Good morning, ladies and gentlemen. Thank you for having accepted this invitation this morning to attend the presentation of the financial performance of LVMH. This is a pretty easy exercise because this was an excellent year for LVMH in 2010. We have broken a number of records. For the first time, we have exceeded EUR 20 billion in revenue. It's the first time 2010 is the first time where the current profit from current operation is more than EUR 4 billion. EUR 3 billion in net profit, and it's the first time that we have more than EUR 3 billion in cash flow. It is an exceptional year, an outstanding year indeed.
Remarkable figures. I should like to pay tribute to all the teams represented here who made it possible to achieve such a remarkable performance. In each of the business areas of the group, I'll say a few words about the business. I shall not dwell too long on the figures because after all, the figures themselves are nothing but the consequence of the excellent quality of our products, our excellent strategy. Of course, they are a direct reflection of the strategy we have conducted for the past few years for the development and promotion of the fine quality products around the globe. There are several business areas. I propose to go through them quickly.
All the performances in the business areas are remarkable, starting of course, with wines and spirits. Wines and spirits achieved a remarkable year in 2010. There were some remarkable events and innovations. For instance, several vintage years of Dom Pérignon. Dom Pérignon, of course, is Louis XIV's champagne and something rather unusual. Dom Pérignon produced a number of vintage years and so, champagnes, wines or high quality liquor have generated the finest growth and in fact, they were the most on demand in the markets. Which means that, in this business like in others, in fact, we find ourselves in a situation where supply and availability becomes short.
You may remember that back in 2009, all the papers said that it was the, it's a Champagne crisis. Mr. Navarre would come and see me and say, we have all these, all this inventory. What shall we do with all the bottles? We decided then that the crisis wouldn't last for very long, and some of our competitors that were dumping their stock, well, we felt that we shouldn't do that. We should do the opposite. We decided to buy more. In fact, we didn't go far enough. We didn't buy enough. Now with the recovery, the resumption of the market, we find ourselves short. Champagne is not the only one.
There were two remarkable vintages for Cheval Blanc and Yquem. You might think that Cheval Blanc 2009, that was an outstanding year. The new 2009 bottles were sold at to the tune of EUR 600 a bottle. I remember in 1998, Cheval Blanc, I mean, the price for a new bottle of new Cheval Blanc was EUR 60 back in 1998, which goes to show the incredible growth in quality and value for these great wines. Likewise, Yquem very much in demand in Asia.
Even though a Sauternes is a rather sweet wine, nonetheless, we find that our Asian customers, especially our Chinese customers, are becoming more refined in their taste and even though this is an acquired taste, we find that there's more and more demand for Château d'Yquem in Asia. Likewise, cognac also has achieved outstanding performances. Cognac, of course, for the oldest cognac, we are again in short supply. We are in a position where we think we can meet demand, especially in 2011. Of course, we have a fine retail network, indeed one of the finest in the world.
We work with Diageo, which of course is the first distiller of wines, of spirits, in the world. We, using that network, this gives us a tremendous competitive advantage in the environment, especially in emerging markets. Mr. Navarre's team has beefed up its sales forces precisely in these countries, especially in Asia, in view of the fast development of demand in such markets as Southeast Asia, China and even Japan. Even Japan, which is now making new headway in Champagne. Fashion and leather. Fashion and leather is of course the Louis Vuitton brand. The brand of Louis Vuitton, of course, is going from strength to strength.
It's a great company. Building on its achievements, it produces fine products. Also, its business model is unique. It is the one company in the world that distributes all its products in its own shops. No other luxury company has this elite strategy that enables Louis Vuitton to be in direct contact with its customers. That means that we don't have to do sales. That is rather unique. We're the only ones. That is the main feature of Louis Vuitton. We never have discounts, never sales. Of course, we have a very specific policy in terms of allocation of stores. For instance, we never have duty-free shops in airports, unlike many other brands in the luxury sector.
It is a policy, it's an elite policy, a quality policy that lies upon a very strong demand, and that demand has kept growing. Like Champagne, where we run out of bottles for leather goods, we run out of leather makers. Of course, the problem is in order to have a cobbler or a leather craftsman, we need to train them, and it takes time. Last year, we hired 18,000 people. 4,000 jobs were created. Even not only is this business profitable, but it is socially productive because we create jobs, and we certainly create jobs in France.
In France, of course, we share part of the social responsibility for the welfare of the country. We have to remember that 70% of our products are exported around the world. So this is a significant part of our revenue. Back to our capacity issue, it takes time to train craftsmen, leather craftsmen and others. While we train people, we find that demand is growing faster than we can keep up with. Sometimes we find ourselves in a position where we supply simply doesn't meet demand. There were times when we had to keep shorter opening hours. We open new workshops. There's one in the Drôme. Mr. Carcelle can tell you about that in a minute.
We're trying to increase our production capacity slowly but surely. Of course, our objective is to still ensure that the quality of our products remains second to none, especially for leather goods, but also the hamper and bag business and all these things that have made our reputation outstanding around the world. We have a presence in new areas. We have opened a new shop in London. Of course, there are not many Louis Vuitton shops around the world, but we try to have one in each of the capitals. The one in London is outstanding because it is unique in its style.
In fact, it was a sensation in London and indeed outside because you have visitors from around the world who come to London to visit the Louis Vuitton house in London. You have tourists that simply go there to have their picture taken in front of the Louis Vuitton shop on Bond Street. You have as many people having their pictures taken in front of Louis Vuitton shop as they are in front of Big Ben, which goes to show the incredible fame that we enjoy, but also the unique quality of Louis Vuitton. The thing is this is the only place where you can buy a Louis Vuitton item.
If you want a Louis Vuitton item, you have to go to the shop. You can't pick it up at the airport or something. The extreme refinement of that shop is a reflection, of course, of the unique quality of Louis Vuitton. Apart from the outstanding performance of Louis Vuitton, we also have to point to the performance of other brands in leather goods. Fendi, to start with, was able to produce and to generate a number of new leather items. Some of these items are subject to waiting lists around the world, in particular the Peekaboo model. Peekaboo, as you know, is a rather remarkable product. It's made in Italy in Fendi's own workshops.
There again, Fendi achieved fine performances in 2010. It is worth pointing out that a number of smaller brands were able to follow suit. It took time. I have to recognize this, but the strategy we have with Mr. Roussel, that strategy has enabled that business to pick up in a remarkable way. I'll just give you one example. Celine. Thanks to the artist who was appointed as a head of design of Celine two years ago, that woman was able to impose a very modern style, something very youthful, very much in demand with our international customers. She was able to create merchandise that were accessories to the clothing itself.
Now the revenue is growing dramatically, it still shows a huge potential. Phoebe Philo, this designer was named, was elected best designer in England by the organization that gives these awards. Likewise, Marc Jacobs was named best American designer in 2010. The other brands are growing as well, but I won't get into the detail of everything. You could do this during the Q&A. Perfumes, again, this was perfumes and cosmetics. This was another outstanding year, again, because of the fine quality, historical quality of its products.
You know that Miss Dior was launched by Mr. Dior in 1947 when he started. This was the first, the first couturier who started the perfume at the same time as his fashion store. That has continued ever since. Of course, Miss Dior is still very popular today. In fact, we will have a new advertising campaign on this fine perfume with Natalie Portman. Of course, Mr. Dior was at the head of his company in a remarkable way between 1947 and 1957. He died in 1957, but he started in 1947, and it was his anniversary here. He was born on 21 January 1905.
We celebrated this, the anniversary of his birthday in this very room. He was only head of his own shop of his company for 10 years, and that has become the finest and couture shop in the world. His successor, John Galliano, taking the same or following the same aesthetic codes, used created J'adore. I say the same aesthetic code because in his creation, Mr. Dior look, used amphoras, the Greek amphoras, and this emblematic form or the pattern or design of Dior was taken out by John Galliano in his J'adore. For the first time in 2010, J'adore is number 1 on the French market. This has had never happened before. It's the best-selling perfume.
It was in 2010, the best-selling perfume in France. You can see on the picture now that cosmetics and things like lipstick, sorry, also did extremely well. Building on historical records and achievements, Guerlain built on its past achievements with the Shalimar and Orchidée Impériale. It's face cream, which is most remarkable. Indeed, it has met with a resounding success around the world, obviously outside our borders. Perfumes and cosmetics generated a remarkable or showed a remarkable performance in 2010. Watches and jewelry, again, the financial performance are of course outstanding. It should be pointed out that these products are still gaining in quality.
The strategy we've been conducting with the watches and jewelry has been to focus on our brands and improve these brands in terms of of supply, because one of the difficulties in the watch business is to have an effective supply chain. With Hublot, of course, is a brand, is a rather remarkable brand that was that was very successfully developed by Mr. Biver, who sells high-quality products. Of course, these products will be manufactured in our own workshops. Now, Hublot's distribution strategy is right on the mark. It is highly selective and has just opened a shop on the Place Vendôme.
It is a superb shop. Others will follow suit around the world. The next in line will be open shortly on Madison Avenue in New York. TAG Heuer celebrated its 150th birthday. It's a great brand. Our concern is to ensure supply from our own workshops. Of course, we are always concerned with adequate supply. TAG Heuer has many iconic products. Mr. Pascal d'Halluin has been able to point to fine shops around the world. TAG Heuer, of course, is one of the leading brands in the U.S. It's still behind in China.
There's huge potential in China to develop the brand on the Chinese market because needless to say, that brand came a bit late in the day in China. The other brands in the group, Chaumet in particular, were very successful. Indeed, in 2010, Chaumet has its fine jewelry workshops on Place Vendôme above its shop right next to the Chaumet parlor where Frédéric Chopin died. This is again a fine company manufacturing watches and jewelry. Moving on to selective retailing. That again enjoyed an outstanding year. DFS. DFS is a rather unique company. It finds itself at the heart of sales for or to Chinese tourists. DFS is in a rather unique position.
It distributes all the luxury brands of the world. LVMH's brand, but also that of our competitors. If you go to a luxury mall, a DFS shop in a luxury mall, you find all the brands. You have, of course, brands that are intended for high-end customers, but you have there, this is at the crossroads of all Chinese visitors. Last week I was in Macau. Macau may sound like an exotic destination. Some of you may be familiar, but it's when you are in Macau, it is quite remarkable to see that there are more visitors to Macau than there are in Las Vegas.
DFS has the largest luxury shopping mall of Macau, and it attracts all the visitors that go to Macau. DFS's sales are growing dramatically. This accounts for the high revenue you can see on the slide. That is for DFS. Sephora as well was very successful in 2010. It gained market shares around the world. It produced specific brands or items under the Sephora brand. There are sales on the Internet. Sephora is the number one internet perfume merchant in America. That company is growing as well.
In 2010, we acquired the first internet retail in Brazil through Sephora. Sephora has its shops in China, now it is making inroads into Brazil, where its business will be heading to, will be directed at all emerging economies. That's what we can say about our business, our various business areas, and the performance achieved in 2010. You might want to hear about the strategy that made it possible for us to achieve such a performance. Of course, the strategy hasn't changed. It has been the same for many years. First, internal growth, that is our priority.
By internal growth, we mean developing our brands, investing in our brands, investing in R&D, in developing new products, ensuring the high quality of our manufacturing processes, opening new stores, and supporting the brand image. That is our number one priority. Of course, we invest more behind those or in those brands that show the greatest potential or indeed that have achieved the greatest success already. There is Celine. There's Loewe as well. These are brands where we feel that all the conditions are met for a big success to occur. We invest selectively with all the backing of the organization.
We always try and strike the right balance between the various geographical areas. We're well-balanced. We have one-third in Asia, one-third in Europe, and one-third in the U.S.A. Decentralization also means that the group can develop more harmoniously because, of course, in our group, our organization is more like a constellation than the confederation. It is a group with satellites around the world, but all these satellites are independent. Of course, they also have as a pool of attraction the main satellite, as it were, the flagship store. Having said that, they enjoy great freedom of action.
They can be extremely responsive and proactive, that means that of course you will find specificities for each group, each brand, each business a-area. Internal growth, some external growth, but very selective at that. Because external growth, the purpose is to develop our own, our own companies. We buy up smaller brands. We bought Sack's in Brazil, for instance, and there are other such products that will that are expected. Of course, of course, you may hear, you might know about the investment we made in Hermès, I would like to point out that that investment was a friendly and peaceful one.
We are proposing to support the families, the shareholders in the group. I mean, I understand they were a bit surprised that we came in, but Yeah, we ourselves did not expect to become shareholders, uh, of Hermès. Circumstances meant that starting from a financial investment, for technical reasons that were more or less imposed upon us, we had to turn that into an official stake in the company. Now that we are shareholders, we are certainly peaceful as shareholders, but it doesn't mean we are passive. Peaceful doesn't passive.
I mean, there, we will be active, but we won't be activists, if you can catch that distinction. Regarding the position of the group as a whole, we have reasons to be optimistic. I think we have, I mean, ever since 2010, we have entered a new economic cycle. We have a resumption of growth. The forecast is a growth of 4%-5%. Around 4% in the U.S., slightly less for Europe, about 10% for China. We are looking at growth. Again, in my vision is that, I mean, we are looking to a three year cycle till 2012. What comes after that is difficult to predict.
There could be, of course, geopolitical events that we know. Outside buying that, the demand for high-quality exclusive products, French products, that demand is bound to continue. Very, we're very confident indeed. In fact, January has shown a business picking up since last year, at least speeded up compared to last year. We have a forecast. We work out these forecasts internally, even though we don't advertise this. Our figures are promising indeed. Now, we're looking at a responsible development, that is our fundamental attitude.
We believe that we want to preserve jobs in this business, and so we are here to hire fine craftsmen. This company is very profitable. It makes a lot of money. This also is a company that can help the French economy along. We can hire craftsmen. We also need to hire people outside France. The great I mean, we believe we can make a big difference to the labor situation in this country. We also have a very responsible policy in terms of the environment. Not for me to get into the details, but we've always been very much committed to protecting the environment, and we indeed have our own environmental charter. As I said, we're very committed to that policy.
A policy not just for protecting the environment. We also have a policy of diversity. We are concerned with preserving diversity in this organization, and we are fortunate to have many women in this group. We have more women than we have men. They may be better workers as well. We don't know. There's certainly in number, there are more women than there are men. In terms of gender, our policies are definitely directed in that way. In fact, for many of the products, we need the female talent and intuition and often aesthetic female talent. This is how very much progress is made in our organization.
Indeed, many new products will be rolled out in 2011. It is not for me to give you all the details, but there will be major advertising campaigns. We will have a new Louis Vuitton shop in Shanghai, another one in Rome, but we shall remain selective. As I was saying earlier on, the figures, the financial performance is the consequence of all this because day in and day out, we focus on high-quality products. We focus on the quality of our shops, the people who we try and ensure our people are doing the best they can. Then, of course, the financial performance is the logical consequence.
Of course, then you get into financial intricacies. The other day I mean, I took comfort in seeing that even our auditor had trouble finding his way through all these issues of foreign exchange hedges and so on and so forth. We have, of course, we have a fine financial performance, and our CFO is, of course, the master of all this. Other than that, I think I have to pay tribute to the fine performances delivered by our men and women working for the organization. We certainly expect 2011 to be as good a year as 2010. Our word of order is quality and selectivity.
This is our constant quest for quality on all levels of the organization in each of the business areas. That is what the success of our group is based upon, and I believe we are the one organization in the world that shows the finest potential in the universe of luxury goods. Thank you. Thank you so much. I'll give the word to Mr. Guiony, our CFO, who will give you these figures in detail.
Thank you. Good morning. You know everything, I'll tell you a bit about the rest, starting with the figures for the vintage that you have on the chart. As Mr. Arnault indicated, some records were broken or limits were crossed. Revenues topped EUR 20 billion. Profits from recurring operations, EUR 4 billion. EUR 3 billion in net profit, up 73%, and cash flow also tops the EUR 3 billion mark. Just to go into greater detail, let's start with revenue growth for the year. Growth in euros 19%, as you can see on the right-hand side of the chart, assisted by a positive currency effect. 6% organic growth, up 13%. Let's look at the quarterly trend of this organic growth.
Not much change between 13% and 15% for the quarters, whereas the basis of comparison for the previous year was quite changeable. You recall that the first half of 2009 saw an organic drop of 7%, - 3% in the third quarter, and 3% in the fourth quarter. The basis of comparison became increasingly demanding as the year progressed, and that didn't really impact our performance. You can also see that we're not speaking of catch-up, but of growth, because we had negative organic growth of 4% in 2009, and up 13% in 2010. It's genuine growth compared to a base that was impacted by the crisis, but we went well beyond the catch-up of the crisis effect. Revenue breakdown by geographic area, not much change.
Mr. Arnault stated the balance of the three thirds within the group. U.S. pretty stable. Japan losing one point. They're pretty flat. Asia up two points, 25% of the total. Europe's pretty flat, loses about one point. Next, the breakdown in local currency by geographic area of our revenues, with the exception of Japan, rather separate, where demands remain sluggish for the past few years. U.S., Europe, up in double digits, had declined single figures last year. A catch-up, in fact, growth across the areas. You can see that the Q4 performance, even if they were slightly down compared to the first nine months, an evidence extremely good. 12% in the U.S., whereas you'll no doubt have questions on that.
Wines and spirits made a very cautious landing to avoid inflating inventories and distribution. Asia on a pretty constant note, and Europe put in a performance close on double- digits. Very commendable in Q4. Turning now to the consolidated income statement, let's review the main items. I won't return to revenues. 19% growth. Gross margin 21% higher than revenues. Gross margin 63.8%, up 0.8 versus last year, reflecting a better efficiency of our operations. Marketing and selling up 17%. In fact, that's 12% on a constant currency basis. Within that, marketing expenses up 21%. They account for about 1/3 in that. Up 21% on a like-for-like, whereas selling, that's stores, rentals, that was contained at about 8%-9%, excluding currency impact.
General and admin expenses up 16%. That's 12% on a like-for-like currency basis. There are some non-recurring effects last year with provision write-backs, and this year, additional provisions in most of the operational entities to take account of the performance achieved, notably in terms of bonuses. We end up with growth that was, in fact, slower in the second half than it was in the first half, as we'd indicated. In total, this growth of expenses lower than the gross margin, it leads to a 21% increase. The other of EUR 151 million, that's down about last year. That's essentially amortization of intangibles, as is the case for most of the years. Financial profit is changing considerably. Impact, the tax rate, 37%, slightly higher. Minorities, up.
That's fairly logical. Moët Hennessy and DFS put in remarkable results, growth in minorities. Total increase of 71% of profit at EUR 3 billion, EUR 32 million. EUR 745 million of net profit. That's the unwinding of the Hermès equity swaps. Apart from that transaction, the profit would have increased by 33% for the full-year. Turning now to the analysis, as you saw just revenues by business group. On this summary chart, everything is in double digits. That's the main take-home message. Growth across geographic areas and shared by all business sectors. Also in profit from recurring operations, strong growth of our business. Groups growth, it is higher than in revenue in EUR. We saw that at European level. There was an operational driver in each division.
Watches and jewelry-That have doubled their profit in Selective Retailing. Revenue's up 19%, boosting profits by 38%. Remarkable performance in those but two areas. The traditional chart on the currency impact on our revenues. The conversion of our results abroad, and the change in our hedging policy. You see that it was positive there again. In fact, very positive, EUR 370. We had EUR 120 in the first half, EUR 250 in the second half. You can see that growth is split two-thirds, one-thirds. Operational improvements, that's the profit from the business. The impact measured here rather mechanically of the currency, the currency impact. Turning now to financial income. As you can see, changed considerably.
Four items here just to see our way clear. Cost of financial debt, of net debt has declined from EUR 190 to EUR 150. That's the impact of the drop in the rates and average cost of debt. We were impacted, as were many companies, by the fact that the cash that we accumulated in the assets of our balance sheet, that doesn't generate much interest. That prevents financial income to decline as much as net debt did. Foreign exchange hedges, the cost has doubled. Not that we spent more than last year, but it's an accounting booking of this cost that's rather complicated as I indicate every time. Last year, I said it would increase. It has increased, I can say that it will decline next year.
The recurring cost in cash of foreign currency hedges is of the order of EUR 65 million-70 million. It's a figure we never have. We always have more or less. It's one of these accounting quirks. Results pertaining to current and non-current available-for-sale financial assets. That's essentially linked to the unwinding of the equity swap on Hermès, highlighting a profit of the order of EUR 1 billion. These transactions are, have an accounting reflection, which as I see it, is not fully economic. We have an accounting profit of an unrealized operation because we don't plan to sell the Hermès shares. Booked at a share price of EUR 175.5, which is very different from that of the current share price. These accounting principles were applied, whatever their financial impact.
That seems to me somewhat different. The rest, without any particular comment. On the group's financial structure, not much change compared to last year. Equity's up 49% of the total balance against 46%. EUR 18 billion, the rest is pretty much unchanged. We managed, in particular, to keep a lid on inventories. That's linked to currency impacts, not so much to inventories constituted as such. As to the rest, not much change in the balance sheet structure over last year. On cash flow, EUR 3 billion mark reached. That's cause for satisfaction. You can see that cash flow from operation after payment of interest and taxes, at EUR 3.8 billion. Need in working capital requirements, EUR 247, having generated EUR 91 million last year.
Last year, at a time of crisis, it was not abnormal to generate working capital requirements. This year, with a recovery, it's a little more surprising, and that denotes the high quality of the work put in there. I'm not sure that that performance will be reproducible in 2011. Our inventories will increase, our receivables will increase to drive growth. In 2010, we put in quite a remarkable performance in that respect. Investments have increased, reaching close to EUR 1 billion. That's our resolve to invest selectively. Available cash flow of EUR 3 billion. Net debt, as you can see in light blue, has declined just under EUR 3 billion.
We have EUR 2.7 billion at the end of this year, in spite of a cash impact of Hermès operations of the order of EUR 1.7 billion, in spite of the buyback of the Samaritaine minorities that cost us about EUR 180 million. On the strength of our cash flow, we were able to reduce the debt, which is 15% of equity, one of the lowest levels that the group has ever recorded. Lastly, the dividend, which is the consequence of a number of these changes. We'll be proposing to the AGM to approve dividend up 27% at EUR 2.10. An interim dividend was paid in December of EUR 0.70. We see an average annual growth over the past five years incorporating the crisis period. That's 13%.
Let me end briefly with this chart that I can't resist showing you, which shows the share price performance over the past three years. Years of crisis which include the crisis period. You'll all see that in blue, LVMH, and in gray is the CAC 40 index. This speaks for itself.
Right, ladies and gentlemen. Now if you like, you can put questions to us. Please introduce yourselves before putting your questions. Thank you.
Hello, Antoine Belge from HSBC. I have in fact three questions. Number one, regarding on the profit from recurring operations in wines and spirits, that you had a major growth, 13% organic growth, plus there were positive mix effects. The question is, wouldn't you have expected even greater operating margin? Or were they unusual events or high A&P investments? Second question referred to the Japanese market as being rather stagnant, but you still in Q4, you have only - 2% compared to - 4%, 6% in the previous months.
Is this simply a basis for comparison, or are you being more optimistic in 2011 to try and stop the decline in Japan? Third question, Mr. DF, Mr. Arnault mentioned about, mentioned DFS and its appeal to Chinese tourists. Could you expect taking advantage of the growth in Chinese airports with duty pay rather than duty-free shops?
Christopher, for wines and spirits. Well, we should confirm the fact that there were an improvement in the profit margin at Moët Hennessy, especially for Cognac Hennessy, which accounts for a significant portion of our profits. It is also the case that Champagne enjoyed significant growth.
For the first time indeed in the history of Champagne industry, after the first year after a crisis, normally you have to wait three or four years for a recovery. This is quite remarkable. We have a recovery immediately in the following years. This is the first time we've seen this, and this is the first time we have a global crisis followed by such a dramatic development. Not just growth, but also the market mix. There were some of the prestige vintage bottles also enjoyed tremendous growth, although there's still some ways to go. This meant that profit margins increased, but it will still take some time to get back to the historical levels. That means implementing our long-standing strategy.
Let me point out that I am quite confident that we are the only ones who were able to maintain our prices, indeed increased our prices at a time of crisis. This means that our brands are robust, and this is part and parcel of our long-term image. This is what will enable us to continue this high-value strategy. Regarding Japan, Mr. Carcelle will have to say something, I can tell you that the position in Japan hasn't been good for many years. It looks like it's stabilizing, but that's basically what's going on, isn't it? Well, the Japanese model is developing dramatically. What you have is because the yen is depreciating, you now are in a position to reach out to the middle class and indeed the younger portion of the population.
Because the euro went up and the yen went down, the prices went up in Japan, luxury goods are pretty much the same in Japan as they are around the world. That's one thing. The other thing is that luxury retail is mostly in department stores. Department stores have been over-investing, now we have shops that haven't got the wherewithal to improve their facilities. You have a number of shops that are closing down, a number of Mitsukoshi shops are closing down in Japan. There are other shops that are next in line. In that context, the one tool that we do have is that for a number of years, Louis Vuitton, but not just Louis Vuitton, has been investing in freestanding stores.
Now we have a two-tier market. We have a high growth in our sales in our freestanding stores, but at the same time, lower traffic in department stores, especially among the youngest the younger clientele who were our luxury customers a few years back. There's a sea change in Japan. It's interesting to see that China, a poor country, moving into China, into luxury in number of years, in a small number of years, and Japan following almost the opposite trend. I believe that a longer-term quality trend is underway in Japan. Give or take a few years, a few transition years, we have a strategic hope to believe or reason to believe that we will have much better figures than in the past.
Just to pick up on the point about DFS, I agree when you say that there's huge potential developing in airports and beyond airports, in luxury centers. As you know, we're already present at Hainan Airport. That's a small beginning, and we're working hand in hand with.
The authority that runs the duty-free market in China to see if there are profitable expansion opportunities. Further questions? Yes.
Bonjour. Hello. I'm from Sanfrans team. I have three questions. Number one, you said that there were satisfactory performances even for the small brands in fashion and leather, such as Celine. Is this still a priority? Is your priority to refocus your brand portfolio around these brands in the future? That's one question. I was pleased to see that you noted that exchange effects are foreign exchange effects are rather complicated. The exchange effect was significant this year. There's an assumption that exchange rates will remain the same this year. Do you have any comments as to your expectations this year in terms of exchange rates? About Hermès, you said that you would be an active shareholder.
Is this to say that you might cooperate on some issues with Hermès, for instance, advertising campaigns or such like?
First of all, on the fashion brands, the smaller fashion brands that I mentioned in my introduction, well, some of them are developing very successfully, and there's no plans for additional disposals. I mean, we have a strategy that's very well tailored to each of them that I cited. Of course, success is there, we're going to continue to build around these brands. On currencies, well, it would be very imprudent, in my view, to make a forecast on that front, because it always varies in a direction that is contrary to the prediction of the best forecasters. Unfortunately, it's one of those uncertainties where our means of action is very limited. Even as is our case, we receive the leading specialist with Mr. Guiony.
We see them frequently, we see them a year later, generally, they've got things hugely wrong. We need to adopt a humble attitude in that respect. Any other questions on Hermès? I'll answer your question, but are there anyone else like to ask a question about Hermès? We'll perhaps just group them together. I'm sure that there are probably several questions on that.
Bertrand Perignon, financial operations. I would like to know, Mr. Arnault, at the next general annual meeting of Hermès on 30th of May, would you ask the end of the voting rights of those shares held by the family that were not recognized by the AMF, even though there was an appeal placed to that and by the same family?
Further questions on the matter?
Pierre-louis Germain, Le Revenu. I have a question. Do you consider Hermès to be a competitor of Louis Vuitton as a brand?
Okay. Yes. At the back.
Odile Benyahia-Kouider , Le Nouvel Observateur. Can you tell us what is your stake in Hermès, 20% or more? The second question, if Hermès puts out this holding, the floating will be less, and if the share becomes less speculative, is there a threshold below which you do not propose to remain to keep your stake in the company?
On the, on the Hermès question, what needs to be said is that, first of all, for the reasons that I outlined earlier, we're very pleased to be a shareholder of this very fine company that once again, in a very peaceful manner, in other words, we wish to support the family shareholders, that we wish to support the management. Nevertheless, you would not believe me if I were to say that we will remain peaceful. I believe we can establish if conditions improve in a relationship with the family and management, we can build constructive relations whilst, of course, remaining outside the management of this very fine company.
We can provide them with a certain number of advantages, both at the strategic and operational levels, if they so wish, without any other counterparty than our presence and our presence as a shareholder, to the tune of our current shareholding. We believe that cooperation is, is one thing, but our concern in this company, and one of the reasons why, whereas we had not planned, in fact, we decided to become a shareholder of this company, to ensure its sustainability, its durability in its current system of operation. You asked me, is Hermès a competitor of Louis Vuitton? It's a competitor of Louis Vuitton in as much as Dior is a competitor of Louis Vuitton or Celine for Chanel. We are all in the right places throughout the world.
It's competition that is fruitful for all participants. I'm often told that Hermès' culture is different to that of Louis Vuitton. That's true, but do you prefer Hermès or do you prefer Louis Vuitton? Do you prefer Proust or Stendhal? I think we can prefer one or the other, but we're bound to recognize that both are great talents. In that respect, we tend to position ourself as the Pléiade Collection. That is, that we respect culture and talent, and of course, we can make them live in harmony, but we're not interested in popular novels. We're really just interested in good, great authors.
This demonstrates that all these components that are part of the LVMH group have enhanced their originality and the quality of their products in their belonging to the group. Remember what was said when we took a stake in Yquem. That it was going to be a disaster in the offing of this wine that is still the finest wine in the world. That we were going to, what? Produce T-shirts and other horrendous things. I mean, nothing has happened. I mean, Yquem, since Yquem, which is an iconic wine, joined the group, the quality of the products have improved still further, and it remains the most mythical wine in the world. Competition, yes, but fruitful competition.
Different cultures, I believe that LVMH can be, can guarantee the long-term respect of a culture such as Hermès, and that's the objective we've set ourselves. The level of shareholding is still around 20%. We haven't bought any shares since the last statement. I don't wish to give systematic details regarding our shareholders. Since you're putting the question and that we're gathered here, exceptionally, I give you the figure. As to add a scoop to the meeting, if that's indeed a scoop, we don't plan to exit from the company. We're there, positively and peacefully, and I hope that this very constructive and beneficial for the long term of the company, that this attitude will be recognized by the current shareholders and its management.
That's my wish, and don't count on us to be aggressive or anything else.
Further questions?
Daniela Fernandes da Costa from Valor Econômico, Brazilian economic paper. I have a question on Brazil. Number one, I would like to know what is the share of Brazil in LVMH's sale? Is Brazil a priority region in the development of LVMH? More specifically looking at brands, can you tell us where Sephora will open its first shop? I mean, it's already got a website. As to Louis Vuitton, will there be new shops in Brazil? Then are there other brands in the group that propose to move to Brazil?
Well, Brazil is a great country. It's in full expansion. It's a country that we know well. It's not always an easy country for our brands because custom duties are very high. As you know, there's a considerable price difference in a whole series of products between the U.S. and Brazil. We're interested in this country. We already have Vuitton, Dior stores and now Sephora. For Sephora, since Toni is following their market. Yes, I was in Brazil last week, and we're working to open the store in 2012.
Paulo or Rio?
Between São Paulo and Rio. I mean, that's the focus there for the moment.
Sephora.
Sephora will be opening a store, what? We're gonna open a Sephora store. In 2012. In 2012, we should open several and contribute to the huge growth in Brazil. We'll also be selling quite a few Brazilian products in these. Yes. At the Sack's store, we launched a care line developed by Gisele Bündchen for the Sack's location. The Brazilian public will see a very fine mix of international products that we'll bring in, products that already exist. Concerning Vuitton, well, we're already established. We have further plans. Mr. Carcelle, would you like to say a word about plans for São Paulo?
Well, in Brazil, like in many other countries, our strategy is rather to broaden our existing retail network rather than opening new points of sales. Both in Rio and São Paulo, we propose to expand the existing shops, Iguatemi and the other as well. We can see that there's a significant speeding up of business in Brazil, but the import duties are high. Sometimes it takes a long time to get our products out of customs, and that means that many of our Brazilian customers buy outside Brazil. We have many Brazilian customers, not just in Brazil, but in the U.S. and in Europe, it's a shame not to have them in Brazil itself.
It's a lost opportunity, but still we're investing there, both in Rio and São Paulo. In two years' time, the places will be unrecognizable.
Sure.
Bonjour. Hello. Emmanuel de Broissia from Société Générale, and I have three questions. Number one, on Louis Vuitton, I can't understand that half the profit is generated by Louis Vuitton. Maybe Mr. Carcelle can tell us about the outlook for the brand in 2011. Apart from Brazil, are there other countries where you propose to open new shops? Last year you said that the priority was less to open new stores, but rather to expanding existing stores and improve service in the existing stores. Could we have details as to the number of stores? You've decided apparently not to give us numbers on that. The second question about Sephora. Would like to know where you stand with your Russian partner. I believe you had a possibility of acquiring a greater stake in that Russian company.
Also in Mexico, I believe that Sephora U.S. was the company that may issued statements but not the Sephora headquarters. The last question, you don't have to give us a name, but are there other equities swap contracts in other listed companies in the business areas where you are present? We don't want names exactly, but is it the sort of thing that you're going to do again?
As regards plans, I can only confirm what we said last year and what I've just said as regards Brazil. I mean, we really cover the globe quite successfully. In many countries, we don't need to have additional detailed coverage. We want to increase the size, the service, the luxury, the emotion generated by our stores in countries where we're present. Mr. Arnault mentioned Rome. We're going to triple, quadruple this face, facility in Rome, taking over Spazio Etoile, which was the oldest cinema in Rome. We're going to rebuild a smaller cinema that will be open to customers with special screenings there.
In Singapore, we're going to open the first Louis Vuitton Island because in Marina Bay, we have the opportunity of taking one of the artificial islands in front of the casino and the marina there. It'll be a magical location. Place Vendome will be opening up at the end of the year with the first of watches and jewelry store, specialized in watches and jewelry. A jewelry workshop that will be in the same building on the top floor will allow customers to view how the jewels are made and how they are progressing. We're going to double the size of the Cannes store. We're going to triple the store in Munich, triple its size.
All our plans, not just in Asia, but across the leading cities of the world, we want to offer increasingly luxurious premises to our customers. Mr. Arnault mentioned New Bond Street, which doubled the revenue generated at New Bond Street, but radically changed the luxury perception of the brand. We're prepared to invest more in terms of quality than in quantity. There'll be fewer than 10 new store openings this year.
Regarding Sephora, I can tell you this. In Russia, we have a partner who runs the business extremely well. We are very happy with the partnership. He's done a very fine job, a highly qualitative job. We're perfectly happy to go on working with this partner in the same way. With Mexico, we have a joint venture with Axo, we have our own business plan, we propose to open two stores in two shopping malls in Mexico City by years. Regarding the strategy in general, of course, we still are seeking out new pillar countries where we have market shares of 20% or more, like France, the U.S. or indeed Poland.
There are several countries where we have a, we have less than 20%, and we're trying to reach that level, Italy, Spain, Turkey, Canada. There are new countries like Singapore. Singapore, we opened last year. We will be opening Malaysia in a month or two, and then you have Mexico and other such countries.
No more equity swaps. Well, equity swaps are proposals that were put to us by banks. I mean, you're a banker. It's a little too sophisticated for us. I mean, at the outset, I didn't know what an equity swap, I mean, Mr. Guiony masters that very well. I think that all that's going to change. For the time being, let's keep things simple.
Hello, I'm Lutz Meier from the Financial Times, Germany, and I have several questions for Mr. Arnault. You said that you were in short supply for certain items, in particular Champagne and leather goods, and in jewelry, I believe. How can you meet the demand then if you are in short supply? Is if supply is too short, could that hamper growth in the leather goods business? Because you said it takes time to build new workshops, to train new people. In the meantime, what do you do to stall demand? Did you have sort of subcontractor or something?
In Champagne, I believe, I read in the papers that you had an interest in the Rémy Cointreau Champagne branch for the supply of grapes. Is that right? What's the other way to meet the supply shortage?
Well, to resolve production problems, there's no other solution than to gradually increase capacity of the Louis Vuitton workshops by hiring craftsmen in existing workshops, which is what we're doing, by attempting to certain suppliers, subcontractors also to increase their capacity. That's not always easier because we control them very closely. In Champagne, likewise, to increase the number of bottles sold, we must boost our wine-growing capacity. We're seeking additional capacity for buying land and production, manufacturing contracts, everything that's available. I think that we will gradually succeed there in increasing, but we're rather limited by that difficulty. The working capital requirement, as you've seen, has declined because we're reducing inventories.
Other questions?
I didn't hear that. Rémy Cointreau, yes, we looked at that, but no more.
It's William Hutchings from Goldman Sachs. Just a question on your capital expenditure plans for the group. I wonder if you could give us a bit of color about by division, by geography, and by type in terms of store or production facilities, where you stand in terms of your plans. Do you have a budgeted number for the group in total?
Well, capital investment in 2011 will increase, which is quite logical, on the back of the economic recovery, as Mr. Arnault said, directed towards the most promising and the most effective brands. Yves Carcelle mentioned that we have quite a few plans in terms of stores, store extensions, fewer openings, but, I mean, quite a few. In total, we'll continue to have an active policy supporting our brands through investment, be it in the networks. We always speak of Vuitton, we can also mention watches and jewelry, be it in production capacity. Carcelle was mentioned for Vuitton earlier. There will be ongoing support, as has always been the case.
Vincent Amel. I had a couple of questions. First, on perfumes and cosmetics, this is one division where there was less leverage till than elsewhere. I believe that last year there were some technical effects last year, as a result, there's less growth, less this there than elsewhere. Regarding selective retailing, can you explain why there's such a difference in the performance between DFS and Sephora, and especially as regarding profit margin? Then you said, you just said that you would support your brands both in terms of production and retail network. I expect that in 2011, there will be, you will be giving us more numbers in terms of revenue compared to 2010.
For perfumes and cosmetics, you're right. We started the year rather prudently. Then we were encouraged by the growth, and we saw that the competition was investing a great deal, so we considerably boosted our marketing spend in the second half. If you look at the income statement, there's positive leverage in terms of volume, gross margin, marketing and selling and administrative expenses. We have an A&P spending, which is 5% higher than last year. We hope that that will have an impact on growth in the coming year. As regard selective retailing, well, it was a very good year with growth that was pretty evenly distributed. DFS achieved a higher growth, there was also a small rebound over 2009.
Sephora had a very good year in 2009 and continuing to grow. For operating margin, it's interesting to see that both Sephora and DFS and Le Bon Marché are putting in margins well above the 10% market. Miami Cruise Line is recovering, but it's not at that level.
Bonjour, Marc Willaume .
Marc Willaume .
I have three questions. One on Louis Vuitton and its network strategy. The fact that you propose to open a shop in the Seoul airport. Is this that you want to open a duty-free store, you want to take advantage of the Japanese, Chinese traffic? Outside Louis Vuitton in leather goods and fashion, are there brands that are losing ground? Has Fendi resumed, renewed with its producers levels of two years ago? What about scope effects?
Well, Louis Vuitton, from the outset, since we arrived at LVMH, has been selling duty-free products in Korea. It's the only location in the world. It will continue to be the only location in the world and places where all the other brands are present, but of a pretty average quality. We decided to discontinue all those stores that weren't sufficiently high from the qualitative standpoint and to come to regroup them in the finest, the largest, finest store at Incheon Airport. Louis Vuitton's policy is never to be present in duty-free areas, and this that example is the counterexample, in fact, that confirms the rule. No duty-free at Louis Vuitton except for there, which it was there, unfortunately, I would add, when we arrived.
Since then, we have not been able to change, given the size of those locations and the impact of the market. Never duty-free apart from that. Never any duty-free at Louis Vuitton. You'll never see any duty-free stores anywhere else in the world. What was the other question? On the fashion, the fashion brands. Well, all the fashion brands are overall positive. We won't go into the detail, but there's a considerable growth potential, growth of the earnings in this section of the business that is now reaching quite a significant size. Fendi has returned to the profit level of 2008. Yes, Fendi is putting in a substantial profit and T4.
One.
One last question, and then I invite you to visit the Dior store that is next door. A small exhibition showing the creation of Mr. Dior since the outset and how Galliano continued in the footsteps of Mr. Dior there in the hall just next to this meeting room. Last question, please.
You noted that gearing is low to 15%, what are you gonna do with all that cash? Do you propose to make new acquisitions or share buybacks, increase dividend payout, since you have so much cash on your hands? You noted that there's a difference in culture with Hermès. Can you give us, can you tell us about that difference?
Regarding the capital, yeah. We have a low gearing ratio, but, might I say, I mean, that's a situation that we can live with and survive with for a number of years without worrying unduly about it. Without, before thinking about using the cash, we need to be patient. We must wait for opportunities and see how they develop and, initially to focus above all on investment in growing our businesses. You mentioned culture in terms of Hermès, I believe I expressed myself. I mentioned difference in culture between one luxury group and another. Obviously, Christian Dior's culture is different to that of Chanel's, which is different to that of Hermès, which is different to that of Vuitton. I find it rather pointless to oppose cultures.
I mean, it's like the example I took about writers. I mean, do you prefer Victor Hugo to Molière? I mean, they're very different writers. You can't compare them. They are two very great writers. Vuitton is an extraordinary brand that has a culture of travel, of a trunk maker that was founded in the middle of the 19th century. Hermès is more geared to the manufacturer, the production of saddles initially. Developing leather goods from saddles. Two very different universes, but universes that are equally respectable, that have a distinctive culture. What I believe is that LVMH in today's world is best placed to preserve the crucially important cultures for the futures of these companies.
Now that we're a significant shareholder of Hermès, we can guarantee the preservation of their culture in the long term. Ladies and gentlemen, thank you.