Compagnie Financiere Richemont SA (CFRHF) Q4 2024 Earnings Call Transcript

Compagnie Financiere Richemont SA (OTCPK:CFRHF) Q4 2024 Results Conference Call May 17, 2024 3:30 AM ET

Company Participants

Sophie Cagnard – Corporate Communications and IR Director
Johann Rupert – Chairman
Jérôme Lambert – CEO
Burkhart Grund – CFO
Cyrille Vigneron – Cartier CEO
Nicolas Bos – Van Cleef & Arpels CEO

Conference Call Participants

Zuzanna Pusz – UBS
Thomas Chauvet – Citi
Louise Singlehurst – Goldman Sachs
Melania Grippo – BNP Paribas
Luca Solca – Bernstein
Patrik Schwendimann – ZKB
Piral Dadhania – RBC
Carole Madjo – Barclays
Rogerio Fujimori – Stifel

Sophie Cagnard

To be better with mic on. So sorry about that. So I’m just repeating, but surely, you must have noticed that I’m not on my own. And today, are Johann Rupert, Chairman; Jérôme Lambert, CEO; Burkhart Grund, CFO; Cyrille Vigneron, Cartier CEO; and Nicolas Bos, Van Cleef & Arpels, CEO. As usual, the company announcement and financial presentation can be downloaded from richemont.com, and the replay of the webcast will be available today from 3 PM Geneva time.

Before we begin, please take note forward-looking statements in our ad hoc announcement and on Slide 2 of our presentation.

So while you do, just a few personal words. As many of you know, I’ll be retiring later this year. And so this will be my last results presentation. Thank you. Thank you very much.

So over the last 22 years, it has been incredibly rewarding to build and lead the Investor Relations function and interact with world-class sell-side analysts and highly knowledgeable investors. I would like to express my gratitude for your insightful questions and constructive feedback. I would also like to thank the Chairman for his trust and support and all my many inspirational colleagues in the Richemont family. I’m pleased to say that you’ll be in good hands moving forward with Alessandra Girolami, who will lead the department from September.

So turning now to the slides. Jerome will take you through the year’s financial highlights and sales, and then Burkhart will review our business areas, group financials and key ESG initiatives. He will then hand back to Jerome for the conclusion, which will be followed by a Q&A session open to participants present in the room. I will now hand over to Jerome.

Jérôme Lambert

Thank you, Sophie. Good morning, ladies and gentlemen. Thank you for joining us today. Throughout the year, we faced continued macroeconomics and geopolitical uncertainty, unfavorable foreign exchange movement and demanding comparative.

Amid these challenges, we nevertheless achieved all-time high sales of €20.6 billion, an increase of 3%, at actual exchange rate and 8% at constant exchange rates. Operating profit came in at €4.8 billion. On a reported basis, operating profit was 5% lower than the previous year, resulting in an operating margin of 23.3%. The currency impact was quite significant. At constant exchange rates, operating profit increased by 13%, and the resulting margin rose as well, as we shall see on the next slide.

Excluding nonrecurring charges of €58 million net, reported operating profit was close to €4.9 billion. Profit from the year for continuing operation was solid at €3.8 billion, down 2% on the prior year. Cash flow from operating activities was strong reaching €4.7 billion, while the group net cash position continued to be robust with a €0.9 billion increase from the previous year to €7.4 billion. Richemont delivered a solid underlying performance in a challenging context. Sales growth was fueled by all regions led by Asia Pacific in value term and by Japan in percentage terms as well as double-digit growth at Jewellery Maisons and in the retail channel.

We saw a strong performance in Q1 and Q3 and a 2% increase at constant rate in the fourth quarter against a particularly challenging comparative of last year, 21% on the prior year period. The full year operating profit from continuing operation of €4.8 billion was affected by significant foreign exchange movement. At 68.1%, our gross margin included a 200 basis point of negative foreign exchange impact. At constant exchange rate, gross margin was up 130 basis points, while operating margin increased by 100 basis points. At the business area level, the Jewellery Maisons maintained the highest operating margin at 33.1% reported.

Over the year, Richemont strengthened its approach to ESG with several milestones reached. The group was proud to have obtained global gender EQUAL-SALARY certification from the EQUAL-SALARY foundation, recognizing Richemont’s commitment to ensuring a fair and equal wage policy between women and men for more than 38,000 colleagues across 39 markets. Let me now walk you through the group sales performance, first by region and then by distribution channel. Unless otherwise stated, all comments refer to year-on-year changes at constant exchange rate. It is worth noting that sales grew across all regions for the third year in a row, also in terms of individual market.

The U.S., benefiting from its strong growth rate over this past year, has now become the group’s largest contributor, just ahead of Mainland China. Europe delivered 3% growth on top of 27% in the prior year, mainly supported by local spending. This including increase in France, Switzerland, Italy and Spain, more than offsetting softness in some other locations. The fourth quarter was strong with a 7% sales increase on a demanding comparative. Turning now to Asia Pacific.

The region grew double digit for the year and contributed the most to the absolute increase in group sales. Growth reflected the strength of Hong Kong and Macau, which benefited from an increased travel from the mainland Chinese. Most other location in the region showed growth for the year. Fourth quarter sales were down by 12%, primarily reflecting the particularly strong comparative of plus 26% in the prior year period. The Americas.

We see a very solid performance with a 5% growth rate, benefiting from strong domestic demand sustained by a favorable macroeconomic environment and repatriation of spend. Fourth quarter sales growth accelerated to double digit. The America was the second largest region after Asia Pacific, with sales of €4.5 billion. Japan was still the strongest sales increase for the year at plus 20%. This was primarily driven by tourist spending, notably from Chinese clients.

Of note, other sales in Japan saw extremely strong growth, exceeding 40%. And this again — this against a challenging comparative. Middle East and Africa had a robust performance with sales up by double digits, benefiting from higher spending by both locals and tourist. This was particularly the case in the United Arab Emirates and Saudi Arabia. Fourth quarter sales also rose by double digit, continuing the strong growth momentum recording during the year. Let’s now turn to the sales by distribution channel, starting with retail, where directly operated store contributed 69% of group sales, up from 68% in the prior year.

The Retail channel outperformed all other channels with an 11% sales increase, building on the double-digit growth rate of the prior year.

This strong performance was driven by double-digit growth at both the Jewellery Maisons and Specialist Watchmakers as well as mid-single-digit growth at the Fashion & Accessories Maisons. All regions posted sales growth with double-digit increase in Asia Pacific, Japan, Middle East and Africa. Retail sales benefited from 81 net new stores opening, mainly in Asia Pacific and in the Americas. Fourth quarter retail sales increased by 2%, building upon a sharp 24% growth in the prior year period. The online channel, comprising the group’s online sales of the Group’s Maisons and Watchfinder contributed 6% of group sales in line with previous year.

Sales were 2% lower as growth in most regions was more than offset by softer online sales in Europe and Asia Pacific. The F&A Maisons posted limited growth, but included double-digit increase at Peter Millar and Alaïa. The reduction in online sales was partly due to the strong resurgence of brick-and-mortar shopping as clients return to physical stores. Sales in the fourth quarter were in line with the prior year period. Finally, wholesale sales.

Comprising 25% of group sales, wholesale sales increased by 4% on a solid performance from the Jewellery Maisons, partially offset by softer sales in the Other Business areas.

Fourth quarter sales rose by 2% on demanding comparative. The group proportion of direct-to-client sales, which includes sales of our directly operating stores and online, increased by 1 percentage point to 75% of wholesales. The increase was driven by the Specialist Watchmakers and Fashion & Accessories Maisons. Indeed, direct-to-client sales of the Specialist Watchmakers increased by 4 percentage points to 60%.

This follows a 5 percentage point increase in the prior year, reflecting the success of the group’s ongoing retailization strategy to complement to focus on key strategic multi-brand retail partners. Jewellery Maisons continued to have the highest rate of direct to client sales at 82%. Burkhart will now take you through the year highlights by business area. Over to you, Burkhart.

Burkhart Grund

Thank you, Jerome. Let me review our business areas with all numbers at actual rates and starting with the Jewellery Maisons. Building upon a very strong growth in the prior year, sales increased by 6%, exceeding a new sales threshold of €14 billion. At constant exchange rates, the 12% growth marks the third year in a row of double-digit growth for Jewellery Maisons. Sales were up across all 3 Jewellery Maisons, most distribution channels across and all regions, most notably in Asia Pacific, Japan and Middle East and Africa.

In the fourth quarter, sales were slightly down, although up by 3% at constant exchange rates on a challenging comparable basis of plus 26% in prior year. The Jewellery Maisons operating margin was strong at 33.1%. All Maisons continued to make long-term investments, particularly in jewelry production capacity and distribution. Communication expenses also rose notably for high jewelry events. The operating result rose by 1% compared to the prior year, highly affected by adverse foreign exchange movements.

At constant exchange rates, the operating result was up 14%, with an 80 basis point increase in the operating margin. Let us look at the key developments during the year. The Jewellery Maisons developed — generated good growth with iconic collections. In Jewellery, this included Trinity, which is celebrating its 100th anniversary this year, and Clash at Cartier, Alhambra and Fauna at Van Cleef & Arpels, and Opera Tulle and Macri at Buccellati. Good watch performances include Panthere and Baignoire at Cartier and Perlee at Van Cleef & Arpels.

High jewelry enjoyed a strong performance supported by international and local events around collection launches. These included Le Voyage Recommence at Cartier, Le Grand Tour at Van Cleef & Arpels and Mosaico at Buccellati.

The retail network was further upgraded with renovations and new openings across the regions. Renovations included the Milano, Montenapoleone store for Buccellati, Geneva Rue du Rhone for Van Cleef & Arpels and South Coast Plaza for Cartier. New openings took place in New York for Cartier, Hong Kong for Van Cleef & Arpels and Macau for Buccellati as well as in new markets, such as, for example, Mumbai for Cartier. 64% of Cartier stores are now under its new concept, a material increase from 51% a year ago. To support the strong demand for jewelry pieces across our 3 Jewellery Maisons, production capacity is being increased through production facilities being acquired, built or expanded.

These facilities are located in Italy, France and Switzerland.

Let us now review our Specialist Watchmakers, where sales were 3% lower following a strong comparative in the prior year. On a constant exchange rate basis, though, sales grew by 2% against high single-digit growth in the prior year when they reached an all-time high. Regionally, increases in Asia Pacific, excluding Mainland China, Japan and the Middle East and Africa were supported by both local and tourists spending. Such increases were more than offset by declines in other regions. Mid-single-digit increase in retail sales was more than offset by softness in other channels.

In the fourth quarter, following a double-digit comparative from the prior year, sales were 4% lower than the prior year on a reported basis and 1% lower at constant currencies.

The operating result of €572 million translated into a resilient operating margin 15.2%. During the year, investments in communication on the store network continued to further reinforce the retailization of the business. As in the first half, the decline in profitability reflected a moderate sales contraction combined with the strong Swiss franc and internalization of external points of sale. Excluding for ForEx movements, which impacted this business area the most, the operating result rose by 3% and the operating margin by 20 basis points.

Let us now look at some of the key developments over the past year. Performance was varied across the Maisons yet supported by continued resilience of iconic collections. These include the Lange 1 at A. Lange & Sohne, Portugieser at IWC, Reverso at Jaeger-LeCoultre, Luminor at Panerai, Polo at Piaget and Traditionnelle at Vacheron Constantin. Our Specialist Watchmakers have continued to strengthen direct engagement with clients through the elevation of the experience in stores as well as through events highlighting craftsmanship and artistry, such as Watches & Wonders, Concours d’ Elegance for A. Lange & Sohne and [indiscernible] for Jaeger-LeCoultre, to name just a few.

Further development of the retail network included new openings such as Casa Panerai in Paris, the first internal boutique in Thailand for Vacheron Constantin in Bangkok and A. Lange & Sohne in Paris on Rue de Lappe. Other highlights included the internalization of external points of sale, relocations and renovations, the latter including the first Piaget boutique renovated under the new store concept in Taipei 101 in Taiwan. More on the evolution of the Specialist Watchmakers business model at the end of the presentation underlined by the DTC, the direct-to-consumer rate, here on this slide.

Finally, let us move to the Other business area, which primarily includes the group’s Fashion & Accessories Maisons, along with the group’s unbranded watch component manufacturing and real estate activities as well as Watchfinder.

Sales were 2% lower year-on-year on a reported basis and 1% up at constant exchange rates. Resilience in the Americas, our largest region, mitigated softness elsewhere. IR sales in most Fashion & Accessories Maisons were more than offset by lower performance in other units, predominantly Watchfinder. For the fourth quarter, sales were overall slightly down year-on-year facing a strong comparable base in the prior year. The operating result for the year was €43 million loss.

This largely reflects the impact of Watchfinder and our watch component manufacturers. The Fashion & Accessories Maisons broke even, yet at constant currencies, generated €30 million operating result. Again, let us now look at some of the highlights of the past year. Most Fashion & Accessories Maisons experienced sales growth due to a heightened focus on creativity. Fiscal year ’24 was another successful year for Alaïa and Peter Millar.

Alaïa had a strong reception of the latest collections and saw success of leather goods, such as the curl handbag and ballet flat shoes.

Montblanc enjoyed success with this higher price offer and large leather goods collection. Also noteworthy were the acclaimed first collections of Simon Holloway at dunhill and Chemena Kamali at Chloe Indeed, Chemena’s inaugural show was ranked number one by WWD among the top 10 fashion shows in Milan, Paris and New York City. The retail network was further enhanced with new openings across regions, including Delvaux in Kuala Lumpur’s Pavilion mall and in Beijing at Wangfu Central, Alaia at the Kingdom Centre, Riyadh, Peter Millar on Madison Avenue in New York.

The group also strengthened its portfolio further with the acquisition of Gianvito Rossi, a recognized leader in high-end shoe manufacturing, with proprietary savoir-faire in development and production. We will now begin to scale up this unique Maison leveraging the infrastructure and backing of the group. Watchfinder continued its expansion and is now present in full-time value locations, including Abu Dhabi and Macau, well-being present in over 100 Specialist Watchmakers and Cartier boutiques via its Part Exchange Service. In addition, a marketplace offer was launched earlier this year in the United Kingdom.

Let me now turn to the group financials, starting with gross profit, which rose by 2% to €14 billion. The gross margin declined by 60 basis points to 68.1%, impacted by strong Swiss franc versus the euro and higher raw material costs. Excluding the 190 basis point negative impact from adverse foreign exchange movements, gross margin increased by 130 basis points, reflecting the positive impact of targeted pricing increases by Maisons and more favorable geographical mix. Next, let us look at operating expenses, which were tightly controlled to end just 6% and higher than the prior year in an inflationary environment.

Constant exchange rates, operating expenses rose by 9%, broadly in line with sales.

I will now take you through the expenses by category. Selling and distribution expenses increased by 7% at actual exchange rates and by 11% at constant exchange rates, accounting for 54% of total operating expenses in line with the prior year. Most of the increase related to inflation-driven operating cost increases as well as to the development and enhancement of our retail network and growth in retail sales, notably in Asia Pacific, Japan and Middle East and Africa.

Selling and distribution expenses represented 24.3% of group sales, an 80 basis points increase compared to the prior year. Communication expenses rose by 3% at actual exchange rates and by 6% at constant exchange rates.

The higher spend was more marked at the Jewellery Maisons to support sales growth, notably with impactful high jewelry events. Nonetheless, investment in communications remained at 9.7% of group sales in line with the prior year and within our normalized 9% to 10% range. Fulfillment expenses, which represent the cost of fulfilling online orders from our Maisons and Watchfinder, increased by 5% at actual exchange rates and by 3% at constant exchange rates and continued to represent 1% of group sales. Administrative expenses rose by 11% at actual and constant exchange rates and represented 9.2% of group sales, 70 basis points higher than a year ago.

The increase was primarily driven by salary increases, IT investments and our strong exposure to the Swiss franc. Other expenses of €103 million were in line with the prior year and included nonrecurring charges of €58 million net, primarily from a €34 million impairment of intangible assets and a €19 million impairment of goodwill at Watchfinder. Excluding nonrecurring charges of €58 million, operating expenses grew by 7%. Overall, net operating expenses as a percentage of group sales increased from 43.5% a year ago to 44.8%. At €4.8 billion, operating profit was robust, generating a 23.3% operating margin, 190 basis points lower than the prior year.

The year-on-year change is mainly explained by the adverse foreign currency movements.

Constant exchange rates, operating profit increased by 13%, with resulting operating margin 100 basis points higher compared to the prior year. Note that operating profit came close to €4.9 billion when excluding the nonrecurring charges of €58 million, which were largely noncash. Note also, that we do not apply hedge accounting, hence, the full impact of foreign exchange movements is reflected in our operating income.

Let us now review the rest of the P&L items below the operating profit line, starting with finance costs. Net finance costs improved by €136 million to now €178 million. This improvement reflects 3 main items. Firstly, we recorded a €123 million increase in net foreign exchange gains on the group’s hedging program. Secondly, we benefited from a €62 million positive variance in net interest expense, primarily from higher interest income.

This positive variance was partially offset by €170 million fair value loss on financial instruments, which comprised a €269 million write-down of the Farfetch convertible note, now valued at 0 in our financial statements as well as €168 million gain in value on the group’s investments and internally managed bond funds and money market funds. Moving now to discontinued operations, where sales were down by 14% over the prior year at actual rates and by 12% at constant exchange rates. The operating loss at €1.4 billion largely reflected a €1.3 billion noncash write-down of the net assets held for sale to fair value considering current levels of net working capital. I remind you that YNAP remains as held for sale in our financial statements.

Let us now turn to the profit for the year. Richemont reported a solid profit from continuing operations of €3.8 billion down by €93 million. The increase in profit for the year to €2.4 billion, reflected the reduced €1.5 billion loss from discontinued operations and the €136 million improvement in net finance costs that I just mentioned, partially offset by a lower operating profit. Our effective tax rate for the year for continuing operations was 18.1%, in line with the envisaged 18% to 21% range. Cash flow generated from operating activities was up 5% to €4.7 billion.

This increase was mainly due to a €326 million inflow from the settlement of currency forward contracts compared to a cash outflow in the prior year as well as a lower buildup of inventory.

Let us now turn to gross capital expenditure, which amounted to €1 billion. As a percentage of group sales, CapEx reached 4.4% of sales in line with a year ago. 45% of gross capital expenditure related to point-of-sale investments, including internal and franchise boutiques as well as external points of sale. Also, the spend was allocated to boutique renovations, upgrades and relocations, notably at Cartier. Manufacturing accounted for the remaining 24% of gross capital expenditure related primarily to R&D and increased jewelry capacity in Switzerland, France and Italy.

Finally, Other investments, which made up 31% of CapEx, mainly related to IT spend. Let us now review free cash flow, which rose by €82 million to €2.9 billion. This increase was primarily driven by a €205 million increase in cash flow from operating activities, including the cash inflow from hedging derivatives mentioned earlier. It was partially offset by higher net CapEx and lease liability repayments.

Moving on to our balance sheet, which remains solid with shareholders’ equity accounting for 48% of the total. Net cash amounted to €7.4 billion on the 31st of March 2024, an increase of €0.9 billion over the prior year. This includes the benefit of the cash inflow of €880 million from the exercise of warrants issued in 2020, mitigated by €2.1 billion dividend cash outflow. The Board has proposed a dividend of CHF 2.75 per 1 A share or 10 B shares, which represents a 10% increase of the ordinary dividend over the prior year, subject to shareholders’ approval at the Annual General Meeting on the 11th of September 2024. I will now share an update on our ESG progress.

This year, Richemont is taking the next step on its journey of continuous improvement to further consolidate the group’s approach to ESG. Building on the foundations put in place last year, in fiscal year ’24, we completed the development of a group-wide ESG Management System, establishing an overarching structure to integrate policies, processes and actions providing the framework to execute the group’s ESG priorities. This management system has enabled all the activity across the group to be combined into a consistent harmonized approach across Maisons, regions and functions.

Our commitment to continuing to build ESG capabilities and increasing ESG professionalism has led to the creation of the Richemont Sustainability Online Academy. The goal of the academy is to equip all our teams with the right tools and opportunities to grow their technical ESG understanding in a consistent manner across the group.

Continuing with our compliance-driven approach, this year, our nonfinancial report has been developed in accordance with GRI standards, with selected GRI indicators independently assured with PricewaterhouseCoopers. Report also complies with Article 964a-c of the Swiss Code of Obligations. We continue to act on our environmental impact. And in 2023, Richemont was recognized by the Carbon Disclosure Project for its environmental performance, receiving an A- score for climate change. We’re also pleased to report that CO2 emissions from transportation and distribution reduced by 31% versus 2022.

This is mainly the result of a shift from air freight to shipping by sea. Also as part of the group’s ongoing efforts to advance its sustainability operations, Richemont continues to pursue internationally recognized building certifications. Today, 22% of the buildings owned by the group are certified in accordance with the highest building standards.

In terms of driving social impact, Richemont obtained global gender EQUAL-SALARY certification from the EQUAL-SALARY Foundation. This recognizes Richemont’s commitment to ensuring a fair and equal wage policy between women and men for more than 38,000 colleagues across 39 markets.

In addition, this year, the group’s human rights statement was published, supported by dedicated internal human rights task force. The statement reflects the group’s long-standing commitment to respect the human rights of all people across the business and value chain, including employees, customers, partners and suppliers. It aligns with the United Nations Guiding Principles on Business and Human Rights and the Principles of the United Nations Global Compact, to which Richemont is a signatory.

When it comes to preserving craftsmanship, we’re investing in the next generation of talent to ensure that we can support our business’ sustainable long-term growth. Richemont owns and partners with a number of leading schools in the fields of luxury design, jewelry-making, fine watchmaking as well as luxury management courses.

We also invest in an extensive global apprenticeship program as part of our deep commitment to preserving special craftsmanship techniques.

And with this, back to you, Jerome.

Jérôme Lambert

Thank you, Burkhart. Before closing, we wanted to bring the attention to our Specialist Watchmakers, their business area, to take stock of the qualitative transformation that has taken place since the creation of the division at the end of the calendar year 2017.

Specialist Watchmakers Maisons have evolved toward a sustainable business model based on client centricity and true demand. Many of the 8 Maisons have reached a new scale and together have generated incremental sales of more than €1 billion since 2018, an absolute 39% sales increase.

Their disciplined approach and execution of the strategy, nurturing the desirability of the brand, operating and developing the savoir-faire that goes into the crafted timepiece in careful lockstep with an evolution of the commercial and operational model have progressively instilled resilience in the business areas — in the business areas economic model. As a result, the operating margin rose to 15.2% this year, up 550 basis points from 9.7% in financial year ’18, while the euro depreciated from 1.14 to 0.96 versus the Swiss franc in the same period.

Let’s dive deeper into the levels that our SWM and Maisons have used to embed resilience in pursuit of sustainable growth and value generation. First, by nurturing the brand equity and desirability of our Maisons, with continuous investment in visibility while fostering craftmanship, creativity, invention, innovation and high watch-making savoir-faire that gets into developing the most exceptional timepieces. Strong and enduring demand for many collections previously mentioned in the presentation has led them to reach an iconic status.

The recent product launch at 2024 edition of Watches & Wonders also showcased how Maisons quest to pursue the boundaries in high watchmaking. As an example, Vacheron Constantin built the world’s most complicated watch, Les Cabinotiers, the Berkley Grand Complication, comprising 63 horological complications and 2,877 components.

And yes, took indeed 7 years.

Second, by accelerating direct engagement with our clients, notably with the development of directly operated stores in prime location, an alternative format of distribution, such as the Vacheron Constantin Suite 1755 in Dubai, alongside ensuring that provide — they provide the highest standard of client service. Our share of direct to clearance sales has reached 60% in this financial year, up from 39% in financial year ’18. And if include our externally operated franchise store, the total share of sales in a mono-brand retail environment increased to 79%, up 27 percentage points compared to financial year ’18, serving, in fact, 2 out of 3 clients today in count.

We continue to pursue a disciplined approach to our network evolution with a strong focus on productivity and alignment with true demand. By establishing a network footprint and distribution ecosystem, our Maisons are able to access full client potential and reach across markets.

Our Maisons also rely strongly on our strategic retail partners to achieve this ambition, whether in mono-brand franchise store or multi-brand stores, which also includes the TimeVallee concept. Third, by applying an uncompromising focus on clients to know and serve them better. We strive to offer and deliver a more personalized and creating engagement and omnichannel experience with greater satisfaction throughout all touch points. Finally, by further focusing on local clients across geographies, developing multi-market strengths and mastering excellence in our end-to-end operation with shorter response cycle times in order to constantly offer our clients the product, the design in the right place.

We have strengthened our teams across the organization, reinforce the agility and flexibility in our operations, accelerating our time to market and manage our inventory effectively with the strict adherence to the SOSI, sell-out versus sell-in, at 100% over the cycle, aligning supply strictly with demand. We will remain focused on these principles, and we progress in our ambition to drive sustainable and profitable growth. Now a few more words to conclude before we move to the Q&A. Richemont delivered another year of solid financial performance, while facing a continued uncertain geopolitical and macroeconomic environment. We’ve recorded sales growth across all regions at constant and actual exchange rates, leading to all-time high sales of €20.6 billion.

Our Jewellery Maisons and retail distribution channel performed strongly. Both our Specialist Watchmakers and Fashion & Accessories Maisons showed a good resilience over the year. Our financials were actually equally very solid. Our operating margin increased by 100 basis points after excluding the significant adverse foreign currency movement, but including the nonrecurring charges. Cash flow from operating activities was robust and contributed to the further strengthening of our balance sheet.

We now have an increasingly balanced regional and nationality with in terms of sales.

Finally, Richemont further consolidate its approach to ESG and reached several milestones during the year. Our Maisons are strong and agile, with resilient iconic collection. They have developed strong relationships with local clients and incredibly rebalanced their clientele mix. Their growth potential and strength of the group balance sheet gives us confidence in our ability to generate long-term sustainable value creation, whatever the new term uncertainties. I would like to close this presentation by thanking all our colleagues for the commitment, [indiscernible] to what has been an intense year, which has enabled us to deliver these solid results.

And this concludes our presentation. Thank you.

Question-and-Answer Session

A – Sophie Cagnard

Thank you, Jerome. [Operator Instructions] Thank you. Okay. So first, Zuzanna, then [indiscernible]. And then afterwards, I must say, I’m a bit lost.

So we’ll see who is afterwards. So maybe we’ll go that way and thereafter. Zuzanna, thank you.

Zuzanna Pusz

Zuzanna Pusz, from UBS. Maybe before I ask my questions, Sophie, thank you so much for all of your help over the past years. I’m sure we will all miss you. And congratulations to Alessandra on her new role and Nicolas as well.

So I’ll stick to two questions. The first one is on something that you mentioned during the presentation. It’s on the performance by cluster. So maybe if you could mention what was the performance of the Chinese, American and European clusters in Q4? But specifically related to us — to this, I wanted to check if you could tell us broadly what is the mix of the various clusters right now?

The reason I’m asking because I think there’s still this misconception in the market that the group is heavily reliant on the Chinese consumer, which I think was the case probably in the past, but it is not anymore at least as per our estimate. So I wanted to double check that.

And the second question is on maybe margins. I think it was pretty impressive. You’ve seen a very good cost control. So Burkhart, well done on that and to the team. But obviously, there was a big FX impact.

But it seems that at current rates, given that you don’t use hedge accounting, FX will be broadly neutral or maybe even slightly positive in FY ’25. So I wanted to double check that.

Sophie, can I ask a small third question, please? Just a very…

Sophie Cagnard

No, if you don’t mind, because I see many hands. We’ll come back to you after afterwards, okay? Thank you.

Zuzanna Pusz

Okay. I’m following the rules…

Sophie Cagnard

Yes. And thank you very much for your message, by the way, Zuzanna. Appreciate it.

Johann Rupert

Well, in terms of your question on our reliance on Mainland China, some 2 years ago, I was quite unpopular with my colleagues, who saw their share price drop by 15%. It was in this meeting 2 years ago, when we expressed the view that it would take longer for the few good factors to return in China. I also said that I totally believe in the medium to long term, firstly, in China, in the Chinese consumer. They’re smart, they study, and they work. And I don’t think the ascent of China will stop. But we did express the view that the feel good factor would take longer to return.

And we have been explaining for decades now that luxury goods sales really depend upon the feel good factor. The disposable income and the availability there of, obviously, is a determining factor. But if people don’t feel good, it’s a natural instinct. And we felt that the lockdown would have a longer-term effect on the general feel good factor, deeply cohesive society. It was a jarring and scarring effect.

So we’re seeing where people travel, obviously, then they feel good. The same propensity is there. But people act rationally, especially intelligent consumers. They are still a 6 wallet group of people, both grandparents and both parents. And the majority of the people are not that affected by the bigger issues when we look at the real estate problems, et cetera, et cetera.

But they’re acting rationally. So we said please let’s not rush to think that they’re going to get back. And that is proven to be the case. But over the years, what we’ve tried to do is, for 30 years, we’ve been trying to say that our business really is in creating desirability for products. And that depends upon the brand equity.

And there is the danger, luxury should not be ubiquitous. Because if it’s everywhere and available, people start thinking, well, hang on, that’s not luxury. So one has to put the handbrake on at times. That does not mean by creating false scarcity.

We had the issue where — I’ll give you an example. A. Lange & Söhne had to shut their waiting lists on some of their products. And I said to the Wilhelm, then stop advertising because, ultimately, I am the person who gets the phone calls. Because a friend of a friend of a cousin of another friend would say, don’t know — you know Johann Rupert.

Well, I want the [indiscernible]. You see you’re causing an upward funnel to me. We have to explain to the people that this was not artificial, but you need 15 years of experience to build the watch. And 15 years ago, there were not that many people in [indiscernible] rushed into the watchmaking business.

But for instance, my wife wanted a car, where the grandchildren could fit in, and she wanted an SUV, a Range Rover. 18 months later, so they — it created aberrations. And we looked. Now we are fortunate today that, geographically, the demand has widened geographically. And as Nicolas said earlier this morning, United States used to be East Coast, West Coast.

Today, you’ve got Austin, you’ve got Charlotte, you’ve got Chicago. Huge areas that are becoming very viable, where the demand is there. I mean, I’ll go back to Coco Chanel who said, money is money is money. It’s only the packets that change. And we have to be there in markets, where there’s a desirability and the pocket.

But luckily, we fly on — we like a plane with 6 engines. If the one engine is not working as well, then luckily, the others make up. So our geographical spread is far bigger than 5 years ago, let alone 15 years ago. And there’s — our drive is the coordination of — and obviously, pricing. You’ve got to make sure that there is a global pricing.

And with foreign exchange fluctuations, the clients are very smart. They noticed Japan was cheaper. They’re not — our clients are smart. So Maisons will do well, but the clients will buy in another area. And the Chinese traveling has not yet resumed like before, but it will.

We try not to look at the Americans, Europeans, Africans or Chinese. These people all read the same things. They all follow the same as social media. And there is a universal globalization of tastes. Even though the economies are deglobalizing, and I’m worried about trade barriers and trade wars, if you create a universal demand, then the sales will move from geographical area.

So if you look at current, and we were a Chinese brand, please look at what — I’ve now nearly been 50 years with Cartier, 1976, an alarm. And all of these people, Nicolas, we’ve been through and we’ve seen it. So I wouldn’t focus on Chinese demand. We, 2 years ago, said we think it’s going to be slower. And it’s turned out to be, not because of capacity, but I think the lockdown left a big scar and people are recovering from it.

But when you look at — we talk about Mainland China, but I don’t know when any of you last went to, I would say China related, Indonesia, Thailand, the Philippines, these are very big markets that are doing very well economically. So I suspect that there’ll be new areas. But in simple pure economic terms, if you take the number of people in Mainland China, and you take the number of people, it’s a huge, huge place with many people who work very hard and who are successful. So there’s no reason to believe that when the feel good factor starts returning, the numbers will show it.

And in terms of — over to you, Burkhart, for the second question. I’m not going to stick my neck out on that one.

Burkhart Grund

No, no, no. I mean this is a very simple answer. I mean we’re 6 weeks into our fiscal year. So I cannot reliably project or guide, which I won’t do anyway, of how the FX will impact our accounts for fiscal ’25. I mean today, it’s neutral.

Dollar is pretty much stable against our average of last year. The yen, however, is significantly lower than our average, it’s about 7% lower than our average of last year. The Swiss franc is a bit weaker, 1.5%. So today, at present, 6 weeks in, yes, it’s neutral or rather neutral. But don’t ask me for the full year until 31st of March 2025.

Johann Rupert

If I may, it’s a very good question, but I’ll just step back. In 2003, when most of you weren’t probably born or working yet, I had to step back, that’s when we had a Chief executive officer with finance, everything, reporting. It was the only profit warning we ever had to issue. In that year, our luxury goods business that you know now today had an operating profit of about, I think, it’s €155 million, €156 million. And we got €486 million from VAT.

Our operating profit dropped by 50% that year, and I stepped back. But interestingly enough, since then, the Swiss franc has increased by about 40% versus both the dollar and the euro. It strengthened by about 40%. So those of you who get Swiss franc dividends, even though our costs go up because we’re Swiss-based, our dividends are 40% worth more. So if this has been carrying on since 2003, that we’ve had to look at it.

Luckily, people are buying Swiss watches. Everybody who makes real Swiss watches are exposed to the inflation, which we cautioned about. You can’t have inexplicably stupid quantitative easing with 0% interest rates for that long and then expect to get relevant in 2 or 3 years, especially when you see the fiscal irresponsibility in the United States. If you look at the total debt, it’s astronomical. And so we have to look at exogenous factor.

Things are under our control, I’m very happy of that. We couldn’t predict COVID, no. We should have known that we were selling too many watches in 2015. The whole industry should have known that we are pumping the market full. And we had to take that remedial action.

It cost us a lot. Then COVID. So I wanted to get back to an original CEO role. But every time there was some crisis. And we lost €483 million in the first month of COVID in April.

So we had a war cabinet. But we went through the stress test of the watch — global watch glut. Today, we have the ratio where we sell out more than we sell in. And I don’t know about everybody, but I can tell you that responsible competitors, like Rolex and Patek, are also not flooding the market. So there is a general responsibility of balancing demand.

So for those of you worry about the Swiss watch industry, 2015 to ’18, it’s not that case.

In terms of how — we have to accept that fiscally responsible countries, like Switzerland, with the working democracy will be attractive in terms of its currency. It’s the perfect working democracy. I mean I challenge you to know the President of Switzerland. We don’t have a Biden fighting a Trump. It’s heaven.

However, we have to realize that it will have an appreciating currency. And we have to — with Karlheinz and all of the people, we have to make sure that our supply chain and the efficiencies in our factories, we have to improve all the time. And Burkhart maintaining an eagle eye over the cost structure, and that’s really all we can do. But I’m answering it so that I’m answering a couple other questions that are coming over the next 10 minutes. Thank you.

Sophie Cagnard

Yes. Thomas, go ahead. And afterwards, actually, Louise, Melania and we will go to [indiscernible]. Please.

Thomas Chauvet

Thomas Chauvet, from Citi. Word for Sophie as well. Thank you very much for 18, 19 years of fruitful collaborations, and all the best to Alessandra and the team from September. Two questions, please, especially we have Nicolas and Cyrille on stage. The first one, a broad one on jewelry.

Your jewelry sales have been more than doubled in the last 5 years, that’s 16% CAGR. That’s quite impressive. The category, I think, has been maybe more resilient in the last 5, 10 years than anyone had thought. It bears some resemblance to the trends we’ve seen in leather goods for the last decade.

We all know the story of branded jewelry gaining share over the unbranded segment. Can you talk about the long-term driving force you see from here that could continue to fuel close to 10% growth at your brands, whether that’s the evolution of high jewelry, self-purchase? You are quite I think, vocal in that, Cyrille, at Cartier, bridal, entry-level lines and so on. And with greater scale, generally comes higher profitability, are you still sticking, Burkhart, to your long-term target of 30% to 35% EBIT margin for the Jewellery Maisons?

And secondly, on the group and the structure and the important changes within the Exec Committee and the Board today and the return to classic CEO role assumed by Nicolas, congratulations to you.

One, what will change for the individual Maisons under this new structure? Is it further collaboration on transversal issues, like manufacturing, distribution, marketing? Is it trying to help smaller brand grow? You’ve acquired Buccellati and Vhernier recently in jewelry. Is it trying to fix some underperforming brands?

And about you, Mr. Rupert, I think this morning in a media interview, I don’t want to misquote you, you said you were not stepping back. So I assume you’re still very committed to Richemont and to the control you have over the group.

Sophie Cagnard

Thank you.

Johann Rupert

I’ll answer the last one. Somebody asked me, how is my working relationship with Nicolas going to change? I said it’s not going to change. It’s still going to be on having fun and total thrust. But if you want to run Richemont, you better understand the consumer.

It’s got to be a cultured person who has proven success in the field. How do you build brand equity? And no, it’s not stepping back as such. It — some of the direct line functions that I had, Nicolas, will be shouldered with now. And I actually asked Nicolas to consider the job more than 18 months ago.

And he thought about it, he came back and he said, “I’m going to have to disappoint you because I’m having far too much fun what I’m doing right now. And I don’t need the hassles and the politics and everything of a CEO role.” And Anton said to him, “That’s exactly why we want you. We don’t want a unification power thing. We want somebody who doesn’t want the job.” So — and I joke about it, but Italians do not have a monopoly about machiavellian tactics. So I thought how am I going to seduce Nicolas. And I put him on the SBCC, and he suddenly saw it can be fun.

The jewelry businesses are run autonomously. Cartier is an autonomous big company. Van Cleef is the same. Buccellati has got its own structure, its got its own DNA. Yes, we can help them.

Vhernier is a totally different. It’s not the same DNA as Cartier. Cartier doesn’t have the same DNA as Van Cleef. Different psychographics totally. But — and obviously, every single one of the companies have their own supply chain — from the designs through supply chain all the way through.

If you start mixing and matching and you start joint manufacturing, sooner or later, they all look the same. And the client profiles are different. So they will be run separately. And I think they can talk about the jewelry, but the structures. Lange is Lange, Vacheron is Vacheron.

IWC is IWC. They’re separate companies. Yes, we can help with access to distribution. And one of the beauties today is for a new Maisons in the group, where we can help them tremendously is with access to retail. If we go and speak to a big shopping center, a big mall, when we go there as a group, it’s very helpful.

Very, very helpful. And maybe Jerome can tell you about some of the big mall owners. I mean, tell them about Mr. Alabbar, what’s his turnover.

Jérôme Lambert

Everybody knows that Dubai Mall is today is the largest mall in the world. So — and it is the largest mall in the world for luxury as well.

Johann Rupert

Yes. And we’re very close to him. We’ve been partners for a very long time. So with our relationship — with long-standing relationship with mall owners, that’s where the smaller brands can really benefit. I would say that, Cyrille, that would be the biggest benefit, Nicolas, for the smaller brands.

Cyrille Vigneron

And for the smaller brand as well, there is synergies in manufacturing and in relationship with partners. As you know, our jewelry is a part where there is a significant manufacturing plant or workshop for craftsman and artisan. But this was also shared. And you know that it’s…

Johann Rupert

They’re independent.

Cyrille Vigneron

Independent. And with the attraction of jewelry from other competitors, then they try to acquire them. So the more we can work and develop and secure the network of manufacturing, then it helps also the growing brand to have access to the best-in-class. Otherwise, they might have more difficulties because of the new interest for jewelry. And there are a lot of innovation coming in there that might be difficult for them to acquire if they don’t rely on us to do so.

And we have done some collaboration, very pragmatic in Milan for Buccellati, for instance, to help them to take over and to grow. And it worked very smoothly because we could do that. So our presence in Italy, in France and in Switzerland is a great half on distribution as well, having access to the best mall and so forth. So it’s an accelerator for growth.

And for the question of jewelry as a whole, it’s one of the category, which is the most attractive on client side and the most definition of identity. And the more we grow also to sustainable attitude, meaning use more and waste less, the more watches and jewelry fit that. They are durable by nature, and they can continue for a long time. You can transmit to your children in a way which is quite easy and natural for other things more difficult. So we see that growing interest in this way in basically all countries of the world.

So we don’t see any reason to stop mention for, also self-purchase, and it’s true for women and for men. Jewelry is more and more attractive for men as well, definition of self-identity. And we see this trend growing basically everywhere.

Nicolas Bos

And I can only confirm definitely the synergies are about supporting mutually between the brands and supporting the smaller brands. It’s not about applying a recipe, it’s not about having the same workshop, the same teams working for different brands. But as Cyrille said and as we are seeing more and more, it’s really about supporting each other and also supporting the category. We are investing — co-investing in professional schools, for instance, which we don’t run directly. But this is absolutely a key in order to make sure that we have the next generation of craftsman, and this is the way we’re going to continue to work together.

As for the category, you were saying, yes, there is the whole story of branded and unbranded market, but still a very, very valid story. It’s still category where the unbranded share is still extremely high, and the brands continue to gain share. And I think there is a lot of potential in the years to come in that area. They are — and they were mentioned not new markets, but definitely new markets for international brands. And yes, we’re talking about Thailand.

We’re talking about some European countries. We’re talking about Australia that has developed tremendously. So we’re looking about Vietnam in the last few years. So we see more and more countries opening up to international jewelry. And it’s one of the oldest categories in the world, I think that without going into history.

But a few years ago, there are archeologists found in Morocco, a series of 33 shells that were pierced that date back 150,000 years ago. And this is the first necklace that was ever found historically. So we are a category that dates back 150,000 years ago. So it has gone through a lot of cycles, for sure, and we never can predict the future. But if we survive 150,000 years, we might survive the next few decades and probably continue to grow.

So that’s quite promising.

Sophie Cagnard

Thank you, Nicolas. I think we can move…

Johann Rupert

Does that answer?

Thomas Chauvet

Yes. And maybe just on the margin side….

Johann Rupert

I do not allow anybody to comment on margins because…

Sophie Cagnard

Sorry, you mean, the guidance — the indication.

Johann Rupert

No. For a simple reason, I hate it. Because our clients know they’re buying value. If you look at — the last thing people want is buying an electric vehicle and the moment they drive it out of the dealership, they lose 40%. We want these to be loved and valued over very many years.

So I hate this margin, margin. Yes, it’s nice for you, but it’s not very nice if you’re a client.

So that’s why we look — if you look at Christie’s and Sotheby’s and if you look at the sales there, Cartier and Van Cleef dominate in terms of value and what people get a decade later or 20 years later. And that’s what we’d like to. We’d like to have clients know that they don’t lose 30% when they buy it.

So I urge people, please don’t stress how much money we make out of something. But we wouldn’t cut out on buying if we didn’t think it’s not a growing category. Thank you.

Sophie Cagnard

Thank you, Thomas. Next is Louise and thereafter — yes.

Louise Singlehurst

Louise Singlehurst, from Goldman Sachs. Will obviously ask Burkhart later offline about the margin question. We’ll come back to that later. But just to ask, I wonder, Mr. Rupert…

Johann Rupert

Which I’ve just give a blanket cover for, he doesn’t have to answer.

Louise Singlehurst

Totally understood.

Jérôme Lambert

She will still ask for it.

Burkhart Grund

I know.

Louise Singlehurst

I wondered, if I could just follow up on a couple of points from Mr. Rupert. You’re very explicitly, which is absolutely something that we concur with, in terms of feeling about the feel good factor for luxury goods, and you talked in detail about the Chinese consumer. I mean when we look at the numbers this morning, the plus 7% for Europe, plus 12% for the U.S., fantastic numbers, you must all be absolutely delighted. But I wondered if you can just talk to us about the strength of that cohort and what you’re seeing because obviously, the economic data wouldn’t necessarily lead you to a plus 12% for the U.S., that would be very helpful.

And then secondly, you’re talking about the knowledge of the customer — many congratulations to Nicolas this morning. But the knowledge about the customer and servicing that customer, how the group has changed? What are you seeing in that cohort? How are you engineering the group more towards that higher end cohort in terms of service culture?

Johann Rupert

In terms of service culture. So I get all the complaints about service. So every dinner party, it is not that I go out a lot, somebody’s friend had bad service in that boutique. So — and you will remember 20-odd years ago, I started this thing of mystery shopping, where I’d grow a beard and walk in and — because the sales assistance tell you all the truth, and I’m still doing it. Obviously, during COVID, it was impossible.

Yes, service, service, service. When I grew up, when I started and I joined my father’s company, in every elevator, and Louise this before all of the modern work, there was a sign that customer is your king and queen, he and she pay our salaries. And I constantly tell my people, I don’t pay your salaries. Burkhart doesn’t. We just handle the money, but clients pay our salaries.

That is a mantra, they pay our salaries. So service, it has helped immensely the — our whole collaboration in terms of e-commerce and online plus the longer — a few years ago, our factories, Karlheinz and his people, the return under warranty became so minimal because of the quality, that we were able to extend the warranty by 5 years. But obviously, the clients have to register because before then watches being a wholesale business, we only captured 15%, 18% — less than 20%. Today, the people are so willing because of this long-term guarantee of service, that we’re getting hundreds of thousands of willing — people willing to share their data. The — and yes, it’s helped as a group, and it’s continually growing.

And now with AI, if you don’t have the data, you’re going to be lost. Totally lost. Because what do you interrogate? You interrogate data, and you could start predicting trends. In terms of the cohort and the 10%, 12% and 8%, somebody could tell me whether President Trump is going to be found guilty or not guilty in the next 3 weeks.

I will get a pretty good understanding of what the presidential election is going to shape up to be.

And the divisive — I love the United States, I’ve never seen it as divided. And that will affect the feel good factor. I mean you’ve got to read what right value in the FTE to date. [indiscernible] is a very smart man. So all things being equal, we’ve got debt.

But things are never always and the volatility internationally has increased so much geopolitically, that we will continue to have a strong balance sheet to withstand — because there will be a next crisis.

We didn’t see COVID coming. That was a real stress test. We can only control what’s inside. With everything as it is now, I’m happy that from supply chain through to distribution, through to actually making sure we don’t produce more than we can sell.

But it’s taken a lot of work by an enormous number of colleagues to get there. And we believe warehouses, optimized warehouses, until COVID broke out or the only tornado ever to hit Italy, hit the bloody warehouse of our online business. Don’t laugh. We’re building another warehouse for Peter Millar. Not in Raleigh, North Carolina, but in Columbus, Ohio.

And I thought it’s the hub. It is a hub. I’m sure somebody said to me, until Scott said to me, it’s also outside the hurricane belt. I never thought of the hurricane belt. So that beautiful book Antifragile really became true during COVID. Suddenly, we were really optimal and efficient. It created fragility. So it’s — there’s so many moving parts. I cannot tell you what the Americas will look like post election. It’s — yes, it’s still the economy is showing a remarkable resilience.

And I think some of it can be ascribed to their home financing and how they’ve gone for long-term mortgages, whereas, for instance, the U.K., inflation it’s quicker, a lot quicker when people are on short-term mortgages. So it depends upon how consumers finance their major investments, their homeownership for instance. And that’s, I guess, country by country, society by society, how does inflation affect the consumer.

Because I suspect we’re going to have inflation for longer than the Central Banker has thought. It’s — we predicted that a year ago because we could see it and this key inflation, which means we’ve got to look at our cost structures.

It also affects all of our leases, as you can imagine over a 10-, 15-year period. But please don’t ask me what the cohorts are going to do. We just want to be there. Like Coco Chanel says, “When the pockets change, we want to be in the other pocket or we want to be there.” But I’ll tell you, the UAE I think it’s astonishing growth. And I don’t know how many Australians are here, but I always tell my Aussie mates that thank god for them because they’re the only Anglo-Saxons that South Africans are going to frown upon culturally.

But Australia must have a lot of immigrants because — sorry, they’re All immigrants, but we have — nearly all. Well, all Australians are basically immigrants, but new immigrants. And you have places like Melbourne and Sydney. So as long as we’re there and as long as we desire.

Yes, I can’t tell you, Europe, we have had a fantastic — well, it’s far better than I expected, appreciation by local client. So we are still local. And that’s why, for instance, as I think one of — Cyrille or Nicolas pointed out, we have to look after domestic Japanese consumers that are very, very loyal. So we didn’t just raise the prices to cope with the Chinese buyers, because we would have affected our local clientele. So we look at servicing local clientele because, in the end, they’re the bedrock.

So it’s a very good question, but it really — it’s like a lot of moving parts. You have a foreign exchange movement. Now the first instinct is raise prices. The problem is your local clientele who are not buying in foreign currency, they get affected. So we’re not greedy.

We like to look at what is the effect in 3 years, 5 years’ time.

Sophie Cagnard

Thank you, Mr. Rupert. Melania?

Jérôme Lambert

To comment on service. So the current…

Johann Rupert

He’s commenting on service because that’s where I get most of my complaints from. Okay.

Jérôme Lambert

To understand the issues that can come with the volatility, and you have some areas that can be quite mild in traffic and some areas becoming really, really strong. Even in Switzerland, can have, in mind, that’s the cities dealing with Chinese group, like [Lucerne] and Dulliken are quite soft. But Zurich is booming and local customers don’t want to wait. So we have to adjust the size and service, it’s quite difficult. In Japan, they have more and more non-Japanese buying.

So you have to address both Japanese and Chinese. And the rest of Asia coming increasingly to Japan and then have to have some staff speaking Japanese and Chinese and English and having different expectations. Middle East, Doha is quite quiet and Dubai is very strong. But in Dubai Mall, you have, Emirates expecting people to spend as much time as needed, meaning hours. And Chinese as little as needed, which is minutes in Chinese.

And Russia and something different in the same store, and some don’t want to queue outside. So dealing with service is quite difficult. So we have more and more complaints. I don’t want to wait. I don’t want to have this.

I was not treated properly, and we are making our best effort to adjust. That’s why our retail is becoming increasingly know-how, not only for treatment, service, knowledge, data and so forth. But the current context is quite challenging.

Melania Grippo

This is Melania Grippo, BNP Paribas. I would like, first of all, to thank Sophie for your help during this year. So wish you good luck for your future. And also good luck to Alessandra and James for also their future developments. So I have two questions first.

The first one is on the appointment of Mr. Nicolas Bos, and congratulations also to you. I would like to know — I would like to go back to the leadership also the CEO of Van Cleef, will someone be appointed soon? Or you will continue — will you continue to oversee also that brand, specifically also as the role of CEO?

And my second question is on the OpEx growth at constant FX that we should input for March ’25.

Johann Rupert

Well, I’ll answer it. I’ll help you. I’ll help the first one. Nicolas has identified an individual, but nothing’s gone further than that. So I don’t want to announce or ask him to announce it before that has actually been put in place.

I’ll pick that to you, baby. Over to you, Burkhart.

Burkhart Grund

Yes. I mean — okay. I would never give you a range or whatever going forward with all the volatility that we currently see. Just we try to keep, obviously OpEx growth and sales growth aligned and not a linear delineation alignment, but which does not mean that we will not, at times invest more than we see in the short-term sales development. So I’d say the same rule applies.

We will invest what’s necessary. And for the midterm, we’ve always had relationship between sales growth and OpEx growth.

Melania Grippo

Can I have a small follow-up also on the cost side, given the increase in the gold price, if you could please remind us what percentage of your COGS is gold and how you offset it.

Burkhart Grund

Well, we’re not breaking out that for obvious reasons. But what we do once again has been the product policy over many, many years, many decades, used pricing to offset raw material price increases. People are looking a lot at the increase in the gold price. Remember, it recycles through our P&L over 12 to 18 months, right, in the future. So it’s not an immediate hit either way, up or down. And it remains consistent with our approach over the long term.

Sophie Cagnard

And we have next question is from — go ahead, Luca.

Luca Solca

It’s Luca Solca from Bernstein.

Johann Rupert

Luca, I think we all know you by now. Thank you for saving you all.

Sophie Cagnard

Yes. Mr. Rupert, it’s also for the benefit of webcast, that’s why, yes.

Johann Rupert

Okay.

Luca Solca

I’m interested in getting your thinking about lab-grown diamonds. Because we see that they are starting to become relevant, at least in some markets. We saw that in volume, for example, they now represent 50% of the market in bridal in the U.S., not in value, clearly. But the fact that you have big perfect stones in a price range that is from $5,000 to $15,000 could potentially have an impact also in the enterprise jewelry market, I guess. We’re seeing new players coming into the market like Pandora with the punchline, diamonds are everyone, rather than diamonds are forever.

So I was just wondering what you see as the, let’s say, next 5 to 10 years, implications from this development that could potentially change the jewelry category in many ways. The second question is about multi-brand digital distribution. We saw recently a couple of deals that made me thinking because, for example, the purchase of [matches.com] has been very difficult, and it has been basically going nowhere. And when Coupang bought what remained of Farfetch, we saw a number of big brands, for example, the Kering brands move out of the Farfetch assortment. So I’m thinking about what is your perspective on the divestiture of YNAP?

Are you looking at a clean-cut divestiture? Are you looking at a more complex deal potentially like the one you had in place for Farfetch? And how do you see the difficulty of selling a company that loses money?

Johann Rupert

Lab-grown diamonds, we — 30-odd years ago, we were having quite a few fake and it used to be Cartier, in those days watches. And I’ll never get discussing it with [indiscernible]. And Joe being the wise man that he was said to me on, “When people buy a fake watch, fake Cartier or fake Rolex, and their friends said to them, ah, beautiful watch.” They either lie to their friend, but they’re a little bit embarrassed. And then guess what, they eventually buy the real one. And in terms of — and you wouldn’t give a fake watch to a friend or a girlfriend or a wife or a daughter without saying it’s a fake watch.

It’s highly embarrassing. Because when I had no money, lived in New York, I bought my sister a Cartier watch, it turns out that it was a fake watch. It’s still a family joke. But I was so embarrassed, I thought I’d bought the real one. It’s in the ’77 or somewhere.

Now if you are going to give somebody a lab-grown diamond, you’re going to say this a beautiful lab-grown diamond with 5 carats. Do you tell her its lab-grown or don’t you? You tell her it’s lab-grown. That’s fine. But when somebody else then says, what a beautiful ring, it’s lab-grown.

Trust me, it’s not got the same effect. You and I are too old, but you’ve got to propose to a woman, you say to her I’ll give you a beautiful ring x or you can have that, but by the way, it’s lab-grown. I’m not sure it’s got the same effect who knows in 5 or 10 years’ time. But the second problem with that is unless you’re building it with hydroelectricity, unless you are using electricity, that is carbon neutral, you got real issues. I know the head of Pandora, the owner very well.

And as — and he plays in the [Daniel Links]. And I said, “you know we don’t normally have competitors here.” And he looked at me and said you’re — “I’m not a competitor of yours. My market is totally different. I’m not competing with Cartier or Van Cleef. Trust me.” So I think in his words, he said I’ve got a totally different market segment.

He’s a very smart guy. But he basically tried to get reinvited to the Daniel. He’s a lovely guy, but it’s a different business. It’s — so do we poo-poo it? No. I would suspect that the first place logically would be on [Perlee] diamonds or the watches.

That’s where I suspect that if people buy. Let’s — I wouldn’t say Patek Philippe, I wouldn’t mention the name. But they’ll still think I’m buying a watch. But when you buy diamonds in jewelry and it’s not real, I’m not sure.

We’ve obviously discussed it, but not Van Cleef, and certainly not Van Cleef or Cartier. You would be undermining all of the DNA. But that it will grow in certain categories. It’s very much like AI. You basically need a new power station if you’re going to hold a very, very big data center for AI, it is — consumes enormous amounts of electricity. So the carbon footprint is going to be very big. And that’s something we watch very carefully. They are not too open about that. But the current processes, you’ve got to remember that DeBeers had — they were the first creators long before anybody else. They had a company called Boart.

They had technology 30 years ago, 40 years ago, which they use for industrial machinery for grinding and polishing, et cetera. But Boart manufactured cultured or artificial diamonds. De Beers had the technology. The company was called Boart, B-O-A-R-T, but they did it because it was a way of creating grinding for industrial purposes. So it’s not a new technology as such.

My biggest fear was that people would get a natural stone and then grow it with chemical vapor deposition. So our buying is very specific. We’ve got to — because can you imagine buying an artificial stone and somehow it finds itself into a necklace, and you bought it. And looking under a loop, you could see the impurity and it looked like the real thing and we sell it to a client. So we’ve been studying — Cyrille and Nicolas, we’ve been studying this from an integrity point of view for a very, very long time.

And in terms of our whole blockchain, our whole traceability, especially after Russia with the mining, we did turn to De Beers because they can certify that these are the diamonds, and they’ve helped us. So it’s not something that I poo-poo. I mean poor Elon Musk must really wish that CNBC or Bloomberg interview and I asked him about BYD. And he started laughing and he said, “Have you seen their cars?” 12, 14 years ago.” We never laugh at our competition. We never — a bit like Ralph Lauren, we had dinner and we both agreed we’re both paranoids.

So we’re not joking, we’re not ignoring, but currently, I just don’t think consumers — I don’t think you’re going to have the same effect proposing to a lady or to a man, whatever in today’s world, and say, by the way, I got you this beautiful lab-grown diamond, I’m not sure it’s the same effect. But you asked another one there, Luca, you said lab-grown and then?

Sophie Cagnard

Multi-brand digital distribution.

Johann Rupert

Sorry?

Unidentified Company Representative

YNAP.

Johann Rupert

YNAP. All I can say about that is when I read the recent bloggers’ comment that all the buyers have disappeared, I immediately called my son and Burkhart and they said, no, they haven’t. So there are still more people interested. But we also have a moral obligation to the very many small people who are using it as a platform. You don’t just dump people.

So there will be a marketplace. If we made the mistake was the business model of actually owning the stock, what’s wrong? Because basically you’re a speculator, you buy and you think you’re going to sell it. And frankly, I didn’t know how really short the fashion cycle is.

If you ask people in the true fashion business how long things stay on full price in the stores.

It’s like this. So the Farfetch model — and I actually feel sorry for Joe. Joe is right. He didn’t cash out, are tied to the market. He didn’t monetize when everybody wanted it, and he was a true believer.

So actually, for one guy, I feel sorry for him. But the world changed. If in — when I asked in 2015 for the whole industry to get together and to support a single platform instead of everybody trying to do their own thing, it would have been a good platform. And Amazon owned by the supplier, by the trademark owners. Unfortunately, everybody went their own way.

And today, we’ve learned an enormous amount. But you know we keep on focusing about it. If you look at our cash cost, I mean, we spend more to my utter horror on consultants. We used to spend more on consultants, used to. That’s no longer the case.

Then our investment, I’m talking as a group, and why not. So we cannot predict — I cannot predict, but there are a number of people who are interested for various reasons. And it’s progressing well.

Sophie Cagnard

Thank you, behind.

Patrik Schwendimann

Patrik Schwendimann on ZKB. What is the current percentage of sales with the younger consumers like, up to 33 years old? What was the recent development? What are your expectations here? Because you can imagine this was a quite substantial growth driver also for Van Cleef, for example, and Cartier?

And second question, why don’t you have paid another special dividend despite the huge cash pile? What were the reasons behind this?

Johann Rupert

Why haven’t we paid another special dividend? I think a 10% increase this year is very good. If you look at our competitors that have less than that. Who has had a higher dividend increase this year? I don’t think anybody.

And two, we’re comfortable adding our capacity. When I got a Wall Street, Milton Friedman was the guru and Jack Welch with General Electric embodied that, shareholder supremacy. Everything is about shareholders. And I knew him well. We added this agreement about the philosophy how to run companies and Six Sigma.

And I said the company is about more than just the shareholders. It’s about all the colleagues. It’s about the communities you live in. It’s about your obvious leader clients but the communities you live in and he’s got a far bigger social role than just shareholder return. And I had a debate about him, about how is it possible when you’re a proxy for the U.S.

GDP that you increase your profits every quarter, every quarter, every quarter. And that Six Sigma went to Boeing. And they replaced financial — aeronautical engineering by financial engineering. And we see what one of the great companies in the world, what happened there.

And if one day I give you a compilation of all the — all of the investment banking suggestions that we got over the years — merger, buyback, do this, buy your own shares back.

Now when do people ask companies to buy their own shares back? At the top of the cycle, just when they’ve made a lot of cash.

And then bad times arrive. When Anglo-American — when I got to Johannesburg, controlled 44% of the Johannesburg Stock Exchange. About 20%, half of it, was Anglo and De Beers that really they inherited. But people forget when Mr. Oppenheimer became the boss in ’38, they missed their preference share [indiscernible].

They built that up. But the second 24%, they both, I feel still, I can give you a list of great companies that they built. Then what happens, they move, they get a change and the nonexecutive starts running the company, and they appoint a person that’s never been in mining, a lot of the senior executives leave to other companies. And then they were at the top of the cycle. And investment bankers and Nonexecutive Directors persuaded them to do a share buyback I think of about $12 billion.

The cycle turned and suddenly that $12 billion worth of debt. And this unbelievable company now when they’re investing 5 to 8 years, the mines that they want to buy happen to be developed by the current CEO, the current Chairman, the Chilean copper mines. And there was an 8- to 10-year payback. What they’re doing with fertilizer is 8 to 10 years. Now they’re getting rated.

You need the fat for when the bad times come. And we’ve — 2 years ago, I said to the shareholders, “We’ll try to grow our dividends by 15% per year on a sustainable basis.” And we’ve managed to do that on a sustainable basis. But in order to do that, you need cash flow. In order to get cash flow, you need to have brand equity to support the demand for your product. That is the mantra.

But I’ve seen too many companies get into trouble during good times. And guess what happens when you really have bad times, people have to sell their best assets because nobody is going to buy the rubbish. So we’ll try to equalize it out. But I think a higher than our competitor increase in dividends in Swiss francs. Thank you.

Patrik Schwendimann

And regarding the consumers?

Cyrille Vigneron

So we have — and I guess, the same for Van Cleef, a broad range, meaning attractive to all generation. But there can be, of course, difference in the wealth distribution in different regions. And so far, millennial customers we’re more than 2/3, and to Gen Z by 20%, and some areas more than 30% and some others can be, of course, in Europe, you have a higher wealth distribution for people both more mature. But who wears, in some way, is quite broad as well. So we are present in all age brackets in all parts of the world, and that’s what has to be done.

If it’s too dominantly on some, either too mature or too young can be a problem. When you can have a broad view that all generation like something basically similar is the best. I mean generation buying together or sharing things in family.

Patrik Schwendimann

The recent change in the last couple of years that the young generation is really increased in terms of percentage contribution?

Cyrille Vigneron

Not so significantly. And you have a higher range of young generation in Middle East and in China compared to, for instance, Europe or Japan. But then it’s a question of market mix. We cannot say some trends of having a much higher proportion in one segment compared to another, we’re saying.

Nicolas Bos

The same. I think there is always quite a wide spectrum of customers. There is always a new and most recent generation. So probably to me the customers look younger today than they did 25 years ago, maybe it’s me. Yes, I think so.

And then you have some phenomenal. I’m thinking purely about comparing apples for reasons that we didn’t even imagine or tried to provoke it. We see a very strong recognition and appeal among very, very young people for the Alhambra collection for instance, and people that are 15, 20, 25, they are not necessarily buying, but they’re referencing that collection as desirable although they are not necessarily knowledgeable about precious jewelry. So sometimes you have an impact which is, in a way, generated by the social media. Whether it’s going to transform into sales, we’ll see.

But this is a good indication of just the high level of desirability of our brands and traditional collections even to very, very young generations.

Cyrille Vigneron

And we can see then for Europe, in university students, now they all want Cartier or Van Cleef. My daughter’s friend, they all want Cartier or Van Cleef. It’s a good sign.

Sophie Cagnard

Thank you. I think this was Piral, sorry. If Piral, can ask, just before Patrick. So thank you. We’ll go back to you, Carole, afterwards.

Thank you.

Piral Dadhania

Piral Dadhania from RBC. So I had a one long-term question and a shorter-term question. Mr. Rupert, you’ve been quite good at calling the China trends. My question is on the longer-term demand.

The demographic evolution that we’re expecting to see over the next 20 to 30 years, it looks like it will be less favorable than it’s been in the last 20 years, give or take. So I just wanted to see how you envisage the demand environment for luxury progressing with fewer customers to naturally speak to or to sell to. And then on the shorter term, just a question on inventory availability. I think comments were made that the overall demand shift is much faster these days with customers buying in different locations, obviously. I think at the 3Q earnings call, one of my colleagues had some trouble purchasing a Christmas gift.

So I was wondering, how have — what changes have been made? And is the product more available, particularly at Van Cleef in the key locations where you’re seeing increased demand?

Johann Rupert

Well, thank you very much. But normally, I get that phone call, why can’t I get this there? I really wanted to talk about demographics when you talked about the younger consumers and percentage with the early. The one thing about demographics, you can’t fight it. And we are seeing Japan being the leader for instance.

They had the most sophisticated, but total — the demographic plateaus inverted. And obviously, with the one-child policy, China is going to face an inverted plateau. However, we’ve seen in the most advanced market, in Japan, growth in the domestic clientele. So I think that lead lag effect is not imminent. It’s really medium to long term.

But I think in most of our traditional client countries, we have aging populations, Europe; Without immigration, the United States would have been in that position; China; for historical reasons, Japan. But we haven’t seen that affecting us yet. I’m more worried about the lack of saving that if you listen to Larry Fink, our people are living longer, healthier and that their pensions and their savings may not be sufficient. And another thing we have seen during this helicopter money period with national balance sheets being leveraged with more debt and that money not being spent on long-term projects, whether they be of educational or infrastructural nature, but more on consumption. So there is a fair amount of intergenerational theft that has taken place.

And people with capital, like us, like me, we were offered free capital. And the people who really need access to it were starved. Therefore, if you recall, I predicted social disharmony because people are not stupid, they’re diligent. And they realize now that there was a well shift that was — and I warned about in 2015 and I got criticized, how can the Cartier owner worry about the poor, but it was wrong. And therefore, we see all this strife, the political tension, social fabric being torn.

That, to me, is a bigger concern than demographics at this stage. And the clients who can afford to will not wish to be seen. That’s why quiet luxury. You will recall few years ago, we said less bling, and we went to less bling. Quiet luxury, if you wish to call it.

But if your child is at school, parents lose their job. And it’s your child’s best friend’s father. Do you really want to drive around in a Lamborghini? I would say, no. You’d go for an Audi.

So it is — that is a trend that I think will continue, that people will become more sober in general. Hopefully, that will help to abate some of the tensions. But I see social tensions as more worrisome for the total, especially the conspicuous consumption.

Sophie Cagnard

Thank you, Mr. Rupert. On product availability, I don’t know whether — perhaps Nicolas.

Nicolas Bos

Yes. I mean if you can give me exactly the reference of what you’re looking for. But it’s — we have shortages. They are not organized. They are mostly linked to the scarcity of some raw materials, some precious stones and also some high-level craftmanship.

We’ve been developing quite nicely over the few years. So basically, these capacities of production and capacity have improved, not always at the same pace as the desirability of the collection. Very difficult to predict. So we are working a lot.

I think they were lot of mentions of investment in workshops and facilities, and they are quite significant for the many years to come. But they will take years also to really build the capacity we need to the right level. So I hope in a way that we will keep some forms of scarcity because it means that the [indiscernible] is still high, but we’re trying to compensate that because, as the Chairman mentioned, we don’t believe in organized scarcity. So we try to deliver the best possible service and the best possible satisfaction to our customers.

Johann Rupert

Maybe you can tell everybody this I have trouble in sourcing things. It’s not only the clients. I sit on waiting lists because I try not to take preference over clients, especially in limited editions. I pay full price limited edition and I have to wait, which is irritating. But on the other hand, I can’t tell them don’t.

Build 20 new factories and then in 2 years’ time, we have a crunch and then they look at me and they said, “Do you remember that.”

So it’s not deliberate. It’s not manufactured. It’s really in the end — because these are not mass-produced machine products. There’s a human skill and craft involved. So you can’t just open a tap. And it’s — what I can tell you is not deliberate.

Sophie Cagnard

Thank you, Carole, and if you could. Given the time, I suggest we stop after Carole. It’s already 11:30.

Johann Rupert

It’s your loss, 1:30.

Sophie Cagnard

Yes. Sorry, I surely tell you it’s okay. Sorry, maybe we stop after Rogerio then.

Carole Madjo

Carole Madjo from Barclays. Two questions on the watch space, please. Could you share with us how you think about the path of recovery for the watch sector? I think you mentioned that the industry should not face the same issue it was facing 10 years ago. There is no structural issue.

So do you expect to see better trends, so positive growth from this year onwards?

And then you mentioned, I think, Vacheron Constantin and Lange & Sohne as brands are doing well. So is it fair to assume that watches at a lower pricing points are a bit more under pressure today? And lastly, you also mentioned that pricing power helped you sustain your margins. So what kind of price actions have you taken last year? And how should we think about price increase this year on both watches and jewelry?

Johann Rupert

We were laggards in taking pricing. Some of our competitors, especially should I say, in leather goods and other categories massively increased their prices. We were more reluctant because if the economy turns, you can never drop your prices. start dropping your prices. Somebody doesn’t want to.

I mean if you look at the Tesla thing, people buy Teslas and then they drop prices by 15%. How happy are the people who bought a month or 2 before? So we are cautious in increasing prices because of greed, and we were slower than our competitors in using price. We shouldn’t only say Lange and Vacheron. They are — I mean, they’ve both done very, very well, and Vacheron particularly but it’s — it was a 5-, 8-year positioning, having clarity.

Everybody knows the patrimony. And they have done extremely well. But it’s not because of the recent sudden shift. They’re now part of the Holy Trinity.

To give you an idea on pricing this year, I had to ask the people to raise the price of the first steel ODYSSEUS Lange. We took it from, I think, €28,000 to €34,000. A year later, a former client who will not get another watch, sold the watch at auction for €92,000. There was an artificial speculation, which is like Bitcoin. In the watch business for the pre-loved watches, obviously, that’s returned back.

That was related to scarcity or not. So we don’t use pricing. We could have doubled the price of the ODYSSEUS than we would have sold. But we look at the cost. We look — and so we’re not short-term greedy in pricing.

Yes, we have to adapt pricing in terms of inflation, in terms of cost structure. But Burkhart, we’ve not used it to increase margins. We want to remain desirable and we want to. And I think the key thing, a few years ago, we reset what we thought the Swiss watch industry. And I said to my colleagues, I don’t think — forget about 20%, think of 8% to 10%.

That will be a natural normal growth for us. And let’s now look — and please remember that it’s got a very big supply chain implication, all the way through our factories. And I don’t want to hire a bunch of new colleagues. And then because we overestimated 3 or 4 years later, tell them, “Sorry, we don’t have enough jobs for you.” So I think the thing that should calm everybody down when they look at “Swiss watch exports.” It’s not 2015, 2016, 2017, where everybody sold as many watches as they could. And suddenly, the Hong Kong democracy — you can mark the date when the democracy protest started.

That’s the day the biggest watch market in the world was Hong Kong in those days. It suddenly froze up. And suddenly all of us realized that people react to incentives, and we incentivized our people by sell-in. Guess what? We should have focused on sell-out.

Now with proper data management and proper communication with our wholesale and, I stress, partners, because if they don’t do well, we don’t do well. We have a bigger grasp of the total market and the system. So we have real-time data that we never had 8 years ago. So I would say — and our competitors as well. I think Rolex can sell in hundreds of thousands more if they focus on sell-in.

But they’ve also — we have good relationship with the other Swiss manufacturers. So we kind of know because we talk the same dealers as well. And I think the industry is in a totally different shape to what it was in 2015, ’16. But if you want to really grow over high single figure, you’re going to have to win market share. I think that, that is a given.

Whereas in jewelry, the unbranded universe is still so big that you don’t have to compete only against other international jewelers because the universe is far, far bigger, unbranded jewelry is still a very, very big percentage of global jewelry sales. But we had the Kors watch industry nearly killing the Swiss watch industry and then mechanical watches. But then there was a total boom, growing at 30% per year. Now those were abnormal times. I think we’re back to normal times.

And it’s still a very well run, and I’m talking the Swiss watch industry, an increasingly well-managed business. Is that enough?

Sophie Cagnard

Carole, if you could give…

Unidentified Company Representative

I’ll comment one more thing, that it used to be also done through the Watch Fair, Baselworld or Watches and Wonders now. And so the many makers used to take orders based on the past sales and projecting and having some kind of a year or more than a year of worthwhile of order, if you expect 30%, you would push 30% in front. But if it comes on 15%, when there is the anti-corruption in China, and that market shrinks by 50% or when Hong Kong shrinks right away.

So if you have placed order based on a plus 50% assumption and comes in a 12 month or so forth, assume you have a cliff. And so the industry has learned from there and know how to have some sound in the market, but not trying to place firm orders and to push whatever you have in production to have this adjustment.

So we have learned from these things and be more realistic.

Johann Rupert

And one of our directors, I can tell you that Bram Schot, who used to run Audi, yesterday, explained it to another nonexecutive director and he said, there’s a big difference between selling helping with buying. Our auto industry was helping with buy, then COVID came. And they are the natural restriction on the volume that they could produce and helping with buying, discounts, et cetera, et cetera, et cetera, disappeared. And guess what? The profits exploded.

So if you are producing more than the natural market, then in the end, you either have gray market or you have discounts. You have what you call helping with buying. I think we are focusing today on selling. I thought it’s beautiful. I told him I’ll give him credit for when I quote him.

So I have credited him.

Sophie Cagnard

Yes, it will be in the transcript. So definitely credit. Rogerio, so we’ll conclude the presentation with you because given the time.

Johann Rupert

One more.

Sophie Cagnard

Yes, absolutely, from Rogerio.

Rogerio Fujimori

Sophie, and thank you very much again for all the help over the years. I have a follow-up on the Jewellery Maisons and retail KPIs. I think one of the positive surprises, I think, to the market today and in recent years has been the consistent outperformance and resilience of the Jewellery Maisons with local clients in the U.S. and Europe. Is there anything standing out in terms of retail KPIs when I think about average transaction value or conversion of customer retention rates to explain this consistent outperformance versus some of your key peers, of course, in addition to all the iconic product lines that you have?

And probably related to that, if both Cartier and Van Cleef, €14 million sales today, much bigger than prepandemic levels. I was curious if the percentage of repeat customers is materially different to prepandemic levels?

Unidentified Company Representative

Thank you. First of all, the €14 million also include Buccellati. I think there was — historically, all of these companies were really built for domestic customers and progressively also, they serve international travelers along the decades. And a couple of decades ago, the importance of international travelers became so strong, especially in Europe that sometimes at certain companies.

If I talk on Van Cleef & Arpels, we somehow lost track also of domestic clienteles. And it’s true that, that was under the positive impact of the COVID period that we had to really come back to welcoming, treating, understanding domestic clienteles in Europe, in Japan, in pretty much all the countries where we had, had very, very strong success because of tourism before.

And at the end of the day, the teams are very good and they are retailers, and they do sell and they do understand their clients and adapt to the specifity of the market. So yes, in certain areas, for instance, in Europe, the price point will not necessarily be exactly the same. The taste will not be exactly the same as international travels, Americans, the Middle Eastern or Chinese in the past and we need to really reconnect with the market. And I think that probably for forecasted was — let’s say recovered it a bit easier because they had a very, very stronger historical footprint with domestic clients for Van Cleef & Arpels, for instance, it was really a reconnection in the past few years, but now it’s definitely an asset that we’re going to protect. We hope that in the future, we will see traveling customers coming back. But definitely, we will keep very, very strong attention to domestic clienteles.

Unidentified Company Representative

And for the element of the Maisons, I think what comes first is what Johann said is brand desirability. And for Jewellery, it means having distinctive style. If you think of Van Cleef , you know something, Alhambra or Berlin, but there is a style. And we think about Cartier and have the iconic collections or also some other iconic clients. And on the jewelery will think of Tutti Frutti or they will think of Panther and for iconic line of LOVE, Rendez-vous or Clash alternately, and there are several.

In jewelry, you don’t put your name on the product. So you must have a style and you must be consistent with that. If you try to be a little bit of everything, at some point, you may have some cool, but it doesn’t last. If you want to build in time, you have to build strong brand equity and you have to make it recognizable style. And that’s why we do year after year to do that.

Well, the same for Cartier watches. And at some point, we’re trying to do too much of everything and it lost appeal. So let’s bring it to what makes the Cartier style distinctive from everyone else. And now people think of Cartier watches as something distinctive, more than before. Even if this kind of a not very necessarily new model when we launched the Panthere, it became kind of a young product worn by young women, even if it was Baumann for some years, and it’s one of the best growing collections for the past 8 years.

So at some point, you have to be true to what the Maisons is about and cultivate that. At the end, we are what we sell. So that’s what we try to do. Well, we have a rather high level of repeat customers. But of course, to grow that level, we need to also attract constantly new customers.

So if you say the highest percentage come from new customers, but the repeat customers are quite steady, growing and their repeat value is increasing, which is a good sign. And the repeat value also on the — you can see on auction is also growing for all categories. And so one question before, the resell value of Lagrone diamond is 0. It sells only once. In auctions, our products sell pretty well.

Johann Rupert

But it’s very interesting if you look at the auctions. The people are not buying golden diamonds and platinums and rubies. They’re buying a product that’s distinctive and recognizable as Cartier style or Van Cleef style. Mr. Harry Winston, at first, he was very close to Mr. Oppenheimer and he had, at the sightings, he got preference in terms of stones in the 70s and 80s. But they didn’t develop the distinctive style. They sold beautiful diamonds.

And if you look back, those companies, they were selling stones. They weren’t selling style. Whereas if you look to me, you’ve got the Tutti Frutti there. I mean everybody knows that’s a Tutti Frutti. And I’m sorry to say whenever Cartier has gone off pace with a product that doesn’t say Cartier, it didn’t sell.

People have the imprint and have the imprint of consistency in style. So that’s really — it’s not just being a businessman. It’s actually having the nose and knowing this is the style.

And new Karl Lagerfeld felt quite well. He was a genius, did well at Chloe and brilliantly at Chanel, but Karl Lagerfeld himself, with his own brand, could never work because he was so inventive it’s this, it’s this, it’s that. There was never a single style that was maintained. So — but Madame Wertheimer said to him, there is your picture frame, and you’re not moving out of that frame. That’s where you stay.

So you saw Chanel. I could see Chanel. I can see it the mile away. So they innovated, they contemporized brilliantly, but Chanel remained Chanel. And that’s really — we have welcoming products. So in America, especially when young ladies turned 13, 14, the tradition is I’d like a LOVE bracelet. And life is about our home pass everything is just about memories. There’s no past.

Future is about fears or hopes, philosophically, and it’s about good memories. And it’s about rights of passage. If you graduate from university, your father takes you and he buys your Cartier watch. That is among friends of mine in the United States for the rite of passage. So when you wear that watch, you remember that the love of your parents that they gave to you.

It’s moments of history. So when you look at history and you look at watches, on their own, it doesn’t really matter. But my daughters were my late mother’s watches, those are the memories of the time they spend together. So it’s a very deeply emotional. And as a friend of mine says, life is about moments.

And you can’t plan a moment, then it’s always boring. Planned Bonomi and fake Bonomi is the worst thing.

But somehow, and it’s not necessarily luxury is seeing a beautiful sunset. It’s what do you remember. And that’s where if we can memorize with our clients, those beautiful memories, then will continue to be successful. So that’s really the overarching philosophy is about seeing something and having a happy memory. And that’s why, sorry. I’m not sure you’re going to look back at cultured diamond and say, “Oh, I had that wonderful time.” Thank you. Now Sophie, before you’re allowed to go, can you bring that now, the flower?

Sophie Cagnard

Wow, fantastic.

Johann Rupert

Thank you all for coming.