Ladies and gentlemen, welcome to the Financial Year 2021 Richemont Annual Results Presentation. I am Alice, your call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it is my pleasure to hand over to Sophie Canard, Group Corporate Communications Director. Please go ahead.
Thank you, Alice, and good morning, everyone. While we're disappointed that once again we cannot host a physical meeting, Johann Rupert, Chairman Jerome Lambert, Chief Executive Officer, Robin Krone, Chief Finance Officer, Cyrille Vignoron, Chief Chief Executive Officer of Cartier, Nicolas Boss Chief Executive Officer of Van Cleef and Arpels Jim Fraser, Investor Relations Executive and I I'm pleased that you are able to join the audio webcast of Richemont's 2021 Annual Results and hope that you are all keeping well. We would like to remind you that the company announcement and financial presentation can be downloaded from richemont.com And that the replay of this audio webcast will be available on our website today at 3 pm Geneva time. Before we begin, may I draw your attention to the disclaimer on our presentation and company announcement regarding forward looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Also, I would like to note But throughout today's presentation, Hong Kong SCR refers to Hong Kong SCR China.
First, Jerome will take you through the year's financial highlights And say, Burkhard will then discuss Maisons key developments, group's financial and key initiatives. You will then hand back to Jerome for an insight into our digital strategy and the conclusion, which will be followed by Q and A session. I will now hand the call over to Jerome.
Thank you, Sophie. Good morning, ladies and gentlemen. Thank you for joining us today. As we are all aware, it has been an unusually challenging time as we had to navigate the uncertainty associated with the global And I would like to pay tribute to the dedication and perseverance of our colleagues at Richemont. We acted Quickly and decisively on all fronts with a primary focus on protecting the health and well-being of our teams, clients, In this exceptional circumstances, Richemont demonstrated remarkable agility and resilience, delivering growth in a number of segments and geographies and a significant increase in net cash.
Richemont delivered a strong financial performance with sales for the year decreasing by 5% at constant rates and by 8% at actual exchange rates. There was a marked contrast between the first and second half of the year. From April to September, sales decreased by 25% at constant exchange rates And by 'twenty six at actual exchange rates. Following widespread temporary store closure in the Q1, performance improved in the ensuing quarter As initially, lockdown measures began to lift. From October to March, sales rebounded with year on year growth of 17% at constant rate and 12% at actual rates, including a 4th quarter sales increase of 36% at constant exchange rate and 30% at actual exchange rates.
This momentum has accelerated in the month of April. Operating margin increased from 10.7 percent last year to 11.2 percent, despite operating profit slightly decreasing to 1.4 €78,000,000 given good cost discipline and a sharp rebound in sales in the second half of the year. Profit for the year amounted to €1,289,000,000 or 38% increase from €931,000,000 in the prior year. Cash from operating activities was strong with an €848,000,000 improvement. At 3,003,000,000 €93,000,000 our net cash position was almost €1,000,000,000 above the previous year.
To help you compare our Q1 and full year sales to pre COVID-nineteen level, here we are providing ourselves by business area on a 2 years basis. Overall, 4th quarter sales were 10% 7%, above level seen 2 years ago at constant and actual exchange rates respectively. The Jewellery Maisons and Online Distributors Both delivered growth above the 2019 levels for this period. Sales at the Jewellery Maisons were 28 24% higher than in Q4 twenty nineteen in constant and actual exchange rates. Sales At the online distributors, we're 7% higher at constant exchange rate and 4% higher at actual exchange rates.
Specialist Watchmakers in Fashion and Accessories Maisons were more impacted by the pandemic due to their greater reliance on wholesale sales. Prospective 4th quarter sales were lower than in the same period 2 years ago. Full year sales compared with Financial year 'nineteen shows similar pattern with jewelry, Maisons and online distributors posting higher sales while Specialist Watchmakers and Fashion Accessories Maisons recorded lower sales. Now turning to some of the year's highlights. Faced with the unprecedented impact of the global pandemic, our colleagues acted quickly to preserve cash and find new ways of engaging with clients.
As a result, the group was able to deliver a strong financial performance led by the Jewellery Maisons online retail in Asia Pacific. The Tableau Le Jeux du Marie Maisons grew sales billion pre COVID level with a 31% margin, a testament to their enduring appeal. The Specialist Watchmakers returned to growth at constant rate in the second half of the financial year. Their team adapt swiftly and efficiently to changing levels of demand, effectively managing large swings in production from a slow in Q1 to a peak in Q4. Mainland China was the 1st among major markets to begin a recovery and generated triple digit growth For the group, as the Maisons from local presence and the lack of outbound travel contributed to increased domestic spending.
Notwithstanding lockdown measures, retail sales delivered growth at constant exchange rates. Online retail sales at our Maisons grew by triple digit, underscoring the success of our digital transformation. This led to a penetration rate of online sales that more than doubled to over 7% from less than 3% of Maisons sales in the prior year. Overall, online sales accounted for 21% of group sales. We are fortunate that the digital transformation we embarked on several years ago was already well underway when the pandemic hit.
This activity has accelerated rapidly over the past year as many in person interactions such as fashion shows, Launches and the Watch and Wonders fair were successfully transformed into virtual events. Our Maisons also implemented fully Digitalized fashion showrooms, virtual boutique visit and the online distributor benefited from an improved use of artificial intelligence. In recent years, we have made strong efforts to increase direct communication and engagement within clients. This has served us well and now over 3 quarter of our sales are generated directly within clients. In this context, cost and working capital discipline were essential.
And thanks to the effort of our teams, Richemont was able to achieve a significant increase in cash from operating activities and free cash flow versus prior year as the recovery started together pace. Let me now walk you through the group sales performance, first by region, then by distribution channel and finally by product line. Let us first look at A geographical overview of sales at actual rates. Sales decreased in all regions except in Asia Pacific where Double digit growth partially mitigated declines in other regions. Europe and Japan were the most affected by reduced travel and temporary store closure.
This pronounced divergence in performance between geographies led to a rebalancing of the regional sales mix With Mainland China leading to the micro leading the macroeconomic recovery, it has now become the number one location in terms of sales. And Asia Pacific at present post a larger proportion of sales in Europe and the Americas combined. In the upcoming slides on sales, please note that changes versus last year are expressed in constant currencies unless stated otherwise. Let us begin the regional review with Europe. Sales declined by 30% and were significantly impacted by recurring periods of temporary store closures, the shutdown of a number of distribution centers in the Q1 and a continued lack of international tourism.
This was only partly mitigated by increased local demand. All main markets recorded double digit declines except Russia. We saw a net improvement in the second half of the year with the decline in the Q1 limited to 7%. The Maisons online retail sales grew by triple digits, helping online retail in the region achieve moderate overall growth. Sales in the retail and wholesale channel both recorded double digit declines.
All business Our areas posted lower sales. Also, the relative outperformance of the online distributors is worth mentioning. Sales in Europe represented 23% of group sales, down from 30% in the prior year. Let us move to Asia Pacific, where sales increased by 22% for the year with varying performance across the main markets. Sales in Mainland China grew by 107%, benefiting from a strong local presence and international travel restriction, which favored Strong domestic spending, strong domestic spending.
Thanks to the group's historical presence on Island Island, Richemont benefited from the impressive growth of this duty free up. The lack of mainland Chinese tourism weighted heavily on Hong Kong SIR and South Korea. So both locations saw a noticeable improvement in H2 with only single digit declines in sales. Overall, sales in the region grew by triple digit in Q4, albeit with less demanding comparative as impact of the pandemic We are felt from the Q4 of the period financial year. Both the Jewellery Maisons and Specialist Watchmakers posted double digit sales growth, including triple digit growth for both business areas in Mainland China, while sales for the fashion accessories, Maisons and online distributors declined.
Retail sales increased across all business areas and online retail enjoyed double digit growth, including triple digit growth in the Maisons online retail. Wholesales declined only slightly with growth at both the Jewellery Maisons and Specialist Watchmakers. Overall, sales in Asia Pacific increased to 45% of group sales from 35% a year ago. Let us now look at the Americas, where sales accounted for 18% of group sales compared to 20% in the prior year. Overall, sales declined by 10% year on year, but we saw sequential improvement as the year progressed And the effects of the pandemic began to recede with economic activity gaining traction.
Sales were flat Increasing from Q2 onward, including a robust 21% increase in Q4. Online retail sales showed strong growth with a triple digit increase from the group's Maisons. This was more than offset by lower sales in other channels. Jewelry Maisons showed Relative strength with single digit sales growth while sales at the other businesses areas decline. Let's now turn to Japan, where sales for the year were 21% lower than the prior year and affected throughout the year by international travel restriction and a sharp fall in inbound tourism spend.
2nd half sales showed growth, but with easier comparative due to the prior impact on the VAT In Q4 and the impact of the pandemic in Q4, in Q3, VAT and the impact of pandemic in Q4. Sales were lower in all business areas. In terms of channels, online retail posted good growth on the strength of the Maisons online sales, which more than doubled. Sales in the region represented 7% of group sales, broadly in line with the prior year. And finally, Middle East and Africa, where sales rose by 4% for the year, with a sharp increase in The second and third quarters due to increased tourist spend and resilient local purchasing, they partly benefited from the repatriation of sales from location with travel restrictions.
Double digit increase at the Jewellery Maisons and Online Distributors more than offset decline in the other business areas. Increased retail sales were partly due to the internalization of Jewellery Maisons operation in Saudi Arabia. Online retail sales grew by double digit Solid growth from the online distributors and the development of the Maisons online offer. Sales in the region accounting for 7% of group sales in line with the prior year. Let us now turn to sales by distribution channel.
1st, the retail channel, which is by far our largest channel contributing 55% of group sales, up from 51% in the prior year. Retail operations were impacted by recurring period of store closures due to the pandemic. Consequently, sales in our 1190 directly operated boutique rose by 2%. Asia Pacific and the Middle East and Africa grew, while the other regions saw declines. Also in the Americas, it was limited single digits.
Strong growth at the Jewellery Maisons More than compensated for decline in the other business areas. Sales in the 4th quarter increased by a robust plus 62%. 2nd online retail, which includes sales from Net A Porter, Mr. Porter, YOOX, ZOUT NET and the online sales of Watchfinder as well as well as the Group Maisons. Sales rose by 9% supported by growth across all regions led by Asia Pacific and Middle East and Africa.
In the Q1, sales increased by 22%, partly benefiting from new flagship stores on At the group Maisons, sales grew by triple digit in all regions, now representing 7% of sales excluding the online distributors and with North America contributing more than 50% of the data. Online retail sales accounted for 21% of group sales, up from 19% a year ago. Direct to client sales, a combination of both online and offline retail sales, represented around 3 quarters of total group sales. And 3rd, wholesale, which includes sales to franchisees And multi brand retail partners as well as realty income. Wholesale sales were 25% lower than the prior year.
Temporary store closures, a lack of travel retail and a lower digital penetration all contributed to this decline. Sales were down in all business areas and regions with Asia Pacific, however, broadly in line with the prior year. Wholesale sales stood at 24% of group sales compared to 30% a year ago. Burkhard will now take you through the Maisons and segment highlights. Over to you, Burkhard.
Thank you, Jerome. Let me review our business areas With all numbers at actual rates and starting with the Julien Maisons, which include Boucherlati, Cartier and Van Cleef and Arpods. The Julien Maisons demonstrated continued strength with full year sales rising by 3%. Sales improved significantly as the year progressed With 4th quarter sales up by 54%. As a result, full year sales exceeded pre COVID levels.
Both Asia Pacific and the Middle East and Africa recorded solid double digit growth. And in the Americas, sales were resilient with a low single digit decline. Robust sales growth in the retail channel, notwithstanding recurring store closures and a triple digit increase in online retail more than offset Lower wholesale sales. The operating result improved by 11% and the operating margin was solid, increasing to 31%. This 220 basis point improvement over the prior year can be explained by sales growth and strict cost control, which successfully mitigated higher gold prices and a stronger Swiss franc.
As was the case last year, investments were focused on digital initiatives and selected store openings and renovations. Let us look at the main developments over the past 6 months. The team showed incredible agility and flexibility in reacting to site closures, a sharp drop in demand at the beginning of the year, followed by a sharp recovery. The management of production, inventory levels, product launches of all resources And engagement with clients was commendable. The Maisons successfully enriched their product offerings to support the enduring appeal of their most iconic collections.
In jewelry, new reference were added to the Clash and Justin Clou collections at Cartier, to the Alhambra, Perlet and Frivol collections at And to the Macri and Tour collections at Buccelotti, to name but a few. In watches, Cartier relaunched Santos and introduced the Maillond de Cartier, while Van Cleef and Harpels added new References to its Frivol, prondisse amoreu and poetic complication watch collections. Julien Maisons leveraged their omnichannel capabilities to capture growth opportunities arising from changing consumption pattern. These initiatives included distant sales and new digital interactions with clients through online and mobile platforms. Digital events such as the Watchmaking Encounters platform at Watches and Wonders with a digital preview launch For Cartier's high jewelry, sur naturale collection ensured that our Maisons were able to interact with clients.
Selective investments in renovations and store openings continued throughout the year and included renovations of the Dubai Mall and Paris Saint Honore boutiques For Cartier, the Wuxi Center 66 renovation in Mainland China for Van Cleef and Arpels. Michelotti expanded internationally and Van Cleef and Arpels Launched an online flagship store on Tmall Luxury Pavilion. Let us now review our Specialist Watchmakers business This area, which consolidates the results of 8 Maisons. Sales were 21% lower than in the prior year, With a significant improvement in the second half, including an 11% increase in the 4th quarter. For the year, Asia Pacific recorded a double digit sales increase, including a triple digit increase in Mainland China, While sales declined in other regions, there was triple digit growth in online retail and sales in the retail channel were resilient, Registering a single digit decline.
Wholesale sales suffered the most as the pandemic had a more pronounced impact on multi brand retail partners. Due to a close partnership with our retail partners, inventories continue to be tightly monitored with the ensuing sell outsell in ratio above 100 The operating margin decreased by 4 70 basis points to 5.9%, largely due to lower levels of manufacturing capacity utilization, higher gold and a stronger Swiss franc. These were partly mitigated by tight cost control and reduced investments, which were targeted at select boutique renovations, new franchise and online flagship store openings as well as research and development initiatives. Of note is cash generation, which was significantly stronger than last year. Sales reflected the lasting appeal of iconic collections With launches mainly focused on new references across iconic lines.
This related to the Portuguese and Pilot collections at IWC, The Master and Reverdo lines at Jaeger LeCoultre, the Luminor family at Panerai, the Procession and Limelight Gala lines at Piaget, as well as the overseas collection at Vacheron Constantin. The specialist watchmaker, Maisons, accelerated the digital transformation With innovative online events such as Watches and Wonders, which were complemented by physical events in Shanghai and Sanya And digital campaigns on Tmall, Net A Porter and Mr. Porter. Several Maisons further engage with clients through virtual boutique experiences As for example, IWC, Piaget and Roger Dubuis in support of distant sales. The retail network increased with new store openings, mostly franchise, in Mainland China and South Korea.
In addition, IWC Scharfhausen, Jaeger LeCoultre, Panarei, Piaget, Vacheron Constantin all launched flagship stores on Tmall Luxury Pavilion. Let us now move to online distributors. Sales of our Maisons products on NET A PORTER, MR Quarter YOOX and the OUTNET are shown under both the Maisons' respective business areas and Online Distributors. They are subsequently eliminated under Intersegment eliminations. Sales contracted by 9% to €2,197,000,000 After the closure of several distribution centers in the Q1 of the year, sales showed sequential improvement and growth by 3% in the 4th quarter compared prior year period with a positive performance in the second half.
For the year as a whole, growth in the Middle East and Africa could not offset Declines in other regions, although Europe and Japan demonstrated relative resilience. We continue to see a highly competitive pricing environment for online This benefited the off season businesses of YOOX and the OUTNET, which together posted higher sales, But it proved to be a challenge for Net A Porter and Mr. Porter where lower stock levels and temporary site closures also weighed on sales. The operating loss improved by €18,000,000 to €223,000,000 reflecting strong cost control. Strict cash preservation measures led to an improvement of the inventory position.
Compared to the prior year, the EBITDA loss halved to €37,000,000 despite increased customer duties related to Brexit. Cash outflow decreased steeply as a result of strong inventory focus, Notwithstanding continued investments in information technology. Let us now look at some developments over the past year. As part of the previously announced succession plan, YOOX NET A PORTER welcomed a new CEO, Geoffroy Lefebvre, at the beginning of January. Prior to his new role, Geoffroy drove the expansion of Richemont's e commerce initiatives and previously has held several other executive positions within Richemont.
This appointment reflects the need for a new organization to support an evolution of the business and operating model, as Jerome will explain later. The migration to Net A Porter's new global technology and logistics platform made good progress and is on track for completion in the autumn of this year. Net a Porter and Mr. Portia successfully expanded their watch and jewelry offer with new launches, Product curation, interviews and editorial content. In Mainland China, through the joint venture with Alibaba, Which is developing according to plans, a digital watches and wonders campaign was successfully run on Tmall during April September.
Watchfinder continued its internationalization with new stores opened in September in Geneva and in November in Paris. Overseas sales now account for over 16% of sales. Watchfinder is also collaborating more And since March through the personal shopping service at NET A PORTER, Mr. Porter. Finally, let us move to the other businesses, which primarily include the group's fashion and accessories businesses and the group's unbranded watch component manufacturers.
The 25% sales decrease was broad based, double digit declines in all regions despite relative outperformance in Asia Pacific, Thanks to strong growth in Mainland China. All set sales were notably impacted by temporary store closures, particularly in Europe And international travel restrictions with its resulting decline in travel retail sales. Online retail recorded strong growth And we presented 17% of sales, an increase from 9% a year ago. Peter Miller showed resilience with only a limited sales decline. Operating loss increased to €241,000,000 Cost mitigation and strong cash protection measures were deployed early into the year, yet we're not able to fully mitigate the adverse effects of the reduction in sales.
In terms of main developments at the Fashion and Accessories Maisons, there have been notable enhancements in leadership and creativity. With the arrival of Philippe Fortunato in September as CEO of Fashion and Accessories Maisons and new creative Directors at Alaya, Chloe and Mont Blanc. In line with the group's strategy, La Maisons made good progress on the digital transformation agendas. Jarmilla launched a new e commerce platform with a richer customer experience. Chloe, Daniel and Montblanc All opened new flagship stores on Timor Luxury Pavilion, further enhancing their presence in the important Chinese market.
Meanwhile, many Maisons introduced digital fashion shows and fully digitized
showrooms.
In addition, the highly acclaimed launch of AZ Factory took place in January. Across our Maisons, core categories in iconic products, including writing instruments at Montblanc, leather goods at Chloe and menswear at Daniel were resilient. This was supported by notable product launches such as the Editions collection at Alaya, additions to the Woody collection And Gabriela Hearst's first collection at Clouet, the petit prince and planet writing instruments at Montblanc, the future expansion of G4 at Peter Millar. Let me now walk you through the rest of the P and L, starting with gross profit. Gross profit decreased by 9% and gross margin by 70 basis points.
The 59.8% margin was primarily impacted The lower manufacturing capacity utilization due to COVID-nineteen and adverse currency movements. The impact of a stronger euro against the U. S. Dollar And renminbi affected sales. And a stronger Swiss franc also weighed on costs, less did higher gold prices and a sales shift towards locations with higher duties and a highly competitive pricing environment in online fashion, albeit to a lesser extent.
These factors more than offset the positive impact of a greater share of online and offline retail. Let us now look at net operating expenses. At €6,383,000,000 operating expenses were down by 10%, At constant exchange rates, operating expenses were 9% lower, Demonstrating strict cost discipline. I will now walk you through the expenses by category. Selling and distribution expenses, which accounted for 51% of total operating expenses, decreased by 8% at actual exchange rates and by 5% at constant exchange rates, in line with the decline in sales.
This reflected strict cost control from the beginning of the year, €67,000,000 in rent relief relating to store closures and €46,000,000 from government support schemes. Communication expenses fell by 27% at actual exchange rates or by 26% at constant exchange rates, primarily as a result of aggressive cost cutting during the first half of the year as well as the cancellation of physical events throughout the year. This resulted in a lower communication expense ratio of 8%, down from 10% in the prior year. Fulfillment expenses increased by 1% at actual exchange rates and by 3% at constant exchange rates. Higher fulfillment costs resulted from the strong increase in online sales, partly offset by lower expenses at the online distributors.
Administration expenses declined by 5% or by 4% at constant rates. Expenditures in IT and new retail initiatives at the online distributors and Maisons. Other expenses at €272,000,000 were 7% higher than the prior year at both actual and constant exchange rates. This increase was primarily due to nonrecurring investment property expense. Net operating expenses as a percentage of group sales decreased by 120 basis points from 49.8 percent a year ago to 48.6%.
A resilient gross margin and rate of cost decline that outpaced The rate of sales decline contained a reduction in operating profit to 3% versus the prior year. Of note is the operating margin that was up by 50 basis points compared to the prior year at 11.2%. Let us now review the rest of the P and L below the operating profit line, starting with finance income. Net finance income amounted to €25,000,000 Compared to a net finance cost of €337,000,000 in the prior year. €362,000,000 positive swing can be explained by several items.
€294,000,000 favorable variance on non cash net foreign exchange gains on monetary items And a €255,000,000 improvement in fair value adjustments mostly related to the Farfetch and Dufry convertible notes. These positive factors more than offset a negative swing of €72,000,000 for financial income to financial expense, primarily due to lower interest income and higher bond interest expense and a €124,000,000 negative swing in hedging activities. Let us now turn to the profit for the year, which increased by 38 percent to €1,289,000,000 With the profit margin rising by 3 30 basis points to 9.8%. The increase primarily reflected €362,000,000 positive swing in net finance costs just seen. Our effective tax rate for the year amounted to 15.1% Versus 22.6% in the prior year, the rate broadly aligned with a 14% Swiss tax rate.
The trade also reflected lower trading in higher tax jurisdictions, better trading in lower tax ones and the unrealized Noncash investment gain in Farfetch notes, which led to a nontax gain. At €3,218,000,000 cash flow generated from operating activities were 36% €6,000,000 positive swing in working capitals due to strict cash protection measures implemented early in the year, but the reduction in inventories, Increased trade payables was an offsetting increased trade receivables as a result of increased wholesale orders in the 4th quarter. Let us now turn to our gross capital expenditure, which amounted to €513,000,000 30% lower than the prior year. Investments were significantly reduced in order to preserve cash Without compromising strategic progress, with a focus on the selective renovation or relocation of existing boutiques and investment in IT, mainly at the online distributors. Capital expenditure as a percentage of group sales amounted to 3.9% Compared with 5.2% in the prior year.
45% of gross capital Expenditure related to points of sale investments, including internal and franchise boutiques. Renovations included Cartier boutiques in Rue du Labe in Paris, The Dubai Mall in the United Arab Emirates and on Rue du Rhone in Geneva as well as Van Clief and Arpels in the Princess Building in Hong Kong SAR. Relocations included Vacheron Constantin on Madison Avenue in New York and Cartier in Osaka, Japan. Manufacturing spend accounted for 13% of gross capital expenditure and related primarily to R and D and machinery, mostly at Cartier and the Specialist Watchmakers. Other investments accounted for the remaining 42%, mainly reflecting investments in information technology at NET A PORTER and EUSE.
Let us now turn to free cash flow. Free cash inflow amounted to €1790,000,000 The €766,000,000 increase compared to the prior year primarily related to the higher cash flow from operating activities, Lower capital expenditure and lower lease payments, partly due to rent relief, all of which more than offset investments in the Farfetch convertible notes issue. And now on to our balance sheet, which remains very strong with shareholders' equity accounting for 51% of the total. Net cash increased to €3,393,000,000 at the 31st March 2021, up from €2,395,000,000 at the end of the prior year as a result of the items discussed on the previous slide. The Board has proposed a dividend of CHF2 per 1A share or CHF10 G shares.
The doubling of the dividend over the prior year Back to pre COVID levels reflects an improving economic environment, solid cash flow generation and attractive long term prospects Before summarizing the past year's performance, let me update you on the progress we have made on our And then on the sustainability roadmap. Richemont has a long standing commitment for doing business responsibly. 2019, we stepped up our efforts with the introduction of our transformational CSR strategy named Movement for Better Luxury. Recognizing the need for continual progress, our targets have been grouped under short-, medium- and long term targets. On our 2021 sustainability report will be published in July, let me highlight some of the good progress made across our main focus areas.
We have strengthened our governance through the creation of a Governance and Sustainability Committee, which is made up of non executive directors, Machine executives and ESG specialists attending. Its purpose is to assist the Board in reviewing and approving management proposals regarding strategy, policies and guidelines on our environmental, social and governance matters. It will also provide direction on best practices and ensure compliance with all relevant regulatory requirements. This represents active engagement from the highest levels of Richemont's organization and shows how seriously we take these responsibilities. Richemont is also co chairing the new SDG task force launched by the Responsible Jewellery Council last month to track and aid members' progress in implementing the 17 UN Sustainable Development Goals.
On the social front, we have introduced We Care, A global employee assistance program to support our colleagues' well-being. We have launched dedicated training for our teams on diversity, equity and inclusion matters. We have also initiated the development of a global diversity, equity and inclusion community, which is led by the heads of DEI. We began appointing across the group, maisons and geographies some 2 years ago. We continue to give back to the communities in which we operate and have rolled out a global volunteering framework to encourage increased volunteering.
In addition, we have launched several initiatives through our Maisons to promote children's education and literacy, notably by partnering with UNICEF. Richemont is committed to transparency and traceability in raw material sourcing And we'll continue to work collaboratively with industry organizations and business partners to promote best practices across our full supply chain. We're committed to respecting responsible business practices, human and labor rights and the environment. Today, Over 95% of the gold we purchase is RGC chain of custody certified and comes from recycled origins. After several years of collaboration with peers through the Color Gemstones Working Group, we participated last month in the launch of the gemstones and jewelry community to promote responsible business practices across the gemstone industry.
Richemont is committed to sourcing 100 percent renewable electricity across group operations by 2025, in line with RE100 initiative objectives and is finalizing its formal commitment to science based targets in line with the Paris agreement. The 2021 sustainability report will report against our short term targets to March 2021 and will include enhanced disclosure in areas Such as water consumption. Let me now highlight a few noteworthy sustainability initiatives. 2020, Cartier established the Cartier for Nature Fund to preserve biodiversity and healthy ecosystems across the planet. The Maisons also participates in the Richemont led plastic shift initiative and since 2020 has eliminated all single use plastics from packaging.
This March, IWC achieved certification to the stringent chain of custard B standard of the Responsible Jewelry Council and is the only Swiss luxury watchmaker qualified to date. Other specialist watchmakers are on the way to obtaining certification. At the 2021 Watches and Wonders Fairs, Panerai revealed its submersible Elab ID Concept Watch Made of 98.6 percent recycled based materials by weight, the highest percentage of recycled based material ever in a watch. The appointment of Gabriela Burst has accelerated Chloe's ambition towards lower impact materials. In its first show, more than 80% of cashmere yarn was recycled and more than 50% of silk came from organic agriculture.
In addition, ESG metrics have been incorporated into Chloe's senior executive KPIs. At YOOX NET A PORTER, the Infinity program aims to promote circularity through a number of pilot initiatives to reduce pre- and post consumer waste And empower customers to make more conscious, sustainable and circular choice purchases, notably through the Netsustain offer. Moving back to numbers now with some final words on our financial year performance from my side. First, Richemont delivered a strong performance in exceptional circumstances. The sharp rebound in the second half led by the Julien Maisons Online retail and Asia Pacific, especially in Mainland China.
The Jewellery Maisons generated sales exceeding pre COVID levels In a solid 31% operating margin highlighting the enduring appeal of Cartier, Van Cleef and Arpels and Bucielatti. 2nd, our strategy was executed with discipline and agility. From the outset of the pandemic, our teams reacted swiftly to manage costs and protect cash, which led to an improved operating margin and substantially higher cash flow from operating activities and free cash flow. We have an efficient and well established process to manage the sell in, sell out ratio with our wholesale partners. This control has contributed While our digital transformation began a few years ago, this year we've witnessed benefits From our progress to date and saw an acceleration of new retail and digital initiatives as Jerome will expand on shortly.
3rd, as just reviewed, we further progressed on our transformational CSR journey. 4th, Our strong balance sheet with a net cash position of €3,400,000,000 not only acted as a fortress, but also provided flexibility And acted as an engine to support our ambition. Back to you, Jerome.
Thank you, Burkhard. Before concluding, let me share with you some insights into our digital strategy. This year, Richemont's digital strategy has accelerated strongly. Online retail sales at our Maisons grew by triple digits and represented 7% of our Maisons revenue compared to less than 3% a year ago. In addition, digital initiatives supported our ability to connect with customers and thus underpin our retail sales performance.
Maisons leveraged new tools and communication channels including mobile sales, video and social media interactions to enable more diverse customer journey. This led to significant distance sales. We have strengthened our new retail foundations with the rollout of Our sales force CRM program across 8 Maisons and the client selling application for sales assistant, which enables a better use of data. Most of our Maisons and businesses have now localized their website in the Middle East and will now pursue this in other locations. New omni channel routes have been activated such as Montblanc and Cartier Click from store and boutique appointment and we have implemented new touch points with customers, A table in Mainland China with 9 new flagship stores on Timo Luxury Pavilion.
We have also made progress in upskilling our teams through our digital training programs in UIs. In November, we announced a partnership with Alibaba and Farfetch This includes a US300 $1,000,000 investment by Richemont in private convertible notes issued by Farfetch Limited And our intention to take a 12.5% stake in a joint venture being credited in Mainland China with Farfetch and Alibaba. Another important part of our digital strategy relates to the evolution of the business and operating model at Net A Porter, Mr. Porter, YOOX and ZEOTNET. To complement their wholesale offer, Net A Porter recently introduced a consignment offer for some key brands partners.
This transition for an EIBRI model mixing 1P and 3P will accelerate this financial year. For YOOX, we are looking to establish a marketplace offer during financial year 2022. The operating model of these businesses is also evolving in several key areas. We are progressing with the localization and our operating model to capture even more growth, notably in Mainland China And the Middle East, building on strong local partnership. Businesses are also increasingly tech savvy.
The migration of Net A Porter to a new platform will enable a single view of the inventory and of customers to improve service and support sales. Ultimately, all this evolution will enable us to better meet our clients and partner needs and lower our capital requirements. In conclusion, Richemont, its Maisons and businesses demonstrated strength in the face of unprecedented level of global disruption. Our performance was supported by several factors. First, the brand equity of our Maisons is rooted in their strong heritage, craftsmanship, creativity and innovative spirit, which strengthened the enduring appeal.
2nd, The ability to connect with clients throughout new retail initiative and a customer centric mindset reinforced by a strong local presence in markets such as Mainland China, the U. S. And the Middle East where demand recovered faster. 3rd, Richemont showed agility adapting Quickly and pricing investment into the most strategically important areas. It is worth reiterating that Through online and offline retail sales, threefour of our Maisons sales are now directly generated within clients, which enables a closer relationship with and better understanding of our clientele.
Finally, the strategic partnership we have forged over recent years with, for example, Alibaba, Dufry, Watch and Wonders And through Time Valley has enabled us to seize meaningful growth opportunities. We very much believe that partnerships make you stronger and we'll continue to take this approach. I would like to close this presentation by thanking all of my colleagues throughout the organization for their dedication, ingenuity and discipline during what has been A challenging year for everyone. Together, we'll craft the future. This concludes our presentation.
Thank you for your attention. I will now hand back over to you, Sophie.
Thank you, Jerome. We can now start the Q and A session.
The first question comes from the line of Louise Singlehurst with Goldman Sachs. Please go ahead.
Good morning, Louise.
Ms. Singhal first, your line is open. You may ask your question.
Hi, good morning everyone. Apologies for that. Thank you very much for taking my call and the details so far. Just speaking to the two questions, if we look at the jewelry Maisons to begin with, I wonder if you could Help us think about the retail component. Obviously, the 62%, would it be fair to assume retail would be near the 80% mark if we look at the Kind of the wholesale dynamic going through there as well.
And I wonder if you can talk about obviously volume, but the positive impact from mix going on in the quarter. And then secondly, if we could just have a look at the spread model, it sounds very interesting for YOOX and Neta Porter. It's very clear from a brand And also the consumer perspective, it makes sense. What does it mean in terms of like the volumes and the margin impact? And is that only the 1st party on offer for a few Larger brands.
And then just finally on that same point, we look at the brands, is it available for the whole inventory catalog or is it is from a curated added perspective.
I think first question on Julie would be For Cyrille and Nicolas, so I would just like to hand that question over.
Nicolas, you want to start? Oh, I can. So for the question, the by channel, the strongest channel throughout the period has been the ecom, Which has gone about triple compared to what it was before. And then a strong retail everywhere. The part which has been, of course, lagging behind In travel retail, as many airports and travel retail destination being closed, it's good, but natural.
And then on the other part of the specialist retail and the wholesale, it has been also a bit behind. So Yes, the strongest network has been ecom, 2nd retail, 3rd, I would say, franchise retail and 3rd and 4th, coming the Specialist Network. Nicolas?
Yes. Thank you, Thierry. If I may add to that in terms of mix Within the collection, we've seen performance pretty much across the board. What we've seen in jewelry during this year is Some difficulties for HiJuri due to the difficulty to organize events, international events for clients to travel And also due to a certain lack of social opportunities for clients to wear new pieces of high jewelry and the growth Being much higher performance, being much better with more daywear jewelry and daywear lines, as it was mentioned in the presentation, Both for Cartier, Van Cleef and Apples or Boucherleti.
And then, Jerome Lambert speaking, I will answer to your question about the evolution of the operating model, Indeed, what we described here is our development of a more hybrid model Within YOOX NET A PORTER, here we speak from mixing 1P and 3P and heading to our Excellent experience in creative model, the marketplace as a marketplace approach. As we know, all are working in 1P gives you a higher lifetime value from your clients And that's what YOOX NET A PORTER has been building over the time with excellent service and business with the so called EIPs of the brand. To further expand and recruit, the opportunity of 3P is bringing an even larger platform When it comes to product availability, it's true for Net A Porter because their connection that has already started With the concession model shows on higher capability to answer to the needs of our clients, Both in term of vertical and horizontal. So we have basically we have a larger choice of assortment with the concession model and we also have a deeper or more available products for the bestseller of it. The second and very interesting approach of the 3P model to the 1P model, particularly when it comes to YOOX, is a linearization Within the year of the supply flows.
Indeed, on top of creating and carefully choosing the product To be present on our website, we'll bring an additional adaptation to last trends and last demand trends With immediate presence. You saw the numbers, that's 14,000 brands already and we can foresee A good 20% of additional offer without impact on our capital, thanks to the money.
Thank you. And the technology to deliver the 1st party, is that all in house constructed? Is that something that's all written in the CapEx program Thank you. It's my last question.
For the concession model, yes, indeed, the concession model and the dropshipper Currently and purely are powered and make available and possible with recent Work done on the replatforming, because the replatforming is also allowing a stronger localization capabilities From a tech perspective, so it's within the same frame. For YOOX and for other countries like China, We are currently finalizing the choice of technology that will come on top of the technical stacks that we have today, but within the frame Of our CapEx as said and as fixed in the past.
Thank you. Next question. Very
clear. Thank you.
Thank you, Lisa. Next question please.
The next question comes from the line of Francesca Di Pasquantonio with Deutsche Bank. Please go
ahead. Good morning, Francesca.
Yes. Good morning, Sophie. Good morning, everyone. Two questions also for me, please. The first is on watches.
If I look at the performance of the category as compared to the performance of the Specialist Watch Lakers division, it seems watches as a category are outperforming. Is this Mainly a result of the channel with Cartier more exposed to retail and online or is there something else that we need to take Into account in terms of product flow innovation or Strategic decisions beyond wholesale. And the second question is On a comment which was made by the Chairman this morning about the Long term strategy to build assets over time. I was wondering whether You could provide some color around this statement and what areas of Focus should we have in mind? Thank you.
Thank you, Francesca.
Yes. Maybe on the Thank you for your questions. And it was, obviously, you have partly the answer to your question in the comments of our Chairman This morning where he was highlighting some significant stock rebalancing happening for the Specialist Watchmaker in the Q4 of this year. And that's how you can understand the delta of performance between the two. Out of that, what we see is it's More time difference between the flows than any other material elements.
It's a very difficult question because we try To build brand equity over time in all of our Maisons, Some take longer. That's what I highlighted with I mean, panorized very quick. Van Cleef, we were more careful. It took us a while To really look at all the possibilities to go through the archives. And so that took longer, but it depends on It's a very good question, but one that I can't answer because we have to look at various categories.
You can do very well in a category that is not growing very well and it will not affect your P and L. So it's a question of capital allocation and human resource allocation. And I'm not going to speculate on the next I just tried to highlight the difference In approaches between different companies, our goal has always been to build brand equity And to build value instead of just buying it and paying goodwill, even though I guess the markets reward
Thank you. We can move to the next question.
The next question comes from the line of Ashley Wallace with Bank of America. Please go ahead.
Good morning, Ashley.
Good morning, Sophie. I have two questions as well, first on jewelry and then on specialty watches. My question on jewelry is really just about like I think it's a big picture question. Some investors we seek to believe that luxury was a was a COVID or lockdown beneficiary, and I think that this is especially true for the perception of the jewelry category strength. Today, you've obviously delivered a very solid quarter in jewelry with revenues up close to 20% on a 2 year stack.
How do you think about the impact of Reopening on your jewelry business and the sustainability of the performance that you're delivering, I guess, do you see Reopening is a net positive or negative on impacting jewelry demand. And then my second question on specialty watches Is just on a comment that's in the report, which says that sell out was ahead of sell in, but that in the 1st 4 months of the calendar year that you're Trading above 2019 levels when corrected for a significant stock rebalancing. Should we read that to mean that there was a big stocking event in April? Or can you just Explain exactly what that comment means, please.
I will answer the second question, it's Johan here. No, we've been reporting this as a metric for a while. We took a hit on our returns On net assets, etcetera, the metrics that we use in capital allocation For 4 to 5 years already, as we cleaned up the watch market And we invested heavily in logistics, software, systems, etcetera, For online route to market, We look at our clients, our wholesale partner stock and our own And after growing for years at 30% to 35%, that was obviously not going to last. So we acted proactively over 4, 5 years ago already by cleaning up the market. And one Thing that we wanted to make sure of is that we were not force feeding the market.
You see in the end your wholesale partners get stuck with stale stock, which they then immediately Put into the gray market, they don't like it, we don't like it, your brand equity is Effective. And so we must be a deliberate decision Not to pump watches into the market, but to maintain A positive sell out to sell in ratio. That strategy, which we started a few years ago, Obviously benefited us tremendously in this year as we did not have wholesale partners stuck With enormous levels of stock. So this has been going for 2 years. We've had this positively, The sell out to sell in ratio over 1 for over 2 years, It's a deliberate strategy.
So I don't think you should read too much Into stocking and destocking, that's not the case and that didn't happen. It's a long term strategy, but we all benefited from that strategy Of having a very clean business during this most dramatic year. You've got to remember that A year ago in May, we had a board meeting where to report that we lost in April, the month April alone over €400,000,000 in cash. Now obviously we started doing extrapolations. It was not very funny.
So we did act immediately and it was In fact, the biggest stress test that I think that Richemont's ever well, it's definitely the biggest stress test we've ever gone through. And I've been around since the 'eighty seven crash when most of you were born. Obviously, the 2000 and then the mini crash, But with long term effects of 2,008, but this one Came out of the blue and it stress tested us. And I think you can really look at our watch business, our jewelry business, all of our businesses As having, we turn really started turning in about August. So by October, November, the numbers and the cash flows were looking better.
But then by mid February, it really started picking up And those trends are continuing.
Okay. So the comment around the 1st 4 months of the year being above 2019 levels, I guess then is to do with what you're seeing in your In retail business rather than meeting to do with suggesting that April is much better than the, I guess, the minus 16% that you reported In the first three months of the investment you are making.
The testing trends, but we love to extrapolate them I'd be in for nice time because the world is still The free enterprise still having to cope with the idea of not having a hurdle rate. We have enormous liquidity. You've got Bitcoin. There are signs of bubble signs, if I can put it. And as such, All things being equal, we are performing very well Even in comparison to luxury goods rivals.
I'm talking about the risk of extrapolating Global economic growth and global trade, etcetera, etcetera, one should always just have Not an eye in the rearview mirror, but a balance sheet that can withstand Further shocks, we'll have shocks. I don't know where they'll come from, but we'll have further shocks. But what is especially pleasing is everybody has spoken about China, but we're seeing real signs of growth in the United States of America. So where the market let me make a general statement here. Where the markets have opened, We've done very well.
In countries where the markets have not opened, we Have benefited from our online business. That's not to say that our online business is not doing very, very well in countries in Mainland China, for instance, Or in China related, if we can put it like that. It's and I don't expect our boutiques, but that's I think we could ask Cyrille and Nicolas to answer That's because they have the daily figures, if they could say. I know that where the boutiques open, it's Accretive. It will be accretive.
Yes.
That's fair statement, Cyrille and Nicolas.
Yes.
Indeed, if I may, of course, we just confirmed exactly that. We've seen very, very good resilience. What we've seen throughout the period The attractivity of jewelry remains very strong. And as you said, Mr. Chairman, about route to market.
So when the only route to market was e commerce, we saw that route really grow. But every time Physical retail reopened. We saw customers and we see customers coming back and enjoying the physical experience.
So for the first question, say, Will the reopening retransfer the customers' appetite? It's not an equal pie. It's a pie cut is varying and can be volatile. So that's the 2nd part. So in some way, the positive part, when we see the kind of post crisis rebound like was in 2010 to 'twelve, There can be some robust rebound, but there can be some shock in between.
And there is a long term trend for branded jewelry, let's say, on a long term perspective, can be quite positive. And also appetite for customers and many new ones, especially in China or as mentioned in the United States or even Middle East. So the question is, say, how to see what can happen within a calendar year or a fiscal year is very difficult to predict. But the long term perspective, we think are quite positive.
Thank you, Eileen. Thank you very much.
Thank you, Ashley. We can move to the next question.
The next question comes from the line of Luca Solca with Bernstein. Please go ahead.
Good morning, Luca.
Good morning, Luca. Good morning, Sophie. Good morning, Borghat. Good morning, all. I have a question on clienteling and remote Sales, what we saw during
the most recent quarters is that there's been a
bit of a bridge between digital And in store sales and some of your peers have been using clienteling and CRM As a way to try and offset store closures, I wonder if you feel that you're on par On this remote selling and clienteling activity or if there's more that you are planning to do and preparing to do That could boost your capabilities down the road. As a second question, I seem to understand that even in the Q3, there was not much contribution from High Jewry. Do we understand correctly that high jewelry is still to come back and was not present in the Q4 as well to Any meaningful extent and could possibly be rebounding once occasions of use and also
Thank you. I will Jerome Lambert speaking. I will answer to the first part of to the first question. When it comes to our distant sales, indeed, During the first part of the pandemic, distance sales was the only way and all the clientele to develop around We are the best, if not the only solution to maintain contact with the end client. So in the second part of the pandemic All in countries like China where very rapidly after the Q1, most of our doors, if not all our doors, where we open, We saw emerging a new way of buying and a new way of interacting.
When it comes to China, it's obvious that live streaming event Took, I would say, a larger and stronger impact. And besides that as well, all the work done Within the Pavilion and on Tmall, it's been given the opportunity to leverage much more data And marketing intelligence that in the past. So in China, we see already the impact of This new performance marketing approach and how it leverages the level of performance and how it give us the opportunity To create new way of aggregating clients. When it comes to the rest of the world, Richemont is being investing for Casio Dikel in call centers and we have now more than 300 colleagues working in the different call centers around the world. And there the interaction with our colleagues in the call center offering Continuity in service, even when boutique are closed or out of the working as a traditional boutique working time As being a new source of client service and being part of So journey of our clients when it comes to discover the products, asking for more information without always to come To the centers of the cities and there are partly closing or the restriction in travel Has been a strong initiator to discover this new route.
So yes, indeed in the first part, It was this solution has no other solution. In the second part, we see new ways of interacting, new hybrid ways of interaction that we leverage. Cyrille Nicolas for jewelry.
So
the first half of last year have been really, really slow because most of the events were canceled. And for the second half, started to have some events, especially in Asia. So we had in Taiwan, in Shanghai, in Tokyo and Seoul. And we consider the appetite of Customers there was quite good. But of course, with no traveling from many other regions, it remained globally under.
But the Q4 in Hai Jui It was quite promising to what can come at some point. They said, we're still in a lockdown in many countries in Europe. There is still not a can of Even if there are some questions for vaccination, authorization and so forth, it's not there. So HiGiry will come back. Again, the question how fast this can reshape.
The customer's appetite is there. Nicolas, do you agree?
Yes, I fully concur, Ciel. And I would say also that we kind of reshifted the way we present HiJury from major international events That we like to organize that were completely impossible to probably more smaller size, more intimate, local or sometimes regional events. So it's also more diversity in the ways we interact with hydraulic clients and the presentations. And we see We already see the results of that, and we will probably see that improving again during the coming year.
Thank you very much indeed.
Thank you, Luca. Next question please.
The next question comes from the line of Susanna Puus with UBS. Please go ahead.
Good morning, Susanna.
Good morning. Good morning, everyone.
I have two questions, please.
My first question is, I'd say broadly on Goluby, but also pricing specifically. So It's pretty clear that you are outperforming your peers and the growth is very strong. I mean, I think, as you mentioned, you think that it's just an underlying strength of the brand. But I also have this feeling that, Obviously, over the last couple of years, you were a bit more cautious with pricing, especially versus other product categories like soft luxury. And we probably ended up in a situation where jewelry does look like relatively good value versus perhaps even some of the handbag prices.
So I'll be just curious to hear what are your plans when it comes to pricing, if you think maybe if this strong growth Cortignes, if you could maybe have some room to increase prices. And obviously, I remember you've been historically kind of rebalancing prices Across regions, but I'm here talking about kind of net price increases at the global level. And my second question Maybe just probably on regional performance. So you've seen a very nice acceleration when we look on a 2 year stock in the U. S.
Melissa, a bit of a deceleration. So could you maybe share a little bit of kind of color behind that? And specifically when it comes to the U. S, because Mr. Rupert mentioned that he thinks that there is maybe some sort of Long term concerns regarding a bubble or something like that in the market, but at the same time, he said that the U.
S. Was very healthy. I'm just curious if you actually believe that the momentum in the U. S. We are seeing is an actual kind of underlying momentum of the U.
S. Consumer. And if so, what is driving that given that it feels like the U. S. And especially for you now in Q4 is growing ahead of its kind of a long term growth lines.
Thank you.
I can pick up for the first question for a few things. Well, we don't comment for the other Part of luxury, but it's sort of strategy that worked this time. Say, we have to leverage the overall price worldwide Because customers are traveling and if you have some parts in the areas where it's structurally overpriced, of course, expect except For the part of VAT and sales tax that we don't control, but then it makes some perception from customers that The price at home is too high. If we've seen that the strength of our sales and robustness have rebound domestically, Well, also because customers knew that it was not overpriced, whether in China or in Russia and Middle East. So on some part where we didn't Try to make highest yield in period where everything was doing fine has been paying off there.
Then This said, we have increased Swiss francs, increased the gold price. At some point, we have to reflect. It's just part of the normal management of our pricing. So I think there is something that can come because of gold price is very high and because of the cost of goods coming to Switzerland, The fact you have equal pricing policy worldwide has shown it's more resilient in the long run. Nicolas or Jerome, do you want to comment as well?
Nicolas? I really Yes, I really agree with that. I think that over the past few years and before that crisis, we really gone through an international What we call fair pricing as Cyrille was describing and to have more marginality and alignment between the different prices The different regions and it's clearly a factor also that helped us somehow redirect sales from tourists To more local clients, because they know that they will pay pretty much the same price, excluding taxes and a fair price. And I think that we've not been opportunistic when it comes to price increases. As Cyrille was saying, of course, we have sometimes to adjust To our current to exchange rates and to the price of materials.
But that's also, I think, part of the feeling that goes with jewelry That there is more long term view, more permanence when you buy Druid and sometimes other categories. And I think that you have Once again, a homogeneous pricing and also a non opportunistic approach to price increase is well Understood and appreciated by your clients.
Sorry, it's
Mohan here. I think also Embedded in fair pricing, I'm always pleased when I look at Christie's and Sotheby's and even Phillips and Even watches antiquorum, when I see that the Maisons represented, they are inevitably And also in the watches that Cartier and Lange, etcetera, Fetch prices that make them Value in the long term, we joked earlier on with the press that there was a Cartier London watch That was sold at Phillips. It's a baseball or pebble Model and I thought I was going to go big and I bet, but the highest end of the Estimate only to lose because somebody else paid 5 times more. So if you are in the jewelry and especially eye jewelry business, You want your clients to have residual and investment value. So if you have a look at The sales at Christie's and Sotheby's,
they
Our products do well. So there is a fair price as well.
Okay. And probably,
Burkhard here, I
just want to address the question about The regional sales split, I think what was said by the Chairman before is It's very important to understand where markets reopen, we're doing very well, And this has been proven throughout the year. And this is not just a, I'd say a storyline where we have had a very strong business in China due to, let's say, the effects we know. The demand It's no longer outbound given the current circumstances. So we've had a very strong growth in China. But it's important to understand that the other major markets like the Americas or the U.
S. Particularly I've started to stabilize and some have started to grow again and have sequentially accelerated as the sanitary conditions have improved. Middle East, same thing, started to stabilize and grow again in summer. Now there is no signs of deceleration that we have seen. We've spoken about Some, let's say, more technical effects that have weighed on the Q4, such as boutique internalizations, where actually you take back the inventory from dealers and actually then shifted into your internal directly operated stores, Some rebalancing of inventory between regions.
So that's more a technical effect. The underlying growth trends or dynamic Has been, as in the U. S, quite strong. It really depends on sanitary situation, reopening of markets. And in a way, also the customer mindset that is associated with that.
I think in Europe, we've had The same evolution over the year. 4th quarter, definitely better Then the 3 quarters before. However, as we've seen, we've had we've seen Another wave of closings in Europe in our last quarter, which are now starting to lift, but we now see Japan again Closing down and buckling down. So it is really still a bit of volatility out there, but that doesn't change, I'd say the underlying trends that we've seen through the year. Once it's open, we are doing quite well.
Thank you so much. That's very helpful. Can I just very quickly follow-up on your comments on the regional sales Because obviously, the group is very diversified? You have many products that they've reached. Can you maybe just give us an idea, especially that the U.
S. Is a region where things have reopened, So and probably, hopefully, won't be closing, so you have probably the best picture. What have been the strongest performing and the weakest performing categories in the Would Tullary be leading the way or watches? Or what was it?
I wouldn't generalize these trends. It's and my colleague Cyrille said it in the earlier call today, this is Not necessarily about categories or product categories. This is one luxury customer. And With changing dynamics, with changing purchasing habits. And To that, you can add the appeal of the Maisons, its product offering, its positioning.
So I wouldn't necessarily project a trend by product category. It's one customer.
And then just to add to what you What we see is more time pattern following in somehow a different client journey when it comes to the different categories. And what we have seen along the different continents was a kind of same pattern when it starts with jewelries and it goes to Specialist Watchmakers then it goes to most of the accessories and soft luxuries and online distributor being more On off when the distribution center and when the operation are back to normal, they are where we enjoy growth and rebuilding and recovery.
Okay. Thank you. We can now move to the next question.
The next question comes from the line of Anur Bismuth with HSBC. Please go ahead. Good morning, Enlai.
Yes. Hi, everyone. Hi, Sophie. I have two questions. My first question is on the Rue Hauser Maisons.
So after such a stronger operating performance this year, how long is it going Okay. To reach peak margins in January Maisons going forward. And my second question is about the time value concept. What is your development plan going forward for this concept? Thank you very much.
Probably let me introduce the topic on Julien Maisons before I think Cyrille and Nicolas can add to it. What you call peak margins, I believe you referred to margins 6 to 8 years back. Situation is not comparable. And as you know, we will not give guidance for the simple reason that We have no clear view on where we're going to be in the next 5 years, let alone the next 6 months. Volatility is there.
And if anybody knows how to reliably Project out over the next 3 to 5 years, I'd be very interested to have that because I probably Would not have to work any longer because I would just invest on that basis. Sorry for the pun.
The strong count was very different.
Yes.
Mr. Rupert, we don't hear you.
I said both Burkhart and we would probably be sitting in the Seychelles by then. Yes, absolutely,
And not just for a week or so.
Yes. So to add on that, if you can Yes. If we can know what will be the gold price, what will be the dollar price, what will be the renminbi price versus Swiss franc That would probably have a clue. And if we can project that in 2 years from now, it would help because we don't know all of these. Many factors are So we don't know when it can be peak margin or not.
I think we have good margin now already considering that we have a gold price very high, Swiss franc very And something has been adverse in terms of dollar and things. So considering that, I think it's quite positive.
And when it comes to 10 Valley, a few words, just to again do a little bit of Update on the concept, first concept if you remember was launched 7 years, more than 5 years ago, I think close to 7 years ago Because we had so called hole in our distribution in China, not only in T1, but already at that time in T2 cities. So the concept was launched on how to bring quality, how to bring product training for end client In T2 Cities in China. What we have seen now is with the stronger even stronger performance In China itself with a lot of Chinese resident buying in China, it's not only T1, T2, but it's Also T3, T4 even to T5 cities. So the challenge that we had 5 years ago is come back, But now to T4 and T5 cities. And the concept being as evolved quite nicely in between And we see now again a second wave of success for itself.
Very clear, it is always done with a partner. So always our distribution, obviously our traditional retailers when they want to spend in the city or they already existing Of the city are owning the shop or the staff that are working there as their staff. It's not only Richemont concept because it's not only our Maisons that are sold there, but you see as well Some of the Maisons are present there in term of distribution. What we have seen as well now as an additional It is also a strong factor of modernization of the wholesale distribution, because it gives the opportunity to develop Luxury New Retail with them as well in the spirit of partnership. So we see it as a further factor of acceleration of the partnership with our traditional partner and a good way to embark our partner in that better service For the clients for the future.
Thank you. We can move to the next question.
The next question comes from the line of Antoine Belge with Exane BNP Paribas. Please go ahead. Good
morning, Antoine.
Yes. Good morning. Good morning. It's Antoine at Exane BNP Paribas. Two questions.
First of all, to come back on this question about margins. Maybe I understand about the moving parts, but there is one moving part which shows significant decline last year that was Communication, is it possible maybe to have an idea of the speed at which that communication spend could come back, Especially in light of 1 competitor being acquired by a larger one. And the second question relates to the Partnership you announced last year with Farfetch and Alibaba. Is it possible to have a few Comments about that, the sort of testing and maybe what you expect in terms of That partnership?
I can tell you that, Antoine, if you are near.
We will
obviously I wouldn't say it's obviously, it's a good question, but we will Go back to supporting our Maisons in terms of communication. But You know, a lot of communication also goes into high jewelry Expenditure on private events, it's not the traditional Communication that we used to have 10, 15 years ago. So a lot of it was forced upon us. We just simply could not hold events. And but you can Expected to return back to a more stable Percentage, long term percentage.
But it will be different. It will not be like it was 5 or 10 years So I suspect it will be a lot more digital and it will be a lot more focused on individual consumers As we learn more and more and more through our data management. To give you an idea when before when we sold 800, let's take out the We've got 800,000 watches. We only got data on 15% of those clients. We then introduced an 8 year warranty because we feel comfortable with it, But they have to register.
Suddenly, data capturing goes up multifold. So now we can communicate directly. It's just one tiny example of redirection of Communication spend. In terms of Joint venture and cooperation with Ali and with Farfetch, It's going according to plan, and we are working towards getting that hybrid model. But as we said in the beginning, as Jose said to me right in the beginning, you've got to understand we're 2 different blood types, data platform versus A3P, A3P, A1P.
So we're working towards a hybrid model And deciding on platforms. And But they are all leaders in the platform business. And basically, they're a tech company and we're a luxury goods company in terms of Our approach to online business, but our clients want Duration, but they want out of what. They want you don't want to go on a website and the stocks are not available. So the blend is the best model.
It's going according to plan. We've already had the first benefits of our relationship with Ali in China, and you will see high none. I'm confident that the investment was worth it and It will become more apparent to everyone over the next 2 to 3 years. Antoine, you remember we always discuss the problem of turning fixed costs into variable costs. Now if you look at our total lease costs, it's still, I mean, correct me, Burkhard, between 900 1,000,000 and a 1,000,000,000.
Yes, per year, yes.
Now that's per year, yes, per year. A large portion of that of course is boutiques. Now how do you create an asset turnover jump? You've got to make you've got to keep your fixed costs down whilst increasing your turnover. Now, especially in things like the fashion and accessories business, Where we, for instance, Mont Blanc got hammered this year with travel retail, it's Because they were exposed there.
If not if, but when we are Fully omni channel and atawad, any device, we should be able No, not sure. We will be able to increase our asset turnover And we will turn variable costs fixed costs into variable costs and that is the goal. And there are many components underlying into that mix, but the real goal is To keep fixed costs steady and to lower it whilst increasing turnover. And that is where if you're not a leader in online, You're not going to be able to do that.
Thank you very much. Maybe just a quick follow-up. I mean, I think Burkhard mentioned A stricter cost control at YNAB and also a new management team. Without asking for guidance, I mean, can we expect that I mean, we already saw that in H2 that the losses should go down in the fiscal year 2022.
I think we've got to have a shift in mindset a little bit, Antoine. If I go and buy a company for €10,000,000,000 8,000,000,000 of its goodwill, Then you amortize it and none of you folks, our shareholders, the press, nobody asks the questions. When you build the goodwill and you take it through your P and L, we get continuous questions. I know we're wasting. It's like advertising.
If you spend $100,000,000 50% of it's wasted. We just don't No, we know a lot more now and better, which 50% of it's wasted. But when you are developing your Systems, your logistics and you're on a big learning curve. We made mistakes. Obviously, we've made mistakes.
But if you look at it in terms of the quantum of our free cash flow and if you look at it in terms of What we're really investing, we have to go through that experience. Will it be continued to be as burdensome? No. That's why we're going to a hybrid model.
Thank you very much.
Thank you.
If we hadn't done that, We wouldn't have been able to do the deal with Ali. And if we hadn't done the deal with Ali, Jose would never have approached us.
Okay, understood. Thank you.
Thank you. Next question please.
The next question comes from the line of John Cox with Kepler Cheuvreux. Please go ahead.
Good morning, John.
Hey, good morning, Sophie. Good morning, guys. Congrats today on the figures. Just a question on The cost side of the equation, obviously, I think you guys have shown you can do a fantastic job when things aren't going so well. We saw it 10 years ago with the financial crisis, etcetera, etcetera, and further back.
But now, obviously, things are going back to normal. Just in terms of Do you think you've found a new way to do business during this whole crisis in terms of costs? Or should we just naturally expect And inflation in costs because you've been really squeezing the business over the last 12 months or so. And actually, we're going to get quite a big part of inflation in costs. My colleague was talking about communication, but I'm really talking about across Board and the furloughs, everything, etcetera, etcetera.
Or as I said, has there been a fundamental change as part of your omni Where you don't see that sort of return to really inflationary cost during the sort of recovery phase? And then same sort of question on the cash flow side, fantastic cash flow again. Maybe you can just Tell us what your thoughts are on CapEx for this year, but also on working capital because I'd imagine that will there'll be a negative Probably $500,000,000 maybe even $1,000,000,000 in working capital this year just as things recover and normalize again. Just your thoughts on the cash flow side of the equation as well. Thank you.
Well, John, just to give you a bit of background, What the way this year has unfolded. I mean, on the sales side, I think I'm not spilling the family secrets here that the first half year has been Challenging, extremely challenging, top line down. And actually, we've had quite a significant and you remember Your results in November, quite a significant and sharp drop in our respective cost lines, I would say, across All major cost lines, I would even say with a strong focus on A and P For our communication expenses, a big part because physical events were not possible. Travel Retail Channel, I would say, was nonexistent. So and many other Businesses and, I would say, communication opportunities severely disrupted.
Then as we've outlined, In a way, we've seen a year or 2.5. We've seen a sequential recovery accelerating out of the year of our top line of our sales base. And actually, behind that, we have Done the same on the cost side and also on the cash flow side. So in line with an accelerating business, we have reinvested in the business where we believed it was The right area to invest in. And actually, over the second half, many of these different spend lines I have already started to normalize.
I think in the end, we've come out with a pretty decent, So performance in the second half on all lines. The and what we have been talking about for some years now is And the Chairman touched on it again, is how do you actually transform fixed costs into more variable costs, Which go up and go down the way your business goes. I think this has seen an acceleration with the acceleration Digital, not only sales share, but also the digital spend attached to that. And I think over the years to come, this should continue on these trends in line With increasing online share of our sales. Obviously, we will not guide into the future, but I just wanted to give you a bit of context And this is this applies to the cost lines and the cash flow lines.
And any thoughts on working capital or CapEx at all?
Well, CapEx, I mean, we've if you look back over the, Let's say like even the last 10 years, we've somewhere we've always been between 5% to 7%. Over recent years, we've been more around the 5% mark. On this year, obviously, for obvious reasons, we dropped below in 4% at 3.9%. I would expect that to normalize, But still be on the lower range of the 5% to 7% range. But once again, we will always invest The ventures that we believe will bring us towards our strategic objectives.
Thank you. Next question please.
The next question comes from the line of Edouard Aubin with Morgan Stanley. Please go ahead.
Good morning, Edouard.
Yes. Good morning, Sophie. Good morning, everyone. Just two questions for me. The first one for Cyrille.
So Cartier has clearly outperformed since you came back and that continued in the Q4. In recent months, if you could help us understand what kind of is continuing to drive the Between product and communication and distribution. I'm sure it's a lot of all of that, but if you could help us rank in terms of order of importance, That would be very nice. And then the second question is on the others division. So the quantum of operating loss was quite a bit higher than Was it relatively broad based or was it mostly explained by Montblanc kind of high exposure to travel as hinted by Mr.
Rupert? And if so, should we expect a relatively significant narrowing of losses this year? Thank you.
Sire, do you want to start?
Yes, yes. For the first question, what we have seen, it's not Very different from what Van Cleef has seen as well. So on that, we are not the only one. The element we can say that size matter. And when we have a bigger size and also being a geographical presence, which is well established with strong retail, Also having gone with also development on the e com side and we were kind of proactive in China, in the U.
S. As well, Then it adds. I mean, there have been clearly on the market a premium to the biggest and the well known and stronger brand equity. So That can explain. On the R side category, it was, let's say, slightly better for Jewry, what she's coming behind.
And so on that being a leader in the market helps. So this I think are the key factor and what we said before, the fact that we had gone to Very strong flexibility in our supply chain, which can also help to answer the element on the working capital. The more we go with velocity, the less we have in the pipe. And then we can go directly from manufacturing to sales without having to pile up a lot of things in between. The more we come to e comm, the better.
So So it's a continuous improvement on that and all the elements work together. Looking also from omni channel where we can use any point of sales to be the Resource for the other also helps reducing the value of the inventory in the middle. And on that, I think we have really worked together with all our Richemont colleagues To do that and we have seen that we could rebound fast and we can we also shorten and shut down very quickly And adjust the inventory needed in the middle. So I think those plus strong brand equity, equal pricing, meaning that the Customers repatriated basically everywhere. We were on by clientele, we went positive from September basically everywhere in our country, Not by regions, because some regions are very dependent on incoming tourists, but by clientele, we have seen the growth coming back quickly.
So that's size, diversity, treating all clients well, being close to them. Even when there was the closed down, lockdown, The remote sales worked very well because the staff were in contact and had bonding with their customers. There were some region we didn't have e comm Like Dimituriz at some point when we did distance sale. And then we implemented very rapidly the e com that grew super well as well. So again, agility and adjusting to context.
Does that answer your question?
Yes, perfect. I mean, I could listen to you for talking about the strategy and so on for a long time, but that's in a nutshell, that answers the question, yes.
And I will pick up the second part on the fashion accessory category. So indeed there is here What we see here is a factor that Montblanc was a strong contributor to the result of that category And as for Montblanc, as we did with the Ausimelon, we decided last year to close manufacturers To preserve the cause of brand equity of Maisons and manage quantity of goods
in the
market, We have had to absorb last year a large part of non fixed cost absorption, so called OMM, the nice languages of your When it comes to that. So that's indeed what you see, it's a non plus That is, I would say, it is turning afterwards in a large minus for the category and it's due mainly To that, are stopping manufacture during the while. They are back now to work.
Okay, understood. Thanks.
Thank you. We can move to the next question.
The next question comes from the line of Thomas Chauvet with Citi. Please go ahead.
Good morning, Thomas.
Good morning, Sophie. Good morning, Wachs. I have one question on Spec Watchmaker. Just two points of clarification, please. On Spec Watchmakers, a couple of years ago, Borje, you have guided for target of 20% EBIT margin medium term.
You've reached 11% in H2 despite a weaker than expected Q4. What is the EBIT margin bridge to 20% from here? Is it mainly a function of The sales base, do you need to add what's been lost in the last 6, 7 years? So I think you're €1,000,000,000 below previous peaks in spec watches. And just On that distribution of spec watches, can you explain the 10% increase in the footprint of the franchise stores Year on year, I mean, is it a way to offset the closures of doors over the past 3 years you've done in traditional multi brand wholesale?
And the two points of follow-up. One is for Cielo and Nicolas, perhaps when you talk about hydro resale being promising, Was there growth year on year in hydro in the Q4 compared to what I think is a 30% revenue decline in Q2 and Q3 you had Indicated previously. And second follow-up for Mr. Rupert and his media interview this morning. When you said caring approach to a year ago, not Acquisition of your stake, but for collaboration, what type of collaboration could you envisage beyond the existing relationship in Eyewear?
I mean, is it Potentially buying Ulysinaga and Girard Pergo, working more closely together on Farfetch or on secondhand online platform? Is it ESG sustainability best practices discussion? I'd like to hear about this. Thank you.
Yes. John, let me Birkhead here, let me start with the first question, if I may. Now first of all, We don't guide, so I didn't give guidance. I think my exact quote was any self respecting Decently sized watch Maisons, I would expect to target that area or that range.
Actually, Birka, the question was, would it be possible to reach 20% again?
Yes, the peak margins, right? So 'twenty or even higher in terms of peak margin. So I left it much more open Because if you look at our different Maisons who have all very different characteristics based on their heritage, They're positioning their geographical spread. I would expect And this is very much the pattern that we see that the Maisons that have emerged first, that have out of COVID, Crisis or disruption accelerate not only their revenue lines but obviously The profitability lines. So that being said, this is still Outstanding as a comment.
But let's be very clear here. All Maisons have different A path of how to achieve their strategic objectives. And this is not a 1 size fits all approach. And I think it's very important to understand. You were talking in the second part of the question about the expansion of the franchise stores For the Specialist Watchmakers over the recent years, I think there's 2 elements in there.
1 is Over the years, multi brand points of sales have been successfully transformed into More franchise store offerings for Maisons, meaning a branded environment in a multi brand point of sale, and that is part of basically Having a reclassification of some of these points of sales or Customer relationships we have there. And secondly, operating and opening in promising markets With strong local partners, and remember, we very much value the partnership, has been Quite a successful route for Specialist Watchmakers in recent years to expand their presence without carrying The heavy cost base. So I think local heroes working with our Maisons in promising markets is a very good Approach that the Maisons have
chosen. Next question is relating to
Jewelry?
Yes, in Q4, whether it's positive or negative.
I leave that to my colleagues.
Nicolas, you start.
Yes. Thank you. Regarding Hydrate, Basically, with Adria, as you know, it's quite difficult to measure performance on a short term. So quarterly basis is really I'm sure to frame to measure what we've definitely seen is activities restarting and resuming, Better and more frequent contact with clients, high level of interest in many countries. So that should lead to promising transactions in the coming
months. In our side, we had Q4 to Q4 mildly positive. But I would say yes, same as Nicolas and we cannot measure just on 3 months.
And then there was a final question maybe for Chairman about gearing.
I've tried to answer that a few times In that, we are willing to work with A lot and with our competitors where it makes sense. And Obviously, in terms of ESG, it is Not a competitor. It is, as I said earlier on, human beings should start acting responsibly. So It's not only an industry wide initiative, but it should be Responsible, caring, spelled C A R I N G, attitude. So and in terms of e commerce, in 2015, I pleaded with all of our competitors to join us So that we could have a common platform.
And we are just taking control We've been investing in IP for a long time. I bet I invited everybody to join us. That stage our competitors all thought they could do it by themselves. And I feared that this was a classical case of the prisoner's dilemma. Well, it turned out to be that way.
So we carried on and we Yes, Don. And then in the end, we were approached by Ali and we met and we concluded a partnership in China and then A partnership. Jose then came and we realized the need For a hybrid platform. Now that platform is open to everybody. And you will remember that Kering also invested, But it's open to everyone to join.
Some people have chosen to join, some people have not chosen To join. And we will continue to do collaboration with what you deem to be competitors. If it lowers their variable Of course, because these will be very and ours. So it's We're prepared to talk to everybody. And that caring news is I don't know where it originated that it ended in the block, but it was so old and stale and 2nd and then it got picked up by serious people like Bloomberg.
And it's just unnecessary because it's an inconvenience to So, Harry and to me, we made it quite clear, we're going to remain autonomous. They will and We'll be friendly competitors. We already collaborate in eyewear, But we do it with others as well.
Thank you, Mr. Rufford. We'll take the last question because actually it's already 11.36.
The last question comes from the line of Ray Baum with SVG Securities. Please go ahead.
Hello, Roy.
Good morning. Well, it's actually good evening on this side. Thanks for just quickly getting me up for the last question. I was just curious, specifically, I also have 2 questions. 1, dealing with the online distributors.
I've noticed maybe just in terms of the gross margin of the online distributors, I see this time around you have not Disclose that, I mean it was 33.2%. Maybe just an idea where it was this year versus last year. And then the other question just revolves around the tax rate. I appreciate it that you say It's down to the Swiss tax rate around about 14%. But I mean we said with the first half where the tax rate, what was it, 55%.
55%. And now in the second half, it works out like 3% or 4%. So I mean, Maybe if you can just sort of clarify the area a bit and just help us think where we should Throw the dart at for this coming year tax rate. I mean, I know in the past you said 20%, 22% is sort of a tax rate. So Maybe just help us on that one.
Yes. Let me probably start with the tax rate. I mean, we the midterm guidance we've given It's never a hard target. It's a range, right? And we've been guiding for some years now 19% to 21 Percent tax rate.
And actually, the underlying rate Today, behind the 15.1% that we've shown here is around 20%, 20.2% to be exact, Prior to, I'd say, one off effects, which this year have brought the rate down to 15%, which last year actually have The rate up to 22.6%, so above that range. You shouldn't read it as H1, H2, that would be a bit too simplistic. It is based on A given geographical sales mix, which actually drives then behind it an estimation of the full year rate. And then when your business accelerates, accelerates across other geographies, actually, the Geographical mix of your profits and your high tax and your low tax markets can change quite significantly. So it's not that we do an H1 and then an H2 rate.
We always try to project out, given on a given a mix, What the effective tax rate will be for the full year? So in this case, 19% to 21% range is The range in which we are, bar one off effects, which can go in both directions.
And if I pick up the financial performance Of YNAP, because if we speak from our online distributors, it's mainly YNAP. Two things to say. First, yes, indeed there is a gross margin recovered During the last fiscal year, so we saw a nice increase. You can read it in the EBITDA improvement with the loss of the EBITDA at half During this year and it was also mentioned that the biggest part of that loss of the EBITDA is linked to a one off effect Of the Brexit effect with impact on the stock, the value of tax on the stocks that we have to consider. It was a big work done by the team, led last year still by Federico.
And then they did it in the context of warehouse closure, warehouse closure that as we all know is not the best To maintain margin and to keep cost under control. So It is really their work and strong contribution from Federico and his team during last year. Thank you.
Thank you, Jerome.
Okay. Excellent. So just so I mean so what you're saying is that the margin improved versus the prior year despite the first That was so much lower.
Exactly. Yes, definitely.
Thank you, Ray. So thank you all. The presentation is now over. And if you have any additional questions, please call James for me. Thanks, Simon.
And wish
you a
good day. Bye bye.
Thank you very much. Have a good day.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.