Operator: Ladies and gentlemen, welcome to the Annual Results 2023 of Hermès International. I'm now going to hand over the floor to Axel Dumas and Mr. Eric du Halgouët, CFO. Gentlemen, over to you.

Axel Dumas: Good morning, everybody.

Thank you for joining us for the publication of the 2023 full year results. We are particularly happy to welcome you once again in our Sèvres store. Thank you to the Director of the store. 2023 was an exceptional year of Hermès in an unstable global context. I'm happy to present today yet another year of outstanding results.

In a market that is more and more polarized, this performance reflects the solidity of our corporate model that of craftsmanship, resting upon vertical integration and a strong local territorial base. It testifies the strong desirability of our creations in all the divisions. This year was marked by the crossing of historical cash flows for Hermès. First, going beyond 22,000 employees who make up for the success of Hermès worldwide. I'd like to warmly thank them for their enthusiasm, their creativity, their know-how and their commitment.

And then the levels of operational investments that accompany the momentum of Hermès that have gone beyond EUR 800 million in 2023. And finally, the level of sales with a continued growth observed year-on-year, reflecting the abundant creativity of our collections, recognizable by their style, their creativity, the excellence of know-how and by the quality requirements. We've doubled our staff in 10 years and more than 75% of the job creations have taken place -- more than 60% of the job creations have taken place in France, where may I remind you, we manufactured 75% of our items. And Hermès has increased its operational investments by EUR 2 billion of it 60% in France. It is, therefore, with confidence that we deal with 2024 despite the geopolitical economic uncertainties, true to our values with the will to continue to make our customers dream everywhere and reasserting our commitments in the social and environmental fields.

Let us now come to the highlights. The talent of the creative teams headed by Pierre-Alexis Dumas, give you some examples. In the leather goods collection alongside the iconic models, the new models have met with great success, such as Arçon, Della Cavalleria, Élan and the R.M.S. suitcase in the travel field but also [ Haut à Courroies ] proposed in different versions. Our collections of women and men's ready-to-wear have also met with great success everywhere in the world.

And then in 2023, we are celebrating the very strong momentum of watches and jewelry, with, for example, the H08 Hermès watch, which is today available in different versions or again the creations of Pierre Hardy around iconic clients, Chen Dong and Kelly. We're also delighted with the successful launch of perfume Un Jardin à Cythère and Tutti Twilly, and also the fifth chapter of Beauty, Le Regard Hermès. I would also like to mention that the divisions, Mosaïque, the home where the textile and furnishings collections have met with good success during the presentation at the Milan Fair, where the Hermès pavilion was visited about over 20,000 people. We're pursuing investments in our production capacity in all the divisions. In 2023, we inaugurated the leather workshops of Louviers in Eure and la Sormonne in the Ardennes, the first industrial building in France certified E4C2, a label which evaluates the environmental performance according to the energy consumption and carbon emissions.

We've also enlarged the glove workshop in Saint-Junien in the Haute-Vienne. In 2024, we will be opening a new leather workshop in Riom, in the Puy-de-Dôme, in the formal manufacturing factory of tobacco in the city. And the work has pursued in 3 other sites, the L'Isle-d'Espagnac, Charente 2025; Loupes, Gironde 2026 and Charleville-Mézières, Ardennes, around 2027, which will add to the 9 leather goods workshops spread out over the national territory. Investments in increased production capacity is strengthened in all the divisions to accompany the strong growth of the group. And I would here like to mention a new printing line for textile in Pierre-Bénite, projects underway in the metal fixtures, but also in perfumes and tableware.

The house has accelerated the vertical integration products -- projects to secure supplies, mainly in the divisions of jewelry and shoes by taking minority shares in some of our historical partners. Hermès maintains long-standing relations with its suppliers and its partners in all the materials, in all the divisions. We have about 20 years seniority for the 50 largest partners of Hermès. The House therefore contributes to the expansion of sectors of excellence in France. Let us now come to the integrated omnichannel and exclusive retail network.

Operational investments have continued getting our collections as close as possible to the local clients with a service offer, which is more and more extended by respecting the balances between the different zones. We've extended our new network with new addresses in the U.S.A., namely in Chicago, which you see here in the photograph success and 2 new addresses in China, in Chengdu and Tianjin. In Hermès, each store is a house of objects with a unique architecture -- special architectural gestures, which combine the identity of Hermès with a local culture and which thanks to the freedom of purchase of the Director of the store offers a unique assortment. Our e-commerce network has had a solid performance everywhere in the world and pursued its development with the opening of the new platform in Brazil. The success of the collection and our products have led us to strengthen our logistics chain to serve all the stores, including e-commerce.

Finally, this year was marked by a strong rebound of travel retail. The credibility of the House is also expressed with the 17 métiers of Hermès that of communication. In 2023, with the events open to the public all over the world, we wish to tell about the creativity know-how and the universe of Hermès. The artisans of Hermès with the events such as Hermès in the Making travel to Lille, Chicago and Bangkok. The exhibition Héritage dedicated to Hermès Heritage went to Sao Paulo.

We also wish to have discovered the 16 divisions of Hermès, for example, that of silk with the event called Brides de Galaxy in London, that of the home with the event called Parade in Seoul, that you see on the photograph and also petit h in Beijing and Osaka. Let me now come to sustainable development. In 2023, the group remained true to its commitment to sustainable growth in keeping with our local footprint and a support also for responsible industry. Nature is where our raw materials come from and lies at the heart of our artisanal model and therefore, our commitment climate change, its impact on biodiversity and protecting raw materials are among our prime concerns. And all of this is covered under our climate strategy, our initiative to make the industry more responsible as well as our policy to preserve natural resources.

And we continue to assert our attachment to local areas where we operate. Hermès remains true to its commitment of being socially responsible. We sped up job creation with an extra 2,400 people who have been recruited, 1,400 in France. A bonus of EUR 4,000 was distributed to all employees so as to share fruits of our growth with those who make up Hermès. There will be a 6 -- or rather in June, we announced a 6 free share plan for all employees.

So much so that today 80% of employees are also shareholders, more or less 18,000 people. To support our growth and to train employees to our know-how, we continue to roll out our in-house training programs with 8 training schools in France, and the Cutting diploma course was launched this year. In 2023, we continue to focus on inclusion and diversity. Hermès currently has 6.85% of employees that are disabled, and that's more than what is required in French law. For gender equality index, we currently stand at 95 out of 100, and we ranked fourth in the women in executive position table, the SBF 120.

Our ambitions for the climate are in keeping with COP21 and our commitment to a trajectory or pathway under 1.5 degrees approved by SBTi. The rollout of our decarbonization plan led to a reduction of 30% of emissions for Scope 1s and 2 compared to the previous year. We offset already 100% of our Scope 1 and 2 emissions since 2019. And these emissions linked to transport and high-value environmental and societal programs. We continue also to pay attention to our real estate, and we are going to reduce CO2 emissions during the construction of new buildings, but also make sure that these buildings are energy efficient.

Our commitment to protecting biodiversity remains crucial in 2023. We joined the science-based targets for nature program to better protect biodiversity. Hermès continues with its partnerships like the one with WWF signed in 2016 or with CDC biodiversity to analyze the impact of our materials, like silk, for example, the impact of which is very positive with no chemical fertilizers. We remain committed to the sustainability of our products with more than 200,000 repairs along with our eco design reuse and recycle policy. Hermès has also made progress in nonfinancial rating once again in keeping with our commitments and our desire for greater transparency.

For example, our AA MSCI rating, our leader position in luxury goods sector, awarded by Sustainalytics, we are also on the CDP A list. We also received the award on Emploi France for the third time in a row from Humpact and the CAC Large 60 for the Transparency award that rewards the quality of financial information in regulated publications. And now activities. In 2023, Hermès had a remarkable performance of sales of 2023 reached EUR 13.4 billion, up by 21% at constant exchange rate and 16% at current exchange rates. All the regions have flagged solid performance with homogenous growth of around 20%, and all the divisions have confirmed a good momentum with a double-digit growth.

In the Q4, the sales is of EUR 3.4 billion, growth of sales in Q4 is slightly higher than that of Q3, plus 18% is against plus 16%, and this in most of the regions. Let us have a look at the activity per geographical zone. In 2023, France, plus 20%; and Europe, excluding France, plus 20%, which is a solid growth, thanks to the loyalty of the local customers and the momentum of tourist flows. Japan, plus 26%, registered a progression of sales that were sustained and regular. Asia, excluding Japan, plus 19%, pursued its strong growth, with beautiful progression of sales in all the countries of the region despite a high comparison base.

Americas finally plus 21%, confirmed an excellent performance, too. The activity was particularly sustained, namely thanks to the opening of our stores, Naples, Aspen and Los Angeles Topanga. Let us now have a look at the distribution per division. In 2023, all the divisions confirmed a solid dynamic. Saddlery leather, plus 17%, strong progression.

It is based on sustained demand and the increase in production capacity. Clothes and accessories, plus 28%, pursued a strong growth, thanks to the success of the ready-to-wear collections and those of the shoes. Silk and textile, plus 16%, solid performance around exceptional materials and new production capacity. Perfume & Beauty, plus 12%, benefiting from the success of the latest creation that the classics of Hermès with the performance of Beauty. Watches, plus 23% confirms a beautiful performance around unique creativity and exceptional watch-making know-how for models of complication as well as the iconic models of Hermès.

And finally, the other divisions of Hermès, plus 26%, which include jewelry and the home growing. And I would here like to mention the -- so, Hermès dinner set, in Portland, which draw inspiration to the host jumping competition. The evolution of the distribution of the divisions reflect the dynamic of gloves and accessories, leather continues its growth in line with its objectives. I'd like to now give the floor to Eric du Halgouët, the CFO, who will present the results for you. Eric

du Halgouët: Thank you very much, Axel.

Good morning one and all. The group posted a robust performance in 2023, whilst reinforcing its investment and speeding up recruitments. The recurring operating income has increased by 20% and net profit by 28%. This graph here captures the speeding up of our revenues progression and net profit over the last 3 years. Across the last 10 years, annual average growth rate of our revenue and net profit stand at, respectively, 14% and 18.5%.

The 21% sales increase in 2023 is like in 2022, extremely positive. It is driven by growth in both volumes and value with a price effect that was contained at 7%. The negative currency impact on revenue is quite significant and stands at EUR 570 million, driving growth down from 21% to 16%. The gross margin rate is 1.5 point -- 1.5 percentage points above 2022, and this is mainly due to our currency hedge. Our production was very high in our production sites and the take-up ratio was also very high for all divisions, including fashion.

Our expenditure for communication reached EUR 260 million for the first half of the year and then exceeded EUR 600 million in the second half of the year because there were more events organized. Administrative costs, so that's the salary of salespeople and people in support functions, and rent reaches EUR 2.6 billion. The group has reinforced its head count in distribution to match the increasing footfall in our stores and to support the increase in volumes. Other income and expenses of EUR 889 million are mainly made up of depreciation in terms of all intangible assets, and they also include for 2023, the free share program distribution for all employees. Just as a reminder, this is a cost of EUR 60 -- there is also a cost of EUR 60 million, which is the 5-year commitment made to Fondation d'Entreprise Hermès and that was booked in 2022.

The recurring operating income, therefore, stands at EUR 5.7 billion, 20% higher than in 2022. Recurring operation profitability has reached its highest watermark at 42.1% of sales, an outstanding result, 1.6 basis points more than in 2022. The financial result is a proceed of EUR 190 million versus expenses of EUR 62 million in 2022. It includes the currency hedge, the debt on our leases and the interest income on cash that reached EUR 330 million in 2023, with the increase in interest rates. Tax amounts to EUR 1.6 billion.

And our effective tax rate is 27.8% as forecasted in June. Now the results for our partner companies reached EUR 105 million and captures the dynamic business in the Middle East. And our net profit reaches therefore, EUR 4.3 billion, a 28% increase versus 2022. The increase in recurring operating profitability and cash income allowed us to reach a net profitability of 32%, a record and a 3 point -- 3 basis points year-on-year increase. After having invested EUR 250 million in the first half of the year, the group invested EUR 600 million in the second half of the year.

Operating investments, therefore, reached a total of EUR 859 million, EUR 258 million were devoted to the renovation and the extension of our distribution network, mainly in Asia with our projects in Beijing, Tianjin and Chengdu, as well as in the U.S. with our projects in Chicago and Las Vegas. EUR 392 million were invested to develop our real estate and to -- for the support functions for the different divisions and for logistics. We've also sped up our spending in IT and digital tools. EUR 208 million were devoted to beefing up our production capacity, especially in leather goods, but also in Silk and textiles, perfumes, the home department and watches.

Our internal financing capacity stands at EUR 5.1 billion, a 25% increase, and after 2 years of decrease in our working capital requirements to the tune of EUR 400 million. This has led us to a net position of EUR 794 million for 2023. And this comes mainly from our stock recovery in the distribution network and the increase in our stocks of raw materials to secure production. After accounting for operational investments and the reimbursement of our debt on leases, our adjusted cash flow stands at EUR 3.2 billion. Financial investments account for EUR 316 million.

That's essentially shares that were bought in partner companies in keeping with our vertical integration strategy. Hermès International has bought back 75,000 shares for a total of EUR 132 million and distributed EUR 1.4 billion of dividends. Our net cash flow increases, thereby by EUR 1.4 billion to reach EUR 11.2 billion at the end of 2023. Our cash flow makes up 50% of our assets and equity, more than EUR 15 billion, pretty much our 75% of our liabilities. The group, whilst growing strongly, has consolidated its solid financial foundations to remain independent and deploy its long-term strategy.

The ordinary dividend, which needs to be approved by shareholders on 30th April stands at EUR 15 per share, and a EUR 10 exceptional dividend will also be proposed. Thank you very much for your attention, and I'll give the floor back to Axel for the outlook.

Axel Dumas: Thank you, Eric. I now come to the outlook of the group that remain unchanged. We pursue our dynamic momentum driven by the enthusiasm of all the teams worldwide.

So [ with the favorable ] gratitude that we closed 2023, "In the Spirit of the Faubourg" will be the theme of this new year. This plays born out of a dream that of Émile Hermès', is the beating heart of Hermès. It is everywhere where Hermès is and breeds sparkle and joyful spirit into Hermès. We pursue the momentum of job creation, multi-local and multi-division as well as our investments. We will continue to accompany our suppliers and all our partners.

We will also be investing in our retail network, which is omnichannel with the opening and enlargements of stores such as that of Princeton, Shenzhen MixC, and Lille. We will strengthen the vertical integration upstream and downstream across the board in link with our historical parties in the Middle East. Amazon become the majority shareholder alongside its historical partner in the retail sales activity situated in UAE. For 2024, the group starts the year with confidence with its unique corporate model and particularly robust deployed around our values, that of independence, spirit of enterprise, customership and creativity. I would once again like to thank our teams and our clients all over the world.

We are now ready with Eric to answer to your questions.

Operator: [Operator Instructions]

Unknown Analyst: [indiscernible] from HSBC. My first question is about the month of January. Can you tell us about how the year started? I believe that you've increased your prices by 8% to 9% in January 2024. Has there been a slowdown in the volumes after this price increase? And secondly, you've clearly overperformed against your peers in 2023.

Do you think that it's also down to the fact that you are less exposed to them to the aspirational client category?

Axel Dumas: Well, there's a lot of questions wrapped up in one. I understand that you have done away for 2023 and looking towards 2024. Well, look, I don't want to disappoint you, but we can't say much about January 2024. First of all, because I'm quite cagey as a person, but also because the Chinese New Year will not be in February like last year, but generally in this year -- or rather, sorry, it's the other way around. In any case, the Chinese New Year is not at the same time than last year.

It takes place tomorrow. And I apologize because I celebrated the New Year with our Chinese friends when they came over the last time. But I mean, there's a lot of uncertainty, as you can see, myself, I'm a little bit lost at the minute. So we will only be able to take stock of the situation at the end of March with all the back and forth and the travels after the Chinese New Year. Eric Halgouët will be doing the presentation for the Q1 results, and you'll know more then.

Price increase, yes, 8%, 9% across January and February. So once again, it's a little bit early in the day to draw any conclusions. Now regarding our success compared to our competition, I don't know. I'll leave you make -- let you make any comment on that. We always make very high-quality products with outstanding know-how and that fuels the success of Hermès more generally.

I don't want to make any comments on the other mission out there.

Operator: We've got another question here. Luca, over to you.

Luca Solca: Just a few words maybe to understand the evolution of the Chinese customers plants. Several investors have been asking themselves about the Chinese demand in 2024 as well as the situation of the middle class in China where confidence seems to be somewhat low.

Second question related to the -- where your stores are in the real estate. There seems to be a race to get the most wanted spaces. There have been -- we've seen purchases of certain premises in the industry, what is your approach, in particular, in the city of Paris, which is the capital of luxury in the world and which will -- so we'll be having the Olympics as a window onto the world, so to speak.

Axel Dumas: Well, on the Chinese clientele, that's a real subject for the whole industry. May I do some strategy.

Maybe that's a bit of a big word, but you'll see the answer is not so strategic. But anyway, if I say that -- one of the structural differences in our industry in the 15 years is that people don't necessarily buy according to the income, but according to their wealth. So success and on success of our industry when the market's real estate stock markets do come into play. And I think that is your comment. We do see that in China, there are difficulties of real estate and Shanghai market.

So that can sort of have an impact. But I would like us to come out of a Franco French vision, which is that in world, there are more and more middle classes that are younger and younger, more and more numerous and richer and richer. Well, that is why we can have beautiful results that we've had because I hear always talk about the difficult economy, we did plus 20%. We don't do plus 20% in a very difficult economy, personally. It's been over 20 years that I've been working in Hermès, and plus over 10 years that I've been having the group.

We've had years that have been more difficult. 2008 was a difficult year. So once we've said this, we remain confident on the Chinese market in the medium and long term per quarter, maybe it's more difficult to judge. And in my troubles, I saw fewer people in some malls with less footfall -- Hermès is not the most affected because our customer traffic is qualified. And I haven't seen any major projects of infrastructure being stopped.

So it's amazing to see the number of projects being developed in Shanghai and in other cities. So we are between 2 things really that are fair, things continue to move and which direction it will go. But I remain confident on the Chinese market. And I must say that the results up until now have shown that there's an attachment of the Chinese customers to our House to Hermès. As far as real estate is concerned, well, either I -- or reply honestly, and I get prices going up or I don't and I have -- I don't feel right about it.

Anyway, so there's a lot of people are buying real estate. We are lucky. We like to be off beat. They buy a lot on the fifth avenue. We are not on the fifth avenue.

They buy a lot on the [ Chaîne d'ancre ] and we are not on the Chaîne d'ancre. So and then in Paris, we have 3 stores in Paris. We have the Faubourg that we own, George V that we own, and several where we receive you, where we are tenant. There's no rule really on this. We are opportunistic with Florian Craen because the risk is that we own the walls and then the market changes and you're so happy with the walls that you own that you remain in your premises.

That is what happened in Milan before we moved, but we have went beautiful locations that we own Rodeo Drive, in LA, Seoul. We were the first the last to be in Tosan Park, and it's a question of finding the right opportunity. And we'll do the best.

Operator: We're going to try to alternate left and right. So over to you.

And then you'll be to my right.

Antoine Bregeaut: Antoine Bregeaut from BNP Paribas Exane. Two questions on my side. First of all, thank you for talking about the Chinese market. There's another important market, namely the U.S.

For other competitors, it seems to be slowing down, but not for you. You've probably been helped in that with the opening of the new stores over there. Could you maybe give us an outlook of the U.S. market? Will there be an impact because of the Presidential Elections? And then second question on your margin that is at a record high at the moment, but driven by currency impact. So what could be the impact of currency on the operational margin for 2023? And am I right in saying that there will be some conversely negative effects when it comes to currency because currently you stand at 42%, but with a negative currency impact, will there be a downward correction? And the turnover of the revenue is higher than what you expected.

So the ratio is probably driven up by that as well a little bit. So could there be a negative impact in 2023?

Axel Dumas: Well, thank you very much for your question. Let's start with the U.S. market. As you know, in the life of a company that there is what happens inside the company and outside of the company.

I talked about the Chinese market earlier, and I'll talk about the U.S. market right now. What we currently see is that there is a huge amount of footfall in our stores. Although we are not in areas where there are necessarily a lot of potential clients, but we seem to be able to draw them to where we are located with the Madison store, which was a huge investment for us, and it continues to show a very healthy dynamic in New York. We've got a new General Director in the U.S., and she wanted to show that she was good at doing business.

So the numbers are really good and they finished the year really with a very strong performance. So we'll see how this pans out for 2024. But there's also all the internal dynamics to take into account. So 2023 was a very good year for us in the U.S. in a broader context that remains good.

And it's true that, yes, for election years, up until the election, there is some uncertainty. But for the moment, we haven't seen any changes in the trends. It's meant to be a little bit lower up until the elections. And regardless of who is elected, it picks up afterwards because we could always make up for any losses incurred in November, December with the end of the year -- end of year events and holidays. Now for the rest of your question.

We are not steering the group with margin in mind. We've never done that. And we've never done this on purpose, but this is the way we operate. We have fixed costs and we were able to overshoot our targets, but we try and manage and steer the group in a conservative financial manner. But we never think about the margin rates, it's often mean that we see at the end of the year.

And then on your question on currency impact. Yes, that drives our profitability up for 2023, because we have an extra profitability point that comes from the currency hedge booked in 2022. On top of this hedge effect, there's the conversion effect that was positive this time around and drove our profitability a little bit higher. So yes, better profitability driven by currency effects. The idea was to reinvest in our information systems, in communication and in beating up staff in the different divisions and reinforcing our structure.

So yes, profitability driven by currency impacts. In 2024, there is an 8% to 9% price increase, and we've remained true to covering our production costs that have increased by 6%. And that's also part of our commitment to our employees. And we wanted to also cover the currency impact that is quite negative, and that's an extra cost of some EUR 300 million. So the price increase covers the extra production costs and the negative currency impact.

Regarding communication, we -- as you can see, we were at 4.5% this year and the year after that. What is specific with Hermès compared to other players is that we invest a lot in client events and much less in press and media events. So we do the opposite of what other players in the industry do. But our main communication channel is the client or customer events, and we can't invite them every single day of the year. So this is why there are some changes from 1 year to the next.

We don't have to invest a lot of money in media and press to drive up our revenue unlike others. So we're pretty much in keeping with what we've always done. Since COVID, we've multiplied by 2 our revenue, but we've kept the same ratio. So yes, we have also increased our communication expenditure. We might not all agree on this on [ execute ], but there's a lot of communication to do.

Edouard Aubin: Edouard Aubin, Morgan Stanley. Now for jewelry -- you've gone beyond EUR 1 billion with all the different categories of jewelry, have you gone beyond the #1? And your objective is a phenomenal growth over the last 10 years and your prospects for the 2 to 3 years to come on this market segment, first question. Second question. Second half of 2023 since -- for the first time since 2017, there's a growth of number of employees that was higher than the result. Can you give us the net recruitment? Will there be a moderation of recruitment in 2024 as compared to 2023? And a question on dividend, EUR 1 billion exceptional -- on the exceptional dividend.

I think it's a [ bit-to-mid ] people were expecting EUR 2 billion. Generally, historically, you've given exceptional dividend every 3, 4 years on an average over the last 10, 15 years. Can we see a shortening in the future of the payment of exceptional dividend?

Axel Dumas: I'm going to -- I won't give you the figures of jewelry, adding the [ Chaîne d'ancre ], fancy jewelry. But since I'm -- I don't need to add all of this to go beyond EUR 1 billion. So indeed, there was a big success of jewelry, Chaîne d'ancre.

I used to head jewelry. And since I don't head it its increasing size marvelously. So I really will salute the teams that are heading it brilliantly. Now for the recruitment. If you've been following us for a long time, you've seen years where we were recruiting 1,000 people a year and now with this size we had 2,400.

It's net. When, say, 2,400 people with the departures and retirements and the gross is higher. And we will continue in this event in 2024. There is an idea of first slowing down from this point of view. For the dividend, we have the right to have a different opinion than yourself.

Sometimes with Eric, we ask ourselves we haven't gone too far. So thank you for reassuring us from that point of view. Ever since I've been the CEO for 10 years now, this is the third exceptional dividend. So you might say that it's every 3 years, there were years different. Earlier, it was exception dividend, EUR 5 per share.

We've gone to EUR 10. So we thought that was a gesture that was strong. It is exceptional cases whether it's going to be an exceptional that would be regular because then it would be exceptional, but I take a good note of hope for months.

Operator: Olivia, you have the floor.

Unknown Analyst: 2023 -- we saw the landing for 2023 and that growth rates were a bit slow in luxury.

Last year, if I recall, you explained that Hermès were impacted, but a bit later down the road from these market impacts. Do you think that this year there will be a slowdown in sales or not?

Axel Dumas: Well, first of all, we are going to celebrate this plus 20% sales increase for 2023. But yes, moving on and looking towards 2024. It's very difficult to speak to the market on these matters. Everything is often blown out of proportions and not interpreted properly.

What we are doing, however, is working on an artisanal market. Our production capacity is limited because of the know-how and because of the rare raw materials that we use. So I've never had in mind this idea of doing plus 20% in 1 to 10 years, because we want to keep our quality standards. What we have noticed in 2023, and that will help us better understand '24, I believe what we saw in 2023 is that a lot of luxury companies had a good year. And for other luxury companies, it was not such a good year.

So there seems to be a polarization in our industry, those who are very successful and those less so. And what you call normalization is something that we've benefited from in the past in that whatever you do, whether you make a mistake or not, it ends up working out. So when we do something good, it works out. When we make a mistake, we pay for it. I don't know if you want to call it normalization.

I think that, yes, it's pretty much normal, but I am confident in the group. I'm confident in our clients. And also look at our teams, and I see a general sense of optimism as they look towards the future. Now if you know me for a long time, I am not paranoid at all. So I -- you don't worry about meeting you, crossing the road or stuff like that.

But I'm also a great optimist at heart. I never think that we've won before the battle has started for me. It's really important to be an attractive and desirable maison people need to come here and to be excited and happy to buy what we make. And desire is not something that you can measure or forecast for the next couple of years. So each collection, we changed all of our [ garage ], all of our tires.

And we have no idea whether people will like what we have prepared for them. Do you want an example? Now you want another question? Okay, I'll give you an example, anyway. Myself, I am a client of Hermès. I get to the stores. And as imagine, I want to buy some dresses.

I tried them on and I tell the sales person, [indiscernible], I don't know whether I need these trousers and he says, well, don't buy it. We don't here come to buy something that you need, but something that you want. Now can we excite people's desire? I mean that's what we try to do. And I think one of the way to be successful is to also bear in mind the fact that it might not work out.

Unknown Analyst: [ Louise Singlehurst ], Goldman Sachs.

Two questions, please. The first is concerning the different categories of products. So what are the categories where you see more growth coming in the coming years? And concerning the category of beauty products, can you tell us a little more? Is it a product category that allows you to attract new customers as a majority? Or does it allow you to sell new products to your preexisting clients?

Axel Dumas: Now what was not so usual because of COVID and post-COVID. Before the crisis, it was the strongest mid-tier department that could sort of be the amortizing way like leather. But amazingly, all the departments worked, I wouldn't be incapable of saying which are all the materials, all the departments have a double-digit growth.

And I congratulate them. But I could say that we had incredible results. The shoes incredible one for ready-to-wear, incredible results for jewelry to take a few examples, but it's incredible to do on leather, plus 17%. So I think that all these departments, all these materials will continue to grow to the success of Hermès -- the incredible success of Hermès. With the COVID years, I stay home.

I look after one side of the House. And I do know that we sell so many plants and table ware and so forth. We have a vision in the game theory. I try to put in place the success of each of our departments and then it is a client who decides, and we were lucky to decide it in all the departments, all the materials. And held the emulation, and we are there to put in place the right conditions.

But we let the market to go towards the product today. I was marked personally. I did my first internship in 1988 in Hermès, 53% of the sales were Silk and Textiles and 9% were leather. Luckily, we continue to recruit artisan and continue to make handbags. So I'm there to put in place the possibilities and the potential of each and everyone.

Now the beauty products, first of all, this is something that we're very attached to and that we did first for 2 reasons. Strategically, because I think it is important that Hermès perfumes via 3-dimensional brands; and secondly, also to please ourselves. It's a pretty not to have color and makeup in house of colors. And CEO for Perfumes, also the Executive Committee, I mean I do love the beauty, and so we went into it to please up. Now what's to be sure, we hope to have more customers with beauty than Hermès customers who - to whom we sell beauty, we want to develop sales.

Perfumes as a result of its distribution network because we have many more stores and our own stores where we sell perfume. There's a larger assortment of customers than a normal Hermès store. So it's new customers, if you like. It's more customers. Maybe all our Hermès customers and others.

Operator: Microphone to the person here in the back.

Unknown Analyst: Sorry, I did have a microphone previously. So I'll ask my question. My name is Alessandro from the Financial Times. You said that you're anticipating price increases to the tune of 8%, 9% for 2024.

It was 7% last year. So my first question is, can you give us a bit more clarity on the segments where price increases will be the highest? Can you tell us more about leather goods, for example, what are you forecasting there? And among your peers, some have said that they are increasing prices, but not to the same level and the price increases for them will be lower in the next few years. What convinced you that you could hike prices? Is it because you have a very high end client base? Or is there another reason?

Axel Dumas: Well, I'm glad you took the floor because these are very interesting questions to me. So yes, the price increase is around 8.9%, pretty much 8%, 9% across the board. It's not one mid-Tier 1 division that has increased its prices more than another.

The prices I'm going to come up with a broad answer and one that is understandable by all. So what is our MO? The price policy was started out by my mother in the 1980s, and we've always done the same. We use the production costs. And based on that, we decide what the price will be at the financial times. You probably heard that there is some inflation out there that has been impacting our prices.

And then there's also currency effects. We are in the eurozone. And we have 95% of our production in the eurozone. You know that the yen has lost of its value likewise for the U.S. dollar.

So with currency effects, and inflation, we have this price increase of 8% to 9%. So why are these prices still respected across the world? It's because -- this price increase is driven for internal and external reasons like currency impact. There is no marketing. There is no desire for us to be more profitable in this price increase. I remember that 3 years ago, I was extremely proud the same event, and I said our price increase is only 3% to 4% because currency exchange was in our favor, and there was very little inflation.

I was really proud of that. And then our peers increased their prices much higher than we did. And everybody pointed to me saying that I was not increasing prices high enough. Ian Rupert -- and the share price went down. Ian Rupert said a year ago that we -- the Maison increased prices a bit too much.

And I thought that this was going to be a complementary year to me, but it was not the case. And now you say others are not increasing prices than you are. And once again, I feel that you're pointing the finger at me. So I understand your perspective. You have to accept your Karma in life, and it seems that the price increases or decreases are never seen favorably at least in my personal case.

But we've increased prices because production prices have increased. But our margin rate at Hermès is pretty much the same, whether it's a very desirable object or a much less desirable one. So the margin rate remains the same and has remained the same, actually. So this is our strategy, and I believe that our clients understand it probably better than financial analysts do.

Zuzanna Pusz: It's Zuzanna Pusz from UBS.

So I have 2 questions. First one on actually both of them are Leather Goods. It feels like over the past couple of years, your growth has been a little bit above the usual sort of algorithm of just adding volume and pricing within the Leather Goods division. I think after COVID, initially there was a little bit of a pickup in productivity, but it does feel like it seems to continue, which I guess makes us feel like there could be something more to it, perhaps a little bit of a mix effect because when we just look at your product offering, there's been a lot of innovation, lots of great new products. So would you be able to share with us if this could be the case if there is an incremental mix effect and what that has been and what that could be going forward? And then the second question also sort of related to that.

You disclosed the footwear division within ready-to-wear. Would you be able to tell us more or less what percentage of your revenue is footwear right now? It's been quite successful in the last couple of years, be useful to know it.

Unknown Executive: Yes. Regarding leather, our increase in capacity remains quite stable year-on-year. It's roughly, we say, 6% to 7%.

So your question is why did you reach 17% last year? The main reason is that compared to the previous year 2022, we had a higher productivity because our production activities we're penalized by the -- still by the COVID in 2022. So I would say we have kind of 2 points, which is exceptional. But we keep the trend. We opened one new workshop each year at least, which gives us roughly a 7% capacity increase.

Unknown Executive: After it's something -- there is something that need -- it's complicated for you to factor it completely because it's really human made.

So one bank is like 15 hours. So I cannot always tell that at a quarterly presentation, but some time we had bird flu, and for us, it's terrible. And the next -- and the flu is better next year, and they have a huge increase for the quarter in productivity at that time. And of course, the flu -- it's not something that we control. We do offer free vaccination for the one who won't.

But -- so it's very -- I will say it's very variable because it requires also the spirit of the people. We had a good year in terms of productivity this year, less when people were too stressed in France. So there is a lot of things who came into this result, which are very human and not totally economics and financial. Well, you are right and this we don't exactly factor because all our orders, everything that we sell is decided by the store. Twice a year, we do the podium, we just initiated, and we have Florian Craen, who is heading all the Retail.

They come with their budget and they buy. So it depends also what they buy -- what we see also is that there has been a very good success, of course, of our high-end bags. Catherine Fulconis, which is the leader, has created a lot of novelty as I told, but also a lot of high-end pieces using handcraft, embroidery and this has been tremendous success also. So it's true that it's one of our specificity. If we make a very, I would say, simple bags, 15 hours, we make a very complicated pricey bags, for example, in Crocodile, 15 hours.

So there is a value effect. And we try to adjust with the capacity of the people to do it because not everybody is able to do very high-end thing. Everybody is progressing. That's why we are able to do more. And the second thing, the availability of the materials.

If it's not at the level of the material we want, we don't produce. That why it's quite organic. But we've seen, of course, an attraction for the high-end product that we have in jewelry. In shoes, I won't give a percentage, but as jewelry is a very high number. And I never work on the shoes business.

Operator: One here in this side. Please go ahead.

Unknown Analyst: To react to the prices in China because there's a bit of a deflation there. Can you give us an indication on the prices in China?

Axel Dumas: No, not really. We don't participate in the deflation though.

It's in the average. And you have to take into account the depreciation of the R.M.S. to be slightly above average. We're not deflationist.

Carole Madjo: Carole Madjo, Barclays.

I have 2 questions. The first, can we come back to the change in structure in the Middle East? Is there a special reason for which now you have a greater share in the region -- the prospect more interesting than some years ago. Second question, similar to the new growth prospects, India, Malaysia, Singapore, are these markets that seem more attractive in the future? Is there something other than China that could be a growth driver in the future?

Axel Dumas: Well, on the structure in the Middle East, it's been a very long time that we have had strong activity in the Middle East with a very good development with partners with whom we were in joint venture, but we had a minority share, mainly because the law didn't allow us to have a majority share. Now the laws have changed, the law has changed in particular in Dubai and Abu Dhabi, and we, therefore, have taken the majority share. We continue to work with these partners who have great quality, and we will take a big control, but there's not much change because we were already very much involved in the structure, very well balanced between our partners and ourselves and the teams.

So this is taking place in a very easy and simple, flexible way. It's more a change from a minority share to a majority share in both cases, and we see a great dynamism in the Middle East, but this has been going on for the last 10 years. The city of Dubai is performing strongly as a sort of turning point in the region with a strong momentum. And we hope that it's not because we will deal with it to look after it directly that it will perform less well. For the other countries, you're totally right.

I'll answer to your question on China, but I've really been trying to explain for a very long time that Asia is the general boom of Asia, which is incredible, not just China, Singapore is functioning very well, and we'll be renovating the [indiscernible] store in Indonesia, Philippines, Thailand has an incredible progression. And let's not forget, North Asia, Korea wonderful market and Japan, of course, if you keep too little outings in Asia geographically, but not in our financial reporting. So there's that strong math, if you like. India, we've been present for quite some time. We are waiting for the clientele locally increases -- there's a lot of customs duties.

We've got big customers outside of India. We're going to be opening a third store in India. And let's hope that it will take time and take off as it should. We already have a very good customer base namely in Dubai, they come shopping. We always look at the new countries, which are very important.

I think we really have to ask ourselves a question, do we need to open store in a country, we need a middle class, the very wealthy classes. They did travel all the time, find them in Miami, Milan, London, Paris, it's when the country reaches, it has a sufficiently big middle class to open a store. Today, we see a development of the middle class in India, indeed, and also in other countries of Asia, which allows us to have stores, which with their local clientele have great dynamics and great momentum.

Operator: One final question maybe.

Unknown Analyst: [indiscernible].

I only have the one. In Europe, could you maybe give us a bit more color on the tourists versus local clients because in Hermès we see that there is no slowdown compared to your peers where the slowdown has been quite noticeable.

Axel Dumas: Yes, we did plus 20%. So yes, indeed, no slowdown for us. There are 2 issues that are quite conflicted in Europe.

First of all, we are very specific in that we have a very strong local client base. We have Italian clients in Italy, German clients in Germany, et cetera, et cetera. So the impact of tourist flows is not as important than for our peers. I don't have the numbers for the other companies, but you seem to have them. What we have noticed -- I said these are local clients have been very good to us, for example, in Nordic countries where there are fewer tourists.

We've also seen tourists come to our countries, the high-end tourists that can spend more on average than local clients. So that can drive up the dynamism of our sales. So that was -- yes, the trends that came on top of the good success for Europe in 2023. So we've got plus 20% in sales increase, which is something that we haven't seen previously.

Operator: We're now going to move on to the questions asked online.

We've got a question from Thomas Chauvet from Citi.

Thomas Chauvet: The first question is on the categories where Hermès was very successful, especially recent categories like Beauty and Jewelry. If you do a 5-year forecast and without giving away any of your secrets, which are the categories that need to be grown? You talked about complexion products, for example. Can you tell us about this in skin care as well products? And since the reopening of countries after COVID, you've seen an increase in the footfall in the stores. I saw it last year in London, but also in the stores, the renovated stores in Bordeaux.

Can you tell us a bit more about the client pathway in these stores? Because we feel that there is always a huge amount of people in the stores. And thirdly, your net cash flow is the highest in the industry, EUR 11 billion, whereas the interest rates will be going down. So how are you going to redeploy cash in years to come? Will it be earmarked towards production or distribution?

Axel Dumas: So first of all, a word on the categories. Now, we are here to set up the Darwinistic conditions conducive to each métier growth and to try and meet also some kind of demand from our clients. So I'm expecting growth from all of the different métier divisions.

Now for jewelry, I'd just like to remind you that our first line came out in 1918, and we created the Chaîne d'ancre in 1937 designed by Mr. Robert Dumas, and I'm actually his grandson. So I feel that we are not new comers when it comes to jewelry. However, it is true that when I started looking at jewelry, we didn't just do silver, we also had some products made in gold, et cetera. So I'm expecting some progress from jewelry but also from the other divisions.

Now for makeup, this indeed is a recent midyear for us, and we have huge expectations for beauty. And as I mentioned, I want us to have a holistic approach and also enter into skin care to have this free dimensional approach. For the other métier, we are a bit more conservative. We want to have complete control of what we do. And we do not want to outsource the decoration of a hotel to another player.

We are one of the rare companies that do not hand out licenses. So we like to keep control over all of this. Then there's always someone who tells us it's great. It's great for our clients. Could we have an event agency -- but we invite our clients, it's always free, which is, I think, good for everyone.

We don't have to put a price on all of our brilliant ideas and pass that price on. Now for customer service. Now on that matter, you are entirely right. It is a great success. I'm quite lucky or maybe unlucky to have Florian Craen, who says that yes, they are indeed too many clients.

Now I was happy about the fact that there were too many clients. And it's true that we need to improve things in that regard. And that means, first of all, having bigger stores, better trained salespeople and more salespeople, but to have more salespeople, we need more square meters as well. So this is one of our objectives with Florian Craen is to improve the customer service. We have more training for salespeople, finding also the best people because salespeople at Hermès are not just here to sell something.

They're here to take the time to tell you the story of Hermès and the different products that we offer. So that's definitely one of our objectives. And you were also very kind to talk about our stock recovery because sometimes you can't always buy the product that you want because of its success. Florian Craen summed up the situation quite neatly. He said, if you come to Hermès, and you don't know what you want, then we'll definitely find something that you will like.

If you're coming to something specific, it's a bit more complicated. And then digital, as Eric said, here, we also have our digital selling channel for a lot of métier and has been very successful, and we've seen a lot of progress. Regarding cash. Now that's quite an unpleasant question because for years, we had cash that didn't make any money. Now interest rates are going up.

We don't have to beg banks to make money on our cash, but now we can make money with our cash flow. I would just goes back to Luca's question. We can buy a flagship without having to borrow from the banks. It means that we can continue with our vertical integration that started in 2023 and that we will continue in 2024. And maybe there will be an exceptional dividend paid out, who knows.

Well, look, I want us to stick to our financial strategy, which is to not have any debt and to divide up the cash of our company in securities and then in self-financing for our investment. And then third, the last third for our intelligence. And over the last 10 years, we've been managing our cash in that way. And so far, it has worked out quite well and allowed us to be very resilient. At the moment, we had plus 20%, which is of course great [indiscernible].

And still and I believe that I speak, of course, not only in the day, but I think that everybody is happy, but we also need to be resilient and independent going forward. This independence is extremely important. We never actually decreased the dividend in our history.

Operator: Back in the room for a final question. If there are -- if there is any, don't feel obliged to ask a question.

Axel Dumas: No? Well, all right. Thank you. Thank you very much. It's a real pleasure to receive you every time and we try to give you as precise an image of the house as possible with these parts of shade, which make up for its success. And management is what which make up for the magic of Hermès, and we wish us all 2024 as beautiful and successful as 2023, at least from our point of view.

Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]