Q3 2025 Hermes International SCA Earnings Call

Operator: Mesdames et messieurs, bienvenue à la conférence.

Speaker #2: Ladies and gentlemen , welcome to the Q3 Analyst Conference for HERMES INTERNATIONAL . I now yield the floor to Eric dilute , CFO and Antoine Ryu , head of Investor relations .

Eric du Halgouet: Ladies and gentlemen, welcome to the Q3 Analyst Conference for Hermès International. I now yield the floor to Eric du Halgouet, Chief Financial Officer, and Antoine Riou, Head of Investor Relations. Gentlemen, over to you. Thank you very much. Good morning, one and all. Thank you very much for joining us. In the third quarter, sales continued to grow and reached €3.9 billion, up 10% at constant exchange rates, a slight improvement compared to Q2, particularly in Europe, Americas, and Asia. Hermès kept the course, thanks to solid growth in spite of a high comparison basis. Indeed, Q3 sales last year were slightly above that of Q2. The group's consolidated revenue amounted to €11.9 billion at the end of September 2025, up 9% at constant exchange rates and 6% at current exchange rates. Currency fluctuations represented a negative impact of €254 million on revenue.

Speaker #2: Gentlemen , over to you . Thank you very much . Good morning . One and all . Thank you very much for joining us in the third quarter .

Speaker #2: Sales continued to grow and reached €3.9 billion, up 10% at constant exchange rates. There was a slight improvement compared to Q2, particularly in Europe, the Americas, and Asia.

Speaker #2: Hermès kept the course thanks to solid growth, in spite of a high comparison basis. Indeed, Q3 sales last year were slightly above those of Q2.

Speaker #2: The group's consolidated revenue amounted to €11.9 billion at the end of September 2025, up 9% at constant exchange rates and 6% at current exchange rates.

Speaker #2: Currency fluctuations represented a negative impact of $254 million on revenue at the end of September 2025. The Leather Goods and Saddlery, along with the other Hermès sectors, achieved solid growth.

Eric du Halgouet: At the end of September 2025, the leather goods and saddlery and the other Hermès sectors achieved solid growth. The ready-to-wear, accessories, and silk and textiles sectors accelerated in Q3. Hermès is maintaining its course, thanks to solid growth, thanks to our investments, and thanks to our creation of jobs to support our growth. For 2025, our outlook remains unchanged. The group confirmed its ambitious growth target for revenue at constant exchange rates and continues to grow with confidence. Over to Antoine for the geographical and mid-year breakdown. Good morning, one and all. Moving to the geographical breakdown, and the evolutions will be given at constant exchange rates. As Eric mentioned, at the end of September 2025, all the regions posted growth. First of all, Asia, excluding Japan, is at plus 4%.

Speaker #2: The ready to wear accessories and silk and textile sectors accelerated in Q3 . Hermes is maintaining its course thanks to solid growth , thanks to our investment , thanks to our creation of jobs , to support our growth for 2025 , our outlook remains unchanged .

Speaker #2: The group confirmed its ambitious growth target for revenue at constant exchange rates and continues to grow with confidence. Over to Antoine for the geographical and mid-year breakdowns.

Speaker #2: Good morning one and all . Moving to the geographical breakdown and the evolutions will be given at constant exchange rate . As Eric mentioned at the end of September 2025 , all the regions posted growth .

Speaker #2: First of all , Asia , excluding excluding Japan is at plus 4% . With strong growth in Greater China in the third quarter , the region benefited from the House's value strategy .

Eric du Halgouet: With strong growth in Greater China in the third quarter, the region benefited from the House's value strategy, the loyalty of local clients, and the qualitative development of the network. The renovated and expanded store at the Central Embassy Mall in Bangkok reopened in January, followed by the Taichung store in Taiwan at the end of March. In June, the renovated and expanded Four Seasons store in Macau reopened its doors, followed by the Galleria Mall store in Seoul in August. Japan, plus 15% after a solid Q3, maintained sustained growth driven by the loyalty of local clients. Americas, plus 13%. Still a strong momentum with a slight acceleration in Q3, thanks to the U.S. The new Scottsdale store in Arizona opened in September, and then we had Nashville in Tennessee last week. In Mexico, the Molier store reopened in early October after renovation and expansion work.

Speaker #2: The loyalty of local clients and the qualitative development of the network. The renovated and expanded store at the central Embassy Mall in Bangkok reopened in January, followed by the Taichung store in Taiwan at the end of March.

Speaker #2: In June, the renovated and expanded Four Seasons store in Macau reopened its doors, followed by the Galleria mall store in Seoul.

Speaker #2: In August, Japan reported a 15% increase after a solid Q3, maintaining sustained growth driven by the loyalty of local clients. The Americas saw a 13% increase, with strong momentum and a slight acceleration in Q3 thanks to the US. The new Scottsdale store in Arizona opened in September, and last week we had the Nashville store in Tennessee open. In Mexico, the Mollier store reopened in early October after renovation and expansion work.

Speaker #2: Europe, led by France, is at +12%, showing solid growth across all the countries in the region. France itself is at +9%. We are still experiencing strong activity in all the stores in Italy.

Eric du Halgouet: Europe, bar France, is at plus 12%, so solid growth there in all the countries of the region. France, plus 9%, with still strong activity in all the stores. In Italy, the Florence store reopened in February after renovation and expansion work. The other area, plus 15%, which mainly includes the Middle East, pursues its momentum. Moving on now to the mid-year or the division breakdown at constant exchange rate. Leather goods and saddlery post great performance with plus 13% in line with its annual trajectory, supported by strong demand for iconic products and new collections. The new equestrian-inspired models, WSLE and BKS13, as well as the return of the iconic Plume, are enjoying great success. The increase in production capacities continues with the opening of the 24th leather goods workshop in L’Isle d’Espagnac in the Charente region in September.

Speaker #2: The Florence store reopened in February after renovation and expansion work . The other area , plus 15% , which mainly includes the Middle East , pursues its momentum .

Speaker #2: Moving on now to the mid-year or the division breakdown at constant exchange rates. Leather goods and saddlery posted great performance with a plus 13%, in line with its annual trajectory upward, supported by strong demand for iconic products and new collections.

Speaker #2: The new equestrian inspired models and bikers trotting , as well as the return of the iconic plume , are enjoying great success . The increase in production capacities continues with the opening of the 24th Leather Goods Workshop in Lille , D'espagnac in the region in September .

Speaker #2: Over the next three years, three additional leather goods workshops will open: Loup in 2026, Charleville-Mézières in 2027, and Colombel in 2028.

Eric du Halgouet: Over the next three years, three additional leather goods workshops will open: Louviers in 2026, Charleville-Mézières in 2027, and Riom in 2028. They will be reinforcing the 10 centers of expertise located across the national territory. The ready-to-wear and accessories sector posts strong growth at plus 6%, continues on its strong momentum with a speed up in Q3. The men's Spring-Summer 2026 show held at the Palais d'Iéna was very well received, in September, we presented the Autumn-Winter 2025 collection. The women's Spring-Summer 2026 collection was successfully unveiled in early October at the Garde Républicaine. Silk and textiles, plus 4%, good growth supported by bold creations, exceptional materials, and diversity of formats. Perfume and beauty is at minus 5%. It's impacted by a high comparison base due to last year's launch of Barignat.

Speaker #2: There will be reinforcing the ten centers of expertise located across the national territory. The ready-to-wear and accessories sector posts a strong growth at +6% and continues on its strong momentum, with a speed up in Q3.

Speaker #2: The men's spring Summer 2026 show , held at the Palladiana was very well received , and in September we presented the Autumn Winter 2025 collection and the Women's Spring Summer 2026 collection was successfully unveiled in early October at the Garde Républicaine silk and Textiles Plus 4% could growth , supported by Bold Creations , exceptional materials and diversity of formats .

Speaker #2: Perfume and beauty is at minus 5 percent. It's impacted by a high comparison base due to last year's launch of The Barina. The perfume collections have been enhanced with two new eau de parfum introduced this year, D'Hermès and Barena.

Eric du Halgouet: The perfume collections have enhanced with two new eau de parfum entrants this year, Terre d’Hermès and Barignat. In a challenging environment, the watches' métier continues its development with the success of the new versions of the Hermès HR8 line and the reinterpretation of its iconic complication, Le Temps Suspendu. In July, Hermès also announced plans to strengthen its production capacities with the expansion of its Noirmont watchmaking site by 2028. The other Hermès sectors, jewelry and home universe, continue to deliver strong growth at plus 11%. The eight for haute bijouterie collection, Les Formes de la Couleur, were presented in July in Tokyo, and at the end of May, Hermès also announced the first stone being laid down for the new Cousé workshop dedicated to tableware. Thank you very much, and now we're happy to take your questions.

Speaker #2: In a challenging environment, the watch is mid-tier and continues its development with the success of the new versions of the Hermès line and the reinterpretation of its iconic complication, Le Temps Suspendu.

Speaker #2: In July, Hermès also announced plans to strengthen its production capacities with the expansion of its normal watchmaking site. By 2028, the other Hermès sectors, such as jewelry and the home universe, continue to deliver strong growth at plus 11%.

Speaker #2: The aid for the Bijouterie collection was presented in July in Tokyo, and at the end of May, Hermès also announced the first stone being laid down for the new corset workshop dedicated to tableware.

Speaker #2: Thank you very much. And now we're happy to take your questions. Ladies and gentlemen, you can now ask your questions by pressing the star key and then one on your phone.

Eric du Halgouet: Ladies and gentlemen, you can now ask your questions by pressing the star key and then one on your phone. Please, no more than two questions at a time. We have Charles-Louis Coty from Kepler Cheuvreux. Over to you.

Speaker #2: Please , no more than two questions at a time . We have Charles-Louis Coty from Kepler cheuvreux . Over to you . Good morning .

Speaker #2: Thank you . I've got two questions . First of all , could you give us a update on trading and an outlook on the Q4 ?

[Analyst]: Good morning. Thank you. I've got two questions. First of all, could you give us an update on trading and an outlook on Q4 because the organic revenue has increased by €350 million in line with Q2? Do you think that you can keep that pace in spite of a comparison basis which will be more complicated for Q4? Could you tell us a bit more about your confidence going forward, especially for Greater China? On the leather goods growth, it has slowed down, although it's still in keeping with annual targets. Have you built up any stocks in Q3 to support growth in Q4 where the comparison basis will be particularly tough for leather goods?

Speaker #2: Because the organic revenue has increased by €350 million , in line with Q2 . Do you think that you can keep that pace in spite of a comparison basis , which would be more complicated for Q4 ?

Speaker #2: Could you tell us a bit more about your your confidence going forward , especially for Greater China ? And then on the leather goods growth , it has slowed down , although it's still in keeping with annual targets .

Speaker #2: Have you built up any stocks in Q3 to support growth in Q4? Where the comparison basis will be particularly tough for leather goods?

Speaker #2: Well , thank you very much , Charles-Louis . Well , look , as you say , Q4 will be a higher comparison basis .

Eric du Halgouet: Thank you very much, Charles-Louis. As you say, Q4 will be a higher comparison basis. We're at something like $200 million more than in Q3. The trends at early October mean that we are confident in spite of this comparison basis. Yeah, we're confident across all the regions. Leather goods at +13%, that's in keeping with our annual target. I'll also recall that our deliveries are not linear for our different stores, so it's really delivery effects. Our stocks have been rebuilt and will be at a similar level to that same time last year to prepare for the end of the year and for the Chinese New Year. Next question from Anne-Laure Bismuth from HSBC.

Speaker #2: We are . Yeah . Something like a 200 million more than in Q3 . The trends at early October means that we are confident , confident in spite of this comparison basis .

Speaker #2: Yeah , we're confident across all the regions . Leather goods at plus 13% . That's in keeping with our annual target . And I'll also recall that our deliveries is not linear for our different stores .

Speaker #2: So it's really delivery effects. Our stocks have been rebuilt and will be at a similar level to that same time last year to prepare for the end of the year and for the Chinese New Year.

Speaker #2: Next question from Angela Bismuth from HSBC . Well , good morning . Two questions on my side . First of all , on the specifics , Baja Japan .

[Analyst]: Oui, bonjour. Je me présente, je suis à deux questions.

Eric du Halgouet: Good morning. Two questions on my side. First of all, on the specifics bar Japan, we've seen a slight increase in the %. Is that down to China mainly? How do you explain this slight improvement when some of your peers have seen a better improvement in Q3? Is there still less footfall in the stores in China? Second question, have you completed your price increases for next year and can you tell us more on that? For Asia-Pacific, for South Asia, we have seen a speed up in growth. We're looking at double-digit growth in Malaysia, Korea, Australia, and similar growth between Q3, Q4 for Singapore and Thailand. For Greater China now, I'd just like to remind you that we grew over the whole year in 2024, and there again this year we are posting growth since the beginning of the year up until the end of September.

Speaker #2: We've seen a slight increase in the percentage . Is that down to China ? Mainly . And how do you explain this ? This slight improvement when some of your peers have seen a better improvement in Q3 ?

Speaker #2: Is there still a less footfall in the stores in China ? And second question , have you completed completed your price increases for next year ?

Speaker #2: And can you tell us more on that ? Okay . So for Asia Pacific for . For South Asia , we have seen a speed up in growth .

Speaker #2: We're looking at double digit growth in Malaysia , Korea , Australia and similar growth between Q3 , Q4 for Singapore and Thailand , for Greater China .

Speaker #2: Now, I just like to remind you that we grew over the whole year in 2024, and again this year, we are posting growth since the beginning of the year up until the end of September.

Speaker #2: So there will be no huge changes in that trend. We continue with our value strategy. There is a slight improvement in Q3 this year compared to Q2.

Eric du Halgouet: There'll be no huge changes in that trend. We continue with our value strategy. There is a slight improvement in Q3 this year compared to Q2. There are two encouraging signs which make us optimistic from a macroeconomic point of view. First of all, there is more stability in real estate in tier-one cities in China, so that's a positive signal. Secondly, we have another reason to be optimistic. It's the pickup of the financial markets in continental China and Hong Kong, which is also a good sign. For the first week of October, which was the golden week in continental China, we saw quite strong and dynamic business. We can't extrapolate this for the whole quarter, but nonetheless, it is encouraging. Regarding now, Anne-Laure, your second question on price increases, we have our budget process which is underway, so it's too early to give you any indication on that.

Speaker #2: There are two encouraging signs that make us optimistic from a macroeconomic point of view. First of all, there is more stability in real estate in tier one cities in China.

Speaker #2: So that's a positive signal . And secondly , we have another reason to be optimistic . It's the pickup of the financial markets in continental China .

Speaker #2: And Hong Kong , which is also a good sign . And for the first week of October , which was the golden week in continental China , we saw quite strong and dynamic business .

Speaker #2: We can't extrapolate this for the whole quarter , but nonetheless , it is a encouraging . Regarding now on your second question , on price increases , we have our budget process , which is underway .

Speaker #2: So, it's too early to give you any indication on that. I can only tell you that it will be below the price increase of this year.

Eric du Halgouet: I can only tell you that it will be below the price increase of this year. That's the only indication I can tell you right now, but the budget is still under discussion. Next question, Luca Solca from Bernstein.

Speaker #2: That's the only indication I can tell you right now, but the budget is still under discussion. Next question, Luca Solca from Bernstein.

Speaker #2: Good morning. Good morning, Antoine. Thank you for taking my question. My question is on the demand trends for the different segments of your client base.

[Analyst]: Yes, hello Eric, hello Antoine.

Eric du Halgouet: Good morning Eric, good morning Antoine. Thank you for taking my question. My question is on the demand trends for the different segments of your client base. You can see that the most affluent part of your client base is very dynamic at the moment. I was wondering if this is a trend that will continue in the future. Is it going to also drive demand in China? It seems that wealthy and affluent people are also going to be a key driver there. Could you give us a little bit more detail on the demand dynamics that you currently see in the U.S.? Is it a demand that is very broad, that encompasses the whole customer base, or is it driven by the more wealthy individuals, given the cryptocurrency market trends at the moment?

Speaker #2: You can see that the most affluent parts of your client base are very dynamic at the moment. I was wondering if this is a trend that will continue in the future.

Speaker #2: Is it going to also drive demand in China? It seems that wealthy and affluent people are also going to be a key driver.

Speaker #2: There. And then can you give us a little bit more detail on the demand dynamics that you currently see in the U.S.?

Speaker #2: Is it a demand that is very broad, encompassing the whole customer base, or is it driven by the more wealthy individuals, given the cryptocurrency market trends at the moment?

Speaker #2: Well , first of all , for our Chinese client base , outside of Greater China , we haven't seen a speed up , particularly for wealthy individuals .

Eric du Halgouet: First of all, for our Chinese client base, outside of Greater China, we haven't seen a speed up, particularly for wealthy individuals. The two client bases that we believe are more important, the most important in Europe and France, it's people from the U.S. and the Middle East who travel over. We saw it in Q3, a slight uptick when the events between Israel and Qatar, when the tensions were at its highest. We have gone back to normal levels since then. As you've seen, silk, which is a volume-driven division, and clothing and fashion accessories, that has sped up a little bit. We've seen these divisions benefit from a slightly higher footfall, including in the U.S. Now, Luca, your second question. We had very good Q3 in the U.S.

Speaker #2: So the two client bases that we believe are more important , the most important in Europe and France , it's people from the US and the Middle East who travel over , and we saw it in Q3 a slight uptick when the events between Israel and Qatar were were the probably the tensions were at its highest .

Speaker #2: But yeah , we've gone back to normal levels since then . Now , as you've seen , silk , which is a volume driven division and clothing and fashion accessories that has sped up a little bit .

Speaker #2: And we've seen these divisions benefit from a slightly higher footfall , including in the US . And now , Luca , your second question .

Speaker #2: We had a very good Q3 in the U.S. growth that was driven by jewelry, silk shoes, and watches, by pretty much all of the divisions.

Eric du Halgouet: Growth that was driven by jewelry, silk, shoes, watches, by pretty much all of the divisions, an increase in footfall, and also a growth that is well distributed between the East and the West Coast. Over and beyond the U.S., Mexico and Brazil also have sped up their growth. Also a reminder, the U.S. is a country where we'll be focusing our development. In October, we opened a store in Nashville, Tennessee. We are going to continue to focus the development of our network in the U.S. Thank you, Eric.

Speaker #2: An increase in footfall and also growth . That is well distributed between the East and the West coast over and beyond the US , Mexico and Brazil also have sped up their growth and also a reminder , the US is a country where it will be focusing our development and in October we opened a store in Nashville , Tennessee , and so we're going to continue to focus the development of our network in the US .

Speaker #2: Thank you . Eric . Next question . Thomas Chauvet from Citi . Good morning , Eric , and Antoine . Two questions . Question number one on ready to wear and accessories .

[Analyst]: The next question comes from Mr. Thomas.

Eric du Halgouet: Next question, Thomas Chauvet from Citi.

[Analyst]: Bonjour Eric, bonjour Antoine.

Eric du Halgouet: Good morning Eric and Antoine. Two questions. Question number one on ready-to-wear and accessories. Grace Wells-Bono was appointed yesterday to follow up from her predecessor. A lot has been said, but is it going to mean a more modern, more casual look to the men's ready-to-wear collection? How much does the menswear weigh in the total revenue? Second question on perfume and beauty, which was at about 3% of the revenue. It's about €500 million over the whole year. This is a business which is more and more strategic for other players in the luxury industry. What is the weight of makeup five years after its launch? Are you thinking about launching a new line of care products? Are you happy with the profitability of this venture into makeup? Tell us more about the vertical integration for perfumes.

Speaker #2: Grace Wales Bonner was appointed yesterday to follow up from her predecessor . A lot has been said , but is it going to mean a more modern , more casual look to the men's ready to wear collection and how much does the menswear way in the total revenue ?

Speaker #2: And second question on perfume and beauty, which was at about 3% of the revenue. It's about what, €500 million over the whole year?

Speaker #2: This is a business that is becoming more and more strategic for other players in the luxury industry. What is the weight of makeup?

Speaker #2: Five years after its launch, are you thinking about launching a new line of care products? Are you happy with the profitability of this venture into makeup?

Speaker #2: And tell us a bit more about the vertical integration for perfumes. Regarding the appointment of Grace, it really is in keeping with our desire to continue on the momentum.

Eric du Halgouet: Regarding the appointment of Grace, it really is in keeping with our desire to continue on the momentum. I think that Grace has got a lot of things in common with Véronique Nichanian, her love of craftsmanship, for example, and her very contemporary outlook on fashion. She'll be bringing her own signature to a new chapter for men's ready-to-wear, and her first collection will be presented in January 2027. Regarding perfumes now, as you've seen, a slight decrease in Q3. In the press release, we said that it was down to the high comparison point with the launch of Barignat in Q3 and Q4 last year. There's also a new Hermès that was launched and a new chapter for Loubin, which opened last year. Some of our distributors also had to reduce their stocks in Europe and in the U.S.

Speaker #2: I think that Grace has got a lot of things in common with Veronique Nichanian , her love of craftsmanship , for example , and her very contemporary outlook on fashion .

Speaker #2: So she'll be bringing her own signature to a new chapter for men's ready to wear . And her first collection will be presented in January 2027 .

Speaker #2: Regarding perfumes , now , so as you've seen , a slight decrease in Q3 now in the press release , we said that it was down to the high comparison point with the launch of Barena in Q3 and Q4 last year , and there's also a new Hermes that was launched and the new chapter for Le Bon , which opened last year and some of our distributors also had to reduce their stocks in Europe and in the US .

Speaker #2: So there's a correlation between our delivery and the end sales to customers, and the end sales continue to increase in France, Germany, Italy, etc.

Eric du Halgouet: There's a deceleration between our delivery and the end sales to customers. The end sales continue to increase in France, Germany, Italy, etc. The takeaway here is that our pillars, Barignat and Terre d’Hermès, continue to grow. For your final point on care products, this is a project that we're still working on, but for 2028 onwards. Next question from Mr. Antoine Belge from BNP Paribas Exane.

Speaker #2: The takeaway here is that our pillar's Barena and continue to grow. And then for your final point on care products, this is a project that we're still working on.

Speaker #2: But for 2028 onwards . Next question from Mr. Antoine Belgi from BNP Paribas Exane . Good morning . Eric . Good morning Antoine .

[Analyst]: Oui, bonjour.

Eric du Halgouet: Good morning Eric, good morning Antoine.

Speaker #2: Two questions on my side . First of all , for a clothing and accessories , a category that is , well , a two pronged categories with different dynamics .

[Analyst]: Deux questions d'abord.

Eric du Halgouet: Two questions on my side. First of all, for clothing and accessories, it's a category that is, well, a two-pronged category with different dynamics. You mentioned at Q2 that some accessories, like belts, for example, were bought by tourists, and that because there was less tourism, it explained the job. Could you tell us a bit more detail on Q3 for clothes on one side and accessories on the other? Second question now on your operational margin rate for this year. Do you think that you'll be around 40% or above? Is that still achievable? You talked about the negative exchange rate on the revenue for Q3. I imagine it'll be the same for Q4. Generally, when you're impacted on the revenue in 2025, you'll be maybe also impacted going forward. If you could tell us more on that.

Speaker #2: You mentioned the Q2 that some accessories , like belts , for example , were bought by a tourists , and that because there was less tourism , it explained the job .

Speaker #2: So could you tell us a bit more detail on Q3 for clothes on one side and accessories on the other? Second question now on your operational margin rate for this year, do you think that you'll be around 40% or above?

Speaker #2: Is that still achievable? You talked about the negative exchange rate on the revenue for Q3. I imagine it'll be the same for Q4.

Speaker #2: Generally , when you're impacted on the revenue in 2025 , you'll be maybe also impacted going forward . So if you could tell us more on that , and then the third question , there was some controversy on Q2 and on some sales in Russia .

Eric du Halgouet: Then the third question, there was some controversy on Cucinelli and on some sales in Russia. Could you maybe tell us what you do or don't do in Russia and with the Russian client base? Now, clothes and accessories, indeed, covers men's ready-to-wear, women's ready-to-wear, and fashion accessories. Growth is driven by ready-to-wear for both men and women. For the rest, it's a bit more complicated for fashion accessories. It's a division that is very much about volume. Now, regarding our operational margin, I'd just like to remind you, and you've seen it over the years, the profitability in Q2 is always lower to Q1, simply because we speed up our investments during the year. This year, we've got an exchange rate impact, which is quite homogenous, but we have also made some gains on our hedging, but there's been the depreciation of euro.

Speaker #2: So could you maybe tell us what you do or don't do in Russia ? And with the Russian client base ? Now close and accessories indeed covers men's ready to wear , women's ready to wear and fashion accessories .

Speaker #2: Growth is driven by ready to wear for both men and women . And for the rest , it's a bit more complicated for fashion accessories .

Speaker #2: It's a division that is very much about volume . Now , regarding our operational margin , I'd just like to remind you , and you've seen it over the years , the profitability in Q2 is always lower to Q1 simply because we speed up our investments during the year .

Speaker #2: This year , we've got a exchange rate impact , which is quite homogenous , but we have . Also made some gains on our hedging .

Speaker #2: But there's been the depreciation of euro . We're going to speed up also our communication investments in Q2 . And for recruitment . We're also very conservative at the beginning of the year .

Eric du Halgouet: We're going to speed up also our communication investments in Q2. For recruitment, we're also very conservative at the beginning of the year. We always wait for the general trend to crystallize before we can start recruiting. Recruiting will also be a bit faster from now on. That's the different elements to bear in mind. They're two elements that are there to support the growth of the group. Just a final point on our IS, our information system. We invest for the future, although it's booked as an expenditure, but we are preparing for the future as well. Regarding sales in Russia, we are one of the first groups to have pulled out of Russia and closed our stores after the beginning of the war. All of our stores are closed since the war started.

Speaker #2: We always wait for the general trend to crystallize before we can start recruiting. So, yeah, recruiting would also be a bit faster from now on.

Speaker #2: So, yeah, that's the different elements to bear in mind. The elements that are there to support the growth of the group.

Speaker #2: And then just a final point on our is our information system . We invest for the future , although it's book booked as an expenditure .

Speaker #2: But yeah , we are preparing for the future as well . Regarding sales in Russia . Well , we're one of the first groups to have pulled out of Russia and closed our stores after the beginning of the war .

Speaker #2: All of our stores have been closed since the war started. We had kept the stores, but we are now exiting the leases so that we only keep one store in Saltykov.

Eric du Halgouet: We'd kept the stores, but we're now exiting the leases so that we only keep one store in Stoleshnikov, just to host the couple of people who are in charge of legal obligations and maintenance. We have no business in Russia anymore. Thank you. Ladies and gentlemen, you can ask your questions by dialing star one on your phone. Please keep to two questions. Next question from Édouard Aubin from Morgan Stanley.

Speaker #2: Host: The couple of people who are in charge of legal obligations and maintenance. But we have no business in Russia anymore.

Speaker #2: Thank you, ladies and gentlemen. You can ask your questions by dialing Star 1 on your phone. Please keep to two questions.

Speaker #2: Next question from Édouard Orban from Morgan Stanley.

Speaker #3: Bonjour .

[Analyst]: Yes, hello Eric and Antoine.

Speaker #2: Good morning, Eric and Antoine. I have two questions regarding the store openings. Eric, we've seen the trends over the last two years.

Eric du Halgouet: Good morning Eric and Antoine. Two questions. For the store openings, Eric, we've seen the trends over the last two years. The total number of stores is pretty much the same or even a tiny bit lower, but with a bigger average size for the stores. In 2025 and 2026, are we going to be seeing the same trend? Could you maybe tell us an even vague idea of the percentage increase in square meters? Secondly, I imagine that for leather goods, you're looking at capacity over the next few years. In light of that, the 6 to 7% growth that you've enjoyed over the last few years in leather goods, is it going to be the same for 2026, 2027? Do you think that you keep that rhythm of plus 6, plus 7% over the next two years? Thank you.

Speaker #2: The total number of stores is pretty much the same, or even a tiny bit lower, but with a bigger average size for the stores.

Speaker #2: In 2025 and 2026, are we going to be seeing the same trend? And could you maybe tell us an even vague idea of the percentage increase in square meters?

Speaker #2: Secondly , I imagine that for Leathergoods , you're looking at capacity over the next few years , and in light of that , the 6 to 7% growth that you've enjoyed over the last few years in leather goods , is it going to be the same for 2026 , 2027 ?

Speaker #2: So do you think that you keep that rhythm of plastics plus 7% over the next two years ? Thank you . Okay , so regarding the development of the network , Édouard , you've summed up very nicely the strategy of the group .

Eric du Halgouet: Okay, regarding the development of the network, Édouard, you've summed up very nicely the strategy of the group. We move to larger stores, stores that are generally more than 500 square meters. For 2026, we have two large projects which are going to be completed. First of all, we've got the renovation and the extension of the Geneva store, which is a temporary store at the moment. There's another big project where we'll be opening Bond Street in London. It's a very big project, and it'll be a very original store, and it'll open around the summer, a bit before. We have also a store that will be opening in China, a market that we invest quite a lot on, and in the U.S. This year and next year, we always have three to four openings of stores and about 15 projects of renovation and expansion.

Speaker #2: Group, we are moving to larger stores, stores that are generally more than 500 m². Now for 2026, we have two large projects that are going to be completed.

Speaker #2: First of all, we've got the renovation and the extension of the Geneva store, which is a temporary store at the moment.

Speaker #2: And then there's another big project where we'll be opening Bond Street in London. It's a very big project, and it'll be a very original store.

Speaker #2: And it will open around the summer, a bit before then. We also have a store that will be opening in China, a market that we invest quite a lot in, as well as in the U.S.

Speaker #2: But this year and next year, we always have 3 to 4 openings of stores and about 15 projects of renovation and expansion.

Speaker #2: Regarding leather goods capacity, we anticipate an increase of 6% to 7%. We are on track to meet this goal for next year with the opening of a new leather workshop, as well as the extension of some older sites that have reached maximum capacity.

Eric du Halgouet: Regarding leather goods capacity at plus 6, plus 7%, we are going to be in line with that for next year with the opening of a new leather workshop, but also with the extension of some older sites that have reached maximum capacity. We keep to our rule of having sites with 300 people maximum, 250 of which are craftspeople. In 2026, we're going to continue with our capacity increase around plus 6, plus 7%. Next question from David Demaille from CIC. Good morning, gentlemen. A quick follow-up question on China. You mentioned a slight improvement in Q3, and I'd like to know whether that is attributable to an increase in footfall, as you highlighted for the U.S., for instance, or is it your value strategy that is paying dividends in China? It's not so much down to footfall or value strategy. Actually, it's a little bit of both.

Speaker #2: But we keep to our rule of having sites with 300 people, a maximum of 250 of which are craftspeople. So, yeah, in 2026 we're going to continue with our capacity increase of around plus 6% to plus 7%.

Speaker #2: Next question from David from CIC . Good morning gentlemen . A quick follow up question on China . You mentioned a slight improvement in Q3 , and I'd like to know whether that is attributable to an increase in footfall .

Speaker #2: As you highlighted for the US , for instance , or is it your value strategy that is paying dividends in in China ? It's not so much down to footfall or value strategy .

Speaker #2: Well, actually, it's a little bit of both. There is a slight increase in footfall, and our value strategy is also paying dividends.

Eric du Halgouet: There is a slight increase in footfall, and our value strategy is also paying dividends. Our value strategy aims at selling products of higher value. For jewelry, for example, we sell larger items. Likewise, for watches, we sell more items with complications. It is the combination of both, which explains this improvement, which speaks to this good improvement in early October. You need to, of course, remain humble and conservative. There are some positive signals in China with the financial markets that are recovering, and also the real estate in tier-one cities in China, which is stabilizing. We have no further questions for the moment, it would seem. In that case, we'll be closing this conference. Do not hesitate if you have further questions. Thank you very much, and see you soon. Ladies and gentlemen, the conference is now over. Thank you very much for taking part.

Speaker #2: Our value strategy aims at selling products of high value . So for jewelry , for example . We sell a larger items . Likewise also for watches we sell more more items with complications .

Speaker #2: So it's the combination of both which explains this improvement which speaks to this good improvement . In early October . But you need to , you know , of course , remain humble and conservative .

Speaker #2: But there are some positive signals in China with the financial markets that is recovering and also the real estate in tier one cities in China , which is stabilizing .

Speaker #2: We have no further questions for the moment , it would seem . Well , in that case , will be a closing . This conference .

Speaker #2: Do not hesitate if you have further questions . Thank you very much . And see you soon . Ladies and gentlemen . The conference is now over .

Eric du Halgouet: You can now sign out. Thank you very much.