Ladies and gentlemen, welcome to the LVMH Full Year 2020 Results Conference Call. I will now hand over the call to Mr. Jean Jacques Yony, Financial Director of the Group. Sir, please go ahead.
Thank you. Ladies and gentlemen, good day and welcome to this Francois. I am Georges Guillenide, the CFO of the REMS Group. Before I begin, I must remind you that certain information to be discussed on Mr. Today's call is forward looking and is subject to important risks and uncertainties that could cause results to differ materially.
Mr. For this, I refer you to the Safe Harbor statement included in our press release. Let's now move to today's topic, full year 2020 figures. After a brief discussion on the year's highlights, Chris Solis, Group's Head of Investor Relations, will cover the main Mr. Development of our different groups business groups.
I shall then comment on the main figures and after this, as usual, both Chris and I will be available for your questions. The press release is available on our website as well as the slides for today's presentation and the financial report. Mr. Moving to Slide 3 of the presentation, I would say that 2020 shows LVMH's good resilience in a very adverse environment, We shall go into some details, but the main points to bear in mind in my view should be first and foremost the successful emphasis We put on the health and safety of our employees and customers as well as our direct support in fighting against this pandemic, our top priority in this unprecedented environment. On the negative side, the impact of the global health crisis in all geographies and all businesses.
This unprecedented situation led to the closure of most of our physical stores, much reduced Mr. I should say that this is talking from our wholesale clients and almost complete suspension of travel retail related activity. Mr. On the positive side, I would mention the resilience of our main brands, the strength of our online businesses, the strength Mr. The underlying demand in China despite very tough first half and the good rebound experienced Mr.
In the second half across most of the businesses and geographies. Finally, the finalization of the agreement with iconic American jewelry brand Tiffany. I will now turn to Chris, who is going to review the main developments within our various business groups. Chris?
Mr. Thanks, Jean Jacques. I'll start with Wines and Spirits and the key figures on Slide 5. Mr. As you'll see, the 2020 revenue fell 14% on an organic basis to 4,800,000,000 Mr.
Euros, reflecting a strong comeback from the 23% decline in the first half. Looking at the 2 categories, champagne and wines Mr. Revenue reached €2,120,000,000 down 15% on a reported basis, but a decline on 16% on an organic basis Mr. After taking into account a positive 3% perimeter effect, mainly relating to the integration of Chateau Desclat Mr. And a 2% negative currency impact.
Konec and Spirits revenue reached €2,640,000,000 a 14% decline In reported revenue, the decline of 12% on an organic basis after taking into account a 2% negative currency impact. Profit from recurring operations in this group for the year was €1,388,000,000 Mr. A decline of 20% versus 2019, and this reflects a 29% decline Mr. In the first half, we had a strong improvement to a decline of 13% in the second. Breaking down the total champagne and wines contributed €488,000,000 and Konekan Spirit's €900,000,000 Mr.
We turn to the highlights on Slide 6. On an overarching basis, our performance in this business in the second half reflected a strong recovery Mr. S. As well as better trends in China. In champagne and wines, volumes were down 19%, Reflecting a significant decline in consumption given lockdowns and dramatically lower traffic in restaurants and nightclubs.
Mr. We are glad though that in addition to the U. S, we saw improving trends in Europe. As I mentioned, our results to include the integration of Chateau Desclaurs, the fabulous rose we acquired at the end of 2019. In cognac and spirits, Hennessey volumes were down only 4% for the year, reflecting a return to growth in the second half, thanks to a strong performance, Mr.
In particular from the Versus Quality. There was a strong rebound in the U. S, driven by the off trade where stocks remain at low levels I'm probably helped by the stimulus measures taken to support consumption. We saw improved trends in China Mr. Where the earlier Chinese New Year last year led to a more challenging comparable at the end of this year.
Finally, a new high end rum from Cuba, M and N. Take was launched in Europe in September 2020. Looking now at our fashion and leather goods brands for 2020, you'll see the key figures on Slide 7. Mr. Revenue was €21,200,000,000 in this group, a decline of just 3% on an organic basis after a 2% negative currency impact.
This reflected a strong second half with consecutive double digit growth quarters. Profit from recurring operations fell 2% to €7,188,000,000 for the year, reflecting an exceptional increase of 32% in the second half compared to a decline of 46% in the first. Mr. Looking at the highlights, Slide 8. As Jean Jacques mentioned a few moments ago, our major brands drove strong performance and this was the case in Fashion and Leather Goods.
Louis Vuitton and Christian Dior each delivered double digit organic revenue growth Mr. In the last two quarters, that would be a triumph at any time, but even more so in 2020. At Louis Vuitton, its proven strategy Center on creativity and quality has driven consistent success. Recent new product lines include Mr. Ponce 9 and the 18/54 Canvas.
The Maisons also generated excitement with its in person shows in Shanghai, Tokyo and Miami, all with strict COVID protocols observed, as well as Another important driver of Louis Vuitton's growth is its commitment to responsible creativity that it brings alive Mr. Focusing on sustainability throughout the production process. Lastly, in terms of recent Louis Vuitton highlights, The Maison also continues to make strides in its digital offering, which has been a key contributor to sales growth. Christian Dior, the Maisons saw outstanding momentum and market share gains in all regions, driven by stunning new products such as the Bobby Bag Dior Chemois and Ready TO Wait. They also held a spectacular women's show in Lecce, some exciting artistic collaborations the Men's Collections and Christian Dior Designer of Dreams exhibition was enjoyed in Shanghai.
We are also glad to note Mr. Shao good resilience and was very creative in maximizing visibility in this period, including through collaborating with the musical group Anima Mundi with performance in several cities. Turning to some other fashion brands, Loriciana opened a flagship store in Ginza, Tokyo. Celine had a strong recovery in the 4th quarter, driven by sales in Asia. Loewe's unique show in a box and show on a wall Mr.
Marc Jacobs, the accessories business continues to progress nicely and the online business is performing well. In the perfumes and cosmetics group, Slide 9, revenue fell to 5 point EUR 2,000,000,000 a decline of 22% on an organic basis after 1% negative currency impact. Profit from recurring operations fell 88% to €80,000,000 The key highlights on Slide 10, this business is particularly impacted by the sharp decline in international travel and in makeup. Recognizing this, each of the brands move swiftly to maintain their selective distribution approach and limit promotions Ms. In order to support brand equity.
At the same time, there was ongoing process in the skincare business Show good resilience based on the continued success of its iconic lines and the strength of its product innovation. Mr. Successful launches in 2020 included Miss Dior Rose and Roses, J'adore and Finisimier and new Mr. Ruggio, all off to a nice start in spite of the environment. Across this business, revenue improved in Q4, especially in China, reflecting in part a a strong acceleration of online sales as well as this is the revenue improvement as well as in Japan and the U.
S. China was also a strong market for Gala with outstanding performance in skincare. Mr. Gabriel and the Alcadie Imperial lines continue to perform well. And the Aqua Allerge, Mr.
A collection in perfumes is also a strong seller. In some of the other brands, we saw a good performance of the makeup line, Prism Vibre Givenchy and progress on the digital front at Fresh, while Fenty launched its new Fenty Skin line. And finally, benefits business was impacted by the suspension that it offers in its stores due to the lockdowns. Turning now to Watches and Jewelry, Slide 11. This business has been impacted by destocking across retailers, There was a marked improvement in the second half.
Revenue for the year was €3,360,000,000 On an organic basis, Mr. This was a decline of 23% after a negative 1% currency impact. Importantly, in the 4th quarter, organic revenue in this business Was down just 2%. Profit from recurring operations was €302,000,000 a decline of 59%. Mr.
Slide 12. I'll start with the biggest news in the business. The Tiffany transaction closed Mr. At the start of this year, we are now starting the integration process having already named a new leadership team with Mr. Angelie LeDreault from Louis Vuitton assuming the CEO role, Alexandre Arnaud as EVP and Michael Burke becoming Chairman.
Now moving on, let's begin with Bvlgari. We saw a strong recovery in the second half in China. Fueling this in part were the introductions of exciting new products, such as the Serpente Viper and the B01 Rock lines and the high end jewelry Ms. Collection Boroca. In addition, the new Bulgari Aluminium Watch is being Mr.
Very well received and OTO Finissimo received its 6th world record relating to its ultra thin movement. Tag Heuer has shown good resilience as well. They launched the 3rd generation of the connected watch in New York before the lockdown started in the U. S. Mr.
And is having great success. The brand also celebrated its 160th anniversary with the launch Mr. Huvelo continues to bring excitement to the luxury watch world, including most recently launching new products, Mr. Big Bang Integral and Spirit of Big Bang Mecca 10. The brand is also official timekeeper of English Football Premier League Mr.
Chaumet for the 2020, 2021 season. Chaumet has also had an active period, including reopening its Mr. Stor at its historic Place Vendome site in Paris and also strengthening its footprint in China. The brand also presented its Mr. Cheyenne's jewelry collection, Peuseventif in Monaco and in China.
And finally, at Fred, they too are bringing newness to the market, including with the development of the Force 10 line and the launch of Chant's Infini. They're also expanding in China Mr. And further enhancing their digital capabilities and offering. Moving now to the final business group, Selective Retailing on Slide 13. Mr.
Revenue in this business declined by declined to €10,200,000,000 On an organic basis, this reflects Mr. The decline of 30% after a negative 1% current impact. The result from operating results from recurring operations in this business was a loss EUR203 million. Let me start with Sephora, this is Slide 14, which adapted well and showed strong resilience Mr. Simeon, over the course of 2020, while in store shopping was deeply impacted by the crisis, online sales grew very sharply.
This is due, of course, to the strength of the product offering, including notably in skincare and the growing success of new products, such as Sephora Collection's Mr. Goodfaud, as well as Sephora's best in class digital capabilities and successful strategies to drive growth through, for example, events Mr. CFO, such as the virtual Sephora Day, where beauty trends were presented in China. At DFS, where suspended Travel had a significant impact on its traffic. Steps have been taken to drive sales outside of the core Travel Retail Business, Including the new services geared towards local customers as well as strengthened online offerings, which have been well received.
With respect to stores. We did see improved revenue in Macau at the end of the year. Mr. Le Bon Marche, the department store, has taken great measures to remain in close contact with customers to continue to serve them, And this also played a role in driving strong revenue growth at itsecommerce site, 24s.com. Mr.
So now I'll hand back to Jean Jacques, who will go through the key consolidated figures before opening up for Q and A. Jean Jacques?
Mr. Thank you, Chris. So let's now discuss 2020 figures a little bit in more detail. I shall start with a review Mr. Revenues on Slide 16 where you can see a comparison between quarters in terms of organic growth.
Mr. As you can see, it has been a story of, I would say, 2 halves. Two points worthy of note. One is a strong rebound in organic revenue in the from a decline of 28% in the first half to only a 5% decline in the second with all business groups contributing Mr. And to the increased negative currency impact in the second half from 1% to 3%.
Let's now move to Slide 17, which shows the geographic breakdown of revenues in euros. Given the suspension of travel, there was a repatriation of Mr. Chen from Europe towards Asia representing 4 points, while the U. S, Japan and other markets remained stable in relative share. Mr.
Moving to Slide 18, you will clearly note that the group's geographical performance was contrasted to say the least Mr. With the exception of Europe, which has remained stable compared to Q3, all regions have improved during the last two quarters of the second half with a notable double digit growth in Asia. On Slide 19, as Chris has already touched Mr. Ong, the business groups. I just wanted to point out the gradual improvement in organic revenues Mr.
Since the beginning of the second half, with total organic revenue only declining at single digits. In the Q4, the later Chinese New Year this year had an impact on the timing of shipments compared to last year in Wine and Spirits. But otherwise, all business groups Mr. Improved compared to Q3, especially in watches and jewelry, but most notably obviously in fashion and leather goods, which recorded double digit growth Mr. Let's now move to the next slide, which is 20 on the absolute figures as well as the reported and organic changes.
Ms. Once again, it illustrates the impact of the suspension of international travel while demonstrating the resilience of the fashion leather goods Mr. As well as the wine and spirits. Turning now to our simplified P and L account for the period, Mr. Which is on Slide 21.
The main comments are the following. Obviously, we already discussed revenues with Mr. On average for the year, minus 17%. Gross margins decreased by 180 basis points, essentially related to the first half, Mr. In H2, the gross margin was comparable to last year.
Marketing and selling expenses are down 16% in organic terms, While admin is down 5%, overall operating costs decreased 14% on a constant currency basis, Mr. Reflecting the group's effort to contain costs in an adverse environment. Profit from recurring operations is down 26% Mr. At €8,300,000,000 other operating income and charges are negative by 3.30 $3,000,000 reflecting mostly amortization and depreciation of intangibles, but also this year some donations and acquisition costs. Mr.
Financial charges are a little higher than last year due to the impact of the mark to market of our financial investment portfolio. I will comment this Mr. The group's income tax rate is around 33%, 5% above last year, Mr. Resulting from exceptional impact of certain non deductible charges incurred in 2020 Mr. And the uncertainty around the future application of some losses with a full in minority interest, overall, the group's share of net profit is EUR 4,700,000,000 obviously.
Let's turn to Slide 22. You can see on that chart the impressive rebound in the second half. Profit from recurring operations was a 7% improvement over last year. Looking at this by business group, Fashion and Leather was in strong positive territory at +32%, Mr. Driven by improvement across the group and notably Christian Dior and Louis Vuitton.
Wine and Spirits and Watkins and Ruili were resilient Mr. At minus 13% and minus 16%, respectively, in the second half with margins similar to the same period of last year. Peruvian Cosmetics showed a small profit in the second half in a highly promotional market and Selective Retailing also returned to profit Chairman in the second half of the year, but remain loss making on a full year basis. Let's now look at the profit from recurring operations, which is broken down by business groups Mr. On Slide 23, wine and spirit profits declined 20% underpinned by a 29% decline in profits in champagne and wines And a more moderate 13% decline in cognac and spirits.
After a particularly strong second half, fashion and leggers Mr. Profits ended up almost stable, actually down 2%, which is in my view quite remarkable. Perfume and cosmetic and watch also renewed with profitability in the second half of the year and achieved $80,000,000 for perfume and cosmetic and 300 Mr. For watches and jewelry and selective distribution remain loss making to the tune of 200,000,000 Mr. Reflecting the division's exposure to Travelers as well as a lower level of the margins than the other divisions.
Let's now turn to Slide 24 and the analysis of the net financial expense. A few points to mention. The cost of debt declined significantly quarter Mr. The cost of hedging strategies and the financial cost of leases under IFRS 16 were quite stable compared to last year. The market value of our financial portfolio was essentially flat after increasing by about $82,000,000 in 'nineteen.
We have opted, as you know, for mark to market accounting for our financial asset portfolio. And as a result, Mr. This item shows market fluctuations of LatAm Capital Gain and not actual profits and losses. Moving on to Slide 25, the balance sheet structure remains very sound. The slight decline in intangibles and tangible fixed assets Mr.
Reflects more limited capital investment during the pandemic. Inventory is hedged down as a percentage of total, reflecting unfavorable Mr. Finally, the increase in debt and other current assets is related to preparation for the acquisition of Tiffany obviously. Mr. Turning to the important Slide 26, a few words on the cash flow statement.
As you can see at the bottom of the slide, operating Mr. Free cash flow was almost stable, an impressive feat in this very challenging year. The decline in the cash flow from operations Reflect the lower operating profit adjusted for non cash items, mostly inventory and intangible depreciations. This was almost entirely offset by a 25% decline in capital expenditures consistent with the objective we have given ourselves, lower working capital requirements, which we just discussed and to a lesser extent, lower taxes. A quick comment on the group's net debt, which stands as €4,200,000,000 as you can see on Slide 27, about $2,000,000,000 below 2019 level and a gearing ratio of 11%, obviously, prior to the acquisition of Tiffany, which was completed Finally, a word on the dividend.
After having reduced last year's final dividend by 30% from the original amount, we proposed a dividend of Mr. €6 per share at the April AGM, in line with the level paid in 2018. Given the interim dividend of EUR 2 paid in December 2020. The final of EUR 4 would be paid in April 2021. Chairman, highlighting the most important point of this half.
First, I would like once again to stress the quality of the work achieved by the teams And their agility throughout this unusual crisis, the strength of our brands, which once again demonstrated the resilience nature the quality of the distribution both offline and online, all of which enabled us to look at the future with confidence. Mr. Secondly, we look forward to integrating another store jewelry brand with Tiffany. We will pursue the digitalization of our Maisons to continue to enrich customer experience and we will accentuate the group's commitment to preserve the environment and corporate responsibility including diversity, Mr. Equality and Inclusion.
Thirdly, the revenue and profits achieved in this most challenging Mr. Miyher demonstrates the outlook has certainly got better or should I say gets progressively back to normal. We are optimistic and confident although there are Mr. 2 things we should not forget in order to be able to react quickly to any changes in the environment. The resolution one is that the resolution of the pandemic crisis lacks visibility Mr.
Tian, we cannot rule out further difficulties and to the Travel Retail business is and will be suffering for a number of months or quarters before we come back to normal. So that's basically all Chris and I wanted to say. Operator, could you open the line for questions please? Thank you.
Ms. Thank you, sir. Ladies and gentlemen, we will now begin our Q and A session. Mr. We have one first question from Madam Susanne Apuetz from UBS.
Madam? Ms.
Hello. Good afternoon, everyone. Can you hear me well? Because I think the line broke for a second.
Yes, we can, Susanna. Thank you.
Perfect. Hello. Ms. I have three questions, please. So the first question will be on the Fashion Ledger Goods division.
Would you be able to discuss Ms. Trung by nationality in Q4. I guess it would be just mainly to ask if you've seen the continuation of trends from Q3. Anne, if I remember correctly, growth was driven by the American consumers and the Europeans, and the Chinese consumer was positive, but I think still slightly lagging, the Americans and the Europeans. And also related to the Fashion Advice Division, if you could just quickly confirm what was the contribution pricing to the division for 2020.
2nd question is on profitability, also from Schneider Group's division. So I'm being a bit boring here. The profitability was really impressive in H2 at 41%, but I'm Just trying to understand in light of the FX headwinds and also the fact that if I understand correctly, you probably didn't have the chance to spend as much marketing on 21. It will be very helpful to get some comments to understand that. And my final question will be this time about Jewelry.
Ms. You've seen a nice improvement in Q4. I presume that's been driven also by jewelry. And generally looking at the trends in the market, the jewelry category has been quite strong in the last two quarters. And because of that, I think there's been some concerns whether this is something sustainable or is this some sort of short term change in patterns of spending by the consumers because of the pandemic.
So If you have any high level thoughts on that, it would be very helpful to understand that. Thank you.
Thank you, Susana. It's a good Mr. List of questions to start with. So, nationality, I will answer in broad terms for Louis Vuitton Mr. As always, which is the brand where we monitor that with some good accuracy.
Q4 trends were in line Mr. With some changes nevertheless, as far as Americans are concerned, Which are leading the charge, I would say. We were in line. So the American customers Mr. In a very strong double digit way.
As far as Japanese, we registered in Q4 positive growth, Which was not the case in Q3, but mostly due to the comparison base being complicated by the VAT impact in 2019 that You all remember, so I will not elaborate on, but we ended the quarter in 2020 with the Japanese on Mr. And as far as Chinese, they were also at quite a sizable acceleration compared to Q3. So we are quite pleased with all the numbers with the various nationalities, not to mention European nationalities. I commented Q3 with all European nationalities being strong. Mr.
They were, I would say, even stronger in Q4, although as you always know, it's not sufficient to offset the almost disappearance of touristic flows in Europe. So Europe altogether is down, but European client Mr. Rup in a significant way in Q3 in Q4 as they were in Q3. As far as pricing is concerned, there were some price hikes Mr. In the course of 2020, after, as you know, several years of flat prices, I think 2020 was the year to do that.
I mean, if you don't do it in 2020, when do you do it, particularly after 4, 5 years of Mr. Faer. No price increases, so it varies a lot from one brand to another and from one geography to another. But in the growth, particularly in the second half, there is some contribution, obviously single digit contribution Mr. As far as profitability is concerned, there was nothing coming from FX.
Mr. The contribution of ForEx to profitability is negligible in 2020. It's a little bit positive in H1 and a little bit negative in H2, nothing really significant. Obviously, you mentioned marketing, but all the cost base was under control. And we ended up with revenues growing faster than cost, Mr.
Which, sorry to say that, is a good recipe for increasing margins. So, we all know that this cannot last forever. At some point, we shall have to reinvest to Mr. Into marketing, into distribution, etcetera. But Mr.
We were able in 2020 to control very much the cost base and to decrease it even at the time when the revenue base was growing faster Mr. Than we expected. And all in all, we have enjoyed a good ride on the margins in 2020. Mr. Your question is whether this is sustainable or not.
Probably not. But the idea is not Mr. For this to be sustainable is to show our ability to react to an adverse environment. Finally, Jewelry, You're right. I mean, the improvement was significant in Q4.
Bvlgari did well. I mean, if we look at the retail business at Mr. Bulgari in Q4, it was at low double digits, so it's quite encouraging. Was there anything connected with the pandemic and non sustainable? I really don't know.
The environment is what it is. Mr. The readiness of it is not ideal to say the least. So we will see what happens. But at the very least, at the end of the year, Mr.
With our main jewelry brand so far was extremely encouraging and bodes well If things continue to improve for 2021, but there is a big issue in what I said.
Perfect. Thank you. It was very helpful. Just to follow-up, I would say clarify on nationality. So would if I mean, you mentioned the Americans and the Japanese.
Is it the right way to think of did you mention them by kind of growth in Q4 or was it just random order? So would the market be faster than Q4 than the Japanese?
The order I have on the paper that I read so that I don't see stupid things when I answer the question.
Thank you, Megan. Next question is from Mr. Lucas Solca from Bernstein. Sir, please go ahead.
Mr. Yes, because this is a rather special situation. Chinese consumers are not going to travel abroad Mr. This time, and this is typically the time when they buy in Europe mostly. But at the same time, there's been some resurgence of COVID-nineteen cases, which could potentially disrupt the pre Chinese New Year Shopping in China itself.
So I wonder what you make of the situation knowing that very strong support in China has been Mr. Tormantor in producing these very, very good results. The other question I have is on Beauty. There's So many moving parts because of COVID-nineteen that I wonder if you see Mr. Amy, structural developments, you changed the CEOs of Sephora Mr.
Recently, and so I wonder if any of the, let's say, more structural and fundamental goals and plans that you have for this business And thirdly, I appreciate what you said about SG and A and the ability to contain costs And the agility that you've shown in performance. But would it be very wrong to assume that part of this Mr. Lower cost is potentially going to be showing sticking power and benefit some Mr. Of the 2021 performance knowing that uncertainty is still prevailing. Thank you very much.
Okay. Chinese New Year, well, your guess is as good as mine. I mean, unfortunately, if you want to point out that there are risks connected with The sanitary situation in Chinese or anywhere else, I agree with you. I mean, nobody knows exactly where we are Mr. Heading for neither in China nor elsewhere.
I mean, China has proven quite in control over the last few Mr. I would say. So it is not the place where I would assign the largest lockdown risks. But anyway, Mr. Nobody knows.
So there are risks. And obviously, such risks, if they materialize at the time of Chinese New Year, the impact would compounded, which is exactly what happened last year. So I mean, I don't think I can elaborate further. Nobody knows. As far as Beauty is concerned, no, there were no CEO change to Mr.
Assiforat, there was an appointment of CEO and Chris Della Puente was appointed in the whole Division of Selective Distribution. So you mentioned disruption from COVID, Mr. Which is quite obvious. I assume you're talking about distribution and Sephora and to a certain extent DFS Mostly, we suffered from a big disruption from a physical traffic viewpoint, a switch to Internet, a massive negative operating leverage in the brick and mortar business. So, all this has been at play in 2020, will not disappear At any point in time soon, I mean, it could take a while for everything to normalize.
I think we can be Mr. Reasonably pleased with the way we have handled the situation, which was very adverse with a lot of stores at At some point, all of them being closed, which makes things quite difficult. I mean, generating revenues when all your stores Mr. Clos is a fairly challenging situation you will admit. And we handled that throughout the year with obviously negative financial consequences.
But all in all, I mean, I think we were able we turned the profit for Sephora for the full year, Which was not obvious frankly at the beginning of the year and I think the Cephal teams reacted extremely well. The future forecasts are uncertain, particularly as far as the future is concerned. So It's always difficult to say what will happen. I didn't catch your last question on costs reductions. Depend on the overall environment.
I mean, the necessity to reinvest into all businesses at some point will emerge. Mr. Obviously, it will emerge. It will be a function of the normalization of the environment. I mean, if all of a sudden, the Ms.
This is disappears and everything is back to normal. Obviously, we will reinvest into the business both in terms of OpEx and CapEx. If not, We will manage the situation in a fairly flexible way as we have done in 2020. So for me, it's hard to say to To be more precise than that, I mean, we are navigating depending on the weather conditions. And should the conditions improve, we'll act accordingly.
If they deteriorate, we will also do the same.
Understood. Thank you very much, Jean Jacques.
Mr. Thank you, sir. Next question is from Mr. Edouard Aubin from Morgan Stanley. Sir, go ahead.
Mr.
Yes, good evening. On Vuitton and Dior sorry, three questions for me. The first one is on Vuitton and Dior. Jean Jacques, I know you don't like to get the Ms. Klein, the very significant outperformance of these two brands.
Again, just curious to have Mr. Your analysis on things. The second question is on DFS. I think it's quite likely that the losses were Quite significant in 2020. And to what extent could we on what basis could we assume that Breakeven this year is likely to what extent the shift to I9 is a structural headwind or not for this business.
And maybe lastly on the e com strategy. I think if I'm not mistaken, Dior Beauty went on Tmall in June. I think some of your smaller fashion brands such as Kenzo on the platform and obviously some of your competitors, Cartier and Gucci Recently joined as well. So to what extent some of your other Fashion and Leather Goods could be joining the platform and your take on the Mr. Concession Model.
Thank
you. Thank you, Edouard. I love the first question. I love to talk about what went well Mr. Paul in the year.
So, why is it that there is an outperformance? I would say, I'm not going to be very original there. There are three reasons. 1 is product, the other one is marketing and the third one is distribution. Basically, what I mean by that is that when we look at the brands, I mean, there was The two brands, it's true, it goes beyond LVNV and Christian Dior, but it's particularly significant there.
If you look at the pipeline of products and the products that were introduced 2020, which obviously were designed before that. There was a very strong pipeline. I mean, I could spend some time on Vuitton, but or Dior, I mean, there were a lot of introduction of new products, I mean, the PONNEU for Vuitton, the Game On, the since 18 Mr. Citi 4, etcetera, etcetera. So there were a lot of novelties and strong ones, which is a testimony to the creativity of the brand.
And likewise, Mr. As Chris mentioned in his outline. So I think the product front was fairly busy, But it was designed in the prior years. As far as marketing is concerned, it was a tricky year because people were not so much concentrating on reading newspapers and magazines. So we have to find other ways to make to talk So we have to find other ways to make to talk about the brands.
And I think we were quite Mr. Efficient and bold, I would say, in the way we have decided to talk to our clients. You've probably seen Mr. The many initiatives that we have taken, the late share runway show for Dior in the middle of nothing was happening apart from that. The various shows that we did for LV Men, for instance, in China and in Japan, the exhibitions, etcetera.
So we did all that At the time, the point to bear in mind that we did it when nobody else was talking. So it was really Dior and Vuitton Mr. Taking the bulk of the customers' attention because nobody else was talking, we did it in the relevant Geographies in Asia basically and this is thanks to the fact that we have very, very strong local teams that Mr. We're able to do it themselves. I mean, take a run ratio, main run ratio in Shanghai.
It's a Chinese team. I mean, the Asian team and the Chinese Mr. Actually, the Chinese team that organized it, no one from Paris moved to Shanghai because it was not authorized. So they had to do it. And the strength of the team was such that they could do it.
So all in all, I mean, we took a lot of initiatives and I think All these initiatives, be they product or marketing, ended up helping the business and showing the performance that we are generating the performance that Chris and I have described previously. DFS, obviously, losses this year It's breakeven insight for 2021, I hope. But this is a function of to return of tourists to the traditional DFS locations. So nothing could be granted Mr. So we are hopeful.
What I would like to stress with regards to DFS is that they were really hammered By negative operating leverage in 2020 with a big drop in the customer base, But this goes both ways. I mean, the minute customers come back, I mean, the profitability will come back to where it was previously. And it will be all the more so that DFS has been extremely active in 2020, as I said before, in cutting costs. So the cost base and the breakeven point has been lowered tremendously in 2020 and it is to the credit of the team there. And we expect that the minute the business comes back, we shall be able to benefit from that in a tremendous way.
It's a volatile business. We cannot hide the fact It has ups and downs and 2020 was down. But let's hope that with the return of the tourists, we should be able to generate a much more a much healthier financial performance. And finally, your question on Tmall. You know, Tmall could be different things to different people.
We think Tmall is a powerful vector to reach customers, but you can do different things with that. I mean, it could be a way to promote products and to offer discounts, Which you expect people will not see because it's on the web and it's not in the stores or it could be another I mean, an online distribution channel, which has exactly the same pricing and merchandising strategy than the regular stores. As far as we are concerned, this is the second option. We have decided that whatever we do in Tmall, we should be able to do it. Mr.
Whatever we do in brick and mortar, we should do it on Tmall. So there is no such thing as price discounts on Tmall. We are reasonably pleased with the outcome. This generates a sizable and healthy business. Whether we will extend that to other brands.
I mean, the question with online is always the same. I mean, is it additive? Is the introduction of new Channels additive to the overall business. Tmall is a fairly expensive way of distributing products. If the idea is to get there and to cannibalize all the channels that would be more profitable, it makes no sense.
So this is the way we look at it. I don't have definitive answers for all the brands and I don't want to provide them anyway as we speak because we don't know them all. But that's the way we think about it. We do the same thing at Tmall that we do elsewhere and we make sure that we don't cannibalize at a higher cost The business we do elsewhere. These are the main principles on what we do in Timol.
Okay. Many thanks. Mr.
Thank you, sir. Our next question is from Mr. Erwan Bremberg from HSBC. Sir, please go ahead.
Mr. Yes. Hi, good evening, gentlemen. Thank you for this and congratulations. I'll stick to 3 questions as it's tradition.
So first of all, on cognac, I'm just wondering if you can help us understand depletion and inventory levels. Notably in the U. S, there was a sense that there was almost an issue of supply rather than demand. And I'm just wondering where you're at For this category in the U. S.
Specifically. Secondly, just a question on online because there seem to be very different exposures and strategies. I mean, some of your competitors Like Chanel, they don't actually sell online. Hermes sells very little online. And on the opposite part of the spectrum still outside the group you've had, People like Moncler or Gucci doing a lot.
So I'm just wondering what is the exposure for a brand like LV And where do you see this going in the year ahead, sorry, post COVID? And then thirdly, I just had a question on staycationing because ironically, It seems that there have been comments on the fact that if people stay at home and they're not spending on fancy hotels and restaurants and flights, They might be spending more on personal goods and luxury. And so I'm just wondering, is it a risk? Again, counterintuitively, if the world reopens, is it a risk that consumers might be spending more On the travel part and possibly less on products, how do you think about this? Thank you.
Thank you, Owen, for your three questions. On cognac and depletions in the U. S, well, depletions were slightly higher Mr. Dan's sell in numbers. So we enjoyed sell in numbers in the U.
S. Throughout Mr. The year on average at a double digit rate, but the second half of the year was extremely high, I mean, in excess Mr. Of 20% and depletion, so sell out was commensurate to these numbers. We started the year with a level of stock around 50 days.
We are at 30 days more or less. This is not entirely precise, but this is a ballpark Mr. Of the number, so we have reduced our inventories, which enabled I mean, our distributors have reduced their inventories, which enabled Kellaud to be a bit higher than selling in volumes, but also in percentage. So Mr. A fairly strong year after a difficult start of the year, very, very strong recovery from May, June onwards.
Online sales, I mean, it's a very I know that you've been precising your questions on LV, but It's a very broad question because when it comes to online sales, there could be different things. I mean, you have e commerce, you have e concession and you have e wholesale. And we have a different attitude toward the 3 segments. The first one is a must have. I mean, we believe that e commerce Basically, what we do on the vertical website of each brand is something that we need to do and that we do.
I mean, I don't think there is one single brand within the group that doesn't have Mr. A website today where they do sell most of their product. And this has proven very useful Mr. I think we noticed that the brands doing the better, having the better performance were the ones that had invested into Online sales and on e commerce ages ago. I mean, it's not something that you develop in the middle of a crisis.
I mentioned that already For H1 numbers, with regards to e concession, on paper, there is nothing wrong apart from the fact that Capturing the data is not always very easy. So we could develop that provided we can have access to the data, which is not always Doable. So why not, but probably for not all the brands, particularly if we end up, as I commented on Tmall previously, Considering that it would be cannibalization of existing sales at a higher cost, so this will not happen. So we have a cautious view, but there is nothing wrong on paper ongoing to e Mr. Stations.
Finally, e Wholesale, we are against it. In the same way as we try to limit it in the physical world, there is no question to develop it Mr. Last question on staycation. Well, the short answer is I don't know. I mean, There is bear in mind that as far as we are concerned, we have a better ability to analyze offer than demand.
I mean, what happens with demand necessitates a little bit of hindsight and it's difficult for us to know what happened over the last 3 weeks and whether this is due to XYZ factor. So It's quite complicated. There could be some element into the strength of the business in the last few months. And if things normalize in the near future, there could be some impact. On the other hand, we are talking about so many moving pieces that I frankly think it's very difficult to isolate some explanation and to make it Mr.
The sort of roots for any future development in the business. So frankly, I have a hard time answering Mr. Your last question, Erwin. Okay.
Thank you very much. Just wanted to follow-up on the online question and just Focusing on e commerce. I think it was Montclair who mentioned that pre crisis, they were at about 10% of sales online, looking to go to 20% Over the next 3 years, is that ballpark a magnitude in terms of contribution that could make sense for Your portfolio, Brian.
Well, last year we were all together for the group we were 9%. That's the only number sorry, last Mr. 2019, we were 9%. That's the only number that we gave. I don't want to give you the 2020 number as you know because It's very high, but it's not sustainable.
Hopefully, it's not sustainable because it means that the whole thing will normalize and we'll go back to normal with people going to the stores As opposed to shopping online, there is nothing wrong with shopping online, but we would like a better balance than the one we had, particularly in April May in Mr. T. 2020. The question of the objective, Mr. The 20%, Mark, you mentioned depends very much how far we want to go into e concession Michel.
I mean, as I said, we are pretty reluctant to go into each of them. We are pretty cautious in our approach. So I think this limits the potential. I will not confirm any number. And Mr.
But you have the main elements of our strategies there with big emphasis on e commerce as opposed to the other 2 segments.
Mr. Thank you so much. Best of luck. Thanks.
Thank you, sir. Next question is from Madame Louise Engelhurst from Goldman Sachs. Stan. Please go ahead.
Hi, good evening Jean Jacques and Chris. Thank you for taking my questions. Just a couple of follow ups for me, please. If we could just go back to that very impressive Margie, Fashion and Other, which I know will be on top of everyone's mind.
But I wonder if you
can just help us Jean Jacques think about what's truly variable versus fixed cost because I suppose what we're all learning is just how quickly you are able to amend that cost, given the Mr. Circumstances of 2020 and particularly given, obviously, Europe remains very challenged in terms of tourism. So So either we're getting the profit pooling by region, I presume, wrong, but if you can just help us with that dynamic, it would be very helpful. And then secondly, on the LV customer base, Can you tell is it lots of new customers coming on? What's the team learning about the CRM data?
Is it lots of customers already in existing database who are coming back and spending more and just price points as well in terms of the key product areas. And then finally on digital, just a follow-up from Erwin's question just before. With e concession, is it possible to tell us which brands have e concession relationships beyond 24/7? Thank you very much.
Mr. Thank you, Louise. I wish I could help on the with your first question, which would certainly be helpful when it comes to Spreadsheet forecast, but the reality is quite complex there because your analysis is fixed versus variable, which in the real life, Yes, fixed, variable, but also discretionary. I mean, marketing cost is not something which is either fixed or variable. It's something that you decide to engage or not.
And this is an example of cost that we can decide to engage or not And therefore, a big element in our ability to react to adverse environment or when things are going well to sort of over Invest in order to widen the gap with the competition as we have done many times in the past. So It's really important to bear this in mind to understand how we react. Frankly, I don't know the answer to the question because it varies a lot. I mean, in some geographies, we have fixed rents. In other words, we have variable.
It moves from an area to another. In some brands, we have a lot of fixed pay, some a lot of variables for other brands. I mean, there is no such thing as a unique answer to this question. What we try to do is to be as flexible as we can as you've seen. And frankly, I'm happy to report that we are able to grow the profits in the context of declining revenues, Which is a testimony to the ability we have to reduce our cost base.
That's all I can say. And in the cost base, part of it was mechanical, Obviously, with the variable portion of it, but part of it was engineered with the idea that Discretionary spending should be adjusted in tough times as in good times. Your second question about Mr. The customers, by and large there were no major differences in terms of new and old customers. What we saw, which is not entirely intuitive as we saw across the board the drop in traffic, Not in business, but in traffic.
In other words, conversion was much higher, which means that people pushing the door of a retail store and it's Mr. Across the board actually, we are more decided to buy something than they would be otherwise in normal times, which would normally be the behavior of existing clients. If you look at the hard facts and the numbers, in reality, the acquisition of clients is almost at the same rate, Mr. Slightly lower, but almost at the same rate as it was in the preceding years. So there is no major difference between 2019 and Mr.
2020 in this respect. With regards to e concession, the bulk of Mr. For the brands in e concession or the cosmetic brands, we don't have that many e concession in fashion and leather. Ms.
Great. Thank you. I didn't think I'd get the question on variable versus fixed, but thank you very much for the color.
Mr.
Thierry Gautard from Societe Generale. Go ahead.
Yes. Good evening, Jean Jacques and Chris. I would have three questions, Introducing some follow ups. Starting with cognac, you mentioned 30 inventory days at the end in the U. S.
At the end of the year. If I'm not wrong, I think this is slightly higher than at the end of the 2 previous quarters. Should we expect some The level is still very low compared to history. Do you expect some inventory buildup over the coming quarters that could support the sales in the segment Mr. Ornaud, notably in H1.
Secondly, on perfume and cosmetics. If I'm not mistaken, a few years ago at the Christian D'Or trip, You highlighted that the target was to for Dior to be the number one beauty brand in Luxury in the world by 2020. Now you have lost some ground in recent quarters, admittedly due to your low skincare exposure. Can you update us on your positioning versus peers on your targets Mr. Anand focus now versus then.
And lastly, a more general question. I was wondering, Have you seen the pattern in 2020 and notably in Q4 of outperformance of the key brands in their respective segments, meaning Mr. Parfon Christian Dior versus the rest of the beauty business, Bvlgari versus Watches and Jewelry, Vuitton versus its own segment, Mr. Moet Deschandondes versus Champagne. So do you see anything clear and any lesson to draw from that?
Or is it not as clear as that? Mr.
Thank you. Thank you, Jerry. No, I don't think I mentioned Mr. 30 days, which is ballpark. I think the precise number is 28.
And at the end of Q3, it was 26. So We are pretty close. So I don't think you should draw any conclusions from that. Inventory buildup, well, the problem with inventory buildup is that what is inventory is not sold out. So basically, that dense Mr.
Into the sellout and the depletions, it's mostly the distributors' call. I mean, they have to make an arbitration in between whether What we sell them is something they want to sell immediately or keep in their inventory for future business. Usually, they don't do that. Mr. So whatever they get, they sell it.
And if they can sell more by than what they get from us by reducing inventories, they will do it. So don't expect a lot of inventory buildup in the current environment at least. So So I mentioned the percentage on your target of being the largest luxury brands in 2020. Mr. As you have seen, 2020 did not work exactly as expected for a few brands inside LVMH Or outside.
But the objective is exactly the same. The question is to whom we compare ourselves because Piotr. You have clearly seen that a lot of the so called competition have adopted strategies, particularly distribution strategies that are very different from us. Basically, Mr. The Korean duty free operators have never done such a good business as they have in 2020 Mr.
They've been buying from the brands and selling into China at discounted I mean to Daigou that in turn was selling into China Mr. At discounted prices. And we decided we didn't want to go that route because we want to preserve the quality of the distribution and the price Mr. Of the product so that in the long term, we preserve the value of the brand equity. Not so many players have done that.
It's mostly limited to BH Group and maybe to its most renowned competitor channel. Otherwise, I mean, the rest of the industry Mr. Went through the discounted channel that we don't want to play. So that's a very important point, which in our view limits the comparability of what's going on, what happened in 2020. We have a very restricted distribution strategy in order to preserve long term the brand equity.
You can only compare us to the ones doing exactly the same. And as I said, they are not many. I missed your last question. I mean, Outperformance of the Maybe it was
a little too global. But the idea is, have you seen the pattern of outperformance of the large brands, the largest brand In every segment, I mean, you're in beauty, Bvlgari in her luxury, Vuitton in its own segment, Moite de Chandon in Champagne. I mean, Have you seen anything in that sense in Q4 and for the full year? Do you draw any conclusion? Or are there more specific instances every time?
Well, we don't know all the numbers from the competition as we speak. So it seems that we've been outperforming some of them.
Mr. Sorry, I meant within the within your portfolio.
The big ones within the portfolio and what's the conclusion we drove for the smaller ones. Sorry, I missed your question. Yes. I mean, as always in crisis time, the big brands do better than the smaller ones. It's not new.
I mean, remember, it was the 'nine, it was exactly the same thing. Should we decide that we should be concentrating only on a handful of brands because they do better in bad times and give up on the other wines, certainly not. I mean, there are benefits to having a large group of brands as we discussed many times together. And we intend to we do not intend to change our Mr. Grigel.
In this respect, what is important is that crisis after crisis, the number of brands doing better in crisis time Mr. The preceding times is increasing. It is certainly the case this time. I mean, the brand like Fendi suffered like hell In 2009, much better this time, for instance, just to move away from Dror and Vuitton one second. I Tarin.
We were very pleased with the outcome of Fendi in the current situation. Loewe did very well. Celine had a very difficult first half, but the second half was very strong. Some brands that we never speak about. I mean, I know Marc Jacobs.
Marc Jacobs is positive in I mean, is Profit making in 2020, not ideal year for turning out a profit after 5 years of losses. I mean, there were some achievements there Mr. That make us quite hopeful that the portfolio has very strong assets and it's Mr. Probably not in the midst of the crisis that you have to judge whether the winners and the losers who are the winners and the losers. We certainly know the winners, But there could be other ones that we hope to develop in coming years.
Okay, very clear. Thank you very much.
Mr. Thank you, sir. Next question is from Mr. Omar Saad from Evercore. Please go ahead.
Mr. Good evening. Thanks for taking my questions. I have 3, hopefully quick ones. My first question is, Looking at the really impressive rebound in demand and the sales trend, especially in Fashion and Leather in the second half, despite the fact that you haven't Mr.
Travel hasn't returned to normal, work going to work hasn't returned to normal, the social occasions haven't really returned either yet. Mr. What do you think is behind this underlying demand? Is it pent up demand from previous quarters, misspending? And How do you think about how demand could unfold given that dynamic as we get to a world where We're reaching herd immunity and the vaccine uptake is much more widespread.
That's my first question. And then my last two questions. One is, If you could just make some comments on the Sephora news with Kohl's, what you think the opportunity is there and why you think Kohl's is the right partner? And then lastly, I don't know if you can speak to this yet, but any early thoughts on the areas of the biggest opportunity you see with Tiffany? Mr.
Thanks.
Thank you, Omar. Well, your first question, I think it's a little bit what Mr. Erwin. Ask for staying about talking about speculation. And as I said, I mean, analyzing demand is awfully difficult without the benefit of hindsight.
It could be true that no travel, no social, no nothing, I mean, pushes people into stores because they have nothing else to Mr. To do. I don't think it is life is as simple as that. I mean, it's not a simple choice between eating out, Traveling or going to luxury stores. I mean, there are other things to be done.
But anyway, could some element of that could explain the Mr. Strength in demand in Q3 and Q4, but I mean, it's difficult for me to elaborate on that Because we don't really know. I mean, we shall need a few quarters to really understand what's going on. We have to make surveys. And also, we also have to observe the behavior of customers when the situation normalizes, which will Probably come this year, but we nobody really knows.
So I again, I mean, as I said to everyone, I have Mr. A little bit of a hard time on this question. On your second question on Kohl's, why we think it is the right partner? Paul. Well, first of all, we think there is a good adequation in terms of client base.
Secondly, if you look at Mr. The geographic complementarity is pretty strong. They are where we are not and vice versa. So it's pretty favorable. Certainly, the format of our shop in shop, whichever way you call it, I mean, it's a store within the store, It's exactly what we wanted to be.
We think we have a strong proposition and something really nice for the Kohl's shoppers. So all in all, I mean, we are pretty familiar with the formula because we have experienced it in the past with J. C. Penney. With now with Kohl's, with a partner, we are Mr.
So we are extremely hopeful it will take a little bit of a while to develop, not so much, but we need some quarters to unfold Mr. Storz, but we are extremely hopeful that it will resonate very well with the client. Tiffany, I Amit. I could answer, but I will repeat what I've said before. We'd be working on products, on distribution and on marketing.
Mr. A bit early to be more precise and to get into more precise strategies. So I will just repeat general ideas and I will Mr. Staryudat at this time in the day.
Thank you very much. Best wishes.
Ms. Thank you, sir. Next question is from Mr. Oliver Chen from Cowen. Please go ahead.
Ms.
Hi, good afternoon. This is Kimberly Hong on for Oliver Chen. Thank you for taking our questions. We just have 3 quick ones. Me.
Following up on the prior question on the COVID-nineteen recovery, how many new customers have you seen domestically, specifically in China and the U. S. During the Ms. Piriod. Do you think it's reasonable to think that domestic spending could be higher permanently compared to prior to pre COVID-nineteen levels even when travel comes back, particularly in the U.
S. And China. And then secondly, just quick one on Sephora. Could you just touch on the holiday trends you saw this year? And have you seen any Ms.
Color Cosmetics recovery in the last quarter. And then lastly on Tiffany, just like where on the cost side do you think we can see midstream cost leverage with Tiffany now in Jewelry and Watch segments. We know you've previously mentioned that Tiffany is going to operate without major changes its strategic vision and plans prior to the acquisition. It seems like that's still the case, but if you could just remind us on where on the cost side you can see leverage for that segment? Mr.
Thank you.
Thank you. So on the domestic spending, Maybe, maybe not. I mean, it's hard to say the trends with client base that used to shop a lot as tourists and less so as locals Mr. Has been over the years repatriation. 30 years ago, the Japanese were shopping 70% outside Japan.
Today, they shop 85% inside, Japal. Likewise for American customers, I mean 85% or even 90% of the business we do with American With U. S. Citizens, it's done in the U. S.
So what happens to Chinese customers, I don't know. We have had some form of, how can I say, forced repatriation in the course of 2020? We did come back to the previous trend immediately when the COVID situation is over. I don't think so. But I also don't think that we should rule out any touristic business from Chinese in the coming years.
So So there will probably be a rebalance, maybe not as high as it used to be because the move towards more local spending will probably stay for good. But this being said, I mean there is no reason to believe that the domestic Mr. The Touristic business will disappear forever. I don't think it will be the case. As far as Sephora is concerned and your question about the festive season, we've seen pretty good numbers, although they happened very late in the month of December.
We saw pretty good numbers in our main geographies, namely the U. S. And France and also in to Mr. Stanley in China. As far as color cosmetics are concerned, well, Not too good.
I mean frankly we neither from a Sephora viewpoint nor from a cosmetic brand viewpoint do we see any Marked improvement in the U. S. It's probably not as bad as it was in the first half of the year. But overall, I mean, the year has been Very, very tough in the U. S.
And elsewhere frankly, but the U. S. Was by far the worst and we don't see any marked improvement Mr. Lowering the corner. So it's wait and see as we speak.
Well, the cost leverage, Tiffany, I mean, I will not repeat what I said before. We expect to do more Mr. In terms of revenues in a significant way, we shall have to engage More costs to do so, be it OpEx or CapEx. That's the sort of basic financial equation of Tiffany. This should lead to higher margins, certainly higher than 2020 in the COVID context, which we do not satisfy ourselves with.
So we shall improve margins through our operating leverage, but I cannot elaborate further. I mean, we never communicate Neither our targets nor our plans to develop margins. And Tiffany will be no exception to that. I mean, there have been no pressure Mr. I don't want them to have external pressure on top of that.
Enough is enough.
Mr. Scott. Thank you so much.
Thank you.
Thank you, Madam. Next question is from Madam Dina Telsey from Telsey Advisory Group. Please go ahead. Ms. Good evening, Jean Jacques and Chris.
As you think about the physical footprint globally Ms. And what's come out of COVID and the pandemic? How do you foresee the physical footprint plans changing? Are there opportunities to enhance or lower your costs with more variable rent structures? Do you see that globally?
Is it more one region than another in terms what you're looking for and the ability to continue to grow the operating margins. And then just lastly, just on a different tact of Tiffany, how do you foresee the integration of Tiffany and Cadence different than Bvlgari? Thank you.
Thank you, Dana. So the physical footprint, I mean the question of fixed versus variable Depends on 2 things, whether we want to do it or not and whether the landlords want to do it or not. So at the end of the day, It's not that easy to decide if we want to do so to move from 1 to the other. And when we move from fixed to variable, Mr. Usually, it is at our expense.
I mean, the landlords would like it to are okay with it as long as they get more dollars out of it. So, I've not seen many, many conversion from fixed to variable in the past. Although and variable is a mixed blessing. I mean in bad times, obviously, it helps. But in good times, people would question our Operating leverage, I mean, selling expenses are raising as fast as sales, don't you get operating leverage?
Well, the reason why we don't is that we have a lot of variable rates. So, all in all, I mean, it's not under our full control to say the least. And whether this is desirable or not It's questionable. I mean, we have benefited a lot in the past from fixed rents. But even fixed rents at some point get So adjusted, so Drew is out whether this makes sense or not to move from fixed to variable.
And sorry, I missed your question, Tiffany.
How do you foresee the integration of Tiffany and Cadence different than when you acquired Bulgari?
It's a bit too early to say frankly, Dana. I mean, that's We did probably 3 good months to really assess the situation there and really to identify the key challenges. We have some ideas, But it will be foolish to take them as sort of preconceived ideas and to move forward without checking whether Our ideas are the right one. I mean, the issues that we have identified are the right ones or not. So basically, the management team Yes, refocusing on really discovering the business model in Mr.
In much more details than we have been able to do in the due diligence phase and we will assess its action plan on that basis. So It's hard for me to say whether things will take different direction from Bvlgari. I mean as far as Bvlgari is concerned, I mean to make a long story short, we had when we bought the company a very strong product pipeline and a lot of mistakes in marketing and distributions. So it was somewhat a Mr. It's fairly ideal situation because we could introduce new products fairly quickly and at the same time we fixed the marketing and distribution issues Mr.
Reasonably quickly as well. And this, with the help of a strong demand, enabled us to really get Mr. A strong increase in business overall business volumes and margins. I could not describe Tiffany's reality in as Mr. Simple words as I just said about Bvlgari because I don't have the benefit of hindsight.
So it's as simple as that. So Give me a few quarters to really be able to answer your question in a more precise way.
Thank you very much.
Mr. Thank you, madam. We have one last question from Mr. Robert Williams from Business and Fashion. Please go ahead.
Mr. Hi, Jean Jacques. It's Robert. I wanted to ask you, how do you see the store network adapting in the year to come As tourist flows appear to be coming back quite slowly, I'm curious if there will be any actions taken to kind of rebalance the network Mr. As the U.
S. And Asia appear to be performing quite well and your European store network continues to really struggle to stay relevant.
Thank you, Robert. Your question is basically European question. I would say, as you suggested, Mr. As you said, I mean, U. S.
And in Asia held up quite well. But if you look at the numbers in Europe, Roughly speaking, the business is down 25% in 2020 in Europe and it's true for the big retail brands. I mean for Fashion Ladder, it's also 25%. So basically, the challenge we have ahead of us, assuming there is no such thing as tourists coming back, Mr. Tuohy, which as I said before, is not our assumption.
But anyway, let's assume that, that we're able to grow the business we did in 2020 Mr. To recover the volumes we had in 2019. And this surge we would get from locals. Obviously, this will not be achieved in a year or even in 2, but we think it is achievable to develop locals In a significant way to offset at least in the short term part of the lost business with tourists. And on top of that, as I said before, I mean, the tourist business may not come back at its preceding levels, but will come back.
So as far as we are concerned, I mean, we see no particular reason why we should be shutting down stores, particularly in Europe, elsewhere is a more obvious Mr. We don't want to do that. But even in Europe, where there was a fall in the global volume of business and the recovery in it Mr. It is less obvious than it is elsewhere. Well, we see no reason to do that.
I mean, we think we can recover the lost business With tourists coming back and developing the local client base, so we see no reason to take action in the short term or medium term Mr. On that, apart from the fact that we are concentrating our efforts and basically marketing and CRM efforts to develop the locals as we've done Pretty successful in 2020, which was not ideal, you will admit. Thanks so much. Thank you. I think it was the last question.
So I thank you all for attending this call. And I look forward to Mr. Singh with you an interesting Q1 performance and Q1 numbers in