Compagnie Financière Richemont SA (CFR) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Richemont's 2025 Full Year Results Presentation. Thank you for joining us in person in Geneva and virtually by webcast. I am Alessandra Girolami, Group Investor Relations Director. And joining me today are Johann Rupert, Chairman; Nicolas Bos, CEO; and Burkhart Grund, CFO. As usual, the company announcement and results presentation can be downloaded from richemont.com, and the replay of the webcast will be available on our website today from 3:00 p.m. Geneva time. Before we begin, please take note of the forward-looking statements in our ad hoc announcement and on Slide 2 of our presentation. Turning now to the presentation. Nicolas will begin by discussing the year's highlights and group sales. Burkhart will then review our business areas and group financials, and Nicolas will finish with some concluded remarks. The presentation will then be followed by a Q&A session open to participants present in the room. I will now hand over to Nicolas.

Thank you, Alessandra, and good morning to everyone. Thank you for joining us today. In fiscal year '25, Richemont delivered a robust performance in an uncertain macroeconomic environment, and I would like to start by warmly thanking our teams for their dedication throughout the year. Let's now go over our key numbers. Sales reached EUR 21.4 billion, an all-time high for the group, up 4% at actual and constant exchange rates. Operating profit stood at EUR 4.5 billion, down 7% compared to the prior year or down 4%, excluding unfavorable foreign exchange movements. Profit from continuing operations at EUR 3.8 billion was 1% lower than the prior year. Cash flow from operating activities amounted to EUR 4.4 billion. Finally, our net cash position remained robust at EUR 8.3 billion. Turning to our highlights. Following a resilient first half, we saw our sales performance accelerate in the second half with a 10% rise in Q3, followed by plus 7% in Q4. Overall, sales were up 4% over the year. The Jewellery Maisons, the group's largest business area, posted a high single-digit increase for the year, led by double-digit growth in the second half. Combined with a solid performance in Fashion & Accessories, this more than offset the decline seen at the Specialist Watchmakers. Over the year, we saw double-digit growth in all our regions, except Asia Pacific, which remained impacted by soft demand in China. This led to the further rebalancing of our regional footprint, thereby enhancing the resilience of the group. Moving to our financial performance. We posted EUR 4.5 billion of operating profit, down 7% versus the prior year. The decline in operating profit largely reflected the impact of external headwinds, including higher raw materials costs, notably gold, and unfavorable foreign exchange movements as well as lower sales at the Specialist Watchmakers weakening fixed cost absorption. Also included were EUR 72 million of nonrecurring charges and other onetime items that Burkhart will take you through later. Adjusted for this, the decline in operating profit was actually very limited. This overall robust performance was underpinned by a rise in operating profit during the second half, thanks to the strong sales growth mentioned earlier, particularly at Jewellery Maisons and as a result of ongoing cost discipline. Additionally, over the year, Richemont renewed its executive leadership and governance. We have expanded and deepened the expertise of the Senior Executive Committee with the respective nominations of Catherine and Louis at the helm of our largest maison, Van Cleef & Arpels and Cartier and of Marie-Aude as our dedicated Chief People Officer. I'm equally proud that as part of our long-term succession planning, we were able to implement smooth senior management transitions at several of our Maisons. Contributing to the stability of the business, we have drawn from our top talent pool that combines both broad industry expertise and extensive group experience. With a reinforced governance and talented teams around us, I'm confident that we are fully equipped to navigate the current uncertainty while continuing to build the group's future. On this note, and before handing back to Burkhart, I would like to spend a moment on how we are investing to support the business for the long term. First, we continue to selectively expand our networks, further strengthening our local anchoring in key cities and our proximity with local clientele for a total of 25 net new internal boutiques, including 8 from Vhernier. In parallel, we pursued a targeted program of renovations, relocations and extensions across all regions and business areas, striving to offer an enhanced client experience in the best locations. In fiscal year '25, we dedicated close to EUR 500 million to CapEx to our distribution network and another EUR 200 million to the acquisition of 2 real estate assets in prime locations in London. Second, we've strategically invested in our manufacturing capacity, focusing on the Jewellery Maisons to support business growth and increase agility. Additional capacity was created for Cartier in Valenza in Italy. New ateliers were acquired by Van Cleef & Arpels in France, and Buccellati proceeded with the integration of previously acquired workshops in Italy. In total, EUR 400 million were spent on manufacturing CapEx during the year, a significant increase on the prior year. Overall, the vast majority of our 1,400 new colleagues recruited last year were for roles in distribution and manufacturing. Third, we continue to invest to preserve rare artisanal skills and foster young talent creativity through educational programs. To mention a few examples, over 170 apprentices are currently enrolled in our watchmaking course in Switzerland, whilst every year, our Creative Academy in Milan trains 20 of the best young designers in different luxury domains and has been doing so for over 20 years. Another example is dunhill new craft apprenticeship program, which in partnership with 2 highly regarded colleges, will help maintain expertise in traditional techniques for laser and pipe production. With its opening in Dubai this year, l’École des Arts Joailliers, the school for jewelry arts supported by Van Cleef & Arpels will aim at sharing the jewelry culture and [indiscernible] to an even wider audience in the Middle East. In addition, many of our Maisons contributed actively to Homo Faber, a biannual major event that brought together over 400 artisans in Venice last September. Lastly, the objective of our communication strategy is to continue building brand desirability over time. This includes our participation to the renowned annual Watches and Wonders event, where we showcased the innovation and creativity anchored in the heritage of our Maisons. And it also includes relevant and impactful hydro events such as the Nature Sauvage, L'île au Trésor collection and the Prince of Goldsmiths exhibition in Venice, respectively, at Cartier Van Cleef & Arpels and Buccellati. When it comes to communications, we make no compromise on investments needed to nurture our brands, but remain disciplined with the way we allocate them. This has helped us maintain a stable ratio of communication expenses over sales at around 10% last year. Let me now walk you through the group sales performance in more detail, first by region and then by distribution channel. Unless otherwise stated, all comments refer to year-on-year changes at constant exchange rates. All regions grew double digits over the year with the exception of Asia Pacific. Sales in Europe increased by double digits with stronger growth in the second half. The performance was fueled by robust local demand and double-digit growth in tourist spending, particularly from North America and the Middle East. All channels and all main markets posted growth with notable performances in France, Italy and Spain. Fourth quarter sales grew by 13%. Sales in Europe made up 23% of group sales, slightly up from the prior year. Asia Pacific sales were 13% lower than the prior year with a softer decline in the second half. The performance was largely due to a 23% decline in China, Hong Kong and Macau combined, affected by continued weak demand in the market. Excluding China, the rest of the region posted growth, led by a double-digit increase in sales for the South Korean market. Jewellery Maisons and online retail sales showed the highest resilience during the year, while Specialist Watchmakers were strongly impacted by their exposures to the Chinese clientele. Fourth quarter sales for the region were down by 7%. Sales in Asia Pacific represented 33% of group sales, down from 40% the year before. Turning to the Americas. Sales increased by 15% with growth across all business areas and channels, benefiting from robust domestic demand throughout the year. This was particularly the case in the second half despite a mixed macroeconomic backdrop. Fourth quarter sales were up by 16%. The Americas contributed 25% of group sales, up from 22% a year earlier. Now Japan. Japan grew by 30% and posted the strongest regional increase for the third consecutive year. This was fueled by strong domestic and tourist demand, notably from Mainland Chinese clients. It is worth noting that fourth quarter sales in Japan grew by 22% against a particularly challenging comparative of plus 41% in the prior year period. Japan's contribution to group sales increased by 2 points to 10%. In the Middle East and Africa, sales rose by 14%, 1-4, with growth across all channels, driven by higher spend from both local and tourist clients. The United Arab Emirates market was a notable contributor to growth. Fourth quarter sales rose by 14% as did sales for the full year. Sales in the Middle East and Africa region represented 9% of group sales, up 1 point over the previous year. Looking more broadly, all regions contributed strongly with the exception of Asia Pacific. The Americas grew their sales by over EUR 700 million, Europe and Japan by over EUR 400 million each. The strong contributions from these regions more than offset the decline in Asia Pacific, underscoring the value of our diversified regional footprint. Let us now turn to sales by distribution channel with growth expressed at constant exchange rates. Retail represented 70% of group sales, up by 1 point compared to the prior year. Retail sales increased by 6%, led by a strong performance at the Jewellery Maisons and double-digit increases in all regions except Asia Pacific. Online retail contributed 6% of group sales, in line with the prior year. Sales rose by 11%, benefiting from strong performance at Jewellery and Fashion & Accessory Maisons. Regionally, Asia Pacific recorded a slight decline that was more than offset by very solid increases in all other regions. Finally, the wholesale channel represented 24% of the total with sales down by 3%. This decline was led by Specialist Watchmakers and regionally by Asia Pacific with growth in all other regions. Overall, direct-to-client sales, combining sales in directly operated stores and online made up 76% of the group, an increase of 170 basis points versus the prior year. Of note, Jewellery Maisons sales through directly operated stores now approached 85%. With this, I now hand over to Burkhart, who will take you through the year's highlights by business area. Over to you, Burkhart.

Thank you, Nicolas. I will now review the business areas with all comparisons at actual rates unless otherwise specified. Let me start with the Jewellery Maisons, which include Buccellati, Cartier, Van Cleef & Arpels and Vhernier now being consolidated from October of last year onwards. Sales were up by 8% for the year to EUR 15.3 billion. All regions grew double digits, except for Asia Pacific, led by robust direct-to-client sales. The second half experienced faster growth with a remarkable 14% growth in the third quarter, followed by 11% in the fourth quarter, all at constant rates. The Jewellery Maisons generated an operating result of EUR 4.9 billion, up by 4% or by 6% at constant rates compared to the prior year. Higher sales, notably in the second half, combined with disciplined operating costs and targeted price increases helped mitigate the impact of higher raw material costs, particularly gold. In addition, as Nicolas detailed earlier, we continue to invest in distribution and manufacturing capacity to support the long-term growth of the Maisons. Operating margin remained very solid at close to 32%. Let us now look at the key developments of the year. Sales growth was fueled by the Maisons iconic jewelry and watch collections. Those notably included strong performances from the Panthère and Trinity collections at Cartier, the Alhambra and Perlée lines at Van Cleef & Arpels and Macri at Buccellati. Several novelties were launched across collections like the Love Medium & Hinge and Juste un Clou in white gold at Cartier. Frivole Rose Gold and Perlée diamonds of Van Cleef & Arpels, several Opera Tulle and Blossoms additions at Buccellati. Complementing our leading Maisons, we are happy to welcome the Italian Jewellery Maisons Vhernier which brings its distinct to somewhat fair and innovative design-driven jewelry to the group. Our High Jewellery collections have continued to showcase their creativity and quality craftsmanship, nurturing desirability through the launch of, Nicolas mentioned, Nature Sauvage in Cartier and the L'île au Trésor collection at Van Cleef & Arpels. Maisons continued to upgrade and expand the store network. Major reopenings at Cartier took place in the Dubai Mall in the UAE and at South Coast Plaza in the U.S. New addresses and prime locations included Amsterdam and Madison Avenue in New York for Van Cleef & Arpels and Seoul Coex and a flagship store in Riyadh for Buccellati. Let us now turn to Specialist Watchmakers, where sales were down 13% at both constant and actual rates to now EUR 3.3 billion. The overall decline was reflective of the performance in Asia Pacific, the Specialist Watchmakers largest region where sales were 27% lower than the prior year. This was primarily driven by weak demand in China, Hong Kong and Macau combined. Excluding China, Specialist Watchmakers sales were stable at constant rates and 1% down at actual rates. The Americas and Japan both showed solid growth, while sales in Europe and the Middle East and Africa were largely stable. It is worth noting the softer rate of decline in the second half at minus 9% mainly owing to double-digit growth in the Americas. This included a fourth quarter at minus 10% at actual rates and at minus 11% at constant rates, partly impacted by targeted buybacks in Mainland China. The operating result of the business area declined to EUR 175 million. While the Maisons demonstrated discipline on operating expenses, notably in communication, the decline in sales had a significant deleveraging impact on both production and fixed operating costs. In addition, the continuously strengthening Swiss franc weighed on the operating results as most of the Maisons production and headquarters are located in Switzerland. Overall, the operating margin reached 5.3% for the year. Specialist Watchmakers Maisons saw a varied performance depending on the individual regional exposure and product mix. A. Lange & Söhne and Vacheron Constantin showed the most resilience over the course of the year. In the context of fluctuating demand, our Maisons have continued to closely monitor the inventory in the trade and managed to retain an overall balanced sell-in, sell-out ratio of 100%. The Maisons have remained true to their distinctive DNA by launching novelties inspired by heritage and fueled by innovation. An example of this has been the new historic 222 timepiece of Vacheron Constantin, created in stainless steel, marking the start of its 270th anniversary celebration. Specialist Watchmakers continue to improve the distribution network through targeted new points of sale and renovations across regions. To name but a few, IWC opened flagship stores in Paris and New York and Piaget renovated several stores under their new concept in Asia and the Middle East. At the same time, Panerai optimized its footprint in Asia Pacific, mainly in China with the closure of 4 internal boutiques. Lastly, targeted efforts were made to elevate client engagements supported by strong events. Those included the A. Lange & Söhne sponsorship of the Concours d'Elegance, bringing together automobile and watch enthusiasts, and Jaeger-LeCoultre with Precision Pioneer Exhibition which welcomed visitors us to an immersive experience in watchmaking craftsmanship. Let us now move to the Other business area, comprising the group's Fashion & Accessories Maisons. Watchfinder & Co., the group's watch component manufacturing and real estate activities. Sales reached EUR 2.8 billion for the year, up 7% at both actual and constant exchange rates underpinned by faster growth in the second half. All regions grew other than Asia Pacific, with notably double-digit performances in the Americas, Europe and the Middle East and Africa. All channels saw their sales increase with online retail growing the most. Overall, the Other business area reported an operating loss for the year of EUR 102 million resulting in an operating margin of minus 3.7%. Excluding targeted inventory provisioning, Fashion & Accessories Maisons posted a minus 2% operating margin, in line with the first half. The Maisons continued to invest in their desirability and visibility as well as in an e-commerce solution replatforming triggered by the YNAP sales process. Going into the business highlights, I will start with Alaïa, which recorded another year of strong growth, particularly in leather goods, with the success of products such as the Teckel bag and La Ballerine shoes. Similarly, Peter Millar saw its solid momentum continue. Overall, ready-to-wear sales rose by double digits across the Maisons, which is an encouraging performance at Chloé. More broadly, the recent collections showed continued designer creativity across product categories, leading to increased desirability. Gianvito Rossi, our Italian luxury shoe maker, celebrated their first anniversary with us in February with a strong -- with a very encouraging performance. Watchfinder enjoyed solid growth and continued its collaboration with the other Maisons, with the launch of a certified preowned program with Vacheron Constantin. Select expansions of the retail network, notably included the new flagship stores for Alaïa in Paris, [indiscernible] St. Honoré and for Montblanc in Chengdu. G/Fore opened several new stores, of which one in Los Angeles, while Gianvito Rossi relocated the New York boutique to a prime location on Madison Avenue. Let me now walk you through the rest of the P&L, starting with the gross profit. Gross profit rose by 2% in absolute terms to EUR 14.3 billion, but declined as a percentage of sales by 120 basis points to 66.9%. The main impact came from higher production costs owing to raw material cost increases, notably for gold. We also made the decision to proceed with targeted buybacks in Mainland China at 2 Specialist Watchmakers Maisons as well as stock provisioning in Fashion & Accessories, further impacting the gross margin. These adverse effects were partly mitigated by the positive effects of targeted price increases as well as beneficial channel and product mix. In addition, unfavorable foreign exchange movements, mainly from the Japanese yen, Chinese Renminbi and Swiss franc amounted to a 35 basis point negative impact. Excluding foreign exchange rate movements, gross margin was down 80 basis points for the year. Now let's look at the operating expenses, which were 7% higher than the prior year, reflecting our continued investments in the business while being disciplined on costs. I will now take you through the expenses by category. First, selling and distribution expenses increased by 7% at actual rates accounting for 26.3% of sales. This was a 90 basis point rise compared to the prior year, mainly due to the next forward expansion of fiscal year '24 and '25 million as well as salary increases. Communication expenses rose by 4% compared to the prior year. Despite the phasing impact of the annual Watches & Wonders event, communication costs remained stable as a percentage of sales at 9.8%. Administrative and other expenses rose by 7% and represented 9.9% of group sales. The increase was driven by higher salary costs, valuation adjustments on acquisitions and the impact from a strong Swiss franc. Also included were EUR 72 million of nonrecurring charges, mainly related to provisions for legal disputes and impairments of goodwill. Overall, net operating expenses amounted to 46% of group sales. This resulted in an operating profit of EUR 4.6 billion -- sorry, EUR 4.5 billion, down by 7% at actual exchange rates and by 4% at constant exchange rates. Excluding the EUR 72 million of nonrecurring charges that I mentioned earlier, in addition to targeted inventory provisioning and buybacks, the underlying operating profit was very robust at EUR 4.6 billion, down only 2% at constant exchange rates. It is worth noting that operating profit in the second half was up versus the prior year period, led by strong performance at the Jewellery Maisons and healthy cost discipline. Let us now review the rest of the profit and loss items below the operating profit line, starting with finance costs. Net finance costs improved to EUR 53 million for the year from EUR 178 million a year earlier. This EUR 125 million improvement was the result of 2 main items that partly offset each other. First, a favorable change in fair value adjustments accounting for EUR 396 million, reflecting gains on the group's investments in externally managed bond and money market funds. And secondly, nonrecurrence of the write-down of the Farfetch convertible note. Second element, a EUR 258 million negative evolution of the contribution of our foreign exchange hedging program. Turning now to discontinued operations, which consist of YNAP. Sales were down by 13% at actual rates and by 14% at constant rates. The loss for the year at EUR 1 billion largely reflected the EUR 954 million write-down of the carrying value of YNAP assets in the context of the sale to Mytheresa. This was an improvement compared to the EUR 1.3 billion communicated at our first half results, partly reflecting the evolution of Mytheresa's share price since then. Let me take this opportunity to say a few words on YNAP. As you know, the transaction closed a bit less than a month ago on the 23rd of April. As agreed in the terms of the transaction, Richemont received a 33% stake in the newly created LuxExperience corresponding to 49.7 million shares of Mytheresa or LuxExperience. YNAP was left with a net cash position of EUR 555 million, implying a EUR 426 million cash out for Richemont. The group granted a 6-year RCF to YNAP for EUR 100 million. Fiscal '26 interim results will include the final result on disposal as well as customary post-closing price adjustments and YNAP will be deconsolidated from the closing date. We truly believe that this transaction will offer an excellent future for YNAP with LuxExperience set to become 1 of the leading global digital luxury platforms. Now returning to our fiscal '25 results. Let's review the profit for the year. Profit from continuing operations stood at EUR 3.8 billion, down 1% versus the prior year. This included the improvement in net finance costs that I just described, a higher share of equity-accounted contributions and a lower tax impact. The group's effective tax rate for the year was 16.5% and lower than we had anticipated, mostly driven by noncash accounting items. Overall, and after taking into account reduced losses from discontinued operations, profit for the year rose by 17% to EUR 2.8 billion. Cash flow generated from operating activities came in at EUR 4.4 billion, down EUR 253 million. This 5% decrease mostly reflected the evolution of the operating profit from continuing operations, slightly higher cash taxes and a marginal change in working capital requirements partly mitigated by reduced operating loss from discontinued operations. Let us now turn to gross capital expenditure, which amounted to EUR 1.2 billion, up 16% versus the prior year. The investments in our distribution network represented 41% of gross capital expenditure and were largely dedicated to the upgrade and extension of the internal boutique network. Manufacturing accounted for over 1/3 of our investments, a strong increase versus the prior year with the expansion of our Jewellery Maisons capacity, primarily in France, Switzerland and Italy. Other investments, including IT, made up 24% of CapEx. Overall, CapEx represented 5% of sales, up from 4.4% in the prior year mainly due to the increased investment in manufacturing capacity that I have just mentioned. Now to the review of free cash flow. At EUR 2.2 billion, free cash flow was EUR 0.6 billion lower than in the prior year. 40% of the reduction, let's just say, about EUR 253 million came from the cash flow from operating activities that I described earlier. The remainder mainly came from higher investment in our operations, combining a EUR 153 million increase in CapEx with EUR 187 million outlay for select real estate investments that Nicolas mentioned earlier. Our balance sheet remained very solid, with shareholders' equity accounting for 54% of the total. Net cash amounted to EUR 8.3 billion at the year-end, an increase of EUR 0.8 billion over the prior year. Let me now finish with the dividend. The Board has proposed a dividend of CHF 3 for one A share or 10 B shares, which represents a 9% increase of the ordinary dividend over the prior year. This will be submitted for shareholders' approval at the group's Annual General Meeting on the 10th of September 2025. So thank you for your attention, and I now hand over to Nicolas for the conclusion.

Thank you, Burkhart. Before moving to the Q&A, I would like to summarize the year and share some concluding remarks. As we have just seen, the group posted a robust performance in fiscal year '25 against the backdrop of a complex macroeconomic and geopolitical landscape. We saw remarkable growth at our Jewellery Maisons and in the retail channel, improved sales at our other activities, while the performance of our Specialist Watchmakers mostly reflected weakness in their largest region. Importantly, we continue to invest in our Maisons existing and future growth, strengthening our distribution network, expanding our manufacturing assets and contributing to preserving unique artisan skills. We also delivered on several strategic fronts for the group and notably completed the acquisition of Vhernier. We are now working on its integration and development to ensure that its full potential can be realized over time. as we began doing for Gianvito Rossi 6 months earlier. Furthermore, YNAP has found a new home as part of LuxExperience that will enable the business to thrive and contribute to the creation of a new global leader in digital luxury. With a now renewed leadership team and governance and a smooth management transition underway at several of our Maisons, we are equipped to steer the group through the next phase of its development with talented professionals that retain creativity and innovation at heart. Of course, we remain vigilant as we face the ongoing global uncertainties which will require continued agility and discipline. Our history shows that we've always been able to adapt, and the group has built solid fundamentals to withstand short-term uncertainty and create value over the long term. We have leading Maisons, each bringing a distinctive heritage built on unique craftsmanship and timeless creations fueled by innovation. Our regional mix is increasingly balanced and in all our markets, we strive to continue to excite our clients every day. At Richemont, we can count on the long-term view, underpinned by a strong balance sheet, the same approach that has led us to increase sales sevenfold over the past 25 years. Of course, none of this would be possible without our colleagues, valued clients and partners around the world and I again wish to thank them for their continued support. This concludes our presentation. Thank you.

[Operator Instructions]

Edouard Aubin, Morgan Stanley. So 2 questions for me. Alessandra, I will be disciplined. The first thing is -- so congratulations on the top line trends. I know you don't like to comment about current trading, but I'm going to have to ask the question. Obviously, a very uncertain environment. Some of your peers in the past few days have flagged that they've seen deteriorating demand in the U.S., among other regions. If you could just -- could you give us some color on the trading you've seen in the environment over the past few weeks. So that's question number one. And then question number 2 on the price increase. So we've seen, I think, Cartier passed on some price increase this week and Van Cleef a few days ago. I think some of these price increases were relatively moderate, maybe a touch below anticipated by -- what were anticipated by investors. Is it a function of you remaining disciplined on this price increase as you've been over the past few years? Or are you seeing some resistance or anticipating some resistance given the soft demand worldwide for luxury?

I think I'll answer the second one. We've always looked at the residual value of our clients and tried to protect that. And so we were not greedy in the post-COVID boom period. And I think our resilient results prove today that we are not suffering from post-greed revenge by our clients. We will obviously monitor the various trade restrictions, but our goal is to continuously keep the value relationship for our clients. It was interesting in the Watch Auction over the weekend in Geneva, which is quite a barometer that our watch Maisons across the board maintained their value and, in fact, exceeded the expectations where a lot of our competitors had quite precipitous declines. I guess those were speculation watches, which who are not part of the natural absorption rate. So our goal is to continue like we have in the last few years. Obviously, when you have currencies that are too cheap and then you have a Japanese effect were very many people went to Japan to buy. Now if you then raise the prices, you discriminate against your loyal Japanese clients. So it's a very difficult -- it's a discipline that we have with universal pricing, but we do have to be sensitive to being loyal to our local clients as well. The luck that we have is as Bernard Fornas said 10, 15 years ago that we fly on 5 engines. And if the 1 region has got difficulty, there is enough brand equity and desire for our product in other regions. So it's not necessarily a pure science. A lot of it is judgment as to how to keep our clients happy. But it's not due to insufficient demand. But it's -- as you correctly pointed out, thank you. We weren't greedy 2 or 3 years ago. And I think our results today reflect that. If I could say to you, I was quite emotional when I went to the V&A to see the Cartier exhibition. I would urge you, it's booked out until October, November, I think. But I'm sure that if you speak to our people, we can arrange visits -- special visits for you. If you walk through there, you really understand the power of Cartier. And VCA is pretty much the same. It's an emotional experience, plus it differentiates Cartier and Van Cleef from the new Jewellery Maisons where fashion went into jewelry, making fine articles, but they do not appear at Christie's and Sotheby's at auctions. And if you go to the auctions and you see the pieces that hold their value, it's inevitably Cartier or Van Cleef. Some Winston pieces are there but because of the diamond quality that they had -- that they probably still have. But as for the rest, it's been a few centuries that we've worked with it. Now when Sophie sadly retired, she, in a prior role, worked for Mr. Kanoui and others, and she sent me a whole bunch of old files, which I found fascinating. Like when we started in a Board meeting in 1989, and we were discussing the Cartier museum, and Joe Kanoui asked me, please, could I have another EUR 6 million because the value of our music museum is not EUR 12 million, EUR 18 million. And I said, please, Joe, just carry on. I mean, I would think it's into the billions today, the value of the museum, but it's not the monetary value. It's the value when clients go through and they see the remarkable journey and the breadth and the width and they can sense the DNA. So it's part of a -- it's like being a conductor of an orchestra, you've got to try and get the various players to play towards the same goal. And it's not -- let's not just say it's purely a science. A lot of it is just intuition. Do we know that the United States of America? President Trump is correct. You can't owe the rest the world EUR 36 trillion. It's not sustainable, and I would submit that we should all watch the next debt ceiling that I think is being reached in August because before then those and others there is too much expenditure. And whether you agree with these politics or not, it really is a once in a lifetime President that can say we owe too much. I think he's going to get about $2.6 trillion from his weeklong visit. It's what I hear from my friends in the UAE. It's quite remarkable to go there and get $2.6 trillion of investment, and these investments will occur. So they also do realize the people in treasury that you cannot trade with papers. So I would say that a lot of the tariffs, et cetera, can be viewed as transactional and not cast in stone. And if you really have to play a game theory, you would be an opponent that I would not like to play a game theory with because I don't think they know in the morning what they're going to do in the afternoon. It must be very disturbing having an opponent like that. But luckily, we've got a strong balance sheet and a strong cash flow and five engines. So we'll just carry on as before. And you alluded to the transitions that have occurred, I'm particularly proud of the transitions that we've managed here at Richemont. We formed the watch [ bill ] when the disasters happened in Hong Kong, and we suddenly found that the total market had been oversupplied, and we took quite draconian measures in those days, bought back watches in hundreds of millions and cleaned it up. And the watch bill enforced the sell-in, sell-out ratio because in the past, our colleagues who are incentivized on selling in. So people react to the incentives. And we changed that to the fact that sellout ratio must be equivalent to sell-in ratio. So over the years, we've downsized the sales expectations of our sales colleagues, and it's led to a lot more efficiency in the factories. And had we've been in the position where we were in 2016 now, I would have been concerned. But at this stage, I'm not concerned. Yes, there are watch Maisons that are suffering more who were more reliant upon Mainland China. And -- but that's across the industry. the first movers into China that had established a beachhead, and we're selling well, obviously, are disproportionately affected in the downturn. But I fully believe that China will recover and when the consumers get a bit more confidence because unlike the rest of the world, I think in America, the credit card debt is $1.4 trillion at the moment and a lot of it is getting into default. In China, the consumers have got cash plus you have the six wallet, that's still in effect. That will then rebalance for instance, some of our watch Maisons debt will start selling more. It's going to come when I'm not sure, but I think it's more dependent on the mood. I think the Chinese consumers were scared by the lockdown, really scared. And Burkhart and Nicolas, we have evidence that where the lockdown was very stringently involved, the scars are still deeper and the propensity to spend is lower. But in the Mayors and the areas where there was a lighter touch, more Sweden. In Greater China, there were some major areas that had like the touch. And there the propensity of spend is coming back quicker than in the areas where they were really truly locked up. But if you look, it's on YouTube. Just do yourselves a favor and look at the Shanghai Motor Show. It's astonishing. They leapfrogged us in the west in terms of the quality of the vehicles and now the designs are beautiful, absolutely beautiful. And in 2020, I think 64% of the Chinese market were foreign. That's down to 32% and the only place where non-Chinese are still over 30% is in the IC in the internal combustion section with Volkswagen and Toyota especially Toyota with its hybrids where they still a player. China is unstoppable and it will continue to grow economically. They like modern things, love tech. And if you're in tech, you have a real opponent, the luck that we have. And I don't want to please don't go and write this because that will prompt them, but the luck that we have is as of now, they've not managed to enter the luxury goods area with centuries old Maisons. So we still have a brand equity there in comparison to if you're selling an electric vehicle, if you are a BMW or Mercedes and you're trying to sell EVs there, we're in a better position selling luxury goods. It's in a side, but you know I used to be an investment banker, and I was in tech. We had a big share of Chanel push, until I found Russian kids in St. Petersburg, crack our encryption code at teleview and we would pay EUR 2 billion for the football rights and a couple of 18-year-old kids would break our encryption and sell our access cards to the tobacconist on the corner at the 10th to 20th of what we charge. So we paid EUR 2 billion to the Italian football league, and we immediately lose EUR 1 billion. So I swear, I'm not going to be the whole intellectual property in 0s and 1s because they're quicker and they're smarter. Louis Cartier is in the vault. It's not easily disturbed through advances in technology. And I don't know where we're heading with AI. I really have no idea. It scares me to listen to people like Eric Schmidt because I don't think we as a society are ready. But we've looked at AI on our operations. We're not as vulnerable as some other sectors of the economy. So I like -- I didn't know any of this when we started in luxury goods in the late 70s, but it's turned out to be fortuitous. Provided we're not greedy and provide that we do not penalize it by being coming ubiquitous and being everywhere on everything, stick to our knitting, and preserve our brand equity. But that's an overall philosophy that also encompasses our pricing strategy. But no, it's not a reactive to market conditions. Is that fair answer?

Luca Solca from Sanford Bernstein.

This is like President Mandela coming and saying to me, I'm Nelson Mandela. We do know you Luca.

For the benefit of the whole audience, they know we know each other. Elaborating on what you were just saying about the Chinese and the luck the luxury industry is having, we're seeing new entrants in the jewelry business. Love for gold has been growing like a weed. Is that more of a flash in the pan? Or is it something that we need to worry about in the future? They are seemingly very, very popular and their IPO has been extremely successful. So that would be my question number one. Maybe my question number two, on the core business. You have now a new CEO at Cartier. I wonder if your approach to Cartier and what Cartier is about to do is being adjusted in any way? And how if you could tell us a bit?

Luca, starting with the first one. I think that's something that we discussed over the last decades, which is the fact that the jewelry market was primarily a non -- what we consider a non-branded market, meaning by that, that they were very, very strong local resources everywhere in the world because probably jewelry compared to some other categories is very much anchored into cultures and traditions and so that was and still today is the potential for international brands that they can take some market share from that nonbranded or less branded market .

Taxes. Local taxes. In India, people would have access to stones, and then they've master full craftsman and then they have their own jewelry set. So it's -- India is an example of a very strong local jewelry market.

And I think that in that context, and we believe that is something very healthy that there is an active markets with newcomers, new players in the different regions and different cultures. And love for gold is a fantastic example of a new Chinese brand that's very much rooted in Chinese culture has also integrated and understood some of the codes of international luxury and is developing a very, very unique and differentiated offer. And so to us, it really contributes to building the desirability on the category and the energy around the category. And of course, it means also that we have to continue to be creative and to develop ways to make our brands desirable. And to what the Chairman was mentioning, there was a fantastic Cartier exhibition in Shanghai a few months ago that was extremely successful, same contents a bit as the one at the [ Vienna ] and this legacy, this history is something that extremely appreciated and this is something that's quite complementary to what a new local brand can offer. And I think that this complementary in the market at the end of the day is a blessing because it makes the market desirable and the category attractive even to younger upcoming clienteles.

No, no, we absolutely respect them and watch them. And I guess, in a way, it's going to be tied to a nationalism and tied to a patriotism and they have a lot of wins in their favor. However, it's universal -- Cartier is universal and Van Cleef and they really appeal universally. A lot of our Indian clients wear Indian jewelry at home and then they keep the Cartier in London. And then they wear the Cartier in London and New York, et cetera, et cetera. But I mean, if you look at Tutti frutti, if you look at and the Maharajas in India, we have a very long history. So it is as exactly as we've discussed in the past as well, it is still a very fragmented market. And people then move towards branded jewelry, especially those with a long DNA. And they all feel there is value because they look at the auction prices and they see that Sotheby's, you know if you look at the Hong Kong auctions, Christie's, there is a very big demand and there is a value proposition, an investment value proposition, which they appreciate.

I think there was a second question from Luca on Cartier.

So on Cartier -- on Cartier, it's a matter of continuity. I mean we talk a lot about the legacy. I think that the work that has been done in the past few years and really a tribute to Cyrille Vigneron and his team for that, was very much to refocus on historical lines, and we've seen that in jewelry and watchmaking and [indiscernible] as well, they've been very successfully relaunching and reemphasizing historical lines like Panthere, like Santos and Louis Ferla and the team, which remains in the Cartier team, and Louis actually is a Cartier veteran in a way, he used to run markets for Cartier, in Middle East, in Asia for a long time. Their mission and their purpose is really to continue along the same lines. So making sure that we keep this legacy very alive and active. And at the same time, that's their own operations and they take care of the different international markets with a very efficient approach. So really continuity at all levels.

Louis, in fact, in China at the moment visiting the Northern 30 cities because it's a bit cold in October to visit, then you'll see in October do the 30 Southern cities when it's not -- well, when you don't want to go North because it's rather cold in October. So we'll have a full feedback in about 2 weeks, 3 weeks' time. And the transition there has been very good. I'm really quite proud of the culture of Richemont that when we dismantled SWM that Emmanuel gratefully went to Panerai and Jerome asked to go to Jeff. So it really says something for our culture that we've don't enter in arguments. And I must say even if it's in front of him, I'm glad that it took me about 18 months to persuade Nicolas to become the CEO. But thank you, Nicolas.

Question from Carole.

Carole Madjo from Barclays. Two questions from me, please. The first one, to come back on the Jewellery Maisons. I assume that Van Cleef has been growing at a faster pace than Cartier in the past few quarters. And I guess the Alhambra collection was a key part of this growth. Is there a small risk of ubiquity of the Alhambra collection? Or is it way too early to talk about this for this product? And then going forward, which kind of line, would you like to push a bit more at Van Cleef to drive the growth in the upcoming years? That's the first question. And number two, just back on China quickly. I think you talked about having done some buybacks on the watch industry. I know it's quite difficult to talk about the recovery pace of China, but could we expect more buybacks on the watch space in H1 as well?

On Van Cleef, I think there's been a very, very healthy growth, both at Cartier and Van Cleef and Buccellati for that matter. And I think that, of course, they start on different basis, but we see very, very high potential on all the Maison and also for -- at a smaller level for the new kid on the block, which is Vhernier. So very good growth there. Yes, Alhambra is a very important connection for Van Cleef & Arpels. I don't believe it has become ubiquitous. I think it's -- I could talk about Alhambra for some time. But I think it has -- it's a fantastic collection that was created more than 50 years ago, and that has potential to develop into a number of very, very exciting versions and very, very different expressions. And we see actually the success of that specificity of Alhambra. So it's a better known collection today than it was 20 years ago for sure, and it's probably one of the most important jewelry lines in the world. But we feel it's far from having reached its full potential, and we are very also cautious on expanding it and there are other lines Burkhart mentioned them in the presentation like Perlee like Frivole which are becoming significant contributors to the turnover and the success of Van Cleef & Arpels. And of course, we're investing a lot on these lines. The same that at Cartier, you have LOVE Bracelet, Trinity and Panthere now and Clash. We feel that this diversity of major lines is very important. It's something that we definitely nurture at Van Cleef & Arpels. You want to answer the buyback?

There is still a stress in Alhambra, and I know because I get phone calls, my wife's birthday is in 3 weeks' time, and I've been looking for 6 weeks to buy this necklace. And then depending upon who it is, I called Nicola, said please, then he finds one in New York, and he moves it to Miami. And so I know where the stresses are. They have not overproduced at Alhambra, they've not made it available everywhere to everyone.

Yes. Let me just quickly answer the question on the buyback. So there were overall, let's say, on a group level, not material in Specialist Watchmakers. They were a bit more material, very targeted to Maisons. I'm not going to name any names here. Then they were addressing specific challenges that these Maisons had in some -- in one part of the distribution. So again, it's nothing out of the usual. We always do rebalancing of inventory. We pointed it out because obviously, it had an impact on our gross margin. And that is about it. It's not a massive across the -- cross country across the watch space inventory buyback. It's just inventory rebalancing and actually, that happens quite regularly. But in this specific instance, it had an impact on the gross margin.

But you remember that at our AGM, I asked for discipline by the Swiss watch industry. Now we know who are the discipline players are, I can tell you one of them, obviously, a Rolex, the other one Patek Philippe, where not everyone has displayed the same discipline in reducing production in terms of their total absorption rate. So you do find -- should I say the EUR 2,000 to 3,000, EUR 5,000, EUR 6,000 range, you find fierce competition. And I would say that's where more of the stresses are.

If I may just add on that. The Chairman mentioned the strong effort that was made 6, 7 years ago to really clean the market and distribution for watches, is the fact that we continue at, of course, lower level year-after-year to maintain the quality of the inventory out there is very important that requires discipline. And this is also the way we support our wholesale partners that are very important to our watch brands.

Supporting our wholesale partners who invest and we don't want them to find excess stock in their markets, which inadvertently arrives there.

Zuzanna?

My name is Zuzanna Pusz from UBS. I will stick to 2 questions. The first one will be on Buccellati. We haven't discussed it much here, but this seems to be the next rising star in the group. Would you be able maybe to tell us a little bit more about its performance over the past year? What is the potential of the brand? And I don't mean to complain, but there's also a lot of waiting list. I think Macri takes 18 months to get a product, other collections up to 12 months. So...

You, analysts, never surprised me, you either mourn about excess stock or that you can't find the stocks?

That was the consumer speaking not the...

Sorry. Who do you think gets all of these calls?

So that's my first question because I feel like we...

Let me answer that. These two gents persuaded me to back them to buy Buccellati because we had it in round 1. But then there was a member of the family that had like a shared trademark in Rome, and we passed on it. Then they came back. And the trade market been reunited, et cetera. It does, it profitability 3 years before -- 3 years before target, and it is a wonderful Maison. And it's totally different to Cartier and it's totally different to Van Cleef. A lot of home furnishings and the most wonderful thing is how nicely, we work together with the family. They are a fantastic asset. The only problem there is somewhere in our security division. They've made it impossible to get into the building. I mean it is like entering Fort Knox. It's...

Which is good. Okay. There is no jury there.

And maybe my second question, and I don't mean to put anyone in trouble, Burkhart, especially. And I'm not asking about the outlook, but you've historically commented that in a good year, we can expect Jewellery Maisons to achieve 45% EBIT margin, in a bad year, you try to maintain it at around 30%. I do know we are not in a good year, but given the...

Sorry, that nonsense, I thought stopped years ago when Jan du Plessis got here and said, our operating profit is this percentage, and he'll stay there. I said him Jan, plus he bragged about how low our tax rate was, I couldn't believe. I don't think you can blame Burkhart for decisions we make as a group at the SEC strategic decisions on what -- if you can tell me the gold price in 6 months' time, I think we're one of the biggest buyers of gold outside of government. And we don't control that input cost that directly into the bottom line.

I guess not to waste the question. Maybe if you could just tell us if there's anything you can do to offset the gold price because we know you don't want to overdo pricing, which is the right decision. But do you have any other levers to pull? Just so -- we also need to understand our job, we need to forecast, and it's quite difficult with the gold price. So just to understand if there's any...

I'm sorry. What about us? I want to sorry -- our watch Maisons come and they propose products for the next 2 to 3 years. And then we look at the positioning and we don't know what our opponents are going to do with their gold prices. So I think it's everybody is in the same boat.

I appreciate the thought, but we're actually completely in the same boat. We've always been clear gold prices, we don't know. We cannot guide on anything linked to that. We have exchange rates, we don't know. And yes, I understand that right now, on top of that, with all the volatility that we're having, that it is very difficult to project out. We see that as a very wide range of projections, and we face the same dilemma. So we have to -- but we have to manage it.

The only thing I would maybe add is that we maintained a very, very strong cost discipline so that we can afford to maintain fair pricing.

Well, you're UBS, I can tell you that's a personal story. When I started getting grandchildren, I said to my wife, I want to leave each of those grandchildren enough to get a college education and a house. So how much? And then I bought gold. But I bought gold through Credit Suisse. And then about 6 months, well, I didn't, but the people who did it for me, and then about 6 months before 3 months before I started saying, maybe I'll move it to the UBS. It's not a nice thing to call Credit Suisse to say, please send the gold to UBS and just when it got there, you bought them. So now I'm back with the same people. Well, that's not for reporting, by the way. But so, no. But the funny thing is that governments are buying now, and I don't know whether you've noticed, it's one of the problems that we in Switzerland have with tariffs. They look at the balance of payments and they see the amount of gold going into the United States. But it comes via Switzerland because it's being smelted. Costco, have you've seen how many one these little tiny gold bars Costco is selling? I mean, the size, but it's being refined and now it's counted against Switzerland's exports. But we are one of the biggest buyers apart from governments.

Anne-Laure Bismuth from HSBC. I have 2 questions, please. The first one is on the U.S. market, that has delivered a very strong performance in Q4. So what is your outlook for the U.S. market this year in light of the macro environment? Or do you think about the consumer psychology? And also some press article mentioned a bit of a boost pre-price increase in April. Have you seen such an impact? My second question is about the price increase. So you have mentioned targeted price increase for Jewellery Maisons? Would it be possible to quantify the magnitude of the price increase? And when did that happen? Thank you.

We can't give you an answer because we don't know ourselves. We're in exactly the same position as everybody else. We've got to see how all of this plays out. All of the tariffs and all of the trade friction. I suspect that it is transactional and that is not lasting. Did you know, It started with Milton Friedman. Shareholders are the only people that count that went through the General Electric model, as the Welch and outsourcing, and a lot of production capacity got outsourced I mean, do you know Britain was one of the biggest steel manufacturers in the world. It's today -- and Chinese cheaper prices and productivity led to a lot of deflation in the United States. People got better products cheaper. Unfortunately, to move from a production economy to an information and services economy, which it has successfully done. Two things happened, one, COVID and supply chain constraints and distance from supplier, woke up a lot of people. if you order a car an Audi or a Range Rover or something, you suddenly found out that parts of it were made in the Ukraine, electronics. And then this is made in -- because the car manufacturer is really an assembler. And suddenly, they woke up to the fact that the supply chain wasn't perfect. And then secondly, obviously, the job losses because the blue collar workers in the States did not transition into the service stroke IT sector. And that's President Trump spoke for the unemployed. And for the middle class, the middle class has suffered in the United States. And I'm not too sure that there are parts of Europe that are not going to go through the same social fabric being tied with throne. And that's before the machine age is really kicked in and before AI. So there are going to be exogenous forces that are so big that we can't predict certain year. And then to talk about pricing and exchange rates 3 years from now, I mean, the Middle East is becoming one of the AI centers, the UAE. It's the United States, China and parts of Britain and the UAE, who would have thought that. So I think the next decade is going to be very turbulent, huge advances in medicine. Huge advances in biology, in the biosciences and there will be disruptions. If you think the whole of the European motor car industry is in trouble, do you know how many dealerships there are. Most dealerships make most of their money by selling oil. Electric cars don't need the same servicing. We're talking about millions of people whose livelihoods are going to get destroyed. It's -- and those are our clients. So I think there are exogenous forces that make me very low to predict. And I really long back for the period when I was in my 40s when I was certain about everything. It was so nice to be certain, basically when you know nothing.

Makes it easier. It makes it easier.

So I'm sorry if I speak broadly, but I can't tell you what America is going to be in 6 months' time. And people would tell you that, I've got a line to the almighty that I don't have an extension because I don't think they know.

And you had another question on price increases, right?

Price increases. If I knew, I wouldn't tell you, obviously. I'm trying to be straight. we will not take big price increases that we cannot sustain and I -- if you take big price increases, you can aim to have to have a deliberate shortage of goods. Then you make it away with a pro tempo. But there's a backlash when people double the prices of the handbags, there's a backlash.

I think, Patrik, you had a question?

Patrik Schwendimann, ZKB. You are outperforming the peers not only in the non-branded jewelry, but also in the branded jewelry part. You have a very strong brand equities, obviously, with Cartier and Van Cleef. What else is the secret of your success, maybe also to attract your consumers? And what percentage do you have currently with young consumers? That's my first question. And second question, Johann, you have mentioned maybe 12 years ago that Richemont needs around 1 million ounces of gold. What is the current volume you needed for Richemont?

Where do you remember that? I don't remember saying that.

Analysts, never forget.

It's about 40 tonnes of gold this year.

Yes. We're no longer in ounces. We're in tonnes.

That's about $105 million per ton. That's roughly the number.

Not all of it, though, is used for our own operations.

So we do also supply other parties through VALINOR.

But this is getting more important to -- really feel it now that also consumers, they are really buying gold because it's nice value to...

I think they buy gold because they don't just -- they don't trust the governments.

And central banks are buying. So we're competing against central bank.

If you look at China, I'm not sure of the exact number, but I think they're getting close to $1 trillion worth of U.S. treasury bills. You cannot run a balance of payments deficit at infant item. So there'll be a balance in either the renminbi will depreciate, I don't know. But there is a very famous shipping company here in Geneva there I'm a partner with [indiscernible] London and Mediclinic. And I can get the monthly shipping containers shipped out of China, trust me, it was up massively last year. So the Chinese traders not done that. And look, basically, there's an overcapacity of most industrial goods in the world, whether it's cars, whether it's fridges, whether it doesn't matter. As soon it's industrialized, local governments will support a major -- the major real economy as we heard in Shanghai. The major is the term where the car are manufactured. That's why they've got a plethora of cars, cars that you and I have never heard of. Now there will be a shakeup, it will be the same as when General Motors mocked up the others. But are they a force? Yes. Do they make brilliant products? Yes. Will there be excess? Yes. Then you've got to start worrying what's going to happen to the European car manufacturers. Stellantis, you take them all. Volkswagen Group, huge excess capacity, that's not good for the general economy. You really want what I said to Anton. When the industrial revolution started, there were no organized sports beforehand. Men and women work, work the fields and worked underground in mines. And they went to church in England 5 times a week. That's a couple of centuries ago. Suddenly, free time came because you had this new thing called the horsepower, not meaning horses, but horsepower in the steam engine and the industry. So they had free time. So they arranged organized sport. Football came. Cricket, which turned into baseball. So for the first time mankind had free time and a quality of life. Now if we're going to project forward and we go into the machine age, quantum computing, all of AI. What are we going to do? I thought maybe they'll take cultural travel like the Chinese are more interested in cultural travel than shopping travel, highly cultured people. That's why Alitalia put in a route to Rome, not to Milan, and the Chinese airlines because the Chinese wanted to go to Rome. Experiences. The second thing, and I agree with Anton probably virtual reality, those sit insulated and live in a virtual world, because we're going to have abundance. The key question is how are we going to share that abundance. I'm a proponent of the universal basic income principle because I think there are going to be huge amounts of people that are going to become structurally unemployed quickly. And combine that with mass migration, you've got a [ moats of cocktail ]. So we, as a society, will have to start thinking how do we look after people that become structurally unemployable. And the funny thing is it's going to be educated people. The hairdresser will have a job. The gardener will have a job. The actuary or the radiologist studied 8 years, you're a radiologist in 3 or 4 years' time, they take a drop of blood, they scan you twice, and they'll give you exactly what's going on with you. So we're going to have such disruptions that bother me more. And how can that impact on the Richemont or anything else? And there, I can sleep at night. I don't think we're going to go obsolete. It's a crazy thing, but you ask me why -- why do I like the industry because I think there is a resilience to it, and the interesting thing, some of our biggest clients now are tech moguls, who appreciate very complicated watches. Techies that you would know, you know their names. So instead of them wearing an Apple watch, which you would have thought intuitively, no. So I've given you, it's not 1 million, it's now a bit more.

Do we have other questions?

And regarding the jewelry results, the secret of your success versus the other branded jewelry, maybe also with the younger client end?

I think people are finding out that the business is more difficult than they thought when they bought it, the competitor. We are gaining market share against non-branded and branded.

Piral Dadhania from RBC. Two from me, please. Could we just talk about the retailification of the Specialist Watchmakers division? Obviously, you've been adding stores. The retail mix, I think, has reached around 60% now. With that comes a higher level of operating leverage or deleverage, should I say, which has been very visible this year. Is the strategy to continue to drive the retail mix in the Spec Watchmakers division higher? Or have you reached a more steady state, should we say? And the second question is just on LuxExperience Holding, I think it's 33% that you now have. Could you just let us know what the lockup is for that holding and what the long-term strategy is?

I think we're optimal in terms of the internalization because I hate fixed costs. And we have some very good partners now, wholesales partners. I'm not sure that we're in a rush to open boutiques. In terms of the lockup, if in 2015, the rest of the industry and our competitors had joined us in doing a proper online platform, the results would have been different. I'm not sure that we're not going to get through more COVIDs. My epidemiologist friends tell me it's inevitable. And I still believe that there's a business in online, but maybe it's going to be changed to a subscription model. But that's for them to run. It's a very good CEO.

I'll sit on the other side of the forum next time. I'll keep to one question. I wonder Mr. Rupert. In the past, you've sometimes referenced Coco Chanel and money is money, and it moves pocket to pocket. I think earlier this morning, you talked about, you see the Chinese, they absolutely have the cash and it's more of a sentiment and a confidence point we probably spent a bit too much in the West. I suppose when you're thinking about the longer term and the investment cycle, when is the time to reaccelerate the investment back into China again for the longer term? Actually, I will have a second question, just whilst I've got you, you've been so generous with everybody this morning. Just on the EUR 8 billion of net cash. I can't let that go, that's a phenomenal performance, wonderful control. Are we waiting for something bigger down the line in terms of potential M&A? Or is this just keeping your powder dry and the conservative nature that we've seen historically.

We could buy half of private equity right now, but it's not our goal. I think we're very well represented in China. You know on that, people will talk about the war in Taiwan. As a Chinese friend of mine said to me, the one child policy is still the effects of it are still there. And you've got grandparents and parents who have one child, yes, 2, 4. How popular will President Xi Jinping if he loses 1 million one children. You're too young to remember the Vietnam war and how popular that was. So it also has a very interesting effect on the psyche of the people. Those princelings are not going to get sent to war, trust me. The grandparents who are still alive and the parents are not going to like that. But it's still a six wallet economy without trying to get into too much detail, I am certain that there are scars. Here, we live in Switzerland. It's probably the country with the biggest thrust in the state, not the government of today, but the state of any society. You do that -- you go to the U.K. and you ask the average Brit, do they trust the state today? Not even discuss the government, probably is zero. And there are very few countries in the world where Nordic country is probably better with the citizens trust the state, and that used to be in China that you make the money, but they trust the state. And now for the first time since lockdown, there is a little bit of, why did you put us through this? And when that trust returns, I think you'll start seeing people spending more because they have to. They cannot just rely upon capital investment. They have to get their consumption internally. So -- and they're highly intelligent. They know what they have to do. So I do believe that it will return. They're highly sophisticated. Will they go for extravagant display of ready-to-wear? I doubt it. I think they're more mature now. So -- but I mean, I'm not a Chinese expert. It's just I have friends or Chinese who are experts. And I'm really just quoting them. But when you leave Shanghai today and you fly to New York, you think you're getting into a third world country. It's unbelievable, you go down the FDR. You need a 4x4. It's astonishing. Or you leave Abu Dhabi and you go to London, we've underinvested in infrastructure woefully. These things have to balance out. And I think that's part of President Trump's drive, I suspect. So are we going to invest more in China? We'll have to, but we'll do so when things pick up. And then we've got aging demographics, what will that do? You know what? 3 or 4 years ago, everybody complained about lazy balance sheets. Today, it gives you a feeling of warmth and comfort. And our bonds now have, what, 2% positive carry, yes.

We want to pay back first tranche of it in March of next year.

Yes. So first tranche, it's already -- I mean it's amazing how quickly it's gone. Would you say that, unsolicited investment banks have given us lines of credit of what, EUR 45 billion?

Correct.

Sorry?

Correct, yes.

There's still too much money floating around.

Do we have any more questions? Okay. So thank you very much for being here and for listening on the webcast. And this now concludes the presentation. Thank you.