Ladies and gentlemen, good morning. Welcome to the company Financier Richemont Fiscal Year 2016 Interim Results Presentation. I'm Dino, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. After the presentation, there will be a Q and A session.
The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Gary Sage, Richemont Chief Financial Officer and Sophie Kania, Head of Investor Relations. Please go ahead.
Thank you, Dino. Good morning. Welcome, everyone. Cary Sage, Richemont's Chief Financial Officer and I would like to thank you for joining the audio webcast today to review Richemont's 1st half year results for the year ending March 2016. I would like to remind you that the press release and financial presentation are available for you to download at crechemo.com and also that the audio archive of this web cast will be available today on our website at 1 pm Geneva time.
Before we begin, I would like to draw your attention to the disclaimer on our presentation and press release regarding forward looking statements as defined in the United States Private Securities Litigation Reform Act of 1995. Gary Sage will first give you some results highlights before reviewing Richemont's operation. I will present the Maisons main developments before handing it back to Gary for a financial review and conclusion. This will then be followed by the Q and A session. The presentation will now begin.
And I'll hand you over to Gary.
Thank you, Sophie. Good morning, everyone. Thank you for joining us this morning. A particular thank you to all of our Richemont colleagues who are also listening on the call. I think Richemont reported a good set of results for this interim period.
Group sales grew by 15% or 3% on a constant currency basis. Remember this number excludes the Net A Porter business, which is reported on a net basis as discontinued operations within our financial statements. The highlights of the past 6 months have been the performance of our fully owned stores and the jewelry category generally. Retail sales were strong, including in Mainland China, growing overall at 13% at constant currencies. They were particularly good in Japan and Europe, offsetting the continuing negative environment in Hong Kong and Macau, as well as the subdued demand in Americas and the Middle East as we will see in a minute.
Operating profit rose by 6% to 1,000,000,000 €390,000,000 driven by a favorable euro, the strong performance of the Maisons boutiques and good administrative cost control. This is in light of the underperformance of our largest region and the strength of the Swiss franc. The operating margin was approximately 24% of sales. Net profit was lifted by lower hedging losses and rose by 22% to €1,100,000,000 Inventories were well controlled and cash flow from operations was solid at €1,055,000,000 Let's now start with the review of sales by regions at constant currencies. Remember, the numbers that you're going to see exclude Net A Porter in both periods.
First, let's look at our sales in Europe. Europe enjoyed a sharp 24% increase in organic sales across most of our Maisons. Performance was driven by an increased number of tourists attracted by a lower euro, notwithstanding the price increases implemented in the region. Growth was also fueled by locals. 9 internal stores were opened during the period.
Growth was all the more organic as the reopening of the Cartier flagship on Champs Elysees in Paris at the end of May only partially impacted sales. Now let's turn to Asia Pacific, which now accounts for 34% of group sales. Sales declined by 17%, predominantly impacted by Hong Kong and Macau, which together account for approximately 15% of group sales. In those two markets, the decline was particularly significant in the watch category and in the wholesale channel. Other regions enjoyed positive developments, in particular Mainland China, which in total turned mildly positive.
Thailand and Australia grew by strong double digits benefiting from purchases made by mainland Chinese tourists. Particularly noteworthy in the region was high jewelry, which achieved double digit growth in sales at constant exchange rates. Let's now turn to the Americas region. Growth softened to 1% at constant currencies. Given the strength of the U.
S. Dollar, the region experienced fewer tourists from Europe and Asia, even though the U. S. Is primarily driven by domestic tourism. Watches as a product category were slow, while jewelry enjoyed a strong performance at all price points.
Chloe and Peter Miller once again continue to record outstanding growth. Let's now move on to Japan, which represents 9% of group sales. Sales increased by 44%, helped by an easy base of comparison and a weak yen. Price increases were well absorbed and the performance was not materially affected by the temporary closure for renovation of the Kaiche Ginza flagship. Growth was driven both by locals and tourism.
Among the tourist clientele, Mainland China were predominant. Watches and Jewelry did particularly well. Within jewelry, it is worth noting that high jewelry enjoyed strong growth, which is a new phenomenon in Japan. Finally, the Middle East and Africa, where growth was softer at +4 percent impacted by tough comparables and strong currencies, hence lower tourism. The region was also impacted by a politically unstable environment and a number of high jewelry sales that were done in Europe rather than at home.
Let's now look at sales by network. Retail saw sales rise by 13% organically compared to wholesale sales that declined by 6%. Wholesale was particularly affected by Asia Pacific and the Americas. The outperformance of retail explains why its contribution to sales increased by 500 basis points to 54% of group sales versus 49% in the prior period. Despite the temporary closures of 2 Cartier flagships and a difficult situation in Hong Kong and Macau, retail sales were underpinned by the net opening of 26 internal stores and good performances in the rest of the world, principally Japan, Europe, Mainland China, Korea and Australia.
Finally, on the sales, sales breakdown by main product line. Watches continued to be negatively impacted by lower consumption in Hong Kong and Macau primarily, and to a lower extent also in America. Watch sales were down mid single digits. In our fully owned stores, however, sales of watches grew. Jewelry, particularly high jewelry, continued to enjoy a stellar performance.
Cartier, Van Cleef and Arpels and Piaget all did extremely well. Leather and clothing recorded double digit growth, thanks to renewed creativity at Chloe, Montblanc and Peter Miller. Let's now look at our Maison highlights before Sophie goes through the details. Overall, the performance of our Maisons reflected their creativity and their geographic exposure. In the Jewelry segment, profitability remained at a high level.
The specialist watchmakers faced a challenge presented by the sharp appreciation of the Swiss franc and registered a lower operating contribution margin of 23%. Other Maisons that include Montblanc and the Fashion Maisons, but now exclude the NET A PORTER Group reported a 17% sales growth. Results continued to be affected by the underperformance of Alfred Dunhill and Lancel as we will see shortly. Over to you, Sophie.
Thank you, Gary. We will start with the Jewellery Maisons, which posted an excellent performance with sales up by 6% at constant currencies and by 18% at actual rates. Jewelry drove the growth, in particular, high jewelry, where Cartier and Van Clegg and Arpels are clear leaders. Watches were positive in retail, but remained challenging in wholesale in Hong Kong, Macau and Americas and weighed on the overall watch performance. The anticipated subactivity and strength of the Swiss franc impacted the operating margin, which was reduced by 160 basis points to 30.7% of sales, while the operating contribution rose by 13% to €1,100,000,000 Let's look at the main product developments over the past 6 months.
We will start with Cartier, which continue to record very strong jewelry sales driven by the Etour Difin high jewelry collection, which generated substantial sales within months of its launch. The 2nd high jewelry event recently took place to display the rest of this collection and the results are again promising. Jewelry sales also enjoyed strong momentum sustained by the new Amulet, Jus Saint Clou, Love and Pantsir collection. While Cartier watches saw further slowdown in wholesale, organic sales were up in retail. Lacres de Cartier in precious materials made good initial response and we expect more impact from the gold and steel version, which was introduced this September and is supported by worldwide advertising campaign.
Jewelry boosted retail sales in Japan and Europe, which were also fueled by weak euro and the successful absorption of price adjustments. Retail more than offset a weak wholesale in Hong Kong and Macau. Worth noting is the marked sales increase in China, as Gary mentioned earlier, across channels and product lines. At the end of May, Cartier reopened its flagship store on the Champs Elysees in Paris, while the New York mansion and the Ginza flagship are being renovated. Overall, the retail network was largely stable.
To meet the modern jewelry Cartier is further increasing capacity with a recently opened workshop at Le Locre in Switzerland. Now, Van Clee de Narpels. La Maison reported substantial sales growth across all its product lines and most geographies. Worth noting is a successful launch of the 7 Seas high jewelry collection and rejuvenated Cadena watch line. The Verdeli and Alain Bra collections continued to perform very well, thanks to new references.
Van Clegg and Arpels further improved its retail network by relocating its Cannes boutique to La Crozette and opening a boutique at Del Maru in Shanghai and the Avenue Malls in Kuwait City. Now let's turn to our specialist watchmakers. Maisons showed mixed results depending on the exposure to Hong Kong and Macau and the product positioning. Overall, the good increase in reported sales, thanks to weak euro, helped mitigate the organic slowdown. Margin wise, the strength of Swiss francs following the removal of the peg versus the euro on 15th January 2015 and the underutilization of certain manufacturing sites led to 13% decrease in operating contribution.
The operating contribution margin now sits at 23% of the Specialist Watchmakers sales. Let's move on to Piaget, which continued to enjoy good growth in both high jewelry and jewelry. In particular, Piaget launched 2 high jewelry collections called The Mediterranean Garden and Secret and Lights. It also introduced a redesigned position jewelry line. Watches on the other hand were affected by trending conditions in Hong Kong and Macau and the metal focus on precious materials.
Late September, Piaget launched the Altiplano Chronograph worldwide. We're pleased to say that SwissWatch received the Chronograph award at the Grand Prix D'Orleans in October. Piaget also just launched its first automatic ladies watch in Asia, the Lamblight Stella, which was very well received by the trade and the public. Next, Vacheron Constantin. Europe, Middle East and Japan enjoyed a good organic growth nearly compensating for slow momentum in parts of Asia Pacific and America.
Sales have been supported by the 260 San Verti Collection Harmony, high end pieces and the bestseller Pacrimony. The latter part of the year will be supported by marketing events and further visuals on the new advertising campaign celebrating the 260th anniversary of Maisons. Let's turn to Long and Sonae, which faced strong demand in higher end watches in particular with complications such as the 18/15 Tourbillon or Zeitz first minute repeater. Worth noting is the visibility gain in Germany by the inauguration of extended manufacturing site by Chancellor Merkel at the end of August and the launch of the rejuvenated Lange-one. Next, Roger Dubuis, whose performance has been impacted by strong exposure to Hong Kong and Macau, where wholesale has been particularly weak.
Having said that, the first half service confirmation of Excalibur as the number one collection for the Maisons and also the increasing appeal of Roger Dubuis with women, notably via the Velvet Ladies collection. The 3rd deliveries of homage miniature pizza took place recently and new references such as the Excalibur 42nd thematic introduced in September should help the rest of the year. At Jurgen Couture, it is worth highlighting the fact that the classic round shapes like the Master collection, high complication offer and the feminine line Rendezvous have continued to gain traction. The new point of sales concept continues to be rolled out. The London Old Bond Street store and Tornow Corner in Bryant Park, New York City are the latest points of sales featuring Jaeger LeCoultre's new architectural codes.
Now let's look at IWC. In a tough environment, IWC managed to generate a good level of organic growth. The new Portuguese line was successfully introduced, while the Portofino line continued on a high note. 9 stores were opened during this first half, notably in Shanghai, Korea and in Paris at the Galeries Lafayette. Proficile Pameraille benefited from a well balanced geographic split, a low dependence on the mainland Chinese clientele and well received launches.
The Lumino 1950 Equation of Time, Le Rademir 1940 and Marine of Strom 52 millimeter to name just a few. In June, Opitinib Panera's 3rd e commerce sites in the U. S. Was launched and is off to a good start. Finally, Baume and Mercie.
Maison benefited from a strong foothold in Europe and from the relaunch of a plasma, which was particularly well received. Now let's look at other. Improving results at Montblanc, Chloe and Peter Millar offsetting deterioration at Alfred Dunhill and Montel led to losses being reduced to €11,000,000 At Montblanc, one off costs from integrations were completed this year. Product offer and gross margins improvement as well as the strict cost management are now being reflected in the operating results. Let's look in more detail at the product development over this half year.
So we'll start with Moulin, which enjoyed good organic growth in sales. The leather division boosted by the new format store and night flight collections has emerged as mouflon's strongest growth driver followed by the watch category. In watches, the new Star Roman and StarWalker Urban Speed featuring a connected band generated a significant buzz among the press. Riding instruments showed good resilience given the tough comparables after the introduction of the Master Stoop 90 years edition last year. The launch this September of the Montblanc M writing instrument designed by Mark Newson should support future growth.
Retail was strong, helped by 8 net internal store openings, the strong performance of a Korean subsidiary and outstanding e commerce sales. The wholesale business recorded a modest organic growth overall. Let's move on to Chloe. Chloe performed remarkably well, driven by all product categories, channels and regions. Leather was the strongest engine of growth sustained by the Jewel bag, but also by the growing success of the recently launched Faye and the very recently introduced Hudson bag.
Turning now to Alfred Dunhill, where sales in Western Europe in Western Markets, sorry, and Japan continues to grow. However, this good organic growth is not enough to compensate for the deterioration in Asia Pacific, where percent of Alfred Dunhill sales are generated. Overall, the menswear business is down organically, while leather is in line. Finally, L'Ansell. The predominance of the French clientele coupled with an ongoing downsizing of a wholesale network in France, heavily weighed on land sale sales.
With a new management team in place for over a year now, Lancel has completed the repositioning of its collection. The new completely rejuvenated offer is starting to appeal to both the French and a growing number of tourists. This includes Charlie, Lancel's best link bag collection and 2 new collections, Pop for travel and Graphic for men. The new retail concept is being gradually deployed and should become a key growth driver as evidenced by the performance of the renovated Saint Germain and Gary Lafayat Osman stores in Paris. This concludes the review of Maisons.
I now hand over to Gary.
Thank you, Sophie. Let's now get into the financial review. First, we'll look at operating profit. Reported operating profit is up by 6% to €1,390,000,000 sustained by a higher gross profit and administrative expenses under control. This is a positive result in light of the Swiss franc strength and low organic growth.
Operating margin proved to be resilient and represented approximately 24% of group sales. Let's now look at the gross margin and expenses in more detail. The 13% increase in gross profit led to a gross margin of 65%. The 100 basis point reduction in the gross margin results from a mix of positive and negative factors. On the positive side, a weak euro and increased share of retail.
These positive developments were mitigated, however, by higher Swiss franc cost in euros and a lower capacity utilization. Currency impacts on margin for the period were 30 basis points negative. Now let's look at our operating expenses in some detail. Net operating expenses grew by 18% to 41% of sales. The rate of increase reflects primarily the Swiss franc appreciation.
At constant currencies, net At constant currencies, net operating expenses excluding communication grew by 9%. Now let's look at the expense categories in detail. Selling and distribution expenses, which represent 60% of our total operating expenses, rose the fastest. On a constant rate basis, selling and distribution expenses rose by 10%. Of this 10% constant currency growth, non boutique costs were limited to a rise of only 2% in constant terms.
Retail increases related primarily to increased depreciation in rentals as well as to other variable expenses. Communication costs rose by 7% and represented approximately 8% of sales. Administration expenses grew by 13% or 2% on a constant rate basis. Admittedly, the phasing of expenses toward the second half of the year kept this category close to flat for the first half. Now let's look at some details on financed income, which turned positive this half year.
Compared to the prior period, our mark to market adjustments were limited to a charge of €8,000,000 on our hedging program compared with a €239,000,000 charge in the prior period. This explains the majority of the movement between the periods. Non cash income, which does not affect equity, amounted to €85,000,000 for the period. As a result, net finance income turned positive and amounted to €76,000,000 Let's move to the rest of the P and L items below operating profits. Profit from continuing operations for the year rose by 30% to €1,200,000,000 thanks to an increased operating profit and a reversal in finance cost as we've just seen.
Our taxation charge increased to €270,000,000 This largely reflects the performance for the half year in higher tax jurisdictions such as Japan and France. We continue to forecast our underlying tax rates to be in the range of 18% to 20% for fiscal 2016. I would now like to focus on our cash flow from operations. Cash flow from operations rose to €1,055,000,000 The improvement reflects a good management of inventory, which translated into lower increases in working capital needs. Receivables remain healthy with more than 97% of the portfolio being current.
We incurred €40,000,000 in outflows related to the cash settlement of derivative contracts compared with a €13,000,000 inflow in the prior year. The 2 large movements for the period relate to normal seasonal build of receivables as well as the settlement of all incentive obligations related to the Net a Porter business. Now let's take a look at our capital expenditure. Growth capital expenditure rose by 8% to €282,000,000 to approximate 5% of group sales. The half year saw the continuation of our investment program in our manufacturing and distribution networks.
Fiscal 2016 should mark the end of our elevated manufacturing spends. For fiscal 'sixteen as a whole, we expect cash outflow of approximately €800,000,000 Now let's look at the nature of our investments made during the past 6 months. 45% of the gross expenditure related to point of sale investments, including internal and external boutiques and wholesale point of sale environments. 26 net internal stores were opened. The most notable projects for the half year included Van Cleef and Arpel in Tokyo Ginza and Rome, as well as the extension and renovation of its flagship on Place Vendome in Paris.
Montblanc introduced a new concept store in Taipei 101 and also opened up a new flagship in Hamburg. The ongoing renovation of the Cartier flagships on New York Fifth Avenue and Tokyo Ginza continue. 17% of our spend related to manufacturing investments. The most important investments included the recently completed Langa Manufacturing Extension in Saxony, Vacheron Constantin's Manufacturing Extension in Geneva and the new Cartier workshop at Lilac to cope with increased demand. Other investments accounting for the remaining 38% included our Merren project, which is a multi purpose project.
The campus will house the manufacturing for movement components, dials, cases, a research and development platform as well as administrative offices for a number of our Maisons. This project should be completed in early 2016. CapEx and other also included ongoing IT, logistics and related projects. Let's now discuss free cash flow. Cash flow from operations financed our significant investment program as you've just seen.
Free cash inflow amounted to €516,000,000 a €119,000,000 increase over the prior period. This primarily reflects higher cash flow from operations and lower tax payments primarily due to timing. Let's now look at our balance sheet. The group continues to enjoy a very strong balance sheet. Equity accounts for 74% of the total.
Net cash and investments amounted to €4,700,000,000 compared to €4,300,000,000 at September 2014. Rishwan's net cash position includes short term liquid bond funds as well as cash, cash equivalents and all borrowings. Liquid funds and cash balances were primarily denominated in euros, Swiss francs and U. S. Dollars.
As you can see, our overall financial position and cash reserves have not been negatively affected by the devaluation of the euro against the Swiss francs. And now some color on October sales. October sales declined by 1% on a reported basis and by 6% on a constant basis. Hong Kong and Macau continues to suffer from poor trading conditions, while the Americas was negative for the month. Retail and Jewelry, however, continued to outperform and watches in wholesale continued to suffer from a challenging environment.
Let me now describe in more detail the Net A Porter transaction will affect the second half of the year. In March, we announced the merger of Net A Porter with YOOX. This fifty-fifty transaction on a fully diluted basis was completed on October 5. Remember that while we own 50% of the new Yucatanat A Porter Group, our voting rights are limited to 25%. The gain that we will record of approximately €620,000,000 will be recorded as part of discontinued operations in the second half of the year.
As a result, the net income from discontinued operations is estimated at €530,000,000 for the full year to 31 March 2016. This investment in the future for which our basis will be €1,100,000,000 will be recorded under associates in Rieschmann's balance sheet. Let me wrap up the financial review with some concluding comments. We think the volatility from external risks and foreign exchange movements will likely continue to be part of the challenges we face. We will continue our long term strategy in the face of these challenges by investing continuously in all of our Maisons to develop organic growth.
We will continue to focus on our jewelry category at Cartier, Van Cleef and Piaget, while also completing our significant investments in the watch category next year. As always, our strong balance sheet allows us to think and act with the long term in mind. Thank you for your attention. And now, Sophie and I am sure we'll take a few questions that you all might have.
Okay. On you, sure, Gary.
We will now begin the question and answer session. First question is from Mr. Luca Solca, Exane BNP Paribas. Please go ahead.
Yes. Good morning. Hi, Luca. How are you? Very well.
How are you? Fine. Good. I was wondering about the watches trends you're observing. Clearly, the watches business seems to be the one most under pressure.
Other than I think you referenced the geographic presence of different brands. Other than the geographic layout of their networks and their exposure to Hong Kong and Macau, are there any other meaningful trends that you observe in terms of differences by brand or differences by price point or differences by metal, for example, precious metals and so on? Second question on the retail and the wholesale different dynamic. Are you comparing apples to apples is the simple question. Are you seeing retail to be strong in areas where wholesale is weak?
And we know that retail is significantly more exposed to jewelry. So I wonder about your what is retail activity and what you could potentially infer from it? And last but not least, a rather delicate question, but will we see the change of CEOs at Cartier? I wonder if you could tell us a couple of words and especially the fact that this has nothing to do with the current trading conditions. Thank you.
Okay. Look, a lot of questions there. I think maybe just to start, we some of the headline numbers are not great, right? We admit that. October, not good at all.
Retail for the month was actually flat. Now we tend to look through that, because we don't really focus on numbers that we give you on a monthly basis, but we tend to look at the trend. Now if you remember this time last year when we spoke, Hong Kong was just starting to get really difficult, right? And admittedly, it was something challenging that we had to face and we hadn't faced something like that before. This time around, it's really quite interesting because, yes, Hong Kong is still extremely difficult, particularly on the watch side and in retail in general.
Macau, the same. We're all aware of that. But I think if you look at the retail business overall for us, the retail business grew not only for jewelry, but for watches as well in total. So that's interesting. Knowing that Hong Kong and Macau are extremely difficult, our retail business, both watches and jewelry, are growing.
The other interesting piece of news, if you will, is we finally returned to growth in Mainland China. It's been a long time coming. We've made many mistakes in calling the bottom before, but Mainland China in total grew by 1%. And clearly within that, which you see throughout all of our numbers, retail, our own retail grew significantly, watches and jewelry. Wholesale was significantly affected.
I think in general, and Mr. Rupert said it in his comments, the wholesale continues to be extremely challenging. When is it going to get better? We have no idea. But we take comfort in that our retail networks for both watches and jewelry are performing.
In terms of and I understand the question, Luca, and it's a good question of is it apples to apples, you're being very elegant in saying that way. I can tell you that the retail underlying retail business is strong and it's not just new stores.
And when you said flat for October, it's at constant currency?
Constant currency, flat at constant currencies. On the question of the Cartier CEO, first, let me say I'm sad. Stanislaus has been a colleague and a good friend for many years. It was his decision to step down entirely. I think the press release is pretty clear.
On the other hand, maybe not necessarily known to the public world, but surreal Vigneron has worked for the company for a long time. He was actually one of the first people that I met in Europe when I started in Cartier in 1988. He's a good manager, he's a good professional and he's a good guy. So that's all I'd like to say on that.
Thank you very much indeed, Gary.
Next question from Mr. Thomas Chauvet, Citigroup.
Please go ahead. Good morning, Gary and I have three questions, please. The first one, I understand October flat in retail. It seemed, however, that the trend in the summer, at least that was my impression, had been actually pretty good in retail. So can you just explain what happened in September October in the retail channel to go to flat?
I mean, has the slowdown in Europe and Japan you're referring to in the press release been driven by weaker travel flows perhaps or perhaps a further slowdown in the European local demand? What happened in the U. S. As well? It looks this market is getting perhaps a little bit worse.
Secondly, on the cost side, in May, you gave us a guidance for OpEx growth of admin selling and distribution expenses, as always, in constant FX and for A and P as a percentage of sales. In light of the challenging environment you're expecting, can you update us on these guidance for the rest of the year and whether you've taken any particular action on either the manufacturing side of things or OpEx to mitigate that? What would be your best guess of gross margin in the full year cost of FX? Is it still 65%? And finally, any update on the search?
Just leave some questions for others,
will you? Just a very final one, sorry, on Net A Porter or YOOX Net A Porter. Any update on the search for a serious partner to buy part of your 50% stake in YOOX and therefore create the truly independent online platform Mr. Rupert is hoping for? Thank you.
Okay.
I hope I wrote all this down, Thomas. I think you know what I always say, Thomas, the numbers are the numbers, okay? I could certainly say maybe retail was affected in September by the non recurrence of the BNL. I could say maybe it's high jewelry. Frankly, there's nothing really to tie to, I have to say.
I mean, but again, the retail, if you look through October year to date, is really quite strong, right? So and that's what we focus on. I will say that Europe was strong. We know that. We know it was currency related.
But certainly, we saw and the data shows us this, that we saw many more American customers in the summer buying and buying it at fairly elevated levels. I think if you talk to the President of Cartier in the U. S, Mercedes Abramo, she's pretty grumpy about this, right, because usually she has a good fall. So I don't think we can read into September or October exclusively. The retail is performing.
And as I said, DeLuca, it's performing in watches as well. So knowing that Hong Kong and Macau are difficult, right? So in a way, I won't say we're relaxed, but
we're in
a comfortable we're certainly more in a comfortable place this year than we were from an understanding point in last September. Having said that, I think and my phone will probably explode in a second for Mr. Rupert, but I think the gross margin of 65% is still a number to work with. I think from an S and D standpoint on constant, we're probably looking at 9%. I think the differential relates mostly to an increase in variable expenses.
And I think admin, we said 5 in May, I still think it's 5. In terms of net a a porte, YOOX net a a porte, remember, Thomas, the first thing that's going to happen is an overall capital increase, and that's more a question related to Federico and Rico and Sylvia. I haven't even attended a Board meeting yet, So let's see, yes. Thank you.
Next question from Mr. Antoine Berge, HSBC. Please go ahead.
Hi, good morning. It's Antoine. Hi, Antoine. Yes, Antoine.
Three questions, if I may. First of all, I'd like to follow-up on the wholesale question. It reminds me a bit like after 2008, 2009 what you did in the U. S, you catch your wholesale presence by 40%. Is it the same thing happening today in Hong Kong and where that's a part of the wholesale decline is actually driven by yourself and 1 year or 2 years from now will emerge having mostly retail exposure for you guys in the region.
I mean, is that a fair assumption? And my second question is actually on the way you look at your production. I mean, you said you I'm quoting you, you were pretty relaxed and are better from an understanding point of view. So how are you actually planning the production for the second half? And what could be the impact on the gross margins?
And actually, if you could with the gross margin impact from your production in the first half and then you're telling us how it could evolve in the second half. And finally, I you're looking at the jewelry category, obviously, very strong. And I think it's a bit hard to sometimes to understand how the strength of that business, especially in Asia? So any sort of color you could give on the consumer appetite maybe from Chinese, which maybe are discovering foreign brands or any sort of marketing study you've done on that very interesting category? Thank you.
Okay, Antoine. I think on the wholesale watch question, we certainly are not thinking like 2,008 or whatever year you picked. We think the distribution network is healthy. We always believe that the wholesale channel is there in the watches and will continue to be there. We're not thinking of changing the network.
I do think that some of the Asian dealers are under stress, but that's any decisions made is more related to them than us, if I can say it that way. In terms of the production, I'll say what I always say, Antoine, I'm pretty brave to come out and give you a number. I think the assumptions that we made to start the year in terms of under capacity in Cartier Eyewear, some in Piaget are still there. So we're happy with the 65%. I think the best part of our results for the 1st 6 months is the cash flow.
Now the headline number was $1,055,000,000 but remember we have to record the settlement of the Net A Porter liabilities within operating flow, which, okay, we had to do it and it was there, but that was 230,000,000 pounds right? So if you really think about it, our operating cash flow was 30% higher than we reported. Why? Because we actually the cash build on inventories in the first half was 0. So as always, the people in the brands, they can see the demand their retail channels, they're very disciplined.
So inventories are fine. And in theory, if inventories are fine, then there's no other untoward things coming in gross margin as of today. Jewelry, I think jewelry, we've started to see first of all, the high end is extremely buoyant. We made that Van Cleef a few years ago, the stone plan. We increased significantly our inventories last year.
That's really paying off. I mean, nothing more to say. I mean, we have very creative people, the jewelers, the designers, I mean, they're real artisans, and they design pieces that people love. The underlying collections at
the lower
level are working well. If you take Cartier, the Amulet collection and the Justin Klu collection are really something and becoming something. Certainly, we are continuing to see an appetite for high jewelry from Asia. We started to see that last year. We said it was a relatively new phenomenon at the time that continues.
So I think all of those things and we still believe that the branded jewelry market is taking share. The latest study I saw was it's now up to 16%, and we continue to believe in that direction. And I really think if you really look at our cash flow of $1,300,000,000 we really need to provide some more oxygen, I think, to the jewelry brands in particular for further inventory development in the future.
Many thanks. But just as a joke, you are going to have a lot of questions from my colleagues on the use of that cash flow.
Yes, that's right. But that's okay.
Listen, it wouldn't be an analyst presentation until I unless I had to deal with that. That's
okay. Thank you.
Okay. Very helpful.
Next question from Ms. Melanie Flouquet, JPMorgan. Please go ahead.
I have a lot of questions, I'm afraid. So let me try to make them short. Number 1, can I get a clarification? When you say you mentioned September October flat, is it on retail or did I misunderstand that?
Yes, you
misunderstood, Melanie. I said on a constant currency basis, in October, retail was flat.
And it has already decelerated in September compared to the plus 13%?
No. No. No.
So it's
a new event. And where did it decelerate markedly like
this in October by geography? I think America was weak. But again, is some of it a function of the Americans bought in Europe during the summer. I mean, they believe that. Okay, let's see.
Okay. Actually, my next question is on Americas. Even if I take aside what has been happening in the summer and that there may have been a shift towards Europe of the spend. Year to date, it's not been a particularly strong market. Can you explain what you think is happening in the U.
S? Because it's quite exposed to jewelry, so I would have expected that would have helped this market. So is watches particularly
Well, I mean, I think Melanie, remember it's a big watch market as well. Yes. And the watches have not been good. That's for sure. The jewelry has been doing okay.
So I think the numbers speak for themselves really. The watch market generally for the wholesale for us is challenging, extremely challenging. And but if we're performing at retail, which the watch brands are at retail, that gives us comfort a little bit.
And then can I ask you, your selling and distribution costs were up 10% in organic constant currency in the first half? You had guided for full year around 7 percent to 7.5 percent if I recall well. So has there been a shift in is this just timing or there is indeed a higher expense going into selling industry cost than you had expected coming from boutiques and from rents, which you're flagging in your release? Yes.
No, I think, Melanie, the one thing to focus on is, if you exclude the boutiques, S and D only rose by 2. So I think from a control standpoint, we're in good shape. Clearly, from a retail perspective in terms of variable costs, to the extent that you're doing business in Japan and Europe, that tends to be higher from an S and D standpoint. So that's really what it is. So Mr.
Rupert will probably have my head. So I've adjusted the numbers.
Okay, perfect. But in terms of directly operated stores rollout, you've added 26. Quite a lot of these openings were actually on Specialist Watchers. Strategically, is this what's going to happen and continue to happen?
Well, again, I think the projects the retail openings are very much project based. I think Van Cleef and Cartier will have more stores in the second half. We still think about 50 to 60 this year. But again, as I've said in the past, it's very much project based.
Okay. Thank you. I'll let you to other people. Thank you.
Okay.
Next
question from Mr. Mario Oteri, Sanford Bernstein. Please go ahead.
Good morning, Garik. Good morning, Cartier. Hi, Martin.
Three quick questions for me. The first one is about Cartier Watch. The performance has seemed quite subdued. I want to understand if it's mainly on the entry price or on the gold watches and when do you think that the wholesaler will stock the Nucle de Cartier in stainless steel and gold? The second question about pricing, if you can make a recap of the price changes in the first half of twenty fifteen and if you have got in mind any other price adjustment in the second half of the year.
And the last clarification about the store openings in second half, you are talking about 50 to 60 openings. It does include also internalization of franchisee and if not, how many internalization are you planning?
Okay. Let's see. We think 50 to 60 net openings for the full year. Yes. So that hasn't changed.
There are few internalization on that.
Very few internalizations, mostly new locations. I think on the pricing question, Mario, I don't we haven't changed prices since we saw you in May. So if I may, if you could refer back to the presentation there. I don't have that level of detail with me. I think in general, we said in terms of price positioning, in terms of our fair pricing, we were in a good place in May.
We're still in a pretty good place. So we don't expect changes. But again, we don't know what the currency is going to do, but at the moment, we're in a good place. In terms of the watches, I think the clay is off to a good start. It's off to a good start clearly and certainly in the wholesale channel, the higher end gold and gold and diamond pieces continue to do less well.
Certainly, the Cartier collection in various models of steel with diamonds is quite okay. But again, the watches are growing at retail. Now when is it going to unclog, when is the wholesale environment going to get better? I have no idea. I have no idea.
But the good news is the demand is there on the retail side. I would much prefer that than the reverse.
Just a clarification, which percentage of Cartier watches is sold or frugal sales channel?
Good try, Mario. I tried.
Thank you.
Next question is from Francesca Di Pasquantonio, Deutsche Bank. Please go ahead.
Hi, Francesca.
Hi, Gary. Hi, Sophie. So I have a couple of questions, please. One is if you have had any adjustments on sales from any product buyback from the 3rd party retail network? And if you can elaborate whether you have taken or will be taking any further steps with respect to the product in the 3rd party network?
And secondly, I know you said you have no visibility and you have no idea about the timing of the wholesale recovery. But just to help us understand how you are looking at the situation and how you are managing the situation in what the reasonable expectations are that we are seeing maybe the final leg of a very tough period and things are getting worse before they normalize and stabilize or whether you think and you are prepared for a much longer destocking period?
Thank you.
Okay. The first one is buyback inventory.
The buyback, yes. I am aware, Francesca, that Cartier early in the year made some stock adjustments to retailers for some slow moving products. They will do that as well as all the other brands. It doesn't really frankly feature on my radar. I can't I'd love to say that the wholesale performance is based on huge returns.
It's not. I think what you see is what you get. I think when we say we have no idea when it's going to get better, we're not making this up. The wholesale has been difficult. Now the comparables for Hong Kong should get a little better, but we've been burned before by saying exactly the same thing for Mainland China a couple of years ago, right?
So don't want to enter into that discussion. I would say Hong Kong is still dreadful. It's becoming a little less dreadful, but let's not get all excited, I would say. Certainly, on the positive side, Mainland China is at retail for us is doing extremely well. So I'd love to answer your question, Francesca, on when it's going to turn, but we just we don't know.
So in terms of your planning, your inventories and capacity utilization. Are you saying we are I mean, we are having this production with the idea that wholesale pressure will continue from now June, September.
Well, I mean,
you would need some time to readjust in case things But Francesca You don't feel that urgency, right?
Francesca, we adjust all the time. I mean, the wholesale it's not we should be adjusting all the time. We just don't wake up one day and say, oh my god, we're overstocked. I mean, remember, the cash build on our inventories in the first half of the year was 0, 0. So that means that we adjust all the time.
We adjust all the time. The brands, particularly the watch guys, they know what they're doing. We have good systems and they adjust all the time. That's the thing that's most important for me as the accountant in the room, right? But I mean that's an astonishing performance, 0 inventory built.
Yes.
Okay.
All right.
All right, Francisco.
The next question is from Mr. John Cox, Kepler Cheuvreux. Please go ahead, sir.
Yes. Good morning, Gary.
Good morning, Gary. Good morning, everybody. John, before you start, I hope you will agree that my treasury department was pretty quiet this time around.
I was very happy about that.
Good, bad. Okay.
Good, bad. Although then I saw the discontinued $88,000,000 loss. What does that come to? Can you give us a bit of explanation on that? And just to clarify, you said all of the cash outflows were in H1.
There's nothing coming in H2 related to that. That's a bit more sort of nuts and bolts thing. Yes. But I'm coming back to what some of my colleagues are saying. You seem to be relaxed.
You say maybe comparables in Hong Kong should get better, but you said it before. And just on this whole comping base in Hong Kong, when did it start to fall off a cliff for you guys last year? Was it really sort of November, December, January?
No, I think it was I think we started to see a real effect in October, John.
Okay. So even with the easier comp, you've seen a bit of a step down again?
Well, it's just it's not there yet. Like I said, I think overall, it's getting a little less worse in Hong Kong, but I'm not going to be popping champagne on that. I mean, again, it's very different how the channels are performing. The only thing that we control is retail, and that's the only thing we see really over the counter, and we know that those are sales. And even in watches, even with Hong Kong and Macau, the watches are working.
So that's okay, I'm never my job is not to be relaxed, it's to be miserable, right? But it's it could be worse. Could be worse.
In terms of Chinese in Europe, are you seeing any signs of a slowdown? You think you're saying it's Americans who may be
No, I think relative to the total pie, maybe there was less Chinese, but it's still the Americans were huge in the summer. But I wouldn't say because their percentage of the pie maybe at this point is lower, I wouldn't read into that negatively.
And then just in the Americas, again, you seem to be saying, well, maybe they were buying in Europe and now they're not buying at home. Any sort of thoughts into the sort of Christmas season and year season in the Americas?
I mean, John, let's see. America has the retail was not a good performance for the month of October. That's a data point. Is it a data point that we're going to project forever? I'm not there.
Let's see how it goes. I think the at the high end of the market for the jewelers, it's still reasonably active, but okay, will those translate into numbers? I don't know. I don't know. In terms of the Net Acorte, quarter, remember what was going on here.
We had to buy back both incentive shares and actually 3rd party shares, right, in order to deliver those shares as part of our holding to Yuke's. That valuation on the incentive shares went through an appraisal process and the appraisal was higher than I had accrued for, to be perfectly frank. Those incentives settled in the month of September, my accounting Ayatollah said, well, you have to book that. And I said, well, it's all part of the overall transaction. And they said, no, no, you're not taking delivery of the shares until October.
You have a timing problem. So okay, that's life. I think don't ask me to forecast Net A Porter because it's not my business anymore. But I think in the first half, Net A Porter on an operating basis made about $14,000,000 So the difference between $14,000,000 and the loss is my incentives and also interest and taxes, right, because the discontinued operations is not an EBIT number, it's a net number.
Okay. I want to then just ask, you mentioned the capacity utilization rates are pretty low or lower in the watches. Are you making any adjustments there in terms of, I don't know, thinking about factory closures or layoffs? Or is it something you just sort of wait and see approach for the time being? I know you've done other bits and pieces in terms of people maybe working more for less and maybe on slightly shorter time.
But is there any sort of other projects going on? Or is it maybe as you've been sort of hinting, maybe the whole slowdown in the watches is after 3 years coming to an end and you wouldn't want to start closing factories now while maybe things could improve?
John, I
just built these
factories. Now you want me to close them?
No, I don't. But for the question, you're basically cutting staff or what are you doing to make the process more efficient?
John, again, let's go back and focus on the important things, okay? The margin that I'm telling you is unchanged. We put 0 euros into our inventory position in the first half. I think all of the brands in their own way are coping with the difficult volume situation because of wholesale. Piaget is difficult, but we saw that coming and we told you about it in May.
Same thing for Cartier Eyewear. So I mean this is an ongoing process that we continually tweak, continually tweak.
Okay. And then just a last question then on cash flow generation very strong as always, you guys do a very solid job there. What use for cash in the future? You mentioned potentially putting more into inventories in terms of precious stones. Any thoughts on buybacks or anything like that at all?
No, I think well, you know our approach, John. It's unchanged. I mean, buybacks really aren't for us except to hedge options. We want to increase the dividend in a sustained way. We will continue to do that.
I do think the cash generation is really quite strong And we really need to start to think about creative ways to deploy some of that back to the brands, whether it be increased inventory, whether it be some brand building activities. We don't necessarily want to increase fixed costs, but we think there are things to do in terms of sweating our assets, if you will, even further. An example is, I referenced the new Mont Blanc concept, which they put up in Taipei 101. And just this new concept, probably the sales per square foot are going up strong double digits. So that's not necessarily increasing my flex cost.
I'm just redoing the store, because in theory, I have depreciation for the old store. So we need to think creatively about that. I certainly think that we need to deploy back for some of the brands.
And for shareholders?
Shareholders, we're going to increase our dividend in good times and in bad, John.
Yes, Understood. Thanks, guys.
Next question from Mr. John Guy, MainFirst. Please go ahead.
I still got a few questions left in the bag after quite a few. So maybe just starting with your store positions in Hong Kong. I mean clearly, I think we've seen recently some press articles highlighting Cartier and Jaeger LeCoultre store closures on Russell Street.
And I
think a local cosmetics player, I think, took one of those stores for a 50% rental discount. So how should we think about the store profile in Hong Kong and Macau? What level of closures are we likely to see, do you think, going forward within a more normalized environment there? That's my first question. My second question on Cartier watches.
It seems to me compared to 2013 that on a non weighted average selling price basis, we've actually seen a pretty healthy price mix increase within Cartier watches. And I think the product and price positioning has improved. You've lowered your quartz weighting. I know you've obviously introduced the Cartier Clay. So with regards to your directly owned store performance, that looks pretty encouraging.
So could you just maybe talk about how you see the price mix positioning of Cartier watches going forward? And then just with regards to the October trading, just so I'm clear, and we've obviously seen monthly volatility in the first half of the year. I mean, quite extreme actually, and I appreciate that April was obviously down on the timing of pricing. Just to be clear that there was no I think you mentioned this earlier, there was no change in your overall pricing policy through the back end of the first half and into October, which led to that slightly more volatile October trading period? Thank you.
Yes. John, I think as I said, I'll say it again and I'll try and be as clear as I possibly can. October constant currencies, retail was flat. Wholesale continued more or less on trend. From a pricing stand, no change, no impact on anything.
So I think what you see is what you get and we'll see. See. In terms of the stores in Hong Kong, we've said in the past, we have a very cash generative network. The brands decide to open or to close stores based on their distribution strategies. Certainly, I focus on sales that are under stores that are underperforming, right?
We've said in the past that Hong Kong is probably a bit over retailed, but that's no surprise to anybody. So when a lease comes up, depending on what the terms and things are, we have to make a decision, right? But despite its difficulties, it's still a huge market for us and it's still very profitable. And in terms of Macau, we actually counter intuitively, we opened up new stores in Macau in some of the new projects and they're on a percentage rent basis. And we think we can have a go there.
So we look at these things all the time.
Okay. And maybe just on jewelry. I think going back to sort of Antoine's point around jewelry, I mean, could you maybe just give us more color as to why you think that consumers really do focus on the branded side now relative to, say, non branded? You mentioned this growing appetite for high jewelry within the Asian consumer. I mean, what's specifically driving that, obviously, besides the fact that you guys are making some very nice products?
Yes. I mean,
John, I'm not the marketing guy, okay? So I don't anything that I possibly say there will be idiotic, right? I mean, the reality is we know from a data point of view, the branded market is growing generally. The jewelry business is a big business, okay? We have we think we have the 2 best branded jewelry businesses in the world.
The creativity and the sensibility of the products for both Van Cleef and Cartier is extraordinary, right? And as we've said in the past, the jewelry business is an event business. It's fabulous. Men like to give jewelry and women like to receive it. So we're in a good place with that and we have exceptional teams.
Thanks very much indeed. Bye,
John.
Next question from Mr. Patrick Schindman, ZKB. Please go
ahead. Hi, Gary. Hi, Sophie.
Patrick, I'm sure I answered all of your questions already. I'm surprised you're even on the call. Almost.
Just for clarification regarding the gross margin. Did I get this right for the full year as a best guess you would expect 65% at current ForEx?
That's my first question. Well, yes, I mean, remember what I a fair question, Patrick. I always assume that the average rates for September will continue, right? So that's not based on the rates today, but it's based on the average rates at September 30. And yes, it would be on that basis 65.
Okay,
great. And regarding Mail and China, you were mentioning retail is extremely well, did I get this right? I mean, obviously, Google is outperforming and but watches is also growing, you have mentioned, in retail. Yes. But the slight growth, I would expect.
So low single digit or?
We said Mainland China in total was plus 1 on a constant currency basis.
And plus 1 in
H1? Yes.
Yes, for 6 months.
6 months.
For 6 months.
Retail, okay.
Right. But if I go back to my accounting school, total. Total, total.
Total is fine.
But now if I go back to the accounting days, if you had an immaterial difference, you have to look at that because it could be very high going one way and very high going the other way, right? And the retail is performing and the wholesale is not.
Okay. And regarding CapEx, which will be $800,000,000 this year, you mentioned next year lower. So what shall we expect as a best guess
for next year? Too early to tell, Patrick. We'll update that in May. But I think we haven't really changed our thought process. The $50,000,000 drop is more due to timing, I would say.
For example, we thought that the Cartier Mansion would open up in March, it will probably open up in June. So we really haven't changed our thinking. But even with a spillover to last year, CapEx will be less, but I don't have that yet.
Okay. And my last question regarding selling and distribution costs. I know it's very early these days. But just to have an idea, I mean, this year, you have mentioned plus 9% in local currencies. Just to have an idea for next year, will the growth be clearly lower than this 9%?
Or what's the year your best guess?
Patrick, too early to tell, right? Too early to tell. Let's see.
But it should be lower.
Too early to tell, Patrick.
So we're not commenting this.
All right. Thanks a lot.
Thank you, Patrick. Bye bye.
Next question is from Mr. Julian Easthoek from Barclays. Please go ahead. Yes, thank
you very much. A couple of questions
as well, if I may. First one is on the other businesses. There was some improvement in the losses or low losses in the first half. But last year, the second half losses were obviously a lot larger. I just wondered if you were expecting to see any progress there given all of the different sort of rationalizations you've actually taken place over the last year?
And the second one coming back
to jewelry and diamonds. There seems to be
a bit of a mismatch between the
sort of diamond market generally, which seems to be struggling quite significantly and jewelries. Are diamonds actually a big component of your jewelry business? And are you going to benefit from the lower prices that we're now starting to see in
the diamond market? Thank you.
Okay. On the diamond question, I think one of the things that maybe make our brands unique is we take diamonds, we take colored stones, precious materials, and we use the artisans and the designers to create beautiful pieces. So it's more it's not we're not in the commodity business. We're in the design and creativity business. So I think that's where we maybe differ from the down to earth diamond solitaire business.
We do it. It's a good way to access consumers, especially through the bridal programs. But more of what we do is on the design side. What was the other question? What was your other what was the first question?
I have to dial in.
Just in terms of
the other businesses, it's time
to sort of improve with the next 2 years. How could I forget my favorite topic? I think generally speaking, not for the other businesses, but for Richemont in general, we tend to spend more in the second half, right? We don't know what the sales are going to be, but with Christmas, with Chinese New Year, we tend to put more of certainly communication costs in the second half of the year, and we'll do that. I think from a business standpoint, what's really happening?
Mont Blanc, okay, Mont Blanc has been down for a couple of years, but Mont Blanc is really starting to perform and grow their profits. Chloe actually is exceptional. The Claire and Jeff Law and the team have really hit the accessories. We're really seeing growth there. So they're doing well and Peter Miller is doing well.
Lancel, I think from a results point of view, they'll be on par with last year, which implies a little worse in the second half. But they've rejuvenated their product line and okay, it's French based, but they're getting there. We need to let them work. Dunhill continues to be difficult, continues to be difficult due to the Hong Kong exposure, still a work in construction. And Peter Miller in the U.
S. Is doing extremely well. So there's a lot of moving parts under there.
Okay. Thank you very much.
Thank you, Jim.
Next question from Ms. Annabel Gleeson from Redburn. Please go ahead.
Hi, Gary. Hi, Sophie.
Hi, Annabel. Hi, Annabel.
Hi, Annabel.
Hi. Just two quick ones, please. Could you give us any color on your watch sales by nationality? So what did sort of the U. S.
Maybe the Chinese consumer and the European consumer? Were they all in growth? So sort of taking into account U. S. Domestic but also U.
S. Buying in Europe. And the second question, I'm just trying to think about your retail channel and the impact that these high jewelry sales are having on your retail business. I mean, presumably, it's making your retail business far more volatile than historically. And was there sort of impact to this in October?
Or how should we think about that?
On the volatility, I mean, that's a fair comment because the transaction price tends to be higher. But I think it would be too easy to blame the October performance on big high jewelry sales in October last year. We can't say that. I think if you think about the high jewelry, there is an installed inventory base there. There are various VIP events and what have you.
But transactions are being worked all the time, okay? When they come, they come. But I wouldn't subscribe the performance in October down to that. In terms of the tourism question, as we really don't give that level of detail. We have 20 brands, but clearly, we saw more Americans and other nationalities except for the Asians In Europe in the summer, the Asians were there as well.
Tourism in America was weak, generally speaking, probably more dollar related than anything.
Would you think that your sales to U. S. Customers globally are positive in watches?
Yes. In watches, I don't know. Yes. Couldn't tell you, wouldn't know.
And could you give us any insight?
But again, remember, I think the takeaway is watches on a constant currency basis in our retail networks are growing, right? That's the only thing because how do we know when someone buys a watch in the wholesale environment? Frankly, we don't know who buys it, right? So the only thing we can look to is the retail.
Thanks. And could you just sorry, one more. Could you give us any idea of the percentage of your jewelry sales that's high jewelry?
No, we don't disclose that.
Okay. Thank you.
Next question is from Mr. Ray Beaum from SBG. Please go ahead, sir.
Hi, good morning, Gary. Sophie.
Ray, sorry about the rugby, my friend. Sorry.
No problem.
Okay. Well, let me just start off. I just want to clarify in terms of the working capital outflow. I mean, yes, you mentioned the inventory quite good. But the increase in debtors and the drop in the creditors, are those just timing issues that we must think of in terms of the rest of the year?
Well, I think, right, there's well, there's generally 2 components, Ray, as you're well aware. It's inventory and it's the debtors, right? Now inventory was 0, right? So there's the receivables, which is a normal seasonal build, I would say. So it's not huge.
My portfolio is 97% current. The big outflow in working capital is I had to flow the settlement of the net a Porter incentive programs through that. Okay, good. And so that was the more major piece of the move.
Good. And just in terms of your cash flow statement as well, I've noticed some additional property investments. Is this a strategy that you will continue with? I mean, if there's opportunity to buy retail space that you will continue to do that?
Yes. I mean, remember what we what the thought process there is, right? We if there's opportunities that we think can assist our brand portfolio, we'll have a look, right? So that one property that we bought is in Paris that we think can fit nicely within the portfolio. So it's not an ongoing strategy, if you will.
They don't get a budget, but we look at projects on a project by project basis.
Okay. And then just two short little questions. I just want to confirm the monetary item in here on the cash was that $130,000,000
in your income statement.
Yes, I just want to know if that was the $130,000,000 was that all related to the that cash that sits in Switzerland?
The cash on the non cash rate, that's what you're asking, the usual? Yes. If it comes
to your net investment line.
Yes, $130,000,000
was it hold on, just hold on, just hold on. Let me get to that page, Ray. Just hold on. Okay. So the 100 you're asking about the $130,000,000 Yes.
Okay. Okay. There are some gains in there on hedging of receivables and things, but the piece related to the non cash on the cash, if you will, right, which doesn't affect equity, is $85,000,000 of that. Sorry, dollars 80,000,000 dollars 85,000,000 dollars 85,000,000 Yes, of the $1,000,000 Yes.
And just lastly, I mean, is it possible to give us an indication what the constant currency growth was at Montblanc?
I think I've been clear, right. Other is other, right. But and we don't really break out by brand anymore. But Montblanc is doing very well, not back to the heydays, but certainly performing as expected. Okay, excellent.
Thank you so much.
Thank you, Ray. I think we'll take one last question from Sylvain. Is there anyone left?
The final question is from Mr. Chris Walker from Nomura. Please go ahead.
This has got to be a very creative question for you guys.
Well, I was going to go
down the thematic and strategic route actually, which is nice just to wrap up. But just wondering about the obviously, given the volatility, both from a trading perspective and a tourist flow perspective, it's been probably unprecedented, I guess, over the last year or so. How what are you learning through this process? And how are you actually changing your approach? I'm assuming it kind of supports your gateway city strategy.
And I guess linking into that, there's obviously a few refits on the flagship stores. Obviously, that can be quite disruptive in the short term, but will certainly help in the longer term. So should we expect an acceleration of that refit strategy as well for your flagships?
Well, we don't have too many flagships, Chris, right? But certainly, as I said, we certainly we're generating very positive cash flow. Without increasing our fixed cost, we want to give the brands oxygen, whether it be on refits or more inventory to really bring the brands to a different level. That's for sure. I think the retail strategy is in general is unchanged.
We do focus on the gateway cities, but kind of happy that all of the investment that we made in Mainland China because we cared about the local consumer is actually starting to pay off and we're starting to see growth there. So I think we're very focused on return on net assets. So we don't want to put stores everywhere, we can't. But we want to we're happy to do retail if we do it properly.
Okay. And I guess layering on top of that sort of online as well, how that performed in the first half and what's the outlook for that? Will that become more important?
Yes. Well, I mean, I think the online is growing certainly faster than our other business, continues to grow at substantial double digit rates. We tend to look at that on an annual basis, but we've just installed in Hong Kong. We're now moving to Singapore, which will be next year. So it's there.
It's a 4th channel. And we've been saying that for a couple of years now. Okay. Thanks very much.
Okay. Chris, is that I think that was the last question. Do you have anything left? Okay. So thank you very much for your participation.
And we look forward to seeing you in the near future.
Thanks, gang. Bye bye.