Kering SA (KER) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Kering 2022 First Quarter Revenue Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Jean-Marc Duplaix, Chief Financial Officer. Please go ahead.

Good evening to all of you, and welcome to Kering's First Quarter 2022 Revenue Call. Starting on Slide 4, you can see we opened the year on a strong note. Underlying demand was solid across regions, and this was further enhanced by healthy momentum across brands. Starting in March, however, our Asia Pacific performances were impacted by severe COVID restrictions, mostly in Mainland China. Against this backdrop, group revenue came close to EUR 5 billion, a year-on-year increase of 27.4% in reported terms and 21.4% comparable. FX provided a significant tailwind of more than 5 percentage points, while scope was broadly neutral, the consolidation of Lindberg more than offsetting the disposal of watches. On Slide 5, some insights on the revenue breakdown. We've made a few minor changes to our segment presentation. We removed the Luxury Houses' subtotal, which was no longer relevant. We also decided, so you can better assess the scale of Kering Eyewear, to report its total sales in the segment we retitled Kering Eyewear & Corporate, and we introduced an eliminations line to encompass all intra-group transactions. More substantially, I'd like to flag the remarkable growth of Saint Laurent and our other Houses. They have in common a relatively low penetration in Asia Pacific to date and also benefited somewhat from their worldwide footprint expansion in recent years. The revenue mix by region shows some pretty hefty changes from last year. Asia Pacific represents 37% of group revenue, a drop of 7 percentage points. North America and Western Europe each gained 3 points accounting for 26% and 24% of group revenue, respectively, while the rest of the world moved from 6% to 7%. I'll come back on regional trends, but let's first look at revenue by channel on Slide 6. Here, too, we are looking at it at the group level, including Kering Eyewear, which is a wholesale model. This explains the 75%, 25% mix between retail, on the one hand, and wholesale on the other. Our strategic focus is unchanged. We are tightening our control of our distribution to enhance customer experience and brand exclusivity. In Q1, retail grew a healthy 23% comparable or 32% on a 3-year stack. Our Houses' store network was nearly stable with only 7 net additions in the quarter. Online revenue increased 34%, representing 15% of retail sales, a penetration very similar to last year's. Wholesale and other revenue were up 19% comparable driven by a strong performance from Kering Eyewear as well as positive royalty trends. Now moving to the retail performance by region on Slide 7. In Q1, Western Europe was up 75% over a lean and demanding base, supported by dynamic sales to locals in France, Italy, and the U.K. notably, along with some inbound tourism gradually resuming mostly intra-European, Middle Easterners and Americans. It is worth highlighting that we are virtually back to the 2019 levels as successful local clienteling initiatives enabled our brands to make up for most of the shortfall. North America sustained its high growth rate, up 42% or 94% on a 3-year stack. All age groups contributed. The store network continued to experience strong traffic and significant increases in average tickets. Online trends were, once again, very supportive. Japan was up 20% year-on-year, not far from its 2019 level. Here, also without the benefit of tourists. On the back of gradually easing COVID restrictions, our brands successfully pursued their engagement with local through a host of activations. After a very robust start to the year and against a high comp base, Asia Pacific, and especially Mainland China, was impacted in the latter part of the quarter by new COVID restrictions and lockdowns, leading to store closures and more meaningfully to sharp drops in traffic and major disruption. Logistics also faced significant challenges. The situation was also difficult in Hong Kong and Macau. Conversely, the rest of Asia enjoyed good dynamics. All in all, Asia Pacific was unchanged year-on-year in the quarter, but was up more than 30% on a 3-year stack. Rest of the world was up 46% year-on-year and 62% when compared to Q1 '19. Trends were buoyant in both the Middle East and Latin America, which together account for the bulk of this region. I now provide comments on our Houses starting with Gucci on Slide 8. Q1 revenue rose 13% comparable with retail up 15%. Wholesale with rationalization is now nearly complete, declined 2%. In retail, Gucci performed extremely well in Western Europe, North America, Japan and rest of the world. In this market, where it was able to fully deploy its strategy, the brand leveraged the appeal of its carryovers and novelties both across categories, notably in leather goods and across customer segments. Revenue benefited from a nice contribution from volume, price and mix. In Asia Pacific, where Gucci enjoys significant positions, trends have obviously been more challenging in Mainland China. The situation is hopefully temporary. The strengthening of the Houses' organization in this market should also help it fully capture its significant potential. Gucci is constant -- consistently rolling out its brand elevation strategy in all markets, focusing on higher price points, iconic clients and a sophisticated blend of creativity and craftsmanship. Moving to Slide 9. Saint Laurent had an impressive quarter with comparable sales up 37% year-on-year, driven by spectacular growth in western markets, where its performance is lifted by the strong appetite of locals for its iconic products. Retail was up 49% or 62% on a 3-year basis. The House achieved high double-digit growth in North America and Western Europe. It also posted comfortable increases in Asia Pacific and Japan. Once again, growth was broad-based across product categories. Sales of ready-to-wear rose at the fastest pace in the period. In leather goods, Saint Laurent's key carryover lines were in high demand as were its seasonal animations. Wholesale increased 10% as the House steps up its rationalization of this channel. All told, Saint Laurent had another excellent quarter and its appeal with local customers positions it well in today's environment. On Slide 10, Bottega Veneta delivered another strong quarter. Its total revenue was up 16% comparable, on top of the high base, resulting in 59% growth from 2019. Retail was up 18% compared to the first quarter last year, generated through a stable store network. Matthieu Blazy's first fashion show was widely acclaimed by industry followers and by customers. It provided additional energy to the Houses' iconization strategy, putting into the spotlight new interpretations of some heritage models. This strategy is now being deployed consistently, and we are very happy with its results with existing and newer clients, including younger customers who are accounting for a growing share of the mix. The ongoing rationalization of Bottega Veneta's third-party distribution is proceeding according to plan. In the quarter, wholesale was up 10%. Bottega Veneta's outstanding momentum is further intensified by its creativity, the elevation of its collections and its impactful communications. The other Houses on Slide 11 had an excellent quarter. Total revenue increased 35%, both comparable and reported with consistent double-digit growth across brands. Retail posted a remarkable 45% increase also fueled by all our Houses. Balenciaga continued to build its presence worldwide. In late March, it opened its biggest flagship in Europe on London's New Bond Street and it planned other openings this year, notably in the U.S. Balenciaga successfully reinforces its leather goods offer and expands its shoes and ready-to-wear proposition while growing its visibility through high-impact communications and fashion shows. Alexander McQueen, too, experienced a very good start to the year with strong double-digit growth across all channels, all categories and all key regions. The continued focus on locals is paying off as is work done to enrich and diversify the offer. Brioni grew very nicely in the quarter, driven by retail in Europe and in the U.S. The brand announced new high-profile ambassadors as you see on this slide. In Jewelry, our Houses posted outstanding performances. Boucheron sales grew sharply in key Asian markets in addition to robust trends in Japan and Europe. Pomellato's permanent bestsellers led the growth and its high jewelry was extremely well received. And Qeelin sale were, again, very dynamic, the success of Chinese New Year mitigating recent headwinds. Switching to Kering Eyewear & Corporate on Slide 12. Revenue was EUR 308 million, of which EUR 300 million contributed by Eyewear, a 36% comparable increase year-on-year. This growth was fueled by all regions and types of distributors with the Gucci and Cartier brands leading the pace. Revenue also benefited from the consolidation of Lindberg, adding 21% to the total. As a reminder, we announced a few weeks ago the acquisition of the iconic brand, Maui Jim, with closing expected in the coming months. To conclude, on Slide 13, we are pleased with the group's strong performance in the first quarter that saw the emergence of new tensions on the global scene. Our solid results are a testimony to the power of our portfolio of brands and the huge attraction they exert with new and existing Luxury customers around the world. They also reflect the methodical deployment of our strategy, notably with regards to distribution. We are continuing to nurture our Houses to ensure that they remain as desirable and authoritative. We are also investing in the growth platforms that support our Houses' development in all markets. In this more uncertain environment, we take comfort in our long-standing track record of vigilance. We are monitoring the situation closely and will respond with agility to any development. Finally, we operate in an industry and in segments that have demonstrated their ability to bounce back effectively, and are confident that our healthy fundamentals put us in a strong position. In closing, I want to echo François-Henri's message of sympathy to all the people impacted directly or indirectly by the situation in Ukraine. I also want to reiterate our support to our clients and to the group's employees whose lives are being disrupted by lockdowns in China. Our priority has been to provide as much material assistance to our people as we are able to, and we will continue to do so. That sums up what I wanted to say today. And now Claire and I are ready to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Piral Dadhania from RBC Capital Markets.

I was just wondering if you could provide an update on any current trading commentary you're able to give, particularly for the North American market. The comparison base in the second quarter gets significantly more challenging as you're lapping stimulus checks from this time last year, so just wondering if there's any change in momentum in North America in particular. And secondly, just on pricing, could you perhaps just give an indication on how much pricing support was in the comparable growth rates for Gucci and maybe any of the other key brands where there was significant pricing taken?

Thank you, Piral, for your 2 questions. As regards to the current trading, I'm not sure it would be wise at this stage to provide an update, especially not that early in the quarter, considering the current disruptions we have still in Mainland China. For Western Europe and the U.S., trends are still supportive at the beginning of the quarter. And a gradually more demanding comp base. And particularly, in the U.S., you're right to mention that we had, starting in rather mid-April or end of April, more incentives in the U.S. economy. So I think that the next weeks will be very interesting to that regard. But let's say that we started the quarter on the same basis as regards Europe and America and especially if we compare to 2019 second quarter. Now regarding pricing, just starting with a reminder. You know that the strategic priority we have in the group is to work on the architecture of the brand's collection with, as a result, an increase in the average through the mix. Generally, we don't provide visibility on the price increases. But as you know, we have some regular price increases, generally, at the time of the introduction of new collections or seasons or pricing strategy is also defined taking into account geo pricing and FX move or local market in terms of competitive and consumer environment. And this is a strategy that we have implemented, as you know perfectly, very consistently in the past. And as a reminder, in 2020 or in 2021, we had 2 price increases in -- at Gucci, and this comment could apply also for the other brands. However, regarding pure price increases, it's fair to say that thanks to our Houses' desirability and creativity, there is room for some upward price adjustments either on specific SKUs or broader base -- or on a broader base. I think we have indeed passed some price increases for some of our brands. And for instance, Gucci with a magnitude of low to mid-single digit risk or let's say, no visible price elasticity. And it's good just to stress that this increase happened late in the quarter. So the impact on the quarter is quite limited. I would rather highlight the fact that thanks to the introduction of new pieces, there was really clearly an increase of the average selling price, thanks to the mix, and it has contributed quite substantially to the growth of Gucci during the quarter.

Your next question comes from the line of Louise Singlehurst from Goldman Sachs.

Two questions for me then, please. I mean firstly, can you just help us think about Gucci and China? I suppose really trying to square the Gucci performance versus the rest of the group, which has clearly done better. And I know there's always space to take account of and we don't get the pure like-for-like across the brand, but it would be really helpful to understand, from your perspective, how we can think about the underperformance of the Gucci brand versus the rest of the brand portfolio within Gucci Group for Q1. And then secondly, just in terms of sticking with China, I suppose, can you help us understand how you're planning for Q2? I know you're not going to give us the exit rate for China, but I suppose what we're trying to think about is how the trends were pre the COVID-related lockdowns. Are there 1 or 2 factors that you can provide us with to give us the confidence of Gucci brand momentum locally in China? I do understand that clearly, North America and Western Europe were incredibly strong.

Thank you, Louise, for your questions. And I would start, rather, with the last one about China, maybe to give a more -- let's say, more an overview about the situation in China. And if we take a step back, in fact, I would like to insist on the very good start to the year we had in China and especially during the Chinese New Year for all the brands, including Gucci, especially considering the very demanding comp base. So what happened in Feb after the Chinese New Year, there was a moderation, but -- of the demand, which is quite classical after -- it has been already observed after the Chinese New Year to see some moderation in terms of traffic. And in fact, trends started to reverse in March and for Gucci, but not only for Gucci, it was across the brands, of course, depending on the magnitude of the presence or the -- let's say, the exposure to the market. Of course, it has a different impact on the total performance. But let's say that it was very consistent across the board because basically, you had some store closed or less traffic, some restrictions in terms of traffic. Also that we had some disruption as regards to logistics. So also the online business has been impacted during that period. And just to jump on your first question, then I will be more specific on Gucci. It's true that it's very difficult to analyze the situation, looking only at the number of store closed because, in fact, in March, you had, in terms of percentage of the total network in China, quite a small number of store closed, but already, the traffic was down. Now in April, in fact, if you consider Shanghai, of course, as one of the main hub for Luxury purchases in China. And if you add the disruption we had in Shenzhen, Shenyang or Harbin, you have a significant chunk of the network, which is now completely closed since beginning of April. So of course, it's very difficult to predict what will happen after the lockdown. I think that what has been probably underestimated is the fact that it's a disruption, which is more severe than the one we observed during the summer. During the summer, you had some restrictions in terms of traffic, some moderation in terms of traffic. Here, we are coping with real lockdowns with some heavy consequences for our Chinese clients and our Chinese employees. So it's fundamentally different. But as mentioned by some of my peers, we know what is the resilience of the Chinese consumers, what are the underlying trends for the Luxury market in China. Now to be more Gucci specific, I think it's difficult to say because as I mentioned before, the fact is that the decrease of traffic has impacted all the brands. It's true that considering that we were reinforcing the structure in China for Gucci, we had a road map of a lot of activations and initiatives in China to clearly boost, again, brand perception, brand penetration and also to say the opportunity to have the introduction of the Aria collection and then the Love Parade collection to have a lot of actions and initiatives in the Chinese footprint. Unfortunately, because of the situation, it's very difficult to activate this. So in fact, the Gucci, we are waiting for the reopening of the stores to be able to activate more. And we will reinject some budget in terms of A&P later in the year to support the rebound of the brand in China. So that being said, I think that, of course, the share of the weight of China in the total business of Gucci is above the average of the other brands. So quite logically, there is an impact on the overall performance if we compare Gucci to the other brands of the group.

Can I ask just one quick follow-up? Is that greater online for the likes of Saint Laurent and Bottega in China? I presume Gucci would be ahead of them. Just trying to work out the difference between the underlying performance.

Louise, this is Claire. Can you just repeat your question? You would say penetration of online?

I was just trying to see if there's any difference in terms of the online with the stores closed. Was Gucci impacted by that? Or was it weight of category? Is there a higher apparel mix versus the others, which may have had a bigger impact from March and April with the store closures? Or is there a mix in terms of distribution with online? Because obviously, Gucci has materially underperformed BV, Saint Laurent and they've all got a decent exposure to Asia Pac and presumably Mainland China.

No. I mean in terms of penetration, I mean, Gucci is, of course, well penetrated in Mainland China, that's for sure. Now what you have to take into account is that even online has been pretty disrupted by the restriction. I mean it's difficult to have a logistic in Shanghai. All the warehouses in Shanghai are closed. We are completely closed. And there has not been, I would say, a shift to online that we had observed in the -- in some previous situations in terms of lockdown. So it's not either a question of a category or whatever, it's exactly what Jean-Marc mentioned. It's about the weight of Mainland China at Gucci compared to the other brands, plus the fact that, as you know, Gucci is rather on the stable store network, which is not the case for some of the other brands. So that's, I think, the only thing I can add.

Thank you very much for the color, I realize it's challenging.

Your next question comes from the line of Thomas Chauvet from Citi.

I have 2. A quick follow-up on Louise's question on China. Could you comment -- I understand you suggest that the restrictions are more severe than last summer. If we ignore Shanghai or Shenzhen, I was curious about the cities where you have limited restriction. And how has traffic conversion overall sell-through evolved since mid-March in those cities where you have a meaningful retail presence? Is -- are trends still positive? Is the mood still good on those stores? And secondly, a question on Eyewear. You've done 2 sizable acquisitions over the past year. Can you indicate what you're looking for when you buy eyewear brands, whether that's Lindberg or Maui Jim? The Founder, CEO of the brand was saying this was a once-a-lifetime opportunity for Kering. So are you sharing a view that maybe there aren't that many available quality targets out there? And if not, then can you talk about how you intend to capitalize on licensing opportunities with other Luxury brands? Is that part of your strategy beyond, obviously, the Richemont Group, where, obviously, you have an actual relationship?

Thank you, Thomas. Clearly, I think there is -- the store closures have -- make equally an impact on the performance on some cities and we -- you -- we were mentioning Shanghai and Shenzhen. Now currently, all the stores in Shanghai are closed. In Shenzhen, you have still some store closed, and you have a clear difference between the cities where we have the store -- the footprint is completely open and the cities where you have a partial or total restrictions. And you see a clear difference, let's say, since March, of course. However, I think the general mood in China because of the restrictions in some key cities was, let's say, mixed. And of course, there was an impact on the consumer sentiment globally. You had also less traffic between the cities because people are not allowed to travel so much. So part of the consumption in China is also driven by intra-Chinese tourism or visits from one city to another, so it had an impact. So there is a clear difference in the consumer trend. The trends in the key cities where you have no closures are far better compared to the other ones. But still, we saw that because of the general environment and overall lockdown measures, there was an impact also across the different cities. And of course, also the different clusters of cities between Tier 1, Tier 2 and Tier 3. Eyewear, in fact, we have been very consistent in terms of strategy. We had announced that we were creating this entity, Kering Eyewear, first to operate the licenses of our brands. We were open to some partnerships, and it was the rationale behind the deal with Richemont. And we have been also very clear about the fact that once we would have reached a certain size, we will start to contemplate some acquisitions, generally the -- to -- of course, to have a better penetration in terms of distribution, to have, let's say, better market share and also to have a broad offer for the distributors. And also to, let's say, face some -- or let's say, to improve the situation in some geographies. It's true that with the acquisition of Maui Jim, we are increasing [ on North of America or capitalize ] on some technologies, on some know-how. And typically, Lindberg is a good example. And it does fit perfectly with the strategy considering that both Maui Jim and of course, Lindberg are acquired in the high-end segment, including for Maui Jim. And you see that because of the technologies and the design of the frames, the average price is quite high for sunglasses. I think that we have, as you know now, a quite decent size on the market. And I think that clearly, Kering Eyewear is one of the leaders in the high-end segment of eyewear. Going forward, we may target some other acquisitions. But I think, first, we will need to work on the integration of both Lindberg and Maui Jim. To operate some of the license, there could be also an option in the long run. But here again, we have recently -- or quite recently added some new licenses from Richemont to Kering Eyewear, and the priority is to provide the best quality of service to our -- or to the Richemont brand. So that -- the strategy has not changed, and we will continue to -- sorry, I was thinking that I had a problem with sound. And we will continue to deploy exactly the same strategy for Kering Eyewear.

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

I have 2 questions, 1 on China. I can't promise it's the last one on the line, but at least the only one from me. So just maybe trying to approach China a little bit more simplistically, hopefully not too simplistically, but I mean if we look at Gucci's trend by region, they were basically really solid across every single region, apart from APAC, which seems to be basically the only reason why the trends are a bit weaker. And I guess, in China, mainly the Shanghai area impacted by the lockdown. And so would you be able to maybe give us an idea of what Gucci's exposure roughly to the area which is most impacted by the lockdown? And if I do a very simple calculation, which sometimes could be wrong, but it looks like 25% of Gucci stores in Mainland China are in Shanghai area, which is twice the amount for its peers, which are roughly 12 -- 13% of their stores in the area. Again, it's probably not perfect because stores don't necessarily mean revenue, but I guess I'm trying to understand that -- maybe that's just simply the only reason why trends were a bit weaker for Gucci in China. And second question, also on Gucci, sorry. Would you be able to comment on your margin expectations for Gucci in light of what's happening in China? And if I remember correctly, I think consensus is looking for roughly 100 basis point improvement at the EBIT level for the brand in 2022. So I know it's pretty early days, but would you say it's still realistic for the year?

Zuzanna, I'm going to take the first one, and then I think we will have covered the Chinese topic with this one. So the first answer is that -- just to give you an idea, we had a rough year. And this is not only Gucci with the comment, but Gucci is more exposed. You can assume that we had roughly 40% of our store network in cities that were impacted by some restriction in March. So that's not the number of store closed, just to be very clear. But if you apply the number of stores to the cities where you had disruption, full lockdowns and then, of course, fully -- I mean, heavy impact on traffic, this is up to 40-plus percent. So that might give you a proxy. So just to give you an indication of the percentage of store closure we had on the 2 last week of March in Mainland China, it's only 10%. Now early April, it's 30%, and that's the number of store closure. So I think with this one, we will not take any other question on China, and I'll hand over to Jean-Marc for the EBIT part.

Yes. There is a war in Europe, you have lockdowns in China, and I think, obviously, we are -- it's very early stage to comment on the EBIT trajectory because you have a lot of moving parts, to be honest. You know that you have an inflation that does impact -- that may impact at the point of demand, even if it's not yet the case. And that clearly does have an impact on the cost. And if again, we can offset this inflation, thanks to price increases but also thanks to selected and targeted financial discipline. FX should be also a significant tailwind in absolute terms. We don't know exactly what will be the final impact on the margins, we could get at that stage that it could be rather neutral. We keep -- we remain very vigilant on the cost but we want also to reinvest in our brands. I think we need to work on the good balance between profitability improvement and market share protection or gains. So at the end of the day, we have a clear trajectory of profitability for the group and for each of our brands. And to be honest, as the CFO, I'm managing a group, so when I'm allocating resources for CapEx, it's at group level that we are doing that. And in terms of trajectory, because at the end of the day, the EPS of the group is deriving from the EBIT of the group. So I'm more focused on delivering the trajectory for the group, and we will take some decisions in terms of investment, having this in mind. So it's very early to comment specifically on Gucci. We are confident anyway in our ability to achieve the improvement of margins that we have already commented in the past over the mid- to long term for all the brands, considering the full potential of our brand. And I would remind that thanks to the transformation of the group and what we already did, what we have done in terms of diversification of the portfolio of brands we have, the improvement -- the massive improvement of profitability of each brand, we have increased year after year the EBITs of the group in absolute terms, and we will continue to do so.

Your next question comes from the line of Edouard Aubin from Morgan Stanley.

So 2 questions from me. One on Saint Laurent because, obviously, you had blowout numbers, and I don't think you got questions so far. So if -- Jean-Marc, if you could just step back for a minute, and over the past 18 months, the brand performance has been accelerating. Again, stepping back, why is the brand resonating even better with consumers now? So I'd be curious to have your analysis on that. And then on Gucci, apologies, and it's not on China. But when you reported full year results mid-February, you had talked about a strong start to the year for Gucci. So clearly, you had a strong deceleration in the second part of Q1. And as you said, it looks like the Mainland China is the main culprit for that. But to -- on a -- from a product standpoint, to what extent the new collection, Love Parade, which was launched in February, might not have gotten as much traction as the previous Aria collection? So from a product standpoint, I'd be curious to have your view.

Let's say when you -- I'm not sure that you had attended the Capital Market Day dedicated to Saint Laurent a few years ago. And I think that there was a presentation of what had been done at Saint Laurent and what was the road map for Saint Laurent. I think it happened in 27 -- '17. And in fact, we are delivering the plan. The acceleration of Saint Laurent is something that I comment now for many years because since 2014, we have delivered consistently, except, of course, during the COVID-19 year, more than 20% of growth per annum. And it's something which has been built piece after piece with a clear strategy in terms of merchandising, in terms of distribution. You can see that the brand is more and more exclusive in terms of distribution. And what we have made in terms of reorganization, rationalization of the wholesale at Gucci is happening also at Saint Laurent with a lot of conversion. And also, we are reducing the wholesale footprint. I think that what was interesting is that Saint Laurent has been very strong in the leather goods segment. But now the brand is also accelerating in the other segments, in the other categories and especially ready-to-wear, where clearly, Saint Laurent is among the fashion authorities in the market with a very clear and very targeted proposal offer on the market. So I think it's just a question of good execution of the strategy, which is super clear. Considering also the strong heritage of the brand, I think we can capitalize on it. And what we see is also that the growth of Saint Laurent is not driven by -- only by the openings. We have mentioned it because I think it's important to remind that the brand has benefited from space expansion. But if we look at the like-for-like growth, it has been a very sound growth, and what is, is that now all the engines are working at full speed, so all the different categories and all the regions. I would like also to highlight the fact that Saint Laurent is historically very strong with the local clients and is not relying so much on tourism flows. And it has helped, clearly, in the past 2 years to have strong ties with local clientele in all the key markets. And I think also that -- and just to conclude on Saint Laurent is that Saint Laurent is developing now very nicely in China, even if -- just to bounce back on a few comments we made before on China, Saint Laurent suffered also from the lockdown measures in China. As regards the categories, Claire, do you want maybe to comment on that?

Yes. I mean there's nothing specific to cut out, to be honest. I mean it has been started in terms of introduction with very limited number of SKUs in March, most of the drop because we're still on this pace of monthly drops, will come April and following because it's basically a spring/summer collection, so it will cover up until August. We've seen good traction from Aria and from Love Parade, so I mean, really nothing to call out. Good also implementation of the strategy. We see very good traction in the higher price point. The mix is very positive across the board. So it's really a question of volumes and not overall. I mean volumes and traffic has been supportive in Western Europe, in North America, that's really in Mainland China, starting, as Jean-Marc mentioned, especially in March, where we've seen some traffic pressures, some volume pressure. Especially, I have to say, on the lower price point and also on the acquisition of new, maybe a bit younger clients. But there's nothing to call out specifically about the products and merchandising.

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

It's Antoine at BNP Paribas Exane. Two questions. One, first of all, following up on the impressive performance of Saint Laurent. It seems that there was no store opening in the quarter. So is it possible to have an idea of the space contribution, maybe price? And maybe, I mean, are you seeing a significant mix impact at Saint Laurent? So I mean are you expecting store opening this year? And secondly, on the performance of the other brands, which is quite a big number now. I mean reading your slide, it seems like all brands had a pretty similar trend with 2 buckets, 1 like Balenciaga and the McQueen compounding on very strong growth rates and 2, another group of brands which were less resilient are now recovering. So is it a fair assumption that now year-on-year growth rates are not too different? And if I'm mistaken, maybe you can highlight the -- like the outliers on the positive and negative side.

Well, on Saint Laurent, I won't be too specific because I think I already partly answered. It's true that in terms of space expansion, during the first quarter, you had 0 net opening. If we compare to Q1 2021, we had some openings because last year, it was another year of investment for Saint Laurent. So I think that -- I will say that it's a very good balance between space expansion, traffic and price. I mentioned before, we are not too vocal on the price side, but it's true that if we consider the work done by our brands in terms of price architecture and increase or improvement of the mix, it's obvious that we are going -- we are heading in the right direction. And what is -- what was very interesting is that we have introduced some ready-to-wear pieces at Saint Laurent at a fair price, but also -- we have also increased the average selling price on the handbag segment with, I think, a good mix across the different price clusters. And it's one of the strategic ambition also for Saint Laurent to continue to have the right offer, fulfilling the whole spectrum of the prices. So really, it's a good balance between the different, let's say, factors for supporting the growth. Your second question is about the performance of each brand within the segment of the brands. It's -- of course, it's -- we are talking about brands with different profiles. So theoretically, I should be very specific on each brand. But what I can say is that what was very impressive during the quarter is that the performance was very consistent across the board. That's the reason why I mentioned specifically Brioni because Brioni had a very good quarter, and we are very encouraged by the trends we see at Brioni despite its exposure to the Russian clientele as we know historically, but they did very well in some key regions. So obviously, with, of course, different factors supporting the growth, and of course, you know that our jewelry brands are expanding now more in Asia Pacific compared to the past and with good penetration now of Boucheron in some key markets, especially in Korea, where the brand is doing extremely well on top of the good performances the brand had before in China or in Taiwan, now we have also Qeelin, which had an excellent Chinese New Year. And on -- Pomellato is doing also extremely well, and we were very pleased with the introduction of the high jewelry collection. And when it comes to Balenciaga and McQueen, nothing specific to mention. I think we continue to execute the strategy that paid off in 2021. Nothing new, store openings, increase of traffic, work on the price architecture. What is also very positive is that across the different categories, we see very good trends in leather goods, in ready-to-wear and in shoes for all the brands -- or for all the fashion brands in that segment. So nothing specific to add. I think we are very pleased with the development of our brands.

To just maybe follow up on my question about the number of stores at Saint Laurent, 267. I mean what's the -- in your view, the potential? I mean we see that Dior is still adding double-digit services and so -- I don't know, I mean you -- as you mentioned, there were investment in store opening in the past. So do you think that you need maybe to digest those? Or yes, I don't know, any sort of medium-term sort of potential in terms of number of stores for that brand?

I think you should ask the question to Francesca, maybe during a Capital Market Day, Antoine, and she will have the right answer. That being said, you know that in the past few years, we had a road map of openings from, let's say, around 20 to 30 stores per annum, of course, with the mix of flagship stores, corners and so on. We had mentioned, I think, during the full year results call, that this year, the -- it would be a year of pause in a way in terms of investment. Of course, you will have some targeted openings, you will have also some closures. So we don't bet this year for Saint Laurent on the substantial expansion of the store footprint.

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

Also have 2 -- I have 2 questions, please. The first one is on Gucci. You said in the past that in a pre-COVID world, that Gucci had the power to grow twice as fast as the Luxury market. Did anything change in the Gucci brand power to jeopardize this target? I mean there is an underperformance versus peers also in Q1, and this can't be linked only to the exposure to China. So is there something that is broken in the Gucci recipe that has done miracles in 2017 to 2019? And my second question is more technical, is -- how do you -- how should we think about the wholesale restructuring impact as we progress in the year?

Sorry, Aurélie, could you repeat the second question? Just to -- wholesale restructuring as a...

Yes. What would be the impact as we go to Q2, Q3 and Q4 for the other brands? Because you're doing the same thing that you have been doing for Gucci, if I'm not mistaken.

I will start with the first one. I think your statement is quite brutal and unfair to say that something is broken at Gucci is not exactly what is happening. We have not reached the size like this, so I think it's a result of hard work that paid off. You know that in Luxury, what we have to consider is the long term. I think our peers have insisted in the past that Luxury is about long-term trends and investments for the future. What I see is that in the past few years, the growth of the Gucci brand has been very consistent with our main peers, whatever the other performance of our peers in the 2, 3 recent years. At the same time, we have started -- or we have opened a new chapter at Gucci that was announced during the Capital Market Day of 2018 by Marco Bizzarri with a refocus in terms of distribution that has an impact with some, let's say, inflection in terms of aesthetic and so on. So I think that it's true that the fact that you have the COVID-19 crisis at that time of this strategic evolution didn't help because it's true that while the brand was more exposed than the average of industry to tourism flows, it does not help. But I think that the fundamentals of the brand are very strong. Claire didn't mention it before, but we -- during the quarter, the performance in the different categories were very consistent especially in leather goods, where it was the strongest category during the quarter, thanks to the [ biller lines ] and all these very iconic lines that we have introduced gradually with a very good reception of the most recent ones, the Bamboo or the Diana. And of course, Jackie is doing still extremely well. So I think that we continue to work and the ambition [ to grow thrice the market ] is an ambition that has been set at a time which was completely different. So the point here is to continue to invest in the brand as we do. And we are confident that intrinsically, the brand has all the ingredients to perform very well in the coming years.

Yes. On the wholesale, I think we mentioned it already, but I'm happy to mention it again. I mean for Saint Laurent and Bottega, you -- we are in a phase of, I would say, rationalization/retailization, so you should expect wholesale at some point to moderate and to turn negative. We mentioned for the full year, something that would be, I would say, low to mid-teens, maybe, depending on the pace of these 2 direction, and this has not changed.

And sorry, I definitely did not want to be brutal, but we have been accustomed to very, very strong growth rates at Gucci, so we need to cope with the new one.

Your next question comes from the line of Chiara Battistini from JPMorgan.

I just wanted to come back on Gucci and the performance in Europe actually. If I look at the 3-year stack, so if I look at the performance in Q1 '22 versus Q1 '19, I actually noticed a very sharp deceleration of around 10 points on a 3-year basis. So I was wondering, is this related to Russia? Due the overall mood of the consumer? Or anything else that we can think about, thinking about this deceleration on an underlying basis? And a similar question actually on Japan, which is also -- which has also showed quite a significant deceleration there. So I was wondering if you could give a bit more color on that. And then -- so -- and also on -- a clarification on what, Claire, you said about the pressure on entry price points and acquisition on new customers, is this U.S. specific or is it more broad?

Chiara, I can take the first 2 ones on Europe and Japan, but I think the answer would be the same. To be honest, looking at sequential 3-year stack is not that meaningful, if I may say so. Because the impact you had in Q4 and the impact you had in Q1 are clearly not the same. So I think the sequential is -- I mean, we didn't do it in the comment, we didn't do it in the slide. And really, it does not make sense. I'm sorry to say it this way. So we see very good traction of Gucci in Europe, very good traction, of course, with locals. We see a bit of resumption that's not Gucci specific of also tourist compared, of course, to last year. Of course, compared to '19, we're still down with tourists and the performance is, I mean, even more impressive if you take this into account. So once again, sequential comparison on a 3-year stack is not that relevant.

So reminding that in Japan, Q4 '19 was very specific, as you may remind. And what we are looking principally, the performance on local. And the performance on local is excellent, obviously. So that's -- and of course, you have some variance in terms of tourism flows between Q4, Q1 because you have less tourism in Europe in Q1. So it's difficult to interpret, as mentioned by Claire, the 3-year stack sequence. Now looking at...

Chiara, maybe there is an echo on your side. I'm sorry, but you -- can you -- because of your mic, maybe?

I'll go mute.

Okay. Thank you.

Okay. That's better. Thank you.

Thank you very much. So your last question, it's very difficult to elaborate. I think that the fact that -- what is very difficult to analyze is that because there is this -- or let's say this work down on the architecture of the offer, it's very difficult at this stage to assess if this is a result of this elevation strategy or if it's because you have less new customers coming to the market, especially because of the disruption we faced during Q1, it's very distorted because it's true that you -- with less traffic. And generally, the young customers and the new customers are already supporting the traffic, especially in China, so it's very difficult to say. What we see in the U.S. typically is that -- as we mentioned during the speech, is that we had a very strong performance across the different segments of age. So different profile of customers, so including young customers or new customers are also buying entry price -- more entry price, more affordable products. What is true is that we have maybe an acceleration of the growth front -- rather, on the VIP or VVIP segments, so the high-end segment. But here again, it's difficult to know if it's the result of the strategy implemented by Gucci and all the clienteling initiatives or it's because of some new trends we could observe in the long run. So I think it's a little bit early to conclude on that point.

Yes. And maybe just to add, I mean, it's pretty obvious and when you have so much disruption and store closure and et cetera, it's much easier to work on your existing customer base than to attract new traffic because of the -- I mean, traffic is clearly impaired.

Your next question comes from the line of Rogerio Fujimori from Stifel.

Rogerio here from Stifel. I have 2 quick questions on Gucci. I think on -- I think earlier this year, you talked about bringing the best of the Gucci brand in terms of carryover offerings in '22. So could you just talk a little bit about how you feel about the progress made so far? The consumer traction you're observing for Gucci higher-end leather bags? And so should we expect the weight of leather bags to remain more or less stable this year versus last year? And then the second question is just more of understanding the Gucci minus 6% comparable in Asia Pacific outside Mainland China. Just talk a little bit about what you have seen Q1 performance in the other key markets, in Hong Kong, Korea, Singapore, Macau, et cetera, relative to Q4.

Thank you, Rogerio. As you can assume, I won't give the full details of the performance of Gucci cutting in slices, the -- our sales product by product, SKU by SKU. What we can say, just to make it simple, we had a good performance across the different categories or let's say that the performance is very coherent across the different category with the leather goods segment leading the way. In -- and if we focus a little bit on this segment, we had a very good reception of newness or let's say, seasonal versions of the iconic lines, but we had also a very good performance of the iconic lines. In the iconic lines, we had a performance which was good with -- in the different price clusters. And I don't see specifically some different patterns if we look at the different price clusters. So let's say that overall, the reception of the more, let's say, elevated offer is fine, and it's a way really to engage with some local clients. And I think it's -- it does explain also why we had a good performance in Europe or in the U.S. We have an offer clearly to engage with this local client and this more sophisticated clients with more purchasing power. So let's say that nothing here specific also to call out. And I think that when it comes to this leather goods offer and these new introductions, it's -- we are very pleased with the results. And just to once again insist on the fact that the balance between newness and the carryover has not changed dramatically. We continue to have exactly the same strategy, which is around 2/3, 1/3, even if, of course, it cannot be always exactly this proportion, but it's around that quarter after quarter. When it comes to Asia Pacific, obviously, I think that you had another market -- I would say that Greater China was really impacted. In Hong Kong and Macau, trends were not good at all as you can imagine. So globally, the performance in Greater China was down, while for the other markets, in all other markets which here was positive in terms of growth. But within the region, of course, China, especially, which is weighting more compared to the other brands. So globally, we had very good performances in all the key markets in Asia Pacific. We sometimes acquire demanding comp base. If we think about -- especially Korea, the comp base was very high because last year, we had a very, very strong performance in Q1. So overall, the trends are positive in other countries, and we are very pleased in the other countries of the region. But for sure, China was a drag for the region.

We will now take our final question from the line of Flavio Cereda from Jefferies.

Two questions, which hopefully you'd be able to answer. If you look at Kering as a whole and you look at the U.S., are you seeing some noticeable regional differences in performance within the U.S.? And I'm saying Kering as a whole. And then if I look at Gucci and I compare China predisruption, forget about the disruption for a second, I compare China with, say, Europe or the U.S. by category, is there a significant difference in performance by category of Gucci by region?

I will start with the first one. As you know, the -- as we already mentioned and explained during the last call, the U.S. market has changed dramatically in the past few years for many reasons that I won't comment again. And what has changed is the penetration of our brands in certain regions in the U.S., especially in the South or in the Middle West. What we saw, what we observed during this first quarter is that all the regions contributed to the growth with still more growth or more solid growth in the regions I mentioned before because also they are catching up in terms of penetration compared to the other regions. Our brands have not all exactly the same network in the U.S. Some of them have a more mature footprint in the U.S., so are more able to capture the growth across the country. On top of that, you know that the demand was also fueled partly by some new clients, more aspirational. So depending on your positioning and on your price point, of course, you benefit on that at full speed of the dynamism of the U.S. market. And we had already mentioned that Bottega Veneta, because it's a more high-end brand with a more, let's say, a traditional base of clients, was not growing at the same pace as -- extremely well in the U.S. and clearly above our initial expectations. So I would not flag specific differences between the different regions, all of them contributing to the growth for the quarter.

And yes, your last question, Flavio, was about Gucci performance by category, by region and by month, was it?

No. By month -- no. If you want to mention this stuff, it would be great.

Before and after? Sorry? But in China, specifically?

No, no, not in China. I was saying, if you could forget the current situation in China. So let's just look even the January, February by category, was China noticeably different in terms of trends compared to Europe or the U.S. by category? Not the overall -- the number, just in terms of trends.

No. I think once again, we were doing fine. I mean we had a very strong start to the year, as we mentioned, when we released the full year. The Chinese New Year was good across categories, meaning leather goods, meaning ready-to-wear, shoes. So no, I think the only really thing we -- once again, I'm sorry to repeat, but the only thing to call out is really the impact of the traffic. So we're not seeing any specific, I would say, strengths or weaknesses by category that could be -- have been different in Mainland China.

Thank you all. Thank you for your questions. Thank you all for being on our call and for all these questions, and thank you for your discipline and to stick to 2 questions, even if some of you try to add some follow-up as a third question. We appreciate your interest in Kering. And as always, with Claire and our team, we are available to answer any question you might still have, even if we try to be very comprehensive, and we are ready to continue this dialogue. We wish you a very nice evening.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.