Kering SA (KER) Earnings Call Transcript & Summary

Welcome to Kering's 2021 full year results presentation. I am Jean-Francois Palus, Group Managing Director, and I'm here with François-Henri Pinault, Chairman and CEO; and Jean-Marc Duplaix, Chief Financial Officer. 2021 has been a year of multiple achievements across the group. François-Henri will go through a few of the most salient together with the implications for the future in 2022 and beyond. Next, Jean-Marc will review our strong operational and financial performances during the year and in the fourth quarter. And all three of us will be available to answer your questions. Before François-Henri takes the floor, however, we would like to share with you a brief video highlighting some of the events that have marked the year at Kering. [Presentation]

Good morning to all of you. And first, let me hand my welcome to Jean-Francois. As you've seen from this video, 2021 was an eventful year. We are busy building Kering future, and we are far from over. But still, our performances are well ahead of our expectations, so stay tuned. 2021 was a strong year for Kering. Our top line grew sharply. But more importantly, retail sales, which represented 81% of the 2021 total, those have grown by an average of 18% annually over the past 5 years. And this is really what I call a very steady and sustained delivery. The group EBIT margin exceeded 28%, and we generated a record free cash flow. As you see, we are firing on all cylinders. And all of our houses contributed to our strong performances, and we did that in a very demanding and fast-changing circumstances, requiring even more flexibility, more audacity and more tenacity. We continue to invest and make decisions, big and small, that supported our 2021 performances. These decisions and investments will continue to pay off this year as well as in the mid and long term. As you see, it's a genuine team effort involving all 42,000 caring people at every level. Each one of us apply the lessons we learned in 2020. We continue to strengthen our team through the pandemic, and thousands of talented new colleagues joined us during the year. They value and embrace the culture that makes us very different. And as a signal of recognition, we are currently working on a comprehensive employee share ownership plan, which will be submitted to the shareholders in April. In fact, I firmly believe that purpose goes hand in hand with long-term profitability. Organizations like ours have a duty to contribute disproportionately to making a long-term impact on the social and on the environmental front, and this is why I took the head of the fashion pack because I really believe that as competitors, we can do a lot more together for the good of the planet than individually. Here are some of our environmental and social accomplishment of 2021. Of course, you will find more comprehensive details in the annex and in our regular reporting. As you know, we've published nonfinancial indicators for nearly 20 years now, including our trailblazing EP&L, since 2015. Our 2021 people survey shows a continued high level of employee engagement and an even higher inclusion score. We've made further progress in terms of gender parity throughout the group, and we have not relaxed our commitment to sustainability. We updated the science-based target we've set in 2016 to strengthen our climate ambitions, and our strategy is now fully aligned with the 1.5-degree pathway. With the Regenerative Fund for Nature that you saw in the film, we moved further in our efforts to preserve biodiversity, which is crucial to our industry and to the future of the planet. In July, we issued Coming Full Circle. Coming Full Circle is a report highlighting the concrete actions our houses have already implemented around circularity. Beyond recycling, it is about rethinking the way we produce, rethinking the way we use and extend the life of resources and products. And I am very proud of the pioneer ESG role Kering has played for many years now in our industry, of course, but also in the broader conversation. In all our houses, we focus on intensifying and honing creativity and exclusivity. The iconic items that convey the deep-rooted codes of our houses are central to this effort. It is our ability to blend tradition and disruption in a single movement that makes our houses so influential. Through the year, Gucci highlighted its beloved handbag lines, reinforced by the launch of the Diana and more recently by the launch of the Bamboo 1947, reviving and reinventing historical Gucci models. And both were extremely well received. Balenciaga returned to haute couture, a defining segment for the house after more than 50 years. Boucheron graphic high jewelry collection launched last July merges high-tech materials and centuries-old craftsmanship. And the last New Maharajahs Collection that we just unveiled is a strikingly contemporary interpretation of our archives. As you see, our strategy entails developing brands that have a capacity to expand their territories and to replicate their success across many categories, consistent, of course, with their personality. And we did that first with Saint Laurent, building a leather goods and accessories powerhouse on top of its ready-to-wear legacy. Its success to this day, and notably last year, validates our approach. Bottega Veneta is another perfect example. I felt the house potential as a global brand, and I pushed it to reinvent itself from what was a rather narrow product offer. And it has cemented this status all along last year. Saint Laurent and Bottega Veneta are not isolated cases, and I could cite plenty of others. For instance, Gucci is winning for us into high jewelry and more generally into high-end segments of the market. I could cite Alexander McQueen drawing on its tailoring expertise to gain legitimacy in daywear and leisurewear while raising its visibility in leather goods. And we are also making a strong push across the group to increase our focus on men's products. Collaborations have also provided room for our houses to broaden their perspectives. Gucci's partnership with The North Face created a whole new category, and I could also mention Balenciaga cooperating with NASA last summer. In another vein, our hacker project was a resounding first as two leading fashion houses, Gucci and Balenciaga, came together to create a unique hybrid universe. We are strengthening the long-term communication strategy of our houses. And here, too, we want to focus on reinforcing their deep-rooted codes and their ability to define new ones. Balenciaga is a case in point. It's a house that can talk in the same breath about return to haute couture and its groundbreaking association with Fortnite or The Simpsons and, by doing so, pushing the boundaries between luxury, entertainment, culture and technology. As you know, I made the decision to reinforce the exclusivity of our distribution across the board because I really firmly believe that it is key to reinforcing brand equity and achieving customer excellence. We have resolved to reduce the share of wholesale for our larger houses, and we are making massive progress here. It will pay off even if it entails a little pain in the short term. We started with Gucci, where wholesale accounted for less than 9% of sales last year, down from 15% in 2019. With Saint Laurent, Balenciaga and Bottega Veneta sharing the same vision, you should expect the share of retail to continue to rise here, too. In the meantime, we are enhancing and fine-tuning our networks of own stores, consistent with our strategic vision of retail. Last year, our focus was largely on increasing quality and size, but we also opened many beautiful stores, mainly for those houses whose capacity and geographic coverage are not fully deployed. We are -- we have also developed highly innovative formats, providing the right blend of experience and destination both for permanent stores like Bottega Veneta, you saw a boutique in Manhattan, for example, and for pop-ups like the Gucci Circolo format. Our strategic vision of distribution also extends to the online world. Our focus remains squarely on our brand.com sites now, as you know, all successfully internalized. And we use in concession -- e-concession only when they complement our own sites and we can control all the key elements of our presence. Across all segments of the omnichannel universe, we are obsessed about providing only best-in-class customer experience. Innovation is in our genes, and we are constantly on the lookout for new modes of consumption, disruptive business models or emerging types of engagement. And we do this with our sustainability lenses on. The secondhand market is a real transformative factor in luxury, and this is why we invested in Vestiaire Collective. It gives us a front-row seat on this new trend, and it enhances our ability to influence the future of our industry. And we will continue to explore and test other opportunities independently or in partnerships. Our houses are also reaching new customer through the metaverse. In addition to Balenciaga's appearance on Fortnite, Gucci has leveraged her presence on the Roblox gaming platform to build brand awareness with the upcoming generations of luxury shoppers. Another area of innovation is research into new materials. Last year, Gucci launched Demetra, a high-quality, eco-friendly material usable in a wide range of products. But we don't keep innovations to ourselves, and Gucci is making Demetra available to others in the fashion world. Gucci also launched a second collection of the Off The Grid eco-friendly luggage line. Finally, our growth platform support and systematize our efforts. Two major developments in 2021 were the final step in the internalization of our e-commerce with the integration of Balenciaga in February and Bottega Veneta in May and also the effective coming on-stream of our Trecate hub in Northern Italy, which greatly expands and accelerates our logistic firepower. All these actions aim at strengthening brand equity, reaching new clienteles and gaining market share notably with local customers. The pandemic has accelerated changes already happening in the way people shop around the world. We had anticipated many of these shifts, and we are intensifying our efforts to always remain ahead of emerging trends. Our initiatives also aim at strengthening the loyalty of the new generations of consumers our houses have attracted and are continuing to attract into the world of luxury. Our culture, our ability to blend heritage and innovation are absolutely aligned with those of the upcoming cohorts. We are focusing on the areas where we had the most value. In eyewear, we were the first to understand the importance of internalizing licenses and to create dedicated, powerful entity to manage this business. And this was the right move at the right time, and Kering Eyewear has gone from success to success ever since. With the acquisition of Lindberg last year, we are rounding out our offer in a very high-end segment of the market, and we are looking forward to growing our -- that new business and benefiting from this addition across Kering Eyewear. Late last month, we announced the sale of our watches activities to their management. Our strategy here is to focus on segments of business which -- with growth potential and on the houses and activities we can scale up over time that can really profit from being part of the group. And this transaction was squarely aligned with this goal. All our houses are stronger than ever before, and we are very confident that we will extend in 2022 the rebound of last year. And even more importantly, we are well positioned for continued growth and profitability in the long term. After 100 years, Gucci never stops to surprise, reinforcing its desirability and the visibility of its beloved icons together with its glamorous positioning; Saint Laurent continues to expand its clientele, fueling steady, outstanding growth; Bottega Veneta is confirming its status as a truly global brand and its potential deriving from creative products and communications; Balenciaga gains in distinctiveness with its reentry into haute couture without relinquishing any of its brazenness; alexander McQueen is successfully developing a sound presence across multiple categories; Brioni is making solid progress in a fast-changing segment. Our jewelry houses have taken off. Boucheron is leveraging its entry into new markets, notably China; and Qeelin is exploding, demonstrating a unique ability to build a booming Chinese luxury house; and Pomellato on -- is on course for new breakthroughs. Kering Eyewear is expanding the presence of all our houses in the key aspirational segments and enhancing its technological expertise. As you see, our vision is forthright. We are building for the long term, doing exactly what we say we will do. Of course, we are not yet where we want to be. But definitely, we are in the right direction. We are exploiting our growth potential and creating value. Our very solid position reinforces our confidence in the success of our business in the short and long term. And now I will give the floor to Jean-Marc for the review of our 2021 performances.

Thank you, François. Good morning to all of you. Let me now describe to you in more detail the high-quality performances François introduced. You have some highlights on slides 12 and 13. I'll start with revenue. At EUR 17.6 billion, sales were up 35% year-on-year in both reported and comparable terms, setting a record. FX turned from a negative in H1 to a positive in H2, ending up broadly neutral in the full year. We also had a positive scope effect coming from the initial consolidation of Lindberg in the fourth quarter which did not have a material impact on the full year. Comparable group revenue was 13% above 2019. Looking at our regional mix. It has changed significantly in the past 2 years, requiring agility across our operations as well as in client engagement. Compared to 2019, North America and Asia Pacific gained 7 and 4 percentage points, respectively, while Western Europe lost 10 points, Japan 2 and Rest of the World 1. Moving to the quarters. Group revenue was consistently above 2019 levels throughout the year. We had a marked acceleration in Q4, up 32% comparable year-on-year and 25% on a 2-year stack. Recurring operating income passed the EUR 5 billion mark, a 60% increase over last year. Here as well, we reached an all-time high. At over 28%, our margin is back on a healthy expansion trajectory. It's the result of effective operating leverage while we pursued our investment strategy. Next, our free cash flow generation was very strong at EUR 3.9 billion, nearly doubling year-on-year. CapEx stood at 5.3% of revenue, largely dedicated to our houses' development plans. Investment in our growth platforms is back to its 2019 level following completion of our logistics hub in Italy. As a result, net debt dropped to EUR 168 million at year-end, down close to EUR 2 million (sic) [ billion ] year-on-year. We were proactive, seizing market opportunities to trim our stake in Puma, carry out a share buyback program and reinforce Kering Eyewear's portfolio with the acquisition of Lindberg. In slides 14 to 17, a deeper dive in revenue trends at our luxury houses with sales totaled EUR 17 billion in 2021. First, growth by channel. Retail fueled the strong end to the year, reflecting our strategic focus on controlled distribution. Retail represented 81% of 2021 revenue and 85% in Q4 alone. Full year comparable retail revenue was up 40% versus 2020 and 18% versus 2019. We had a sharp acceleration in Q4, up 39% and 34% on 1 and 2 years basis, respectively. Wholesale was up 17% year-on-year in 2021. More significantly, it was down 3% over 2 years, consistent with our move towards greater distribution exclusivity. Royalties improved nicely during the year and are now above the 2019 level in eyewear, still slightly below for perfume and cosmetics. The focus on retail trends by geographies shows sound recovery across regions. Western Europe, Japan that were still down on a 2-year stack in the first 9 months improved materially in Q4, driven by strength in local demand and successful clienteling initiatives. Western Europe rose 59% in the quarter, ending up nearly flat on a 2-year stack. In Japan, retail was up 33% or 19% versus Q4 2019, partly due to an easy comp base but mainly to very solid demand. In Q4, North America grew 63% year-on-year or 82% compared to 2019, sustaining the high growth rate we saw throughout the year. We achieved high conversion rates and increases in average ticket in our stores as well as online. Asia Pacific resumed the dynamic momentum, up 18% year-on-year in Q4 and 37% compared to the same period in 2019, back to a growth rate in line with Q2. The rest of the world was up 48% year-on-year and 57% compared to Q4 2019, driven by the Middle East. Turning to e-commerce. Our houses' revenues exceeded EUR 2 billion in 2021, a 55% increase year-on-year and 2.6x the 2019 level. In terms of online penetration, our worldwide average is now 15% of retail sales. In North America and Western Europe, penetration is already around 25%. In Asia Pacific, there is still plenty of room for growth. To end my remarks on luxury houses, let's go through EBIT and margins on Slide 18. They are perfectly consistent with the trajectory we outlined and with our strategy of creating value over the long term. We are benefiting from our operating leverage while reinvesting selectively in key OpEx lines to strengthen our houses' competitive positions and future growth prospects. Their EBIT came at EUR 5.2 billion, passing the 30% profitability threshold again. Most of the houses were already ahead of their 2019 levels, and all displayed a healthy recovery. I'll now provide comments on our individual houses, starting with Gucci from Slide 19. We took advantage of this year of rebound to strengthen the fundamentals of the house. Revenue for the full year exceeded EUR 9.7 billion, up 31% year-on-year, both reported and comparable. It is 3% comparable above the 2019 level but 10% higher in retail while wholesale is down 39% over the same period. We are nearing the end of the wholesale rationalization phase with retail close to 92% of sales in Q4 '21. In the quarter, retail accelerated materially, up 35% year-on-year or 25% on a 2-year stack. As you know, Gucci had an intense calendar of initiatives towards year-end. Aria hit the stores and high-profile animations were organized around the house's centennial and hacker project capsules. Aria provided new evidence of the richness of Gucci's codes and creative universe. It was very well received across markets and age segments. In-store events, pop-ups or brand experience formats strengthen bonds with new and existing local clients. Due to both mix and selective pricing actions, Aria had a very positive impact on AURs. Recurring operating income amounted to EUR 3.7 billion, a 38.2% margin. Gucci achieved a sizable rebound in profitability while it carried out planned strategic investments notably in clienteling and communications. CapEx targeted network enhancements with a mix of refurbs, openings and relocations. On Slide 22, some highlights on Saint Laurent, which is consistently reaching new highs. At EUR 2.5 billion, full year revenue was up 46% comparable or 26% on a 2-year stack, a remarkable achievement for a house whose trajectory over the past decade has been spectacular. Q4 marked another acceleration, up 47% comparable year-on-year. Performance was driven by retail, up 54% over 2020 or 61% against 2019, probably among the top growth rates in the industry. All regions contributed with Asia Pacific, Western Europe and Japan leading the sequential improvement and North America sustaining an impressive momentum. The house's affinity with local clients in mature region is now solidly established and it is fast developing similar bonds in newer markets. Full year retail revenue was up 55% from 2020 and 35% on a 2-year stack. All main product categories are steadily fueling growth. E-commerce kept growing rapidly, up 82% year-on-year and more than tripling over 2 years. Wholesale is up 20% in Q4 and 23% in the full year. But growth is moderating on a 2-year stack, up only 6% in 2021 as rationalization of this channel is underway. EBIT was EUR 750 million, a 28.3% margin for the full year. This is a new record profitability for the house. Saint Laurent focuses CapEx on network expansion. In 2021, this translated into 29 net store openings, mainly in Asia Pacific and North America. Moving to Slide 25. Bottega Veneta reached new milestones. One of the few brands that grew in 2020, Bottega Veneta passed the EUR 1.5 billion revenue mark in 2021, up 25% comparable versus 2020 and 32% on a 2-year stack. In Q4, revenue was up 14% comparable versus 2020 driven by retail, up 28%, accelerating sequentially on both a 1- and 2-year basis. Wholesale was down 18% in the quarter compared to 2020. Bottega Veneta's sound growth is entirely realized with a stable store count and with a healthy mix of existing and new clients. It's creativity and desirability before their house important pricing power. Bottega Veneta's long-term strategy focuses on an even more exclusive distribution, allowing it to fully deliver on the potential of each of its product categories, providing them with maximum exposure. It will result in a gradual reduction of wholesale in its channel mix. Recurring operating income was EUR 286 million, up 67%. Margin expansion has resumed already, exceeding 19% in 2021. While Bottega Veneta is reinvesting in brand equity, its scale and higher sales density are driving operating leverage. CapEx is focused on enhancing the network with a mix of relocations, innovations, highly selective openings and creative retail formats. Starting from Slide 28, you will see that the high growth potential of our other houses is fully materializing. Revenue in 2021 was up 44% comparable or 31% over 2 years, reaching EUR 3.3 billion, a full EUR 1 billion increase in 1 year. There is no scope impact as our watch brands were still fully consolidated in 2021. All houses contributed to the rebound from 2020, and virtually all were well above their 2019 level. Keep in mind that Balenciaga, Alexander McQueen and Qeelin had posted a top line growth in 2020. Compared to 2019, retail is a key driver, up 40% comparable. This performance stems from the expansion of the store network, the rapid development of online sales and the move towards a more exclusive and controlled distribution that should amplify in 2022. In Q4, comparable revenue rose 34% year-on-year, with retail up 45% or 60% on a 2-year basis. Balenciaga and Alexander McQueen had another spectacular year, both achieving record revenue and outperforming the whole segment. The two houses are successfully implementing their development plans in term of product, categories and geographies. With striking shows and powerful communications, they broadened their visibility while also strengthening their market presence, notably in North America and Asia Pacific. Brioni posted a very encouraging rebound in 2021. Our jewelry houses also had an outstanding year. In a category that is enjoying solid growth, we are reaping the fruits of our past and current investments. Boucheron is capitalizing on its exceptional offering in high-end jewelry to confirm its promises and its strong potential in Asia Pacific. With sales multiplied by 2.5 from 2019, Qeelin confirmed its unique status in the region. Pomellato, which still derives the bulk of its revenue from Europe, is gradually expanding its footprint, leveraging its iconic lines and new launches. Recurring operating income was EUR 458 million, 2.5x the 2020 level, yielding a 14.1% margin. This performance is driven by increased profitability at Balenciaga, Alexander McQueen and our jewelry houses. CapEx was up, reflecting the expansion plans at all brands. On slides 32 and 33, a few words about Kering Eyewear and our corporate segment. Total external sales of Kering Eyewear exceeded EUR 700 million, translating into a contribution to consolidated revenue of nearly EUR 600 million. Revenue was up 45% comparable over 2020 with a 5% noncomparable impact, most of it from scope as a result of Lindberg's first-time consolidation in the fourth quarter. The business enjoyed significant recovery in 2021 across brands and geographies, particularly driven by Europe and North America. Kering Eyewear's recurring operating income and profitability rose sharply, contributing significantly to the reduction of the segment's negative result, which stood at EUR 158 million, down EUR 74 million year-on-year. The corporate segment's CapEx was just below EUR 300 million, back to the 2019 level after a peak in 2020 related to major investments in our logistics and IT backbone. The remaining lines of the P&L are summarized on Slide 34. Other nonrecurring operating result was negative EUR 220 million largely due to the impact of the announced disposal of our watches brand. Net financial charges amounted to EUR 273 million, a 20% decrease year-on-year. They include interest on lease liabilities for EUR 106 million. Excluding this, financial charges were EUR 167 million, down 27% year-on-year. Cost of debt at EUR 38 million improved, thanks to lower average coupon. Other financial charges decreased to EUR 129 million, driven mainly by a reduction in the cost of currency hedging. Corporate tax amounted to EUR 1.3 billion, a 27.5% tax rate on recurring income, very consistent with our normative tax rate. Group net income from continuing operations, excluding nonrecurring items, exceeded EUR 3.3 billion, a 70% increase year-on-year. A few comments on free cash flow, net debt and other key metrics on slides 35 to 37. Free cash flow generation was very substantial at EUR 3.9 billion, up 88% compared to 2020. On top of excellent operating performances, we continued to successfully manage our working capital without impacting inventory availability, and we return to our usual CapEx-to-sales ratio in the range of 5% to 6%. Our financial structure is more than healthy. As you can easily figure out, the level of our profitability and the soundness of our balance sheet led to a further improvement of our return on capital employed. With over EUR 13 billion in shareholders' equity and a net debt of EUR 168 million, 2021 has indeed been a year of further deleveraging. We paid EUR 1 billion in dividend and resumed the share buyback program. So far, we repurchased 0.7% of our shares for an amount of nearly EUR 540 million. The amount of lease repayment plus related interests is nearly matched by the disposal of an additional 5.9% in Puma back in May. Our stake is now roughly 4%, covering the exchangeable bond due in 2022. Net financial investments include the acquisition of Lindberg that was completed in September. My final comments will relate to the dividend on Slide 38. The Board of Directors has proposed a dividend of EUR 12 per share, a 50% increase. We are coming back to a balanced payout ratio, as you can see in the graph. We paid an interim dividend of EUR 3.50 last month, and the balance should be paid in May pending AGM approval. This ends my remarks, and I return the mic to Jean-Francois.

Thank you, Jean-Marc. You are all familiar with the messages on this slide, but I wanted here to conclude this presentation to remind you that our focus is unchanged. We have a very clear vision of the trajectory of each of our houses, and we are investing systematically to release this huge potential year after year and over the long term. We encourage a passion for innovativeness, imagination and consideration in all our people. These are values that resonate with many of our customers around the world. Our financial situation is extremely sound, enabling us to look at outside opportunities with great serenity. We are confident in our future for 2022 and for the coming years. To showcase some of the factors that underpin our conviction, we are hoping to hold an Investor Day after this 2-year break sometime before the summer, if possible, as has been our practice in the past. While we haven't yet settled on the format, location or precise content, we expect to spotlight a few of our houses rather than focus exclusively on one of them or a specific theme or region. We will keep you posted. And now François-Henri, Jean-Marc and I are ready to take your questions. Thank you.

[Operator Instructions] I must advise you that this session is being recorded. [Operator Instructions] The first question comes from the line of Thomas Chauvet from Citi.

I'll limit myself to two. The first one on Gucci and the very strong fourth quarter performance. Could you perhaps comment on how you see the brand developing in 2022? You might not be willing to discuss current trends, but what are -- you think the 2, 3 key indicators about Q4 that give you the most confidence that Gucci trends are likely to continue? And on the margin side for Gucci, 38.5% EBIT margin, not much operating leverage in the second half of last year, is that level of margin a good proxy for the future given the required investments in the business? And secondly on pricing, there was a headline this morning saying you will do selective price increases. Could you comment about the magnitude of price increase you have in mind? And what is your view of the recent trends in terms of pricing? We've seen in 2020 a pretty aggressive path of price increase for the industry. Some brands are passing on price increase up to 10%. Do you think this is just a temporary adjustment in light of very strong demand since COVID, in light of input cost inflation? Or is there something maybe more structural like what we've seen a decade or so ago?

Thank you for your question. So concerning the key drivers for 2022 after you saw very strong Q4 at Gucci, which was not a surprise for us, of course, we are still enjoying beginning of this year very strong trends, very in line with Q4. And let me reassess some key elements on Gucci. Not only it's one of the 3 or 4 megabrand in this industry, but because of the power of creativity of Gucci, Gucci is often seen as a matter of collection. But Gucci is much more than that. It's not just about creative seasonal introduction. Gucci is as much about codes, craftsmanship, value, and this is expressed in terms of iconic lines, carryovers. And Gucci is all about that. And last year, which was an important year for Gucci because it was the time for us to broaden the offer, and which we did and particularly with a very strong emphasis on the very high-end segments on all the categories. And this is probably one key element of the rebound in Q4. And the -- one of the key drivers also for this year, not only we have a broadened offer, but the high-end segment brought, in terms of value, a strong push for Gucci. The average price of this new offer is significantly higher than the previous offer of Gucci. So this will play a significant role this year. I would add to that, that in terms of other elements, not only we have strengthened the fundamentals of Gucci in terms of distribution, in terms of brand equity last year, strong investment in terms of brand equity, this will deliver, of course, a significant support to growth this year, but also in terms of drops, in terms of capsule, in terms of collaboration. We have a very strong pipeline for this year again. And this will, of course, support the growth of Gucci this year, not to mention the fact that the rationalization that we did on wholesale, as you know, will be over in 2022. So the headwinds will be much lower than before, and we will probably also enjoy a start of back winds by the restart, I think, probably in the second part of the year of travel retail. So when you combine all that together, we are very, very confident about the performance of Gucci in 2022 in terms of activity. I will let Jean-Marc maybe to comment on the profitability and price increase.

As regards the evolution of the margin, let's say that you will have noticed that in H2 still, there was some operating leverage. And at the end of the day, when you look at the drop-through, it was around 50%, which does reflect in a way an intensification of investments we had in H2 with more clienteling initiatives, a lot of store events. And you see that it paid off in terms of revenue. There was more focus on local clientele across different touch points and, as explained also, the good -- strong performance of Gucci in some key markets like Europe or Japan, where we have been able to reengage more with local clients. That being said, I think that we have defined a trajectory for the brand. We have already commented on the fact that there will be a gradual improvement of the EBIT margin, not reaching the peak margin as soon as 2022, but we are confident that we will continue to improve the margin. There was no structural reason at the end of the day that we would not be able to exceed what has been the peak margin in the long run for the brand. I think we have all the ingredients in the brand to continue to improve the margin. And so it's a good link with your question about the pricing. I think that first of all, we don't want to provide any sort of visibility on the upcoming price increases because it's not the most important aspect, I think. What is more important is that generally, what we see and what we have observed in 2021 is that we have been able to increase quite significantly across the different categories, across the different regions. We've been able to increase the AUR, and it's thanks to the combination of the work done by the brand on the product mix. And I think that Aria was really a milestone in the direction of this elevation of the collections and the increase of the average selling price and selective price increases or sometimes price increases across the board. And the fact is that in 2020 or in 2021, Gucci increased its prices 2x and generally seizing the opportunity of the introduction of seasonal collections. So for 2022, I think the road map is very consistent with what we did in the past with some price increases and pure price increases and continuous work on the product mix and the elevation of the pricing. Structurally, I think that the big brands and all the brands typically in the portfolio of Kering got pricing power, thanks to the success of their collections. I think that if we take another example, which is Bottega Veneta or even Saint Laurent on the leather goods segment, all of them have been able to increase prices in 2021, and I don't see any reasons concerning the desirability of this brand that we would not be able to increase further the prices in 2022.

The next question comes from the line of Antoine Belge from BNP Paribas Exane.

It's Antoine Belge at BNP Exane Paribas. So I have two questions. First of all, following up on Gucci and I think in all your comments, you seem very encouraged by the fact that when you invest behind Gucci, there are results. So how confident are you with the sort of 10% organic growth forecast that consensus has? And back to the comments about gradually coming back to the margins, I think the idea was to gain -- regain around 100 basis points per annum. So that would mean around 2 to 3 years to get back to the margin of 2019. And then with regards to the second question on the very strong balance sheet and being debt free and not even taking into account the remaining stake in Puma. In terms of acquisition, I think 2021 was -- you didn't see an acquisition from Kering. So what's your most recent thinking especially at a time when maybe interest rates are going up? So maybe there is not a window closing, but the time of like free money might be behind us.

This is Jean-Francois speaking. Look, as you know and as usual, we will not comment on the consensus. But like François-Henri has just said, talking about the drivers of Gucci for growth, we are very confident that again, in 2022, Gucci will post very solid growth. The brands have never been as creative and desirable. They show the way in terms of fashion and luxury, and everything is in place to, again, this year, post another very good growth.

I will comment on the -- on your question on M&A. First of all, just to remind you that it's true that even if interest rates are going up, the real interest rates, if you take off inflation, will remain, in my opinion, very attractive going forward. So it's not a point. And in our rationale for M&A, it's not based on interest rates. It's more based on what we're capable to do with the acquisition in the future that makes the decision of buying or not buying. Having said that, as you know, we -- and we have proven that -- over a long period of time our capability to deliver strong organic growth. To give you a number, of the 5 -- the last 5 years, the average CAGR of Kering is probably, in retail, 18%. It's 19% for Gucci. So we have this capability of delivering significant growth above market trends consistently over a long period of time. Despite that, of course, our balance sheet is very strong, even stronger than before. We are always very active at looking at opportunity. Our portfolio is not yet perfect. We could reinforce our portfolio going forward. So we will very actively look at a potential acquisition if they make sense in terms of our portfolio strategy going forward, and we have the means to do that. So we're looking at that. But in M&A, there is 3 key values. It's patience, it's about being very opportunistic and, most importantly, being very lucid. So we will move -- you saw -- and it was a tactical but strategic acquisition also for our eyewear business with Lindberg last year. So we are always monitoring what's available and what makes sense for us, and we will continue to look at that. And for sure, acquisition could make sense in the near future for the group.

Okay. Maybe a follow-up on this, especially because you had mentioned regarding the disposal of the two watch brands that -- I mean, I think you mentioned the fact that the segment was not attractive. So does it mean that now watches shouldn't be an area of focus in term of -- if an M&A opportunity would arise in the industry?

Antoine, regarding the disposal of our watch brands, this is quite consistent with our strategy that gives priority to the houses that have a potential to become very sizable assets within the group. And also, we want to keep assets which we can provide decisive support to and that we can bring to a higher level. And so when we think that someone can take care better -- in a better way of those assets, then we dispose of them. And we -- like François-Henri just said, we are quite lucid with that and this -- and we will continue to do so. So again, we want to focus on the brands that we have, jewelry, ready-to-wear, leather goods, accessories. And it is true that we thought that we would not reach a sizable performance in the watch industry.

The next question comes from the line of Zuzanna Pusz from UBS.

So my first question would be on Gucci's growth by nationality. Would you be able to maybe provide a little bit of color of the trends you've seen in Q4 versus Q3? Because I think what is quite reassuring is that it looks like the growth -- improvement in growth was pretty broad based, especially in Europe. So any incremental comments on that would be very helpful. And secondly, maybe a bit of comment about the U.S. market. I think there is some sort of a concern in the market that in the U.S., we're going to see a slowdown and that all of the strength we've been seeing in the past 2 years has been just driven by the stock market performance, crypto, stimulus checks. So any comments from your side on perhaps a structural improvement in the market which could lead to a higher penetration of luxury goods in the long term would be very helpful. And lastly, kind of a small geeky technicality, but how are collabs like Gucci and Balenciaga booked? Is it booked in terms of revenue for both brands or is it booked just at the Gucci level, I guess, because we'll be seeing probably some more of them? So it would be very helpful for us to understand that.

And I will start with your question about the nationalities. Having in mind that it's very -- it's not an easy exercise to analyze by nationality considering there's a massive repatriation of the Chinese demand in China, considering also that part of the repatriation is not fully captured in our figures because Hainan, as you know, is our wholesale business, so it's obviously not easy. What we can say is that in Q4, all the market and all the nationalities have been very supportive in terms of revenues for Gucci. And by the way, the patterns of consumption we have observed for Gucci are more or less the same across the board, so -- meaning that U.S. and the American cluster remain very strong. As you can see, it's very consistent with the performance of the past quarters. There was an improved performance in Europe, which is really due to the increased engagement of the brand with the locals, plus some tourism, principally intra-Europe and with some input from American and Middle Eastern tourism but to a lesser extent. When it comes to Asia Pacific, in China, trends were very consistent also with the past quarters. So very strong performance in China, especially if we consider the 2-year stack performance. Why there was an acceleration in some other markets, and I would mention first Korea, where, obviously, the new collections are resonating and also the [ Bio-on ] lines, by the way, are resonating super well with the Korean clientele. And finally, in Japan, I think you know that we had a sort of easy comp if we look at the 2-year stack. But besides this, maybe the -- because after the Olympics and the relaxing of some sanitary measures and also because the Diana bag, which is a more classical one, is a perfect -- is resonating also very well with the Japanese customers, we had a very good performance with Japanese. So let's say that the Q4 performance was driven across the board, so across the different markets and across the different nationalities.

Regarding the U.S. market, what we can say is that so far, we have enjoyed sound and long-lasting economic background with high consumer confidence, also low unemployment, accumulated savings, wage increases and so on and so forth. Also, what we -- I want to emphasize is that in fact, luxury players have gained new customers recently and, in fact, have broadened their penetration of this market. And also, I will remind you that, in fact, this U.S. market is rather young as a luxury market. And so we have had the opportunity to develop our exclusive distribution strategies, in particular a rising online distribution but also implementing new retail formats like pop-ups, for instance and not -- again, not only in the usual high streets but also in other locations for -- and comes up to my mind the -- this Bottega Veneta pop-up in Williamsburg. So again, I think that we have -- we are here to stay with a very good consumption. Also, we are having a leeway in terms of age segments starting with the younger generation, who find in luxury a new way of a self-expression. So again, in terms of categories, aspirational products and so on and so forth. I will add also the change in the luxury map because today, we have a significant potential in second- or third-tier cities and the new pockets of wealth such as Atlanta or Nashville or even Austin. And Gucci is about to open a store in April in Austin. And again, this is something that will fuel a very solid and sound growth in the U.S. for a long time.

Okay. And after long discussions between us, we decided that this accounting question will fall in my scope. So this is the reason why I will answer. And first of all, the hacking project, and just maybe to take a step back, is part of a more strategic approach, which is about drops in animation in the Gucci store. The hacking project is something among some other products like the collaboration on the new -- collaboration with North Face. We had also the Gucci centennial principally in October. And the hacking project, that's very basic. You had sales of products in the Gucci stores. So that is accounted for in the Gucci sales. And when the products are sold in the Balenciaga store, it's in the Balenciaga revenues, considering that, of course, there is a question of size of network and that, of course, a majority of the sales are accounted for in Gucci.

Your next question comes from the line of Aurélie Husson from HSBC.

Yes. My first question will be on Gucci in the U.S. Could you share the proportion of the new customers you had in 2021? And how is it different from 2019? I also have a question on Balenciaga. Could you have a bit of color on the performance of the leather goods? You said that the performance of the brand was excellent. So is it also driven by leather goods? And how much do they represent now into the brand and especially on The Hour Glass and if the franchise has reached your expectations? And I'm afraid I have just a technicality question as well. Considering that H1 '21 was still a bit catch-up on depressed H1 '20 and so growth is not normative, shall we assume that we will have to compare the quarters of 2022 to the quarters of 2019, meaning we'll have the pleasure to be introduced to a 3-year stack?

Regarding the share of new customers in the U.S., we will not disclose this detailed information. What I can tell you is that again, because Gucci has been a pioneer in the sustainability and has got a great image in terms of societal and environmental responsibility, we've had a very good response from the new customers and the young ones. But again, we have had a very good, balanced growth, and this is carrying on right now.

Concerning Balenciaga, thank you for the question because Balenciaga has an amazing year last year. And with Saint Laurent, it's probably the fastest-growing brands in the world last year. And the growth of Balenciaga has been very, very sound and very well balanced between categories. It's not just about sneakers, as I too often heard on the market, it's really a very well-balanced and healthy growth between ready-to-wear, men and women shoes and also leather goods. And leather goods are growing very fast. And there is a rebalancing -- as Balenciaga is reaching a very high level of maturity in terms of sales, there is a rebalancing between the categories in favor of leather goods. So it's, as I said, very healthy going forward.

Concerning your last question, Aurélie, it's not an easy one. And of course, I will let the analysts and the market make the comparisons that they want to do. But basically, we could consider that on a full year basis, 2021 is more normative. 2021 is above 2019. It does show that we have recovered. What is true is that when we look specifically quarter-by-quarter, Q1 2022, the most relevant comparison will be probably with Q1 2019. You are totally right on that aspect because Q1 '20 was distorted by the emergence of the COVID and it's true that in '21, Europe was almost closed. So the comparison -- the most relevant comparison for Q1 will be probably with 2019. So we would be very pleased to provide the data at that time. But for the following quarters, probably we will reconsider our position because after that, the most relevant comparison will be with '21. And we cannot spend the following years to always compare 2-, 3-, 4-year stack, so at least for Q1, we will help you to understand better the business.

Your next question comes from the line of Carole Madjo from Barclays.

Yes. This is Carole Madjo from Barclays. Two quick questions for me, please. First of all, on Saint Laurent, can you come back on the performance of the brand in Q4 maybe as well by nationalities? Any key insight here or differentiating factors will be quite interesting. And then I guess going forward, how should we think about the growth of this Balenciaga, of course really outperforming over the past 2 years, and as well of the kind of margin profile? Any comments there will be really interesting. Second question on the secondhand market. You mentioned that you invested in the segments, of course, during the year. Can you share your findings on this segment so far? What kind of potential do you see on that? And of course, is there some room to include resale at the kind of brand level going forward, of course thinking of the concern around brand equity?

I will start with the performance of Saint Laurent in Q4, considering that -- the main drivers of the growth. In fact, there was a gradual -- or there was a sort of deceleration in terms of performance of wholesale, and wholesale should turn negative in 2022, on par with the plan of rationalizing the distribution as well for Saint Laurent. So the main driver of the growth for Saint Laurent in Q4 was retail. And in retail, I would mention -- I would make the same comment as I made for Gucci. I think that there was a contribution of all regions and all the categories [Audio Gap] top of the achievements we had already commented on the -- for the leather goods and the shoe categories. So I think that we have green light everywhere in Q4 for Saint Laurent with improved performance, by the way, especially in Asia; further progress also in America, where the brand was very strong already; in Europe with a very high degree of penetration with locals in Europe; and in Japan. So overall, the performance is very strong across the board for Saint Laurent in Q4 with continuous operating leverage, which explains the level of EBIT margin. Here again, we have a trajectory for -- we have defined a trajectory for Saint Laurent, and we expect to improve further the EBIT margin for next year. But we will continue to invest in the brand. I think that in terms of space expansion, we made the bulk of the job in the past few years. So in terms of space expansion, it should moderate. But we will continue to invest in the brand in different areas and typically in terms of communication and marketing. So here, again, the EBIT margin improvement should be very gradual and well under control.

Concerning your question about the future of Saint Laurent, the potential of the brand, that's a good question because it's probably a brand that is highly underestimated, in my opinion. As you saw, the level of performance last year has been striking at Saint Laurent, reaching maturity levels that are very interesting. As Jean-Marc mentioned, Q4 retail plus 61%, just to mention that. And it's a brand that is far from being mature in some area of the world. When you look at how strong the brand is in America, there's no reason why the brand cannot reach a much stronger level of performance. In China, so the brand is pushing a lot in China. And in the future, this will bring a very significant potential to the brand. On another aspect in terms of categories, the brand is very healthy with a very strong growth on ready-to-wear, which is the desirability engine of the brand. And as you know, a very strong offer in accessories, very attractive with a pricing power that is increasing going forward. Saint Laurent is a little bit like Gucci also. It's putting a strong emphasis on the high-end segments -- on the high-end customer segments, where the brand has a huge potential for growth going forward. So all the cylinders are firing up at Saint Laurent. And I'm absolutely convinced that the potential of the brand is very significant and it's a brand that will join what you call the mega brands of this industry in the near future. Regarding secondhand, I will say that circularity is at the core of our vision of modern luxury. And also, we think that secondhand provides us with a great opportunity to bring additional services to our clients and also to reactivate our inactive clients and also to transform one-timers into repeaters. And then, as you know, we took a stake in Vestiaire Collective, and we built a very good relationship with them. We do collaborate a lot. And we put in place with them some proof-of-concept tests with a few of our brands to build differentiated experiences with their clients that resonates with their own specificity and business models. And so again, we are convinced that we will soon integrate secondhand in our service offering.

Excuse me, Carole, have you finished with your question?

Yes.

The next question comes from the line of Luca Solca from Bernstein.

I was impressed by the performance that you produced in the fourth quarter in Europe. I presume it's coming primarily from domestic customers. Please correct me if I'm wrong. But I wonder what you expect about the return of tourists to Europe. I heard François-Henri speaking about the potential tailwind that the travel retail could provide in the latter end of the year. Some of your peers are more pessimistic about the return of tourists. I wonder where you stand on that and whether just a focus on domestic consumers could be on the menu going forward. I would also like to ask about the digital distribution. You focus on brand.com, which seems to be the best approach as far as maximizing consumer data and margins. But you're also referring about tightly controlled e-concessions. I wonder what you mean by that and what could be the criteria that you use in order to ascertain which e-concessions are good and which are less attractive.

Regarding Europe, we are enjoying some supportive factors. And also, in Q4, we were quite satisfied with the development regarding our local clienteles. We work hard to tap this potential. We increased specifically our level of service. We also enhanced our client experience specifically for the locals. We also build specific and closer relationship with previews, one-on-one appointments, dedicated spaces. Of course, we revived our distance selling approach. Our CRM activities were quite focused on locals and so on and so forth. And this -- we reach -- we reaped fruits from that with quite an increase of the share of locals, obviously, but also a very sound and loyal customer base. Regarding the impact of travel constraints on tourism, do not forget that in Europe, we have a significant portion of intra-European tourism, okay? Also, we've had some tourists from the Middle East and also, at the end of the year, a resumption of American tourism. So that was good. But the fact is that we are quite cautious, and we do not bank on the tourism in Europe to tap the level of 2019 before long. Regarding digital and e-concessions, the strategy, as you mentioned, is to tighten control over our direct distribution. And that's why we internalized our e-commerce activities first at Gucci and then in 2020 and finalizing in 2021 for the other brands. And now we want also to tap this fantastic potential with e-tailers but preferably in concessions in order for us to control the brand and enhance the brand equity and avoid some price situations that can be detrimental to the brands. So having a concession-type activity, we will monitor the buying, we will monitor the prices and we will also make sure that the brand equity is safeguarded. So we have had a very good penetration of 15% on average of e-commerce with quite a diverse situation region-wise, something between 23%, 25% in the U.S. and Europe but low penetration in Asia and Japan, where we have, therefore, a great potential. And everything there is made together with our own brand websites and e-concessions.

Can you give us a rough breakdown of the brand.com versus e-concession or e-tailer split and of the [indiscernible] broadly within?

Well, I would say it depends on houses and on the regions. In China, for instance, we have a very good approach through Tmall. But as you know, the ecosystem in China is quite peculiar with a very good, very large share of Tmall. And conversely, in Europe, it's our brand websites -- or in the U.S., our brand websites that take the most share of the line. So again, it's quite various -- variable.

The next question comes from the line of Graham Renwick from Berenberg.

I just have two, please, on Gucci. Just firstly on the collections. Aria was clearly very well received and performed very well for you in Q4. I just wonder what your early indicators and industry feedback is for the next Love Parade collection. And how does that compare to the early indicators you had on the Aria collection last year? Do you think Love Parade could match or even surpass the success that you saw recently with Aria? And then secondly on products. I was wondering if you can give us a bit of color on how the brand performed -- the Gucci brand performed by product category through '21. I just wonder if there's any category that may have underperformed in recent years due to pandemic or where we could be in line with a much stronger catch-up as we return to a more normal environment. So I think leather goods has clearly been a much stronger category in recent years, but are you expecting stronger outperformance in categories like ready to wear and footwear this year?

Thank you for your questions. So we'll start with your question on the Love Parade but more importantly on Aria. Again, I will -- let me stress again that Aria, of course, is the name of the collection. But for me, it's just more a moment in time in '21 when we decided it was the right time to broaden the offer and to put an emphasis on the high-end segment of the offer at Gucci. So this was embodied through this collection. And of course, it's a movement going forward. So Love Parade is in the same vein of -- in terms of strategy. And as I mentioned, Gucci is by far not just creative seasonal injections, it's also about code, it's also about craftsmanship, it's about timeless iconic products, as you saw with the launch of the Diana or the Bamboo '47. So -- and of course, the Love Parade that has been presented in L.A. is in that strategy going forward. So the AUR, for instance, is completely consistent with the one that Jean-Marc mentioned about Aria. So it's the continuation of that movement of broadening the offer, reaching new segment of clientele, thanks to that, having more pricing power going forward. So Love Parade is absolutely not an exception, and it's consistent with this strategy. Jean-Marc, I will let you answer the next question.

Yes. First of all, I will start by saying that if we compare to 2020, we're very pleased with the performance across categories with double-digit growth in all categories and a further acceleration in Q4. And Q4 was very strong in all categories. Now if we look at a 2-year stack, it's true that it was very strong. And it was -- or within the category, what is very interesting is that it was not only about units but also on the [ bill of lines ], typically -- where we had a very, very, very solid results typically. The Diana -- the introduction of Diana and the introduction of the Bamboo 1947 were very successful in some key markets. So I think that I will not mention any specific category which will be lagging or something like this. We are constantly monitoring the performance product category by product category. And I'm more interested also about what has been the evolution of the average price by category. And the strategy was clearly to elevate the average price and the perception around the collection. And I think that we have achieved here great results because across categories, the AUR has increased quite massively compared to '19 and compared to '20.

Your next question comes from the line of Thierry Cota from Societe Generale.

First, if you could come back on the balance sheet. You are now more or less at 0 debt. I know you did an over EUR 500 million share buyback last year. But what do you expect going forward if there is no large-scale M&A materializing? Are you happy to go below 0 net debt? Or could you envisage a considerably larger share buyback program than what you have been doing up to now? And secondly, more on the technicalities. Can we -- should we expect still a double-digit increase in other brands' store count growth this year as we've had in the past? Or do you expect a moderation, as you mentioned, for Saint Laurent? And just on BV, I was wondering whether this year, the EBIT margin, I suppose, reasonably should be expected above 20%. I wonder if you think it's going to be a moderate increase or level above 20% or something more of a higher stage.

Okay. So I will start with your question in terms of share buyback in terms of more broadly on our balance sheet. Of course, we are, as I said, committed to a steady return to shareholders. We are active and we never stop to be active on the M&A side. So we are looking at opportunities, and we will continue to do that. But at the same time, as I said, return to shareholders is an important part of our commitment. As you saw, the dividend proposed -- that we propose to the next AGM is at a very strong level compared to, of course, last year, but we are back to EUR 12 per share. And in terms of share buyback, we will continue to activate share buyback programs very tactically going forward. So all those elements will be at stake. So it should be quite healthy in terms of use of our resources between acquisition, between fueling our expansion through the brand, our organic growth and of course, committing to a steady return to our shareholders. Jean-Francois?

Yes. Regarding the store network, all our brands have a very important program to expand their store network in 2022 not only in terms of number of units but also in terms of locations, like I said earlier, in order for us to go into new locations, particularly in the U.S. but also in China. Also, some of our brands that are less mature than others are intensifying their store openings, particularly in Asia Pacific. And also, we will work on the size of our stores because generally speaking, our stores are quite small. And this is particularly the case of Bottega Veneta, where most of the stores, we cannot even display the full monty of our product categories. So there's a huge amount of work to be done in 2022. And we have started that, and we have a very sound plan to improve and increase our store network.

As regards the -- your question, Thierry, on the BV margin, let's start maybe with a broad perspective and what's the story around Bottega Veneta. I think the first comment I will make is that we have successfully repositioned BV from a niche brand to focus on high-end leather goods to a house that, while keeping its positioning, is able now to leverage on its code and to expand into a global brand, which is important to have in mind because it does give also an indication about the profile of the margin. In fact, we have invested massively in that brand, and we will continue to do so. However, the brand has a strong potential that would be gradually unleashed, and that needs to be nurtured, first of all, because sales are driven by full-price sales in retail, wholesale will continue to decrease. First, there will be a stable store count but with some relocations and expansion and then further expansion of the store network but not for next year. So all in all, with more, let's say, retail in the mix of the distribution, with the strong pricing power that the brand has, clearly we are confident that BV will continue or will pursue its steady growth -- top line growth trajectory and will confirm its profitability improvement that just resumed. So at the end of the day, to exceed the 20% mark in terms of EBIT margin for 2022 is exactly what we have in mind.

The last question comes from the line of Rogerio Fujimori from Stifel.

I have one on China and one on Gucci. On China, how do you read the Chinese market at the moment given the tough comparatives and the COVID restrictions? Do you have any general color on Chinese New Year in terms of traffic and domestic travel activity at market level that you could share with us? And what kind of growth range do you envision for the Chinese luxury market in '22? And just a quick follow-up on Gucci. How should we think about the marketing investment as a percentage of sales this year to keep the market intensity compared to '21?

All right. Regarding China, obviously we are enjoying very good and sound and healthy growth in China. We think that repatriation has been full steam last year and will continue to bear fruit because we don't expect international travels to resume before at least 1 year. We have deepened our penetration and reach in Mainland China. And for the brands, for the houses that were late in conquering this huge market like Brioni or Pomellato or Boucheron, we are opening stores there with high intensity. So we have also focused our communication efforts on China with specific events, showings, fashion shows and so on. We have localized our CRM activities, levering a very good knowledge of -- about the digital ecosystem. And so like I said earlier, we are also leveraging on the capacity of Tmall to showcase our brands and to -- with a very good impact, a very good synergy on our China.com -- on our brand.cn, sorry, site. So we are -- carry on our investments in China, and we also have a very good presence in Hainan, which has been phenomenal since 2020. We expect even more touristic flows to be developed towards Hainan but also to some other venues in Mainland China. So as a whole, we are very confident about the health of the Chinese consumer and the potential of this market. We have a new -- a lot of new consumers entering into luxury every year with a very good propensity to buy and to buy more. So again, we are very confident with China.

Maybe a few words on the A&P on Gucci and not only about Gucci because, first of all, what we saw in 2021 is that advertising and promotion expenditures returned or exceeded the 2019 levels when measuring this OpEx as a percentage of revenues. Typically, if we look now at Gucci, it's true that the A&P and marketing costs have increased in 2021 as a percentage of revenues, driven by the group and the brand decision to reinvest quite substantially in the brand and a lot of marketing initiatives launched by the brand, as we had the occasion to describe during this call. What is interesting is that for all the major brands -- there was -- the COVID crisis created a clear shift in media buying strategy towards digital media platforms compared to traditional offline media support. So that's really a shift that is a long-lasting trend. On top of that, there is a broader scope of initiatives with something which is sometimes closer to marketing activities, clienteling activities. And it does explain principally the increase of the A&P cost at Gucci level in 2021, and it does explain also why the expansion of the EBIT margin has been more moderate. And obviously, I think that we have reached a more or less a normative level in terms of percentage of sales that we invested in A&P for our brands. Maybe if we consider Balenciaga, which is becoming more and more mature, there will be further increase. But when it comes to Gucci, I think that in terms of percentage of sales for next year, we can accept -- or for 2022, we can expect something very similar to the percentage posted in 2021.

Dear participants, thank you so much for all your questions. I would like to hand over the conference to CEO. François, over to you, please, for closing remarks.

Thank you. As a word of conclusion, I just want to say that we are, of course, very pleased with the performance of last year, very confident in our ability to deliver another strong year this year, as you see. And it's important for me to emphasize on that. All our houses have contributed to our strong performance. Our strategy, based on a portfolio of complementary brand, is working full speed, and this will continue going forward, everyone contributing to the overall performance in a much balanced way going forward. All our brands have never been as creative and desirable as they are right now. They are also pioneers and have a very strong impact on the luxury sector. We have this ability to blend modality and tradition, and our focus on the high-end segment to enlarge our customer base will deliver significant growth going forward. So we are, as you understood, focused on the long-term vision, focused on the future, enjoying a very important potential across our brands. And we will continue to invest to nurture our growth starting this year and the following years. Thank you for your attention.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.