Ladies and gentlemen, good evening. I'm delighted to welcoming you for this meeting presenting the annual results of 2016. At the risk of hiring you, I'd like to say that the 2016 results, record results, you will no doubt have read the press release. Revenue for the first time has topped the €37,000,000,000 mark. We have profit from operations that exceed €7,000,000,000 up 6%.
Net income is up 11%, and free cash flow is also up at about EUR 4,000,000,000 and so the gearing has dropped to around 10%. It's been a very good year, pretty mixed year on the whole. The first part of the year more restrained with the second part of the year displaying sharp acceleration. I'd like to review the various business groups before giving you my views on 2017, which is one of caution, and then I'll explain why. So 2016 Wines and Spirits, a good year, very good performance and increase in the United States.
Recovery in China after some difficult years. The prestige Cuvee of Champagne delivered an excellent result, and that in Shandong strengthening its global leadership position of champagne. We're developing the Wet and Chandon brand across the world, very dynamic. And we're also developing innovations in various areas for champagne. I won't go into all the details.
HEMSI, of course, is very successful. You mustn't expect HEMCE to continue too long because we're out of bottles. So be cautious. The problem is to deliver The stocks are at an all time low. And so we're faced with that situation that may seem excellent but is going to put a break on the expansion of our business there.
But the strategy that we put in place with Mr. Naval is bearing fruit because we constantly create value. We've always resisted in the most difficult times in China. We didn't cut prices that some of our peers did in order to continue to grow. We've never done that.
And we truly are market leader for Wines and Spirits Premium. Over now to Fashion and Leather Goods. The, of course, leading brand is Louis Vuitton that puts in an excellent performance with a slower start to the year, but a stronger growth in the second half of the year. This growth is achieved throughout the world, thanks to innovation, thanks to extremely creative products and an exceptional organization such that in a company such as Vuitton, in spite of its sales that I won't disclose, we have 1 month of stock, which is a remarkable performance. And I'd like to say that we can't expect a huge expansion because we are constrained by manufacturing 1 month stock and then we have to make the products.
We have to create workshops even if we're going to create a new workshop in the United States, as we've announced. It allows if there are problems of tariffs and duties, we'll be able to bypass that, but we have to train the people and the teams. The customer demand would allow us to do this, but we need to bide our time. There's no point in achieving too much growth. We have to do it in a consistent fashion.
Of course, during the year, we achieved a number of successes with new openings, at least store renovations. You've seen the number of stores is reducing some. We're increasing the sales per square meeting, and we're creating new stores that are quite exceptional. A few weeks ago, there was the opening of the renovated stores in Hong Kong that are quite extraordinary. And there again, the sales not perhaps not skyrocketing, but nevertheless increasing sharply in spite of the situation, thanks to their efficiency and innovation displayed in these locations.
Other brands are also growing well, have grown well in 2016, Strong increase in Fendi, Loro Piani that's opened a store at the end of right close by. Unfortunately, it will be closed at the end of this meeting, but I urge you to take a look when you can. There is some very fine products there, especially with the cold weather. There are some fine cashmere products available. Other brands making good progress.
Celine, of course, Kenzo that's been repositioned. Berluti, there again is achieving considerable success. We've disposed of Donna Karan that wasn't quite in line with our other brands. We're reorienting repositioning Marc Jacobs, and we acquired a majority holding in Rimmel Verde. So we're now majority shareholder of this fine German company of manufacturer of high quality luggage of excellence with increased air travel.
These are the lightest and most robust cases to be found on the market after those of Vuitton, of course, but those of Vuitton are not in the same price range and they're almost impossible to find. Perfumes and Cosmetics, Here again, many, many events. The prime event is that of our new creative studio at Grasse, Les Frontain Parfumet. If you're passing through Grasse, I invite you to visit this new facility. A lot of craftsmen and artisans who are developing the Vuitton and Dior Fragrances.
Vuitton, I didn't mention in the highlight, but launched its collection of fragrances last year that prompted considerable demand. On Dior, that is the leading perfume brand. The success of the iconic line J'adore and Miss Dior continue. Sauvage for men that we launched 2 years ago has achieved success worldwide. It's number 1 in several countries and one of the leading fragrances in the world.
And the goal that we've set ourselves to be world number 1 will be achieved in 2 years' time. The other perfume brands held up well, notably Guerlain with the fragrance Le Petit Trad Noir and also more iconic brands of makeup. The new brands acquired and launched by Sephora, Cat Bandy, Mr. La Puente has presented the store. It's full of this brand and it's full of customers, whereas we're not making any advertising.
So makeup is a good segment. Watches and Jewelry, it's really all good news. Perhaps you might find this rather tiresome, but Boungari has achieved performance better than market. And you can see on this photograph, we've launched the new collection of Cerpentier, the Bvlgari historic model that's very successful as well as the enhancement of lines, Diva or Leucher, a women's watch that works well. TAG Heuer, the watch market is down, but TAG Heuer is up, thanks to the success of the company.
Refocusing of the strategy on what is achieved the success of the brand. And also thanks to the connected watch that is a big hit, we've achieved growth in the watch segment, likewise for Hublot, which for different reasons is continuing to grow. And Xiaomi is also achieving excellent momentum with a new concept store inaugurated in Hong Kong, which I saw recently. That's very successful. Selective retailing, pretty mixed performance.
Sephora continues to deliver surprising performance. I won't give revenue, but it's growing strongly for several years now, double digit growth for Sephora and also profits. All that's useful. We're number 1 in the distribution of perfumes and cosmetics in the United States, both in physical stores and online ahead of all our U. S.
Peers, be it Macy's for stores or Amazon. For Amazon, that's pretty much mass market products, not really our competitor, But there's huge potential with this company that's extremely dynamic, which not only is opening stores, selling and distributing products, but also taking majority holdings in brands that we're developing very fast, thanks to the global network that topped the 2,000 stores now at 98. Let me remind you, when we acquired the company, it had barely 10 stores. So that's considerable success. Not so great for DFS.
Well, DFS is suffering from the situation in Hong Kong that made the mistake of taking a license in Hong Kong Airport that cost us a lot of money that we're continuing to pay. That's stopping at the end of the year. We'll exit next year, but it will still impact on this year's results. And Hong Kong, one of the places in the world where the outlook is the most challenging, and Le Bon Marche achieved very useful results. I invite you to visit the latest exhibition organized by Ms.
Wachner that's attracting a lot of people. It's quite exceptional. So much for the events of the year, and that explains why our results are what they are. That is very good. In spite of all that and in spite of the fact that the year is beginning with green lights.
I'm very cautious about 2017. Why? It may sound strange. Well, first of all, when everything's going well as it is, it's always in these times that something unexpected occurs and that we have to be very vigilant. So said to the teams, let's be vigilant in a period that may seem euphoric and they give encourage people to let out.
People congratulate each other. The stores are full. We don't know how we can meet demand. That's pretty much some way of the situation, and they tend to ease up. But I believe we need to be extremely vigilant because from experience, every time we found ourselves in such a situation, the year ended not so well.
And why could that happen? First of all, for almost 10 years now, there hasn't been a major crisis. The last one dates back to 2,008. And when I see my friend Warren Buffett, he always tells me, I'm very optimistic for the long term. I'm also very optimistic for long term.
But over a 10 year period, normally, there are 8 good years and 2 not so good years or even a very bad year. Now we're coming to the end of the 10 year period. So what's going to happen when we see a global outlook with interest rates that are defying gravity as low as they are with share prices that are rising with exuberance to quote a well known term, with a geopolitical situation that's difficult to read. There's talk of a trade war, tariff war, currency war with very low growth in Europe. So can all that continue to be buoyant for all our business, I think we need to remain cautious.
It's better to expect a first half that will be relatively easy because comparisons are easy. The 2016, the first half wasn't that great. So this year should be okay. Geopolitical, economic events that might unfold in a way that isn't particularly helpful and the way the second half of twenty sixteen was promising. We must expect things to be far more difficult the second half of the year.
So this year, and I conveyed this to my teams, I've conveyed to them a message of great caution in spite of the results and the excellence of the figures that we're presenting. It doesn't only have disadvantages, a difficult situation because these are the periods when we can seize on opportunities. Currently, shares are very high, so people continue to buy. But when share price drops, that's when they tend to sell that they lay down their arms. But a few years later, it picks up perhaps during this year or next year.
There will be opportunities for the group because it's true that it's in more challenging times. I've noticed that we've always managed to increase our market share and to outperform our peers, but one never knows. We really need to be prudent. But I believe, nevertheless, we will strengthen our lead over the market this year. Over now to Jean Jacques Guillenie for more information on the financials.
I don't want you to get depressed. If you look at the figures last year, they are pretty outstanding, especially looking at sales. The numbers here, you have sales on a quarterly basis. There's lots of numbers on this table. 2 things you have to note.
Organic growth over the year is was a 4% in Q1, that's the dark blue, 6% in Q2 and 8% in Q4. And overall, organic growth was 6%. And then if you look at the ForEx and structure effect, they're almost negligible, compensate one another. So organic growth is, in fact, not very different from growth in euro terms. If you look at distribution of sales, 3 big blocks, U.
S, Europe, Asia, 26%, 28%. So each over a 3 year period, Asia has done 2 or 3 points and the U. S. Is up 2 or 3 points. There's some parity effect differential growth rates, but all in all, same numbers.
If you look at the dynamics of growth, you can see if you look at the 4 major regions, 3 are up, U. S, Asia and Europe and one region which suffered the backlash of some events, Japan. Japan did well with tourists until March or April, whereupon the yen went up and the Chinese authorities, the customs authorities, were much more restrictive as to the imports of goods imported from Japan into China. And so that, of course, hampered our growth in Japan. And so the numbers are stable or indeed slightly down.
That's the only dark point. If you look at the U. S, we're looking at 7% growth accelerating at the year end, and yet you had some negative effects. The consolidation of a joint venture that we had with Grand Marnier and that we had to dispose off and then the negative effect of Dona Caron because Dona Caron month on month during the transition period had negative performances. So if you leave that out, and so these are one offs.
Of course, we were looking at upwards of 10% for the period as a whole. So that's pretty good. Asia is interesting because you were looking at 5% growth for the year as a whole. But if you look at H1, 0 and H2 is 10%. So there was in June, July, there was a complete turnaround in Asia.
And this actually occurred also in China, indeed, in greater numbers because if I think China was like 14% growth. Likewise, H1 was, say, average, whereas H2 was much, much better. And finally, Europe, the 7% growth. I don't think anyone in this room at the same period last year would have bet on that 7% growth in Europe. In France, we're slightly down, I think minus 1%, slightly negative.
And all the other countries did well, and there was indeed business really picked up at the end of the year. Now looking at the at our various business groups, inorganic growth, and of course, Mr. Arnaud mentioned this already, but if you look at the right hand column, you have for Wines and Spirits, we're looking at the 7% organic growth, slightly better for cognac and spirits. If you look at cognac specifically, even better slightly better than champagne, but look, both numbers are very good. Fashion and Leather Goods are 4%, but there was 0% in H1 and 8% or 9% in H2.
So a significant contrast even though the dolateran cost us 2 or 2 point 5 points of negative growth in these numbers. Perfumes and Cosmetics, 8%. And this is an environment where growth is not as good as all that, so we're doing extremely well. Watches and jewelry 5% with the Bvlgari ending the year beautifully, and TAG Heuer did well throughout the year. And then very contrasting figure in selective retailing, etcetera, double digit growth and DFS was in negative territory throughout the year, even though it picked up slightly at the end of the year, but for reasons that you already know.
Now then, this time looking at age or even on a quarterly basis, looking at business groups, you have the dynamics. Wipe and Spill is 4% in Q3. And of course, compared with 2015, the basis of comparison was somewhat distorted. Fashion and leather goods, the same effect that I mentioned. H1 was flat literally, but of course, the pickup in H2 perfumes and cosmetics and waters jewelry and Selective Retailing a few swings, but by and large, sustained activity.
And you can see that Selective Retailing went up, but the numbers are not due to Sephora but rather DFS that was able to turn around at the end of the year. If you look at the income statement, sales up 5%, gross margin up 6%, is 24% compared to 23.1 percent last year. Overheads or and marketing expenses are up 6%. Overheads, administrative expenses up 10%. Now we have new accounting rules.
There are additional provisions, and indeed, most business groups completed their accounts with significant provisions out of caution, but not including the provisions. Of course, there wouldn't be such an increase in admin and overhead. We're looking at SEK 7,000,000,000 in profits from recurring operations, up 6%. I think we're looking at 18 point 7%. If you look at the other income and operating expenses, slightly less than last year, but you have depreciation and there are some goodwill amortization.
And then the capital gains on Dark Island, about EUR 40,000,000 and it is recognized here. The financial result, and this is complicated, I'll return to that later. Income tax is always too high, 2.8% of the income before tax. The net income is stable and the minority interest is down not because of Morenci, because Morenci did well, but because of DFS whose performance was down. And this is reflected in the minority interest.
And finally, we are just under EUR 4,000,000,000 in the actual net group income group share of net profit, but still up 11%. Now if we look at profit from recurring operations by business group, Wipes and Spirits up 10%, whereas sales were only up 5 percent. So profit margin was significantly increasing Wipes and Spirits, and this is particularly visible for champagne and cognac. Fashion and other goods, 3% what 3% increase in sales and 10% in profits. So again, profit margin significantly up and a dramatic improvement in H2.
Perfumes and Cosmetics and Waters and Jewelry, if you look at sales and operating profits, they increased to the same tune. But selective retailing, the minus 2% is not due to Sephora, but DFS, which whose performances declined over the year even though they picked up at the end. And then finally, if you look at the effects are mostly due to organic growth. How to account for the increasing profit? Most of it is organic growth, which was roughly equivalent both in sales and profit, even though that indicator for organic growth is not really the one we would choose.
The currency effect is limited compared, say, with last year. The change in net financial income. Now it's always a complicated story. You start with a simple line, which is the cost of net financial debt, which is roughly stable. They were little by way of interest or debt outstanding.
But there was a well, our cash is not bringing in as much so because the interest was down, but that doesn't make much difference. The net ineffective portion of foreign currency hedges, and that's what we do to cover our positions. There were significant one off costs last year, which we do not have this year. So the EUR 330,000,000 is a recurring expense, but it is exceptionally high because normally it should be somewhere like EUR 160,000,000, EUR 170,000,000. The recurring part of this charge was much less last year, and it should be much less next year.
As you know, it is not Linear IS9 should allow for a linear recognition of these currency hedges. The cost of the ineffective portion, that is the cost of these hedges for 2017, we recognized more in 2016 than the actual cost that was dispersed, which is, of course, absurd both in accounting terms and in economic terms. We'll fall back on our feet next year, but of course, it's just as absurd. The net gains or losses due to the disposal of assets, well, of course, we didn't have any capital gains last year well, this year that we had last year, and so hence the difference. Now if you look at our balance sheet, equity is about half our liabilities.
We have some increase in stocks. We have a sound financial structure, and we have undrawn credit lines to the tune of SEK 3 400,000,000. So that's EUR 3,700,000,000 indeed. Cash flow is also a source of satisfaction. Let's look at our cash from operations, up almost €800,000,000 at 8.7 €1,000,000,000 Working capital requirements is mostly stock changes, maintained to almost the same level at leisure.
It cost us €400,000,000 last year, not €500,000,000 this year, but we're looking at the same numbers. Operating investments, slightly up. We're looking at €2,200,000,000 compared with €1,000,000 with just under €2,000,000,000 last year. All in all, the free cash flow stands at roughly €4,000,000,000 just under but it's almost EUR 4,000,000,000 there. And so this is a significant improve compared with last year.
And along with sales and profit from recurring operations, this was a record year. Now if you look at the debt position, well, this is in dark blue. Debt stood at €4,200,000,000 now it stands at €3,200,000,000 So the debt is down €1,000,000,000 There was €4,000,000,000 in cash flow, EUR 2,200,000,000 for dividends, EUR 200,000,000 for acquisitions, EUR 300,000,000 for the buyback of shares and EUR 2,000,000 or EUR 3,000,000 in various operations, leasing adjustments or monetary adjustments. All in all, we were able to reduce the debt to the tune of €1,000,000,000 and gearing sense a 12% debt to equity. So this is a low number.
And finally, we're offering a dividend. What we'll be offering is €4 per action, up 13%, and this is in line with the net results of €4,000,000 We paid out €1,400,000,000 in December. So the final payout will be €2.6 paid in April. Thank you.
Ladies and gentlemen, if you have any questions, we're available to answer you. If you'd kindly state your name before your question. Thank you. Hello. HSBC, three questions.
You mentioned the United States with number of constraints, border tax. What's the percentage of your business achieved, for example, in fashion and leather goods in your factories in California. Jean Jacques Pune said that the tax rate was too high. Mr. Trump might perhaps give you a helping hand on that front.
The second question on cognac. There's probably a difference between the capacity constraints that you mentioned and the sellout. Could we have some feedback from the Chinese New Year? And how do you plan to address these problems of supply? And might that lead to a couple of quarters to distributors that would be lower than to the end users?
And in terms of your use of cash, you made an acquisition, Rimowa. Perhaps you could tell us a bit more about that. Could you confirm that you've also taken 10% in the Italian company, Marcoli and why? And as to share buybacks, €300,000,000 is that a beginning? And might that become recurring in the coming years?
So for the USA, while the USA is the world's leading market, so obviously, for us, it's very important to follow what's happening. Currently, the market is very promising, very buoyant. The atmosphere is well, perhaps not euphoric, but almost you see that the stock market has what topped the 20,000 mark in the Dow Jones for the first time. That's historic. Is all that going to continue?
Well, I have to say that the measures that have been announced, the tax cuts, easing regulation and investments in infrastructure, I mean, all that's pretty promising for companies that are in the United States. So we, for the time being, have little manufacturing in the United States for 25 years Vuitton offers a certain manifest advantage if border tax is worth to increase. Obviously, the products manufactured in the United States is no problem. So I don't have the exact figure, but a large part of Vuitton products sold in the United States and made in the United States. So we're really quite immune.
And for the other products, we'll see what happens. But there again, we do have some flexibility on the prices. Most important is to see what's going to be the global impact of changes underway, change in economic policy, which for the time being is very well perceived in the United States. They're far more positive than negative points. I mean, the changes in Europe with Brexit there again for the time being in terms of the way our business goes in the UK, it's pretty promising.
Everything's cheaper for visitors when they go to the UK except for Vuitton products. But when they go to the UK, they have cheaper hotel rooms, cheaper tax fees, etcetera. So they travel far more to the U. K, perhaps a little less to France, but they travel a lot to the U. K.
So it ultimately is the likely poorest state of the Britains following Brexit will be such that it's going to create political and economic problems in the U. K. That needs to be seen. It's we'll see in 2 years. I mean, it's very long period of time for the politics in any particular country.
It's impossible to say what will happen exactly. But for the economy, there are a number of uncertainties. What's going to happen with China? Will there be a battle on customs tariffs with China? Will China be more difficult to access?
The Chinese President gave a speech in Davos praising free trade, but one never knows. That's why we believe we need to be cautious as regards to the development of our business this year. What's more, we need to you mentioned cognac. Well, cognac sales might decline. I mean, if we don't have enough cognac, we can't invent it unless Mr.
Navarre does miracles. But once we've exhausted the stock, we have to rebuild the EU and the inventory. So but currently, demand is outstripping supply. I don't know what that will lead to, but we're faced with that reality. On the cash front.
So okay, the acquisition of Rimova, right, we sold on a Koran and we bought Rimowa. It's a profitable business. It has a lot of potential. It's one of the finest SMEs in Germany, ranked as such in all the corporate rankings for Germany. Outstanding German quality and we believe it has great potential.
And there's currently strong demand for the products. In fact, today, I invite you to visit the store just opposite the Bristol Hotel in Paris that's quite outstanding. You can find these cases that we also sell in the United States. Macron, I won't make any comments about that. I won't tell you what we're doing.
In any event, whatever we do, I mean, it's a small operation as regards to cash. On the cash front, we need to be prudent with cash. It's better to have some than not to have any. Currently, we're in a rather strange period. We're being lent money and we're being paid to borrow money at negative rates, which can encourage people to do very silly things.
Wisdom with Mr. Guillony, we're trying not yield to temptations. We bought back a few shares, they're too expensive now. So we won't be doing any more share buybacks. They're too expensive.
I'd rather wait. I mean, if the market collapses, then at that point, we'll buy back some more shares. But once again, one never knows. There are investments totally abnormal that were done. I mean, I in 2007, just before the crisis, no one predicted that, as you recall.
And then I recall that I bought LVMH shares at 40 years €40. It's not that long ago. I'm not saying that we can hope for that, but it's best to wait. Any further questions?
It's John Guy from MainFirst. Could I start with CapEx and returns? A question for Jean Jacques, please. In 2011, I think you had a CapEx as a percentage of sales over 7%. You've been normalizing closer to 5%.
Your free cash flow continues to skyrocket and the gearing is very low. So when you think about the prospect for future returns, can you maybe give us an indication as to where you think normalized CapEx is and what we can expect for a sustainable rate or return on invested capital going forward? My second question is with regards to the global Chinese consumer. We saw a very sharp rebound in global Chinese consumption in the 3rd quarter. Could you maybe talk a little bit about how the Chinese global Chinese consumer evolved in the 4th quarter?
And finally, to Mr. Anno, with regards to cognac and Louis Vuitton capacity constraints, How do you think about pricing or the volume and value mix going forward? I did notice that in the UK, we saw some pretty strong pricing activity, but the volumes remain very strong. So that's a testament to the brand equity and clearly the desirability of the product. So how do you think about that going forward?
Thank you.
Regarding CapEx, you mentioned 5%, and 5% is sort of the ratio of CapEx to sales. It's an objective. I don't mean all brands will do the same. Some brands need to spend more on CapEx because that is to and such brands as Sandy need to do this to ensure a better return on the brand. And so they have high CapEx, but other brands as well.
So we're looking I mean, what we're aiming for, but it's not an actual stable objective. We're looking what we're aiming for is 5%, but there are exceptions to that. And we can that can lead to returns, well, that is return on capital, was slightly down in the years 2012, 2013, 2014, but now returns on capital invested is on the up, although it's not a it hasn't increased that dramatically. You had the second question on a sudden rebound in Chinese consumption. What we have found was that, while Chinese customers have always been loyal, but what happened in H2 well, Q3 and of course, this accelerated in Q4, what we had is repatriation of Chinese consumption towards Mainland China.
And we have if you look at the main malls in China, they were stagnating at single digit growth until the summer. Then now they are into double digit territory. And of course, the brands were the better positioned brands are doing better. And as Jean Jacques pointed out, it's partly to do with the currencies, but also the Chinese differential is not as repatriate consumption. That is, they want people to consume at home than buying from abroad.
Chinese New Year is still underway, and I don't think we could look at the events now as the continuation of Q3 and Q4. Regarding the stocks of cognac and Vuitton, we can always hike up the prices, but the profit margins are pretty good as it is. We also have some responsibility vis a vis our customers. And we now find ourselves in a situation that there's more demand than we can meet. And I think the thing to do is act responsibly and preserve the future rather than hike up the prices in the short term and find ourselves in a position which is not really neither tenable nor ethics nor ethical vis a vis our customers.
And so there may be situations where revenue may not be as buoyant as one might ask, but so be it, we will survive. We will make do with that. Yes? Good evening. Le Castelga from BNP Paribas.
I have a question about fashion and leather goods. It has been some time that you find yourselves in this position with Marc Jacobs. Well, in the same position with Marc Jacobs. Is there any changes underfoot? And on the digital sales, I mean, will there be a point where you will be able to sell online or to reconcile this with the sales in shops?
Do you have any ambitions for e commerce? And Michel, I believe that your encounter with the U. S. President hasn't reassured you vis a vis the situation. Would you care to comment on that?
Well, I'm more concerned about Marc Jacobs than the U. S. President. Well, in any event, I mean, he can I don't think he can do much about the U? S.
Policies. But of course, Marc Jacobs Jacob is well, is a challenging situation. Mr. Husserl is working on that. That's the only business along with the FS, which is in the red.
We will pull out, I'm sure. But in the fashion industry, you have to be cautious. Things are volatile. And you need a retail. It's the same.
You have to you do not want to turn this company into a fashion company because when things go out of fashion, then you've had it. Vuitton is a timeless company. It's a company where we have this sort of timeless robustness just like, well, watches. I'm not saying that our fashion goods are accessories, but whereas for Marc Jacobs, Marc Jacobs is a very much fashion business. And so when things are in fashion, fine.
And when they go out of fashion, not so fine. Regarding sales on the Internet, yes, Mr. Baloney, well, we have been looking at the issue of digital sales. And of course, all companies are very much concerned with the digital dimension. Of course, you can't just go online.
You need to have the infrastructure, you need to have the talents, you have to have the databases. You have to have all that, the web with all 4 to be able to offer a satisfactory digital experience. Our customers have been doing this and on our sales on the Internet are significant. We're looking at about €2,000,000,000 and significantly and growing significantly. Some brands are doing better than others.
So, we can be happy with the digital transition. Or at least we could see that in all business groups, digital, we have been making significant digital inroads. It's not just a matter piling up sales. We have to offer an integrated experience so that our customer is fully supported. Now regarding American policies, I may have sounded concerned.
I think as things stand now, the policies are in our favor. I read a paper in the Daily Telegraph saying that the new U. S. President is very much criticized, and this has always been the case. But the question was, what if it worked?
What if it could I know you read that paper, but these things, it could just work. And indeed, some of the measures taken by Mr. Trump, lowering taxes, deregulating, increasing or giving a push to major infrastructure project. All this is positive stuff. Now most people appointed at least for positions to do with the economy, they are high the highly trained professionals, people from the banking industry having good bankers, a good banker working in the financial sector world.
That can only be good news. Yes?
If I may. The first one on pricing. In your cautious outlook for 2017, which price increase do you expect for businesses like Vuitton that in the past year took a lot of their growth from pricing? The second one always linked to your cautious attitude for 2017 is about divestiture. You are a fantastic collector of brands.
Last year, you surprised us selling one of them that is not very common in the house of LVMH. Should we expect a portfolio assessment of the various business that you have and further divestitures? The last question is always linked to your cautious attitude for 2017 and it's about the agility of the organization. You work in a business with a lot of fixed cost, which are the changes that you are asking to your management team to be more agile? And how do you want LVMH to react in the next year?
Well, on prices, I mean, I believe I've already answered. I think we have great elasticity, but we're already expensive and we have excellent profitability. So we have a responsibility, I won't say social, but at least moral visavis our customers to really set the right price. And when we see the results of the group, the results of vous vous tranche, the cognac, since the question was asked, I mean, I don't think it would be appropriate for the short term benefit for additional short term profit to give oneself an image that would not be consistent with the general ethics of the group. Disposals, okay, that's really the margin.
I mean, the disposal that we made were just very small companies that didn't necessarily have an assured future in the group. So if there are other minor small disposals, they will just be they will be just that, small disposals, nothing significant. As to the cost base, well, yes, I mean, the cost base, we're constantly striving to make it more variable. But you must realize that in an organized group, teams must be organized, they must have good morale, they must grow. And for that, we have to have teams that are very, very different, I mean, from start ups.
I mean, we also have start ups, but in a company such as Louis Vuitton, Wines and Spirits or now Sephora, it's necessary for the smooth functioning of these large companies, companies whose revenue exceeds several €1,000,000,000 to have an organization that operates and that operates whatever the ups and downs of the market, which doesn't mean that these organizations must not be agile, mobile and highly entrepreneurial. I believe the teams in the group have 2 characteristics, as I often say. First of all, they must have an entrepreneurial spirit and be aware that they're in a family business. That's very important because a company such as LVMH is not an anonymous company. It's a company where there's a family atmosphere.
In addition to the fact that the family controls the business, we try and manage the various brands like family brands. The Berge, who heads up Vuitton considers that he is the owner of Vuitton, manages such Mr. Toledano, Mr. Toledano Adeo has been there for some time now. Well, he is Mr.
Dior. And in fact, he could design the dresses. At least, I mean, he's already designing the bags, which is pretty good, you see, and so on and so forth. So we convey this highly entrepreneurial spirit, but also very family oriented. We're in a family.
We're not anonymous with mass market machines. I mean, some have come from there, some and who joined the family and who fitted into the family very well and become one of the pillars of the family. But it's another mindset. It's the family entrepreneur. The company is still small.
I say that we're really only at the beginnings, as I often say. Everything remains to be done.
A couple of questions then because then it will be time for drinks. Let me talk about Italy. What are your intentions with Safilo? I believe you have licenses and with Celine. And then with Marcolin, and I know you want to tell us more about do you propose to take another supplier?
Or what do you propose to do? Look, we do have a strategy. I cannot tell you what it is. So it will be a surprise, and you will find out sometime this year. There are still things are being finalized as we speak.
So I'm afraid I will not be able to give you a premature answer, but things will be all right. So a final question then, a final question. Thank you. Karen Fincken from Werther Vohre. I have a single question.
You have decided to buy to acquire Rimowa. Rimowa, you have purchased this operation in gas and Beauty Island in Russia. So I believe you are reaching out to the middle class, aren't you? Is this to say that you are hoping to reach out to new markets? And what are your expectations in terms of volumes?
And also, do you do you believe that by giving the middle class a sort of a way to access your brands, you can also enchant them and make brands that were out of their reach, make them able to reach them. Well, that's exactly right. We and for many of our brands, look at Dior. Dior is the largest, it's the greatest haute couture company in the world, and there was a splendid fashion show last week. And you can purchase very expensive dresses, but you can also purchase lipstick worth only €30.
So that brand has the dream or carries the dream of extreme luxury, but you can also it can also be affordable. We are not just selling to a closed sort of a restricted elite. We are reaching out to the general public. And through that through our products, you have access to the creativity of the whole brand. With Vuitton, we have remarkable products.
We sold custom made hampers whose average prices were EUR 10,000 and we sold 100 of them. And it takes the waiting list is 6 months. You can't just pick them off the shelf. So you have these €10,000 hampers, but you can also get a buy a bottle of perfume for no more than €200. And likewise, with these suitcases that you can procure in Germany in terms of value for money.
In terms of value for money, well, there's certainly very good value indeed. There's a lady at the back of the room. I have, in fact, 2 questions. Number 1, you said that in 20 17, you told your teams to be cautious. And I would like to know whether this means you will impose more stringent criteria in terms of profitability and might this make more difference next year?
I mean, there's innovation in various brands, but are there areas where you have to be particularly careful or where you will be more demanding in terms of profitability? Another point, last year, you said you were not satisfied with the financial flexibility of your company because of volatile interest rates. You've reduced debt by €1,000,000,000 Would there be any interest for you to broaden the group's structure and scope so as to have more flexibility because you said there would be attractive opportunities this year or next year.
Well, on that, I mean, it's difficult to answer because even if we had a plan, which isn't the case, we couldn't we wouldn't be able to disclose it. I mean, it's very difficult. As I said earlier, interest rates are so low that one can find money very readily. But once again, one needs to be able to invest it wisely. So I'm really waiting for a turnaround in the market.
It's necessarily going to happen. I'm not saying it's going to happen in 2017, but it happened in 2018, but it's necessarily going to happen with this ecstatic exuberance, which was not short lived at least, but I mean, I don't see it lasting for several years. On the profitability criteria, we always have profitability criteria for our business. But what matters most, and this is what we're discussing the most, the criteria of quality and image of the brands over the long term. When you're managing a company, every morning asking yourself whether in 10 years' time, we'll still be the market leader as VuToys today, the finest luxury brand in the world or Sephora, the best retailer of products in the world.
What must we do today to continue driving forward the quality of manufacturing and motivation of the teams? And then profitability follows. It's not an objective because when you start setting targets from profitability, then it's really addressing the problem from the wrong angle. Profitability really stems from the sound, good management of the brand equity and the quality of the products. Thank you very much.