Kering SA ($KER)

Welcome to the Kering 2026 First Quarter Revenue Conference Call and Audiocast. Please be advised that today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Armelle Poulou, Group Chief Financial Officer. Please go ahead, madam.

Thank you. Good evening to all of you, and welcome to Kering 2026 first quarter revenue call. We are speaking to you today from Gucci headquarter in France, just two days ahead of our Capital Markets Day. I will be reviewing our performance and will be joined by Philippine de Schonen Head of IR for the Q&A session. Starting on Slide 5. We introduced our new segment reporting, which was announced on March 16 and reflects group strategic priorities. We are now organized around 4 segments: Carrying fashion and leather goods, including Gucci, Saint Laurent, Bottega Veneta, Balenciaga, McQueen and Boni. carrying jewelry, bringing together Boucheron, Pomellato, DoDo and Qeelin. Kering Eyewear as a stand-alone segment and Corporate and Other, which includes group services and Ginori 1735 Gucci is obviously part of caring fashion and leather goods, but its performance will also be disclosed separately given its weight in the group's renew and our commitment to a high level of transparency in the context of the transformations currently underway. On Slide 6, group quarter came close to EUR 3.6 billion, down 6% as reported impacted by the strengthening of the euro and stable year-on-year on a comparable basis. The stabilization represents an important first milestone and a further sequential improvement. [indiscernible] delivered in a challenging and uncertain environment with low visibility and continued pressure on consumer confidence. Geopolitical tensions, notably in the Middle East, also weighted on traffic and performance during the quarter, a point I will come back to. Regional trends remained uneven. Western Europe continued to face headwinds, while North America delivered an excellent quarter with growth across all brands clearly standing out as the group's [indiscernible] region. Q1 also demonstrated continued progress in terms of ambition and balance sheet strengthening. We executed several major strategic moves across jewelry, beauty and real estate, clearly sharpening the group's focus and significantly enhancing our financial flexibility. In jewelry, we announced the creation of Kering Jewelry and finalize our initial 20% stake in Razel Franco, 1 of the largest independent luxury jewelry manufacturer in Europe. This marks a major step in building a sizable industrial platform to support long-term growth in jewelry with a clear pathway to full ownership. In Beauty, we completed our strategic partnership with L'Oreal with the disposal of Kering Beaute for EUR 4 billion in cash and continued cooperation through a joint venture to explore opportunities in longevity and wellness. In real estate, consistent with our commitments, we completed a new refinancing transaction for our Via Monte Napoleone asset in Milan, following similar partnerships in Paris and New York, enhancing balancing balance sheet flexibility while securing strategic locations for our houses. In parallel, we continue to optimize our distribution network and step us vigilance on both CapEx and OpEx, while never promising the actions required to preserve and strengthen the brand equity of our houses. Moving on to our quarterly revenue in more detail on Slide 7. As you can see, performance remains uneven across segment, although sequential trends are positive across the board. Gearing, fashion and leather goods declined by 3% on a comparable basis, representing a sequential improvement of 2 points versus Q4. Within the segment, Gucci was down 8%, also showing a sequential improvement as the house continues to make progress in its turnaround. Kering Jewelry delivered another very strong quarter, up 22% on a comparable basis, clearly standing out as a growth engine for the group. Performance was supported by strong brand momentum and solid execution across regions. Kering Eyewear grew by 7% on a comparable basis once again, confirming the strength, consistency and resilience of this business driven by the breadth of the portfolio and continued operational execution. Finally, Corporate and Other was up 10% on a comparable basis over the first quarter, notably driven by the very strong performance of Ginori 1735. Overall, our geographic mix remains well balanced with only modest shifts during the quarter. Asia Pacific and Rest of the World, we have done 1 point, while North America and Western Europe each gained 1 point. On Slide 5, let's review the top line by channel and region. Fitel accounting for 71% of revenue was down 2% on a comparable basis. Within retail, e-commerce grew 6% year-on-year and represented 12% of retail sales. Western Europe declined by 7% comparable in the quarter. Trends, remaining, particularly due to softer tourist flows, notably from Asia and Middle East. North America delivered a very strong quarter, up 9% comparable, clearly standing out as the best-performing region driven by a favorable mix [indiscernible] the high end with positive contribution from all brands, including Gucci. Japan declined by 3% comparable, a marked improvement versus previous quarters. Performance continues to be driven by the jewelry houses. [indiscernible] spending remained negative, reflecting a less attractive pricing gap, while demand from local clients turned positive. Asia Pacific declined 4% comparable, an improvement of 2 points compared with Q4 after 5 points between Q3 and Q4. Strong performances in South Korea, Hong Kong and, to a lesser extent, in were not sufficient to offset the decline in Mainland China. As in Q4, the Chinese cluster ended the period down in the mid-teens. Finally, rest of the world declined by 8% on a comparable basis, mainly reflecting a deterioration in performance in the Middle East since the beginning of the conflict in the region. Our retail network completing 1,672 stores showed a net decrease of 47 units compared with year-end. Over the period, Gucci store count declined by 11 net units. In line with the commitments set out at our 2025 full year results, we reaffirm our objective to achieve at least 100 net store closures by the end of December. Wholesale and other revenue accounting for 29% of the total, was up 6% comparable in the quarter with a continuing good momentum in Eyewear. Let's now move to Kering, Fashion and laser goods on Slide 9. Revenues stood at EUR 2.9 billion, down 9% reported and 3% comparable. The retail channel showed a similar trend, declining by 4% on a comparable basis. You will find the usual details by region in the appendix of the presentation. Before turning specifically to Gucci, let me first say a few words about the other brands within the segment. Saint Laurent, Bottega Veneta, Balenciaga and Brioni delivered year-on-year growth in the quarter, not to be led by North America. At Saint Laurent, results reflected a very strong performance in shoes and ready-to-wear combined with the successful rollout of new products, including the Mombasa and bag. Bottega Veneta showed solid trends in Asia Pacific, underpinned by a robust product pipeline and sustained brand desirability with good traction in the full-price network and an increase in average unit retail on handbags. Balenciaga delivered another quarter of growth, supported by sustained demand in leather goods building on the success of the city and Rodeo lines. [indiscernible] confirm a very positive momentum over the period with particularly strong growth in bespoke. As expected, McQueen continued its rationalization in line with the actions undertaken to reset the brand. Wholesale and Other was up 2% with royalties and other revenue increased by 6%. Focusing on Gucci now on Slide 10, the House recorded sales of EUR 1.3 billion in the third quarter, down 14% as reported and 8% on a comparable basis year-on-year. North America delivered a solid performance, up 7% year-on-year driven by strong newness and increasing AUR, providing early confirmation that the strategic reset is starting to gain traction. This momentum, however, was not sufficient to offset weaker trends in Asia Pacific and Western Europe during the quarter. Beyond the short term, the quarter was firmly execution-driven marked by decisive actions across product, distribution and client engagement. We have refocused product architecture strengthened category priorities and are progressively rolling out new collections in stores. The introduction of [indiscernible] now initiatives, even though it applies to a limited number of products is designed to improve responsiveness, sharpen newness and better align product drops with client demand. Looking ahead, upcoming milestones are meaningful. Our Capital Markets Day will provide better visibility on the Gucci road map, while the [indiscernible] show in New York next month will be another key moment to showcase the brand's renewed creative energy and product direction. While the recovery will be gradual, the fundamentals are being rebuilt in the right order with disciplined execution, clear leadership and a sharper focus on core clients and products, we are confident in Gucci's ability to progressively restore momentum and create long-term value. On Slide 11, Kering Jewelry delivered an outstanding performance, reaching a record level. Sales were up 14% as reported and 22% on a comparable basis. In the directly operated [indiscernible] network, sales grew by 28%, while wholesale revenue increased by 14%. Performance was broad-based across key regions. We stand out demand in Japan and Asia Pacific, notably in South Korea. Brand momentum at Boucheron was positive this quarter with the hours delivering the highest growth within the group, supported by robust performance across its main markets. [indiscernible] also posted solid growth, supported by strong traction in Japan and thanks to the Nodo, Iconica and together collections. DoDo extended several quarters of sustained growth while Kering recorded a strong performance driven by Asia. Beyond the quarter, Kering Jewelry continues to confirm its role as a structural growth engine for the group. The category benefits from strong underlying financials. And from the disciplined way, we are scaling it across houses and regions. With strong brand desirability, growing retail footprint and an increasingly integrated industrial backbone, we are confident in Jewelry's ability to increase its contribution to group revenue over time. On Slide 12, revenue of Kering Eyewear division. Kering Eyewear were delivered a landmark performance, marking the strongest quarter in its story. Sales amounted to EUR 489 million, up 3% as reported and 7% on a comparable basis, reflecting very strong demand across the portfolio. This performance once again highlights the strength, resilience and scalability of the Eyewear platform. Growth was supported by a combination of high-profile product launches, including the first Valentino eyewear collection developed by [indiscernible] strong sellout momentum and successful commercial execution around major industry trade events. Marketing and communication initiatives across brands also played an important role, reinforcing visibility and desirability while execution remained consistently strong across key markets. Beyond the quarter, Eyewear continues to demonstrate the relevance of our integrated model, combining brand desirability, industrial expertise and disciplined execution. With its diversified brand portfolio and recurring demand profile, Kering Eyewear remains a highly attractive and reliable growth engine for the group. On Slide 13, I will make a few comments about the Corporate and Other segment. In the first quarter, revenue from Corporate and Other amounted to EUR 30 million, down 7% as reported and up 10% on a comparable basis, with the variance mainly explained by scope effects. Within the segment, [indiscernible] 5 5 delivered a very good quarter with double-digit growth, reflecting continued progress in brand development, positioning and desirability. Before turning to our outlook, let me briefly address the situation in the Middle East. Since the end of February, the situation in the region has remained an area of heightened attention for the group. Our priority is and remains the safety of our teams. To date, none of our employees has been directly affected. The region represents around 5% of our retail revenue with approximately 1,100 employees and 79 stores. The crisis unit was immediately activated and continues to manage the situation in real time. While some areas experienced temporary disruption, the retail network is fully operational today. In the first quarter, retail revenue in the region declined by 11% after a positive start to the year. Beyond the local impact, the key consideration going for one is to potential effects on global tourism flows and the broader macroeconomic environment, which we continue to monitor closely. Overall, we are operating in a still uncertain geopolitical and macroeconomic context. In this environment, our focus is on agility, discipline and flawless execution. We are equipping each house with sharper, more sustainable brand strategies and the operational capabilities required to accelerate progress. As we move through 2026, our objective remains to return to growth and improve margins. We look forward to sharing more details on our strategy and road map at our Capital Markets Day on Thursday. And with that, we are now ready to take your questions. Operator?

[Operator Instructions] And your first question today comes from the line of Thomas Chauvet from Citi.

I have 3, if I can. The first one on the performance of the various cohorts for use in Q1 relative to Q4 for retail. So Americans look pretty strong, but perhaps the Chinese, Europeans, Japan, of course, Middle Easterners, and the Q2 comp is quite similar to Q1. So are you seeing a change in trend in March or April with the other cohorts outside, of course, the Middle East. Secondly, you've talked about product newness and deliveries of first collection. If we take the 3 brands where you've had a new creative direction and the first collection delivered to store in Q1 to [indiscernible], how would you rank them in terms of the strongest customer response you received on that inaugural collection? And finally, on your guidance that you will confirm, I know you'll talk at this about the longer term, perhaps road map. But if we think just you reconfirm it will be a year of constant FX sales growth and margin expansion for Boucheron the other key brands. How do you think about the phasing of that return to growth in light of the Q1 performance, the tougher comps in H2 and now the disruption to the Middle East and to global tourist flow, as you just alluded to. Thank you.

Thank you, Tomas. I just don't see my 3 questions, but happy to answer on the first one, what I can say on Gucci court by nationalities is that we saw improvement in most of the nationalities. If I start by the Americans, we saw a strong improvement of the American cohort in Q1 versus Q4, actually turning positive. In Europe, we also saw a very nice improvement with European cohort still negative, but improvement from Q4. I would say, we had also a nice improvement in, I would say, other regions. While Japan remain difficult for Japanese. And I would say for the Chinese, the situation was sort of flat to Q4, still negative. Regarding your question -- your second question on current trading. So we are only 2 weeks into the quarter. But what I can say is that if I compare the beginning of the quarter and maybe the month of March, performance remains broadly in line with what we saw in Q1 at book level. But of course, we need to see what's going to happen in the coming weeks. If I go to your third question regarding customer response on your new [indiscernible] director. We are very happy with the response to our new [indiscernible] Director. If I thought with Gucci, but maybe the main comment is to say that in the 3 brands where we have a new [indiscernible] director, we see a good response to new net introduction. So this is, for us, a very good sign. As you know, it's the beginning of the new product rolling out into stores, it will increase progressively along the year. So of course, we are looking for one to see the confirmation of that in the next quarters, but the signs are very encouraging. Okay. Now I think you asked me a question on the exit rate and the guidance. So as you know, we posted Q1 flat, and March also was flat. Now if we consider the impact of the Middle East crisis and if we look at what would have been the performance without the Middle East crisis. March actually would have posted a 3% growth. Now so this is encouraging. Now for the full year, as we've always said, we expect the improvement to be gradual and sequential along the year in a context that is extremely volatile.

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

Really looking forward to see you in Florence tomorrow. So three questions for me as well, mostly on Gucci. So I'm sure you're going to elaborate more in greater detail tomorrow, Armelle on that topic. But in terms of the product rollout at Gucci, I think [indiscernible], which was hitting the shelf in -- mostly in Ginori was relatively into the assortment, about 8%, I assume. What should we see in terms of April, I think you have the so-called [indiscernible] Gucci on how you call it hitting the shelf this month, to what extent is that going to be more material and then Primavera in the third quarter. So that would be my first question in terms of the share of the assortment, which will be new and designed by them now. . The second one is if you -- I guess you should have by now good visibility on your wholesale expectation for Q2. I think you were up 2% at Gucci [indiscernible], as you said, in Q1, do you expect more or less the same type of trajectory for Q2 for these 2 components? And then lastly, you just talked about the divergence between China and the U.S. for Gucci. You gave us the performance by cohort. I think, obviously, most brands are doing better in the U.S. than in China, but Gucci is quite an extreme example in terms of the divergence what's and I guess maybe you're going to talk about it more in tomorrow and Thursday in great detail, but how do you explain the fact that you're lagging in China? And what are you doing to get things to Gucci to trend better in that geography. Thank you.

Thank you, Eduard. So let me answer on your first question. I think you very correctly mentioned the progressive rollout of new collections to [indiscernible] and Primavera. Maybe the share of LatAm product was a bit higher than what you mentioned, higher in SKU, but even higher in sales, considering the good reaction to those new products. I would say as a whole, we are so happy to see, of course, the traction on the new introduction with [indiscernible] and that will be confirmed with the full collection of [indiscernible] but also, I would like to mention that we see a good resilience of our newness in the portfolio. which is something that is encouraging both in terms of sales, but with also a [indiscernible] that is higher with the introduction of new products that are resonating better. But also at the same time, and I think that is also some very encouraging elements. You remember, we had a very difficult performance very negative of the carryover for many quarters. And I would say that the first quarter where we see the carryover for [indiscernible] getting better, much better partially because we are now in the carry over some of the introduction like the [indiscernible] of last year. And also, we see -- we are very happy with the success of the introduction of the new Malmo. As you know, this product has been introduced with a better quality and slightly improved design. And those 3 products are supporting the performance of the Kering. Your first question -- your -- sorry, your second question was on wholesale, if I number. Wholesale for Q2, it's a bit difficult to give you a right number, but it could be in the same area that what we saw in Q1. Finally, you asked me a question on the situation and the performance of Gucci in China. And you are perfectly right that the performance of Gucci in China is quite different from we can see in some of our peers. And we've been always very clear on the fact that we have been suffering in China from the fact that the market was not very supportive, but also from the fact that we have our own issues. We are actively working on that, fixing the issues with a dedicated plan for China. We are building the cultural event in China with sharper store savings stronger ambassadors and region-specific activation. While, as you know, we are also working to improve and upgrade our store network in China. But as you said, you will have more information during the Capital Markets Day.

The next question comes from the line of Anne-Laure Bismuth from HSBC.

I have 2 questions, please. The first 1 is about the split of the performance between volume, price and mix in Q1 for the Fashion & other division. And the second question is about the performance of Gucci the U.S. that improved a lot in North America sequentially accelerated to 8% in Q1. Was the performance broad-based across product category or any product category would doing better than the others? And also, is it a question of initiatives taken in the U.S. [indiscernible] marketing campaign, resonating better with the U.S. consumer, leading to that strong performance in the U.S. Thank you very much.

Thank you, Anne-Laure. So let me answer to your first question. We say that in Q1, we didn't take any actions on the pure price increases , but at the same time, we had some improvement in the AUR, as I was saying, especially thanks to the good performance of the newness that was introduced with a slightly higher average AUM. And in terms of volume, as you know, traffic was still very soft. So basically, we suffered on volume and we gain on pricing through the mix. Regarding your second question on Gucci in the U.S.A., yes, we are very happy to see these positive trends. It has been improving for several quarters, progressively as the performance of Gucci in North America is supported by the performance of the back. You remember the very strong success of the video, for instance, but also new introductions are resonating very well in the U.S., but we have also positive trends in ready-to-wear and in shoes. And I would say in terms of clientele, as it is the case for our other Maison, there is in the U.S., probably a slightly better resilience of the high-end part of the clientele.

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

A couple of follow-up questions on Gucci, please. The first question, actually following up on Edwards and the different performance between China and North America. Besides China, the other regions also remain in double-digit negative territory. So I was wondering, really taking a broader picture on what is really differentiating your performance between North America and the rest of the world, if you could share more color. And I guess, indeed, we're going to hear more about that this week about thinking about the broader world rather than just China, what you're feeling that needs to change? Outside of North America? Or what are the learnings you're seeing from North America that you can apply everywhere else in the world. . Second question on the space closures in Q1, Gucci. I was wondering if you could help us with any impact from increased space closures on the Gucci performance in Q1 versus Q4, if there was an incremental negative impact there? And finally, on -- maybe a question on jewelry and the very strong performance there and accelerating performance. I'm wondering to what extent there's been price increases in the quarter that helped the acceleration and besides pricing, if you're seeing any accelerating demand underlying and what's driving that in your view?

Thank you, Chiara. So on your first question, as you know, I think we are working on improving the situation at Gucci many front. Probably it's the traction and the reaction to those action starting better in the U.S., but we are confident it's going to happen across region with some time. You know that there is more work to do in China. We've been always very clear about that. But I would say, in general, we are working on the product architecture on the product architecture on the product offer. You know that we have simplified the number of SKUs. We are making sure we have a sharper offer. We are making sure also we introduce newness. And of course, we are working on communication as well as we absolutely need to work on the traffic to our stores. And yes, it's going to be -- to take a bit more time in China. In China that probably we've been hurt a bit more in terms of image and it was the case in the U.S. but we are tackling the issue one after the other. In terms of store closures, yes, at Gucci in Q1, we have closed net 11 stores. So yes, it has a small impact on the sales. ut as you know, we pay a lot of attention to recoup majority of the sales by working on the clientele of the store that we are closing by making sure that we transfer some sales associates for the closed store to the next one. So it's quite difficult to actually have a clear number on the impact net-net. But yes, we are continuing on our plan and we are very confident that we are going to execute the store closure plan for Gucci and for the rest of the houses as we planned at the beginning of the year. Regarding your third question on jewelry, yes, you're right. We -- in the context of the gold increase, we passed some price increases, for example, at Boucheron in Q1. And we know that in Japan and Korea, it certainly helped partially the performance in Q1. And it's important to note now that was not the only reason for the very good performance of jewelry in Q1. I think the category is quite resilient. We have brands that have a very care positioning, a very good execution. And also maybe to note in Q1 for Boucheron, we introduced a new ring in the cat line, which is the excess, and it was very successful in every region.

We will now go to the next question. And the question comes from the line of Antoine Belge from BNP Paribas.

It's Antoine Belge, BNP Paribas. Three questions. The first one being more like a clarification on the welding. So I think you confirm you want to return to growth. So I think you had said earlier that all brands would be positive in terms of organic growth in 2026. So is it confirmed for all brands, notably Gucci after the rather soft start to the year? Or does it mean that you want to be back to positive sometime in 2026? My second question relates to the consensus for group operating profit, which was that you disclosed recently above EUR 1.9 billion. I think last year is a bit more than EUR 1.6 billion, EUR 1.9 billion is like almost 20% year-on-year increase. Can you confirm that the gross margin guidance is still for around flattish and also OpEx flat, so which would mean that any EBIT and EBIT margin improvement would come from the top line? And point number three is actually on OpEx on the assumption that OpEx flat is still the guidance. Can you maybe, one, comment a bit on the moving parts? Are there some savings that will be found and reinvested, especially and you heard about new platforms have been put in place? And also looking at the Middle East, are you taking some special action? Or are you waiting a bit to a bit more how the conflict will evolve before really changing OpEx and CapEx commitment?

Thank you, Antoine. So on your first question, I'm not going to comment specifically the consensus. But yes, this is the ambition to return to growth and to improve margin for all brands, excluding Alexander McQueen. Considering -- and maybe to add some color on your question on OpEx, we have done a lot of work on efficiency and considering the work that we are still doing actually, I confirm that I think we can at least maintain our margin stable even without growth. So this is probably a slight improvement on what we were expecting on OpEx. Now the reason for OpEx savings are always the same. We are making a lot of effort on efficiency, on the support function, on the efficiency in the company in the group between the brand and the houses, on the procurement, on the transport cost on many elements. But at the same time, we are continuing to invest behind our brands in client, in communication and in store refurbishment because it's true that we've been talking a lot about store closure, but I want also to mention that we are upgrading the network by doing some refurbishment and relocation when we can relocate in a better location, especially in the mall in Asia. Regarding maybe gross margin, gross margin, how difficult it is to forecast. So for the moment, no reason to change what I said. Now there are many moving pieces in the gross margin. But for the moment, we still keep the same forecast. And just one precision. The ambition is to go back to growth for each of our brands, excluding Mac business margin.

Okay. Maybe just one follow-up specifically on the impact of the store closure. So what is the impact on the EBIT margin if there is one already this year? Is that something that is hurting a bit the sales, but has a positive impact on margin or not really about that?

Yes. So as you imagine, we closed underproductive stores. So actually, the impact on the EBIT margin is slightly positive.

We will now take the next question. And the question -- the question comes from the line of Luca Solca from Bernstein.

I was wondering whether you could help us understand what is working best at Gucci when it comes to seeing the green shoots of the brand working, for example, in the U.S., is it the higher end? Is it the fashion? Is it the remaining streetwear components? Or is it anything else that you start to see as a potential formula that you could export elsewhere? If we dig a bit deeper in the marketing mix and whether it's a product, it's an animation or anything else that you could potentially use as a template in other regions as well to produce a similar positive impact. On a different note, I was curious to hear a bit more about Balenciaga. This seems to be a major departure with the new Creative Director at the helm of this brand. I wonder what reports you have on this change, which is making Balenciaga very different from what it was before and how this is being received in various regions. And then maybe if you could also give us a little bit more granularity on what you think Gucci is missing in China. You were talking about Gucci having problems of its own and some of the brand equity being damaged. I was wondering -- if you could be a little bit more specific. Was it a matter of insufficient communication, inappropriate product execution, wrong locations, wrong social media involvement. Where do you think is the action point that you could potentially use to make the brand move forward in that region?

Luca. So on your first question, I would say if we look at the U.S. and North America, we have positive trends in bag, but also in ready-to-wear and shoes. We see slightly better response in the high end, but that is, I think, across the board in the U.S. and not specific at least within our group, not specific to Gucci in particular. I would say that I think what is very important is the 360-degree approach that we are taking to both product, communication, client and distribution to make sure that we align all elements, not just counting on the new but making sure that from the product introduction up to the retail experience in store, up to the client, also our communication. I think we've managed this year to have a strong fashion moment during the fashion show, but also not to rely completely on that and have a lot of commercial activations in stores. And of course, the work done by Gucci is to align all those elements in also probably with a very strong effort to have a very clear product architecture across categories, ensure that there is a coherent brand expression across the categories, across the price points, but with the offer that is relevant at different price points for different type of clients in the different categories. So this is the work that you will see developing along the year with the new introduction. I think we're happy to see the traction on the new products, but we are also happy to see that the carryover are much more resilient that the introduction also of last year are continuing to be successful. I mentioned the [indiscernible]. I can also mention [indiscernible] is still ranking very well in our bag sales. And that's good news because it's good to introduce successful newness, but we also need to have a strong portfolio of products over time. Regarding Balenciaga, Yes. Sorry, maybe you asked for Vega, but maybe I will go to Gucci in China to complement the first point. In China, what we consider is that we have to work to make sure that Gucci has a cultural relevance in China and disciplined execution. We are working more and more to localize a bit the storytelling in a way that resonates with the Chinese tumor. Having a stronger focus on some new products aligned with local demand. We are working on distribution. We have overdistributed in China. We want to upgrade our network with less stores, fewer stores, but better store with a higher level of client engagements. And for that also, we continue to increase and better target our marketing investments. Maybe an example of that is Latin Media the only region where we did sort of interpretation of the movie with some Chinese actors. We had a very strong investment in China in terms of engagement on social media discussion. And probably, this was a very good initiative to act with the worldwide event of the 5-minute movie but also making sure it resonates with the Chinese in the country. So this is really to find the right balance and making sure that we have localized go-to-market strategy, and that's very important, I think, going forward. Of course, it is also the other implication. At Gucci, the level of collaboration between the headquarter and the region is even more important than in the past to make sure that we both push the global strategy of the brand, but also making sure that we take into account all the findings and all the important element that the region can bring to the headquarter. And maybe you -- and also an example of that, I think we are happy with [indiscernible]. Amlan is still doing very well in APAC. Olam is aligned with some smaller banks. We also introduce the [indiscernible] and the small video to make sure that we have products that are relevant for China, even if they are part of a worldwide line in terms of functionality, in terms of size. Coming back to your question on Balenciaga, that [indiscernible] brings a renewed direction to the brand. We think is going to help us to strengthen the outdentity without compromising its edge. You can see if you've been into the store, but this impact is really already -- you can see it especially on the ready-to-wear collection especially with fireside, a stronger women proposition. You know that Balenciaga was very much skewed towards men, especially in ready-to-wear. We think we have the opportunity to develop the brand also in the women ready to wear. And apart from the new category of Paolo. We are also happy to see the end developing very well by saga. You know the brand was quite unbalanced in terms of our category and the and [indiscernible] are developing very well and again, I think that we can consider that Rodeo and Citi are really starting to [indiscernible]. They are very successful in all the regions, which are very good news.

We will now go to the next question. And the next question comes from the line of Piral Dadhania from RBC.

My first question is on carrying jewelry, which has obviously been the best performing vertical within the portfolio. So congratulations on that. Could you maybe just elaborate a little bit on the performance by brand? Is there anything -- what are the specifics, if I could put it that way, in terms of where the momentum is coming from, is my first question. And the second part to that is, I think there's a technical factor related to the rest of world, which I think grew 176% whilst the royalties declined by something like 50-plus percent. So could you just help us understand what's happened there in terms of how the business is structured in the rest of world? And then secondly, just following on from Antoine's question. I was just wondering if you're able to help us understand or quantify the magnitude of the cost savings that you expect to deliver in 2026. The reason we ask is we're just trying to understand whether you'll be able to deliver the level of margin expansion that the market is anticipating despite negative organic revenue growth, particularly in H1.

Thank you, Piral. So let me come back to Kering Jewelry. That is true. We had a very good quarter. I can try to give you a bit more color brand by brand. You know we had actually a very good and positive performance in all 4 brands of the portfolio, which is good news. Certainly, the performance was stronger in APAC, where those brands are actually very strong. Much is strongly in Japan and Korea but also -- and that has been 1 of the great development of the fuel last year in China. We just opened actually a very nice set in Sintandi. Pomellato is also doing well, and Kering is doing well. I would say probably Europe was a bit more difficult. And for the U.S., you know that we are under developed at the moment in North America for jewelry. We have a plan to develop Boucheron. Actually, the results are according to the plan in North America, but we also know that it will take time because we have to develop the awareness of the brand in the U.S. Of course, you will have more information on jewelry during the Capital Market Day. So I'm sure you will have a lot of more color on this new business segment for us. Regarding -- I think, your second question was on the performance of the rest of the world. But this one was affected for sure by the event the conflict in the Middle East. So we had a performance that was low double-digit negative, but it was actually [indiscernible] one month in the 3, so you can make your own calculation and imagine what it was doing in March. Our stores were sold at the beginning are actually today operational. But in the Middle East, it's a tourist flows that are suffering more than the locals. In terms of cost saving, so you remember, I said that we were aiming in February, we were aiming to be OpEx flat this year, which means some efforts because to be OpEx flat while continuing to invest strongly behind the brand in terms of marketing, clienteling, product development and so forth. It means that we are doing some efficiency non-client-facing areas. We are working on that. Of course, we are trying to continue to go further. I'm not going to give you some numbers at this stage. But of course, it's a continuous effort. We are developing some programs to be more efficient. Here again, during the CMD, you will have more color on the organization of the group and the platform that we announced. And probably on the longer term, we expect that it will help us also be more efficient going forward in the coming years.

Our next question today comes from the line of Oliver Chen from TD Cowen.

Regarding Gucci, what are your thoughts or what's happening on conversion relative to traffic across the U.S. versus China? And any thoughts on what you're seeing on that conversion versus traffic angle? And second, on Gucci, and you continue to work on elevation. How should we think about the marketing and communication plans? And specifically, any thoughts on what's fixed versus variable and what your plans are regarding what you're seeing in terms of that factor? And then thirdly, on supply chain, what's ahead in terms of the intersection of speed and supply chain and as well as any bits on how you're innovating with AI in that context to drive a responsive supply chain, given all the change we've been all seeing in brands in different stages.

Thank you, Oliver. So on your first question on Gucci, traffic is still soft for Gucci in many regions with some differences. Of course, it's more positive in North America than it is in APAC, especially in China. What we experienced in Q1 is an improvement in conversion, which is encouraging because it means that all the efforts that we are putting in the product, but also in the training of our sales associates in the retail experience in store is starting to bear fruit. Of course, it does not completely offset the softness of the traffic, but it's a very good sign to see conversion going up and it's going up in all regions including China. In terms of marketing and communication, I'm not sure I got you completely well, your question. Maybe just to say that we continue to invest behind our brands. We're going to keep an AMP that will be high single digit of sales. And we are working on the ROI of our action being more scientific, I would say, in terms of how we allocate the resources in communication and marketing to make sure that we get the best reserves on our investment. For that, we are -- here, again, we have strengthened also the organization at group level, and we are also working at Gucci to make sure that we allocate between the different pockets of communication with the best ROI, both in terms of media but also in terms of regions, in terms of activations. So this is really a very disciplined way to marketing and communications. Lastly, your question on supply chain. [indiscernible] are very important. You know also that we have a strong objective to be more efficient in terms of inventory levels and supply chain and industrial production [indiscernible], it's not the only one, but it's also a role that is very important in the efficiency of our Maison. And of course, we rely a lot of new technology in that direction. But for that, you will have plenty of very interesting additional information at the CMD. So stay tuned.

Okay. One follow-up on Gucci. You spoke to this, but the handbag pricing matrix, are you comfortable with where it is now? And what are your thoughts on the price ranges in the families and making sure that you both elevate but communicate value to the customer, the balance of doing both.

Yes. On the [indiscernible], yes. I think if you look at the product architecture now is very clear. I mean we really make sure that we have an offer at a different layer in terms of price, but also in terms of functionality, in terms of client taste. And in terms of price, we have now some newness and strong proposal at the different level of the pyramid. That's very important. It's important in terms of pricing. You know also that we are very aware of the importance of -- for the customer of a good perception of the value for money. And at the same time, we also increased the quality of the product that's very important. So it's a combination of pricing, but also quality and creativity and innovation in the product at every of the proposal. And we really want to expand because we think that we can be -- could see relevance both at the entry level at the core, but also at the high end.

Our next question today comes from the line of Charles-Louis Scotti from Kepler Cheuvreux.

I have three. The first one within the fashion and goods division. Other brands grew 2% like-for-like in Q1 you provided some qualitative comments on each brand. Could you please specify which ones outperformed this subsegment, which ones underperformed? . My second question, I just want to make sure that I understood you correctly. Did you mention that the organic sales growth would have been around 3% in March at the group level, excluding the impact of the Middle East complete. And is that excluding only the impact within the Middle East region itself? Or does it also exclude the Middle Eastern customer spending abroad? And last question, you closed 47 stores in Q1, and your target is at least 100, so we roughly have already achieved after Q1, where closures front-end loaded? Or is the 100 target conservative in this environment, meaning you could go faster than initial plan on store closures?

Thank you. So regarding the other brands, we've seen the fashion and laser goods segments. Saint Laurent, Bottega Veneta and Balenciaga, all showed nice growth in Q1 and all sequentially improved versus Q4. If I can give you a bit more color, Bottega Veneta posted the strongest growth and Balenciaga, the strongest sequential improvement. Regarding your second question, yes, I confirm that March would have posted a plus 3% growth without the Middle East impact, and I'm talking about the Middle East itself, the region. And for the question, start question, yes, we have closed the 47 net stores. And we mentioned -- we announced that we would close at least -- I mean, we are on the plan, and we are delivering the plan with confidence.

We will now take our final question for today. And our final question comes from the line of Zuzanna Pusz from UBS.

I had just one actually is a follow-up regarding the outlook. [indiscernible] up on this, but it's quite important for us from a modeling perspective. Can I just clarify when you refer to objective to of sales growth in 2026 for everyone excluding McQueen, is it that sales growth for the full year or that the return -- the brand return to growth at some point during the year just because I don't think I got it. So it's just a very quick one. .

Thank you, Zuzanna. So yes, just to clarify, yes, our ambition is to be back to growth for all brands except McQueen the full year.

There are no further questions at this time. I will now hand the call back to Armelle Poulou for closing comments. .

Thank you very much for your interest and for your questions. I'd like to remind you that 8 Philippine and her team are available to go over any point that requires more clarification. We are all very happy to see you in 2 days. Have a good evening, and thank you again.

Thank you, ladies and gentlemen. Thank you for joining. The conference is now over. You may disconnect your telephones.