Good morning. Good morning, everybody. I'm delighted to be with you this morning to comment upon the excellent results of 2017. I'd like to thank you so much for your presence today. 2017 has been placed under the theme of the meaning of objects.
Every year for many years now, we've had a theme to give another facet of MS in 2017 was the meaning of objects. And so maybe it's time to remember that above all, we are a house of objects, a house that has a corporate project with respect to independence attached to a model that puts the artisanal dynamic at the heart of its growth and which is based on the solidarity of a collection and open to the world through the network of unique stores that accompany new users and behaviors in purchase. So coming to the activity of 2017.
Now in 2017,
the revenues reached €5,500,000,000 and progressing by plus 9% at constant exchange rates and 7% at current rates. Growth, I remind you, is once again very healthy with the resting upon mainly the volumes. This growth is very virtuous as a result. The development of all the matrices continues, thanks to the strengthening of production capacity, differences of the last collection sustained demand. This progression of services is very solid and at plus 9% in the stores and applies to all the geographical zones.
Hermes has pursued qualitative growth of its distribution network, and I'll be coming back to that. Results, 2017 has reached a certain amount and has provided the solidity of Hermes in international context, which remains uncertain. The current operating results progressed by 13% and is still at €2,900,000 and operating margins 34.6% of sales is up by 2 points as compared to 2016. It's an exceptional level. Net group share growing by 11% and at €1,200,000 and represents 22% of the sales highest historical level ever.
I would like to present this slide. There is no comment except for the fact that the evolution of the revenue net result for the last 10 years, average annual growth remains over 13% 15%. What have been the difference in years you tripled the revenue and multiplied 4x net results? The group has generated important cash with capacities of financing of EUR 1,600,000,000 and allows for the financing of all the investments, operational investments without having recourse to debt, sorry, debt to EISPR and distribution of dividend and the buyback of dividends. Net IFRS cash position has progressed by EUR 6,000,000 and starts with EUR 2,900,000,000 on the 21st December, 2017.
Obviously, Hermes is an artisanal group from the saddle hand So Hermes has strengthened itself by 650 people, over 400 people in France, mainly in the manufacturing units and sales teams. In 2017, the group employed employed 13,483 people, of which 8,317 in France. In 2017, ramping up of the production capacity in Levenin there, Charente and France, we pursued. These continue to the dynamism of the region that was being accompanied by training programs and preservation of the environment. And the development projects are being continued with the opening of the manufacturing in the Lalonde in 2018 and Guyan and motor road, completion of which is planned in 2020.
I propose we focus for a moment, this is certainly new, a film on our stakeholders. For those who are only in audio, it's a 7 minute film, you will need an original version, but it will be developed on the new Internet platform in a month's time. This comes from a collaboration that we made with the document maker, Frederic Lafont, the digital catalogue and who in the footsteps of Hermes, a film called on Pretor Le Monde than in people of the world, weaving things with those who surround us. This first one on the leather work of leather manufacturing of Montbrun, what's the point of view of the impact that it has on the community? I'm wishing to now listen to the film in the original version.
Thank you. This is what Hermes is about, encounters. We decided not to have a class meet with more than 300 people. So we have 17 clients in France every time. We meet new people, wonderful people like this city mayor.
So we also very much into creation. That's at the heart of the activity. We are attached to preserving and transmitting creation. The customers don't walk into the store to check the quality of somebody to discover novelties. And so in 2017, we had the collections of women's ready to wear designed by Nadege Vanille.
We have a lot of exceptional materials and know how in the collections of Dominique Nichagnon. We have new models of bags, Verma Sinetique Oblique, the bully shark, which is on the screen, which is very successful. We have created a new line in the home universe, the Liane Der Maize and we've had also the successful launch of the new fragrance, Tuivy Dermese. And there was also the success of the PUNTURE line designed by Chirante. In terms of communication, I must say that there are a lot of people from the team here in this room.
They were very busy. There was an abundance of creativity in the company to make changes this year with our MS Matik as well as very successful. We also have a number of events around the women's world, also around the men's world. So we had Hermes Club in Shanghai for the women's universe, downtown men in the Central East and men up and down in Hong Kong. We've had also a number of major institutional events.
We've just had the 8th edition of the Sawyers Hermes and competition. It was very, very cold, but there was an Hermes writer who won. So it was the year of successes. We've had the World of L'Espanancherry Exhibition, celebrating the 50th anniversary of HOVIC with us. And then Martin Margiela with the Hermes unit in Antwerp.
As far as the distribution network is concerned, we opened one new store in Sao Paulo in Brazil. It's called Iguatemi, But the growth may not come from here entirely, but it will still bring its contribution. So we have continued with our extension and refurbishment program. We have more than 20 stores in the world, including Elm Street in London, Munich, Athens in Europe, Toronto and Palm Beach in North America, So to Funky in Taiwan, Kuala Lumpur, Tokyo, New Delhi, Oklahoma and Kowloon in Hong Kong and Asia. And we've also taken over to concession stores in Monterey, Guadalcanara and Club Medellin.
We have a good geographical balance and which means that we can adapt to various events and to the expectations of the customers. So the distribution network is at the heart of Hermes. We launched we successfully launched our new website, airmass.com, first of all, in Canada and then in the United States, which is a
bigger country for digital media.
And this will be deployed during the first half of twenty eighteen in Europe and China towards the end of the year. There are a number of initiatives as well regarding new buying experiences. In other words, we deployed
a couple
of stores in Gion and Quito. It was very successful. And we've also had DASH pop up sales in Rome and in Seoul, which led to a lot of press coverage and great sales as well. Now let's come a little bit to our activity and revenues by geographical area. In 2017, we've had an increase in all regions of the world.
First of all, in Europe, we've had a very dynamic market, very good performance in all of the stores of the group, especially in the UK, possibly with the help of the exchange rates, Italy and Germany. This is also based on the success of the opening and the taking over of the Copenhagen concession store. France, in particular, plus 5%. We have a Bijoure de Saint store, which is currently being extended. Japan, plus 4%, which is a great performance.
We have Japanese teams that really make MS a star in Japan. And so there's been fantastic teamwork here. And then Asia Pacific, excluding Japan, a 2 digit growth was up 11%, in Continental China as well. Now in the in South Asia as well, we have some improvement in Hong Kong and Macau. In Southeast Asia, we continue with our successes in Hong Kong, Australia.
And of course, Air Max will continue with moderate growth in China with Hangzhou and Sharp at the end of the year, the openings at the end of the year. And then as far as the Americas are concerned, we've had 7% with the opening of new stores Toronto, Palm Beach, but also with a very positive dynamics for the whole of the area. Now our geographical areas are somewhat balanced, as you can see. We have plus 13% for Japan, plus 19% for Europe, plus 14% for France, plus 18 for the Americas and plus 35 for Asia and the Pacific. We continue investing in the historic countries of Hermes, the position growth and the dynamism of middle classes, middle income classes in Asia Pacific will lead to more growth, but we're trying to preserve our geographical business.
Let's talk about the various metrics, the various sectors. All of the metrics have improved level goods and salary with plus 10%, which is in line with our objectives. And as we announced at the beginning of the year, so as to really meet very strong demand. We have a very strong demand there for our iconic tags as well as for other models like the Constance, Alisson, Lindy, VIBU bags, which were very, very successful. Now as to the British wear and accessories division, we've had a plus 9% growth, thanks to the success of the Transportation Accessories and Ready to Wear collections with a very good sell through for our collections in 2017, which means that we've achieved great profitability.
For Silk and Textiles, we have a plus 6% growth. Perfumes, plus 10% with a marked increase with the successful launch of Twilio during the Q2, which now continues with growth, and this is plus 1%, a slight increase. For a long time, we had a negative figure here. Now this is kind of turned. And for the first time, we were present at the Geneva Fair, and we were very successful.
We'd like to do this. In other MS, Miele's tableware are out of living, and the Jorvik also has a great growth. The 3 Miele's inside leather, which has increased most of shoes, jewelry and women's ready to wear. So we have a balanced revenue per sector, as you can see, with 11 goods and salaries still counting for 50% and the other departments for the best of the revenue. I will now give the floor to Eric, and he will be presenting to you the annual results.
Thank you.
2017 growth was very profitable. The gross margin progressed by 2.4 points and reached 70 plus 0.1 percent in 2017. This position first results in the positive impact of the ForEx hedging coming from 2016, as we mentioned, to increase semester allocation and so profiting in 2017. So an impact of nearly 1 point. The gross margin also benefited in 2017 of the productivity of our sites, production sites, particularly integrated sites, which are in silk and leather.
And the structural of our inventory tied to the success of our collections. The negative impact resulting from a rise in tariffs, but very limited and exclusively in the eurozone In order to preserve our price in the region were amply offset. Communication, 7% of the sales was against 4.7% in 2016. That has allowed for the sustaining of Hermes perfumes with the successful launch of the Zulily Hermes. Overheads as a percentage of sales have had a small lease leverage effect and other expenses as a result of the free share plan attributed to employees and the commitment of the payment of the the next 5 years.
So the operational income has progressed by 13%, EUR 1,900,000,000. So the operating margin has reached its highest level at 34.6 percent and the exceptional level up by 2 points. The financial result is results from the adjusting of in exchange instruments. The reduction of sale as compared to 2016 €600,000 as compared to €1,800,000 in 2016. Tax on profit is up by 1.7 points as a result of EUR 2,000,000,000.
On the one hand, the unfavorable effect, EUR 16,000,000,000 of the tax provisions in France. Indeed, we had launched an surplus index functional corporation fee at end of 2017 to offset for the reimbursement of CRD following the decision to invalidate the tax on dividend by So we are impacted by the American tax reform, which obliges us to note in 2017, a non cash expense, 0.7 points impact of taxes. So the reduction in tax came from 35% to 21%, the rate applicable in the U. S. Can see it reaches a record level.
Operational investment EUR 265,000,000, nearly half that is €120,000,000 was devoted to the development of the retail and the 2020 projects of store enlargements, renovation and moving from one premises to another. So the projects impact in 2017 was projects of Hong Kong,
Toronto in Canada and Palm Beach in the U. S.
The production and investments were mainly leather manufacturing units, mainly in the Lalonde, the Normandy and the Saint The these were inaugurated in 2017. This also concerns tanneries, where we continue to invest in MS perfumes and Silicone Textiles, where we have taken investments for additional capacity to the demand. Finally, EUR 64,000,000 have been invested either in real estate with the pursuit of our work in marketing in logistics and IT and digital projects, which have previously mentioned development of the digital platform rolled out in the USA and in Canada. 2017 is characterized by strong cash generation. The self balancing capacity of €6,000,000 increased by €11,000,000,000 the same pace as the net income.
And we also note a drop in working capital requirements for the 2nd consecutive year, thanks to very good control over inventory and special improvement of the allocation of our retail inventory. After financing of operational investments and financial investments, payment JPY 3.75 per share, but the restated cash was JPY 3,000,000,000. So here's the IFRS cash flow statement. The difference in SEK 140,000,000 as compared to the restated cash comes from the D class definition in IFRS in financial investment because of the declines higher than 3 months. This graph shows the evolution of the operating cash flows between 2012 and 2017, you can see a doubling of the value in a period of 5 years.
This in which we'll this approval of the shareholders meeting is €4.10 per share, progression of 9%, which allows us to maintain a payout of about 35%. And it's proposed in the exception dividend of €5 per share at the shareholders.
Thank you, Erik, for having presented the best slides in the presentation. All indicators are good. So we are likely to talk a little bit about our outlook. We're going to continue with our long term strategy, hoping to be able to be agile to be faced up to these changes. So we have to be the gardeners.
We have to prune the roses to push every morning and plant the trees tomorrow. So we are hoping to continue our long term development based on creativity, our know how and singular communication. We're also going to continue with the development of our distribution network with the extension of more than 20 stores and refurbishment of a number of stores as well, and 7 new stores will be opened. In the medium term and despite the growing uncertainties, we confirm our ambitious goal for revenue growth at constant exchange rates. In 2018, Hermes is celebrating the team Let's Play, which is which goes beyond mere creation.
It actually guides our vision as opposed to the importance of enjoyment as a driver of creativity, innovation and agility. In 2018, we to continue to increase our production capabilities with the inauguration of the manufacturing of the Lalonde in the first half of twenty eighteen and the ramping up of this activity. We're also going to continue developing our distribution network. There was a successful opening. So it's a little early to say that, but the 1st months are very good.
We have a new flagship store in Hong Kong, which is a 900 square meter store over three levels. And we also have had we'll have the launch of commerce but also communication. And then emmet.com will give us an opportunity to tell the general public about all of the actions made by Amex and the MX position in the field of CSR issues. Now we're going to have another video, another 7 minute video in Japanese, but it will be subtitled. And you will discover a specific know how, forgotten know how of a very, very nice Japanese family.
And of course, after that, I'll be ready to take your questions. Thank you. Something very beautiful. Now these cards, of course, will be sold in limited numbers. Some people might consider it is a bit of a limit to the supply.
And you
see that what they have been
produced as much as they could. And I think it's absolutely wonderful. It's part of the ethics of MS. We have tried and reproduced this technique with modern means, but we prefer to preserve it in its integrity. And but of course, the
difference would be slides and possibly
not necessarily to the native eye, but still kept to the old method and that's part of the future working at Amex. And now I'm prepared to answer your questions. And please take a microphone so that we can hear also those who are following us elsewhere. Good morning. I'm sorry, I'm back to more financial issues.
But could you tell us a little bit about the beginning of the year? Is the trend just as good as it was in 2017, especially for geographical area? The second question, what is the impact on your operating margin of the activity? And also, given the tax rate, what can we expect for 2018? Well, three questions.
I will answer them vaguely. First of all, the quarter is not yet over. You know that I'm traditionally very cautious and prudent. And there's also something pretty specific for the Q1, which is the Chinese New Year, which is not always at the same date. And this is a very important event.
So long as we know how to reach the end of March, we can't really say. But what we've been saying over the past 18 months, that we've been doing it sometimes, is that we have more or less the same trend continuing. Sometimes we have a quarter which was exceptional
the year before or maybe the
fastest because 1 week before, 1 week after or maybe there's the flu and we have fewer employees. But moreover more or less, we have a similar trend over the past 18 months with slight variations. And we see that, for instance, at the end of the quarter that we had a strong euro. And of course, this has an impact. So were there more trips inside of Asia, less in Europe?
Possibly yes. But the fundamentals in which we are interested are similar. Now as to the impact of the exchange rates, the euro is stronger. So there will be an impact, but we don't really know exactly where this will lead us because we have to finish the year to know the difference between the PEO rates and the average rates and so on. So yes, but there will be an impact that we cannot quantify at this point.
As far as the tax rate now is concerned, we had not foreseen it will be taxed more heavily in France. There are just a few of us who are taxed more. I hope that we can be pleased with it. But at any rate, we'll see. What is certain is that the American tax reform, which obliges us to take some more provisions this year, should benefit us in 2018.
We should have a positive impact of the American tax reform in 2018, 1.5.1.5.
More.
Melanie Flutier from JPMorgan. I have four questions, if I may. The first one has to do with the profitability. I would like to come back to this. Beyond the foreign exchange, can you give us some indication as what is to be expected in terms of the cost developments, things that you control in terms of marketing and other cost plans that you have?
In terms of marketing costs, which is very much related to the fragrance activity, are we are you going to have a major launch this year or not? Secondly, it has to do with the production capacity in the leather sector. This is not going in a straight line. So usually, we have 7% to 9% the growth in average. But when are you going to step up?
Because historically, we also had times where we had double digit growth. From what I understand, so in the coming 2 years, I'd like you
to confirm this. 3rd point, it has
to do with digital development. So clearly, you have completely revamped your e commerce platform. But I would like to know what your position is on retaining is on the on third party digital development. It would lead you to sign with some partners or not to sign with some partners, if you can pass to China where there's a major development there.
I will leave it at
the only 2 questions at the end. So first, well, I mean, despite on everything, basically, first of all, you can observe that we are very cautious because we are talking about exceptional profitability here, whereas net profitability is historic. So we pay attention to words. And this year, I'm always very scared of but we had an exceptional year in 2017 with plus 9% and no change in the working capital requirements, which is exceptional. So we benefited from our provisions in 2016, and therefore, we had a great profitability for the first half of the year, but the ForEx effect will take place at the end of the year.
And we finished with a very low inventory, which is also something which is not natural in a way. So necessarily, our operating our operational profitability will be more than usual, but it all depends on the customers. It's difficult to quantify, depends on how far to go in terms of inventory building and so on. Where you hurt my feelings is that we do not have any marketing division with the MMS. I mean, we have a communications division, but this is our specificity.
So yes, we had communications expenses for the launch of Twilio. It's not really not so much a change of strategy. It has to do more with Charlotte Tilley, managing in 2018 because we want to really settle those fragrances that sell well over time. So we continue with the success of Galo and also with the Comme des Hermas with an Audre Fresh Audre Divair, sorry, which is our new fragrance there, a new version. And then we continue with the cologne tradition.
We started with the Eau d'orange and now we're going to have which is a major success with little communication, just a little bit of communication on this. So we have reached approximately 5%. These are our communications expenses relating to the turnover, and we find that this is a
good figure. Now to the digital development,
that's a hard question because we don't want to answer it. But first of all, we did not launch our site anew. We're going to really install it over time. And as you may imagine, lots of people are asking us to partners. But when I talk about digital developments, I'm making a little long, but I would like to get back to the kind of issues that we raised in the 1970s when we talked about going international.
There was this discussion back in 1970s as to whether we wanted to go international or not. And we said, no, it's not worth it. The whole world comes to various. It's It's empty cost a lot of money. It's risky.
And how can we do that? And it happened. It so happened that there was a vote taken and there was one vote extra to actually go international, and this is what we did. And I think it's the same kind of situation that we have here for digital development. We said, okay, everybody come to our store.
Should we go for it or not? Yes, we have to go for it, of course. But it's also risky. And then the second thing is that, okay, how can you well, how do we go international contrary to other companies who went to U. S.
Department stores with 7 years, sometimes also license. But we decided to do it on our own. It's longer, it's higher, but we didn't purchase licenses in the 1990s and we continue to do it. So I think we are applying a somewhat similar strategy to digital development now. In other words, we're trying to have the best possible platform on the Internet, and we're trying to build it.
It's not we don't want
to be too fast. We don't want to lose control of our products. This is a digital platform that we need to also allow to China, and we're going to see whether we can how Viking control over it, how we can possibly go to Alibaba and so on. But we can see that the social buying in China is something that is much more widespread than anywhere else. So we need to try, 1st of all, to install ourselves there and try and keep things under control.
This is just a general principle. And if it's strategic, it is in your interest that you'd be within LMS and you should not outsource it and you should not go with web partners. Otherwise, it might be a little choosy. That's my opinion.
Hello. Daniel Fernandes from Valle Economica Brazil. You indicated that your new store in Sao Paulo is not working. No, no, that's not what I said. It's not I said it's not thanks to me, which is that you paid 5.5%.
No, no, it's working very well. Like for like basis? And if yes, by how much? And what are your medium term plans in Brazil? And how do you see the market that market today?
And generally speaking, what are your prospects for the world Literacy Market for 2018? Thank you. Brazil is a country that I like very much. And at constant scope, we are growing. We have 2 stores that's why 3 stores, we have 3 stores.
He's the retailer. He's running 2 stores. We had 1 in Sao Paulo, which is a historical one. We opened 1 in Rio just before the Olympics to see able to sell titles, yes. Anyway, so both are doing well.
And we will put 3rd one, it's not on the other side. And the growth rate is quite high. And on an in the medium term, I would say that the middle class and the resources that they have ought to represent important countries. But you have some economic difficulties in the same effect than I do. So 2017 was not the best year in the development experienced by Brazil.
The good thing that has contributed for luxury products is the import duties. You have these import duties which are very high on our products. And so we sell Lindy also to Brazilians side of the Colombia, Buenos Aires or in Lisbon or Peru, etcetera. So for the moment, we're mixed with other industries in terms of the duties and so the prices for Brazilians in Brazil tend to be high. So for as long as we will have these customs duties that are very high, I don't think it will be able to continue to increase the number of stores significantly because after all, Brazilians travel a lot, at least our customers do and the price is an important element.
And then the average cost of luxury, I ask the analysts to know this better than I do and who position themselves on it. It's very difficult to say that we are in an uncertain world, but the forecast 2018 should be more or less in line with 2016 except for 1 or 2 points. Now what has actually changed as cancer when I was appointed CEO in 20 10. We were more or less in the average. We would I think there is a real polarization in our industry, so some succeed very well and others don't, etcetera.
So I must have the same average as before, but the standard position is higher. Leopold Luthier OWS. I have a question on the management of your treasury or cash management, except for the difference euros per share, which corresponds to the same dividend as in 20152012. But your net cash position is much higher. So if I were to calculate, we should be at about EUR 2,500,000,000 in cash next year.
Do you keep
some do you redistribute? Is it going to call upon the change in policy of dividend distribution and the impact on the CapEx and the additions in the future? You're difficult to satisfy and then you have the question that you're not as successful and you're not happy. No, our position
is yes, it was an
exceptional year. We're ending with a very nice cash position. It was good time to have an exceptional dividend. But I remain cautious because the rule of
the
in cash to see the future. That's the goodwill strategy excluding except from dividend. Now I think you're in a very volatile world where you will have opportunities, there are risks, etcetera, and to have essentially a cash cushion, which allows you to act and yes, and there's really a true benefit in having the optionality in the moment. That's over the time. And this cash gives us positions.
We managed to finance 100 percent of our investments, no problem, and ensure and the exceptional dividend. So we have invested this year. We've made the most to actually have this additional €5,000,000 with also good progression of our EBITDA dividend. So that's €9,010,000,000 over the year. Hello.
Carrie, Daniel Biedefem Business. Trying to come back to the digital a little bit. Do you have a launch of the website of the new website in France? And just to go a little further with regard to what you were saying, Instagram launched shopping button in France. So can you, on the basis of social networks, unless you're present, start reflecting on this channel for sale, using that channel to do sales.
On digital, I find it very difficult to say because I had done so 2 years ago and it wasn't very precise. And if I would give you the exact things that we have in house, it's next week, okay? But if between the 3, 6, then forgive me, Europe will be soon, but we will really be putting in the marching order China before the end of the year. And that is going to really occupy the energy of our teams because contrary to the U. S.
And Europe where we are changing the website. In China, we didn't have those in the website. So it's totally new. So that's a major progress. We have something to reflect upon it.
It's important for us to stabilize our environment. We wanted to do something original originality is either something that pays off or it's a mistake to make e commerce through communication that is to sit and buy. You can also watch films, you can see this imprint on the world, the one we just saw, other things. It's a little more demanding, the 7 minute films, 7 minutes, keeping the attention of people on the digital is going to be good, but that is what we wish to do. And the first results that we have on the website are very positive.
In 2017, we now have a lot of connections that we didn't have on the smartphones. Over 60% of the connections are through smartphones. So I would consider the 75 5,000,000 people visiting. We don't have 75,000,000 obviously, clients in the world. But there are certain people who actually visited anti conversion, those who visit and those who buy has gone up.
So indicators are all green and it is important for us to continue in that way and to sustain that development. And the social buying, I'm looking for who's developing the net and also the distribution and the shoes this year. Should we test social by what's most advanced potential before we do so in China? More of the capsules and their like competitors, would you plan to do the same thing in the 12 to 24 months? On watches, I know that's a small part of your sales, but the sales of 2017 is lower than it was in 2012.
Can you tell us a little bit about the analysis of your lack of attractiveness in the sales of watches? And nationalities, which were the ones that participated most in 2017 and 2020 now, the month of 2018? First, we talked about market, then we talked about partnership capsule, the strategy of Hermes in general is not to make partnerships, okay? So I'm really against co branding, not something that you try to develop at all. I tend to think that sometimes it's a way of compensating for companies in house, but my role is to develop this creativity in house.
That being said, but for other reasons, we worked with Apple to make the Apple Watch. So I started by submitting this partnership and we did do the Amazon Apple Watch, so it's a division of the management on it. It's a company with the 3 share values. And so the idea was not to do a co branding but to bring the confidence in terms of flat scrap and design because they've taken the offering of our iconic watches. And so it was an opportunity which we thought was natural, but which doesn't aim to repeat itself.
So I'm not pushing the partnerships and capsulums like others. This is the money that we put aside. We have a lot of demand. I asked for some question, does it really sell Sejmaz? And I write first little my weaknesses in house, which is for once they were growing in Fort Me Into 2012.
I think there are 2 things. 1 was just clearly into the industry. It's really dropped. So we're not the only ones understanding. I said always said that we have a plan for watches.
We had to settle 3 issues: 1, certain creation. I have a lot of ambition for creation, whichever it is. And I think we've got some very strong models, but over the last year around 2012, we could have done better. I'd say that frankly, that takes time because developing a watch is something in duration. We undoubtedly had a problem of organizations because we became a manufacturing unit with the movement, the cases that we talked about, it was all vertically integrated and required work of integration that took some time.
And you needed to also agree on what is the commercial strategy, something that we work with on a lot of wholesalers as a retailer. So we reflected one of the cheaper maybe a little slow to pick on these retailer mentality setting on wholesale, yes or no. So any of the changes, we're beginning to see the fruit of these changes and to continue. It's a long haul, as you have mentioned, with weakness in the background, so other than the fact that the shipments are likely to be good, we still have to work in the medium term, working with very motivated teams. And so it's making progress, frankly.
And the third question was on the nationalities. There's no change, I would say, in the big numbers in the major nationalities, European, Japanese, Asian and Americans strongly. There is an increase, of course, in the number of Asian nationalities that are becoming growth rate. We see China continue to grow, but it's impressive also to see the arrival of metal tires, Indonesians and all of this is also concentrated in Singapore, which is a very important center. And so also the importance of nationalities of South Asia.
So there's a strengthening of Asian zone, but the balances. And can you tell us about the openings in 2018 and the major renovations that you'll be setting up this year?
In 2018, we're going to have 7 openings, 2
in China.
In fact, in China, we were 2017 and 1 in 2018, but we're a little bit late in the work, Not our works, but neighborhood. So we're going to open a store in Palo Alto. We're very excited about this. So all together, 7 stores. And then we are going to have refurbishment, but it's extension 2 in France are on the way at the moment, which means that it's a bit difficult to do France at the moment because we have a store in Monte Carlo and one is the Jean Jacques.
And then
in Asia, Europe, America, the one in Hawaii, which will be opening during the Q4 of the year, and we should be really a
beautiful fashion store.
Would it be possible to have some indication as to the amount of capital expenditure to be expected in 2018? And secondly, the percentage of the turnover, which is online? Okay. So this will divide the COMEX members. As far as CapEx is concerned, we are around 100,000,000.
That's the rough figure. As to your second question, not only will I not answer, but even worse than this, I refuse to set such an objective internally because I mean, what I'm saying is I really believe in the omnichannel, multichannel. And the customer has to choose and select where he prefers to buy. And the top is also have 5% to 10% or 15% sales online because of course, everybody is dreaming of me giving them this KPI so that we can then check on it internally. But I don't think that this is the most important thing, I mean, especially as we've decided to make a site which is both selling and communication.
But I believe that in the years to come, there will be for 80% of the purchases, a connection with the digital world. You need to look at it, to look at product or buy online. But our best customers, and this is something that's interesting, are those who buy it both online and in the stores. Second thing is that I think that there are lots of people who go to the Internet at some point who print out something from there and then go to the store to actually make the actual purchase. So there should be complete porosity between the 2.
I mean, there's one that is better than the other. And secondly, this is a situation that I do not set internally because I think this would generate 2 rigid behaviors, which would not be good for our omnichannel strategy. They're already there. Good morning, I have just one question on the millennials because some of your competitors generate about 60 percent of their sales in this category of customers. And I would like to know what the proportion of your sales is made with millennials, especially for leather goods because your entry price for leather products for bags in particular is fairly high.
So is it something that you monitor in such a way that you could possibly develop a specific offer for these customers who are going to be This is a very complex question, as a matter of fact. Now very frankly, let me continue to what I usually say, which is something that I strongly believe in, we do not have a marketing department. And therefore, none of our patients is specifically dedicated to the customer. And so now collection, we never try to have products for millennials or products for senior people or products for whoever some nationality. So it's really important to me that we have the true freedom of creation at MS.
And this is why I'm saying we have no marketing I mean, it is true. We have no marketing department. And but sometimes in the communications department, they do something that works. And sometimes, we sell some of our products to unexpected customers. But there's also a freedom to purchase.
There's no merchandise department. In other words, each store manager decides what he's going to pick, what type of product assortment he's going to have. So twice a year, we have 800 people from 49 different countries who come to us here in Paris to shop and decide what they're going to purchase at a store. And our strength is that we have a very wide product offer. In other words, even though you might be a millennial or maybe it's difficult for you to afford an MSD, but still you'd be able to find something.
And at a certain level of quality, I'm very proud to have EUR 100 50 or EUR 350 products, for instance, or more expensive products like gift bags. But it's what's important for us is that you appreciate your image products and then you come back to the store afterwards. So then also, I think that we should not have preconceived ideas basically, I think, right? So I fell into the Chinese market, for instance, they're very young there. Because the Chinese market is empty, it is.
And if I were to sell only to Chinese people, I would, of course, be millennials oriented. But we should not have any preconceived ideas because these Chinese millennials are very rich, and they're prepared to hide some expensive to wear products or bags and so on. So you have to be careful and not be too rigid and too oriented for your vision of who the millennials are. But this is my feeling, you know? And I think that if you have excessive weight given to Asian customers wherever they purchase.
You also have a specific weight of the millennials as well. So I think that sometimes this debate that the millennials has to do more with the indicator that describes the penetration of the Chinese market. And also something else that I would like to say and why did we continue growing? Well, the Chinese very soon learned what quality was about, what craftsmanship was about. And they really they actually changed their the companies from which they purchased the goods.
And now we have a lot of Chinese customers. Everybody who's not buying luxury goods on Monday will move to Hermes, you see. He lives with Fabienne Carre in China. He manages the retail distribution and network all over the world. And there was a Chinese person who walked into the store and said, oh, I cannot buy this bag, but very soon, I will come back and I will buy it.
My name is Marie Felicie Cogifi. And if I may, I have
three questions.
Could you tell us a little bit about the concession stores? At what point do you decide that you buy back a concession? At what point do you decide that it's better for that store to be a concession store? Maybe this is rare that this question is asked to do, but do you have an acquisition policy for small niche markets? And if yes, in what areas?
And I would like to, again, sorry, go back to the digital question. But at this stage, do you see any limit to what you would possibly be able to sell via the digital medium? Because what's unique at Hermes is the customer experience that is seldom seen anywhere else. So by moving to the digital world, we do not get this customer experience. So for things like frequencies, okay, may work for things that you already know, this may work, but literally there's a limit to digital development.
Thank you. Now as far as concession stores are concerned, this is what I would say. There are 2 types of concession stores at MS. The historic ones, We work to concessionaires for 3, 4 generations sometimes. And here basically is loyalty that comes into pay until the next generation really wants to go back differently.
And then we also have the country concessions, countries where it's supposed to operate directly and where we have concession stores. And there, it depends on the political climate and on how part of the world market this country is. In Russia, we started with concession stores, and because we think it was very difficult to operate if you were not Russian yourself. And now we have these things have changed, and we operate directly. In a number of countries, we still have their concession stores for legal reasons very often.
And it really depends very much on the legal environment. Sometimes you're not allowed to operate if you're a foreigner. And sometimes or very often when it moves about and things change, we try to have joint venture or staff in full of our concessionaires who are helping us. And it's good to also have someone who sees things from the outside. You can be very happy, and then you go to the future and the concessionaire says everything is horrible.
So we are developing organic growth. We've had lots of acquisitions. That's the second question about the acquisition. We continue making a lot of acquisitions upstream, in other words, to have a bit more vertically integrated production. Making the watch cases or the dials and so on, for instance.
So here, we have a fairly strong integration flow. But we're not very interested otherwise in niche development. This is not our strategy. As to digital development. Of course, customer experience is really essential for MS, but Maro is not for me to decide the customer.
If the customer wants, I would like to offer the customer the best possible experience. If he prefers to go to the store, that's fine. If he wants to go digital, that's fine. But as I said, we invest so much in the product and the quality that we put in it, the work that we put in it, the raw materials, already being able to attract a customer is good already as it is, and we're not no stops. I mean,
at the
time, we started opening shops in airports And we did that with very people who never dared walk into an Hermes store, who stopped going to Hermes stores. And so the idea is to be as welcoming as possible and digital development is a way to be able to be welcoming. And they will have to look at the videos. Unfortunately, they will have to eat some
of the communications
products, But we'll be trying to do this as much as we can, as well as we can. But I'm not in a position to say to someone, oh, no, no, no, this is not good. This particular channel is not good. So long as
we control it ourselves, so long
as we do it ourselves and so long as we remain open to our consumers' execution.
A question maybe on cosmetics, which is in the books for the coming 2 years, makers in particular. Hong Kong, you sold some real estate, you moved into some new premises. You is this going to be reinvestment in bigger surface? Is that on the books of 2018? On GES makeup cosmetics, we're developing
and now we're at our pace.
It's moving ahead, but it's early to give you a launch date on the subject. But indeed, it's within the framework of our strategy of MS and Pertuz. For Hong Kong, when there was a crisis in Hong Kong, it was difficult. The ovens had concentrated Hong Kong and we were so interested in us because the biggest door which is Galleria which we own and we thought this is a good opportunity to take some Hong Kong. Have you taken this business?
I
now
We put on sales where we were already watching in the press, we didn't say that we had a process sale. So it's being done. Whether it's going to be done or not, we'll see. And if it's done, we'll have a capital gain. On Hong Kong, we have a massive business we obviously developed.
We developed by enlarging our store, the elements of store, which is in Calhoun. And we would probably grow as well in half because our stores are a bit small as compared to our activity and our sales. It will probably be rental in Hong Kong rather than purchase. And it is not our location to have another flagship in Hong Kong. We have an incredible local customer base in Hong Kong and they really feel the comfort of the football, the people who travel a lot.
And so we've the whole of the Exeavour Company, we the piglets and did all that together and so it's fine. And between 2 months, it's too early because obviously, because of the new store as well as the shop of the store, they all come to see will it be sustained over time. And we
also had the Chinese New
Year, so while we were opening this also. Thank you for taking another question. On the IFRS 16, tangible impact to the company is a little bit, What is the impact that you can assess for 2018? And so, clearly, we are doing the assessment, but these are strongly impacted as a result of our commercial leases. As you know, the at least when to be received to bid in asset and liability, we can't complete the amounts to you today.
There will be a significant impact. If it's an impact on margin, yes, obviously, it will impact slightly margin because we will be noting in amortization in the place of the rent. So financial expense, which will correspond to the theoretical loan.
And I
may and stand corrected by you. IFRS 16, we treated balance sheet more than the income statement so that it doesn't pollute too much because otherwise, it has to do sort of pro form a. We will be doing it because it is a standard needed interest upon us. But in terms of management, that's what Axcel implies. We continue to see the growth, excluding the impact of this standard, which has no impact for us.
But including this standard, can then again, to see increase in margin, it's too early. It's too early. We keep the figures. Well, thank you. For me on behalf of the financial analysts of France to congratulate you for your record results and for this magnificent presentation as usual.
Especially with the 2 films. This was an innovation, very interesting.
I see you've missed it. There's a lot of discussion
before we decide on it.