Good day and thank you for standing by. Welcome to the Caring 2026 Third Quarter Revenue Conference Call. Please note that today's conference is being recorded. I would now like to hand the conference over to Armelle Poulou, Chief Financial Officer of Caring. Please go ahead.

Thank you. Good evening to all of you and welcome to Caring's Third Quarter 2026 Revenue Call. I will be reviewing our performance and we'll be joined by Philippine Duchon, head of AIR, for the Q&A session. We'll start with the key highlights of the quarter. Against an uncertain macroeconomic backdrop, we continue to roll out our reconquering plan, tackling, step by step, the changes needed to build a more resilient and integrated group and giving us the agility to better navigate these increasingly challenging environments. First, Our houses keep on deploying their strategies, with product execution being the clear priority. This was for example visible through the recent fashion shows which gave each house the opportunity to translate strategic choices tangibly. Second, we continue to strengthen our leadership with appointments at Bottega Veneta, Pomelato, Dodo and at group level. These moves reflect our focus on building leadership depth, combining the recruitment of external experts with the promotion of internal talents. Finally, as part of our long-term commitment to nurturing the craftsmanship and talent that underpin our House's industrial base, our caring Academia Perle HLNC launched its first full academic year, welcoming more than 1,500 students across programs developed with our houses and seven partner schools across Italy. Taken together, these actions mark continued progress on our roadmap. I will now turn to our financial performance in more detail. On slide 5, group revenue in the quarter reached €3.3 billion, down 1% on a comparable basis, and flat as reported, Reflecting the positive impact of the US dollar and the Chinese yuan, partially offset by a negative impact from the Japanese yen. There was no scope effect. The quarter reflects phasing effects at Gucci, together with a more pronounced seasonal effect at Kering Eyewear, a demanding comparison base as last year's sequential progression from Q2 to Q3 was particularly strong, and more challenging macro trends. Traffic remained the main constraints across the group. However, other retail KPIs were supported by various initiatives reflecting solid engagement from clients visiting our stores. As anticipated during our H1 call, Gucci's performance in Q3 is impacted by the phasing effect of our collections before benefiting from the ramping up of our ongoing work on products. In the meantime, The group can rely on the strengths of its portfolio with Saint Laurent, Bottega Veneta and Brioni as well as Kering Eyewear and Kering Jewelry which continue to extend their strong trajectory. Overall, against the current macro backdrop, we remain focused on the levers within our control and our priority is clear, execute better, move faster and remain relentlessly focused on desirability, product, and client response. Moving on to our quarterly revenue in more detail on slide six. The performance remains uneven. By segment, Kering Fashion and Leather Goods was down 3% on a comparable basis and down 1% as reported, with Gucci down 6% on a comparable basis and 4% as reported, as the house continues its turnaround. Kering Jewellery increased by 11% on a comparable basis and by 12% as reported, supported by strong performance at Boucheron and Pomelato. Kering Eyewear grew 4% on a comparable basis and 6% as reported, confirming the resilience of its business. Corporate and other decreased by 5% both on a comparable basis and as reported reflecting the end of rental income following the real estate deals despite the continued strong performance of January 1735. Overall, our geographic mix stays well balanced with the main shift being a lower contribution from Asia-Pacific amid mixed regional trends. Mainland China is our major headwind as consumer confidence stays subdued and customers are increasingly selective, while South Korea continues to grow. On slide 7, let's review the top line by channel. The split by channel remains stable with retail, which represents 75% of revenue, down 3% on a comparable basis. Within retail, e-commerce grew 3% year-on-year on a comparable basis. and represented 11% of retail sales, a rather stable proportion. Traffic remained under pressure overall in our stores. This was partly offset by better conversion across most houses, supported by stronger product execution and improved client engagement, together with higher average unit retail price and average ticket. These indicators point to healthier product dynamics and reinforce our focus on product transformation. Our Directly Operated Network now counts 1,614 stores, a net reduction of 105 stores since the end of last year, including 25 net closures at Gucci. With this, we have reached our objective of 100 net store closures before year-end. The group now anticipates at least 125 net closures for the full year 2026. Alongside closures, we continue to open stores in selected locations. At the same time, we keep focusing on maximizing the productivity and appeal of our existing network with store refurbishments, strengthening the expression of each house, and elevating the client experience. Wholesale and other, increased by 3% in line with the previous quarter. When zooming in on distribution speed per segment, carrying fashion and leather goods retail sales declined by 4% on a comparable basis. This sequential slowdown reflects a more challenging environment, a less supportive contribution of Gucci, and lower traffic this summer, especially in mainland China. Wholesale increased by 1%. Kering Jewelry was driven by the strong retail performance of our jewelry specialists, posting 18% growth, while wholesale declined by 5%, affected by software performance in mainland China and retailization in the Middle East. Kering Eyewear, whose revenue entirely derives from wholesale, keeps on enjoying positive momentum, with revenues increasing by 4% on a comparable basis. Moving on to retail regional performance on a comparable basis on slide 8. Western Europe was flat and posted its third quarter of sequential improvement, with both local and tourist spending improving sequentially, driven by Saint Laurent and Bottega Veneta. In North America, trends have softened this quarter after several quarters of strong growth. Performance remains strongly positive for most houses and the region posted a 1% growth on a comparable basis despite normalization in consumer demand. Japan eased this quarter, posting 4% growth, boosted by the dynamism of our jewelry houses in the country. Tourism dynamics became less supportive than in Q2. Asia-Pacific declined by 8% in the quarter, with the low traffic in mainland China being the main headwind, partly offset by continued strong momentum in South Korea. Nevertheless, in-store indicators were more encouraging. The dedicated China plan remains focused on rebuilding visibility. I will get back to this in more detail later. Finally, the rest of the world declined by 5%. The Middle East continued its sequential recovery and posted a positive growth in Q3. Let's now move to carrying fashion and leather goods on slide 9. Revenues stood at 2.7 billion euros, down 1% as reported, and 3% on a comparable basis. Excluding Gucci, the segment grew by 2% in retail, with Saint Laurent, Bottega Veneta and Brioni enjoying momentum. This broad-based contribution highlights the strength and diversification of our portfolio, helping to partially offset Gucci's current transition. Before turning specifically to Gucci, let me first say a few words about the other brands within the segment. At Saint Laurent, the house keeps benefiting from strong traction driven by sustained growth in North America and Western Europe and engagement from VICs and core clients. Bottega Veneta continues to outperform supported by sustained brand desirability, solid traction across key markets, and continued strong momentum in leather goods with successful product introductions. The house also advanced its diversification strategy, notably in ready-to-wear, while benefiting from strong engagement among VICs. This performance confirmed the methodical roll-out of the house strategy unveiled at the Capital Market Day, with growth increasingly driven by value. At Balenciaga, performance was more challenging as the house worked through its creative transition. Leather goods remained the engine of the house, while ready-to-wear and shoes remained key areas of focus. Basket size improved, both in value and units. McQueen continued to execute its repositioning and the reset of its retail network. The house is refocusing its identity as a British tailor, and its latest show in London further reinforced this renewed focus on its British roots. Finally, Brioni maintained its solid growth trajectory, supported by its highly personalized approach to client relationships and the strength of its bespoke offer. All sales and other revenues were up 4% on a comparable basis. Royalties and other revenues recorded very strong performance, driven by the beauty and eyewear licenses of our fashion houses. Focusing on Gucci now on slide 10. The house recorded sales of 1.3 billion euros in the sub-quarter, down 4% as reported and 6% on a comparable basis year on year. Retail ended down 7% as reported and 9% on a comparable basis. This performance reflects several factors. An 11 percentage points tougher comparison base this quarter and a less pronounced newness effect than in Q2 partially offset by the first benefits of our ongoing work on product development from creative teams to retail excellence. On phasing, Primavera started to reach stores in mid-July and was fully deployed in September, with advertising rolling out from late August. The collection contributed positively to newness. Being fashion-forward, it primarily speaks to a fashion-led clientele. It is now being complemented by Gucci Core, which is more focused on the core wardrobe and will begin to reach stores in November. Traffic remains a main constraint across regions, with mainland China our key headwind. That said, conversion, average tickets, and average price continued to improve. This quarter was primarily about execution. We continued to reshape the product architecture, sharpen category priorities, and improve pricing and perceived value, while bringing new collections into stores. Handbags are at the forefront of this work with a richer offer and a clearer price architecture. Ready-to-wear and shoes remain key areas of focus. The recovery will be gradual over time as we keep on working towards progressively translating improving dynamics into traffic and sustainable growth. Wholesale and other revenues were up 35%, Allsell, which represents around 9% of sales, or €120 million in the quarter, was up 45% on a comparable basis, reflecting a low comparison base and order book effects as new collections came through. On slide 11, Kering Jewellery again delivered a strong performance, reaching €239 million in revenues. Sales were up 12% as reported, and 11% on a comparable basis. Sales in the directly operated network increased by 18%, while wholesale and other revenues decreased by 6%, both on a comparable basis and as reported. This segment is benefiting from a growing retail footprint and the first effects of the integrated platform supporting synergies. Boucheron possied another strong quarter, driven by the continued strength of its iconic collections, Quatre and Serpent Bohème, and good performance in Japan and South Korea. Pomelato also benefited from positive momentum, supported by strong traction in Japan, thanks to the Nudo, Iconica, and Together collections. Performance at Dodo and Kilinu was mixed, though the houses continued to advance their product initiatives notably with Kylian's successful launch of Wooloo Purple Jade. Beyond the quarter, carrying jewellery is confirming its role as a structural growth engine for the group. The category benefits from strong underlying fundamentals and from the disciplined way we are scaling it across houses and regions. We are also investing in the communication of our brands. With strong desirability, A growing retail footprint and an increasingly integrated industrial backbone, we are confident in jewelry's ability to increase its contribution to group revenue over time. We will present our key priorities for the jewelry business during a Caring Jewelry Day, which will take place on the 2nd of December in Paris. Moving on to slide 12, let's focus on the revenue of Caring Eyewear, which which posted another quarter of solid performance. Sales reached 373 million euros and were up 6% as reported and 4% on a comparable basis, reflecting strong demand across the portfolio and the anticipated more chronic seasonality effect during the second half of the year. This performance highlights the strength, resilience and scalability of the iWear platform across geographies. Growth was supported by a combination of several product launches, including Maui Gym Fall-Winter 2026 collection and the continued roll-out of the activations supporting Lindbergh's 40th anniversary. Commercial and marketing momentum remained strong, supported by a successful Spring-Summer 2027 sales campaign and media investment across key brands and targeted activations. Beyond the quarter, Eyewear is demonstrating again the relevance of our integrated model. With its diversified brand portfolio and recurring demand profile, Caring Eyewear is a highly attractive and reliable growth engine for the group. On slide 13, I will make a few comments about the corporate and other segments. This quarter, revenue from corporate and other amounted to €27 million, down 5% as reported and on a comparable basis, primarily reflecting the end of rental income following the real estate transaction, despite a very strong double-digit growth delivered again by January 1735, highlighting the continued progress in brand development and desirability across key markets. On slide 14 and before concluding, I would like to step back from the quarter and show the steady progress we are making on our transformation, brick by brick. Clearly, the performance of the third quarter is not where we want it to be. But beneath the top line, the actions we have taken are becoming increasingly visible. First, at Gucci, our priority is to rebuild desirability. Creative renewal is underway. The store show in Milan at the end of September brought the house strategy fully together, building on Primavera and Gucci core presented earlier this year. The collection stood out for the diversity of its look, products, and style across both men's and women's. We have also sharpened the organization around creativity with product, merchandising, marketing, and retail now working more closely together. At the same time, we are increasing media investment, strengthening communication, and intensifying clienteling in Q4, making sure our actions resonate more strongly with clients. We are already seeing tangible results with improvements in conversion, average tickets, and average price. Traffic remains a missing piece. We are also working on retail excellence. deploying our new store concept, optimizing the network, and stepping up Salesforce training. Second, in China, we are tackling the challenge head-on. On the operating model, we are adapting our organization and leadership with more decisions now taken locally. On client relevance, we are putting Chinese clients more firmly at the center of our actions Stepping up outreach to top clients, timing major product moments around local locations, and conceiving campaigns in and for China rather than adapting global ones. As part of this effort, I am pleased to announce the launch of a content factory in China for China. And on the network, we remain disciplined. We are optimizing our stores while investing in refurbishment and restyling. Formats and visual merchandising are the levels we hold on traffic itself and we are using them first where footfall has fallen most. Third, we are enhancing the offer across the houses. Product and price architectures are becoming clearer, quality is being upgraded and we are reducing the number of SKUs. Buying is becoming more responsive to actual demand. also support our objective to reduce fashion and leather goods inventory by around 1 billion euros by year-end. And finally, on efficiency, we are building an integrated group. Our shared industry, client, and tech platforms are increasingly supporting the AOCs for manufacturing and procurement to client engagement, forecasting, and inventory management. On change management, we are embedding a stronger culture of execution with clearer accountability, faster decision-making, and a collective mindset. And on cost discipline, we are further reducing our cost base without compromising investment in our houses. CAPEX remains disciplined, and we confirmed full-year OPEX below last year, with H2 2026 below H2 2025. Before turning to the outlook, a word on creative leadership, which sits at the heart of our model. At Saint Laurent, we are opening a new chapter from a position of strength, with the house back to growth, a clear strategy, and solid momentum. At McQueen, we will build on the repositioning already underway, sharpening the house focus on what makes it distinctive, British tailoring, Women's Redditware and Occasionware. In both cases, our approach is the same, the creative vision fully aligned with the Clear House strategy and supported by the strength of the group platform. We look forward to sharing more on creative leadership soon. So, while the benefits of the transformation are not yet fully visible in our revenues, the actions behind them are well underway. To summarize, our focus is on rebuilding desirability, improving retail productivity, and translating these changes into healthier and value-creating growth. As you know, we continue to operate in an uncertain geopolitical and macroeconomic environment with limited visibility in some of our key markets. This is waiting on our short-term revenue trends. Nevertheless, We continue to prioritize the quality of our revenue with several of our brands showing strong momentum and the recovery at Gucci gradually taking shape. On profitability, we confirm our objective of improving recurring operating margin in 2026. This will be supported by the continued implementation of our efficiency measures while maintaining strong investment in the desirability of our houses. Today, our focus remains firmly on the execution of our strategic plan with agility, discipline, and flawless execution, concentrating on the levers that are within our control. We are clear-eyed about the work still ahead. Q3 reinforced the necessity of our transformation, but it does not change its direction. Our priority is to translate the progress we are making across our houses and the group into sustainable growth, stronger profitability, and cash generation. And with that, we are ready to take your questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to the first question. One moment, please. And your first question today comes from the line of Anne-La Biesemuth from HSBC. Please go ahead.

Yes, good evening, Armelle and Philippine. My first question is on the performance for the fashion and leather division ex-Gucci, so it was flat in Q3. Can we have a bit more granularity about the performance of Bottega Veneta and Saint Laurent if it was above average? And yes, it would be good to have that granularity. And the second question is about the consumer reception of the Primavera collection, if you can share a bit of feedback on that. And then, as the core collection has been rolled out a bit earlier in some of the locations globally, and maybe a last one, I know it can be a bit premature, but can we see a bit of an improvement on the back of these collections being in stores in Q4 for Gucci? Thank you very much.

Thank you, Anne-Laure. So first, let me comment on the fashion and leatherwear brands ex-Gucci. Yes, it was fast. It was up 2% in retail. Very happy to see a positive momentum at Saint-Laurent, driven by North America and Western Europe. We saw a very strong traction in ready-to-wear and shoes, supported by a lot of newness that was very successful. And also I would say a very interesting traction on the VIC. You remember that's part of the strategy to elevate the part of VICs at Saint-Laurent. and we had a very good recruitment of new VIPs at Saint-Laurent over the quarter. Regarding Bottega Veneta, Bottega Veneta delivered another high single digit growth in the quarter despite tougher comparison basis. Leather goods remained the key driver supported by the Andiamo but also by new launches. We are also happy to see the good reception to the ready-to-wear collection, which allow diversification to develop at Bottega Veneta. And at Bottega Veneta, we are also seeing a double-digit growth of our high-client category. For the other brands, Balenciaga and McQueen, the quarter was a bit more challenging. You know, Balenciaga is seeing very good results on the leather goods with the CT and the Rodeo and we just launched a new bag, the new Howard Glass Avenue that has a very good start and at the same time it's suffering on the ready-to-wear and shoes where we need to focus on introducing new lines and new products. McQueen, you know, it's working on its repositioning but it's making good progress on the network optimization The restructuring of the company and the repositioning with some early good signs in women's reddit wear and formal footwear. Prigioni delivered a very strong growth with a large success of the bespoke offer and also here again a good development of a very highly personalized client relationship. Your second question was on Primavera. So Primavera gained traction throughout the quarter. You know it's a collection that was very fashion-led, which for us was very important because the objective, you remember, from the beginning of the year was to regain visibility at Gucci and to get Gucci back into the conversation. which we did with Generation and then Core. The objective of the next collection that is coming, as you said, in Q4 will be to enlarge the appeal of the collection because it's going to introduce more daily wardrobe and it should resonate more to a larger audience of our clientele. Asking how is it doing for Core is really too early because I think it just arrived in the store. The full deployment in store will be done over the month of November, so it's a bit early to give feedback on call. And then, of course, you've seen the show of the store. That will be the next step with, here again, a collection that will be even more large in its offer across category and size. And you asked me... Well, that was it. Thank you, Anne-Laure.

Thank you. Thank you. Your next question today comes from the line of Antoine Balge from BNP Paribas. Please go ahead.

Yes, good evening. It's Antoine at BNP. Three questions if I may. I know it's probably difficult to estimate, but you think that there is a calendar impact from the phasing of the Thank you very much. Thank you very much. Thank you very much. Can you maybe give a flavor by the key clusters for retail and also maybe in conjunction with my first question which maybe there is a particular region that suffers more from less newness. And finally on margin, so you said that you're conferring a full year target of higher margin but if I'm not mistaken there was also A target on the H2 margin being higher than H1, which would be above 12.8%. And if that would be achieved, that would be 170 basis points more for the full year. So can you comment a bit on that? I mean, is it fair to say that now you're abandoning this 12.8 for H2? And if that's the case, maybe I think you gave a bit of flavor Thank you Antoine. On your first question it's a tough one of course because it's very difficult to

To measure precisely, what is sure is that we are introducing those new collections one after the other and there is both, as I was saying, the calendar effect of, you know, the collection coming to store in September and the fact also that, you know, remember in Q2 we had two collections, we had Génération and La Familia both in stores. But, you know, for us what is important is to continue to deliver the plan and to enlarge, I would say, the breadth of the collection, one collection after the other. So difficult for me to give you a precise answer. In terms of retail and deceleration, where we had the most headwind was in China, as you probably well imagine. For sure, that was true for the Chinese cluster as well. We also had a deceleration. Your question is on Gucci. For Gucci, we also had a deceleration in the US. But in terms of performance, that's China that waited the most on the performance of Gucci retail in Q3. I cannot say it was linked to less newness in a region or in another. It was more linked to the dynamics of traffic. Now, even in this environment, in every region, we are pleased to see that we had an improvement of the conversion, an improvement of the average ticket and average unit price, and also cross-selling. So, difficult traffic, but once the customer is in the store, good reception with the newness. On margin, yes, we have done some further improvement on our discipline on OPEX, which is a good thing. We are not going to, and we confirm that we can improve margin for the full year in 2026 versus 2025. We will not improve H2 margins versus H1 margins, considering the challenging environment, but we will still improve the full year margin, which was what we indicated at the beginning of the year. This is driven, as I said, by good discipline on OPEX. Even if we continue to strongly invest in communication behind our brands, we also strongly invest in the refurbishment of our stores. but we do some efficiency efforts in other area. You know, the same area I mentioned many times and it's always said it was not one of effort. We are raising the efficiency within the company in every house but also leveraging on the group platform to be more efficient as a group for our houses with more and more mutualization of services for the brand. Grossmargin, you know that we are not guiding on Grossmargin. It's true that the elements you mentioned on the regional mix, the raw materials and investment of quality still remains. Over time, you know that we are counting on the group platform over time to have some efficiencies. Some of it we will reinvest in the product as the product is an absolute key priority for us.

Maybe just to follow up on the clusters because at the group level that's usually where you communicate. I'm looking at my notes in Q2. I think the mainland Chinese, they were down around 10 and American up high single digits. So is it possible to have these two clusters for Q3 at the group overall?

Chinese, we were sort of low tilt in Q2 and we lost, I would say, around five points. And Americans, we were high single digit and we lost sort of same number of points, roughly. So deceleration in both clusters, but America is a positive region for us.

Okay, all right, so I thought Meetings Down was for Gucci in Q2, not the group, but I might have that one wrong.

Which one, you're saying for Chinese?

Yeah, the Chinese, you say Down Meetings.

It was Low Teens in Q2, Low Teens in Q2.

All right, okay, thank you. For the group. Yeah, thank you, thank you.

Thank you. Your next question today comes from the line of Thomas Chauvet from Citi. Please go ahead.

Good evening, Armelle and Philippine. I have two questions, please, and just a quick follow-up on the slide deck. On the first one, coming back to the cost, you've explained well you've taken a lot of costs out of the business since the end of 24. As you shift from Restructuring towards investments, ramp up of new collection, new designers coming at Saint Laurent and McQueen. Should we expect a more normal pace of OPEX 4 next year? I see consensus is currently assuming around plus 4 for the OPEX at reported rates. So very different number from both H1 and H226. And then secondly, on your guidance, very clear on the margin comments you just made. It seems you have removed from the last slide of the deck the sales growth target for the year that was provided in H1. The nine months at group level are flat at constant effects and you're not assuming growth anymore, I suppose. Is that because of this uncertainty you described earlier, the lack of visibility, maybe the front situation? that you are not comfortable with delivering growth in Q4. Perhaps if you could comment maybe on how October has trended. And just thirdly on clarification on the Europe performance, Western Europe was flat in retail in Q3, but Gucci was down, sorry, Fashion Leather was down five, and Jewelry was also down in Europe. So how does that reconcile? I must be missing something. It's been a long day with a lot of reports. I'm probably tired, but I just can't reconcile that performance in Europe with the fashion, leather and jewelry that are both down in Europe. Thank you.

On your first question on cost, first you know the effort we are doing on cost are, as I was saying, are based on efficiency effort. It's also coming from the optimization of the network. You know, we are continue to work in that direction in next year. It's really early for me to give you any indication on the OPEX for 2027. Regarding the outlook, it's true that we are in a very uncertain environment at the moment in France, but not just in France, also in other parts of the world. So we want to concentrate on the quality of the SAVE, that for us is the most important. We are working on what we can control and it's very important for us to concentrate on the execution of the plan and on the quality of the SAVE. You know we don't guide on quarterly revenue now, but I can tell you the quality and the transformation are progressing. Now, your question on October, what I can say is that for the moment, broadly, it is in line with the Q3 trends in most of the regions. Your last question on Europe. You're taking me by surprise. I'm sure the numbers are right. Let me come back to you. Thank you.

You take it offline Thomas.

Thank you Philippine.

Thank you. Your next question today. comes from the line of Luca Solka from Bernstein. Please go ahead.

Yes, good evening. It's Luca Solka from Bernstein. Thank you for taking my question. I wonder if you could summarize how you're seeing the new creative directors coming on board and when they could potentially be launching their new collections in the brands where You've announced recent departures. Do we expect the new creative director to be preparing the for winter collection for Saint Laurent to go on the catwalk in early 27? And is that going to be the same for Alexander McQueen? I think that there was a lot of media reports about potential changes of Balenciaga, so if you could confirm that Piccioli is saying that would be very helpful. That is my first question. The second question is on off-price. I remember you have announced a significant ambition to reduce inventory. I think that part of that is getting inventory or old inventory out of the system through factory outlets. I wonder how that is proceeding and if you could give us any update on how you're realizing your ambition and how the off-price channel contributed to the retail performance.

Thank you very much. On your first question, you know we are very happy to welcome shortly two new designers and I'm not going to announce their name today but We should be able to give you more indication very shortly. Those successions were well anticipated and planned. That's why we are very positive on the impact it will have with the brands. The situations are a bit different because Saint Laurent is starting from a strong momentum situation, so it's more the opportunity to open the new chapter and to unlock all the still and many others that we see at Saint Laurent and that we explain at the CMD. And for McQueen, it's also going to help the repositioning of the brand with a British tailoring approach with a very bold point of view. I'm not going to give you more detail on the collection and the timing, it's a bit early and you will see that Later on, when those creative designers will join the brands. On Balenciaga, I'm going to be disappointing, but I'm not commenting the rumors. Regarding off-price, first, I'm happy to confirm that we are very well on track on our objective to reduce inventory for the year-end. This has been done in many ways. Yes, some products have been sold in outlets, some products have been sold in family sales, but the most important for us is that we have reviewed completely the buying strategy. It's not just the buying. We are mentioning from time to time the work that we are doing on the product architecture, number of SKUs, reducing the number of lines. I mean, it's a full work of, I would say, SNOP. where we try to improve the planning, we try to improve the industrial agility, we try to improve also the correct assortment by cluster of stores, and we have reduced, quite importantly, the number of units we produced, but because we are much better organized in terms of planning and distribution, we managed to reduce Thank you very much. It's not just reduce the size of the inventory but it's also to enhance the quality of the inventory and to enhance our capabilities in terms of SNOP. We have a strong project at group level together with the IOCs that we call IBP. This is a good example, I think, of where the group platform can help and influence our efficiency because this is a project that is held at group level but it is done with the houses all together and we are quite satisfied to see already some improvement in some KPIs. Inventory is one, but sell-through and months of coverage is another one.

Thank you, Armelle. And just as a follow-up, could you maybe also update us on your ambition to reduce the number of stores and how is this proceeding just ahead of the full year-end?

Yes, so in terms of stores we are proceeding well because you know we had announced at the beginning of the year an objective of 100 and we are already at 105. That's why we are revising the ambition of 125. In this number you have also some new openings because it's a net number. We have closed more stores and we are also opening stores. and more importantly we are accelerating on refurbishment. We think it's extremely important especially in the brands where we had the creative transition to make sure that not only we rejuvenate the product offer but that we also refresh our stores. So having less stores we also can concentrate our capex on refurbishment. We have a strong plan in all brands but at Saint Laurent for example this year we have already deployed the new store concept in many new flagships and at Gucci we have also started refurbishments. The new store concept will be unveiled in November in Avenue Montaigne but we have a full program for next year where there will be some I would say strong large refurbishment but also restyling of our stores where we will be able to be quite agile and quick in changing the look and feel of the stores without being too disruptive to the sales.

Thank you very much.

Thank you. Your next question today comes from the line of Edouard Aubin from Morgan Stanley. Please go ahead.

Good evening, Armelle and Philippine. Most of my questions are on Gucci. Apologies to come back to that. Armelle, you talked about the weakness in China, but I think maybe one of the biggest surprises is North America because you turned negative in Q3. I get the point that the comp base is obviously more difficult, for sure. But you had talked about the brand perception remaining strong in the US. You did the show on Times Square in May. What are you hearing from your teams in North America? What's the analysis of the contraction of Gucci in Q3? So that would be question number one. Question number two is on Gucci wholesale. So you talked about the order book and so on. Are we going to see a bit of a reversal, i.e. wholesale at Gucci being down year over year in Q4? If you could give us a little bit more detail and also what's the regional push? Was it the rest of the world or where was wholesale particularly strong in Q2? Finally on Gucci, there's a lot of talk about ASP potentially being down via either price cuts that you're taking and the way you play with the mix. I've seen some figures on price cuts in the mid single digit and if you can comment on are these discontinued lines that you're heavily discounting to reduce your inventory and do a cleanup? and also if you can just comment on either the straightforward like-for-like price cut but also the efforts you're making with the mix and the strategy because I think that's a key focus of investors these days. Thank you.

Thank you, Edouard. So regarding North America, before I go to Gucci, I cannot prevent myself to comment on the fact that Saint Laurent and Bottega Veneta are double digits growing in the US. Regarding Gucci, I think the analysis we do at Gucci is when we look at the collection that we're in store and also at the customer that bought it, we see it's a collection generation and to a certain extent but also Primavera that was very much fashion for one and that attracted more the higher hand of our clientele and we saw in the mix More VICs, more resilience in the VICs than in, I would say, the core part of the clientele and the aspirational. And that's exactly why, and that was the plan, the collection that you saw in May in New York, that we come to the store in November, has a breadth that is much more large and it's more daily wardrobe than fashion for one. So this is for us. One of the explanation, you know, we had a very demanding conveys in the US industry, but certainly more resilience and with the fashion forward clientele. But for us, it's very important. This is also what is putting back Gucci in the conversation. It's also what is going to help us gain traction. But then we need in the store to have a larger offer. So we know we need to work still on the product. We are seeing good results on handbags. We know that on ready-to-wear and shoes, you know, the new collection are going to bring some more newness and probably more attractive to a larger audience. For wholesale, in Q4, you know, it's always very difficult to... Also, there is a bit of phasing, so probably It won't be as much up in Q4, maybe even a bit negative in Q4 due to some ceilings, but you know, it's not our first focus also. And maybe coming back to your question on price, and thank you for asking the question because there has been a lot of talk about what we've done about price at Gucci, and I'm very happy to give a bit of explanation. You know, our approach is really based on common sense. What we want to do is to give to our clients the right product at the right price. So yes, we have done some recent price cuts. They were done on a very limited number of SKUs, and they were seasonal SKUs from the previous creativity, so not products that are reproduced. So that was part, yes, of the cleaning strategy. It's also a way sometimes to bring some clients to store and we actually, it was very interesting to see that we did a lot of cross-selling between sometimes a still valid, old still valid and a new product. But for us the focus is really on recreating a desirable offer with the right pricing architecture and an improved quality perception and both are very important. and that's actually why you see that we are happy to see that the AUR went up and it did in every region. It's because we also regain in handbag and also in the middle range, I would say. You saw the success of the Borsetto and the Papparazzo that are bags that are priced around 3,000K. You know, we are not going through repositioning in pricing of Gucci, but at the same time, we want to introduce new products, creative, with a higher quality, but that are perceived as good value for money for our customers, and that can be at the very high end, at the entry point, or in the middle.

Okay, thank you. And if I can just keep a quick one on net financial expenses, you know, how do you see the trajectory in 26 and 27 now that you've delivered the balance sheets? If you could comment on that, that would be helpful. Thank you.

Yeah, the cost of debt is going to follow the size of the debt, so it's going to go down, which is good news. You know, in Q1, in the net financial expenses, we add also to some foreign exchange Thank you.

Your next question today comes from the line of Aaron Ramberg from Goldman Sachs. Please go ahead.

Hi, good evening. Aaron Ramberg from Goldman Sachs. I mostly have follow-ups now. I was wondering if within the quarter you saw any difference between the beginning of the quarter and the month of September. Bizarrely, some of your peers have mentioned weather and other elements that weighed more on the beginning of the quarter before things got a bit less bad or even better in September. Secondly, a follow up on, so your store closures, so you're well ahead of plan. does it mean you're going more quickly in negotiating these exits or does it mean that you'll eventually go deeper meaning you will on a three-year view cut more number of stores that you had in mind or you just are just quicker at doing it and then thirdly and this is probably a question that's difficult to answer but maybe you can give us feedback from the people on the ground if you look at China I'm just wondering what you are picking up in terms of what's weighing most on psychology because obviously it's the entire sector which is under pressure in China. Is it real estate? Is it equity markets? Is this new taxation law? Is it something else you have in mind that is explaining how sequentially this market has become a lot worse in the quarter? Thank you.

Thank you everyone. So regarding your first question, September was slightly above the quarter. Regarding your second question on store closure, I think this is a result of, you know, we've been cautious in the number that we communicated because we knew it was dependent on the negotiation, as you said, because we also closed store before the end of the lease. And I think it's good news to see that our real estate team have been very efficient in the negotiation. We didn't change the list of stores, it's just that the negotiation went well and we had been a bit cautious in the communication of the number because we didn't know at the beginning of that exercise how difficult it could be. It's not always easy but mostly it went well, which is good because you know that we are doing this effort at group level. This is also part of the benefit of having some mutualized function at group level for all our houses. On China, of course there is a combination of all the effects that you mentioned. What we can say and see is that for us the main headwind is the traffic. But you know regardless of the reasons that are creating a weak traffic, first we are encouraged by the fact that conversion, average ticket and tickets are up nonetheless for us in China. Average price and ticket. Average price and ticket, sorry. But also what we do is that we focus on our China plan. We know we have a lot of work to do in China. We know that we are starting from We are reviewing our playbook in China and this plan that is led by Luca is looking at many elements but I will mention four. One is the organization and the operating model. We are evolving our operating model. We are going to strengthen the teams locally but also empower them more. in order to be able for them to take quicker decisions and more relevant from a Chinese standpoint. The second point is that we are working also on the products. We need to make sure that the assortment of products that we put in store in China is relevant for the Chinese customer. It's something probably where we didn't pay enough attention in the past. We are going to become much more client-centric in the assortment. Here again, using much more the feedback of our teams on the ground. Third thing is on marketing and commercial activation. As I said in the speech, here again, it's extremely important in China at the moment to be relevant, to be culturally relevant for the Chinese. And we are launching a content factory that will be based in China to ensure agility, speed, but also to be locally relevant in terms of content. And then the last one we already mentioned is the store network. Very important also to make sure that once the clients come to the store, the retail experience is perfect. And the store network, by having a more concentrated store network, We will also do a lot of refurbishment and restyling of the store network in China. And we know that in some brands like Saint Laurent, but also like Gucci, it is much needed because you still have stores with a very old style coming from previous creativity.

I'm sorry, I just wanted to come back on the question of store. Thank you very much. Best of luck.

Thank you. Your next question today comes from the line of Charles-Louis Scotti from Kepler Chevro. Please go ahead.

Good evening. Thank you for taking my questions. I have two. The first one regarding Gucci. Down 6% like for like in Q3, 9% in DTC. Could you please give us an indication of the impact of the stock closure? to help us understand the underlying same-store sales trend. Because given you are closing an increasing number of stores each quarter, I would assume that the impact is becoming more significant quarter after quarter. Could you confirm whether this is the case? And looking at Gucci Retail, it decelerated 7 percentage points sequentially in Q3 and your peers were down between 4 and 9 percentage points. I'm just trying to understand whether on the same stock sales basis, Gucci may actually have held up better than some of your peers. And secondly, just a quick follow-up on the creative director changes. This announcement obviously has naturally led some investors to question the position of other designers. across the group who were also appointed before the change in management including at Gucci. The market environment is obviously making the Gucci turnaround more challenging but could you confirm whether the new management team is currently satisfied with the recent collections and the brand new creative direction and whether Gucci overall trajectory remains in line with the management expectations? Thank you.

Thank you, Charles-Louis. So on your first question, yes, I'm going to give you some numbers, but not at Gucci level, at group level. So because, you know, also this network optimization is done across the group, not just at Gucci. It's true to say that, you know, the store closure, and it's very difficult, but we try to estimate the impact on sales. It's not easy because it, of course, depends where you close the store. If you close the store in a city where you have many stores and one that is just opposite the street, it's very different than if you close the store in a city where you have only one or two stores. But, you know, I'm going to give you a rough number that are just an estimation. We estimate that in each one, the store closure had a represented headwind of one point on the sales before sales recapture. It's important to say. And in H2 of two points. And regarding your question on the deceleration of Gucci, here again, it's important to remind you that we are also facing an 11-point combi from Q2 to Q3. Regarding designers, of course, I'm not going to comment apart from Salon and McQueen, but I think what is important to say is that we are working at the moment to set up a more efficient operating model around creativity. So it means that it's making sure also that we have product development, marketing, and merchandising that are set up around the creative teams and making sure that we make the best of the creativity of our designer. And that's extremely important. The creative designer is very important, and it's also very important that the team is able to deploy and I insisted already on the importance for us on the enhancements of the product offer that we have a team and that early stage is working together is true for merchandising but also marketing and product development in order to be able to translate the creativity of the designer the best way in the product offer and to make sure and in the campaigns So that at the end of the day, we have the best offer for the customers in stores. So this is, I would say, where the management is mostly concentrated at the moment. And here again, using also the help of the houses and the group platform all together to see how we can optimize the model to give us more agility, more time to market, but also a better translation of the creativity in the product offer.

Thank you.

Thank you. Our next question today comes from the line of Oliver Chen from TD Cowen. Please go ahead. Thank you.

This is Jonah. I'm for Oliver. Thank you for taking our question. To the extent that you can, you know, give us any color, how should we think about your exposure to aspirational customer versus ultra high-end income consumer both across, you know, in China and other regions? If any color that you can give would be helpful. Thank you.

Thank you, Oliver. You know, on this question, as I said, we see that the I.N. customer at the moment is more resilient. You know, we are in a moment where the macro backdrop is waiting on confidence and discretionary spending. and certainly uncertainty adds to the pressure on middle income customers. Now we also know that those customers are very attracted by newness and creativity and what we are doing at the moment in the price and the product architecture is to make sure that we have the relevant offer for all our clients from the healthier to the core and the aspirational customer in different categories and at different entry points. and certainly we are paying a lot of attention in all the categories because we know that the aspirational customers can enter the universe of our brands through categories like eyewear, like perfume, like small leather goods, but what is true is that we want to offer them extremely high qualitative products at the right price for the aspirational customer but also for the other one. but certainly at the moment what we see is a fashion customer that is facing more uncertainty for sure and that is true all around the world.

Thank you so much. Thank you. Your next question today comes from the line of Victoria Petrova from Barclays. Please go ahead.

Thank you very much for taking my questions. I have very short follow-up ones. First of all, Do you think it is fair to assume that now your sales densities are below €20,000 per square meter, so down from last year? That at least looks like that, but maybe I'm missing something. Secondly, you are talking about traffic not coming back. Do you see any indication in any regions The traffic is recovering, which we could use as a leading indicator. And finally, Oncelorun, this is one of the best performing brands. Why are you changing creative direction there? Thank you so much.

Thank you, Victoria. You know, Oncelorun, we see some improvement in some of our brands, but I will not give you a number. I see that you do your own math. You know, of course, what we do on the network as an objective over the plan is to increase the sale density. We are closing stores, we are rejuvenating the offer, and we know that over time this is going to increase the sale density, which is of course a strong objective of our CMD plan, as it is also a strong lever for our profitability. It also comes with the refurbishment plan that I was mentioning. We are working on it, of course, in many different directions. Regarding traffic, I would say it's difficult to call for a regional one. I mean, traffic is quite soft. It may depend sometimes on some brands. One thing I could say is we see some encouraging signs in Europe for Saint Laurent, for example, but Saint Laurent is a brand that is resonating very well The tourists in Europe but also the European customers. But you know what we focus on is really to improve conversion, our average tickets because what we do is we work on what we can control and for us it's encouraging to see that once a customer enters our store we see a better response. Regarding your question on the change of creative directors at Saint Laurent, Saint Laurent is experiencing a strong momentum and we are very happy about it. You know the change of creative directors, it's opening a new chapter after 10 years of success. It's also good from time to time to bring a new point of view to the brand. We know that we have As you know, our priority and our growth level at Saint Laurent is to develop the day wardrobe, to develop the main line, to be more relevant in China, and we are very confident that the new creative designer, together with the Saint Laurent team, will be able to contribute to the development of this plan.

Thank you very much.

Thank you. Your next question comes from the line of Susanna Pouch from UBS. Please go ahead.

Thank you for taking my questions. I have actually just two, or no, maybe three actually, but I'll be quick. So first of all, on Gucci's performance in retail in relation to the inventory cleanup they're also still doing, may I just confirm, when you look at Gucci's performance in retail, can you confirm if full-price stores are outperforming or they're underperforming outlets? Because I know, you know, your focus is to sort of the emphasis is outlets, but in the meantime, as you clean up the invention, I'm just wondering what's the dynamics. Certainly, sorry, it's also on Gucci. On wholesale, unless I misunderstood something, but I think at the beginning of the year, you were talking about wholesale being slightly negative for the year. And then I believe, Every quarter so far has been actually positive. And unless, again, I misunderstood it, I think you said it's going to be still probably slightly positive or slightly negative in Q4. So it looks like it's not going to be negative for the year. What is the specific reason for that? Is it maybe regional mix that franchise stores are performing better? Is it the response of maybe hosting to the new collection? Just, I don't know if you can give a bit more color on that. And then final question. I mean, so you're making some changes to designers. I mean, the two ones you've discussed. And I think it was mentioned before that you don't really expect this to have any impact on sales through any disruption. But at the same time, I think you did mention that in Q3, The reason why Gucci was a little bit weaker is because it had to do with the flow of newness of the products from Demna. So I'm just trying to understand how these brands are less driven by the designer. I just want to get an idea because I guess we're all a bit worried that those brands may also go through a bit of a transition. Thank you.

Thank you. I'm going to answer to all your questions. Maybe I'll start with the designer. You know, each brand is on a specific trajectory and each situation is very different. I was mentioning Saint Laurent and McQueen. It's two different situations. What I can say is that those transitions were planned and have been well planned and anticipated and they are coming on top of a strategic plan that is under execution that is very clear. So it's not changing at all. The execution of the plan for each of those brands is enhancing the execution of the plan. The situation of newness of Gucci is different. We know that we have more work to do at Gucci on the rejuvenation of the offer, and that's the work that Debna is doing with the team. On your question regarding wholesale, yes, actually for Q4, I'm expecting a more negative number but I don't think this is really what is important. You know wholesale is only a small part of our sales and you know it's a channel that can vary from one quarter to another quarter because of phasing, because of also the willingness of our partner to buy the product. What is important for us is that you know it represents a very small part of Our focus is in our DTC stores and that's where we are putting all our efforts that I mentioned before in terms of store optimization, refurbishment, relocation and reinvestment in the store and the retail experience. And then finally your question on full price stores and outlets. You know the direction going forward over the plan, our intention is to reduce The Share of Outlet, because our focus is really to sell our product full price in our stores. I'm not going to give you some details, we never communicate on the split of the sales, but this is of course will be done through enhancement of the product offer, better engagement with the client, and as I mentioned before, first and foremost, a more efficient SNOP within the company. and that's really the objective because the outlet is not a channel of sale for us, it's a channel for the leftovers and of course what we are focusing at the moment is to reorganize in a way and it's a question of organization but it's also something where we can lever on technology and AI where we can increase substantially the efficiency of our production towards the client demand in order to reduce strongly the leftover at the end of the season. So that's the objective of the company going forward.

Thank you.

Sorry, just to follow up.

Sorry, I'd already moved on to the next question. Shall I get Susanna back?

No.

Yeah, yeah, you can. Let me just get Susanna for you one moment. Sorry, Susanna, your operator cut the line. Susanna, your line is now open.

All right. Thank you so much. Sorry, I just wanted to clarify that I understand and I think that's totally the right strategy to de-emphasize outlets going forward. But I was just more curious as we are, you know, as Gucci is performing now, because The H1 gross margin was a bit weaker, so I'm just trying to get my head around how we should think about the gross margin for H2. Because let's say if you're still clearing the inventory through the outlet channel for Gucci, then we could expect a bit more gross margin pressure. So it was more like I understand your long-term strategy, but I'm just trying to understand what's performing well and if outlets are outperforming or underperforming now for Gucci.

What I can tell you is that the pressure we had on those margins was mostly coming from the regional mix and the fact that we lost market share in the mix in China and the cost of the raw materials. So if that can help, we don't know exactly what will happen in Q4, but probably those elements will stay there for the second half of the year.

So it wasn't the outlets in H1? It was just other aspects.

No, it was not the outlet. It was many elements. I mean, we talked about the raw materials. We talked about the gold price. We talked about the investment in product sales. And you know also that we have, yes, and so those were the main reasons of the gross margin.

And you had some forex impact in nature. True, as well.

Thank you.

Thank you. Your next question today comes from the line of Utati Vadhu from Avua Capital Markets. Please go ahead. Atiya, your line is open. Thank you.

Good evening.

Thank you for the opportunity to ask questions. I just have one on the jewelry division.

The North America sales growth in Q3 slowed to minus 10% from plus 10% in Q2. That's quite a significant deceleration. Could you give us some color on what led to that very sharp drop? Thank you.

Sorry, thank you for your question. So regarding jewelry in the U.S., you know that our position in the U.S. at the moment is very limited in terms of mix. This is one area for us of development for the future because we are mostly very strongly present in Europe, but very strongly present in APAC and in Japan. In the U.S., the reason for that drop was I think that we had some very strong high jewelry sales at Boutros in Q2 that did not anniversary in Q3. Conversely, Pomelato had a very good performance in the U.S. in Q3.

Thank you, Patricia.

Thank you. Our next question today comes from the line of Chiara Patostini from J.P. Morgan. Please go ahead.

Hello. Hi. Thank you for taking my questions. Just a couple of very quick ones. Firstly, actually, following up on jewelry, on the jewelry division, because it was a broader slowdown sequentially, I guess, to the extent the comp got tougher. Anything to call out more broadly and high level on the jewelry category that you've seen in Q3 versus Q2? Any changes in consumer behavior there, or it's just a function of the comp base? Second question on Bottega Veneta. As I think the CEO has now joined us, so any early indication of his priorities or where he's focusing at the moment besides, of course, getting up to speed? Any first steps that we should be expecting from there?

Thank you.

Hi Chiara, thank you for your questions.

On the first one, it's mostly due to the combés. You know, we had a very demanding combés in Q3 in the Drury Division. I would say some of our brands, but pretty small like Kevin suffered over the summer from the deceleration of the Chinese market. But the other brands did well, but the corn base was the main reason for the deceleration. Regarding Bottega Veleta, very happy to have welcomed Romain on board. What he's doing is that he's, of course, executing the strategy that we have for the brand. He's not going to change the strategy. He's fully focused on helping the teams to deploy the strategy. His priorities are to boost the brand visibility and awareness, to elevate the retail network and experience, There is a point for China because you know Bottega is very successful in the Western world but still not incurring that success in China. It's mostly a problem of awareness. So he has a lot of initiatives towards awareness but also towards engaging with high-end customers. And of course he's also working on the consolidation of the of the brand success beyond leather goods, notably in ready-to-wear, which is part of the diversification and the potential that we see at Bottega. You know that the very high-end clients generally are very fond of high-end ready-to-wear. So we see, of course, a lot of potential for Bottega Veneta clients in leather goods to extend their purchases to ready-to-wear. Okay, I think we are at the end of our call. I want to thank you very much for your interest and for your questions. Before we close, a quick word for Victoria, who will be leading the IR team to join group communications at Kering. Victoria, thank you for everything you have contributed to and all the best in your new role, which will keep you close to the team. Philippine and the IR team remain available for any follow-up you may need. Thank you again and have a good evening.

Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.