Executives: Chris Hollis - Director, Financial Communications Jean-Jacques Guiony - Chief Financial

Officer
Analysts: David Da Maia - BCG Warwick Okines - Deutsche Bank Hermine de Bentzmann - Raymond James Thomas Chauvet - Citigroup Fred Speirs - UBS Catherine Rolland - Kepler Cheuvreux Rogerio Fujimori - RBC Capital Markets Annabel Gleeson - Redburn Céline Chérubin -

Natixis
Operator: Welcome to the LVMH First Quarter 2016 Revenue Conference Call. I will now hand over to Mr. Chris. Please go ahead.

Chris Hollis: Hello.

I am Chris Hollis, Director of Financial Communications at LVMH. And with me is Jean-Jacques Guiony, our Chief Financial Officer. Thank you for joining us. We have some brief remarks to make about LVMH’s revenue for the first quarter of 2016. As in previous periods, these revenue figures reported in accordance with IFRS.

After these remarks, Jean-Jacques and I will be happy to take your questions. Before I begin, I must remind you that certain information to be discussed on today’s call is forward-looking and subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the Safe Harbor statement included in our press release. Turning now to yesterday evening’s announcement, hopefully, you’ve all had the chance to read our release, which was issued in both French and English. As always, it’s available on LVMH’s website, www.lvmh.com as are the slides that we are using to guide today’s discussion.

Let’s start with the first slide, Slide #1, anyway, which gives you key revenue highlights for our third quarter performance. We see Q1 as a good start to the year in the context of a challenging and unstable environment. We delivered 3% organic revenue growth driven by the U.S., Europe and Japan while experiencing volatile trends in the rest of Asia. Looking at the business groups, we saw continued creative momentum at Louis Vuitton and the concentration around the new product lines at the other fashion brands, particularly those based in the U.S. Within our Wines & Spirits business, champagne showed strength in Europe and cognac continued its momentum in the U.S.

while gradually recovering in China. Among our Perfumes & Cosmetics business, Parfums Christian Dior was the highlight, delivering an exceptional performance. In Watches & Jewelry, TAG Heuer is successfully refocusing its strategy and the jewelry brands demonstrated robust performance during the quarter. And finally, within selective distribution, DFS was affected by the environment in Hong Kong and Macau, while Sephora continued to build on its very strong momentum. For the first quarter, turning to Slide 2, total revenue rose 4% on a reported basis to €8.60 billion from €8.32 billion in the prior year.

This includes, as I mentioned, a 3% rise in organic revenue and a 1% structure increase from the integration of the French newspaper, Le Parisien in other activities. While there are some currency impacts on a business group level, the overall impact on a group level was small. Turning to revenue by region, we continued to have a well-balanced revenue mix across geographies. As you can see on the map on Slide 3, in euro terms, Asia, including Japan, represented 37% of revenue for the first quarter. The quarter was a little bit boosted by Chinese New Year in that region.

Europe, including France, accounted for 26%. The U.S., including Hawaii, represented 25% and the remaining 12% related to revenue from other markets. In terms of change relative to last year’s first quarter, organic revenue rose on a geographical basis in euro terms in both U.S. and Japan. Europe also delivered growth with a 7% – rose 6%, sorry, in U.S.

and Japan. Europe also delivered growth with a 7% increase, while the rest of Asia saw a 2% decline. So, similar trends to what we saw in Q4 with slightly higher growth in Europe and the U.S. being offset by Japan where the yen strength at the end of January had an impact on tourist flows. Let’s look more closely at each business group starting with Wines & Spirits.

Organic revenue grew 6% with the total revenue rising to €1.03 billion from €992 million in the first quarter of last year. On a reported basis, this group was up 4% after taking into account a 2% negative currency impact. If we break this down by Champagne & Wines, in Champagne & Wines revenue grew 3% on an organic basis and with a negative 2% currency impact with €201 million in the first quarter of this year compared to €397 million in the year prior. Revenue for Cognac & Spirits saw a 7% increase in organic growth after a negative 1% currency impact to reach €633 million compared to €595 million in the year ago first quarter. Looking at Champagne & Wines, volumes in the champagne business were down 1%.

However, in organic revenue terms, we saw growth in Europe partially offset by the impact of the performance in the U.S. primarily due to the timing of price increases. Estates & Wines recorded good organic growth driven by positive pricing effects. In Cognac & Spirits, Hennessy volumes were up 8% for the first quarter, reflecting continued strong momentum in the U.S. We are also encouraged to see a gradual recovery of cognac in China with sellout trends in February looking healthy.

However, as we have seen in the past, it is always dangerous to extrapolate the first quarter trends. So, both Belvedere and Glenmorangie demonstrate its sustained growth. Moving on to Fashion & Leather Goods, Slide 7, this business group was flat for the quarter both on a reported and organic basis. Revenue remained basically steady at €2.97 billion versus €2.98 billion in the year ago period. To give you some color in Fashion & Leather Goods, this group experienced continued growth in Europe, except France where popular tourist destinations saw a marked decline in traffic in the quarter.

Japan continued to grow albeit at lower rates. And the U.S. continued to be impacted by the ongoing changes at our U.S. brands. And finally, the rest of Asia remained a challenging region even though there were some signs of improvements.

At Louis Vuitton, the brand continued its creative momentum with its new models well received during the recent shows and the continued success of its historic leather goods lines. In addition, the brands new Blossom jewelry and precious watch collection were positively received. Among the other fashion brands, Fendi showed solid performance in its leather and ready-to-wear lines. Loro Piana continued its focus on exceptional quality products. And Céline demonstrated a good momentum due to successful developments of new segments, including shoes and small leather goods.

However, the discontinuation of the DKNY C and DK Jeans lines at Donna Karan at the end of last year as well as the more recent label changes at Marc Jacobs had a negative impact of around 2% on this business group’s growth. For our Perfumes & Cosmetics business group, Slide 9, revenue reached €1.21 billion compared to €1.13 billion in the first quarter of 2015. This reflected an organic revenue increase of 9% offset by 2% currency impact bringing revenue growth for the quarter to 7% on a reported basis. I should note that the 2015 figures have been adjusted to take into account the reclassification of the Kendo Cosmetics company from Selective Retailing to Perfumes & Cosmetics. The performance of this business group, this is Slide 10 now, was bolstered by the strong momentum of perfumes and make-up in Europe and in the U.S.

Christian Dior’s new Sauvage fragrance continued its success and the new campaign of the iconic J’Adore fragrance through the launch of La Nouvelle Eau Lumière has been well received. There has also been a positive response to the new Poison Girl fragrance and good performance of the Dior Addict make-up line. During the quarter, Guerlain launched La Petite Robe Noire make-up line and its Orchidée imperial skincare line showed solid progress linked to the celebration of its 10-year anniversary. Guerlain also opened its first fragrance-only shop on the [indiscernible] in Paris. Parfums Givenchy saw continued progress in its make-up lines and Benefit continued its innovation in make-up with products such as Real! Tinted Primer and Dandelion Shy Beam Liquid Highlighter.

And to finish this up with the highlights of this group, both Make Up For Ever and Kenzo’s portfolio of brands, notably Kat Von D Beauty, are enjoying rapid progress. Now looking at our watches and jewelry business, Slide 11, revenue in this group was €774 million compared to €723 million in first quarter last year, growing 7% in the period on both on organic and reported basis. The growth this quarter in watches and jewelry has essentially been driven by progressive recovery of TAG Heuer and continued growth in jewelry. After the successful repositioning last year, TAG Heuer connected watch is attracting a younger clientele and this core offering is gaining momentum. This is expected to continue into the second quarter given the success of the Baselworld Watch fair.

There was also a solid performance in jewelry with all brands contributing to this growth, Bulgari’s successful new B01 collection and its renovated London Bond Street flagship store together with Chaumet success particularly in Asia are among the highlights in the quarter. The Selective Retailing group was up 4% on an organic and reported basis to €2.75 billion from €2.65 billion in the year ago period, what was a truly a tale of two very different themes. Sephora, this is Slide 14, delivered very solid organic revenue growth overall and a double digit comparable store increase in North America and the Middle East as well as in Russia and in Southeast Asia. In addition, the brand continued its robust online sales growth. And during the quarter, Sephora continued to expand its store network opening locations in Europe, Asia and the U.S.

and launched e-commerce in Southeast Asia. The DFS was impacted by continued challenging market environment in Hong Kong and Macau, but showed good performance in Japan where it benefited from the Chinese tourism. It also opened a new T Galleria in Siam Reap in Cambodia in March. So overall, LVMH delivered good performance against a challenging economic backdrop, all our businesses contributed to growth in the first quarter with the exception of Fashion & Leather Goods, which was affected by lower tourist flows in France and the discontinuation of certain products lines. The group continued to benefit from both its businesses and geographic diversity.

And going forward, we will continue to focus on innovation and creating high quality products while selectively expanding our store network as we pursue our objective of increasing our leadership position in the global luxury goods markets. Thank you. And with that, we will take any questions you might have. Lauren, please could you open the lines?

Operator: Yes, sir. [Operator Instructions] And we have the first question from David Da Maia from BCG.

Please go ahead sir. David

Da Maia: Hello. Hi everyone. Two questions please on LV, just to better understand the drivers behind this slowdown in Q1, have you seen a renewed weakness of the local demand in your main markets Europe, U.S. and China or the slowdown recurred in Q1 is only attributable to the fall of tourists spending.

And if it’s the case, can you share with us the current rate of tourist spending at LV total sales, please, especially in Europe. And I have a second question on pricing, it seems that you didn’t implemented a new price increase so far, are you planning something for the rest of this year, maybe some price increases in Europe to reduce the gap versus China, for example? Thank you. Jean-

Jacques Guiony: Thank you. So on the weakness or potential weakness in local markets, the answer is definitely no. What we have seen in the U.S., in Europe and obviously, to a certain extent in Asia, what is true as well in China is fairly strong resilience in some areas like Europe, some significant growth of local customers.

So basically, the slowdown, the limited slowdown that we have seen in Q1 comes mostly – and this is not a surprise unfortunately for all of us, come mostly from the touristic flows and the slowdown in touristic flows, particularly from the Eastern part of the world into the Western part of the world. The share of tourists at Vuitton, I think it’s about 35% to 37%. It’s obviously higher in some areas like Europe where it’s a bit in excess overall of 50% and some areas like the U.S. and Japan. Although as far as Japan is concerned, the share of tourists is growing.

But in some other areas, the share of tourist is pretty small, below 10%. Price increase, we are not going to disclose our price policy. You are true and you are right in saying that we have not increased in the main areas. We have not increased our prices. We did a few technical price increases in areas where currencies have been particularly weak.

But otherwise, we didn’t do anything. We don’t really doubt, but we have no plans, no particular plan to announce yet. David

Da Maia: Thank you.

Operator: So we have another question from Mr. Warwick Okines from Deutsche Bank.

Please go ahead.

Warwick Okines: Good afternoon. A question about the drag from the discontinuation of some U.S. lines in the quarter and firstly did you see similar drag in Q4 or did the activity really begin to hit Q1 and if so, do you expect the same sort of quantum of drag over the next couple of quarters, please? Thank you. Jean-

Jacques Guiony: Thank you, Warwick.

Well, particularly at Donna Karan, where we discontinued both DKNY Jeans and DKNY C, we started doing that about December last year, so the drag on Q4 was extremely limited last year. It is much more significant in Q1 of this year. And obviously the impact will last still we anniversarize the discontinuation of these lines end of the year. As far as Q1 is concerned, we estimate that the impact on the division altogether, on the group of the Fashion & Leather Goods of business was about 2%. So absent this discontinuation of lines, the gross would have been 2% instead of zero.

So it’s quite significant and will prevail most of the year.

Warwick Okines: And presumably in Q3 a little bit more than other quarters because it’s more of wholesale quarters after that?
Jean-

Jacques Guiony: Yes. But I mean if you look at it in the context – in the global context of Fashion & Leather, there could be some differences. But you are talking about digital digits, so it’s a bit complicated, but you may be right, yes.

Warwick Okines: Sure.

And if I may, one more, can you comment also on cognac price rises during the quarter, if you made any? Thank you. Jean-

Jacques Guiony: No, we didn’t. We will probably do something in Q2 but not in Q1.

Warwick Okines: Thank you very much.

Operator: We have another question from Hermine de Bentzmann from Raymond James.

Please go ahead madam. Hermine

de Bentzmann: Hi, good afternoon. Just two questions for me please. The first one in Fashion & Leather Goods, can you provide more granularity on this quarter regarding the performance month-after-month, are you seeing an improvement in March versus February especially in France. My second question is on cognac, can you give a bit more details regarding the Chinese New Year, I think you mentioned during the presentation that the sellout trends were well quite healthy.

And lastly, in Watches & Jewelry can you confirm that Bulgari is growing double-digit or do you expect Bulgari to maintain such a nice pace of growth? Thank you. Jean-

Jacques Guiony: Well, the first answer to your question is no, we are not trying to provide you with the detail of monthly numbers. We release quarterly figures. We don’t have to go into further the details. What I can tell you as far as France is concerned and as for Vuitton is concerned, because Vuitton is the brand obviously most affected by the change in touristic flows in France is that we don’t really see any improvement as of to-date.

It will take a while. And after the tourist attacks of November, it took a while before the impact was felt, but once it’s felt, we know that it’s going to take a few additional months to normalize. As far as Chinese New Year for cognac is concerned, we are quite happy with the sellout numbers for Chinese New Year. The Chinese year started a bit late, but nevertheless, altogether, we ended with pretty good performance as far as V.S.O.P. is concerned, we did positive around mid single-digit depictions for Chinese New Year.

And as far as X.O is concerned, it was better than that. I don’t know whether we can extrapolate this, but the start of the year for X.O is very good. As far as Watches & Jewelry and Bulgari is concerned, as you know, we don’t disclose precise figures on brands and I don’t know where you get the idea that Bulgari was double-digit. We did much better with Bulgari in Q1 and in Q4. Q4, as you remember, had a marked slowdown for the brand.

Last year, Q1 was much better. It’s particularly strong with jewelry, a little bit less so with watches, but all-in-all a good, I couldn’t say turnaround, because it was only one quarter that was a little bit under pressure last year, but nevertheless, a good improvement in Q1 this year. Hermine

de Bentzmann: Thank you.

Operator: We have another question from Luca Solca from Exane BNP Paribas. Please go ahead, sir.

Luca Solca: Yes, hello. I was wondering whether you could give us a sense of demand by nationality irrespective of where the demand is emerging and I understand that the terrorist attacks had an impact in Europe, a negative impact in Europe. I wonder what you are seeing on the main nationalities, especially the Chinese and the Americans and the domestic Europeans, if you could give us a little bit of granularity on that one? Secondly, you are in transition on two brands within Fashion & Leather Goods as you can tramp the date, the Donna Karen and then Marc Jacobs. I wonder what prospects you see for them to reach a new normal and when you anticipate that this could happen, if this is something that we could see in 2016 or whether it will take longer? And last but not least, there seems to be strong momentum in some of your watches brands. I was wondering whether you could help us understand the different dynamics in that division between jewelry and watches? Thank you very much, indeed.

Jean-

Jacques Guiony: Alright. Thank you, Luca. So, demand by nationality, no dramatic changes compared to Q4. We saw Chinese demand being flattish. It was a bit more positive in Q4 and it was flattish in Q1 both at home and as far as touristic markets are concerned whereas we had a significant discrepancy between the two last year.

So, that’s probably more the new thing. I mean, it’s more balanced as opposed to what we had last year. As far as American customers are concerned, it’s small as the same trend as the one we had last year. For European customers, it’s more complicated to measure. And I am obviously answering on Vuitton, because it’s the only brand where we can measure it with some accuracy, but even for them, it’s quite complicated to measure.

We have seen some pretty strong numbers in Italy, in the UK, even in France despite the drop in the touristic markets and what happened at the end of last year. So all-in-all, we see, even in Japan, was alright. I mean, we are talking about losing a digit growth in the customer base, but anyway, it’s not that bad. So, we have seen seeing domestic clientele being reasonably strong in Q1. Your question on the contemporary brand on DKNY and Marc Jacobs and prospect for a new normal, it’s obviously a very difficult question.

The only thing I can say is that – I would say two things. One is that as far as 2016 is concerned, we are doing according to our expectations. I mean, collection after collection or season after season, we see volume of business being in line was very much at or even exceeding it. So, it’s quite encouraging. This being said that type of turnaround doesn’t take two seasons or two quarters.

I mean, it’s much longer than that. As far as 2016 is concerned, we more or less know with the bookings what we are going to do. So, I can qualify this as a start of a turnaround, because it’s done according to our plans. Maybe you will have the different feeling as numbers will be lower than last year, but it’s different, maybe a different perspective on that, but I don’t think we will see a marked improvement before 2017 anyway. As far as Watches & Jewelry is concerned, as you said, I mean, the momentum for watches and particularly for TAG Heuer, is quite strong.

It’s not – it didn’t start yesterday. I mean, it’s some improvement in the offer that we have started few years – a couple of years ago. So, we are I think getting the benefit of the repositioning, the lowering of prices of the brand. Even the U.S. market, which was quite difficult – which had been quite difficult for some years, is improving now.

So, we are pretty pleased with the turnaround at TAG Heuer. There is some way to go. But it was okay. But as far as TAG Heuer is concerned, it’s a fairly small portion of the total business unlike other brands. So, it’s very encouraging.

As far as Bulgari is concerned, I said or I made a few comments already, the jewelry business is still doing very well. And I am talking about basic jewelry. So, that the b01 introduction, all these things that we have done in the first quarter of the year are working extremely well. The watch business is still particularly the female watch business is still a little bit under pressure as it was towards the end of the year. The novelties are doing okay, but the other lines are struggling a bit.

So, it’s not a catastrophe from that. Overall, I mean, we registered significant growth for the brand, but definitely a big contrast between jewelry and watches.

Luca Solca: Understood. Thank you very much, indeed. Thanks.

Operator: So, we have another question from Mr. Antoine Belge from HSBC. Please go ahead, sir.

Antoine Belge: Yes, hi, it’s Antoine Belge. Three questions.

First of all, I would like to come back on your comment about the impact of the non-LV brands on Fashion & Leather. I appreciate the comment, especially on the U.S. lines. Presumably, other brands like Céline, etcetera, are probably doing quite well. So, what I am trying to get at is the delta for the division as a whole has been minus 3 if you compare Q1 ‘16 versus Q4 ‘15.

Is it hard to say that the delta has been more subdued for the Louis Vuitton brand? My second question is regarding how we should think about the basis of comparison to our Fashion & Leather in Q2. I think there is a bit of a debate amongst investors. Some people are, I think, quite afraid by the fact that last year, you did plus 1 in Q1 and plus 10 in Q2. And for some people, it will be just sort of mirroring the previous year, not because of the price increase that happened in April 2014 or actually should – are you – would you advise us to be cautious as well, because you had a big benefit from tourist flow, especially in Europe in Q2? And if that’s the case, are you taking a more cautious attitude on cost especially at Vuitton? And finally, on champagne, the first quarter seems to have been impacted by a bit of timing difference on volumes. So, are you still quite confident about the full year? I mean, champagne has been a steady business of the last 2 years, so basically, are you expecting a cash effect later in the year in champagne? Thank you.

Jean-

Jacques Guiony: Thank you, Antoine, for your three questions. As far as LV is concerned, if I get you well, I mean, you want me to give you the difference in the growth of LV in Q4 and Q1, which obviously I am not going to give you. There was a little bit of the slowdown on LV as well. I mean, there is slowdown to the division, which in my view is mainly attributable to particularly DKNY, I mean, DKNY C and DKNY Jeans, as I mentioned before. And to a lesser extent to Marc Jacobs, there was also a little bit of a slowdown, maybe less so at LV, which is mostly coming from Paris.

I would say we have double-digit – that we are double-digit down in Paris with Vuitton. Not surprised to that. Paris is an important place to do business for Vuitton. We may have recovered a little bit of this outside France although it’s not obvious because most tourists would not only visit France, but they usually visit other countries as well. So the impact is probably felt in – on a multi-country basis.

But there was also a little bit of slowdown at Vuitton. So that’s all I can say on this at this point in time. The business for comparison in Q2, I mean you know the numbers. So if you look at – the only way to answer your question is to look at 2 years numbers and if you – which has a benefit of erasing the impact of the VAT changes in 2014, which created a low growth environment in Q1 2015 and high growth environment in Q2 2015. This was distorted comparison base.

If you look over 2 years, it’s more or less the same type of – it’s more or less the same type of growth. So I don’t think we should bother too much about all that. I mean what is important as far as we are concerned is to look forward and to try to benefit from – to try to manage the business with the current environment as opposed to really looking at the comparison base and what happened last year where there was a VAT increase impact in sales in 2015 numbers and so on. As far as Champagne is concerned, yes there is a timing – a little bit of the timing issue in the comparison base as last year. We had a price increase in late March or early April.

So as always, when this happens, particularly in the U.S., there is a big pickup in volumes in both sale and sell out before the price increase. We don’t do that this year. Maybe there will be a price increase but later on in the year. It’s not decided yet. So the comparison base was a bit affected, hence the flattish or slightly negative volumes for Champagne.

We remain pretty optimistic for the rest of the year for Champagne. Our European business is doing okay. The Japanese business is also doing okay. And the U.S. business will certainly normalize after this strong comparison base in Q1 and will normalize for the rest of the year as well, pretty hopeful about the Champagne business.

Operator: Okay. We have another question from Mr. Thomas Chauvet from Citigroup. Please go ahead sir.

Thomas Chauvet: Good afternoon Jean-Jacques, Chris, I have three questions, please.

The first one at Vuitton, I mean you seem quite happy about the pricing, the product extension after several years of reengineering and subtle changes, can you perhaps give us some qualitative comments on what kind of categories did well between the small leather goods with more affordable price points, the classic canvas bag, I think you mentioned that did very well and the high end leather bags on, which you communicated a lot of the past, have you seen differences in price points, intangible differences. Secondly, on Japan, I am just trying to understand what happened in Q1, I mean I know the 2-year comparative was tough because of the spike ahead of the VAT increase 2 years ago, but the 1 year comp wasn’t, so are you seeing an underlying demand slowdown with the local clientele, are you seeing any moderation in tourist demand from Chinese given the stronger Japanese yen we saw slightly weaker tourist trend into Japan from Chinese versus January, for instance. And thirdly on DFS Hong Kong, can you comment perhaps on traffic versus average basket, are you still seeing a less sophisticated shopper into this channel and given the uncertain outlook for that business, when are you thinking of starting the discussion about the renewal of the Hong Kong airport and what would be the trigger for you to stay there other than a rent reduction? Thank you. Jean-

Jacques Guiony: Okay. Thank you, Thomas.

So on the growth differences in between price points at Vuitton, I will not go into detail. The only thing I can tell you is that if you look at the product range for leather goods, irrespective of canvas leather goods, socks, etcetera, I mean the only category that did really much better than the rest on a consistent basis is small leather goods, which is a very important category for us. And it did really much better. It was exactly the same in Q3 and Q4. So it’s really I think a trend.

So definitely, the small leather good portfolio of Vuitton is doing very well. For the rest, I mean I cannot go into detail. There are pluses and minuses even within comparable price bracket, there are some lines doing better than others as it is always the case. We don’t rely on three different models. We have a lot of products in the catalog, in the stores.

So there are pluses and minuses. So it’s very difficult for me to give you a trend in that apart from the really the consistent out-performance of small leather goods.

Thomas Chauvet: And Jean-Jacques if I may just as a follow-up sorry, on small leather goods, which if I understand correctly, mainly canvas generally and quite affordable price point, is it a way for you to attract new type of customers to the brand or is it just a trading down from your existing clientele that is interesting and maybe in small dynamic categories like wallet, purse, etcetera, I am just trying to understand the strategy behind that?
Jean-

Jacques Guiony: Well, the strategy is to have a range of affordable product with high attractiveness, but trading down is not something we have in mind. And bear in mind that for the price of the wallet at Vuitton, you could buy a bag at some other brands, so it’s affordable, it’s high quality, it’s fabulous designed, it’s the creativity, etcetera, etcetera. But it’s high value and that’s what we are fighting to develop with small leather goods.

It’s been there forever, but we have which I think new creativity, new design in this part of the portfolio of product and it works very well. The strategy is to have a very convincing accessory portfolio of products and it works well. That’s the strategy behind it. It’s not trading down. It’s not anything like that.

That any expression of the brand that we do should be convincing and this is particularly convincing. The proof is the reaction from the customer base. To your question on Japan and China, I mean in Japan we had, as I said flattish domestic customers. In Q1 the touristic flows were still growing, obviously, not necessarily at the same growth rate as the one we had before because when you look at only 2 years back, I mean this trend was nonexistent. So obviously, you get triple digit growth for a while and then it goes down on.

But in terms of millions of euros being added to the business in Japan, it’s quite significant and we are pretty pleased with the growth of the touristic business in Japan. You are right in saying that the Japanese yen became stronger towards the end of the quarter. But it’s a bit early to assess the consequences, if any of this strengthening in the Japanese yen versus the [indiscernible]. And finally your question on DFS, while it’s still exactly the same, I mean, we see traffic is alright and that is really a big basket declining. So, that’s been the situation for quite sometime in Hong Kong and we see no signs of change in the future.

As far as the airport is concerned, the only thing I would say is that the maturity or the expiry of the current concession is 2017.

Thomas Chauvet: Thank you.

Operator: So we have another question from Mr. Fred Speirs from UBS. Please go ahead sir.

Fred Speirs: Hi, good afternoon. Two questions for me, please. Firstly, within Vuitton handbags, if you were to exclude small leather goods, could you add some color on how much of the handbag growth has been driven by higher ASPs compared to volumes. Secondly, yesterday, we heard from Prada on their conference call that they are looking to bring in new products with a harmonized pricing range of less than 10% between regions, just interested to get your latest take on how you feel about your current regional price gaps? Thank you. Jean-

Jacques Guiony: Well, on your first question, the day our competitors will provide us with this information, I guarantee you that I would answer this question.

But unfortunately, I will not comment on this. This is obviously way too sensitive from a commercial viewpoint, I am sorry. As far as price range is concerned and the 10% price range on what basis announced or commented, I would say, yesterday, it’s – I am not really in a position to comment competitors’ decision or plans. The only thing I would say is as far as we are concerned we think that the 10% global range is too narrow to cover tax differences in between countries. I mean, you have countries where you have no taxes at all and you have countries in which you have a lot of taxes like China, for instance.

You have import duties. You have VAT. You have consumption taxing, etcetera, et cetera. So, having a 10% price range, if this price range implies to prices available to clients, I mean, not to net prices, to gross prices available to clients in stores, it’s obviously in my view not palatable, but I don’t have details – enough details to comment.

Fred Speirs: Thank you.

Operator: We have a question from Madam Catherine Rolland from Kepler Cheuvreux. Please go ahead, madam.

Catherine Rolland: Yes, good afternoon. Catherine Rolland with Kepler Cheuvreux. I had two questions actually.

First of all, regarding Vuitton sales to Chinese customers, I understood that they were flattish in Q1, but I didn’t get the sales to enter U.S. customers. Could you just remind us what was the sales trends? And my second question was about the cognac organic growth of around 7% in Q1. Could you give us more color about the split between the perfumes that you had in the U.S. and the one that you had in China, please? Thank you very much.

Jean-

Jacques Guiony: Okay. For the U.S. customer, it’s mid single-digit. And sorry, I was looking at my number when you asked your second question, you second question, Catherine, is about what, is cognac?

Catherine Rolland: Yes, cognac, yes. Jean-

Jacques Guiony: Yes.

Well, cognac in the U.S. is up almost double-digits in volumes in Q1, more or less in line with the trend that we have seen. We ended the quarter with a very low level of stock with our distributors. So, we will see how we manage the replenishment of this in the months and quarters to come.

Catherine Rolland: Okay.

And about sales trend, selling sales trend in Mainland China, do you give any color?
Jean-

Jacques Guiony: Well, it’s quite positive for X.O, less so for V.S.O.P., because V.S.O.P. last year, we had – we still had large – fairly substantial numbers of big outlets in entrée that we closed March, April last year, because they were unprofitable. So, despite the volumes were already down last year in China, we still had some unprofitable business that we decided to discontinue from March, April, onwards last year. So, the comparison base is still a bit unfavorable in Q1, but will normalize as of Q2. So, selling was slightly down in China and I commented already on sellout.

Catherine Rolland: Okay, thank you very much. Just to come back to the U.S. customers trend in Q1 was there any change in trend versus Q4, did you see any slight deceleration from U.S. customers?
Jean-

Jacques Guiony: Yes, a little bit but nothing significant enough to call this a trend and to comment further, frankly.

Catherine Rolland: Okay, thank you very much.

Jean-

Jacques Guiony: Thank you, Catherine.

Operator: So, we have another question from Mr. Oliver Chen from Cowen. Please go ahead, sir.

Courtney Willson: Hi, this is Courtney Willson on for Oliver Chen today.

Thanks for taking our questions. We just had a question on Sephora in the U.S. Are you planning on accelerating the store openings in the U.S. and how do you feel about the current size of your U.S. store base? Thank you.

Jean-

Jacques Guiony: Well, accelerating – thank you for your question. Accelerating, I don’t think so. I mean, although the U.S. market for us is absolutely fantastic and has been absolutely fantastic for 5 or 6 years in a row. We have developed our capabilities at Sephora to open more stores and to be more efficient in this respect.

But sometimes, more is too much and we think that we are already opening about 40 to 50 stores a year at Sephora in the U.S. It’s a lot of things, a lot of work and it’s a lot not to do mistakes if you see what I mean. I mean, definitely, if you speed up the process of opening stores, you end up opening in the wrong places and that’s certainly not advisable. So, we are pretty, pretty happy with the capabilities of Sephora to manage their store base and store count in the U.S. and we are not asking them to speed up the process.

And as far as the total store count is concerned, there are obviously questions as to how many stores we could have in the U.S. We currently have about 350 or a little bit more than that in the U.S. We can certainly open many more, particularly if we manage a different format, but it’s really too early to give more precise numbers there.

Courtney Willson: Thank you. Best of luck.

Jean-

Jacques Guiony: Thank you.

Operator: Okay. We have another question from Rogerio Fujimori from RBC Capital Markets. Please go ahead.

Rogerio Fujimori: Hi.

Two quick questions. First on Fashion & Leather in Asia, I was wondering if you could comment on sequential trends you saw in Mainland China, Korea and rest of Asia in Q1? And then second, could you give us an idea about the level of growth you are enjoying Sephora online and how much online accounts for Sephora today? Thank you. Jean-

Jacques Guiony: You don’t really expect answers on the second question. You know that, we don’t communicate that. I mean same answer as the one on handbags for Vuitton previously.

I mean, it’s a very sensitive information from a competition viewpoint, so I will not comment. As far as Mainland China and the rest of Asia is concerned I didn’t hear at the beginning of your question, but I suspect it’s for Fashion & Leather. We have seen growth rates being almost flat there for Asia in the first part of the year, China being a little bit better than Asia. Obviously, Hong Kong and Macau are still deep down for the main brands. Korea is definitely the right spot of Asia.

Prices are particularly favorable there due to the level of the Korean won. So, it helps the business a lot. Singapore is doing okay. Australia is doing very fine. So, basically, we have – I think we mentioned in the press release that there is a contrasted situation in Asia.

That’s exactly it. I mean, we have a fairly flattish situation in Mainland China. Macau and Hong Kong going down in some pockets of growth like Japan, Korea, Australia and Singapore, to a lesser extent.

Rogerio Fujimori: Okay, thank you. Jean-

Jacques Guiony: Maybe one last question?

Operator: Yes.

We have a question from [indiscernible] from Macquarie. Please go ahead.

Unidentified Analyst: Good afternoon. Thank you for taking my question as last one. Just on indication and maybe a follow-up on your previous one on the performance of ready-to-wear versus accessories.

And then a comment on maybe longer term view, a few times in the past, you gave an indication that the growth of Bulgari is related to brand specific trends and also today in press release you mentioned that division outperformed. What do you think is still strong in Bulgari growth after few years of performance? Is that innovation, better mix? Any color on that would be appreciated. Thank you. Jean-

Jacques Guiony: Growth in a brand like Bulgari, but like in any other brand is a strong integration between product introduction and the strength of the brand. And I think this is not obviously achievable in two quarters, but it comes from a fairly long history of product introduction and brand management with the brand under our own management and under the previous owners’ management.

The brand is very strong. I think we made it clearer for the customers. It’s definitely a jewelry brand and the product introduction, be it [indiscernible] lines, etcetera are extremely strong expression of this brand. And obviously, they found their customers and the strong business has been generated. If you have that on top of that, a little bit of rationalization of the store network.

I think this explains the strength of the brand over the last 2 to 3 years. It’s an ongoing process. I mean, it’s a never-ending process I would say. We still have to improve the brand. We still have to improve the network and to launch exciting product and we intend to do so.

Unidentified Analyst: Thank you. And the ready-to-wear versus accessories?
Jean-

Jacques Guiony: I am sorry?

Chris Hollis: Ready-to-wear and accessories?
Jean-

Jacques Guiony: What was the question, I…?

Chris Hollis: What was your question?

Unidentified Analyst: What’s the performance difference, the gap between ready-to-wear and accessories in the Fashion & Leather Goods?

Chris Hollis: Ready-to-wear and accessories in Fashion & Leather, what’s the difference?
Jean-

Jacques Guiony: Difference in what?

Chris Hollis: In the performance, you are talking about?
Jean-

Jacques Guiony: Well, I cannot comment on a global business. And as far as Vuitton is concerned, if you put small leather goods into accessories, which is what it is in terms of price point, particularly the accessory business is outperforming the rest of the business.

Unidentified Analyst: Okay. Thank you.

Jean-

Jacques Guiony: May be one or a couple of questions.

Operator: We have another question from Annabel Gleeson from Redburn. Please go ahead madam.

Annabel Gleeson: Hi, I just wanted to clarify this 2% comment, I mean is it right that, that implies €250 million of sales at Donna Karan that you are getting rid off or is there actually timing things that’s more in perhaps Q1?
Jean-

Jacques Guiony: On a yearly basis, you mean?

Annabel Gleeson: Yes, if I annualize 2% of the last year’s Fashion & Leather Goods sales, it implies €250 million?
Jean-

Jacques Guiony: Yes, you are right.

Annabel Gleeson: So, you are giving out €250 million to sell at Donna Karan, is that right?
Jean-

Jacques Guiony: Well, we are closing the Jeans and the C business and your assumption on the amount of the business that we are closing is right.

Annabel Gleeson: Okay. And just on nationalities, so far you have said the Chinese demand is flattish, American demand is mid-single digit positive, European demand is strong, Japan is low single-digit growth, so I was just wondering, where exactly is weak by nationality?
Jean-

Jacques Guiony: I don’t really know. I mean it comes various places Middle East, Latin America. Not all the European customers are positive. I mean I am not going to elaborate on this.

But if you take the average of what I said, I mean they are not very far from the type of growth or performance that we had in Vuitton in Q1. So this is not inconsistent in my view with our pluses and minuses. I will not go into details.

Annabel Gleeson: Okay, thank you. Jean-

Jacques Guiony: One last one.

Operator: Okay. We have another question from Céline Chérubin from Natixis. Please go ahead.

Céline Chérubin: Yes. Good afternoon.

I have one additional question regarding Fashion & Leather Goods and in particular Louis Vuitton, do you expect any specific launch of products for Q2 in order to fuel the growth?
Jean-

Jacques Guiony: Plenty, a lot, I mean novelties in Vuitton are a significant portion of our total business. Obviously, there will be launches. There will be plenty of them. As I said, no we are not dependent on one singular particular launch. It’s not the same type of model as what you have in perfumes.

For instance, I mean there is a wide, a large number of initiatives being taken and no one single initiative should have particular impact. But all-in-all, I mean we expect to have our product pipeline is in our view as strong as it’s been for sometime and it should help support the business.

Céline Chérubin: Thank you very much. Jean-

Jacques Guiony: Thank you. That concludes of the conference call.

So I look forward to discussing with you H1 numbers in mid-July. Thank you and have a nice day.

Operator: Ladies and gentlemen, this concludes the conference. Thank you all for your participation. You may now disconnect.