Ladies and gentlemen, welcome to the LVMH 2021 First Quarter Revenue Conference Call. I will now hand over to Mr. Chris Hollis. Sir, please go ahead.
Thank you, Tejal. Hello, I'm Chris Hollis, Director of Financial Communications at LVMH and with me is Jean Jacques Guerny, our Chief Financial Officer. Thanks for joining us. We'll begin with remarks about LVMH's revenue for the Q1 of for 2021. As in previous periods, these revenue figures are reported in accordance with IFRS.
After these remarks, Jean Jacques and I will be able to be happy to take your questions. As a reminder, 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. So these are referring to the Safe Harbor statement included in our press release and on Slide 2 of our presentation. Turning now to our announcement. Hopefully, you've all had the chance to read our release, which was issued a short while ago In both French and English and as always the release is available on the LVMH website, www.lvmh .com as are the slides that we're using to guide today's call.
So let me begin by slide number 3, by going through the highlights of the quarter. We are glad to report that the year is off to a good start, Well, the impact of the pandemic continues in many areas. We are seeing a very encouraging recovery in Asia and the U. S, in particular, with double digit growth in both regions. This is offset somewhat by the continued low level of international travel and a slower recovery in Europe where lockdown Against this backdrop, we saw broad based organic revenue growth with Fashion and Leather Goods Delivering a particularly strong performance and continued growth of online sales across our businesses.
I should also note that all businesses all business groups saw positive organic growth with the exception of Selective Retailing. Given the onset of the pandemic in the year ago Q1, our basis of comparison year over year is not a straightforward indication of the growth we are seeing. In order to give you a more indicative measure, if you look at revenue in the Q1 of Schulz, both to 2020 and to 2019 1st quarters. Finally, before we dive in, another significant factor in our Q1 2021 performance is the addition of Tiffany and Co's numbers for the first time, which more than offset the impact of Currency. Looking at the overall figures, this is Slide 4, for the Q1, total revenue increased 32%, that's the green figure underneath the bracket, on a reported basis to €14,000,000,000 from €10,600,000,000 in the year ago period.
This reflects a 30% increase in organic revenue, along with a negative 6% Currency effect and a positive 8% structure impact related to the consolidation of Tiffany. All those numbers Oren Green. Comparing Q1 revenue in 2021 versus the Q1 of 2019, As I just mentioned, organic revenue increased by 8% and reported revenue rose by 11%, and those figures Or in blue, as will be for the rest of the slides. So, I won't repeat that. Now, Revenue mix in the Q1 of this year reflects the current part of the worldwide recovery from the pandemic with the continued repatriation Of consumer spend, especially in Asia, as international travel remains subdued.
As you see on the chart, Asia, excluding Japan, represented 41% of revenue as measured in euros. Europe, including France, on the other hand, was at 18%. The U. S, including Hawaii, was at 23%. The rest of the world contributed 11% of revenue, and Japan contributed 7% of revenue.
In terms of how the revenue changed for each region relative to last year's Q1, Organic revenue was up a very strong 86% in Asia, excluding Japan, and a strong 23% in the U. S, excluding Hawaii. The continued impact of the pandemic in Europe is reflected in the 9% decline in organic revenue in that region. Compared to the Q1 in 2019, this is the column on the right, or before the pandemic, revenue in the Q1 of 2021 was up 26% in Asia and 15% in U. S, down 3% in Japan and down 18% in Europe.
Turning now to revenue by business group from the start as always with Wines and Spirits on Slide 7. For this group, organic revenue increased 36% for the Q1 2021 versus the year ago period And 29% on a reported basis, inclusive of a 7% negative currency effect. In total, revenue In this group, it was €51,510,000,000 in the Q1. By category, Champagne and Wines revenue was €549,000,000 in the Q1 of this year, up 30% On an organic basis compared to the year ago period, and revenue for cognac and spirits was 961,000,000 Euro is up 39% on an organic basis compared to the Q1 of 2020. Looking at revenue In this group versus the Q1 of 2019 on an organic revenue basis was up 17%, 12% on a reported basis.
Moving to the highlights in this group, I will start with champagne, Which saw a strong 22% increase in volumes in the Q1 of this year versus last year and 15% of 2019. This reflects improved trends in the U. S. And Europe, partly due to restocking by retailers. However, the continued closure and capacity restrictions at restaurants and nightclubs around the world did impact consumption in the period.
On the news front in the champagne business, we announced during the quarter that we acquired 50% of champagne Armand de Bruyneac, making us partners with JZ in his successful champagne business, and we look forward to its ongoing growth. Turning to Cognac and Spirits. Hennessy also saw a strong increase in volumes, up 28% versus the Q1 of 2020 And 11% compared to the same period in 2019. This reflects continued growth in the U. S.
Off trade, Despite the high comparison basis, which is putting some pressure on supply in this market. There was also a strong rebound in demand in China following an easier comparison basis and the later timing of Chinese New Year this year Compared to last. Finally, I should note that Glenmorangie enjoyed robust local demand and notably in Europe. Looking now at Fashion and Leather Goods, Slide 9. The Q1 was an exceptional period By any measure, with 52% increase on an organic basis compared to the year ago period and a 45% reported after a negative 6% currency effect.
In euro terms, revenue was €6,700,000,000 compared to €4,600,000,000 in last year's Q1. And compared to 2019, revenue was up 37% on an organic basis, 32% as reported. While we saw strength across this group, the major brands delivered remarkable record performance, Stemming from local clientele. At Louis Vuitton, growth continued to come from the same two sources as always, innovation and creativity. During the Q1, the Maisons introduced a number of new leather goods and its magnificent ready to wear collections from Nicolas Ghesquiere or Virgil Abloh were extremely well received by customers.
It's also important to note that Leviton's success in the period was fueled in good measure by its very high quality digital services, Which have been critical as lockdowns have continued in some markets. That said, many markets are opened once again, including Japan, When Amazon opened its newly renovated historic flagship store in Ginza, designed stunningly by Juna Oki. Christian Dior continues to perform beautifully, including with the ongoing success of its classic leather good line, such as the Iconic Lady Dior as well as its new men's and women's ready to wear collections. You may have seen or read about the Mayzans fallwinter 2021, 2022 women's ready to wear show inspired by fairy tales held in the spectacular hall of mirrors at Chateau Diversailles. It was very well received.
I'd also like to note an important online event that Dior recently held with UNESCO called Dream for Change, which is focused on gender equality and inclusion at a time when the pandemic has had a particularly hard impact on women. To give some highlights of happenings of other brands in the Q1, at Fendi, Kim Jones' first women's shows were very well received. Laurent Siena expanded its offerings with the launch of new collections, which reflects the Tandem's elegance of the brand and complements its focus on the finest quality materials and commitment to sustainability. Heidi Selvan's creations were very successful at Saline as were J. W.
Anderson's capsule collection, Loewa is my neighbor, Totoro, as well as the recently launched surplus project, responsibly crafted handbags. Marc Jacobs also had a good performance, thanks notably to its e commerce in the U. S. On to our perfumes and cosmetics business group. Revenue was up 18% on an organic basis and 12% on a reported basis, taking Into account a negative 6% currency effect.
In euro terms, revenue was 51.5 $5,000,000,000 in the Q1 compared to $1,380,000,000 in the year ago period. And compared to the Q1 of 2019, Revenue is down 8% on a reported basis and down 4% on organic basis. To give you a sense of the trends driving the increasing strength in this business, it is important to note That the major brands saw strong growth through e commerce, which partially offset the impact of reduced international travel. I should also point out that our brands maintain a highly selective approach to distribution. Our brands do not engage in parallel sales to discounters, We chabad for the long term image of a brand.
Many of our competitors have not avoided the parallel approach. Moving on to the categories, the strong momentum of skincare continued across the board due to local clear on sale, especially in Asia. At the same time, the iconic lines and some exciting launches also fueled growth. Christian Dior saw continued success from its iconic fragrances, including Sauvage, Monsieur and Jadore. Additionally, the new Rouge Dior Forever transfer proof liquid lipstick is off to a strong start.
At Guerlain skincare line, Abi Royale, continued to perform very well, And the new fragrance, Mangalain and Spakim Bouquet got off to a good start. Benefit, a long term leader in Mascara, Has had good success with the launch of their Real magnet, an extreme lengthening product. Parfums Givenchy saw good performance from its Prism Liber line, notably the new foundation, Prism Liber Skin Caring Glow. And finally, Maison Francisco Jain delivered good revenue growth in the period. Turning to our Watches and Jewelry business on Slide 13.
Organic revenue increased 35% in the period. Of course, On a reported basis, the addition of Tiffany increased the size of this group by more than 2 times and Taking into account as well a negative 6% currency impact, revenue for this group was at $1,880,000,000 compared for the Q1 of last year. Excluding Tiffany's revenue, Q1 2021 revenues in this business was up 1% compared to the Q1 of 2019. So the highlights of this business, I'll start with the new addition, Tiffany, which I'm pleased to report has seen a strong start to the year, we announced the new leadership team in the business several months ago and work is now underway to build on the heritage and success of this with his iconic brand. Many of you remember that building on an extraordinary heritage was indeed central to the group's approach following the acquisition of Bvlgari, And we're pleased to report that it continues to perform very well based on its highly sought after classic lines as well as new ones, Including the recent launch of the Serpenti Viper line.
Turning now to the other brands with some key highlights. New, Sag Hoya Entered into an exceptional partnership with Porsche, which is celebrated with the successful launch of a special edition of the Carrera chronograph, and it has performed very well. The same is true of the new limited edition classic Fusion Takeshimi Murakami All Black Watch by Hublot, which sold out extremely quickly. Chaumet launched a magnificent new collection called Josephine Aiguarette, While Zenis launched its new Chronomaster Sport with his exceptional El Primero movement. Fred relaunched its Pretty Woman collection, a tribute to the beloved now 30 year old film and the iconic Fred necklace worn by Julia Robertsinet.
Last year, I should mention that LVMH held its 2nd virtual Watch Week in January, which reached 15 countries and was again a good success. Now looking at the Selective Retailing Group, Slide 15. Organic revenue was down 5% in the Q1 of 2021 versus the year ago period. When we take into account a negative 6% currency effect, this brings us to a reported revenue of €2,300,000,000 for the quarter compared to €2,600,000,000 in the prior year period. Looking at this business in the Q1 of This year versus that of 2019, organic revenue declined 30%.
Breaking this performance down, Sephora continues to perform well, fueled in good measure by online sales and its excellent omni channel capabilities. This is particularly evident in China in the period where Sephora continues to expand its business. Its selective expansion focus on China and the U. S. Markets will be important, including its new partnership with Kohl's, which begins this year will continue to roll out through 2023 when there is expected to be a Sephora presence in at least 850 cult stores.
Of course, like so many other retailers, Sephora continues to be impacted by store closures, primarily in Europe. DFS, the decline in international travel continues to have a significant impact on this business. To offset this, the team is rigorously focused on reducing its selling expenses and cost structure. At the same time, it is making highly selective Growth Investments, including its recent opening in Haiku Mission Hills in Hainan in partnership with the Shenzhen Duty Free Group. So now before we open the line to your questions, I would like to summarize what we've shared by noting that the Q1 marked a good start to 2021 for LVMH, with all groups except Selective Retailing contributing to the strong organic revenue growth we discussed.
Among the factors contributing to this growth is our team's focus on significantly scaling up our digital and e commerce capabilities over the past year, Which has helped offset the impact of store closures, particularly in Europe. Beyond that, the work done by the teams across the board To continue to drive forward innovation, creativity and an unyielding commitment to quality positions our Maisons well to continue to gain market share even as we closely manage costs and maintain a flexible approach as the recovery from the pandemic continues. Consistent with this and as we look to the balance of 2021, LVMH's objective is, as always, to reinforce our leadership in the global With that, I thank you for joining us today, and we will now take any questions you might have. Cathie, please could you open the line?
Povich, 1 on your telephone keypad. We have one first question from Madam Susanna Puig from UBS. Madam, please go ahead.
Good evening. Thank you for taking my questions. I have 3. So the first question is on pricing. Would you be able to tell us roughly What level of pricing was implemented for Fashion as it was in Q1?
I'm obviously not after the exact number, but maybe something like low single digit, mid That will be very helpful. Secondly, I mean, again, that's Fashion Under Goods division. The performance has improved Quachly when we look at it 2 year stack versus Q4. So I was just curious to know what was the kind of driver behind the sequential acceleration when it comes to the nationality and also maybe brands. So was it the Chinese consumer, the American consumer that accelerated versus Q4 and also maybe specifically the brand.
And then finally, question on trends. I know it's a tricky one, month on month. But Obviously, January February are always quite difficult to comment on because of the timing of the Chinese New Year. But it was very helpful. You mentioned in the press release that basically for Fasche Leisure Group again.
Q1 was at +37 versus Q1 2019. So I'm just curious if looking at trends month by month, the exit rate, so the month of March was actually above that 37% or was it below? That will be very helpful to know maybe some color around that.
Thank you.
Thank you, Susanna. Well, you know how much I love the questions on a month by month basis. Frankly, it's already difficult enough to report on a quarterly basis. I feel lucky not to have to report on a monthly basis. Let's start with your first question on pricing for Fashion and Leather.
I will not go into details for the whole division because there is no such thing as a unique price increase for the whole division. But for the main brands, the price impact, it's not necessarily price increase in the course of Q1. The price impact That affected the revenues for Q1 was in between 4% and 7%, depending on the brands. Most of them were implemented Last year, basically and still have effect into the Q1 of 2021. The second question you have on acceleration in the sequential growth 2 years growth of the Fashion and Leather division And which are the customers that explain it, it's not easy because when we look at the various customer base We can do that for Victor and for Dior.
Obviously, we most of the client bases are Reasonably are showing more or less the same growth rate in Q3, Q4 and Q1 on a 2 years basis. So we find it hard to find an explanation there. Maybe it's in the small plant basis that we are looking with less Accuracy, but I find it hard to have an explanation. On top of that, the numbers you mentioned You are accelerating a bit, but it's nothing to write home about in my view. So take the numbers as they are, they are pretty good and it's Quite complicated to find explanations for small percentage changes as we see that.
And And obviously, on your third question, I will not answer because I don't intend to go into the details on a monthly basis. Sorry about that.
Thank you. Just to clarify, that was very helpful on pricing, the 4% to 7%, but that's the pricing running basically from last year. But if I remember correctly, most of the brands tend to also have some small price hikes still, I would say, in Q1, probably March or so. Zoran.
Not so much in fashion. It's very much the case in wine and spirits, but not so much in fashion. I mean, it happens when it happens. Basically, it's not necessarily in fair beach and every year. It happens sometimes, but not always.
And this year, There were no particular price increase to be noticed.
All right, perfect. Thank you very much. Thank you, Madam. Next question is from Mr. Antoine Belge from Exane BNP Paribas.
Sir, go ahead.
Yes. Good evening. It's Antoine Bege at Exane BNP Paribas. I've got 3 questions. First of all, Back to the Fashion and Leather division.
Can you maybe comment a bit on the brands? I think you mentioned you are still Very strong, but maybe explaining your Dior, Vuitton and maybe in the rest of the portfolio, which branded Maybe a bit less well and if there were some capacity constraints for any of the brands. Second question with With regards to watches and jewelry, could you comment on the performance of jewelry versus watches? And so if you're seeing some kind of Talking in what is happening or not yet. And finally, I think you mentioned qualitatively a strong start to the year at Tiffany.
Is it possible to have the organic growth of Tiffany in Q1 even though it's not contributing to your own organic growth? And also if We should expect some kind of margin dilution in what is likely to be a transition year for Tiffany. Thank you very much.
Okay. Welcome back Antoine and thank you for your three questions. The first question on Fashion and Letter. As always, I mean, it's been more or less the same structure for quite some quarters now. We have Dior Being in excess of the average, doing better than the average, Vuitton as always is close to the average as always.
And the average of the other brands is, by definition, a bit below the average for the division. We had pretty strong numbers coming from Celine, from Louis from Fendi, from Marc Jacobs. These are the most noticeable ones. Not that the others are not doing well, but the best Performances were with those brands. As far as jewelry versus Watches are concerned.
Jewelry did significantly better than watches. And conversely, we see no signs of restocking as we speak. It may come later in the year, but for the time being, Activity is pretty quiet. So nothing was reporting there. On Tiffany, I don't have the organic growth.
We have a growth. It's probably one of the last time I will report on this number, but you can probably try to figure it out from the various The numbers you had in the past, so I will get into some details. So we were around 8%, 9% published growth in dollar terms At Tiffany, in the Q1 of the year, it's not exactly their old Q1 because we have They were reporting at end of January and we do report end of December. So there is in there probably a positive currency impact, But we are not in a position yet due to the systems being integrated to reevaluate the impact of currencies. So it's probably Some effect there, I will comment further in July when we have a better understanding of the numbers.
Just maybe so with regards to Tiffany, so Nothing
to worry
in terms of the potential margin dilution. And there's no brands in Fashion and Leather having to face Capacity constraints because maybe especially in France where production might have been hampered by Social distancing and things like that.
We manage, particularly as far as Vuitton is concerned, Where we own a very large share of the production facilities, We managed that pretty well. I think not only we manage and we have been managing flexibility much better over the last 10 years than we used in the past. So we have this ability to produce more when it is needed and less when it is the opposite. But at the same time, we are able to deal with in a fairly efficient manner with the constraints coming from the pandemic without Taking obviously any risk for our people, but this has not been a serious issue Yes. As you can figure out from the numbers in the second half of the year last year and in the Q1 of the year this year.
Okay. Thank you very much.
Thank you, Antoine.
Thank you, sir. Our next question is from Mr. Edouard Aubin from Morgan Stanley. Sir, please go ahead.
Yes. Good evening, Jean Jacques and Chris. So three questions, I guess, for me as well. The first one is on geographies. If you look at the U.
S, if I'm not mistaken, it was one of your the main sequential acceleration. Dick, and it was one of your the main sequential acceleration on an underlying basis, and I guess 2 year basis. If you could please provide a little bit more color by division for the U. S. And related to that, are you seeing a Change in terms of the and I guess I'm mostly asking for Vitor and Fashion Leather Goods in terms of the profile of the customers you have there today versus what they might have been a year ago.
Are you more successful, for example, with more aspirational customers? So that's question number 1. Question number 2 is on the marketing spend for fashion and leather goods. So I guess in order to avoid the risk of trivialization or The luxury brands have to grow desirability ahead of sales. So should we expect sort of a step up From you in terms of spend behind the brands on advertising pop ups, small shows and so on.
And I guess I'm talking more in Percentage than in absolute. So are we going to see this roughly the same level on percentage basis This year in the coming years then you are spending pre pandemic on marketing. And then lastly on again fashion leather goods and I know Very early days in markets like the U. S, but are you seeing any negative impact from reopening of markets On luxury sales and the reason obviously I'm asking the question is about the risk about the wallet shift in favor of more experiences such as restaurants as you know, spending on goods. Again, I know it's early days, but I'd be curious to have your take on this.
Thank you.
Thank you, Edouard. So by division in the U. S, we had Very, very strong numbers in wine and spirits. We benefited there from a brilliant cognac market as it's been the case for quite some time. So nothing new there.
Nothing new in terms also of Capacity constraints, we could certainly sell more if we had more bottles, but the volume growth for cognac in the Q1 In the U. S. Was around 15%, so it's organic growth of something a bit more than that with price increases. So it's quite Stunning number and we are already very happy with that. Champagne did well for two reasons.
Inventories were pretty low at the end of last year. So there was inventory replenishment, but on top of that, depletions happened to be Extremely strong in the first half of the year. So we don't get carried away With those numbers, there were price increases at the end of the quarter. So we know that there is tenancy from both distributors and resellers to ahead of the price increase. So we need a little bit of hindsight to look at these numbers.
But anyway, there are good numbers in champagne in the U. S. So that's the first Comment second comment is Fashion and Leder where we had very, very good numbers. And otherwise, the other divisions are on average around I'm talking about comparison between Q1 2021 to 2019 obviously was more or less at the same level as what we we had 2 years ago. So really strong advances from wine and spirit and fashion and leather and the rest He's around the same level as what we had 2 years ago.
2nd question, marketing spend. Well, there is quantity and quality. That's the key difficulty in your question. You can invest less and invest better and invest more and Not so well. So we think we have to combine the 2.
The short answer to your question is that I don't a big surge in volumes or in percentage of sales in terms of marketing spend. I mean the question, as we've seen during the pandemic, It's not how much you spend, but how you spend. And we had a tremendous impact, particularly, agreed to endure with some events. The environment was reasonably easy because nobody was talking at the time and we're more or less the only one. Yet, it's something worth Remembering and really the quality of what we do is almost as important, if not more important than the quantity of the investment.
So I don't expect a bigger surge in on a secular basis. I mean, I'm not talking obviously about the comparison with 2020, when things normalize, we'll obviously have an increase in marketing spend, but there is no particular reason why they should be much higher In volumes and percentage terms with what they were prior to 2020. And finally, your question on Basically, it's impact of normalization. What happens when people have other opportunities to spend their money than just shopping, which is basically what we've seen in for quite some months. Well, again, the short answer, As you suggested is that we don't really know.
It's a bit early. It's welcome anyway. I mean, staying in where restaurants, hotels, cinemas, theaters, whatever are closed is not a good thing for people and therefore not for the business. So we'll probably be in a better position to comment on that hopefully, I would say, in 3 months' time.
Okay. Thank you.
Thank you, sir. Next question is from Mr. Thomas Chauvet from Citi. Sir, please go ahead.
Good evening, Jean Jacques and Chris. I have three questions, please. The first one on the online growth in Fashion and Leather. Could you try to give maybe some qualitative comments on how it's evolved in Q1 as you start to anniversary Maybe tougher comps. Was it above the 52% growth in the division?
And how would you expect e commerce to trends To evolve, now that consumers may be more used to stay at home and shop at home. Secondly, on DFS, You resized the cost base of DFS last year in light of the significant falling in traffic. With the situation not improving on international travel, is there a need for more structural cost removal at the FS or maybe some So strategic thinking about, I don't know, maybe certain concession To be abandoned or not renewed. And thirdly, on China and Recent political and social media backlash, you have obviously very significant exposure to Greater China. It's mostly through retail and wholesale operations, Not so much sourcing, but can you comment on whether you feel any of your major brands may be at risk of some government.
So should we hear backlash that have impacted some fast fashion sporting goods or brands or even Burberry? And whether this had an impact on your distribution at network, particularly on platforms in the last few weeks.
Thank you, Thomas. It seems to me that you want qualitative comments on online growth, but Basically, what you want is quantitative comments, which I will not provide. I mean, the anniversary of tougher comps It's a fact of life. I was forecasting the share of online to decrease on a group wide basis and particularly in Fashion and Leather. When things normalize, it's not happening as much well, it's not happening at all, to be frank, So not as much as I expected.
We'll see. I mean, 1 quarter is probably a bit of a short period of time to really assess the consequences. The only thing I would comment is that I don't feel that people are just willing to stay at home and shop just from home. I mean, as we've discussed many times, The experience you get from a screen or from a store is entirely different, and we do believe that Nothing replaces the store visit. We can just improve it with visit on the website before.
So it's a research online, purchase offline Or it's taking appointments, checking the availability of the product, you name it. But we don't view online as Being a new channel, we think it just reinforces the quality of the experience people have when they come to stores and we have not changed I will mind there. 2nd question on the FS. Yes, we have to resize the cost base. Is there further cost cutting to come?
I don't think so. I mean, although DFS is very active in making sure They can provide as much cost relief as they can. They will probably benefit this year from rent reliefs That were actually negotiated last year and took some months, It's not quarters to agree upon. So there will be some further impact in 2021, which is not permanent cost cutting, but it's welcome in the current environment. With regards to concessions that could be abandoned, I mean, obviously, I would not comment.
Everything is I mean, all options are on the table. Obviously, when you lose money on a given business, we have to discuss with the concession owner what is the best course of action going forward. Your last question on China, I mean, that's the a little bit the talk of the day. I mean, I've never seen A big threat in being successful in a given country. So everybody is talking about China being an issue as far as I'm concerned, it's more an opportunity Than anything else, we are very happy with the business we do there.
And we believe that It's a complex country like any other business, I would say. And we are not particularly worried that something very bad could happen there.
Thank you.
Thank you, sir. Next question is from Mr. Oliver Chen from Cowen. Sir, please go ahead.
Hi, thank you very much. As you continue to innovate digitally, how do you think about e concession Relative to 24S and relative to just wholesale and online wholesalers, I would love your view on strategy and thoughts there. Also congrats on Kohl's. Regarding Kohl's, How might the assortment differ on a Kohl's Sephora versus others? And do you feel like cosmetics is on better footing Relative to skin care.
And lastly, in the U. S, just would love your thoughts if the stimulus had impact in terms of Demand and Inventory Management and geographically was it broad based strength? Thank you.
Thank you, Oliver. How we feel about e concession? If you compare that to wholesale, which is in your question, obviously much better. I mean, we don't do We try not to do wholesale in the or less as little as we can, particularly in fashion and leather in the Physical words, so obviously when it comes to the digital one, we don't intend to do what we don't do elsewhere. So At least e concession allows to control prices, allows to control discounts, is a much better proposition from the digital platform.
This being said and we've discussed that many times, We lack the same knowledge of clients of data clients that on clients That we would get in a normal store. So this is the reason why we've been going into e concession with a pretty cautious approach as we don't think it would be wise to who just sent all this data to the digital platform without getting access to it. And for brands like Dior, Vuitton, Vuitton, It has been a nonstarter. There are no one single e concession agreement. And up in the tier, they get access to full access to data, they won't go there.
Secondly, on Kohl's and Sephora, so what about the assortment? I don't have very precise numbers, but typically Sephora would have For 10,000 SKUs, so different items. I think we are talking about in between 35% 45% of this amount in a course format, which is much smaller, obviously, than it's a shop in shops, which is much smaller Than typical Sephora in the U. S. So we would show more bestsellers and We would treat it the obvious way given the less square meters available.
Our cosmetics doing better in the U. S, it's not obvious. I mean, the cosmetic business is still suffering badly Even compared with well, compared to last year, it's okay, but compared to 2 years ago, it's still Well below skincare is doing better. Finally, your question on stimulus impact, Well, there is no such thing as a survey telling us that we benefited up to certain level from the amount of money that was made available to the households, particularly in the U. S.
We've seen some businesses like wine and spirits for instance, which we think benefited a little bit from that. But I think the big impact of the stimulus was to avoid the whole country being sort of frozen As it would have been the case if such stimulus had not been distributed. So it's not the impact itself of the money that was distributed. It's a psychological impact of we will be there for you, so you can continue to do shopping. And I think we benefited from that Like the rest of the economy, not necessarily with a direct link of the amount of money that was distributed, which was converted into actual purchases into our brands.
Thank you. Very helpful. Was the U. S. Pretty broadly strong?
Any color on volatility or geographic? And lastly, just longer term, your physical Stores are very important. So e comm penetration over time, what's your view on how that may evolve As you continue to invest a lot in the physical experience as well.
Well, we are strong believers in stores as you Gould because we think we cannot replicate the customers' experience on the screen or on the website the same way as we have it in the stores and we think that the web should or the digital should help for complement the physical experience more than anything else. So this being said, I mean, there is nothing wrong with A certain level of web penetration. It used to be on average 5%, 6%, 7%. It went up significantly last year. As I said, although I was wrong for Q1, it will probably go down with things normalizing this year and next year.
And we'll see where it stays once things are back to normal. If we end up with penetration, which will vary anyway between categories of products being around 10%, I mean that would be absolutely fine. I mean that doesn't put into jeopardy all the investments we have done in the physical stores and at the same time allow people that don't want to shop into stores for whatever reason, the main reason being that they are too far away from physical stores to shop online, which is absolutely fine with us. So there is nothing wrong with that. As far as your first question on geographic discrepancies in the U.
S, not really, although you should bear in mind that We do the bulk of our business in the Northeast in Florida and California. But as far as these three regions are concerned, Things were pretty consistent from one to another.
Thank you. Great results. Congrats.
Thank you, Oliver.
Thank you, sir. Next question is from Mr. Rogerio Fujimori from Stifel. Please go ahead.
Hi, Jean Jacques and Chris. Congratulations. Two questions. First on Jewelry. Could you talk a little bit about the underlying performance by price points for BUGA and SIFANIE, I.
E. Any color on Performance for high jewelry versus the mid price or the entry level lines in Q1? And what have you seen in terms of interesting trends around Chinese New Year or Valentine's play in Q1. And the second question is just about the selling surface plans for LVNV or based on your project pipeline, what should we Speck in terms of change in retail square meters for these two brands this year. Thank you.
Thank you, Gerard. I take the opportunity of your question, Juri, to make clear that the number I mentioned on Tiffany was a 2 years Gross. It was 2020 Q1 compared to 2019 Q1. It was not a 1 year, it was 2 years. So your question on jewelry, what I can say there is that high jewelry was not Good in Q1 2021 even compared to 2020.
I mean numbers were not great, Which is understandable in my view in the context. But anyway, numbers were not too great, so we did well. Both brands did reasonably well. I mean, Bvlgari was In retail, pretty close to double digit growth, particularly if we take out the negative impact from hydro really. So we already did well and I mentioned the numbers as well for Tiffany.
In terms of price points, it's hard to differentiate between the various price points in As far as Stefania is concerned, to be frank, I don't have the numbers, so I cannot comment. But as far as Bvlgari is concerned, I mean, our main families of products did very well. The 01 which is considered as the entry price did well, but Saint Petya as well where we had some launches. So it's really hard to say that It was more the entry price than the middle range. It went reasonably well across the board.
So I have, To be frank, a little bit of a hard time answering your question in a precise way. Your second question on selling surface, We have had in the Q1 a limited increase in space. As You can understand we cut or we postponed, which is probably more accurate, we postponed a lot of projects last year to protect cash flow. And this project will, depending on the assessment we have for the year, Will probably be reinitiated in the course of 2021, but it will be not enough time for them to be live before the end of the year. It will probably be 2022 impact.
So you can expect, as we had in 2020 for the main brands, Fairly stable selling space, same thing in 202120 20 compared to 2019 and probably some increase in 2022 with all the postponed projects being We're ignited and becoming live in the next year.
It's helpful. Thank you very much.
Thank you, sir. Next question is from Mr. Thierry Cotard from Societe Generale. Please go ahead. Yes.
Good evening, George Thank you for taking my questions. Three questions for me. First follow-up on beverages. You've mentioned price increases in March, I guess, as usual. Can Can you confirm that they are, as in the past, low single digit in Wines and Spirits?
And secondly, you mentioned low inventories in cognac in the U. S. I was wondering if you could update us on the cognac inventory days in the U. S. At the end of the quarter.
Secondly, we've had large store closures at least in Europe. In Q1, do you have any idea of the percentage average of store closure in Fashion and Other Goods and in the retailing division over the quarter and where we stood at the beginning of 2Q. And lastly, a broader question. Well, I understand that the core focus is on Q1 sales, but can you tell us whether the OpEx control that we saw Very much in action last year and notably in the 2nd semester. Has that continued in H1 or not?
And in fact, I'm naturally pointing to the margins we could imagine for H1.
Thank you, Thierry. Yes, I can certainly add the price increase is low single digit. I mean, as always, 2.5%, 3% implemented mostly end of March. Therefore, the impact on restocking that I mentioned, Which happened in the U. S.
Cognac days in the U. S. Is I think it's 25, so we are at a pretty low level. It went down throughout 2020 and we've not been able to replenish it significantly in Q1, which is a good problem to have. But anyway, Given the strength in the demand and the strength in depletions, we were able to we were not able to increase this level.
Store closure in Europe is complicated. I know why you're asking the question. It would be easier for you if you get the average So closure in order to figure out what the impact of lower level of store closures could be in the following quarters. Unfortunately, It's not a data that I have. What I can tell you is that it's mainly impacting obviously Europe and some The large European countries.
At the end of March, for instance, in Fashion and Leather, most of the stores Where early April, most of the stores were closed in France, Germany, Italy, Spain and to to a certain extent in the United Kingdom. So we had most of our fashion leather stores being closed. As far as Sephora is concerned, throughout the quarter because it started earlier, we had on average about 50% of Stores in Europe being closed because the stores were below the limit threshold particularly in France, but They were belonging to shopping malls sometimes that were above the 10,000 square meter threshold that was requiring them to close. So there was on average about 50%, but it's probably the only brand for which I have an average closure rate. Otherwise, I I mean for the other brands in Q1, there were not so many closures, a little bit in the UK, a little bit in Germany here and there, but not on a global basis, same thing in Italy.
So it's pretty difficult to figure out what was the impact in Q1. It was limited in fashion and leather. Anyway, it's going to be probably a bit tougher in Q2 with the impact of closures or shutdowns in France in particular.
Oh, so actually at this point, you would think that the Q2 impact could be worse than what you had in Q1.
Well, I can end up July, if you Allow me, okay. I don't know, my crystal ball doesn't tell me much as we speak. Your third question on OpEx control, I mean, you would probably be surprised if I was telling you that we are releasing OpEx and we are spending like mad. Obviously, we are still controlling OpEx in a serious way. Bear in mind that last year, we benefited from one offs, Particularly with regards to rent reliefs that may not be as important as They were they will probably not be as important as they were in H1 last Although, as I mentioned, I mean, we will benefit from some deferred rent reliefs that Actually applied to 2020, but that will be paid in 2021 and that we were not bold enough to account in 2020.
So there will be some delayed benefit from that, but not in a very I'm sure you'll be asking the question again in July. So I will probably answer that it was not entirely significant. But anyway, from for the FS, for instance, it will have from some impact. But cost control is still on the agenda, believe me.
Okay, great. Thank you very much. Thank you.
Thank you, sir. Next question is from Mr. Lucas Zocca from Bernstein. Sir, please go ahead.
Yes. Good evening, Jean Jacques and Chris. I had a first question on spend per capita A number of customers that you saw over the pandemic period and in this quarter in your major businesses, are you seeing anything noteworthy In terms of expansion of the customer base on the back of savings on Essentials or any other change, Especially if you look at the European or the American consumer base. Then maybe A second question about your setup in Hainan. Are you distributing directly In that location or are you going through some kind of JV and wholesale agreement?
I see that you specify your partner in Hainan, so I was interested to understand how it works. And then last but not least, we've seen in the media that a number of brands have been suffering from the pandemic Very significantly and are opening up to potential M and A. I think Armani was quoted saying They are not looking at independents as a must have. Ms. Tweed was reporting about Delvaux being for sale.
I wonder whether you see this as a potential opportunity to cherry pick Assets and what is your logic and criteria for M and A knowing that you must have A lot of fish to fry integrating Tiffany at this point. Thanks very much.
Well, thank you, Luca. The Last question, you made the question and the answer a little bit. I mean, we have artificial fry and integrating Tiffany is very important For us, we don't want to dilute our efforts by going on to new ventures that could make our life Complicated and make us from a management viewpoint less efficient. I mean, it's really the number one priority. It's a bigger position for us.
We are Obviously, putting it's a challenge for us, particularly at a time when integrating a company Where most of the people like it is the case everywhere else are working from home. I mean, this is a challenge. And we think we have to devote all our resources there, so we don't want to dilute Such resources to other acquisitions. Your other question, spend pack EBITDA and number of customers, It's a very difficult question because what we've seen is a few trends. The first one is a drop in traffic.
It's not really your comment, but we've I mean, conversely, conversion rates have increased significantly because the business is not so bad at all, but we do more or less the same business with way less traffic. So that's something important that we've seen. In terms of number of customers, it's not the question of So much the question of how many, but more who did we see. I mean, we used to have I'm stating the obvious, you know that perfectly well, but we used to have A large penetration into the touristic category, which is a thing of the past As we speak, it will certainly come back, but the tourists, particularly in Europe and in some Asian countries are gone. The real question is about the number of customers that we get on a local basis, because we've seen all these stories disappearing, which we counted as In our per capita spending and all these things, they have all been repatriated to their home country And we have a substitution with locals, which is not in some countries like in Europe, a one to one substitution.
But anyway, We get a big surge in local client base in Europe, which is I think a very good signal, Not sufficient to offset the fact that the tourists are gone, but anyway, we see that. In terms of spending pattern, they are not exactly the same, more frequent purchase. So the spending per capita or When they go to store, they spend less than the tourists, which have sometimes only a lifetime opportunity to buy into European brands in Europe. So they spend more Then what the locals spend because they have the opportunity to come back in the store whenever they want, including the day after. So it's a Different behavior, but anyway, it has to be put in the context of big shake up in the way our for a client approach to business, which is much more on a national basis than on a touristic on an onshore basis No, no, no, offshore basis as it was in the past.
So it created some disruptions, which we think are easily manageable and positive Long term. Finally, your question on setup in Hainan. As you know, Hainan is In order to do business in High-nine, you need a duty free license. Some licenses were awarded mostly, if not Key. Entirely, but I think it was entirely to Chinese companies.
We are tying up DFS is tying up with Shenzhen Duty Free for a big project in Haiku that opened a few months ago, which is off to a good start like the rest of Hainan, which is doing well. But as far as the brands are concerned, they cannot go direct at least for the time being And they have the choice between wholesale, which is limited to some brands, mostly the cosmetic brands and shop in shop as it's been the case with any department store. So the business model there is not any different from a Sheila Lotte DFS business model where you have a combination of shop in shop and wholesale activities. So that's where we are in Heineken.
Thank you very much indeed. Understood.
Thank you, sir. Next question is from Mr. Piral Zadagnier from RBC. Please go ahead.
Hi, good evening. Thank you for taking my I just wanted to come back on Wines and Spirits. The commentary has been very positive on the call, especially around U. S. Inventory levels and champagne restocking.
But in the press release, you make a comment saying it continues to be an uncertain environment. I was just wondering if you could provide any further color around where you see potential headwinds or challenges in the coming quarters for that division. And then just a follow-up on the rent relief. Could you just remind us perhaps on what the magnitude of the rent relief OpEx saving was in the first half of last year, Just as we think about the margin structure for this year. And finally, on Fashion and Leather, is there any significant call out in terms of performance by product category that's noteworthy for LVNV or in particular.
Thank you very much.
Thank you. Well, what we feel about the uncertainty in the environment, I'm not so sure I have to elaborate too much on this. I mean, environment seems to be reasonably uncertain as we speak that's what we meant. I mean, there is nothing special. We are not pointing out to a specific risk there.
It's just that the global environment calls for caution and we don't know where we are heading for. So that's all. As far as the rent relief reminder, I will not remind you because I never tell you. So We never mentioned the amount of the rent relief. We want to avoid shortcuts into what will happen this year In terms of cost increase, because at the same time, we got rent reliefs last year.
We got 17% drop in Q1 and 38% drop, if I'm not mistaken in Q2 for the global sales of the group. So we think the 2 are going together and it's not worth isolating rent reliefs, Which is a function of the very specific environment that we had last year. And finally, your question on fashion leather, any particular insights by products category at Vuitton and Yore? I would say, I looked at this, It's quite homogeneous. I would say handbags ready to wear shoes, particularly for the 2 brands are Doing well with more or less the same type of growth rate.
I'm not saying there are some there are not Difference is there are some, but nothing really worth mentioning. These 3 categories Are extremely consistent in terms of growth and we are pretty happy about that.
Perfect. Thank you.
Thank you.
Thank you. Next question is from Mr. Erwan Remberg from HSBC. Sir, please go ahead.
Yes. Hi, Darren. Thanks for taking my questions. And well done on the wording of the release. I thought a good quarter was a nice euphemism, so well done.
So I'll stick to 3 as it seems to be tradition. Going back to Tiffany, I'm just wondering if you can share with us After a few weeks of overseeing the brand, if you see any easy changes, any tougher changes than you had anticipated, We saw a few price hikes. I don't know if it's limited silver products or a few high prices more broadly for that brand. So that's the first question. 2nd question around your European footprint, because Europe is seemingly taking longer to get out of this COVID mess than we would have thought maybe 2, 3 months ago.
And I'm just wondering if long haul flights Take a longer while to come back. Does that change your view on what your European footprint should be? And then thirdly, sorry to come back on LVNV, but given the explosive growth you've had growing in the 50s and I think you mentioned price hikes Accounting for 4% to 7% of the growth, is there a case to be made that you might be underpriced And that you might have the latitude to actually hike up prices a lot more significantly in the next 18 months. Thank you.
Thank you, Owen. Interesting question, your last one. I will start with the first one. So Tiffany, Basically, you're asking us whether it's tougher than anticipated. The answer is no.
As far as the brand is concerned, we are we were convinced that this was a very, very strong brand and nothing in what we've Discovered there makes us change our mind. I mean, it's a very strong brand. The potential Yes, it's tremendous and we have no doubt whatsoever on this particular front. With regards to What has to be done in terms of executing the appropriate strategy, we are not surprised either. I mean, we said that Big issue of Tiffany was that their timing with the stock market was not appropriate and they couldn't have the the stock market was not giving them the time to develop the strategies that was needed to develop the brand.
Basically, what we are talking is about years and not quarters, and it We take years to do what we want to do with this brand from a distribution, merchandising and marketing viewpoint. We know that there is a lot of A lot to be done within the next years and we'll do it. It's not going to take Less or more time because we don't know exactly how much it will take. It's a lot of work. We are committed To doing it, we are very hopeful that with the strength of the brand, we can achieve our objectives And we will report them as they unfold.
That's basically what we've done with Bvlgari and we intend to apply exactly the same strategy For Fortifenie, not the same brand strategy, the same behavior or the same plan, let's put it that way, for Fortifenie. As far as the European footprint is concerned, just one number. The business is down only 20% It's down 20% only, I don't know, but it's down 18% compared to 2019. So basically, in order to justify Footprint reduction, let's put it that way. That would be the admittance that There is no way we can bridge this gap with 2019 in the foreseeable future.
And the answer is obviously not the case. I mean, we expect to bridge this gap with the locals and with the return of the tourists in a reasonable timeframe. I mean, I don't know whether it's going to take 3 quarters for 2 years, but it's going to take what it takes, but it doesn't justify to write off investment and sometimes to give up some retail positions that we think have some value just because the business is only 80% of what it used to be. So we don't intend doesn't mean that we will not adjust, but we don't intend to lower the footprint in Europe In any way, we will adjust, we will close, we will open as we always do, but that's it. Is Telgi and you're underpriced?
Well, I don't know. Because the question you're asking is about price elasticity. I mean, the price elasticity in luxury It's an unanswered question as long as luxury exists. So it's difficult to know when you increase prices whether There will be some reaction in terms of volumes. So if you take this As an assumption, you can increase prices as much as you want.
And at the end of the day, usually there is a problem. So it's Prices have to be handled with gear. Sometimes we have no choice. I mean particularly in times when currencies are falling, We have to increase prices to protect our margins. It is not the case as we speak.
I mean, although we have a little bit of a Keith. Impact from currencies, we are not talking about the sort of secular drop in currencies as we had In the first part of the year 2000, so we don't feel there is a particular necessity to increase prices. If it comes, we will do it. In the meantime, we will push prices up when we have to. We try to Reflects inflation into our prices.
We could be tactical and sometimes when a product is very much high in demand, We would push prices up, but we don't consider ourselves as being underpriced and this doesn't call for particular action on our side.
Okay. I was just asking because you jacked up the prices on Vuitton last year after years of not moving them and it Didn't seem to affect your volumes much, if at all. Thank you. Just a follow-up on price hikes at Tiffany, because we saw some price hikes on silver product, but I don't know if it's limited to just the silver product.
It was limited to some, not all of them, to some silver products.
Okay. Thank you very much. Best of luck. Thanks.
Thank you, Owen.
Thank you, sir. Next question is from Madam Aurelie Staudermontier from Kepler Cheuvreux. Madam, please go ahead. Thank you very much. Good evening, everyone.
I have 2 questions please on fashion Knevebe. The first one is on the supply chain. What did you put in place to cope with such high volumes that we are Ding in Q1 and also in Q4. And is the level of inventory sufficient enough as we are entering a quarter that is supposed to see a strong catch up versus last year. And my second question is on the growth.
Could you of the Chinese consumers, could you share with us, if not the figures, at least some indication? Thank you very much.
Thank you, Harry. Well, what we put in place in Q4 and Q1 is basically not Unfortunately, we had the supply chain people, particularly at Gitan, and they took this question of flexibility very seriously from years ago because it took years to implement, and they have implemented a fairly flexible system. They adopted the 2 shift System instead of 1 in the past, which enables much quicker and better reaction to swings in volumes, be they positive or negative. We've We've seen a big negative swing last year and a positive one this year. So all in all, I mean, we have a fairly flexible system and that enables us To be much more reactive than we were 10 or 15 years ago in terms of volumes.
So we don't foresee Particular constraints, you have also noticed that we have opened some atelier that came at the worst moment in 2020, but P. With the benefit of hindsight, it's not that bad after all, because we still at the year, we'll be able to meet the increase in demand that We are currently experiencing. So if we had cut all these things last year, it would have been a big mistake. So Vuitton was wise enough not to do that. And we today have additional capacity, which is welcome.
So additional capacity and flexibility is basically the name of the game and we are pretty hopeful that we shouldn't face major disruptions in the course of the year. The growth of Chinese customers is about on a 2 year basis, obviously, so compared to Q1 2019 is about a bit less than 40%.
Thank you very much.
It's total client base. It's much more than that in China and obviously in Mainland China and way less in offshore markets.
Okay. Thank you.
Thank you, ma'am. We have one last question.
We have one last question from Madame Louise Singlehurst from Goldman Sachs. Madam, go ahead.
Hi, good evening. Hi, Jean Jacques and Chris. Thanks for taking my questions. I will keep it brief. Just two quick follow-up questions, if I may.
Just firstly on back to Fashion and Leather. This obviously we're trying to understand the phenomenal growth that's come through and no doubt we'll understand share as we hear much more from the peers over the next few weeks. But just going back to the level of like new customers or recurring customers, Thiemers. Obviously, we're not going to get the answer, but I wondered, I said the answer of what we're trying to look for is how we should think about customer acquisition costs going forward, if there's more efficiency in the system in an already high margin business, but thinking about the performance going forward, both from a top line and margin perspective. And I wonder if there's anything by nationality or surprises.
You've highlighted obviously the strength in the European domestic, which has been key. And then my second question, There's been a few questions about digital and then the clear emphasis on the physical store environment. I'll go for the qualitative question rather than the quantitative, but there's obviously a big management change with Ian Rogers last year and now you have the Chief Omnichannel Officer, if I remember correctly. Can you just tell us a little bit about the group approach, what that means in practice, and whether there is specific opportunities by brand or whether this is very much a holistic group approach at the moment. Thank you.
Thank you, Luis. So unfortunately, that your question is about will there be An increase in customer acquisition costs connected with more locals and less tourists. The short answer is I don't know. I mean, that's an interesting perspective, I agree. We are mostly using our sales staff to not necessarily acquire New customers, but to develop the business we do with existing ones.
The new customers are mostly coming from the Traditional marketing that we as I said before, that we do not intend to increase. So I would be tempted to say that Whatever shift we have in the approach to customers, less tourists, more locals, At the end of the day, it should not increase significantly the amount of spending that is behind it. So we I'm not particularly worried. But to be frank, I mean, it's the first time I get into such a question. So, leave me the benefit of thinking about it before making a more educated answer to that question.
The second question on digital and What particular strategies we have in mind, I think the title says it all. I mean, omnichannel is exactly What we have in mind, we feel that e commerce is fine for the clients who want to shop E Commerce, but we also feel, as I said already on that call, that digital actually reinforces For strengthen the experience of client in physical stores and that's what we want to develop. So it's basically The research online, purchase offline, as I mentioned, the ability to book an appointment, to check the availability of the product, to get home delivery If the product is not available on the spot, all these things that are provided by omnichannel strategies All the things we want to put the emphasis on in the coming quarters. We have already done a lot of work there. The experience the client experience has already been improved Significantly through these various actions, but we intend to do more.
That's the for what we have in mind.
Thank you very much.
Thank you, Luis. That was the last question. Thank you very much for attending this call. As I mentioned a few times, I look forward to discussing with you End of July, our Q1, including the full P and L discussion. Thank you.
Bye bye.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.