Executives: Chris Hollis - Head, IR Jean-Jacques Guiony -

CFO
Analysts: Zuzanna Pusz - Berenberg Courtney Willson - Cowen John Guy - MainFirst Antoine Belge - HSBC Mario Ortelli - Bernstein Luca Solca - Exane BNP Paribas Thomas Chauvet - Citi Elena Mariani - Morgan Stanley Fred Speirs - UBS Rogerio Fujimori - RBC Melanie Flouquet - JP

Morgan
Operator: Welcome to the LVMH 2017 Third Quarter Revenues Conference Call. I will now hand over to Mr. Chris Hollis. Sir, please go ahead.

Chris Hollis: Thank you, Ron.

Hello, I am Chris Hollis, Director of Financial Communications at LVMH and with me is Jean-Jacques Guiony, Chief Financial Officer. Thanks for joining us today. We have some brief remarks to make about LVMH’s revenue for the third quarter and first nine months of 2017. As in previous periods, these revenue figures are reported in accordance with IFRS, International Financial Reporting Standards. 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 is 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 our third quarter and nine months revenue announcement, hopefully, you all had a chance to read our release, which was issued yesterday evening in both French and English. As always, the release is available on LVMH’s website www.lvmh.com as the slides which we’re using to guide today’s conversation. So, getting down to business, we are pleased, this is slide two that in a very uncertain environment, we were able to continue the good performance we delivered in the first half.

We reported double-digit organic revenue growth across all business groups in the period, with the exception of Wines & Spirits, which was limited by supply constraints, notably for cognac. On a geographic basis, we saw good growth in Europe and Asia in particular for the nine months period. With respect to business trends, Fashion & Leather Goods group, Louis Vuitton continued to benefit from its team’s exceptional creativity and the other fashion brands continued to perform well with exciting product introductions and store openings. Christian Dior Couture was integrated within LVMH Group for the first time from the beginning of July of this year. And the highlights include Parfums Christian Dior business, which continued to deliver a solid performance.

In Watches & Jewelry, we saw market share gains at Bvlgari. Sephora, Sephora remains a great performer based on the ever-increasing strength of its omnichannel strategy and the ongoing rapid sales growth of online sales. In the DFS, we are seeing good revenue gains, driven by Hong Kong and Macao. Looking at the numbers on slide three. On the right hand side, you can see that year-to-date revenue exceeded €30 billion.

Organic revenue grew by 12%. And after taking into account, a 3% structural impact offset by a negative 1% currency impact, reported revenue grew 14% compared to the same period last year. In the third quarter, organic revenue grew by 12%, similar to the growth in Q1 and Q2. However, currency and structural impacts were much more consequent. There was a negative 5% currency impact due to the weakening of the euro against the dollar related currencies and the yen, and a positive 7% structural impact, mostly due to the consolidation of Christian Dior Couture for the beginning of July but also Rimowa, the acquisition of Rimowa and the session of -- disposal of Donna Karan is included in that figure.

Reported revenue for the quarter was up 14% and exceeded €10 billion. Turning to slide four, which shows the group's revenue in euros by region over the first nine months. It reflects a healthy balance between regions with Asia including Japan representing 36%; Europe including France, 27%; and the U.S. 25% and the balance of 12% in other countries. Compared to last year, Asia has slightly increased its weight from the U.S.

and Europe, in part reflecting currency changes and their impact on tourist flows. Slide five shows the strong organic revenue growth that Asia saw in the third quarter. Asia grew 21% in the quarter and 19% for the year-to-date. Japan was also up 21% in the quarter, although the comparison base for Japan was easier. Europe rose 11% in the quarter and 12% in the nine months.

And finally organic growth in the U.S. was 7% for the nine months but 3% for the quarter, reflecting in part the supply constraints that I mentioned for cognac. Breaking this down, our revenue growth as you'll see on slide six. Organic revenue is up in the double digits across all of our business groups in the third quarter and nine-month period with the exception of Wines & Spirits, as I mentioned earlier. Taking a closer look now at each business group, I'll start on slide seven with Wines & Spirits.

Organic revenue was up 8% for the nine-month period. Reported revenue reached €3.5 billion, up 7% after taking into account the negative 1% currency impact. For the third quarter, revenue was up 4% on an organic basis. After taking into account a negative 4% currency impact, reported revenue reached €1.22 billion, very similar to last year. Breaking this down for the first nine months of the year, champagne and wines delivered 7% organic revenue growth compared to the same period last year.

After taking into account a negative 1% currency impact, reported revenue increased 6% to reach €1.5 billion compared to €1.4 billion in the same period in 2016. In the third quarter, champagne and wines organic revenue grew by 3%. For cognac and spirits, the organic revenue for the first nine months grew 8% with limited currency impact and therefore delivered €2 billion in reported revenue compared to €1.9 billion in the year-ago period. For the third quarter, cognac and spirits organic revenue grew by 5%. Champagne volumes increased 4% in the first nine months, owing to good momentum in Europe and Japan.

Other wines saw organic revenue growth largely from pricing in the Estates & Wines business. With respect to cognac, while we were pleased to see volumes rise 9% for the first nine months, in Q3, it was only the older cognacs, i.e. V.S.O.P and X.O. categories that were in positive territory. As we have been discussing in recent quarters and particularly evident in the third quarter, production constraints impacted the V.S.

business whose biggest market is in U.S., and this is unlikely to abate soon. China on the other hand has seen some rapid growth, in particular in the V.S.O.P and X.O categories, and this growth has been encouraging but we remain cautious as to the sustainability of this high rate of growth. Also in Asia, we have continued to see destocking of Glenmorangie by distributors to get to more reasonable stock levels. Turning now to the Fashion & Leather Goods business group on slide nine. Organic revenue grew by 14% for the first nine months of the year.

The 8% structural impact relates to the consolidation of Christian Dior Couture, which is the largest portion as well as the acquisition of Rimowa offset by the disposal of Donna Karan. After taking into account this 8% structural impact and a negative 1% currency impact, reported revenue is up 21% to reach €10.84 billion compared to €8.99 billion in the same period last year. For the third quarter, specifically in Fashion & Leather Goods, revenue was €3.9 billion, up 13% on an organic basis versus the year ago third quarter with a negative 5% currency impact and a 19% positive structural impact. The drivers behind this performance include strong growth in both Asia and Europe and continued solid growth in U.S. Louis Vuitton, as I mentioned earlier, continues to benefit from its outstanding creative momentum, the iconic lines continue to perform well and that performance is augmented by the exceptional reception to new products.

In the quarter, Louis Vuitton also entered into new territory with its connected watch, the Tambour Horizon which is in wide demand. And the brand just recently opened or inaugurated its new Maison in the Place Vendôme here in Paris. I encourage you to visit this incredible location. For the first time, we can talk about Christian Dior Couture on this call as it was integrated as of July. The brand celebrated its 70th anniversary with an exhibition at the Musée des Arts Décoratifs in Paris, which has had a tremendous success.

If you’ve not been present in person, I suspect you might have seen some of the widespread media attention it received. Highlights from the other brands include Fendi has continued solid growth trend. The brand expanded in the U.S. with new stores in notably New York, San Francisco and Dallas. Loro Piana and Céline continued to show solid progress as did Loewe, Kenzo and Berluti also perform strongly.

Givenchy held its first fashion show under its new Creative Director, Clare Waight Keller, which was well received. And Rimowa, a global leader in high quality luggage which we began integrating in January, is putting in place a strong foundation for more sustainable and longer term growth. And Marc Jacobs work continues on the positioning of its product lines and its restructuring. In Perfumes & Cosmetics, it’s now slide 11, organic and reported revenue grew 14% to reach €4.1 billion from €3.6 billion in the nine months period of last year. For the third quarter, organic revenue grew 17%.

And after taking into account a negative 5% currency impact, reported revenue was up 12% over the year-ago period and reached €1.4 billion. Looking at Perfumes & Cosmetics, overall this business saw growth across all regions, notably in Asia. Again Parfums Christian Dior is performing well, owing to strong demand for the iconic J’adore and Sauvage fragrances as well as the successful launch of Miss Dior Eau de Parfum and that was also an excellent performance in its makeup lines with Rouge Dior being a particular star. Guerlain undertook the international rollout of Mon Guerlain perfume in the third quarter and this is being well-received. Parfums Givenchy saw strong performance in its makeup lines, especially in lipstick.

Benefit saw a nice performance from its newly launched concealer Boi-ing. And finally, the Fenty Beauty by Rihanna makeup line created by the partnership with Kendo is off to an outstanding start. Please go and see it in Sephora where it’s sold exclusively. Moving on to Watches & Jewelry, organic revenue in the first nine months grew by 13% and after taking into account a negative 1% currency impact, reached €2.8 billion for a 12% increase over the year-ago period. For the third quarter, organic revenue for the Watches & Jewelry business group grew 14% and after taking into account a negative 5% currency impact, reached €951 million or 9% more than the year-ago period.

Europe & Asia were strongly performing regions for this business group in the third quarter and there is an exciting period of activity across the brands. At Bvlgari, its emblematic lines Serpenti, Diva and B.Zero1, continue their solid performance while the launch of its new High Jewelry line Festa brings great excitement. Chaumet relaunched its emblematic jewelry line Liens with success. Fred added to its successful 8°0 bracelet collection. TAG Heuer celebrated more than 150 years of its history with an exhibition, Heuer Globetrotter in 10 markets around the world.

And to celebrate Ferrari’s 70th anniversary, Hublot launched the Hublot Techframe Ferrari 70 years Tourbillon Chronograph. Lastly in this business, Zenith launched its new Defy Lab model, the world’s most accurate mechanical watch, thanks to a groundbreaking oscillator. Watch lovers around the world are quite excited by this. Turning to the last business group, Selective Retailing delivered organic revenue growth of 12% in the nine-month period, after taking into account a positive 1% currency impact, reported revenue rose €9.34 billion or a 13% rise compared to the prior year period. For the third quarter, organic revenue grew 14% compared to the year ago period.

And taking into account a negative 5% currency impact, reported revenue increased 9% to reach €3.06 billion. To take a more in-depth look, starting with Sephora, as I mentioned earlier, its impressive performance continues with rapid growth in Asia and the Middle East in particular. Online sales remained strong and its pioneering digital technologies are increasingly integrated into its stores, making them true destinations. In Spain, Sephora rolled out two digitally enriched stores following a success of this concept in France, in Boston it opened its first Sephora studio, a smaller store concept for an urban location with a more curated selection of products and services. And again Fenty by Rihanna is as I say, on fire in Sephora.

Now looking at DFS, we are glad to see a confirmed recovery in Macau and Hong Kong where we will soon at the end of November, terminate our unprofitable airport concession there. Finally, T Gallerias in Cambodia and Italy are developing nicely. We now reach the end of our prepared remarks. So to summarize, the third quarter continued the solid performance we had seen since the end of last year with all business groups contributing to the growth trend. While we are starting to see some impacts from currency, from supply constraints and the comparison base, we remain cautious and careful in the uncertain global economic and political environment and note that we are up against much tougher comparisons in the fourth quarter.

But we remain clearly focused on increasing our leadership position in the global luxury goods market. We will work to achieve this, as always, through our strategy of driving creativity and innovation to deliver high quality products and selectively expand our store base, while closely managing costs. Thank you. Jean-Jacques and I will now take your questions. Ron, could you open the line, please.

Operator: [Operator Instructions] And we have first question from Zuzanna Pusz from Berenberg.

Zuzanna Pusz: Good afternoon, gentlemen. Many thanks for taking my questions. So, first of all, a broader question on the trends among various nationalities. Despite somewhat tougher comparables in Q3, you’ve seen an underlying acceleration in most of your businesses, particularly Fashion & Leather Goods.

So, could you please provide a bit more color on the trends behind it, especially maybe if possible some quantitative comments on the global various consumer clusters, especially the Chinese piece? Secondly, more specifically on the Wines & Spirits, which was a bit weaker due to the supply constraints which you mentioned before. I mean, is there any visibility, is there any kind of timeline when we could expect that grow to normalize, and perhaps if you’re planning to implement any additional pricing actions? And just finally on the trends you’re seeing in Europe, especially in the Watches & Jewelry division. There has been some, I would say, deceleration reported by some of your peers in hard luxury. So, I was just wondering, are your branches just gaining share or have you seen any sequential deceleration of growth in Europe because of stronger euro? Any color would be very helpful. Thank you.

Jean-

Jacques Guiony: So, I’ll start with the trends in various customers’ groups throughout the quarter for Fashion & Leather. What I can say is that we’ve seen a few changes, but not that many. By and large, the Chinese customer base has proven extremely robust throughout the quarter. The growth was slightly lower for the global Chinese customer base when we can measure later, it’s mostly the case Louis Vuitton and to a lesser extent Bvlgari. The growth was slightly lower, but still very strong double digits, so not really worse, commenting on the differences.

So, as far as China is concerned, it was really a very strong quarter. Same thing with Americas, we didn’t see for our main brands, there are some exceptions, but by and large, for our main brands, we didn’t see any change in the growth with American customers in the third quarter. As far as Europeans are concerned and it’s mostly Louis Vuitton, that we can measure it. We still enjoy double-digit growth in Q3 in our local customer base. So by and large, I would say, the business within the Fashion & Leather with our main customers' groups was as good as it's been since the beginning of the year.

We haven't seen a lot of changes. Your second question on visibility in cognac particularly, I mean in Wine & Spirits volumes slowed down due to availability of product. We announced it quite a few times already as we said that we couldn't load, particularly the U.S. market, the way we've been doing it in the beginning of the year. So, the materialization of this was in Q3 and we've seen global cognac volumes being slightly down in Q3 compared to a very buoyant start of the year.

It's obviously connected with the availability of volumes. The question going forward is two things. One is that the type of growth we have had over the last two years, I would say is not something that we can replicate forever; the more normalized growth in volumes for cognac is more something like 3% to 4%, exceptionally 5% but nothing really more than that. And the second comment I would make is that we have had two tough years in terms of supply. We had hail in 2016 and we have drought in 2017.

So, altogether, what we put in our sellers at cognac was lower than what we anticipated. So, all in all, this created a little bit of constraint for the business for the quarters to come I would say. It's hard to quantify and to know exactly what will happen, but it's pretty sure that the type of growth we have had for a number of quarters will not be replicated in the future. And finally, your question on Europe and Watches & Jewelry, I cannot really comment for other players, but as far as we are concerned, the growth in this business in Q3 remained pretty solid in Europe with sort of double digit numbers. So, we are pretty happy with the business and we saw no signs of slowing down.

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

Courtney Willson: Hi. This is Courtney Willson on for Oliver Chen.

Thanks for taking our question. Just going back to the local U.S. consumer, can you speak in a little more detail to which categories in the U.S. has been performing best or better than expected? And then, also on Sephora, did you see strong trends both at your U.S. stores and also on the digital platforms? And any comments you can make on store traffic in Sephora's in the U.S.? Thanks.

Jean-

Jacques Guiony: The comment I made on U.S. customers was mainly related to Fashion & Leather and to lesser extent to the Bvlgari business where we can really comment, where we can really analyze precisely our numbers. Roughly speaking, in the U.S., we had a little bit of slowdown in growth in Q3. Growth in Q3 was 3% compared to 9% growth in H1. The bulk of the drop comes from the Wines & Spirits division, I would say 70% to 75% of the drop in the growth really comes from the Wines & Spirits divisions for reasons we alluded to before and notably on the cognac business.

As far as the Fashion & Leather business was concerned, growth was more or less in line, particularly as we saw with where it was in the preceding quarters, the Watches & Jewelry business was better particularly at Bvlgari. Perfumes & Cosmetics business was much better, much stronger in Q3. And as far as Sephora is concerned, we've seen numbers being slightly lower, not a big deal but the traffic is slowing down a bit, conversion as well and like for like is slowing down a bit but nothing dramatic but we saw slightly lower numbers in Q3 than in the rest of the year, which was already quite high. So by category, these are the main comments to be made. Just staying one second on Sephora, if you take North America, the comparable growth was a bit lower than what it was in the preceding quarters but was still mid to high single digit number.

So, we are still pleased with business we do in North America with Sephora.

Operator: So, we have another question from John Guy from MainFirst. Please go ahead.

John Guy: Thanks Jean-Jacques and Chris for taking my questions. First question with regards to Louis Vuitton organic growth of around 13% in the quarter.

Could you give some indication around the volume and value contributions? I am assuming that the sales contribution for the space was probably low single-digit at best, given what we are seeing at the store count level. That’s my first question. My second question is with regards to Bvlgari jewelry. You’ve clearly singled out the jewelry side. Could you maybe give us an indication as to how Bvlgari’s watches are performing and what the splits are now in terms of sales by category within Bvlgari? And on Christian Dior Couture and the premature [ph] impact that we have seen in the third quarter with Rimowa, is it fair to say that Christian Dior was growing organically well above 20% in the third quarter and Rimowa may be around the mid teens level, is that a fair assumption to make during the year quarter? Thanks.

Jean-

Jacques Guiony: John, thank you for asking the questions. I will start with the last one. I don’t know how you get to 20%, actually it’s double-digit, but it’s not as high as 20%. I won’t be more precise than that because I don’t want to give you the number but it’s lower than 20%. And as far as Rimowa is concerned, the sellout numbers that we try to monitor and we do it better and better are pretty good.

But the sell-in numbers are not that great because we have to manage, little bit of excess of inventories as we announced before. So, there would be a few quarters in which sell-in numbers, i.e. the numbers we account in our books, will be lower than the sellout numbers, nothing dramatic given the relative size of Rimowa, but don’t expect fantastic positive numbers for Rimowa before few quarters. On your question about volume value, volume and price on the organic growth, as in the preceding quarters, if not all but a big, big chunk of the growth was made of mix and volume numbers, the price increases were negligible. So the bulk of it was mix and volumes.

And on Bvlgari, so a few indications as to the relative performance of the various categories, obviously the main category jewelry was very strong double-digit number with both high jewelry and normal jewelry being more or less the same type of growth. So, there is no particular contribution from high jewelry, which could prove to be volatile in the quarters to come. Watches was mid dingle digits, perfume is quite flat and accessories are also very strong double-digit. So, we have a business that polarizes on jewelry and accessories, and watches are being -- are under pressure but nevertheless positive.

John Guy: That’s great.

Thanks Jean-Jacques. May be just one final housekeeping question just on Hong Kong Airport concessions. The contract terminations, are they at the beginning of November or at the end of November this year?
Jean-

Jacques Guiony: End of November.

John Guy: End of November. Okay, great.

Jean-

Jacques Guiony: We shall miss -- I mean our frequent session technically is a little bit complex because our frequent session, not all of them are ending exactly at the same time but it will start a little bit before end of November and end a little bit in December, on average it’s end of November.

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

Antoine Belge: Yes, hi.

Good afternoon. Three questions. First of all, regarding Asia, I think you mentioned it was up 21% for the Group and I assume that it was probably the same for Fashion & Leather. And I think that probably Mainland China was at between 30% and 40%. So, maybe could you comment about Mainland China and why the strong -- the growth is so strong in the Mainland country.

Second question, regarding cognac and champagne, I think the volumes in Q3 were negative in both cognac and champagne, yet you recorded plus 3 and plus 5% organic growth. So maybe could you explain the gap between volumes and the organic growth? And finally, could you update us on your hedging rates for the euro and the yen and also any decision that you [ph] could take on pricing for Louis Vuitton as of before the end of the year or in 2018? Thank you. Jean-

Jacques Guiony: Thank you, Antoine for your three questions. So your first question on Asia versus China and you’re not so far, I mean your estimates are not so far from reality. So, as you suggested, China is growing faster than Asia, it’s nothing new.

I mean it’s being going on for quite a while. I think there are several reasons for that but the main one being that with the strength in the dollar and therefore in the Renminbi and the Hong Kong dollar, part of the business is and increasing part of the business is done at home or is done domestically with the interest of shipping abroad, diminishing compared to what it was 18 months ago. So it’s something that we’ve seen for some time. If you look at Louis Vuitton customer base for instance, which is growing, it’s growing faster in Mainland China than it is outside China which suggests that an increasing part of the business is done there. I don’t know whether the Diego [ph] business is drying out, it’s impossible to measure but anyway the Mainland business, domestic business is growing faster than the rest of the business and therefore is growing faster than the rest of Asia.

It is little bit the same in Wines & Spirits, the business is growing faster. You’ve seen that some markets like Taiwan or Vietnam have been under some -- also under some pressure for quite some time now, whereas China is booming. So that explains why altogether the Chinese business and the Mainland Chinese is more robust than rest of Asia, which is doing well anyway. Even if you take out China, I mean the rest of the Asian business is very positive. On your comment on cognac and champagne volumes being negative and overall growth in Q3 being positive.

First of all, in cognac, we had a huge mix impact. As you know, the negative volume impact was mostly on V.S. And at the same time, we enjoyed a very good business in the V.S.O.P. and X.O., particularly in China and in retail. So, we ended up with a very positive mixed impact, little bit of price impact as well, although we had mature amount due to the fact that some categories or some products are being limited, availability is limited so obviously the promotion level under such circumstances becomes much lower than it would normally be and we assimilate.

We analyze reduction in promotion as the equivalent of a price increase. As far as champagne is concerned, it’s very less dramatic. There was a little bit of price and a little bit of mix as well. The drop in volumes we had was not registered at [indiscernible], so we had a faster growth in the most valuable categories. So that explains why we had a quite sizeable mix impact in champagne as well.

And finally, your question on hedging, so the hedging policy obviously has been put in place basically last year. So, we have hedging rates around 111 and 117, 118 for the yen; 111 for the dollar and 118 for the yen, about 60% of next year’s budget. Obviously, current year is fully hedged, so that will help us go through the difficult times coming with currencies. As far as pricing as Louis Vuitton concerned, I won’t make any comment on this, apart from saying that end of the year is usually not the right time to take any decisions on pricing.

Antoine Belge: So, if I may just follow up.

So, regarding Louis Vuitton, the Chinese cluster and how much is it of your total sale and how is it now split between local versus tourists?
Jean-

Jacques Guiony: Well, the split between local and tourist didn’t change much, we’re still little bit about 60 in tourists and a little bit less 40 in locals, I mean it changes but very, very slowly. And it’s about -- on total, the Chinese client base is around 30% of total business.

Operator: So, we have another question from Mario Ortelli from Bernstein. Please go ahead, sir.

Mario Ortelli: The first question is about cognac.

It seems that these constraints in supply will continue for a couple of quarters. Can you give us an idea for Q4 next year, what we should expect on impact of this constraint on supply? And the second thing is linked to this one, considering this constraint on supply, are you thinking that price increases for V.S.O.P. but also the other quality of cognac? Another question on price about Louis Vuitton is in the first three quarters of this year, what was the average price increase that we had at Louis Vuitton? Thank you. Jean-

Jacques Guiony: On cognac, I would say that for the foreseeable future, i.e. probably the next three to four quarters, in my view, volumes will not increase very, very significantly, will have a slight improvement in volumes for, a slight increase in volumes for V.S.O.P.

and X.O. but a small decrease as well for V.S. So all-in-all, we should have quite flat or slightly growing volumes for the end of the year and the first quarters of next year. Your question about price increases in cognac, as I mentioned briefly, there will be mechanically less promotions, I mean with the bottle incentive that we normally give to clients disappears when a business is under such constraint. So, it generates average price being higher.

So that’s a net price increase. On top of that, we will probably be able to pass limited price increases to customers. But as you know, we do it end of Q1, early Q2. So, it’s way too early to discuss. But obviously, we’ll think about it and that will be an element of our policy for next year.

As far as price impact of LV in the first nine months of the year, I mentioned the rough amounts before, I mean, and as I said, the bulk of the growth is not all -- was mix and volume based, not price based. So the price increase, average price increase impact on the business of Louis Vuitton in the first nine months of the year was negligible.

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

Luca Solca: It does seem indeed that Louis Vuitton has been upgrading its offer over the years.

Is it fair to say that the price mix improvement has produced the lion share of the double digits growth that we’re seeing here while volume has contributed to a lower extent? Can you give us a sense of how the two drivers are being -- contributing to the overall growth that Louis Vuitton has been producing? Another question on Vuitton, but this time on go-to-market. You said in the past that at one point you’d be able to integrate digital in the Vuitton stores and the ability for consumer to purchase products that are not physically in the store. I wonder how you’re proceeding on that in the broader context of the significant developments you have in digital. And last but not least, you mentioned slightly lower performance of Sephora in the U.S., even if it continues to be strong with like-for-like in traffic and conversion slightly fading. Do you see that coming from slower demand overall from competitive pressure, so that other players are gaining market share on Sephora? Thank you very much.

Jean-

Jacques Guiony: Thank you, Luca. I’ll start with the last one because you know how much I love the questions of making a quarter a trend. I mean that's always extremely difficult. So, I will -- I can’t answer, honestly I don't know. When I look at our market share, our market share is increasing and has been increasing steadily over the past 15 years and it’s still increasing.

Although it's very difficult to measure market shares anywhere, particularly in the U.S. you don't count exclusive brands, you don't count Sephora brand, so it's quite complicated. But as far as we understand, our market share is increasing. As the market becomes much more diverse and complex to analyze as it used to be, there are a lot of indie [ph] brands which have their own distribution channel on the web. So, it's quite complicated.

Our feeling is that this business has been growing at a very high speed over the last I would say 6 or 7 years, particularly triggered by innovation in makeup, which has been very dynamic in the U.S. indeed. Maybe there is a little bit of -- this was a quarter with a little bit less of innovation, I don't really know; it's way too early to say. But it's certainly an innovation-driven market. We are not driving innovation, we are distributing innovation and therefore we have subject, we are only as good as the brands we distribute.

So, we try to keep and repeat the best brands. And I think we've been pretty successful in that. But you're also talking about pretty small changes from one quarter to another, and as I said, making a trend with a quarter which is very difficult. So, I won’t really advocate for getting the benefit of few quarters if not years in retrospect in order to be able to reanalyze what's going on in the U.S.? Then, on your question of impact of mix volume on Louis Vuitton. Mixed, I will not quantify obviously, unless you tell me that our competition -- that's [indiscernible].

And as you’re unlikely -- this is unlikely to be the case, I would not quantify. But mix can move the needle up obviously but not in a big way. I mean, you don't generate 5% or 6% growth on a daily basis with mix; I mean it's impossible, particularly in large business like Vuitton. So, a big chunk of the growth comes from volumes, and mix takes a little bit of time to have an impact. And bear in mind that a product, which is introduced in a given year is mix impact, if it is more expensive, its mix impact in year one and its volume impact, changes volume impact in year two.

So, it's not this is really counted as mix in year two, although the bulk of the development took place in year two. So, it's quite complicated to measure, but the bulk of the impact is definitely volume. And finally, go-to-market, and digital integration at Vuitton. While it's progressing well, we are not allowing full omnichannel features in all our stores at Vuitton, but in a big chunk of them. So, it's progressing as expected.

And within few months, if not year but probably few months or few quarters, Vuitton should be in a position to really define a full omnichannel proposition to its clients in all its stores, which is not totally the case today.

Luca Solca: Thank you very much, Jean-Jacques. If I may just slightly rephrase my question as far as the mix effect on Vuitton. When you look at price brackets, do you see that over time the amount of sales that you get, let's say from €500 to what €1,000 or from a €1,000 to €2,000 and so on has been shifting upwards in a meaningful way?
Jean-

Jacques Guiony: Yes and no. Yes, I mean, what we do with $1000 is increasing.

If you look just at handbags for instance, that's on average the price of handbags is -- average price of handbags is going up. But if you look at the global mix and particularly if you include accessories and small leather goods, it’s not so much the case because the business of accessories and the small leather goods has grown quite fast over the past few years as well. And as you know, it’s very important for us because not only it’s good margins but it’s also a very important way to define products to our customers. So, all-in-all, I mean average prices are going up slightly but not as much as they do in handbags for instance.

Operator: Now we have another question from Thomas Chauvet from Citi.

Please go ahead, sir.

Thomas Chauvet: Good afternoon Chris and Jean-Jacques. I have three questions, please. The first on Fashion & Leather. At the end of H1, your inventories were pretty light, they were up 8% on year-on-year on 17% reported sales growth.

Now with the continued momentum at Vuitton and Fendi in the third quarter, do you feel you have enough inventories to meet potentially very strong Christmas demand, have you taken any measures in the last few weeks to step up production for the festive period? Secondly, coming back to Sephora, could you give us, as you I think did in the past, some granularity on the LFL for France, U.S. and China. If I understand correctly, in the U.S., online growth is accelerating while physical store growth is slowing down sharply. Do you think it’s mainly cannibalization of sales and are you seeing the same phenomenon in France and China? And finally, we heard yesterday that the U.S. private equity firm may have taken a 50% stake in Supreme, the exciting streetwear brand with whom Vuitton collaborated at the beginning of the summer.

I believe it’s a brand that picks many boxes and what you like in a brand. So, given what we are seeing in terms of consolidation in industry, acquisitions of [indiscernible]. Could you remind us where the scope of the Fashion & Leather division ends and what you are looking for when you complement this division with additional brand, be it geographies, categories? Thank you. Jean-

Jacques Guiony: Okay. The first question on Fashion & Leather inventories, have we taken measures to ensure availability of products for the end of the year, particularly Vuitton, the answer is yes.

We have voluntarily limited the production and therefore the business in some best sellers. The objective being twofold, one to allow production time for -- inventories to meet year end peak season. And secondly, to avoid over exposition of some products that would become too widely distributed and that -- which could be long-term an issue for the brand. So, we try to kill two birds with one stone. Not only we limit the visibility of some products but at the same time we give us some -- little bit of room for maneuver for building up inventories for the end of the year on any type of product.

Sephora, you probably remember some like-for-like numbers by geographies but not from me because I never give them. So, I give global numbers, I can give them to you. It was 9% like-for-like on constant currency basis -- on a worldwide basis for H1, it’s 7% for Q3. As I said, I mean, a little bit lower in the U.S., slight improvement in Europe, and Asia remaining very strong at very strong double-digit level. I wouldn’t talk about cannibalization between online and offline.

I don’t think there is [indiscernible] so that we don’t have to worry too much about cannibalizing ourselves between online and offline. Finally, Supreme -- your question, which is exemplified by Supreme acquisition, 50% of it being acquired, when it comes to like-for-like, to acquisition strategy in Fashion & Leather, the only thing I can say is that it’s truly opportunistic. We have no particularly predefined criteria. We discussed that many times but when brand fits our -- we understand it well, we have some ideas about what we could do in order to improve it. And if you don’t know what to do to improve the brand, there is no way you should be making an acquisition, because if you do not a better job than the previous owners, or your own strength [ph] doesn’t allow a better management of the – of the brand, it’s not worth doing the acquisition.

So, it’s purely opportunistic based on a very thorough analysis of what we think we can bring to the brand in order to get a higher value from it. So, I cannot answer, and neither the theory, nor the example of Supreme could really help in defining whether we are opportunistic and when we see a brand, makes sense for us, we contemplate it but otherwise we don’t.

Thomas Chauvet: Thank you. So, no regret on Supreme this time?
Jean-

Jacques Guiony: It’s not a question of regret, I mean we -- a question of strategy, it’s a great brand, otherwise we wouldn’t have collaborated with it. I don’t think it is something that we would have done as well as really not to justify the price that it touched.

Operator: So, we have another question from Elena Mariani from Morgan Stanley. Please go ahead.

Elena Mariani: Hi. Good afternoon and thanks for taking my questions. The first one is a broad one.

Overall, over the past year, you sounded generally prudent and cautious on the second half of the year. So, is it fair to say that the numbers you’ve just reported have exceeded your earlier expectations? And if so, was it just the Chinese cluster that proved to be more resilient than expected? I was just trying to think about the fourth quarter and see whether there could be a deceleration coming from some of the divisions and perhaps knowing where you were positively surprised could help me. The second question on Hong Kong and Macau, you’ve talked about Mainland China, you’ve talked about Asia. Could you comment a little bit about what you’re seeing in Hong Kong and Macau and whether what is happening there in your view is just a bit of a normalization after a few years of decline or perhaps there is a proper pick-up in traffic and spending in your view that will continue over the medium term? And finally, I appreciate it might be very early but could you give us a first feedback on the launch of [indiscernible] how should we think about the evolution of this platform going forward and what’s your ultimate ambition there? Thank you. Jean-

Jacques Guiony: Thank you.

I will start with the last one because we don’t answer [indiscernible] I mean, we don’t intend to comment quarter after quarter; it’s a long-term development. We are lagging behind the main players in this particular business. It will take us a while to bridge the gap and I don’t want to put undue pressure on the management of this business and those people are doing very good job by setting publicly objectives that they would have to fulfill. So, it’s developing well, we have a platform that works well, we have an unparalleled lineup of brands. So, we think we have strong competitive advantage, but it’s not a business that you develop in 10 minutes.

So, it will take a few years. It will be loss making during a few years. It will take a few years, but we are very confident that the strengths of the management team that we have there will enable us to make a success. And each time you will ask me the question, I will basically say the same thing. So, on your first question, which I wish I had the answer actually, but let me put it into perspective a little bit.

This is a very important one obviously, and your question is basically whether we were overcautious for H2 and particularly Q3, given what happened. Let me remind you what we said. We said three things basically. We said one, currency will reverse; two, the comparison base will be more challenging; and three, some capacity constraints will arise in the course of the second half of the year. Let’s look at them one by one and try to put them into perspective for Q4.

On currencies, I don’t think I have to elaborate too much. I mean, unfortunately we were right actually, and the currencies didn’t stay as strong as they were. Just to remind you that Q4 last year was the best level on average for the dollar, it was 108 and if I’m not mistaken, it was 117 for the yen. So, we are having huge gap to bring this year, if the currencies stay where they are. So, that’s a fairly significant challenge for us, both from a topline and bottom line, despite the hedging strategy.

On the comparison base, if you look at the difference between Q3 and Q4, last year, Q3 was 6%, Q4 organically and Q4 was 8. So, on the face of it, the difference is not tremendous. When you look at it on a country-by-country or business-by-business, I mean for some businesses or some countries, it will be a very significant challenge. It is a case for Fashion & Leather. There was a four point improvement in between Q3 and Q4 last year.

It’s also a challenge for areas like Hong Kong and Macau that you mentioned it’s your second question. It’s -- the Chinese customer base improved very significantly in Q4, not so much in Q3. Q3 numbers were already better, but we’re comparing with very soft Q3 in 2015, you probably remember, the drop in the stock market and to drop in the yuan and all the things that happened in 2015. So, we had very weak 2015 business in Asia and therefore the improvement in Q3 last year was largely based on that. So, I would say -- and I would answer on your question about were we pleased with -- positively surprised with our Q3 numbers.

A little bit, but not so much, because when you analyze carefully the Q3 2016 number, they were better. The part of it was really negative one-off that affected 2015 Q3. So, the real tough comparison base starts in September and in Q4, where we have a much tougher comparison base. And my third point is on capacity constraint. Some of it’s already materialized, particularly in the U.S.

I discussed a bit the production and availability of product strategy at Vuitton, so I will not repeat what I said to answering Thomas’s question before. But we may expect some -- few constraints there. So, Q3 was probably -- maybe a bit better, but only a fraction better than what we anticipated. But we still feel that the challenges that we identified at the beginning of the year and that goes to what myself mentioned at the full year conference last year, I mean earlier this year are still there and will be playing against us in Q4. So, we reiterate our caution for Q4.

On Hong Kong and Macau, obviously the business is stronger this year, mostly based particularly for Hong Kong on a very, very weak comprising base, the market had been going down in 2014, 2015, and 2016 is flattening out and rebounding double-digit, but what does it mean. So, for us, Hong Kong is normalizing, but not far from having recovered the good levels of 2013 and 2014. So, it’s really at the beginning. And Macau is a bit better, but I would make the same management.

Operator: So, we have another question from Fred Speirs from UBS.

Please go ahead.

Fred Speirs: One question from me please, slightly longer term. Just interested to get on the LV margin. We’ve seen nice developments over the last couple of years obviously. How do you feel about the levels that you’ve reached now, do you see scope for the margins to progress, much for the compare? Thank you.

Jean-

Jacques Guiony: There were not double one day, I mean that’s the issue with LV margins, they are much higher than any other company in this business. And it’s already quite complex to analyze how they could grow much further. On top of that fueling the growth of such a large and prominent business requires a lot of investments. Another way to say it is that we are extremely pleased with LV margins. They are unparalleled in the industry.

The main objective is certainly not to increase them, but more to keep them where they are and which is sufficient to create a lot of value for the shareholders.

Operator: So, we have another question from Mr. Rogerio Fujimori from RBC. Please go ahead. From RBC.

Please go ahead.

Rogerio Fujimori: Hi. Good afternoon, everyone. Jean-Jacques, Is there anything you can share to us on your initial take on Golden Week trading? And I know you don’t like to talk about monthly trends but was your performance in September similar to Q3? I just wanted to follow up on your answer to Elena, the September compares was much tougher than July and August. So, it could be useful to help us think about Q4 and also because September is a very directional month for luxury, I presume.

Thank you. Jean-

Jacques Guiony: Thank you, Rogerio. Now, on the Golden Week, I don't know. I mean, this was last week I mean or skittering [ph] on. I don't remember exactly.

So, it's way too early to say. I know that the wholesale businesses, particularly Wines & Spirits anticipated a good Golden Week and a good unit festival [ph] and loaded the trade accordingly, but that's not sellout, that's in anticipation of -- so it's different. So I cannot answer. Your question on September, September was in line with the rest of the quarter.

Operator: So, we have another question from Melanie Flouquet from JP Morgan.

Please go ahead, madam.

Melanie Flouquet: Yes. Good afternoon. I have four questions, if I may. The first one is regarding ForEx, sorry.

Could you share with us what your ForEx gains were in H2 2016 and H1 2017? In other words, what we will have to accomplish this semester and next semester? The second question is on, whether you could help me understand a bit better what happened in perfume and cosmetics, spectacular performance of plus 17% this quarter? The one prior was already well ahead of our expectations, so I dare asking the question on one quarter acceleration. The third question is on Wines & Spirits and on cognac in particular. The landing we’ve seen in Q3, actually is not as bad on organic as we could have said, given the volume contraction as mentioned by Antoine earlier. And you seem to be guiding for rather soft landing still in Q4 and into beginning of next year. I was wondering, when do the harvest start having an impact and notably when will you be careful on your use of reserves, and whether we could have another downfall in volumes in other words? And my last question is whether -- given the very strong performance you're referring to in local demand in a number of markets that are actually the European local, the American local, the Chinese local, I was wondering whether you could share with us what the percentage of tourists is at Louis Vuitton and how this has changed versus last year or two years ago? Thank you.

Jean-

Jacques Guiony: Thank you, Melanie. Well, the first question, I never answer it, so you don't really expect me to give you the ForEx gains. I assume you're talking about hedging gains. If it is ForEx impact, you have them in the documents, but hedging gains, we never disclose them, the reason being that in isolation, they are meaningless, I mean they are always a compensating factor for either good or bad situation from prime currencies. So that's why we don't disclose that.

Your second question on Perfumes & Cosmetics 17%, it comes from two things. One is very strong business from I would say the main brands, not only the main brand because it's usually Dior leading the path, it's actually Dior obviously but also Givenchy, Guerlain and Benefit. So, we had a very good quarter with the four main brands in this business. And the second impact was also the sell-in factor on Fenty Beauty. The sell-in differently from the sellout that takes place on a much shorter period of time and most of it was in Q3, we had some costs associated to that in Q2 as you will probably remember in my comments on Perfumes & Cosmetics margins in H1 but the benefit of it, so the revenue side of it was in Q3 and it was quite concentrated.

So, it helped a bit the numbers for the division. You will certainly note as well that the elimination number was in the total, it’s unusually high; this is the reason for this high number. I will also say that as far as we know and it's only beginning but the sellout numbers for Fenty Beauty are extremely strong and very encouraging. So, this strong sell-in we covert into strong sellout, but that is a different period in time obviously. On your question on cognac and the landing being not as bad, it’s not as bad mainly due to the fact that we had a very positive mix impact, which we cannot replicate each and every quarter.

And the business in China is extremely strong. There are a few positive one-offs in the business in China that will not repeat -- that will not be repeated in the coming quarters. So, you cannot expect; one, the business in China being as strong, and therefore two, the mix impact being as strong as it was in Q3. So, I am not advocating for crash landing scenario but the Q3 numbers are probably -- for cognac are probably a bit high compared to what we will do in the next quarter. As far as the harvest impact is concerned, I would say it starts now, although the LV that we are lacking will only be in cognac in two or three years’ time.

We have to smooth a little bit impact over a number of years and we will not -- we shall not deplete our inventories as much as we can knowing that within two to three years we will have a gap coming from the poor harvest of 2016 and 2017. So, we’ll try to smooth this impact over a number of years. This is why this poor harvest will have an impact starting today and hence my caution on the -- and being pretty cautious on the various comments for this business this year and next year. And the local market -- sorry, and the share of Vuitton inventories, it’s still about 60-40, so it doesn’t change much.

Melanie Flouquet: Total Louis Vuitton, not just China, just change the number -- talking about double-digit growth…
Jean-

Jacques Guiony: It’s double-digit growth for both and it’s 60% locals and 40% tourists.

Melanie Flouquet: The 60-40 is for the Chinese or for total…
Jean-

Jacques Guiony: No, no, 60 is for the total business. I understood your question as being question on total business…

Melanie Flouquet: Yes, absolutely, thank you. Jean-

Jacques Guiony: For the total business, it’s 60-40.

Operator: We have another question from Rim Ben Salah from AlphaValue. Please go ahead.

Mr. Rim Ben Salah your microphone is open you can ask your question.
Jean-

Jacques Guiony: Okay, maybe next question?

Operator: So, we have no other question, sir. Jean-

Jacques Guiony: Okay. So, thank you for attending the call and we shall talk to each other again in end of January to discuss full year performance, not only on revenues but also on bottom-line and other aspects of the business.

Thank you so much.

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