Good morning, everyone. Nice to see some familiar faces. Burkhard 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 Vigneuron, Cartier's CEO Mr. Nicolas Boss, Van Cleef and Arpels' CEO and Mr. Jerome Lambert, Chief Operating Officer. The presentation and company announcements are already available on richemont.com. An archive of this website sorry, of this webcast will be available today on Richemont's website at 3 p.
M. Geneva time. So first Burkhard will take you through the highlights before reviewing group sales. Then I will present Maisons developments. And thereafter Burkhard will walk you through the financials and conclude.
As usual, the presentation will be followed by Q and A session and questions will be taken from the floor. And also time permitting from those of you watching the webcast who would have put their dedicated link on richemont.com. So before we begin, could you kindly ensure that your mobile devices are switched off? Thank you. Over to you, Burkhard.
Thank you, Sophie, and 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 €10,979,000,000 Excluding inventory buybacks in both financial years 2017 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 €1,844,000,000 up 5% versus the prior year, reflecting improving improved gross margin and tight operating expense control. Excluding onetime items totaling €208,000,000 in the year under review and €109,000,000 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 1,221,000,000 impacted by a higher effective tax rate. Cash flow from operations was strong, rising by €827,000,000 to €2,723,000,000 Let me now walk you through the group sales performance, 1st by region, then 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 2nd 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 Q4 of the year, tight inventory control within our wholesale network and the optimization of the wholesale distribution network. Sales in France, our 4th largest market in the world, contracted and in Switzerland, we're in line with prior year. The United Kingdom, however, enjoyed continued growth. Sales of all product categories were broadly 9 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 Cleeferr Appel's flagship stores also in Ginza and Tokyo. And finally, let us review the Middle East and Africa region, which generated 8% of group sales and soft 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 and 11 23 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 6 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. And 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, Montclair Pecils 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 were more than 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 Daniel and Peter Miller. The category was impacted by the exit of Shanghai Tang on the 1st July and the change of Creative Directors at Chloe and Dunhill. Sophie will now take you through the Maisons and the segment highlights.
Over to you, Sophie.
So thank you, Burkhard. Let me start with the segment highlights. So the Jewellery Maisons operating margin strengthened to almost 30%. The Specialist Watchmakers managed to improve their profitability while taking inventory management initiatives. And the profitability of our other businesses was impacted by a number of onetime items.
Let's look now at the reported sales and operating results by segment in more details. So we'll start with Jewellery Maisons, which segment, which accounted for 59% of group sales. The segment includes the total sales of Cartier and Van Cleef and 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 buybacks at Cartier.
The Jewellery Maisons operating results improved by 15% to €1,926,000,000 This €244,000,000 increase reflects the robust sales just mentioned, good cost control and the non recurrence of the EUR 151,000,000 onetime 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, at Alain Brat, at Onpheve and Arpels. Watches reported growth across price points and materials supported notably by the success of Poetique Complications at Van Cleef and Arpels and the relaunch Van Cleef collection at Cartier.
Wholesales 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 and Arpels' creation, but also from the net opening of 2 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 and Arpels Ginza flagship store. The year saw a number of successful digital initiatives at both Maisons. At Cartier, there was a Pantera pre launch on NET A PORTER and the Justein Clou digital campaign.
And at Dontleif and Arpels, there was the award winning nano website for Le Secre high jewelry collection and as well as the social media campaign for the Perlet jewelry collection. Let us now review our Specialist Watchmakers segment, which consolidates the results of 8 Watch Maisons. The 6% decline in sales reflect €203,000,000 of inventory buybacks in the Q4 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 EUR262,000,000 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 4 main factors: 1st, a focus on attracting new clients by introducing new aesthetic and broadening the offer within collections, such as the revisited overseas attache from Constantin or the Luminor duet at Officine Panerai, which with its thinner shape appeal to new clients. 2nd, the strength of the jewelry offered at Piaget, which brought more female customers to the store 3rd, boutique openings in Mainland China and in new markets like Australia and Canada and 4th, the internalization of external sponsor sales for Jaeger LeCoultre in the UAE. The year under review also saw increased investments in digital, bid in advertising, website rejuvenations at Piaget, IWC and Baume and 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 3 month sales of Zhang Altang. The operating results including onetime charges of €37,000,000 compared to a net gain of €114,000,000 in the prior year.
These charges stem from the sale of Shanghai Tang on 30 June 2017 and the write down of assets at Lancel. Excluding onetime items in both years, operating losses would have been €28,000,000 in the year under review and €4,000,000 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 sorry, and the costs 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 products new technology products such as the Summit smartwatch and enhancements to its interactive 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 Chloe, the first collection under its new creative director received positive reviews and was introduced in stores, driven by a strong partnership with Luxe Neisse driven by a strong partnership with Luxe Nat A Porter and new points of sales within the Dufry network. Retail sales were broadly in line with the prior year. The impact of the disposal of Shanghai Tong was mitigated by a variety of retail initiatives.
Excluding the exit of Shanghai Tong stores, the network benefited from 16 net new store openings, such as in Paris, Galeries Lafayette for Dunhill and in Tokyo, Ginza for Chloe. 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, Chloe and Dunhill. E commerce developments and overall investments in digital have been on the rise. Let me give you two examples. The click and collect features on Montblanc and Chloe'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. Burkhard, over to you.
Thank you, Sophie. Let me now walk you through the rest of the P and 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 €351,000,000 year on year improvement in gross profit reflected higher manufacturing capacity utilization, 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 €203,000,000 lowered gross profit by €135,000,000 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 U. S. Dollar related currencies. Effectively, when you exclude the €178,000,000 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 €56,000,000 excluding the prior year €178,000,000 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 onetime charges of respectively €208,000,000 this year €109,000,000 last year, operating profit for the year would have increased by 10%. The current year's onetime charges primarily relate to watch inventory buybacks and portfolio transactions. Let us now turn to the other P and L items below operating profit. We start with net finance costs.
At €150,000,000 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 1,221,000,000 The higher operating profit was impacted by a higher effective tax rate of 25.5 percent compared to 22.5 percent a year ago. This increase can be explained primarily by a onetime non cash tax charge arising from the recently 21%, in line with the nominal effective tax rate in Switzerland. We anticipate our effective tax rate to remain in the 19% to 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 percent to EUR 2,723,000,000 The EUR 827,000,000 increase was driven by a high operating profit and favorable working capital movements. Working capital inflows of €234,000,000 compared to a €29,000,000 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 €268,000,000 onetime 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 €4,900,000,000 at year end were €359,000,000 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 €487,000,000 gross capital expenditure was below last year's, representing 4.4 percent 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 Clif and Arpels and Chloe stores in Ginza, a new Cartier store in Cannes and a new Daniel 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 and Danos started the implementation of its new retail concept starting with German 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 Glubelje and the completion of the new IWC manufacturing site at Mireshausen, 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's Central Logistics Center at Villarsurglaan in Switzerland. Let us now discuss free cash flow.
Free cash inflow amounted to €1,090,000,000 up by EUR 63,000,000 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 €4,000,000,000 bond issue completed in March 2018, which represented an opportunity to secure long term financing in a low interest rate environment.
At 31st March 2018, the group's net cash position amounted to €5,269,000,000 The EUR 522,000,000 decline in net cash is largely explained by the investment in Dufry, the purchase of the previously mentioned investment properties for €213,000,000 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 U. S. Dollars.
Let us now look at our dividend proposal. Our fiscal year 2018 dividend proposal to be confirmed by shareholders in September is CHF1.9 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 to good cost control and kept to our golden rule stating that the operating expenses should increase less than sales increases. And last but not least, our cash flow from operations was strong, increasing by 44% versus the prior year. This year, under renewed Board of Directors and with a largely 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 omnichannel proposition, planning 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 is a meaningful opportunity to help them grow the business over the long term and further strengthen their leading positioning in online luxury retailing with a 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 omnichannel and digital marketing, which are key features of the transformation journey we just discussed. As you may have seen in our recent company announcements, the office progressing quite smoothly and nearing its completion. We are confident that with the remaining steps of sell out 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. Vishmar's strong balance sheet provides projection 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, 1st 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 started already.
Yes, so many hands. I don't know where to start. But just before you start asking your questions, please announce your name and your company's name. So we'll go right way and moving up because otherwise it's tough.
Thank you. Edouard Aubin from Morgan Stanley. On your jewelry Maisons, 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 points on a reported measure and 200 basis points on an adjusted basis. So 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.
But if we look at consensus for fiscal 2019, I think consensus is around EUR 2,400,000,000, which would imply something like 16% growth for the group, while you grew basically less than 10% this year. Is that realistic? And then just on Specialty Watchmakers, a number of your brands can be found on Grey Market platform today at substantial discount. If you could elaborate on the steps you're taking to address this and to in order to protect your brand equity?
Edouard, if I can't well, that makes 3 questions. So maybe you can pick only 2, up to you, what you think that counts.
Yes. Those were 3 questions on my count as well. I mean, the first one let's say, the second one, I can very easily answer. We don't guide. So you come up with numbers out of your models or consensus numbers.
You must understand we cannot really comment on those. So that leaves 2 remaining questions. The Jewellery Maisons, I don't really share your view. I think the Jewellery Maisons have had a strong year. The margin is back to close to 30%, as we were saying, 29.9% to be exact.
And they are in a process or at a level where with very high operating margins, we must worry to protect those margins. So both Cartier and Van Cleef are investing into their network, and they're investing into communication. And we're very comfortable with the level at which their operating margin stands today. On the Specialist Watchmakers, Jerome, you want to take that up?
Yes. Good morning. When it comes to our specialist watchmaker Maison and your comments about the product available the product available on various platform. We know that there are alternative distribution network that exist and tend to develop themselves. We monitor there as well the rate of discount.
And what we see that's a tendency of this rate of discount of going down. It must be primarily as a consequence of a qualitative action when it comes to our distribution network. And for sure, that's a result of the first steps of our buyback that took place this year.
Yes. 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 special watchmakers. We were quite clear about it saying that, well, we do not believe that oversupply at our partners' points of sale is helpful to protect the long term brand equity because this oversupply is not being dealt with quickly, well, then our retail partners have a balance sheet problem. And in order to address that, we took the decision to buy back because otherwise these products will find their way into the grain market and impact this will impact our long term brand equity.
And 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, and we've seen that this year. We've addressed the overstock situation with for our products with the retail partners at the Specialist Watch Maisons this year. And we believe that, that is a sound basis now that they have reached a healthy inventory level with our products.
And we believe that on that basis, they have a solid foundation to grow from, and we've stated that. Now what is the timing of a rebound? I know you're waiting for that. Now I must say today on the we look at the retail on the retail sellout, and that is a very healthy sellout for our watches, both at Cartier and at the Specialist Watchmakers. So that gives us some hope.
And when the inventory equation is right in the wholesale center, then wholesale sales will grow again.
Patrick Schwindelands, Zurich Antennale Bank. First question overall on the wholesale channel, what's your best guess here? I mean, you had a clear outperformance in retail last year for the current year, if you would assume, let's say, 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? And I don't have I don't want the guidance for the current year. What's your longer term view? Would you say it's still possible to have mid term over 20% EBIT margin as it was the case in the past? Or do you say, no, the market has changed?
Yes. Good morning, Patrick. Retail is strong. Wholesale was quite strongly impacted by a number of initiatives we took. So that's where it's standing today.
I mean, I can't guide you on that, you know that, but I appreciate you're trying. But let's put it this way. There's always a link. Retail sales, which is the true demand we see, are strong. And with a time gap, wholesale follows.
Now 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. And 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. So that over time brings it to a point where sell in and sell out will normalize again, and that's when we should see the pickup 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 sellout side, but then again, predictions are entirely difficult to establish, especially when you talk about the future. But today, the data points we have is retail sellout is strong, watches, jewelry and double digit strong. And 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.
We'll add on comment that we have started this 2 years ago, and what we see is there's a long tail. And for markets that have recovered early, like Mainland China, we see the sellout trend in wholesale region visually the same. I think it's fine. Other markets were in distress and not only because of us, but the entire profession are still struggling. So to see when will the aggregate wholesale demand or the aggregate wholesale figures match the retail depends on us and on others as well.
But in markets with being 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 twenty seventeen. We've seen good business and healthy business. And 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. So I think some brave measures that Thierry and his team took last year, we believe they're paying off. And 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 and I understand that we have been talking a lot about one off effects in fiscal 2016, 2017 2018. I can assure you, we don't we will not like to continue to do that for the foreseeable future because it makes the results very hard to read and to understand. So just bear with us for the time being. The underlying EBIT margin is obviously stronger than the one we report on, but that is not an excuse.
So 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 and we have a positive growth of the top line. Well, if we get the gross margin equation right and if we get the operating expense growth to below sales growth, well then, 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. So we'll see. We'll see.
I'm positive about the future, but then again, I would say that, right?
Do Melanie and okay, Melanie will come back and
Melanie Flouquet at JPMorgan. I have two questions, please. The first one is regarding your investments in Softline that have been pretty impressive in Dufry and in particular in YOOX NET A PORTER of late, so 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.
And if this is the case, what does sizing long term investment with your cash balance mean? So that is my first question. The second one relates to it's a question to Burkhard, 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? And you've delivered therefore lower OpEx than top line, but is this a satisfying level for you? Or are you considering that you have 2 to 3 years investments that are a bit heavier than the normalized run rate of OpEx? Thank you.
Thanks, Melanie. Yes, okay. To bring a bit of color to what we're saying to the press this morning. So Dufry, 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 to for us to kind of leapfrog into a new age on the distribution side. Fine. And mechanically, if you look at it, today, we have about 1% of our group sales are in e commerce or through e commerce. When we combine with YOOX NET A PORTER, we jump to 17%.
But 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 softlux 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. And in order to quickly advance into that field, we believe and we still 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, well, 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, well, then it's probably a good place to be, especially for us who are very strongly present in DFS, which has a different footprint, as you can know. As you know, it's more Asia based. And do free is more on the Western Hemisphere and comparatively less exposed to Asia. So we believe it's a good position to be in to grow business opportunities with them.
Now 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 Clourier as an example, but Dunhill is also there, Lon Lancel is there, which is a different story, as you know. And let's not forget Cartier in the past had had a very sizable leather business. And 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 in leather hub, as we call it, which was developed by Montblanc, very successfully so.
So and 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, on the development side than what we usually have on the hard luxury side. So 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. So that's what we or what I said this morning when I said that when I spoke about growing organically. Now 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. And 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. And Sarah Pian, this small acquisition last year was 1st and foremost about development and production capacity as well in that area.
So that's what the plan is on the organic side. Now am I happy with the leverage? Same answer. Well, 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. So you we've we're still rolling out a Gemini into Fashion and Accessories Maisons now. We've had transaction expenses. So there's money one offs. Some of them we spell out, some of them we don't spell out that are linked to this transformation.
Now 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.
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? And then secondly, I just wanted to follow-up on the M and A side perhaps outside of Soft Luxury. You've clearly raised the €4,000,000,000 bond despite having significant cash on balance sheet. The dividend is perhaps a bit shy of market expectations. And you're talking about seizing long term opportunities.
Should we think about M and A outside of the soft luxury side as well?
I will pick the first one for China, China's demand and sustainability. I think that the Chinese wealth growth and the above GDP growth is about 6.5%. It continues. And 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, it's really massive. And so for still a middle income country, it's moving quite rapidly up.
So the number of potential new customers is just enormous. And in a period where the renminbi is also strengthening, the purchasing power is just enormous, both inside Mainland China and outside. So we see same things happen in Japan, on the contrary, it's 10x bigger. So 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.
But beyond that, there is still a need. And we see moving even more massively towards women who are increasingly independent and spend on their own. So that says no worry for the next coming 10 years.
Okay. So on the dividend and the M and 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. So we want to grow the dividend year after year on a sustainable level. So 6% growth this year, 6% last year. We believe that's a nice and healthy trend going forward.
Should we be thinking about M and As M and A activity outside of the soft luxury space? I think that was the question, right, Ella? Could I would I be able to comment on that here?
Okay. So Francesca, John, and then we'll go back to the first row, please.
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, but 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.
But 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. So it would be interesting to frame this acquisition with your omnichannel, omnistock strategy and whatever you can say at this stage would be helpful. My second question is around the it's a specific question on CapEx. I know you guide for CapEx.
So can we have CapEx guidance for next year? And 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. But is it correct to assume that when and if the convergence of sell in and sell out 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, and then I'll let my colleagues speak about the watch side of it, even though I have my views on that. The on the YNAB 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 Aynch'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. And we believe that has worked very well in the past. And now as we are we have reached almost 95%, as you've read yesterday, and 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, but we still believe it's a very attractive platform for us to trade through. Now the world obviously is big, and there are other customer or there are other views, there are other business models out there, which are attractive, and 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 what when I say about the business, this is what the customer engages with. So we need to learn about more quicker about the customer and we need to meet his expectations. And expectations, obviously, are what we also in this industry call about the omnichannel challenge or promise.
And we believe we are strong in retail. We are working to be stronger in wholesale. And obviously, with a strong asset in the digital field, we believe that is a fantastic proposal that we can build over time. So we looked at the asset, obviously, because when you offer €38 a share, which is a premium to the market, well, then you better take a view. Our view was that it is a very strong management, very strong teams who are also in size wise, one of the best, if not the leading assets in the digital arena.
And 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. And as we're in a market space where you are well, you need capital, and I'll come to that, and you don't want to manage a business with a long term view on a short term pressure. So that's why, for many reasons, we came to this conclusion that it would better to take it private. Capital needs, you know the numbers better than I. YOOX NET A PORTER, they've been talking about €150,000,000 to €180,000,000 CapEx, which for them is clearly significant.
But then again, let's start thinking about this is a technology driven business. So what does that mean? What is the technology side of the business? So as I said, €150,000,000 to €180,000,000 for them, that's what they guide on. We'll have a look at it.
Once again, once we secure and we expect that to be done by summer, then 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. So we'll have a look at that. If you look 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, 5 years, which has been a range between 5% 7% of sales, and we're comfortable with that.
But I don't give guidance. Hold on. There was another question on the watch business.
Yes. 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. And it's for us very, very important given the size and the history and the patrimony of our Maisons. We cannot only consider short term, but we need to project ourselves in the midterm and long term.
Cartier was a pioneer in establishing a strong monitoring of its sell in and sell out. And we've extending our sales expertise during the last 18 months to the other Maisons of the Polo Specialist Watchmakers. He brings us to be capable to say, as Burkhart was saying before, that our sellout is higher than our sell in. Now if you combine that to the buyback, as it has been announced and presented in our account, yes, we can say that we have, globally speaking, at global level now reached a good level of stock. What does it mean geographically?
To come back as Franco comment of Burkhard, we do not guide our clients when it comes to say where do you want to buy. And of course, Harry says it's not to use it. I will teach you volatility of the currency and it has definitely an impact where the client want to buy. And it's absolutely impossible to know where in September October will be the global price positioning because of the currency.
So John, two questions please again. Thank you. And afterwards we come to Luca and Luca.
Two questions. Thank you. My first question is around the 4.30 to £850. It's a little bit more expensive than your Bauma 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. So I'm just trying to understand really you launched 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 cost you 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. And I guess linked with that, a question for Cyril. 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, minus 5 to maybe plus 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.
I will start with our new baby. Yes, indeed, I will say. We're very happy and glad to see the breadth of a new Maisons within our portfolio of Maisons when it comes to the watches. You described, I would say, part of the production chain of Baum and indeed it is assembled in Netherland mainly for logistic reason as personalization is one of the key item 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. And indeed, we found in, 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. And it is indeed very important for us to nurture the desire step by step and to continue to get and raise the relevance of watchmakingfine 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, regenerating itself constantly during the last year. We go one step further with BOOM, and I appreciate that you notice it's different approach and positioning.
We are very, very much interesting in clients that are interested in shopping digital, to B2C, to personalization and also with an unwavering consciousness approach.
Can I just add something to that? We I think today this morning on the media call, we said, well, BOOM, what is BOOM? It's young, it's eco conscious, it's digital. And I think that captures the essence of it. I think it's very interesting proposal.
We'll see how if that is 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. And it was also a project that has been run separately, let's say, it doesn't come out of Baum et Marseille, but it was run separately by a team fully engaged in that. And it's a great dynamic that we've seen around the development of this project, and 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. And so that was a very interesting experience in many, many aspects.
And now we are putting it to the test of the market.
To comment on the yes, the question on our pricing and product offer. So I said 2 years ago and still on the market, there's a bit too much of everything, so meaning it's a buyer's market. In buyer's market, you have to get 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.
So what we've been doing is we construct the offer with good pricing on every category from steel and diamond or gold and gold and jewelry, and we are growing in all categories in there. So as you see for the new Santos, the perceived value for money is really good. And by doing that counter intuitively, you get better value for money, you increase encourage customers to trade up. So our average pricing is increasing. And also with that, you have better capacity utilizations, you also consolidate margin.
So by having, in some way, more aggressive price to each category, we encourage more trading up than trading down and we encourage margin consolidation. It might look counterintuitive, but our results show.
Good morning. It's Lucas Olca from Exane BNP Paribas. Looking at watches specifically, I understand that the inventory buyback 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 Watermakers 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 Frankly for Nappels and the other companies within the group operate? Is it 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.
So I will start with the watches. Thanks for the question. Indeed, I would say how Maisons are existing through their products And the efforts that Richemont or the Maisons Richemont did during the last year has been very meaningful. If you see the last ACH and the creativity of our Maison, You see the importance of the Polaris line at GLT at Geiger. You can see here the launch of the relaunch of the position at Geiger.
Thije, you see that our Maisons 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're saying, 8 Maisons with Boma, we can say 9, Maisons in Specialist Watchmakers and then to that you had to add Van Cleef, Cartier or Edmond Blanc. All these Maisons are very much paying attention to their expression and to offer a wide offer. And then in somehow an offer different from 1 Maison to the other. How 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 Maisons have more than centuries of existence. And like species, we know that these are continuous channel but creativity, differentiation and iconization are definitely the heart of our strategy.
And probably, I might add, the test is always if this is relevant for the customer and which is a given as a principle. But and if we look at the recent I mean, the fiscal year 2018 retail numbers and the retail growth of sellout, 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, But there's a constant renewal process that is ongoing. And sometimes, they come up with even some surprising offers like BOOM today that we're just referring to.
To comment also on more specific things. Say, there has been a major contraction coming from China, and it has two origin, 1 was anti corruption and 1 was renminbi devaluation. For anti corruption was not only corruption, but also corporate gifting. A big part of state owned companies were offering gifts and big parts were watches. And when you offer something that's not on your own money, you can spend whatever you want.
And so this part is gone. So there is a market adjustment linked to that, that this probably will never come back. So this had to be in some way, this had become everything for that. It's a 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, and the strong brands are getting weaker than before. When we have relaunched the Panther, Veric 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, when we launched something not new and square and quartz and it's a landslide. So 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. So we have to create that demand and to make customers willing to buy that, meaning nice things for fair value and it works. So we are on the way to reconstruct that. So there is some part where you have to adjust to market where substantially some demand has changed because it was not there and some reshifting, 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 mentioned the digital part. I think, 1st and foremost, digital is not a kind of one size fits all monolithic strategy or reality. And it's been there for quite a long time for most of our brands. So 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 Dunkleff and Apples, 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 legal initiatives around education. So 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. And then of course, it's also a way to provide additional service that includes online sales. I mean, 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 percentage on sales, as Burkhard was mentioning, but really provides for a complementary service. And 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 kind of immersive approach that can be provided through a physical store environment, but then combine that with their online experience. And so it's a reality today. It doesn't mean that e commerce is replacing retail for a brand like Van Cleef and Apples, but definitely that combination of digital and physical is a reality. And moving forward, it's going to be more and more the case.
Yes. Good morning. John Cox, Kepler Cheuvreux. A couple of group questions, shall I say. First of all, technical questions, maybe for Burkhart.
Yes. Le Domino Tua.
The one offs, could you just give us a breakdown exactly where they are? Because you mentioned 208 and then you mentioned 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 part of technical, very quick question on YNAP.
When will you fully consolidate, I guess, from the 1st April? How much will be the book gain? Because I guess that will be pretty material. Operationally, it looks like you're pretty happy to lose market share in luxury watches, it seems to be 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 Others segment, should we think of a blank zero this year given the exit of Shanghai, Tang and Lancel?
And while you're here, Nicholas, maybe you can give us a quick comment on Van Cleef and the plan for expansion. And 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. 2 years now, you've had mid single digit dividend increase. I think it's probably not what some investors signed on for, as you can see with some of the shareholder reaction this morning. But that's just a comment. Thank you.
Thanks, John. You want me to comment on the comment first? Now this 15% has been floating around for a long time. I personally haven't found when it started, but we can definitely have another look at that. I still think and we've been, I think, very clear about that, that over the long term, we view our business and we view the long term and value the long term relationship with our shareholders.
Now a 6% growth in dividend in today's environment, I think still is an honest proposal. Okay, there's a share price reaction, fine. But I think once again, you need to look at the shareholder return over the very long over the long term. So that's our view on that. Now are we happy to lose market share?
Would I answer yes? Probably not. But then again, we don't really and I say that in a very relaxed fashion, we don't really, really look at the short term here. Now is it 1 year up, 1 year down? Fine.
The Maisons are here for many generations. And if you look back at the history of Vacheron, for example, let me calculate probably more than 10 generations. And I don't think that they built the Maisons 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 2 years that addressing the unhealthy inventory situation next to running or doing a good job on product creativity, network, quality, etcetera, is the view that prevailed.
And I don't want to go again and say, well, because brand long term brand equity is of utmost important for us. So is that means that short term, we have fluctuations, volatility in our market share? Well, that is a consequence of it, but we don't want to manage it in terms of market share. But it is for the long term health and the strength of the brand
equity. I would give, I would say, 2 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. And it is clear for us that the sustainability of our business model is a key criteria.
And it is a discipline now because sell in, sell out data and working hard 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, but we believe in that strategy.
To be more specific, don't take Swiss watch export as a proxy for the market share, not in short term. If you take about 3 years, probably it matters. In 3 months, it's just restocking distribution somewhere. If you say 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. So we have to be very strict on where we put things and how we make the market can consolidate in a good way.
So we're confident that we gain market share, but the market share on true demand.
Okay. And John, finally to not forget that, come back to the one offs. €208,000,000, we said it in the release as well and the results announcement, there is €135,000,000 linked to the buybacks in Specialist Watchmakers. So we do find that in that segment, obviously. And then we said the rest is linked to portfolio transactions.
And as you've seen or heard or read, we exited Chang'eitang. We're in talks for Lancel. And okay, we're in the process of securing the 100% majority of YOOX NET A PORTER, so that you will the rest you will find in the other segment. Now don't nail me down on €5,000,000 here and there, but that's the general trend of it. 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 at 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. And the second condition was the MAC condition that we had explicitly to waive, which we also did with yesterday's press release. So considered 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.
And the rest, we expect to finalize by this summer.
I think it's really that one of the final illustration of what we talk about Richemont, 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. And I think quite a high level of respect and desirability from customers. And this is what has happened slowly, but surely in the last 2 decades and 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. And we've seen very good response to that specific positioning. So we feel that, that kind of long term view and organic pace have been quite efficient for Van Cleef and Apples and should continue to be in the
future. Thank
you so much for taking my questions. Zana Pusz from Bernenberg. So 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 YNAB personally or not. But when we think of YNAP being consolidated within Richemont Group, can we assume that whatever targets the management of YNAP had for the growth, which was, I think, 17% to 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. So 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 good digital efforts? And with regard to that as well, given that you have you will soon have YNAP on board, will it prevent you from also working with other platforms?
I mean, recently, Farfetch has launched their hard luxury hub, which some of your peers have joined within the watches and jewelry. So 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, all else kind of combined. And on the trends observed among the younger generations, you've mentioned the fact that younger people are looking more at the environmental factors, etcetera. Now we've seen recently a big rise in the discussion around the secondhand 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, that will 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 3rd, and I will ask my colleagues to add some color to that, especially your second question. So on YNAP, I cannot really or I 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 into 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 a sense that to 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. And I think we'll talk about other business models in the space afterwards.
It's a profitable business model. So we're happy with that. Their guidance is quite strong. They have confirmed their guidance as well after their 3 months earnings announcement. So today, we have no reason to believe that, that would be challenged or questioned.
Even though I think I've heard something, right? EBITDA Alevidacci was that punchy line there, Francesca, I like that. So in all honesty, we're looking into the model after at the end of the year. We've said when we formulated the offer, we know the numbers as you do. We know the also what they guided on CapEx spend, €150,000,000 €180,000,000 We'll see.
If we need to accelerate spend, then 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 or engaging with other players. Do you want to take that up, Cyrille? Or
For that, we have not put any clear view on 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. And it's places where you can have counter feet partial or total or you can have some trans shipping or can have many things happening there. And so that's an overall issue. So there will be, I guess, gradually, and that's why we also have to have a strong point on what can be a clear and neat and selective offer on the online and which part are just kind of arbitration or place for wrongdoing.
So we continuously review because there are new partners or new people or new offer every day and many, many, many hybrids. So 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 also on what they do directly or indirectly and can be considered. But we currently, we don't see any at this stage that has shown up that quite well. So this was probably the with YOOX Centre 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, to let's say, to start an e commerce business, but 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 and you need the quality of execution. And that goes with a strong backbone, but that also goes with the 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 in the especially on the soft side is a given.
And you don't 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 teams at YOOX NET A PORTER, and that's why we believe in 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 ICH, 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. So we still think we think there is 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, and we're talking about watch today.
And
they are building watch expertise on their own or they're building a collection or they use that as a way to enter into the market. And that is, of course, interesting for everybody in the market. And that's why I think you hear so much noise around it today. And I mean that in a positive way, noise, because I think it is the industry is waking up to a market there or space in the overall market that has been overlooked in the past, and we're monitoring the situation as well.
So we're running out of time. So there will be time only. Yes, you Ermin, go ahead. And then there is one question on the web, which has not been answered.
Ermin De Vence Brandes, Raymond James. I have 2 very quick questions 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? And 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.
Did I expect to do this level of inventory buybacks? Depends on when. After I was told, I fully expected it. But 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.
And their brief was very clear or the brief given to them was very clear from the new managers overseeing the Specialist Watchmakers segment from Jean Lambert and Emmanuel Perin, 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. And it was done on a Maison by Maison basis, on a market by market basis and on a customer by customer basis. Now I can have my view, which might be right or wrong. In the end, the Maisons came with their proposals, and they have 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 €50,000,000 more or less for the simple reason that we have to get it right. And if we come to the right level, well, then that is what it needs to do or that's what it takes. So that's my very simple view on that. Q1, while it's still very young, haven't done anything in Q1.
Okay. Thank you. So there's a question I think for Jerome regarding the appointment of Eric Valard and whether you can elaborate on what is new targets or any key initiatives and also at Fashion Accessories Maisons? Thank you.
Thank you, Sophie. Indeed, we announced this morning as appointment of Eric as the Head of the Fashion and Accessory Maisons. You can see in his appointment, he says the very mirror decision and organization that the ones that we decided to put in place with Specialist Watchmaker a couple of months ago. So it's indeed the willingness to work with the Maisons of Fashion and Accessory in an efficient, proactive and professional way. You can read in resume of that is in the presentation of in the announcement, a 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 Maisons and as well in term of geographic.
Thank you. So that concludes this presentation. Many thanks for coming. Thank you for watching. And James and I are at your disposal later on if you have more questions.
Thank you.
Thank you very much. Have a
good day.
Thank you.