Richemont Stock

Good morning, everyone, and welcome to Richemont's 2026 Full Year Results Presentation. Thank you for joining us in person in Geneva or virtually by Webcats. I'm Alessandra Girolami, Group IR Director. And joining me today are Johann Rupert, Chairman; Anton Rupert; Nicolas Bos, CEO; and Burkhart Grund, CFO. As usual, the company announcement and results presentation can be downloaded from richemont.com, and a replay of the webcast will be available on our website today from 3:00 p.m. Geneva time. Before we begin, please take note of the forward-looking statements in our dog announcement and on Slide 2 of the presentation. Turning now to the presentation, Nicolas will begin by discussing the year's highlights group sales. Burkhart will then review our business areas and group financials, and Nicolas will finish with some concluding remarks. This presentation will then be followed by a Q&A session open to participants present in the room. I now hand over to Nicolas.

Thank you, Alessandra, and good morning to everyone. Thank you for joining us today. In fiscal year is, Richmont delivered strong sales momentum and solid results against fast-evolving global conditions. And I would like to start by warmly thanking our teams for their dedication and achievements throughout such a challenging year. Let's start with a few key numbers. Sales reached EUR 22.4 billion, an increase of 11% at constant exchange rates and 5% at actual exchange rates. Operating profit came in at EUR 4.5 billion, up by 1% compared to the prior year or up by 23% at constant exchange rates. Profit for the year reached EUR 3.5 billion compared to EUR 2.8 billion in the prior year. The solid performance led to the generation of EUR 4.9 billion of cash flow from operating activities, enabling the group to end here with a net cash position of EUR 8.5 billion. .

Let's turn to the highlights, starting with sales. The group demonstrated sustained momentum throughout the year, delivering growth across all business areas, regions and channels at constant exchange rates. The jewelry Maison posted a remarkable performance, illustrating the strength of their brand equity and overall value proposition. Sales rose by 14% with double-digit growth throughout the year, led by higher demand across all regions. In addition, the Specialist Watchmakers and Fashion & Accessories Maisons posted modest growth, both improving in the second half. All regions contributed to growth with a notable double-digit rise in the Americas throughout the entire year. Sales in Middle East and Africa were also up by double digits, although naturally affected by the conflict in the region during March.

In addition, Europe, Japan and Asia Pacific contributed to growth in value. all posting high single-digit growth for the year. Let me add that in Q4, the group was able to maintain its momentum with sales up by 13% at constant rates. Sequential acceleration in Asia Pacific, the Americas and Japan offset slower sales growth in Europe and a modest decline in the Middle East and Africa region. Moving to our financial performance. Operating profit reached EUR 4.5 billion, up by 1% versus the prior year, while including EUR 164 million of nonrecurring costs. Overall, the contribution of our strong sales growth, combined with ongoing cost discipline, mitigated the significant impact of the external headwinds we faced. With a net cash position of EUR 8.5 million, the group ended the year in a strong position to continue supporting both long-term resilience and growth prospects.

As we navigated the challenging macroeconomic environment, we continue to execute on our long-term vision. We've always been guided by the belief that differentiation, brand identity and disciplined pricing are primary drivers for incenting clients and delivering value over time. To support this, we continue to make strategic investments, including EUR 1 billion of capital expenditures primarily for distribution and manufacturing while dedicating circa 9% of our sales to communications. In parallel, our team straining creativity further cultivating the desirability of our iconic collections and successfully launching new lines.

Let me now elaborate concretely on how we are strengthening the distinctiveness of our Maison for the long term. First, we continue to elevate the quality of our retail network. This involved openings in ski location, such as new cities for Banca apples in Europe alongside Cartier in Tokyo, Buchele, Santo, Korea, and IWC in Dallas, among others. At the same time, we significantly enhanced the cleat experience through major relocation and renovations, such as Page and Plasma and Bucala in Aspen. Specifically looking at the China market, we have been reshaping our store network by closing selectively stores across business areas as well as opening in key locations to optimize our footprint.

Second, we continue to cultivate craftsmanship to preserve specific skills as well as the enduring quality of our timeless pieces. We invested in our own air notably with several jewelry projects in Paris in Valenca and Italy, which are due to open over the coming year. In parallel, we nurtured artisanal and creative skills through dedicated programs. We accompanied over 200 apprentices in Switzerland and Germany through 2-, 3- and 4-year programs in watchmaking and another 100 in France and Italy for jewelry meter. This year, again, we welcomed another 20 young designers at our creative academy in Milan while our Maison continue to partner with prestigious institutions like the academia customer in Moda in Milan or recently, the Kings Foundation in the U.K. on decorative method in watchmaking.

Extending this commitment, we also strive to share our passion for craftsmanship and art with a wider audience. In the past year, the 4 campuses of Legal deserve supported by Banca Arps attracted thousands of students and visitors to curated yet accessible exhibitions around jewelry arts. Another example is the Fondation Cartier new home in Paris, that has already welcomed over 300,000 visitors since its opening last October. Third, and building on this, our Maison continued to perpetuate their heritage and singularity. Further solidifying the iconic status of their creations. Throughout the year, several Maison hosted patrimonial exhibitions, highlights included Bucala's successful prints of Golfsmith exhibition in Shanghai and Cartier exhibition at the V&A in London, which drew over 350,000 visitors, including many of you, I hope.

Maison also held exclusive hydro events across various geographies, including Italy, Sweden and Spain. This was accompanied by vibrant and purposeful communication such as the cart new brand campaign launched in September and centered on its iconic Penser symbol showcasing both beauty and Odey consistent with the Maisons identity. This, of course, would not be possible without a constant obsession with creativity that contributes to drive desirability and nurture brand equity over time. and I want to thank the teams for their unwavering efforts at designing and crafting the beautiful new creations featured on this page.

Let me now walk you through the group sales performance in more detail, first by region and then by distribution channel. Unless otherwise stated, all comments refer to year-on-year changes at constant exchange rates. Fiscal year '26 saw robust sales growth across all regions, with notable improvements in the second half in both Asia Pacific and Japan. Sales in Europe rose by 9%, supported by growth across all business areas, led by the jewelry Mason. All main markets grew with notable performances in Italy, Germany and the United Kingdom. After a strong first half, Europe's growth rate moderated in the second half, reflecting strong comparatives in the prior year period. Local demand was strong throughout the year, while tourist spending was overall positive albeit decreasing in Q4.

Fourth quarter sales overall grew by 5%. Sales in Europe made up 24% of group sales, up slightly from the prior year. Asia Pacific sales ended the year up by 8%, led by double-digit growth at the jewelry Maison, which more than offset lower sales at other business areas. Regionally, the performance was driven by strength in the South Korean market. Sales in China, Hong Kong and Macau combined rose by 3% for the year, led by double-digit growth in Hong Kong. Elsewhere in the region, Australia and Singapore also continued to deliver robust growth. Fourth quarter sales for the region were up by 14%. Sales in Asia Pacific represented 32% of group sales, down slightly from 33% the year before. Sales in the Americas grew by double digits throughout the year, ending the full year at plus 17% against demanding comparatives. This included double-digit rises at Jewelry Maisons and Specialist Watchmakers combined with mid-single-digit growth on the other business area. Strong local demand supported growth across all markets in the region and all channels.

Fourth quarter sales were up by 18% and marking the ninth consecutive quarter of double-digit growth. The Americas contributed 25% of group sales in line with the prior year. Japan sales were up by 9% compared to the prior year, led by the jury Mason and the retail channel. The performance was supported by strong growth of local demand, while tourist spend was lower notably from Chinese clientele. Growth significantly accelerated in the second half and included a remarkable plus 28% in Q4 that built up on a demanding comparative of plus 22% in the prior year period. Japan's contribution to group sales remained stable compared to the prior year at 10%.

Turning now to Middle East and Africa, where also are with our teams, our partners and everyone affected by the ongoing events. Sales for the year increased by 13% in the region, driven by the jewelry Mason. All main markets saw strong increases led by growth in the UAE and Saudi Arabia. In the fourth quarter, sales were naturally affected by the conflict in the region in March and ended 3% lower than the prior year period contrasting with the double-digit increases recorded until then. Sales in the Middle East and Africa region represented 9% of group sales in line with the previous year.

In fiscal year 2026, all regions contributed to the group sales growth, attesting to the strength and balance of our regional footprint. Despite unfavorable currency movements, sales grew by EUR 1 billion. In value, the main contributors were the Americas and Europe, both adding circa EUR 400 million of sales compared to the prior year. Let us now -- sorry, let us now turn to sales by distribution channel with growth expressed at constant exchange rates. Retail represented 71% of group sales, slightly above the prior year's level. Retail sales were up by 12%, with growth across all business areas and regions, led by strength at the Jewelry Maisons and the Americas. Online Retail contributed 6% of group sales in line with the prior year. Sales rose by 8% with growth at the jury Maison and modest declines elsewhere. All regions grew with notable performances in Japan and the Americas.

Overall, direct-to-client sales, combining sales in directly operated stores and online retail made up 77% of the group, up slightly compared to the prior year. Finally, the wholesale channel represented 23% of the total with sales up by 9%. Similarly to retail, wholesale sales were up across all business areas and regions, led by the jury Maisons and the Americas. With this, I now hand over to Burkhart, who will take you through the year's highlights by business areas. Over to you, Burkhart.

Thank you, Nicolas. I will now review the business areas with all comparisons at actual rates, unless specified otherwise. Let me start with the Jewellery Maisons, which include Buccellati, Cartier, Van Cliff Apples and Werner. Sales were up by 8% for the year to EUR 16.5 billion. At constant rates, they increased by 14%, with double-digit growth across all regions, underpinned by both jewelry and watch sales. In the fourth quarter, Jewelry Maisons maintained the momentum with sales up by 16% at constant rates. During the year, the Jewelry Maisons implemented measured price increases while continuing to preserve value for clients. At the same time, they demonstrated agile cost management, notably through efficient communications with spend below prior year levels, both in absolute terms and as a percentage of sales. This was a company by certain yet selective network expansions.

As a result, Jewelry Maisons managed to mitigate the significant impact of external headwinds on their costs and operating profit reached EUR 5 billion, up by 3% or by 20% at constant rates compared to the prior year. Operating margin remained solid at 30.5%. Let us look at the key developments of the year. The Jewelry Maisons is also strength across their iconic collections in both jewelry and watches among which Love and Pantera Cartier, lamb and Perley at VanevenPeltz; and Operate Denmark Buccellati. Throughout the year, sparkling novelties contribute to further building desirability and attractiveness. At Buccellati, these included pedal bags and colored additions to. At Cartier, the Love Unlimited and cash color pieces in jewelry and new watch creations for Ponder and Santos collections. Also of note, onclifenapls introduced major Alhambra novelties as well as its new jewelry collections, Flower lease and Florida hit.

Amazon had successful exclusive events across several regions building on outstanding high jewelry collections, of which LilotRezorat Vancin Arpels, 1 Ciiva Cartier and Artis Advani. In parallel, the Jewelry Maisons continued to enhance the client experience through selective network upgrades and openings while conducting targeted closures. Of note, Buccellati completed the expansion of its Hong Kong princess flagship boutique Cartier opened but in Tokyo Ginza and Japan and completed a major renovation in the Miami Design District. Monte Fanabel notably reinforced its presence in Europe through several openings, including in Florence, Frankfurt and Hamburg.

Warner continued to consolidate its foundations and ended the year with a net addition of 2 new botiqs, of which it's first 1 in Asia. Turning to specialist watchmakers, where sales were down by 4% to EUR 3.1 billion. At constant rates, sales rose by 1%, led by strong growth in the Americas that compensated for declines in Asia Pacific and Japan. Both retail and wholesale channels slightly increased at constant rates. Signs of stabilization emerged to sales returning to moderate growth in H2, including plus 2% in the fourth quarter despite a double-digit decline in Middle East and Africa.

Moving to profits. Gross margin was affected by unfavorable external factors such as foreign exchange rate movements and the rising gold price. In addition to a deleveraging impact from lower sales on fixed costs. While facing these headwinds, the Maisons have displayed solid discipline in managing the operating expenses that were down compared to the prior year most notably in communication. Consequently, the operating result amounted to EUR 107 million, down versus the prior year, but up at constant exchange rates. Operating margin stood at 3.4% for the year. Whilst less watchmakers overall posted mixed performances across the year. Some of them showed notable improvement in the second half of which are Langrana, Gasoducto and Vasantanta. The overall sell-in, sell-out ratio remained at circa 100% over 12 months, reflecting sustained efforts to maintain a healthy level of inventory in the trade.

Major novelties introduced during the year supported the solid growth of iconic collections such as the reverse tribute electro. In parallel, the Masons holded notable events showcasing the distinct heritage and craftsmanship, including Vachon Constant as [indiscernible] anniversary global celebrations and penalized depth of time traveling exhibition presented to the public in Florence and Shanghai. Overall, specialist watchmaker maisons pursued selective openings such as Alan and 1 on Open Street in London, while proceeding with targeted closures mainly in China. Major renovation projects were completed in the year, such as the PG flagship on plus and in Paris.

Finally, let me conclude that. Earlier this year, an agreement was announced for the Damian Group to acquire full ownership of Bulmers with completion expected in summer of this year. Let's move to the other business area comprising the group's fashion and accessories Maisons, Watchfinder & Coal, the group's watch component manufacturing and real estate activities. Sales of EUR 2 billion for the year were down by 2% at actual exchange rates. Constant exchange rates, sales were up by 3%, underpinned by growth in the Americas, Europe and Middle East and Africa. The fashion net accessories is also a moderate increase, while Watch finer posted double-digit growth. The retail channel showed solid performance and wholesale sales were slightly up.

Sales in the fourth quarter were robust at plus 7% at constant rates, led by growth across all regions, except obviously Middle East and Africa that was slightly down. The Fashion & Accessories Maisons maintain consistent and disciplined investment in their brand equity during the year. Overall, the other business area reported an operating loss for the year of EUR 96 million representing a modest improvement over the prior year at actual rates and a more meaningful 1 when excluding unfavorable FX movements. Peter Millar and Alaia both showed continued sales momentum during the year. Premia benefited from its further expansion into a broader lifestyle proposition. While Alia achieved increased global recognition and strong performance of winter spring '25 and some fall '25 archetypes collections across categories.

Overall, the F&A has also robust increases in the ready-to-wear category. Also of note, Malon showed encouraging signs with sequential improvement during the year as the Maison progressed on its transformation, driven by writing instruments and high visibility brand initiatives. Watch Fine had a solid year, supported by certified preowned partnerships with Cartier and Rachana while benefiting from increased local sourcing. The Fashion & Accessories Maisons continued to enhance the retail network with selective openings and targeted closes. Notably, no locations included flagship boutiques for Momboan Sydney and for lie in Beijing, Sanlitun as well as the first store for Chloin Australia.

Let me now walk you through the rest of the P&L, starting with gross profit. Gross profit rose by 1% in absolute terms to EUR 14.4 billion but declined by 250 basis points as a percentage of sales to 64.4%. Let me provide some color on the moving parts, starting with the production costs. In the full year, about 2/3 of the increase in production costs were driven by the net impact of higher raw material costs notably gold. The remaining 1/3 was mostly due to the additional U.S. duties that amounted to circa EUR 200 million. Finally, like in the prior year, we made the decision to proceed with targeted buybacks at some of our specialist watchmaker maisons, mainly in China. These pressures were partly offset by the positive impact from measured price increases combined with favorable sales mix, notably through higher volumes combined with the shift towards higher-priced products.

Taking these elements into account and excluding foreign exchange rate movements, gross margin was down 40 basis points for the year. As we anticipated at our interim results in November, the gross margin erosion was more visible in the second half than in the first as the stronger pressure from gold in U.S. tariffs was only partly offset by a higher contribution from price increases. Finally, foreign exchange movements for the year, mainly from the U.S. dollar, Swiss franc and the Chinese renminbi accounted for a 210 basis point negative impact, bringing the total gross margin down by 250 basis points.

Next, let's look at operating expenses, which were broadly stable in value reflecting our strategic investment to NurteMazon's long-term potential while exercising discipline on costs. I will now take you through the expenses by category. First, selling and distribution expenses rose modestly by 2% at actual rates and 7% at constant rates, reflecting selective network expansion and salary increases. As a percentage of sales, selling and distribution expenses accounted for 25.6%, down by 70 basis points. Communication expenses were down by 5% compared to the prior year or by 2% at constant rates. This evolution illustrated the Maisons efficiency at allocating their spend and to a lesser extent, the phasing of certain events such as home fab. Administrative and other expenses were up by 4%. This increase was fully driven by higher nonrecurring costs that went from EUR 72 million in the prior year to EUR 164 million for the year under review. This EUR 164 million primarily reflected a EUR 99 million combined charge related to noncurrent asset impairments, mostly goodwill.

In addition to a EUR 59 million write-down following the announced sale agreement of BomeMercie. Overall, net operating expenses amounted to 44.4% of group sales, down by 160 basis points reflecting the sales leverage from strong top line growth. This resulted in an operating profit of EUR 4.5 billion, up by 1% at actual exchange rates and by 23% at constant exchange rates. This robust performance reflected the positive contribution from strong sales growth and cost discipline that mitigated the impact of the external headwinds we faced during the year. Excluding the EUR 164 million of nonrecurring charges and the targeted buybacks that I mentioned earlier, the underlying operating profit was close to EUR 4.7 billion.

Let us now review the rest of the P&L items below the operating profit line, starting with finance costs. Net finance costs increased by EUR 91 million to EUR 144 million for the year. Net foreign exchange losses on monetary items increased by EUR 314 million compared to the prior year. In addition, we borrow a EUR 170 million impact from lower fair value adjustments, mainly related to the group's investments in its money market funds and segregated investment mandates. These 2 items were mostly offset by a positive variation resulting from the group's foreign exchange hedging program, thanks to a EUR 374 million gain after a EUR 71 million loss in the prior year. On this point, I would like to remind you that the results of the FX hedging is not included in our operating profit today. Should we adjust our operating profit for the FX hedging gain of EUR 374 million operating profit would be up by 11% instead of plus 1%.

Returning to our fiscal year '26 results. Let's review the profit for the year. Profit from continuing operations stood at EUR 3.5 billion, down by 8% versus the prior year. This reflected the increase in net finance cost that I just described. In addition to a lower share of equity-accounted investment results, mostly due to our stake in Lux experience. And finally, an increase in the group's tax charge. Indeed, the effective tax rate for the year was 20.4%, reflecting the group's regional mix and compared to 16.5% in the prior year, which included noncash accounting items. Overall profit for the year increased by 27% to EUR 3.5 billion, benefiting from the nonrecurrence of the Wine write-down in our previous financial year.

Cash flow generated from operating activities came in at EUR 4.9 billion, up by EUR 0.4 billion. This 10% increase mostly reflected 2 elements. First, a higher operating profit adjusted for the noncash items that I mentioned earlier; and second, lower working capital needs, mostly reflecting higher cash inflows from foreign exchange derivatives. Let me add that in a context of strong sales growth, cash consumption was broadly in line with the prior year, owing to solid management of trade working capital. Let us now turn to gross capital expenditure, which amounted to EUR 1 billion or 4.6% of sales. While down on prior year, CapEx included a higher share dedicated to investments in our distribution network. Up by double digits. Retail investments represented over 50% of the total envelope and were largely dedicated to upgrading our internal boutique network. Manufacturing accounted for over 1/4 of our investments, mainly dedicated to the continued expansion of manufacturing capabilities, mostly for the jewelry Maisons. Other investments included disciplined spending in IT and other projects making up 20% of CapEx.

Let us now review free cash flow, EUR 2.8 billion, free cash flow was EUR 0.6 billion higher than the prior year. The increase was primarily driven by the rise in cash flow from operating activities, driven by the solid results of the group. Our balance sheet remains solid with shareholders' equity accounting for 57% of the total. In March 2026, the group repaid EUR 1.5 billion corporate bond, which was issued in 2018 and had carried a 1% coupon. The repayment had no impact on the group's net cash position as the decrease in liabilities was matched by an equivalent cash outflow.

Finally, net cash amounted to EUR 8.5 billion at year-end, an increase of EUR 239 million over the prior year. I would like to take a moment to summarize our cash usage for the year. As I mentioned earlier, cash generated from operations amounted to EUR 4.9 billion, was used to fund strategic investments in operations and reward shareholders. On the 1 hand, investments in our business include EUR 1 billion of CapEx and EUR 0.8 billion in lease payments. In addition, EUR 0.6 billion were transferred to YNAP upon completion of the sales transaction with Lux Experience. On top of which other movements, including FX explained another EUR 0.4 billion of negative impact. On the other hand, the cash outfall linked to the group's ordinary dividend amounted to EUR 1.9 billion, reflecting last year's dividend. As a result, net cash increased by EUR 0.2 billion, as described in the prior slide, further strengthening the group's balance sheet.

Let me now finish with the dividend for the year. Based upon the solid performance of the year and the strong net cash position that I've just described, the Board has proposed a total dividend of CHF 4.30 for A share or 10 shares made up of an ordinary dividend of CHF 3.3, up by 10% over the prior year. In addition to a special dividend of CHF 1. This will be submitted for shareholders' approval at the group's Annual General Meeting on the ninth of September 2026. Thank you for your attention, and let me now hand back to Nicolas for the conclusion.

Thank you, Burkhart. Before moving to the Q&A, I would like to summarize the year for the group and share some concluding remarks. Richmont delivered remarkable sales growth and solid results for the year, highlighting the strength of our differentiated market positioning, the strategic value of our balanced regional footprint and the entering agility of our teams. It is worth noting that the outstanding performance of the jewelry Maison, that gained further market share in both jewelry and watches, led by their high desirability and strong value proposition built over time. Importantly, in such a highly complex and volatile environment, the group maintained its long-term focus, prioritizing Maison's future growth prospects while exercising consistent discipline on costs and operational execution. .

Looking ahead, we will have to navigate through volatile times, which will continue to require agility and discipline. While we remain vigilant about the macroeconomic environment, particularly as the consequences of the conflict in the Middle East are still unfolding. Richemont has the strong fundamentals to continue to create long-term value. This includes a distinctive heritage and brand identity for each of our man unwavering creativity to nurture our iconic collections and enhance desirability in addition to a balanced regional and client mix, building on deep local anchoring. All of this is underpinned by the group's financial robustness that allows us to invest in quality distribution and develop our manufacturing capabilities while consistently cultivating craftsmanship. I would like to finish by thanking our colleagues, valued clients and partners across the world for their continued commitment and support. This concludes our presentation. Thank you very much.

We'll open the floor to questions. So please announce your name and company if you can, at least at the beginning, limit yourself to 2 questions. Thank you. Okay. Let's start this time. On the left, Zuzanna.

It's Zuzanna from UBS. I have 2 questions, but I guess before I answered it, I just wanted to congratulate the whole team, and especially Burkhart on this great cost control. And also, I think we all owe an apology because I was the other day, we're reading the transcripts from 2022, and we are all pushing back why the margins were not exceeding peaks like among peers and well, I guess a paid off. So I just wanted to say that. So 2 questions. One is on jewelery Maison's growth. I think if I understand correctly, there's maybe roughly 6 percentage point contribution from pricing in order to offset partially the pressure from gold. But I presume you're not growing by volume alone. So there must be also some mix effect, which I've personally fallen victim of as well in the stores. So I'm just curious if you could tell us a little bit more -- there's been so much innovation, lots of products at nicer, higher price points. if you could touch just a bit of an idea of what could be the mix contribution within last year's number?

And then the second question, maybe very quickly on the supply chain. We've seen a lot of your peers now focusing a lot suddenly on jewelry. There's been some pretty expensive transactions happening, some peers buying out workshops. It would be just interesting to hear thoughts on that if that changes in any way your approach to vertical integration, if you plan to maybe accelerate that? So these are my 2 questions.

Thank you very much. Maybe I will start. On your first question, yes, I think that the growth for the Maison was a combination of value increase with some limited yet real price increases pretty much in the area that you mentioned, 5% to 6% and volume increase. And volume increase is in the like-for-like networks where we saw some growth, additional stores also in certain countries and the mix effect, which is also part of the equation, as you mentioned, where -- we've seen in some brands, some movements towards higher price points. But that doesn't mean unlike what we've read sometimes that it's really only the high end and the hydro that's doing well. It is doing well indeed, but there is still very, very strong traction and success on the more affordable lines. But yes, we've seen with the cash collection that you seem to appreciate for instance, a very nice mix effect, particularly on Novelis.

On the second 1 for the jewelery maison manufacturing, yes, we watch what's going on around. It's been a competitive environment forever. I think that it has always been a category with many, many players. We have history and expertise in the field, we believe. So we've been consistently building our manufacturing capabilities in jewelry and Burkhart touched upon that. It's requires some capital expenditure. But we prefer in most cases, to build because we know how to build additional workshops in hydro, in volume jewelry rather than to acquire. So it has happened in the past that Cartier or Boncafe Ares or Bucala did acquire certain specific workshops with a very, very unique expertise that complements our own, but the majority of our investments are very much developing our own capacities so that we really dedicate the resources and the cash to optimize the production capabilities.

This is [ Natasha Bonnet ] from Morgan Stanley, and congratulations on the good set of results. The first question was growth consistent throughout the quarter in Q1, including and excluding the Middle East because obviously, you had a positive good performance in the Middle East, which is a big part of your sales despite -- in light of basically the conflict in the region. And then the trends excluding the Middle East continuing so far? And my second question would be how should we be thinking about margins in fiscal year '27 because I believe as it stands, the intensity of headwinds you experienced in this fiscal year should diminish -- thank you.

Yes, thank you for the questions. I'd say growth was pretty consistent throughout the quarter with obviously 2 exceptions. The first 1 being Chinese New Year was primarily in January last year. in February this year. So obviously, that changed a bit the growth dynamic from 1 month to the other in our last quarter in China. And secondly, the Middle East, obviously, we had a consistent and nice double-digit growth in the first 2 months and then obviously a sharp drop in the month of March, which I think all of us, including our peers have experienced. Sorry, can you just remind me what the second question was?

How should we think about margins this year to understand the headwinds the incentive teams you faced in the minute.

Well, I don't know. I mean we'll -- let's discuss that on March...

That you can look for I was trying to just get things...

I was trying to anticipate that comment. No, I mean, I don't think I can seriously answer that. If you would have asked that question a year ago, I think no 1 would have foreseen what we experienced last year...

More money where ever goes if you could answer that. I'll put a dry . I'm sure. If you could predict that why your time. Yes. I can predict the gold price, the oil price any 3 does, it does not be yet. I'll go there.

I think we'll take please.

Piral Dadhania from RBC. So just a follow-up on the previous question. Are you able to provide us with a bit more quantification on what the realized gold price was in and perhaps also what the revaluation benefit would have been in terms of the tailwind to margins? And just saying on that point, maybe the average cost of gold on your inventories, just so we can try and calculate what the 2027 gross margin headwind could be from a gold price perspective. That was the first one. And then the second 1 is just in terms of brand-level performance and category performance within jewelry Maison, obviously, very, very strong numbers on the top line. Could you maybe give us some color around Cartier versus Bank versus Built -- is there any big differences? Or are they all performing like...

Well in the gold price, you figure out yourself. Okay. We are never ever comparing in between the different myself. They're all 3 doing very well.

Hello, everyone. So I'm [indiscernible] HSBC. So the first question is on jewelry masonry to go back on your comment about the performance by your price polo which price point is are we performing? You talk about the fact that the affordable segment is also but can we have a bit more granularity around that? And my other question is around China. So who are the underlying trends there? And what are your key observations for this market? .

I think you will remember, we've said it on numerous occasions in the past. I know your colleague on your left, it knows it, that the higher the jewelry, the lower the margin. high, high, high jewelry do not enjoy the same margins. that's what we'll say about the mix it depends per my zoned -- and depending upon what I focus on. Right now, we've got a curtain jewelry show on outside Santaris it Yes, and it's going extremely well. But that's a very long sit. I think the thing that we must get into our minds because you have all these wonderful new words, soft luxury lot, hard luxury. I mean -- when I started, none of you had heard of luxury, it was a boring business, which was very nice for me. Because it wasn't sexy. There were no predatory buyers out there. And certainly, we didn't feature and the newspapers.

Suddenly, it's sexy and everybody's yuan it's a lot cooler for you to be here than at an oil refinery announcement of results, even though they make 5x more than we do. I've noticed that when I go to dinner, Cartier maybe 1/4 of the tenth of the size of the chaps all refinery, but I sit at a better table than he does because it's not that good to own an oil refinery. So you all year because you write about nice things. There's nothing special about luxury goods. If there's a real catastrophe, the world's not going to miss us. It's not shelter. It's not food. So we mustn't think that we are these wholly beautiful not service. We're just very lucky to be in a very beautiful business where we deal with lovely people and with beautiful handcrafted products from the conception right through the end.

But our business respond takes longer. From with our designers start conceptualizing until we're ready to offer, not sell, offer products. It takes a while. So we have a pretty good understanding I mean we will sit at the product of Martin, we'll see a year or 2 in advance because we know what's coming with the combined a lot Parana I together over 100 hours of experience. Anton has now been there 20 years. How long have you been -- 35, but not product come. So it's 240. We have a pretty good idea. The Germans called a single pitch in fuel, but we have a pretty good idea whether it's going to sell or not.

But that's longer -- that's not a spring line or a cruise line with under cruise line of any impact on our group. So for us we don't control the gold price. We have to make sure that our product mix is affordable to customers. And that's how we look at the gold price. Not a speculation, but we need to hedge, we will hedge just enough to be able to tell our watch manufacturers and jewelry, roughly, this is the band that your cost of goods sold will be. So you can competitively price, but it's driven by marketing and by competitive position. Is that hopeful. Not as helpful as you'd like so that you can write down in your little model. You know what you can do like this I have an AI model I'll take your questions, put it in, and I'll save you the trip. I saw last night an AI model of somebody who fed is public information there. Nikesh Arora with Palo Alto and the only fed in public information, and Anton was damn good. He said why sorry, JPMorgan. He said, "Why do I need JPMorgan apimension, in that case, JPMorgan, but you could basically put anybody -- if you want to be good, you've got to pick up what's not obvious.

You've got to pick up nuances. You're going to have to use your nose more than asking questions like what's the average gold price which you can work in back into your model. I'm going to have to ask your friends, what do you like did you see that line? Do you like it? I go in our sales ladies. I do shopping before any of you heard of it, mystery shopping for 30 years, about 40 years. And I don't ask the sales ladies because they deal with the customer and ask them. So what do you think is hot? And then in the end, I review I go and stand on window corners -- sorry, on street corners and like out. If you ever stood outside the shopping more or inside and look, who walked into me who walked in. I know you do, but you're a special one. You excluded, yes. Okay. But I'm asking, in general, we've ever done that.

Well, guess what? Today, they do it with drugs and they look at shopping centers. And they actually use AI to see who goes where, but that's how you get a competitive advantage as an analyst. Is there any question you ask me, that's of real value to you. I'm not going to tell you. It's like people who have consistently used business consultants, Bain or ever Mackenzie they come you, they steal all your information they go and sell it to your competitor. You've got to be out of your mind to do that. The 1 or twice where we do have a competitive and guarantee, we've been working together for decades. I trust them. They trust me. We trust our colleagues in the room. We're not going to blabber it out. And I'm just giving you a is what you can't see that's important.

And your friends will tell you what's at not. Not XYZ is overpriced, XYZ's dropped its quality because we catered even if we don't ask. You got to dinner party , somebody down to tell. You've dropped quality there or you've overpriced there. And all you have to do is listen. So I'm sorry, it's -- you can't expect of us to do your work. Several questions, but it's doing your work. When you ask that to Burkhart, he's not going to -- he knows that he's not going to answer that. right. And now here we go for the Maestro. Luca.

Thank you very much, indeed, Johann, for saving me the effort of announcing me from Bernstein. I lost track because of the various generations and what has been going on with duties in the U.S., maybe you can tell us, as you're very close to the American administration in President and Trump. .

Sorry. Sorry, I had access to the President. There's a huge difference between being friends and having access, okay. I had access. Thank you. .

For sure. Are you going to be able to -- because of the Supreme Court ruling, are you going to be looking at getting some of the duties...

When my bet, thank you. I'll tell you the rest call. I said, Luca Solca is going to pick up on the fact of the tariffs. How much? And what are we going to do? Luca, we haven't decided. We have another week, 8 days, is it? 7 months basically end of the month to decide -- and we're looking at what the other people are doing. Now on the 1 extreme, there's somebody who's not just to the world that he is going to reclaim because there was a tax on consumers. We, if you look at our pricing, we've always believed in a worldwide pricing just stop, as you know, gray market in -- our products are high margin, low volume. If you have high margin, low volume products that can move seamlessly across borders. They can be stuck in a plane, it's tougher than bulky things, stresses, et cetera.

So we've always had to make sure that our global pricing works roughly. So the major impact in the last year and now you guys will shoot me that I don't say the wrong stuff. But the major Nicolas -- has been gold price dollar. Now you know Luca in the past. When the gold price went up, it was basically the dollar down and by -- this time, Luca, we had both up -- it was rather unforeseen -- so that is us more than the tariffs. The tariffs, I think, with minus public [ EUR 300 million. ] And we are deciding upon what we're going to do. But it's not just big an impact on our P&L and operating margins as the gold price and the dollar, Swiss franc dollar euro. We must all as tariff payers, watch that we don't reclaim the tariffs back without adding it back to consumer.

Now we did not use price increases to offset. But you notice we may have 1 sales lady or salesman somewhere. Same to 1 client erroneously, I give you my word that yes, because your President did it, so we increased the prices. And then we have a law -- so we are very cautious. We're looking at everything. I can give you my word. We did not use pricing to offset tariffs -- if I could get the gold and the dollar back, then I would be front of mind, but there's no counterparty that's willing to do that. I have no idea how it's going to play out. We are -- I was with a Swiss government 2 nights ago. And we are still in discussions with the United States on the finalized agreement. But there's nothing bad emanating out of the United States heading our way at Switzerland.

I find it very sad that Elena has to appear in front of polymer. I mean, had it not been for the delegation and going to Switzerland and going to the White house, 40% plus a brilliant company like Pilatus would have had 25%, 30% of people unemployed, we could not withstand 40%-plus tariffs. What these people think when they say, why did they go, et cetera. We didn't negotiate, I mean how do you negotiate with the United States, you beg? Okay, it's a big difference. Well, I saw the president, I said we're not negotiating sir. Henry Kisan just said, if you want to negotiate, you need 3 aircraft carriers standing up there. China could'nt negotiate -- the whole of Europe can't renegotiate. Let run Switzerland. So we really applied to their goodwill and asset to them.

We're not against America, Switzerland. In fact, please, just year or -- and the good thing is America is now in surplus with Switzerland. And it was all about the gold price because they thought was going to be tariffed, -- so there was a huge amount of raw gold flowing, not jewelry, gold flowing into the United States at that stage. So it looked like the United State at a huge trade deficit with Switzerland. We pointed it out to it and it's reversed. So as Switzerland, is in a deficit or the United States is in the surplus. So no rational reasoning for punitive tariff, which would have been devastating for Switzerland.

I couldn't agree more. My second question was on the perimeter. I think the market and investors saw with pleasure the simplification of the business bringing Power the divestiture of Mercier. Can you tell us maybe how the other divisions businesses are doing? And if there's any further latitude and opportunity for simplification?

It's sad because boneless is 1 of our very first majors. At times, 1 must realize that for bone we're not the best owner. They need more flexibility. They need to -- crude they put -- they need to be able to act more entrepreneurial we have very fixed cost structure. And I think that the new owners Ben was always an Italian brand. It always is very, very, very well. And we wish them luck. We've tried -- and sometimes, you will say it's better than somebody else's ad. This nonsense about charge. I mean, please, how can you -- who's -- where is UBS here? You apparently believed what you read there. Yes, but please. Whoever says that, never trusted -- there are 2 or 3 of them or bloggers who really don't have a clue and who are spurring nonsense. And for us, it doesn't mean the dad thing. But imagine if you're a worker at Jose, it's unfair. It's real later, somebody was actually suing because it's a lie, it was never discussed.

In fact, you want to know how we got the group -- when LMH was bought by -- we started a mobile phone business in South Africa, Vodafone, and we were in partnership with Vodacom with Vodafone. You can't believe it. I saw Julian Smith that was our counterpart. The other day, 1 of my grandson schools. And -- because Mones Mana bought the mobile phone business in Germany, Vodafone bought it, but in it -- and we really wanted to eliminate. We didn't know how to make watches. We were big with Cartier but court. And Alan didn't like it very much, but I'd tell him that the courts and lot and I very, very close, but I have just become sophisticated enough because I don't know whether you know Guoping day. Well, we worked in New York together. And I had a court watch on and he went like this court what do you mean? You said you need a mechanical watch. Any case, so little did I know how much trouble we are going to cause ourselves because mechanical watches need [Technical Difficulty] Of Boinas -- sorry, of shares of the court and the other much the other 75%.

So I went to see Jacqueline and the current end of is Olivia. Olivia and whether 1 of the first times are the video conferencing, and I bought their 25% in Jack. I went to see my absolute are, Mr. Gunter Blima who bought Dow Group. And he was a systems engine. He was also 1 of the best copywriters that I've ever seen. He wrote all the right for Langone. And for that, sorry late somewhat provocative non-work copy that he had for AWC, about women shouldn't do this and that a case. And I was the only 1 who actually went to blasted went to and I didn't have to pronounce it that because I asked them -- how do you pronounce the town where RWC's manufactures. How do you pronounce it? You're wrong has [indiscernible] .

So I go there, I said, please, could I go to taxi driver said no. So I had to explain so we went to chaffs I've met with them, and my -- was -- and we really wanted to was Mr. Bloom line, we're basically recreated Viana. And we batten we won a part of the extreme price was for Alenia bone cancer. It was an absolute tragedy. But the key that we use, and I think you must all understand this. His engine that he had and the key that he used, the expertise that he used is Jaslo. And up till today, Jager is the watch company the Maison, the manufacture that can do nearly every component of a watch except for probably crocodile skin, lizzard, they can do everything. And in a sense, they have helped so many of the other Maisons. If somebody else runs into trouble. So there is no way in which it could ever have been contemplated.

And I'm saying this to you so that when you hear these stories, please do not listen because it's a rubbish. We're very loyal to them. They make phenomenal watches. I mean, what have you got on your own on.

The cardinal points faster on overseas.

Okay. But that's only because you and I can't get to steal because we're waiting for the steel ensure -- they've made the new steel watch, which is fine divester the master line, that is spectacular. It's not there for. It's our thought that we haven't been able to explain to the rest of the world that it is, it's the watch makers watchmaker. You speak to watch makers, they look up to Jes. So trust me, it's I would use the words in front of ladies. Okay. But don't believe it. Any case, how can -- have you got other questions, Luca. I'm sure you do.

We're just thinking of business simplification in the other division. I'm thinking you mentioned in the presentation that mont bland is proceeding in the right way. There are sort of bits and pieces in that business with things doing very well like Bitmilar and other brands not doing very well. So I was wondering...

100% correct. And you can do 4 of us sitting here, I had 20 minutes yesterday, asking people and before that we have people we have the habit of turning simple things into complex things. And those days are over now. We want complexity refined to simplicity. And trust me, we are going in that direction. It's a very good question. Thank you.

Thank you. Good morning, and Thomas Chauvet from Citi. Congrats to everyone for a strong end to the year in a difficult environment for the sector. I have 2 questions. The first 1 on the Americas, another strong year plus 17% in constant FX, the extreme stability quarter-on-quarter, while the environment has started with liberation there at the start of your fiscal year and ended with the war in the Middle East. Could you explain what you think are the structural changes in the high-end luxury consumer in the U.S., perhaps the hard luxury consumer that explains such resilience? Or do you think this is largely due to wealth effects and the stock markets?

Secondly, on the Chinese consumer and the potential behavior changes. You go, Nicolas, you provided some very interesting comments about the strong success of Chinese born jewelry brand, particularly Launo to mention them, how do you adapt your related to these local players? Is it about being very differentiated on style, craft quality slightly different pricing, I guess, as well? Or do you see opportunities to acquire brands on the ground in China, Richemont was even a pioneer with Shanghai Tang that you acquired in the late '90s when no 1 had ever thought of doing such a move, I guess. We heard Mr. Rupert in the media interview this morning saying group could pursue acquisition if there were interesting opportunities? Are they interesting Chinese jewelry brand out there you very much.

On the first one, in America, I think our activities are very much linked to consumer confidence. And I think that there is quite a high level of consumer confidence in America, when you're over there, you feel a very, very positive feeling and that translates into a very good level of sales. It's true that there has probably been a refocus cycles, obviously, but a refocus towards Jewelery watches more iconic products with a long-term value compared to probably more fashion and accessories in America. We see that clearly. And there's also been a long ongoing trends towards internal brand retail versus wholesale in America. So we're benefiting from this impact. And we've seen them, as you mentioned, very, very steady throughout the year with very, very good steady growth. So that's for America.

On China, we had a discussion last year. First of all, I think that probably Chinese owners are the best at running Chinese brands. And probably we are not so bad at running Swiss brands or French brands. And so anything artificial like trying to be there by acquiring something local that we don't necessarily fully understand or master is not necessarily what we look for. What the success of Launa few others thought us and indicated that we discussed last year that there is -- in a market that was really stable and that's not at its whole time high for the last couple of years. There is very much an interest in newness, in new brands, in new propositions. And probably these new emerging brands, Chinese for that one answered that expectation.

And we see other ways to answer that. We see, for instance, with the success of Buccellati in Japan -- in China, which is still quite recent in the country and considered a bit of a newcomer. Also it has a very long and respected heritage. That is getting a lot of traction. And we've seen also with Cartier, which is long established in China. The success this year, for instance, of collections like Clash or Pote watches that were not necessarily historically successful collections in China, but that under a new light together with high drew a highly in demand. So I think that there is really -- we feel that there is really a renewed interest in China for creativity and maybe going for a different proposition that can come from the historical brands, but has to be renewed.

People -- the thousands of tons, but we come to suspect over the years that what Nicolas said is people -- did you say feel good or what happy -- confidence factor, a few good factor. People are willing to spend if they feel good. It's not necessary that you have to have a lot of money in your and no debt. But if you feel good about the future if you're confident about the future, then you're more comfortable spend and to buy and to give gifts. You are a concern, you're not happy, it dampens that. And in America, in the United States, we kind of internally we joke that the nation's happiness, it's through economic status minus envy. And in the United States, people are not as envious of people who are successful, in Europe, they hate success to a very large extent you sinister.

In the United States, it's a much younger society, people still say well done because they also believe that they can work on and do it. In Europe, they believe, sorry. By and large, people believe, even if I work out or to it. Sudden I were commenting yesterday, the exception is Switzerland. Where the rich do not believe in it -- behave in a vulgar way. People are much more conservative. So there's not this iterate of the rich. Starting in the United States on the campus is now with the students. If you see Erikegotbood when he made a speech about AI because these kids leaving the colleges have got debt and they can't find jobs. And any commencement or actually, it's now graduation. And you've got to watch it -- this is what I was trying to say if you want to know, watch what goes on SNF a lot older than you still I watch that Eric Schmidt speech because every time he said AI, everybody booed. And we discussed this last night with his friend of ours who's 1 of the top Silicon Valley CEOs in situ, they're realizing that they're not giving jobs.

So your college kid, you leave college with debt, and you're not finding as many jobs as 10 years ago. So in 10 years' time, 5 years' time, well, that few good factors still be there. Well, they're talking in numbers that either understand. I mean I've got to rely on Anton with all the acronyms when we have a discussion with these techies. Every second word -- every second sentence has got a new acronym in that I've never heard of -- but this is where the money is. I mean the new IPO is $1.6 trillion. I mean that is half of the U.K. GDP. I mean, it's numbers, we do not -- sorry, that I cannot quite get my answer but they still seem to be confident. If something goes wrong in the AI and that AI loop. I am told by Nikesh and others that it's gone too far now it itself will fill in. It will carry on the build-out of data centers and it's unassured it's real. Whilst that is carrying on, they're going to grow in Europe -- but Luca, we bond people, not once, not twice, 3 times on this special that they might have nuclear weapons.

But we're giving 3 or 4 individuals, a capacity that's going to affect our gradual formal with no guard drugs, I mean agenetic AI and we're handing over power. I'm told nobody tests it that if you want to stop people from putting viruses into your system, you need, if you want to stop bad agents using AI from infiltrating your system, you need AI. So we're going to have AI fighting AI and it I'm not to know what they're doing to each other -- this is 3 years from now. Two years on what's your bet? 3 years?

Already happening. .

Okay. Sort of really apart -- the point is -- you're asking me about the oil price in the year time or got price or what -- what scares the living daylights are met? Is stuff that I really just don't have a clue of. We're constantly thinking how can it affect us and stopping the truck points, the entry points. And there, we have the gentleman sitting who never knew what he was signing up for behind you. It's -- that would bother me more if I were to be in your shoes, I would look at which companies can actually like size companies can be wiped out in a month, 2 months -- we've never -- I think we're on the cusp of seeing , we've seen the biggest growth, but we could follow, see the biggest destruction of wealth of people who never understood what was going to eat them.

And software as SaaS as a service, those companies, can you imagine if I was -- I wouldn't sleep but talk. I mean I would probably have sold them conforming. The real issues are things that we cannot foresee. Things that we can foresee, I can assure you, Burkhart with a better shape now. Nicolas, than I can remember ever from balance sheet through tech through everything, supply chain, for everything traditional that we could foresee we're in great shape. Something on the left field.

I think we have a few more questions. Chris, please.

This is Chris Gao from CLSA in Hong Kong and congrats on the very resilient results amid the complex environment. I have 2 core questions regarding China, Chinese. So firstly, we are very happy to see Greater China on the path of coming back -- so my question is on the midterm outlook of the competitive landscape in the China market. So on 1 hand, in the past few years, definitely, the market noted the fashion cycle of some of the local heritage jewelry has been picking up the momentum in China like Lau selling out. While on the other hand, together with Hischman we also see some other luxury peers deploying more resources in the jewelry segmentations and also sequentially more in China market, right? So how do you see the competitive landscape in China in the next few years?

And I remember last year, Mr. Rupert mentioned that there is definitely universal desirability on Hischman brands. So are you seeing -- or do you expect to see the high net worth consumer in China shifting more towards global brands in the future, especially to Richemont brands in the next cycle. So this is the first question.

My second question is regarding the drivers of recovery that you see in Greater China right now. So wondering if the comeback is more from the existing loyal customers or you have been seeing a very apparent new consumer recruitment -- as Mr. Rupert said, now we're seeing AI industry, for example, as a new wealth effect driver -- so at the same time, how does aspirational customer spending trend doing like look like now? And how would you comment on aspirational consumers recovery trends going forward in China. Thank you.

That's a very good question.

I think there is definitely and has always been at least in the last 25 years, a highly competitive loans in China in luxury, in -- so that's going to remain, probably some -- as always, some players are getting stronger, some players are getting weaker. There's definitely an effect of cycles and trends. I was mentioning the -- what we see today is that there is really -- there is a very strong clientele. There is a very strong desire for our categories. but there is an expectation of creativity and renewal, which we have to answer to. And that can be found in our brands, in historical brands as well as newcomers and I think it's a good reminder that we're here to be creative, we had to be unchanging. We cannot rely on past successes, and we start to see really a very positive effect of that in China.

Our view in China is also to adjust and rightsize our presence. I think that I was mentioning the confidence factor, maybe sometimes we got our sales a bit carried away by the confidence factor in China in the past few years, where everybody thought in China and the is that 3-tier, 4-tier cities would be very, very strong places for luxury retail. There were so many new real estate development, so many opportunities that probably some of our brands and some of our competitors also over expanded their presence and now we are really fine-tuning our presence typically with Cartier this year we reduced our presence by 5-point of sales in the country.

And at the same time, we are upgrading and improving some of the major ones. So I think that's really a phase of consolidation and stabilization and we see a clientele that's a very loyal clientele. I was mentioning the Cartier Hydro event that took place in Beijing last November that was extremely successful and this is primarily a 1 that knows Cartier very well is very, very familiar with the high jewelry collections and is a loyal clientele. And at the same time, we see also renewal -- renewal of more operational customers that really appreciate both iconic historic clients, Alumbra, Love and also expect new collections that are, again, very successful. So I think it's a very -- for us, a very interesting time. We still consider that stabilization is important. We don't bet on China coming back to growth patterns that we've seen years ago. But we feel it's a very important moment to consolidate the presence of our brands over there.

Next question, Nick.

Are you from Shanghai.

[indiscernible].

But where are you from. Okay. Well, you might have Shanghai woman. Do you really think Shanghai woman is not going to decide for self. Shanghai woman decides for Shanghai women. Not Shanghai men and certainly not rightly sitting in Switzerland. They make -- they're the strongest group of people I've met, do you agree? They make their own decisions.

No. In the foreseeable future, definitely, you can see, I would say, not only China, but the emerging market consumers, definitely, everybody have a stronger understanding towards themselves towards the brands.

Well, I'm specifically, you're very polite my Chinese gold friends, lady friends, a lot as polite they tell me straight. That's a stuff up. This is good. That is bad. Trust me, they decide for themselves. I have a friend who's a big industrialist. Originally, Hong Kong move to the Main Land is probably got 300,000 people working for him. And he has a group of every year picks the best of the youngsters the intake. And about 10 years ago, his partner came to him and he said we're going to need a actions here. Said, what do you mean? He said, we're going to have to promote certain sectors. What are you talking about? Is it if you looked around of all of our future leader 85% of women, the men don't make it.

So we're going to have to artificially promote men. And he showed me the list we said they're better. And a lot of them are -- so I say to my colleagues, go and speak to them, ask them what they want. And when they say I want to just make it, don't be French, don't pick you know better, trust me, they the boss, okay? So that's my attitude.

Really appreciated.

Do you realize that they're not around the table anymore. But when I saw to the non our French -- on a French colleague of [indiscernible] and Cartier in London I say it's Bombardier. I said, Bambas that said look to I say, "What is that?" And I don't ever what it was. So I came back and I said, please make it . Now a little secret. If you say if in our group, you suggest something to a German, they think it's an instruction. So you've got to be very careful. You can't just make a joke and make a suggestion, they'll do it.

If you give a Frenchman an absolute instruction, it's a mere suggestive, okay? Maybe was meaning that, but -- we don't think he was serious. So I said to them, I want you to make it. They didn't. And a year later, I really got [indiscernible]. And when they finally did it, I went on 1 of my trips that I went to China. And I just vented Japan, where they thank they always all the sales ladies and I would like to the Japanese ladies are. That I'd give you a hug -- thank you. So I thank you. I said no, we got it. I said yes, it's selling like crazy. Then I go and I find out that our friends at head office decided the clue is too aggressive for the Chinese clients. So I didn't even bother I asked Kagem on our Board. She just burst out laughing. Said -- we are the most aggressive people on earth. You need to change your marketing team. They clearly do not know us as clients.

So you asked there about China. I actually think we go to China, we asked the Chinese, and then we've got a good job. Would you agree.

I will see China definitely have them with long-term resilience and the Chinese women beside their career path and decide on the show...

All the response people you listen here, okay, Chinese people decide the uncarrier both. It's -- I love it here. But this is my real 1 for you. as to why we've been rather slow. It's not that anymore.

Next question from Nick, then I think that we have 2 more.

It's Nick Anderson from Berenberg. I just had 2 -- you talked about being in the best shape ever...

Sorry. So adjust the current head of culture loved in China. -- for long time. for a long time. I think he is fluent in mandarin.

Not about speaks on the end. I don't probably...

So you'll see a change.

So I had 2 questions, 1 on the balance sheet, 1 on stores. And just on the balance sheet, specifically on cash balances. You've always been very, very clear in the past about the benefit of having a very healthy balance sheet and the large cash balances. But I just wonder if you can help us how you think about is there an optimum size? I mean, is it an absolute amount? Is it relative to sales? I don't know, just help us understand that -- and then on the stores, -- you've obviously done a lot of rightsizing this year. Is that process largely complete? Or going forward, will we likely to see a similar sized store network that you aim to drive, I suppose effectively more revenues existing stores or might we start to see new store openings on a basis again...

I think better rather than small. Is that a phased type Nicolas.

Yes, exactly. And it's never completed. I mean, a network is a leading organism. So it will -- there will always be adjustments improvement -- but yes, there is a phase of consolidation right now. It's very much more to your point about improving the quality of the network rather than continuing to expand the number of ...

Yes. But I think he must think we're going to have fewer and small it's -- and that's part of not having a problem with cats. We can improve, improve the shopping experience. .

And if I may, Devolver time. I remember from naan apples. When we mm size was 100, 120 square meters. Now an optimum size is probably 300 square meters of course, the offer has expanded. We welcome more clients. So this is also evolving with time and the desirability of the brands.

When did I meet Mr. Fran and B, when will we buy want? So it's 26 years ago. We paid EUR 300 million, Telenor turnover....

It was around EUR 60 million.

Until we tell them your losses...

It was around EUR 60 million.

So we paid EUR 300 million. It was something that turned around EUR 60 million -- that also lost EUR 60 million. And we need it over the phone with a gentleman. And today, Shapo Nickelup because -- it's a EUR 5 billion brand. So when people talk about attacking our competitive capture they forgot that uncle killing them. It's a remarkable success story, go from minus EUR 60 million to EUR 5 billion shopper -- so this is really what I'm going to say to you. It's a group of people working together in ultra of trust. We then get killed if you make a mistake. Don't take it twice, then we'll have an issue. You can make 1 mistake as long as you admit it immediately. And we're having fun I think if you carry on doing it you're also during bad times, such as now -- we've -- I've said to you and look at our member, I said a few years ago, in bad times, we tend to outperform our competitors.

It's not great at the moment, especially not for some of our competitors. So we have the flexibility. And the other interesting thing is, as Nicola will tell you, it's easier to gain marketing access and to do deals when other people are cutting their marketing. So you gain ground in bad times and gain loyalty from trade partners. Is that good very much. Yes. Are there any other questions? Yes. Okay.

James?

It's James Grzinic from Jefferies. I wanted to piggyback on your sense of smell on demand elasticity to full price. I presume it's very different in China relative to Western markets. Can you help us map out the extent to which you are concerned or otherwise to sudden adjustments in gold price. It looks like it's...

I'll give you a dip when I buy gold sell Okay. It's sure indicator of the high point.

So what are you doing right now?

I don't have enough money, they have to buy I bought 5% from the high point. Okay. No, I did not get the margin. So nonense.

But on all seriousness, it looks like short-term Chinese consumers are very have been pared some gold prices, they...

I'm not sure that it's consumer and whether it's not Centrobank. I'm not sure. I don't know who was buying. But what I can say to you is if you've ever been in a good line and you've got grandchildren and you know governors of central banks, then maybe you should think of 2% or 3% in gold for your grandchildren because I promise you, they're not going to put new gold. It's impossible to get it out at $5,000 an ounce. Okay. If you trust guys with crypto, it's over centuries. I will not go tell anybody 50% or 50% at 5% to 10%, 5% put it away.

Soon, Anton is going to have a son or daughter in a month's time, then I'll have 8. So I want to leave some for all 8 grandchildren that they can maybe get through university, put a payment on a house. And how do I make sure it's there. Yes, you can put some in the S&P. But do I trust central bankers. I used to be a banker when I found out that I understood certain things better than them they got very on. And when they were a lot younger than me, I got even more on -- so that is in for gold . But the problem is it's affected us -- on the other hand, you know what psychologically it's given our clients are feeling for hang on, it's gold. So they -- it's a value store.

I guess that's my question in terms of -- I understand production costs and the long-term bias inflation. But if I think a world unpredictable, big adjustment downwards for whatever reason in gold prices, -- is that an issue in terms of demand in Western market? Is that something you think about?

I don't think that I do think -- I think people are worried that 4,000 and 5,000 are still what is it -- it underpins the feeling of value of luxury. It makes it very expensive. And we've got to be very cautious. But what would you say you're trying -- you sell it to them.

Exactly what you say. I think that on 1 hand, it's a challenge because it has a strong impact on the gross margin. But on the other hand, it plays in favor of jewelry and precious watches because there is feeling of interesting value, not investment in a sense it's going to come with a return, but investment in the sense that you're going to be able to meet, which is what Jewelry has always been about for thousands of years. So should go down. I think at the end of there's going to be less pressure on the margin going to enable to go even more into creation with gold products, which is a bit more difficult these days. and to maintain them at a reasonable price so that they are still affordable also to an aspirational customer, which is being challenged in some markets today.

We'll take 1 very last question for [indiscernible] .

Thank you very much. And I'll be quick. First, we're obviously seeing your jewelry overall, and you significantly outperforming luxury market. What is your idea on who you are taking market share away from? Is it leather goods? Are you just expanding the boundaries of your category? Is it other nonconsolidated players given the retention of value of Cartier and Van Cliff and other products. And my second question is your communication costs went down this year, and you are still talking about keeping them stable. And with everything you talked about AI and overall technological progress. Do you think you are more efficient on your communication and marketing, do you think there is, I don't know, a ratio where EUR 1 spent on marketing next year would be worth 1.5 year before. Do you think you can keep it at 9% and reach more consumers ultimately. Thank you.

Thank you. thank you for asking the question. I gave them hell, and I told them I want that to answer, which was given to the Board yesterday.

Yes. Thank you.

Just the same thing that you did low -- it's our company sector sitting the nose. One of the worst signs to me, never ever, ever, if you can buy anything from private equity. We as they will cut research and development et cetera, and then communications just before they sell it to. But 1 of the things I watch all the time as vocation expenses. The problem is the smaller the mason, the bigger percentage of turnover, you have to spend just to get noticed. But when you get to EUR 5 billion, EUR 10 billion -- EUR 500 million or a lot of money. When you start spending really spending $100 million. So we asked for a very good explanation, which he can give you now.

No. It's a very good question, and it's actually ...

I really mean it.

A series of factors. The first 1 is that, yes, the brands and typically the jewelry brands are reaching levels in absolute terms where they have the visibility that they wish to get. And we don't want to be all over the place. We want only to have very measured, selective communications. We don't believe that any noise and communication is good for a brand. So we want to make sure that we have the right threshold. So it's true that the bigger they are, at the end of the day, the less they need necessarily in percentage.

The second thing, and the Chairman mentioned it, that it was a year also with a lot of disruption in the industry in the market. So you could optimize your marketing spend. You could get positioned in advertising communication for -- in better conditions than before. So with the same amount of money, you could get a better impact. And -- and the second -- and the last part is that, yes, with the environment, we've been very, very cautious together with the management of the brand throughout the year. and we maintain cost discipline, including on communication. It's true that we saw quarter after quarter that the desirability of the brand was there, that the results were very, very positive but yet we maintain that cost discipline. So that drove also for a decrease in the percentage of communication compared to the growth of sales.

But you did to me yesterday in Nicolas which I've forgotten that we exceeded our budgets in turnover. And as a result, simply mathematically the percentage of turnover that we budgeted 1 on went down. So it was a straight mechanical floor. But trust me, we do not try to save money by cutting communication. But on that note, it's changing so much I mean my sons generation communicate and get their information through totally different things it's -- it's a young person's job that for all of that communication, we need to realize that the medium as changes -- any last question?

Please -- that will be the last question.

Yes. If I look at the geographical trends, it seems that the growth in Greater China accelerated significantly Q4 compared to Q3. If I have seen well, you haven't given the growth in China in Q4. I'm not sure you all get it. But my question is, do the effort you mentioned at Cartier on the product side were already a visible result in Q4 in China?

Yes. Sorry. Yes, yes, we saw -- once again, we mentioned it a couple of times today, we are very -- we believe there is still consolidation. We still -- we see an improvement. We see better signs definitely enjoy with -- very brands with Cartier. Notably, there was very, very good new year -- Chinese New Year period on the Q4 that also drove quite healthy results.

Chinese New Year fell in Q4 for us this year. Well, yes, you're an correct.

Thank you very much for everyone in the room and listening to us today. This now finishes the webcast. Thank you.

Thank you.

Thank you.

Ladies and gentlemen, welcome to Richemont Financial Year 2026 Interim Results Presentation. I am Sandra, your call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it is my pleasure to hand over to Richemont. Please go ahead.

Thank you, Sandra, and good morning, everyone. Thank you for joining us for Richemont's half year results presentation for the period ended 30th September 2025. Here with us today are Johann Rupert, Chairman; Nicolas Bos, CEO; Burkhart Grund, CFO; and James Fraser, Investor Relations Executive.

We would like to remind you that the company announcement and results presentation can be downloaded from richemont.com, and that the replay of this audio webcast will be available on our website today at 3:00 p.m. Geneva time. Before we begin, please take note of our disclaimer regarding forward-looking statements in our ad hoc announcement and on Slide 2 of our presentation.

Turning now to the presentation. Burkhart will begin by discussing key highlights and group sales. I will then provide further detail on the performance of our Maisons. And finally, Burkhart will take you through the financials and offer some concluding remarks. This presentation will then be followed by a Q&A session.

Burkhart, over to you.

Thank you, Alessandra. Good morning to everyone, and thank you for joining us today. Richemont delivered solid results in the first half in a complex macroeconomic and geopolitical environment. Sales for the period reached EUR 10.6 billion, up by 10% at constant exchange rates and by 5% at actual exchange rates. Operating profit stood at EUR 2.4 billion, up by 7% compared to the prior year period, or up by 24%, excluding the significantly adverse foreign exchange movements. Operating margin reached 22.2%, improving by 30 basis points. Profit from continuing operations at EUR 1.8 billion was 4% higher than the prior year period. Cash flow from operating activities amounted to EUR 1.9 billion. Finally, our net cash position remained very robust at EUR 6.5 billion after the EUR 1.9 billion dividend paid in September.

Turning to our highlights, starting with the top line. The group posted double-digit growth at constant rates, led by continued success at Jewellery Maisons and sustained local demand across most regions. In the second quarter, in particular, the group and its Maisons experienced strong momentum with sales up by 40% at constant rates. In Q2, we saw higher sales across all business areas, including a remarkable 17% increase at the Jewellery Maisons. Sales of the Specialist Watchmakers were up 3%, posting their first quarter of growth in almost 2 years while sales at other business area rose by 6%.

In addition, all regions posted double-digit increases in Q2, including Asia Pacific, supported by a return to growth in China. In the period, the group showed its ability to maintain a robust financial position. Operating profit in the first half increased to EUR 2.4 billion, reflecting the positive contribution from the strong top line growth combined with effective cost discipline. This was achieved despite external headwinds, including unfavorable FX movements, increasing raw material costs and to a lesser extent, the initial impact of additional U.S. duties. Consequently, the group maintained a solid net cash position at EUR 6.5 billion, an increase of EUR 0.4 billion over the prior year period.

In this context, our Maisons continued to demonstrate agility while investing for the long term. Showing their persistent drive for creativity and product innovation, they introduced strong novelties with craftsmanship at their core and further nurture their brand equity through impactful yet disciplined communication spending. We continue to cultivate future growth prospects through strategic investments. This drove a higher share of our CapEx envelope towards internal boutiques and manufacturing capacities primarily for the Jewellery Maisons.

Let me now discuss the group sales performance in more detail, first by region and then by distribution channel. Unless otherwise stated, all comments refer to year-over-year changes at constant exchange rates. Most regions posted solid performances in the first half, benefiting from double-digit growth across all regions in Q2 led by strong local demand. Sales in the Americas maintained the momentum throughout the first half and posted 18% growth with strength across all business areas, all channels and all markets in the region. Of note, Jewellery Maisons and Specialist Watchmakers posted double-digit performances, while several Fashion & Accessories Maisons showed encouraging signs.

In Q2, the Americas region posted its seventh consecutive quarter of double-digit growth, with sales up by 20%. The Americas made up 25% of group sales, up from 23% in the prior year period. Asia Pacific returned to growth in the first half, up by 5% compared to the prior year period fueled by a 10% rise in the second quarter. Of note, sales in China, Hong Kong and Macau combined stabilized in the first half. The notable improvement to 7% growth in Q2 led by the Jewellery Maisons. The performance was solid elsewhere in Asia Pacific with notable double-digit growth in the South Korean and Australian markets. Sales in Asia Pacific made up 32% of group sales, down from 34% in the prior year period. Sales in Europe increased by 11%, driven by double-digit growth at the Jewellery Maisons and single-digit increases at the Specialist Watchmakers and other. All major markets in the region posted higher sales, notably in Italy. Growth was led by strong local demand in addition to a positive contribution from tourist spending, particularly from the American clientele. Overall, the performance in Q2 was consistent with that of Q1 at plus 11%.

Sales in Europe represented 24% of group sales, [ a tad ] higher than the 23% in H1 '25. Japan ended the first half with sales down by 4% after returning to double-digit growth in the second quarter, led by an acceleration in local demand, particularly at Jewellery Maisons -- spending, while improving in Q2 declined in the first half, reflecting demanding comparatives and a stronger Japanese yen. Japan's contribution to group sales decreased slightly to 10% compared to 11% in the prior year period. Middle East and Africa posted the strongest regional growth for the period, with sales up by 19%, slightly ahead of the Americas. The performance was led by the Jewellery Maisons with positive Specialist Watchmakers sales at constant rates. Our markets were up, with the United Arab Emirates being the key contributor. Sales in the region made up 9% of group sales in line with the prior year period.

The largest contributors to sales growth in value terms were the Americas and Europe, each adding over EUR 200 million in incremental sales followed by the Middle East and Africa region with a contribution of over EUR 100 million. Combined with broadly stable sales in Asia Pacific and a limited decline in Japan, the group was able to generate over EUR 500 million of additional sales in the first half despite a significant negative impact from currency movements.

Let us now turn to sales by distribution channel with growth expressed at constant exchange rates. Overall, the 3 channels experienced broadly similar performances in the first half, leading to a stable contribution from direct to client sales at 76%. [indiscernible] to growth at the Jewellery Maisons and mid-single-digit growth at the other business area, while sales at the Specialist Watchmakers declined slightly. All regions, except Japan posted solid performances led by double-digit growth in the Americas and Middle East and Africa. Online retail at 6% of group sales grew by 7%. Strong performance at the Jewellery Maisons more than compensated for softness in the other business area. Sales at the Specialist Watchmakers were broadly stable in the period. All regions posted growth led by Europe.

And now moving to wholesale, which includes sales to external mono-brand franchise partners and third-party multi-brand retail partners, sales to agents and royalty income. Wholesale sales represented 24% of the group sales and were up by 9%, supported by growth at both the Jewellery Maisons and the other business area. A region, the strongest contribution came from the Americas, Europe and Middle East and Africa.

Now back to you, Alessandra.

Thank you, Burkhart. I will now review the business areas with all comparisons at actual rates, unless otherwise specified. Let me start with the Jewellery Maisons, which include Buccellati, Cartier, Van Cleef & Arpels and Vhernier. Sales reached EUR 7.7 billion, an increase of 9% in the first half. At constant exchange rates, sales were [ up ] by 14%, with all regions posting double-digit growth, except for Japan, which was nearly flat. Q2 was particularly strong with sales up 17% at constant rates after a solid plus 11% in Q1. In the first half, sales grew across all distribution channels. The Jewellery Maisons generated an operating result of EUR 2.5 billion, up 9% versus the prior year period or up by 21% at constant exchange rates. Facing significant adverse currency movements, higher raw material costs and, to a lesser extent, the initial impact of additional U.S. duties, the Jewellery Maisons implemented balanced price increases while aiming to maintain long-term value for clients. In parallel, they continue to invest in their network while managing their cost effectively, as demonstrated by the level of communication expenses only slightly above the prior year levels. Coupled with strong top line momentum, this allowed the Jewellery Maisons to mitigate the unfavorable impact of external headwinds, resulting in a stable operating margin at 32.8%.

Let's now look at the main developments over the past 6 months. Both jewelry and watch collections posted strong growth, fueled by the success of timeless lines, such as Opera Tulle and Macri at Buccellati, Clash, Panthère and Santos at Cartier and Alhambra, Perlé and Flora at Van Cleef & Arpels. Blending heritage with creative spirit, the Maisons pursued persistent innovation to foster desirability. Cartier launched its new branding campaign featuring the Panthère. And later in September, the Love Unlimited line, bringing a bold new look to the Love collection that was imagined over 50 years ago. Also in September, Van Cleef & Arpels displayed their artistic and craftsmanship [indiscernible] with the launch of their new Flowerlace jewelry collection.

In the first half, high jewelry sales were supported by impactful and curated events in Europe and Asia for the [ own Equilibra ] collection at Cartier and [indiscernible] collection at Van Cleef & Arpels, while Buccellati also hosted exclusive events in Italy. Vhernier has now celebrated an intense first full year within the group. The performance is very encouraging, and the integration is progressing as planned. Vhernier has now internalized several boutiques and refurbished one of its [indiscernible] among other initiatives -- continuing to build a strong foundation for future growth. The Jewellery Maisons continue to upgrade and expand our network in strategic locations. Notable renovations, including Cartier boutique at Collins Street in Melbourne, while key openings featured Buccellati at the Mall of the Emirates in Dubai and Van Cleef & Arpels in Goethestrasse in Frankfurt.

Let's now turn to Specialist Watchmakers, where sales were down by 6% in the first half. At constant exchange rates, sales were down by 2% with a notable return to growth in Q2 at plus 3%. Regional performances continued to show contrasting trends. Double-digit growth in the Americas partly offset lower sales in Asia Pacific and Japan, 2 regions that combined account for over 50% of sales in the prior year period. Of note, all regions improved sequentially in the second quarter. By channel, retail and wholesale experienced slightly lower sales, while online retail was stable at constant rates. The operating results amounted to EUR 50 million, corresponding to an operating margin of 3.2%. Gross margin was impacted by the combination of unfavorable foreign exchange movements of which the weaker U.S. dollar and the stronger Swiss franc, rising gold prices and an initial effect from higher U.S. duties. Ongoing cost discipline visible through a slight decrease in operating expenses partly mitigated the deleveraging impact of lower sales on the fixed operating cost structure.

Reflecting their varied regional footprints, the Maisons experienced mixed trends. However, they maintain a 100% sell-in, sell-out ratio over 12 months, demonstrating disciplined inventory management. Novelties [ drawing ] on the Maison's strong heritage and showcasing their craftsmanship contributed positively. The Lange & Söhne Odysseus Honeygold limited edition, for example, was fully allocated within 1 week of its launch. IWC introduced new references of the Ingenieur and [ pilot watches ]. Jaeger-LeCoultre released the Reverso Duoface Small Seconds and Piaget, its new jewelry watch collection, the Sixtie. Of note, Piaget has seen 5 of its creations nominated for the '25 [indiscernible], which recognizes watchmaking excellence.

2025 also marks the 270th anniversary of Vacheron, Constantin celebrated through worldwide events and new launches. Worth noting is the creation of La Quête du Temps, a mechanical wonder 7 years in the making and currently displayed at the Louvre, showcasing the Maisons' ability to combine history, craftsmanship and engineering. In parallel, while the overall number of stores was largely stable in the first half, the Maisons continued to enhance their network. Notable examples including IWC's new [ booking ] in Taichung, Taiwan, Vacheron Constantin strategic relocation in Seoul, and Jaeger-LeCoultre's major renovation at the Kuala Lumpur Pavilion.

Let's move to the other business area, comprising the Fashion & Accessories Maisons, Watchfinder & Co., and the group's watch component manufacturing and real estate activities. Overall sales were down by 1% at actual exchange rates, but rose by 2% at constant exchange rates. Regionally, Europe was a main contributor to growth and trends in the Americas were encouraging. By channel, sales in both retail and wholesale increased slightly. Growth at constant rates was driven by a double-digit rise at Watchfinder and modest growth at the Fashion & Accessories Maisons. Trends improved sequentially across all regions in Q2, leading to a 6% increase in sales at constant rates. Overall, the other business area reported an operating loss of EUR 42 million. Fashion & Accessories Maisons posted a EUR 33 million loss, improving at constant rates, thanks to controlled operating expenses while continuing to invest in the desirability of the Maisons.

Turning now to Maisons highlights. Alaïa saw its sales grew by double digits, fueled by sustained success and brand heat of its icons such as La Ballerine and Le Teckel. It is also worth highlighting the continued solid performance at Peter Millar, thanks to its lifestyle positioning and success in its crown crafted collection. Chloé saw improved momentum led by ready-to-wear, confirming that its strategy to reconnect with its roots is resonating well with clients. Overall, ready-to-wear across the Maisons achieved double-digit growth in the first half, fueled by sustained focus on creativity. Montblanc made progress on its transformation program, comprising a greater focus on writing instruments and leather goods categories in direct-to-client channels while streamlining its wholesale network. Gianvito Rossi has been increasingly recognized as a leading global luxury female footwear brand, underscored by the enthusiastic reception of its latest golden edge fashion collection. The Maisons continued to enhance their distribution networks over the period. Openings, including Chloé in Saint Tropez, Peter Millar expanding to San Diego and Columbus, and Watchfinder, launching its first U.S. internal boutique in Soho, New York City.

This concludes the review of the first half performance of each business area. Burkhart, over to you.

Thank you, Alessandra, and well done on the pronunciation of [indiscernible]

Thank you, Burkhart.

Let me walk you through the rest of the P&L, starting with gross profit. Gross profit increased by 2% to EUR 6.9 billion and represented 65.3% of sales, a decrease of 190 basis points compared to the prior year period. This is the result of several moving parts, which have evolved considerably in the past 6 months. Starting with our production costs that were affected by rising raw material prices, particularly that of gold and to a lesser extent, this period higher U.S. duties. With the time lag between production and effective sale, our inventory levels acted as [ a patrol ] natural hedge in a period of rising material costs. Compensating for the higher production costs, we benefited from positive impacts related to pricing and favorable sales mix. This was not sufficient, however, to compensate for the material adverse currency movements of a negative 180 basis points we faced in the first half, notably driven by a weaker U.S. dollar and Chinese renminbi, next to a strong Swiss franc, one of our main manufacturing currencies.

Before we move on to the rest of the P&L, let me add a few words on U.S. duties. In the first half, the impact of increased U.S. tariffs rates was limited to some EUR 50 million, thanks to our proactive inventory management since April and due to the phasing of the implementation of different tariff rates, starting with 10%, then 15% for Europe made products, followed by 39% in August for Swiss made products. With this phasing in mind, we anticipate a greater unfavorable impact in the second half particularly if the 39% tariffs on Swiss origin products are maintained. Based on the current levels of our U.S. inventories and planned shipments, we estimate the full adverse impact of the increased U.S. tariff rates to be around EUR 0.3 billion for the full current fiscal year.

Let us now look at net operating expenses, which were stable compared to the prior year period in value and increased by just 3% at constant exchange rates. Operating expenses stood at 43.1% of sales, down 220 basis points, driving positive flow-through from higher sales. Selling and distribution expenses were up by 3% or by 6% at constant exchange rates. The rise in cost was primarily related to continued retail store network expansion as well as salary increases. As a percentage of sales, selling and distribution expenses were down 70 basis points. Communication expenses decreased by 4% or 2% at constant rates, reflecting the Maisons' efficiency in allocating the resources and to a lesser degree, some impact from the phasing of specific events from 1 year to the next. As a percentage of sales, communication spend was 8.2% down -- sorry, 8.2%, down 80 basis points and below our typical range of 9% to 10%. Administrative and other expenses decreased by 2% at both actual and constant rates amounted to 9.2% of sales, down 70 basis points, reflecting lower valuation adjustments and fewer nonrecurring costs than observed in the prior year period. This resulted in an operating profit of EUR 2.4 billion, up by 7% at actual exchange rates and by 24% at constant exchange rates.

Overall, the strong sales growth contribution and the effect of cost control mitigated the impact of external headwinds in the first half, namely of unfavorable foreign exchange movements, the sharp increase in the price of gold and to a lesser degree, additional U.S. duties. As a consequence, operating margin remained robust at 22.2%, a 30 basis point improvement versus the prior year period.

Let us now review the rest of the P&L items below the operating profit line, starting with finance costs. Net finance costs reduced slightly to EUR 158 million for the first half, down from EUR 173 million in the prior year period. This EUR 15 million improvement is mainly comprised of the following items: on the one hand, higher net FX losses on monetary items were EUR 162 million, primarily due to weak U.S. dollar in addition to the impact of lower fair value adjustments for EUR 129 million. The latter relates to the group's investments in externally managed bond funds and money market funds. On the other hand, more than compensating those 2 items were the EUR 326 million increase in net gains on FX hedging activities.

Turning to discontinued operations, which consists of YNAP until the completion of its sale on -- at the end of April of this year. Profit for the period stood at EUR 17 million. As a reminder, last year's results included a EUR 1.2 billion noncash write-down related to the transaction. Figures presented here are the estimated final closing adjustments related to the disposal, our 33% stake in [ Lux ] experience being now recorded as an equity accounted investment.

Let's now review the profit for the period. Profit from continuing operations stood at EUR 1.8 billion, 4% higher than prior year prior period. This included the rise in operating profit and the improvement of net finance costs that I've just described. The evolution of the share of equity accounted results was down EUR 34 million, primarily reflecting lower gains than in the prior year period on equity-accounted businesses and, to a lesser degree, the result of our stake in [ Lux Experience ], which was included for the first time. The group's effective tax rate for the first half stood at 19.5% in line with our expectations for the full year, absent any special unforeseen items occurring in the second half. Finally, profit for the period was EUR 1.8 billion, up from EUR 0.5 billion in the prior year period that included a EUR 1.2 billion noncash write-down from discontinued operations.

Cash flow generated from operating activities came in at EUR 1.9 billion, an increase of EUR 600 million compared to the prior year period, driven by higher operating profit and lower working capital requirements. Indeed, inventories rose, but less than in the prior year period, notably as the Jewellery Maisons experienced strong sales growth. Specialist Watchmakers also demonstrated effective production management contributing to controlled inventory levels. To a lesser extent, higher cash inflows from foreign exchange derivatives also contributed to the reduction of working capital needs.

Let us now turn to our gross capital expenditure, which amounted to EUR 0.4 billion and represented 3.6% of group sales. Our CapEx was broadly in line with the prior year period, higher share was allocated to distribution and manufacturing. Investments in our distribution network dedicated to renovations, relocations and openings of directly operated stores represented 55% of gross capital expenditure, a share 8 percentage points higher than the prior year period. Share of manufacturing spend increased to 30% of overall CapEx compared to 24% in the prior year period, investment mostly related to the Jewellery Maisons. Other investments represented 15% of CapEx down compared to the prior year period. The decrease mainly reflecting the completion of several noncommercial Maisons projects.

Let us now turn to free cash flow. At EUR 1 billion, free cash flow was about EUR 0.8 billion higher than in the prior year period. The increase primarily reflected the EUR 0.6 billion benefit from cash flow from operating activities that I described earlier in addition to the nonrecurrence of last year's real estate acquisitions in London.

Our balance sheet remained solid. Shareholders' equity accounted for 54% of total assets. Net cash amounted to EUR 6.5 billion at the end of September, down EUR 1.7 billion compared to the end of March 2025. This decrease is more than explained by the EUR 1.9 billion dividend cash outflow in September reflected an ordinary dividend of CHF 3 per share, which was approved by shareholders at the latest AGM.

Before turning over to the Q&A, I would like to offer some concluding remarks. Richemont delivered solid results in the first half in a complex macroeconomic and geopolitical context. Our sales growth largely fueled by sustained local demand in most regions speaks to the strength of our Maisons' positioning build with consistency over time. And we will continue to nurture their brand equity and cultivate their potential through investing in quality locations and manufacturing capacities. While we continue to navigate uncertain times and phase demanding comparatives, we maintain the course and remain focused on leading the group with the same discipline as in the past. We have full confidence in our talent and team's dedication to continue to enchant our clients with craftsmanship and creativity at the core to deliver sustainable value creation for our stakeholders.

Now this concludes our presentation. Thank you for your attention, and I will now hand back over to Alessandra.

Thank you, Burkhart. We now start the Q&A session. [Operator Instructions]

[Operator Instructions] The first question comes from Ed Aubin from Morgan Stanley.

Yes. So Ed Aubin from Morgan Stanley. So first of all, congratulations, obviously, for the strong set of results. And Mr. Rupert, congratulations on the opening of the [indiscernible] Cartier building in Paris. I think it's really stunning and I guess, for your support of the art world. So just going back to the question. So Burkhart, on the exit rate and kind of the start of Q3, which I know you don't really like to comment about. But yes, if you could comment in terms of how things have been trending over the past few weeks. You're going to be facing a much higher, much more difficult comparison basis for the quarter ending December, particularly in the U.S. So are you already seeing some slowdown on the back of that and so on. So that would be question number one.

And then question number two, on the gross margin, which was down 190 basis points. Burkhart, if you could just -- I know you've helpfully provided a profit bridge, but on the input cost inflation and particularly related to gold, if you could provide a little bit of color because ahead of the results, people were struggling a bit with the modeling. And related to that, you hopefully, given some tariff -- quantify the tariff headwind for H2, which I guess is EUR 250 million. The consensus is currently assuming a lower rate of decline for the gross margin only 150 basis points in H2. Does that seem realistic given that the tariff impacts should be substantially higher in H2 versus H1?

Yes. Good morning. Let me -- okay, let me try to help you within the limits of what we usually do, right? I mean, forward looking and looking at Q3 sales, you know that we will not give you that color because there is too much uncertainty going forward. What I can point out is, and remember that we had a very strong third quarter last year, a growth of 10%. And I think we're confident, again, in the long-term prospect of the Maisons, but we cannot, at this stage, give you any indication of how we're trading.

The performance across the second quarter was pretty uniform with a bit of slightly higher growth in the month of September, but that has something to do also with past year's comparison. So really nothing much to add to that.

Now the gross margin, I think we have been giving some indications, let me try to be helpful. So overall, we have a 190 basis point drop in the gross margin in the first half, out of which 170 basis points really are linked to the FX impact, so the translation effect. And it's a mixed bag between obviously weaker dollar and dollar-linked currencies, but also for example, the renminbi to a much lower extent the Japanese yen this year and some other currencies such as the Korean won,for example, combined with the relative strengthening of the Swiss franc, which you know is one of our major manufacturing currencies.

The other drivers in the first half are about 20 basis points negative or combined, right? The biggest downward pressure on the gross margin came from gold, which is about north of 2 percentage points. And as we pointed out, for the time being, a very minor impact from U.S. tariffs around EUR 50 million plus, which, as you know, is linked to, let's say, the inventory cycle. It is [ on inventory today ] and will then when we sell the inventory, be recycled into the cost of goods line later. The stock revaluation and price increases for the time being roughly compensate for these negative impacts. That's why the overall decline of the gross margin not linked to FX is about 20 basis points in the first half.

Now on tariffs, we will not speculate about that. We know the current rates. And answering your question, actually, your question is answered to what you put on the table saying, is that realistic to estimate that gross margin will be weaker -- with a weaker drop in the second half if we have a disproportionate impact of tariffs. So I think the answer lies in the question there.

The next question comes from Antoine Belge from BNP Paribas.

Yes. It's Antoine Belge, BNP Paribas. So 2 questions. First of all, can you talk a bit about China, Chinese, Greater China, that needs a bit complicated. So in Q2, I think whether China was at 7%. My understanding is actually Hong Kong and Macau are quite strong. So was Mainland China locally a bit positive. And what about the Mainland Chinese cluster, if you take into account maybe the impact of tourism? And more generally, what's your view on China improvement just easy comps? Are you seeing some macro impacts, better consumer confidence?

And my second question is a bit of a follow-up on the topic of gross margin. So I understand that there will be some headwinds that are going to be greater in H2, but you passed quite a hefty price increases, I think, in September. So could you quantify those? I mean, according to our estimates in September globally for [indiscernible] it was around high single digit coming on top of around 3%. [indiscernible] I'm slightly surprised by the comment that the gross margin would be declining more than they did in H1 because they should be at least in my opinion, more impact from pricing. So am I getting something wrong here?

Nicolas Bos here. I will answer your -- try to answer your first question although everybody would love to have a final view on China in its evolution. We've definitely seen an improvement, particularly in the last quarter, definitely on the region, what we refer to as Greater China. As you mentioned very well, it was driven by an improvement of business in Hong Kong and Macau, both touristic or Mainland Chinese traveling to Hong Kong and Macau and also domestic clientele, particularly in Hong Kong. All in all, we see -- I don't know if it's a stabilization, but we are back to a positive performance for the region, including slightly positive in Mainland China on the very end of the period and clearly driven by the Jewellery Maisons. In general, we've seen some repatriation of purchasing, notably from Japan to Hong Kong for mainland Chinese clients. But it seems -- and it will be difficult to predict the future, but it seems that we are now at a more stable level of purchasing from our Japanese or Chinese clients, sorry.

What we see at large, but maybe it's a wider discussion is that there is an evolution of consumption in China connected probably to the economic situation, but also to an evolution in [ taste ] where we see Chinese clients becoming much more demanding, discerning and differentiating when it comes to their choice of brands and collection. That affects positively the Jewellery Maisons. We still see on some of the watch Maisons a more challenging situation. And what we foresee, if we're able to foresee anything is that it's really a market that is reaching another new level of sophistication and of quality of demand, very much at par with what we see in the rest of the world and that has an impact, really brand by brand, category by category, collection by collection. But all in all, it seems to be quite stabilizing.

And Antoine, just picking up on your second question. Listen, we're not going to guide on any gross margin in the second half because we have uncertainty and volatility on currencies, on gold, et cetera. What we have pulled out or pointed out is that at current rates, we will have a disproportionate impact of tariffs in the second half as for the first half, we have been shielded by inventory holdings and, let's say, proactive inventory management. So that's really all I can say on this topic.

Mainly on the price increases, I mean, could you maybe confirm that what was taken in September at high single-digit overall global number for Jewellery Maisons, is that what happened? .

Well, we had some -- as you noticed, we had some price increases because we've discussed it before that we want to maintain price increases as limited as possible because for us, keeping the affordability of certain collections and the attractiveness of the Maisons is really what comes first. But regardless, we had to implement some price increases. There were some in May, low single digit. There were some in September, particularly for Cartier, quite limited on a worldwide basis to try to reflect some of the increase in the price of gold, notably, but then including also some specific local adaptation. We need to keep in mind that the dollar has depreciated 8% in 1 year. So we need also to maintain kind of fair international pricing and reflect the evolution of exchange rates. So that came on top of the slight international price increase.

So we haven't seen a true impact, let's say, in desirability of traffic in the stores, meaning by that, that we didn't necessarily notice a specific spike of purchasing before the price increase nor decrease afterwards. We believe it's because it was quite reasonable and the desirability of the collection comes really first. So we'll see in the second half, how that unfolds.

The next question comes from Thomas Chauvet from Citi.

A couple of questions, please. The first 1 a follow-up on pricing and maybe your pricing philosophy. Nicolas, you said you're trying to maintain affordability and to try to limit price increase because obviously, you can't cut prices once you've increased them so you're very careful. Nevertheless, do you think the consumer, not just in China, but globally, is also starting to buy jewelry a bit differently than in the past for other reasons than the beauty of the Cartier [indiscernible] design or the emotional value that you talked about before or simply gifting purposes or the big events of life, but also as a commodity investment? So very strategically to invest has more than a [ store ] value, but maybe even an investment in unprecedented rising gold and precious metal market. So -- and how would you react to that? Because we've seen some of your Chinese luxury competitors, if I can call them competitors. We know the way they operate, how put [indiscernible] increase prices by 20% today. Tomorrow, mechanically, they'll reduce prices because gold prices have decreased. I know that's not how we -- operate, but we're in a very different gold market now. So curious to hear your thoughts.

And secondly, perhaps also for you, Nicolas or for Mr. Rupert. It's been over a year that Nicolas, you've been appointed as group CEO. Are there any areas where that you've identified with the group or perhaps the individual business areas, divisions could do differently, could evolve, could be a bit more efficient? Obviously, there's been huge cost efficiency in the first half, as we know. Could you share some high-level thoughts on your also perhaps portfolio review, particularly within Specialist Watchmakers and Fashion & Accessories? Are there any obvious brands that may need financial or strategic support or brands that you think maybe might prove challenging to turn around? I'm thinking perhaps [indiscernible] Montblanc or [indiscernible]

Thank you very much for your questions. I think that would require probably a few hours to answer. But starting with the first one. I mean, the pricing philosophy has not changed. We really believe in what we call fair pricing, which is that the price of any of the creation should reflect its interesting value. And of course, we need also to take into account variations in the price of raw materials and exchange rates.

I have to correct what you said. It does happen that we decrease prices and it has happened in the past because that fair pricing policy includes that as well. So it has happened. It's not something easy to implement but it does happen. And on the very high end, [indiscernible], exceptional watches. We do actually adjust prices up or down on a monthly basis from a European pricing that we translate into local currencies. So we have fluctuations that can go up and down. Of course, the primary focus is to limit the increases to make sure that the fair pricing is still there and the attractiveness of the collections is maintained. So we will continue to look at that. We truly believe that our clients have really precise understanding and assessment of value. And unlike what we sometimes hear is not because a piece is expensive and a client or collector has significant resources that elasticity is endless and that the price doesn't matter on the opposite. So we are very attentive to that and we will continue to do so. I don't know if that answers your question.

On the second part, maybe Johann will want to say something. But what I can say is that -- and we talked about it before. Richemont is very much about long-term and continuity and then I came after more than 30 years already in the group. So not here to make any form of revolution. I think that's not expected at all. We've seen a period where we had very, very unexpected and strong phenomena during COVID -- after COVID that actually led to a very, very strong ups and downs in performance across the board. And we were seeing also global purchasing trends in Asia, in America and Europe.

What we see in the last period, clearly in the last year, 1.5 years, is that we come back to a much more differentiated performance by brand, by category, by collection, by geography in a way, back to what we used to see before that whole period and COVID and pre-COVID period. So what I'm very, very attentive to, with all of my colleagues is to make sure that we maintain or sometimes bring back all of our Maisons to really their core identity, their core expertise that they're all a very, very distinctive offer and complementary offer. We don't see today a global phenomena where everybody as well or everybody is challenged anymore. And my belief and our belief at Richemont is that each and every brand is much stronger when they are occupying their respective territories. And of course, the territory of expression of [indiscernible] is different from longer and the one of [indiscernible] already different from Vacheron Constantin. Same for the Jewellery Maisons or the Fashion & Accessories Maisons. So this is the primary focus to make sure that they are already playing in their specific respective field.

And then taking with Burkhart and the team and all my colleagues, a very differentiated approach. Some of them are very successful mature international brands, some of them requires still some more support because they are in development phase. Some of them are in redevelopment in some areas. You were mentioning [ Daniel ] with this new, and I would say, fantastic designer, [ Simon Holloway ]. We also talk about Montblanc, where we do a lot of work with [ Giorgio Sarne ], the new CEO and the team to see how Montblanc can revolve around the auto writing and the expertise in laser and you've seen with renewed communications and identity where we try to bring back Montblanc in a way to its core expertise. So this is very much the kind of long-term work, but nothing at the end of the day, different from the previous decades, I believe.

The next question comes from Erwan Rambourg from HSBC.

Yes, everyone, and congratulations on such a standout performance. If I could just make a comment, you're sounding very low volume wise. So -- and I don't think I'm the only one suffering from this. So if you don't mind speaking slightly louder. I'll keep it to 2 questions [ as asked ]. So 1 on Van Cleef. We've had pushback from people who are bearish talking about the [ Alambra-dependente ] ubiquity, potential fatigue. Obviously, you're probably set up with this, Nicolas since you've probably heard these comments when you were running that brand. But I'm wondering if you could talk about maybe relative performance within Jewellery Maisons. I suspect, Buccellati is booming from a low base. But can you sort of compare and contrast what you're seeing from Van Cleef relative to what you're seeing at Cartier, please?

And then second question on Cartier. Obviously, a management change there as well with now [ Luis ] being in the seat replacing [ Sears ]. I'm wondering if you could talk maybe about -- I know there's no revolution going on, but maybe what the areas of focus can be and what has changed. I think people looking at the group from outside will possibly think that there's greater SG&A discipline at Cartier, that would maybe be a bit simplistic. But what would you call out in terms of maybe the 2, 3 focus points for [ Louis ] in running Cartier.

And if I can cheekily add another very small question related to Cartier. Love Unlimited seems to be a pretty resounding success. Should we consider this as permanent or more in animation on the range?

Thank you very much. It's a lot of questions. And of course, we don't discuss so much performance and results by Maisons. Of course, on the Van Cleef & Arpels side, I need to answer. I don't feel any fatigue about Alhambra. [ So we have been seeing ] quite a few of them for 25 years. And I believe that most of our clients and stakeholders share the same view. So to have an icon is a blessing. So it's very often referred to as kind of liabilities. Is there a risk attached to it. At the end of the day, it's a blessing. I mean, the brands that do have iconic clients, in jewelry, in watches, in ready-to-wear or accessories are usually the ones that are very successful in the long term if they manage to maintain the desirability and the creativity around this iconic lines. So Alhambra, I can talk about Alhambra for some time, but I'm not going to. But it's -- to me, an extraordinary collection has been here for more than 50 years. And as offered over these more than 5 decades, almost endless opportunities for creativity with sizes, colors, styles. And that will continue, and we see that there is renewal within that collection, and that's why we appreciate it.

Needless to say, Van Cleef & Arpels like other Maisons is working on other collections. We've seen collections like Perlée. We were talking a bit earlier in the presentation about Flowerlace and Flora collection. Some of the watch collections also at Van Cleef & Arpels that established [ themselves around it complications ]. So Alhambra is not the only collection far from that, but it's true that it's probably the most recognizable and iconic one, and it's something that we will continue to develop and protect.

At Cartier, the same. Cartier is blessed with having several very iconic collection. Love is definitely one of them, created pretty much in the same period, Alhambra [indiscernible] and Love [indiscernible] And Love Unlimited is actually a very important development within that universe of the Love collection. It's not the way I see it with the team and animation. It's really a new expression within Love. Love is a bangle bracelet. And for the first time, it has become so bold and articulated. And I believe personally, I like jewelry, as you know, it's a fantastic piece and fantastic collection even with my [indiscernible] I have to say and to acknowledge is really a fantastic collection. And we've seen the response among existing clients of the Love collection or new clients actually entering the world of Cartier. And it's so far, a very, very positive response. So we'll see how it goes. But we believe it's here to stay for the long term, and the team is already working on the further development around Love Unlimited.

As for Louis and Cartier, think Louis is doing a very good job. The transition with [indiscernible] is going on extremely smoothly and [indiscernible] to both of them. [indiscernible] still very involved with some activities at Cartier, if you think of the women's pavilion and all the philanthropic and artistic activities of Cartier. And they work really hand-in-hand with the current team.

Once again, Cartier has the other Maisons is evolving and adapting to this new environment. I mean, there is always a new environment and typically the slowdown in China, which was a very, very strong market and still a very strong market for Cartier, something that the team is really addressing now and to see how we can make sure that Cartier will be ready for the next phase of the luxury industry in China. We've seen the strength of Cartier in America and the United States, which is quite impressive over the period. And they're also working there, renovating and improving the retail network and operations. So yes, he has a lot on his plate, but it's very much once again question of continuity with the previous management and the whole history of Cartier, and I'm quite confident it will continue to be very successful.

The next question comes from Jon Cox from Kepler.

It's Jon Cox with Kepler here. A couple of questions for you. The first one, just on the -- you had a very tight grip on costs, including on the CapEx side of things in the first half of the year. It's clearly an unprecedented environment, potentially maybe looking a bit better with China and Hong Kong coming back. Just wondering how we should think about the costs going forward in terms of you guys have a fantastic track record when things get a bit more difficult. You tend to look very closely at costs and cash flow and that sort of stuff. Is it more about maybe relaxing a little bit more? Or has the...

It's Johann, Jon. What makes you think that it's during tight times that we look at cash flow and cash?

I know you all the time. [indiscernible] Nicolas is adding a bit more on the cost side maybe than you have historically done. That's the sort of gist of the question.

No, no. [indiscernible] directly. I think you've got a look at Burkhart as the gentleman that managed to keep the costs under control through [indiscernible] [ up until now. ] .

Yes, Jon, and we're not going to give you any guidance going forward, but we intend to confirm the reputation that you just cited and mentioned by keeping focused on that. But remember, this is not a cost-saving initiative that is disconnected from what our Maisons need to grow. And we will always continue to invest where we need to invest to make our prepare our Maisons for the future with the right level of resources that they need. So we would never suppress activities that will impact the future readiness, so to say, of the Maisons.

We have done during COVID, have deployed an approach that have been executed by all the Maisons with a high level of responsibility and auto responsibility of how to make it through a very challenging time. And the same approach is what the Maisons are driving today that they are aware of the external factors, and they know best what resources they need to deploy for the future of the Maisons. And I think this is built into the philosophy of our management teams in the Maisons and the businesses.

Okay. And then maybe just as a bit of an add. You mentioned a potential EUR 300 million charge if the existing 39% tariff is maintained. If that tariff sort of goes back to 15% next week or in the next couple of days, should we just think it will be 6 weeks worth of EUR 300 million costs?

And just as an add Johann, you're on the call. I saw your comments earlier to the media saying this misunderstanding between the Swiss and the U.S. could be resolved in the next day or 2. Any further comment on that at all?

[indiscernible] those are us, Jon, that were on the call. [ I was selective ]. You know what subeditors do. It's -- could be today, but I said the comprehensive agreement would probably take up to February. But I have absolutely no idea. It's in the hands of third parties. So I'm not predicting anything. It was selective editing.

Yes. And Jon, based on what we know, which is the current rates, we expect for the full year roughly EUR 300 million impact. Again, after a good EUR 50 million in the first half, where, again, I pointed out that we're pretty much shielded in time from -- through our inventory. But that obviously, once we sell the inventory, we recycle it into the income statement, and that's what we expect overall at current rates, again, current rates a total cost of about EUR 300 million for the full year.

Okay. I'm just going to throw in a cheeky one. Trade receivables have gone up a lot in that half compared to a year ago, certainly a couple of hundred million. Is this any sort of indication you guys are looking forward to a good Christmas period?

I'll answer that question right away, Jon. I just want to add 1 more thing on tariffs. Let's not forget that the biggest impact of tariffs comes from the tariffs -- the European tariffs, which is, as you know, 15% because we produce a significant amount of jewelry, fashion and accessory items and 1 watch brand as well in the European Union or inside the European Union. So that impact will stay here. The same logic applies what has been in inventory will be recycled into the income statement, and that is where the biggest part of our sourcing actually comes from, right? So let's not equate just tariff impact with Swiss tariff impact.

So second question, we have wholesale debt of around EUR 600 million, also debt, meaning receivables, which are highly current. So this has -- is really on the on the back of the wholesale channel performance. We have pointed out that retail and wholesale are roughly growing at the same rate, which means that we also have a healthy recovery of sell-in, again, strictly controlled, which is watches, but which is also linked to the very strong performance of our ready-to-wear lines. And I would say this is pretty current. Our inventory -- our receivable days are quite low, talking about 40 days on average. So this is more, I would say, the expression of a healthy business in wholesale today, and I would not interpret that as pointing to the future.

The next question comes from Luca Solca from Bernstein.

Luca Solca from Bernstein. Looking at the U.S., I wonder how you're thinking about American demand and whether that could be a reason to think that because of the stock market because the crypto American consumers are very strong. Or is there also an element of consumers wanting potentially to avoid price increases and buying ahead of those price increases on the back of the tariffs that have been introduced, and how you separate which is which? I wonder if just myself thinking about the possible contribution from demand being brought forward or if that is not really a point that you would see from your retail activity in America.

And congratulations, Johann, for [ apparently sounding the right tone ] with President Trump seeing the picture of you and [ de Ponte and Dufour ] and a few others in the [indiscernible] office with President Trump was clearly refreshing. If that goes through, I think you should be seen as a Swiss hero, that well done.

On another point, that would be my second question. There's a lot of talk about the [ K shape ] society coming forward. Artificial intelligence applications could possibly make wealth and income polarization and inequality even greater. You have a very broad range of prices to take care of the very rich and the middle class, and you stated that you're very careful to maintain accessibility for all consumers. Are you seeing in the way you're selling? And I'm referring to the different price points at which you sell, this K-shaped reality is indeed appearing and that you have the highest demand growth at the 2 extremes of your offer. Thank you very much, indeed.

Luca, as usual, Johann here, very -- set of question -- but please don't think that had much to do with whatever the eventual outcome between [indiscernible] Washington news. The -- like you, I'm really concerned if I could put it like this, about the possible unintended consequences of the AI economy. We know that there will be winners but perhaps it's easier to spot the losers than the winners 5 years [ since ].

Now -- and the [ following ] out and polarization, I would say, especially in the United States, the biggest visible effect that I've seen is a hollowing out of the middle class. If you look at the malls and if you look at -- I hesitate to mention names of companies. But if you speak to mall owners, they will tell you that Cosco and Cartier are still doing very well. It's in the middle of that [ following ] out has occurred. And this was clearly reflected in the angle displayed by the voters in the last presidential election. There is a hollowing out of the middle class. That's more evident if you look at where they're spending their money. Clearly, I'm worried about this [ in 2015. ] Societies cannot live with that massive differential between rich and poor. The problem is that in the new economy, and it's before AI, it's a winner takes all economy. In the past, the bricklayer, [ lay 8 bricks ] [indiscernible] [ earned x ], but if you did [ 120 or 100, ] you were paid more, but the person who laid 20% less, still had an income. Today, if you write software, that's 20% less effective, you get 0. And especially when you have an economy and intellectual based -- intellectual property-based economy where you can increase production at 0 marginal cost, it's a winner takes all economy.

And if you look at, let's say, the top 10 companies in the United States and you look at the -- their percentage of capital allocated and how it's circular [ a month ] that 1 does get a problem that how [ constant created ] is this capital allocation and the wealth generation. I think I read somewhere that in videos created in the last year, 1.5 years, [indiscernible] the stock. Now good luck to do that. It does indicate that in 5 years' time, and if you start looking at the differential between winners and losers because of AI, I think we're going to have more polarization.

I suspect that we're going to have abundance. The real question is, how is that abundance shared? That will be the real question, any case.

Luca, Nicolas here to continue on your first question. We haven't seen so much movement and the variations of trends and sales linked to the timing of price increases. So there might be, to your point, some kind of global feeling that you might as well, particularly in the U.S. these days by before additional price increase or tariff impact materialize. It's clearly something that's in the air. But we didn't feel a massive impact of that. And over the last 6 to 9 months, we've had different price increases in the respective brands are different timings, but we haven't seen spikes or downs that we could see some time before that we used to see, as you know, for instance, in Japan, where a few years ago, if you are planning a price increase, you knew that the month before will be phenomenal and the month after will be really down. We didn't see any of that at that level in the U.S. So there is definitely that feeling, but I think it's not so important, and we feel that -- in a way, if I may, we have clients that -- and collectors that if they can afford, then they have a good reason to buy and they want to enjoy is the right moment. They don't know what the future is made of. So they say we might as well enjoy now and make that purchase because who knows how it's going to go. So this is pretty much what we hear. And so far, it's very much down to the desirability of the brands and the collections. Hence, the [ positive wealth ] or actual wealth of the buyers and the clients. Johann was discussing a bit earlier today with Burkhart. It's true that we see in a few countries, clients, collectors that are buying much more from their wealth and their assets or their positive wealth and the stock exchange does play a role, of course, into that more than by -- according to their income and the valuations of their income. And that's pretty much the case in the U.S. these days.

And Luca, I just want to add 1 thing. If it were a quarterly spike, we would probably come to a different conclusion, but this is 7 quarters in a row with double-digit growth. So this is probably reshooting a bit that argument.

Absolutely. Absolutely. I understand the point on American demand. That is very reassuring. Thank you, Burkhart and Nicolas. I also think, and thank you, Johann, for your explanations that artificial intelligence is proposing monumental questions to politics and society. So we'll see how that is taken care of. Thank you very much indeed. .

The next question comes from Patrik Schwendimann from Zürcher Kantonalbank.

Congrats for this outstanding numbers, and thank you, Johann, especially for your support for Switzerland. If the gold price stays where it is currently, how much more pressure on the gross margin do you expect for H2 and also for next year? And how much more price increases would you need? That's my first question.

And second question, again, on China. The Chinese luxury consumption has improved recently. How sustainable do you think is this? I mean, you've just seen this morning, real estate market is still down.

Patrik, I really don't want to speculate. So can't really and won't really answer that question. I mean, gold pressure, a gold price increase, we've seen it. Our Maisons have, I think, adjusted to it quite well in the first half, trying to find the right balance between limited price increases, efficiency gains, strong inventory management and strong cost management. And I think the way the mix has come out is quite favorable. And we will continue to apply that approach by our Maisons. And going into the numbers gain, how much would you need would reduce the quality of the mix in a way. I mean, it's not price increases to offset as a singular item, but we're working on many more items of the mix. And I can only confirm that this will be the policy and the approach going forward. But I would reframe with the high volatility that we have and the many moving pieces to -- and I know you have to feed your models, and I don't blame you for that at all, but it's a bit more complicated to actually run these businesses than just applying a simple model.

But just the recent [ price enrollment ], I would assume that the pressure is increasing, right? Because you have a time lag.

Well, we have a time lag, yes, that's the mechanics of it and price increases also have a time lag because, as you know, most of them were applied pre-summer, during summer and after summer. So a bit later in the first half than from April 1. So that also has a time lag or a stronger impact later in the year.

And Patrik, if I may add, Nicolas here to that. Impossible to predict the volatility of the gold price. As you know, one of the specificities of jewelry is that gold, which is for many people an investment [ vehicle ] for us is a working material. So it has always been the case, will always be the case. So we have to see the fluctuations of the gold price and that the impact on our cost of goods and our margins.

On the other hand, as we discussed before the desirability of gold and its investment value also, we believe, impact positively the attractiveness of jewelry. Of course, we prefer and we will welcome your support in advising clients to buy gold under the form of jewelry instead of under purely financial form because then they get the best of both worlds. But from that, we can only react afterwards.

As for China, we believe that -- first of all, we've seen a stabilization of our sales. Is it going to last time? We've seen the bottom of it. We never know and we cannot predict, but it seems to be stabilizing both Mainland China and in general, sales to Mainland Chinese whether domestic sales or touristic although we've seen some movements and, for instance, repatriation of sales from Japan to Hong Kong in the last quarter quite significantly. What we see is the strength of certain brands. It remains extremely, extremely important and that's the desirability of certain lines, certain collection and probably the most iconic, the most historic lines, the more attractive they are these days. We've seen that continue to strengthen. So we are very -- I wouldn't say optimistic, but yes, to some extent about China, it's a very, very sophisticated culture. Obviously, there is high purchasing power. It's impossible to predict how it's going to evolve quarter-by-quarter, but we continue to invest in our presence in China and the quality of our presence in the development of the visibility and desirability of our brands, retail network, exhibitions, activities, and we believe it's going to remain a very, very important market, although we're probably not going to see the type of growth. But obviously, we've seen during a few years before.

The next question comes from Atiyyah Vawda from Avior.

I have 2 questions. The first 1 is on the Specialist Watchmakers store network. I noticed that the number of stores have been reduced by 14 during the period. Can you give us a bit more color on what that related to?

And then the second comment is on the jewelry business. From a strategic perspective, how easy is it to launch maybe platinum versions of the product, for example, in the Love range or in the others from a manufacturing perspective, but also from the ability of the brand to actually have platinum versions of the current products.

Thank you very much. Maybe I will start with the second part, which is a bit more technical, and thank you for that. It's true that platinum that somehow decreased or more disappeared in the jewelry [ hydric ] category. A decade ago is becoming again a very interesting material to work with, but availability is still limited and the workability is very different from the gold. So for instance, you were talking about the gold bracelet or if I'm talking about certain other collections, there are a lot of motives that you can create in gold that are very, very difficult to create in platinum. It's much harder material to work, and it's also a much heavier material. So it's less [ adaptive ] to certain lines. But you're right, there is a thinking behind that and there are lines that are -- that always existing in [indiscernible] a bit less visible and that become quite interesting and attractive again. But it's not going to replace gold anytime in the future for sure. It's going to complement at most. And we see that also in the watch making, some beautiful opportunities for platinum versions of some [ iron ] watches.

Yes. Let me just circle back on the Specialist Watchmakers network now. Just a bit of context between internal, meaning directly operated stores and external stores, franchise stores at the Specialist Watchmakers. We're talking about a good 920 stores. So 14 is a slight downward adjustment, which is primarily that more than half is driven by some closures or adjustments on the franchise store network and some very few internal stores that we have closed. It's not in 1 market. There is a bit in China, but there's a bit outside of China as well. I'd say overall, it's pretty much what we do every year. We review the -- or the Maisons review their store network and adjust when they see the need. And this is not something very major that has happened here.

Next question comes from James Grzinic from Jefferies.

I just had 2 quick questions. The first one, Burkhart, you talked to reduce building inventory at the end of [ F1 ], if you compare it to last year, given that strong growth in jewelry sales in Q2. Can I just check that if demand were to grow strongly in the peak quarters as it did in half 1, your [ machine ] really could feed that demand? That's the first question.

And secondly, can you perhaps more generally talk to what the customer response has been to those meaningful Cartier price rises through mid-September. Any markets where there's been more resistance than others or vice versa?

James, Nicolas here. On the second question, we mentioned before that we haven't seen real significant trends around the price increases. So maybe a very, very case-by-case basis, some slight acceleration before the price increase [indiscernible]. But even on a monthly basis, it pretty much averages. So we didn't see any noticeable movement there.

On the inventory, let me kick off and then Nicolas will complement. Just look at -- let's look at the numbers. First of all, there's about a EUR 600 million increase in inventory. A good half of that, so a bit more than EUR 300 million is linked to either FX, meaning valuation or revaluation of inventories due to the higher input costs, notably gold. So that automatically revalues or increases the value of our inventory. The other half is increased inventory per se. And the split there is between the biggest part of that in really underlying inventory increases work in progress, meaning in the production or manufacturing process today and a smaller part is finished goods.

So this is really just the number and when you see the inventory coverage, it's gone from close to 20 months to about 18. So that's really the financial frame of it, so to say. You know that we have been investing over the last years in -- primarily in additional capacity for jewelry making. And you've seen as well in the first half of the year that a bigger part or a bigger share of the CapEx went, not just into distribution, but also into manufacturing. And that manufacturing was concentrated in the Jewellery Maisons. So we have been focusing over the last years already also because we've had shortage in lines to rebuild the inventory holdings to the right level and have had good success in it. But this is an ongoing process that we continue to complete.

Does that cover, Nicolas, do you have...

Very much so, then we would go more in detail, but it's very much the investment in production workshops that you will find for the Jewellery Maisons, at Cartier, Van Cleef & Arpels and Buccellati and also Vhernier and [indiscernible] recently. So we are definitely -- we are very -- we are being cautious. We don't want to build over capacity, obviously, but we want to make sure that we are ready for the future. And if trends continue to be positive, we can answer to them with limitations that will remain availability of craftmanship for handmade jewelry remains an issue, and then it's a very lengthy process that we tackle of identifying young talents, training them, being involved with the schools and so on, but this is more in a 3-, 5-, 8-year journey to train craftsman. But it's been an ongoing process for years and years. So we're quite confident that we will probably continue to see some scarcity and some shortage on some collections, but that's the nature of the activity. But all in all, our capacity to supply will follow the demand the way we look at it.

That's great. Thank you, Nicolas. So to paraphrase you, if top line turns out to be demand would support double-digit in [ big trade ], you'll be able to feed that basically giving you production capability now and notwithstanding inventory balance at the end of September. And I presume you are satisfied with price elasticity since those price rises that Cartier in September that will allow you to continue to, I think, use the fine balance of value, affordability, et cetera, et cetera?

James, are you trying to find out if you should buy now Christmas present or later?

I already had. So I'm...

Okay. So rest assured, that's fine.

The next question comes from Chris Wang from UBS.

Chris Wang from UBS. Congratulations on the results and I stick to 2 questions. My first one, sorry, Burkhart, just to come back on the commentary you made on September faster than the quarter. I assume that the group level comment. So could you perhaps please talk specifically about the Jewellery Maisons. As you [ had newness ] from Love Unlimited at the end of the quarter, and that should be quite mix accretive. So just wondering if you can touch on the cadence of Jewellery Maisons to help us think about the momentum ahead.

The other question I have is a clarification on pricing. Nicolas, you mentioned the pricing did in September. So thank you for that. But just to clarify, what's the incremental contribution from pricing in Q2, specifically versus Q1 for the division? I'm just trying to understand within that 6 percentage point sequential acceleration, how much of that actually came from pricing? Was it more of a low single digit or mid-single-digit contribution, please?

Chris, I'm not sure if we can be really helpful on these questions. They're very, very short-term oriented. I understand where you're coming from, but commenting on a single month. And then by -- with a high level of granularity by Maisons is not something that we recommend to do because it can lead to conclusions that do not reflect the reality of our business. Our business is always be it by year, be it by quarter, cyclical and has as much to do with the current trends as well as the comp base of the prior year. And this is the way I would leave it today. I would not endeavor to go further. Sorry for not being more helpful than that.

No worries, understood. Thank you.

We will now take the last question from Carole Madjo from Barclays.

Carole Madjo from Barclays. Two questions, please. The first one, can you share a bit more color on the state of the watch market? Do you feel like the market has fairly stabilized, I guess, mostly in China, and that the positive growth you are able to deliver in Q2 can be sustained? That's the first question.

And then number two, just to come back on communication costs, which was lower in H1. Are you still happy with the ratio of around 10% of sales for the full year, which is what you have been doing over the past few years? I know you talked about some phasing effect. So are there any particular events worth flagging that you will do in H2 to push top line as again, you will be [ facing tough accounts ]

Nicolas here on the watch market. I mean, we would love to be able to predict how that market is going to evolve. What we've seen definitely in the recent period is a stabilization for most of our Maisons. They come from very, very different situations, the respective weight of the geographies, for instance, some of the [indiscernible] extremely successful in Asia and in China in the past. And of course, the slowdown in China did hurt them more than the ones that are more of an American or European footprint. So we see, all the Maisons pretty much coming back to a more healthy and better balanced situation.

As I mentioned before, also very much refocusing and focusing on their core collection, core identities and delivering a strong and clear message to the -- their collectors and their stakeholders. So we are seeing some positive impact of all this. How it's going to evolve in the future is difficult to predict. We see for sure more and more differentiated watch market, where it's much more difficult to see a global trend even at the scale or at the level of 1 country or 1 price category. And if you see, for instance, the success of Cartier watches in the past period, be it in sales or even in attractiveness and buzz around the Cartier collection, it's extremely high and shows also an evolution or a kind of coming back in terms of taste towards smaller shaped watches that had been disappeared for period. So we very much have individual and singular trend Maisons by Maisons. And we try to very much follow them on a very granular level. Difficult to say how it's going to evolve. For sure, what we see and we see that also through the activities of [ Watchfinder ], which is the secondhand watch business that we own.

[indiscernible]

[indiscernible] sorry, Mr. [indiscernible]. We see for sure that the speculative [ bubble ] on watches that followed the COVID period has burst and is gone now and we are back to a much more, let's say, rationale and a bit more predictable consumer behavior when it comes to whether [ prelove ] or first love watches.

If I may just make a final observation. These successes at for instant Cartier, it's not turn on turn off. It takes years to develop. And I really would like to pay homage to not only, obviously, Louis, but [indiscernible] what they have prepared and what you are witnessing is really the power of Cartier. There are only so many Maisons in the world that have the power and the reach and the influence and the trust of consumers across all continents that if they have good products, these products sell and sell [indiscernible]. So I mean, this comes from [indiscernible]. Cartier is a [ machine ]. And you are seeing the results of decades of work, really decades. And I'd like to pay homage to all of those people. That's why when you have something very, very good, like the new Love range, it can [indiscernible]

Thank you very much. This will now conclude the call. Please do not hesitate, of course, if you have any further questions, and talk to you soon. Thank you.

Thank you very much. .

Thank you.