Welcome to the LVMH third quarter revenue conference call. I now hand over to Mr. Chris Hollis. Sir, please go ahead.
Thank you. Hello, I'm Chris Hollis, Director of Financial Communications at LVMH, and with me is Jean-Jacques Guiony, our Chief Financial Officer. Thank you for joining us. We have some brief remarks to make about LVMH's revenue for the first nine months of 2013. As in previous periods, these revenue figures are reported in accordance with IFRS. After these remarks, Jean-Jacques and I will be happy to take your questions. Before I begin, I must remind you that certain information to be discussed on today's call is forward-looking and is subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the safe harbor statement included in our press release. Turning now to our third quarter and nine months revenue announcement. Hopefully, you've all had the chance to read our release, which was issued yesterday evening in both French and English.
As always, the release is available on LVMH's website, www.lvmh.com, as are the slides that we're using today to guide today's conversation. Turning to slide two of the slides. Performance in the third quarter continued the trend we saw in the first half of 2013, delivering 8% organic revenue growth, up from 6% in the year ago period. The growth in this year's third quarter was significantly offset by a large negative currency impact versus previous quarters. In the first nine months of the year, we generated 8% organic revenue growth. Overall, we maintained positive momentum in the U.S. and Asia and demonstrated resilience in Europe against an ongoing challenging economic backdrop. At the business level, we continued to enhance the high quality of our leather goods and distribution strategy at Louis Vuitton, while investing in the continued development of our other fashion brands.
The solid performance of the wines and spirits and selective retailing businesses, combined with the improving trends we saw in watches and jewelry, drove the group's overall performance in the first nine months of the year. Turning to the evolution of the group's revenue performance year to date, as I said, we generated organic revenue growth of 8% in the nine-month period. This compares to 10% organic revenue growth in the prior year period. As you can see from the chart on slide three, the currency impact has had an increasingly negative impact on reported earnings every quarter this year. The weakness of the JPY, in particular, and the USD compared to last year, resulted in a negative 6% impact in the third quarter and a 4% negative impact of currency for the nine months.
Turning to the revenue by region in EUR, our revenue continues to be diversified and well-balanced across geographies. Asia, excluding Japan, now represents 31% of revenue as measured in EUR, and continues to represent the largest region. This is followed by Europe at 28%, of which France represents 11%, the U.S. including Hawaii at 23%, and Japan at 7%. Other markets accounted for 11% of revenue, up slightly from last year. As you can see on slide five, organic revenue growth for the first nine months was up across all regions compared to the same period last year. Revenue rose 13% in Asia, 10% in Japan, followed by a 9% increase in the U.S., excluding Hawaii. Revenue from Europe grew 2%, demonstrating the group's strong execution in the context of persistent economic weakness in the region.
Let's turn to revenue by business group starting with wines and spirits on slide six, which delivered a solid performance. Organic revenue was up 7% for the nine-month period, driven by growth in Asia, the U.S., and particularly Japan. This comes on top of 12% organic revenue growth in the same period of last year. Total revenue in this group increased to EUR 2.84 billion from EUR 2.76 billion in the same period last year. On a reported basis, this reflects a 3% gain that includes a good organic sales growth that I previously mentioned of 7%, offset by a negative 4% currency impact. For the third quarter, revenue rose to EUR 1.03 billion from EUR 1.01 billion in the third quarter of last year. This reflects a 9% increase in organic revenue and a 7% negative currency impact.
Looking at this business group in more detail for the nine months, champagne and wines was slightly down at EUR 1.194 billion in the nine-month period. This represented 5% organic revenue growth and a 5% negative currency impact. Similarly, revenue for the third quarter rose to EUR 455 million. This reflected a 9% organic revenue increase. This is in Champagne and wines, and an 8% negative currency impact in the quarter. For cognac and spirits, that saw an 8% organic revenue increase for the nine-month period, and a negative 3% currency impact, resulting in a rise to EUR 1.65 billion. For the third quarter, cognac and spirits generated 9% organic revenue growth with a 5% negative currency impact, resulting in EUR 577 million in reported revenue. Moving to slide seven.
Champagne volumes rose 2% in the nine months, reflecting continued progress in Asia and the resilience I discussed in Europe, in an uncertain economic environment. There was also a good performance of the estates and wines, sparkling wines. For cognac and spirits, Hennessy volumes were up 4%, and Glenmorangie, Belvedere, and Wenjun also showed solid volume growth in the nine-month period. The strong momentum in the U.S. continued, and the group benefited from the positive impact of price increases. While Asia as a region was up over the period, the group has seen pressure on consumer demand in China ever since the Mooncake Festival as a result of the reduced banqueting activity. Now looking at fashion and leather goods. Slide eight. This business was up 4% on an organic basis, offset by a 5% negative currency impact for the first nine months of 2013.
As a result, reported revenues were slightly down to €7.14 billion, from €7.18 billion in the same period last year. In the third quarter, revenue was €2.4 billion, reflecting a 3% increase in organic revenue, offset by a 7% negative currency impact. To give you some highlights of the quarter in this business group, Louis Vuitton continued to focus on product quality and distribution excellence. The brand's leather products performed particularly well. Both the new Capucines and the W bags contributed positively to performance, and ready-to-wear made good progress during the period. Louis Vuitton continued the selective expansion of its store network and reopened the Matsuya Ginza store in Japan in mid-September. In terms of the other fashion and leather goods brands, Celine delivered robust growth, primarily driven by its leather goods and shoe collection.
Givenchy, Kenzo, and Berluti also showed good momentum in the nine-month period, and Fendi opened major boutiques in Paris and Milan in the third quarter. The group also made some exciting new announcements in the quarter. Firstly, the announced acquisition of Loro Piana, in which we expect to receive regulatory approval by the end of the year. More recently, we've announced separate new partnerships with young creators Nicholas Kirkwood and Jonathan Anderson. The latter is now the new creative director at Loewe. Turning to perfumes and cosmetics, slide 10. Revenue increased to €2.68 billion from €2.62 billion in the nine-month period of last year, excluding a 3% negative currency effect. This represented a 5% increase in organic revenue. For the third quarter, revenue in this business group was €879 million, with organic revenue up 4% over the year-ago period, and a 6% negative currency impact.
Starting with the Parfums Christian Dior, slide 11. The iconic J'Adore fragrance with its eau de parfum, and Dior Homme with Robert Pattinson as its new ambassador, were positive performance contributors. Additionally, the iconic Rouge Dior lipstick experienced strong growth in the quarter. Guerlain had a mixed quarter with the successful relaunch of its iconic perfume, Shalimar, while facing tough comparisons one year after the major launch of La Petite Robe Noire. Kenzo saw a promising start for its new Flower in the Air fragrance. Benefit continued its store expansion, including the introduction of its new Glam Up & Away beauty kiosks in major U.S. airports. Fresh's new skincare products made good progress in Asia, particularly among Chinese consumers. Finally, during the quarter, a new and larger research and development center was opened in Saint-Jean-de-Braye, France, for the LVMH perfumes and cosmetic brands.
Turning to our watches and jewelry business. Revenue in this group was €1.99 billion compared to €2.03 billion in the first nine months of last year, including 3% organic revenue growth, but a negative 5% currency impact. For the third quarter, revenue was €677 million, representing 6% organic revenue growth over the year-ago period and a negative 8% currency impact. This business group saw sustained growth across its retail stores, while there was a gradual reduction in wholesale, reflecting both more selective distribution and some caution from buyers. At the brand level, Bulgari successfully launched its new high-end jewelry Diva collection and made progress on its ongoing strategy to enhance the quality of its distribution network. TAG Heuer expanded its store network, including on Boulevard des Capucines in Paris, and began operations at its new movement manufacturing facility in Chevenez during the third quarter.
Hublot made good progress, particularly in Japan, and Chaumet launched the Hortensia high-end jewelry line. Turning to the Selective Retailing group on Slide 14, which delivered an excellent 19% organic revenue growth, slightly offset by a 3% negative currency impact for the nine-month period. This comes on top of a 14% increase in organic revenue growth for the same period last year. For the third quarter, revenue surpassed the EUR 2 billion mark, reaching EUR 2.1 billion, up from EUR 1.86 billion in the third quarter of last year. This reflects organic growth of 19% and a 6% negative currency impact. The impact of the new Hong Kong International Airport concessions is around 8% for both the nine months and the quarter. Selective Retailing, Slide 15.
DFS' strong momentum in Asia continued, with the Hong Kong International Airport concessions, as well as the Hong Kong and Macau Galleria, contributing significantly to performance in the region. Globally, the stores started rolling out the new T Galleria by DFS brand identity, which reflects the next step towards becoming the ultimate luxury shopping destination and pays homage to DFS' core business serving travelers. Sephora once again grew market share in all key regions, driven by positive momentum in existing stores, particularly in North America, Asia, and the Middle East. There was strong progress of its online sales and the successful introduction of new products, including the launch of Marc Jacobs Beauty in the U.S., all contributed to its great performance. The business continued to expand its store network, opening around 30 new stores in the period.
In summary, our business groups performed well throughout the first nine months of the year and all contributed to organic growth in the third quarter, demonstrating strength in the face of a difficult economic climate. Looking ahead, LVMH will continue to execute its strategy of providing the highest quality products and innovation, combined with the selective expansion of its store network, to pursue the objective of increasing our leadership position in the global luxury goods market. Thank you. With that, we will now take any questions you may have. Charlotte, can you please open the line?
Ladies and gentlemen, if you wish to ask a question, please press 01 on your telephone keypad. We have a question from Luca Solca from Exane BNP. Sir, please go ahead.
Thank you very much. Good morning. I have a couple of questions, if I may. First, you were referring to a very good reception of the new product lines by Vuitton. I wonder how you see the progress towards moving the brand to its new target, and whether you see any geographic difference on how the new lines have been received in the different markets. More generally, I was wondering how you see demand trends for luxury goods in China in particular. We've had mixed reviews as far as the Mainland China market is concerned, and whether you see any impact to be anticipated from the new package of price regulations in China that were implemented on the 1st of October. Lastly, you were referring to the European environment continuing to be tough.
I wonder if you're seeing any change sequentially on domestic demand in Europe for your different products. If you could tell us about prospects for the appointment of the new creative director at Vuitton and the plans for Marc Jacobs. Thank you very much.
Good morning, and thank you, Luca, for this question. Let's start with the first one on the new products. As Chris said, we registered fairly strong growth on these new products. This being said, as we said many times, the recent introductions are of products of a certain level of price, which is probably the top end of what we have to do. Although the reception by the client base is very good in terms of impact on global sales, it's not a major thing as we are talking about top-end products.
With regards to the introduction and the shift toward more soft leather product, it's on the way. I said many times that it's not a three weeks process. It's going to take quite some time. It's on the way. There are some product initiatives that you have seen already, some more to come. It's very difficult to comment on a sort of quarterly basis on that type of development. I will not make further comments. As far as the differences by geographies are concerned, you alluded to, I wouldn't say there are any significant differences when it comes to the reception of new product initiatives. We've seen more or less all the geographies reacting the same way. The second question is about Mainland China. The situation there has not changed dramatically since the beginning of the year. We are experiencing the same type of growth.
I don't know whether your question was limited to fashion leather or more globally for the group, growth in Mainland China for the group in Q3 was about 5% in local currency, which is better than what we had in Q2, but which is more or less in line with what we had in the first half of the year. We saw some improvements, particularly in the segment of watches. Fashion leather is more or less what it's been since the beginning of the year. The regulation on travel you mentioned is likely to have some impact, but it's very difficult to know what kind of impact we are going to have. Obviously not on Mainland China because it's likely to have some impact on budget travels, i.e., mostly to Macau and to a larger extent, probably to Hong Kong.
It could have an impact on Hong Kong. What we see at DFS is quite complex to analyze. We have very few numbers to analyze, but it's quite complex to analyze. We see a drop in traffic, but a big increase in shopping per head, which means that probably this regulation eliminates people that would come into the stores but wouldn't shop. It's a bit too early to say, and we shall comment that further later on. Your next question was on Europe. I don't have much to say on Europe. You've seen that growth in Q3 was about 2%, which is exactly the growth we had in H1. No major changes. A bit of improvement in wine and spirits, particularly on the champagne front. The figures are not yet satisfactory, but nevertheless, they are a bit better than what we had. Same thing on watches.
The numbers are significantly better. The perfume and cosmetic business in Europe is a bit under pressure, but still positive. No major changes in Europe in the course of the quarter. Finally, I won't make any comment on the creative director of Louis Vuitton. It's too early to say.
Perhaps if I may ask, the prospect for the Marc Jacobs brand?
Well, we said that with Marc Jacobs concentrating now on his eponymous brand, we think it's a major opportunity to develop the brand further. It has already reached what we think is a critical size, but we intend to grow it much further. We think the opportunity on the contemporary market is extremely strong, and we intend to benefit from it. That's the logic of Marc Jacobs really concentrating on his own brand. That's the logic of it. I don't have further comments to make. We'll unfold the strategy in the months and years to come, and we are very hopeful about the outcome.
Thank you very much, Jean-Jacques.
We have a question from Mario Ortelli from Bernstein. Please go ahead.
Morning, Jean-Jacques. Morning, Theresa. Thank you very much for this opportunity. The first question is about the FX. What do you expect will be the impact of FX on margins for this year? The second question.
Sorry, Mario, I missed that. The impact of FX on?
On margins for this year. The second question is about the performance of the fashion and leather division, especially if you can give us some color on which is the impact of the mix value volume for this quarter, especially for Vuitton. The last question is about America, if you can give us some color about the American consumer and the performance of this quarter, or what you expect for the end of the year.
Okay. Thank you, Mario. As you know, we normally do not comment on margins, but on your question on FX margins, the impact on margins in percentage terms is likely to be neutral to slightly positive for the year. Nevertheless, in absolute terms, it will be negative. I know it's a bit complex. We discussed that many times with you all, but that's the situation in 2013. The hedging gains, which are likely to be pretty high this year, will not offset entirely the negative impact of currencies. Nevertheless, as the hedging gains offset the cost of goods, it has a positive impact on margins in percentage terms. That's the main explanation, which I made many times. Sorry to be technical, but that's the answer to your question. On the fashion and leather, I will not comment in details on value and volume.
What I can tell you is that our growth in Q3 is a bit lower than what we had in the first half of the year. The reason stems from two main things. The first one lies in Vuitton. As you remember, we had a significant price increase in Japan very early in July. I think it was 30th of June or 1st of July. As always, as we announce the price increases two weeks before, you have a boost in sales two weeks before the price increase, and consequently and conversely, a negative impact on sales afterwards. This was pretty significant due to the magnitude of the price increase that we implemented in early July. It had a positive impact on sales for Vuitton. You remember that the Japanese figures in the first half were pretty good.
It had a positive impact on sales for Vuitton in the first half, and a negative impact for the third quarter. That's more or less half of the explanation in the difference in growth in the fashion and leather division in Q3, the rest lies in the non-Vuitton brands, which growth was, in some brands, a little bit softer than what we had in the first half. Some comes from markets being softer, some comes from wholesale being voluntarily reduced. We also had a slight negative impact there. That's what I can comment on the difference in the fashion leather growth in between H1 and Q3. The third question on the U.S. As you've seen, the growth numbers in the U.S. were pretty strong. We had 9% in H1 and 10% in Q3. More or less all the business groups are doing well.
The fashion is doing okay, is doing better than in H1. Wine and spirit as well. We are very pleased with the performance of wine and spirit altogether, but particularly with regards to the U.S. and the cognac performance. Perfume and cosmetic and Sephora are still doing very well. Only watches and jewelry is a little bit under pressure, but it's doing better than it did in the first half of the year. All in all, the U.S. market is an area of robust growth for the group throughout the year and particularly in Q3.
Thank you very much, indeed.
We have a question from Thomas Chauvet from Citigroup. Please go ahead.
Good morning, Jean-Jacques. Three questions, please. The first one on wines and spirits. You had highlighted in July, destocking effects would continue in cognac in the third quarter. Can you comment on the drivers behind this improved sell-in? Secondly, just wondering what's happened in perfumes and cosmetics in the third quarter. What region especially drove that slowdown? On the flip side, it seems from your commentary that Sephora's not [lagging] in China and the U.S. remains pretty strong, could we have the regional LFL for Sephora? Finally, on the smaller fashion brands, I remember there was a lot of margin compression in the first half due to increased investments at Fendi, Céline, [Loewe] et cetera. Are these investments in the brand, in the distribution largely over now and when would you expect these brands to contribute more to the fashion division's profits? Thank you.
Okay. Thank you so much. On the first question on Wines and Spirits and Cognac basically in China. Basically at the end of the quarter, at the end of September, we are more or less in same situation as we were at the end of June, i.e. volume wise depreciations are down about 10% and our selling numbers are flattish. Obviously, we have some price increases, so all-in-all, we registered some increase in our sales but in terms of volumes. So we are basically the same difference in between the two which means that inventories are little bit high in China these days not to un-tolerable levels, but nevertheless little bit on the high side. I was expecting some destocking and therefore some reduction in sell-in in the third quarter which did not really materialize.
Will it materialize in Q4? It is likely, nevertheless bear in mind that Chinese New Year which has some impact in Q4 in wholesale businesses is two week before what it was last year. So it could have an offsetting impact. So it’s as always is very difficult to make any forecast on the sell-in, sellouts relationship particularly in a market like China. As far as perfume and cosmetic is concerned and your question about geographies I would say that mainly there are two areas where the market has proven to be softer in Q3, one is Europe and t he second one is China. We are obviously not talking about the same type of growth as far as China is concerned. We are still very close to double-digit growth.
As far as Europe is concerned, it's quite flat. Only slightly growing. The markets there, particularly in Europe, are pretty difficult. The situation for the time being is not ideal. We are placing high hopes to product introduction, and we expect to do better in the last part of the year, which is awfully important for this business, as you obviously know. Like for like for Sephora, nine months like for likes is 10% altogether in the U.S., about 2%. No major change compared to the numbers I mentioned at the end of June. 2% for Europe.
We are talking about Middle East is 25%, Asia is also 25%, or between 20%-25%. Very strong numbers in the eastern part of the world and in the U.S. Obviously, Europe is suffering from the softness in the main markets. Finally, your question on margins in fashion. I'd rather not comment margins at this point in the year, and I will leave my answer to when we release our numbers for full year.
Thank you.
We have a question from Warwick Okines from Deutsche Bank. Please go ahead.
Good morning, Jean-Jacques. Good morning, Chris. A few questions from me, please. Firstly, could you talk about the growth rate of Vuitton to Chinese consumers in the quarter? I think in the first half you said that growth was running mid-single digit. Just wondering if that had changed. Secondly, could you talk about any other price rises you may have made other than the increase in Japan at the end of June? Have you changed prices in any other territory? Thirdly, I think from the numbers you've given us, that the growth rate in Japan slowed quite sharply in Q3 compared with the first half. You talked about the impact at Vuitton from timing, but was there anything else that drove that slowdown? Thank you.
Okay. Thank you, Warwick. The growth rate with Chinese customer is not really different from what it was at the end of June. It's a bit better. We've seen the touristic activities with Chinese customer being a bit better than it was in the first half of the year. Nothing really significant, and the domestic business is flattish as it's been since the beginning of the year. All in all, we are still mid-single digit plus with the Chinese customer base. Price increase at Vuitton, apart from the one we discussed before, there were no significant price increase at Vuitton in the course of the quarter.
As far as Japan is concerned, it's difficult to isolate the various impacts, definitely the bulk of the drop in the growth with the domestic Japanese client base comes from the boosting, depressing factor of price increase at the end of June, early July, that I mentioned before. I'm not saying that the activity there is otherwise very strong. The activity is soft with Japanese customers in Japan. Nevertheless, the bulk of the drop comes from this impact.
Thank you. Just on price increases at Vuitton, other than, I think, the two price increases you've made in Japan in the first nine months, have there been any other major territories where you've moved prices?
No, we did, I would say, regular price increases in the U.S., in Europe, et cetera, earlier on in the year that we commented before on this course in February, if I'm not mistaken, in Europe, and more or less the same thing in the U.S. We are talking about 3%-4.5% in these various geographies.
Thanks very much.
We have a question from Catherine Rolland, from Kepler Cheuvreux. Please go ahead.
Good morning, Jean-Jacques. I have several questions regarding Vuitton. First of all, could you tell us if Vuitton outperformed or underperformed the fashion and leather goods division? The second point is about Vuitton's performance by regions. Could you give us some color by Vuitton's performance by region with a special focus regarding Japan? Could you tell us what was the sales trend in Japan in Q3, taking into account the negative impact coming from the shift in sales between Q2 and Q3? Also, could you tell us what was the overall sales trend to Japanese customers, including tourists, in Q3? The last question was about the impact of regulation on travel in China.
I just wanted to make clear that when you said that you could have eventually some impact, were you talking only about DFS, or do you think that it could have also an impact on other businesses such as Vuitton, for instance? Thank you.
Okay. Thank you, Catherine. Vuitton slightly, as it was the case in the first two quarters of the year, the growth in Vuitton was slightly below the rest of the division. You know that Vuitton's growth never differs very materially from the division's average, but it was a bit below, exactly as I said in the first two quarters of the year. Vuitton by region, I will not go into too many details, but the U.S. numbers were reasonably good. We had numbers which were a little bit more than mid-single digit in the U.S. Europe as well, due to the touristic activity, particularly of Chinese customers, was in the same vein. Asia was flattish, and Japan was mid-single digit negative in Q3. The sales to Japanese customers at LV since the beginning of the year is slightly negative if we include tourists.
As you know, the drop in the touristic activity with Japanese is extremely significant at Vuitton due to the drop in the value of the JPY. Your last question on the new regulation regarding travels in China, my comment was mostly on DFS, because it affects only the conducted tours. The conducted tours, i.e. people being in buses, is mainly a business that has an impact for DFS in Hong Kong. It could have a marginal impact on other businesses, but the bulk of the impact will be, if any, as I said, it's too early to say, but if any, the bulk of the impact will be on DFS.
Okay. Regarding the sales to Japanese customers, is it true to understand that you had a slight worsening in Q3?
Yes, it mainly comes from the domestic situation where, as I said, we had a shift from Q3 into Q2 due to the price increase.
Okay. Thank you very much.
We have a question from Antoine Belge from HSBC. Please go ahead.
Yes. Hi, it's Antoine Belge at HSBC. Three questions. First of all, I would like you to maybe comment a bit more on the role of Delphine Arnault at Louis Vuitton. She's often referred in the press as being the number two of the brand. What does it really mean? On which area is she particularly focusing on? Also, how do you expect the transition period from Marc Jacobs to somebody else? My second question relates to Vuitton. Assuming that Louis Vuitton did 1% or 2% less than the division average, is it fair to say that the contribution from selling space, mostly coming from enlargement, was in the mid-single digit areas? Finally, could you comment maybe on the champagne harvest and especially the yield, and what could be the impact on the margin from that, especially compared to a very depressed H2 last year? Thank you.
Okay. As you may expect, I will not really elaborate on your first question. Delphine is concentrating on products, will not be replacing Marc Jacobs, but I think it's pretty obvious to anyone on the call already, and that's all I'm going to say. Your question on LV and the contribution of new space, as you know, it's awfully difficult to isolate the contribution of space, particularly when we are talking more about enlargement than real increase in the number of stores. The store count at Vuitton has been stable since the beginning of the year. The growth in space, which is in the same order of magnitude as it's been for the past few years, is mostly coming from enlargement, and it's very difficult to tell what is the impact. On the harvest, a little bit too early to say.
We need a few days, at least, probably a bit more than that. The anticipation, we ended up the year last year with a very low harvest, which was 8,800 kilograms per hectare. A bit early to say again, but we expect to be above 11,000 this year. It should be a much, much better harvest with some positive consequences in terms of profits. As you know, we book the profit on the own harvest, which is one fourth of our volumes, in the year of the harvest and not when we sell the corresponding bottles. It will have a positive impact, which will be all the more positive than we had a strong negative last year, as you remember.
Okay, maybe just two quick follow-ups. First of all, on your comments about the technical impact of FX being actually positive in 2013, is it fair to say that it should be the reverse in 2014? I think last time you commented on hedging for the yen, you had half of your exposure for 2014 booked hedge at around 119 versus 104 for 2013. I'm assuming that the remaining part has been done at rates above 120. Maybe, what would be the most recent average rate for 2014? Also on Marc Jacobs, can you confirm that you're considering an IPO for the brand? What would be the rationale of doing this, since you don't really need cash and as you said, it's one of the most promising brand in your portfolio?
Okay. On the FX, chances are that the impact on margin in percentage terms, again, that's a point I want to stress. The hedging is particularly disturbing when it comes to analyzing margins in percentage terms, which all of you love to do. The impact will be slightly positive this year, and all other things being equal, i.e., not having hedging gains next year in the same magnitude but passing on price increases to customers. Obviously, this would have a slightly negative impact. As far as the rates for the JPY are concerned, for this year, we are 90% hedged at 104, and for next year it's about two-third of the exposure at 121. Chances are that we'll still benefit from hedging gains next year on the JPY, but obviously, to a much lesser extent than what we had this year.
As far as Marc Jacobs is concerned and the IPO perspective is concerned, we are not the only shareholders. Both Marc Jacobs and Robert Duffy are shareholders of Marc Jacobs as well. They've been shareholders since the beginning, and the IPO may enable them to get the liquidity on their shares should they want to, which is not decided yet, obviously.
What is exactly the minority stake in the company?
I cannot comment at this point in time. Next time we'll be talking, I will be able to answer this question.
Okay, thank you.
We have a question from Julian Easthope from Barclays. Please go ahead.
Yeah, thank you very much. Morning, guys. Just three questions from me, if I may. First of all, in terms of the watches and jewelry division, you've introduced two new jewelry ranges. I just wondered how important jewelry was in terms of the growth rates for the division in the third quarter. If you could distinguish that between jewelry and watches, that would be great. Second question is regards to the evolution of the quarter. We hear from others that July was weak and August strong, really due to the shift in Ramadan. September has deteriorated. I just wondered if you saw that trend and if you've got any comments to make on it. Lastly, when it comes to the fashion leather goods division, you've always said that you did about 25% sales logo, 25% other canvas and 25% soft leather.
Has that actually changed materially in this quarter? Where would you see that likely to go in three to five years' time? Where would you actually want your ranges to be? Okay, thanks.
Okay. The watches and jewelry, definitely, I will not go into the details of the respective performance of both segments. Definitely, jewelry did really well. We have double-digit growth in Q3 for jewelry. They did really well. We had some introduction of new collection with Hortensia Chaumet and Divas' Dream at Bulgari, but they really did well. The watch business did better, but not necessarily up to our expectations. We are in positive territory, but we're still suffering a bit, mostly in the U.S. and in mainland China. The rest of Asia and Europe and Japan as well are doing quite well. With regards to your second question on September, I never comment on monthly performance, but there are some differences, but not meaningful ones. I don't think it is particularly interesting to comment on this.
Finally, your question on fashion leather and the objective for leather, I assume that the question is mostly for Vuitton. It's hard to tell, but definitely we think that there is a very big window of opportunity with regards to soft leather, and we expect to benefit from that should we introduce the appropriate-- Setting a goal, particularly in percentage of total sales for such a big company is awfully difficult, I really cannot answer.
Okay. Thank you very much.
We have a question from John Guy from Berenberg. Please go ahead.
Yes, good morning, Jean-Jacques, and Chris. A couple questions from me, please. Could you comment, first of all, in terms of what the impact, if any, has been with regards to the new collections versus the iconic ranges that you have within Louis Vuitton? Appreciate it's very early days. Certainly looking at the new collection ranges, it looks like there's been an average selling price increase across entry mid to high of around 23%. As you said, they've been well-received, but appreciate they're at the high end. That's my first question. Secondly, with regards to wines and spirits, you talked around a rebound within the champagne market, albeit reasonably soft. Could you just elaborate on where you're seeing the strength and by how much has the French market moved?
Finally, in terms of the pricing delta for Louis Vuitton between Beijing and Paris, I know at the beginning of the year it was around about a 45%-47% delta, which moved, I think, to the first half of around 30%. I was just wondering, over the nine months or effectively at the end of Q3, if there's been any material difference or change. Thanks very much.
Okay. Thank you, John. I think I more or less answered on your first question already. The new collections are doing well. They are doing very well at a high price point, therefore they have a marginal impact on global numbers. They are significant in terms of strategy and what we intend to achieve. I've said that many times, but nevertheless, they are not moving the lines. It's too early to say. I will not add further comments on that particular point. On the champagne business, as I said, we've seen some improvement in Q3 compared to the rest of the year. As I said, Europe is a bit better, but still negative in volume terms. U.S. is much better. We've seen some shipments, particularly for Clicquot, and depletions are pretty good for Clicquot and Dom Pérignon. The U.S. market has definitely proven stronger in Q3.
Japan is still very strong. It's a market which is not particularly important in terms of volumes, but in terms of value, as the bulk of what we sell there is Dom Pérignon. In terms of value, it's a very important market, and we are getting very high growth, very strong double-digit growth in Japan. In Asia, which is still at this point in time, an emerging market for champagne, but it's growing very fast as well. That's the global picture for champagne. It's not entirely satisfactory. All in all, our volumes over the first nine months are up 2%, but Q3 is encouraging, we wait and see, but we could have a pleasant surprise for the end of the year. Finally, your question on price difference between Beijing and Paris. If I'm not mistaken, we should be about 27%-28% premium in between Beijing and Paris.
The price differential, which was much higher a year ago, was reduced by price increases in France, but also by the fact that we didn't increase prices in China, and we had a little bit of a drop in the renminbi. Not a major one, but a little bit of a drop in the renminbi. At this point in time, the price differential is what is, in our view, justified by the difference in taxes and in landing costs .
Okay, great. That's very helpful. Thanks. Maybe just one follow-up, please, just on the watches and jewelry. You talked around watches, highlighting some softness, certainly at the wholesale level in terms of reordering in the U.S. and mainland China in particular. Towards the end of the quarter, have you seen any potential shift or sort of exit rates looking like they're improving? Certainly, export data for mainland China and Hong Kong gets very soft within the months of September, October, and December in particular. I was just wondering what your thoughts are going into the fourth quarter.
Well, it's difficult to be that precise. I would say that the mainland Chinese market is proving very soft, but the peripheral markets like Hong Kong and Macau, particularly, are quite strong. It's difficult to look in the next two to three months to figure out how the year-end will be. It is unlikely that this growth differential will be very different in the last part of the year.
That's very helpful. Many thanks.
We have a question from Julian Easthope from Barclays. Please go ahead. We have a question from Matthias Eifert from MainFirst. Please go ahead.
Yes, Hi, Matthias Eifert from MainFirst. First question on Fendi. Was that a drag on your performance in the third quarter? Could you tell us when you think the other wholesale cleanup and so on will be finished? Could you comment on the space growth trend for LV in the first nine months? You touched on it earlier briefly that there were no store openings, but roughly a figure would be very helpful to get here. Thirdly, on Bulgari was there still an impact of the de-emphasis of the cosmetics line in the third quarter for the watches and jewelry division?
Thank you. On Fendi, as you know, we don't comment on individual brands. The retail performances are pretty good. Exactly as we said before, wholesale figures, wholesale numbers are a bit under pressure as we decided to reduce the wholesale business at Fendi. Nothing really different from what we've seen since the beginning of the year, although we can comment that the openings in Milan and Paris did very well and are strong contributors to the brand. Space growth at LV is about high single digit, as it's been over the past few years. As far as Bulgari and perfumes and cosmetics are concerned, the situation, which was highly negative in the first six months of the year, was much better in Q3 due to introduction of some new products or new development of existing lines.
We moved from the negative into the positive territory for the perfume and cosmetic, and at the same time, Bulgari improved its performance for watches and to a lesser extent for jewelry, which was already pretty good with double-digit growth.
Excellent. Thank you.
We have a question from Paul Swinand from Morningstar. Please go ahead.
Good morning, Chris and Jean-Jacques. Thanks for taking the questions. Wanted to drill down or maybe get some more color on your comments about the spirits and cognacs in China. You said that you had a discussion earlier with the sell-in, the sellout. Is there any more color on the product type or is it pretty much across the board? In other words, is the high-end doing better? Are there certain types of spirits that are maybe softer and dragging the category down?
It was very difficult to hear your question. If I'm not mistaken, your question is about growth in China and whether there are some differences between high-end and other categories, right?
Correct. I was talking in the cognac, but you could comment on either.
Cognac.
Cognac.
On cognac. Right. No, there are no major differences. If you look at depletions since the beginning of the year, XO and VSOP are showing more or less the same type of drop, around 10%. What I may comment, nevertheless, is that we've introduced for the nightlife, mostly on trade, a new category, which is called Classivm, which is less expensive and therefore more for the young customers, which is doing extremely well. We are growing very fast from a small base, obviously, but growing extremely fast. That's the only comment I could make, but otherwise, the performance is more or less the same across the board.
The product that you're mentioning for the younger consumer, is that a new product?
It's Classivm.
I'm sorry, can you hear me? I said, has it been the fast growth is from new products?
Is the fast growth from new products? Is that your question?
Correct. You said it was for a younger consumer.
Yes. That's the product where we get the fastest growths from a small base, but we get the fastest growth there. Yes.
Understood. Thank you very much.
Thank you.
We have a question from Christopher Walker from Nomura. Please go ahead.
Yes. Good morning, guys. Just wondered if you could comment on your marketing strategy at LV. I've seen some changes in how you're portraying the product given the evolving product strategy there. Just wondered on your interpretation of the initial success of that marketing policy and how that may evolve over time. Secondly, just online trends. Just wondering if you could comment on online traffic and conversion rates sort of globally and across the group, really. Thank you.
Well, the question on marketing strategy at LV is a bit broad, so it's pretty difficult to answer that. We already touched upon the product strategy and the opportunity in soft leather. You've seen a shift also in the communication strategy of Vuitton, which you've seen in the magazines and the newspapers, I don't think I have to elaborate further. As far as the distribution strategy of Vuitton is concerned, I also alluded to the fact that the emphasis is on enlarging the stores as opposed to multiplying the number of stores in the various geographies. In two minutes, that's a little bit the summary of the marketing strategy of Vuitton. As far as online is concerned, the trends are pretty good across the board. I would say at Vuitton in particular, but across the board we see e-commerce being very positive, but a small base.
We don't feel that e-commerce could be a very major part of the business for all the brands. Nevertheless, growth rates are pretty significant and justify the investments we have already made.
Perfect. Then maybe just a quick follow-up on Vuitton, given the shift towards soft leather from a manufacturing perspective. Is there significant investment needed in the supply chain and the production of that product as you shift from canvas to leather over time?
Well, in terms of capital spending, not really, but nevertheless, manufacturing soft leather bags and canvas bags are not exactly the same manufacturing techniques. It's much longer, obviously, to manufacture, to produce a soft leather bag. We have to adapt to that and improve the productivity up to the level we had for other categories. It takes time, but the big challenge is mostly on the supply of quality leather, which is a scarce resource for the time being, and that's the biggest challenge that we have for this year and for next year.
Okay. Do you think that's causing some restrictions at the moment in terms of that supply?
Yes, definitely. Without supply concerns, we would certainly produce and sell much more than what we do. As I said before, these things will not take three weeks. It takes a little bit of a while. We are talking about a very, very large company, and moving the lines and the numbers in such a large company takes a while.
Sure. Thank you very much.
We have no more questions.
Okay. I think that can conclude our call. Thank you very much for listening. The next formal meeting will be for the results at the beginning of next year, but I'm sure I'll speak to you between now and then.
Ladies and gentlemen, this concludes the conference call. Thank you all for attending. You may disconnect.