Good morning, everybody. I'm very happy to be with you today in this very different period for the presentation of the half-year results. Obviously, we cannot hold this meeting face-to-face, but we hope to be able to organize it in the best possible conditions, directly or in a deferred mode. Thank you for being there. The unprecedented crisis, which started in the beginning of the year and that we are still going through, allows us to test the solidity of our model. The results of the first semester were highly penalized as a result of the closure of stores, even if we are observing progressive improvement since the end of the month of May. I wish to thank the commitment, the solidarity, and the courage of the Hermès teams everywhere in the world.
We are today particularly happy to find our clients in our stores and on our e-commerce sites. Given this unprecedented health crisis that we're encountering, Hermès is faithful to its humanistic culture and its commitments. Its solidity, economic and financial, allows it to face up to this crisis. Hermès has preserved its jobs and maintained the basic salary of all the collaborators in the world without having recourse to public subsidies in different states. The group has made a donation of EUR 20 million to a public hospital and has maintained its financial commitments to Soong Ching Ling Foundation in China, and Red Cross in Europe and Asia. 50 tons of hand sanitizers were produced by Hermès Parfums, 120,000 masks were distributed. The shareholder meeting decided on the dividend that was maintained at EUR 4.55, identical to that of last year.
Executive chairman have given up the increase of their compensation fixed in 2020, and kept it identical to that of 2019. Now, let's come to the first quarter. As expected, after a sustained first quarter, after a very good Chinese New Year, the epidemic was intensified in the second quarter, bringing the closure of most of the stores for several weeks. At the end of June, the income is down by -24% at current exchange rate, and -25% at constant exchange rates. All the geographical zones have been impacted by the health crisis. The sales in groups are -22% at constant exchange rates are coming back progressively, respecting the strict barriers in order to protect our customers and our collaborators, with improvement started in end of May.
The customer loyalty, desirability of our collections, and the agility of omni-channel, and the independence of the group are the pillars that support a resumption of activity. First half of 2020, all geographical zones were impacted by the health crisis. France, -38%, and Europe, -36%, excluding France, affected by a drop in tourism flows, despite the faithfulness of our local customers. After the closure of all of the network in Europe for nine weeks, approximately, the stores progressively opened their doors in Germany end April, in France mid-May, in Italy and Spain end of May, and finally mid-June in the U.K. In Japan, -23%. The stores were closed in April and in May over a period of six weeks. The resumption is very dynamic, thanks to the customer loyalty locally. Sales were particularly strong in the e-commerce platform in Hermès Japan.
In Asia excluding Japan, -9%, all of the stores were able to open in continental China in March, with activity strongly growing, while activity in Hong Kong and Macau stays low as a result of the border control measures. Many countries in the zone have seen a second wave of closure of the stores, namely Singapore, until the middle of June. The new flagship store in Sydney was inaugurated in June, and stores of Guangzhou in continental China, and Bellavita in Taiwan reopened in April, and in May after enlargement. The deployment of the new digital platform in Asia proceeded with success in Hong Kong, Macau in February, and then Korea in June, with a beautiful growth in e-commerce sales. AmÉrica, -42%, underwent total closure of stores for over 10 weeks in the U.S., as well as other countries in the zone, with very progressive resumption end June.
The revenue by geographical areas reflects the closure of the stores with a greater weight of Asia Pacific, thanks to the good dynamic of continental China and Korea. At the end of June, all the métiers were affected. The closure of the stores penalized all the métiers, particularly the fashion métiers, such as ready-to-wear and accessories. Leather and saddlery, down by -23%, close to that of the group as a whole. Clothes and accessories, -29%. Silk and textiles, -39%, have been penalized even more as a result of a drop in customer flow. The perfumes, despite great success in the launch of beauty beginning February, underwent a downturn of -29%, like watches, -19%. Other métiers of Hermès did particularly well, thanks to the good performance of jewelry and maison. The breakdown of the métiers is as stable as compared to the first quarter 2019.
Creation remains at the heart of our métier. In the beginning of the year, successful launch of the 16th métier of Hermès that I just mentioned, beauty, with the first collection of lipsticks, which has encountered a very warm welcome by the customers. The major technical innovations with the double-face carré imprinted on both sides, and cufflinks in anodized aluminum. The new dinner set, Passifolia. The presentation of the ready-to-wear collections for women and men. The enrichment of the leather collection with models Chengdu, Birkin 35 Cargo, and Bolide line. Creativity of the group was welcomed in communication over this semester. The theme of the year, Innovation in the Making, was launched in New York in February. The recent support of the presentation of the Spring-Summer Men's Collection 2021, in collaboration with Cyril Teste, that I invite you to watch online.
Exhibition of petit h in March in a GUM store in Moscow revealed the relevance of a proposal and an approach of upcycling. Finally, all along these weeks of closure, in link with our community, via the release of the Le Monde d'Hermès, delivered in person to our customers, has always been kept up. The physical network showed the inauguration of the new flagship in Sydney, in Australia. In June, five stores were renovated, embellished over the semester in Kuwait City, Lugano, Guangzhou, Taipei, and Montreal. Our new platform, hermes.com, opened in Hong Kong and Macau in February, and then in Korea beginning June. Henceforth, most of our network benefits from our new e-commerce platform.
In order to protect all our employees and in respect of the instructions given by the government, our production sites in France and in Europe were closed down for four weeks mid-March, the time necessary to put in place the health provisions over all the sites with a progressive resumption of activity. We are pursuing operational investments, namely in the production capacity for the four leather concerns, leather workshops, Guyenne, Montereau, then Louviers, and the second one in the Ardennes. Work is also being pursued in the textile area with enlargement of the Pierre-Bénite site. I'd now like to give the floor to Éric du Halgouët, CFO for the half-yearly results 2020.
Good morning, everyone. As Axel just recalled, we've been true to our role as a responsible employer. The group, therefore, maintained jobs and maintained the base pay of its employees throughout the world without recourse to government subsidy in the various states. This was a decision that was made, as well as our strong vertical integration. They both weighed on our operating profitability in the first half, which were impacted by the proportion of fixed expenses as a percentage of sales. In spite of a continued improvement in all regions starting end of May, revenues down 24% at current exchange rates, and minus 25% at constant exchange rates, were hard hit by store closures in the second quarter that peaked on April 20th. At that time, over 75% of our stores were closed, including all of the flagship stores.
From the 4th of April to the 2nd of May, over 70% of our own stores, as well as our concessionaires, were closed. Wholesale business saw a strong slowdown in the second quarter. In addition to a downturn in travel retail due to the fact almost all airport stores were closed. The drop in gross margin by 3.7 points is mainly the result of an under-absorption of direct labor costs, as well as indirect production expenses. Precisely, all of our production sites, especially leather production sites, were closed for one month from March 16th to April 14th. Activity resumed gradually in the following weeks, all the while giving priority to social distancing. Furthermore, the gross margin was hit by lower sell-through of the spring-summer collections of fashion sectors that were displayed in the stores over a short period.
Communication spending expressed as a percentage of sales, slightly down due to cancellations of events in many countries, such as the Saut Hermès jumping event in Paris. Selling, marketing, and administrative expenses, which include mainly store staff, payroll, and support functions, are down thanks to good control of other costs. Due to the drop in sales, this has a negative impact on operational profitability to the tune of approximately 5.5 points versus 2019. Other income expenses, mainly this is depreciation of rights of use and fixed assets. These depreciations are up EUR 40 million due to the new leases taken out and continued strategic investments in our retail network and our digital network. Other income expenses also include an expense relating to the free share plan, up EUR 30 million in 2020, after the grant plan where free shares were given to all employees in mid-2019.
This also includes our donation to the Paris Hospitals group of EUR 20 million. These three components explain most of the increase in other income expenses. Due to the drop in business activity, this represents 12.6% of sales. After taking into account all the points we previously mentioned, recurring operating income, therefore, is EUR 535 million. As we mentioned previously, operating profitability is hit by a drop in business, although we maintained jobs and wages and continued our strategic investments, reaching 21.5% nonetheless. Net financial income is an expense of EUR 43 million versus EUR 16 million in the first half of 2019. This change is due to the increase in foreign exchange hedging options and discounts and hedges, as well as location rent liabilities. Furthermore, return on cash on hand went down substantially due to a drop in interest rates, which continued in the first half of 2020.
Tax rate in the first half of 2020, 32.7%. This is our best estimate of the tax rate for 2020. We compare this with the effective tax rate of 33.1% for 2019. The expected drop of 0.4 points is due mainly to an expected country mix, which will be beneficial in conjunction with an uptick in business in China. Information point, the positive effect of the drop in the tax rate in France is offset by the expense that'll be booked in 2020, which has to do with the adjustment of deferred tax assets. Net income attributable to owners is EUR 335 million. The group continues its strategic investments in the first half. EUR 68 million were spent on renovation and enlargement of our retail network, such as extension work at the Sèvres store in Paris, as well as projects to move stores in China to Dalian.
EUR 44 million spent on production and métiers were broadly, mainly in leather. Thinking of projects in Guyenne, Montereau, Louviers, and Saint-Junien. Lastly, EUR 50 million were invested in real estate projects, particularly in Pantin, and in our digital projects as well, with a continued rollout of our e-commerce platform. Operating cash flow reaching EUR 634 million in the first half, making it possible to finance the change in working capital requirements in conjunction with an increase in inventories, as well as operating investments, which we alluded to previously, as well as payback of rental liabilities. Shareholders meeting approved in April, paying a dividend reduced from EUR 5- EUR 4.55 per share, which is the identical amount which was paid in 2019. Amounts paid out, EUR 490 million. Furthermore, the group did a share buyback, EUR 123 million worth, excluding transactions within the framework of the liquidity contract.
Restated net cash position of this group is EUR 3.9 billion as of the end of June 2020. The group maintains a high level of cash on hand and maintains a sound and strong financial structure. I'd like to give the floor back to Axel to talk to us about the outlook.
Thank you, Éric. The progressive improvement of activity started end of May, and we are confident in the future, aware to be able to take support from the pillars that sustain our resumption of our activity, the faithfulness of our customers, desirability of our collections, agility of our network, and independence of the group. For 2020, the impact of the COVID-19 epidemic remained difficult to assess as a result of the evolutions that are pursued in the different geographical zones where we are present. Today, we are very happy to renew with our customers everywhere in the world. Our objectives are unchanged in the medium term despite economic, geopolitical, and monetary uncertainties in the world. The group confirms the objective of progression of the turnover at constant rates, which is ambitious.
Thanks to its business model, Hermès pursues its strategy of development in the long term, founded on creativity and transmission of knowhow and quality. 2020, despite the pandemic, is an affirmation of our sellier spirit. This will lead to the second semester, the pursual of the work in our leather workshops and the laying of the first stone in Louviers, opening an enlargement of 14 stores in the world, launch of the new collection of haute joaillerie in Paris within the framework of the Fashion Week and the collection of the women's ready-to-wear fashion show on the 3rd of October, finally, the launch of our new finance and governance site with the ESG component. Now, the group with confidence keeps its course. Thank you very much for your attention. We are henceforth available to answer your questions, thanks to the technique, I hope.
You may ask your questions now. Press zero one. Only two questions per person, please. Thank you. We have a first question. David Desmarest, CIC, you have the floor.
Question one on recent trends. You mentioned a gradual improvement since the end of May, beginning of June. Can we take it then that sales are still down double digit as some of your competitors have mentioned? Improved trends, are they continuing in July? If that's the case, which markets are seeing the best recovery in most recent times? A last question. Gross margin. Give us a split, could you? In terms of impact on gross margin between direct labor costs and fixed expenses, cost of sales, and lesser sell-through in ready-to-wear. Should we expect a return to a more normative level, which is to say in the neighborhood of 70%, thanks to a resumption of production in the second half? Thank you.
Thank you. Éric, I'll take the first one. You can answer the second. Well, we reached a low point in April. That's when you had the largest number of stores that were closed, so revenues were lowest. What are we seeing for June? In June, first of all, we've seen a real split between retail business and wholesale business. Retailing is our main business. Wholesaling, for instance, travel retail, which has been impacted and continues to be impacted sustainably. What are we seeing in retailing? In our retail business, when a store can reopen and health situations enable that, customers come back, and we see the true desirability of our brand. There are still differences due to health situations in different geographies.
Let's look at June as an example. In our retail business, two areas as we report this, are growing at a double-digit pace. That's Japan and Asia Pacific, whereas things are a bit more difficult in Europe and the United States. The trends that we're seeing in July are in line with Q2, i.e., further improvement from one month to the next, month-on-month. It's too early to do any actual projections with figures.
Éric, on question two, on change in gross margin, it's true, the two components, under absorption, fixed production cost and direct labor, and slowdown in inventory sell-through are basically 50/50.
The improvement in both of these components is due to the point Axel brought up earlier, i.e., gradual resumption of sales, recovery in sales, which should minimize these impacts in the second half. Another question? Do we have another question?
Yes. We have another question from Mélanie Flouquet, JPMorgan. You have the floor.
Yes, good morning. I hope you are well. I've got several questions. Sorry about that. First of all, another question regarding June. I believe you've said minus 25% for June. A lot of your competitors talked about -10% to -20%. Some of the iconic products selling well. Why is it then that Hermès isn't outperforming its peers in June once there was a reopening of stores? We're expecting usually outperformance. Question 2, supply chain, particularly relating to leather goods. In the past, we'd also become accustomed to the fact Hermès was very much supply chain driven. You saw a disruption in Q2. What's its impact going to be on the full year in terms of volume increases you're expecting? Might we see a catch-up in 2021, or will this basically be a lost period?
In terms of training and developing production centers, you've got a lot of catching up to do for next year. Will growth rates be similar to previous years? Point 3, question 3. Online. I'm wondering, the recent crisis, will it be helping you even further focus on online business? You've already got a focus on this. Will you step that up? Could you give us the proportion of e-commerce in 2019 versus 2020, and what you expect in terms of disruption for 2021 in e-commerce business? Next question. What's the proportion of local sales? You talk a lot about a return of local customers, gauging about 40% travelers sales normalized last year. What was the proportion last year at Hermès? Our last question, sorry about this, on inventories. I see they're up double digit versus last year, versus December and June.
My question is, are you comfortable with these inventory levels? Which brings me to the previous question. If there wasn't depleted inventory, why isn't there a better resumption?
Thank you for the questions. It's Axel. I'll answer each point. First of all, I believe Hermès has a sound business model. Basically, your question isn't how we're reacting during the crisis. The point is, how had we prepared for this? I think thanks to our basics, think of our high cash on hand, think of our loyal customer base and our products. This has all paved the way, prepared for us to confront tough times confidently. As to revenue figures, I don't believe we report June specifically. We can't compare to our peers. They don't either. We can say that in June, we've opened, we've got strong growth. Asia Pacific, I'm thinking of, which is growing strongly compared to 2019 in June. Japan reopened, was impacted, and in June, is also growing. We've seen trends that are basically positive. Next, I said this as of Q1.
Thanks to the Chinese New Year, thanks to local customers in other European countries when the Chinese stopped traveling, held up well. When the stores are closed, I have the same figures as everyone, zero. Unfortunately, that was the case. We had periods of store closures, fairly lengthy periods when our stores were closed based on government regulations, employee safety, and so forth. I can't say who else opened what. Sometimes things were a lot more fuzzy than in the U.S. We kept some of our stores closed a bit longer than some of the others sometimes. Still, we coped with the crisis and did not take any risks for our employees' health or customers' health.
Regarding our supply chain, there'll be two effects that'll be important with 2020 and 2021. First of all, full month's closure of production sites. There's, of course, the lead time in building production sites and training new employees, and there'll be that gap for when we were closed. There's strong demand for these products. For 2021, we're hoping to be able to resume the usual customary growth of this group, especially since the differential will be fairly easier because there will be a big difference from 2020. Anyway, productivity rates will be important to look at 2021. Productivity rates, because this felt a big impact due to health measures we took, social distancing in the workshops, separations between people, and the fact that employee density isn't at its usual levels. Next, online business. Here as well, let me say, how we prepared ourselves for this for quite some time.
I've been talking to you about our online omni-channel strategy, a new platform that we've been rolling out for four or five years now. Now, what do we see during the period? We saw a strong speed up of online sales during the period. What's even more important, more interesting as I see it, the online sales were done with new Hermès customers. Around 75% of these were new Hermès customers. These aren't sales that didn't take place in stores, that took place online instead. These are new customers, new customers who came to our online stores, so there wasn't any sort of cannibalization that went on here. We see that our website in China continues to grow very strongly in Q2, in spite of the fact that all the Chinese stores have also reopened. Next point.
I don't give targets to my teams with specific figures as to internet sales, because I see the most important thing is to have an excellent showcase on the internet as well as elsewhere, and have the best in-store service. Growth in both areas takes place in the best possible conditions without any cannibalizing. I can say to you, when the stores were all closed in the U.S. and in France, 100% of sales took place through digital means. I don't see that as a success in itself. That's basically where we stand in terms of e-commerce. We're continuing to see potential is very strong. Next, proportion of local sales. We don't report those figures. We never have, given the specifics. No doubt about what we saw it in the Q1 results. We've got a very strong local customer base in many countries.
In Europe, of course, in other specific countries like Germany. Think of Italy, France, and Spain, more tourist customers. Hong Kong is also an example. Situation is complicated because of border closures, but we've got Hong Kong customers, very strong customer base there. Equally, in Japan, we've had e-commerce there for years. We've got very strong local customer traffic, which has helped our growth. This local customer base we've had for quite some time will be an added benefit to overcome the crisis.
Éric, on your last point on inventory levels, we're not concerned about the increase. There are three reasons for the increase. 30% approximately due to raw materials increases, that these raw materials can be reused. They're not perishable. Secondly, transit inventory due to the resumption of production sites and ramp up at those sites. We have transit inventory, especially in Asia Pacific, in transit. The last third is finished product inventories, a little bit stronger, reallocations, particularly to China, have been made when the sell-through was lower in some other countries. Thank you very much. I apologize. I hadn't seen June, my mistake. Could you give us the June specifics, the drop that you saw? You talked about a gradual improvement in terms of the half yearly trends. Could you give us more specifics on that? Thank you.
No, you can't quantify the improvement because it depends on the progressive increase of the sales, which is very difficult to assess today. Thank you.
Thank you. We have a next question from Luca Solca.
Good morning, Axel. Good morning, Éric. You did mention the progression of sales per country, per geographical zone. Can you give us some precision with regard to this progression? If we look at it from the point of view of different nationalities, if you look at the Chinese consumers in particular, the Americans, the Japanese, and Europeans. Where do the different nationalities fit in terms of the resumption of sales? You talked about the productivity rate of different sites, especially with regard to the social distanciation in your leather workshops. Can you tell us what is the situation of your work from this standpoint to come to a rate of productivity coming back to the period before COVID-19?
Do you believe that the social distancing measures and the management of the epidemic are now going to put you in a position whereby your productivity will be weaker, in particular, for the second half of the year?
Thank you. Well, sales per nationality, as there are very few tourists to the upper country. What do we see since the beginning of the crisis? Well, after a very strong reopening, Asian countries are doing well, continue to do well. The revenge buying. Even after the normalization, you see that the situation in Asia is stabilizing with the very dynamic customers. Very dynamic from the beginning in China, continental China in particular. Very dynamic in Taiwan, remains very dynamic in Korea. These customers, the clientele remains very strong.
With this successive reopening in Asia Pacific and Singapore, which opened very late, is doing well with the Singapore customers, the Thai customers, et cetera. If I were to put things into perspective, I would say that where it is opening again in Asia, it is doing very well. With one cautionary word where the Singapore and Hong Kong depend on the opening of the borders with China, where they are not back up to the same level. The Japanese in Japan, where there is reopening, doing very well with the local customers. There is one difficulty in Asia, same as the rest of the world, which is travel retail, which remains impacted and will remain impacted for a certain time to come.
In Europe, the share of the local customers going up in true dynamism, which doesn't entirely make up for the losses of tourists in the most touristic zones, even though in countries such as Germany, which are slightly less touristic or countries very strong when they open, like Russia, doing well. Even if the results are very encouraging, very disparate, you have the U.S.A., where depending on the regions, the epidemic doesn't seem to be well under control. I can't say that we're back to a normal situation in the U.S.A. Even if we have encouraging signs in the last weeks, the situation still remains to be stabilized.
We're relatively dependent, and that will be the link with your second question of the ups and downs in terms of the health measures, the protection measures that will be put in place, as well as the perception of the risks by the populations. Now, when it comes to production, we've taken time to do things well. We closed down production for 4 weeks. This was not an easy decision to take. This allowed everybody to stay home for at least 15 days during the incubation period, and then find the right gestures, the barrier gestures. We put in place social distanciation. We had lighter teams that could revolve, compulsory wearing of mask, putting plexiglass between teams, a lot of things that have allowed us to improve, slowly but surely, the productivity. We have also been impacted in terms of productivity by the closing of schools.
We have a lot of mothers in our teams. They were not all able to have their children kept. Regularly since we've reopened, there's been an increase in our productivity, significant increase towards levels that are relatively high, but which are still not at the level of our norm of last year. We hope we get there, but I can't preempt on the health situation. The production of leather is 100% French, and France in the second half of the year, the reopening of schools and the epidemic hotspots, something that we don't have a handle over. We have the capacity to continue to produce our leather goods. Really, I admire the desire to work of all our employees and the energy that they've put in to help the house in circumstances that are not easy. Social distanciation, of course, obliges us to make certain trade-offs.
We make up as easily as possible. Every day, there are new ideas to improve the situation. We're very confident on leather. The proof of our confidence lies in the fact that we will continue to recruit. We add 240 more, and we continue to build, even if there were some pauses during the confinement, during the lockdown, our four new leather workshops. What will be the speed with which we will come to the normality of the habitual level of productivity? That'll depend on the health situation. Thank you.
Thank you very much, Axel.
Thank you. We have a question from Ivan Letessier from Le Figaro. You have the floor.
Good morning to you both. You started answering regarding local customers. I'd ask you, in France or in Italy, what about local customer purchases? Have they grown since the end of lockdown? Furthermore, do you agree with what some of your peers say, thinking that in the future there'll be ever less purchases of Chinese during their traveling abroad, and they'll consume more locally? If you do feel this way, will this lead you to rebalance your store numbers, with changes in mainland China conceivably reducing Western European size of stores? Last question, how can you explain the drop in your operating margin rate is a little bit greater than that experienced by your two main rivals that have already reported their figures at the beginning of the week?
Thank you, Ivan. I'll answer a couple portions. We'll both be answering to those questions. Local customers are seeing purchases grow in all of our countries. When our stores are open, there's growth in purchases by local customers. In Italy, it's the case. In Germany, it's true. In France, it's true for the local customers. It's interesting, I might add, where do we see best growth rates in France?
In our provincial stores, where we've got very local customer bases, but not just local customers. In our provincial stores, whether they're talking about Marseille or Lyon, we've got very good results. Paris sees a little bit more of an impact because there are fewer tourists now, though our Parisian stores are doing good business with Parisian customers. There's nothing new here, though. For quite some time, we've been very careful to make sure that our geographic footprint is there to serve local customers. That's why we're one of the houses with the largest proportion of stores in France. We've got stores in Nantes, we've got stores in Marseille, in Lyon, Dijon, and in many, many locations in France. We have many French stores. We've always had this establishment to be close to our local customers. That's one of the reasons for our success in Japan.
In Japan, when everybody stopped investing to then move on to China, we continued investing in Japan. We continued opening big stores there, continued having beautiful locations in Japan, which is why today we're resisting very well in Japan, and we're growing there. This is our strategy, first and foremost, to be loyal to our previous customers, our existing customers, and loyal to the fact we want to also win over new customers. I see no rebalancing, no. Aside from what's already been slated, no rebalancing of our stores in Europe. We're redoing the Sèvres store. We're refurbishing the Lyon store. This is very important. We've got projects for Milan. We're continuing. That continues to be our strategy. Regarding our strategy for China, it's very straightforward. It was decided with Florian Craen, who was head of China at the time, now he's head of all of our retail business.
We had to strike a balance between entrepreneur and not wanting to dilute. We decided to open in one new city per year in China. We continued with this strategy. We got new cities slated for 2021, 2022. We're continuing to enlarge our stores. We have major projects for Beijing. The big strategic change in the last three to four years has been our boosting of the rollout of our e-commerce sites. They're wildly successful, and they've never cannibalized some of our in-store sales. Our retail sales did not suffer due to online business. This is very interesting to note. Regarding our operating margin, I'll give you a simple answer, Ivan. First of all, if I might, we are weathering one of the most serious crisis in this industry, have a 21.5% operating margin. I think that's pretty good.
I think sometimes we'd like to reach 20% of operating margin in a period of crisis. There are two things that are entirely true in our business model at Hermès, and we accept this. We're highly integrated. We're a house that produces a great deal of its products internally. The result is, in our operating margin, we take a large portion of the downturn in business. Some of them weigh more heavily on their suppliers, but we have it weigh on ourselves mainly. Next point. We accepted to keep everybody's wages for all employees without taking any government subsidy. That makes for a cost, an impact on operating margin. We've seen increase in our expenses. I think we were a good employer. We were a good partner to our suppliers. That entails an expense. Éric talked you through this. There's an inventory impact as well that did smooth out.
There'll be a smoothing effect, and it's cyclical as well as stores reopen. Éric highlighted a point, vertical integration is not only upstream, over 6,000 artisans, but also downstream with our retail network, which is highly integrated as well. About 90% of our revenue is sales in our own branch businesses, wholly owned stores.
Thank you. Thank you very much.
Thank you. We have another question from Arnaud Visot from HSBC.
Good morning. Our first question is on retail performance versus wholesale. You said retailing grew by 22% in H1 after dropping 25% revenue. Difference is three points between group performance and retail performance. I was wondering, does this also apply to Q2 performance in retail, which would be a drop in retail of 38.5% in Q2? Would it be possible to hear performance in wholesale for Q2 and H1? Another point, to come back to performance in Asia. Basically, Q2 still down by 9%. Good growth in mainland China. Could you give us more color in terms of that performance in Asia?
Mainland China had been growing double digit previously. I'd like to know how things have changed in the first quarter. Last question, number of openings and refurbishments you've slated for the second half of the year. Would it be possible to also find out number of openings and number of renovations that are scheduled for the second half of the year?
Axel answer. I'll try to answer these. As Éric just clarified, about 90% of our revenue is through retail business, which goes to show retailing is the main component of our growth. Wholesaling, therefore, remains fairly low, heavily impacted because that includes travel retail sales to the duty-free operators.
They didn't resume business as opposed to the ongoing improvement we see in retail business. They didn't resume their business, so about three or four points worth in our figures, plus to the retail side. Now on to Asia and your point on that geography. The situation in China continues to improve. We're seeing strong growth, yes, between Q2 and Q1 for China. The somewhat more difficult points in Asia were in Singapore, which only opened very late, starting on June 15th. Singapore is very important for our business. Due to border controls, as I mentioned, some difficulties were encountered for Hong Kong and Macau, which is why we don't see Asia growing. All the reopenings we did of our stores, whether you're talking about Sydney in Australia, Guangzhou in China, or whether you're talking about our store in Bellavita, that's Taiwan.
After all the reopenings, we were very successful. We did feel the impact in Q2 in Asia Pacific, mainly when our strong Southern Asian stores were closed and reopened later in the day. When they do reopen, there's good momentum, fewer difficulties, though in Hong Kong and Macau, there are somewhat slight problems due to a lack of Chinese tourists who haven't yet come back to those locations and sometimes have limited authorizations to travel. To build on what Axel has said, in the second quarter, retail growth in Asia Pacific, a double-digit growth. Third item, number of openings and scope effects. Three openings are scheduled for the second half. Two takeovers from concessionaires and about 12 projects of refurbishments, enlargements, which will then make for reopenings in the second half. For instance, in the U.S., Denver and Las Vegas.
Another example, Dalian in China, Harbour City in Hong Kong. Just a few examples of stores that have been enlarged.
Thank you very much. We have a question from Edouard Aubin, Morgan Stanley.
Good morning, Axel and Éric. I have two or three questions. The first one on jewelry, not in terms of the weighting in your sales. It's 2%, 3%. How do you explain the very big success of Hermès in the category in the last quarters? I know you were starting from a base that was weaker as compared to your peers in the luxury sector, but you have a growth which is much better. Can you come back to that? First question. Second one, Axel, you said that creation was at the heart of the métiers of Hermès. Could you kindly give us an order of magnitude of the number of products, an approximate figure of products that you intend to launch this year? How things have changed over the last three, four years?
How do you manage the creative process? Also a number of products that are kept. You have many launches, but not all are kept from one year to the next. Last question on the impact of exchange rate. Can you, Éric, please tell us about the impact that you expect over the year on the operating result of the increase in the value of the U.S. dollar compared to the euro? Thank you.
On exchange rate, exchange rates which were fixed last year are slightly positive and should represent this year between half a point and one point of favorable impact on the gross margin. However, may I remind you that we have decided to make increase in price, very limited ones in our retail price, while our cost price has gone up slightly faster as compared to 1% hike in weighted price that we applied in 2020. Concerning 2021, it is too early to give you the hedging rate because we are hedged for under 50%.
Thank you, Éric. Concerning jewelry, because our collections are very beautiful, that they work. This is a métier that I headed operationally with great pleasure for some years as of 2006. I'm very attached to this métier. What does it mean? When you reopen, you have your loyal customers, superb loyal customers at Hermès, who come back to the stores because they have bought products. It could not have been jewelry, but could have been from the home department because the maison métier has progressed very well, too, because people have spent a lot of time in lockdown at home.
These métiers, which are not high volume, but exceptional pieces, gold jewelry pieces, for example, that function very well, have resisted well, have done well as just when it comes to our loyal customers. The métiers that have suffered more are those with high traffic because we didn't necessarily have, either because of the tourism flows or because of health measures, the same customer traffic as before. That will take a little longer. Where we've seen in China, for example, the reopening of stores in China, first with beautiful sales with our faithful customers, with increasing traffic, and then traffic comes back, which is now higher today in China than it was before. This success that you see in jewelry with beautiful sales and beautiful collections, if I may say so, is also the loyal customers that buy in different métiers when they come to the store.
Now the creative process was very important for me. It was very important to keep the same dynamism of creation, whatever be the situation. Preserve the freedom of creation. We don't have a marketing department in Hermès, and so our creators, our designers are free to create. They don't start with the price point to arrive at something. No. I spent a lot of time in stimulating creativity in a period that had a lot of angst, which was difficult. They were all under lockdown as well. We were all affected personally to see people we knew who were either ill, people losing their parents. It was important for me to say that your role in this situation is, and I borrow these words from a historian, is to put back beauty into the world.
I said, "Make us beautiful collections, make us dream, create that pleasure." That is how creation was sort of headed and will continue to be so. Creation in Hermès is burgeoning. You are right. It is plentiful, and we have a number of very large SKUs. Don't want to give you the figure because I'll probably make a mistake. It's above 50,000 easily. Different SKUs. That's how it continues. This freedom of creation is what I would say, compensated, controlled, accompanied with a freedom of purchase. That is very important. All our store managers choose their very own assortment. We launch a lot of things, and then whether they'll buy or not buy, there are some products, for example, we don't withdraw from the collection, but there are some products that are more or less bought by store managers.
That's why each store is very different in terms of the product offering. Some models that you may not find in a store, but you might find it in the neighboring store because the store manager actually loves it and will continue to follow that SKU. Hermès has that capacity to stay close to the local customer and have a very differentiated offer available in our different stores. Then who chooses in the end? It's the customer. We don't decide to stop or not. It is more or less shown in the stores, more or less bought in the stores, and that is the magic of Hermès. I often tell this to the teams, we didn't sell the Birkin bag for the four years after its launch. We put it in the store.
We see whether it works or not. We don't do big evenings to launch a product. We do big evenings to receive our customers. We don't do launches like in other industries. We didn't sell the Birkin for four years. It is after four or five years that it was discovered, and this happens sometimes. We have a beautiful success on the Roulis bag. For two years, nothing happened. All of a sudden, it took off, and today it is part of one of the pillars of Hermès. There's a kind of certain Darwinism in Hermès product. It's for customer to decide to be attracted, for the creators and designers to attract the store manager so that he buys the product, and then to the customer. We've been able to benefit from the word of mouth of our customers rather than big launch events.
There's very big variety of creation, and this freedom of purchase of our stores is essential. These pillars are very interesting for the future with regard to the changes that we are undergoing, and I think these are part of the strengths that will allow Hermès to be even more relevant in the world of tomorrow.
Perfect. Thank you very much.
Our next question, Thomas Chauvet, Citi. Go ahead.
Good morning. I have three questions. Firstly, to come back to production capacity, you said productivity leather workshops in the second half and next year will depend on controlling the health situation. What about the first half and changes in volumes considering closure of production sites for just over a month? Question two, e-commerce. During unusual times, have you learned any interesting lessons? I don't know, stories, lessons you've learned from changes in product mixes, penetration in certain geographies, or organizing customer service logistics or what have you. Thirdly, what's the expense you're expecting in the second half for free shares to employees compared to the EUR 67 million in the first half? Thank you.
I'll answer that last question. It's easier. The expense will be the same in the second half because the expense in the first half included the plan granted one July 2019, which covers a four-year period. On to production capacity. We don't have the figures entirely since we're fully consolidated. It's the retail sales, thank God. There was a gap of one month and gradual resumption of production capacity for leather goods, at least. I'd make the same point. We had the same situation for textiles located in France. 80% of our production's in France, then a little bit of production in Switzerland with our watches factory also impacted by lockdown. Next, there's some ready-to-wear and shoes, Italy, they had a big impact on production there. All happened at the same time, same locations. We very much hope there'll be full resumption. Everything halted when sales halted broadly.
Production stopped when selling stopped. Important thing is to keep these flows so the stores get the right goods at the right time and location.
Regarding e-commerce, what lessons would we draw? The first lesson, first of all, it's extraordinarily important, clearly, to have this strategy, the e-commerce channel, but it all hinges on logistics in tough times when all of a sudden, planes can't fly or employees can't travel to logistics. In spite of virtual, there's also the real considerations. You may end up in a situation that's quite complicated, and we can say the teams did a brilliant job of it. The number one priority immediately was to relaunch logistics for e-commerce to serve our customers. It wasn't always easy, but this was a number one priority. e-commerce isn't all virtual. There are very real things underpinning it all.
I have to say very clearly, also in China, I would make the point, in e-commerce, for a few days, people stopped. The first thing we focused on was deliveries. Delivery positions were some of the most important. We know the delivery people in the front lines, and we had to focus on them. We're not talking about two separate universes. There's always something physical underpinning online. A very interesting point I'd like to make, this is a wonderful way to discover Hermès through e-commerce. We've seen it in all countries. These are new customers coming to our e-commerce sites. They're coming for the first time to our online stores, our e-commerce stores, discovering our products there. This enabled them to discover our products, silk products, fashion accessories, shoes, doing very well online. Another thing we saw, there's no price limit.
Someone came to the e-commerce site, and their first purchase at Hermès was a sofa that they bought online from Hermès. There's no limit. We have to be proposing more products. Not all of our products in all locations are available online. For instance, our leather collections aren't all available for sale through e-commerce. Our production capacity doesn't provide us with that possibility of making them available online. A third point interesting to look at, the reopenings of our stores. Growth rates in e-commerce didn't go down. We continued to see growth in e-commerce while the stores are reopening. It's two things happening in parallel. I believe we've got beautiful years ahead of us in e-commerce. A fourth lesson I draw, we have to be flexible and adapt to local customers in e-commerce as well. It's very important to be close to your local customers.
Very important to fully understand the way they do their purchasing. We had to become part of WeChat in China. We had to pay careful attention to our system in Korea. This is part of our success. We're really doing made-to-measure policies, tailoring our e-commerce to the local country customs and the various regions and the way they purchase. I've been pushing this project forward for quite some time, supporting it for quite some time. At previous boards of director meetings at Hermès in the 1970s, people wondered if they should start opening stores outside of France, and some of the board members thought, "Oh, it'll be complicated. Everybody comes to France. Why open up outside of France?" Clearly, we did start opening outside of France. Other questions arose in our industry as to whether we should go online. I certainly felt "Yes," immediately.
What's distinctive is it's just been a plus for us. It's not been a shift from customers from one channel to another. It's often been new customers, often countries that are located near our stores, but they're new customers for us, and they're coming online. It's been quite broad, a big success, which is thanks to the internet teams. What we've learned is the website, as you see it, is the tip of the iceberg. There's everything behind it, the logistics, the systems, the integration, that make for a success or not of a beautiful website.
Well, I think there are no more questions. Thank you very much for having followed us live. We're sad not to be able to be together in a boardroom, we hope to be able to receive you physically for our annual results and have a discussion together. Thank you, Éric. Thank you very much. Have a nice day.