Thank you for standing by, and welcome to Kering's 20 21 First Quarter Revenue Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by question and answer session. I must advise you the call is recorded today on Tuesday, 19th October, 2021. I would now like to hand over to your speaker today, Mr.
Jean Marc De Plaes, Chief Financial Officer. Please go ahead.
Good evening to all of you, and welcome to Caring's Q3 2021 revenue call. Starting on Slide 4. Group revenue reached €12,200,000,000 in the 1st 9 months of the year, The strong year on year increase of 34.5% in reported term and 36.6% comparable. Revenue is up 9% comparable over the 1st 9 months of 2019, A slight acceleration versus H1 when the 2 year growth rate was 8%. In the 1st 9 months, revenue from our luxury houses grew 36% comparable or 8% on a 2 year span.
Focusing on Q3. Reported group revenue was up 12.6% year on year, reaching €4,200,000,000 Comparable revenue growth was nearly equivalent, implying a modest FX tailwind. On a 2 year basis, group revenue was up 10% comparable, consistent growth rate compared to Q2 and 2 points ahead of the H1 growth rate. Revenue from our luxury houses stood at €4,000,000,000 in the quarter. On Slide 5, some insights on growth by channel.
Retail, which includes e commerce, accounted for 77% of revenue and grew 12% year on year, 11% on a 2 year basis. Worldwide, an average of 4% of our network was closed in the quarter, the bulk Being in Asia Pacific where 8% of the stores were shut down. Hotel was up 10% in the quarter And royalties and order grew 37% comparable. Now Moving to the retail performance of our Luxury Houses by region on Slide 6. Western Europe was up 15% in Q3 and down 32% on a 2 year stack, Still impacted by the lack of tourism when compared to Q2 'nineteen.
However, Trends improved sequentially compared to Q2, supported by local demand and some inbound tourism slowly resuming So far, mostly intra European, Middle Easterner and Americans. North America grew 31%. Compared to Q3 'nineteen, Growth was 83%, in line with Q2. The store network experienced high conversion rates and increases in average ticket. All head groups contributed To the region's sales growth.
Japan was up 2% year on year in Q3, Improving on a 2 year stack though still 21% below the 2019 level. Our brands are reengaging with locals, but it does not yet fully mitigate the absence of service. After a very strong H1, Asia Pacific was up 1% in Q3 and 19% compared to the same period in 2019. We enjoyed a good July performance, But softer trends emerged with the resurgence of COVID cases, modernity restrictions in Mainland China and new lockdown in other countries. Rest of the world was up 24% year on year and 44% when compared to Q3 'nineteen, improving sequentially in both the Middle East and Latin America.
Turning to Slide 7. You see that our online sales are progressing well. ECommerce revenue was up 24% in Q3 and high comps. Indeed, compared to Q3 'nineteen, we grew online revenue 2.5 times. In terms of our mine penetration, our worldwide average is 13% of retail sales.
In certain regions, namely North America and Western Europe, penetration is already around 20%. In Asia Pacific, there is still plenty of room for growth. Our brand.com internalization is complete since Q2. This is yielding multiple benefits with The rollout of new omnichannel capabilities and services reduced lead time leveraging our new logistics infrastructure, Hennan's customer experience and KPI. We are also making good progress on the conversion of online partnerships.
We are satisfied with the development of our existing econ stations. In addition to generating incremental business, the significantly improved client service. I'll now provide comments on our individual homes, Starting with Gucci on Slide 8. Q3 revenue rose 4% comparable With retail up 7%. Wholesale declined 19%.
On a 2 year tax, Retail is up 2% and wholesale down 44% as we steadily pursue the downsizing of this channel. In retail, Gucci had a contrasted quarter. In Western Europe and Japan, trends improved sequentially. In North America, once again, Traction with local clients resulted in a very high growth rate. Asia Pacific, where Gucci enjoyed Significant positions was more challenging.
New COVID restrictions impacted store traffic And led to the cancellation of retail events and activations planned for the final chapter of the Ubertcher collection. The pace of novelty injections tied to this collection was also new minor this quarter. The key introduction was that of the Dynabag in early July, which delivered great results, Showing the appeal of the brand across generations and allowing it to tap into the high end segment with new and existing clients. If we look at overall growth drivers, Gucci is on the right track. The shortfall in traffic temporarily civilized volumes, but the combination of price and mix is having a very positive effect on AUR.
The structure of the Arya collection should further confirm this. In line with British calendar, Arya started hitting the shelves in late September with scores of launches and initiatives planned for Q4. On Slide 9, Saint Laurent's revenue growth versus 2019 accelerated this quarter. Comparable sales were up 28% year on year or 32% over 2 years, highlighting the Hollys' continuing strong momentum. Retail was up 31% or 37% compared to 2019.
Growth was particularly impressive in North America and Western Europe, While its resilience in Asia Pacific underscored growing brand awareness and the fruits From Saint Laurent's network building in a region where it still enjoys great potential. The houses performance We've calculated our well balanced across product categories, more up double digits compared to 2019 3rd quarter. Successful ready to wear attracts growing numbers of local clients to install, Carryover continue to shine and Nynas is also doing very well. Wholesale was up 22% primarily reflecting delivery of the Wieland Fall 2021 collection. In line with our good strategy, Saint Laurent is working on making the channel even more exclusive.
This was an extremely positive quarter for Saint Laurent with resonance With local, effective communications and distinctive spending translate into solid numbers. Turning to Slide 10. Bottega Veneta, again, demonstrated that the sound foundations The deal in recent years are delivering healthy balanced growth. Keep in mind as you look at these numbers that Bottega already had an outstanding performance in Q3 last year. This quarter, revenue rose 9% year on year and was up 31% from 2019.
Retail was up 6% versus 2020 or 18% on a 2 year basis, All from a network that was essentially unchanged. All product categories Contributed to 2 year growth. Bottega Veneta continues to do a great job, Attracting new clients with sales to younger generations growing faster than the average. At the same time, it is strengthening its appeal with existing customers, resulting in a very well balanced Client mix. At plus 18%, the increase in wholesale showed a sequential inflection.
Bottega Veneta stores have streamlined and have failed It's 3rd party distribution, which remains an important channel for its shoes and ready to wear. Bottega Veneta is demonstrating quarter after quarter the subject of our strategy as it expands The housing territory tightens its exclusivity and turns into a truly global luxury brand. The other housing segment on Slide 11 achieved once again a next 7 quarter. Total revenue increased 26% with both hard and soft luxury up Robert double digits against the 2020 and 2019 quarters. In Couture and Leather Goods, Alexander McQueen as well as Balenciaga made further progress in strengthening their brand architecture, expanding their reach into new creative territories.
Balenciaga continued to build its presence in the U. S. Where it posted a sharp revenue increase against HICOM and performed very well in China. Benefiting from the houses and fazors On Couture and its well rounded offering, all product categories were up with notable performances in ready to wear and leather boots. Alexander McQueen experienced solid sales growth in North America And Asia Pacific.
Retail sales were up double digits in all product categories on a 2 year basis with a notable showing in ready to wear. On the back of their decline in the fashion shows presented in the past weeks, Baron Tegan and Alexandre McQueen should extend our successful run. As for Brigun, we secured Q3. We have returned to the 2019 level on a smaller network supported by the performances as some of its flagship. In Jewelry and Watches, our houses posted notable sequential acceleration On a 2 year basis, the jewelry brand were all up double digits or more on both onetwo year basis.
Boucher sales jumped in Asia Pacific, notably Korea and Taiwan in addition to Mainland China combined with robust retail performances in Japan and Europe. Oberico's permanent jet skitters drove its sales growth, while its high jewelry offering is hastening visibility. The Kirin sales were again very dynamic at more than twice their Q3 2019 level. All Lattice Brands confirmed their return to positive sales growth in the quarter. 2 words on top right and other on Slide 12.
Revenue was up 24% With Care Eyewear consolidated sales up 25% up €138,000,000 though Travel Retail remains impacted. Growth was positive across the board. We closed on the acquisition of Lindbergh On September of the first and started consolidating the brand in the current quarter. To conclude, On Slide 13. Kering delivered a very solid Q3 at the group level with revenue up 10% from Q3 2019 ahead of the comparable growth rate in the 1st 6 months.
We are pleased with the performances of Saint Laurent, boutique Havana and the other houses, while Gucci transitions to a new collection and prepared for a 4th quarter at its reach in events and new developments. We are implementing our strategy in a steadfast manner, focusing on short term priorities as well as on long term priorities. 1st and foremost is the upscaling of our brand positioning and of their distribution. They are working on their high end offering to round out their presence across all relevant segments. In line with our roadmap, we are also reducing the overall contribution from hotel, keeping only top quality partner And this move will continue.
We are capping down the contribution of 3rd party online retailer through We'll switch to e transaction and focus on our own brand.com development. Our businesses rely more and more on their knowledge of local conditions and familiarity with local clients. This is a long term trend, not just a reaction to the events of This requires increasingly design logistics and sophisticated systems, Literally, this decides retail activities to improve efficiency and obtain retail expense. It requires the right people, and we are actively hiring, training And retaining our teams. So our infrastructure is getting more effective every day.
Sustainability is central to our strategy, and we have achieved New ESG milestones in recent months, including our decision to go entirely for free. And the Watch and Jewelry Initiative 2030, we launched with Cartier and the responsible jewelry council a few days ago. Please open to all the players who share our commitment to a sustainable structure of the industry. I'd like to end by stating that we are continuing to invest at all levels across our organization To secure our long term trajectory, emphasizing profitable growth and significant cash flow generation. As a group, We are confident that all the building blocks are in place to successfully pursue this journey.
Sarah and I are now ready to take your questions. Operator?
Thank you, sir.
Your first question today comes from the line of Ann Duignes of Exane BNP Paribas.
Yes. Good evening. It's Anton at Exane BNP Paribas. Three questions, if I may. First of all, with regards to Gucci, I think you made some relatively Positive comments about RBR on the all the events that are expected to Happened in Q3.
So have you seen that towards the end of September and already early For an acceleration and maybe just on the product concept, but it's sort of like that maybe you may have noted a sort of way from CICQ And clients knowing that there would be new products ahead, we'll be postponing some purchases. So any Sort of information on this would be great. Regarding Still Gucci and the fact that probably Q3 was Below what you had expected end of July because you couldn't really expect the restriction on So what are the implications on the margins, the outlook for technology in the second half from these loss sales, which Are we going to be difficult to recontin spite of a full year strong Q4? And finally, regarding Bottega, Is it fair to say that after the first half of the recovery, there is a bit of a A plateau happening, especially in Asia was negative. And maybe there is now a different A perception or, I would say, stage of the recovery, maybe much more obvious in the U.
S. And Rather than in Asia,
if that's Okay. Good evening and thank you, Antoine, for your 3 questions. You may have 3 questions indeed. First of all, I would start With Gucci and how the ARIA collection is welcome, and it's true that, as we mentioned during the As I mentioned during my speech, there was a transition between 2 collections. And you know that the previous collection had less SKU compared to ARIA, it was a less comprehensive offer in terms of products.
And it's true that there was a lot of expectations around the ARIA collection among our customers. And as you may know, the collection has been introduced gradually since the end of September With some teasing during the summer in many regions with some presentation, the worldwide advertising campaign was launched the 10th September. And indeed, IR is achieving extremely positive first results in all the regions. We had already an indication with some tranchero that we We organized before the official launch. And as soon as the 2nd week October, if we look more specifically at the newness by season, we see really an acceleration.
And definitely
and what
is very encouraging is that it's across the different categories. So women ready to wear shoes, the new leather goods items introduced in the collection among the luggage And the GGG ritual as well as the impact with some seasonal variations of the carryover that you may have seen during the show. So clearly, the impact of ARIA, because it's a broader collection, We expect some clearly increased both in terms of traffic and therefore in terms of volumes. It's a good conversion. On top of that, you know that there is a mix In the correction, that should push the average price, which by the way is increasing since the beginning of the year, and it's The work done by the merchandising team at Gucci, which is to work on the collections to gradually increase the average selling price.
But clearly, there will be a boost. Thanks to the ARIA collection. And just to conclude, you will have Further drops along the season until the next collection, so let's say February 2022. With a lot of animation in the store, on top of that, as you may know, we will have more animations, more activations in the store, A lot of activities to support the new collection. As a result, and it's a good transition in a way About the profitability.
First of all, I would like to stress that as you can see, the trajectory of the other brands It's very impressive. And many of these brands are, as you know, are recording already a good, Very good level of profitability, especially if I think about that on Centaur, Laurent. And so globally, we remain quite confident The trajectory of the Group as a whole in terms of profitability. That being said, It's true that compared to the last call we had, we may consider that we need to continue to invest for to invest in Dicci to support the launch of the collection. So our views have changed In the sense that we need to reinvest in all our brands to support their future growth, to create long term value and broad equity.
And we are actually convinced that it makes sense to invest even more short term to accelerate brand momentum when it's needed. So we will definitely always favor long term value over short term profitability. So the fact that Q3 may have been slightly softer for Gucci does not lead us to decide Some cuts in terms of OpEx for the last quarter. On the contrary, we think we need to push. So you may remind what I said during the H1 call, That in a more normative environment, the profitability of our brands should sequentially increase in H2 compared to H1, the magnitude Being in the range of 1.5 to 2.5 points.
4th floor, considering the Q3 at Gucci And the investments we had in the price call at the last quarter, we should be below that range for Gucci. But as I said before, what is interesting to me is more the trajectory of all the brands, both in terms of revenues and in terms of profitability. Regarding Bottega Veneta, I'm not really, I don't see really what you mean by this plateau in Asia, I must say, because for sure, In it indicates, in fact, if we look at the different regions or sub countries in Asia, Because at the end of the day, like all the other brands, there was a deceleration in attack in Q3 on a 2 year stack basis due to the store closures, Principally, as you know, in August. And clearly, APAC We're still up strongly in Q3 on a 2 year basis and driven by Korea for sure. China was a little bit more contracted, but you may remember that the network in China for BV It's not optimal in the sense that we have not a huge proportion of the store footprint where we can display the 3 categories.
And also in Q3 'twenty, the performance of vertical and so was particularly high In China, we have something above 100% of growth. So all in all, we believe that today, if we look at the performance over 2 years, The performance of Dostigevanis is quite well balanced across the different regions, very balanced across the different categories And now also very balanced, if we look at the gender between men and women collections. Just
one follow-up on is it possible to quantify the acceleration in
Antoine, you know asked me what is the situation of the industry today with a lot of TBT, you may remember that in August, we had a more challenging situation in Asia Pacific Some improvement starting from September in the U. S. Also, you have some volatility from one city to another, From one week to another, so I will not make any predictions based on what's happening currently with the reception of the ARIA collections. Let's say that, as I said, we are very pleased with the sellout we see today With the ARIA collection products, we are very pleased with the price architecture, and we are very pleased with the latest trend. But I will not make any sort of prediction for the last quarter.
We have dimension in a way of investments to support a very robust growth and an acceleration in Q4, but I would not make further prediction. Thank you very much. Thank you, everyone.
Thank you. Your next question comes from the line of Susana Bruce from BNP Paribas.
Good evening. Thank you for taking my questions. I have 3, please. So the first question will be on Gucci margin. I mean, you mentioned investments, which I need to assist you to help sort of launch the new collections.
Would you be able to maybe give us a little bit more color on sort of the margin feather out? So I know you don't type, but just to get an idea of Investments last into 'twenty two and maybe how quickly at this stage was kind of the visibility you have with the plans to go back to the I begin with the 41% EBIT margin. That's my first question. And the second one is also on Gucci. Sorry, I promised the last one was Gucci.
So can you comment on Gucci's performance by nationality for Q1 versus Q2? Because it looks like Europe improved a bit. And although I think it makes a little bit less than what we've seen for some of your peers in Europe. So there was a little bit of a return of tourism, but at the same time, maybe you're more Post 2 broke Q3, I don't know. So any color on kind of performance in nationality would be very helpful just to get an idea of where you've And the last question is more broad on e commerce.
So would you be able Maybe, Shalvulgar, if you're learning from the internalization of e commerce, how you had to with what you've kind of achieved so far, Would you be potentially interested in joining forces with some other e commerce giants to support the development of only sort of dealer platforms? But we know what I'm trying to do, but I'm just trying to give it a go. Thank you.
Thank you, Susana. And I will try To assume what you have in mind for the first question, we'll work hard to find what you have in mind. Starting with your first question. Once again, I love this focus on Gucci, of course, and I understand it very clearly. But as I said before, During years, we have mentioned that we were managing a portfolio of brands, and it was particularly true looking at the trajectory of It's now also true when it comes to the trajectory of the profitability, considering the level of profitability delivered by many of our brands.
However, here again, when it comes to Gucci, there is not an obsession to get back to the 41%. We know that the brand has the potential Deliver again this profitability considering what we are doing in terms of elevation of the distribution as regards The elevation in terms of average price plus the focus we are putting on the high end segment And with very positive results during the quarter with an increase of the contribution of VVIC and VIC and also ether and multi timers, What we call merchant timers, so people who are buying several charms in a year. And therefore, The 21% does remain an ambition, and we can exceed the profitability in the long term. But short term, the focus It's about investing in the brand. So I will not give you any guidance.
I already indicate you that we would be below The improvement of EBIT margin we have mentioned during the summer call, so below 150 bps. So and it's already far below because we are working on investment in Gucci, but we are We're working also to have a sequential improvement of the profitability from H1 to H2. That does remain an ambition in this question of discipline. But without impairing our capacity to invest in the brand. And therefore, in 2022, we will continue on the same trajectory, but we won't Deliver the 41% for next year.
That's not the objective, and it will not be sound considering what we are doing for our at Gucci. So as we go to performance by nationality, obviously, if we focus on the quarter, It's Global is very positive across the board. Of course, you can imagine because of some Restrictions still in China and still the lack of tourism, we are still slightly negative compared to 2019 and Flat compared to last year 2020. But now if we look at all the other nationalities, we have posted very solid progress In almost all key nationalities, we are double digit up with Western European clients. Of course, considering the share of tourism in 2019, it's not so obvious if you look at the performance of Western Europe Because as a reminder, we had for Gucci something around 70% of tourists in 2019.
But we have a double digit increase with local clients in Europe in almost all key countries of Europe. We are, of course, as you can imagine, very positive with the American cluster. With the Korean cluster, which is a very important company, continue to improve and it's almost double digit increase with The Korean cluster compared to 'nineteen, a year where the focus was more about tourism in Korea, Which is according to me a great achievement for the brand. So in fact, if you make your math and you look at the performance of Gucci for the quarter, The main difference comes from Asia Pacific plus on the Chinese cluster, something which is flattish compared 2020 and still negative compared to 2019. However, since the beginning of the year, on the Chinese cluster, We are remaining quite flattish compared to 2019 over 9 months.
And clearly, the appetite of Chinese customers for newness, Especially for brand like Gucci, which has original fashion positioning. And clearly, there was a wait and see behavior before the ARIA collection. E Commerce, that's a very good topic, and I have a lot to say about this In the sense that, yes, definitely, the focus for us is about the ground.com business. It does remain the priority of the group. You know that also we are working on converting some partnerships into e concessions, and we have made solid progress this year again.
And by the end of this year, We would have achieved all the discussions as regards Gucci Business, not all the other brands. Some Discussions will be finalized rather next year. But for at the end of 'twenty one, we will have a shift To the concession model for almost all the key accounts where we had started some with Com, we had started some discussions. So today, the priority is given first to the brand.com business and 2, to finalize the conversion Two Econ stations. As regard to Econ stations, I must say that we are very happy, as I mentioned in my speech, About the quality of the experience for our customers, the delivery time, the display of products, the pricing policy.
So and by the way, for Gucci, the e concession contribution to online revenue.
Your next question comes from the line of
When we look at Gucci and Thank you. Gucci has produced an incredible revival in the most recent 5 years. The impression is that in the most recent one and a half years, It was punching below its weight. And given that this seems to be a traffic issue, Is traffic low because consumers know what to find at Gucci? And would it be important For you in revising and pushing Gucci to get new ideas in the brand, the choice of this Aria, congratulations that you have and potentially building on that, possibly strengthening Alessandro Michele's team This is
the most of the momentum
that you will achieve in the Q4. Could you stick to the So pretty much on a Creative Director model does work well for you with a number of situations. My second question is on Balenciaga. I think that or I assume Balenciaga is producing a lot of the other houses, organic growth, probably together with Alexander McQueen. Is it fair to say that it's now in size of the sugar vein in terms of size or maybe above it already?
The Simpson Initiatives since Progenius, and I wonder if you have any feedback on brand momentum, More than what you already disclosed. And thirdly, our factory plan. There were Congratulations in media, I think, that what is allowed to access is the perimeter of the company. But I wonder, In jewelry as well, how satisfied are you with the progress of Boucheron and Sumalatto
Thank you, Luca, Thank you for your first question because it's not an easy one, but it's good to start to remind what has been the trajectory indeed of Ricci. If we look at the last 5, 6 years, the average growth of Gucci is still above the market. However, you know that there was a need anywhere among the first to highlight this A few years ago, to reposition Gucci at the core at the center of the fashion industry. And to do so, Considering the DNA of Gucci, we thought that creativity was absolutely moving and we put a big emphasis on creativity. There was a time when there was clearly a need to We have a different 3 cities to pursue the trajectory of Gucci.
It was about being more exclusive in terms of distribution. And also, it's important to remind that in the performance of Gucci, you have something like minus 40% minus 45% on the wholesale revenue part, Just so significant. We have not extended the number of stores. So a lot of initiatives To elevate the brand, while keeping the creativity at the core, which is absolutely needed. You know that we are working also on the more timeless Transitioning of the brand and the centennial is a good occasion to remind you and to work on that Very important component of the brand.
And ARIA is typically with an extension in terms of Number of SKUs but also in terms of type of products, the way it should really engage with the broad base of consumers. So what you have described In a way, as an action plan is exactly the one which is implemented at Gucci With a reinforcement of all the structures in the different layers of the organization, Including in the studio to support Alessandro. And I think typically that in the past few years, and it's Something maybe that is not very visible from your standpoint, but there was a need to reinforce globally The structure because Gucci grew very rapidly. And this is actually what we have done. And when I was mentioning that we were hiring, it was on purpose.
Definitely, I mean, if we are not communicating every day about this, there is a huge reinforcement Among the Gucci teams with very high profile, more skilled in all the different areas, merchandising, Communication, marketing, CRM and, of course, creation. So I think there is an evolution In the way we are organizing our brand and what is happening at Gucci will happen also at the point in all the other brands The more mature they will become. So and by the way, I think that perfectly well the personality of Alessandro. He never behaved as a prima donna and he's someone really working very well with a lot of people around him, Supporting him in different in the different domains of the creation. We don't provide figures about Banque Terre, but We have already mentioned that it's a brand which has exceeded the €1,000,000,000 mark some time ago.
So you can imagine that in terms of It's not something which is very far and very different in terms of revenues as Vottega Veneta, but there's a slightly different, Let's say, a breakdown of the sales with the higher contribution of wholesale and higher contribution of e commerce, also considering the transitioning of the brand And it's any question among the young customers. I think that here again, Like Gucci, there is a work which is done to have the right balance between creativity, innovation, Fashion and also Timeless. And the haute couture collection had really an impact In terms of perception of the brand, and the brand momentum is absolutely very excellent With probably a shift to certain categories with lower of sneakers, but and casual wear, but also more contribution of more formal shoes and ready to wear. Good results also in terms of leather goods. So that's exactly the evolution we were expecting for the brand with Gradual rebalancing to certain categories and certain clientele.
Of course, it does open some new opportunities in terms of store openings. It's like Cimarron, if you see a brand which has a huge potential in terms of soft offering. Finally, as regards watch and jewelry, of course, you may imagine that I won't comment on the rumors, But I can answer you about the progress made in our jewelry houses. We have been, at Cairn, very impressed by the work done by our team At Boucheron, Killeen and Thomeo Latour, Boucheron is doing extremely well now in all the regions with More penetration in EMEA. That was very strong in Japan.
But now we have opened some new stores Mainland China, in Hong Kong and in some other countries in the region with great success, I must say. And we see that for brand like Buffon with such a legitimacy in high jewelry, when you are investing in communication, you have Right products. There is an immediate response of the market. So very pleased with the development of Bouffoulou. Qilin continues to perform very well in China.
As you can imagine, this is a true Chinese brand in a way, And we are very pleased with the development we have, both in terms of, let's say, And also reception of the products and the sales crew we have in all the different Categories and we start to have also more high jewelry, more high jewelry offer also at Kinlin with also very good response of the market. And finally, Portmeletaud is doing very well with so far limited investors because you may remember that we have decided to choose first But here again, very good results, both in the carryover lines, we see the new collection unit differently, We're also now more and more traction in the more high end segment in high jewelry. So globally, We are very, very pleased with the success of the trajectory of the Jewellery brand, and there is no intention at all Thank you, Luca.
Thank you. Your next question comes from the line of Louise Singlehurst from Goldman
Good evening, Jean Marc. Thanks for taking
my questions. I have just a follow-up. I'm afraid you're trying to ask the same question but in different ways. But Could you just
go back to Gucci and
the performance during Q3? We know widely across the peer group that the risk was softer, particularly from China with the COVID restriction. Can you give us any comments in terms of what you saw during September and the end of the quarter? And I think as we reflect back and what we've heard from the peer group so far, the consumer environment remains pretty competitive for luxury consumption and that's very broad based and across price points. What's in your view, apart from the timing of ARIA, what else is that you think you're missing?
Any executional kind of misses or delays What's something that happened during that quarter to change in the course or the past of Q2 2020?
It's the same question, but with a different angle, definitely. But I will try to answer anyway. Yes, it's true that August was softer. I think if we look at the portfolio of brands, The trend started to improve in September, but we feel a certain degree of volatility. So we had some regions or some cities where we had less traffic And in some other, the fact is that when the traffic started to resume in China, We had, as I mentioned before, maybe less products available in the store Waiting for the introduction of ARIA.
And clearly, there was probably lack of newness at that time in September. I cannot say that there was an issue with the Chinese market in August, by the way, because if I look at the trend in online month by month, August was very strong in August for the online business of our brand, showing in a way that it was really due to the COVID restrictions There was a decline of traffic in the stores in the offline channel. So September improved, but clearly Gucci was impacted partly because of the lack of business. And as soon as we have the introduction of new products, we had a very good response of the market. For sure, we continue to, let's say, to be impacted considering the size of this year by what happened in 2020 with the COVID issue we had in Italy particularly.
We had mentioned in 2020 that we had some, let's say, Question of phasing in terms of product development. So clearly, September, specifically, May have been a little bit more impacted by that. But at the end of the day, what we see here again is that ARIA is receiving a very good response For the market, whatever the region and China, we see a rebound that I will not qualify. When it comes to execution, I would not dare to assess if there was an issue of execution. I don't think it's the case at all Because when I look at the lead time in terms of delivery, shipping of the products to China, there is no specific issue on the logistics side.
In terms of quality of the retail network, I think that 10 years ago, there were some debates about the quality of the stores, but now I think We have a very sound network in China, so nothing to say about execution.
Just one follow-up, if I may, on the timing for the Launch is coming up for the end of the year. Can you just remind us if there's any change or as planned for the Gucci by Balenciaga? I think that was for November. Just to hope you could give some clarity around that at year end.
It's Claire Noel. As I
Thank you.
Your next question today comes from the line of Anne Laure Gisimos from HSBC.
Yes. Hi, good evening. Ann Marie Lipinski from HSBC. Actually, I have 2 questions. The first one is if you can come back about the calendar of market share event that is planned Q4 for Gucci and especially 2 initiatives around the BRL100 for Gucci.
And what do you plan to do around the launch of the movie house So Gucci, in November, end of November. And actually, I asked 3 questions. My second question is about What do you plan in terms of full sales exposure for these 2 brands To have a more meaningful impact on Saint Laurent and Bottega Veneta. And the last question about M and A. Is there any
Yes. Hello, Elhard. This is Phil. So I think going into Q4, we already mentioned the Centennial celebration. You already have That is on the shelf for this one in October.
Then you will have the hacking project with Valentine, I will mention, for November. For December, it has not been disclosed yet. And then you will have a succession of additional activation, of course, to cover for the gifts And Susan and then to cover for early Q1 next year. So it's a pretty full agenda, and this is About projecting production, taking also into account, there is a, I would say, a collection a main collection that is not about only substitute or drops of collaboration, where you will have, I would say, every month some launches, some introduction to cover for all the seasonal needs of the collection. So that's what I can say now in terms of even surround, you're going to have, of course, a big mix of client activation in stores.
That's going to be a big one. You're going to have what we call prepayment. You're going to have our offers, as usual, some pop ups, also activities. And then you will have, of course, I would say, bigger picture mortgage and events when it comes to the The new fashion show that will take its place early November in the U. S.
And then you know also that Tricci has not commissioned the movie, but the movie is going to provide for
Hotel, as we have mentioned, there is a good strategy, which has been decided and approved by all the CEOs at the end of 'nineteen, With a gradual shift to occasions or a reduction of the number of accounts we are working with Across the board, of course, some initiatives we have already at Saint Laurent or Balenciaga or Balancing Gaspar, Bottega Veneta are not so obvious because of the success of the collections and also because we as I mentioned during my speech, It's very important as long as we have not the full network at the Bottega Veneta to support the development Of the release wear and shoes collections to rely on some very competitive accounts in wholesale. So in wholesale today, part of the equation of Bottega Veneta is really driven by these 2 categories, not only but also the it's quite new For Bottega Veneta to have such a penetration in these categories. But starting from Q4, we start to have a moderation of the growth At both Saint Laurent and Bottega Veneta, of course, it's too early to predict what will happen in 2022, but Negative or being flattish if we continue to have to decide to work with some accounts.
But Globally, the objective is to reach a number of accounts, which is very comparable to the one we have at Gucci And it's crucial. M and A, I will be very fast, quick on that because I think, if I remember well, Mr. Fardoust had answered to that question during H1 call. I think I could repeat exactly the same. Our views have not changed.
But when it comes to M and A, at least we have closed the Lindbergh deal, which is a very smart deal according to us. And we are very pleased
Thank you.
The next question comes from the line of Ashley Wallace from Bank of America.
I have 3 as well. The first question you don't have to answer, sorry, so to keep going on. So in Q3, the quarter was obviously quite attractive due to COVID-nineteen I now
have renewed the Q4 for
the quarter on the back half has largely normalized. In addition, you will have Barrio in stores, the movie and Henry and Octol on its own. Is there any reason that Q4 for TV that will go back to 11% to use that closing line in the second 2 quarter? And I understand you don't want to give guidance. This is more of a qualitative question around the EBITDA for holding existing Q4 that were not there in the second quarter.
My second question is just on the supply chain, how many industries are facing volatile supply chain pressure. While we believe that actually largely news news, I was just wondering to hear how you took that from the device and the cost pressure and leasing to call out And then my question is just on Silavon. Obviously, very solid performance Accelerating in the U. S. And the uncertainty.
Is that improvement all like for like or is there anything else You see the acceleration in EBITDA, please. And if you don't mind, just a clarification On the last question that you answered for Susanna, I think her line dropped out when you were seeing the percentage of Gucci
Ayesha, this is Claire. I'm going to take the first one because, I mean, we're not going To give any quantification, I think Jean Marc mentioned already, we can just reiterate that we are confident that Q4 at Gucci That the bond can really accelerate compared to Q3. That was a transition for the quarter and not will be a good proxy to assess around trajectory. Now we hope, as we told you, I guess, that Q4 would be more normalized in terms of business condition. But if things are clearly more normalized, we are confident in the ability of of Gucci to clearly reaccelerate on the 2 year base.
I think that's Thomas Buchanan for the first question.
On the Saturation side, let's look first at the manufacturing process. In fact, we are not facing particular issues or manufacturing activities that are either internalized All relying on long term partnerships with selected suppliers principally based in Italy. So no issue on this side, Evan, if You know that there is a competition to internalize some capacity. And in terms of raw materials, we have Secured the sourcing and we have now identified for any specific issue as regard The raw materials. When you look rather at the logistics side, there is Clearly, on the cost of transportation from inflation, some shipping costs which are increasing, but we have adapted the freight strategy to either offset What contains that inflation with more volumes concentrated on some freight operations, keeping in mind that at the end of the day, considering the level of margin, We can absorb this inflation on the transportation costs.
So not really an issue there. Thank you for asking the question of Saint Laurent because here again, we are very we have already highlighted that Saint Laurent had much room to grow further to a higher degree of penetration of certain markets. It is true that year after year, we are adding some units in the core footprint of Saint What is very strong with that brand is that even if you look at the like for like growth, it's very strong, Very strong in all regions if we compare to 'nineteen with, of course, the exception of Europe Because of the lack of tourism, which is not a surprise, as you may imagine. So globally speaking, The growth is very well balanced as it has always been the case at Saint Laurent between like for like growth And site extension. Just I'm not sure to understand your question about e completion, But yes, because at the end of my answer, unfortunately, was cut.
I don't know there was a sound issue at the time. But what I was saying is that as we have the easiness of Gucci, the wholesale Contribution of e commerce should reduce and be focused on a very limited number of partners as it would be the case for the offline distribution. And what I mentioned is that the repatriation of some businesses through e contractions at the end of the day, The vast majority of the online revenues of Gucci are the ones made To the brand.com business, so there is generally some, let's say, a lot of debates and discussions about the accomplishments For Gucci in the market, but at the end of the day, I insist on the fact that the priority is given to the brand.com business, which represents The large majority, the very large majority of the e commerce of which is the contribution of e transaction is none is material but is not significant in this call.
Your next question comes from the line of Thomas Chabot from Citi.
Jean Marc Hester, Kepler. It's getting late. I'll try to be brief. I have both three questions. 1 on Ecom Strategy, the second one on the shift, again, 3 on Russia.
On the Fashion Tech Investment Strategy, which Since you've identified, you've done this, Steve, you've invested in the quarter and rental business and more recently in the slide shopping app. When you did the spin off of 4 months 2018, you said carrying was not a good focus on personal luxury goods and that non luxury investments would be on At the Autonomous level, what is the criteria today given all that's happening in the e com world for carrying also for Mr. Fino who heads Optimistic side, what tech investment should be called optimists, like for instance, Farfetch and which ones make more sense to integrate We're clearly carrying that because of the shareholder value. Secondly, on the share buyback, you've pulled back capping nearly 500,000 shares If my calculation is correct, so that's nearly all of the first half of 0.5% of the capital. With March 2, obviously, and the pressure since mid August, are you tempted to launch quickly in the second tranche?
Can you do that? And confirming that's the best deal of cash in the absence of a margin M and A transaction. And finally, on Russia's and Stenjomar, you're not going to confirm a potential divestment over the Smart Energy Off Belt. So nevertheless, For that to happen in a sensible way for all parties involved, I guess you need to be, I think, close to cash flow positive. Can you tell me where you see the evolution of losses, the magnitude of also the capital needs of this unit so that you can comfortably
Yes. Regarding the investments we are making, I think there is a big We continue to consider that the investments we have made with And all the other names you have mentioned are managed by the innovation team at Kering. And the mission of this team led by Louis Golgi Boutin that you have met is really To accelerate our learnings about some new business And that's really the point we have here. It's not about the financial investments. Of course, we are very vigilant about the quality of the investment.
It's really to set some collaboration or to have a seat at the Board to make some tests with the partners. When it comes to the investments made at Arsenit level, there is no need necessarily To have some collaborations with the Kering brand, and it's a completely different approach. So the criteria is more about Can we develop some collaboration, make some sense with the target? And it has to do with Our business model to a certain extent, whether it's because secondhand, because it's subscription, it's about the news age and the new practices And the industry that we want to test, and we believe that sometimes to have a minority stake can help To accelerate our learning curve on this aspect. So Clearly, the criteria is about Jonathan with the brand of the group and what we did the intensity of the collaboration Because sometimes you may have some collaboration between companies in which Artemics have invested in our brands, but generally it's more something which is not pushed.
It's just because there is already sometimes an existing collaboration. So that's really the main difference. And of course, the way it is analyzed It's different. We have already a angle, which is brought by the innovation team. And we continue also to have really a venture capital approach.
We have invested in some venture textile funds, by the way, also to continue to track some good opportunities for the Group, Not as a majority shareholder, but rather as we could do in terms of collaboration and in new business The Sherpa, that you're right. We should finalize the first tranche in the coming days. It's too soon to react about what are our intentions for the next 1st of all, we'll highlight what has been the outcome of this first tranche, and we will welcome the allocation of the shares Between what will be allocated to cover, to hedge the free share plans and what We'll be the destination or the ones which will be canceled and we will keep it in process of course if we would resume another tranche This year or next year. When it comes to watches, I'm sorry to be politically correct, but let's 1st, celebrate what has been done by the brand, the watch is done during the quarter. There is a very there are a lot of encouraging signs, Both in terms of revenues, but not only in terms of revenues, it's also about the quality of the offers, the quality The distribution that has improved dramatically.
I think the team of working on Uniswada and Jean Clairaud is doing a great job. The visibility of the brand has increased massively. So we are very pleased with a lot of initiatives with the Van Des Globe, with Aston Martin. And clearly, the brand awareness is increasing. You know also that the Group is very Agile and very flexible and we generally try to measure and to follow all the different options We have in hand, you know, perfectly that this brand I'm very confident that these brands can improve that Trajectory, they are excellent brands with a very good reputation.
But globally on the market, carrying this credit score on the watch market, Which has an impact in terms of distribution because it's more challenging, of course. So we will take the right measures in due time. But for the moment, as you will have noticed, we have invested massively to support our brands with good results, I must say. So we keep all the
Thank you. And Jean Marc, when you said as much as return to growth in the quarter, do you mean To Euro or is it just year on year?
It's year on year.
Year on year. So it's still down significantly on a 2 year basis.
Yes. It was already listed in Q2 where we were back on growth With an acceleration in Q3, but we are not yet at the level of 'nineteen, of course.
Yes. Maybe if I just we already we still have a few questions lining up, and it's already a quarter by 7. So if I can ask
Your next Question comes from the line of Tahira Kotler from Societe Generale.
Well, I had a few questions on Gucci. Let me speak to 2. I was
wondering whether you raised Gucci prices as you grew often around new collections. And
Jean Marc, you
mentioned the mix effect So I was wondering whether you could measure for us in terms of price mix in Q4 for And maybe just one more thing. You commented earlier in September, 100 basis points, right, with the margin versus H1.
Yes. Hello, Thierry. I think the second answer has question, sorry, has been answered already. So we won't take this one. On the price impact, what I can say Is that yes?
There is a pure flash increase also coming with higher collection, which is low single digit, I would say, in average worldwide. So some SKUs have not been increased. Some SKUs have a higher increase in terms of percentage, but the comment I was, I'm giving you on the average. And then yes, we do expect positive pricemix in Q4 as it has been the case already since the beginning of the year.
So when you compare to 2,
high single digit is possible?
I'm not going to give any quantification.
Thank you. The next question comes from the line of Edward Aldrin from Morgan Stanley.
Yes. Hi, Jean Marc and Claire. So sorry, just one question in the interest of time. In terms of on Gucci, so Just to make it's a slightly different question. We understand that the interest is obviously the focus On U.
S. And I obviously given the DNA of the brand. But in recent quarters, you had launched focus Taking more and more time, let's present, continue to be taking more emphasis on some of your IT and clients. We're also launching more higher priced, which led to play in effect. So just like some questions related to that is to what extent you've been broadening your customer base, both into In terms of nationalities and with Europeans.
And also related to that, is there any way to kind of curious The beauty brand or because of the nature of the brand being a fashion forward brand, it was a
2 cycle and there's little bit
of proof at that. Thank you.
Yes. It's important to clarify when we mention Karya. It's not only about Nynaez. Clariant is an environment in which you have both Nunez and also seasonal variations Of carryovers, and you will see a lot of bags of the same as below line with New fabrics, new leather, new patterns. So it's always a collection, a combination of carryover and Pure newness.
And that's the reason why we continue to assert that you have something at least in the lever bag or in the lever goods segment, Something like twothree of the products, which are carryover. So it's not contradictory at all with what we have mentioned before. What we just mentioned is that there is a broader offer with ARIA, which is the first collection forward where you have such The coverage of all the different functionalities and all the different clusters of clients. And by the way, I've mentioned also the successful launch of Diana Vague, which shipped the share of starting of June end of June, the
beginning of July, beginning of July, if I remember well, starting with Japan,
with a very good reception in Well, starting with Japan, with a very good reception in the macro countries but also in some other markets, and the price cost is quite high. And I was mentioning before, if you listen to me that we had also increased of the VICI and VIC, which is a demonstration that we are working on the offer in a way To also engage with the more high end segment. So everything is very consistent in a way in the approach. I would say also that ARIA is the 1st collection marking really an evolution in the aesthetic. It was not yet the case With the Ubertus Collection, so ARIA is the first one where you have, let's say, rebalancing between the different Chart of products, both the timeless component and still the fashion forward component.
We believe that today, The brand has a maturity, the positioning, the distribution to work in a different way on this balance between timeless And fashion forward, also the brand considering its DNA and its history will remain A brand with a strong component about creativity, but you will see when you will visit the store that you have that good balance
Thank you. The next question comes from the line of Rogerio Fujimori, Bank of
Hi, Jean Marc. One on Gucci. Is there anything to call out on the sequential trend in e commerce in Q3 And the performance on Tmallochibadine in the 1st 10 months since joining Q4 in January relative to your expectations. Thank you.
Hello. Hi, Gerri, it's Claire. I think, I mean, the performance of Gucci In China, it has remained very, very strong and including on national pavilion, so both on the brand that come and on this with platform, so it's very satisfactory. I think Gucci is already very penetrated mainly in Western Europe And in the U. S, the trends have been a bit softer, but on a very high comp base, as you can imagine.
So I think nothing to mention. The only region where really online is penetration is more difficult than where you clearly don't see any, I would say, shift when the stores are either, I would say, with affected hours or more difficult To get into stores, you don't see any sheet. Online is really Japan. So Japan is still a region there where online is He's still behind, but for the rest, which he is, I mean, he's doing super well online and has been very well in China. I think we are going to take maybe the last question now.
Thank you. Your final question comes from the line of Carol Matto from Barclays.
Yes. Hi. Good evening. So just
one second for me, please.
To comment on the U. S. Market,
which was, of course, very strong in Q3, how do you expect this market to evolve going forward
With the end of the stimulus,
do you see already any signs of normalizations?
Thank you, Karl, for your question. In fact, we had some volatility in September, and we are guessing what was we are looking at what could be the growth of this Volatility we observed in September, but at the end of the day, as soon as the 1st days in the 1st week of October, We observed a pretty sharp rebound of the business in America. So we cannot really say that the end of the stimulus so far has an impact. It's something we are hearing a little bit looking at the volatility in September, combined with some other events like bad weather conditions. But at the end of the day, it's not so obvious when we look at the most recent trends That there is any sort of slowdown beyond just clearly normalization of the growth because we start You have a very demanding comp at global clicking.
Another point which is interesting is that in the U. S, we have a level of retention rate, Which is quite good with also some new customers which came back to the store So that we have a frequency of sales or repeated sales, which is clearly above the average of the trends we see on a worldwide basis. So far, we believe that the U. S. Environment It's very supportive.
Besides some restrictions that could occur because of COVID, but so far here again, It had not had any sort of drag on the business. So, so far, the U. S. Environment Remain very strong and for all the brands in the group. So Thank you all for being on our call and for your questions.
All a lot of questions Today, we appreciate, of course, your interest in Turing. And as always, with care And our team, we are available to answer any questions you might still have and continue this very fruitful and pleasant dialogue. Wish you a very nice evening.
Thank you. That does conclude our call for today. Thank you all for participating. And you may now disconnect.