Bon. Merci. Bonsoir, mesdames, messieurs.
Good evening, ladies and gentlemen. I'd like to welcome you to this meeting where we'll be presenting to you the results for the year 2012. The year 2012 is once again a record year for the group LVMH, because we have a growth of our sales in euros of 19%. The revenue is quietly moving towards the EUR 30 billion mark. When I think of what it was back in the early '90s and the road traveled with the teams of the group. Operating income is close to EUR 6 billion for profit from recurring operations, significant improvement, and net income is up 12%. Consequently, our financial position is strengthened still further. The gearing is of the order of 17%, having two years ago undertaken investment in Bulgari, and we've absorbed that investment. We are in a situation in 2012 where the group once again has posted exceptional performance.
The market was buoyant in 2012, slightly less so in the second half than in the first half. You will no doubt ask me how 2013 is shaping up and what our sentiment of the group is regarding the business climate for 2013. I believe we can be confident for the overall business climate because the world is growing. It may be surprising to say that from France, where we see pessimistic articles about the situation in Europe. It remains that France and Europe are today in a difficult situation in terms of economic growth, whereas the world is poised to post about 4% growth this year. Major markets, the United States, Asia, China in particular, are expected to bounce back. For the United States, we expect about 2%, and for China, about 8%.
Growth that is expected, that's of course linked even if we set ourselves apart from markets in general. I would say a market situation that is expected to be rather positive for the group. Just one slight downside, which is the currency trend. I'm very struck by the way the Japanese yen plummeted at the end of last year. There's a risk of a currency battle, competitive devaluation, which is likely to lead to a situation in 2013 in which a number of currencies, dollar, yen, that's already happened. Other currency in which French exporters are involved will decline, whereas the euro, which finds itself in a situation of renewed confidence with a central bank, which is currently tasked with not driving economic growth, but rather defending monetary orthodoxy, will not make any particular effort to improve the situation.
In particular, would not be opposed to a rise in the EUR, which, in my view, is alas predictable and is likely to have an impact on the business of French exporters and therefore of our group. Even if we are in a very specific situation compared to other exporters, because we can increase our prices, or it takes a bit of time. There's always a lag between the measured effects and the result obtained. If we look at the situation of the various business segments, a great success with wines and spirits. Mr. Arnault never has enough bottles of cognac and market's always clamoring for more. We're slowed by production. We could sell far more, but we're limited by our production capacity. The most spectacular products are those that sell the best. Emerging markets are extremely promising.
We're also notching up some fine success in the U.S. I want to mention innovation, strong innovation momentum. You're all familiar with that because as analysts, you're in contact with the group and all its details, so you're fully familiar with all our new launches. An excellent year for wines and spirits, which even more so today, one of the pillars of the group's activity. On fashion and leather goods, excellent performance too. You have the figures. Mr. Guiony will present them. Double-digit revenue growth for Louis Vuitton. Strong momentum, new products, very successful. There's always an elitist strategy for Louis Vuitton. We set ourselves apart from our peers in that respect, and that's why we're not at all cost seeking revenue growth.
You'll probably ask me, "Why you don't seek to obtain higher revenue growth in this company?" Louis Vuitton is the leather goods brand that far and away offers the best quality in the world. What we are focusing on for the long term is the brand image and the satisfaction of our customers by offering them the finest products. It's not increasing revenue that we could, of course, increase far more than it is here. All it would take would be to open far more stores, and you'll have noticed that the group strategy is now to limit new store openings. Whereas some of our peers are opening stores everywhere. That's at their own risk. Short-term, it works.
Longer-term, it's more questionable. We could also push more products that are the most sought after, such as the monogram, which is widely sought after, that we could push more. We've decided, since Mr. Trapani headed this company, and now with Michael Burke, we've decided to be well and truly consistent with what we wish to convey by way of a message as the finest leather maker in the leather world. That is, we give promise to leather goods, and that employ the greatest amount of manual craftsmanship and offering the finest quality. We're rather slowed by this production of leather goods. We don't wish to develop more than we might do those products, which lead to bringing a lot of people into our stores.
There are always as many people in our stores, but in terms of service, we need to be second to none. That's the strategy, which explains why the figures for Louis Vuitton currently posting very strong growth will continue. That growth will continue, but backed up by a very targeted strategy of selling and focusing on products that offer the highest value added in leather and leather goods. We have a whole set of leather goods. You've seen those in the Louis Vuitton, offering high-end leather goods and the Louis Vuitton store to be on the Champs-Élysées, but these need to be ordered. It takes several months for them to be delivered, and these are products that are a bit like haute couture at a particular price. Louis Vuitton is the only house in the world that can offer such a degree of quality.
In parallel to that, for our stores, our strategy for Louis Vuitton stores entails opening far fewer stores because we now have a whole suite of stores that extremely develop the world over. Our policy is to improve existing stores. We increase the surface area, but we increase them by focusing more on quality, where the service provided to our customers is more significant, more bespoke, and more adapted to the selling of the high-quality products that are manufactured by Louis Vuitton on a continuous basis. That's for Louis Vuitton. We have other brands in fashion and leather goods that have posted remarkable success. For example, Céline, I'd like to say a few words about this company, which has been in the group since the 1980s. Mr. Roussel turned around a while back, and we have a designer who is both exceptional and particularly suited to this brand.
Here, the growth, because this is a rather small company and the growth rates are significant and with quite remarkable success. When Céline finds itself next to other brands belonging to our peers that I won't mention here that are successful, very often Céline, which is a brand that is far more recent, manages to overtake them. All regions are experiencing the same success. The products created by Phoebe are in Europe, U.S., and Asia, received with the same acclaim by our customers. This is a very significant success that I would like to underscore. Fendi too is developing well. We're currently rethinking the concept of stores with the manager, Mr. Beccari, and we have some fine prospects with this Roman brand that has high ambitions and will, I'm sure, achieve those. At least the figures in 2012 are good. Moving now to perfumes and cosmetics.
We have experienced a very good year in 2012. Firstly, very successful year for Christian Dior perfumes with strong growth of fragrances. Christian Dior is first and foremost a perfumer today. For the third consecutive year, J'adore is the most widely sold fragrance in France as well as in a number of countries, and I hope that in a few years' time, it will be the number one selling perfume worldwide. Mr. Belloni, that's our objective. You'll have seen the advertising campaign that we launched with Charlize Theron, the Galerie des Glaces at Versailles, and also an advertising campaign on television demonstrating the know-how of our designers for this fragrance, and this had a major impact on our markets.
The Dior perfumes are continuing to go from strength to strength, reflected, and you'll have seen that in the results in the handout, leading to a significant improvement in profit from operations. A number of perfumes at Dior, new skincare range, makeup. I won't go into the detail. The ladies here will be familiar, and if they wish to try those, I'm sure Mr. Martinez will be happy to oblige because, in the room next door, that's where we generally present all our makeup and skincare products. Other highlight of the year, Guerlain, that posted an excellent year, not unexpected. A very original advertising campaign with La Petite Robe Noire because there's no model for this ad campaign. It's a cartoon that was so successful that at the end of the year, La Petite Robe Noire was in second place in the French perfume market.
In 2013, we plan to extend this remarkable success to the rest of the world. We'll attempt to do that. Other brands grew well, notably Benefit, posting a strong growth with sales per square meter that are particularly sustained. Turning now to the watches and jewelry segment. Good results there, too. Bulgari has now fully integrated for the first year. Bulgari continues to grow. With Mr. Trapani, we have refocused Bulgari's strategy towards greater targeting, more focused product range with a certain concentration in terms of retailing, which is yielding excellent result per point of sale. With the creativity that we are currently accelerating further for the timepieces, the watches, because we launched this year a very successful Octo watch. Mr. Trapani will be able to show you that. He'll be wearing it during the Q&A session if you put questions to him.
With the current refurbishment of stores, these stores are being redesigned to focus them far more on the fundamentals of Bulgari, high-end jewelry, and watches. We'll still do some leather goods, but we've decided to return to the roots of the brand, making it one of the most widely known jewelry brands worldwide. We're currently number two in the fine jewelers, and over time, perhaps we can improve that situation even further. Other brand watches have improved, and we've changed some of the workshops. We're coordinating that effort with Francesco Trapani. Things are developing well, and I'm quite confident regarding the growth in this area of activity. The selective retailing.
Here again, excellent results achieved with DFS that has posted some very strong growth rates, thanks notably to its ever-increasing capacity for Asian tourists to travel, and of course, the knowhow and expertise of DFS that increases the number of locations. With DFS, we've just won a concession for the three new airport concessions at the Hong Kong Airport, which will give us an even stronger presence and therefore to have more products, greater capacity to negotiate with the suppliers, and an even more dynamic team, in particular in Hong Kong, which is the head office of DFS. Likewise for Sephora. Strong growth with significant market shares. Still number one on the U.S. market this year. In 2012, has opened up the Brazilian market. Very fine start there. Last night, we opened the first store in Shanghai.
Mr. de Lapuente, who was there, informs me that it was a huge success. You need to know that in Shanghai alone, which is a significant market, Sephora is close to a 30% market share in the sale of cosmetics, and with this store, we'll probably exceed that. Sephora in a whole series of countries worldwide, developing countries, China, Brazil, or countries such as the U.S., we've achieved leadership positions in retailing of perfumes and cosmetics. Also very successful on the Internet. Because in the U.S., I haven't got the-- Can't really give you the detailed figures because that's rather confidential. But some very impressive figures of sales on the net of perfumes and cosmetics on the U.S. market. That's pretty much for 2012. For 2013, as I indicated earlier, the global growth climate is still present, save in Europe.
In Europe, we also sell a lot to visitors, so we're less impacted by the economic stagnation than other sectors of activity. In 2012, we're confident regarding business development. The only shadow here is currency trends. Mr. Guiony said, "No worries, all that's hedged. Even if the dollar collapses, we won't even feel it." Nevertheless, I'm a little wary, but don't think it will lead to excellent consequences. We'll see what happens. If we're hedged, we're maybe hedged for 12 months or 18 months, but we can't be hedged forever, so we'll end up by feeling it. In any event, we'll have to increase prices. Louis Vuitton, I mentioned the strategy. We'll continue that strategy. For Dior perfumes, a whole series of new products will be launched, and in the other areas too, a well-honed strategy.
Now may be rather tired from this presentation because we always talk about the same strategy every year, and results that are just the consequence of that strategy are there. In the group, we're not motivated neither by revenue or by income. We're motivated solely by the quality of the products and customer satisfaction. Everything I'm saying, what I'm telling you is really a consequence. I'm not saying that it's unwitting, but it's an automatic result of the quality of the work put in by our teams, and we're fortunate in having excellent teams that we increase year after year. I would like to point out that this group has hired over 2,000 people in France in 2012 and will continue to hire more in 2013. It's interesting to point out, at a time when everyone is rather depressed, I believe, that companies are just closing plants.
We're opening workshops, we're hiring staff, and we export about 90% of our output. It's not that bad. We could do more, but it remains one of the drivers of the French economy, I believe. In terms of globalization, as I've often explained, our group is a positive example of globalization, where we manage to manufacture a number of products in our French workshops and to sell them to customers in China, Japan, Taiwan, Brazil, the U.S., and elsewhere, by bringing in currency. We'll continue that policy, and that policy is due to the expertise, the entrepreneurial spirit of all those who work for the group. We're really structured like a large SME. In a group such as ours, I would say we mustn't organize ourselves like a large corporation. There's nothing worse. We need to be organized decentrally and work in small commando teams.
A bit like sending drones into countries where we wish to act, not a 747 full of bureaucrats with wall-to-wall accountants. I won't dwell on that. I'd just like to say that we're confident for 2013, even if we're not making any forecasts. Over now to Mr. Guiony for the figures.
Merci. Thank you. Good evening, ladies and gentlemen. Let's start off with revenue. This slide may look a bit complicated. There's a few things on it. On the right-hand side, you see the overall growth of revenue over the year, 19%. 9% organic growth, 3% of scoping effects. That is because in the first half of the year, we took Ile de Beauté from Bvlgari, 7% of currency effect, foreign exchange, a positive and basically constant effect over the year, even though there was some fluctuation during the year. This is one of the few times we do have this positive contribution. Organic growth is significant. Earlier on, we said that there was a slowdown in the second half, it is true. We stood at 12% in the first half. In the third quarter, we stood at 6%, 8% in the fourth quarter.
There was an embellishment in the fourth quarter. A slowdown, overall, the fourth quarter was on a more positive trend than the third quarter. On the usual slide on the breakdown of sales revenue by region, some changes. Asia, two points more than last year. Japan, one point less give or take. Europe, one point less as well. That's because of the developments in markets. Also there are some monetary variations because these are numbers in euros. Now let's look at the regions. Over the first quarter, there are specific changes. Let's start with the U.S., a positive development. The economy is better positioned in the fourth quarter, +12% over the year. No big change, 11% in Q4. Nothing to worry about. This is a very sound region. Japan is a bit more complicated.
The comparison basis was somewhat distorted by the dramatic events of Fukushima in 2011. The first half was "easy" because there was nothing in the previous year. It was +10% in the first half. The second half of the year did not have this favorable or easy comparison effect. We came back to a more moderate level of growth, +3% in Q4. It was also 3% in Q4 the previous year. Overall, we looked at 6% over the year. Over two years, we have a 5% growth in Japan. This is not great growth. Compared with the decline we had in previous years, not only has Japan stabilized but has picked up slowly but surely. Asia. There are quite a few comments about Asia. The numbers are pretty good, +10% over the year in Asia.
Within Asia, China, which accounts for a significant portion, is +12%. That's a significant number. Quarter-on-quarter, no big changes. Some slowdown in the fourth quarter. In fact, we didn't see that in China, a slowdown in the fourth quarter. The overall figure stands at +10%. Europe, there again, there's lots of talk about Europe, we still stand at +7% growth. Likewise, in 2011, not much change in growth from one year to the next. Of course, we have the advantage of tourists coming to shop, still, the overall result is very good. Let's look at the various business areas. We have the +9% at the bottom right corner for the overall growth. It's broken down, as you can see. Two businesses have a double-digit growth. Wines and spirits, as Arnault pointed out, cognac and spirits up 15%.
On champagne, well, it's perfectly honorable. There's only so much champagne we can produce region by region. Of course, the harvest this year, well, it varies from one year to the next. Still, we only had 7%, that's still perfectly honorable. Fashion and leather goods up 7%, that is also due to DFS and Sephora. Well, in fact, fashion and leather goods, watches and jewelry, selective retailing. Selective retailing has a double-digit figure, the other three have single digit, still very acceptable growth numbers. If we look at the improvement over the year, we can see the improvement in all businesses, maybe less so in wines and spirits, still very good overall. Let's look at the income statement. The gross margin is looking good. The margin didn't grow as much as sales.
Revenue was up 19%, gross margin up 17%. In 2011, there was a negative development in marketing and selling expenses. General and administrative expenses, they were significantly up. It's not just the numbers. We have to look at the foreign exchange effect. If you take out the foreign exchange effect, instead of 21% and 11%, you only have 11% and 4%, respectively. The emphasis should be placed on the marketing expenses. Of course, this is always a big chapter. The profit from recurring operation, that's always the main indicator. This is up 13%. Again, a slight slowdown in the operating margin. The operating margin has stabilized, still, profit is still up. Operating profit is up 11%. There was a depreciation of tangible assets, otherwise, you have recurring depreciation of non-tangible assets, goodwill, and goodwill amortization. The income taxes, it has gone up a bit.
There's no surprise there. A, because income has increased, it's a rather good problem to have. There were a number of changes, taxes and deferred taxes. We have two percentage points, two additional points in taxations. There is some partial deductibility of interest expenditure, also we had fewer deferred tax assets this year than last year. Overall, the net profit stands at +13%, in line with the other indicators, the group share of net profit, without minority interest, stands at 12%. If you look at the profit from recurring operations by business group, they all have double-digit growth except for the champagnes. Fashion and leather goods, I mentioned that in the first half of the year, we had a number of investment, Mr. Arnault mentioned the quality aspect of the investment for our brands.
There are other investments, for Fendi. We are much more selective with multi-brand. We took over the jeans license, which had not been well taken care of by our franchisee at Donna Karan. We have investment at Louis Vuitton. We are relaunching Berluti. This is a big investment there in terms of marketing, so that has an effect on profits, but still, the overall improvement is still 13%. The breakdown of the profit from recurring operation, for once the currency impact was positive. Don't believe that all the growth is due to currency because you have pluses and minuses. When the currency impact is good, well, the operational is reinvested in the business. When the currency impact is not good, well, people tend to save money. This is a static image, but the real story is much more dynamic.
If you want to look at cash flow, we have four items. First, the cost of net financial debt is down, even though debt itself has gone up 40% over the year, the average debt, because we acquired Bvlgari last year. The interest rates have come down from 2.7 to 2.15, so that was a positive development. There is always the traditional item, ineffective portion of foreign currency hedges. This is the sort of thing that is totally unpredictable. I knew it was going to come down because last year we over-recognized the costs of currency hedges, we can expect that item to go up this year. The gains related to AFS assets, that's when we had the SMS event that occurred last year. Overall, we arrive at a net financial income that stands at EUR 14 million, so a variation of EUR 228 million.
The financial structure is very sound. We have very few developments in the various items of the balance sheet. Regarding the cash position, you can see that the cash from operations before changes in working capital but after interest is up, stands at about 12%, up EUR 976 million. The working capital requirements absorbed a fairly high amount this year. This is because there was inventory, which is necessary during periods of growth, but also there was a lesser increase in payables. I beg your pardon. That's the technical explanation. There was significant operating investment, about the same as last year, EUR 1.7 billion. More investment towards brands. Last year there was some property investment in the EUR 1.7 billion of last year. This year, we generate about EUR 2.4 billion or almost EUR 2.5 billion in free cash flow. This is a significant increase compared with last year.
The debt position has improved again because we came down from almost EUR 4.7 billion to EUR 4.21 billion. The EUR 2.5 billion excess cash I mentioned, EUR 1.8 billion was used in dividend payouts, but not just LVMH shareholders, but also minority shareholders of Moët Hennessy and DFS. There were EUR 300 million in financial investment, most of which was the buying back the 20% of Benefit Cosmetics which we didn't own, the balance was for a debt payment, we end up with a debt-to-equity ratio of 17%. Finally, dividend is up 12%. We will offer because of the interim dividend in December that went from EUR 1.8 to EUR 2.1. The final dividend will be EUR 1.8, the total dividend will go from €2.6 to €2.90 per share. Over the past five years, even though there were two years of recession, dividend was up 13% on average. Thank you.
Well, ladies and gentlemen, we're available now to take your questions. Are there any questions, please? Yes, please. If you could kindly introduce yourself now we know you. Antoine Belge.
Antoine Belge, HSBC. Three questions. First of all, Mr. Guiony explained the currency effects that were very favorable, very positive this year. He always said that there were communicating effects. The operational people were spending a bit more when the currency was favorable, but the result of the operating profit was a 4% in fashion and leather goods. Mr. Guiony said at the end of Q1, part of the drop in the margin in fashion and leather goods was cyclical, and the second half would be an improvement. What made things deviate somewhat from that forecast? Would it be possible to quantify the portion of the drop in margin at Vuitton? What was the impact of Berluti, Donna Karan and Fendi in particular? Mr. Arnault indicated that currencies were trending negatively and the possibility of increasing prices.
In Japan, the yen's down 20%, given the market as it stands today, what's Vuitton's capacity to increase prices in Japan? Final question, could you perhaps return to management changes, firstly at Vuitton, but also those that were indirectly created at Bulgari, given the transfer that took place? Thank you.
On the margins, the second half was similar to the first half, both in qualitative and quantitative terms. The effect I mentioned in the first half, the brands I mentioned earlier, where we are investing, Berluti, Acqua di Parma, and Fendi, these are different types of investments, but we still are generating the same effects. As regards Vuitton, we're still in a high investment stage, both in our shops or in terms of advertising. We have some events you can watch on our screens. It's a fine advertising campaign, but it has required significant resources, but this has had an effect, of course, on the numbers of the second half. It's less expensive than buying Brad Pitt. On prices, we're going to increase 15th of February in Japan to offset all that.
Appointments, Mr. Trapani is making signs to me saying that I should not indicate who we're going to put at the head at Bulgari to replace Michael. Since I'm very disciplined, I won't tell you, even though it's on the tip of my tongue, and a member of staff from the house who's particularly well experienced in one of our businesses, but I won't say anymore. Changes, yes, at Vuitton. There we had quite a tragic issue because for a year we trained a great manager and that unfortunately, just after his appointment, he suffered a serious health issue, such that he had to stop and will no doubt have to withdraw from his professional activities for some considerable time.
Faced with that totally unexpected situation, we called upon Michael Burke, who has been in the group for a long time, one of the most experienced managers who's been in the group since the early '90s, since the start of the group, and has worked in various businesses, Vuitton, Dior, before heading up Fendi, which he turned around completely, and up until the present year, he was President of Bulgari, and we've appointed him CEO of Vuitton. I'm extremely confident. I've been working with Michael for some 30 years. I worked with Mr. Cassel for 20 years. These are fairly long common trajectories, and I'm absolutely convinced that Michael will be able to drive Vuitton forward in the future and continue this wonderful strategy, which, as I said, makes Louis Vuitton the number one leather goods brand in the world. Any further questions, please?
Luca Solca from Exane BNP. I have a question to follow up on Vuitton. Should we expect changes? What are the developments desired in terms of change regarding the outstanding performance delivered by the brand? Perhaps a word on the prospects for China with competitors on the market in terms of demand trend and operating costs, because there are a number of concerns regarding an increase in operating costs in China, be it rental costs or staff costs. Let me take this opportunity since you're here, Mr. Arnault, if I could put a question that people put to me every day, that is the logic of the separation of Christian Dior and LVMH. If you could give us some Outlook on that. Lastly, is there any change in the relationship with Hermès? Thank you. I'll start with the last question with Hermès.
As far as I'm concerned, nothing's changed. We have a very peaceful relationship, and I hope that peaceful view of the situation will be shared by our friends who lead Hermès. I'm delighted as one of the major shareholders of that company, of their performance and their dividend payout. I hope they will continue at that rate, will be absolutely delighted. As to the Dior LVMH separation, I don't know if it's you, but I always have the same question. I always give the same answer. This separation is historic, and there's no other reason, and there's absolutely no reason to change things. Nothing is currently under study that will lead to a change in that situation, if that is the subject of the question that is put to you by your customers. China. China is a major market.
It's a market which, going forward, will be one of the leading markets in the world. That's part of Asia. It's true that salaries in Asia are rising to such an extent that a number of Chinese companies are offshoring, not luxury good companies, but industrial companies are now moving to Vietnam. You're familiar with that because of the major differences. It's true that operating costs are rising, but we're far from operating costs to be found in other countries of the world. The market now has experience with the handover, did experience a slight slowdown in the second half of the year because, of course, the economic policy in China is to favor domestic consumption over exports. That should boost consumption. With the handover to the new leadership in China, things will pick up again, and growth rates expected for China, according to our experts, is 8%.
That's not bad. I'm confident. As to Vuitton, we're not going to change strategy. We're not going to change a strategy that's successful. We keep the team that's successful, that all the teams at Vuitton are there. They're motivated, and they are passionate about working for this iconic brand. As I said earlier, we're slightly perhaps going to adjust expansion development. You mentioned Hermès. Very often we're compared, but I believe the quality of Louis Vuitton products has nothing to be ashamed of compared to its peers. Very often it's of superior quality. I'm somewhat saddened, and some of the people in the company have a wry smile when they say, "Well, it's not the same quality universe." I believe in some cases, Louis Vuitton has no competitor capable of producing the same quality leather goods.
Of course, Vuitton is of a size such that in Vuitton stores, if you go to the Champs-Élysées store, there's lots of people, and we can't only sell leather goods. That leather goods, priced between EUR 5,000 and EUR 10,000 or even more. The strategy that we're developing now, because, of course, the difficulty, the problem is the people. The more there are people, the more it's possible to offer adequate service. We're trying to strike a right balance by increasing the store size. This year, very few store openings, and that will continue by deciding to provide superior service and by favoring the most iconic products that are leather products that really are widely sought after. I'm not saying we're slowing, but we're not pushing products that are always sought after. Of course, it would be easier for Louis Vuitton to boost its revenue.
All it would take would be to launch 10 new products with the monogram product. Down the road, it's not a good strategy. What we want to favor is the outstanding know-how and savoir-faire of Louis Vuitton workshop. There's no real change, just an adjustment of the strategy. Louis Vuitton wishes to focus on the long term. What I'm interested in 15 years' time, Louis Vuitton should always remain the leading high-quality leather goods brand in the world, the most sought after, the most envied. Of course, this question of figure, it's all a consequence, and that which has the best figures in every respect.
Hello, Rodolphe Ozun from Bank of America Merrill Lynch. You mentioned Vuitton's strategy, fewer new store openings and more brands developing. Is this to say that there will be less CapEx in relation to revenue or maybe redirecting CapEx towards other divisions? Can you tell us more about the CapEx allocation. CapEx is not always easy to predict. We do have budgets, but we cannot drive it exactly the way you want. You already have the answer. At Louis Vuitton, the level of CapEx will probably remain stable or climb down a little bit because it had reached significant heights. For certain brands, part of the equation is addressed in terms of products, in terms of marketing. This also means a significant investment in retail networks.
Celine, Marc Jacobs, Givenchy, many brands are in the position where, in terms of product and the general marketing, we have got the result. We have leveraged this outcome in the different outlets. The sales network has to be properly resourced in leather and fashion, but also watches and jewelry. Access to retail is essential for the future, so there will be some significant capital expenditure there. I don't see that changing unless, of course, I'm assuming the general economy remains the same.
Hello. Thomas Chauvet from Crédit Agricole Cheuvreux. A couple of questions. First, about your advertising strategy at Louis Vuitton. You said that you were disappointed by some of the return on investment on some of the advertising investment. What was done in H2, and what will you do in 2013, the split between press advertising, TV advertising, and digital media?
On Berluti, you said that for fashion and leather goods, there was a significant share of Berluti in that chapter. Do you expect this segment to increase just with Berluti, or do you expect some external growth for ready-to-wear and men's shoes? The last question on Q4, Mr. Guiony said that Asia came down a little bit, China didn't. What are the countries that came down? On the fashion and leather goods, there was no improvement on Q4 in spite of the 8% improvement in Europe for Vuitton. Are there some underlying reasons for this?
Advertising at Vuitton, your question is how we're going to continue. We're going to stick to the strategy that you saw in 2012. Let me say that Vuitton, in percentage terms, has advertising expenses that are well under control. They've increased, but they're well controlled. The best advertisement for Vuitton are the stores, the shop windows, press advertising or internet or TV advertising. That's all well and good, in my view, it's less prominent in the minds of customers than are the stores, the windows of the Champs-Élysées store, the shop windows of stores throughout the world, this exceptional presence of the Louis Vuitton brand through its stores. We'll continue with pretty much the same figures. Berluti. This is a brand that is being redirected.
Antoine now heads up Berluti, in which we expect in a few years' time to achieve good revenue, several hundred million EUR. We're fortunate to have found a designer who's perfectly suited to this brand, I'm quite impressed to see that in the reviews that we see on the recent fashion shows, it's one of the brands that are the most prominent and that we see the most, that's one of the smallest. That's a good sign. We don't yet have a network of stores. We must increase the network of stores. We'll do some advertising. Asia is a very promising market for it. Today, it's not profitable. It's in the investment phase. I believe that in three years' time, it'll be profitable. That's the objective.
Regarding the slowdown, the picture is a bit more complicated. Asia did better in Q4 than in Q3, there was a slowdown over the first three quarters, the last quarter was up 8%, whereas in the third quarter, it was only up 5%. These numbers are below the Chinese numbers. Growth outside China was under pressure, especially in the third quarter, less so in the fourth quarter. We mentioned this during the talks about the third quarter figures. Hong Kong, Singapore, and Macau were somewhat under pressure in the third quarter, they improved in the fourth quarter. Final question, maybe? Yes. Nicole Vulser from "Le Monde." I have a rather political question. What are you going to do in Belgium? You've never said anything about your Belgian plans. What is your plan? Why did you ask for dual citizenship?
That's the question. The second question is about Pierre Godé, who is taking new position in Italy. Is he still the number 2 in the group?
Madam, I'm going to disappoint you, today we're here to discuss the results of LVMH and not to talk about Belgium. I'm sorry, I will answer your question in another context. Mr. Godé, well, we produced a press release yesterday. He's going to be heading up our business in Italy, there's no other comment to be made about that. Mr. Pierre Godé has been working in the group at my side since it was founded and has occupied a number of positions, either directly with me on the operational front. There's a need to coordinate and expand our Italian brands in conjunction with our French brands, he's in charge of that. It's of interest to him, that's his role. Further questions?
Thank you. Three questions, please. First of all, with regards to Vuitton. If you're looking at the 20-year average space growth, which has been around 8%-10%, and pricing power around 3%-5%, what can we expect for the next 3 years, given less space and the need to raise prices to combat currency headwinds? The second question with regards to cognac. It appears that the cognac profit was probably one of the notable strong performers in the second half of the year. Is that more a question of less A&P, or could you maybe expand on the improved performance within the margin on cognac? Finally, where do you see the Berluti revenues by 2015, and how profitable do you expect that business to be? Thank you.
The first question regarding the connection between Vuitton's revenue and the surfaces. There's no direct relation. Mr. Arnault just said that we try and embellish the stores as in a quality improvement, but the connection between the increase in square meters and the increase in revenue, this direct link isn't appropriate. This is not to say there will be no growth, but you can look at pricing power. You can look at an improvement in the mix. We are trying to improve quality or increase the high-quality items in the overall mix, and this has been the case over the past few years. There have also been increases in volumes, but still quality volumes, but overall improvement in customer service and the general quality improvement in the stores. This connection that you mentioned between the surface and the sales is questionable.
On cognac, let me say that performance was good throughout the year for cognac across the range of products, but also across countries. We also benefited from a significant price effect because we significantly increased the price several times across 18 months. It's true that as compared to the champagne business, for example, it's true that the increase was constant throughout the year. I think that very strong performance is fairly regular and steady and very encouraging, as Mr. Arnault said, for the year that's just beginning.
Any further questions, please?
I have a question about Louis Vuitton. I understand that your strategy is not to push revenue for the sake of revenue, but would you be happy with growth inferior to that of the two main competitors, Hermès and Gucci, as was the case in 2012? Regarding China, in terms of new stores, again, your competitors are opening new shops, especially in secondary cities in China, where market growth is greater than in Beijing and Shanghai. Why then are you not following that strategy? About the debt-to-equity ratio, it's low, it's coming down. Is that an end in itself, or might you start making more acquisitions and therefore more debt?
my objective is not to grow Vuitton's revenue. The growth in Vuitton's revenue is a consequence of what we want to do in the next 10 years in terms of the quality and customer satisfaction. The prime objective we set ourselves is to continue to manufacture at Louis Vuitton the best quality of products, the products that are the most sought after by customers, be they French, Chinese, American, et cetera. That's our objective. You mentioned competitors. Our objective is to manufacture products that are better quality than our peers, and I believe that's the case today, and it's absolutely vital to heighten the quality lead. In terms of store openings, it's easy, but it's not something that's favorable to open, I don't know how many stores in the secondary cities of China. Yes.
It's not something that attracts a brand such as Louis Vuitton, because the product that is sought after, such as Louis Vuitton, people come to find it in the main Chinese cities. We don't need to be in the smaller cities. Take an example with France. If you want to buy a dress from Dior or a bag from Vuitton, if you're living in Angouleme, you come to Paris in order to buy it. Why open a store in Angouleme? We have competitors who decided to boost their revenues, quote unquote, easily to go to all these cities that are small on a Chinese scale. Perhaps larger than Angouleme, I'll give you that, but on a Chinese scale. There is something that's kind of try and become more mundane that we have tried to stay removed from, and revenue is a consequence. It's not an objective.
Any further questions? One last question, please.
A last question because time is running out. We can take your questions one-to-one later on. Yes.
It's from Goldman Sachs. Two questions. One on the watches and jewelry division. Could you help us understand, has there been a difference in performance between watches and jewelry? Has some of the weakness you've been seeing in watches been related to a destocking effect in Asia? The second question is on the Louis Vuitton strategy of growing leather goods. Could you tell us what % of revenues today comes from leather goods and where you expect that to go to, and what impact that is likely to have to the average selling price of the Louis Vuitton brand?
On watches and jewelry, it is one division, we tend not to divide it up. I can tell you that watches did quite well in 2012. Of course, there was some variations from one region to the next, but overall, the year was good. Jewelry, the division is essentially dominated by Bvlgari, or just about only by Bvlgari. Did extremely well in the first half of the year. The second half was not as good, simply because the comparison basis was difficult. 2011 was a difficult act to follow because there were some exceptional items that came out. There was a cleaning out in a number of businesses in perfumes, which are kept for technical reason, kept within the fashion and leather goods. Watches, of course, did extremely well.
As to the split between leather goods, between leather and canvas, you won't be surprised if I don't give that to you. What I can say is that leather is growing faster, significantly faster, that's deliberate than the rest. Thank you. Any further questions? Okay, one last one. Yes, madam.
Blanca Rimer.
Blanca Rimer from Mangrove Market. I have a question in line with the question about Christian Dior and LVMH. In the long term, might you simplify the structure of the various holding companies? A number of observers feel that the structure is rather complicated. Could that change in the long term?
Let me say, on a scale of a group such as ours, I don't find it particularly complex. The public holdings, the publicly quoted companies are only two, Dior and LVMH. That's two. That's not very considerable. As I said earlier, the question that was put to me, we don't plan any change on that front. As to the rest of the private holding companies, well, they're observed. I don't know why they are observed because they're private. They shouldn't be observed. They're observable. There's no secret there. They're attracting a whole series of question. Of course, it gives material to journalists because they have to tell interesting stories, I don't find that very useful. I don't find it complicated either. In all groups, international, family groups, you have a whole series of companies.
If you take Mr. Warren Buffett's companies, I don't want to compare myself to Mr. Warren Buffett, if you take Bill Gates or people who have family companies, they all have companies that do different things. We have investment companies. We have a whole series of things. Nothing that isn't perfectly normal and natural in family investment companies of a certain size. Thank you all very much. See you next year, if not before.