Good morning. We may be wait for 2 minutes for the last elevator to come up because I came up by the stairways. There are some journalists in the elevator, so we'll wait for them. Thank you for being here this morning. It's a pleasure to present our results to you.
Shall we go? All right. Now 2018 is the year the team is let's play. So that's what we told our employees this year, let's play. And we are very happy.
We always take with great humidity. The fact that we were able to work and have a very nice year, very good performance in performance in 2018. And it is probably once again the opportunity to put an emphasis on the specificity of House of Hermes amongst which is this theme and it was in 2018, let's play. And we want to continue to represent the fundamentals of the house, the spirit of independence, around the quality of know how, this is something that drives us a lot, creativity. We are a house of creativity.
We don't have a marketing department. And to put this growth of the group for a fundamental that is the respect of craftsmanship person through investment in the network. And there is an English expression, which probably translates better what we try to do is workshop. We try to be a workshop. We have a lot of crowdsmen.
That's the first then you have sales associates, creators, designers, and we all try to work together in this workshop. It isn't the most widespread model. So it is essential for us to show that this model, which is somewhat different, also arrives at producing a strong economic performance, and that is what we succeeded in doing in 2018. Now the highlights of the activity, well, the positives will say plus 10% at constant exchange rates with a very good sales figure. Others are more negative.
We'll say missing €34,000,000 to make the €34,000,000 to make the €6,000,000,000 So well, almost. So anyway, we can say we made €6,000,000,000 and progressing at 10% at constant exchange rate. That's a good success. And we haven't had this progression for some years. So it's always on a stronger basis.
So this growth is a very healthy one, which means that we have very little price effect and very little scope effect. So it rests quite virtuously on the volumes, the constant in the stores, which has had a beneficial effect on our profitability that you will discover. Now obviously, the stores have performed particularly well because the growth sort of stands at 11% plus 11% with the growth in all geographical areas. The operating income above 6%. The current operating income, this is the 1st year between there's the effect of the Hong Kong.
So it has reached 34.3% of sale, which is close to an exceptional level and very good profitability. Now we have a capital gain of 53,000,000 euros from the sale of our former Hong Kong store that we owned. We moved with great success on the other side of the street for a bigger store. And so we sold the Hong Kong store that we had bought some years ago, and it gave us a capital gain of CHF53 1,000,000 giving us a exceptional profitability of 35.2%, which is the highest historical and increased as a result of this capital gain. And then consolidated net profit is at €1,400,000,000 up by 15%.
Now this slide to explain the evolution of the last 10 years and you see that there's a strong acceleration since 2 1,009, which is an important point as compared to if you put 20 or 30 years. Now of course, there is the currency effect and so forth, but there is a great dynamism of Hermes. May I assure you that these curves will not cross even for the grevious revenues remaining above the net result. Even the magic of Eric Algoit doesn't manage to do that. And as a result, we have very little debt.
We have Virtu's growth. Available cash flow is €1,400,000,000 up by 8%, which leads us a net cash of €3,500,000,000 on the 31st December 2018, which has allowed us to finance, pay our CapEx and investments as well as pay out the onethree in CapEx and onethree in cash flow for the future. Now all of this is only done with the men and women of Hermes who work on an everyday basis. And we, for example, people in this room are unable to make a handbag in this room and incapable of making a bag. So I'm very grateful to them and grateful to the members of the ex com who have all worked.
Each of them have worked in the different fields with a true excellence in 2018. And in this workshop spirit, it is everybody's work that leads to things actually working, and I'd like to very warmly thank them all. But they were more numerous because we recruited more than 800 people. This is a pleasure, more than 500 in France in production and sales. So you can see Hermes Group has been creating new jobs, 1,000 a year.
We've got to recruit the double because with those leaving on retirement and so forth. So this is a true strength and a great joy for Hermes is this capacity to train people and then you have to integrate them, convey the culture to them because we have certain culture, and we come to 14,002 84 employees, which is fantastic.
Lots of people in production, lots of people in sales, of course. This is one of the specific cities of Hermes. Most of our products, about 75% of products are produced by Hermes itself. And we are one of the companies that is the most integrated from that point of view. And of course, this goes hand in hand with fairly large CapEx.
For instance, here we have a leather workshop in Normandy that is ramping up. We have another leather workshop in Saint Junin close to the Vienne River, which is one of the most beautiful settings that we have. I don't know whether this helps improve productivity, but it's wonderful for those who work there. We also opened a new Marocinery in France area and we also have some new projects with the Guyenne leather workshop close to Bordeaux and the new leather workshop in Montreux. And we hope that all of this will be completed by 2020.
And we also started working on a new workshop in Normandy close to Louviers, which should be completed by 20 21, which will ultimately be generating 2 50 jobs every single time. It may not be clear on the picture, but you we have 2 50 people there. But every time, in other words, we try to develop beautiful plants, beautiful workshops, and this is really the what we have inherited from Ridumo and we really this is something that's very dear to our heart. We want to make beautiful objects in beautiful workshops and our CapEx and our workshops are fairly large because there's a lot that goes into the architectural projects on top of all of the efforts that we're making with Olivier Fonio for sustainable development. And we want the sites to always be energy saving sites as much as we can.
And this is part of the beauty and the architecture of the projects. We also create, as you know, this is a great strength of Hermes. Lots of our collections have been completely renewed, ready to wear collections, our silk collections without any marketing department with more or less success because as you know, we do not test anything before launching. Sometimes we meet with good surprises, sometimes with less good surprising. But we have for us, we think that a successful product is a product that is in line with the creative vision.
It's not a product that sells well. It's 1st and foremost a product that meets the creator's ambitions. And what's really interesting and I will sum up what's on the slide is the continuous success of the leather goods in their diversity. In other words, of course, yes, we have the iconic bags like the Birkin, the Kelly, the Constance, but we also have novelties. And also something that was really important was that everything was actually sold and this can be found in the working capital requirement and in the inventory levels.
And that diversity of our models was very large at the beginning of 2018. That's the first thing. Second thing, we were present on both spectra, soft luxury and hard luxury, so to speak. In other words, all of the fashion sectors sold very well, beautiful collections for women's ready to wear with Nadege and shoes. And also the taking off and ramping up of watches and beautiful sales in the jewelry department.
And then we're also having fun with Hermes Horizon, ready to measure products, the jukebox. And there was also fly fishing for people who love fishing, but they also did things around sliding, around surfing. So we have skateboards, longboards and roller skates, rollers. So nobody got hurt so far, so that's very good. And perfumes, of course.
This was also a very major year for communication lots of events. This is one of our specificities. Part of our communications budget is spent on events more so than on media coverage With what we call the men's world, we have both men's products as well as women's products in Hermes. This is part of our history because we were saddle makers initially. And so historically, we've always been producing things for men and for women.
So we had an event for men in Shanghai. We had an event in Tokyo for women. We have had a silk event, smaller formats in New York and Singapore. And then there was also the very important event for us in haute joeiserie in high jewelry, which was our 5th collection, which was presented there. And of course, we also the corporate occasions like the 9th Soh Hermes.
And it was actually an Hermes partner rider who won with an Hermes saddle this year. But of course, it's thanks also to his performance. Then we also have the Metiers, the craftsmanship festival with Hermes Orlemur, where we have 15 craftspeople who represent all of our know hows and this brings lots of people who are very enthralled by looking at this craftsmanship and also Herne's Heritage exhibition. As far as the distribution network, we continue with our strategy. We continue opening a number of stores, but not too many.
However, we have a lot of refurbishments. We try to extend our stores so as to be able to better show and display the diversity, the breadth and depth of our offer. We have refurbished our Hong Kong or rather we've had a new store opened in Hong Kong. Palo Alto, we opened the store as well. We're the first ones to actually settle there close to San Francisco, Changsha, of course, Istanbul, Cancun, those are the new openings, Xian and Chatstone and Ycon Siam.
And then stores that reopened after refurbishment and extension. And so we invest both in new countries and in traditional geographies as well with Monaco, Nice and the Georges V store in London, in Italy and in Asia. And we also continue with the launch of our digital platform, which has been revamped. Our European store is again online. And also we opened our new virtual store in China.
So we have a new distribution channel in China. We decided to do this independently, and we had excellent results in 2018 with this store virtual store, which was a great surprise. Let's look at revenue by geographical areas. All geographical areas have improved France with very strong growth, plus 8%, sorry, plus 6% for France, which is quite positive. It's a very dynamic performance given the fact that December is a very major month for us and there were a bit of disturbances because of the political events.
In Japan, great success with plus 8%, no price and no scope effect, very dynamic sales with very faithful and loyal Japanese customers. Asia outside of Japan continues with great growth 14%. We reopened Shanghai. We reopened Singapore. But everything is fine.
When you reach a plus 14% growth, things are great. But our Hong Kong store actually came right at the right time, at the right location and really had a major impact given the fact that we actually completely changed the story. It was not just an incremental growth, but it was an exponential growth for Hong Kong. And then as far as the Americas are concerned, we have a +12 percent growth. Palo Alto was our 34th store opened in that particular geographical area.
All of this gives us some balance in our geographies and we try to preserve the balance between the group because we will never know where the problems might occur in an area. We know that every 2 to 3 years there are problems due geopolitical problems or whatever in an area. So we try to preserve the balance between geographical areas. We continue investing in new countries, but we also continue investing in older countries. And the strong growth of Asia is such that every year Asia Pacific wins an extra percentage point, but still quite balanced.
Let's look at the revenue per sector. All sectors have had growth, which is a great pleasure. Leather Goods and Salary, 9.4% growth with lots of improvement in our production again, confirms the growth there. In again confirms the growth there. In particular, with men's and women's ready to wear, fashion accessories and shoes in particular.
This was a great success for Hermes Femme, which is under the leadership of the Wilfried Guerin, which is for him a very good year because he also is in charge of the digital platform. Silk and textiles at 3.2%. We would have been satisfied with this some years ago, but now we have a weaker growth. So there's room for improvement here, but still €530,000,000 turnover for Silk and Textiles. We're so proud of this particular sector, which is very much integrated.
Perfumes plus 9% pillar. And we've also launched a Truly DERMES, which in 2018 was a real success for Hermes and we're very pleased with this. Watches, watches back on the way to growth. In particular, in our stores, this is a very great success in our retail strategy integration. And then the other all have marked growth.
And you can see we're altogether nearly at plus 20%.
So we keep our balance, leather goods and saddlery 50% and the others together 50% with a dynamic of other sectors higher than the leather and saddle rate. We want to make sure that each sector develop to its best potential
and then it's the
and to see which one has progressed the most. I suggest I would give the floor to Eric now for the results. Thank you. Good morning, everybody. I'd first like to comment on the income statement.
The gross margin is almost stable at 70% in 2018. The slightly negative impact of exchange hedging from 2017.06 percent was neutralized by the relative effect accretive effect, which is through conversion effect, which I had mentioned to you on the 30th June for 0.4 points. The gross margin has benefited from very good productivity in our production sites and an exceptional selling of our inventory ready to wear men and women's shoes. In a context of rise, very moderate rise in retail price increased on an average by 1% at the group level and mainly in the European Union. The The growth of cost price was lesser than what was expected.
Now communication expenses represented as in 2017, 5% of the sales. The overheads mainly administrative expenses and commercial expenses. So leverage effect of 0.2 points, thanks to a good control handle over expenses. Other products and expenses, which is basic amortizations, show sustained pursuit of investment in the retail network of the group. The current operating income grows beyond €2,000,000,000 and this shows an operational profitability, which remains very high because it is 34.3%.
Other non recurring income and expenses concerning a net capital gain of sale of €53,000,000 resulting from the sale of the former Galleria store in Hong Kong. And the operating income, which integrates this capital gain, is at 1,000,000,000, which reflects a total of EUR 35.2 billion. Expressed as a percentage of sale, the current operating margin, 30.3 percent is close to the record that we achieved in 2017 because in 2017, it was €34,600,000 The financial results, a loss of €35,000,000 almost stable as compared to 2017. Just as a reminder, it's made up of the exchange rate expense, which is the accounting for hedging instruments, put us on options and carryovers. And financial results include products from the remuneration of income and investments of the group for €15,000,000 Income tax 32.5 percent and it is going down by 3 points as compared to 2017, a result of 3 main reasons.
The first reason, may I remind you, is an exceptional income expense that group sustained in 2017, which is a contribution of €68,000,000 which was offset partially by the reimbursement of the CRT for 52,000,000 euros That is just an impact on the tax on 0.7 points down. 2nd impact is the drop in the corporate tax in the United States. The tax went to 35% to 31%, which represented 1.5 points of drop in income tax. And the last element for 0.8 points, which is the sale of Galleria store, capital gain without taxation, which is the 3rd element, which contributed in the drop in income tax. So the net result has gone above €1,400,000,000 and progresses by 15% as compared to 2017.
And if we restated the capital gain for the sale of Galleria, it's 11%. The net profitability, 23 point 5,000,000 is a record level. If you look at the last 10 years, that's for the net profitability. Operating investments, €312,000,000 Just like in 2017, nearly half €151,000,000 were dedicated to the development of the retail network with store openings, qualitative and targeted openings, 20 odd renovation and refurbishments and Francisco or Shanghai IFC. All the San Francisco or Shanghai IFC or the opening of Palo Alto in 2018 or that of meat packing in New York, the inauguration of which is planned for the month of April.
Production investments concern mainly leather workshops, Guillain Montreux and investments in MS perfumes and silken textiles, we are pursuing our investments of renewal and capacity. Finally, €84,000,000 have been invested in real estate and group projects IT and digital, pursuing of the rolling out of the digital platform. Now 2018 is characterized by a strong cash generation, cash flow generation with increase of 5 €55,000,000 which results mainly from the following elements. First of all, cash flow of €1,700,000,000 €1,000,000,000 growing by 6% at the same pace as the current operational income. Reduction in working capital's capital requirement as the good management of inventory and the reimbursement that I was mentioning by the French state of the CRD claims, the famous 3% on the dividend that was invalidated for 52,000,000 euros 320,000,000 in operational investments, operational and financial and the €958,000,000 dividends with the exception of €5,000,000 After sales of Calabria for €59,000,000 and disbursement of €69,000,000 share buyback.
So you have a total of EUR 3,600,000,000 as opposed to EUR 3,000,000 in 2017. So no really comments required on the IFRS. The €52,000,000 gap that you see between the restated cash and the IFRS cash position is as a result of the investment, the majority of which are above 3 years 3 months, sorry, to interpret the correct result. This graph shows you the progression of the cash flow. The annual average growth is 11% over the period.
Now the dividend which will be submitted to the approval of the coming shareholders meeting is 4.55, 11 percent increase, very close to the net restated results of the Galleria sale.
Thank you very much, Eric, for the slides and thank you for the work throughout the year because this looks fairly simple. But behind all of this, there's a lot of control and a real financial strategy as developed by the group from year to year. So what are the what is the outlook? I'm going to be very brief because we are not going to change our outlook. And also given the growing economic, geopolitical and monetary uncertainties around the world, despite them, the group confirms an ambitious goal for revenue growth.
And this year will be the year where the theme will be in pursuit of dreams. And you can see this image, which makes you think about dreams. It's not just dreaming of nothing, but everything started with a dream at Hermes with Pierre Hermes, who came to Paris and who wanted to be the best harness maker 180 years ago in Paris. And we continue trying to do our job as well as we can. And everyone has to unleash its ability to dream and to imagine.
We have launched, as you know, a new perfume, Jardin Sur La Lagoon. Again, no marketing not too much marketing behind this. It's Jardin in Venice. And we also have launched the new watch, Arceau Leur De La Lune. We have left Paris.
We left Paris years ago, and we went to Geneva with it. And you see the quality of the movement on the screen. The collections were very well received, very positive feedback. And in Milan, as we do every year, we will continue presenting our home collection next April. We're going to continue with our investment on in our digital platforms.
We're going to completely transform our Japanese site. Site. Well, we already have the Japanese site and its new version, and we're going to continue with the rest of Asia. We're going to have new digital stores in sorry, we're
going to have
new brick and mortar stores in 2019 in Orlando, one in New York in the meatpacking district. We wanted to be a bit more downtown. We didn't go to SoHo. We went to the meatpacking district. Waikiki, Vancouver and Stolechnikoff.
Those are in 10th anniversary of the So Hermes in the Grand Palais and we'll continue with our collections events with men's ready to wear event tomorrow in a presentation in London tomorrow. So that's it for me. And of course, I'd be delighted to answer your questions. David Amaya, CIC. I have three questions.
The first one regarding your pricing policy. You talked about 3% to 3.5 percent price increase. Can you give us a little bit more information about the price hikes that occurred? And the second point related to this is currency impact for 2019, you mean? Yes.
Yes, the exchange rates impact on in 2019. Can you give us some more information about your hedging rates this year and the impact that can be expected on your gross margin? And the third question about the beauty law. You announced that this beauty sector would be launched in 2020. Could you give us a little bit more information about this knowing that you're going to have a selective distribution network?
But what is your ambition for the longer term for beauty and perfumes and cosmetics, knowing that you are you have a very powerful brand, but for the moment, you're not your penetration is not as big as some other Italian brands, for instance, or other Parisian brands like Chanel or not very Italian. Well, I said from Paris or French or Italian, I said. Yes, well, I'm joking because this will allow me to actually give a more accurate answer. So no question. I don't want to put you in an uncomfortable position.
But Eric will answer you very precisely with regards to the prices. But I would like to give you the basics about how we go about this to not just to model 2019, but in general. As far as prices are concerned, we no marketing department and we have no pricing policy. Our prices increase based on our manufacturing costs. What are our manufacturing costs with MS?
What are they based on? Well, there are 2 things. 1st of all, the purchasing of the raw materials. And of course, we try to buy the most beautiful raw materials possible. Sometimes this is linked to price increases, some because they are rarer.
And sometimes we can't even get those raw materials because simply the quality is not there. And the second thing is that the bag it takes 15 hours to make one bag. And so this means that the price hikes are directly related to wage increases in France. And so each year, well, maybe I should have discussed this before, but 2018 was a great year, and we're very, very pleased with this and pleased with the dividend. I would like to thank the executive committee, but also every single MS employee who participated in this success.
This also allowed us to increase wages for all French workers in September by €100 per month. And this allowed us also to distribute an extra extraordinary bonus at the end of the year for all of €1,000 for every employee who owns less than 3 times the minimum wage. And all and abroad, all Hermes employees received an exceptional bonus based on the good results that we obtained. So our prices therefore increased because of these two factors, which are the wage increases and the raw materials. And on a regular basis, we get about 3% to 3.5% increase altogether.
But last year in 2018 because of the exchange rate, because of the changes in the exchange rate, we had decided to increase our other areas, we did not increase prices. And therefore, the average in 2018, the average price increase worldwide was about 1%. And this year, we're going to increase prices in a more universal manner by 3%, which is more the let's say, the normal way of operating. As far as hedging is concerned, here also our policy is very clear, has been constant over the past few years. We hedge in 2018 for 2019, 2019 for 2020.
And in this way, we know approximately what the profit is going to be, what the margin is going to be. And we do this as we go along. And I think that this is one of the major characteristics of Hermes. In other words, having this stability, having this clear reading of the monetary impact on our internal transactions, okay? We cannot hedge for the revenues.
This is the exchange rate risk. But with regards margin and intercountry and intercountry transactions, we are covered, and we continue developing our hedging for 2020. And Eric will give you more information on this.
Now the price increase, we mentioned it at the level of the group is between 3 plus 3 or plus 3.5. And it's Japan and China 5%, 6%, Hong Kong and Macau, Macau slightly less because around 3% and U. S. A. It's around 3% and a little less in the European Union on an average giving 3 to 3.5.
But hedging, the dollar is 1.18, dollars So all dollar linked to dollar. So it's about 7% of certain debts on the yen because we hedged at 131, which gives you a shift of 5%. So when you see the price, if like and hedging, there's 1.5 percent on the gross margin. Now we had for some years the ForEx in our favor and now not. Okay.
Coming to beauty products, it's quite exciting. It's a new sector with the risk that it entails, so we're going to roll it out progressively. And starting with our stores, mainly limited retail to learn, to get a feedback, to be able to react. And we launched it in 2020. And for the moment, we are within the rungs to for this launch.
Now of course, we hope to have the maximum potential possible, and we are trying to do this humbly and cautiously because it's a big market on the one hand and on the other a lot of players, a few who they're good and we'll have to find the rightful place because we hope to sell a product and not a brand. That's all we're trying to and as often is the case in Amex that the option of doing it ourselves. There's a lot of Italian and other Maisons, other companies that you mentioned, they've given it to the professional, so be it L'Oreal or Coty, some work on the basis of licenses, and that's fine. But we've decided be it for the perfumes or the beauty to do it ourselves. So they will necessarily be a learning curve that we will have to do and risk taking.
But on the other hand, if it works, we will have the entirety of the margin and the income. So that is our way of working, which is sometimes slower, sometimes may more risky, but which is that of the MS Good morning, Theresa and Monterrey. I have two questions, please. The first one is what can you tell us about the trends at the beginning of 2019? And secondly, how do you actually prepare for the law that's coming on the destruction of unsold items?
Thank you. Well, on the trends, well, the results are given on the 25th April, so I never give the trends before that. It's that's I know you might say that's not very nice, but it's nice at this time of the year on the Q1 because the doesn't really mean much because there's as much in December because Christmas that comes into play. What comes into play in the Q1 is the Chinese New Year. And what is specific of the Chinese New Year?
It's never at the same time. So the this year slightly earlier, so you have a Chinese New Year, which is in January, so very high sales of month of February, which compares to well, there was no Chinese New Year this year, but still there was. But there is other things that follow in March. So all of this means that we internally as well, we're all really on an equal footing. We can't know before the end of March the trend.
So we'll have to wait for the 25th April. That being said, we don't see any break in trend really. Now we have an artisanal model with not too much inventory and that is seen in the working capital requirement and we have a model where each store is responsible for terms of quantity, unsold items, we don't have too many. So what do we do with the unsold items? The first thing that is very dear to us is that it's our sales.
We have the sales of the Palais des Congres, which is often an event and also in other countries. So a lot of the unsold items, which are not very many to start with, go for the sales. And then what remains, we've been working with associations in different ways to transform. You can no longer tell it's an Hermes product, but to we will come to very small quantities for the unsold. We always have to progress.
We have lots of ideas and it's something that really federates everybody in them as being very careful about the raw materials that come into the group, they use and increase their rate of use. And so we're waiting for the law to see what it will be like, but we are not particularly worried because and then of course, you've got to do things that respect respectful of things and seize the problem in its entirety. That is to say ways of items at the end of quantities affects more fast fashion industry rather than the luxury industry where the of each object is such that one is really careful. However, there's still unsold items at the end, but we trust the legislature to find an intelligence law to pass an intelligence law. Thank you, Bernstein.
In my opinion, the Amherst brand reigns supreme in terms of elegance, refinement, sophistication. However, we see that the consumer trends, especially if you look at the Chinese consumers, seem to be more turned towards street wear and such like. What are your thoughts on this? How do you get access to your brand by young to make it more affordable, easier? What are you doing?
And what do you think can make MS more in line with its consumers? 2nd question with regard to the other categories of products. In the press, you spoke about the cosmetic project. And there are other companies that have launched directly into eyewear, eyeglasses. Do you have other projects that could actually sustain diversification that seems to I mean to be able to be the relay for things like Silk maybe.
Not easy questions to answer for a house like us because we don't have marketing department. So we don't really actually study the clientele, whichever it may be. So we never make a product for that clientele. The quick answer is nothing. We don't do anything, and we wait.
And then you can talk to Paul Florian, who heads all our stores and the retail. And I think it's important to despite our growth objectives and despite our desire to be ambitious is to keep this integrity, I. E, not to have a marketing department because this is our theory. We are there to invent the desires of tomorrow, thanks to our creation rather than the objective of them is to make Brazilian objects that we sell all over the world, but it's not making products for certain such a category of populations or age group. And then, of course, we've made plus 14% in Asia Pacific with the highest rate in Continental China.
So we must have some customers there. Well, to be sure, on the Chinese market, it's a very young market. It's a very young market and the very young spend more than the very young in other countries. So you don't need to have rules. And in particular, I would say, and this is true about our clients worldwide, the young clients buy a lot of shoes and that's part of the success of fashion and clothes, the fashion of Hermes, the success with young customers and this works as well in Rodeo Drive in Beverly Hills in California.
To do to do basic marketing that we don't do and if we did we'd be very bad at it. And we can't say, oh, they're young, they don't have much money, entry price, inexpensive product. No. We do what we know how to do, hoping that it will hold. And that is also the strength of a house operation is that we've got the right to make a mistake.
There are products that we made that we love that work very well and then there are products that we make that don't work totally. But the diversity of Hermes collections, so there are more products that work than those that don't work to start with. And it's not it doesn't matter if we make a mistake, but it didn't cost us much to make we were artisanal. It's less costly to launch an artisanal product than it is to launch an industrial product. And we never do a world wide launch with advertising to the great disappointment of Charlotte David, who heads the communication department.
So I would say that on the one hand, I'm worried all the time because I hope that migrations will be liked by people and then don't do anything to please people. So for the launches, this is a very good point that joins up with my point on this. I believe that we will I guess I won't, but it is very important for a house of perfumes to be three-dimensional. We have to become of a certain size and a world market. Of course, I mean, I'll exaggerate terribly.
For example, Europe is perfume, Americas is makeup and Asia is cosmetics. Although they do a lot of make up in Asia, they're starting to use perfumes, etcetera. If we can become a worldwide brand, you need to have these 3 areas. We're starting with make up and we'll follow later with skin care to try have whole set. And we'll try and do it ourselves.
We'll do it ourselves without licenses and selling first in our stores. That is why for all these reasons that we're not making glasses very profitable and so forth. Glasses, you're not going to make them. You're not going to sell them because you've got to be at the opticians and so forth if you want to. And you Hermes is the idea of workshop that is very dear to me.
We're not a house of style that imposes an edge. I mean, that doesn't mean you can't put it, rest assured, ideas on to put an edge just to say something. So it's a mix between the artisan, the sales associate and today your financial presentation together with a shared aim making the most beautiful products. There's some beautiful MS, which we haven't sold a single one, but doesn't prevent you from liking them.
Actually grow more in China and Hong Kong? And what is the change in the Chinese customers? And what kind of taxes can we expect for 2019? First of all, with regards to China, you saw that we achieved plus 14% growth for all of the Asia Pacific market. Indeed, there's a lot of Continental China in there, but there's also Southeast Asia, which we should not forget because we have great growth rates for Indonesia, Thailand, for instance.
And we've had also great growth in Hong Kong with the strong impact of our flagship store and also because Hong Kong was a bit weaker initially. And so therefore, the history for Hong Kong and historically, let's say, we had weaker results than elsewhere, contrary to Continental China, where we've always had a 2 digit growth. But still, if you look at Greater China, the country that grew most in percentage wise and which is also the biggest one, the most major market is Continental China. So growth is pulled by Continental China. As far as changes in customers and the customer base, while we had a great year in 2018, we had both our loyal customers who continue to come and visit us and lots of young people and which is the specificity of the Chinese customers.
I mean, they're young, they're very young. And the standard of living also is very, very high for them. Now if we look over the longer term history, 8, 9 years, we have now many, many more women. It used to be a very men's market 8, 10 years ago, and now we have more balance between men and women purchases. Now with regards to the tax rates, what is it that we expect, Eric?
There's one uncertainty, which is the development of the tax policy in France, where The taxes were supposed to decrease by 5% in 2019 initially, but we don't really know. But at any rate, there would be an impact by 1% or 0.5% on the group. And also, the sale of Galeria actually will increase our tax rate in the future because this is a nonrecurring element in the statement. I have 1 or 2 questions, which are not financial questions, if I may. You demonstrated that your model really works on the long term with the caution and talent you have to generate value.
You said that you wanted to invent the desire for tomorrow, for tomorrow's products. So we should look what you do in terms of CSR. But why is it that you don't mention this more visibly today because this is a trend for the future really? Because you mentioned sustainable development when you mentioned energy in particular. Why is it that you do not discuss all you do in CSR?
Sometimes we see this at the general meeting, but why don't you talk about diversity, child labor? The kinds of things that you do, you are a kind of precursor, a pioneer in these areas. Could you not have a page on this aspect? And do you have any CSR value generation criteria? How did this generate value for Hermes?
Do you have any criteria in this particular context with regards to remuneration related to the CSR part because we know that you do lots of things when we look into it, but this is not something that you make so visible. Why is it that you don't make it too visible? Visible? Well, thank you very much for this very good question. This is a question that we asked ourselves.
And under the influence Charlotte David, we said, okay, yes, well, she said, well, you do it. You should tell people what you do. But that's part of her role anyway. But I would like to answer you very frankly. Maybe this is not the ideal place to do that, but I will nevertheless.
I mean, there's a general discretion on by nature of the family of the company. We always feel guilty about something. And therefore, we don't tend to say, okay, look how well I do this. This is not something that comes naturally to Hermes. And when we talked with making things good should not be too visible.
And when you are too visible, it's not very good. And so we've been doing lots of things in the CSR context for years. We're in a company where there's a lot of manual work. And therefore, of course, we do not emit a lot of carbon. I mean, and this is important for the gas climate change.
Also together with Eric and Olivier Fournier, we embarked on major reforestation projects with a number of associations, and therefore, we're carbon neutral for scopes 12. But then there's the transportation issue, but we don't do the transportation. So we're already carbon neutral. Ability to be carbon neutral in a more even with a stricter control and to also develop this further with the outside world. And Hermes works on the 3 topics of CSR, which are the environment, of course performance as well, that's part of CSR, and also social aspects.
And it's very important and very important that we are a major player there generating jobs and integrated human beings in our CSR vision. As to remuneration, this is indeed a novelty this year. It was done a bit more explicitly this year. Part of my remuneration is related to CSR, 10% of the variable part. And we'll use 3 criteria, which somewhat represent the 3 criteria that I gave to our hearts.
The first one is to decouple energy consumption from growth. The second one, which I strongly believe in, it's a bit French, but is to redevelop France and the French territory outside of the major cities. And this is why we have these 17 workshops all over France, and we've developed a number of videos on our sustainable development. And we have a video of 7 minutes on the Internet on Laurent and that's really long on the and that's really long on the Internet. People might not want to watch it to the end, but still this is an effort that we made because we really wanted to tell people about how far we are and how deeply we are rooted in the all over France.
And the third thing is wage equality and gender equality. And this is part of really of the spirit of Hermes. I have my 3 CSR criteria, which have been defined and confirmed by the executive committee and by the Board. This is part of my remuneration. Symbolically, it's very important.
It means that it's very dear to our heart, but we also we've been doing it for a number of years already. But it's important that symbolically, this is now displayed. Carringdon BFM Business. A question on the environment. You mentioned this pretty quickly, but did you have was there any impact of the yellow vest movement?
And how do you prepare for Brexit? Are you worried about it?
We are a global company in 49 countries, so every event impacts us. Hence, our strategy for geographical balance, equilibrium. It may be that's how the 21st century would be described as an unstable century with movements that are not controlled by the states and that explode all the time. If I were to some of the history, 30 September, 9eleven, then SARS virus from Hong Kong. And after that, the U.
S. Financial crisis that had an impact, then Fukushima, then mixed with terrorist attacks in Paris and London, in Barcelona, in Madrid, in Las Vegas, all of this somewhere shows you that somewhere in the world every 2 years somewhere somehow. And so the best way of resisting is to have this geographical balance in order to be able to absorb focus. Shima closed Japan maybe for a year, 3 years later. It was one of the countries that was doing the best, and you can see that even today.
So we are subjected to the ups and downs in the world varied ever since Cold War. And it had different impacts. Of course, the yellow vests had an impact on our French clientele at a time when normally people go Christmas shopping. So it did have an impact. Employees in Emirates were very motivated, very committed to be closed Saturdays, but we opened Sundays that allowed us to make up.
And I'd like to really thank the sales associates of Hermes who are courageous on the one hand to actually come to these stores when it wasn't easy and also opening Sunday to make up for it. So we really we had good results for France as you were able to see. And this raises a problem about tourism, the question about tourism. If you have the choice between passing a weekend in Rome, London or Paris, then make your choice as you wish. But we find that there's an increase of our customers in London and in Milan, tourists anyway.
So then Brexit, well, this is a situation which is indeed complex and difficult regarding which we will see the capacity of the customs to actually absorb a certain number of things, how we prepared for it, the first incidence of Brexit from our retailers' point of view was the drop of the pound. What does the drop of the pound do in an environment which is good tourism? So we did more sales in London. Then you have to see how it works, how will the pound remain over time and how we will transfer our products that are made in France and ship them to the U. K.
So lesser inventory than medicines. I can assure you medicine is a real subject with Brexit and customs. AMS product is surely less important in case of the total borders. We'll do with it. We'll have to contend with it when it will happen.
It will have its effect. What is more worrying is what is the global effect that Brexit will have on the economy of UK and if it doesn't create value as they could have expected to create, an English population is important for us because it's always the 1st population in a country. And how will they spend in an environment which is anxiety creating? Mario, I have two questions. 1 on China e commerce, Chinese e commerce, you were talking about young customers.
What have you been able to note by way of recruiting new customers since this website was launched? Second question, recruiting in France, it's higher than what we were able to see in the last previous years. Is it because of the I mean, will there be greater volume growth with the opening of the new workshops in 2020 beyond? On the e commerce website, we decided to do it alone. We didn't link us up to Alibaba, etcetera.
The good news and the surprise of the market and some of our teams was that the customer flow, the number of persons that came on our website, a few referencing. The conversion rate is not extraordinary. The big with the big 6, we delivered in all of China, totality of China, and that is the specificity. That is to say it increases the geographical distribution. It remains nonetheless that we find the 2 counterintuitive ideas of digital is that we mainly sell in places where we have the stores Shanghai, Beijing represent a large part of the sales on digital, which proves that finally we're not as stupid when we open a store, brick and mortar store.
And the second thing is that we sell everything. We can't seem to break the customer who came onto our website and what is so far the 3.5 meter long so far? I mean, that was a surprise of the net and that was could be your first impulsive purchase in the night of solitude on the Internet on the MSO website there. So I think you don't have sort of preconceived idea about what you saw and where you said it works very well. The only way I could tone it down because that we were overcome with the success that we didn't short on inventory.
So the Dotcom is like a new store with its inventory and so forth, this product. So these are problems which we know how to manage. That's it that we'd like to anyway, for France, don't change rate in percentage because the base is always bigger. But there's an effect where we've launched new leather workshops. When we launch new leather workshops, we begin to train new artisans in temporary spots before the workshops are ready, we bring in trainers.
So all of this means that this year, there's been more artisans and more sales associates as well because we had good activities in France whereby also the service, it is not just to make the sales, but you have to have a level of service that you wish to have and recruitments at the level of sales teams and you've seen the curve. There are also the structural effect. Our headquarters and our centralized structures are in Paris. So we've recruited more than actually in France because it completes a strong anchor in France. I always say that of MS is very asymmetrical, 83% of our products sold in France and made in France, sorry, and the same amount sold outside of France.
Well, I don't want to hurt anyone's feelings, but there were 2 there are 2 big countries population wise, economic growth wise, India and China. Now in China, we now have how many stores? 26 stores in China, and we have only 2 in India. We plan about 28 in China next year altogether and only 2 in India. So for the moment, we have not found the solution for India.
It's difficult to operate in these territories. We are there with the retailers. And I try to get the message across to say that we're different. But when I'm in India, I'm alongside Carrefour Fu and the other major retailers. And in India also there is great know how.
There's a culture of sari and Jodhpur. You have the culture of jewelry. Now we used engine textiles. We have some handwoven products in India. We still have handwoven products in Nepal.
All of this is with wonderful know how. And but the organization sociological organization and consumption in India is very different from what we have in China. So yes, we will go to India more but not quite now. Question of mic, sorry. It's a good question, says Mr.
Dumas. And the answer is counter intuitive, which is mainly and so what they prefer is the leather goods actually. Not for those who buy them. What is okay. The 2 products that sell best are the leather products, bags and shoes, also because we do not have competitors on that.
Julien Garnier for Le Monde. I have two questions to clarify questions that have already been asked. 1st of all, with regards to the beauty sector, since you're going to do this, is this going to be integrated or are you going to make the product yourself like varnish and so on? And where are you going to produce? And also can you give us some figures about the loss of earnings because of the yellow vests?
Well, let me first say something. 75% of our products sold by Hermes are made by Hermes. We don't make everything. There are things that are not made by us, in particular, and this will be true for the beauty sector because we don't have the know how in house. So each time we try to find the very best possible know how based on the product that we have, based on the formula that we want to have.
So it's a bit difficult for me to answer therefore. Let me give you an example. For the lipstick, for instance, there are 2 types of For the lipstick, for instance, there are 2 types of lipsticks, different colors. There's 1 matte and 1 shiny one, glossy one. So we found a great supplier for the glossy one, but we thought that the matte finish was not good and then vice versa with another supplier.
So therefore, we're going to have a diversified sourcing for this between Italy and France with the manufacturing of the lipstick of the object itself, which will be mainly in France. So it's not an object made of plastic. I mean, it's going to be some other materials. I don't want to unveil this here. But of course, every time we go for a new project, we try to pay attention to sourcing.
But I would like to say that 1st and foremost, we try to find the location where it will be done best. And we have no mental barriers for this. We have a handwoven textile from Nepal. I'm very proud to be selling something that comes from Nepal at Hermes for lacquer products. We have true know how in Vietnam and our lacquered boxes come from Vietnam and so on.
And it's wonderful. So I think I believe fundamentally that the product and in particular products made by craftspeople are best made where there's a real culture craftsmanship culture. And this is why we make our bags in France because it's a true leather working culture in France. Why do we do silk in France? Because there's true silk culture around the Lyon area.
Why do we make our watches in Switzerland? Because it's true watches culture watch culture in Switzerland and same thing for the John Lobb product for the shoes because there's real know how in England for this. So we're trying to find locations where we have the culture and history of specific know how with us. And this is what we really want to sell and want to develop. That's very important.
Now as to the yellow vests and the yellow vest movement, we haven't quantified this. It's a bit difficult to say what would they have purchased, what would they have we managed to recover and to offset this because of our Milan and London sales? Or do you buy possibly less from the London flagship than from the Fobo Santo Nordi store, which is a bit unique, even though experiences are unique everywhere. But still, I mean, we know we did not go into the exercise of quantifying. We did not think this was a good idea.
My name is Christian Schuber from the Fraunforter Allgemeiner. I have a question on the question of deconsumption. Is this something this phenomenon, is this something that has some impact on you? I know, of course, that you're not going for mass consumption, but do you possibly foresee some kind of impact on you in the medium term? And second question, what is the development of the German I must admit that I'm really a fan of Hermes.
I believe that we are part of the solution to the world's problems. And so with regards to deconsumption and the deconsumption trend, well, there's one thing that we do at MSQ1 products that last for a long time. We don't have planned obsolescence in our objects. Even our designers, I was discussing this with Veronique Nijanjean who's going to present her collection tomorrow. And she said, well, what I love is to mix my the garments that I've made from several collections and that they should match.
So it's not like, okay, you bought the previous collection, don't forget to buy the new collection. No, no, keep the pieces as long as possible. And this is why in our manufacturing prices, we actually include something more and the prices are a bit higher for those products to actually be repairable. And we have a repair department, a very strong after sales service. And it would be it's wonderful when your granddaughter, for instance, or the granddaughter comes with his her grandmother is Kelly and asks for it to be repaired.
It's wonderful. So with the difficulty that we face to get the raw materials, it's not only Hermes or Risand who had some problems with this year. So we want the products to be cherished and to be kept as long as possible. So I think that in this system, in this overall deconsumption movement, Hermes is quite virtuous. We have an organization which is really pre industrial in the way we work and especially in the way we think about things.
Let me give you an example. The U. S, everything collapsed. So what should we do now? Should in the U.
S, everything collapsed. So what should we do now? We should buy gold, okay, because we buy gold. And the price of gold went up, of course. And we put more gold than anyone else on our bag costs for instance.
And so the finance department said, well, I mean, should we really put as gold on your class because it costs a lot of money and so on? And so we had a meeting And we asked together, Olivier and I asked for a craftsperson to come to attend the meeting as well. So we discussed things and then we asked the craftsman his opinion. And he said, okay, Mr. Dumas, that's quite simple.
You could have the same layer, same thickness of gold as all of the others. You won't be able to see this. And then the salespeople will not spot it, the customer will not spot it. But in 10 years' time, our bags will get a better patina than those of our competitors. And because and that's very important.
For us, it's important that our bags are even more beautiful 10 years down the line. And this is really very much part of our DNA. And I think that this really goes along your question with regards to the consumption. Now as to the German market, it's a bit more complicated than other markets. I don't want to hurt anyone's feelings.
But because of the lender principle, contrary to what we have in France, for instance, where you have Paris or London in the UK, every city is important in Germany. And so you have some specificities. The Hamburg store is very strong. Same thing for Frankfurt or Munich and Stuttgart as well. So Germany has centers all over its territory.
And we also have very loyal German customers. I always look at I always pay a lot of attention to the local routes everywhere. In 2018, Germany was a bit under the average, but I hope that they're going to catch up in 2019 because we now fortunately, we have a new manager because we sometimes have our own problems. And so we have a new manager who joined last month for Germany, and I hope that this will make the market the best job would be the manager of Hermes UK. All of the stores are located around the center of London.
You don't have to travel much. But it's more difficult to be the manager in Germany because every store is important very strong.
Okay. Well, if there are no further questions, I would like to, on behalf of the Society of Financial Analysts, thank you for this publication, which marks a new record. This publication, which allows us simply to verify the relevance of the MS model, a model of stability, rigor, which is based on the sustainability of your values and simply your attachment to your roots. Thank you very much. Thank you.