LVMH Moet Hennessy Louis Vuitton SE

PAR:MC

Earnings Call Transcript 2019-Q1

[Operator]

Ladies and gentlemen, welcome to the LVMH 2019 First Quarter Revenue Conference Call. I will now hand over to Mr. Chris Hollis. Sir, please go ahead.

[Chris Hollis, Director of Financial Communications]

Thank you. Hello. I'm Chris Hollis, Director of Financial Communications at LVMH. With me is Jean-Jacques Guiony, our Chief Financial Officer. Thank you for joining us. We have some remarks to make about LVMH's revenue for the first quarter of 2019. As in previous periods, these revenue figures are reported in accordance with the IFRS. And after these remarks, Jean-Jacques and I will be happy to answer your questions.But before I begin, I must remind you that certain information to be discussed on today's call is forward-looking and is subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the safe harbor statements included in our press release and on Slide 2 of our presentation, which is on the website.Turning now to our announcement. I hope that you've all had a chance to read our release, which was issued yesterday in both French and English. As always, the release is available on the website, www.lvmh.com, as are our slides that we are using to guide today's call.Turning to Slide 3 of that presentation. Performance in the third quarter reflected a strong start to 2019 as we continue to deliver double-digit organic growth. All business groups and regions contributed to our organic growth, which is further boosted by a positive currency effect. We saw strong momentum across the board with Wines & Spirits delivering good performance, continued very positive trends at Louis Vuitton and Christian Dior Couture and steady growth within our Perfumes & Cosmetics brands, driven by Asia. Within our Watches & Jewelry segments, Bvlgari saw solid progress, and positive performance continued in Selective Retailing at both Sephora and DFS. I also want to touch on the Belmond acquisition, which we announced in December. We are pleased that its shareholders approved the transaction in February, and we are on track to close before the end of June.Turning to the overall numbers for the first quarter, which is Slide 4. Total revenue rose 16% on a reported basis to EUR 12.5 billion from EUR 10.9 billion in the year-ago period. This reflects an 11% rise in organic revenue along with a 5% positive currency effect. Our revenue mix continues to be well balanced across geographies. And you can see on the chart Asia, excluding Japan, was the largest region in the first quarter representing 35% of revenue as measured in euros. This was followed by Europe, including France at 25% and the U.S., including Hawaii, at 22%. France specifically contributed 8% of revenue, and Japan was at 7%. Other markets contributed 11% of revenue. Compared to last year, Asia gained 2 points from Europe in part due to currencies, but also due to its higher growth, as you'll see on the next slide, 6. In terms of revenue change by region compared to last year's first quarter, organic revenue rose double digits in Asia, excluding Japan, at 17%. And in all other regions, it grew at high single digits, Japan at 9% and the U.S., including Hawaii, at 8% and Europe at 7%, all on an organic basis.Looking now at revenue by business groups. So I'll start you with the Wines & Spirits. Organic revenue was up 9% for the quarter. And after a positive currency effect, reported revenue was up 13% to EUR 1.3 billion. By category, Champagne and Wines organic revenue increased 6% and, after including a positive 2% currency impact, reached EUR 458 million in the first quarter this year, up 8% compared to the year-ago period. For Cognac and Spirits, organic revenue grew an impressive 11% and, adding the positive 5% currency effect, reached EUR 891 million, up 15% from the year-ago first quarter.To give you some more color on Champagne and Wines, we saw good revenue growth in all regions, driven by improved price mix, which reflects value-creation strategies. While Champagne volumes were stable, our prestige cuvées outperformed. Estates & Wines performance was driven by a positive price effect.Turning to Cognac and Spirits. Hennessy volumes were up 11% due primarily to strong sales of V.S and V.S.O.P. These activities saw continued strong demand and some restocking in the U.S. In China, the momentum continued with customers favoring larger formats of V.S.O.P. during Chinese New Year. Finally, both Glenmorangie and Ardbeg made progress notably in the U.S. and Asian markets in the quarter. As I say most years, this is a relatively small quarter for this business group and therefore not a representative quarter from which to extrapolate trends.Looking now at Fashion & Leather Goods, this business group was up a strong 15% on an organic basis. On a reported basis, including a 5% positive currency effect, revenue was up 20%, reaching EUR 5.1 billion from EUR 4.3 billion in last year's first quarter.To give you some highlights, on Slide 10 of the quarter in this business group, overall, we delivered strong growth in the key markets of Asia and U.S., supported by solid growth in Europe, in fact, double-digit in all these regions. Looking in more detail of the brands, Louis Vuitton will continue its remarkable momentum, building on the success of its iconic lines and the introduction of new products. In addition, the brand reopened new stores after major renovations in Florence, London, Monaco and Shanghai's IFC malls and a new workshop opened this year. That's the 16th in France to support the increased demand. Christian Dior Couture enjoyed exceptional performance in all regions and across product categories. The brand's men's and women's runway shows were also very well received and a new exhibit about Christian Dior is now on view at the London's prestigious Victoria and Albert Museum. Fendi hosted its last runway show designed by Karl Lagerfeld in Milan. And Céline's first ready-to-wear collection designed by Hedi Slimane arrives in stores in March. Céline also successfully launched a new store concept in Paris and New York.Loro Piana's vicuna collection and shoes showed a good performance, Loewe showcased its first men's runway show by Jonathan Anderson in Paris and saw great success with its limited edition Dumbo-inspired collection. Then finally, Rimowa inaugurated its first flagship store in Japan's Ginza district and rolled out a new collaboration with artist, Alex Israel.Perfumes & Cosmetics business groups, revenue was up 9% on an organic basis. On a reported basis, revenue reached EUR 1.7 billion, up 11% -- sorry, 12%, including a 3% positive currency impact effect from the EUR 1.5 billion in the year-ago period.Across the board in this group, we saw growth of iconic brands with solid momentum in Asia, consistent with this, Christian Dior saw strong popularity of its iconic lines as well its newly launched Joy perfume. Its makeup and skincare performed particularly well, driven by Rouge Dior and Diorskin. Guerlain also contributed to positive performance in the first quarter through the launch of Mon Guerlain Bloom of Rose perfume and L’Essentiel foundation. In addition, the brand saw continued momentum of its Abeille Royale skincare and Rouge G lipstick. Parfums Givenchy L’Interdit performed well, as the brand continued to see progress in its makeup lines, including with Le Rouge and Prisme Libre. Kenzo launched Flower By Kenzo Eau de Vie, while Acqua di Parma introduced a new collection under the name, Barbiere.Finally, Fenty Beauty by Rihanna continued to successfully roll out internationally, building on the robust performance the brand has experienced to date. Now looking at our Watches & Jewelry business, Slide 13. Organic revenue was up 4% in the period, including a positive 5% currency effect. Reported revenue for the group was up 9% or over EUR 1 billion compared to EUR 959 million in the first quarter last year. This business group has good momentum in jewelry as well as at Hublot and Zenith on the watch side. Starting with jewelry, Bvlgari demonstrated strong progress, driven by its recently launched Fiorever as well as the continued popularity of its emblematic Serpenti and Divas’Dream lines. This year, the brand also started the celebration of the 20th anniversary of the B.Zero1 ring. This will help with the performance of its owned stores during the period. Chaumet introduced a new collection called Liens Évidence, and it opened a temporary boutique on Boulevard Saint-Germain during the restoration of its historic Place Vendôme boutique.With respect to the watch brand, we, once again, had a successful participation in Baselworld this year, which we introduced a number of new models. Bvlgari launched the Serpenti Seduttori watch and the Octo Finissimo watches, Chronograph GMT Automatic and Ceramics. Both of these watches set world records for their thinness. Hublot introduced a new Classic Infusion Ferrari GT, which connects watchmaking motorization and automotive design, while this robust growth was driven by the spirit of Big Bang in its retail stores.TAG launched a Golf Edition of its Connected watch that features an app developed specifically for golfers. And finally, Zenith showcased its new DEFY Inventor and DEFY El Primero 21 Carbon watches.The selective retail group reported an 8% rise in organic revenue. When we add the 5% positive currency effect, this brings us to a 13% on a reported basis. Sales for the quarter rose to EUR 3.5 billion from EUR 3.1 billion on the year-ago period. To give you some detail on these numbers, Sephora saw further market share gains, enjoyed exceptional comparable store revenue growth in Asia. The brand also continued its rapid growth of online sales worldwide and opened a store location in New York's newest development area called the Hudson Yards. On the DFS front, we saw strong momentum in Hongkong and Macau as well as our T Fondaco dei Tedeschi Galleria in Venice. In this business, beauty outperformed other product categories in the quarter. DFS also hosted the eighth annual edition of the Masters of Wines and Spirits in Singapore in partnership with Changi Airport Group. And the nearest Galleria location is under construction as we speak at La Samaritaine in Paris, which is scheduled to open in 2020. Overall, our brand has a strong start to the year with all business groups and regions contributing to organic growth in the quarter. As we move forward, we continue to focus on creating innovative, high-quality products while selectively expanding our store network and managing costs. Against the persistent uncertain backdrop, the group will maintain a cautious outlook for the rest of the year while we continue to pursue our mission to reinforce our positon as the world leader in luxury goods. Thank you. And with that, we'll now take any questions that you might ask. Cecilia, please, could you open the line?

[Operator]

[Operator Instructions] We have one first question from Mr. Edouard Aubin from Morgan Stanley.

[Edouard Aubin, Head of Luxury Goods]

I guess 2 questions for me. The first one on Vuitton. If you could please come back on what were the main drivers behind Vuitton's better-than-expected top line over the past 6 months? And I guess distribution communication product, obviously, they all play a part. In your opinion, what were the 2 or 3 main drivers? If you could please try narrow it down for us. And my second question relates to Sephora. As you predicted earlier in the year, the top line reaccelerated in the first quarter after the weak end of the year. Is it mostly a function of higher performing promotional activity the U.S.? And if so, is there, so to speak, a higher pay-to-play in the U.S., given the now structurally, more competitive U.S. cosmetic market?

[Jean-Jacques Guiony]

Thank you, Edouard. On the first question, which is not the easiest to answer, the main drivers you mentioned, it's obviously combinations of marketing, product and distribution strategies. It's also a function of the strengths in demand, and we have to say that demand, particularly in China, but not only in China. I mean, demand has been very strong throughout the world. We've seen double-digit numbers with Japanese, which, as you know, is something that we haven't seen for a while. With the American, I would say it's more business as usual because we've been growing double digit with American for a long time. But still we have very strong numbers with Americans. And finally, with the Chinese, the business is really moving from strength-to-strength. So we see that the strengths in the demand, combined with strategies from a product and a distribution viewpoint that makes sense for most of these clients base explain the success of Louis Vuitton and what you call a surprising good trend, which we call the result of our effort. If at any way, at the end of the day, we enjoy a good ride with Vuitton, there's no doubt about that. As far as Sephora is concerned, yes, the Q1 numbers were better -- significantly better than Q4. Q1 is traditionally a less promotional period than Q4 or Q2. So the answer is definitely no. The level of promotional activity was not any higher than it was in the preceding year, which is then [ developed ] with a little bit of a better market, I would say.

[Operator]

We have another question from Mr. Antoine Belge from HSBC.

[Antoine Belge, Global of Consumer and Retail Research]

Yes, it's Antoine Belge from HSBC. Three questions. First of all, there's been a very strong growth in Asia, so it should point to a further repatriation of growth from Chinese consumption to more local. So would it be possible to ask the overall share of the Louis Vuitton business done with Chinese? And maybe what was the split in Q1 '19, the local versus tourist? And maybe is there a margin implication due to that trend? And second question relates to the U.S., where in cognac, you mentioned a restocking impact. So could you comment a little bit about that, about the level of inventories? And also, I think you -- Chris mentioned that we shouldn't expect this trend to be sustainable. So maybe a further comment on that. And finally, within the Perfume & Cosmetic business, I think you mentioned another reason why since Dior outperformed. So the overall division was probably dragged by 1 or 2 brands. Would it be possible for you to mention the names of at least 1 or 2 brands which are dragging down the overall performance?

[Jean-Jacques Guiony]

Thank you, Antoine, for your 3 questions. Well, the first one is very precise, and we don't get usually into that type of detail. You mentioned the repatriation of business onto domestic China, which is true, but it's mainly done at the expense of markets surrounding China and not European markets. If we look at what happened in Q1, the European markets, particularly with Chinese, were pretty strong and in the same type of growth as we have seen before. Where we've seen some slowing down is in some markets like Macau and Hong Kong, not so much in Korea, where the domestic part in Korea offsets a slowdown in the touristic part of Korea. But at the end of the day, the non-China Asia was moving downward as obviously, China was picking up. So we have really stability of growth in Europe, increasing growth in China and slowdown outside China and the rest of Asia. These are the trends of most of the luxury brands and particularly Louis Vuitton -- so for most of the fashion, sorry. And particularly for Louis Vuitton, the breakdown -- I mean, the share of Chinese customers does not change in a tremendous way over the past few years, and the share of tourists versus locals has not changed either very much, I mean, even the difference in growth rate doesn't cause this breakdown to shift quickly and immediately. So nothing really to report there. The second question on cognac, so, yes, there was a restocking in cognac. We took the decision, given the strengths of the supply at the end of last year. With a good harvest in 2018, we had enough -- we brought in [indiscernible] so that we could release some volumes. And as you know, we ended the year in 2017 and 2018 with a very, very low level of stocks, and particularly in the U.S. with distributors. We were around 20 days, and we took a decision to increase this level of inventories, so that those distributors could work in a much better environment when they operate at 20 days. I mean, it's -- then I think it's very complicated. So we have put some gasoline, let's say, in the engine, and inventories now are a limit in excess of 40 days. So it's way below normal anyway, but it's better than ever. So consequently, sell-in is higher than sellout. It is particularly the case this quarter in the U.S. as the sellout last year in March was particularly strong as we implemented price increases early April last year. So traditionally, when there is a price increase deficiency 4 weeks ahead of the price increase are extremely high, which is not the case this year, as the price increase will take place only in June. So by comparison, we have a very high sellout month last year and a normal sellout months this year. But all in all, higher sell-in than sellout. Nothing to worry about. Neither the sell-in nor the sellout are worrying, but a normal management of a very important market for us. And thirdly, your question on Perfume & Cosmetic and the name of winners, you know how much we like to point out winners and losers if there is such a word within our portfolios. So I will not get into details. The only hint I will give you is that a big chunk of the growth in Perfume & Cosmetics comes from Asia, and from China in particular and further retail as well. And you know that the traditional brands are the ones like Dior, Guerlain and Givenchy are much stronger in Asia and in terms of retail than the -- our U.S.-based brands. So it's really these traditional brands leading the growth.

[Antoine Belge, Global of Consumer and Retail Research]

Okay. Just maybe a follow-up on -- and I knew that the repatriation of growth in China, any margin implication where we should be aware of?

[Chris Hollis, Director of Financial Communications]

No, I told many times that particularly at retail, margins are very comparable from one market to another. So whether the business takes place one place or another, it doesn't make any difference at the end of the day for us.

[Operator]

So we have another question from Mr. Luca Solca from Bernstein (sic) [ Exane ].

[Luca Giuseppe Solca]

I was wondering about the pipeline of ODV for what concerns cognac. Are we correct to understand that the inventory concerns that we had a while ago are now resolved or there could be further problems down the road? Then on Céline. I wonder if you have any update on how the market reception of the new Céline approach to fashion and demand is going. We're getting mixed reviews on our -- from our contacts. Then last, but not least, you are referring to Baselworld. And there was a lot of discussion this year in Basel on how and if this exhibition will continue in the future. Are you continuing to commit to Baselworld or are you anticipating new ways of presenting your watch collections in the future? And then if I may add a little one, if you could expand a little on the Belmond strategy and value-creation approach you have in mind.

[Jean-Jacques Guiony]

Thank you, Luca. So I think with ODV in Cognac, the answers to your question is no. We have not fully lifted our constraints in terms of ODV supply. You remember that the harvest in '16 and '17 were extremely bad, which caused the supply of ODV to curve down significantly in -- particularly in the second half of last year. Obviously, we did good harvest in '18. This gives us a little bit of headroom. And what we have done in the first quarter of the year was more market monitoring and supply management rather than truth that the pressure from supply is alleviating to an extent that we can shoot for a much higher growth rate. So I'm not saying we'll be having low-single-digit numbers, but don't expect more than mid-single digits for this business. As you know, it's very difficult to grow such an inventory-intensive business more than 5%. That's probably the maximum we can expect. It was under severe pressure last year. Pressure is less bad than it used to be. That's 5%. It's certainly the maximum that we can do this year and next year. So the first part of the year was extremely positive for various reasons, including what I described in the U.S., but also the fact that Chinese New Year took place at a different date than it did last year. So it was a different thinking of business altogether. But at the end of the day, as Chris said, don't expect these recurring trends to -- don't extrapolate them into the rest of the year. The question on Céline I will not -- we will not answer. As you know, we are, at the time, as we speak, putting in place the Spring-Summer collection in the stores., so it would be very unfair to comment at the time when it's just the beginning of it. You mentioned that you got mixed report or reviews. Actually, we don't. We had a very, very good runway show in late February, early March, and we got nothing in terms of mixed review for that. All the reviews were extremely positive. So we remain extremely optimistic as far as Céline is concerned, but it's only too early to comment. As far as Baselworld is concerned, I have nothing to announce. I mean we aren't the biggest player in this universe. You have seen the action taken by the others not only this year, but over the last few years, which are obviously a reason for us to think about it. But we have not taken any decision, nothing to announce. As far as value strategy is concerned, what I can say about this is we'll be focusing on internal growth. We feel that in accordance with management that many properties in the Belmond portfolio can develop further their profitability potential, and we will concentrate on that. And we expect to generate significant EBIT and EBITDA growth in the next few years just by focusing on optimization of existing properties. So we don't rule out acquiring properties here and there, but not in a significant way. The main focus will definitely be on existing ones.

[Operator]

So we have another question from Mr. David Da Maia from CM-CIC.

[David Da Maia, Research Analyst]

The first one, on Fashion & Leather, I know you don't disclose performance by brand, but maybe can you give us more indications on which other brands are performing the most amongst your biggest brands? I mean, you want to highlight a particularly strong performance on one of your style brands during the quarter or the growth has been well balanced between them. And the second question on Louis Vuitton, so the creative momentum is clearly in proceed. You mentioned strong growth in all businesses, but are you monitoring an acceleration in growth in some specific product categories, for example, ready-to-wear or even shoes?

[Jean-Jacques Guiony]

Thank you, David. We don't like too much to comment. Although we achieved performance of brands, the whole portfolio did very well, as you see from the global numbers. Some brands, like Christian Dior and Louis Vuitton, did particularly well. I would say that doesn't mean that the others are doing badly. I mean, overall, we are extremely satisfied with the global performance of the portfolio. And I don't intend, as I said before, to give good marks and bad marks to some of the brands. That's not what we do in this call. As far as LV is concerned, most of the categories -- not most, all the categories did very well. Some did better than others. Just to mention ready-to-wear, both men ready-to-wear and women ready-to-wear had an outstanding Q1. This is not isolating. Last year this business was already very good, but it is particularly good this year. It's not a major business altogether for us at Louis Vuitton, but it's worth pointing out as this is obviously traffic-generator for many stores. And we are very happy to say that this business is doing particularly well.

[Operator]

We have another question from [ Atya Vejada ] from [ Avier ].

[Unknown Analyst]

I've got 3 questions. The first one is on the Watches & Jewelry division. Can you maybe comment on the growth of watches versus jewelry? And then the second question is linked to watches. Can you maybe just elaborate a little bit on the performance of owned stores versus that of third-party retailers? And then the third question is on growth by nationality. Can you maybe give us an indication of like the key nationalities and the trends there, so Chinese, the U.S., European and Japanese?

[Jean-Jacques Guiony]

Okay. Thank you, Well, I'll start with the last question, which we cannot answer because we are a wholesale business and, therefore, it's hard for us to monitor who our clients are selling to. So by nationality, it's very difficult to do. The only thing I would say is that our business is doing better in the Eastern part of the world than in the Western part of the world. So it probably tells something about whose -- which countries are doing better than others, but the monitoring of nationality in the same way as we do it in retail business is impossible in this business. So as far as your first question is concerned, watches versus jewelry, like preceding quarters, the jewelry business is doing better than watches, which has been under pressure for some time. We are repositioning TAG Heuer. We commented that many times already. This comes with growth being under pressure as TAG Heuer -- as it's indicated in preceding quarters. And watch -- jewelry are doing much better, particularly Bvlgari, where we were -- were we registered the low double-digit growth, which is worth pointing out in the current environment. As far as owned stores in watches are concerned, they are doing better than the wholesale business. To be frank, I'm not so sure that our statistics are that significant. We don't have that many owned stores within our own distribution within the global watches business. It's about 15% of total. But for what it's worth, this business is doing better than the wholesale business.

[Unknown Analyst]

Maybe just a follow-up on that. So maybe in terms of the different categories, so Fashion & Leather versus your watches why is there the significant underperformance at your watch -- generally in watch brand versus -- I just want your opinion on that.

[Jean-Jacques Guiony]

Well, it's very difficult to say. I think it's, by and large, demand-driven. And we've seen demand being strong in Fashion & Leather in all geographies for quite some time. It's been the case in Japan. It's been the case in Europe. It's been the case in the U.S., and obviously, in Asia, including China. As far as watches are concerned, the main driver of the growth, and I take it sort of 10 years view, has been China. And China has some slowdown -- significant slowdown as the rest of the categories in 2014 -- from 2014 onwards, which has not recovered in the same way as the other categories since then. So it's -- I think it's mainly demand-driven with a high concentration of growth on to the Chinese customers that have proven less -- that have rebounded less than the -- than its indication of the categories.

[Operator]

So we have another question from Mr. Oliver Chen from Cowen and Company.

[Oliver Chen, MD & Senior Equity Research Analyst]

Regarding Sephora, where do you see e-commerce profitability and penetration going over time? So we had a question on Louis Vuitton and e-commerce digital. What are your thoughts about inventory management between the online and the physical store channel and where that is, and how you're thinking about integrating mobile plus stores and relationships with platforms, such as Farfetch and others?

[Jean-Jacques Guiony]

Thank you. I feel a bit embarrassed about your first question. What I can say that going forward we expect both penetration and profitability of digital and online at Sephora to go up that you would have been surprised if I said the opposite. Profitability, for the time being, was in digital, altogether is higher, slightly higher than it is with brick-and-mortar. And we expect this profitability going forward to remain higher. And the growth rate we have in digital is also higher than the growth rate in brick-and-mortar. So logically, we expect both penetration and profitability to go up in the future. The second question is, I would say, very important and very relevant question. Unfortunately, it's hard for me to answer because it's something we are currently reviewing and discussing internally. It's a very important topic. What do we do with our inventory? Then do we make this available to platforms? But no decision has been taken yet at least for our largest brand. So I really cannot answer on this. The only thing I can say is that it's a relevant question, and we'll have to come to some views on this in the quite near future.

[Oliver Chen, MD & Senior Equity Research Analyst]

Okay. On the Sephora, the U.S. has experienced negative physical store traffic, offset by conversion rates. Has that also been true for your U.S. Sephora business? And I would love thoughts on category strength. We've seen skincare improve where cosmetics has faced cost comparisons. How are you thinking about the portfolio in the context of managing the categories within Sephora U.S.?

[Jean-Jacques Guiony]

That's a good point. Well, traffic is seen in very low growth or slightly negative, and conversion rate is going up,, which is really what happens. I mean we have probably more relevant customers in our stores and, therefore, we have less traffic and higher conversion rate. At the end of the day, I mean, this really, the 2 going together. It doesn't mean that the 2 cannot grow the business. The business is just done slightly differently. As far as categories is concerned, the makeup category is a little bit under pressure in the U.S. It's been the case for the last 12 months, I would say, and the skincare business, which is really growing fast and gaining importance at Sephora, not only from the share of total business, but also from a shared space viewpoint, I would say. So I feel that in the coming months and years, the skincare business will be a very important component of Sephora's growth in the U.S. and probably elsewhere as well.

[Oliver Chen, MD & Senior Equity Research Analyst]

Just last question on Sephora. One question and one observation is that you've done a very good job across formats and sizes and having versatility and flexibility in how you think about physical retail within the Sephora banner. Congrats on Hudson Yard. What are your thoughts about store format and the right size and how you're approaching prudent square footage growth in terms of doing that in an experiential manner for the new customer and also as we see different kinds of real estate emerge within retailing in the U.S.?

[Jean-Jacques Guiony]

Well, that's a very good point. The only way to answer your question is what we do basically is to test and learn. We are opening different formats, particularly in the U.S., smaller formats, different opening hours, and we'll see what happens. I mean there is no such thing as the theory as to what is the right format of the Sephora store in the U.S. It's only experience that should tell us what we should be doing. So to the credit of the team. They are experiencing new formats, testing and trying to learn what could be the winning formulas and deploy them on a larger scale in the future. It's what we've always done with -- Sephora, particularly in the U.S., is not one single format, it's several formats, including JCPenney, the .com, and the brick-and-mortar. And within brick-and-mortar, we have different expression of the brand, and we will continue to do so. It's way too early to tell you what kind of format may emerge in the future, but Sephora is constantly on the test-and-learn exercise.

[Operator]

We have another question from Mr. Rogerio Fujimori from RBC Markets.

[Rogerio Fujimori, Analyst]

Can I ask a question about regional growth for Fashion & Leather? How do the regional growth professionally compare to the total group growth mentioned in Slide 6? The second if you could really talk a little bit about the total Chinese cluster growth in Q1 and drivers of the strong growth of Louis Vuitton in Q1? Any change in terms of contribution from volume versus ASP change?

[Jean-Jacques Guiony]

Thank you, Rogerio. Well, the Fashion & Leather versus group on a regional basis. Roughly speaking, Fashion & Leather, which as you've seen from the group's number, is growth is higher than the global group's growth. It’s exactly the same in all regions. So we have Fashion & Leather being significantly above in Europe. More is in line, a little bit above, in Japan, significantly above in the U.S. and as well [ a bit of growth ] in Asia. That's the main trend. As far as volume versus price and mix at Louis Vuitton, as in the preceding quarter, the bulk of the growth comes from volumes. Volumes are at double digits. At Louis Vuitton, there is a little bit of price, but nothing really significant as we have not passed any price increase this year. So a little bit of lagging impact from last year’s price increase, but nothing really significant. And as always, a little bit of mix impact, but really the bulk comes from volumes. And sorry there was another question. So the Chinese customer for Louis Vuitton in Q1 was at double-digit, more or less in line with -- in line with what we've seen in preceding quarters. So the same type of growth as we have seen precedently.

[Operator]

We have another question from Dana Telsey from TAG Group.

[Dana Lauren Telsey, CEO & Chief Research Officer]

You talked a little about tourist trends. Any more color in terms of what you're seeing by region, where people are traveling to and from and what you're seeing? And then under remodeled stores that you've done for Louis Vuitton, what have you seen that's been impactful that you'll put in other stores that may be of the experiential nature?

[Jean-Jacques Guiony]

Thank you. Well, the tourist trend, not much to be added to what I said before. We've seen, obviously, the traffic is extremely high throughout Asia. But when it comes particularly to the most expensive items due to the fact that price gap in between Asia and China has narrowed significantly, we see less growth and less business being done outside China. As far as Europe is concerned, as I said, globally, the business is pretty good with stores. We see a little bit of pressure in France with the -- and rest on Saturdays, which is a little bit taking its toll, although we have stayed positive in France for all the brands. And I think, definitely, we see very good activity in the U.K. So the U.K. in Q1 has been stronger than we thought. It's probably a little bit at the expense of France. But altogether, Europe is extremely satisfactory, and we still keep a high level of touristic flows in Europe. As far as the remodeling of LV stores is concerned, obviously, we implement good ideas from one store to another. The only point I would make, it's very difficult to be specific on your questions because there are plenty of examples of small magnitude that could be described that I don't think that would be very significant to comment on this call. The only thing I would say that the main retail initiative at Louis Vuitton and in some of the brands is the pop-up stores. I mean that's something that we have developed over the last couple of years. We shall do about 100 pop-up stores in 2019 after 80 last year. And this is the privileged way and the main way to drive innovation and newness from a pure retail viewpoints into -- in front of the customers. So this trend of pop-up stores is extremely important. And we will continue in developing that because it enables us to be talking in a different way to our clients in different places. And that's very important, and it adds flexibility to a retail network, which, by definition, is a bit rigid, and it enables us to be in different places at different times.

[Operator]

Next question from Mrs. Louise Singlehurst from Goldman Sachs.

[Louise Susan Singlehurst, Managing Director]

Two questions really on -- back to LV, I'll be quick. Just in terms of -- can you help us think about how you consider really the pace of growth? Because, obviously, we're seeing some really large growth numbers on a very large brand. That way, we can think about the context of Fashion & Leather, but particularly for the brand, in terms of the budget process, but also managing the manufacturing process, given in terms is internalized. If you could help us just think about that balance or growth equation that would be really helpful. And then secondly, a small one. Is there anything particularly to call out by product category? Obviously, men's are quite small, but doing phenomenally well with virtual upload and online. If you can give us any context, if it's particularly important in terms of the underlying potential of sales. Now it's small, but it's obviously growing quite well.

[Jean-Jacques Guiony]

Thank you, Louise. Well, your question on the supply chain of fast-growing brands like LV is obviously a very important question for us. As you know, we have a very high level of vertical integration. So that creates some form of constraints in terms of meeting a very high demand that this flexibility of -- in the production is not the same as the production that is self-contracted. Nevertheless, I have -- to the credit of Vuitton, and it didn't start yesterday. I mean, they've been working on that for quite a number of years. And the production and supply chain people at Louis Vuitton done a fantastic job in enabling us to develop the production and the number of items they put into the stores in a tremendous way, first, with the same level of atelier and, after that, by opening up new ateliers. So they've done a very good job. And that creates flexibility, and enables us to grow at double-digit levels in volume terms. And it's been going on for a while, which probably, 10 years ago, wouldn't have been thinkable. So that's -- I think we've done a very good job there, and we will carry on monitoring the production capabilities, adding an atelier in France when we think it makes sense and where we think it makes sense. Your second question on product category, you mentioned ready-to-wear in men and women. As you said, it's probably the business of roulette at Louis Vuitton. But we had equivalent growth rates at a very, very high level. I mean we are very satisfied with both the women and the men business. They are of similar strategies altogether, but the growth rate is more or less the same at a very high level so it is very satisfactory. As far as online is concerned, the online business is growing fast, but, obviously, we only provide details on a group-wide basis, not on a brand-by-brand basis. And as you know, online to what was purely louisvuitton.com.

[Operator]

We have no further questions, sir.

[Jean-Jacques Guiony]

Okay. So thank you very much. I have no further remarks to make. Just thank you for attending this call, and I look forward to discussing with you first-half figures towards the end of July. Thank you, and good afternoon.

[Operator]

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