Good morning, everyone. Nice to see some familiar faces. Burkhart Grund, Chief Finance Officer, and I would like to thank you for coming to Geneva to attend Richemont's 2018 annual results presentation. Welcome also those of you watching the webcast. Joining us today from Richemont, Mr. Cyrille Vigneron, Cartier CEO, Mr. Nicolas Bos, Van Cleef & Arpels CEO, and Mr. Jérôme Lambert, Chief Operating Officer. The presentation and company announcements are already available on richemont.com. An archive of this webcast will be available today on Richemont's website at 3:00 P.M. Geneva time. First, Burkhart will take you through the highlights before reviewing group sales. I will present Maison's developments, and thereafter, Burkhart will walk you through the financials and conclude. As usual, the presentation will be followed by Q&A session, and questions will be taken from the floor.
Also, time permitting, from those of you watching the webcast who would have put their questions through the dedicated link on richemont.com. Before we begin, could you kindly ensure that your mobile devices are switch off? Thank you. Over to you, Burkhart.
Thank you, Sophie, good morning, ladies and gentlemen here in the auditorium, and those of you watching behind your screens. Thank you for your time today. Today, Richemont is reporting a set of numbers that reflect a generally improved macroeconomic environment, mixed currency movements, solid sales in our main product categories, and the impact of a number of watch inventory measures negatively affecting the wholesale channel. In total, sales increased by 8% at constant exchange rates and by 3% at actual exchange rates to finish the year at EUR 10.979 billion. Excluding inventory buybacks in both financial years 2017 and 2018, group sales rose by 7% at constant exchange rates. The past 12 months have been characterized by soft wholesale sales and strong retail sales, which were driven by solid jewelry and watch sales.
Operating profit reached EUR 1.844 billion, up 5% versus the prior year, reflecting improved gross margin and tight operating expense control. Excluding one-time items totaling EUR 208 million in the year under review and EUR 109 million in the prior year, operating profit increased by 10%. All in, the operating margin was broadly stable versus the prior year at 16.8%. Profit for the year increased by 1% to EUR 1.221 billion, impacted by a higher effective tax rate. Cash flow from operations was strong, rising by EUR 827 million to EUR 2.723 billion. Let me now walk you through the group sales performance, first by region, by network, and finally by product line. With numbers, as always, expressed in constant currencies. I start with our sales in Europe, which remains our second-largest region, with 27% of group sales.
Full-year sales declined by 2%, adversely impacted by the relative strength of the euro, inventory buybacks in the fourth quarter of the year, tight inventory control within our wholesale network, and the optimization of the wholesale distribution network. Sales in France, our fourth-largest market in the world, contracted, and in Switzerland were in line with prior year. The United Kingdom, however, enjoyed continued growth. Sales of all product categories were broadly in line or positive compared to the prior year, with the exception of watches, which were impacted by the initiatives mentioned before. As a result, wholesale sales declined while retail sales posted modest growth. Let us now review Asia-Pacific, our largest region, accounting for 40% of group sales. Sales in the region increased by 17%, supported by a weaker Hong Kong dollar, easier comparative figures, and a reduced level of buybacks in the year under review.
The double-digit growth was broad-based, led geographically by Mainland China, Hong Kong, Korea, and Macau, and product-wise by jewelry and watches. By channel, sales grew by double digits in both retail and wholesale. Let us now look at the Americas region, which recorded an 8% progress in sales. Lower wholesale sales impacted by watch inventory management initiatives were offset by strong retail sales. Retail performance was driven by jewelry and clothing, with a strong growth of online sales. Retail sales also benefited from the favorable full-year impact of the reopening of the Cartier New York flagship store in the prior year. All in all, the region's contribution to group sales was in line with the prior year at about 16%. The U.S. remains our largest market before Mainland China and Hong Kong.
Let us now turn to Japan, which represents 9% of group sales and posted a 6% increase in sales. Japan benefited from softer comparative figures and a favorable currency environment, which positively impacted tourist spending. Good sales growth in jewelry, watches, as well as the retail channel, more than offset the decline in wholesale sales. The year under review also saw the full year contribution from the prior year's reopening of the Cartier flagship store in Ginza, as well as the positive contribution from the newly opened Piaget and Van Cleef & Arpels flagship stores, also in Ginza and Tokyo. Finally, let us review the Middle East and Africa region, which generated 8% of group sales and saw sales rise by 2%. Higher tourist spending more than offset the adverse impacts of inventory buybacks and geopolitical and regional uncertainties.
In terms of product categories, jewelry, watches, and writing instruments posted moderate growth. Let us now turn to sales by distribution channel. The contribution of retail sales through the Maisons' online stores in 1,123 directly operated boutiques has increased to 63%, up from 60% a year ago. The 14% increase in retail sales was fueled primarily by jewelry and watches, with most other product categories enjoying growth. Retail was also supported by a net of six store openings, including the internalization of external points of sale. From a geographical perspective, all regions, excluding Europe, recorded double-digit increases. The group's wholesale business, including sales to franchise partners, reported a 1% decline. Increases in most product categories could not offset the decline in watch wholesale sales, which were impacted by a number of watch inventory management initiatives.
Generalization of points of sale, notably in Saudi Arabia and the United Arab Emirates, also weighed on the wholesale performance. Sales declined in all regions except in Asia-Pacific. Finally, let us move to the sales breakdown by product line. All major product categories showed growth. Jewelry, which progressed by 15%, enjoyed double-digit growth in most regions. The strong performance was attributable to all Maisons selling jewelry, namely Cartier, Van Cleef & Arpels, and Piaget. Jewelry has now become the group's largest product line and contributes 41% of total sales. Watch sales achieved a mid-single-digit increase as strong retail sales more than offset the weakness in wholesale sales. The 4% increase in leather goods was driven by good growth in Europe and Asia-Pacific. Writing instruments registered a 3% increase in sales driven by Montblanc, a notable achievement in a mature market.
Clothing posted a more measured performance with a good contribution from Dunhill and Peter Millar. The category was impacted by the exit of Shanghai Tang on the 1st of July and the change of creative directors at Chloé and Dunhill. Sophie will now take you through the Maisons and the segment highlights. Over to you, Sophie.
Thank you, Burkhart. Let me start with the segment highlights. The Jewelry Maisons operating margin strengthened to almost 30%. The specialist watchmakers managed to improve their profitability while taking inventory management initiatives. The profitability of our other businesses was impacted by a number of one-time items. Let's look now at the reported sales and operating results by segment in more details. We'll start with Jewelry Maisons, which segment accounted for 59% of group sales. The segment includes the total sales of Cartier and Van Cleef & Arpels Maisons across all product categories. Sales grew by 9%, driven by high single-digit growth in jewelry and double-digit growth in watches, and reflected strength in Asia-Pacific, the Americas, and in the retail channel. Also, sales partly benefited from the non-recurrence of a prior year watch buyback at Cartier.
The Jewelry Maisons operating results improved by 15% to EUR 1,926 million. This EUR 244 million increase reflects the robust sales just mentioned, good cost control, and the non-recurrence of the EUR 151 million one-time charges in the prior year. Consequently, operating margin improved by 150 basis points to 29.9%. Let us look at the main development over the past 12 months. In terms of product lines, jewelry recorded a broad performance with broad-based growth across unique pieces at the highest price points and more accessible iconic line, such as Love at Cartier, Alhambra at Van Cleef & Arpels. Watches reported growth across price points and materials, supported notably by the success of Poetic Complications at Van Cleef & Arpels, and the relaunched Panthère collection at Cartier. Wholesale growth was more measured, reflecting initiatives to tighten sell-in and optimize networks.
Strong retail sales benefited not only from the enduring appeal of Cartier and Van Cleef & Arpels creation, but also from the net opening of two internal boutiques, including in Toronto Yorkdale. There was also the full-year contribution of reopened Cartier flagship stores in New York and Ginza, and the new Van Cleef & Arpels Ginza flagship store. The year saw a number of successful digital initiatives at both Maisons. At Cartier, there was a Panthère pre-launch on Net-a-Porter and the Juste un Clou digital campaign. At Van Cleef & Arpels, there was the award-winning nano website for Le Secret High Jewelry collection, as well as the social media campaign for the Perlée jewelry collection. Let us now review our Specialist Watchmaker segment, which consolidates the results of eight watch Maisons.
The 6% decline in sales reflect EUR 203 million of inventory buybacks in the fourth quarter of the year under review. Excluding buybacks in the year under review and in the prior year, sales would have been broadly in line. Wholesale sales registered a double-digit decline, with Europe, the Middle East, and Americas being particularly impacted. Retail sales posted a double-digit increase, and sales in Asia- Pacific grew overall. A higher manufacturing capacity utilization, combined with a larger share of retail, tight cost control, and a favorable Swiss franc, led to 16% progression in the operating result to EUR 262 million, notwithstanding the impact of the inventory buybacks. As a result, the operating margin for the year under review rose by 190 basis points to 9.7%. Let us look at some of the highlights of the past 12 months.
Performance was varied among the Maisons, but wholesale sales were impacted across almost all Maisons by inventory management initiatives. These actions included buybacks, a strengthened approach to managing sell-in versus sell-out at our multi-brand retail partners, and the optimization of the wholesale network. By contrast, retail sales were strong across most Maisons. The performance was driven by four main factors. First, a focus on attracting new clients by introducing new aesthetic and broadening the offer within collections, such as the revisited Overseas at Vacheron Constantin or the Luminor Due at Officine Panerai, which, with its thinner shape, appealed to new clients. Second, the strength of a jewelry offer at Piaget, which brought more female customers to the store. Third, boutique openings in Mainland China and in new markets like Australia and Canada. Fourth, the internalization of external points of sales for Jaeger-LeCoultre in the U.A.E.
The year under review also saw increased investments in digital, be it in advertising, website rejuvenations at Piaget, IWC, and Baume & Mercier, or new partnerships with Mr Porter and Net-a-Porter. Finally, let us move to the other segment. This segment includes Montblanc, the group's fashion and accessory businesses, its watch component manufacturing, and real estate activities. Sales were broadly in line with the prior year, with growth in Europe and Asia- Pacific, notwithstanding the fact that the period under review only included three months sales of Shanghai Tang. The operating result including one-time charges of EUR 37 million compared to a net gain of EUR 114 million in the prior year. These charges stem from the sale of Shanghai Tang on June 30, 2017, and the write-down of assets at Lancel.
Excluding one-time items in both years, operating losses would have been EUR 28 million in the year under review and EUR 4 million in the prior year. The variance is largely attributable to the costs linked to the retail expansion at several of our Maisons, and the cost linked to the deployment of the group ERP. Let us look at the development of some Maisons. The year saw continued positive sales performances at Montblanc and Peter Millar. Montblanc benefited from solid growth in leather, new technology products such as the Summit smartwatch, and enhancements to its writing instrument pillar with a notable special edition in collaboration with UNICEF. There was good growth in clothing at Peter Millar and under the new creative director, Dunhill. At Chloé, the first collection under its new creative director received positive reviews and was introduced in stores this February.
Wholesale sales enjoyed growth across most Maisons, driven by a strong partnership with Yoox NET-A-PORTER and new points of sales within the duty-free network. Retail sales were broadly in line with the prior year. The impact of the disposal of Shanghai Tang was mitigated by a variety of retail initiatives. Excluding the exit of the Shanghai Tang stores, the network benefited from 16 net new store openings, such as in Paris Galeries Lafayette for Dunhill, and in Tokyo Ginza for Chloé. Dunhill introduced a new floor set approach to better manage its in-store offer, and sales were also helped by the accelerated rollout of new retail concepts at Montblanc, Chloé, and Dunhill. E-commerce developments and overall investment in digital have been on the rise. Let me give you two examples.
The click-and-collect features on Montblanc and Chloé's websites, and at most Maisons, new brand ambassadors with a large reach on social media to recruit and remain relevant to millennials. This concludes the review of the Maisons. Burkhart, over to you. Thank you.
Thank you, Sophie. Let me now walk you through the rest of the P&L, starting with gross profit. Gross profit increased by 5%, leading to a gross margin increase of 120 basis points to now 65.1%. The EUR 351 million year-on-year improvement in gross profit reflected higher manufacturing capacity utilization, a larger share of retail, and inventory buybacks that are below last year's level. These effects altogether overcompensate a 40 basis points negative currency impact. Charges associated with the watch buyback program, which reduced sales by EUR 203 million, lowered gross profit by EUR 135 million. Let us now look at our operating expenses. There was tight control of operating expenses, which increased by 5% on a reported basis, partially benefiting from a weaker Swiss franc and US dollar-related currencies.
Effectively, when you exclude the EUR 178 million real estate gain in the prior year, operating expenses rose by 2% on a reported basis. All in all, they accounted for 48% of sales, with 47% a year ago. Selling and distribution expenses, which accounted for 58% of total OpEx and 28% of sales, increased by 2%. This is largely explained by the strength in retail sales, which led to higher variable rental costs in markets where rentals tend to be indexed to sales and higher sales commissions. Fixed selling and distribution expenses remained in line with prior year. Communication expenses declined by 1% and represented 10% of sales, a ratio in line with prior years and attributable to a large extent to cautiousness in spending from the specialist watchmakers. Administrative expenses grew by 3%, reflecting increased IT spending linked to ERP deployment, digital, and security initiatives.
Administrative expenses and other expenses combined increased by EUR 56 million, excluding the prior year EUR 178 million real estate gain. This brings us to operating profit. Operating leverage improved. Operating profit progressed by 5% with a reported 3% sales increase, thanks to a higher gross profit and tight cost control. The operating margin now stands at 16.8% of sales. Excluding one-time charges of respectively EUR 208 million this year and EUR 109 million last year, operating profit for the year would have increased by 10%. The current year's one-time charges primarily relate to watch inventory buybacks and portfolio transactions. Let us now turn to the other P&L items below operating profit. We start with net finance costs.
At EUR 150 million, they were broadly in line with the prior year with a gain on monetary items and positive movements of the group currency hedging program compared to the prior year, partially offset by fair value adjustments on financial instruments. Now let us turn to the profit for the year. Profit for the year rose by 1% to EUR 1.221 billion. The higher operating profit was impacted by a higher effective tax rate of 25.5% compared to 22.5% a year ago. This increase can be explained primarily by a one-time non-cash tax charge arising from the recently enacted reduction in the U.S. tax rate. Excluding one-off items, the effective tax rate would have been around 21%, in line with the nominal effective tax rate in Switzerland.
We anticipate our effective tax rate to remain in the 19%-21% range for fiscal year 2019, always excluding exceptional items. I would now like to focus on our cash flow from operations. Cash flow generated from operations improved by 44% to EUR 2.723 billion. The EUR 827 million increase was driven by a high operating profit and favorable working capital movements. Working capital inflows of EUR 234 million compared to a EUR 29 million absorption in the prior year, partly reflecting lower inventory levels and the issuance of credit notes as part of the watch inventory buyback program. The non-recurrence of the prior year's EUR 268 million one-time contribution for the buy-in and transfer of the group's defined benefit pension plan for U.K.-based employees also contributed favorably.
Gross inventories of EUR 4.9 billion at year-end were EUR 359 million below last year's level and represented 20.8 months of cost of sales, an improvement of 1.6 months compared to the prior year. This underlines continued discipline in the management of inventories, as well as increased sales. The receivables portfolio remains healthy at about 95% current. Let us now take a look at our capital expenditures. At EUR 487 million, gross capital expenditure was below last year's, representing 4.4% of group sales against 5.6% a year ago. 53% of the gross expenditure related to points of sale investments, including internal and franchise boutiques and corners within multi-brand retail partners. Investments were focused on store renovations and relocations. Openings included new Van Cleef & Arpels and Chloé stores in Ginza, a new Cartier store in Cannes, and a new Dunhill store in Dubai.
Equally worth mentioning are store openings for most of the Specialist Watchmakers and Van Cleef & Arpels in Toronto Yorkdale. Montblanc continued the rollout of the new retail concept with 41 additional locations in the year just ended. Dunhill started the implementation of its new retail concept, starting with Jermyn Street in London. 18% of the gross expenditure was related to manufacturing investments. This primarily included capitalization of research and development expenses with the sizable investments in manufacturing now behind us. Notable investments in manufacturing related to Cartier's stamping facility at Glovelier and the completion of the new IWC manufacturing site at Merishausen, both in Switzerland. Other investments accounting for the remaining 29% included continued investments in IT infrastructure with the deployment of our ERP Gemini project and digital initiatives, as well as the ongoing renovation of Richemont Central Logistics Center at Villars-sur-Glâne in Switzerland.
Let us now discuss free cash flow. Free cash inflow amounted to EUR 1,090 million up by EUR 63 million over the prior year. The 6% improvement can be attributed to the higher cash flow from operations, partly offset by the acquisition of investment properties, as well as a 7.5% investment in Dufry, a leading travel retail specialist listed on the Swiss Exchange. Let us now turn to our balance sheet. Our balance sheet remains strong, with shareholders' equity now representing 57% of total equity and liabilities, compared with 77% in the prior year. The shift is due to the EUR 4 billion bond issue completed in March 2018, which represented an opportunity to secure long-term financing in a low-interest rate environment. At 31st of March 2018, the group's net cash position amounted to EUR 5,269 million.
The EUR 522 million decline in net cash is largely explained by the investment in Dufry, the purchase of the previously mentioned investment properties for EUR 213 million, and a higher annual dividend payment. Richemont's net cash position comprises highly liquid, highly rated money market funds, short-term bank deposits, and short-duration bond funds. Our overall resources are primarily denominated in Swiss francs, euros, and US dollars. Let us now look at our dividend proposal. Our fiscal year 2018 dividend proposal, to be confirmed by shareholders in September, is 1.9 Swiss francs per share. This represents an increase of 6% over the prior year in Swiss franc terms. This reflects the cash flow generated, as we just discussed, and our strong cash position. Before we conclude, let me summarize some of the financial highlights of the year under review.
We enjoyed double-digit growth in retail and in Asia-Pacific at constant rates, as I said before, led by our main markets of China, Hong Kong, Korea, and Macau. Jewelry sales were solid and now represent the group's largest product line. We have addressed the oversupply of watches in certain external points of sale. These initiatives have weighed on watch wholesale sales, but lay a sound foundation for the Specialist Watchmakers to grow from. In our own boutiques and online, watch sales grew at double digits, demonstrating the relevance of our offer to our customers. We have improved our operating leverage through good cost control and kept to our golden rule, stating that the operating expenses should increase less than sales increases. Last but not least, our cash flow from operations was strong, increasing by 44% versus the prior year.
This year, under a renewed board of directors and with a larger, new senior executive committee, saw a number of changes which will shape the future of our group. As you may remember from the interim results announcement last November, our Chairman, Mr. Rupert, commented that Richemont has embarked on a transformation journey to address the complex demands of luxury consumers in today's rapidly changing environment. In order to address these challenges, we must develop a robust omni-channel proposition, planning for both physical and digital channels to ensure a seamless and unique customer experience. This will require a novel approach to communication, customer engagement, and distribution. The tender offer we launched for Yoox NET-A-PORTER is a major milestone in our transformation journey. Yoox NET-A-PORTER operates in an attractive area of the market where there are high barriers to entry.
We believe there's a meaningful opportunity to help them grow the business over the long term and further strengthen their leading positioning in online luxury retailing with the long-term financial backing of Richemont. We look forward to helping Yoox NET-A-PORTER 's management execute their strategy. Yoox NET-A-PORTER is the only digital native business in our portfolio, or in our future portfolio, and its team is unparalleled in the industry, both in number and in quality. This acquisition strengthens Richemont's digital capabilities and accelerates our focus on omni-channel and digital marketing, which are key features of the transformation journey we just discussed. As you may have seen in recent company announcements, the offer is progressing quite smoothly and nearing its completion. We are confident that with the remaining steps of sellout and squeeze out, we will complete the transaction by this summer.
Success of our recent bond issue underscores investors' confidence in the quality of our assets, the strength of our balance sheet, and the group's long-term development potential. Let me now wrap up this presentation with some concluding comments. As we progress on our transformation journey, we remain focused on ensuring that we have the right mix of skills and expertise to meet the demands of our clients and to provide long-term value to our shareholders. Richemont's strong balance sheet provides protection throughout the business cycle and allows us both to support and invest into our Maisons and seize long-term growth opportunities as they arise. We are well positioned in the industry with a unique portfolio of some of the world's leading Maisons. We're particularly well-placed to capitalize on the growth opportunities in our relevant product lines, first and foremost in jewelry.
Through our combination with Yoox NET-A-PORTER , we believe that we are now strongly positioned to seize the opportunities offered in the digital field. We therefore approach our 30th anniversary with a certain degree of confidence in the group's long-term prospects. I would like to thank everyone at Richemont for their contribution and hard work over this past year. We will now open the floor to questions. Thank you very much. Over to Sophie. I think it's started already.
Yes. Many hands, I don't know where to start. Just before you start asking your question, please announce your name and your company's name. We'll go that way and moving up, because otherwise it's tough.
Thank you. Edouard Aubin from Morgan Stanley. On your Jewelry Maison, I think your EBIT margin, if we look at just the second half of the year, if my calculations are right, your EBIT margin compressed by around 40 basis point on a reported measure and 200 basis point on an adjusted basis. If you could just elaborate as to why the margin pressure and to what extent we can extrapolate that margin pressure in fiscal 2019. I know you don't like to talk about guidance, if we look at consensus for fiscal 2019, I think consensus is around EUR 2.4 billion, which would imply something like 16% growth for the group while you grew basically less than 10% this year. Is that realistic? Then just on specialty watchmakers, a number of your brands can be found on gray market platform today at substantial discounts.
If you could elaborate on the steps you're taking to address this in order to protect your brand equity.
Edouard, if I count well, that makes three questions, no? Maybe you can pick only two. Up to you. What do you think, Burkhart?
Those were three questions on my count as well. I mean, the first one, let's say the second one I could very easily answer. We don't guide, you come up with numbers out of your models or consensus numbers. You must understand we cannot really comment on those. That leaves two remaining questions. The Jewelry Maisons, I don't really share your view. I think the Jewelry Maisons have had a strong year. The margin is back to close to 30%, as we were saying, 29.9% to be exact. They are in a process or at a level where with very high operating margins, we must worry to protect those margins. Both Cartier and Van Cleef are investing into their network and they're investing into communication. We're very comfortable with the level at which their operating margin stands today.
On the Specialist Watchmakers, Jérôme, you want to take that up?
Yes, good morning. When it comes to our Specialist Watchmaker Maisons and your comments about the product available on various platform. We know that there are alternative distribution network that exist, tend to develop themselves. We monitor there as well, the rate of discount. What we see that a tendency of this rate of discount of going down. It must be primarily the consequence of a qualitative action when it comes to our distribution network. For sure, it's the result of the first steps of our buyback that took place this year.
Yeah, let me just add to that. We've spoken about it for quite a while now, starting when we did buybacks in fiscal year 2017, primarily concentrated on Cartier and some of the specialist watchmakers. We were quite clear about it, saying that while we do not believe that oversupply at our partners' points of sale is helpful to protect the long-term brand equity. If this oversupply is not being dealt with quickly, well then our retail partners have a balance sheet problem. In order to address that, we took the decision to buy back, because otherwise these products will find their way into the gray market, and this will impact our long-term brand equity. We took a view, which is probably different from other players in the market, to address that problem by buying back this inventory. We've done it last year at Cartier.
We think Cartier is in a very healthy situation, we've seen that this year. We've addressed the overstock situation for our products with the retail partners at the specialist watch maisons this year, we believe that that is a sound basis now. That they have reached a healthy inventory level with our products. We believe that on that basis, they have a solid foundation to grow from. We've stated that. What is the timing of a rebound? I know you're waiting for that. I must say, today, we look at the retail, on the retail sell-out, and that is a very healthy sell-out for our watches, both at Cartier and at the Specialist Watchmakers. That gives us some hope. When the inventory equation is right in the wholesale channel, then wholesale sales will grow again.
Thank you, Patrick Schwendimann. Svend Haugum, Sarasin & Partners. First question overall on the wholesale channel, what's your best guess here? You had a clear outperformance in retail last year. For the current year, if you would assume, let's say, a mid-single-digit sales growth for the whole group, would you say it's justified to assume a similar performance of retail and wholesale? Or would you still assume that retail would clearly outperform wholesale? That's my first question. Secondly, on the EBIT margin, how happy are you with the current EBIT margin? I don't want a guidance for the current year, but what's your longer term view? Would you say it's still possible to have midterm over 20% EBIT margin as it was the case in the past? Or would you say, no, the market has changed?
Good morning, Patrick. Retail is strong. Wholesale was quite strongly impacted by a number of initiatives we took. That's where it's standing today. I can't guide you on that, you know that. I appreciate you trying. Let's put it this way. There's always a link. Retail sales, which is the true demand we see, are strong. With a time gap, wholesale follows. Is that a formula that will hold true in our case? I simply can't tell you because as I said, we started updating all of you on that. We have introduced KPIs that we very strictly follow so that we make sure that sell-in does not exceed sell-out. When you're in an adjustment period where you think, well, we have excess inventory, okay, we bought back, and we monitored and made sure that sell-in was below sell-out.
That over time brings you to a point where sell-in and sell-out will normalize again, and that's when we should see the pickup in wholesale sales if the business and the retail sales still are strong. We have a measured degree of hope that the business continues to be strong on the sell-out side. Again, predictions are entirely difficult to establish, especially when you talk about the future. Today, the data points we have is retail sell-out is strong, watches, jewelry, and double-digit strong. The wholesale channel, we're working on getting the inventory level right. We did a big step with the buybacks. There's still work to be done
Will add on comment that we have started this two years ago, and where we see it's got there the long tail. For markets that recovered early, like Mainland China, we see the sell-out trend in wholesale and retail visually the same. I think it's fine. Other markets were under stress, and not only because of us, but the entire profession are still struggling. To see when will the aggregate wholesale demand or the aggregate wholesale figures match the retail depends on us and on others as well. In markets which been down and the market recovered quickly, like China, it's fine and it's the same.
Probably to add to that, Cartier buybacks were done in the first half of fiscal 2017. We've seen good business, and a healthy business. The comment that we had a few minutes ago that you see many of our products on the gray market, I don't think that holds true anymore for Cartier. I think some brave measures that Thierry and his team took last year, we believe they're paying off. Once again, this is about the long-term protection of the brand equity. Now on the EBIT and the EBIT margin, well, I wouldn't be sitting here or wanting to keep my job if I would say, well, 16.8% is the level that I'm very happy with.
I think what we have to see is that the underlying EBIT, I understand that we have been talking a lot about one-off effects in fiscal 2016, 2017, and 2018. I can assure you we would not like to continue to do that for the foreseeable future, because it makes the results very hard to read and to understand. Just bear with us for the time being. The underlying EBIT margin is obviously stronger than the one we report on, that is not an excuse. We believe that if we apply what we've been saying, meaning we apply sound inventory management principles as we're trying to put in place now, if we apply the golden rule I was referring to saying, well, we have a business evolution where we have a positive growth of the top line.
Well, if we get the gross margin equation right, if we get the operating expense growth to be low sales growth, well, mechanically we will increase. You must also remember that the high points in the margins were reached before the shock we've seen on the Swiss franc. We'll see. I'm positive about the future, but then again, I would say that, right?
Thank you.
Do Mélanie and Oh, God, Hélène will come back.
Good morning.
Okay.
Mélanie Flouquet at JP Morgan. I have two questions, please. The first one is regarding your investments in soft lines that have been pretty impressive in duty free and, in particular, in Yoox NET-A-PORTER of late. Indirectly through the distribution, but certainly in soft luxury buyers. You are stating, apparently in the press, that your ambitions in soft luxury are organic beyond this, so I just wanted to get a confirmation of this. If this is the case, what does sizing long-term investment with your cash balance mean? That is my first question. The second one relates to, it's a question to Burkhart, sorry. It's regarding operational leverage. Without guiding, clearly you had said in the past that you wanted to run OpEx at a lower level than sales. If I take out all the one-offs, you've delivered 7% organic sales growth, 10% EBIT growth.
Are you satisfied with that level of leverage? Can you deliver therefore lower OpEx than top line? Is this a satisfying level for you, or are you considering that you have two to three years investments that are a bit heavier than the normalized run rate of OpEx? Thank you.
Thanks, Mélanie. To bring a bit of color to what we're saying to the press this morning. Duty free, Yoox NET-A-PORTER , is that a way of exposing ourselves to the soft luxury side? It's not necessarily the first and foremost ambition we have. We believe that both on the travel retail channel or on the full digital channel with Yoox NET-A-PORTER , these are meaningful opportunities for us to leapfrog into a new age on the distribution side. Fine. Mechanically, if you look at it, today we have about 1% of our group sales are on e-commerce or through e-commerce. When we combine with Yoox NET-A-PORTER , we jump to 17%. Does that mean now we have made a meaningful venture into soft luxury? Not necessarily. Yes, today, Yoox NET-A-PORTER is mainly trading on the soft luxury side, but that is not the idea of it.
We see that as something that is coming from our customer side, who want to engage with us where they choose and through which means they choose. In order to quickly advance into that field, we believe and We said that, and we believe that that is one of the best opportunities to do that much quicker for us and to learn and scale up very quickly. Dufry, if you believe that there is long-term travel patterns that will accelerate, and we believe that, and if you look at the statistics, that seems to be the case. Then it's probably a good place to be, especially for us who are very strongly present at DFS, which has a different footprint, as you can know. As you know, it's more Asia-based. Dufry is more on the Western Hemisphere and comparatively less exposed to Asia.
We believe it's a good position to be in to grow business opportunities with them. What we're saying this morning, ambitions to grow more organically, that was referring to an area where we believe there is significant potential for us, which is in the leather goods side. We have some very successful businesses in leather goods today. I cite only Montblanc and Chloé as an example, but Dunhill is also there, Lancel is there, which is a different story as you know. Let's not forget, Cartier in the past had had a very sizable leather business. As we've been saying for the last 18 months, we try to do first our job on the supply chain and development side by scaling up a leather hub, as we call it, which was developed by Montblanc, very successfully so.
We're sizing that up, scaling that up so that the other group brands can utilize this. It's a totally different skill set on the supply chain and the development side than what we usually have on the hard luxury side. That job is more or less done, and we can now focus on growing the leather goods business organically by putting forward what we know how to do, meaning developing creative and well-priced products. That's what I said this morning when I spoke about growing organically. Obviously, the question that we've heard and had from many sides, well, does that mean you want to now go out and acquire a target in the leather goods side? Well, you know better than I that there are not many targets out there. Obviously, that is not our priority. Our priority is clearly growing it organically.
For that, we took a bit of time to build the infrastructure. Serapian, this small acquisition last year, was first and foremost about development and production capacity as well in that area. That's what the plan is on the organic side. Am I happy with the leverage? Same answer. Obviously I would like more leverage, but let's put it this way. There's many moving pieces in this transformation phase in which we are, and that short-term affects it. We're still rolling out the Gemini into Fashion & Accessories Maisons now. We've had transaction expenses. There's many one-offs. Some of them we spell out, some of them we don't spell out that are linked to this transformation. Once you're in a fully normalized business, if that still exists, obviously leverage would be higher, but we're transitioning to something new here.
Francesca.
Hi, Helen Brand from UBS. Two questions from me. The first one, I'd just be interested, Mr. Rupert talked about Chinese demand a few years ago, like dining on top of a volcano. I was just wondering how you're thinking about the sustainability of Chinese demand here, and how perhaps that looks compared to a couple of years ago. Secondly, I just wanted to follow up on the M&A side, perhaps outside of soft luxury. You've clearly raised the €4 billion bond, despite having significant cash on balance sheet. The dividend's perhaps a bit shy of market expectations. You're talking about seizing long-term opportunities. Should we think about M&A outside of the soft luxury side as well?
I will pick the first one for China's demand and sustainability. I think that the Chinese wealth growth and about the GDP growth is about 6.5%. It continues. There is kind of a real economic development, not in all regions, but if you see what's happening in Beijing, Shanghai, now in the tech cities, Hangzhou and Shenzhen, is really massive. For still a middle-income country, it's moving quite rapidly up. The number of potential new customers is just enormous. In a period where the renminbi is also strengthening, the purchasing power is just enormous, both inside Mainland China and outside. We see same things happen in Japan on the country is 10 times bigger. For probably the next 10, 15 years, there is really substantial potential for growth. There might be some hiccup depending on what's happening there.
Beyond that, there is still a need. We see moving even more massively towards women who are increasingly independent and spend on their own. That there's no worry for the next coming 10 years.
Okay, on the dividend and the M&A side. We've always said that the way we view Dividend or, let's say long-term shareholder return is exactly that, long term. We want to grow the dividend year after year on a sustainable level. 6% growth this year, 6% last year. We believe that's a nice and healthy trend going forward. Should we be thinking about M&A activity outside of the soft luxury space? I think that was the question, right, Helen? Would I be able to comment on that here?
Okay. Francesca, Jon, we'll go back to the first row, please.
Good morning. Francesca Di Pasquantonio, Deutsche Bank. I will also ask two questions. The first one is on Yoox NET-A-PORTER. I know it might be premature to make any comments, I think not just I we would all be interested to understand, what your plans and expectations are around the integration of Yoox NET-A-PORTER. I'm not asking for really big details on the strategy, which you will be probably brainstorming about. Just to have an idea, on whether you are prepared to invest in the business to catch up, to make Yoox NET-A-PORTER catch up with peers which are more advanced today. It seems to me, YNAP has lost a bit of its technology lead, maybe a bit of inspiration on the management side as well.
It would be interesting to frame this acquisition with your omni-channel, omni-stock strategy and whatever you can say at this stage would be helpful. My second question is, it's a specific question on CapEx. I know you guide for CapEx, can we have a CapEx guidance for next year? If I may, just a clarification on the watch business. It seems to me that you don't feel you are yet at the point where you are happy with the balance of inventory outstanding in the trade, with the exception of Asia- Pacific. Is it correct to assume that when, and if, the convergence of sell-in and sellout happens also globally, we could see a similar performance to Asia- Pacific. You mentioned a double-digit growth in wholesale in Asia- Pacific. Many thanks.
Okay. Let me try to tackle. Good morning, first of all, Francesca. Let me try to tackle the first two questions, then I'll let my colleagues speak about the watch side of it. Even though I have my views on that. On the YNAP or Yoox NET-A-PORTER side, okay, you have your views if they've lost their edge or the sparkle. Actually, when we looked at Yoox NET-A-PORTER and obviously we have a view that we have always, being a big shareholder, almost 50% of it. We've almost always treated it a bit at arm's length for very good reasons, because we always wanted to insist that this is an open platform for, so to say, an industry offer, so that the other maisons who want to trade, or who see value in trading through Yoox NET-A-PORTER can do so.
We believe that has worked very well in the past. Now as we have reached almost 95%, as you've read yesterday, we'll go through the next steps to get to 100%. We still would like to believe that this is more or less the same proposition, meaning this is an open, neutral platform. The feedback we've had from the Kering side, from some of the other bigger brands, have gone in that direction, who have quite spontaneously come out and said, "Well, we believe this is still the case.
Fine, it's Richemont who will hold the majority, we still believe it's a very attractive platform for us to trade through." The world obviously is big, there are other customer, or there are other views, there are other business models out there, which are attractive, we will see how this plays out over the long term. Once again, for us, Yoox NET-A-PORTER , we believe it's a fantastic opportunity for us, not only to learn about the business and when I say about the business, this is what the customer engages with. We need to learn more quicker about the customer, we need to meet his expectations. Expectations, obviously, are what we also, in this industry, call about the omni-channel challenge or promise. We believe, we are strong in retail.
We are working to be stronger in wholesale. Obviously, with a strong asset in the digital field, we believe that is a fantastic proposal that we can build over time. We looked at the asset, obviously, because when you offer EUR 38 a share, which is a premium to the market, well, you better take a view. Our view was that it is a very strong management, very strong teams, who are also size-wise, one of the best, if not the leading asset in the digital arena. That's why we decided to go a step further and try to control the entire company, because we believe with a long-term view, the long-term capital deployment, that that is a very interesting proposal, not only for us, but also for the market.
As we're in a market space where you need capital, I'll come to that, you don't want to manage a business with a long-term view and a short-term pressure. That's why, for many reasons, we came to this conclusion that it would be better to take it private. Capital needs, you know the numbers better than I. Yoox NET-A-PORTER have been talking about EUR 150 million-EUR 180 million CapEx, which for them is clearly significant. Again, let's start thinking about this is a technology-driven business. What does that mean? What is the technology side of the business? As I said, EUR 150 million-EUR 180 million for them, that's what they guide on. We'll have a look at it. Once we secure, we expect that to be done by summer, we'll have a look at it in much greater detail.
Once again, we've been arm's length so far. We have a very good view, but we don't know the details. We'll have a look at that. If you bring all that together, the Richemont and the Yoox NET-A-PORTER CapEx, I would say we're still in the same range that we've been in the last, let's say five years, which has been a range between 5% and 7% of sales. We're comfortable with that. I don't give guidance. Hold on, there was another question on the watch business.
Yeah. Good morning. When it comes to our watch business, maybe in terms of context, there is a word that we like to use, which is sustainable. As far as very important, given the size and the history and the patrimony of our maison, we cannot only consider short-term, but we need to project ourselves on the midterm and long term. Cartier was a pioneer in establishing a strong monitoring of its sell-in and sell-out, and with extending that expertise during the last 18 months to the other maison of the Specialist Watchmakers. It brings us to be capable to say, as Burkhart was saying before, that our sell-out is higher than our sell-in.
If you combine that to the buyback, as it has been announced and presented in our account, yes, we can say that we are globally speaking, at global level now reach a good level of stock. What does it mean geographically? To come back as well to a comment of Burkhart, we do not guide our clients when it comes to say, "Where do you want to buy?" Of course, as I said, it's not to use it. It will show the volatility of the currency, and it has definitely an impact where the client want to buy. It's absolutely impossible to know where in September and October will be the global price positioning because of the currency.
Jon, but two questions please again. Thank you. Afterwards we come to Luca and Jon Cox . Thank you.
Two questions. Thank you. My first question is around the launch of Baume, which I thought was quite interesting. It's not a premium product. I think in GBP terms, the range is around GBP 430-GBP 850. It's a little bit more expensive than your Baume & Mercier Classima. It's designed, I think, in Geneva, but made in the Netherlands. Maybe you can correct me if I'm wrong on that. I'm just trying to understand, really, you launch products the whole time, but this is interesting. I get the point around customization, around ocean waste, and almost having a sneaker-style customization opportunity for a younger millennial. I understand all of those points, but it's not Swiss-made. The movement, I think, only costs just over $11 or $12.
I'm trying to understand, is this a shift in trying to capture a greater segment of the market and moving more downscale in some area, or is this just a one-off that you're just trying in a particular market? That's my first question. I guess linked with that, a question for Cyrille on Cartier. We've seen on a like-for-like pricing, as much as you can look at a like-for-like pricing, we've seen quite a big movement in the last 2 years on Cartier pricing, -5% to maybe +5% over the course of the last 2 years from what we can see. I'm just trying to understand today, given the launches that we've seen, especially the Santos relaunch. How are you seeing customers gravitate towards the Cartier watch offer? Are we seeing still much more stainless steel, less gold?
How are you going to position the Cartier watch element going forward? Thank you.
We start with our new baby. Yes, indeed, I would say, we're very happy and glad to see the birth of a new Maison within our portfolio of Maisons, when it comes to the watches. You describe, I would say, part of the production chain of Baume, and indeed, it is assembled in Switzerland, mainly for logistics reason, as personalization is one of the key items and the time to react to have the watch delivered, we had to be capable to establish it, I would say, very close to a place from where we can ship very quickly. Indeed we found in Switzerland, I would say, a good base for that. I want to say that, again, it goes to sustainability. We definitely want to be capable to continue to recruit new clients for the luxury watch segment.
It is indeed very important for us to nurture the desire step by step, to continue to get and raise the relevance of watchmaking/fine watchmaking, to new and younger generation. We have done it for a while with our communication, our digital communication in many countries, and the style of our communication has been, I would say, rejuvenating itself constantly during the last year. We go one step further with Baume. I appreciate that you noticed that different approach and positioning. We are very much interested in clients that are interested to shopping digital, to B2C, to personalization, and also with an environmental consciousness approach.
Can I just add something to that? I think today, this morning, on the media call, we said, "Baume, what is Baume? It's young, it's eco-conscious, it's digital." I think that captures the essence of it. I think it's a very interesting proposal. We'll see if that view is shared by our customers, and hopefully many customers in the future. For us, it's almost, I would say, a bit of an edgy proposal, right? Against the backdrop of being in quite a conservative industry. It was also a project that has been run separately. Let's say it doesn't come out of a Baume & Mercier, but it was run separately by a team fully engaged in that. It's a great dynamic that we've seen around the development of this project.
It can probably give us some hints of how we can use the creativity that is existing in the group, within our teams, and channel that towards something that is very interesting and very quick turnaround. That was a very interesting experience in many, many aspects. Now we're putting it to the test of the market.
To comment on the
The question, Cartier.
Yes, the question on our pricing and product offer. I said two years ago and still on the market, there's a bit too much of everything, meaning it's a buyer's market. In buyer's market, you have to give good value proposition on every category. It's not that you have to sell cheap products or expensive one. In every category, you have to have a good pricing. What we've been doing is we construct the offer with good pricing on every category, from steel and diamond, or gold and jewelry, and we are growing in all categories in there. As you see for the new Santos, the perceived value for money is really good. By doing that, counterintuitively, you get better value for money, you encourage customers to trade up. Our average pricing is increasing. Also with that, you have better capacity utilizations.
You also consolidate margin. By having, in some way, more aggressive price to each category, we encourage more trading up than trading down and we encourage margin consolidation. Might look counterintuitive, but our results show.
Please, Luca. Yes. Then Jon.
Thank you. Good morning. It's Luca Solca from Exane BNP Paribas. Looking at watches specifically, I understand that the inventory back is focused on the long-term preservation of the brand equity and is appropriate. I also understand that that is driven primarily by the fact that you had originally too much product, but also probably the wrong product in the market. When you look at the various brands in the portfolio, maybe starting with Cartier, but then going into the Specialist Watchmakers brands as well, where do you think your current product offer is today? Do you have the right watches out there for the demand you have in front of you? Or is this process of adjusting the product range still ongoing, at least in some of the brands?
On digital, more than the Yoox NET-A-PORTER side, I would be very interested in getting your view on what is digital going to do to your business, and how is it going to change the way that Cartier or Van Cleef & Arpels and the other companies within the group operate? Is that going to be primarily a function of how you communicate to the market? Is that going to have an important function in distributing the product, or what else? Thanks very much.
I will start with the watches. Thanks for the question. Indeed, I would say our maison are existing through their products. The efforts the Maison Richemont did during the last year has been very meaningful. If you see the last SIHH and the creativity of our maison, you see the importance of the Polaris line at JLC, Jaeger. You can see the relaunch of the Possession at Piaget. You see that our maison have in their heart to reinforce, develop, focus on their iconic expression, while they put a large emphasis on their creativity and factor of differentiation. Richemont has a chance to have, you are saying eight maison with Baume. We can say nine. Maison in specialist watchmaker, then to that you had to add Van Cleef, Cartier or Montblanc.
All these maison are very much paying attention to their expression and to offer a wide offer. Then in somehow an offer different from one maison to the other. Are we to the end offer of the evolution? Yes and no. Yes, when it comes to say we have drastic problem to address. No, because the evolution of the product range is what explain why this maison have more than centuries of existence. Then like specialist, we know that there is a continuous channel adaptation. Creativity, differentiation, and iconization are definitely the heart of our strategy.
Probably I might add, the test is always if this is relevant for the customer, which is a given as a principle. If we look at the recent, meaning the fiscal year 2018 retail numbers and the retail growth of sell-out, this seems to confirm that the offer is relevant now. It's a journey, as we know, with ups and downs. I think creativity is strong. There's a constant renewal process that is ongoing, and sometimes they come up with even some surprising offers like Baume today that we're just referring to.
To comment also on more specific things. There have been major contraction coming from China, and it has two origins. One was anti-corruption, and one was renminbi devaluation. Anti-corruption was also not only corruption, but also corporate gifting. A big part of state-owned companies were offering gifts, and big part were watches. When you offer something that's not on your own money, you can spend whatever you want. This part is gone. There is a market adjustment linked to that this probably will never come back. This had become everything for that is the wrong offer because there is no more demand in there.
When it comes to the rest, the market is picking up in different things, and when brands have an offer, which is really linked to their DNA, the strong brands are not weaker than before. When we have relaunched the Panthère, very Cartier, it worked tremendously well. Even there was a kind of consensus that you have to do something, a novelty, which is round and automatic. We launched something not new and square and quartz, and it's a landslide. We will construct our offer, and we have a lot of way to go, but we are on good shape to do it. On something where there is basically no demand, we do something which is unnecessary, just for pleasure. We have to create that demand and to make customers willing to buy that. Meaning nice things for fair value, and it works.
We are on the way to reconstruct that. There is some part where have to adjust to market where substantially some demand has changed because it was not there. Some re-shifting, but basically to what has made the luxury as before, creative offer, matching something which is not a demand and becomes a demand.
Good morning. If I may answer on the digital part. I think first and foremost, digital is not a kind of one-size-fits-all monolithic strategy or reality. It's been there for quite a long time for most of our brands. I think that for some of the brands within the group, it's alternative commercial network. For some of the brands, it's a way to express their identity. For some of them, it's a way to engage socially. When I look at the way it exists at Van Cleef & Arpels, it's primarily a way to explain what we are about, to talk about craftsmanship, to tell stories that resonate with our collections, and to go with initiatives like local initiatives around education. It's primarily maybe a communication tool or set of communication platforms or engagements through social media, and it's been the case for more than 10 years.
Of course, it's also a way to provide additional service that includes online sales. We have e-commerce that we run ourselves. We have our own online retail in Americas, in Europe, in Japan, in China, which still represents a limited % on sales, as Burkhart was mentioning, but really provides for a complementary service. What we say is the reality of omni-channel, which is clients getting informed online, coming to the stores, still enjoying a retail experience and a kind of immersive approach that can be provided through a physical store environment. Combine that with their online experience. It's a reality today. It doesn't mean that e-commerce is replacing traditional retail for a brand like Van Cleef & Arpels, but definitely that combination of digital and physical is a reality, and moving forward, it's going to be more and more the case.
Good morning. Jon Cox, Jefferies. A couple of group questions, shall I say. First of all, technical questions, maybe for Burkhart.
Only two, huh?
The one-offs, could you just give us a breakdown exactly where they are? You mentioned EUR 208, and then you mentioned EUR 37 for the others. Is the rest just watches, or is there some other stuff in there we should be aware of, just to help us with our modeling? Again, this rather technical, very quick question on YNAP. When will you fully consolidate? I guess from the 1st of April. How much will be the book gain? I guess that will be pretty material. Operationally, it looks like you're pretty happy to lose market share in luxury watches. It seems what you're saying, you're happy to limit wholesale. You can see Rolex and Swatch Group, LVMH, clearly winning market share. I wonder what you think this does medium term. Once you lose share, it's very hard to get it back. Maybe just some comment on that.
Just on the other segment, should we think of a blank zero this year, given the exit of Shanghai Tang and Lancel? While you're here, Nicolas, maybe you can give us a quick comment on Van Cleef and the plan for expansion. Finally, just a comment. I think previously you said dividend payment mid-teen. I think that's to probably misquote Mr. Rupert. I'm sure he's listening in. Two years now, you've had mid-single-digit dividend increase. I think this is probably not what some investors signed on for, as you can see with some of the shareholder reaction this morning. That's just a comment. Thank you.
Thanks, Jon. You want me to comment on the comment first? This 15% has been floating around for a long time. I personally haven't found when it started, we can definitely have another look at that. I still think, we've been, I think, very clear about that over the long term, we view our business and we view the long term and value the long-term relationship with our shareholders. 6% growth in dividend in today's environment, I think still is an honest proposal. Okay, there's a share price reaction, fine. I think, once again, you need to look at the shareholder return over the long term. That's our view on that. Are we happy to lose market share? Would I answer yes? Probably not.
Then again, we don't really, and I say that in a very relaxed fashion, we don't really look at the short term here. Is it one year up, one year down? Fine. The Maisons are here for many generations. If you look back at the history of Vacheron, for example, let me calculate, probably more than 10 generations, I don't think that they built a Maison by looking at market share. I think over the long term, you can only do what is right for your Maisons. In this case, we have taken a view in the last two years that addressing the unhealthy inventory situation next to running or doing a good job on product creativity, network, quality, et cetera, is the view that prevailed. I don't want to go again and say, well, because long-term brand equity is of utmost importance for us.
If that means that short term, we have fluctuations, volatility in our market share, well, that is a consequence of it. We don't want to manage it in terms of market share. It is for the long-term health and the strength of the brand equity.
I would give, I would say, two comments on the comments in this case. First, I don't think that you build market share by selling. My first comment. The second point is we are in a cycle industry. Every correction of cycle is most of the time very painful and distract a lot of value. It is clear for us that the sustainability of our business model is a key criteria. It is a discipline now because sell-in, sell-out data and working hard and on long term with your strategic partner, which are, in this case, our strategic wholesale partner, demand a lot of energy, a lot of common discipline, we believe in that strategy.
To be more specific, don't take Swiss watch exports as a proxy for the market share. Not in short term. If you think about three years, probably it matters. On the three months, it's just restocking distribution somewhere. If you take brands in fashion that have gone extensively on outlet malls and producing for them are decreasing their value badly over time, and the same for watches. We have to be very strict on where we put things and how we make the market consolidate in a good way. We're confident to regain market share, but the market share on true demand.
Jon, finally, to not forget that, come back to the one-offs. EUR 208 million. We said it in the release as well, in the results announcement there, is EUR 135 million linked to the buybacks and Specialist Watchmakers. You'd find that in that segment, obviously. We said the rest is linked to portfolio transactions. As you've seen or heard or read, we exited Shanghai Tang. We're in talks for Lancel. We're in the process of securing the 100% majority of Yoox Net-a-Porter, the rest you will find in the other segment. Don't nail me down on EUR 5 million here and there, that's the general trend of it. Consideration, why the difference? You will find it in the notes to our financial statements. First of all, we have not secured, so to say, the offer.
You remember the tender period finished on May 9. We have put out a press release yesterday saying that we have secured or have exceeded the 90% threshold, which was one of the conditions. The second condition was the MAC condition that we had explicitly to waive, which we also did with yesterday's press release. Consider it effectively done yesterday or today, because today we're going to spend a bit of money by actually putting up the consideration for the shares that have been tendered, which is today. The rest, we expect to finalize by this summer.
Okay. Zuzanna.
To answer your last question on Roger Dubuis. That goes quite okay. I think it's really one of the fine illustration of what we talk about Richemont of this long-term view and long-term commitment. I think it was really to, when it entered the portfolio nearly 20 years ago now, it was the ambition to take a very, very highly respected, historical, family-run brand, and to give it the time to develop organically into an international company with a wide reach and still a very, very clear identity. I think quite a high level of respect and desirability from customers. This is what has happened, slowly but surely, in the last two decades. The plans are really to continue. We operate only through retail. We have about a bit more than 100 stores. We are purely concentrated on jewelry and jewel watches.
We've seen very good response to that specific positioning. We feel that that kind of long-term view and organic base have been quite efficient for Van Cleef & Arpels and should continue to be in the future.
Thank you so much for taking my question, Zuzanna Pusz from Berenberg. I just had two questions. I'll stick to the rule. First of all, on YNAP. Given that there's been, I guess, some deceleration in the performance in Q1, I know that currently, of course, the market doesn't really focus on what's the outlook for YNAP per se or not. When we think of YNAP being consolidated within Richemont Group, can we assume that whatever target is the management of YNAP had for the growth, which was, I think, 17%-20% organic growth and also certain margins and free cash flow considerations, is this something we can take for granted, or you will review all of that once it's been consolidated and perhaps kind of the grand scheme of things will matter more?
It could be a bit of a drag on your profits, on your free cash flow, but you see it as, let's say, wider support of your Group's digital efforts. And with regard to that as well, given that you will soon have YNAP on board, will it prevent you from also working with other platforms? Recently, Farfetch has launched their hard luxury hub, which some of your peers have joined within the watches and jewelry. Can you give us an idea if, in a way, if you see there's something preventing you? And then the second question is, coming back to the comments you've made. That was kind of combined. On the trends observed among the younger generations, you've mentioned the fact that younger people are looking more at the environmental factors, et cetera.
Now, we've seen recently a big rise in the discussion around the second-hand luxury market. You have platforms like The RealReal or TrueFacet in the U.S. growing fast. Is this something you see as a threat, or are you willing to cooperate with them? Do you have any of your own plans in the second-hand market like some of your peers have recently announced? If you have any color on that would be great. Thank you.
Okay. Thank you for the questions. Now, I suggest I give you my views on the first question and on the third, and I will ask my colleagues to add some color to that, especially your second question. On YNAP, I cannot really, or don't want to comment on their results they just put out a few days ago. You have probably heard or read in their announcement, and probably listened in to the call they did on the annual results of last year, that they confirmed guidance which they gave as a range, that they confirmed that. That, for us today, is the assumption. As I said, we'll look into the business model, in the sense that the fundamentals, I think are sound. The management is strong.
We expect and we clearly hope that the management will stay on board, because that's the management that has built a great business and, by the way, a profitable business. I think we'll talk about other business models in the space afterwards. It's a profitable business model. We're happy with that. Their guidance is quite strong. They have confirmed their guidance as well after their three-month earnings announcement. Today we have no reason to believe that that would be challenged or questioned. Even though I think I've heard something, right? A bit of arrivederci. Was that punchy line there, Francesca? I like that. In all honesty, we're looking into the model at the end of the year. We've said when we formulated the offer. We know the numbers as you do. We know also what they guided on CapEx spend, CHF 150 million-CHF 180 million. We'll see.
If we need to accelerate spend, we will do that. We will do whatever is healthy for the long-term development of a profitable business together. Now, I'll let my colleagues to the right engage on other business models. Engaging with other players. Did you want to take that up, Cyrille, or?
For that we have not put any clear view on with which players we will play or not. Depending on what they really do. So far, we're not with marketplace because marketplace are not controlled, especially intellectual property. It's places where you can have a counterfeit, partial or total, or you can have some transshipping or can have many things happening there. That's an overall issue. There will be, I guess, gradually, that's why we also have to have a strong point on what can be a clear and neat and selective offer online and which part are just kind of an arbitration or place for wrongdoings. We are continuously review because there are new partners or new people or new offer every day and many hybrids.
On that we see and those that can be at some point serious and can be controlled and can have a high, I think intellectual property control or so on what they do directly or indirectly, then can be considered. Currently, we don't see any at this stage that have shown up that quite well. That's why also probably with Yoox NET-A-PORTER , we can move forward on something which will be a clear offer that we can use and can get standards on the market.
Probably another word to that. The way we see it is, it is probably easy, probably I say, let's say, to start an e-commerce business. You need to get the basics and the fundamentals right. You need to understand your customer. You need to have the IT capabilities to actually understand the customer demands. You need the quality of execution. That goes with a strong backbone. That also goes with a customer perception that actually they can trust you. You don't want to be stuck after you have bought something with a transaction that doesn't work, with a product that doesn't arrive, or if you want to send it back, which in the luxury space or especially on the soft side, is a given. You want ease and reassurance on the execution side of it.
That's why we believe that there is a very interesting proposition and a great business that has been done and built by the team at Yoox NET-A-PORTER , and that's why we believe in it. You were asking about the pre-owned space of the business. It is true, there has been a lot of noise around that, let's say in the last 6 months, starting at the SIHH, then followed by another group in the luxury space who said, "Well, we're working on that." Some other brands have been talking about that.
We think that's an interesting part of the market if you look at it from a customer perspective, because you find in that space customers who are entering into the watch luxury market, we're talking about watch today. They are building watch expertise on their own, or they're building a collection, or they use that as a way to enter to the market. That is, of course, interesting for everybody in the market. That's why I think you hear so much noise around it today. I mean that in a positive way, noise, because I think the industry's waking up to a market there or space in the overall market that has been overlooked in the past. We're monitoring the situation as well.
We're running out of time, so there will be time only. Yes, you. Irming, go ahead. There is one question on the web which has not been answered.
Good morning. Hermine de Bentzmann , Raymond James . I have two very quick question related to inventory buybacks. The first one, I was wondering if you expected to make such a large amount of buyback in Q4 when you started to implement them. My second question is, I was wondering as well if we can assume that inventory buyback have continued a little in Q1 fiscal 2019, and if you could help us to quantify the magnitude, if any. Thank you.
Did I expect to do this level of inventory buybacks? Depends on when. After I was told, I fully expected it. On a more serious note, how did we run through the process? Clearly, you've seen we've had some management changes as well on the CEO or the management team levels of some of the watch Maisons, Specialist Watchmaker Maisons. Their brief was very clear or the brief given to them was very clear from the new managers overseeing the Specialist Watchmaker segment from Jérôme Lambert and Emmanuel Perrin. The brief was very clear. You will do what is necessary to bring the inventory to the level that is healthy or that we consider as being healthy. It was done on a Maison-by-Maison basis, on a market-by-market basis, and on a customer-by-customer basis. I can have my view, which might be right or wrong.
In the end, the Maisons came with their proposals, and they've run through a very rigorous process of making sure that we come to the right level of buybacks. Frankly speaking, I don't care if it's EUR 50 million more or less, for the simple reason that we have to get it right. If we come to the right level, well, then that is what it needs to do, or that's what it takes. That's my very simple view on that. Q1, while it's still very young, haven't done anything in Q1.
Okay. Thank you. There's a question, I think for Jérôme, regarding the appointment of Eric Vallat and whether you can elaborate on what is new targets or any key initiatives also at the Fashion & Accessories Maisons. Thank you.
Thank you, Sophie. Indeed, we announced this morning as appointment of Eric as the head of the Fashion & Accessories Maisons. You can see in his appointment, I would say the very mirror decision in organizations. That the ones that we decided to put in place with the Specialist Watchmakers a couple of months ago. Indeed there is a willingness to work with the Fashion & Accessories Maisons in an efficient, proactive, and professional way. You can read in the resume of that is in the presentation of or in the announcement, the short one. It's a few lines of Eric that he's a great professional, coming 100% from this fashion and accessory world, with a large experience in term of maison and as well in term of geographic.
Thank you. That concludes this presentation. Many thanks for coming. Thank you for watching. James and I at your disposal later on if you have more questions. Thank you.
Thank you very much.
Have a good day.
Thank you.