2023 Q3 Conference Call and webcast. Please be advised that today's conference is being recorded. As a reminder, all participants are in listen only mode. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Jean-Marc Duplaix, Deputy CEO, Operations and Finance. Please go ahead, sir. Good evening to all of you, and welcome to Kering's revenue call for the Q3 of 2023. Once more, this time around, I will be the one commenting on the group's performance. Armelle Poulou was appointed Group CFO recently, and she will take over the mic on our next call. Armelle is still in charge of Kering's treasury function and rapidly growing into her new responsibilities. Our Q3 top line performance took in the impact of the normalization that is felt throughout the luxury segment, combined with the consequences of our own elevation strategy at most of our houses, notably through reduction of wholesale. Let's start with slide four. In the period, group revenue reached EUR 4.5 billion, down 13% reported, and 9% comparable. Against an adverse macro backdrop, retail trends were affected by weaker in-store traffic, together with a lower contribution from online. Wholesale was down sharply, reflecting our increased control over distribution, as well as some cuts in orders. We remain fully dedicated to our strategy of further tightening distribution. It will yield long-term benefits for our houses, even if it entails some short-term pain, notably in the U.S. In the quarter, scope provided a 2 percentage point boost from the consolidation of Maui Jim, which will be fully comparable from this Q4 on. And finally, with a 6 percentage point negative contribution, FX represented a material headwind. Regional trends were challenging during the quarter. Year-on-year, Western Europe and Asia Pacific softened sequentially, though for fairly different reasons. North America remained subdued, but overall on par with Q2, and Japan's strength was confirmed on tourism spending. In this environment, our houses pursued their steadfast implementation of their strategies. The powerful fashion shows they staged demonstrated their creative identity and were widely acclaimed for their ability to express their unique heritage and craftsmanship. They invested in client elevation as well as in major campaigns, amplifying their brand statements, desirability and exclusivity. Investments in stores were also sustained, including openings and reopenings in landmark locations. I will only mention Gucci's relocation to a beautiful New Bond Street store in London, Boucheron's new Ginza flagship in Tokyo, or the expansion of Bottega Veneta's Montaigne store in Paris, shown on my opening slide, featuring a fully revamped environment. Turning to slide 5, a quick review of the breakdown of revenue by business and region. Gucci and Bottega Veneta posted a 7% comparable decline in the quarter. Saint Laurent and our other houses were down 12% and 15% comparable, respectively. Kering Eyewear on corporate recorded 3% comparable growth. We've seen different dynamics by brand, channel, and to some extent, region, on which I will elaborate in a moment. At group level, Western Europe, Japan, and Asia Pacific all gain share in our revenue mix, weighing 30%, 7%, and 34% of the total, respectively. North America lost 4 points and represented 22% of total revenue. The rest of the world was unchanged at 7%. On slide six, let's move to our revenue by channel and region. Retail, accounting for 78% of the total, was down 6% comparable in Q3. Our global store network didn't grow much during the period, with a few selective openings, especially in travel retail or new markets. In addition, we also took over some franchises. In Western Europe, retail turned negative, down 10%, driven by weaker local demand and slowing tourism spending on a high comp base with Americans and Middle Easterners last year. North America remained in negative territory, down 21%, with normalization still at play in the region. We should note that North America stands 50% ahead of its Q3 2019 top line level. Japan was up 28%, a base similar to the previous quarter. The market is fueled by strong tourist inflows from neighboring countries, taking advantage of an attractive price differential due to the relative weakness of the yen. Asia Pacific grew 1%, a sequential deceleration from Q2 on a more demanding comp base year-on-year, mostly in mainland China. Hong Kong and Macao continued to perform very well, while Korea, Singapore, and Thailand were less supportive. In our regional tourism clearly regained some traction, thanks in large part to the Chinese cluster, which is now spending more than 25% outside mainland China. For the time being, the bulk of the spending remains in the region rather than further afield. In this context, on a year-on-year basis, revenue from the Chinese cluster was up more than 20%. And finally, rest of the world was down marginally. For their part, wholesale and other revenue were down 20% comparable, with a sharp drop in pure wholesale from our luxury houses, notably in the U.S. This was partly offset by growth at Kering Eyewear and in royalties. Let's now turn to our houses, starting with Gucci on slide seven. Q3 revenue was down 14% reported, and 7% comparable. Retail was also down 7%. As usual, you will find details by region in the appendix. By product category, it's worth mentioning the resilience in handbags and, more broadly, in leather goods, also thanks to the success of the travel offer. The heritage-infused Valigeria collection is supported by global campaigns, including the most recent one here on the slide, that generated a considerable level of engagement. The major highlight of the quarter was Sabato De Sarno's debut fashion show, marking a clear change in the expression and attitude of the brand. Stronger communication campaigns, together with the new collection and show, are critical contributors to reestablishing Gucci's edge and sparkle. The house is opening a new chapter with well-defined priorities in terms of execution, enhance brand consideration, aid in exclusivity, exalt quality, and increase efficiency. All the teams at Gucci, starting with the CEO, Jean-François Palus, are fully mobilized to translate these priorities into communications, products and manufacturing, distribution, and customer experience. Moving to slide eight, for Saint Laurent. Comparable sales decreased 12% year-on-year, with wholesale down 38%, the main reason for the drop. This is in line with our strategy to raise control over distribution, including rationalization of third-party distributors. The situation of some U.S. partners is prompting a faster-than-planned reduction, creating added pressure. For the full year, this channel wide will likely decline by at least 25%. Retail, for its part, was down 4% on high multi-years comps, notably in Q3 last year. The house's geographical exposure, slightly over-indexing Western Europe and North America, together with strong penetration on locals, was definitely not supportive this quarter. However, Saint Laurent confirmed its traction on the high-end segment as the brand elevates its product proposition. Women's ready-to-wear posted the best performance, and leather goods were resilient, thanks in part to the success of recent introductions. Consistently building on its legacy, the house's summer 2024 fashion show was a vibrant tribute to its essential cause, referencing the wardrobes of pioneering women. On slide 9, Bottega Veneta's revenue was down 7% in comparable terms, largely due to the planned decrease in wholesale. In retail, which accounted for 84% of the total, revenue was down just 2%. Bottega Veneta is successfully appealing to the most selective clients, and that is also reflected in the sharp increase in average ticket the brand once again posted this quarter. The house's summer 2024 show confirmed its strong brand momentum. The collection was among the highest ranked by the leading fashion publications. It should contribute to further raising the visibility of Bottega Veneta across all markets, as we are starting to witness in China, where the brand is definitely gaining mindshare. Bottega Veneta is investing in upgrading its retail network, including the beautiful, expanded Paris Montaigne store I mentioned. As we target an increasingly demanding clientele, faultless retail rituals and a brand narrative consistently disseminated across all touchpoints are of paramount importance. On Slide 10, a summary of the performance of our other houses. In total, their revenue was down 19% reported and 15% comparable with contrasting trends. In retail, sales decreased 9%. Starting with our soft luxury houses, Balenciaga experienced uneven retail across regions on a very high comp base. The ongoing pressure is concentrated on Western markets, while Japan and Asia Pacific performed strongly. In this environment, the house continued its progress to rebalance and elevate its offer. At Alexander McQueen, the quarter was mixed in retail, with a good showing in its core ready-to-wear category, not fully offsetting the subdued performance in shoes. Significant cuts in the wholesale channel amplified the negative trend at both houses. Conversely, Brioni posted healthy growth, capitalizing both on its recognized tailoring expertise and on the growing appeal of leisure wear in its newer markets. In jewelry, revenue was up high single digit. By region, if our houses were not immune to the consumer environment in Western Europe, they benefited from a low exposure to the American market, while enjoying significant growth from their increasingly strong positions in Japan and Asia Pacific. Boucheron posted another strong quarter, fueled by its spectacular high jewelry collection, as well as by its renowned jewelry lines. Pomellato also enjoyed robust momentum in retail. And finally, Qeelin performed extremely well across Asia Pacific. Let's turn to Kering Eyewear on slide 11. Revenue was EUR 331 million, up 34% reported, and 2% comparable. Performance was mostly driven by Japan and Asia Pacific and by optical frames after a strong sunglasses season in the first half. The integration of Maui Jim is working out smoothly, and we are pleased with the brand's performance. Before we take your questions, as you have seen a week ago, we closed down the acquisition of Creed. We are pleased with the arrival within our group of one of the world's most prestigious and exclusive high-end fragrance houses. It will provide a solid stepping stone to the development of Kering Beauté and our foray into its key adjacent segments. As planned, we are also on target to finalize our purchase of a 30% interest in Valentino before the end of the year. The past couple months, we started operating under the new governance set up we announced mid-July. The transition has been smooth, and we have immediately started seeing the benefits of greater coordination and shorter lines of communications between corporate and brand development functions. We are confident that in the tough market environment we are facing, together with the rest of the industry, we have the right organization in place to regain our momentum and market positions. We are now ready to take your questions. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Chiara Battistini with JP Morgan. Please go ahead. Good evening. Thank you so much for taking my questions. The first one on Gucci, if I can ask, maybe if you can share some of the initial response you've seen to the Ancora show and from the buyers as well. And maybe also if you can share any initial action points that Mr. Palus has identified as he's moved to the brand now. My second question, linked to that also, is how to think about the margins for this year, but even also for next year, as you mentioned that you continue to invest in elevation and store projects at a time that the top line is still under pressure. Maybe any update on that, please? Finally, maybe on wholesale and your plans for wholesale across the different brands, not just for H2, but also into next year, as the cuts seem to be definitely bigger than what I was anticipating. An update there would be great. Also, how to think about the margin implications from the deleverage that we should expect, given the magnitude of these cuts, please. Thank you. Thank you, Chiara, for all your questions that will address many points of what we could discuss tonight. Starting with Gucci and the brilliant fashion show presented in September. I think that of course, as we can imagine, it's a little bit early to comment on what will be the results from this collection, but what we can see, say that it's part of a broader strategy in terms of communication. You may have noticed that we had in July and in August a lot of investments focused on our handbags and especially on the Gucci's icons. I think about the Horsebit or the Bamboo. Then in September, we had some campaigns with a shift in creativity with a focus on the Horsebit Chain, which was a part of the transition collections, if I could say. Then a campaign featuring Daria Werbowy about the jewelry with here again a shift in terms of creativity and aesthetic. And then finally, the Ancora campaign launched in September 2019. At the same time, we had, or more or less at the same time, we had the fashion show. And clearly, what is very convincing to us is that Gucci Ancora eroded a new creative chapter for the brand, while celebrating at the same time its past. I think that the show was a directional statement with a clear silhouette and intention building on the strong codes of the brand. So as such, the fashion show has been very well received by the Gucci buyers and also the professional buyers from the wholesale account, even if we have reduced the number of wholesale accounts, and we'll come back to that. And in terms of let's say engagement on social media, it was also very positive with reach, which was far above the recent fashion shows of Gucci. It does demonstrate, once again, the strength of the brand and how desirable the brand remain. So, as such, I think we are very pleased with this first fashion show, clearly marking an inflection that we are awaiting in terms of aesthetic. When it comes to the action points of Jean-François, I will try to summarize just to give time to the other questions, but Gucci, under the leadership of the new CEO, Jean-François, has clearly four priorities. The first priority is to enhance brand consideration and desirability, and that's the reason why, as I've mentioned, also, all the initiatives we had in terms of communication during the last few months, the last few weeks. So the focus will be really to reaffirm Gucci's unique positioning, which is, as you perfectly know, at the intersection of luxury and fashion. The second and third priorities, it's about to enhance product and distribution quality and exclusivity, so it's about product and distribution. And the fourth priority, it's about enhance the operational efficiency in order to be clearly more efficient with the resources we allocate to Gucci, to be more efficient in terms of supply chain, in terms of sales and operations. These are the four priorities defined by Jean-François, and he's working very hard with all the Gucci teams to clearly fix the different situations we may have in these four domains. When it comes to the margin, so about the EBIT margin, I think that you had the question. As you may assume that we had a target or we had some ambition for this year, but in a context where we were betting on a mid-single digit growth, and you can guess that concerning the performance in Q3 and what is happening in the currently in the market, it won't be the case. So we can expect somehow a dilution of the EBIT margin compared to last year for the full year, something around 200 basis points. And as we already explained, we want really to fuel the growth and the rebound of the brand, and we will make all the investments we need to make going forward to sustain this recovery. We should not expect any sort of improvement of the EBIT margin for 2024, starting with, from the figure you could guess for 2023. Finally, when it comes to, and I, I've partly answered to your fourth question, if I may, which was about deleveraging, and margin implications linked to that evolution of the top line. And maybe, Claire, you can jump on the question about wholesale. Yeah. Hello, Chiara. So, on wholesale, I understand your question is a bit beyond Gucci, so but I'm happy to go, brand by brand, let's say. So for Gucci, we already mentioned that for the full year, you should expect wholesale to be, I would say flat to slightly down. We haven't changed this global view. You know, the rationalization at Gucci is mostly over. Of course, the current environment is not extremely favorable, and then we haven't really, I mean, Gucci has not really pushed its collection, especially in Q3. But the full year, I would say ballpark is unchanged for 2023, for Gucci. When it comes to YSL, Jean-Marc mentioned already in his comments, you should expect full year down at least 25%. Clearly a bit above what we had initially in mind, but quite close. It's most of it is rationalization and downsizing of the channel, and on top of it, a bit of additional pressure from the U.S. BV full year, we haven't changed our message. You should still expect -20% to -25% for the full year, this year at Bottega. And then for other luxury houses, you can probably go in something around -40 to -30, probably for the full year, makes sense. We already said, that, for the three brands I mentioned, so YSL, Bottega, and then in other luxury houses, especially Balenciaga, the bulk of rationalization should be behind us, starting mid-2024, let's say, with a high, much higher share of retail, obviously. What it entails in terms of margin, yes, I mean, obviously wholesale is still interesting margin, and when you have this, wholesale rationalization, you do have some margin impact, short term. So it's obviously not helpful on the margin profile. Great. Thank you very much. Very helpful. The next question is from Antoine Belge with BNP Paribas. Please go ahead. Yes, hello, good evening, it's Antoine Belge at BNP Paribas Exane. Three questions. The first two are on the management changes. First of all, regarding Francesca, she's been promoted and, but she's still also the CEO of Saint Laurent at the time when we see a bit of a slowdown. So, could you elaborate a little bit. I understand that there were two people who should now have a lot of people reporting to them, but how we feel amongst investors that there is a bit of a fear that Francesca will have maybe a bit too much on her plate. Second question, regarding Jean-François being the interim CEO at Gucci, he also, I think at the beginning, I mean, the word interim usually means a short period, but it seemed that it could be a bit longer, so yeah, if you could elaborate on this and what it mean about the start of the search for the new CEO and a bit of precision on the timeframe. The third question is related to the margin expectation, not so much on Gucci, because you've been super precise, and thanks for this, but also Saint Laurent, I mean, Bottega and others been negative this quarter. You know, is there also a bit of downside to what consensus expects for these other assets? Thank you very much. Thank you, Antoine, for your three questions. I can be very clear on the, on the two first one, but as with on the third one, by the way. Starting with the first one, I think, it's important to remind that, Francesca has built in the, in the past few years, a very strong leadership group and has very strong teams at Saint Laurent. Following her, her appointment at Kering, the number of direct reports, she has, has been streamlined to allow her to continue running the company and combine the two functions. The new organization with the deputy CEO and the promotion of the previous CFO to the role of CEO, is in place, already, and is working very well, obviously on par, even above our expectations. So Francesca is already involved in our new role at Kering, but is maintaining her leadership of Saint Laurent, which is very important, because it does allow her to stay grounded in operation, which is a very important factor to steer the development of all the other brands, and also to continue to manage Saint Laurent in this period, which is more challenging for the industry and also for the brand, for specific reasons. So, I can reassure the investors and the shareholders by really saying that we have a strong organization in place at Saint Laurent, and that she can really devote the time she needs, both on Saint Laurent and to Kering, thanks to that organization. I will also clarify on what was unclear, but what we wanted to say by mentioning interim. We needed, as we already mentioned, and Jean-François was super clear on that, in July, a new pilot for the next stage of the journey at Gucci. Jean-François is immediately operational to ensure a smooth and efficient start of the new chapter. He has been Kering Managing Director for many years, working closely with all the brands and all the CEOs, including Francesca, of course, but also many people in different layers of the organization at Gucci. So he knows all the teams in place at Gucci. He's rapidly assessing the situation and strengthening already the organization. He has a good knowledge of what must be done, and he will be able to speed up the pace of execution, and we already mentioned in the past that it was all about execution. Jean-François is here to fix short-term issues, and he's very independent in his judgment. He has been instrumental in the success of the PUMA turnaround a few years ago. He led PUMA in 2012, 2013. He recruited Bjørn Gulden and prepared all the strategies that Bjørn executed afterwards. So clearly, the mission is to set up the new foundations for Gucci, put all the things right on track at Gucci, and once this work will be done, the appointment of a new CEO could be contemplated. So the search for a new CFO so far is not a priority of a new CEO. Sorry, is not so far a priority, and the focus is foremost about the execution of the strategy. So the role of Jean-François will be this one, and it will last the time we need. As regards the EBIT margin of the other brands you mentioned, Saint Laurent, but to give an ETA, to be honest, this is a context where obviously there is some pressure on the top line. And Claire was very clear by saying that the rationalization, which is something which is largely self-inflicted, but does not help. But at the same time, we want also to invest in our brand to nurture their future development, to nurture and to clearly fuel all the initiatives they have. So, of course, to protect the EBIT margin is something we are vigilant about, but it should be made in a smart way, and to find the right balance, the right strike between what is reallocation of resources, but also sometimes incremental resources we need to give to our brands. So that being said, I think that when it comes to Saint Laurent, we are still confident that we can keep margins that would be quite close to the one we have delivered last year. When it comes to Bottega Veneta, while we were anticipating rather at the beginning of the year an increase of the profitability, we should stay around 20%, plus minus, or for the brand. Of course, when it comes to all the brands of the group, it's a mixed bag, as you can imagine. Some of the brands are well positioned to continue to increase their profitability, thanks to a positive operating leverage. I think about the jewelry brands, while of course, for McQueen and Balenciaga, it's clearly more challenging and we anticipate still some pressure on the EBIT margin for the rest of the year for these two brands. Okay, thank you. So, just to clarify, so on the other brands, is it fair to say that it should be more around 10% to 11%, maybe, as a combined margin for others? For other luxury houses, Antoine? Yeah, yeah. For the full year? Yes. No. No, I think, when you look at the level of top-line pressure we have, I think it's ambitious to think we can have double-digit EBIT margin for the full year. Okay. Thank you very much for the precision. Appreciate it. Welcome. The next question is from Oliver Chen with TD Cowen. Please go ahead. Hi, thank you very much. The North America comparison eases next quarter and also the Gucci comparison eases. I mean, as we think about ticket and transaction at Gucci near and long term, what are your thoughts on the pricing and that opportunity? And on North America, second, the normalization factor that's happening, as the compares ease, how do you see a normalization factoring into how we should think about the forward forecast in the North America market? Finally, a lot of our proprietary data around China definitely shows volatility in consumer confidence and housing market and other factors. What are you seeing with the Chinese customer? Are you incrementally worried, or is the Chinese customer inflecting more favorably? Thank you very much. Hi, Oliver, this is Claire. I was not sure the comments, your question was only on North America, but I mean, what we see so far in North America and not Gucci specific, is rather clearly, unfortunately, some pressure on the traffic. I mean, traffic has been clearly weak. We don't see really inflection point for now on the traffic. We are still benefiting from some tailwinds, depending on the brand, on the average AUR or average ticket. But what is still at stake is clearly the traffic. I would mention traffic in stores, but also online. I mean, online is clearly quite a drag on the North American market. Now, what you've seen is that sequentially we have not really... I mean, the trends have not really changed in North America, I would say, not improve, unfortunately, but not deteriorated either. So the question mark is obviously on the Q4. We know the comp base is easier in Q4. Now, you know, also that comp base doesn't make underlying demand, so it's a bit, I mean, difficult to answer. Clearly, aspirational customer has been the most under pressure in the US, and that's still the case, obviously in Q3. I'm not going to answer about pure pricing strategy. Maybe we're gonna have another question about that later on. Okay, and Yeah- On China, Maybe to the Yes, thank you. Yeah, sorry. When it comes to the China or even North America, said by Claire, it's true that normally comp base should help, starting more specifically from November. October was still quite strong last year. But also, we are navigating more than ever in an uncertain macro environment. The visibility we have is quite low, and unfortunately, geographical, geopolitical risks are mounting, and could further impair consumer sentiment. So now when it comes to the U.S., obviously it's difficult to say, and now when it's about China, what is positive in a way, if we look at the last quarter, is that, as I mentioned during my initial speech, one quarter of the Chinese demand was outside Mainland China. We see an acceleration of the tourist flows in many regions. We start to see, again, some Chinese traveling to Korea. We have also more and more Chinese clients in Europe. And even if there are more individuals so far, rather than organized tours. But at the end of the day, what is important, if we look at the Chinese cluster, there was quite a good performance in Q3, even a sequential acceleration if we look on the two-year stack, which is positive, and it was across the board, not only one brand specifically, even if we have highlighted the success of Saint Laurent and Balenciaga in China. So if there would not be any more geopolitical turmoil, we could imagine that in Q4, if we combine the easiest, the easier compares and maybe an acceleration or an increase of the tourist flows, it could help the performance in China. So we are not particularly worried by something that would be specific to China. It's more about the geopolitical environment that I've mentioned before. The macro in China is not helping, the macroeconomic factors in China are not helping, but there is nothing new so far. We don't expect, or we don't see further deterioration on that side. But it's true that the consumer sentiment in China is not where we were guessing that it would be at that time of the year when we started 2023. Okay, thank you, very helpful. You gave a lot of great color on Gucci margins. Last question on, what are the risk factors we should consider, you know, to Gucci margins going forward? Will that mainly be contingent upon the top line drivers? What's in your, you know, bear versus bull case for Gucci margins? Thank you. We are investing to recover, or to regain traction, or to regain market shares. What is very, very difficult way to measure is the return on such type of investment. Sometimes it can take time. We know that there are some markets where, of course, we have already made some investments, some of them are some returns, some of them are, let's say, maybe more challenging in terms of results. So we need to be patient. And clearly, there will be the question mark will be about the trajectory in terms of top line and the need to fuel that growth. And if there is, at a point, a sort of disconnect that could weigh on the EBIT margin. But I think that we expect, let's say, a sort of stability or sort of plateau or in terms of profitability for next year, rather on the present side, even if, of course, once again, if there would be something happening at the macro level, of course, it could be somehow different. Best regards. Thank you. The next question is from Thomas Chauvet with Citi Research. Please go ahead. On Gucci marketing. You've suggested, Jean-Marc, Gucci margins won't expand next year. If we focus just on the communication cost, is it fair to assume that marketing to sales ratio could increase year-on-year, maybe by a couple of percentage points to enhance brand consideration, as you said, on a full year 2024 basis, but perhaps as early as H2 2023? And is there anything different in the way you approach marketing campaign or events under Sabato De Sarno, that you and the new management team want to highlight? Secondly, on pricing, Hermès this morning indicated that they could increase prices by a mid-single digit percentage, due to elevated raw material prices, wage inflation, and less favorable FX hedging on Asian currencies. Do you feel that your key brand will also have to go through the same kind of price increase magnitude to protect profitability and input costs inflation? And finally, on capital allocation, you made some comments at the end of your presentation about recent acquisition. With the closing of Creed and Beauty and the purchase of 30% of Valentino on the way, do you feel you've deployed enough M&A capital for the time being, or do you still see gaps in the portfolio at the time the industry is still consolidating at a pretty high pace? Thank you. Yeah, hello, Thomas. Just as a reminder, it's a Q3 revenue call, so it's not a full year 2024 call. So, we will not be able to give you all this indication, and it's not clearly the right call to do it. So I leave it to Jean-Marc, but just as a short reminder. Yeah. Nonetheless, you know that, what we mentioned in the, in some of the calls, is that we are working to, improve the efficiency of the, the communication, at Gucci. And we- what we mentioned is that it's not only, something that we can do by, increasing, the, the cost of the communication. There is also a question of reallocating the cost to be more efficient. I think that what we are working on is just to have, different, layers of communication. It can be about, typically, a repeated communication to build a desirability around some icons. I mentioned the Horsebit, the Bamboo, but I could also mention the Jackie, that, that these are the three, the three, icon bags. We can also invest, of course, in more seasonal campaigns. I mentioned the one of the fall winter 2023, the one around the Ancora fashion show. We have also some specific campaign with typically the new Valigeria campaign that you may have seen on the presentation with Kendall Jenner and Bad Bunny. We saw really some impact, obviously, and which is a good also illustration, and that we want really to show how the Gucci positioning is about intersection of luxury and fashion. But we have also some more institutional communication investments, typically the one we have with the Cosmos exhibition, that is now in London, and that will come to Japan in 2024 to celebrate the sixtieth anniversary of the brand in the country. All that with also some work to have some more KOLs and influencers with the recruitments of new influencers in China, but also in Korea. That does contribute clearly to add some pressure on the lines of communication, marketing expenses, but it's really what we want to do, and that the reason why we don't want to be too pushy and too clearly to bullish on the EBIT side, because what we expect is, of course, to regain some traction on the top line with some leverage, but that would be reinvested in some different lines of expenses, but clearly communication is part of it. Price increase. It's something that we cannot comment on 2024. You know, that we had some tactical price increases during the year, but pure price increases considering where the brand stands now, I think that's not clearly the right decision. That we have been able, as you, as you may have noticed, already in H1, to absorb part of the inflation, and the gross margin had been quite well protected so far, and I guess that it should be the case, by the end of the year. The combination of hedging and FX, by the way, should help a little bit globally over the year. So as a result, I would say that, it's not on the pricing strategy side that we bet on for 2023 and 2024. By the way, for the end of 2023, there is nothing we can really do now. It's more about 2024, and we have some other priorities and some other focus, considering the positioning of our brands. And as you know, the elevation of the brand is contributing to the increase of the average selling price. It's not just a storytelling, the elevation of the brand, because when we look at the performance of our brands in the higher segments of clientele, of products, we see a real increase. It's not relative, it's in absolute terms. So we see that there is a good response of the market to the elevation of the brand, with an impact on the average selling price. So to add on top of that, pure price increase, it's not part of this, of our strategy, or at least so far, and we will see what will happen going forward in 2024. As regards Creed, the question is not about saying if it's enough or too much, or the point is more about if there is a hole in the portfolio, and if there is some opportunity. To be honest, we are not reasoning exactly completely like that. I think that we have already a very strong portfolio of brands. We have been able to add Creed because it's clearly part of the strategy to for expanding Kering Beauty and accelerating the development of Kering Beauty. And by itself also, Creed is a great brand with a huge potential. When it comes to Valentino, obviously, it's really so far a 30% stake, but going forward, it should be a very nice addition to the portfolio of brands we have, and it's clearly an iconic brand on the market. And what we will continue to target is there will be some opportunity with this type of iconic brands, and obviously, we have also some firepower still to undertake M&A. But I think that we have already a lot of things to do with the existing portfolio, a lot of things to do in terms of execution of the strategy, and short-term, the focus is principally about that. We need also to work on the integration of Creed, which is super important to us. Let's say that so far, the priority is about organic growth and integration of Maui Jim and Creed. Thank you. The next question is from Edouard Aubin with Morgan Stanley. Please go ahead. Yeah, good evening, Jean-Marc and Claire. So three questions for me. On Saint Laurent, so you talked about it, Jean-Marc, but if we look at the performance in the U.S. and Europe, on an underlying basis, you know, looking at the comp base, I mean, clearly things have worsened in the Q2, and it's not just due to wholesale, because I think you reported your first negative retail comp in basically a decade, if you exclude the beginning of the pandemic. So what's kind of your analysis, apart from obviously the adverse macro and, you know, the exposure to maybe aspirational customers, kind of what's your analysis of the relatively brutal slowdown there, you know? Have you chased sales too aggressively with the brand? Are you too dependent on leather goods, and so on and so forth? So I'd, I'd be curious to have your, your view on that. The second question is just to follow up on, I think it was Thomas' question on, on the, the leverage at Gucci. So if, if we look at Gucci, your, your store network expanded quite a bit over the past, three, four years, a bit more than some of the other, leading brands, which obviously is, is leading to some negative scissor effect and, and operating deleverage, as you mentioned. Can you, can you share with us what you expect the sales density to be, in for, for the year? I think you were about EUR 45,000 per square meter in 2021, if my memory is correct. What, what's your, you know, in terms of the strategy, in terms of the retail expansion, you talked about the opening of flagship in Paris and, and London. If we look over the next 18 months, what's your strategy there? Could you actually rationalize, some of the store estate at, at Gucci, there or not? And then, sorry, lastly, again, just to follow up on, again, I think it was Thomas as well on, on the, advertising spend. If we look, more broadly at the industry level, the cost to compete has been going up for the luxury goods industry in recent years. Maybe it's early days, and it's maybe too early, but when you talk with your colleagues at Kering, are they seeing some, or expecting some moderation of, you know, A&P spend in the coming quarters, based on, you know, kind of market intelligence? Are some of your competitors and peers becoming a bit more reasonable in terms of the spend behind the brands? That would be helpful. Thank you. Thank you very much, Noel, for all your questions. You have mentioned already in your question some very important factors explaining the performance of Saint Laurent. Besides wholesale, it's important to remind that first of all, and I want to reiterate that the house's geographical exposure is slightly over-indexing. Western Europe and North America together, they represent something like 57% of the total sales, retail sales. And in fact, it's true that the brand has a good penetration with locals and a lower contribution of tourism. And it's true that in the recent years, when we think about the growth of the brand, in the past few years, it has been also driven partly by aspirational clients, which is absolutely true. But still, if we look at where we are in Q3 2023, the CAGR, the average growth since 2018 is still at 16%, which is huge in the industry. So clearly, yes, the focus on brand elevation that does encompass also a very strong discipline in terms of markdown activities, in terms of exposure to certain channels. The fact that the recent launches in handbags were made at a price point which was quite high, and then we have recently launched some new items, new SKUs, above EUR 3,000 to 3,500 retail price, had an impact, because when the aspirational clients are entering in the store, it's true that they have probably less products to buy. It's true also that something to mention that Saint Laurent, because of also of its positioning and the fact it's a very urban brand, has been quite strong at developing an online business. And the online business, because more exposed to aspirational, has declined. Globally, across the brand, we can say, not specifically to Gucci, but it does cost us probably something like four points of growth because of the exposure to online. So it means that, in other words, without online, clearly on the full price store, Saint Laurent would be positive in retail. So it's what I can say, and the fact that the brand is super strong in Western Europe and North America had an impact. That being said, the good thing I could mention is the fact that the brand has been quite very strong in Asia and in China, and we cannot really say that the brand has lost momentum in this region. The second point I would like to make about what is very positive and, and encouraging to us, is the fact that the penetration of the brand in the top clients is accelerating. We help in that direction with the ready-to-wear. Ready-to-wear is a category, where clearly we are able to engage with a more elevated, more educated client with a higher purchasing power. That's the reason why also we had a very strong fashion show, clearly showing our ambitions to continue to grow that category, which is instrumental to continue to penetrate further the top client segment. Second question about the delivery at Gucci and the store network sales density. As a reminder, first of all, it's always tricky to compare the brands in the industry, because we have not necessarily the same square footage average square footage per store. So it's not because we have opened some points in the past few years with also the retailization, the conversion of some franchisee that there was a massive contribution of space expansion. Conversely, going forward, we don't expect massive retail expansion in the coming years. Rather, in some cases, a consolidation or relocation of some stores. We have mentioned Paris with the project at Castiglione Saint-Honoré, that will be a landmark store for Gucci in Paris. But, the expansion was part of the strategy of Gucci for several years, but with very selected openings. And we could envisage some reduction of point of sale in certain regions and in certain type of stores. When it comes to the sales density, I will let, first of all, the new management of Gucci work in order to define what could be the next ambition. What I can tell you is that, also with the elevation of the average selling price, globally, the sales density has been not so much hit so far, and of course, there is an impact due to the traffic and the evolution of the top line. But we have been able, in 2022, to come back at the level of sales density, which is where we have room for improvement, clearly. We have a starting point, which is, let's say, quite distant. When it comes to your third question about the advertising and communication spend, yes, it's not something new that the cost to compete has increased massively in the industry. And as I already elaborated on, it's not only about advertising and communication, it's more broadly about how we engage with the consumers, the needs to invest, the need to invest in our stores, events in our stores, events, or private events. So it's really about a 360 approach, and it has increased indeed. Also the digital communication is absolutely key, even if the investment should not be skewed only towards digital communication, it does remain a very important way to engage with consumers. And it has a cost also in terms of, let's say, it does also lead to an increase of the cost of information systems. So all in all, it's clear that there was an inflation. Could we say that we could see some moderation going forward? Of course, I won't comment about our competitors, that's not my job. What we told you already is that probably, in that environment, the focus would be to insist and to focus on the return we can expect on our communication investments. When the industry was booming, it was probably less, let's say, need to look at this KPI, even if it's always difficult to measure what the return of investment on this type of marketing investments. But clearly, we need to be more selective and to be sure that for the same amount of money, we can be more efficient in terms of impact, in terms of, let's say, brand awareness, brand equity building. And that's, I think, at least in our brands, it's what we will impose as a financial discipline, is just to be sure that we are investing in the right way. Thank you, Jean-Marc. The next question is from Charles-Louis Scotti with Kepler Cheuvreux. Please go ahead. Hello, good evening. I have three questions, please. The first one, this is a follow-up question on your wholesale rationalization. If I understood correctly, you said it will be nearly down by midyear, 2024. So is it fair to assume the same rate of wholesale decline in H1 next year? And in other word, what kind of retail penetration target do you have in mind for BV, Yves Saint Laurent, and Balenciaga? On e-commerce, I'm not sure I understood you correctly, but did you say that the fall in e-commerce sales had a four percentage point impact on your sales growth in Q3? And if I understood well, it means that e-commerce is down something like 25% to 30% in Q3. Is that correct? Third question on Kering Beauté, can you help us quantify the upfront investment required to set up your in-house beauty business? If I recall well, Dolce & Gabbana said, EUR 250 million overall investment, and nearly 250 hirings. So what kind of ramp up should we expect, and should we expect those investments to drag on the profitability of the, I don't know, Kering Eyewear and corporate divisions, if you include the Kering Beauté in this division going forward? Thank you. Hello, Charles-Louis. So I'm gonna take the first one. Yes, I mean, confirmation, you understood well on the wholesale. We should be a little bit more normative, sorry, starting from H2 next year. But it's a bit too early, sorry, to give you magnitude of decline for H1 2024. So happy to follow up when we release the full year for this one. You understood very well, what I mentioned is the fact that if you look at the retail performance, look at the retail performance, and it's an average for the group, it was not specific to Saint Laurent, and it can of course vary from one brand to another. But let's say that globally, the decline of e-commerce costs something like 4.2-3.4 points of growth. And without the e-commerce, you would have a performance with +4.3% to 4% compared to what is presented in terms of retail performance. Of course, the -25%, -30%, you have rapidly calculated, it's quite a fair estimate. Here again, it depends on the brand, it depends on the penetration of each brand in that segment. But let's have in mind that typically, so far, the e-commerce went back to something like 10% of the retail sales, 10% to 11% in terms of retail sales for the group as a whole. Of course, here again, we have some differences. Some brands have rather quite well resisted in terms of e-commerce performance, but because they were less penetrated. So that's more or less the average, and it does confirm that this was a channel more exposed to the aspirational clientele, and you won't be surprised to, if I tell you that Bottega Veneta also, of course, has been less hurt than some of the brands because of the online business. When it comes to Kering Beauty, this is a startup. This is a startup business, if we put aside Creed, and that's important to mention that. Of course, we will start with, as we mentioned before, Bottega Veneta, McQueen, and Balenciaga, which were, so far, very small business. It means that we are starting from a very low point in terms of top line. So you can imagine that at the beginning, there will be a lot of cost and not so much revenue. I won't quantify this. Clearly, the objective of Creed is that, of course, it will help to accelerate, but also to absorb some of this cost. As a reminder, Creed is a business of almost EUR 300 million of sales, normative side with integration of some distributors, with a very high profitability. We have mentioned something between 40% and 50% of EBITDA margin, or at least on a more normative level, with some additional investments in terms of marketing. And of course, it will help us to also fuel the building, the setup of the Kering Beauty business. That would be a loss-making company, beside Creed, during two years, until we have a sort of critical scale, to be able to absorb the cost of such a business. Thank you very much, François. The next question is from Rogerio Fujimori with Stifel. Please go ahead. Hi, Jean-Marc and Claire, thanks for taking my question. I have one on Gucci and one on Balenciaga. I was just wondering if you could talk about Gucci's strategy to retain its existing customers that are going to carry the brand through this transition phase, until some of those new products start recruiting new customers next year progresses. So put differently, what you're trying to do to protect the customer retention and avoid a bigger sales decline until Gucci has enough fashion novelties in store? And then the second point on Balenciaga, I was just wondering if you could talk a little bit about the retail trends by nationality, and particularly any light at the end of the tunnel for the American and the British nationalities. And could you confirm that Balenciaga outperformed the group's Chinese cluster growth in Q3? Thank you very much. Your first question is not an easy one, but at the same time, I would like to remind you, if I look at the sales of leather goods in Q3 at Gucci, we are still running at something like 70% of carryover on evergreen products. So it means that, of course, you may have some, you know, clients were absolutely, completely, in love with the Alessandro Michele design and aesthetic, but major parts of the clients, they are buying Gucci products and not Sabato De Sarno or Alessandro Michele or Frida Giannini products. It's exactly what we are aiming at, is really to work on the brand in a way that people come to buy Gucci products, because they love the products, they love the brand, and they find top quality products with a very good retail experience. I invite you again to visit the New Bond Street store in London and the Galleria store in Milan, with a concept which is really Gucci, which is very luxurious, and at the same time, very friendly. It's really what we are targeting in terms of strategy going forward in this transition phase. Of course, what I've mentioned before about the communication strategy at Gucci, it's also to continue to engage with a broad range of consumers, different profiles of consumers. And that's the reason why, let's say that it would be clearly, and it's a good question, a challenge for us in the coming months, but we think that we have the right setup. And looking at the retention we had during the Q3, we cannot really say that we saw some evolution that would be a problem to us. I think we kept a quite good retention, and conversely, we have been able to regain some new clients to recruit some clients, so let's say that so far, we are quite encouraged by what we observed in Q3. Balenciaga, maybe Claire will add some comments, but just to start with, what we can say is that Demna and maybe Claire will give some more colors with some figures, but the trends were very strong in Asia Pacific across all the geographies, Japan of course, but benefiting from Asian tourists, and in all the nationalities obviously have not been impacted at all by the controversy at Balenciaga last year. So the brand is re-booming, and is posting one of the best performances in the group in these regions. Clearly, in Europe, even if we had started to see some signs of stabilization in Q2, Q3 has not been completely on par with our expectations. The same in the US, but with more something which is due to the market also. It's true also that in this markets, we have been quite quiet in terms of communication, even if we have resumed a lot of communication initiatives in the past few months. But globally, the tone was really low key and compared to our peers or some other brands in the group, clearly, we have not invested so much in this market. Also, in terms of products, we have not introduced a lot of newness considering this current situation of the brand in this market, and the lack of newness and new SKUs may have not helped so far, but obviously, we continue to believe that going forward, this controversy impact should become more and more mitigated in these key markets. Think I don't have so much to add. I think in Europe, clearly, the U.K. was very challenging. And then overall, I mean, last year, you remember, it was before Q3 was before the controversy, so Europe was still benefiting from high level of tourist inflows, especially Americans. Obviously, the situation in Q3 this year was less supportive with tourists. And also some global softening, but this is across the board with the locals. And the high comp Jean-Marc mentioned, because we had the very successful bag launch last year. All in all, yes, the situation clearly is more challenging in Europe, whereas in the U.S., it's quite on par in Q3 with Q2 and no change. Thank you. The next question is from Carole Madjo, with Barclays, please go ahead. Hi, good evening. I have a few questions please. First question around Gucci. So when you talk about streamlining and focusing on better execution, does this also mean some change at the human resource level? So do you feel like you have a strong enough team to meet all your new ambition, or should we expect Mr. Palus to make some change as well on the employee headcount? That's the first question. Second one, also on Gucci, and this time around exclusivity. I think you mentioned that you wanted to also reduce your exposure to outlets going forward. Can you give a little around that, has this already started, or should we expect less outlet stores in the coming quarters? That would be interesting. And just last question to follow up on Balenciaga. So, just to fully understand, so right now in the U.S. market, and as well as in the U.K., so what exactly are you doing to kind of solve this issue around this controversy? Is it mostly waiting to basically see this go away with time, or are you also doing a bit more initiatives to make the consumers fall back in love with the brand? Thank you. And also last point, when you expect now this to fully be behind us? Thank you. As you know, Jean-François joined Gucci only in July, and Marco left just after the fashion show. So now, Jean-François is at full speed in terms of assessment of the quality of the organization. I think that to improve the execution of the strategy, first of all, I would like just to remind that a lot of things have been done in the past few years under the helm of Marco Bizzarri. What we said is that in some areas, we need to accelerate and to speed up. I think two points, I think that we may see some other changes or some reinforcement in terms of structure. So we will, we can expect in the coming months or the coming weeks, some new hirings, new people joining, the Gucci brand, in order really to add some skills, some competencies, capabilities at Gucci level. It's not a complete reset of the organization. It's more about adding some talents here and there where we feel that there is a need. So you will see some new appointments going forward. And the other point I would like just to highlight is clearly that there will be probably some need to reinforce the structure in the regions or to have a better balance between the headquarters and the region in terms of relation, in terms of flexibility and autonomy given to the regions. So, but with nothing that will be noticeable in that way, we believe that we have also already some strong profiles in most of the regions at Gucci. When it comes to exclusivity and distribution, yes, we mentioned in the past that clearly to enhance exclusivity, quality of the distribution, while keeping an outlet distribution, which is obviously not so high in terms of contribution of the sales and not so high in terms of number of units, but still, it's not what we are targeting in the long run, so we believe that we need to reduce the contribution of outlet to be even more exclusive. When I was answering the question of Edouard about the number of units, I was thinking also about the fact that going forward, there will be a reduction of number of units in terms of outlet distribution. But short term, you can imagine that even if we are working and we have already worked to optimize the level of inventories, because we have a transition and that we are still from all collections, there will be a need to keep for a certain period of time the outlet distribution, and in some cases, that will be clearly limited, but also some markdown activities in some stores, just to manage properly the inventories, also with the same objective, also to be sustainable. That is a priority. That being said, in the future, we could start to see some consolidation in terms of number of outlets. Finally, when it comes to the question on Balenciaga, I think that, it's not about just waiting. I think that, we have been quite silent in terms of communication, now we are coming back. There are some plans in 2024 to be more aggressive in terms of communication. By the way, the brand appreciation is still very high. We had a charity event in New York in September, and we had a lot of celebrities wearing Balenciaga, even if it was in New York City, they were bold enough to wear the latest creations of the Maison of Demna. So the brand appreciation is still very strong, so we will resume communication initiatives in 2024. We will inject some newness. We will increase the number of SKUs available in the stores. And part of the trends we see, obviously, have been self-inflicted, because we have not pushed so much the Open to Buy and the number of products available in the store, but I think it was the right time to digest in the key markets this crisis. So no, we will be active, and we are not passive, and of course, we have plans to, let's say, rebound in 2024. Having in mind, of course, that it will depend on market conditions, it's something that we cannot really control. So if you don't mind, we will take the last question. The last question is from Piral Dadhania with RBC. Please go ahead. Thank you, good evening. So I'll stick to two. On Gucci, the Ancora collection coming early next year, I was just wondering how you plan to approach the distribution strategy for that, given the soft traffic trends you're seeing in e-commerce. Will this product only be available in store to encourage customers to go into store? And then just in terms of the merchandising mix in store, could you perhaps just give us an indication of what proportion of product will be new, i.e., Ancora products versus existing? Just thinking about the evolution of the mix towards the new design aesthetic. And then maybe just, like, a slightly more medium-term question on that same point would be: Over what sort of timeframe do you expect Sabato De Sarno to be able to inject his vision into the more carryover part of the Gucci collection? Are we talking sort of 12 to 18 months, or will it take even longer than that? And then my second question is just on category trends. I think you mentioned in your prepared remarks that jewelry grew by high single digit in Q3 within other Maisons. I'm just a bit surprised to see the strength in the jewelry category, given where we are in the cycle. Could you maybe just talk about what drove that relative outperformance compared to some of your soft luxury brands? And just confirm that I understood that point correctly. Thank you. Let's start with the Ancora collection. We'll see early deliveries end of January in some key flagships with a selection of looks from the fashion show silhouette. Collection will be formally launched mid-February with a fashion show collection in main store. And it will be expanded gradually in mid-March to the broader network for leather goods and shoes with all the commercial developments around the collection. The gradual ramp-up will continue from April. That's about the Ancora collection, and of course, we'll continue to see some introduction of newness along the year, and by Q4, of course, the offer in store will be all designed by Sabato De Sarno for the newness part. That being said, don't forget, once again, that we want to target still, and that's always the objective, to run at around 60% to 70% of carryover lines in handbags, it's slightly less, of course, in shoes and even less in ready-to-wear, even if we will keep some iconic pieces of the previous collections in the offer. I've insisted on the fact that we have now clearly installed a family of iconic lines, the Jackie, the Bamboo, and the. The Horsebit. The Horsebit, sorry. By the way, you will have noticed that already during the the Ancora fashion show, there was a quite good exposure of the Jackie bag, which is really what exactly I was mentioning before, a collection which was a fashion show, which was both very creative, but also which was paying tribute to all the icons and of the brand. So now, clearly, to answer to your question, it means that by the end of the year, a big chunk of the offer will have been designed by Sabato De Sarno and the studio of Gucci. It's very important to me to remind that it's Sabato and the studio, and also the work done by the merchandising director with our team, to have also all the commercial developments around the collection. So let's say that by the end of the year, we will have made significant progresses. And it's for sure that in 12 to 18 months, which was the time horizon you were mentioning, this will be, we will be at full speed with the Sabato De Sarno collection. Jewelry, just it's important to say that, as I mentioned, yes, jewelry brands delivered a very strong performance. I think that we have different situations, Boucheron, because it's a brand in which we have invested a lot. Boucheron had a very good development in many markets. Qeelin, for obvious reason, because of its penetration in Asia, and clearly, Qeelin, sorry, has benefited from the rebound of the Chinese market, whatever the volatility of that rebound, and some weeks, which were maybe weaker. But at the end of the day, overall, for Qeelin, it has been driven by the strong performance in China. That being said, also, you should remember that our brands, the jewelry brands, are less exposed to the U.S., and clearly have not suffered from a slowdown of the U.S. market. But I think it's really the testimony of what we have started with our jewelry brands, which is about investment, expansion, creativity, because our brand, our jewelry brands are highly creative. It's really a brilliant alternative to some other peers, brands in many markets. So that does explain why our jewelry brands have been quite successful during this quarter, considering the current environment. So that was the last question. Thank you very much for being on our call, for all your questions. I think that we have taken the time to answer to most of your questions, and hopefully with sufficient clarity. Please note that we will report our 2023 full year earnings on February eighth, before the market opens. In the meantime, as always, Claire and her team remain available to answer any questions you may still have. We wish you a very nice evening. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephone.