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. Now 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%. Revenue is quietly moving towards the €30,000,000,000 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 6,000,000,000 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 2 years ago undertaken investment in Bulgari, and we've absorbed that investment. So we are in a situation in 2012 where the Grayscale once again has posted exceptional performance. The market was buoyant in 2012, slightly less so in the second half than in the first half.
And you will no doubt ask me how 2013 is shaping up and what our sentiment at 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, but 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. And 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 percent.
So growth that is expected. That's of course linked even if we set ourselves apart from markets in general. But 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, and 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.
We'll not make any particular effort to improve the situation in particular, would not be opposed to a rise in the euro, 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. It all takes a bit of time. There's always a lag between the measured effects and the results obtained. So if we look at the situation of the various business segments, great success with wines and spirits. Mr.
Novar never has enough bottles of cognac and markets always clamoring for more. And we're slowed by production. We could sell far more, but were limited by our production capacity. The most spectacular products are those that sell the best and emerging markets are extremely promising, but we're also notching up some fine success in the United States. I want to mention innovation, strong innovation momentum.
You're all familiar with that because as analysts, you're in contact with the group in all its details. So you're fully familiar with all our new launches. So 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.
Guignet will present them. Double digit revenue growth for Louis Vuitton, strong momentum, new products very successful, a strategy that is 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 costs seeking revenue growth. You'll probably ask me why don't you don't seek to obtain see 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's strategy is now to limit new store openings, whereas some of our peers are opening stores everywhere. Well, that's at their own risk.
Short term, it works. Longer term, it's more questionable. And 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. But we've decided since Mr. Castel headed this company and I with Michael Berg, 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.
So we're rather slowed by this production of leather goods, and 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. So 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.
So 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 not to be on the Champs Elyse, 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. And 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 developed the world over. But 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. So that's for Louis Vuitton. We have other brands in fashion and leather goods that have posted remarkable success.
For example, Celine, I'd like to say a few words about this company, which has been in the group since the 80s. Mr. Roussel turned around a while back and we have a designer who is both exceptional and particularly suited to this brand and here the growth because this is a rather small company and the growth rates are significant. And with quite remarkable success, when Celine finds itself next to other brands belonging to our peers that I won't mention here that are successful. Very often Celine, 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, United States and Asia received with the same acclaim by our customers. So 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 out of perfumes and cosmetics have experienced a very good year in 2012. Firstly, very successful year for Christian Dior Perfumes with strong growth of fragrances. Christian Dior is 1st and foremost a perfumer today for the 3rd consecutive year.
J'adore is the most widely sold fragrance in France as well as it's in a number of countries. And I hope that in a few years' time, it will be the number one selling perfume worldwide. Mr. Martinez, that's our objective. You'll have seen the advertising campaign that we launched with Charlize Terron, the Galeries de Glace 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. And so 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, 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 Robnoir because there's no model for this ad campaign. It's a cartoon that was so successful successful that at the end of the year, La Petit Robe Noir was in 2nd place in the French perfume market. In 2013, we plan to extend this remarkable success to the rest of the world. So we'll attempt to do that.
The 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. Bvlgari has now fully integrated for the 1st year. Bvlgari continues to grow.
With Mr. Trapani, we have refocused Bilgari's strategy towards Greater targeting, more focused product range with a certain concentration in terms of retailing, which is yielding excellent results per point of sale. And with the creativity that we are currently accelerating further for the timepieces, the watches because we launched this year very successful Octo watch. Mr. Tapani will be able to show you that.
He'll be wearing it during the Q and A session if you put questions to him. And with the current refurbishment of stores, These stores are being redesigned to focus them far more on the fundamentals of Bvlgari, 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 2 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. Then 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 know how and expertise of DFS that increases the number of locations. And with DFS, we've just won concession for the 3 new airport concessions for 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 1 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. Della Puente, 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. So with 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 and also very successful on the Internet because in the U.
S, haven't got the can't really give you the detailed figures because that's rather confidential. There's some very impressive figures of sales on the net of perfumes and cosmetics on the U. S. Market. So that's pretty much for 2012 for 2013, as I indicated earlier, the global growth climate is still present, save in Europe.
But in Europe, we also sell a lot to visitors. So we're less impacted by the economic stagnation than other sectors of activity. So in 2012, we're confident regarding business development. The only shadow here is currency trends. Mr.
Buoni 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. And 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. Rivito, I mentioned the strategy. We'll continue that strategy. For Dior perfumes, a whole Fume series of new products will be launched in the other areas.
Dior, a well honed strategy. Now maybe rather tiresome this presentation because we always talk about the same strategy every year and results that are just the consequence of that strategy are there because 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. So 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 percent 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 managed 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 because we're really structured like a large SME in a group such as our SME. If 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 and not a 747 full of bureaucrats with wall to wall accountants. Well, 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. Guillotin for the figures.
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 effect. And that is because in the first half of the year, we took Ile de Botte from Bvlgari and 7% of currency effect. Foreign exchange a positive and basically constant effect over the year even though there was some fluctuation during the year. But this is one of the few times we do have this positive contribution, but organic growth is significant. Earlier on, we said that there was a slowdown in the second half and it is true.
We stood at 12% in the first half. In the third quarter we stood at 6%, but 8% in the 4th quarter. So there was an embarrassment in the 4th quarter. So a slowdown, but overall the 4th quarter was on a more positive trend than the 3rd quarter. On the well, as usual slide on the breakdown of sales revenue by region, Some changes Asia 2 points more than last year Japan 1 point less give or take Europe 1 point less as well.
That's because of the developments in markets, but also there are some monetary variations because these are numbers in euros. Now let's look at the regions. Over the Q1, there are specific changes. Let's start with the United States, a positive development. The economy is better positioned in the Q4, plus 12% over the year, no big change, 11% in Q4.
So nothing to worry about. This is a very sound region. Japan is a bit more complicated. The comparison basis was distorted by the dramatic events of Fukushima in 2011. So the first half was easy because there was nothing in the previous year.
So it was plus 10% in the first half, but the second half of the year did not have this favorable or easy comparison effect. And so we came back to a more moderate level of growth plus 3% in Q4. It was also 3% in Q4 the previous year. So overall, we looked at 6% over the year. Over 2 years, we had a 5% growth in Japan.
So this is not great growth, but 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 plus 10% over the year in Asia. Within Asia, China which accounts for a significant portion is plus stands at plus 12%. So that's a significant number.
And quarter on quarter no big changes some slowdown in the Q4. In fact, we didn't see that in China, a slowdown so in the 4th quarter. But the overall figure stands at plus 10%. Europe, there again, again, there's lots of talk about Europe, but we still stand at plus 7% growth. Likewise, in 2011, not much change in growth from 1 year to the next.
Now of course, we have the advantage of tourists coming to shop, but still the overall result is very good. Now let's look at the various business areas. We have the plus 9% at the bottom right corner for the overall growth. It's broken down. As you can see 2 businesses have a double digit growth: Wines and Spirits, as Arnaud pointed out, cognac and spirits up 15%.
And 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 was not well, it varies from 1 year to the next. But still, we only had 7%, but that's still perfectly honorable. Fashion and Leather Group is up 7% and that is also due to DFS and Sephora.
Well, in fact Fashion and Leather Goods Watches and Jewelry, Selective Retaining well Selective Retaining has a double digit figure, but the other 3 have single digit, but still very acceptable growth numbers. If we look at the improvement over the year, we can see the improvement in all businesses and maybe lesser so in Wines and Spirits, but still very good overall. Let's look at the income statement. The gross margin is looking good. The margin is not didn't grow as much as sales.
Revenue was up 19%, gross margin up 17%. In 2011, there was some well, there was a negative development in marketing and selling expenses. General and administrative expenses, they were significantly up, but it's not just the numbers. We have to look at the foreign exchange effect. And if you look if you take out the foreign exchange effect instead 21% 11%, you only have 11% 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 in the profit from well, the operating margin is stabilized, but still profit is still up.
Operating profit is up 11%. There was a depreciation of tangible assets, but otherwise you have recurring depreciation of non tangible assets goodwill and goodwill amortization. The income taxes, well, it has gone up a bit. This is there's no surprise there. Well, A, because the income has increased.
So it's a rather good problem to have, but also because there were a number of changes taxes and deferred taxes. We have 2 percentage points, 2 additional points in taxation. There is some partial deductibility of interest expenditure. And also we had fewer deferred tax assets last year this year than last year. So overall, we the net profit stayed at plus 13% in line with the other indicators.
And the group share of net profit, so without minority interest ends 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 investments. And Mr. Arnaud mentioned the quality aspect of We are much more selective with multi brand.
We took over 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 an 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 was due to currency because you have pluses and minuses. When the currency impact is good, well, the operational is reinvested in the business.
And when the currency impact is not good, when people try to save money. So you have to this is a static image, but the real story is much more dynamic. If you want to look at cash flow, we have 4 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 Bulgaria 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 in an ineffective portion of foreign currency hedges. This is a sort of thing that is totally unpredictable. I knew it was going to come down because last year we over recognized these the costs of currency hedges. And so we can expect that item to come up to go up this year.
The gains due to related to AFS assets that's when we had the SMS event that occurred last year. And overall, we arrived at a net financial income that's EUR 2.28 euros at 14,000,000 so a variation of 228,000,000 euros 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, it stands at about 12%, up 976,000,000. Euros The working capital requirements absorbed a fairly high amount this year.
This is because we there was inventory, which is necessary during periods of growth, but also there was a lesser increase in receivables in payables, I beg your pardon. That's the technical explanation. There was significant operating investment about the same as last year 1 point €7,000,000,000 more investment towards brands. Last year there was some property investment in the €1,700,000,000 of last year. But this year we generate about 2.4 billion of last year.
But this year, we generate about EUR 2,400,000,000 or almost EUR 2,500,000,000 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 €4,700,000,000 to €4,200,000,000 The €2,500,000,000 excess cash I mentioned €1,800,000,000 was used in dividend payout. Well not just LVMH shareholders, but also minority shareholders of Muet, NC and DFS. There were €300,000,000 in financial investment most of which was the buying back the 20% of benefits which we didn't own and the balance was for a debt payment and so we end up with a debt to equity ratio of 17%.
And then finally dividend is up 12%. We will offer because of the interim dividend in December that went from 1.8 to 1.2.1. The final dividend will be 1.8. And so the total dividend will be from 2 will go from 2.6 to 2 €90 per share. And so over the past 5 years even though there were 2 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.
So Antoine Bege, HSBC. 3 questions. First of all, Mr. Guillen 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. Guoni said at the end of Q1, part of the drop in the margin in fashion and leather goods was cyclical and the second half there'd be an improvement. What made things deviate somewhat from that forecast? Would it be possible to quantify the portion of the drop in margin of Vuitton?
What was the impact of Berluti, Dona Curran and Fendi in particular? Mr. Arnaud indicated that currencies were trending negatively and the possibility of increasing prices. In Japan, the yen is down 20%. And given the market as it management changes firstly at Vuitton, but also the management changes firstly at Vuitton, but also those that were indirectly created at Bilgari given the transfer that took place?
Thank you. [SPEAKER JEAN
FRANCOIS PRUNEAU:] On the margins, the second half was similar to the first half both in qualitative and qualitative terms. The effect I mentioned in the first half the brands I mentioned earlier where we are investing Beluti Delacara and Fendi these are different types of investments, but we still are generating the same effects. As regards to Vividon, 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. But it's less expensive than buying than Brad Pitt.
On prices, we're going to increase 15th 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 as a head at Bilgari 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 is particularly well experienced in one of our businesses, but I won't say anymore. And changes, yes, at Vuitton, well, there we had a 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. So faced with that totally unexpected situation, we called upon Michael, Michael Berg, 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 handing 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've worked with Mr.
Carcel for 20 years. So 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 Vuitton the number one leather goods brand in the world. Any further questions please? Cas Solkar 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 outstanding performance delivered by the brand? And 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. Arnaud, 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?
And lastly, is there any change in the relationship with Hermes? Thank you. Well, I'll start with the last question with Hermes. Far as my concern, 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 Hermes. And 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. We'll 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 and 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. Now China, well, 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 and 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. So 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%.
So that's not bad and I'm confident. As to Vuitton, well, 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's 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. I mean, you mentioned Hermes very often where compared, but I believe the quality of vivuitton products has nothing to be ashamed of compared to its peers. And very often, it's a superior quality. And I'm somewhat saddened and some of the people in the company have a rise mild when they say, well, it's not the same quality universe.
I believe in some cases, Rivito has no competitor capable of producing the same of people and we can't only sell leather goods. Of people and we can't only sell leather goods. And that leather goods, I mean, priced at between €510,000 or even more. But the strategy that we're developing now because of course, the difficulty, the problem is the people. And more there are people, the more it's possible to offer adequate service.
And we're trying to strike a right balance by increasing the store side. This year, very few store openings and that will continue by deciding to provide superior service and by favoring the most iconic products, products that are leather products that really are widely sought after. I'm not saying we're slowing, but we're not pushing the 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.
But down the road, it's not a good strategy. What we want to favor is the outstanding know how in Savoy Ferr of Louis Vuitton workshop. There's no real change, just an adjustment of the strategy, but rivuitton wishes to focus on the long term. What I'm interested in, in 15 years' time, rivuitton should always remain the leading high quality leather goods brand in the world, the most sought after, the most envied. Of course, the question of figure, it's all a consequence in that which has the best figures in every respect.
Hello. Rudolf Friesen 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? And can you tell us more about the CapEx allocation?
Well, CapEx is not always easy to predict. I mean, we do have budgets, but you cannot drive it exactly the way you want well, 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 gone reached significant heights. But for certain brands, part of the equation is addressed in terms of products, in terms of marketing. But this also means significant investment in retail networks Celine, Marc Jacobs, Givenchy many brands are in the position where in terms of product and general marketing, we have got the result, but then we have leveraged this outcome in the different outlets.
And so the network 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. And I don't see that changing unless of course I'm assuming the general economy remains the same. Hello, Thomas Estmann from Credit Agricole Chevreux.
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 investments. What was then done in H2? And what will you do in 2013, the split between press advertising, TV advertising and the digital media? On Berluti, you well, you said that for Fashion and Leather Goods, there was a significant amount significant share of Berluti in that chapter.
Do you expect this segment to increase in just with Berluti? Or do you expect some external growth for ready to wear and men's shoes? And the last question countries that came down? And on the Fashion and Leather Goods, there was no improvement on Q4 in spite of the 8% improvement in Europe for Vuitton? Is that a are there some underlying reasons for this?
Well, advertising at Vuitton, I mean, your question is how we're going to continue. Well, we're going to stick to the strategy that you saw in 20 12. And let me say that Vuitton in percentage terms has advertising expenses that are well under control. I mean, well, 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. But in my view, it's less prominent in the minds of customers than other stores, the windows of the Champs Elysees store, the shop windows of stores throughout the world, this exceptional presence of the Louis Vuitton brand through its stores. So we'll continue with pretty much the same figures. Now Berluti, this is a brand that is being redirected. Antoine now heads up Berluti and in which we expect in a few years' time to achieve good revenue, several €100,000,000 We're fortunate to have found a designer who's perfectly suited to this brand.
And I'm quite impressed to see that in the reviews that we see on the recent fashion shows, I mean, it's one of the brands that we 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 3 years' time, it will be profitable. That's the objective.
Now regarding the slowdown, the picture is a bit more complicated. Asia did better in Q4 than in Q3. So there was a slowdown over the 1st 3 quarters, but the last quarter was up 8%, whereas in the Q3, it was only up 5%. But these numbers are under are below the Chinese numbers. So growth outside China was under pressure, especially in the Q3, less so in the Q4.
But we mentioned this during the talks about the Q3 figures. Hong Kong, Singapore and Macau were somewhat under pressure in the Q3, but they improved in the Q4. Final question maybe. Yes. Nicolas Vulsier from Le Monde.
I have a rather political question. What are you going to do in Belgium? We've you've never said anything about your Belgian plans. What is your plan? Why did you ask for dual citizenship?
And so that's the question. And then the second question is about Pierre Godet, who is taking new position in Italy. Is he still the number 2 in the group?
Madam, I'm going to disappoint you. But today we're here to discuss the results of LVMH and not to talk about Belgium. I'm sorry, but I will answer your question in another context. And Mr. Godeif, well, we produced a release press release yesterday.
He's going to be heading up our business in Italy, and there's no other comment to be made about that. Mr. Pierre Godet 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 and hear the need to coordinate and expand our Italian brands in conjunction with our French brands, and he's in charge of that. He's of interest to him, and 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% to 10% and pricing power around 3% to 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 those of the notable strong performance in the second half of the year. Is that more a question of less A and P? Or could you maybe expand on the improved performance within the margin on cognac? And finally, where do you see the Belluti revenues by 2015? And how profitable do you expect that business to be?
Thank you.
So the first question regarding the connection between Vuitton's revenue and the surfaces. There's no direct relation. Mr. Arnaud just said that we try and embellish the stores. There's a quality improvement, but the connection between the increase in sort of square meters and the increase in revenue, this direct link is inappropriate.
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. It has also there also been increases in volumes, but still quality volumes, but overall improvement in customer service and the sort of the general quality improvement in the stores. So 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 significant price effect because we significantly increased the price several times across 18 months. And it's true that as compared to the champagne business, for example, it's true that the increase was constant throughout the year. So I think that, that very strong performance is fairly regular and steady and very encouraging, as Mr. Arnott 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 2 main competitors, Hermes and Gucci as was the case in 2012. And 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?
And then 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?
Well, 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. So 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, etcetera. So that's our Compiv, 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. I mean, 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 brands such as Rivieton because the product that is that sought after such as Rivi 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. So why open a store in Angouleme? We have competitors who decided to boost their revenues 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. But there is something that's kind of try and become more mundane that we have tried to stay from stay removed from.
And revenue is a consequence. It's not an objective. Any further questions? One last question please.
Last question because time is running out, but we will be you can take your questions 1 to 1 later on, yes.
It's from Goldman Sachs. Two questions. 1 on the Watches and Jewelry division. Could you help us understand has there been a difference in performance between watches and jewelry? And has some of the weakness you've been seeing in watches been related to a destocking of faith effect in Asia?
And then the second question is on the Louis Vuitton strategy of growing leather goods. Could you tell us what percentage 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 wise, it's one division. So we tend not to divide it up. But I can tell you that watches did quite well in 2012. And of course, there was some variations from one region to the next.
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. Also there was cleaning out in a number of businesses in perfumes, which are kept for technical reason kept within the fashion and leather goods.
But watches did of course did extremely well.
As to the split between leather goods, the 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, and that's deliberate than the rest. Thank you. Any further questions? Well, one last one.
Yes, ma'am.
Blanca Rimere.
Blanca Rimere from Mainland Markets. I have a question in line with a question about Christian Dior and our VMH. In the long term, might you simplify the structure of the various holding companies in the group? A number of observers feel that the structure is rather complicated. Could that change in the long term?
[SPEAKER JEAN FRANCOIS PRUNEAU:] Well, 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, there are only 2. Dior, Renault, VMH, that's 2. 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. I mean they're observable. There's no secret there.
They're attracting a whole series of questions. Well, of course, it gives material to journalists because they have to tell interesting stories. But 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.
I mean, if you take Mr. Warren Buffett's companies, I mean, I don't want to compare myself to Mr. Warren Buffett, but if you to Bill Gates or people who have family companies, I mean, 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 family investment companies of a certain size. Thank you all very much. See you next year, if not before.