulate our brands and to support their organic growth, notably for those who recently joined the group. And our second priority for this year is, of course, the relaunch of Puma. Midterm, we anticipate a significant increase in the margins of each of our 2 divisions as well as continuing to improve our return on capital employed. You'll find here the detail of the action plans adopted with each of our Luxury brands for 2014.
I'd like just to focus briefly on some of these points. As regards Gucci, our repositioning strategy has been very successful, as demonstrated by the following metrics: the sale of no logo products, the increase in average prices and the immense global renowned of this brand. This strategy has an impact on our revenue in China, for example, because we're reducing the visibility of certain entry level products. This is naturally reflected positions
where this strategy
has already been positions. Where this strategy has already been implemented in America, in Japan or even in Europe, it had a favorable impact on the brand's profitability. Our priority this year is to ensure its success in China. And this, of course, will require strengthening the quality of our retail distribution in this region where we'll be slowing the pace of net store openings. Furthermore, we have high ambitions for Bottega Veneta, a brand that has before it considerable potential.
We'll therefore continue to drive its growth, notably through short mid term investments. We'll do this by preserving its artisanal routing and by preserving the huge growth potential of this company that has huge unequaled growth potential at this level of exclusivity. The Saint Laurent growth rate should continue at a high pace now that its artistic renewal has been well established. This creativity and legacy faithful to Saint Laurent should see a further increase in its profitability. Lastly, we firmly believe in the potential of our youngest brands.
And for each of these, we put in place action plans to accelerate their growth with the support of their group and in light of their distinctive specific situations. In Sport and Lifestyle, our number one priority is to relaunch the sale momentum at Puma. The new tagline of the brand Forever Forester condensed the repositioning of the brand, focusing on its sports roots and its legitimacy in categories such as running, soccer or fitness. The presence of Puma in Sport and Lifestyle is a natural replication of its historical roots in sports performance. The acceleration of this strategic revival will have an immediate impact on collections both in Sport and Lifestyle.
And the new promo products will stand out through their degree of innovation in order to secure the commercial success and a better, more effective launch on the market. We'll establish closer ties with our suppliers on major retailers with whom we're forging preferred partnerships. This strategy is rolled out region by region to respond to the specificities of each market and to implement this strategy with increased repositioning by launching its first global ad campaign during the second half of this year. Puma also affirms its legitimacy in sports by applying a more selective policy of athletes or leading team sponsoring such as the partnership with Arsenal that we announced at the end of January. These policies will short term fuel growth levels by strengthening the clarity of the Puma brand image and its desirability.
A first set of products stemming from the action plan of Puma has already been presented for the autumn winter season, leading to an encouraging increase in orders. A complete collection for the spring summer collection 2015 will be presented to global retailers in the coming weeks. Of course, we'll keep you informed of Puma's progress throughout this year. This strategic relaunch will have an impact on its accounts in 2014, but it's a necessary investment, and we'll begin to see the results produced in terms of growth and profitability as of 2015. I'm fully confident in the new management team headed by Bjorn Gilden to this wonderful brand.
The other brands of the Sport and Lifestyle division, essentially, Volt Common Electric, have undertaken a major effort in redefining their offer and streamlining their retail distribution network. We've already received the positive benefits of this new strategy in the last quarter. These efforts will be maintained and continued in 2014 and will be amplified by strengthening our marketing and merchandising policies. Before coming to your questions, I'd just like to say one last word on our outlook for 2014.
Over and above the impact
of Puma's repositioning and taking account of the investments that we're implementing to drive the growth of our Luxury brand, we're aiming for an improvement of Kering's recurring operating income for 2014 on the basis of a revenue figure that's up. I'd also I'd like to conclude by saying that we're more than ever confident in our fundamentals. In our 2 divisions, Kering is a leading player in some of the most buoyant markets in the global economy. Our brands are both solidly established, positioned in a distinctive and complementary fashion and rich with considerable growth potential. We remain faithful to our mode of management, which combines rigor and flexibility, shared decision making and centralizing implementation, financial discipline and creative imagination.
Before turning to the Q and A session, I'd like to show you a clip for the new viral campaign that Puma has just launched on the web.
4, these field tests were conducted last week. We We're getting ready for EVO powered. It's unbelievable.
So watch this space, notably as of next summer. So let's now I'd like to turn it over to Q and A. Please try not to ask more than 2 or 3 questions at a time. If questions are asked in English, we've agreed to answer in French for ease of simplicity in the room here today. Who'd like to ask the first question?
Good morning. From Mario Tellus and Francine Bernstein. Three questions, if I may. The first one is, in your plans, how long it will take the full repositioning of Gucci? The second one is, in 2014, how many openings, relocation and refurbishment are you planning for Gucci?
And which impact they will have on the margin of the brand? The last one is on your strategy going forward. You show us the big transformation of the group in the last 8 years. What we should expect in the next 8 years, especially the balance between organic growth and growth through acquisition and which will be the weight according to your preliminary plans for this long term in stores and the weight of luxury? Thank you.
Thank you, Jean Marc. I'll let you answer the second question that involves the numbers. As regards the repositioning of Gucci, well, as you know, we've discussed this with you. We've begun this strategy several years ago now aimed both at going upscale. So to be more specific, that is not to use in the essential categories such as handbags, to use the same products at entry level.
So we want to reduce the exposure of entry level products in these large categories to the benefit of more sophisticated categories by going upscale in terms of the range. This results to 25%, 30% fewer entry level items at Gucci. That's the first action item. The second is aimed at streamlining and better master the wholesale distribution networks, those that are the origin of the gray market worldwide. So there's a major effort undertaken for 4 or 5 years now to streamline the wholesale network by the brand.
So these short term components are, of course, impacting give you 2 that are most recent that we have available. Give you 2 that are most recent that we have available. 2 ratios that we follow quarterly at Gucci that are, for example, the sale of logo type products versus the non logo type products. Well, in Q4 last year, we went from 62% of the sale of no logo products, whereas we were at 44% the previous year at the same time. Take a second metric to measure the going upscale of the brand leather products versus non leather products, we've gone from 72% in the handbag category, 72% of leather products as against 55% a year earlier.
So the strategy is working. The strategy is operating. And of course, we're accelerating that strategy as much as possible in order to prepare the future. Once again, it's all about improving, preparing the desirability of the brand for the coming years. Jean Marc?
Yes. So let me just indicate, as I pointed out earlier, the goal is, of course, to stabilize the CapEx amount. We have 45 net openings of stores, but a number of transformations. So the net openings, excluding the taking up of wholesale stores, is 26. We don't really give a guidance on the number of openings.
But basically, the Gucci plan next year is to keep within the net number of conversions. That is 20 stores on a net level. There'll be a few conversions. There are a few Saks stores to be taken over in the Middle West. So net openings are 20 for Gucci.
These are net openings because we also have closures. And so it's a net net of a number of important closures in China, in particular. We have in Mainland China only no stores in the net, But a number of closures, in fact, these are openings net of closures so much so that the issue today is more about renovation to have a greatest number of stores under the 3 to 1 concept. Your question on the margin was 10 store openings for the total network doesn't create any dilution, but a lot of investment devoted in operational excellence in store to make sure that the consumer experience in the store is as best as possible. A few words just to answer your third question on the longer term outlook.
A transformation of the group that we've embarked upon and also specializing the group on apparel and accessories. So that means there won't be any major diversification as we have over the past 20 by radically changing business segment. This specialization on a global scale, as I explained, versus business diversification in a slower or narrower geographic, which is our ambition, is aimed at building a global group specialized in apparel and accessories. So over time, we'll strengthen the 2 brand portfolios, of course. But we don't plan in the group long term strategy to change business segment or to create radically different business segments.
We remain in this industry of apparel and accessories. Thank you. It's John Guy from Berenberg. Just three questions from me, please. First of all, could you just elaborate, please, on the new Frida Concept stores?
I think there's been some commentary around seeing roughly 30% lower operating costs of those stores. Could you maybe elaborate as to how you reduce the cost of operating the stores in the new Frida concept? With regards to capital allocation for Gucci peaking around €200,000,000 should we start to see Gucci's free cash flow generation run roughly double the pace of revenue over the course of the next few years as the capital allocation comes down? And finally, just on other brands. I think by about 2015, you'll have between 4 to 5 brands generating more than €200,000,000 of revenue each.
Could you maybe talk about when you start to see some real positive operating leverage come through? Is this a plan for 2015 or 2016 where you should be reaching high teens EBIT margin across those 4 to 5 brands? Thank you. As regards to the Frida, the Frida 1 concept as it's known, indeed, I mean, this is a concept over and above the image and the importance of the concept of the brand. It's been worked in order to boost in store productivity.
This is measured by the number of storekeeping items that are prepared on the same surface area compared to the previous concept. So we have store productivity that's sharply up versus the previous store. Furthermore, as with each and every time, once the concept has been agreed, defined in terms of image, it's industrialized in order to be rolled out globally. And so we improved the cost. Notably, we optimized the investment in bond when it's rolled out not just in flagships but smaller sized stores.
So just both in terms of investment efficiency and in store operations efficiency and the store efficiency to improve the brand image. There are 3 positive effects that is saw every time we launch a new store concept, which is the case of this Frida concept on these three items is extremely positive. Jean Francois, perhaps? On the capital allocation, you've seen that Gucci CapEx up 5% this year. So we have a sort of a landing point of CapEx levels at a normalized level such that Gucci has free cash flow generation that's quite considerable and that will continue.
As to the other brands, indeed, in this portfolio strategy that we're continuing aimed at finding major growth and profitability drivers of the portfolio with Bottega that's just crossed the €1,000,000,000 mark. We have brands that are growing fast behind. You saw the Salo half figures, high potential brands, Balenciaga, Brioni, 2, where the growth potential for these brands is also very considerable. And so consequently, the levels of profitability will are already relatively significant, will be significantly higher with objectives in the various businesses depending on the brand specificity in terms of positioning of double digit, high teens, double digit profitability when maturities reach the objective with a gradual increase of profitability following.
Hello, Nares from Barclays. A couple of questions. First of all, Asia was down 4% for Gucci in Q4. Can you give us the breakdown between Mainland and Greater China and what you're seeing there? And secondly, just on China for Gucci, Do you know what the logo, no logo split is for Gucci in China by Q4 and maybe also the percentage for leather?
And then my final question is just on Europe again for Gucci in Q4 down 1%. Can you give us the breakdown between the retail and the wholesale split for Europe, so what retail was doing? And what should we expect for that wholesale piece of Europe for 2014? Is the rationalization now complete? Thanks.
Yes, Alan, I can't give you the actual breakdown of sales trends for Q4 Gucci. But what I can say is that it's true for the full year as we've seen Gucci performance is negative in Asia Pacific trends that I can talk about in Q4. We're seeing improvement overall in Mainland China for Gucci, trend somewhat better in Oralia. And this is why this confirms the appropriateness of our strategy. There's an improvement in Tier 1 cities.
The cities have felt the hardest, biggest impact so far. On the other hand, we've all since thought. Well, let's put it this way. We also saw improvements in Korea, demonstrating that we had reached a trough previously in Korea. On the other hand, other markets continue to be difficult.
Taiwan, Singapore. We also had a slight dip in performance in Hong Kong Q4. And to some extent, I know this is marginal, this is due to measures taken by tour operators. Regarding Gucci upscaling, I can't give specific figures regarding China as such, but let me tell you, the strategy of the set has been underway for several years, conducted in the United States and in Europe and in Japan successfully. The improvement in figures I showed you for the last quarter, mainly driven by China and Asia generally and China specifically, so lots of increases.
But I would like to temper this slightly. We have to be careful and not think that in China, the logo will disappear. It's essential. In a country where growth trends in luxury are driven by more ever more sophisticated to customers. There's a quick upscaling, we said this, but at the same time, you've also got new customers to Luxury Brands.
The new customers very much want these types of products. That do have the images, the logos, the brands they love. So it's very important to find to strike the right balance depending on store, depending on city, between the logo type products and then the more sophisticated products. The big difference compared to Western countries is that currently, we have to work these product offerings and have them in the sales same stores with 2 sets of customers in the same stores. So it's a technical thing to grapple with in China right now.
As we said in the stores network, we're fortunate today to have Chinese operations that are really major, large scale. We're one of the biggest brands in China. We've got one of the biggest market shares in China. It's a country where we've got about $1,000,000,000 in sales in China. We can say that we're a cheerleader in the market.
We've opened around 61 stores to date in China. So we're improving the quality of the overall network now. We feel that we've got the right number in sync with China today, and we're improving the quality of these stores network right now. In China, cityscape is changing quickly, cityscape. And important thing with Luxury Brands is to remain flexible.
Fleet foot is very important to keep be able to change. Mall that's deemed good 1 year, maybe deemed less good the following year. So you've got to be very flexible, we're going to shift and change. Good cheap is working on this carefully right now. We are looking at every single city and improving the quality of our retail network, to repeat.
We're fortunate to be really ahead of the game in China, thanks to the scale, the size of our operations, so we can be addressing quality. We're ramping up quality to further improve attractiveness and profitability of the brand in China. I didn't fully answer the first question, but Alain, a couple of additional points at least regarding logo and non logo in China. In China, the proportion of non logo is now more than 40%, four-zero, in the last quarters. Furthermore, leather, leather still in the handbag category is about 2 thirds of sales in China of other products and several of these with logos.
To go back, Helen, to your question on Europe, performance in Europe is a mix in the last quarter because as we already said, we made an effort to rationalize wholesaling, especially in the first half. So in Europe, in wholesaling, trends are positive in the last quarter, slightly positive, but they're down less good in Q3 in Europe and the retail network. Difficult situation with local customers in France and Italy. Tourist flows continue to grow, but still there was sort of a slowdown in Q4 if you look at our Global Blue data. Gucci brand felt the same trend in Q4 in Europe.
Now regarding wholesale rationalizing, it's about 2014. Most of the streamlining has been done, as I said, in Europe to contend with the gray market, as Francois Henri talked about earlier. But 2014, we'll continue seeing transfers of selective transfers in North America and United States more generally. We have more wholly owned stores. In 2014, we'll be operating our own activities in Russia, I'd add.
That's also going to weigh on our annual performance. We're stopping deliveries to distributors in Russia and inventory, and it's something that we've been holding toward the end of the year. And for the figure of 3 questions, Gucci, could you just give us the figures, the number of closures, especially in China, and tell us if there are any closures that are not relocations, but that are final once and for all closures of stores? Now the upscaling strategy has been underway for several years. When can we expect if this is your target, when can we expect to see growth in sales above those recorded for 2013, particularly in second half twenty thirteen?
Balenciaga, 4th brand, 4th luxury brand of your division seems to see a poor performance. Could you give us your view of this? And what's your action plan to address the brand, which is your temporary for 2013? Last point, are you do you still have your 2020 target for overall sales of €20,000,000,000 in 2020? Gucci, Chinese, French buzzers in China.
Again, we are slowing the pace of net openings for Gucci. What we're doing is improving the quality of the network. An example, I won't give you the name of the city since I couldn't pronounce it, but it's way north in China. Recently, we opened first the first big store and then some sort of smaller satellite store, so to speak. We did it for 2 years and then it turned out the first store was too small.
So we're enlarging it, making it 2.5x bigger. So we'll be closing 1 of those 2 so called satellite stores. So you've got to look at in terms of the overall city, not just one store. You have to look at shopping patterns in the cities. There are traffic issues that are very important in China, and cities are changing and evolving.
So have to look at this city by city. We're doing it. So we're not just doing net closures. The network is going to keep the identical size. But in some locations, you'll have bigger stores.
Others, you'll have stores that will shift, that will be moved. There will be openings in other areas as well. So this is the work in progress. Don't forget China, as I said, Continental China, we're talking about 500,000,000. That's about the size of the U.
S. Market. There's no wholesaling in China as opposed to the U. S. The network we have in China currently is lower than the network we have in the U.
S, so there's a great potential. If we believe in structural and ongoing growth of per capita income in China, that will lead to growth in luxury that will be fairly significant in future years. So growth in China and luxury growth in China is certainly not, I think, the past, precisely the opposite. There's a slight of a slight slowdown right now, which is a time when we can sort of revamp. Now you've talked about the effect, repositioning the brand and so forth.
You saw in the figures I've shown you, one figure went down inter earlier due to these taking better control of wholesale and also upscaling, but profitability didn't go down. One of the reasons for this is the upscaling has meant an improvement, like an improvement in profitability of Gucci operations. On to Balenciaga, the word improvement was used. It may seem too weak a word. We're thrilled to see the transformation.
It's always difficult to change artistic director for a brand, especially a brand of that size. We're fortunate to have a major artistic director and then now a new major artistic director. The transition is not only a success, but the brand has now once resumed a pace of growth in all product categories. The brand now is developing apace. So I really do feel that the artistic transformation at Nanseco is truly successful.
Yes, 2020. So once again, 2020, the exercise that we performed in 2010, I believe, is aimed at giving you a glimpse of the growth potential of the potential that we believe to be achievable by the brands at group level, but it's no way a goal that would be potential to me to know all the macro metrics that we'll have to weather between now and 2020 to give you that. However, the group portfolio as it stands today, given our brand potential as measured by the growth in categories and growth in networks, allows us to view very considerable growth potential without having to make major acquisitions. Hello, everyone from the German publication. How much time have you planned for the Puma relaunch?
And second question, after the dip in operating investments last year, what have you planned for 2014? Thanks. We're very confident in the program put in place by Puma to relaunch its sales momentum and to revitalize its product engine, its design, as you saw in some of the models that were shown. But a few models that will fuel the autumn winter collection 2014. So that's above all the spring summer collection 2015 will really be on to the full effect of the new models of defining and manufacturing producing footwear in particular.
So as of 2015, spring summer, that the full effects will be felt. But we have some initial effects on the Puma order book, which for Q3 2014 are quite promising. On investments,
today,
in 2013, Puma Investments were reduced because we opened fewer stores. In fact, we even closed more than we opened and for 2014, the increase will be low because the renewal of the modernization of our owned retail stores requires a more detailed adjustment of the concept rather than store openings at least initially.
James from Goldman Sachs. I have one question on the portfolio effect. As you've changed the ASP of Gucci significantly over the last few years, do you think that's left you with a gap at a more accessible price point? And do you think you'd look to build another brand or acquire another brand to target lower price point in the luxury segment? And I'd also like, if possible, an update on your online strategy.
You talked we've obviously seen the big tie up with YOOX last year and Gucci targeting building up its online and digital platform itself. I wonder if you could give us an update. And if possible, any explicit numbers, percentage of sales, growth rate from e commerce and online? Thank you.
As regards the portfolio strategy, the initial selling price is increasing, the ASPs increasing in all brands. To date, we have not defined as a priority to enter. The brand elevation of the brands frees up price segments for access brands and some American notably in particular, Havasol. We haven't planned to enter that segment insofar as we wish to focus on the brand elevation effort. I mean, brand elevation doesn't mean that we're yet seeing the entry level segments to allow our customers who like our brands to access.
We want to use product categories that are not the key product categories up and to give access. Eyewear has always been an entry product to the brand. We have to find others, other brands. Gifting is a not widely developed category other brands. So we're going to work more on the entry level categories on these brands rather than acquiring brands that are devoted to that entry level price.
Yes. And on the online, the tie up with Hugues, yes, we had a 1st year ramp up. 6 of our brands are on the Hugues platform. In fact, the last in October was Brioni, I believe it's 7th, allowed them to have access. We can deliver to over 120 countries worldwide, thanks to the huge supply platform and to improve the ecomics.
As we said, Gucci today is not on the huge platform, allows us to benchmark progress. Gucci is very much ahead than the e commerce. To give you an order of magnitude, in the U. S, the most developed market, Gucci reaches close on 8% to 9% of its sales today in e commerce on gucci.com. So of course, these numbers don't include online sales made by other partners of our products such as Lehman Marcus, Saks.
So we're continuing to ramp up at Hugues. It's going well. Jean Francois points out that it's high double digit growth, as we say, and the day we consider the platform has truly reached maturity. We'll consider integrating Gucci for the time being. That issue is not on the cards, but it's been considered for the coming years, yes.
Hello. I'm from Reuters. Three quick questions. For a few years now, I've been following the Luxury segment. I recall a few years back, Gucci had growth rates in excess of 10%.
And today, we're saying, well, Q4, 0.2% on a like for like basis. Are there factors that are not necessarily under your control? I understand appreciate your re positioning the brand. It impacts your sales. But isn't something else, Afoot, that might account for this quite marked significant remarkable decrease here that prompts us to consider the luxury market?
Is it the growth of affordable luxury, the microcos, etcetera? What are your thoughts on that? 2nd question, could you give us an idea of the order of magnitude of growth of Gucci this year and for the coming years. Do you think we can return one day to previously seen growth rates 3, 4 years ago? Is that possible?
And thirdly, could you give us the trend split wholesale retail for Gucci this year versus 2012? And could I ask you, you've bought out franchisees in Russia, if I understood correctly. Are there other countries where you also plan to invest directly, in other words, buy out your partner? So turning to the first question from a strictly arithmetical standpoint, the 10% of 5 years ago, not worth 10%. The percentage today, the worth the few double digit percentage points of a few years ago.
Look, Well, Gucci is a 3,600,000,000 brand. So 1 percent, 2, 6, I mean, we grew very fast. Gucci and O4 posted EUR 1,200,000,000 if or EUR 1,500,000,000 if I'm not mistaken in 2,004. So there's an arithmetical effect here such that the percentages may be deceptive, but it detracts nothing from the ground's growth potential. And your question is a key point.
What's the growth model that we're favoring? The time was when Luxury Brands benefited from the growth of entry level segments and grew considerably. Gucci was there. We had the Joy Bag at 4 €90 back then. Today, you won't find a bag product at that price at Gucci.
So that is a choice we're making to maintain the exclusivity of the brand as it grows is to continue to go upscale because there's demand for grand elevation from luxury customers. We could have a vertical model that'd be very positive on sales. Today, you're right. If I want to boost sales by 10% to Gucci, I open the floodgates for the entry level products and they sell iHeart cakes, that's not the brand strategy. It'd be very dangerous for the exclusivity and the desirability of the brand.
And many other luxury brands are following the Gucci to go upscale, brand elevation and to offer other product categories on these access selling points entry level. Our brands are reaching quite significant size. It's key for the long term that we maintain the desirability of our products and the brands as we grow. So one of the answers given is this brand elevation, better control of wholesale networks to be sure that our products retain their full desirability. On the wholesale retail split, Jonathan?
Yes. Retail figures, retail at Gucci now in the neighborhood of 77% of sales used to be around 75% of sales in 2012. Now regarding buying our franchise holders that you mentioned, as Francois Henri said, at the same time that we are repositioning, we're upscaling our merchandising of products. At the same time, we're also working on in store experience and quality of retailing. So when we're talking about markets that are mature enough in terms of regulation, business law, corporate law, so forth, and we can buy out the franchisors fairly simply, we do so.
So right now, it's not that we have a plan in 2014 to convert other franchise holders, but when an opportunity arises, we do both amount.
Please. I have one and rental costs for 2014? Thank you.
Let me talk to address the point having to do with cost inflation. Our policy is to carefully control and contain. We're very selective in selecting our suppliers. We've also bolstered our impact on upstream activities, particularly regarding leather, by selecting a short set of suppliers of long term relationship. Prices here are set for many years to come.
So there are quality requirements, quality specifications. Also environmental standards have to be here too. All of this is very important. And all this has really been organized for several years to come now, many years. Now regarding rental payments, yes, we are adjusting our real estate policy, considering in some instances buying locations when these are highly prestigious locations and expected rent increases are such that it would make sense for us to actually buy the locations.
That's what we did this year, for instance, in Tokyo, the location we mentioned. We also did this Place Vendome for Boucheron. We also did this at a few other very carefully selected locations precisely to use the fact that interest rates were low to buy these locations when rent payments were going up so much for these premium locations.
This is Matthias Aslett from MainFirst. I have a question in regards to the long term plan then for the Gucci store openings. Do you think this is just a temporary slowdown in the pace of openings? And do you think you because you soon may have sufficient stores to capture the merchant growth in incomes globally? Or are you going to go back to the double digit store opening pace at some point over the next 3, 4 years?
Second question, what's your up to date stake in Puma? And the third question on YSL, the stunning performance in the Q4. Is there anything to consider as in early deliveries that might be missing then at the beginning of this year? Thank you.
Yes. Regarding stabilization of Gucci openings, well, it mainly has to do with China really. That's where we opened up very quickly, very beautiful, very big network. We're now optimizing the quality of the network, as I've said. We've been doing this for several months now, optimizing quality of retail network.
Clearly, yes, we're continuing to improve the network overall. Now the number of openings may be deceptive once you reach a certain size, such as Gucci. The figures we're tracking in house are square meters. It's important for Gucci to also develop by extending product offering. So we're working very hard, making major investments at Gucci to enlarge refurbish and enlarge existing stores, as I explained earlier, to enhance productivity, to also improve the store experience and the overall brand image.
So yes, there will be growth in the network in several geographies, especially the United States. There's still potential for the brand there. Latin America as well, there's potential for the brand. Also, yes, of course, in China, yes, again, we'll be optimizing our network. Don't think that China is that country considering its economy that the luxury brand such as Gucci would cover just 59 or 60 stores.
No, I mean, we're far from having the number we need, but we're being very careful. We're very carefully selecting things, our location and cities. Things change quickly in China. Locations change the cities. It's still being built and growing as the economy grows.
So we have to be very flexible. We have to adapt and change our network as and we're also going to continue opening in other cities. There will be openings, yes, and we're also going to continue opening in other cities. There will be openings, yes. There's no slowdown, no structural global slowdown in openings for the Gucci brand, precisely the opposite.
We have 85.6 percent of the share capital. We try to be as transparent as possible to the financial community. This is why we were called the deliveries of facts for Usenroll. But with growth of 30% in retail in Q4, not impacted by deliveries, growth to the end of Q3 was 30% in wholesale. So 2 quarters right on the mark are normative.
So the offset in time actually improved full year performance, but that's not what led to the excellent Isenao performance for the full year. A few of your competitors recently saw slight improvement in luxury situation in China. Are you seeing a similar trend? Continental China, I'm mentioning. Just quickly, Jean Marc mentioned earlier, I believe Q4 saw an improvement overall for our brands, particularly in China, and the trend continued at the beginning of the year.
I'm being careful in selecting my words, but yes, improvements seem to be in store.
Good morning. Bank of America Merrill Lynch. Three questions. The first, the hedge gains, what have you seen in 2013? And what are you expecting in 2014?
2nd question, EBIT margins in 2014. I know you commented a positive trend on revenue and earnings, but a brief word on margins would be most welcome. And a final point, what have you planned by way of price increases in certain markets, thinking of Japan notably? Thanks. On the hedge front, it's a difficult question because all this is very complicated to explain insofar as when the hedge gains, there's been a negative ForEx effect.
So the negative ForEx, let me just recall, EUR 2 63,000,000 less on revenues. That's 4% growth or hedge gains because we hedge purchases made in currencies with our suppliers. And that's such that we have a hedging policy this year because it was
rather well crafted, allowed
us at the end of the day to more than offset the ForEx effect, notably the yen That's where we have the sharpest fall. So we have a positive impact of the hedging, but Luxury segment, for instance, the EBIT improvement is not only linked to the hedge effect. It's also linked to the fact that we have for all our brands an increase in EBIT. And for most of them, irrespective and separate of the hedge effect, there's a dilution effect that's also linked to the brand mix because we have faster growth and a greater weight of other brands whose profitability is, to date, although double digit, is, of course, lower than for the principal brands. Having said that, it's a positive effect for the year for brands such as Gucci or Bottega.
The hedge effects contributed in a sustained manner to improve profitability at least. These are effects that are generally higher than 50 bps and vary between 50 bps and 100 bps. That's why in 2014, we have a comparison effect that will be more difficult because to date we expect neutral or slightly positive hedge effects. And it's not because we had positive hedge effects in 2013 that we'll have negative effects in 2014. It's just a comparison effect, of course.
So we're expecting neutral or slightly positive effects of the hedge given the currency stake today. But we have improved profitability in our brands that's linked to the improved either gross margin as we anticipate them or given the growth in revenues for the smaller brands, a higher absorption of OpEx because the cost base of smaller brands isn't growing as fast as revenue. So overall, the objective on a reported basis to defend the profitability of the brands for next year as compared to this year. Briefly on Japan. Last year, as you know, following the devaluation, the prices measuring improvement levels of average selling prices in these countries quite continuously.
And as we do every year, at the start of every collection, depending on the product. Each and every time in a collection, there's increased product sophistication of the bulk that generates price hikes on different products and average price hikes that are quite significant. One last question. I'm from Aristide. Your forecast on recurring operating income, will there be further charges and asset impairments expected in 2014 already at perhaps some the balance on Red Cat's or Puma.
As we indicated, the 2013 doesn't include the guarantee of employee guarantees for La Redoute employees. So this investment in the total cost cannot be yet determined accurately precisely. It hasn't impacted 2013, but it will impact the result for 2014. Thank you all very much.