Welcome to the LVMH first quarter 2016 revenue conference call. I will now hand over to Mr. Pratt. Sir, please go ahead.
Hello, I'm Chris Pratt, Director of Financial Communications at LVMH. 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 quarter of 2016. 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, let me remind you that any information to be discussed on this call is forward-looking and subject to important risks and uncertainties that could cause actual results to differ materially from these. I refer you to the safe harbor statement included in our press release. I turn now to yesterday evening's announcement. Hopefully, you all had the chance to read our release, which was issued in both French and English.
As always, it's available on LVMH's website, www.lvmh.com, as are the slides we're using to guide today's discussion. We'll start with the first slide number one on the left, which gives you the key revenue highlights for our first quarter performance. We see Q1 as a good start to the year in the context of a challenging and unstable environment. We delivered 3% organic revenue growth, driven by the U.S., Europe, and Japan, while experiencing volatile trends in the rest of Asia. Taking in the business units, we saw continued creative momentum at Louis Vuitton and a concentration around new product lines at the other fashion brands, particularly those based in the U.S. Within our wines and spirits business, champagne showed strength in Europe, and cognac continued its momentum in the U.S. while gradually recovering in China.
Among our perfumes and cosmetics business, Parfums Christian Dior was the highlight, delivering an exceptional performance. In watches and jewelry, TAG Heuer is successfully refocusing its strategy, and the jewelry brands demonstrated robust performance during the quarter. Finally, within Selective Retailing, DFS was affected by the unrest in Hong Kong and Macau, while Sephora continued to build on its very strong momentum. For the first quarter, turning to slide two, total revenue rose 4% on a reported basis to EUR 8.62 billion from EUR 8.32 billion in the prior year. It includes, as I mentioned, a 3% rise in organic revenue and a 1% structural increase from the integration of the Beautystep and Le Labo in other activities. While there are some currency impacts on a business group level, the overall impact on the group level was small.
Turning to revenue by region, we continue to have a well-balanced revenue mix across geographies. As you can see on the map on slide three, in EUR terms, Asia, including Japan, represented 37% of revenue for the first quarter. Of course, always a little bit boosted by Chinese New Year in that region. Europe, including France, accounted for 26%. The U.S., including Hawaii, represented 25%, and the remaining 12% related to revenue from other markets. In terms of change relative to last year's third quarter, organic revenue rose on a geographical basis in EUR terms in both U.S. and Japan. Europe also delivered growth with a 6% in U.S. and Japan. Europe also delivered the growth with a 7% increase, while the rest of Asia saw a 2% decline.
Similar trends to what we saw in Q4, with slightly higher growth in Europe and U.S. being offset by Japan, where the JPY strength at the end of January had an impact on tourist flows. Let's look more closely at each business group, starting with wines and spirits. Organic revenue grew 6%, with the total revenue rising to EUR 1.3 billion from EUR 992 million in the first quarter of last year. On a reported basis, this was up 4% after taking into account a 2% negative currency impact. If we break this down by champagne and wines, in champagne and wines revenue grew 2% on an organic basis and with a negative 2% currency impact to EUR 201 million in the first quarter of this year compared to EUR 197 million in the year prior.
Revenue for cognac and spirits saw a 7% increase in organic growth after a negative 1% currency impact to reach EUR 633 million compared to EUR 595 million in the year-ago first quarter. Looking at champagne and wines, volumes in the champagne business were down 1%. In organic revenue terms, we saw growth in Europe, partly offset by the impact of the performance in the U.S., primarily due to the timing of price increases. In wines, we continue good organic growth driven by positive pricing effects. In cognac and spirits, Hennessy volumes were up 8% for the first quarter, reflecting continued strong momentum in the U.S. We're also encouraged to see a gradual recovery of cognac in China, with sell-out trends in February looking healthy. However, as we have seen in the past, it is always dangerous to extrapolate the first quarter trends. Both Belvedere and Glenmorangie demonstrated sustained growth.
Moving on to fashion and leather goods, slide seven. This business group was flat for the quarter, both on a reported and organic basis. Revenue remained basically steady at EUR 2.97 billion versus EUR 2.98 billion in the year ago period. To give you some color on fashion and leather goods, this group experienced continued growth in Europe except France, where popular tourist destinations saw a marked decline in traffic in the quarter. Japan continued to grow, albeit at lower rates. The U.S. continued to be impacted by the ongoing changes at our U.S. brands. Finally, the rest of Asia remained a challenging region, even though there were some signs of improvement. At Louis Vuitton, the brand continued its creative momentum with its new models well received during the recent shows and continued success of its historic leather goods lines.
In addition, the brand's new B.zero1 collection and jewelry and precious watch collection were positively received. Among the other fashion brands, Fendi showed solid performance in its leather and ready-to-wear lines. Loewe continued its focus on exceptional quality products, and Celine demonstrated good momentum due to the successful development of new segments, including shoes and small leather goods. Following the discontinuation of the DKNYC and DKNY Jeans lines at Donna Karan at the end of last year, as well as the more recent label changes at Marc Jacobs, had a negative impact of around 2% on this business group's growth. For our Perfumes & Cosmetics business group, slide nine, revenue reached EUR 1.21 billion compared to EUR 1.13 billion in the first quarter of 2015. This reflected an organic revenue increase of EUR 0.90, offset by a 2% currency impact, bringing revenue growth for the quarter to 7% on a reported basis.
I should note that the 2015 figures have been adjusted to take into account the reclassification of Kendo from Selective Retailing to Perfumes & Cosmetics. The performance of this business group, this is slide 10 now, was boosted by the strong momentum of perfumes and makeup in Europe and in the U.S. Christian Dior's new Sauvage fragrance continued its success, the new campaign of the iconic J'Adore fragrance through the launch of J'adore Eau Lumière has been well received. There has also been a positive response to the new Poison Girl fragrance and good performance from the Dior Addict makeup line. During the quarter, Guerlain launched La Petite Robe Noire makeup line, its Orchidée Impériale skincare line showed solid progress linked to the celebration of its 10-year anniversary. Guerlain also opened its first fragrance-only shop on Le Bon Marché in Paris.
Parfums Givenchy saw continued progress in its makeup lines, Benefit continued its innovation in makeup with products such as their Airbrush Primer and Dandelion shining liquid highlighter. To finish up with the highlights of this group, both Make Up For Ever and Kendo's portfolio of brands, and notably Kat Von D Beauty, are enjoying rapid progress. Looking at our Watches & Jewelry business, slide 11. Revenue in this group was EUR 774 million compared to EUR 723 million in first quarter last year, growing 7% in the period on both an organic and reported basis. The growth this quarter in Watches & Jewelry has essentially been driven by progressive recovery at TAG Heuer and continued growth in jewelry. After the successful repositioning last year, TAG Heuer's connected watches attracting a younger clientele and its core offering is gaining momentum.
This is expected to continue into the second quarter given the success of the Baselworld watch fair. There was also a solid performance in jewelry with all brands contributing to this growth. The successful new B.zero1 collection in its renovated London Bond Street flagship store, together with showroom success, particularly in Asia, were among the highlights in the quarter. The Selective Retailing was up 4% on an organic and reported basis to EUR 2.75 billion from EUR 2.65 billion in the year ago period. It was truly a tale of two very different themes. Sephora, this is slide 14, delivered very solid organic revenue growth overall and a double-digit comparable store increase in North America and the Middle East, as well as in Russia and Southeast Asia. In addition, the brand continued its robust online sales growth.
During the quarter, Sephora continued to expand its store network, opening locations in Europe, Asia, and the U.S., and launched e-commerce in Southeast Asia. DFS was impacted by the continued challenging market environment in Hong Kong and Macau, but showed good performance in Japan, where it benefited from Chinese tourism. It also opened a new T Galleria in Siem Reap in Cambodia in March. Overall, LVMH delivered good performance against a challenging economic backdrop. All our businesses contributed to growth in the first quarter, with the exception of fashion and leather goods.
Which was affected by lower tourist flow in France and the discontinuation of certain product lines. The group continued to benefit from both its business and geographic diversity, going forward, we'll continue to focus on innovation and creating high-quality products while selectively expanding our store network as we pursue our objectives of increasing our leadership position in the global luxury goods market. Thank you. With that, we'll take any questions you might have. Laurent, please could you open the line?
Yes, sir. Ladies and gentlemen, if you wish to ask a question, please press zero and one on your telephone keypad. We have the first question from Mr. David Dunnia from BCG. Please go ahead, sir.
Hi, everyone. Two questions, please, on LV. Just to better understand the drivers behind the slowdown in Q1, have you seen a renewed weakness of the local demand in your main markets, Europe, U.S., and China, or the slowdown we had in Q1 is only attributable to fall of tourist spending? If it's the case, can you share with us the current weight of tourist spending at LV total sales, please, especially in Europe? I have a second question on pricing. It seems that you didn't implement any price increase so far. Are you planning something for the rest of this year, maybe some price increases in Europe too, to reduce the gap versus China, for example? Thank you.
Thank you. On the weakness or potential weakness in local markets, the answer is definitely no. What we've seen in the U.S., in Europe, and obviously, to a lesser extent in Asia, but it's true as well in China, is a fairly strong resilience in some areas like Europe, some significant growth of local customers. Basically, the limited slowdown that we've seen in Q1 comes mostly, and this is not a surprise unfortunately for all of us, from the tourist flows and the slowdown in tourist flows, particularly from the eastern part of the world into the western part of the world. The share of tourists at Vuitton, I think it's about 65%-67%.
It is obviously higher in some areas, like Europe, where it's a mixed mix overall of 50%, and some areas like the U.S. and Japan, although as far as Japan is concerned, the share of tourists is growing. In some other areas, the share of tourists is pretty small, below 10%. Price increase, we are not going to disclose our price policy. You're absolutely right in saying that we have not increased in the main areas. We have not increased our prices. We made a few tactical price increases in areas where our currencies have been particularly weak, otherwise, we didn't do anything. We don't rule out, we have no plans, no particular plans to announce here.
Okay.
We have another question from Mr. Warwick Okines from Deutsche Bank. Please go ahead.
Good afternoon. A question about the threat from the discontinuation of the some U.S. lines in the quarter. Firstly, do you see this threatening Q4 or would any activity really begin to hit Q1? If so, do you expect the same sort of quantum of drag over the next couple of quarters, please? Thank you.
Thank you, Wally. Actually, at Donna Karan where we discontinued both the DKNY Jeans and the DKNYC, we started doing that about December last year. The drag in Q4 was extremely limited last year. It is much more significant in Q1 of this year, obviously, the impact will last till we universalize the discontinuation of these lines end of the year. As far as Q1 is concerned, we estimate that the impact on the division altogether on the group, the Fashion and Leather group business, was about 10%. Absent this discontinuation of lines, it would have been 2% instead of zero. It's quite significant and will prevail most of the year.
Presumably in Q3, a little bit more than other quarters because it's more of a wholesale quarter. Is that fair?
Yes. If you look at it in the global context of Fashion and Leather, it would be some differences, talking about 30. It's a bit complicated, but you're really right, yes.
Sure. If I may, one more. Can you comment also on cognac price rises during the quarter, if you made any? Thank you.
No, we didn't. We will probably do something in Q2, but not in Q1.
Thank you very much.
We have another question from Carole Madjo from Raymond James. Please go ahead, madame.
Hi, good afternoon. A few questions from me, please. The first one, impression on Leather Goods. Can you provide more granularity on this quarter regarding the performance month after month? Are you seeing an improvement in March versus February, especially in France? My second question is on Cognac. Can you give a bit more details regarding the Chinese New Year? You mentioned during the presentation that the sell-out trends were quite healthy. Lastly, in watches and jewelry, can you confirm that Bulgari is growing double digits? Do you expect Bulgari to maintain such a nice pace of growth? Thank you.
The first answer to your question is no, we are not going to provide you with the detailed monthly numbers. We use quoted figures, so we don't have to go into further detail. What I can tell you as far as France is concerned, and as far as Vuitton is concerned, because Vuitton is the brand obviously most affected by the change in tourist flows in France, is that we don't really see any improvements as of today. It will take a while. After the terrorist attacks of November, it took a while before the impact was felt. Once it's felt, we know that it's going to take a few additional months to normalize. As far as Chinese New Year for Cognac is concerned, we are quite happy with the sell-out numbers for Chinese New Year.
The Chinese New Year started a little late, nevertheless, altogether, we ended with pretty good performance. As far as LVMH is concerned, we did positive around mid-single digits for Chinese New Year. As far as RiSO is concerned, better than that. I don't know whether we can extrapolate this, but the start of the year for RiSO is great. As far as watches and jewelry and Bulgari is concerned, as you know, we don't disclose precise figures on brands, and I don't know where you get the idea that Bulgari was double digits. We did much better with Bulgari in Q1 than in Q4. Q4, as you remember, had a marked slowdown for the brand last year.
Q1 was much better, particularly strong with jewelry, a little less so with watches, we know it could potentially turn around because it is only one quarter that really became the question last year, nevertheless, a good improvement in Q1 this year.
Thank you.
We have a question from Luca Solca from Exane BNP Paribas. Please go ahead, sir.
Good afternoon. I was wondering whether you could give us a sense of demand by nationalities, irrespective of where this demand is emerging. I understand that the terrorist attacks had an impact in Europe, a negative impact in Europe. I wonder what you're seeing on the main nationalities, especially the Chinese and the Americans, and the domestic Europeans, if you could give us a little bit of granularity on that one. Secondly, you are in transition on two brands within Fashion and Leather Goods, as you confirmed today, between Paco Rabanne and Marc Jacobs. I wonder what prospects you see for them to reach a new normal, and when you anticipate that this could happen, if this is something that could be seen in 2016 or whether it will take longer. Last but not least, there seems to be strong momentum in some of your watches brands.
I was wondering whether you could help us understand the different dynamics in that division between jewelry and watches. Thank you very much indeed.
Thank you, Luca. Demand by nationality, no dramatic changes compared to Q4. With RiSO, Chinese demand being flattish. It was a bit more positive in Q4, and it was flattish in Q1, both at home and as far as tourist markets are concerned, whereas we had a significant discrepancy between the two last years. That's probably more the new thing. It's more balanced as opposed to what we had last year. As far as American customers are concerned, it's more or less the same trend as the one we had last year. For European customers, it's more complicated to measure, and I'm obviously answering on Louis Vuitton because it's the only brand where we can measure it with some accuracy. Even for them, it's quite complicated to measure.
We've seen some pretty strong numbers in Italy, in the U.K., even in France, besides the drop in the touristic market and what happened at the end of last year. We know, we see even in Japan was all right. We are talking about losing a digit growth in their customer base, it's not that bad. We're seeing domestic client base being reasonably strong in Q1. The question on the contemporary brand on DKNY and Marc Jacobs and the prospect for a new normal. It's obviously a very difficult question. The only thing I can say is that I would say two things. One is that as far as 2016 is concerned, we are doing according to our expectations. Collection after collection, we're seeing volume of business being in line with budget or even exceeding it. It's quite encouraging.
That being said, that type of turnaround doesn't take two seasons or two quarters. It takes longer than that. As far as 2016 is concerned, we more or less know with the bookings what we are going to do. I can qualify this as a start of a turnaround because it's done according to our plans. Maybe we are happy to continue, numbers will be lower than last year. It's a different perspective on that. I don't think we will see a marked improvement before 2017 anyway. As far as watches and jewelry is concerned, as you said, the momentum for watches, and particularly for TAG Heuer, it's quite strong. It didn't start yesterday. It's some improvement in the offer that we have started a few years, a couple of years ago.
We are, I think, getting the benefit of the repositioning, the lowering of prices of the brand, even the U.S. market, which was quite difficult, which has been quite difficult for some years, is improving now. We are pretty pleased with the turnaround of TAG Heuer. There is some way to go. We are okay with as far as TAG Heuer is concerned, it's a very small portion of the LVMH business, unlike other brands. It's very encouraging. As far as jewelry is concerned, I've said, or I made a few comments already, the jewelry business is still doing very well. I'm talking about basic jewelry, so that the Terracotta introduction, all the things that we have done in the first quarter of the year are working extremely well.
The watch business is still, particularly the female watch business, is still a little bit under pressure as it was toward the end of the year. The Novelty are doing okay, the lines are still limited. It's not a catastrophe apart from that, although, we registered significant growth for the brand, definitely a big contrast between jewelry and watches.
Understood. Thank you very much indeed, Jean-Jacques.
We have another question from Mr. Antoine Belge from HSBC. Please go ahead, sir.
Hi, it's Antoine Belge from HSBC. Three questions. First of all, I'd like to come back on your comment about the impact of the non-LV brands on fashion and leather. I appreciate the comment, especially on the U.S. lines. Presumably, other brands like Celine, et cetera, are probably doing quite well, too. What I'm trying to get at is, as the delta of the beginning of the whole has been -3%, if we compare Q1 2016 versus Q4 2015, is it fair to say that the delta has been more subdued for the LV brand? My second question is regarding how we should think about the basis of comparison for fashion and leather in Q2. I think there is a bit of a debate amongst investors.
Some people are, I think, quite swayed by the fact of last year being +1% in Q1 and +10% in Q2. For some people, it could be just a sort of mirroring the previous year because of the price increase that happened in April 2014. Actually, would you advise us to be cautious as well because you had a big benefit from tourists flow, especially in Europe, in Q2? If that's the case, are you taking a more cautious attitude on costs, especially at Vuitton? On Champagne, the first quarter seems to have been impacted by a bit of timing difference on volumes. Are you still confident about this full year? Champagne has been a steady business over the last two years. Basically, are you expecting a catch-up effect later in the year on Champagne? Thank you.
Thank you, Antoine, for your three questions. As far as LV is concerned, if I get you well, you want me to give you the difference in the growth of LV in Q4 and Q1, which obviously I'm not going to give you. There was a bit of a slowdown at LV as well. There is a slowdown for the division, which in my view is mainly attributable to particularly the Kenzo and Margiela, as I mentioned before, as well as access to Margiela. There was also a little bit of a slowdown, maybe less so at LV, which is mostly coming from Paris. I would say we have had a little bit down in Paris with Vuitton. Not surprised to that. Paris is an important place to do business for Vuitton.
We may have recovered a little bit of this outside France, although it's not obvious because most tourists would not only visit France, but they usually visit other countries as well. The impact is strongly felt on a multi-country basis. There was also a little bit of a slowdown at Vuitton. That's all I can say on this at this point in time. The basis for comparison in Q2, you know the numbers, the only way to answer your question is to look at two years. Numbers in the Q, which has the benefit of erasing the impact of the VAT changes in 2014, which created a low growth environment in Q1 2015 and a high growth environment in Q2 2015, which is a distorted comparison base. Over three years, it's more or less the same type of growth.
I don't think we should bother too much about all that. What is important as far as the company is concerned is to look forward and to try to benefit from, to manage the business with the current environment, as opposed to really looking at the comparison base and what happened last year, where there was a VAT increase impact in sales in 2015 numbers as well. As far as Champagne is concerned, yes, there is a little timing issue in the comparison base, as last year we had a price increase in late March or early April. As always, when this happens, particularly in the U.S., there is a big pickup in volumes in both filling and sell-outs before the price increase. We don't do that this year. Maybe there will be a price increase a bit later on in the year. It's not decided yet.
The comparison base was a bit affected, hence the flat to slightly negative volumes for Champagne. We remain pretty optimistic for the rest of the year for Champagne. The European business is doing okay. The Japanese business is also doing okay. The U.S. business will certainly normalize after this strong comparison base in Q1. It will normalize for the rest of the year. We are pretty good about the Champagne business.
We have another question from Mr. Thomas Chauvet from Citigroup. Please go ahead, sir.
Good afternoon, Jean-Jacques, Chris. I have three questions, please. The first one, at Vuitton, you seem quite happy about the pricing, the product perception after several years of re-engineering and subtle changes. Can you perhaps give us some qualitative comments on what kind of categories did well between the small leather goods with the more affordable price points, the classic canvas bag, I think you mentioned that did very well, and the higher-end leather bags, on which you communicated a lot in the past. Are you seeing differences in price points, tangible differences? Secondly, on Japan, I am just trying to understand what happened in Q1. I know the two-year comparative was tough because of the spike ahead of the VAT increase two years ago, but the one-year comp wasn't. Are you seeing an underlying demand slowdown with the local clientele?
Are you seeing a moderation in tourist demand from Chinese, given the stronger Japanese yen? We saw a slightly weaker tourist trend into Japan from Chinese versus January, for instance. Thirdly, on DFS Hong Kong, can you comment perhaps on traffic versus average basket? Are you still seeing a less sophisticated shopper into this channel? Given the uncertain outlook for that business, when are you thinking of starting the discussion about the renewal of the Hong Kong effort? What would be a trigger for you to stay there other than a rent reduction? Thank you.
Thank you, Thomas. On the growth differences in different price points at Vuitton, I will not go into detail. The only thing I can tell you is that if you look at the product range for leather goods, irrespective of canvas, leather goods, soft, etc. The only category that did really much better than the rest on a consistent basis is small leather goods, which is a very important category for us. It did really much better because it did the same in Q3 and Q4. It is really, I think, a trend. Definitely the small leather goods portfolio for Vuitton is doing very well. For the rest, I cannot go into details. There are pluses and minuses, even within comparable price brackets. There are some lines doing better than others at a given moment.
We don't rely on three different models with a lot of products in the stores. There are pluses and minuses. It's very difficult for me to give you a trend in that apart from really the consistent outperformance of small leather goods.
If I may, just as a follow-up, sorry. On small leather goods, which are, if I understand correctly, mainly canvas generally and quite affordable price point. Is it a way for you to attract new type of customers to the brand? Or is it just a trading down from your existing clientele that is interested, maybe, in some more dynamic categories like wallet, purse, et cetera? Just trying to understand the strategy behind that.
The strategy is to have a range of affordable products with high attractiveness. Trading down is not something we have in mind. Bear in mind that For the price of a wallet that usually you could buy a bag at some other brands. It's affordability, it's high quality, it's lovely design, sort of ABC, et cetera. It's high value, and that's what we are trying to develop with small leather goods. It's been there forever, but with, I think, new creativity, new design in this part of the portfolio of products, and it works very well. The strategy is to have a very convincing accessory portfolio of products, and it works well. That's the strategy behind it. It's not trading down, it's not anything like that. That any expression of the brand that we do should be convincing, and this is positively convincing.
The proof is the reaction from the customer base. Your question on Japan and China. In Japan, we had, as I said, flattish domestic customers. In Q1, the tourist flows were still growing, obviously, not necessarily at the same growth rate as the one we had before, because when you look at only a few years back, this trend was non-existent. Obviously, you get triple-digit growth for a while, and then it slows down. In terms of millions of euros being added to the business in Japan, it's quite significant, and we are pretty pleased with the growth of the touristic business in Japan. You're right in saying that the Japanese yen became stronger toward the end of the quarter. It's a bit early to assess the consequences of this strengthening in the Japanese yen versus the euro. Finally, your question on DFS.
It's still exactly the same. We see traffic is all right and the revenue per [Foreign language] declining. That's been the situation for quite some time in Hong Kong, and we see no signs of change in the future. As far as the airport is concerned, the only thing I would say is that the maturity or the expiry of the current concession is 2017.
Thank you. We have another question from Mr. Fred Perez from UBS. Please go ahead, sir.
Hi, good afternoon. Two questions for me, please. Firstly, within Vuitton handbags, if you exclude small leather goods, could you add some color around how much the handbag growth is driven by higher ASPs compared to volumes? Secondly, yesterday we heard from Prada on their conference call that they're looking to bring in new products with a harmonized pricing range of less than 10% between regions. I'd be interested to get your latest take on how you feel about your current regional price gaps. Thank you.
Well, on your first question, the day our competitors will provide us with the information, I guarantee you that I would answer the question. Unfortunately, I will not comment on this. It is obviously way too sensitive from a commercial viewpoint. I'm sorry. As far as price range is concerned and the 10% price range on a worldwide basis announced or commented, I would say, yesterday, I'm not really in a position to comment on competitors' decision or plans. The only thing I would say is that as far as we are concerned, I think that the 10% global range is too narrow to cover tax differences in different countries. There are countries where you have no taxes at all, and there are countries in which you have a lot of taxes, like China, for instance, you have import duty, you have VAT, you have consumption tax, et cetera.
Having a 10% price range, if this price range applies to prices available to clients, not to net prices, to those prices available to clients in stores, it's obviously, in our view, not applicable, but I don't have enough details to give you comments.
We have a question from Madam Catherine Roland from Kepler Cheuvreux. Please go ahead, madam.
Yes, good afternoon. Catherine Roland with Kepler Cheuvreux. I had two questions, actually. First of all, regarding Vuitton sales to Chinese customers, I understood that there was flattish in Q1, but I didn't get the sales trend to U.S. customers. Could you just remind us what was the sales trend? And my second question was about the disconnect in growth of around 7% in Q1. Could you give us more color about the split between the customers that you had in the U.S. and the one that you had in China, please? Thank you very much.
Okay. For the U.S. customer, it's single digits. Sorry, I was looking at my memory when you asked your second question. Your second question, for Cognac in the Bottega is correct?
Yes, Cognac. Yes.
Okay. Gotcha.
Sorry.
Yeah. Cognac in the U.S. is up almost double digits in volumes in Q1, more or less in line with the trend that we've seen. We ended the quarter with a very low level of stock with our distributors. We'll see how we manage the replenishment of this in the months and quarters to come.
Okay. About selling sales trend in mainland China, do you give any color?
Well, it's quite positive for if so, let's talk for VSOP. VSOP last year, we still had very substantial numbers of big outlets on trade that we closed March, April last year because they were unprofitable. Beside the volumes were already down last year in China, we still had some unprofitable business that we decided to discontinue from March, April onward last year. The comparison base is still a bit unfavorable in Q1, but will normalize as of Q2. Seven months slightly down in China. I commented already on sell-outs.
Okay. Thanks very much. Just to come back to the U.S. customers trend in Q1, was there any changing trend versus Q4? Did you see any slight deceleration from U.S. customers?
Yes, a little bit, but nothing significant enough to call it a trend and to comment on it. Thank you.
Okay. Thank you very much.
Thank you.
We have another question from Mr. Oliver Chen from Cowen. Please go ahead, sir.
Hi, this is Courtney Wilson on for Oliver Chen today. Thanks for taking our question. We just had a question on Sephora in the U.S. Are you planning on accelerating the store openings in the U.S., and how do you feel about the current size of your U.S. store base? Thank you.
Well, thank you for your question. Accelerating, I don't think so. I mean, over the years, the U.S. market for us is absolutely fantastic and has been absolutely fantastic for five or six years in a row. We have developed our capability at Sephora to open more stores and to be more efficient in this respect. Sometimes, more is too much, and we think that we're already opening about 40 to 50 stores a year at Sephora in the U.S. It's a lot. It's a lot of work, and it's a lot, not to be in pace, if you see what I mean. I think we should speed up the process of opening a store when they're opening in the wrong places, and that's certainly not advisable.
We are pretty happy with the capability of Sephora to manage their store base and store count in the U.S. We are not asking them to speed up the process. As far as the total store count is concerned, there are obviously questions as to how many stores we could have in the U.S. We currently have about 350 or a little bit more than that in the U.S. We can certainly open many more, particularly if we manage a different format. It's pretty early to give more precise numbers there.
Thank you. Best of luck.
Thank you.
We have another question from Rogerio Fujimori from RBC Capital Markets. Please go ahead.
Hi, two questions. First on fashion and leather in Asia. I just wonder if you could comment on sequential trends you're seeing in mainland China, Korea, and rest of Asia in Q1. The second, could you give an idea of about the level of growth you're enjoying Sephora online and how much online accounts for Sephora today? Thank you.
You don't really expect answers on the second question. You know that we don't communicate that. Same answer as the one on handbags, that we don't previously communicate very sensitive information from a competition viewpoint. I will not comment. As far as mainland China and the rest of Asia is concerned, I didn't hear the beginning of your question, but I suspect it's for fashion and leather. We've seen growth rate being almost flat there for Asia in the first part of the year. China being a little bit better than Asia. Obviously, Hong Kong and Macau are still a bit down for the main brands. Korea is definitely the bright spot of Asia. Prices are particularly favorable there due to the level of the Korean won, so it helps the business a lot. Singapore is doing okay. Australia is doing very fine.
Basically, I think we mentioned in the press release that there is a contrasted situation in Asia that we have. I mean, we have a slightly flattish situation in mainland China, Macau and Hong Kong going down, and some pockets of growth like Japan, Korea, Australia, and Singapore to a lesser extent.
Okay, thank you.
Maybe one last question.
Yeah, we have a question from Dan Janiera from Macquarie. Please go ahead.
Hi, good afternoon. Thank you for taking my question, this last one. Just on indication, maybe a follow-up on the previous one, on the performance of ready-to-wear versus accessories. Then a comment on a maybe longer-term view. A few times in the past, you gave the indication that the growth of Bulgari is related to brand-specific strengths and also the gain in accessories. You mentioned that division outperformed. Obviously, there is still strong Bulgari growth after two years of outperformance due to innovation. Any color on that would be appreciated. Thank you.
Well, growth in a brand like Louis Vuitton, like many other brands, it is a strong equation between product introduction and strength of the brand. I think this is not obviously achievable in two quarters, but it comes from a very long history of product introduction and brand management with the brand under our own management and under the previous owners' management. The brand is very strong. I think we made it clearer for the customer, the Louis brand and the product introduction, be it Oshea, be it Nudia, be it the Anki lines, et cetera, are a strong expression of this brand. Obviously they found their customers and the strong business has been realized. On top of that, really the personalization of the store network, I think this explains the strength of the brand over the last two to three years. It is an ongoing process.
It's a never-ending process, I would say. We still have to include the brand, we still have to include the network and to launch exciting products and things like so.
Thank you. The ready-to-wear accessories?
I'm sorry. Ready-to-wear accessories? What is the question? I didn't get the question.
Yeah, what's the performance differential gap between ready-to-wear and accessories in the fashion analytics?
Ready-to-wear accessories in the fashion analytics. Sorry, I didn't get that. What's the difference?
In the whole-
Are you talking about performance?
Yes.
Well, I cannot comment on the other businesses in that sense. We don't consider it's a term, but if you put some of the goods into accessories, which is what it is, in terms of price point, particularly the accessory business is outperforming the rest of the business.
Okay, thanks.
Maybe one other or a couple of questions.
Yeah, we have another question from Annabelle Gleason from Redburn. Please go ahead, madam.
Hi. I just wanted to clarify this 2% comment. Is it right that that implies EUR 250 million of sales that's on a plan that you're getting rid of? Or is there actually timing things that more impacts Q1?
On the ready-to-wear business?
Yes. If I annualize 2% of the last year's fashion leather goods sales, it implies EUR 150 million.
Yes.
You're giving up EUR 150 million of sales on the plan. Is that right?
We are closing the jeans and the shoe business, your assumption on the amount of business that we're closing is right.
Just on nationalities. Far you've said the Chinese demand's flattish, American demand's mid-single-digit positive, European demand's strong, Japan's low-single-digit growth. I was just wondering, where is that biggest weakness by nationality?
I don't really know. It comes from various places, Middle East, Latin America, not all European businesses are positive. I'm not going to elaborate on this. If you take the average of what I said, we are not very far from the type of growth that we had at Q1. This is nothing consistent in my view. There are pluses and minuses. I will not go into details.
Okay, thank you.
One last one.
Okay, we have another question from Celine Sheriba from Natixis. Please go ahead.
Yeah, good afternoon. I have one additional question regarding fashion and leather goods in particular. Do you expect any specific launch of products for Q2 in order to fuel the growth?
Many. I mean, novelties are a significant portion of the business, obviously. There will be launches, there will be plenty of them, as I said. No, we are not dependent on one single particular or the same type of model as what you have in perfumes, for instance. There is a large number of initiatives being taken, no one single initiative should have a particular impact accordingly. We expect to have our product pipelines and R&D as strong as it has been for some time and should help support the business.
Thank you very much.
Thank you. That concludes the conference call. I look forward to discussing with you H1 numbers in May. Thank you, and have a nice day.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.