Hello, and thank you for joining us for LVMH's third quarter 2023 revenue announcement. I'm Rodolphe Ozun, Director of Financial Communications at LVMH, and with me is Jean-Jacques Guiony, our Chief Financial Officer. I will start by taking you through the highlights of the company's performance for the third quarter and first nine months of 2023, and after these remarks, Jean-Jacques and I will be happy to take your questions. As a reminder, certain information to be discussed on today's call is forward-looking and is subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the safe harbor statement included in our press release and on slide two of the presentation. Turning now to our announcement.
Our release was issued a short while ago in both French and English and is available on LVMH's website, lvmh.com, as are the slides for today's call. Let's begin on slide three. For the first nine months of the year, the group delivered 14% organic revenue growth, supported by strong momentum across all divisions outside of Wines and Spirits. All geographies contributed to growth year-to-date, albeit with quarterly fluctuations, as we'll discuss in a minute. Fashion and leather goods has been one of the strongest growth drivers, up 16% on an organic basis year-to-date, with strong performance, in particular at Louis Vuitton, Christian Dior, Celine, Loewe, and Loro Piana.
In Wines and Spirits, Champagne and Wines saw their revenue increase by 2% organic year-to-date, driven by their value strategy, while Cognac and Spirits declined 14% organic as weak demand in the U.S. offset the gradual recovery taking place in Asia. Perfumes and Cosmetics grew 12% organic year-to-date, in line with last year's revenue growth of 12% over the same period, with particularly strong momentum in perfumes and makeup. Watches and Jewelry increased by 9% organic, with double-digit growth in jewelry, while Sephora continued to deliver outstanding growth in all of its key markets, and DFS continued to recover. As a result, Selective Retailing increased by 26% on an organic basis year-to-date.
Turning to slide four, you will see that revenue increased 14% on an organic basis for the first nine months of 2023, and 10% on a reported basis after adjusting for a -4% currency impact, predominantly resulting from euro strength against the U.S. dollar, the Chinese renminbi, and the Japanese yen. Turning now to our geographical revenue mix for the first nine months of 2023 on slide 5, our regional mix is unchanged. In Europe, excluding France, at 16%, Asia at 32%, and Japan at 7%. France and the rest of the world increased by 1 percentage point in the mix to 8% and 13% of sales, respectively, while the U.S. accounted for 24% of revenue, 2 percentage points below last year, but 1 percentage point above the first nine months of 2019.
On slide six, we detail quarterly organic growth by region. As you can see on the left of the slide, LVMH's revenue growth moderated from 17% in the first half of the year to 9% in Q3 due to two factors. First, growth in Asia moderated from 23% in the first half of the year to 11% in Q3, reflecting a more challenging comparison basis in China and the recovery of Chinese tourism outside of Asia. Second, growth moderated in Europe due to normalization of b oth local and tourist demand. As a reminder, revenue had risen 43% in the first nine months of 2022 in Europe and were facing particularly challenging comps as a result in this region. By contrast, Japan and the U.S. were broadly in line with first half trends.
Moving on to slide seven, which provides quarterly organic revenue growth by business groups, I will make two comments. First of all, you can see that Wines and Spirits remained the weakest division as Cognac continued to go through a transition year in the U.S., while Selective Distribution continued to outperform markedly, and being less exposed to China, was relatively immune to the tougher comparison basis in this market in Q3. Second, Fashion and Leather Goods and Perfumes and Cosmetics grew in line with group average at +9% in Q3. Watches and Jewelry was softer, up 3% in Q3, but the sequential deceleration was consistent with Fashion and Leather Goods, reflecting local and tourist demand normalization in Europe, as well as tougher comps in China. Now, we'll turn to the review of business groups, and we will start, as usual, with Wines and Spirits.
slide 10 shows the Wines and Spirits business group delivered EUR 4.7 billion in revenue for the first nine months of 2023. This represents a 7% decrease on an organic basis and a 10% decrease on a reported basis after taking into account a positive 1% perimeter impact related to the acquisition of Joseph Phelps and a -4% currency impact. Broken down, champagne and wines generated EUR 2.4 billion in revenue over the nine-month period, up 2% on an organic basis. After taking into account a 1% perimeter impact from Joseph Phelps and a - 5% currency impact, reported revenue growth declined by 2%. Cognac and Spirits delivered EUR 2.3 billion in revenue, representing a 14% organic revenue decline.
After a - 4% currency impact, Cognac and Spirits declined 18% on a reported basis compared to the year-ago nine-month period. On slide 11, year-to-date growth in Champagne and Wines was led by continued growth in Europe and Japan, and positive price effects. In the highlights of the period, we saw the continued international development of Château d'Esclans, as well as the acquisition of Château Minuty, one of the world leaders in Provence-based rosé. In Cognac and Spirits, Hennessy, while still impacted in the United States by post-COVID demand normalization and the continued high level of inventories at retailers, has been supported by a gradual recovery in Asia and global travel retail. Elsewhere, we saw a strong momentum in the innovation of our growing spirits portfolio.
For instance, Belvedere's high-end vodka, 10 , and the accelerated decarbonization of distillation at Hennessy and Belvedere through renewable energy conversion. Now, turning to Fashion and Leather Goods on slide 13, revenue reached EUR 30.9 billion for the first nine months of 2023. It represents a 16% increase on an organic basis versus the same period last year, and an 11% increase on a reported basis after taking into account a -5% currency impact. Regarding the highlights of the period, on slide 14, Louis Vuitton continued to deliver excellent performance, driven by its strong creativity. Vuitton's women's ready-to-wear performed strongly year-to-date, thanks to Nicolas Ghesquière's highly desirable collection, and customers also eagerly await Pharrell Williams' spring 2024 men's collections.
The brand's effort to continue to support desirability is exemplified by the new GO-14 Malletage bag and the iconic Tambour watch, now enhanced with a new movement conceived by La Fabrique du Temps. Other highlights include the great success of the Malle Courrier exhibition and the LV Dream exhibition, which closes in Paris next month for those yet to visit. At Christian Dior, all product and categories contributed to the brand's remarkable growth. We witnessed inspiring fashion shows by Maria Grazia Chiuri and Kim Jones, a new Plan de Paris motif revealed on several products, the Dioriviera capsule, unveiled during the summer to much success, and the release of 170 exceptional jewelry pieces designed by Victoire de Castellane, inspired by two worlds very close to Christian Dior's heart, couture and gardens.
Celine continued to capitalize on the success of its Triomphe bag and the ready-to-wear collections designed by Hedi Slimane. Loewe saw good response to newly designed bags, such as the Squeeze bag and the Puzzle Fold Tote. At Fendi, the launch of Origami bag enabled the brand to showcase its savoir-faire, and it exhibited also the savoir-faire with its Hand in Hand exhibition in China and Japan. Loro Piana benefited from strong momentum across product categories, and unveiled a first capsule collection with recycled fiber, called Loro. Marc Jacobs saw continued growth of its flagship lines, The Tote Bag and Snapshot, while RIMOWA celebrated its 125th anniversary with exhibitions in New York and Tokyo, and launched a new collaboration with Tiffany. Berluti released a travel line with its new Toile Marbeuf canvas. Finally, Thélios acquired the iconic French eyewear brand, Vuarnet.
Moving to Perfumes and Cosmetics on slide 16, revenue reached EUR 6 billion for the first nine months of 2023. This represents a strong 12% increase on an organic basis and an 8% increase on a reported basis, after taking into account a -4% currency impact. On slide 17, Perfume and Cosmetics continued to enjoy excellent momentum, particularly in perfumes and makeup, and a solid performance in all geographies, while maintaining its highly selective strategy. Looking at brands specifically, Christian Dior delivered an outstanding performance on tough comparison basis and saw a solid performance in all regions, while extending its lead in its key markets. Perfumes continued to see strong growth, thanks to Miss Dior, driven by the relaunch of Blooming Bouquet; J'adore, which was enriched with Francis Kurkdjian's latest creation, L'Or de J'adore ; and Sauvage, which confirmed its worldwide success.
Makeup continued its strong progress, mainly thanks to the excellent performance of Dior Addict Makeup and Forever. Skincare maintains good momentum as well, particularly with premium skincare Prestige, and especially in Asia. Among other brands in this group, we saw, again, excellent momentum in perfumes and makeup. Guerlain continued to grow, driven by its particular, highly popular Aqua Allegoria fragrance and premium fragrance collection, L'Art & la Matière, as well as the successful launch of smudge-proof foundation, Terracotta Le Teint. Parfums Givenchy was buoyed by the continued success of its iconic fragrance, L'Interdit, as well as the release of new variations of scents, Gentleman Society and Irresistible Rose Velvet. Benefit's growth was in part driven by the continued popularity of its pore care skincare, and the successful launch of its new Fan Fest mascara. Maison Francis Kurkdjian had the successful launch of its Aqua Media fragrance.
Make Up For Ever continued the expansion of its HD Skin line with a concealer launch, and Fenty Beauty launched a new volume mascara, Hella Thicc, to great success. Acqua di Parma, boosted by the Signature of the Sun collection, benefited from the newly launched Zafferano scent with Zafferano notes, and Officine Universelle Buly released a new collection of six scents, Le Jardin Français, inspired by garden fragrances. Moving on to slide 10, slide 19, on watches and jewelry. Revenue in watches and jewelry rose to EUR 8 billion in the first nine months of 2023, from EUR 7.6 billion in the year-ago period. This reflects a 9% increase on an organic basis and a 5% increase on a reported basis after taking into account a -4% currency impact. The key highlights of this division are on slide 20, starting with Tiffany.
Three months after the reopening of its spectacular landmark store in New York, Tiffany opened its renovated flagship store in Tokyo's Ginza district, as well as its newest store in Omotesando. On products, Tiffany saw continued momentum in its HardWear jewelry line and rolled out the Lock collection globally after launching the line in the U.S. in September last year. The brand also held a new Blue Book High Jewelry event called Out of the Blue in New York, and renewed its 37-year-long trophy partnership with the U.S. Open. Bulgari also unveiled a new high jewelry collection called Mediterranea, and celebrated the 75th anniversary of its emblematic Serpenti line with an exhibition, as well as artistic collaborations in Dubai. In watches, Bulgari presented novelties at the Geneva Watch Days in its distinctive Octo Finissimo and Serpenti Misteriosi lines.
Moving on to watchmakers, TAG Heuer opened a new flagship on Fifth Avenue and launched the Monaco Chronograph Night Driver and the Carrera Chronosprint in collaboration with Porsche. Hublot announced that it is the official timekeeper of the 2023 Women's Football World Cup, as well as the Hublot Polo Gold Cup in Gstaad. Zenith launched a limited edition of its DEFY Chroma watches, and Chaumet had the prestigious honor of designing the winners' medal for the upcoming Paris Olympics and Paralympic Games, and also presented a new high jewelry collection, Jardin de Chaumet. Finally, Fred launched a high jewelry set featuring blue lab-grown diamonds alongside natural white diamonds in its Force 10 Duality collection. Now, looking at our final business group, Selective Retailing, on slide 22.
Revenue in the nine-month period reached EUR 12.4 billion, marking a very strong 26% increase in organic revenue growth and a 23% revenue growth on a reported basis after taking into account a -3% currency impact. On the next slide, 23, Sephora once again delivered an excellent performance, driven by record growth in North America, Europe, and the Middle East, further strengthening market share gains. The group will soon see a second store open in the U.K. at Westfield Stratford, following the great success of the inaugural opening at Westfield London. Sephora also recently hosted hugely popular immersive beauty events, SEPHORiA , in New York, Paris, and Shanghai, welcoming thousands of clients, both in person and virtually.
DFS has continued to recover thanks to the reopening of borders and to the return of international travel, and in particular, a very strong increase in store traffic and sales in Macau and Hong Kong, as well as North America and Hawaii. DFS also announced plans to open seven-star luxury retail and entertainment destination in Hainan, which is due to open by 2026 and will carry more than 1,000 luxury brands. Lastly, Le Bon Marché in Paris continues to have a good performance alongside a redesign of the store's jewelry space and a number of spectacular immersive experience, while La Grande Epicerie in Paris celebrated its 100th anniversary, and both continue to be a popular shopping destination for Parisians and tourists alike. slide 25 concludes our presentation. In summary, LVMH has seen significant revenue growth across all business groups over the nine months.
Other than Wines and Spirits, which faced a high comparison basis. As we look to the end of the year, the group is focused on and well-positioned to further strengthen its global leadership and market share, while at the same time remaining flexible and vigilant in the context of macro and geopolitical uncertainties. This means that our Maison will continue their focus on creating innovative and high-quality products that reflect both the heritage of their iconic brands, as well as making selective investments, including in strategic store network expansion, while staying agile and focused on cost management. Thank you for your attention. We are now ready to answer your questions. For those of you who are connected on Zoom, if you wish to ask a question, please use the Raise Hand function on your application.
The first question comes from Edouard Aubin from Morgan Stanley.
Yeah, good evening, Jean-Jacques and Rodolphe. So, two, three questions for me. The first one is on nationalities. Please, if you could comment on, you know, how the main buckets, so to speak, in terms of Europeans, U.S., and Chinese, have performed. Chinese on a two-year stack and the other ones year-over-year, that would be helpful. And more specifically, regarding the Europeans on the fashion leather goods, are they still positive as a nationality in Q3? That's number one. Number two, on fashion leather goods, if you could please comment on the performance by brand as usual. You know, it seems we've heard that some of your medium-sized brands, such as Celine, Celine, and Fendi, seem to have lost quite a bit of momentum.
If you could just, you know, elaborate on that. Is it, you know, due to kind of flight to, you know, the biggest brand, the m- you know, in a more adverse market, that would be interesting to share your views on that. Sorry, the last one is on Jean-Jacques, the sales gap between high-net-worth individual and aspirational customers. Has it kind of narrowed or widened in the third quarter versus the first half, to the extent you can assess? I'd be curious to have your views if that trend has been relatively similar or if that has, you know, changed sequentially in the third quarter. Thank you.
Thank you, Edouard. And sorry for my voice, which is not ideal. I'll start with nationalities. Starting with the Chinese cluster, as far as the Chinese are concerned, I mentioned in July that if you look at it the right way, i.e., globally, or organically and over two years, in order to overcome the fluctuations in the comparison base in 2022, we were about growing in the fashion leather division about 40% with most of our brands there. We have slight discrepancies, but most of our brands were growing about 40% over two years. It's exactly the same in Q3. We haven't seen anything very really different on that front.
I really don't have to report any marked change in the business we do with the Chinese clientele. The only thing I would mention is that the movement of mainlanders going out from Mainland China when they shop has been increasing. As far as Europe is concerned, I would say that most... We've seen a notable change in Q3. Most nationalities in Europe used to be high single digit to low double digits. They are now mid-single digit down in Q3. That's a main change.
Yet, bear in mind that as far as Europe is concerned, the weight of locals is much lower than it is in other countries, and particularly, the weight of touristic flows remains extremely high and is pretty close to what it was prior to the pandemic. Your second question is the momentum of the various brands. I mean, so I don't like, as you know, to comment too much on that. Basically, what I can tell you is that if you look Q3 fashion and leather, the average for the division, Vuitton and Dior are pretty close, and we have a few brands that are above that. I would mention Celine and Loewe, but also Loro Piana and Marc Jacobs.
I mean, there are a few, a few brands that are definitely outperforming, the average, but I will not go into further details. As far as your last question is concerned, any difference between high-net-worth individuals and aspirational customers or anything evolving in Q3, I would say that we've seen more or less the same thing. I mean, I'm not commenting about high-net-worth individuals because they are difficult to identify as such in shopping. As far as the aspirational customers, and particularly in the U.S. is concerned, we have reported already some pressure on that front in the first half of the year, and unfortunately, there was nothing new there.
You can notice that the numbers in the U.S. are reasonably consistent with H1, and they are consistent, I would say, for most of the divisions. So nothing really to report, neither bad nor good.
The next question comes from Louise Singlehurst from Goldman Sachs. Louise?
Hi, good afternoon, everyone. Thank you for taking my questions. I just wondered, actually, just following up from Edouard's question, back to the big important question of the Chinese consumer. I just wondered, given we've obviously had a very tough comparable, and I know we're looking at the two-year stack, but all else equal, easier performance in the second half, given the base of comparison. But is there anything underlying how you're talking to the teams about how you're thinking about the Chinese cluster? Or is there anything in the performance that you've seen in the first nine months of the year that makes you feel differently to your expectations for China back at the reopening back in January?
Really trying to think about that 2024 kind of outlook for the Chinese consumer, which I know is a very difficult question to answer. And then my second question, as we're approaching the year-end, it's obviously the, the budget season, although I suspect the budget season is always open at, at LVMH. But when you're thinking about how you're talking about the cost base with all the divisional heads, Jean-Jacques, is there anything that you're asking differently from them? Are you thinking about things more conservatively? Just give us an indication, post-deceleration, that we have seen in Q3, how you're managing that conversation across the group. That'd be really helpful. Thank you.
Thank you, Louise. Your first question is the easy one. I mean, forecasting what will go on with Chinese customers in 2024 is really really easy. Obviously, I have no idea. I mean, you referred to what happened early in 2023 after the change in the pandemic approach from the Chinese authorities. I mean, all this was totally unexpected, and we were very much, at the time, in a wait-and-see attitude. It happened to be pretty positive, and we saw a pretty fast recovery in the Chinese market, more or less more or less everywhere, but it's not something that we would have easily forecast.
So basically, looking forward as far as any market is concerned, and particularly the Chinese market, is almost an impossible task, so I will not dare going into, into that. The only thing I can say, as I, as I mentioned to Edouard previously, is that, if I look at the numbers, Q1, Q2, Q3, they are quite consistent in terms of fashion and leather, and they are showing a good progression compared to the only, meaningful, reference, which is 2021. Your second question about the cost base, I will, I will not elaborate. I mean, this is a, this is a revenue call, so we, we usually don't comment, anything else. The only thing I would say is that you've noticed that, the, impact from currencies on sales is quite significant.
This is obviously something that we have to factor into our projections and into our budgeting for the end of the year. It won't last. I mean, most of it is connected with the exceptional level of the U.S. dollar in the third and fourth quarter of last year, and it normalized thereafter, so it won't last. This being said, I mean, it's a fact of life, and we have to deal with that. So obviously, we ask our operating managers to take that into consideration.
The next question comes from Thomas Chauvet from Citi.
Good evening, Jean-Jacques and Rodolphe. Thank you. Three questions, please. The first one coming back to the Chinese demand recovery, which has been a bit underwhelming for the industry so far this year. Would you say, Jean-Jacques, this has more to do with the classic, you know, economic headwinds impacting, you know, the employment level, stock market, and property negative wealth effect, or just poor feel-good factor, or perhaps more a change in the onshore versus offshore split, which is definitely not back to pre-COVID levels? And we know that tourism for this industry, not just the Chinese, create a structural boost to the overall growth.
Would you also say what was the onshore versus offshore split in Q2, Q3 for the Chinese, if you have information for Vuitton or?
Thomas, Thomas, if you-
Wait-
Allow me to interrupt. Should I take from your question that you're disappointed by the number in China, and you try to figure out whether they could have been better, and then why, how they could have been better? I mean, as I said, I mean, we are extremely pleased with the level of the business we do with Chinese clients. Obviously, there are changes. You mentioned the fact that there is a split that evolves in between onshore and offshore. It used to be about 15% outside China last year. It's about twice as much this year on average for most of the brands in the fashion and leather division, so there's been some changes.
But all in all, and that's why I suggest we look at it on a global basis, the Chinese cluster and over two years, I think we can be only very satisfied with the way the business unfolds following the changes that took place last year.
Okay,
Sorry, I interrupted you, but,
No, no. My question was more if I look at the Americans and Europeans, they returned very quickly to pre-COVID level as early as 2021.
Yes.
The Chinese will take a little bit more time. And do you think this is more due to the economic cycle or perhaps the fact that tourism, not just for you, but for other brands, is just not picking up as fast, perhaps, as it was expected? And as long as you don't have enough offshore spend, perhaps you will not return as quickly to 2019 level. We know the appeal of Chinese shopping abroad-
Yeah
... there is a—
Sorry, it was even faster in China than it was elsewhere. I mean, we recovered the level, the pre-pandemic level in China faster than anywhere else. So that's why I'm a bit confused with your-
Okay
... with your question. As early, if I remember correctly, as early as 2020, we were more or less in line with 2019 for most of the fashion and leather brand. I mean, obviously, the first half had been horrendous, but the second half was, was, was very good. We were pretty close, maybe not for all the brands, but for most of them. Obviously, 2021 was showing a growth, and I'm talking about the Chinese cluster. I'm not talking just about the business we are doing within China, which obviously benefited from the fact that the repatriation helped and boosted, to a large extent, the numbers.
Okay, question-
We can't hear, we can't hear you, Thomas. Sorry.
Can you hear me now?
Yes.
I think I was muted. My second question on fashion and leather and the long-term profitability of that division, if I recall well, in 2021, you said 40% is extraordinary, but this is maybe more of a structural rather than a temporary cyclical new peak for that division. Can you just try to explain why you think it's more structural? And of course, shorter term, how are you adjusting to kind of slightly lower growth environment than previous quarter to protect that profitability? And just maybe finally on the inventories, if I recall, in the first half, there was a bit of a spike in inventories due to a buildup of stocks in precious stones and champagne.
Would you comment on how this has evolved at the end of the quarter, and how you see generally inventory level may be worth mentioning any division like F&L into your end? Thank you.
Well, on the last question, I will disappoint you. I mean, I'll get the balance sheet only tomorrow, so I don't have the numbers, so I cannot really answer. Although the excess inventories that we have seen in H1 have probably normalized a little bit, but not to a great extent. It's likely that we'll end up the year with higher inventories than we would have planned originally. Your second question about structural changes in margins, I mean, this moves us away from Q3 revenues, but what I said at the time is that we have increased... I mean, the size of the division, Fashion and Leather Goods division, is much larger than what it used to be.
So there is a size impact that is felt more or less across the board. I mean, Vuitton, Dior, and the other brands, all of them enjoyed higher margins due to the fact that they were just bigger and absorbing better their operating charges. So that's, that's why I mentioned that. There is nothing new on that, on that front. There could be ups and downs, as you've seen second half of last year and the first half of this year, due to inertia in some cost increases, but nothing really that changes the sort of new level of margins that we have reached throughout the last few years. That, as I said, we intend to keep and to defend going forward.
Thank you, Thomas. The next question comes from Chiara Battistini from JP Morgan.
Hello, thank you very much for taking my question. So first question on Fashion and Leather Goods. I was wondering if you could comment on mix. I understand the pricing comments have been a bit more muted into next year. I was just wondering how you're thinking about mix in H2 and also into next year. My second question's on jewelry, on Watches and Jewelry. If you could provide us with some more color, maybe by either nationalities or jewelry versus brands, and also within jewelry, sort of silver at Tiffany versus higher price points. And last question on Wines and Spirits, if you could update us on the level of inventories in Cognac, and also possibly commenting on the slowdown in Champagne in Q3 versus the previous quarters, please. Thank you.
Thank you, Chiara. The mix impact in Fashion and Leather is still there. I told you many times, and you referred to that, that this is the main source of growth. It has been the main source of growth ahead of volumes and prices over the years. I mean, it's the main way to translate the increased desirability of the brand into the business, and we do that a lot, and Q3 was no exception. We benefited even in Q3 from a sizable mix impact, and the price impact was pretty close, was limited and pretty close to what it was in the first half of the year.
The nationalities in watches and jewelry, I w- they are not any different from fashion and leather. We've seen some strengths on the mainlanders' side, and they've been doing quite well, albeit at a lower level in terms of two years growth than what we've seen in fashion and leather, but it was healthy anyway. Other nationalities have been muted, I would say, in Q3, particularly in Europe. It was better in Japan and in other Asian countries. As far as the U.S. is concerned, I mean, there is nothing to be reported. Trends were exactly the same in Q3 as they were in Q1 and in Q2. Your last question on wine and spirits and inventories in Cognac.
Inventories are slowly moving down, both in China and in the U.S. As you remember, we reported high level of inventories at the end of June. They are slowly going down, which means that sell out is bigger than sell-in, so we have a discipline on the sell-in side, and the regular business is doing its work. This being said, I mean, demand is pretty soft in the U.S. Always difficult to measure due to the great number of point of sale, so it's not always easy to figure out exactly what the end demand is, but it's probably still slightly negative.
As far as China is concerned, demand is recovering, but probably it's recovering not as fast as we had, as we had expected. As far as VSOP is concerned, we are more or less in line year-to-date with the level of business we were doing in 2021. Again, bridging the 2022 reference, which is complicated to analyze. As far as XO is concerned, we are a bit below. I will not give further details, as I understand that our competitors are pretty short on explanations, but bear in mind that inventories are going down progressively, on, in the wake of, pretty mild demand recovery.
Thank you, Chiara. The next question comes from Anne-Laure Bismuth from HSBC.
Yes, hi, good evening, everyone. Thank you for taking my question. I have three questions, please. The first one is on the pricing. Considering the price increases that you have been passed on in 2020, 2021, and 2022, and even in 2023, it seems that the on-street price level consumer are now really weak. Is it fair to assume that the price component into next year's growth algorithm of growth will be limited? That's my first question. The second question is about, looking into Q4, and at the base of comparison, it's targeting pretty easy in both the U.S. and also particularly in Asia, as Q4 last year was down 8% organically.
Is there any reason why, in your view, you could not renew with double-digit or even mid-teens growth in Q4 2023? And my final question is about margin. During Q2 conference call, you mentioned that the barrier, bearing significant FX movement, the group was committed to deliver stable margin for the full year. Do you still confirm this commitment, or do you believe that the cost of doing business has grown so much that it could jeopardize margin stability in 2023? Thank you.
Anne-Laure, I will disappoint you, as you were probably expected to be. So first of all, I'll answer your first question about pricing. You're right. I mean, there will be a limited impact from pricing, despite the fact that we have passed on price increases in most markets, if not all of them, and particularly in the U.S., we have not really increased prices, but we have done it a little bit in China, a little bit in Europe, and in a more significant way in Japan. So there will be some element of pricing next year, but in a limited way. I mean, we don't expect that to be the basis for the growth next year. So you're basically asking me whether I expect double-digit growth in Q4?
Needless to say that I will not answer that question. The comparison base in Asia is a bit easier than it was in Q3. It's also the case to a lesser extent in the U.S., so it will help, but there are so many dynamics at play when it comes to putting together the numbers for the most important period in the year, which is Q4, that I wouldn't dare anticipating anything about that. So I really cannot comment on that. Margins, I will not comment. I mean, it's also forward-looking, and you'll have the answer by the end of January when we report full year numbers.
We have a number of headwinds, I mean, particularly currencies. I mean, we do some hedging, and hedging will be profitable, but you know that even the best hedging strategies do not fully offset the impact of plummeting currencies. So that's something we'll have to offset. I mean, there will be some negative impact left that will have to be offset through other measures. We are working on it, but I cannot make any forecast as to the outcome of this exercise.
Merci, Anne-Laure. The next question comes from Rogério Fujimori from Stifel.
Hi, Jean-Jacques and Gerard. Thanks for taking my questions. I have two. I think on watches and jewelry, I was just wondering if you could elaborate a little bit on the performance for jewelry versus watches, Tiffany versus Bulgari, and curious to hear if you have seen a more pronounced slowdown versus fashion and leather with the European clients in Q3. And then, for fashion and leather and jewelry, I think you talked about the Chinese unstable two-year trend, but could you comment on also on recent trends for other key Asian nationalities, the Korean. Well, Japan, I think, is fine, but other local consumption in other Asian ex-China, just to understand a little bit more about the performance in Asia. Thank you.
I thank you, Rogério, for your question. Your dream would be that we report for each and every brand. I remind you that we have 72 of them, so it would be probably a bit cumbersome on our side and on your side as well. Nevertheless, I will try to answer Rogério's question on watches and jewelry. We had a slightly better performance for jewelry than for watches in Q3, which was the same actually as in H1, where we had a little bit of outperformance of jewelry versus watches. As far as Tiffany is concerned versus Bulgari, you probably figured out already the answer. Bulgari is doing a bit better than Tiffany.
It was the other way around last year for exactly the opposite reasons. I mean, this year, Tiffany, which does a little bit less than half of its sales in the U.S., doesn't get any gross contribution from the U.S. market, which is flattish to slightly negative. Bulgari is way less exposed, and Bulgari is more exposed to the Chinese market, which has proven quite resilient, even in Q3, where Tiffany has less penetration. So all in all, I mean, the geographic mix is playing in Bulgari's advantage. It was the other way around, as I said, last year. Your second question about fashion and leather and the key Asian nationalities.
In Q3, basically, we've seen lower numbers with most key non-mainlander nationalities compared to H1, with some exceptions, like Hong Kongese and people from Macau. Otherwise, I mean, it's... numbers have been a bit softer than what they were in H1.
Thank you, Rogerio. The next question comes from Antoine Belge, from BNPP Exane.
Yes, good evening to both of you. Three questions. First of all, the performance for the entire group in the U.S. came back to positive territory. I guess, cognac was not really helping. So, if you could elaborate a little bit on this, and I think specifically, if my memory doesn't fail me, the U.S. cluster was down 1% for fashion and leather in Q3. What was the number in that quarter? My second question is on Dior. I think in the last conference call, specifically with the Chinese, you commented that Dior was underperforming.
I think you already said that the overall performance was not different from LV, but where are we in the cycle of that brand, which had done fantastically well, a bit more fashion content? Yeah, I mean, if you could maybe give a bit of comment about where you think this brand is in its cycle now. The third question is about just the FX impact that you've mentioned on the margin. Are you talking about something that should happen already in H2, or is it more something that you wanted to flag for next year? Thank you.
Okay. Yeah, the U.S. improved, marginally, I would say, in Q3. This is a little bit across the board. I mean, we've seen a bit better numbers in Fashion and Leather, in Watches and Jewelry , not unfortunately in Cognac, as you pointed out, Antoine. I mean, we are talking about low numbers and high sensitivity to some components of it, so it's frankly not really worth commenting. The U.S. cluster has been exactly on the same trend as what we've seen for the main brands since the beginning of the year. Really, nothing really changes in the U.S. for the time being.
Your second question about the Dior cycle, well, it's an easy and tough question at the same time. I mean, it's an easy question because this brand has tripled in size in less than seven years, so this cannot go on. I wish it would be the case, but it cannot go on like that forever. At some point, and we probably need, growth rates have to normalize. I mean, you cannot grow a business, and I don't think it would be wise, but you can't grow a business 30% per annum forever. The business is to consolidate. We cannot open that many stores, otherwise we would end up over-distributing the brand.
So we also have to figure out what is the exact size of the distribution system, and how do we want to express the brands in terms of category. This should generate healthy growth going forward. We are not worried at all about the quality of the business at Dior. On the contrary, you all know that I'm a great fan of the brand. This being said, don't expect, and I don't think this is what you do, but don't expect the brand to continue to grow 30% per annum forever. It will not happen. So this is where we are.
I think the slowing down in the growth is absolutely normal after these fabulous and outstanding years that we have been through, and we'll continue to deliver value out of it going forward, believe me. The FX impact was mostly connected to H2. I mean, the situation on the currency front is a bit worse than we had anticipated. As I said, we'll have some offset from hedging strategies. But taken in isolation, the currency situation will have some negative impact on margins in H2, no doubt.
Thank you, Antoine. The next question comes from Luca Solca, from Bernstein.
Hello, Luca. You may ask your question.
Yes, hello. Thank you for taking my question. I'm very interested about what has been going on with domestic consumers in Europe, as what you described, Jean-Jacques, seems to be a relatively abrupt change of behavior in a sort of Mary Poppins situation, where the wind has changed. I wonder if there's anything that we can possibly learn by looking into what has prompted this nationality to reduce spend relative to last year, and whether this is potentially a blueprint that we could find with other nationalities. I believe that the stock market has significantly reduced the share prices in the sector on the back of the debate on 2024, not so much on the end of the year, and whether in 2024 we'll see positive or negative growth. That's my impression anyway.
And so I was wondering whether we could learn from your analysis and dissecting what has been happening in with European consumers what has been going on. We're picking up, for example, that there's some pushback on price increases, not specifically on what other majors done, but in general there seems to be quite a significant price exuberance. And one of my concerns is that at one point, consumers could be putting foot on the brake just because they believe that they're spending too much money. Everything has gone up, restaurant prices, hotel prices, you name it, including luxury goods products.
On other topics, I was wondering if I understand correctly, Wines and Spirits were still paying the sort of long-term effect of the backfiring of price increases in the U.S. for cognac, largely. What is causing underperformance in China or in other areas, and is there anything else that is not working within Wines and Spirits that you would want to point out? And last but not least, I saw that Fred, in the presentation, is introducing synthetic diamonds. I wonder if this could potentially be an important piece of new jewelry that you bring into other brands as well, specifically Tiffany, which is so strong in bridal. Thank you very much.
Thank you, Luca. The European consumers, basically, your question is about cycles. I mean, I think there is such a thing as cycles in consumptions, and it's hard for me to analyze. I mean, we find it complicated to explain one quarter from another differences with a thorough client behavior analysis. There is no such thing. I mean, the cycles have to be analyzed over a number of quarters, if not a number of years, to be really understood. So we've seen... The only thing I can report, as I said, is that most European clienteles are showing slight negative slight drops in the in Q3, compared to mid-single-digit growth, mid to high single-digit growth in the first half of the year. Why is it so?
Is it stock market properties, global sentiment, politics? You name it, I've absolutely no idea. I mean, it's very difficult to say in three, in three months. I mean, time will tell, depending on the depth and the length of the cycle, whether it was a real cycle in consumption or merely a sort of blip after three extraordinary years. Obviously, consumers as well have to take a pause, but it's hard for me to be more precise on that. I can-- As I said, I mean, I cannot... I can only report numbers as they are. You mentioned cognac and what's going on with China.
Again, it's the same type of answer. I mean, definitely, we would have thought that the recovery in consumption of cognac in China would be faster than what it has been. We never got any form of revenge buying or of that sort in the early part of 2023. Unlike in most of our businesses, it was not really the case. So Chinese New Year was obviously a dead period, which only led it to higher inventories. Thereafter, we haven't seen a lot of increase in consumption as well. And as far as Mid-Autumn Festival is concerned, it's too early to report the numbers because we don't have them. It ended yesterday.
That said, I mean, we have been reasonably cautious into our loading of the trade ahead of Mid-Autumn Festival, so we don't expect high level of consumption to resume anytime soon. We take a fairly cautious approach to the market. I mean, accelerating is always easy to do in these markets, if demand proves to be better than expected. Finally, your question on Fred. First of all, I would like to say that over 20 years of such discussions with the financial community, it's the first time ever that I get a question on Fred, which I take as a testimony of the excellent job that has been done by Charles and his team to make Fred what it is today.
Thank you, and bravo to Charles. I will answer your question about the blue diamond. Well, I think, first of all, blue diamond are pretty complicated to get on a natural basis. It was an attempt to get something that is hardly available, if not, not, if at all, on any—anyway. I think it's, in this respect, I mean, they did, they did quite well, and, frankly, the amount of PR surrounding the blue diamond has been much bigger than the diamond itself. We are pretty satisfied with this. Is it a long-term trend that we could develop elsewhere? Too early to say.
I mean, the artificial diamonds come with some form of issues that are different from the natural ones. They have to be weighed and assessed carefully, and we are not in a position to comment any further.
Thank you, Luca. The next question comes from Carole Madjo from Barclays.
Hi, yes, good evening. I have three questions, please. The first one, just to come back on what you have just said, you mentioned the Mid-Autumn Festival. Any comments you can give here on the FLG division for the Chinese consumer spending around that festivities? That's the first question. The second one, so thinking about the long-term growth rate in luxury goods, I think the view is that you can usually deliver a growth of high single digit to low double digit in normal times. Do you feel that this level of growth could also be achieved next year? Or are there any kind of factors, like we talked about pricing, for instance, which could make this kind of range difficult to achieve in the short term? And last point on marketing.
Marketing has been a big focus, of course, for you over the past year. Should we still expect some big initiative there in Q3 and Q4, or have you already, I guess, reduced the pace of initiative for the second half of the year? Thank you.
Marketing initiatives in terms of marketing initiatives in the year.
Okay, so on Mid-Autumn Festival, I mean, and Golden Week, I mean, I cannot, I cannot really report. I mean, it's really too, too recent to to get any, any view on, on, how it happened. So, so we'll, we'll have to, to leave that question for now and revisit it later on, later on. Your second question about long-term growth, can we do it, next year? I mean, long-term growth, which I, which I commented a few, a few times with some, some subtle differences between, between divisions, is an average, and an, an average, is basically something that never happens. I mean, either the real numbers, the actual numbers are better or worse, but, the, the average is the average.
I mean, the guy who has the head in the fridge and the feet in the oven on average feels fine. I mean, the reality is a bit different, as you know. Shall we be there next year? Maybe, maybe not. I mean, it's hard to say. I mean, definitely, growth is converging after three roaring years and outstanding years, growth is converging toward numbers that are more in line with historical average. Will we stay there? I don't really know.
There is no reason to believe that we will crash, neither that we will crash, nor that we will come back to the type of 20% growth that we enjoyed for a certain period of time. So we'll see. But as I say, sometimes, I mean, our visibility in the business is as good as yesterday's sales, and even yesterday, sometimes I don't have it. So very difficult to answer your question. And as far as marketing initiatives, I mean, obviously, this is something important that we continue to fuel. We have a lot of them surrounding launch of products, surrounding new advertising campaigns or events that we know how to publicize, I would say.
You'll see some initiatives that will be as spectacular as what we've done over the last quarters, and we expect the second half or the last part of the year to be extremely full with a large number of initiatives. Thank you.
Thank you. Thank you, Carole. We'll now take the last three questions, starting with Piral Dadhania from RBC.
Thank you, Rod. Good evening, Jean-Jacques. So two from me. If I could maybe just ask, on the strategy at Louis Vuitton and Dior, since Pietro Beccari and Delphine Arnault have taken over at the beginning of the year, could you just maybe give us a brief insight into whether any changes have been made from a product or marketing perspective, and any other kind of, you know, adjustments to the strategy that may be in play as we approach a slightly more normalized growth environment? And then the second one is just if you could perhaps, for the Wines and Spirits division, provide us with the price versus volume breakdown for cognac and spirits, and also for champagnes and wines. Thank you.
Thank you, Piral. No, the changes in strategies, I mean, strategy of Dior and Vuitton has three... as I say, three priorities: desirability, desirability, and desirability, and this is not something that we change every other day. We are focusing on increasing the desirability of our brands, and all the strategies, product, communication, distribution strategy we designed are aimed at increasing desirability. Whether it's Pietro at Vuitton or Delphine at Dior, I mean, or anybody else, I mean, that is not, that will not change. Execution of the strategy is about different initiatives, and obviously, we cannot repeat what we have done forever. I mean, it wouldn't make sense, we have to reinvent ourselves from time to time.
But we, the framework of what we do is at all times increasing desirability, and this is not changing. On Wines and Spirits, what I can say is that there is no, as far as Cognac is concerned, there is hardly any price impact. So, the volumes are more or less in line. There is also a slight negative impact due to negative mix impact in Q3, but nothing really significant. As far as Champagne is concerned, there is still a significant positive price impact in Q3, in the magnitude of 5%-6%, as we passed on significant price increases second part of last year and early this year.
So the volumes are lower than the reported sales numbers.
Thank you, Piral. The next question comes from Chris Gao from CLSA.
Good morning, good evening, Jean-Jacques and Rodolphe, thanks for taking my question. The first question is regarding, you know, Chinese consumers' offshore spending behavior. Feel free to take Vuitton or Fashion and Leather Goods division as an example. We are wondering if you see any difference year-to-date versus the year of 2019, regarding the average spending amount of Chinese nationality offshore spending? Do you see any meaningful consumer profile change of Chinese classes offshore spending compared with pre-pandemic? This is the first question. The second question is regarding the, also about the offshore and offshore breakdown on Chinese. You mentioned that for Chinese, offshore spending has accounted for 30%+ of Chinese spending to date.
So just wondering, does your Watches and Jewelry Chinese cohort breakdown also in line with this number, or is it higher or lower than this average? So these are my two questions. Thank you.
Thank you. Well, obviously, there are some changes, compared to 2019. I would say that the most significant change is that the proportion of the business we do inside and outside mainland China is entirely different from what it was, and it entails some difference in behavior. If you are buying in your home country, tickets will tend to be lower, average ticket will tend to be lower than if you go once in your lifetime in a foreign country, where you want to buy something. So, in this respect, I mean, the business being way less offshore than what it used to be, we have on average lower tickets.
In terms of price point or average price point, I mean, the average price point has been going up since 2019 due to the mix impact and what we've done in terms of product offer. It's not particularly specific to mainland China, and the comparison with 2019 is not particularly relevant or actually would apply to any other market. Your second question about onshore and offshore in Watches and Jewelry, no, the proportion of the business offshore in Watches and Jewelry is much smaller than it is for Fashion and Leather. Today, Fashion and Leather averages something like 30% on average year-to-date. The Watches and Jewelry business is less than 20%, so it's really lagging behind.
Thank you, Chris. The last question comes from Charles-Louis Scotti from Kepler Cheuvreux.
Yes, good evening. Thank you for taking my questions. I have two. Could you share more details on the luxury retail and entertainment complex you are planning to build in Hainan at DFS? Also, if you could update us on your strategy for fashion and leather goods in Hainan, as it seems that you are opening a Louis Vuitton and Dior store soon. My second question on perfumes and cosmetics, I know you have been more selective and qualitative in terms of business you did in APAC during the pandemic. Still, to what extent have you been impacted by the destocking of duty-free players and also the current crackdown on the Daigou in China? Thank you very much.
Thank you, Charles-Louis. I'll start with the second question, which is a very, a very good one. We've been impacted to some extent. Obviously, this Daigou situation and the building inventories were above, particularly as far as best sellers are concerned, were above the potential for absorption by the client base. I'm not talking about LVMH, I'm talking generally about the market. At some point, these products have to come on the market, and this created an influx of discounted product all over the world and all over the place. This has been a fairly disturbing factor in the Chinese market, basically since the beginning of the year.
As we have less left inventories than the others, having cut Daigou earlier than anybody else, obviously, we were on the wrong side of it. I mean, we didn't benefit from this at all. So it's been a fairly disrupting factor. Your first question about Hainan and DFS and fashion leather, the point to bear in mind is that the status of Hainan, which is currently operated under the duty-free license model, is due to change by the end of 2025, if I'm not mistaken, to come to a tax-free, or if not tax-free, I mean, low tax model comparable to Hong Kong.
The way we are—we, the brands could operate in this environment will be entirely different from what it is. Given the number of people visiting Hainan on a yearly basis, it's worth considering as an important market, and therefore, all our brands are contemplating opening stores in a selected way in Hainan. No decisions have been taken yet, with one exception that you mentioned, which is DFS. I mean, DFS is launching a fairly important development in Hainan, which we ambition to be, if not the biggest, probably amongst the two or three biggest developments, commercial developments in Hainan, and that will be home for a very large number of luxury brands.
In that way, basically, DFS reproduces what they have done in Macau some 15 or 17 years ago, which is basically to enable luxury brands to enter the market in a totally controlled and safe way. And so we will, we'll be doing exactly the same thing as we've been doing in Macau, and hopefully, we'll be, we'll be as successful in Hainan as we have been in Macau. So it's a very important venture for DFS in Hainan, and we are very hopeful about this new development.
That's all?
Okay. Thank you for attending this call. I have no particular closing remarks to make. I look forward to discussing with you full year numbers in late January. As always, thank you and have a good evening.