Bonjour. Good morning. Welcome to the presentation of our annual results, 2012 of 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-François Palus, the Group Managing Director, and Jean-Marc Duplaix, who came on board as the CFO last year. Several of you have already met with him. Jean-François and 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-François, 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 of our strategies as well as our outlook, I've asked, this year, Alexandre Bompard, Chief Executive of the Fnac, who's here, to talk to you about the major trends for the Fnac in 2012. I'd remind you the Fnac figures are covered under IFRS 5, which is a standalone specific line in the income statement, which covers activities which are being divested. You know that last year we announced the project of demerger of the Fnac. You know this company is doing very well. It's well established in its market segment and is holding up very well in the consumer goods economic cycle. We wanted to really talk to you about the clear facts pertaining to Fnac's business. Those would be my introductory comments.
With no further ado, I hand over to Jean-François, who will be talking to you about the highlights and the group's main achievements in 2012.
Merci, François.
Thank you, François-Henri. Good morning to you all. I would also like to welcome all of you here. 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. 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 three main indicators 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 already like to underline for you the substantial organic growth we achieved in PPR brands. Restated to 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 EUR 900 million in 2012. Our solvency ratio reaches therefore 1.5 times EBITDA. We've achieved excellent financial and operational results. All the while, we've continued investing in our two 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. 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 Qeelin, the Chinese jeweler. This enables us to enhance our expertise and our presence in the Chinese luxury market. At the beginning of 2013, we signed an agreement to take over Christopher Kane. We've bolstered our luxury businesses. This has also led to our joint venture with Yoox, a leader of online sales of luxury products. François-Henri will come back to that point a little bit later.
In sport and lifestyle, we've really focused efforts on coming back to dynamic and profitable growth through the implementation of really vigorous 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 Redcats 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 Redcats at the end of the year. François-Henri told you, we announced in October the demerger of the Fnac, 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 U.S., 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 of 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. Mature countries, 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 our 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 broaden our distribution network, all the while maintaining the quality and exclusivity of our brand. Those are the main features of 2012. We're very proud of 2012.
I'd like to hand the floor to Jean-Marc, who'll give you a more detailed explanation of our operational financial performance in 2012.
Merci.
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% the second half. Our luxury 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 four quarters of the year. All geographies post double-digit growth except for Japan, which nevertheless puts in remarkable performance, an increase of 9% over the year. The very strong increase in revenue led to continued improvement of the division's profitability. It's now reached a record level close on 26% for the year and close to 27% the second half. In 2012, the luxury division's operating expenditures almost double, 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 two years, growth in revenue achieved 36% on a reported basis. This excellent performance demonstrates the strategy of exclusivity of the brand, which for four years now has highlighted the historic values of Gucci with the reinterpretation of iconic products and the use of the finest quality materials. Gucci really leather goods is 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 are 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 EUR 1.1 billion. The operating margin is also sharply up at 31% on the year, with in particular a marked improvement in the second half, where the margin reaches 31.7%, 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, 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 Bottega 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 Bottega Veneta was excellent throughout the year, notably in Q4, in spite of particularly high bases of comparison. In many respects, this performance reflects the incredible potential this brand has with exclusive and high-end positioning. Bottega Veneta today is close to the EUR 1 billion revenue mark without ever sacrificing to its repeated standards of quality, craftsmanship, and innovation. The attractiveness of the iconic models remains strong and performance was remarkable for seasonal models. Leather goods accounting 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 a 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, notably 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 leapt by 57%. The operating margin of the brand now stands at 32% in a year where expenses continued to rise, notably in stores and for advertising and promotion.
The year 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 IFC, 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 Hedi 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% for the year, up 210 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.
Qeelin 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 most recently acquired brands, the Sowind Group and Brioni is successful, and all the synergies that can be implemented with the group have now yielded their full effects. Balenciaga saw its revenue grow double digits. As you know, Balenciaga now has a new artistic director, Alexander Wang, at the end of 2012.
Brioni in 2012, for its first 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 McQ 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 JeanRichard, saw their business develop considerably in 2012. Boucheron also benefited from an important exhibition of its know-how at the Biennale des Antiquaires, as well as the success of its jewelry lines, and in particular, collection Quatre. 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 and textiles, and lastly, the support by the corporate teams of PPR of the sport and lifestyle projects. In many projects, such as store openings or prospecting new markets, demonstrate this positive dynamism. By product category, textiles 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 category is stable overall. By distribution channels, sales in own stores are sharply up on 18% on a like-for-like basis with a strong growth in equal scope.
2012 was also a year of accelerating investments, notably for the brands of the most recent divisions at Volcom. Substantive work was put in during the year in order to boost brand awareness with targeted sponsoring investments such as the Fiji Pro 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 U.S. I'd now like to say a few words about Puma, which, as you know, published its results 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, too, 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 1 market for Puma in Europe, is sharply up. 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 cost 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&P and marketing initiative. Puma saw its net income decline given non-recurring costs linked to the transformation plan for a total amount of €125 million. 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 regard 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 CFAO 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 as a positive impact for €60 million 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 non-taxing at the full rate of certain non-current income, in particular, the sale of CFAO. Restated for this impact, the tax rate is improved by 100 basis points at 21.9% because of the greater weight of the brands.
In the results, income, discontinued activities, that's the positive recurring operating income of Fnac and Redcats for an amount of EUR 194 million 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 EUR 1.3 billion. That's EUR 10.07 per share. In 2012, the group's operating free cash flow stood at a very high level, EUR 930 million. This performance stems from the very good free cash flow from operations, notably in luxury, where the growth in the business has as its corollary an increase in working capital requirement, and furthermore, 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 EUR 2.5 billion. 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 CFAO and part of Redcats' 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 of June the payout of a dividend of EUR 3.75 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 Fnac shares put to the approval of the meeting on the 18th of June, whose terms will be specified soon. Let me recall that an interim dividend of EUR 1.50 per share was paid on the 24th of January after the decision of the PPR board of the 3rd of December 2012. The balance of EUR 2.25 will be payable on the 25th of June this year. Ladies and gentlemen, thank you for your attention. I'd now like to hand over to Alexandre Bompard, 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 Fnac's results for full 2012. We can say that the overall context has deteriorated in all of our markets. Fnac was able to 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 -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. At the same time, our markets, technical products, and various books and other types of product went down on average of around 10%. Those markets went down by 10%.
Internationally, our sales are down by 3.4%, inter alia, 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 both France as well as all of our geographies. 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. We saw double-digit growth in our sales here, making up 14% of our sales, which is EUR 388 million.
We rank among the top three websites in France with excellent profitability for these online sites. We have our multi-channel sales strategy, and I'd point out the following. In 2012, we saw a twofold increase in the share of our products sold through the internet and picked up in our stores. This makes us about 22% of the purchases on fnac.com now, which just goes to show there are new consumption patterns coming to the fore, and 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 were able to position ourselves in the emerging digital books market.
180,000 Kobo by Fnac have already been sold, 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 Fnac stores, 66 of our 88 stores, and this has led to a significant increase in telephone sales. 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.
Those two groups of products were only to be found in about a third of our fleet of stores. We'll continue, of course, rolling out these products in 2013. A third illustration. In 2012, Fnac continued adding to its overall network. We saw the opening of seven wholly owned stores, including Bercy Village. Even more importantly, we've seen the further development of franchise stores. In airports and train stations, we've adapted the Fnac concept using this approach. We've opened our seven first duty-free stores as well. These are again franchise holders. We opened our two first stores with independent partners in La Roche-sur-Yon and in Melun. The format is 320 sq m. End-of-year sales through our franchise holders are well above targets. 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. At the same time we're changing our commercial model, we've also begun transforming our financial and economic business model. In January of 2012, we announced our plan to achieve a cost cutting of EUR 80 million 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 of 2012 is EUR 79 million. 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 Fnac in 2012 was able to hold up very well.
It continues to be a profitable company. It's in a sound financial situation. Available cash, EUR 292 million. In 2012, this performance was possible thanks to the quick pace in implementing our Fnac 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 Fnac'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. Pinault.
Merci, Alexandre.
Thank you, Alexandre. As you've seen, the Fnac 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 two specific divisions, and I'll also talk to you briefly about the outlook for 2013. 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 new 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 Bottega 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'll make it possible for us to really balance out our value creation using several different drivers and not just one single driving force.
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. We continue very carefully adding to our luxury division in a very targeted fashion, as we did recently with Christopher Kane and Qeelin. These brands are in very unique positions. They're in specific territories, and thanks to PPR, they're going to be able to step up the pace of their future development. Now, onto sport and lifestyle. We adhere to the same principles to build our portfolio here, to really tap into brand potential. This is a more recent division with just five 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. 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 Volcom sneakers. That wouldn't have been possible if there had not been a really close collaboration between Puma and Volcom. You'll see, though, that nevertheless, they will have their clear, unique Volcom personality. Above & Beyond Action Sports, where you've got Volcom and Electric, we've also identified 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. Tretorn now is going to be able to move clearly to a path of growth and development to again tap into its full potential. Of course, our priority in the sport and lifestyle will be Puma's turnaround. You look at recent performance, it's not in line with our expectations and certainly not in line with this 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-François, who's now chairing Puma's board, there'll be two 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 it can even give more added value to the various group brands and act as guardians of these assets. We can see the examples of this everywhere. I just emphasized some milestones in the change that took place in 2012. Firstly, Jean-François alluded to this. We signed a joint venture with Yoox. 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 PPR's 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 timeline of 2012, 2016 here. 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. You know sustainable development is a priority for our group. This is a policy which is now being headed by Marie-Claire Daveu. Marie-Claire came to the group in 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 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 centeredly 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 our expertise to support them, and at the same time, help feed into their overall strategic process so that they can really think outside 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, though 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 their 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, luxury, we can say that our addressable customer base is under 1 billion people, and that will go up to about 4 billion 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 pay tribute to 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-François and Jean-Marc, we're going to field your questions. After 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 a 2020 vision in which luxury was to account for about 60% of your business, sport and lifestyle, 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 1 billion to 4 billion. That will not be without posing certain challenges. There's 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. How can a brand such as Gucci, which still has a number of products with logos, how is it going to face that challenge? Thirdly, a more short-term question. The currency environment, very favorable in 2012, 7% for revenue.
If we take the current rates, there'd be a negative impact of about 4%. What's your currency hedges, and what's your pricing policy? That'll be in Japan, where the yen's declined by 20%. Hermès said they would not increase prices. Louis Vuitton, ditto. What about your major brands?
Jean-Marc.
Well, thank you for that I didn't return to our ambitions for 2020. We don't change those every six 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 presumptuous 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 million consumers.
Today, the markets that are potentially consuming very practically, if you add them up, that accounts for over four billion people. Trends are really headed in the right direction, no doubt about it. It's up to us to reinvent luxury of tomorrow, which we're doing daily with our brands. Gucci continues to have a sustained pace of growth. Its potential is significant. Once again, this concept of access to luxury from the geographic standpoint 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 four 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 upmarket with increasingly sophisticated products. You mentioned logos. Well, logos are part of the luxury universe. They're 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. There are other places where there will be an aspirational luxury goods, which will be necessary in the initial stages of developing luxury products. 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. Here, there's a lot of work to be done and 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. 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. Effects are in fact contrary because procurement for Puma made in dollar in Asia for distribution in mature countries. There's a pooling, a degree of immunization linked to the complementary nature of our businesses.
What's interesting with foreign Forex, 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. The reverse effect will also like the Chinese ought to reduce the price differential between Asia and Europe. Of course, we have currency hedges that will be even more favorable next year, given the hedging rate for all our currencies. Lastly, on prices, 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, notably Gucci, as we said.
There will be opportunities to increase prices on a case-by-case basis, depending on product categories, if per chance, 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? Are there differences by price point or by geography on the Chinese continent? Secondly, we've clearly In Puma, on renewing the product range and product innovation, should we expect further strategic changes in Puma, notably, retail distribution? Thirdly, we note that financial leverage available to the group is on the rise. We know that you're attractive in organic growth, but also through bolt-on acquisitions. What are the M&A options and opportunities that you're currently considering? Thank you. On Puma. The strategic direction aims at three 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. The third 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. The aim here is to give greater consistency to this organization. Impact on distribution channels, not really very significant. If we're going to our directly owned stores and on the internet, we'll have perhaps a more local approach than it currently is. 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. 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 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. The Chinese New Year is happening.
It was in January last year, we're still in the dark when it comes to analyzing and confirming the positive trend seen at the end of 2012. 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've been restrictions linked to continental Chinese to enter Hong Kong, which, of course, impacted Hong Kong sales last year. There were restrictions which are purely temporary, in my view.
More 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 quite significantly within a short space of time. This compels 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 discreet products. The fact that we have those two systems, those two constructs in the same country, means that we can respond rapidly. In spite of the slowdown in growth last year, we were able to grow in 2012.
Turning to your question on M&A. 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. In fact, we reopened our M&A activity as of 2011. After 10 years of growth in our portfolio, you must realize that between 2002 and 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. The 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 first 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. In the years 2007, 2008, young brands such as Alexander McQueen or Stella McCartney, important for those to benefit for the experience of a brand such as Gucci. 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 as part and parcel of this mix of varying levels of maturity within our portfolio. We know that it's very beneficial toward 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, so in with the brands, Girard-Perregaux and JeanRichard, and it was of course, the acquisition of the brand, Qeelin, in China. Which in this product category, which also plans to expand, as a matter of priority on the Chinese market. For us, it's a new experience in our portfolio of luxury brands, having acquired Qeelin.
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 to 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-François Palus be really taking charge of that business?
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, 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 as 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, and to be ourselves. We're going to do things like Puma does things. That's the first point. Secondly, as to clarifying things between sport and lifestyle. We weren't going to be adding to one or subtracting from the other. We're going to do both. More clearly.
It'll be clearer for consumers, for retailers, and clearer for employees as well. 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. Leo Klim 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 1st at Puma? What would the timeline be for this appointment? Second question, how patient will you be with that company, considering its negative performance in 2012? There were some major sporting events, nonetheless, in 2012. Then there's another point for 2014, we don't get the impression that things are moving forward very well. What's your timeframe? What are your expectations for recovery? Are you expecting a turnaround in 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, onto your second question. It's not anything about being patient. It's about having the will to do something, we have clear will and determination
We're steadfast, this is clear to Puma, all this is very much moving on the right track. As to the actual timelines, 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 what's really much more powerful. Top quality, a few technical innovations, top-ranking innovations in the whole line. 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 is why things, I am sure, have taken too long. I agree with you, nonetheless, there is no doubt about it, we are proud to see how things are turning out. We gave our word, and we kept our word, and that is how we operate in this group. I agree with Jean-François. Our will is crystal clear, and we are more than steadfast, absolutely determined to move quickly to tap into that brand's global potential.
Bonjour.
Good morning. Astrid Wendlandt, Reuters. Three brief questions. First, could you tell us how your sales held up in January and February? Any change in trend compared to Q4? I am thinking of luxury here, luxury sales. Second, a lot of fashion and luxury brands have talked about a rebound in North America, particularly the U.S. Do you intend to open additional stores in the U.S. this year? How many did you open last year? Could you comment a little bit on the recovery in North America? Third 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, François-Henri alluded to this figure already. Trends are entirely comparable with last year trends. A slight difference, though.
The Chinese New Year is a month later. It was January last year, it is in February this year, that does have an impact this week. Your question on the U.S. Our brand situation in the U.S., in the luxury division, is quite different. We have a brand that is Gucci, that is well-established, has been for a long time, and another brand a little bit less well-established, and the proportion of sales is lower. That is Bottega Veneta. Bottega has very high potential for development of its sales in the U.S. Gucci has potential for development. Let me repeat, though, and I would like to slightly correct a point. To measure potential for a brand by its number of stores, I am not sure that is the right way of measuring. Surface areas of each store vary quite a bit.
Even here, average surface area for Gucci or Bottega can be two times different. Comparing store numbers is not always relevant because store sizes can vary so much, and it is even less of a good comparison if you compare store numbers with other brands, especially when their own business model may be very different and their overall concept of luxury may be different from ours. Potential in the U.S., and also globally, is there. If you look at Gucci and square meters, we have got high potential per square meter. We can say that store size is even more important than store number, and our stores tend to be much bigger than the competitors' stores. Of course, we create a whole luxury experience in our stores. It is a spectacular architectural experience many times. Often, it is a very tailored, consumer-focused luxury experience.
These are differences that are beginning to appear between the various brands. To repeat, there's still substantial potential for development regardless, above and beyond that figure of store numbers, including in the U.S. Did I answer that? Yes. Outlook. 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. We certainly still have projects. Now, the thing about the U.S., they've got a huge domestic market, as you know very well. They've also got a very big tourist industry. Proportionally, it's not as big as in Western Europe. We're betting on this.
We think the U.S. 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 we'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 Florida. For the time being, there are not a whole lot of Chinese tourists because it's sometimes difficult to get visas to go to the U.S. The U.S. administration, I believe, is very aware of this and is working to improve things to make it easier for tourists to travel internationally to the U.S. And this will have an impact on luxury, and we're going to see this will have a major impact on our brands.
Hello, I'm from Mergermarket. Just two quick ones on old projects. 2013, is that going to see a possible sale of Sergio Rossi in 2013?
Why do you say that's an old project? In spite, in July, you denied a possible acquisition of Hugo Boss. Is that going to be on the cards again?
On the second part, never been planned. No, nothing planned there. Sergio Rossi, I didn't quite understand your question. I'm sorry. Oh, it's an open to sell. No. Today, Sergio Rossi is a brand that, as you may know, experienced difficulties more in terms of its industrial organization, because Sergio Rossi is integrated in manufacturing. That's resolved. The brand grew substantially last year. It'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 the portfolio. There's no such plan under consideration.
Hello, I'm from FashionMag. Two questions. First, you mentioned young designers that PPR has assisted, notably British. Are you looking at a potential buyback of young brands in China and Greater China? Second question, are there still acquisition projects, plans in lifestyle and sport division, notably outdoor?
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. 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. 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. We believe it's more relevant when it comes to growing luxury brands in countries as important as China. 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 in sport and lifestyle. 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. 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 two sectors, two segments that we view as very promising long term, action sport and outdoor. Jean-François 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? Ladies? For an Italian, go on.
Good morning. It's Louise Singlehurst here from Morgan Stanley. I shall ask the question in English to save everyone quite hearing my French accent. two questions for me, please. Firstly, on the Gucci underlying number of 8% growth in the fourth 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 fourth quarter? 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? Secondly, Jean-François, 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, 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. Considering that, I think that you may not mention 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, to explain and to demonstrate how the brand has been upgraded and to communicate around the new collections, the less logo-oriented strategy. 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 in China. We will also increase the CapEx budget for next year. 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 that what's important is not the number of stores, but the size of the stores, the number of square meters. Considering Gucci is probably the brand in the world where we have the most 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. If we want to express the brand completely as it is today in stores, we really have a big work to do to be done in enlarging our stores. Same thing for Bottega, for instance. 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.
Of course, you can figure out that these programs are not finished within one year, but they take some more time. 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. This is something that takes more than one year, but it's true that the intensity was specifically high in 2012.
Okay. [Foreign language]
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 18th for the group shareholders meeting. Thank you.