LVMH Moët Hennessy - Louis Vuitton, Société Européenne (MC) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening. We are gathered to review indirectly, since we are on Zoom, the results for the year 2021. I apologize for being on Zoom. Last year, we were already on Zoom, and I hope that next year this pandemic will have left us once and for all, and we will be able to work in our presence. It's a very pleasant meeting. The results are pretty good. As you can see, in 2021, we achieved pretty good growth because revenue has reached almost EUR 64 billion, and profit from recurring operations over EUR 17 billion. Now this performance is all the more remarkable, I believe, that the year 2021 was heavily affected by the global pandemic. Let me add that in terms of the results. We've achieved a remarkable level of operating free cash flow exceeding EUR 13 billion. Growth was strong, especially in Asia and in the United States, and it gradually recovered in Europe towards the end of 2021. And in fact, we saw an acceleration of growth in Q4 because in our [ Fan ] & Leather goods business, for example, we saw year -- annual organic growth on the year of 47%, and in Q4, a growth versus 2019 of 51%. So that really is a high point of the year 2021 is the expansion of our Fashion & Leather goods business, and we can also now return to that the successful integration of Tiffany's that also has achieved a very remarkable performance during the course of 2021. Online sales continued to grow the -- developed online sales with the pandemic were particularly sustained. And the only area that remains a bit more challenging is everything that concerns international travel that haven't resumed yet. I don't believe that they will fully resume before the year 2023 or possibly even '24. Sephora was quite affected during the course of the year 2021, rebounded well last year. Before looking at the businesses, a few words about our commitments and progress achieved both on CSR and environment that we track, particularly closely. We've conducted some major programs to respect each one's dignity and individuality. 71% of women in the group's total workforce, 65 of whom occupy managerial positions. We've transmitted the craftsmanship that is our heritage as well as that of traditional friends, craftmanship, thanks to the trades of excellence that is expanding across 6 countries with some 1,500 apprentices trained and qualified since its creation a few years back. We're also supporting the safety and well-being of our employees, 80% (sic) [ 86% ] of Maisons houses have allowed employees to work flexible hours, part-time working, remote working, and we commit to supporting individuals in difficulty, and we've assisted several hundred thousand during the course of the year. As regards our commitment for the environment, I would like to mention creative circularity. That is the recycling of our materials. 30% of our materials are now recycled. And in packaging, in particular, we have an objective of reaching 70% by 2030. Biodiversity very important. 640,000 hectares of fauna and flora habitat have been regenerated with an objective of 5 million by 2026. Traceability in our vineyards, in our supplies of raw materials, cotton, leather, gold. We have equipped our various value chains with a dedicated traceability system with a target of achieving 100% by 2030. Lastly, the climate. Well, we have this LIFE 360 carbon trajectory, and we are pursuing that very actively. Turning now to the various business groups. Firstly, Wines & Spirits with very sustained demand both for Champagne and Cognac, so strong, in fact, that as regards the shipments that we are allocating to several regions, very strong demand in the U.S. and Europe for champagne with the gradual reopening of restaurants, resumption of tourism in Japan that is still like travel retail impacted by COVID. Things were slightly more difficult, but nevertheless, global demand has exceeded our production capacity, very significant success, less constrained by production because it's manufactured outside Europe with the Shandong Garden spreads that was launched firstly in Europe and in the U.S., very successful there, and the rapid growth of our Rose wines, in particular, Château d’Esclans. I'd also mention the first integration of Armand de Brignac, 50% of which was acquired by the group in partnership with Jay-Z. Also worth noting the fact that Ruinart Rosé in 2004 Magnum was ranked by Champagne and Sparkling Wine World Championship, was designated the Best Champagne in the World. It's absolutely extraordinary. I invite you to taste it if you can find some. Of course, unfortunately, there won't be any drinks offered today after this reception. We hope to be able to organize that next year. That was wonderful. Likewise, for Cognac, supplies that are still below global demand, so sales that are strongly up, but as I say, limited by the supply constraints. We've opened a great many dedicated stores in a number of Asian countries, notably on Hainan Island, where we're selling directly. And we've also seen rapid progress for Glenmorangie, an absolutely remarkable whiskey, and Ardbeg that received the Master Distiller prize for the fifth consecutive year. Moving now to Fashion & Leather Goods. Well, Fashion & Leather goods, as you've seen the figures for that. And Jean-Jacques Guiony will be discussing those in a moment, remarkable success. Credit where credit is due, first and foremost. Louis Vuitton remarkable performance buoyed by regular ongoing innovation, and Louis Vuitton is far more than just a fashion company. In fact, it's not a fashion company. It's a culturally creative company that reaches out to a very important customer base, the most important, Gen Z, very much fans of Louis Vuitton through to a more mature customer base because Louis Vuitton is a company that is involved in many aspects of cultural life. I would mention the latest fashion show that we attended last week, The Tribute Fashion Show in memory of Virgil Abloh, who passed away sadly last November where that fashion show -- it was far more than a fashion show. It wasn't really a fashion show. Of course, there were garments, products, shoes, leathergoods, also music, images, an orchestra rather was the conducted that he himself had chosen -- had picked before passing away. He wasn't expecting that, but this lead conductor, Gustavo Dudamel, who now is the conductor of the Paris Opera, that is the spirit of Louis Vuitton. It's not just a fashion brand. It's a cultural brand with a global audience. That's why we can say that Louis Vuitton is very much apart from what we see in the various magazines that talk about fashion. We could return to that. But in any event, demand's very strong. And the result, thanks to very dynamic teams, thanks to designers as was Virgil, as is Nicolas Ghesquière really provide wonderful ideas, taking this brand from success to success whilst attracting the youngest as well as the most mature of our customer segments in the world. Of course, we also have Christian Dior that is a very different brand. It's a brand that is a couture brand that has very remarkable -- has been very remarkable in its success since the 2 designers, Maria Grazia Chiuri and Kim Jones are designing it and are really giving life to the spirit of Christian Dior. Kim Jones' latest show was a perfect illustration of M. Dior, of his style, his elegance, his refinement, and it was very interesting because during that fashion show, M. Dior was speaking. We managed to get him to speak during the fashion show, was both moving and instructive. I wanted details of everything that Dior does. It's remarkable. It's magnificent. The Maison Dior of Avenue Montaigne that was chosen in 1947 by M. Dior. He said, I'm going to establish my shop there, and nowhere else will be reopening as of early March this year. And I invite you all to come and visit it. I believe it will be an unforgettable event. Under the figures. Well, we won't go into the detail of the figures, but thanks to the management teams of that company, I would say that they are truly dynamic, and whilst being contained, they have delivered remarkable growth. Now there are other brands in the Fashion & Leather Goods. Fendi, big success from Day 1 but accentuated since the arrival of Kim not only producing great shows, the couture in Paris and others such as the bag here, which is the model first, and it's on a waiting list just about everywhere. Celine, our exceptional brand with a very talented designer, Hedi Slimane that has created ready-to-wear lines that are very successful, and during the pandemic, he produced films, stage films of his shows, all very original. They're all very successful. And today, Celine is one of the brands that has highest growth rate of all the world's fashion brands in my view. Loro Piana, [Foreign Language] I won't go into the detail, great brand, growing strong with J.W. Anderson. Great many products there, both fashion, leather goods, ready to wear. I will go to the detail. And maybe just to indicate that we have a new designer at Kenzo, great Japanese artistic director, Nigo, and the first show was held this past weekend. Moving to Perfumes & Cosmetics, also strong growth. Strong growth of perfume and skincare, firstly, at Christian Dior. Well, it's the perfume, extraordinary success in 2021. The Sauvage line become the world's leading fragrance, not just for men, but also beating all the existing women's perfumes. So first time it's happened in the perfume universe, extraordinary success of this Sauvage perfume. I invite you all to test it. Furthermore, the Miss Dior fragrance, the J'Adore perfume continued to grow strongly, and we've launched several new variations in the -- La Collection Privée that is very successful. We've got the Rouge Dior, the world's #1 lipstick and the very strong performance of skincare lines, be it Prestige, Capture, and L 'Or de Vie. I won't go into the detail of that either. Second French brand that's very successful, Guerlain, growth in its skincare of Orchidée Impériale and Abeille Royale. Many perfume successes with its Haute Parfumerie, L'Art & La Matière, and Aqua Allegoria, other smaller brands such as Givenchy, Benefit, Fresh, Maison Kurkdjian, Acqua di Parma, and a new house that is just drawing the group, small but magnificent now called Officine Universelle Buly headed up -- founded [Foreign Language] renowned for very creative products, inspired by the great French tradition and aesthetic design of boutiques that's quite original and extremely inspiring. Moving on to Watches & Jewelry. Well, the high point -- the event of the year was the integration of Tiffany that achieved a record year, a very considerable success of its products, of its iconic lines, the T line, the Knot line, the HardWear line plus the lines created by that famous French Jean Schlumberger that are absolutely remarkable, that have been relaunched and that are very successful. Tiffany achieved a record year. It's interesting to note that Tiffany delivered strong growth. Even though it's flagship, its leading store was closed for the year because of renovation work during the year. The renovation work was started before we acquired it. And that flagship is set to renew -- to reopen at the end of the year. So without the flagship that generated several hundred million dollars in revenue, be its revenue record, both in revenue and profit. Bvlgari, there may be questions on that. Bvlgari was very successful in its stores. It seeks to concentrate now as Tiffany is doing all its jewelry sales in its own stores. And numerous iconic lines continue to grow. The Serpenti, the Diva lines, et cetera. I would also mention the fact that the watch model, a very fine watch. Up to Simo achieved the agreed grand prize in Switzerland. That's a very prestigious accolade for a watch brand. Next, in the Watches & Jewelry, tag higher, continued to grow, cementing a major successful partnership with Porsche. It's the watch that I'm wearing here, the Carrera Porsche. Wonderful watch. It's so successful that it's difficult to find. And they teamed up with various balance suitors, including Ryan Gosling, the famous actor, and have also teamed up with the new Formula 1 champion, who won the last Grand Prix and is a world champion. Hublot continues to grow with several iconic watches, including that with Murakami, Fred jewelry company that I know well because a while back it was led by my sister, who unfortunately is no longer with us today, but that company is rebounding with a great team and is offering products that are extremely attractive and interesting. Well, needs no introduction or, again, very fine jewelry brand, the oldest plus of the plus, began working for the -- for Napoleon and the Empress. So it has absolutely remarkable legacy, history and that is growing very successful in a number of countries, including Japan. We believe that the prospects very good. And lastly, Zenith, this year launched several watches that met with considerable success. There was the Defy watch. And this year, they launched the Chronomaster Sport that received the chronograph watch prize that the grand of Geneva. Selective Retailing. Well, I'll skip over DFS. It's very difficult to get that company to operate when they're in travel retail in the airports where there are no travelers. Thanks to the teams were able to limit the difficulties. In 2020, it lost quite a bit of money. It has lost a lot less this year, a little, but I think that, as soon as travel picks up again, but I don't think that's going to happen soon, it's expected to pick up strongly. Sephora, there's a rebound thanks to the dynamism of the teams, the success of Sephora in the U.S. and the online sales. Sephora has rebounded strongly, reaching a very significant level of revenue, not far from its record and operating profit in several hundred million and is very good in terms of the current climate, where even during the year '21, a number of stores were closed. Let's mention in closing this presentation, the 2 major Parisian stores. We have Le Bon Marché, continued dynamic growth that is off to a good start since the recovery and the reopening because Le Bon Marché was closed several occasions during the past 2 years, and the launch of La Samaritaine, which are wonderful store, and that is getting off to a good start. That all goes well, even if we don't have the expected tourists for Parisian department stores, and that's the case for all department stores. For 2022, the outlook. I believe that if the economic climate continues as it did in January is expected to be promising. The numbers for January confirm growth at the same pace at the end of last year. It got off to a good start. Nevertheless, we need to remain vigilant. Everyone's talking about inflation. That's interesting because the leading experts and specialists, various Nobel Prize winners have very differing views. Some are saying, well, inflation, it's a return to inflation like in the '80s. It will be difficult to stop it. We'll have to constantly increase interest rates. It will penalize the economy, very bleak picture. There are others who are equally legitimate and reputed, some also Nobel Prize. Some are saying that it's transitory and wants the bottleneck created in the global economy by the exit from the pandemic. We know the problems in supply chains in ports where we can't unload the containers, et cetera. Once all that is resolved, inflation will calm down, and things will resume normally. I can't tell you that I favor one or other the explanations, but those are the 2 that we have heard and listened to what I believe is that the group in an inflation situation is a group that is used to weathering economic crisis. I'm not forecasting an economic crisis. I don't expect such an economic crisis. We've just gone through 2 very challenging years. I'd rather think that things will continue to improve, but we have an advantage on quite a few other companies and groups, which is that we have a degree of flexibility on our prices. So in the face of inflation, we have the ways and means to react. And I believe that demand will remain strong for our products. That's what we're seeing currently. Nevertheless, we are vigilant. We're continuing our management efforts. We're confident thanks to our values, our creativity, constant quest for quality, the spirit of enterprise, the entrepreneurial spirit that motivates everyone. It's one company. It's a family operation controlled by a family and employees, be they in management, such as those with us this evening, or right to the craftsmen in our 100 manufacturing sites in France, are part of the family. They are viewed as such. We look after them. We motivate them such that they want to remain with us, and they have long-term motivation. I think that also accounts for the group's success is that we're not to seek results for the quarter but results over several dozen years. That's why a brand such as Vuitton Dior are so successful because, in our discussions, we're not just -- we never look just at the results for the next quarter. We realize and we have in mind that these fabulous brands might continue to increase their desirability over a period of several decades. And lastly, in our values, commitment, environment, corporate responsibility, in particular. Over to Jean-Jacques Guiony, who unfortunately, can't join us here but will speak from his office because he's tested positive for COVID but even if he doesn't have many symptoms.

Thank you, Will. You know everything. So good evening, everyone. So I'll give you some details on the remarkable financial performance that Mr. Arnault outlined. On this slide, you have the numbers that are record numbers, EUR 64 billion in revenue, EUR 17 billion in profit from recurring operations, EUR 13 billion in operating free cash flow, operating margin 26%. Of course, this is a recovery from last year, which had suffered the pandemic, but even from the year before that. Let's start with revenue. This is a rather tedious picture, but it shows our sales, the organic and the structure impact, the 2 benchmarks that is 2020 and 2019. Let's start with 2020. Organic growth, 36%. And of course, there's plus a structure impact at plus 10% vis-a-vis 2020. And the currency effect, only 2%. It had -- it was stronger in the first half of the year and became positive in the second half. So all in all, not much of a currency effect in 2021. So the -- that gives us growth of 44% compared to 2020. Now it's more significant if you move back to 2019. We have 14% organic growth compared with 2019, and we'll return to that figure in the following slides. And this shows that the pandemic in the 2020 crisis is behind us. We offset, as it were, the decline of 2020. And over 2 year, we are registering growth. Let's look at organic growth compared with 2019 and 2020. 2021 compared to 2020. Let's not go back to Q1 because that's an easy comparison because there was a pandemic the year before. But in Q3 and 4, the situation had normalized, and yet, compared with that, we are 24% up, which is quite significant. We were not in the trough of the first half of the year with the shops closed down, and yet we were up 24%. What is significant is compared to 2019, up until the end of September, we were looking at 11% growth, 11% in H1 and in Q3. And in Q4, significant growth, 22%. And so we're looking at 14% compared with 2019. And still compared with 2019, I can't resist the pleasure of showing the figures of Fashion & Leather Goods quite dramatic, quite remarkable. We're looking -- for Fashion & Leather Goods, we're looking at 42% above 2019. And there was no slowdown at the end of the year because in Q4, we were at 51% above the same period in 2019. So let's look at the distribution of revenue per business line. Usually -- well, it's not as spectacular, but the first country now is United States with 26%, 2 points -- 2 percentage points. The first region is Asia, 35% of sales, up 5 points in 2 years. And these 5 points and 2 points were taken away from Europe, which was down 7 points -- 7 percentage points in a matter of 2 years. Well, you have several things. Tourism was down in Europe, and that was accounted for a significant part of the business, and that was transferred to Asia and North America. Now back to the geographical areas and looking at the development quarter-on-quarter starting with the United States then. In the U.S., you look at the last bar on the right, we were up 25%. So a remarkable performance in the U.S. We compare with 2019. It's a 2-year growth, and it's -- well, it's compared with 2019, 25%. And if you look at the quarters, quarter after quarter, we are looking at growth anywhere between 15% and 30%. Some volatility, but that calls for no special comments. So steady growth and significant in the United States. Japan had an overall growth of 5% over the year. You shouldn't consider Q4 as an isolated growth because, on the basis of 2019, you had an increase of VAT in Q1 2019. So that upset the apple cart. But if we look at the first half and the second half of the year, first half, we were at minus 3%, and H2, plus 13%. So growth accelerated considerably in the second half. Asia, of course, is the record because we're looking at an overall growth of 30%. You can see this on the last bar for Asia, 31% -- up 31%. Orders were good. So we were anywhere between 25% and 40% quarter-on-quarter. Now Europe is a more challenging story, and we mentioned this before. It's a more difficult situation. But here, we can draw the lessons. We're looking at an upward trend. We were at minus 18%, then minus 15%, then minus 6% in Q3, and then plus 1% in Q4. So we were not back to the precrisis levels, but we're still below, but there's a steady improvement. And we can be proud of this because it means that our people were able to make up for the absence of tourists. Instead of that, we have local customers, and that is much more of a challenge because looking for new customers is no easy task when all the usual clients have gone. Now looking at the various business lines then, the 14%, which is organic growth compared with 2019, if you look at all the business lines, we are doing better than 2019, except for Selective Retailing. And even then, we're looking at Travel Retail as Mr. Arnault said in DFS, is of course, in tourist areas in Asia that have completely ground to a halt, where Sephora back in 2021 went back over its level -- it's performance of 2019. So a fine performance by Sephora. But of course, challenges remain at DFS, and you know all about that. Regarding Wine & Spirits growth, almost double-digit growth driven by Champagne and Cognac in the United States and in China, by the way. Fashion & Leather goods, I mentioned earlier on, up 42% compared to 2019. You have the performance of all brands, including [Foreign Language] not only them, Loewe, Celine, Loro Piana, Fendi, of course. So all the brands have performed extremely well, and they are very much -- of course, they are driving the growth. Perfumes & Cosmetics are back to the level of 2019. And Watches & Jewelry, here, we're looking at organic growth. We're not looking at the consolidation of Tiffany at 7% compared to 2019. So that is, of course -- but Fashion & Leather Goods were the main driver. Now looking at the same thing, but this time quarter-by-quarter to see what happened. The performance was relatively stable, again, for Wines & Spirits. Fashion & Leather Goods, I mentioned, up 42% with 51% in Q4. Perfumes & Cosmetics back to their levels of 2019. In Watches & Jewelry, there is an acceleration of growth at the end of the year, largely attributable to Bvlgari because Tiffany is in the scope effect and the structure impact. So growth picked up mostly in Q4. That's the retail business of Bvlgari, fine performance. And Selective Retailing, of course, all in all, we're in the red at minus 18%, but Q4 is reaching, is getting back to the levels of 2019. For Sephora, we're way ahead of 2019, but DFS is still lagging behind, but we're getting close to the 2019 numbers. So this is very encouraging. And then for the second half of this presentation, looking at the profit, I showed here, you have the income statement, well, the first line is revenue, so that was already discussed. On gross margin, what I can tell you is 2021, we're looking at 68.5% of sales. I won't compare it with 2019, but we're looking at 2.3 percentage points above 2019, and that is a pretty stable indicator. When you have 0.4%, 0.5%, it's already pretty good. And here, we are looking at 2.3 percentage points. So a remarkable performance. Expenses are always a bit complicated, especially because there's the scope effect with Tiffany. But if you leave out the currency effect and the scope effect, it's quite simple. Expenses last year -- operating expenses were down 14% compared with 2019, which was in itself a good performance, looking at significant headwind. And here, they were up -- expenses were up 20%, which stands to reason because, of course, business grew. But over 2 years, expenses, not including currency and scope, are 5%. That's up 5%, but sales were up 14%, not including scope or currency, and gross margin was up 2%. You have the financial equation of LVMH in 2021 led to a current profit recurring operation of upwards of EUR 1 billion, up 50% compared to 2019 and, of course, 100% compared to the previous year. Well, this may not be significant, but it's still quite good to see that the profits are so up. Operating margin stands at 27%. So all the numbers are good, including gross margin. But of course, we have the significant -- the successful integration of Tiffany, and of course, that made a big difference. Looking at the income statement. Well, it's less exciting, but other operating income and expenses almost nil because some gains made up for losses on intangible assets. Income tax. Well, they were up, but the tax rate was slightly down to about 26%. So that's a positive effect. And so all in all, we have a net profit of EUR 12 billion, which is unprecedented in the group, up 68% compared to 2019. So in terms of net profit, this is a remarkable performance. So now let's look at profit from recurring operation at EUR 17 billion, going line by line again. Now you start with Wines & Spirits, up 8% compared to 2019. This is more than the growth in revenue. So we can certainly be pleased with that. Fashion & Leather Goods a remarkable performance because we're looking here at -- in 2021, we're above the performance of 2019, which in itself was pretty good. We're looking at plus 75% improvement, which speaks for itself. Perfumes & Cosmetics up -- back to the 2019 level. Watches & Jewelry, they are above the previous year's, but there's a scope effect but not only that because Bvlgari achieved outstanding numbers in 2021, way above 2019. So these brands did extremely well in 2021, and that was completed by TAG Heuer and Hublot. And indeed Zenith. We don't often mention that Zenith also had a remarkable performance in 2021. Regarding Selective Retailing, we were losing money last year. Now we're back to in the black, and that is -- well, DFS losses were offset by the profits generated by Sephora. So we're still in the red, but all in all, this is quite a performance considering the circumstances. Now if we look at how we move from organic growth from structural impact in currency. Well, organic growth is the main factor. The main structure impact was Tiffany because Tiffany brought in $800 million in profit last year. It was -- it used to be the level of EBIT and EBITDA. Now it's EBIT at 800 million. So this is remarkable. And in 20 years, this is the first time we have no currency effect. We didn't play around. This is really 0. And so we have a 50% increase in profit from recurring operations compared with 2019. And if we look at the profit from recurring operations year-on-year, if you look at half years, we had a 53% improvement in H2, 44% in H1 compared to the same period in 2019. And all in all, we're looking at 49% improvement. So if you look at the financial results, well, we have a significant net financial debt, and I will give details about that. And yet we generated a negative cost of net financial debt. That is an income that is the paradox of negative interest rates. The interest of lease liabilities, well, this is accretion expense, and that means because you have leases that shouldn't be there but are there on this line, and thank god, it's stable year-on-year. Hedges, currency hedges, the cost of derivatives slightly down, but this is a cyclical situation. It will be back in 2022 to the levels of 2020. And then the fair value adjustment available for sale financial assets, and that there's the variation of the value of our portfolio of financial investments, EUR 500 million. Last year, there was no changes in the value. It was more or less stable, but now it's up EUR 500 million. The value is up this year. But of course, this is unrealized capital gains. These -- we didn't actually sell off these assets. We don't turn our portfolio around. So just because there's an unrealized capital gain doesn't mean we will sell these -- dispose of these properties. And then cash, well, when you have negative interest rates, we might as well invest it elsewhere, and that investment was profitable. In 2021, we were able, therefore, to generate a EUR 500 million gain. Regarding the balance sheet, that's pretty stable. Well, we have the consolidation of Tiffany, which brought in some debt, about EUR 13 billion of intangible assets between the brand and the goodwill, but equity still accounts for about 40% of the whole line if you look at EUR 125 billion, 40% in total equity is not bad. Now looking at the cash flow. And that is significant. We're looking at EUR 13.5 billion cash flow over the year that the previous record was EUR 6.2 billion the year before. This is a significant improvement. Now the payment of taxes in 2021 for 2020, well, that brought in some cash. There was a operational investment in H1, which was not as high as in previous years. And of course, there were -- there was an increase in business in revenue, which generated more cash. We can't expect the same results next year, but that improvement nonetheless, it's quite remarkable. Looking at the debt position, and I'll look more closely at the last 2 items on the next slide, debt is high. It's still below EUR 10 billion, having acquired -- made an acquisition with EUR 16 billion that year. So we worked hard to bring that debt down. It's above what we had in 2017 after the acquisition of Dior Couture, but we are close enough to that level. And on the next slide, you have the explanation for the change in the debt position. So you have the debt level in 2020 -- at end 2020 and at end 2021 on the right-hand side. So what happened? We invested EUR 13 billion in -- well, mostly it was Tiffany. Available operating free cash flow was also EUR 13.5 billion. So it's as if we offset the acquisition of Tiffany with the cash flow. It's not quite true because there were dividends and other things. But I mean, on the picture, it looks pretty convincing. Then there were dividends paid. That's EUR 4 billion. That includes shareholders of LVMH but also minority interests, including Moët Hennessy plus taxes. So we're looking at EUR 4 billion cash out and then various others that we had buyback of shares and technical things. I won't get into the detail of that, but that's why the net financial debt was short of EUR 10 billion, which is not bad considering the amount of acquisitions in that year. And then to complete a few words about the dividends that we will propose to the AGM in April, EUR 10 per share, a dividend of EUR 10. This is a significant growth, but it is in line with the improvement in the net performance -- net profits. Thank you for your attention.

Ladies and gentlemen, we're now available to answer a few questions if you have any. If that's the case, I'd ask you to kindly introduce yourself. Antoine Belge for the first question.

I hope you can hear me. From BNP Paribas Exane, 3 questions, if I may. First of all, we saw the surprise since the start of COVID is this extraordinary growth with U.S. and European customers because, if we look at the figures in Europe, Europe was up in Q4 with no tourists, at least no Chinese visitors. That means that the French, Italian customers have grown strongly. What are the drivers behind this growth? To what extent would you say they are cyclical, and what are the more structural strengths? Second question, margins have grown strongly. Are there certain divisions where there's a need perhaps to reinvest a bit more? Or do you consider that there's sort of a new normal on the margins that we've seen? And thirdly, more specifically on Wines & Spirits with dip in the margin in the second half, are there factors to account for that?

Well, to answer your first question as regards growth with U.S. and European customers, difficult really to draw general conclusions from that. I think that these customers are becoming increasingly selective and really show a priority for a number of brands that offer more. And that's what I said earlier with Vuitton offering more than just fashion. Vuitton sells culture to the Americans and to Europeans. At Vuitton, we offer far more than just fashion. We have, for example, the Vuitton Foundation. I don't know if you've been able to visit the show that's currently there. That's remarkably successful. We just topped the 800,000 visitor -- I mean we -- you can't generalize. When we look at what's happening elsewhere, there are a number of brands, including the brands of the LVMH group are somewhat different in terms of their development with the clientele than others. And then there are markets. There are market, as Mr. Guiony said earlier, where we have greatly developed customer relations with local customers. And so there were previously visitors were extremely numerous in European countries and in the U.S. Those are numerous customers. I won't say were pervasive but were very present in certain stores. When they gradually disappeared, well, we were able to replace that thanks to a focus on proximity relations, the fact that the appeal of our brands is quite special Louis Vuitton, Christian Dior and the others. And so it's, I would say, something that is set to last and that we're developing. And in fact, we don't expect the Asian visitors to return anytime soon. I think that Asian visitors will remain quite far from Europe, the U.S., at least for this year. It was already absent last year. We saw that it didn't prevent our brands from operating well. So selectivity, and I would say, great devotion by our sales forces and our ambassadors with local customers. Now Mr. Guiony on the margins and the calculations, maybe you could say a word.

Yes. Well, what I can tell you is that we have to watch things pretty carefully. Members of the Executive Committee are attending this Zoom discussion, so we're looking very carefully at margin levels. No person in charge except -- expects us to go back to previous margin levels. So we're looking here at something that is sustainable, at least in the context we expect to find in the years to come. As to your last question, Antoine, about Wines & Spirits in H2, we have this almost year-on-year. This is a traditional cyclicality. We have a certain number of bottles available in H1. And when demand is greater than supply, well, there tends to be H1 higher than in H2 in terms of top line. But then, of course, in marketing expenses and advertising, it's the other way around. We spend less in H1 than in H2, except for the Chinese New Year. So there's a disconnect between sales that are high in H1 and lower in H2 and expenses higher in H1 than in H2. So there's the scissors effect that you note for the profit margin.

We have another question from Erwan Rambourg from HSBC from New York.

Congratulations on the performance. If I may, we have a couple of questions and a third one. The first point on China and the risk that China must remain closed off for the next couple of years. What are the implications in terms of expenses? We have -- well, when the Chinese travel, they tend to spend more than at home. But that may not necessarily be the case. The Chinese ecosystem being locked down as it were or locked up, do you see more expenses simply because prices are higher or there's more cross-selling? How -- what do you expect? The second question is about inflation. There are a number of brands within the group but indeed outside the group as well that have increased their prices significantly. Do you think it is realistic? Is there a risk of going too far in terms of pricing -- of increasing the prices too much? And then to respond to Jean-Jacques, well, of course, you have the cash flow more or less being equal to the price of Tiffany. But do you have priorities in terms of possible future consolidations in Wines & Spirits or Cosmetics or -- I mean, do you -- are there any gaps that need to be filled for the group?

Well, regarding our Chinese customers, as we told you in the presentation, maybe it was Jean-Jacques who mentioned this, but we found in 2021, that our Chinese customers, even though they couldn't travel outside the country, our Chinese customers then were buying more from us than in 2019. And so -- and I certainly agree with you. I mean, international travel is not about to resume anytime soon, but that trend is here to stay. And the question is, I mean, as we're doing in Europe, how can we remain close to our Chinese customers? How can we ensure that we provide them with the best products, the most creative products. And indeed, how can we reach out to them with the best quality we have to offer, showing all aspects of our brands. We have to show them that Christian Dior, an iconic remarkable creator is at the same time, a very modern creator, and Louis Vuitton is much more than fashion. Indeed, I keep saying this. Louis Vuitton is not a fashion company. And all this is very attractive to our Chinese customers. And of course, we have to keep a long-term view of these things and to see what it is that attracts our customers, what stimulates, what creates this desire for our brands? What causes our customers to aspire to acquire our products, whether they be European or Asian. And having said all that, I'm not concerned. Now regarding the prices, of course, you shouldn't go too far. There's only -- but nonetheless, if the demand is high, if a product is highly desirable, well, it comes at a high price. Let me just give you an example. Recently at Tiffany, we've just celebrated the 170th anniversary of the collaboration between Tiffany and Patek Philippe. And on that occasion, well, Patek Philippe produced a special edition of a watch called Patek Tiffany. It had the -- the watch was blue, and there were only 170 watches. And of course, there's this close bond between Patek Philippe and Tiffany that goes back 170 years because, ever since its inception, Tiffany had been selling Patek Philippe watches in United States. And so I'm not saying that we should sell all the watches at the same price as that of the unique Patek Philippe watch. But of course, for customers, when you want a high-quality watch, you pay a high price. It's something like $50,000. But we decided to sell 1 of these watches up for auction. And you -- for a charity, and you may have heard, I think it sold for $5 million, the one watch. So -- and that's how much it fetched at an auction. But of course, all that counts is the quality of the product. And then, of course, people will pay the price they deem worth it. As to acquisitions, we're in no hurry. I've been making acquisitions for the past 40 years. People tell us we're making many acquisitions. We only have one every so often. Here, this was a big one. And thanks to the good work of our CFO, we've more or less paid off the cost of that -- the price of that acquisition. Well, if you see another attractive acquisition, why not? But -- it's not a matter of looking for possible acquisitions, as you said. It's just a matter of finding them. .

Are there further questions? Yes, there's another question. I'll give the floor now to [ Angelina Askway ].

Mr. Arnault, about M&As, you have 75 brands in the group. Do you sometimes consider that you should dispose of certain brands? I mean, that was a few years back I believe that some -- you disposed of some brands. And then who is going to replace Virgil Abloh at Louis Vuitton? What are the skills required. I'd like to take the job.

Well, requiring -- regarding the brands, we look at every company in the group. We analyze the performance. We see how we can boost the performance. It may happen but very rarely indeed. I mean, Toni and Jean-Jacques Guiony and myself might decide that, that maybe we might not be able to get through with it. It may not be suited. It may have happened, what, maybe 2 or 3 times in the history of the group. But that is very incidental. But indeed, whenever we make an acquisition, whenever we have a brand, we nurture it. We must not be in a hurry because, of course, we can't expect performance to occur overnight. You have to take the time it takes for this or that company to prosper. But indeed, if after a long time, we don't believe in it anymore, well, then we will draw the lessons. But again, that is very exceptional. Over several dozens of years, it may have happened 2 or 3 times. Regarding Virgil, we were -- I mean, this was a shock. Nobody expected him to die so young. That was a real tragedy. Virgil was an extraordinary creator, more than a fashion designer. He was a very cultivated man. He -- and as I was saying in his last show that he had actually designed prior to his death, that was a cultural event. It was not just a fashion show. And so we're still mourning him. And I will tell you, once that is behind us, we will consider the next move.

The next question comes from Edouard Aubin from Morgan Stanley.

Mr. Arnault, on Tiffany you said that you would be telling us more about the merits of this acquisition. But could you tell us more about your main operations, what you communicated about Tiffany? And then on the Cosmetics division, that is the one division that underperformed in terms of revenue, the main leaders of that segment. How can you -- how do you account for this? And how do you see the performance in the long run? And then one question about the metaverse. What is your opinion? Do you -- I mean, is that a significant concern for the main brands of the group? Do you believe that in, say, 5 or 10 years' time, a substantial portion of the revenue or the profitability could come from the metaverse?

Well, Tiffany, you referred to the products. And of course, what makes such a company as Tiffany so successful is, of course, the product it makes and sells. What you can say is that this year was a major turnaround for the company because, of course, we knew the teams, the people working there, but we have people who have the experience. They know our group, and we were able to bring some people in from Day 1 when we came in and took over Tiffany. It should also be pointed out that Tiffany for -- at a time where the luxury industry grew remarkably all the way up to 2019, but during these years, which was a period of growth, Tiffany stagnated. Both profit and revenue were flat. So we came at an opportune time. People said you're paying a lot for that company. But I think it was not expensive at all. In fact, well, not only Mr. Guiony was able to pay it off very quickly, but it wasn't such an expensive acquisition considering and looking at the performance. And I'll say a few words about that, but considering the performance achieved just because, again, once again, from Day 1, when we came in at the head of Tiffany, we had a team of professionals, a very dynamic team that was -- that knew all about products, communication, retail. We hire a team of high professionals, and should Tiffany still be listed, it probably would be worth -- it would be worth twice its share price. Maybe it's an exaggeration, but I still think in terms of value, this was a great acquisition. Now of course, the products of Tiffany are iconic. You have the [ Line T ] but production was too low. Likewise, for hardware. The shops lacked momentum. Maybe some of them had to be redesigned, and business was sluggish. And so we were able to turn it around and bring it up to an extremely high performance, while all the time, the flagship store had been closed since the end of 2020. And yet we were able to pull this off. So we are very confident as to the future of Tiffany. We -- you may remember that -- well, with Beyonce´, there was a big event that stirred a lot of interest on the part of the -- well, the younger generation. There's this song which Beyonce´ herself, Moon River, which is the song of the movie of Breakfast at Tiffany, where you saw Audrey Hepburn eating her breakfast in front of the Tiffany window. I saw people weep when they heard that song. So I mean, this was great fun. But of course, our teams were highly motivated, and they did quite well. Now Perfumes & Cosmetics, you say we're lagging behind. It's true in terms of revenue. We may not be doing as well as other brands. But this is a deliberate move. You have many brands that flaunt their huge revenue. But -- they said, well, part of the revenue was achieved last year in duty-free stores. But that's all -- how can you generate revenue in shops that have no customers? And we know about this because we have a business called DFS. What happens is you have products that don't even go through the stores because there are no customers there. They go straight from that store or rather from the basements of that store to retailers in China, who sell them at a discount. And that has a terrible negative effect on the image of the brand. And we're not doing this. Look at Chanel, beautiful brand. They refused to do that. I won't name names and tell you who is doing this, but there are at least 2 of us refusing to do this. The reason is we want to preserve the brand image, the image of our brands. And I'm fine with other brands doing it, fine, let them do this. They want to generate revenue in this cheap way, but they want to -- they have to produce revenue figures. Maybe in the short run, it looks good, but it's pretty bad in the long run. As to the metaverse, well, at this stage, all we can say is that you do realize this is a virtual world. And right now, as far as we know, we are very much in a down-to-earth world. We want real products selling for real. Now fair enough. There is some -- it is rather thought-provoking to see a virtual universe generating profit. It would be good to see how this can generate profit, and there's nonfungible tokens generating profits. I'm sure this will probably have a positive effect if things are done properly. This might do useful services for certain brands. But to say, we're not interested in selling a pair of sneakers for -- virtual sneakers for EUR 10. We're not into that. But there may be more relevant applications. We have to see what these applications might be. What universes might actually be in a way profitable? I believe there's a few dozen metaverses out there. We're looking at this. But again, we're not in the business of selling virtual shoes, and we also have to be wary of bubbles. At the beginning of the internet in the year 2000, there were all sorts of things cropping up left, right and center, and that was a bubble that burst, all right? Facebook, there were quite a few of them trying to do it. Only one pulled through, and the others failed. So we have to sound a note of caution.

Maybe we have time for a final question. Yes, that will be Zuzanna Pusz.

Perfect. Great. Sorry, just wasn't aware of the technology. So I have 3 questions, please. First of all, maybe a follow-up on outlook. I think you did a statement in the press release saying that you're expecting the current momentum to continue. So would you be able to tell us maybe how we should read it? Does it mean that this would be growth on a 2-year stack or maybe sort of growth in kind of 20s range? . And then the second question on pricing. I understand that you're probably reluctant to comment exactly on pricing that you may push this year. But obviously, we're in a very high inflation environment. And it would be just interesting to know what we should be expecting in terms of pricing, especially for the Fashion & Leather Goods division, maybe at least some sort of a magnitude mid-single digit, high-single digit. I know you can't tell us exactly in case we were to rush to the stores. And then final question on the U.S. market. We've clearly seen really extraordinary growth in the U.S. in the last 18 months, and there's a debate whether this is structural or just cyclical. And I think you already discussed it, but I guess if we were to assume that there is some cyclicality, but most of the growth is structural, what then happens to your distribution in the U.S.? Are you already considering maybe expanding some of the stores in the U.S. or just maybe enlarging them because I guess at this rate of growth probably customer service maybe some would start to suffer?

Well, I'll answer in French, if you don't mind. But regarding the outlook, as we say in the press release, we're confident, okay, the results in January, considering at the same growth pace at the end of last year, demand is very much still present. Of course, we can't make any economic forecasts for the long term. But as I said in my brief presentation as regards inflation, who's right? Is it those who are very worried about inflation, fearing galloping inflation that will lead to a recession as happened several times 20, 30 years back, or is it those who believe that inflation is something that is just appearing for short-term cyclical reasons linked to the pandemic and will disappear over the next 12, 18 months? It's rather difficult to say. Pricing, well, we're trying to adjust, but you mustn't -- you see the margins were achieving pricing of our products offers very acceptable margins, but we also need to be responsible to our customers. Can't give the impression as some brands do that we can go to figures that don't correspond to the economic reality of the price of the product. We need to be reasonable. We try and be reasonable so that our customers do sense -- do feel that with us they are with brands that bring them something realistic, and there's not artificially even if they're very fine products, but not artificially inflated. As to the U.S. market, well, we already have a presence on the U.S. market, very extensive presence because Louis Vuitton is still leading brand on the U.S. market. Tiffany, and it's very far and away #1 on the U.S. market. Some of our brands need to increase their presence such as Bvlgari, for example, needs to up its presence. Dior has increased its presence significantly. We only do that in light of our ability and the ability of the group, and that's an advantage to be a group as we are, that has the finest brands in the world is to be able to obtain the best locations. I was in November, as it happens, when -- unfortunately, we learned at that time the passing of Virgil. I was in Miami with the teams. And we saw the strength of the group at work in a location, the design district there. We were arriving with all our brands to obtain excellent locations, but we mustn't be in a hurry. I mean, we're not too much. We got great locations likewise in New York, good results, good earnings, very good growth. The sales in our stores and boutiques are increasing naturally. We're seizing opportunities as and when they arise at the right time. Well, thank you all. Mr. Guiony, do you have anything to add?

No, I won't speak again after you. No.

You don't have a few figures to give us? You've given them all? Well, you're really amazing. Is there one last question? One last question, if you like. Okay. One final question. It's already 7:30. And we can't offer -- there's not a cocktail party for our guests this evening. That's really a shame. But if things next year improve, I promise you we'll taste the best champagne in the world, the Ruinart 2004.

Thomas Chauvet, the last question from you.

I really look forward to testing the Ruinart 2004 Rose´ next year. First question for you. Second, for Jean-Jacques. Fashion & Leather Goods, the growth of that division, plus 42% organic over 2 years. That's about 20% growth per annum over the past 2 years to be compared to 15% growth rate over the 3 previous years '17 through '19. What were the main drivers of that significant acceleration, 5 points market share gains versus your peers, price increases, higher or postponing spending, travel, et cetera? That may be temporary, Jean-Jacques, Vuitton operating margin right sharply, 600, 700 basis points versus 2019. 50% EBIT margin, what's the share of that margin progression that comes to -- from growth margin? Thanks to the outstanding growth of volumes and price increases and that comes an abnormally low cost base of rents, marketing spend because of the pandemic. Just wanted to check with Jean-Jacques or maybe with you, Mr. Arnault, that the operating margin for Vuitton this year is a good basis for the next 2 years?

Well, why do we have this growth that is really helping us to gain market share? I mean, that is your first question. There are several factors. The first is probably thanks to the work put in by the teams, the design teams, the production, manufacturing teams, distribution, customer relations. Our brands are more desirable than the market is also customers turn first and foremost and more strongly to our brands than to others. I could explain all that, but it would take rather a long time, the reasons why our products, our brands are extremely appealing. Once again, it's -- we sell a lot more than just fashion. I think that's the most important thing. Next, our customers, our teams are really producing products that are increasingly sophisticated, okay, that won't repeat what I said about the Tiffany watch that we sell at quite a high price but also more and more sophisticated products. Vuitton Delphine, in particular, is in charge of all the leather goods that are growing in sophistication, increasingly appealing, increasingly successful, which means that the average price because the product is more sophisticated, the average price increases. So revenue sales increase as it occurs at a given scale. That explains why growth is higher that those who sell more ordinary products that are a lot cheaper. But since we're speaking about pricing, we try and ensure that the customer buys a sophisticated leather product from Vuitton Dior that he really does get an outstanding product. We have, at Louis Vuitton, we have machines of torture for all the leather goods. If you like one day, maybe invite you to visit what remains of certain products of certain competitors when they emerge from the torture machines of Louis Vuitton. Sometimes there's not much left, whereas the Vuitton has to remain in the machine for a week before it can go to the stores. That's the difference. It's really this focus on quality. I think there was another question. It was for you, Jean-Jacques. You say you're going to have the last word, you see.

Yes, I will answer, and that will bring the session to an end. So I can confirm that the profit margins of Vuitton have not come down. In fact, well, they may have, in fact, increased, but I'm not going to confirm the numbers you have given because we do not go into the specifics of Vuitton. But assuming that the margins may have gone up, there are 2 factors to explain this. Number one, we had a significant increase in volumes, and so that meant there was less depreciation, especially on the finished products in 2021 than in previous years because of the volumes -- and because of the volumes, there is also a better absorption of operating expenses. However, there are no one-off items. There had been some in 2020, but not in 2021, such as renegotiated leases. Indeed, we've renegotiated the leases in 2020 when the shops were closed, but there was no significant effects in 2021, but it's true, we were able better to absorb our operating expenses. Well, ladies and gentlemen, thank you so very much for attending this presentation of the 2021 results. And I certainly hope that next time around, it will be an actual in-presence meeting. It will be my pleasure to let you try out our best Champagnes. Thank you.