Good morning. Welcome to the presentation of our annual results of 2012 at the PPR Group. It's a real pleasure for me to welcome you here to talk to you about the excellent performance of this group last year, to talk about our achievements over the last 12 months and to talk about our outlook, our projects for 2013 and beyond. Jean Francois Palieu, the Group Managing Director and Jean Marc Du Pless, who came on board as the CFO last year. Several of you have already met with him.
So Jean Francois Jean Marc will be assisting me today. First, let me talk to you a little bit about our agenda this morning. I'll begin by giving the floor to Jean Francois, who will be quickly running us through the main achievements of the past year. After that, Jean Marc will go into greater detail talking about our financial statements for 2012. Lastly, before taking the floor back to talk about implementation strategies and strategy as well as our outlook, I've asked this year Alexandre Bonpar, Chief Executive of the FNAAC, who's here to talk to you about the major trends for the FNAK in 2012.
I'd remind you the FNAK figures are covered under IFRS 5, which is a stand alone specific line in the income statement, which covers activities which are being divested. Now you know that last year, we announced the project demerger of FNAC. This company is doing very well. It's well established in its market segment and is holding very well in the consumer goods economic cycle. So we wanted to really talk to you about the clear facts pertaining to the Finac's business.
So those would be my introductory comments. With no further ado, I hand over to Jean Francois, who will be talking to you about the highlights and the group's main achievements in 2012. Thank you, Francois Henri. Good morning to you all. I would also like to welcome all of you here.
Now 2012 was an excellent year for PPR operationally and financially in spite of the fact the overall economic environment was quite a mix as you know. Also in 2012, we stepped up our strategic transformation. We stepped back from our general retail business activity that's almost complete. We've built a highly integrated group, which grows and is highly profitable and we're very much on track for that. Jean Marc will be giving you the detailed figures for the year pertaining to all of our business activities.
I would like to spend a few moments talking to you about the 3 main indicators, so which talk to us about this year. Our consolidated revenue, which really covers the specific activities we're focusing on, the revenue up 21% in 2012, which is up 11% on a like for like basis. I'll come back to this in just a moment, but I'd already like to underline for you the substantial organic growth we achieved in PPR Brands. Restated to cover all cover for all the non recurring elements. Net income group share is up by 28%.
This is mainly thanks to the remarkable development of all of our luxury businesses. We've seen their profitability grow significantly. And at the same time, we made very large scale investments to underpin further development for all these brands. Our net financial indebtedness went down by over €900,000,000 in 2012. Our solvency ratio reaches therefore 1.5 times EBITDA.
So we've achieved excellent financial and operational results. All the while, we've continued investing in our 2 strategic pillars, Luxury and Sport and Lifestyle. We've really emphasized organic growth for all of our brands here. These brands have a great deal of potential organic growth. In luxury, we're always on the lookout for any opportunities in segments that can come as a complement to areas where we're already present.
For instance, we've completed acquisition of Brioni in January of 2012 to really further underpin our position in the upscale men's luxury products. We also announced our majority stake in Qilin, the Chinese jeweler. This enables us to enhance our expertise and our presence in the Chinese luxury market. Furthermore, at the beginning of 2013, we signed an agreement to take over Christopher King. We've bolstered our luxury businesses.
This has also led to our joint venture with Luxe, a leader of online sales of luxury products. Francois Henri will come back to that point a little bit later. Now in Sport and Lifestyle, we've really focused efforts on coming back to dynamic and profitable growth through the implementation of really vigorous strategy strategic action plans. We've also continued divesting from general retailing. We finalized our complete exit from CFAO.
We sold all of our North American Red Cat's business activities and we made a great deal of progress in terms of divesting our children's and family activities in Scandinavia. We'll be finalizing the divestment of Red Cat's Redoute sorry at the end of the year. And Francois Henri told you we announced in October the demerger of Afnac which will be duly approved at the shareholders meeting on June 18th. As I was saying, all of our luxury brands have contributed to the excellent performance of the division last year. We saw an increase by almost 28% in recurring operating income of Luxury division, which led to a record level of operational profitability in 2012, 26%.
In Sport and Lifestyle, in spite of a substantial uptick toward the end of the year and very good performance, especially in the United States, revenue was impacted by a drop in Puma sales in Western Europe. The transformation plan and cost cutting plan have had an impact on operating income for the full year at Puma. Here, I'd also like to briefly emphasize the very good geographic balance we have in terms of overall growth. Emerging markets make up now 40% of our global sales, saw an increase 40% in 2012 with very good performance in Asia Pacific. Now on to mature cutting trees, which are still the biggest contributors to our revenue, saw their sales go up by 9%.
Specifically, growth rates in North America are basically the same as growth rates in Asia Pacific. I'd also like to underscore the following. 95% of the group's consolidated revenue is now obtained outside of France. We can say that our brands in our traditional markets are highly desired by local customers. Furthermore, there are many tourists who purchase their products from emerging countries.
In the emerging countries themselves, we're focusing most of our efforts to open stores in those areas because there's a great deal of potential for growth in emerging markets. In those areas, we keep tight control of our growth. We've broadened our distribution network all the while maintaining the quality and exclusivity of our brand. So those are the main features of 2012. We're very proud of 2012.
Now I'd like to hand the floor to Jean Marc, who will give you a more detailed explanation of our operational and financial performance in 2012. Thank you.
Good morning, ladies and gentlemen. As you'll have understood, PPR demonstrated in 2012 once again the strength of its business model with excellent operating performance. As you can see on this chart, group revenue is up close 21% on a reported basis. EBITDA and recurring operating income are up around 19%. Operating profitability of PPR stood at a very high level, close on 18% for the year and close to 19% in the second half.
Our Lux Centre division this year once again delivered strong growth in revenue with an increase of 26% on a reported basis. That's 15% on a like for like and comparable exchange rate basis. This excellent performance was confirmed with accelerating growth in Q4 over Q3. All brands of the division in 2012 post a strong increase in their activity. This organic growth dynamic demonstrates the relevance of PPR's multi brand model.
The performance of our brands was very uniform throughout the year. As you can see on the right hand chart, the Luxury division recorded a double digit increase of its revenue across the 4 quarters of the year. All geographies post double digit growth except for Japan, which nevertheless puts in remarkable performance, an increase of 9 a record level, close on 26% for the year and close to 27% in the second half. In 2012, the Luxury Divisions operating expenditures almost doubled, half for openings, store extensions and renovations. The other half was devoted to significant investments in production, capacity, supply chain and IT systems with the aim of providing the brands with the sustainable resources for their expansion.
Let's now look at the performance of the various luxury brands, starting with Gucci. After 2011, which was already a record year, Gucci once again is posting an increase of its revenue close on 16% on a reported basis, 9% on a comparable basis over 2 years, growth in revenue achieved, 36% on a reported basis. This excellent performance demonstrates the strategy of exclusivity of the brand, which for 4 years now has highlighted the historic values of Gucci, but the reinterpretation of iconic products and the use of the finest quality materials. Gucci really leather goods, it's an illustration of this exclusive focus on the brand in 2012, the share of no logo products that comprises leather goods and exotic leather goods posted double digit growth. This fine performance is accompanied by an increase in the average selling price.
If we now look at the distribution of revenue and Gucci's growth by region, we see that it's very balanced across mature countries, up 10% on a like for like basis and emerging countries up 8% on a like for like basis. Western Europe Gucci's sales are up 9% in North America. Local customers were particularly dynamic and revenues up by over 13%. In Japan, where growth comes out of 5%, the reception of collections and the development of carryover sales are very positive on this market, which is known as the most sophisticated in the world. In emerging markets, the Asia Pacific area posts a very satisfactory performance, notably Greater China region that accounts for 23% of revenue and is up over 9% on a like for like basis.
Business is more mixed in South Korea and Taiwan with a downturn that's due rather by an uncertain economic climate and also by a deliberate policy of the brand to restrict the weight of entry level products on these markets. Recurring operating income of Gucci is up close to 19% in 2012 to reach a record level close on €1,100,000,000 The operating margin is also sharply up at 31% on the year, with in particular a marked improvement in the second half where the brand the margin reaches 31.7 percent. That's up 130 basis points. Operating investment up a large share of OpEx is aimed at securing production supply chain in order to drive the growth of the brand and to strengthen its exclusivity. The pace of renovations also accelerated with affecting about 50 stores.
In 2013, Gucci will continue these initiatives aimed at strengthening its positioning on the luxury market. In store, this policy will lead notably to a continued energetic renovation policy and extending the existing network. Let's now turn to the performance of Buttega Veneta, which in 2012 posted a further year of strong growth in its revenue, up around 38% on a reported basis and over 30% on a like for like basis. The performance of Bottigar Veneta was excellent throughout the year, notably in Q4, in spite of particularly high basis of comparison. In many respects, this performance reflects the incredible potential this brand has with exclusive and high end positioning.
Bottega Venegar today is close to the craftsmanship and innovation. The attractiveness of the iconic models remained strong and performance was remarkable for seasonal models. Leather Goods accounted for 85% of the business, sharply up, an increase of close to 32% on a like for like basis. Other categories of products, notably footwear, ready to wear, also post double digit growth rates. Bottega Veneta's activity remains very strong in historic markets.
Great dynamism in Western Europe, up 36% on like for like basis, driven by the interest in the brand by local customers. And tourism in North America, growth comes out at 25% on a like for like basis. Furthermore, the brand strengthened its presence further in emerging markets and early in Asia Pacific that remains the leading market for Bottega Veneta with 38% of the business. Recurring operating income of Bottega Veneta in 2012 reached a new record, up close to 47% for the year. For the record, in 2011, the recurring income had led by 57%.
The operating margin of the brand now stands at 30 2% in a year where expenses continue to rise notably in stores and for advertising and promotion. The year was once was marked by many events celebrating the brand such as the launch of the first monography devoted to it or at the inauguration of stores, Shanghai, Ifeng, for example. In this context, the strong exposure of Bottega Veneta and OpEx linked to openings, extensions and redesigns of stores are up by 42%. On screen, you see a glimpse of the performance of Yves Saint Laurent. The year 2012 was marked by the appointment of Eddy Slimane as Chief Fashion Designer.
His arrival led to creative renewal with the launch of new ready to wear collections and accessories in our stores during January 2013. The men's and women's collections were revisited and rethought harmoniously and reflect this renewed impetus. Similarly, a new store concept was developed and the first openings took place at the end of the year. Yves Saint Laurent strengthened its business further across countries, notably in emerging markets. Revenue in Asia Pacific, an area where the brand at the end of 2012 had 31 stores is up close on 70% to account for 21% of total revenue.
Yves Saint Laurent posts excellent momentum of its fashion and accessories activity, leading to a marked improvement in the operating margin coming out at 13.7 percent for the year, up 2 10 basis points. Yves Saint Laurent thus puts in a very fine increase in its profitability whilst investing significantly in the brand in the second half. Furthermore, the brand deliberately chose to delay deliveries of the cruise collection to the start of 2013. OpEx for Yves Saint Laurent is up given store openings, but also works undertaken such as at the Avenue Montaigne store in Paris. Let's now turn to the performance of our other luxury brands.
3rd, in 2012, posted a further year of strong growth with increased revenue of 19% on a like for like basis and a Q4 up to close to 20%. 2012 was an excellent year for all our other luxury brands, both in terms of sales improvement as well as the increase of their recurring operating income, which records a significant increase in the second half of the order of 200 basis points. The integration of the recently acquired brands, the Sowind Watchmaker and Briony is successful and all the synergies that can be implemented with the group have not yielded their full effects. Balenciaga saw its revenue grow double digits. As you know, Balenciaga now has a new Artistic Director, Alexander Wong.
It was at the end of 2012, Brioni and 2012 Opera, its 1st year within the group posts a strong increase in its revenue and delivered a positive contribution to the division's operating income. Alexander McQueen and Stella McCartney also had a bumper year at the British Fashion Awards. Stella McCartney was hailed Brand of the Year and the founder received the title of Designer of the Year. Furthermore, at Alexander McQueen, both the brand as well as the new McHugh line are sharply up. Sergio Rossi also puts in a fine increase in its business.
Lastly, our jewelry and watchmaking brands, Boucheron, Girard Perregaux and Jean Girard saw their business develop considerably in 2012. Boucheron also benefited from an important exhibition of its know how at the BNL des Antiqueurs as well as the success of its jewelry lines and in particular, our collection, Cap. Let's now move to the performance of our Sport and Lifestyle division. The year 2012 was marked by the consolidation of the division and the implementation of synergies, the development of a new full line of footwear at Volcom with the support of the Puma teams optimizing sourcing in textiles and lastly, the support by the corporate teams of PPR of the sport and lifestyle projects and many projects such as store openings or prospecting new markets demonstrate this positive dynamism by product category textile post revenue growth of 5% on a like for like basis. Accessories are up close on 11% on a like for like basis over the year, driven notably by the success of COBRA, Puma Golf.
The footwear, I can't agree, is stable overall. By distribution channels, sales in owned stores are sharply up on 10% on 18% on a like for like basis with a strong growth in scope equal scope. 2012 was also a year of accelerating investments notably for the brands of the most recent divisions at Voltcom. Substantive work was put in during the year in order to boost brand awareness with tight branded sponsoring investments such as the Fiji Pro Serve contest or new store openings throughout the world, particularly in Europe. At electric, all product categories were revised as well as brand equity important launches are in fact planned in 2013.
Short term, in spite excellent holding up the gross margin at Volcom, these initiatives had a dilutive impact on operating margin. The activity also suffered in the second half of the year of a worsened economic context and a major reorganization in certain retailers notably in the United States. I'd now like to say a few words about Puma, which as you know published its result yesterday. In 2012, Puma sales up close on 9% on a reported basis, 4% on a like for like basis, with a strong rebound in Q4, analyzed by main region. Puma's performance is somewhat mixed.
North America confirmed its excellent sales dynamism with a revenue increase of 9% over the year, driven in particular by the excellent performance of textiles and accessories. In emerging markets, 2 sales dynamism is good with a growth of 8.5% on a like for like basis. Western Europe that accounts for close on 30% of Puma's revenue See its sales down by 5%. Germany, the number one market for Puma in Europe, is sharply up. The Euro business was much weaker in France, Italy and in the U.
K. Against this backdrop, Puma sees its operating income decline. The negative impact of materials costs noted at the end of 2011 and the first half of 2012 and a major destocking policy in the second half affected the gross margin furthermore. The operating expenses of Puma rise owing to the stepping up of A and P and marketing initiative. Puma saw its net income decline given nonrecurring costs linked to the transformation plan for a total amount of 125,000,000 euros These energetic measures aimed at improving Puma's profitability and to restore the attractiveness of its products.
Let's now move to a more detailed review of our financials, reflecting the excellent operational performance of the group in 2012. As regards the main items and changes in the income statement, other non recurring income of operating expenses. That's the contribution that's positive from the capital gains of the sale of CFVO in the second half, but also the restructuring charges and other non current items in the transformation plan of Puma. Net finance cost is down of the group if the cost of financial debt remains stable, the group benefited of the positive impact for €60,000,000 of the change in the fair value and the unwinding of an indexed bond tranche, the effective tax rate of the group is sharply down at 18.4%, notably as a result of the noncurrent income, in particular the sale of CFAO. Restated for this impact, the tax rate is improved by 100 basis points at 21.9 percent because of the greater weight of the brands In the results, income discontinued activities, that's the positive recurring operating income of Fnac and Redcast for an amount of €194,000,000 offset by asset depreciations, essentially historical goodwill and restructuring costs, notably at Fnac, restated for all the non current items, income is up by over 28% to come out at an amount close to €1,300,000,000 that's €10.07 per share.
In 2012, the group's operating free cash flow stood at a very high level €930,000,000 This performance stems from the very good free cash flow from operations,
notably in
Luxury, where the growth in the working capital requirement and furthermore of a sharp increase in gross OpEx, up 75% for the reasons outlined previously. At the end of 2012, the group's net financial indebtedness stands at less than 2 €500,000,000 That's a reduction of over 25% over last year. This drop in gearing is accounted for by strong cash flow generation as well as by receiving the balance of the stake in CFO and part of the Redcat's U. S. Activities, the net debt over EBITDA ratio is consequently up very significantly to reach 1.2 times as against 1.8 times at the end of 2011.
Let me conclude now by discussing the dividend. The board will put to the approval of the shareholders' meeting on the 18th June the payout of a dividend of EUR 3.7 $7.5 per share, up 7%. This proposal reflects PPR's resolve to keep payout ratios that are well balanced both in regard to the recurring income of the group as well as available cash flow. This is a cash dividend to which we must add the distribution of FLAC shares put to the approval of the meeting on the 18th June whose terms will be specified. So let me recall that an interim dividend of €1.50 per share was paid on the 24th January after the decision of the PPR Board on the 3rd December 2012.
The balance of €2.25 will be payable on the 25th June this year. Ladies and gentlemen, thank you for your attention. I'd now like to hand over to Alexandre Bombard, CEO of Fnac, who will discuss the performance of Fnac in 2012.
Thank you, Jean Marc. Good morning, ladies and gentlemen. It's a pleasure for me to present to you the Finnac's results for full 2012. We can say that the overall context is deteriorated in all of our markets. The Fanaque was it would resist though by really moving forward on changing its business model, its financial model and commercial model.
Let me talk to you about our achievements. We contained the drop in sales to minus 2.1% for the entire group at a constant exchange rate. France has held up well. Sales dropped by only 1.6% as opposed to a drop of 4.3% the previous year, I'd remind you. And at the same time, our markets, technical products and various books and other types of products went down on average of around 10%.
Those markets went down by 10%. Internationally, our sales are down by 3 point 4% inter aliquoted due to the very abrupt downturn in consumption for the Iberian Peninsula. Our sales held up well. This is thanks to the fact that we clearly stepped up our gains in market share. We increased market share in Just to give you one example, France, our brand has managed to increase its market share by one point for all technical products and has also seen an increase in its market share for books and records.
This has shown that our brand has held up very well. This is an example of the benefits of our commercial transformation plan. A couple of illustrations here. First of all, Internet activity, saw double digit growth in our sales here, making up 14% of our sales, which is €388,000,000 which means that we rank among the top 3 websites in France with excellent profitability for these online sites. We have our multichannel sales strategy and I'd point out the following.
In 2012, we saw a 2 fold increase in the share of our products sold through the Internet and picked up in our stores. This makes up 22% of the purchases on fnaq.com now, which just goes to show there are new consumption patterns coming to the fore. And the Fnac has a clear competitive edge in this area. We are able to really combine our brick and mortar network and digital distribution network. A second illustration, we are extending our brand into new areas and it's already bearing fruit.
We have a strategic partnership we signed with Kobo, thanks to which very quickly we will to position ourselves in the emerging digital books market. 180,000 Kobo by Snack have already been sold, so you can see that we're moving in this market in a big way. 2012 was also a year when we rolled out the dedicated SFR corners in Snack stores, 66 of our 88 stores and this has led to a significant increase in telephone sales. The Fnac has also been innovative, adding new product families for family customers. 25 of our stores in 2012 set up kids areas, providing a full range of children's products as well as games and toys.
That's new. Small appliances have appeared in our home and design areas throughout the year. We can say the initial results are very encouraging. Sales in France by toys and games as well as small appliances have very much enabled us to offset the drop we saw in music in 2012, whereas those two groups of products were only to be found in about onethree of our fleet of stores. We'll continue, of course, rolling out these products in 2013.
Now a third illustration. In 2012, the Fnac continued adding to its overall network. We saw the opening of 7 wholly owned stores, including Perce Village. And even more importantly, we've seen the further development of franchise stores. In airports and train stations, we've adapted the FNAK concept using this approach.
We've opened our 7 first dairy free stores as well. These are again franchise holders. We opened our 2 first stores with independent partners in La Roche, Surgeon and in Mullen for format of 320 square meters. And if your sales through our franchise holders are well above targets. So we can say that we're going to really be focusing on franchises in 2013.
We'll continue that to boost our development, particularly in average sized cities. Now at the same time we're changing our commercial model, we've also begun transforming our financial and economic business model. In January 2012, we announced our plan to achieve a cost cutting of €80,000,000 in the full year period, so we could further enhance our competitiveness. We were able to execute the cost cutting plan very quickly, which meant in 2012, we were able to contain any impact on our recurring operating income. We know markets were in difficult situations and we contained that.
Our recurring operating income in 2012 is €79,000,000 We've also achieved very tangible results. When it comes to cash management, we substantially reduced our inventories, cutting inventory by 10% for the full year. As you can see, the FNAK in 2012 was able to hold up very well. It continues to be a profitable gala company. It's in a sound financial situation.
Available cash, dollars 292,000,000 In 2012, this performance was possible, thanks to the quick pace in implementing our FNEC 2015 development plan and thanks to the good execution of our cost cutting plan. These two points are complementary and must be done at the same time. To continue building on CNAC's long term leadership and to continue to be in a strong position, we're going to continue with this and step up these efforts that we began in 2012. Thank you very much. I'd like to hand the floor to Mr.
Pino.
Yes, Ericsson.
Thank you, Ericsson. As you've seen, the Fanaque is doing much better than many of its competitors. That makes us highly confident in the company's ability to successfully move through the subsequent stages of its development. To wrap up now, I'd like to just briefly come back to talk to you about our strategy in our group as a whole and our 2 specific divisions And I'll also talk to you briefly about the outlook for 2013. But firstly, let me talk to you about our Luxury division.
Our development model is based on brand complementarity and tapping into all the potential for organic growth. Each of our brands is in a unique position in terms of style, price as well as product category. Each of the brands gets the appropriate group support tailored to its needs and its stage of development. This has been our approach for the past 10 years in the luxury division. For instance, we've assisted supported young brands like Alexander McQueen and Stella McCartney.
We've also been able to breathe in life into brands such as Balenciaga. We've been successful in really helping new creative talent come to the forefront and be successful. Thanks to this business model, it's been possible to make Batya Veneta and Saint Laurent top ranking players in the luxury industry. They're making significant contributions to the group. Now you've seen this and their contribution will continue growing.
That will make it possible for us to really balance out our value creation using several different drivers and not just one single driving force. Lastly, thanks to this business model, we've been able to continue developing very strong major brands such as Gucci and at the same time enhanced its exclusiveness, its desirability and helped Gucci move into new international markets all the while. We've clearly proven the strength of this business model also for very young brands. So we continue very carefully adding to our luxury division in a very targeted fashion as we did recently with Christopher Kane and Healey. These brands are in very unique positions.
They're in specific territories. And thanks to PBR, they're going to be able to step up the pace of their future development. Now on to Sport and Lifestyle. We adhere to the same principles to build our portfolio here to really tap into brand potential. And we this is a more recent division, which is 5 brands, whereas our Luxury division has 14 brands.
Each of the brands in Sport and Lifestyle has its own specific positioning and there's no risk of cannibalization. And yet, just as we do in the luxury industry, we can say that there is quite a bit of synergy available to us here. We can boost organic growth for each of these brands. Specifically regarding products, we'll see an example of this this year. Jean Marc alluded to this.
In the fall, we'll be launching VOCOM sneakers. That wouldn't have been possible if there had not been a really close collaboration between Puma and VOCOM. And you'll see though that, nevertheless, they will have their clear unique Volcom personality. But beyond Action Sports, where you've got Volcom and Electric, we've also identified out the outdoor segment as an important area for growth in sport and lifestyle. We already have a real golden nugget here, Tretorn, which previously was sort of living in the shadow of Puma.
For this brand to really have its clear own genetic makeup, its own DNA for it to be able to grow, we've decided to give it greater managerial independence with a new CEO recently hired and new management and creation teams. Tritor now is going to be able to move clearly to a path of growth and development to again tap into its full potential. And of course, our priority in the sport and lifestyle will be Puma's turnaround. If you look at recent performance, it's not in line with our expectations and certainly not in line with its tremendous potential. As quickly as possible, we want to see that brand turn around and resume its pace of growth that it's known in the past.
We renewed Puma's management. We'll be announcing a new Chief Executive in the next few weeks. With the assistance of Jean Francois, who is now chairing Puma's Board, There'll be 2 priorities for them in the immediate term. Firstly, to renew their product offering and marketing so that the brand can see renewed impetus and they can boost their sales. Secondly, they will need to revamp their organization at Puma.
The company saw significant change in size in the past 10 years and was not really able to adapt its structures appropriately. Puma is a sensational brand, which consumers really love worldwide, and we can say it's got huge intrinsic potential. The group will really push this brand, help it benefit even more in the future from what we call the PPR effect. And I would like to specifically talk to you about the PPR effect now. Since 2011, we have really changed the role of our corporate team, so we can even give more added value to the various group brands and active guardians of these assets.
And we can see the examples of this everywhere. I just emphasize some milestones in the
E
E Commerce is a priority for our group. The establishment of this joint venture really shows what our intentions are in this area. This will mean the luxury division will be able to further improve its performance on the single brand e commerce sites. We'll be combining PPRs know how and the technical expertise and logistics know how they have at YOOX, so that we'll be able to really make an exceptional exclusive purchasing experience in over 100 countries online. Furthermore, we've clearly defined the group's objectives when it comes to sustainable development and we're looking at a time line of 20 twelve-twenty 16 here.
With all set, but at the same time, we've put together a group wide environmental income statement. And this environmental income statement helps us target possibilities for improvement throughout the group's supply chain. Our targets for 2016 will be for us to even further reduce our overall environmental footprint. September 2012 after a great September 2012 after a great deal of successful experience both in the private sector and also as a top administration official. I'd also mention Marie Claire, who's here this morning, is also going to be in charge of our institutional relations, our international relations.
Welcome to Marie Claire. Thirdly, as we mentioned last year, we've really bolstered our human resources policy. Our executive committee approved a strategy now of setting up a mobility platform, which will help us further strengthen our ability to adhere, attract, develop and retain highly talented people who we need to support the group's pace of growth. Fourthly, in 2012, we continued strengthening our various capacities for major corporate functions such as brand marketing and property management. Lastly, we've opened shared service centers in Continental China, Hong Kong, Korea and Taiwan.
These shared service centers cover most centrally financial functions, making it possible for us to generate synergy group wide and provide quality service to our various brands so they can focus their efforts on their own development. The geographic location of these centers, remember last year we set up PPR Americas and PPR Asia. The location goes to show that we intend to really have a clear global organization. This global organization is a reflection of our group's geographical reality. Our center of gravity has shifted worldwide and goes well beyond France and Europe.
These are new stages along the way toward our transformation, which illustrate our ambition to give clear support to our brands, providing them with their expertise to support them and at the same time help feed into their overall strategic process so that they can really think outside of the box, push the envelope. That's the PPR effect. Before opening up for questions and answers, if I might just remind you of the soundness of our fundamentals. This makes us very confident in future years. So we keep a careful eye on the overall macroeconomic situation, which is certainly ever changing.
If we look at demographic and sociological trends, they're supporting our performance and they're long term trends. We've opted for apparel and accessories because in this market and in the various sectors where we're active, sport and lifestyle and luxury, we can say that our addressable customer base is under 1,000,000,000 people and that will go up to about 4,000,000,000 individuals in just a few years' time. We're seeing a big increase in purchasing power in emerging countries. People are more interested in authentic, genuine products. This is going to underpin growth in all of our brands in both divisions making it possible to reach our targets.
In the shorter run, we can say we've got unique assets in each of our brands. Our group has momentum, bringing everyone forward. We can say our teams share a passion and they're highly talented. I've contributed them this morning. Thanks to all this, we're going to further enhance our financial and operational performance as from 2013.
Thank you for your attention. Now with Jean Francois and Jean Marc, we're going to field your questions.
So after that, just that brief transition to allow you to prepare your questions. Let's begin. Good morning. HSBC, 3 questions. Last year, at the same time, you presented 40%.
That presentation no mention was made. I'm 40%. That presentation no mention was made. I mean, no vision. What's the situation?
Second question, you just indicated that the population that you're addressing was going to grow from EUR 1,000,000,000 to EUR 4,000,000,000 that will not be without posing certain challenges. This risk of ubiquity, a risk for luxury brands to grow, of course, strongly, but on the other hand, no longer perceived as being exclusive. So how can a brand such as Pucci, which still has number of products with logos, how is it going to face that challenge? And thirdly, a more short term question, the currency environment very favorable in 2012, 7% for revenue. If we take the current rates, that'd be a negative impact of about 4%.
What are your currency hedges? And what's your pricing policy? And that will be in Japan, whether yen declined by 20%. Hermes said they would not increase Rivieton, Dettor, what about your major brands? Jean Francois?
Well, thank you for that. I didn't return to our ambitions for 2020. We don't change those every 6 months. They remain present. Let me remind you this was an exercise undertaken by all the group's brands supported by very concrete action plans.
It's an ambition, no doubt about it. It would be pretentious on my part to have a clear view of what the world in 2020 will look like. It's an ambition. It's the potential of our brands that you must read into this ambition of the figures we gave you last year. Turning to your second question.
Yes, the point about the population. Well, it's simple. The luxury market was built up over the past 50 years between North America, Western Europe and Japan. That's 800,000,000 consumers. Today, the markets that are essentially consuming very practically, if you add them up, that accounts for over 4,000,000,000 people.
So trends are really headed in the right direction, no doubt about it. It's up to us to reinvent sustained pace of growth. Its potential is significant. Once again, this concept of access to luxury from the geographic point of stores that was part of luxury over the past 50 years. This will be replaced by another exclusivity, but it has nothing to do with the underlying concept of luxury.
There are the 4 contents: creative, exceptional content craftsmanship of the finest quality materials absolutely exceptional first rate materials and exceptional outstanding functionalities. It's those criteria that are at the heart of the authenticity, the sincerity of a luxury brand. The fact that it's available in some place or another is not a fundamental criterion for Luxury. It's up to us to ensure the attractiveness of our products through their genuine quality and their authenticity. You see that Gucci has been able to go up market with increasingly sophisticated products.
You mentioned logos. Well, logos are part of the luxury universe elements of the brand. What we must do is, depending on the aspirations of the customers, to adjust your products with very sophisticated luxury products, far more hedonistic in the way they are viewed by the consumer. And there are other places where there will be luxury products. So it's addressing all the product categories.
And the products that will be developed in the future by luxury brands are quite considerable. We're only present in a few categories. You saw that Gucci developed a children's category very successfully. And here, there's a lot of work to be done on expansion going forward. I'm not at all worried about our ability to maintain the attractiveness, the strong desirability for all our brands.
Regards pricing and ForEx, well, it's true that this year ForEx was favorable to our business, notably for Luxury, because ForEx exposure varies between Puma, Sport and Lifestyle and Luxury. So effects are in fact contrary because procurement for Puma made in dollar in Asia for distribution in mature countries. So there's a pooling, a degree of immunization linked to the complementary nature of our businesses. What's interesting with foreign exchange, it doesn't always move in a favorable direction because the drop in the euro gave rise to speculation about the interest of the Chinese who would buy more in Europe than in China. So the reverse effect will also like the Chinese or to reduce the price differential between Asia and Europe.
And of course, we have currency hedges that were will be even more favorable next year given the hedging rate for all our currencies. And lastly, on prices, I mean, we don't set prices on the basis of currencies. What we know is that today, we have a potential across our brands of increasing prices that is there. We haven't had a policy of across the board price increases for our brands and it'll be Gucci. As we've said, there will be opportunities to increase prices on a case by case basis depending on product categories.
If perchance ForEx had such an adverse effect as might be perceived given recent trends. Next question please. Thank you. Exane BNP Paribas. What are the luxury consumer trends that you're seeing in China?
Be the differences by price point or by geography on the Chinese continent? Secondly, we've clearly noted the focus in Puma on renewing the product range and product innovation. Should we expect further strategic changes in Puma, notably retail distribution. And thirdly, we note that financial leverage available to the groups on the rise? We know that you're attractive in organic growth, but also through bolt on acquisitions.
So what are the M and A options and opportunities that you're currently considering, Nikky? The strategic direction aims at 3 points. Firstly, clarify the brand's positioning. Next, improve product momentum with not only, as you mentioned, issues pertaining to innovation and design, but also addressing efficiency issues throughout the value chain that goes from merchandising through retail distribution. And the 3rd strategic focus area is revamping the organization.
So as to really bring it up to date that is that Puma for 10 years has focused on strong growth with various organizations that were not very global. So the aim here is to give greater consistency to this organization. And the impact on distribution channels, not really very significant if we're going to our own directly owned stores and on the Internet, we'll have perhaps a more local approach than it currently is. But I would say that that really is at the margins. Let me just add to clearly understand Puma's metabolism.
This is a company that experienced phenomenal growth over 10 years through the success of its products, but also by buying out its licensees. When you buy out your licensees, these are companies developed locally around your brand. You're buying organizations, processes and systems different to your own. So this requires an organization over time, a period that was very short that explains for the very diverse organizations the need for more coherence. As to your question regarding luxury trends in Industry China, you recall that last year, there was a slight slowdown effect, relatively modest, in fact, linked in part, but not only to the political transition.
You saw that in Q4, there was a rebound of our sales of luxury products in China. It's a little too soon. As you know, I mean, the Chinese New Year is happening. It was in January last year, so we're still in the dark when it comes to analyzing and confirming the positive trends seen at the end of 2012. But our sense is the new team in place will, of course, the new leadership will wish to put in place measures that are clearly visible to the population and boost Chinese domestic consumption, which is a key component in the country's macroeconomic strategy.
The question that you raised concerns consumption levels in China, Greater China, Hong Kong in particular, has always been a special case in point. As you know, there restrictions to continental Chinese to enter Hong Kong, which, of course, impacted structurally, we are seeing and we were discussing this earlier in brand changes, consumption levels in more recent cities where we've opened stores, the Tier 2 or Tier 3 Chinese cities where consumer patterns are quite different from those we see in large cities such as Beijing and China where customer sophistication is growing apace. This is something we saw in mature countries, but in a quite significantly within a short space of time. So this has compelled us in China, which is a good thing, to be capable of offering entry level products to the brand in certain areas and to be able to evolve to more sophisticated, more discrete products. And the fact that we have those 2 systems, those two constructs in the same country means that we can respond rapidly.
And in spite of the slowdown in growth last year, we were able to grow in 2012. Turning to your question on M and A. Well, the group's balance sheet is improving year on year. It's the business model driven by economic growth model of structural debt reduction. We have a track record when it comes to buying but also when it comes to selling, which ties in with our ambitions for 2020.
The bulk of the group's growth will be driven by the brand's organic growth, notably existing brands, what we're doing. And in fact, we reopened our M and A activity as of 2011. After 10 years of growth in our portfolio, you must realize that between 2002 2011, there were no acquisitions in the Luxury segment. We concentrated on the growth of all our brands, and you've seen the figures. This has served us well.
In 2011, we felt that we could now reconsider certain market segments that were too small 10 years ago that are far more significant today than menswear. That's why we acquired the Brioni brand or to look at new brands that can enrich the group's portfolio whilst respecting very stringent criteria in terms of brand positioning regarding the stylistic content, product categories or even market segments, the price segments that the brand addresses 1st and foremost. In the group's metabolism, we believe that we need to have varying degrees of maturity of our brands in order to contribute to enriching, rejuvenating the more mature brands through the younger brands. And in the years 2,007, 2008 young brands such as Alexander McQueen or Stella McCartney, important for those to benefit for the experience of a brand such as Gucci. But Gucci was also benefiting from interaction with those brands.
The fact that we can receive Christopher Kane amongst us over and above that this brand has its own specific positioning is part and parcel of this mix of varying levels of maturity within our portfolio. And we know that it's very beneficial to all our brands. One category where we were still relatively small a few years ago, we felt it was necessary to ensure good balance of our book and need to grow, which was jewelry and watches, gave rise to the acquisition in 2011 of sewing with the brands Gerard Perigot and Charichard. And it was, of course, the acquisition of the brand Quilin in China, which in this product category, which also plans to expand as a matter of priority on the Chinese market. So for us, it's a new experience in our portfolio of luxury brands having acquired Quilin.
I'm from the Handelsblatt, Germany. Two questions for Puma. Clarification of brand positioning. Does this mean specifically more of a return to sport, less lifestyle, the Adidas model? Secondly, there's a missing spot in management.
You'll be appointing a new CEO. That's true, but still. Will Jean Francois Paris be really taking charge of that business? No, no, not me. Fortunately, no.
Seriously, no, I will not be taking charge of the business. A Chief Executive will be appointed and will very much lead that business. Just like for all of our other brands, he will do that closely cooperating with PPR and with the support of PPR, but I am not going to be in charge of Puma. Now regarding clarification of Puma as a brand. Firstly, we're not going to do with Adidas.
We're not going to do like Nike. We're not going to do like anybody else. We are us. We're proud to be us different to be ourselves. We are going to do things like Puma does things.
That's the first point. Secondly, us to clarifying things between sport and lifestyle, we aren't going to be adding to 1 or subtracting from the other. We're going to do both. But more clearly. It will be clearer for consumers, for retailers and clearer for employees as well.
So we'll continue being a sport and lifestyle brand. We will be focusing on lifestyle and sport, and we're going to really be bringing our specific Puma touch to sport, thanks to its lifestyle. Several people asking for the floor. This gentleman, yes, go ahead. Thank you.
Leuklim from Capital, also Germany. A follow on question regarding Puma, some short term questions. Can we expect there'll be a new CEO as of April 1 at Puma? What would the timeline be for this appointment? 2nd question, how patient will you be with that company considering its negative performance in 2012?
And there were some major sporting events nonetheless in 2012. And then there's another point for 2014, and we don't get the impression that things are moving forward very well. What's your time frame? What are your expectations for recovery? Are you expecting a turnaround into 2013?
Well, regarding Puma's Chief Executive, the process is very much underway. The announcement will be made in a few weeks' time. You'll find out at that point. Now on to your second question. It's not anything about being patient.
It's about having the will to do something. And we have clear will and determination. We're steadfast. And this is clear to Puma and all this is very much moving in the right on the track. As to the actual time lines, you mentioned 2014, I suspect you're referring to the World Cup.
Well, we have a whole array of whole football collection that we just saw last week that's very promising. It no longer just focuses on a small number of soccer models and lines, but rather was really more much more powerful, top quality, a few technical innovations, top ranking innovations in the whole line. So we're very confident that we'll very much be there for that major global sporting event. Let me just remind you, for those of you who remember the first period, 10 years ago with Gucci, there was also a sort of lengthy period before the brand really skyrocketed. We can say this group very much adheres to its commitments.
When we commit to a management team with a new business that comes into our fold, we saw this in the past. There were economic difficulties. PPR had a learning curve for the new business line that we were less familiar with in 2007. That's why things, I'm sure, have taken too long. I agree with you.
But nonetheless, there's no doubt about it. We're proud to see how things are turning out. We gave our word and we kept our word. That's how we operate in this group. I agree with Jean Francois.
Our will is crystal clear and we're more than steadfast, definitely determined to move quickly to tap into that brand's global potential. Bonjour? Good morning. Astrid de Vondland, Reuters. Three brief questions.
Firstly,
could you tell us
how your sales held up in January February? Any change in trend compared to Q4? I'm thinking of luxury here, luxury sales. Secondly, a lot of fashion and luxury brands have talked about a rebound in North America, particularly the United States. Do you intend to open additional stores in the United States this year?
How many did you open last year? So could you comment a little bit on the recovery in North America? 3rd question, how many Gucci stores opened last year in all? How many in China? And how many do you intend to open this year in all and in China more specifically as well?
Regarding sales this year, Francois Henri alluded to this figure. Trends entirely comparable with last year trends, a slight difference though. The Chinese New Year is a month later. It was January last year. It's in February this year.
So that does have an impact this week. Your question on the United States, our brand situation in the U. S. In the Luxury division is quite different. We have a brand that's Gucci that's well established, has been for a long time.
And the brand is a little bit less well established and the proportion of sales is lower, that's Bottega Veneta. Bottega has very high potential for development of its sales in the United States. Gucci has potential for development. Let me repeat, though, and I'd like a slightly correct point to measure potential for a brand by its number of stores, I'm not sure that's the right way of measuring. Surface areas of each store vary quite a bit.
Even here, average surface area for Gucci, particular can be 2 times different. So comparing store numbers isn't always relevant because to our sizes can vary so much and it's even less of a good comparison if you compare store numbers with other brands, especially with their own business model may be very different and their overall concept of luxury may be different from ours. So potential in the U. S. And also globally is there.
If you look at Gucci and square meters, we've got high potential per square meter. And we can say that store size is even more important than store number and our stores tend to be much bigger than the competitor stores. And of course, we create a whole luxury experience in our stores. It's a spectacular architectural experience many times. Often it's a very tailored consumer focused luxury experience.
These are differences that are beginning to appear between the various brands. And to repeat, there is still substantial potential for development regardless above and beyond the figure of store numbers, including in the United States. Did I answer that? Yes. Outlook for growth in the U.
S. This year in Luxury, do you intend to open further stores there was that question. We continue opening stores in the U. S. There are projects.
Recently, I was in Miami, for instance, to take a look at some very interesting projects in the design district in Miami. So we certainly still have projects. Now the thing about the United States, they've got a huge domestic market as you know very well. They've also got a very big tourist industry, but proportionately, it's not as big as in Western Europe. But we're betting on this.
We think the U. Will open up more and more to global tourism. And that's going to mean the U. S. Market is going to see very interesting luxury trends, which you're already seeing in Europe.
Proportions between Western Europe and the U. S. Right now are 1 to 2 in terms of international tourists that come to the luxury stores. For instance, Latin America traveling to Latin Florida, Latin Americans traveling to Florida. For the time being, they're not all Chinese tourists because it's sometimes difficult to get visas to go to the U.
S. But the U. S. Administration, I believe, is very aware of this and is working to improve things to make it easier for tourists
Hello. I'm from Merger Markets. Just two quick ones on old projects. 2013, is that going to see see a possible sale of Sergio Rossi in 2013? Why do you say that's an old project?
And in spite in July, you denied a possible acquisition of HUGO BOSS. Is that going to be
on the cards again? For the decision?
On the second part, never been any never been planned. No, no, nothing planned there. Sergio Rossi, I didn't quite understand your question, I'm sorry. It's an open to sell, no. Today, Seggio Rossi is a brand that, as you may know, experienced difficulties more in terms of its industrial organization Casseggios Rossi is integrated in manufacturing.
That's resolved. The brand grew substantially last year's back into operating profit. The brand's EBITDA is once again positive, and we're now preparing the relaunch or the redeployment of this brand in its major markets within our portfolio. So there's no such plan under consideration. Hello.
I'm from FashionMag. Two questions. So first, you mentioned young designers that PPR has assisted, not only with British. Are you looking at a potential buyback of Yung Brands in China and Greater China? 2nd question, where are the other other acquisition projects, plans in Lifestyle and Sport division of Riyadh?
Well, young designers, yes, we announced a few weeks ago now that we were taking a majority stake in Christopher Kane's company. The way we address things internationally is that we have a view of the group regarding the relevance of product categories in various cultures. And we believe that the highest growth potential in a product category must be based on the strong craftsmanship tradition of a country. When we speak of ready to wear, it's not what immediately springs to mind in China. But when you look at jewelry, there's real tradition, real know how, real Chinese craftsmanship in this area.
And that's why we've tended to look at the acquisition of Chinese brands in the jewelry area rather than in other product categories. It's a very specific approach followed by the group, but we believe it's more relevant when it comes to growing luxury brands in countries as important as China. And now China is a country we could, of course, consider that in other countries too. Turning to the Sport and Lifestyle division. As you know, the principle of our group is to build the brand portfolio around a brand that constitutes its foundation.
It's Gucci for Luxury and it must be Puma Inspont Lifestyle. So our priority for the time being is to really place Puma once again in a position where it can really roll out synergies in the supply chain and other areas. And once we've achieved that, we will resume acquisitions in the Sport and Lifestyle division. I said this briefly in my introduction. We identified around the Puma brand, which really is the heart, the core that will remain the absolute priority of the sports division.
There are 2 sectors, 2 segments that we view as very promising long term, Action Sport and Outdoor. Jean Francois said, once Puma is back on track for growth, we will seek to strengthen, in particular, the outdoor segment to build a portfolio. Final question? Guldama. Ladies, For an Italian, go on.
Good morning. It's Louise Singlehurst here from Morgan Stanley. I shall ask a question in English to save everyone. I can't hear it in my French accent. Two questions for me, please.
Just firstly on the Gucci underlying number of 8% growth in the 4th quarter. That was obviously a very good number and ahead of some of your peers. Is there any possibility you could give us some idea of the space contribution in that Q4? And when we look out to 2013, if the store number is starting to slow down in expansion, should we see another further increase in the operating margin for Gucci brand in 2013? And then secondly, Jean Francois, you spoke a lot last year about supporting the growth of the group with further infrastructure, human resources, regional hubs.
Do you feel now you've got that support across the group that you need to support that future growth? Thank you.
Louise, I will answer you with my French accent. Regarding the growth during the last quarter in China, in fact, what I can tell you because you know perfectly well that we don't disclose any information about the like for like growth, but I can tell you that in China, the like for like growth was positive during the last quarter, both in Mainland China and in Greater China. And then considering that, I think that you may have mentioned something about the operating profit for 2013 for Gucci. What is important for us, I stressed several times that we have invested much this year in communication and marketing because we believe that we must sustain the development of Gucci that and to explain and to demonstrate how the brand has been upgraded and to communicate around the new collections, the less logo oriented strategy. So we'll still invest in marketing and strategy.
As we already said, we need also to invest in the stores, especially refurbishment and relocation in some cases, especially China. So we will also increase the CapEx budget for next year. And at the end of the day, the goal and the target is still to at least maintain the same level of profitability and possibly to increase this level.
Just to add something about the stores, I was mentioning what's important is not the number of stores, but the size of the stores, the number of square meters. Considering Gucci, which is probably the brand in the world where we have the more potential in enlarging existing stores considering how long ago they were opened and how big the development was recent in Gucci in terms of categories. So if we want to express the brand completely as it is today in stores, we really have a big, big work to do to be done in enlarging our stores. Same thing for Bottega for instance. So it's opening, but also enlarging existing stores.
As to the second question, it's true that 2012 was a year of investment with high intensity in all brands and all divisions. We are going to carry on those investments with less intensity. And of course, you can figure out that these programs are not finished within 1 year, but they take some more time more. So we will continue this. We have those transformation programs in Puma.
We also are building up some additional capacities in Luxury. We also are securing upstream sourcing in luxury. So this is something that takes more than 1 year. But it's true that the intensity was specifically high in 2012. Okay.
Merci beaucoup.
Thank you all very much. Thank you all for your interest, for your questions. I hope through our presentations and our answers that we've been able to demonstrate to you our confidence in implementing our strategy and a very positive outlook for this year. See you at the group shareholders meeting that will be later this year given the Fnac transaction. See you on June 18 for the group shareholders meeting.
Thank you.