Good morning. We maybe wait for 2 minutes for the last elevator to come up because I came up by the stairway. 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. Should we go? All right. 2018 is the year. The theme is Let's Play. That's what we told our employees this year, Let's Play, and we're very happy. We always take with great humility the fact that we were able to work and have a very nice year, very good performance in 2018. It is probably, once again, the opportunity to put an emphasis on the specificity of the house of Hermès, amongst which is this theme, and it was in 2018, Let's Play.
We want to continue to represent the fundamentals of the house, the spirit of independence, and 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. To put this growth of the group for a fundamental, that is the respect of craftsmanship and, the human person through investment in the network. 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 craftsmen. That's the first, you have sales associates, creators, designers, and we all try to work together in this workshop.
It isn't the most widespread model, it is essential for us to show that this model, which is somewhat different, also arrives at producing a strong economic performance, that is what we succeeded in doing in 2018. The highlights of the activity. The positives, we'll say plus 10% at constant exchange rates, with a very good sales figure. Others, more negative, will say missing EUR 34 million to make the EUR 6 billion. Almost. We can say we made EUR 6 billion and progressing at 10% at constant exchange rate. That's a good success, we haven't had this progression for some years, it's always on a stronger basis. This growth is a very healthy one, which means that we have very little price effect and very little scope effect.
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. Obviously, the stores have performed particularly well because the growth stands at plus 11%, with a growth in all geographical areas. The operating income, above about 6%. The current operating income, this is the first year the effect of the Hong Kong store. It has reached 34.3% of sale, which is close to an exceptional level and very good profitability. We have a capital gain of EUR 53 million 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.
We sold the Hong Kong store that we bought some years ago, and it gave us a capital gain of EUR 53 million, giving us a exceptional profitability of 35.2%, which is the highest historical, and increased as a result of this capital gain. The consolidated net profit is at EUR 1.4 billion, up by 15%. This slide to explain the evolution of the last 10 years, and you see that there's a strong acceleration since 2009, which is an important point as compared to if we put 20 or 30 years. Of course, there is the currency effect, and so forth, but there is a great dynamism of Hermès. I assure you that these curves were not crossed, even for the greediest revenues remaining above the net result. Even the magic of Éric du Halgouët doesn't manage to do that.
As a result, we have very little debt. We have virtuous growth. Available cash flow is EUR 1.4 billion, up by 8%, which leads us to a net cash of EUR 3.5 billion on the 31st of December 2018, which has allowed us to finance, pay CapEx and investments, as well as pay out the dividend. Of that one-third in dividend, one-third in CapEx, and one-third in cash flow for the future. All of this is only done with the men and women of Hermès who work on an everyday basis. For example, people in this room unable to make a handbag in this room and incapable of making a bag. Very grateful to them and grateful to the members of the ExCo who have all worked, each of them have worked in the different fields with a true excellence in 2018.
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. They were more numerous because we recruited more than 800 people, and this is a pleasure, more than 500 in France, in production and sales. You can see Hermès 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, this is a true strength and a great joy for Hermès, this capacity to train people, and then you have to integrate them, convey the culture to them. We have certain culture, and we come to 14,284 employees, which is fantastic.
Lots of people in production, lots of people in sales, of course. This is one of the specificities of Hermès. Most of our products, about 75% of our products, are produced by Hermès itself. We are one of the companies that is the most integrated from that point of view. 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-Junien, 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 maroquinerie in Franche-Comté, in the Franche-Comté area. We also have some new projects with the Guyenne leather workshop close to Bordeaux, the new leather workshop in Montereau, and we hope that all of this will be completed by 2020. We have also started working on a new workshop in Normandy, close to Louviers, which should be completed by 2021, which will ultimately be generating 250 jobs. Every single time, it may not be clear on the picture, but we have 250 people there. Every time, in other words, we try to develop beautiful plants, beautiful workshops, and this is really what we have inherited from Jean-Louis Dumas, and this is something that's very dear to our heart.
We want to make beautiful objects in beautiful workshops. Our CapEx and our workshops are fairly large because there's a lot that goes into the architectural project on top of all of the efforts that we make with Olivier Cornu for sustainable development. We want the sites to always be energy-saving sites as much as we can. This is part of the beauty and the architecture of the projects. We also create, as you know, this is a great strength of Hermès. Lots of our collections have been completely renewed, our 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. For us, we say that a successful product is a product that is in line with the creator's vision.
It's not a product that sells well, it's first and foremost a product that meets the creator's ambitions. What's really interesting, and I will sum up what's on the slide, is the continuous success of the leather goods and their diversity. In other words, of course, yes, we have the iconic bags like the Birkin, the Kelly, the Constance. We also have novelties. 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. The 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 Nadège and shoes. Also the taking off and ramping up of watches, and beautiful sales in the jewelry department. We're also having fun with Hermès Horizon, the made-to-measure products, the jukebox. There was also fly fishing for people who love fishing. They also did things around sliding, around surfing, so we have skateboards, longboards, and roller skates. Nobody got hurt so far, that's very good. Perfumes, of course. This was also a very major year for communication with 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 Hermès.
This is part of our history because we were saddle makers initially. Historically we've always been producing things for men and for women. We had an event for men in Shanghai. We had an event in Tokyo for women. We have had silk events, smaller formats in New York and Singapore. There was also the very important event for us in haute joaillerie, in high jewelry, which was our 5th collection, which was presented there. Of course, we also have the corporate occasions like the 9th Saut Hermès. It was actually an Hermès partner rider who won with an Hermès saddle this year, but of course, it's thanks also to his performance.
We also have the Métiers, the Craftsmanship Festival with Hermès Hors les Murs, where we have 15 craft people who represent all of our knowhows. This brings lots of people who are very enthralled by looking at these craftsmanship. Also, Hermès 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 open in Hong Kong. Palo Alto, we opened a store as well. We're the 1st ones to actually settle there, close to San Francisco. Shanghai, of course, Istanbul, Cancun. Those are the new openings.
Xi'an and Chads tone and Iconsiam. Stores that reopened after refurbishment and extension, we invest both in new countries and in traditional geographies as well, with Monaco, Nice, and the George V store in London, in Italy and in Asia. We also continue with the launch of our digital platform, which has been revamped. Our European store is again online. Also we opened our new virtual store in China. We have a new distribution channel in China. We decided to do this independently. We had excellent results in 2018 with this 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, +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. There were a bit of disturbances because of the political events. In Japan, great success with +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. Everything is fine. When you reach a +14% growth, things are great. 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 store. It was not just an incremental growth, it was an exponential growth for Hong Kong. As far as the Americas are concerned, we have a +12% growth.
Palo Alto was our 34th store opened in that particular geographical area. All of this gives us some balance in our geographies. We try to preserve the balance between the group because we will never know where problems might occur in an area. We know that every two to three years there are problems, geopolitical problems or whatever, in an area. We try to preserve the balance between geographical areas. We continue investing in new countries, but we also continue investing in older countries. 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 Saddlery, 9.4% growth with lots of improvement in our production and collections that were very well received in their diversity.
Ready-to-wear and Accessories, + 14%, which 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 Hermès Femme, which is under the leadership of Wilfried Guerrand, which is for him, a very good year because he also is in charge of the digital platforms. Silk and Textiles are 3.2%. We would've been satisfied with this some years ago, but now we have a weaker growth, so there's room for improvement here. Still, EUR 530 million turnover for Silk and Textiles. We're still proud of this particular sector, which is very much integrated. Perfumes, plus 9%, and D'Hermes, which is our men's fragrance pillar. We've also launched Twilly D'Hermès, which in 2018 was a real success for Hermès, and we are very pleased with this. Watches back on the way to growth, in particular in our stores.
This is a very great success in our retail strategy integration. The other sectors, including jewelry in particular, where we also have marked growth. You can see we're altogether nearly at plus 20%. 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 Saddlery. We want to make sure that each sector develop to its best potential, and to see which one has progressed the most. I suggest we give the floor to Éric 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, 0.06, was neutralized by the accretive effect, which is through conversion effect, which I had mentioned to you on the 30th of June, 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's and women's shoes. In a context of a very moderate rise in retail price, increase on an average by 1% at the group level, and mainly in the European Union, the growth of cost price was lesser than what was expected. Communication expenses represented as in 2017, 5% of the sales. The overheads, mainly administrative expenses and commercial expenses.
A 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 EUR 2 billion and 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 the sale of EUR 53 million resulting from the sale of the former The Galleria store in Hong Kong. The operating income, which integrates this capital gain, is at EUR 2.1 billion, which reflects a total of 35.2. Expressed in the percentage of sale, the current operating margin, 34.3%, is close to the record that we achieved in 2017, because in 2017 it was 34.6%. The financial results, a loss of EUR 35 million, almost stable as compared to 2017.
Just as a reminder, it is made up of the exchange rate expense, which is the accounting for hedging instruments, products, and options and carryovers. Financial results include the products from the remuneration of income and investments of the group for EUR 15 million. Income tax, 32.5%, 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 the group sustained in 2017, which was a contribution of EUR 68 million, which was offset partially by the reimbursement of the CRD for EUR 52 million. That has just an impact on the tax on 0.7 points down. Second impact is the drop in the corporate tax in the U.S. The tax went to 35% to 21%, which represented 1 and a half points of a drop in income tax.
The last element for 0.8 points, which is the sale of The Galleria store, capital gain without taxation, which is the third element which contributed in the drop in income tax. The net result has gone above EUR 1.4 billion and progressed by 15% as compared to 2017. If we restate the capital gain for the sale of The Galleria, it is 11%. The net profitability, 23.5%, is a record level if you look at the last 10 years, that is for the net profitability. Operating investments, EUR 312 million. Just like in 2017, nearly half, EUR 151 million, were dedicated to the development of the retail network with store openings, qualitative and targeted openings, 20-odd renovation and refurbishments, and moves.
The main projects being enlargements and renovations of the George V in Paris, Las Vegas, Hawaii, San Francisco, or Shanghai IFC, or the opening of Palo Alto in 2018, or that of Meatpacking in New York, the inauguration of which is planned for the month of April. Production investments concern mainly leather workshops, Guyenne, Montereau, and investments in Hermès perfumes and silk and textiles. We are pursuing our investments of renewal and capacity. Finally, EUR 84 million have been invested in real estate and group projects, IT and digital, the pursuing of the rolling out of the digital platforms. 2018 is characterized by a strong cash generation, cash flow generation with increase of EUR 555 million, which results mainly from the following elements. First of all is cash flow of EUR 1.7 billion, growing by 6% at the same pace as the current operational income.
Reduction in working capital requirement as a good management of inventory, and the reimbursement that I was mentioning by the French state of the CRD claims, the famous 3% on the dividends that was invalidated for EUR 52 million. EUR 320 million in operational investments, operational and financial. The EUR 958 dividends, with exception dividend of EUR 5. After sales of Galleria for EUR 59 million and disbursement of EUR 69 for share buyback. You have a total of EUR 3.6 as opposed to EUR 3 in 2017. No really comments required on the IFRS. The EUR 52 million 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 three years. This graph shows you the progression of the cash flow. The annual average growth is 11% over the period.
The dividend, which will be submitted to the approval of the coming shareholders meeting, is EUR 4.55, 11% increase, very close to the net restated results of the Galleria sale.
Thank you very much, Éric, for the slides. 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. What is the outlook? I am going to be very brief because we are not going to change our outlook. Given the growing economic, geopolitical, and monetary uncertainties around the world, despite them, the group confirms an ambitious goal for revenue growth. This year will be the year where the theme will be "In Pursuit of Dreams." You can see this image, which makes you think about dreams. It is not just dreaming of nothing.
Everything started with a dream at Hermès, with Thierry Hermès, who came to Paris and who wanted to be the best harness maker 180 years ago in Paris. We continue trying to do our job as well as we can. Everyone has to unleash its ability to dream and to imagine. We have launched, as you know, a new perfume, Jardin sur la Lagune. Again, not too much marketing behind this. It is a jardin in Venice. We also have launched the new watch, Arceau L'heure de la lune. We left Paris two 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. In Milan, as we do every year, we will continue presenting our home collection next April.
We're going to continue with our investment in our digital platforms. We're going to completely transform our Japanese site. Well, we already have the Japanese site in its new version. We're going to continue with the rest of Asia. 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. They are still paving the streets at the moment, so it's really developing. Xiamen in China. Then we reopened Amsterdam, Waikiki, Vancouver, and Stoleshnikov. Those are refurbishments. We'll also be opening in a new country in 2019. We'll be opening a store in Poland, in Warsaw.
This year, we will also be celebrating the 10th anniversary of the Saut Hermès in the Grand Palais, and we'll continue with our collections events with men's ready-to-wear event presentation in London tomorrow. That's it for me, and of course, I'd be delighted to answer your questions.
Good morning. David da Maia, CIC. I have three questions. The first one regarding your pricing policy. You talked about 3%-3.5% price increase. Can you give us a little bit more information about the price hikes that occurred? The second point related to this is currency impacts. For 2019, you mean? Yes. The exchange rates impact 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? The third question about the beauty line.
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? What is your ambition for the longer term for beauty and perfumes and cosmetics, knowing that you have a very powerful brand, but for the moment, 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. Yes. Okay, I will explain. No question. I don't want to put you in an uncomfortable position, but Éric will answer you very precisely with regards to the prices.
I would like to give you the basics about how we go about this, not just to model 2019, but in general. As far as prices are concerned, we have no marketing department, and we have no pricing policy. Our prices increase based on our manufacturing costs. What are our manufacturing costs as Hermès? What are they based on? Well, there are two things. First 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, because they're rarer, and sometimes we can't even get those raw materials because simply the quality is not there. The second thing is that the bag, it takes 15 hours to make one bag. This means that the price hikes are directly related to wage increases in France.
Each year, maybe I should have discussed this before, 2018 was a great year. We are very pleased with this and pleased with the dividend. I would like to thank the Executive Committee, also every single Hermès employee who participated in this success. This also allowed us to increase wages for all French workers in September by EUR 100 per month. This also allowed us to distribute an extraordinary bonus at the end of the year of EUR 1,000 for every employee who owns less than 3 times the minimum wage. Abroad, all Hermès employees received an exceptional bonus based on the good results that we obtained. Our prices, therefore, increase because of these two factors, which are the wage increases and the raw materials. On a regular basis, we get about 3%-3.5% increase altogether.
Last year, in 2018, because of the exchange rates, because of the changes in the exchange rate, we had decided to increase our prices on the Euro area +3%. In the U.S., and in the other areas, we did not increase prices. Therefore, the average in 2018, the average price increase worldwide was about 1%. This year, we are going to increase prices in a more universal manner by 3%, which is more, 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 for 2020. In this way, we know approximately what the profit is going to be, what the margin is going to be.
We do this as we go along. I think that this is one of the major characteristics of Hermès, in other words, having this stability, having this clear reading of the monetary impact on our internal transactions. We cannot hedge for the revenues. This is the exchange rate risk. With regards margin and intra-country and inter-country transactions, we are covered, and we continue developing our hedging for 2020.
Éric will give you more information on this. The price increase, we mentioned it at the level of the group is within +3% or +3.5%. Japan and China, 5%-6%. Hong Kong and Macau, slightly less because around 3%. The U.S.A. is around 3%. A little less in the European Union on an average giving 3%-3.5%. Hedging, the USD is 118, so all USD linked to USD. It is about 7% or slightly less on the JPY because we had hedged at 131, which gives you a shift of 5%. When you see the price effect and hedging, there is a 1.5 points, 1.5% on the gross margin. We had for some years the Forex in our favor, and now not. Coming to beauty products, it is quite exciting.
It's a new sector with the risk that it entails. We're going to roll it out progressively, starting with our stores, mainly limited retail to learn, to get feedback, to be able to react. We'll launch it in 2020. For the moment, we are within the rungs for this launch. Of course, we hope to have the maximum potential possible. 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. We'll have to find the rightful place because we hope to sell a product and not a brand. That's all that we're trying to. As often is the case in Hermès, the option of doing it ourselves.
There's a lot of Italians and other maisons, other companies that you mentioned, they've given it to the professional, be it L'Oréal or Coty. Some work on the basis of licenses. That's fine. We've decided, be it for the perfumes or the beauty, to do it ourselves. There will necessarily be a learning curve that we will have to do and risk-taking. On the other hand, if it works, we will have the entirety of the margin and the income. That is our way of working, which is sometimes slower, sometimes maybe more risky, but which is that of the Hermès model.
Good morning. Elisa de Moutier. I have two questions, please. The first one is, what can you tell us about the trends at the beginning of 2019?
Secondly, how do you actually prepare for the law that's coming on the destruction of unsold items?
Thank you. On the trends, the results are given on the 25th of April. I never give the trends before that. I know you might say that's not very nice, but it's nice at this time of the year on the first quarter because the background doesn't really mean much. There's as much in December because Christmas comes into play. What comes into play in the first quarter is the Chinese New Year. What is specific of the Chinese New Year? It's never at the same time. This year is slightly earlier. You have a Chinese New Year, which is in January, very high sales.
Of the month of February, which compares to, there was no Chinese New Year this year, but last year there was. There is other things that follow in March. 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. We'll have to wait for the 25th of April. That being said, we don't see any break in trend, really. We have an artisanal model with not too much inventory. That is seen in the working capital requirement. We have a model where each store is responsible for its inventory and does its purchasing. We have an inventory management, which is quite fine. In terms of quantity, unsold items, we don't have too many. What do we do with the unsold items?
The first thing that is very dear to us is our sales. We have the sales at the Palais des Congrès, which is often an event, and also in other countries. A lot of the unsold items, which are not very many to start with, go for the sales. What remains, we've been working with associations in different ways to transform. You can no longer tell it's an Hermès product. We come to very small quantities for the unsold. We always have to progress. We have lots of ideas, it's something that really federates everybody in Hermès, being very careful about the raw materials that come into the group, their use and increase their rate of use.
We're waiting for the law to see what it will be like, we are not particularly worried because, of course, you've got to do things that are respectful of things and sees the problem in its entirety. That is to say, waste of items at the end of quantities affects more a fast fashion industry rather than the luxury industry, where the cost of each object is such that one is really careful. However, there's still unsold items at the end. We trust the legislator to find an intelligent law, to pass an intelligent law. Thank you, Christine. In my opinion, the Hermès 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 streetwear and suchlike. What are your thoughts on this?
How do you create access to your brand by young to make it more affordable, easier? What are you doing, what do you think can make Hermès more in line with its consumers? Second question with regard to the other categories of products. In the press, you spoke about the cosmetic project, there are other companies that have launched directly into eyewear, eyeglasses. Do you have other projects that could actually sustain diversification that seems 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, we don't really actually study the clientele, whichever it may be. We never make a product for that clientele. The quick answer is nothing. We don't do anything, we wait.
You can talk to poor Florian, who heads all our stores and the retail 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're there to invent the desires of tomorrow, thanks to our creation, rather than satisfying the desires of today as such. I think the objective of Hermès is to make beautiful objects that we sell all over the world, it's not making products for such and such a category of populations or age group. Of course, we've made +14% in Asia-Pacific, with the highest rate in continental China. We must have some customers there. Well, to be sure, the Chinese market is a very young market.
It's a very young market, the very young spend more than the very young in other countries. You don't need to have rules. In particular, I would say, this is true about our clients worldwide. The young clients buy a lot of shoes, that's part of the success of fashion and clothes, the fashion of Hermès, the success with young customers. This works as well in Rodeo Drive, in Beverly Hills, in California, and interestingly, also in jewelry, the high jewelry, gold bracelets, and so forth. I don't think we need to do basic marketing that we don't do, and if we did, we'd be very bad at it. 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.
That is also the strength of a house of creation, is that we've got the right to make a mistake. There are products that we make that we love, that work very well, there are products that we make that don't work totally. The diversity of Hermès collections, there are more products that work than those that don't work to start with. It doesn't matter if we make a mistake, but it didn't cost us much to make. We're artisanal. It's less costly to launch an artisanal product than it is to launch an industrial product. We never do a worldwide launch with advertising to the greatest boyfriend of Charlotte David, who heads the communication department.
I would say that on the one hand, I'm worried all the time because I hope that my creations will be liked by people, we don't do anything to please people. For the launches, this is a very good point that joins up with my point earlier. I believe that we will either get there or won't, but it is very important for a house of perfumes to be three-dimensional. We have to become of a certain size in a world market. Of course, I'll exaggerate terribly. For example, Europe is perfumes. America's is makeup, Asia is cosmetics. Although they do a lot of makeup in Asia, they're starting to use perfumes, et cetera. If we can become a worldwide brand, you need to have these three areas. We're starting with makeup, we'll follow later with skincare to try and have a whole set.
We'll try and do it ourselves. We'll do it ourselves without licenses, 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. Hermès is the idea of workshop that is very dear to me. We're not a house of style that imposes an edge, in a way. That doesn't mean you can't put it, rest assured. The idea is not to put an edge just to sell something. It's a mix between the artisan, the sales associate, and today, the financial presentation, together with a shared aim, making the most beautiful products.
There's some beautiful products that I like in Hermès, which we haven't sold a single one. Doesn't prevent you from liking them.
Loic Morvan.
Loic Morvan, Juliette Garnier. Two questions. Can you tell me about the activity with the Chinese world in 2018? Did you actually grow more in China and Hong Kong? What is the change in the Chinese customers, and what kind of taxes can we expect for 2019? With regards China, you saw that we achieved +14% growth for all of the Asia-Pacific market. There's a lot of continental China in there. There's also Southeast Asia, which we should not forget, because we have great growth rates for Indonesia, Thailand, for instance. We've had also great growth in Hong Kong with the strong impact of our flagship store, because Hong Kong was a bit weaker initially.
Therefore, the history for Hong Kong, historically, let's say, we had weaker results than elsewhere, contrary to continental China, where we've always had a two-digit growth. Still, if you look at greater China, the country that grew most percentage-wise and which is also the biggest one, the most major market, is continental China. 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 continued to come and visit us and lots of young people, which is the specificity of the Chinese customers. They're young. They're very young. The standard of living also is very, very high for them. If we look over the longer-term history, eight, nine 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 purchasers. With regards the tax rates, what is it that we expect, Éric? There is 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. At any rate, there would be an impact by 1% or 0.5% on the group. Also, the sale of The Galleria actually will increase our tax rate in the future because this is a non-recurring element in the statement.
I have one or two 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. We should look what you do in terms of CSR. 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 these aspects? Do you have any CSR value generation criteria? How did this generate value for Hermès? Do you have any criteria in this particular context with regards the 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.
Thank you very much for this very good question. This is a question that we asked ourselves, and under the influence of Charlotte David, we said, "Okay, yeah." She said, "You do it. You should tell people what you do." That's part of her role anyway. I would like to answer you very frankly. Maybe this is not the ideal place to do that, but I will nevertheless. There is a general discretion, 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 Hermès.
When we talked with CSR on our boards, we were saying, "Okay, making things good should not be too visible." When you're too visible, it's not very good. We've been doing lots of things in the CSR context. For years, we are in a company where there is a lot of manual work, and therefore, of course, we do not emit a lot of carbon. This is important with, of course, climate change. Together with Éric and Olivier Fournier, we embarked on major reforestation projects with a number of associations, and therefore we are carbon neutral for scopes 1 and 2. There is the transportation issue, but we do not do the transportation. We are already carbon neutral.
One essential mission was entrusted to Olivier Fournier, which is to continue, but also increase our ability to be carbon neutral even with a stricter control, and to also develop this any further with the outside world. Hermès works on the three topics of CSR, which are the environment, of course, performance as well, that is part of CSR, and also social aspects. It is very important that we are a major player there in generating jobs and integrating 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. We will use three criteria, which somewhat represent the three criteria that are dear to our hearts. The first one is to decouple energy consumption from growth.
The second one, which I strongly believe in, it is a bit French, but is to redevelop France and the French territory outside of the major cities. This is why we have these 17 workshops all over France. We have developed a number of videos on our sustainable development. We have a video of seven minutes on the Internet, on , and that is really long on the Internet. People might not want to watch it to the end. 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 all over France. The third thing is wage equality and gender equality. This is part of, really, of the spirit of Hermès. I have my three CSR criteria, which have been defined and confirmed by the Executive Committee and by the board.
This is part of my remuneration. Symbolically, it is very important. It means that it is very dear to our heart, but we have been doing it for a number of years already. It is important that symbolically, this is now displayed. Karine Vergniol, BFM Business. A question on the environment. You mentioned this pretty quickly, but 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. Every event impacts us, hence our strategy for a geographical balance, equilibrium. Maybe that is how the 21st century will be described, as an unstable century with movements that are not controlled by the state and that explode all the time.
If I were to sum up history, 30th September 9/11, then SARS, the virus from Hong Kong, and after that, the U.S. financial crisis that had its impact, then Fukushima, then mixed with terrorist attacks in Paris and London, in Barcelona, in Madrid, in Las Vegas. All of this shows you that somewhere in the world every year, every two years, a crisis is taking place. You can't predict them. You have to be ready for them. You've got to be ready somewhere, somehow. The best way of resisting is to have this geographical balance in order to be able to absorb. Fukushima closed Japan maybe for a year. Three years later, it was one of the countries that was doing the best, and you can see that even today. We are subjected to the ups and downs in the world, varied
Since Cold War. It had different impacts. Of course, the Yellow Vest had an impact on our French clientele at a time when normally people go Christmas shopping. It did have an impact. Employees in Hermès were very motivated, very committed. We closed Saturdays, but we opened Sundays. That allowed us to make up. I'd like to really thank the sales associates of Hermès, who were 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. We had good results for France, as you were able to see. This raises a problem about tourism, the question about tourism. If you have the choice between passing a weekend in Rome, London or Paris, make your choice as you wish.
We find that there's an increase of our customers in London and in Milan. Tourists, anyway. Brexit. 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 prepare for it. The first incidence of Brexit from our retailer's point of view, was the drop of the pound. What does the drop of the pound do in an environment which is good tourism? We did more sales in London. 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. Lesser inventory than medicines. I can assure you, medicines is a real subject with Brexit and customs.
Hermès product is surely less important, in case of the closure of borders. We'll deal with it. We'll have to contend with it when it'll happen. What is more worrying is, what is the global effect that Brexit will have on the economy of U.K., 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 first population in our country, and how will they spend in an environment which is anxiety-creating? Mario.
I have two questions. One on China 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.
Will there be greater volume growth with the opening of the new workshops in 2020 and beyond?
On the e-commerce website, we decided to do it alone. We didn't link ourselves to Alibaba, et cetera. 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, few referencing. The conversion rate is not extraordinary. The big success 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 two 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, a brick and mortar store.
The second thing is that we sell everything. We can't seem to break the record of the U.S. when we opened the digital there. There was a customer who came onto our website and bought a sofa, 3.5-meter long sofa. That was a surprise of the net, and that could be your first impulsive purchase in the light of solitude on the internet, on the Hermès website. Anyway. I think you can't have total preconceived idea about what you sell and where you sell. It works very well. The only way I could tone it down, because we were overcome with the success, and we were short on inventory. The dotcom is like any store with its inventory and so forth, its product. These are problems which we know how to manage. That's it.
Anyway, for France, don't change your forecast for the years to come. We always have to recruit more to keep our rate in %, because the base is always bigger. 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. 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 for the service, the idea is not just to make the sale, but you have to have a level of service that you wish to have and recruitments at the level of sales teams. You've seen the curve. There are also the structural effect, our headquarters and our centralized functions are in Paris.
We've recruited more, naturally, in France because the company's got a strong anchor in France. I always say the debt of Hermès is very asymmetrical. 83% of our products sold in France Made in France, sorry, and the same amount sold outside of France.
Well, I don't want to hurt anyone's feelings, there are two big countries, population-wise, economic growth-wise, India and China. Now, in China, we now have how many stores? 26 stores in China, we have only two in India. We plan about 28 in China next year altogether, only two in India. 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, I try to get the message across to say that we're different.
When I'm in India, I'm alongside Carrefour and the other major retailers. In India also, there's great know-how. There's a culture of sari. In Jodhpur, you have the culture of jewelry. We used Indian textiles. We have some hand-woven products in India. We still have hand-woven products in Nepal. All of this is with wonderful know-how, the sociological organization, and consumption in India is very different from what we have in China.
Yes, we will go to India more, but not quite now. Question off mic. Sorry. "It's a good question," says Mr. Dumas, "The answer is counterintuitive, which is mainly, what they prefer is the leather goods, actually." Not for those who buy them. Okay. The two products that sell best are the leather products, bags, and shoes. Also because we do not have competitors on that.
Juliette Garnier for "Le Monde." I have two questions to clarify questions that have already been asked. 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 products yourself, like nail polish and so on? Where are you going to produce? Also, can you give us some figures about the loss of earnings because of the Yellow Vests?
Let me first say something. 75% of our products that are sold by Hermès are made by Hermès. We don't make everything. There are things that are not made by us in particular, this will be true for the beauty sector because we don't have the know-how in-house.
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. 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 lipsticks, different colors. There's one matte and one shiny, a glossy one. We found a great supplier for the glossy one, we thought that the matte finish was not that good, vice versa with another supplier. Therefore, we're going to have diversified sourcing for this between Italy and France with the manufacturing of the lipstick, of the object itself, which will be made mainly in France. It's not an object made of plastic. It's going to be some other materials.
I don't want to unveil this here. Of course, every time we go for a new project, we try to pay attention to sourcing. I would like to say that first and foremost, we try to find a location where it will be done best, we have no mental barriers for this. We have hand-woven textile from Nepal. I'm very proud to be selling something that comes from Nepal at Hermès. For lacquer products, we have true know-how in Vietnam, our lacquered boxes come from Vietnam and so on, it's wonderful. I believe fundamentally that
The product, and in particular, products made by craftspeople, are best made where there is a real craftsmanship culture. This is why we make our bags in France, because there is a true leatherworking culture in France. Why do we do silk in France? Because there is a true silk culture around the Lyon area. Why do we make our watches in Switzerland? Because there is true watch culture in Switzerland. Same thing for the John Lobb products, for the shoes, because there is real know-how in England for this. We are trying to find locations where we have the culture and history of a specific know-how with us, and this is what we really want to sell and want to develop. That is very important. Now, as to the Yellow Vests and the Yellow Vest movement, we have not quantified this. It is a bit difficult to say. Would they have purchased?
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 Faubourg Saint-Honoré store, which is a bit unique, even though experiences are unique everywhere. But still, no, we did not go into the exercise of quantifying this. We did not think this was a good idea.
My name is Christian Schubert from the Frankfurter Allgemeine Zeitung. I have a question on the question of de-consumption. This phenomenon, is this something that has some impact on you? I know, of course, that you are not going for mass consumption, but do you possibly foresee some kind of impact on you in the medium term? Second question, what is the development of the German market for you?
Well, I must admit that I am really a fan of Hermès.
I believe that we are part of the solution to the world's problems, and so with regard to de-consumption and the de-consumption trend, well, there is one thing that we do at Hermès. We want products that last for a long time. We do not have planned obsolescence in our objects, even our designers. I was discussing this with Véronique Nichanian, who is going to present her collection tomorrow, and she said, "Well, what I love is to mix the garments that I have made from several collections and that they should match." So it is not like, okay, you bought the previous collection. Do not forget to buy the new collection. No, keep the pieces as long as possible. 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-sale service. It is wonderful when your granddaughter, for instance, or the granddaughter comes with her grandmother's Kelly and asks for it to be repaired. It is wonderful. So with the difficulty that we face to get the raw materials, it is not only Hermès Horizon who had some problems with this 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 de-consumption movement, Hermès 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. We were discussing leather with Olivier Fournier. We had the subprime crisis in the U.S. Everything collapsed. So what should we do now?
We should buy gold, okay, because we buy gold. The price of gold went up, of course. We put more gold than anyone else on our bag clasps, for instance. The finance department said, "Well, should you really put as much gold on your clasps because it costs a lot of money," and so on. We had a meeting, and together, Olivier and I asked for a craftsperson to come to attend the meeting as well. 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. The salespeople will not spot it. The customer will not spot it.
In 10 years' time, our bags will get a better patina than those of our competitors." That's very important. For us, it's important that our bags are even more beautiful 10 years down the line. This is really very much part of our DNA. I think that this really goes along with your question with regards to de-consumption. As to the German market, it's a bit more complicated than other markets. I don't want to hurt anyone's feelings. Because of the lender principle, contrary to what we have in France, for instance, where you have Paris or London in the U.K., every city is important in Germany. You have some specificities, the Hamburg store is very strong. Same thing for Frankfurt or Munich and Stuttgart as well. Germany has centers all over its territory. We also have very loyal German customers.
I always pay a lot of attention to the local customers, and this is really our big strength. We have these local roots 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, have a new manager, because we sometimes have our own problems. We have a new manager who joined last month for Germany, and I hope that this will make the market as dynamic as possible. Contrary, the best job would be the manager of Hermès U.K. All of the stores are located around the center of London. You don't have to travel much. It's more difficult to be the manager in Germany because every store is important, and you have to travel all over the place to visit those stores, and the Euro is 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 Hermès 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.