Integrated report 2019 REPORT ID CARD
KERING INTEGRATED REPORT OBJECTIVE
To craft tomorrow’s Luxury, at Kering we are convinced that we must continually exceed our limits, support our Houses and engage with the entire industry and our stakeholders. Inspired by the guidelines of the International Integrated Reporting Council (IIRC), this publication is aligned with extending this strategic initiative. It presents an overall picture of the Group and its history, our strategic vision and perspective, and our business model designed to create value in every aspect of our activities – creative, financial, environmental, ethical, and social. By leveraging exceptional quality resources, optimized by Kering, the Group is crafting tomorrow’s Luxury and creating value that it shares with its stakeholders. This expression outlines Kering’s value creation model, presented in this report’s concluding section. Using a system of keywords, it also allows you to discover its main components in the digital version of this Integrated Report.
1 ABOUT THIS REPORT Table of contents
The start of 2020 was marked by the emergence of the Covid-19 pandemic. Though initially restricted to China the pandemic subsequently spread to many regions across the globe. The spread eventually affected activity in the Group’s Report ID card — p. 1 stores in its main markets. Production Editorial — p. 4 in Italy was also impacted following measures taken by the Italian government in March. Group profile and vision — p. 6 To date, the Group’s visibility in terms Group Profile — p. 8 of the health crisis’ impact on performance Vision — p. 12 remains limited. Should you require Risks — p. 14 additional information, please refer to the Market trends — p. 16 Group’s regulated information published on its website (in the Finance section, under Business model and strategy — p. 18 “Regulated Information”). Specifically, you may Business model — p. 20 consult the information published between Strategy — p. 24 March 20 and April 21 and the amendment to Kering’s 2019 Universal Registration Document, issued on April 30, 2020. Performance — p. 28 Joint interview with Marie-Claire Daveu and Jean-Marc Duplaix — p. 30 Overall performance — p. 34 Our capitals — p. 44 Our governance — p. 50
Value chain — p. 56 A chain of actors crafting tomorrow’s Luxury — p. 58 Exceptional craftsmanship — p.60 Stage 1: Creation — p. 62 Change Kering’s integrated reporting Stage 2: Development — p. 66 For the first time, our 2019 framework is also enhanced by a Stage 3: Production — p. 70 Integrated Report provides: dedicated website that allows you Stage 4: Sales and marketing — p. 74 to open the value creation thread Stage 5: Customer experience — p. 78 – A presentation of the while accessing important content Our value creation model — p. 82 Group’s main risks. On this basis, using a system of keywords. we have identified related context You may also access additional elements at each stage of value content that includes information Our publications — p. 84 creation (p. 14-15); on sustainability milestones achieved in 2019. Learn more – A joint interview with Marie- at kering.com. Claire Daveu, Chief Sustainability Officer and Head of International Institutional Affairs, and Jean- Marc Duplaix, Chief Financial Officer (p. 30-33); – A dashboard outlining Kering’s progress in achieving its 2025 Sustainability Strategy targets (p. 36-43).
2 3 Kering’s 2019 results once all what we undertake.We do not which is impacting our livelihoods again illustrate the strength separate economic imperatives and those of future generations. of our business model, the talent from the vision that drives us Such efforts were boosted and dedication of our 38,000 and that goes beyond financial by our commitment to promoting people around the world and performance. We work towards ever-greater diversity, gender our disciplined financial a responsible business approach equality and inclusiveness, stewardship. Our revenue, which which is our daily focus as we as well as our fair and forward- “At Kering, we’re reached €15.9 billion combined look to the future. At Kering, thinking parental and work with a record recurring operating our ambition is to be the world’s policies, such as Baby Leave, embracing a vision margin that topped 30% for the most influential Luxury group in effective at the beginning first time ever, reflects another terms of creativity, sustainability of 2020. Lastly, our lonstanding of Luxury that is modern, year of sustained and profitable and long-term economic commitment to prevent violence growth. performance. Complying with against women, led with great creative, responsible the ethical values and culture determination by the Kering Gucci generated an additional of integrity that form the Foundation for more than 10 and inspiring.” €1.3 billion in sales compared cornerstone of our business years, reminds us how the role with 2018 and Saint Laurent practices, we are crafting of women remains a constant delivered a sales performance tomorrow’s Luxury as we establish concern for Kering and its exceeding the €2 billion mark. an ongoing dialogue and Houses, requiring all our vigilance. Meanwhile, Bottega Veneta’s new continuously interact with Creative Direction is showing our stakeholders. We repeatedly Each and every one of our signs of success, as demonstrated reaffirm our determination to decisions is entirely aligned by its accelerated sales growth. play our part as a responsible with our strategic choices. The same can be said of the corporate citizen and as a And all our results contribute Group’s other Houses that committed player in all our to the fulfilment of our vision achieved sustained growth locations to meet the social, for tomorrow’s Luxury, This integrated report tells the safety of its teams worldwide. momentum throughout the year. environmental and economic as exemplified by this report. story of our value creation journey, The Group has readily played This excellent performance challenges facing the world. and how we have continued in its part in the global effort against was led by Balenciaga and 2019 to create and share value the pandemic in China, Italy and Alexander McQueen. Together, This past year has once again with all of our stakeholders. As we France particularly, rolling out these performances testify demonstrated the vitality of our release this report, the Covid-19 several initiatives tailored to to our mid-term and long-term commitment through initiatives pandemic crisis that we are each country’s circumstances. growth potential, thereby such as the launch of the Fashion enduring since the beginning of In these complicated times we confirming our confidence in our Pact, of which we are a founding 2020 is a reminder of our absolute know how important it is to stay business model. member, or the carbon neutrality shared priority to consider the true to our values and ethical François-Henri Pinault we have achieved across all our health of each and every person principles. We also know it is Chairman and We want our value creation to be operations and supply chains. above anything else. From this essential to continue to report Chief Executive Officer integrated and shared. This is This milestone was achieved perspective, Kering has of course on the responsible way we intend part of our vision for a bold and as a response to the critical worked to protect the health and to conduct our business. modern Luxury that supports challenge of climate change,
4 EDITO 5 Group profile and vision
A global Luxury group, Kering manages the development of a series of renowned Houses in Fashion, Leather Goods, A GROUP GUIDED BY Jewelry and Watches. ENTREPRENEURIAL SPIRIT 1999 1963 1988 2013 2018
ORIGINS GROWTH OF A THE MOVE AN INTEGRATED KERING, A LUXURY LEADER IN RETAIL INTO LUXURY LUXURY GROUP PURE PLAYER DISTRIBUTION
1963 — François Pinault 1990 — Acquisition 1999 — Acquisition 2013 — PPR becomes 2018 — Distribution in establishes the Pinault of Cfao of a 42 % stake in Gucci Kering kind of PUMA shares group, specializing Group, then incremental to Kering’s shareholders 1991 — Acquisition Acquisition of strategic in lumber trading increase until 99.4 % (70% out of a total interest of Conforama tanneries stake in 2004 of 86% owned) 1988 — Listing of Pinault 1992 — Takeover of 2015 — Launch SA on the Paris Stock 2000 - 2004 — 2019 — Completion of Au Printemps SA of Kering Eyewear Exchange Acquisition of the sale of Volcom (majority shareholder of Yves Saint Laurent, 2016 — Integration La Redoute and Finaref) Launch of an offering of Boucheron, Bottega within Supply chain bonds exchangeable into 1994 — Takeover of Fnac; Veneta, and Balenciaga; existing ordinary shares of the Group’s name is partnership agreements PUMA maturing in 2022 changed to Pinault - with Stella McCartney Printemps-Redoute and Alexander McQueen Fashion Pact, carbon neutrality and global 2007 — Equity interest parental policy in PUMA is increased to 62.1 % 2008 - 2014 — Acquisitions in the Jewelry and Watchmaking sectors 2003 - 2014 — Divestment Group profile – p. 8 of retail distribution Vision – p. 12 activities Risks – p. 14 Market trends – p. 16
6 7 AN ENSEMBLE OF HOUSES WITH DISTINCTIVE IDENTITIES AND A TRADITION OF EXCELLENCE
KERING, A GLOBAL GUCCI LUXURY GROUP WITH EXCEPTIONAL HOUSES SAINT LAURENT BOTTEGA VENETA
BALENCIAGA
ALEXANDER MCQUEEN
BRIONI
BOUCHERON KEY €15,884 m 38,068 FIGURESin revenue employees POMELLATO €4,778 m DODO in recurring operating income QEELIN
ULYSSE NARDIN A global Luxury group, Kering a sustainable and responsible manages the development of way. We capture these beliefs GIRARD-PERREGAUX a series of renowned Houses in our signature: Empowering in Fashion, Leather Goods, Imagination. Jewelry and Watches: Gucci, KERING EYEWEAR Saint Laurent, Bottega Veneta, In 2019, Kering had almost Balenciaga, Alexander McQueen, 38,000 employees and revenue Brioni, Boucheron, Pomellato, of €15.9 billion. DoDo, Qeelin, Ulysse Nardin, Girard-Perregaux, as well as Kering stock is listed on Euronext Kering Eyewear. By placing Paris (ISIN: FR 0000121485, creativity at the heart of its strategy, Reuters: PRTP.PA, Bloomberg: Kering enables its Houses KER.FP). It is notably listed to set new limits in terms of on the CAC 40 and EURO STOXX their creative expression while 50 indexes. crafting tomorrow's Luxury in
8 GROUP PROFILE 9 FIND OUTMORE 10 growth andits transformation.growth the Group’sreflects worldwide whichcapital over 10 years, withinternationalized combined ofthisstructuresolidity is vision.The term strategy making, aligningwithits long- decision- ensure effective structure enablestheGroup to shareholderlong-lasting thisstrong andemployees, individual shareholders and of institutionalshareholders, family.Pinault Withthesupport bythe controlled by Artémis, business, Kering is41.0% owned Having grown outof afamily SHAREHOLDER STRUCTURE SUPPORTED BYASTABLE SUSTAINABLE GROWTH and ownership structure Chapter 7. Share capital Document: 2019 Universal Registration
dividend per share was €8 share was dividend per policy.payout In2019, the andattractive to abalanced 40 (+26%).Kering givespriority theentire CACoutperforming year, up42% on 2019, clearly markets, againthis confirmed onfinancial performance rewarded through theshare’s Shareholders’ trustis SUPPORT REWARDED FORTHEIR LOYAL SHAREHOLDERS form for at least twoyears. form forat least shareto each heldinregistered double voting rightsgranted shareholders’ loyaltythrough The Group rewards also its 1 .
proposed. has beenlowered by 30% compared totheamount initially to theapproval oftheJune16, 2020 AnnualGeneral Meeting, impact oneconomicactivity, the2019dividend,whichissubject and given thecontext oftheCovid-19 pandemicandits 1.As decidedby theBoard ofDirectors onApril21,2020 and letterstoshareholders. sitevisits roadshows, meetings, one-to-one conferences, industry in participation audience: toeach using formatstailored its investorsandshareholders, and regular withall discussions developing arelationship oftrust Lastly, Kering to iscommitted GROUP PROFILE
investors French institutional 13.5 institutional investors International 44.7 investors French institutional 8.4 % % institutional investors International 36.5 shareholders Private individual 9.0 % shareholders Private individual 4.8 % % % corporate officers corporate and executive shareholders Employees 0.1 officers corporate and executive shareholdersEmployees 0.1 % % 2009 Treasury sharesTreasury 0.1 2019 Treasury sharesTreasury 1.0 % % Artémis group Artémis 40.8 group Artémis 41.0 % % CHANGE IN SHARE 11 OWNERSHIP (AS OF DECEMBER 31) KERING’S VISION: EMBRACING CREATIVITY FOR A MODERN, BOLD VISION OF LUXURY A new world order is forming. Against a backdrop Our ambition: to be the of ever-faster change, new economies are taking shape as cultures evolve, disruptive technologies emerge and young world’s most influential “always-on” consumers seek meaningful connections. Luxury group in terms Today’s change generation is shaking up the rules. of creativity, sustainability and long-term economic performance.
Kering is setting the trend, individuality. and our vision of women and men who strive purposefully shaping the Luxury of Luxury supports this radical each day to create authentic, of tomorrow, which will be more shift. We dare to take risks, think ever-changing Luxury. responsible and more in tune differently, and constantly propose with our times while remaining fresh and innovative ideas that We want to play our part true to the exceptional history inspire emotion and enthusiasm in the emergence of a more and heritage of our Houses. Our for our exceptional products environmentally friendly world. ambition is to be the world’s most capable of expressing each We are constantly raising influential Luxury group in terms consumer’s distinctive personality. our creative and production of creativity, sustainability and standards to ensure respect for long-term economic What Kering and its Houses the planet while at the same time performance. propose is an experience. having positive social impacts. Our values are closely tied We aim to create value that is A new generation of consumers to a powerful, creative content equitably distributed among means new client expectations. imbued with modernity all our stakeholders. Tradition and expertise, which and are complemented by many luxury brands have relied the entrepreneurial spirit that Pronounced “caring”, Kering is on for decades, are no longer permeates each of our brands much more than a simple allusion enough. Consumers today and by the vision of our creative – it gives meaning to everything want to express their unique teams. Kering is made up we do.
12 VISION 13 FIND OUT MORE 2019 Universal Registration Document: Chapter 6 (specifically section 2 for a description of the risks identified, and the actions taken by the Group to manage them)
OPERATIONAL SOCIAL AND ENVIRONMENTAL RESPONSIBILITY Kering’s luxury paradigm and business model* Raw materials scarcity, quality Customer experience* and biodiversity* Macro-economy and geopolitics* Climate change, other natural or man-made risks Real estate management* Ethics and global governance Production management* Human rights and fundamental freedoms Distribution network* RISK MANAGEMENT Product quality and safety, Cybersecurity* consumer health AT ALL GROUP LEVELS Brand strategies* Talent management Image and branding* Employment standards To ensure long-term value creation, Kering must seize Distressed suppliers* growth opportunities in today’s fast-changing world Information systems and anticipate adverse risks. Kering’s major initiatives
An integrated and continuous The Group’s risk management – the validation and RISKS risk management policy is based on an organizational monitoring of action plans. Risk management covers areas framework that sets out: the roles It reports to the Board of that are much wider than just and responsibilities of the various Directors’ Audit Committee. financial risks: for example, persons involved, procedures Identifying, analyzing and operational, labor-related, as well as consistent and clear controlling risks environmental and compliance standards, for the system. Kering’s risk management uses a risks. Kering’s risk management An IT system makes it possible three-step process: identifying, is a key management tool that to share information about risks analyzing and dealing with risks. helps to: internally. In 2011, Kering created COMPLIANCE FINANCIAL The risk management system is a “Kering group Risk Committee”, – create and preserve monitored and reviewed on a Intellectual property protection* Foreign exchange risk* comprising the Group Managing the value, assets and reputation regular basis to help continuously Director, the Chief Financial Fraud and corruption* Equity risk of the Company; improve the system. The objective Officer, the Head of the Legal Contract management* Interest rate risk is to identify, analyze and map out – render the Company’s Department, the Chief Audit Legal compliance and litigation Liquidity risk the main risks for the Group and decision making and other Executive, the Head of the its Houses during dedicated work Intellectual property infringement processes secure in order Security Department and group sessions with the main Compliance with national tax laws to support the achievement the Risk Manager. The Risk identified contacts. The sessions and international standards of its objectives; Committee reviews: also help identify potential – mitigate the risk of consequences of the main risks unexpected outcomes and – the validation and (for example, financial, human, operating losses; monitoring process for the legal, labor-related, environmental Group’s risk management policy; or reputation-related – ensure that initiatives are consequences) and assessing their consistent with the Company’s – the monitoring of the impact, the probability of values; topicality and relevance of risk occurrence, as well as the level This table outlines the main risk analyses; – bring Company employees of control. Lastly, the objective factors at Kering ranked by type. together to develop a shared view – the analysis summaries is to learn from risks that have The main 15 are highlighted with of the main risks. of general and specific risks; and materialized. the following sign: *.
14 RISKS 15 half ofthemarket invalue. Online 2019, formore than theyaccount in to thisgrowth: contributors were themain consumers Chinese andAmerican reaching €281 billion. exchangerates,comparable at up7% growth, normalized the market more confirms –in2019, GDPgrowth global exchange rates,aslowdownin tensions,volatile – geopolitical bystrong uncertainty shaped changes. Inanenvironment undergoing significant structural Kering,such as andit iscurrently playersby afewmajorglobal ischaracterized industry luxury theAlthough fragmented, 16 FIND OUTMORE Chapter 2.3. Ourmarkets Document: 2019 Universal Registration
offering together withaclient product and differentiated a strong creative they are seeking and notablygenerations YandZ, emerging millennials, countries, background, middle class the market. Coming from a are entering consumers luxury restaurants, etc.),whilenew cruises, (hotels, experiences to goods luxury personal from extending theirspending are consumers Core luxury are more also diverse.consumers Luxury More connected, 12% ofsalesinLuxury. were up22%,representing nearly they robustness since industry’s tothe contributed sales also with the expectations ofnewgenerations ofcustomers. with theexpectations ourrichheritageofexceptionalto combine know-how trendsetter.itself asanindustry Every day, Kering seeks the challengesoftomorrow’s Luxury, whileestablishing with aligned andastrategy perfectly a businessmodel In pursuitofsustainablegrowth, theGroup hasadopted evolvinga leaderinthecontinually luxury industry. by Guided astrong vision,Kering andbold hasbecome WITH NEWCHALLENGES LUXURY: ADYNAMICMARKET – – challenges; and technological – – the industry: the multiplechangesthatimpact fourmajortrends from identified market,this revitalized Kering has To of tapintothefullpotential distribution channels. across physicalanddigital andintegrated personalized thatisboth experience
Demand fortransparency.Demand habits; New consumption environmental Increasing New drivers; growth MARKET TRENDS New stakeholders’ expectations as regards the the regards as expectations stakeholders’ New searching for quality, innovation, and asense and innovation, for quality, searching Development of artificial intelligence (AI), intelligence artificial of Development Greater transparency in supplier relations supplier in transparency Greater (rental, subscription, second-hand, etc.) second-hand, subscription, (rental, significant impactonthedevelopment goodsmarket andmomentum in2020. of thepersonalluxury crisis. While thesamestructural aspectswillcontinue todrive inthe medium growth intheindustry term, thescaleandscope oftheepidemicindicate itwillhave a 2019, fromthefull report roundedout with data publishedinDecember 2019. Bain and Altagamma’s forecasts through2025 were publishedbefore theCoronavirus (Covid-19) Source: Unlessotherwiseindicated, all historicalandforecast informationStudy –Altagamma Worldwide comes fromtheBain Luxury Market Monitor, publishedinNovember
IMPACTS income disposable average in Increase New consumer experiences explored experiences New consumer Young customers, more connected, more Young customers, a new, extra performance driver performance a new, extra environment, society and ethics and society environment, Growing consumer awareness awareness consumer Growing Globalization and digitization Fast-growing middle classes classes middle Fast-growing Larger number of wealthy wealthy of number Larger Increased global mobility global Increased of environmental issues environmental of of purpose (millennials) of consumption habits of consumption in emerging countries emerging in individuals worldwide individuals and technological challenges Increasing environmentalIncreasing demand for transparency New consumption habits New consumption New growth drivers
traced back totheirorigin back traced estimation forpersonal in total personal luxuryin totalpersonal of Group rawmaterials share of e-commerce luxury goods market goods luxury generations YandZ of thesalesmadeto Ambition for 2025 €335-375bn Outlook for 2025 Outlook for 2025 Outlook for 2025 goods sales goods 100 55 25 % % %
and stronger relations with our audiences our with relations stronger and of service customer Personalization approach CRM the of sophistication and transformation of digital Acceleration and processes for products innovation and creativity of Reserves customers tourist and local of Development retail travel of development and approach omni-channel the of Relevance by all stakeholders by all recognition and of Kering Exemplarity chain value entire the throughout standards Improved employer preferred the by becoming talents of retention and Attraction by global communication global by supported experience omni-channel An network store operated directly through universe brand the Developmentof
OPPORTUNITIES
17 Business model and strategy
VISION Embracing creativity for a modern, Our vision leverages our bold vision of Luxury multi-brand business model, guiding our strategy. Their coherence and alignment lay solid foundations in order to achieve our ambition. BUSINESS MODEL
A multi-brand model built on a long-term approach and creative autonomy for our Houses
AGILITY BALANCE RESPONSIBILITY
STRATEGY
Harnessing the full potential of Luxury to grow faster than our markets
PROMOTING Enhancing synergies and ORGANIC GROWTH developing growth platforms
Business model — p. 20 Strategy — p. 24
18 19 BREAKDOWN OF REVENUE BY LUXURY HOUSE IN 20191
13% Saint Laurent
A MULTI-BRAND MODEL BUILT 8% 63% Bottega Veneta ON A LONG-TERM APPROACH Gucci AND CREATIVE AUTONOMY FOR OUR HOUSES 16% Other Houses Thanks to our international footprint and the strength of our Houses combined with the creative autonomy they enjoy and the unique quality of our creations, Kering is BY HOUSE among the foremost players in the luxury goods market. Our model fosters rapid growth for our brands, creating the space for them to thrive. Our multi-brand model 18% is based on a long-term vision and combines agility, Shoes balance, and responsibility. 55% Leather Goods 14% Ready-to-wear
7% 6% Watches and Jewelry Other
BY PRODUCT CATEGORY AGILITY Transformation solid integrated value chain and From a conglomerate pooled support functions. By of diversified retail activities encouraging imagination in all its until the early 2000s, Kering forms, our organization fosters 22% has transformed itself into performance while enabling our Wholesale sales Kering provides its Houses a Luxury group focusing on Houses to unleash the best of and other revenue with an organizational structure personal goods. We are now their talent and creativity. (including royalties) that unlocks their potential an integrated group bringing 78% for excellence. together and developing some The Group ensures that Sales in directly of the world’s most prestigious performance is aligned with operated stores Constancy Houses. Through the years, the brands’ long-term visions Kering began as a family we have been able to leverage and objectives. Thanks to our owned company more than the most effective growth drivers. capacity for self-reflection and 50 years ago. With a strong and big-picture thinking, we can stable controlling shareholder, Clarity achieve the clarity necessary to Kering boasts an attractive and Kering helps its Houses realize secure the performance of the sustainable profile conducive to their full growth potential. At Group and its Houses. BY DISTRIBUTION CHANNEL developing its vision in the luxury each stage of their development, goods market over the long-term. they benefit from the Group’s 1. Luxury Houses’ revenue makes up 97% of the Group’s total revenue. The remaining 3% is made up by “Corporate and other.”
20 BUSINESS MODEL 21 BALANCE and accessories for some, are focused on realizing their ETHICS, Ethics and sustainability are if it is not trustworthy. We earn jewelry or traditional watchmaking full potential and gaining new THE CORNERSTONE OF central to our activities and trust by demonstrating every day for others. The Group supports clients. OUR BUSINESS PRACTICES. the way we do business. our commitment to responsible the brands by providing expertise, No company is sustainable business practices. improving supply chain reliability Ready to weather adverse and opening up access to market conditions Kering’s multi-brand model distribution networks, as well With both well established is reaching optimal efficiency. as enhancing client experience, and still emerging brands in especially in digital channels. various specialties, segments An ensemble of It also encourages the Houses and markets, Kering has an exceptional Houses to share best practices with extensive footprint in diverse Each of our Houses evokes a view to driving innovation. regions. Due to the variety a unique blend of emotions of its clients, products, brands and creations. With distinctive Growth prospects and locations, the Group is 2005 1996 2013 2019 2018 positionings, they play Benefiting from growth drivers well placed to weather market 2014 complementary roles intrinsic to the luxury industry, changes in market conditions Group’s first Deployment Overhauled Code Launch of a Kering’s Ethics Code of Ethics in a coherent ensemble. Kering reinforces its growth and seize growth opportunities. Ethics Charter of the Group’s of Ethics worldwide ethics hotline expanded issued in 14 potential by placing creative first Code of Ethics training campaign to the Group’s languages for all Set up of two and creation of the for all Group partners and Group employees Multi-brand model boldness at the heart of its regional Ethics Ethics Committee employees, which is Suppliers worldwide. We use our strength as a model. So, while our most Commitees repeated each year Group to help forge a distinctive firmly established Houses (Asia-Pacific and Update of Code Launch of identity for each House. are reinventing themselves Americas) and an of Ethics with annual Ethics Our brands find ways to express and re-engaging with their Ethics hotline for all commitment from and Compliance Group employees the Group Executive e-learning training their unique characters – couture audiences, our emerging brands worldwide Committee program. 94.4% and reviewed by take-up vs. 84.9% Board of Directors in 2018.
RESPONSIBILITY incorporating the criterion products, it rewards best business of sustainable value, for clients practices such as good control and 55 COMPLAINTS RECEIVED REASONS BEHIND THE ALLEGATIONS IN THE 55 COMPLAINTS RECEIVED IN 2019 as well as for society. process improvement. In a context IN 2019. 40 CLOSED of limited natural resources, new BY DECEMBER 31, 2019. 7% Other An inclusive approach high-quality materials are being All our operations are founded The aim of such an approach is fashioned and more sustainable 11% Alignment with local regulations on a responsible economic model. to rethink Kering’s relationships processes devised. For our Houses, (overtime, contract termination, etc.) Our comprehensive, sustainable with its stakeholders so as to this represents a vast swathe of FIND OUT MORE approach is a structural ensure fairness and accountability. creative territory yet to be explored. 13% 2019 Universal Registration Document: 69% Alignment with internal policies competitive advantage. Affecting all dimensions of Chapter 1. Kering at a glance; (use of employee discount, resale of Chapter 3. Sustainability HR/Management products, calculation of commission, Kering’s eco-system, from the Governance and ethics issues Code of ethics etc.) Towards sustainable Luxury Group’s strategy and the Houses’ Kering’s responsible model Website: 2025 strategy Can a responsible economic creative decisions to operational leverages an ambitious INVESTIGATIONS INTO THE 40 CASES CLOSED IN 2019 approach change the very production, processing and governance structure, nature of Luxury? For Kering, distribution choices, the model supported by the Board of the answer is a resounding “yes”. aims to reduce the social Directors and its Sustainability 8 For our Houses, sustainability and environmental impacts of Committee. Together they drive Not investigated is in line with our vision of modern the Group’s operations. decisions the sustainability strategy, Luxury. Businesses have an to operational production, which the Houses put into action 32 ethical obligation to be more processing and distribution every day under the guidance of Investigated responsible, reflecting society’s choices. Placing people at the dedicated experts. The Group’s new expectations, but this heart of the model brings fresh Ethics Committees, Compliance situation can also be viewed entrepreneurial spirit, inspiring structure and whistleblowing as an opportunity to grow, and engaging employees and procedure for employees CODE OF ETHICS BREACHES IN THE 40 CASES CLOSED IN 2019 and a source of inspiration and stakeholders. and third parties ensure innovation. Methods, materials, that Kering’s Code of Ethics Breach of Code: resources and products are being Creative potential and principles for responsible 5 cases reinvented and client usages Responsibility brings about short business conduct are properly and expectations are changing. and long-term competitive gains applied. No Code breach: Kering is changing the way it and promotes growth through ever 35 cases designs luxury products by more innovative and attractive
22 BUSINESS MODEL 23 STEADY GROWTH ENTERING A NEW GROWTH PHASE HARNESSING THE FULL Leverage full brand potential POTENTIAL OF LUXURY TO GROW Sustaining high level of operating In-depth work on brand equity, product FASTER THAN OUR MARKETS margins offering, distribution network, supply chain Substantial Free Cash Flow Investments required in short term generation, normative Capex level Significant operating leverage in medium term Over the past decade, Kering has undergone a profound Gucci Bottega Veneta strategic shift and is now a global leader in the luxury Saint Laurent sector. In the coming years, the Group will continue to strengthen and sustain its growth momentum.
AN ENSEMBLE OF COMPLEMENTARY PROMOTING ORGANIC clients’ expectations and communication and distribution HOUSES UNITED GROWTH aspirations by arousing desire, channels. This holistic omni- inspiring dreams, and tapping channel approach is supported BY A POWERFUL into emotions. by targeted directly operated CULTURE store extensions and strategies The Group aims to build on Sales efficiency for distribution agreements, its outstanding performance In their networks of directly travel retail, e-commerce, social to strengthen and sustain operated stores, our brands deploy media and digital communication this momentum in the coming initiatives to optimize comparable in a strategy to control the entire RELAUNCH UNDERWAY SCALING UP years, giving priority to the store sales performance through value chain. development of its Houses. an increasingly effective Offering and distribution Untapped markets, expanded distribution merchandising and in-store Digital expertise, CRM optimization networks, broadened product offering Above-market performance operational excellence, supported and innovation Brand equity investment Opex and Capex investments in a growth industry by the Group and its dedicated Digital is accelerating and Gradual recovery of profitability Margins to increase in short/medium term The future of the Luxury Goods teams. deepening our client relations, market is structurally bright offering exceptional client Girard-Perregaux Alexander Mcqueen and offers Kering major sources Client experience experiences. The goal is to instill Ulysse Nardin Balenciaga of value creation. The challenge Improving the quality of in-store an internal culture of innovation Brioni Boucheron Pomellato for each of our Houses is to client experience is central and produce personalized client Qeelin outperform its respective market to driving sales performance. experiences. A number of Kering Eyewear in all segments and categories. Personalization, support for projects have been set up, driven client before, during and after by a dedicated data science team, Product innovation the sale must be as distinctive under the leadership of the Energized by new creative as our collections and enable Group’s Chief Digital Officer. These teams, our Houses are setting us to create and sustain lasting projects are rolled out to support trends. Backed by the Group, connections with our clients. Kering’s digital transformation they are moving into new and drive e-commerce, CRM, data product categories and coming Omni-channel approach science and innovation activities up with ever more fresh ideas. Our client relations strategy is whilst considering future scenarios Their offerings meet their epitomized by continuity on all in sales and sustainability.
24 STRATEGY 25 FIND OUT MORE: 2019 Universal Registration FIND OUT MORE 2019 Universal Registration Document: Document: Website: 2025 strategy Chapter 1. Kering at a glance Chapter 3. Sustainability Sustainability Progress report (particularly for setting out 2017-2020 the indicators and the scope covered)
OUR SUSTAI-
Being a responsible Luxury group means NABILITYcrafting tomorrow’s Luxury. Kering perceives changes as an opportunity and a growth lever. With this in mind, the Group has set itself TARGETSambitious targets for 20251.
ENHANCING SYNERGIES Eyewear is a notable example. The aim is to adapt these functions FOR 2025 AND DEVELOPING GROWTH Our Houses benefit from a to the Group’s new scope, as well PLATFORMS dedicated specialist that ensures as changing consumer trends full control over the value chain and client expectations. of their frame and sunglasses businesses. This innovative Talent excellence management model enables Thanks to an ambitious CARE COLLABORATE CREATE Our integrated model gives Kering to harness the full growth worldwide human resources FOR THE PLANET WITH PEOPLE NEW BUSINESS MODELS us a distinct advantage. Our potential of its brands in this framework based on ever-greater brands benefit from Group-wide category and generate significant mobility, Kering facilitates the synergies while preserving their value creation opportunities. growth of its Houses through a — Reduce EP&L — Preserve the richness — Imagine disruptive unique characters and exclusivity. shared pool of talented individuals, (Environmental Profit & Loss of our heritage innovations that can Vertical integration expertise and excellence. Account) by 40% — Promote diversity and transform conventional Resource pooling and operational efficiency The Group helps employees reach — Reduce CO2 emissions by achieve gender parity in all processes in Luxury To enable our Houses to focus In 2013, the Group began their potential and express their 50% (Science Based Targets) positions and business lines — Explore new solutions and on the essentials – creation, strengthening its upstream creativity by developing skills — Ensure 100% traceability in and at all hierarchical levels technologies to promote production quality, product positioning in the luxury goods and performance, as well as by Group’s key raw materials of the Group the circular economy range development and renewal, value chain, in particular via offering aspirational development — Achieve 100% compliance — Guarantee equal pay across — Support future generations client relations, etc., the Group the targeted acquisition of opportunities. Particular attention with the Kering Standards all positions within the Luxury industry pools resources and streamlines leather tanneries to secure raw is paid to promoting diversity, for Group suppliers — Be the preferred employer certain strategic functions materials sourcing. Kering gender parity and inclusiveness. — Define and achieve the in the Luxury sector and (logistics, purchasing, legal is constantly improving and The Kering Foundation, which highest standards in animal develop progressive policies affairs, property, advertising adapting its operating model combats violence against women, welfare in employment space buying, IT systems, etc.). to ensure its structures are and the Women in Motion always more up-to-date and initiative, which showcases the Cross-business expertise flexible. The Group has launched contribution of women to the film To enrich its brands’ offerings, an ambitious transformation industry, strengthen the Group’s the Group draws on cross- project focusing on its information commitment to support women. business expertise. Kering systems, supply chain and logistics.
26 STRATEGY 1. Targets set against 2015 27 2018 RESTATED UNDER 2018 2019 IFRS 16 1 CHANGE REPORTED Performance
Revenue (in € millions) 15,884 13,665 16.2% 13,665
EBITDA (in € millions) 6,024 5,093 18.3% 4,436
Recurring operating income (in € millions) 4,778 3,995 19.6% 3,944
Recurring operating margin In 2019, Kering delivered (as a % of revenue) 30.1% 29.2% + 0.9 pt 28.9% another year of sustained, Net income attributable to owners of the parent (in € millions) 2,309 3,688 - 37.4% 3,715 profitable growth. Net income attributable to owners of the parent o/w continuing operations excluding non-recurring items (in € millions) 2 3,212 2,790 15.1% 2,817
Gross operating investments (in € millions)3 956 828 15.4% 828
Free cash flow from operations (in € millions) 4 1,521 3,551 - 57.2% 2,955
Net debt (in € millions) 5 2,812 - - 1,711
2019 2018 CHANGE
Percentage of employees on permanent contracts 93.0% 92.5% + 0.5 pt O/W full-time employees 93.0% 91.8% + 1.2 pt
Percentage of employees trained 82.5% 58.1% + 24.4 pts
Percentage of women managers 55.1% 50.5% + 4.6 pts
81 / 100 80 / 100 DJSI World score Silver Class Silver Class + 1 pt
Maintained CDP Climate score A A in A-list
23rd/100 2nd/100 -21 downgrade Global 100 ranking – Corporate Knights #1 Apparel #1 Apparel in ranking
2018 2015 CHANGE
EP&L intensity (€EP&L/€K revenue) €38 €44 - 14% Joint interview with Marie-Claire Daveu and Jean-Marc Duplaix — p. 30
1 First-time application of IFRS 16 in 2019. 2 In 2019, this item did not include the 3 Purchases of property, plant and equipment 5 Net debt: see definition on page 290 of the Overall performance — p. 34 2018 data restated in order to present non-recurring tax expense relating to the tax and intangible assets. 2019 Universal Registration Document. Our capitals — p. 44 comparable data. See Note 4 on page 312 settlement in Italy. See Notes 12.1.1 and 14.2 4 Net cash flow from operating activities of the 2019 Universal Registration Document: on pages 325 and 329 of the 2019 Universal less net acquisitions of property, plant and Our governance — p. 50 Consolidated financial statements as of Registration Document: Consolidated financial equipment and intangible assets. See definition December 31, 2019. statements as of December 31, 2019. on page 290 of the 2019 Universal Registration Document.
28 29 JOINT INTERVIEW WITH MARIE-CLAIRE DAVEU AND JEAN-MARC DUPLAIX is crucial since it provides a global approach to value creation. As a result, we have a more accurate picture of the challenges we Marie-Claire Daveu, Chief Sustainability Officer and Head face in addition to risks that of International Institutional Affairs could impact our activities. Such an approach allows for better planning, factoring in risk control Have you noticed a change across our entire value chain. in investor expectations and practices with regard Jean-Marc Duplaix – Our teams to Kering’s integrated experience the convergence Jean-Marc Duplaix, Chief Financial Officer performance? of financial and non-financial information, which fosters Marie-Claire Daveu – interaction between our both Sustainability is a driver for global departments and the Group’s our stretagy is relevant.. Today has completely transformed value creation that responds Houses. As an example, our the financial community has a its business model, from a to a growing interest from teams worked together to vital part to play in encouraging conglomerate of diversified mainstream and SRI (Socially launch our first ESG roadshow. increasingly virtuous practices retail activities into a Luxury pure Responsible Investment) investors The event was organized in the public and private sectors. player. Throughout this period, and analysts. It is clearly evident with the assistance of Sophie This unique vision is a key we have also transformed our from the exponential rise in L’Hélias, the Group’s Lead differentiator for Kering. business practices, ramping up questions and requests we receive Independent Director, who also the integration of sustainability from rating agencies, NGOs and attended. This exercise, which we How does the Group account in all stages of our value chain, institutional investors which intend to repeat, had a twofold for social responsibility and including in our Houses’ growth has increased almost threefold objective: answering investors’ environmental challenges strategy. Gucci ArtLab is a over the past two years. questions and strengthening in its economic performance? case in point since it includes It is also evident from the ever- their awareness and conviction sustainability in the creation increasing convergence between JMD – Since entering the that our vision of a bold and and production processes. the financial and non-financial luxury industry in 1999, Kering modern Luxury at the heart of Our integrated approach fosters performance. Integrated thinking
30 ENTRETIEN 31 Europe and the USA, it now by example. We strive towards and Chief Executive Officer, “We have transformed our seems paramount for companies achieving this on a daily basis. François-Henri Pinault. The to develop and adopt these types At Kering, our strategy is to initiative was recently showcased business practices, ramping up of indicators and tools that fully be at the forefront. As a leader, at a G7 meeting. incorporate a long-term outlook we also have a responsibility to the integration of sustainability to inform capital allocation create a momentum on which we I might add that the crisis we are decisions. change practices and mentalities, enduring is proof of our collective in all stages of our value chain, driving forward an alternative capacity to pull together - as MCD – Our desire for business model for all players. citizens, companies and actors of including in our Houses’ growth transparency is the reason With this in mind, our methods civil society - and speedily roll out why we published early 2020 and progress are subject to our disruptive solutions. As we start strategy.” a progress report on results open source policy, including our to think about life after Covid-19, of our sustainability roadmap EP&L and standards in regards and despite all the uncertainties, Jean-Marc Duplaix for 2025. This report not to raw materials sourcingand we suddenly have an opportunity only meets our stakeholders’ manufacturing processes. This to rethink our business model growing expectations, but it is also the core principle of the and practices, both individually also maintains high levels of Fashion Pact, a global coalition and collectively and at Kering motivation internally. The Luxury formed under the leadership of to extend our commitment industry is unique. Luxury must French President, Emmanuel and innovate further to craft set the trends and then lead Macron, and Kering’s Chairman tomorrow’s Luxury.
“The Luxury industry is unique. creativity and contributes to The longevity of our activity Do you see new challenges for reducting costs such as energy depends on their preservation. Kering regarding transparency Luxury must set the trends and water consumption. Above We cannot produce high- and leadership? all, though, aside from our quality raw materials for our JMD –Our business model and then lead by example. demonstrated commitment, businesses without preserving is solid and robust, achieving sustainability is inherent their host ecosystems. We must steady and profitable growth We strive towards achieving to developing high-quality develop a more eco-friendly in 2019. Despite the backdrop products for our customers. business model. Nowadays, of the unprecedented crisis this on a daily basis.” More specifically, it is integral it is unthinkable to develop a we have been enduring since to the production and sourcing luxury product that destroys Marie-Claire Daveu early 2020, we still look to the of the raw materials we use. biodiversity. It is also unthinkable future with confidence as we To guarantee a reliable supply to make a luxury product in social have already demonstrated chain, our concern not only stems conditions that do not respect by the past our outstanding from an ethics and reputation human rights and fundamental ability to adapt, our agility and standpoint, but also from freedoms. We are constantly our tenacity. We are also fully business necessity. working with our suppliers to aware - and have been for some ensure that they all comply with time - of the interrelationship MCD – Each and every one the Group’s high standards by between the three pillars made of us is aware of the major 2025. Our standards focus on up of the economy, the social challenges we face in the twenty- working conditions, reducing responsibility and the protection first century: climate change, our environmental footprint, of our environment. Discussions biodiversity loss, scarcity of traceability, animal welfare with investors have confirmed the natural resources coupled with and the use of chemicals. Our need for Kering to be increasingly an increasing global population, current rate of attainment vs transparent when it comes to which leads to higher demand. our standards already stands at its performance and the related The raw materials we use for 68%, which is very encouraging, KPIs, such as the EP&L. As non- our business (leather, precious but much remains to be financial accounting develops skins, gold, cotton, etc.) are done, particularly in terms of more standards, as illustrated sourced from nature, agriculture innovation. by the ongoing initiatives in or animal rearing mostly..
32 33 CHANGE IN REPORTED REVENUE BREAKDOWN OF 2019 REVENUE (AND CHANGE IN COMPARABLE1 REVENUE 2019 VS 2018, IN %)
3% Corporate and other 97% GROUP A SUSTAINED GROWTH Total Luxury +16.2% (+13.3%) TRAJECTORY: A FURTHER YEAR OF Houses STRONG AND PROFITABLE GROWTH LUXURY HOUSES +16.1% (+13.2%) €15,884m
At each stage of our value chain, we express our vision CORPORATE +19.7% (+16.5%) for a modern and bold Luxury, which combined with AND OTHER top-notch execution, has enabled us to outperform our peers and deliver excellent operating and financial results in 2019. In 2019, Kering once again demonstrated the relevance of its multi-brand model, harnessing
the growth of the luxury goods market across the various 1. Comparable revenue is defined on page 290 segments, regions and consumer groups. of Kering 2019 Universal registration document
REVENUE BREAKDOWN AND COMPARABLE CHANGE BY REGION 2019 VS 2018
FIND OUT MORE 2019 Universal Registration Document: Chapter 3. Sustainability; Chapter 5. Financial information In 2019, the Group achieved – Promoting long-term value NORTH AMERICA WESTERN EUROPE ASIA-PACIFIC JAPAN revenue of €15.9 billion, up 13.3% creation, and combining boldness 19% OF REVENUE 33% OF REVENUE 34% OF REVENUE 8% OF REVENUE on a comparable basis from 2018 1. and imagination, creativity Kering change: +7% Kering change: + 14% Kering change: + 20% Kering change: + 6% Its recurring operating income and measured risk taking, Market change2 Market change2 Market change2 Market change2 grew sharply, totaling €4.8 billion. adaptability and agility; Americas: +0% Europe: + 1% Continental China: + 26% Japan: + 4% For the first time ever, recurring Other Asian countries: + 6% operating margin topped 30%. – Nurturing each House’s This outstanding performance potential, with priority given to is a testament to the strength organic growth and operating of Kering’s business model, the cash flow generation. OTHER COUNTRIES talent and dedication of its 6% OF REVENUE 38,000 employees, the creative Kering’s financial priorities are Kering change: + 6% force of its Houses as well as unchanged and aim to optimize Market change2 disciplined financial stewardship. return on capital employed by Rest of world: - 5% enhancing profit margins and Kering continued to implement rigorously managing capital its vision and strategy in line with allocation. two principles: 1. On a comparable Group structure and exchange rate basis 2. Source: The data on the annual market change in the global Luxury Market come from the Bain Luxury Study – Altagamma Worldwide Market Monitor, published in November 2019 and present the annual change at exchange rates on a comparable basis. 34 OVERALL PERFORMANCE 35 DASHBOARD FOR KERING’S 2025 SUSTAINABILITY This dashboard presents Kering’s progress on results of our Sustainability Strategy for 2025 at end 2019. STRATEGYThis strategy and its related targets are presented on page 27 of this report. Further details are provided on pages 72-77 of Kering’s 2019 Universal Registration Document. Through each pillar, Kering is playing its part in achieving the Sustainable Development Goals (SDGs) of the UN.
Organic growth as Saint Laurent (14.4% ambition to protect the future of our Organic growth is our priority on a comparable basis); industry as well as the communities in an ever-changing industry. with which we interact: – Excellent momentum In 2019, the generation of observed in Kering’s other – Launched Fashion Pact: additional €2 billion in revenue Houses (17.8% on a comparable global coalition of more than 250 and nearly €1 billion in recurring basis), boosted by Balenciaga brands in the fashion and textile SDG 1 SDG 3 SDG 4 SDG 5 No Poverty Good Health Quality Education Gender Equality operating income was exclusively and Alexander McQueen. Both industry formed under the and Well-Being owing to extraordinary organic Houses recorded robust sales leadership of François-Henri growth in our Houses and related growth throughout the year, Pinault, committed to three operating leverage: confirming their status as growth practical objectives: stopping drivers. global warming, restoring – Luxury Houses’ revenue up biodiversity and protecting the 13.2% on a comparable basis, Synergies and growth oceans; propelled by growth of 14.0% in platforms SDG 6 SDG 8 SDG 12 SDG 13 – Improved scores obtained Clean Water Decent Work and Responsible Climate Action its retail channel network (78% Kering is structured and organized in the SRI (Socially Responsible and Sanitation Economic Growth Consumption of sales). This performance was to bring more expertise, value and Investment) indices, and and Production fueled by Gucci, Saint Laurent, operational support to each of its particularly our position in first Balenciaga and Alexander Houses. A notable success story is within the Corporate Knights McQueen, including a surge in Kering Eyewear, which generated 2019 Global 100 ranking for the online sales (+23% year on year), growth of 18.2% on a comparable apparel sector and our position with Wholesale revenue basis, largely owing to the top- maintained in the CDP’s Climate increasing 10.4%; performing Gucci and Saint Laurent A-list for the third consecutive licenses and the recently acquired SDG 14 SDG 15 SDG 16 SDG 17 year; Life Below Water Life on Land Peace, Justice and Partnerships – Outstanding performances Balenciaga license. It contributed Strong Institutions from Gucci with exceptionally €474 million in net revenue. – 14% reduction in the high comparatives (13.3% increase intensity of our environmental in comparable revenue), which Inseparable from our financial impacts (€EP&L/€K revenue) more than doubled its sales performances, our non-financial between 2015 and 2018. between 2016 and 2019 as well achievements result from our NB: Definitions of the indicators presented and their method of calculation are provided in the social and environmental methodological notes, available on the Group’s website. 36 OVERALL PERFORMANCE 37
2025 OBJECTIVES PERFOR- SDG 2019 RESULTS MANCE1 MAIN ACHIEVEMENTS
13 — CLIMATE ACTION Our carbon intensity reached 20.4 -49.9% carbon intensity -50% in CO2 emissions and planetary boundaries. tCO2/€m in gross margin 14 — LIFE BELOW WATER +59.4 pts of green electricity 84.8% of our electricity is green, 17 — PARTNERSHIPS CARE contributing to the decrease by 67.4% -100.2 kWh/m2 (-24.2%) in stores of our CO emissions linked to energy 2 Fashion Pact: 63 leading global textile consumption since 2015 and fashion companies, representing 250+ brands, commit on climate, biodiversity and oceans
FOR THE-40% EP&L 6 — CLEAN WATER Our EP&L intensity2 reached -14% since 2015 AND SANITATION 37.64 €EP&L/€k in revenue Launch of a global study on EP&L 12 — RESPONSIBLE CONSUMPTION AND impact of consumer use and end-of- PRODUCTION life phases of our products
13 — CLIMATE ACTION Kering signs the first private 15 — LIFE ON LAND sector partnership with IPBES for PLANET biodiversity
Implementation of 6 — CLEAN WATER 68% of our key raw materials are +1 pt alignment with the Kering the Kering Standards AND SANITATION aligned with our Kering Standards Standards since 2017 12 — RESPONSIBLE CONSUMPTION AND PRODUCTION
13 — CLIMATE ACTION
15 — LIFE ON LAND
16 — PEACE, JUSTICE AND STRONG INSTITUTIONS
Sustainable design 12 — RESPONSIBLE Traceability is achieved for 88% +3 pts in traceability since 2017 and traceability CONSUMPTION of our key raw materials 3 AND PRODUCTION Kering Standards e-learning platform 15 — LIFE ON LAND 4,400+ employees trained on the launched worldwide Kering Standards via e-learning Publication of Kering Animal Welfare Standards
Creation of the Green Fashion Shows guidelines
Materials 12 — RESPONSIBLE 3,800 sustainable materials in our +83 projects implemented for our CONSUMPTION Materials Innovation Library products since 2015 Innovation Labs AND PRODUCTION Sustainable Innovation Lab (SIL) dedicated to Watches and Jewelry launched in February 2020
Carbon offsetting 13 — CLIMATE ACTION 2.4 million tCO2 offset in 2019 +83 projects implemented for our for 2018 products since 2015 15 — LIFE ON LAND Sustainable Innovation Lab (SIL) dedicated to Watches and Jewelry launched in February 2020
How to read our performance
Results above expected performance to date
Results at expected performance to date
Results below expected performance to date
1. Evaluation of performance to date with respect to the objective defined for 2025 2. 2018 Data 38 OVERALL PERFORMANCE 3. Based on our Kering Standards 39 2025 OBJECTIVES PERFOR- SDG 2019 RESULTS MANCE11 MAIN ACHIEVEMENTS
Preservation of know-how 4 — QUALITY EDUCATION More than 480 experts trained Institut Saint Laurent Couture, through our 20+ haute couture, École de l’Amour Gucci, Pomellato 8 — DECENT WORK AND ECONOMIC GROWTH Watches and Jewelry craftsmanship Virtuosi with Scuola Galdus, and more COLLA- excellence programs
Local communities 1 — PAS DE PAUVRETÉ More than 10 active international Reforestation of gold mining sites programs focusing on our key raw in French Guiana, The Golden Line 8 — DECENT WORK AND ECONOMIC GROWTH materials in Ghana, Gobi Desert cashmere, BORATE Rare in China, and more Assessment and SDGs 8 — DECENT WORK We performed 3,441 supplier audits, +42% audits since 2015 AND ECONOMIC GROWTH accounting for 56% of our suppliers 17 — PARTNERSHIPS Materiality assessment and value chain mapping against the SDGs: 7 key SDGs identified as most material WITH for the Group Partnerships with 4 — QUALITY EDUCATION Key partnerships with leading Creation in 2019 of the IFM – Kering universities: IFM, Parsons, Tsinghua, Sustainability Chair schools and universities 17 — PARTNERSHIPS LCF, etc. More than 33,500 total participants 17,844 participants in the since the launch of the MOOC in 2018 PEOPLE Sustainability and Luxury Fashion – MOOC launched in China MOOC
Forward-thinking 3 — GOOD HEALTH Global parental policy launched in 100% employee coverage worldwide employment practices AND WELL-BEING 2017, Baby Leave policy effective since by policies launched 5 — GENDER EQUALITY January 1, 2020,
Global Health and Safety policy launched in 2019
Gender parity 5 — GENDER EQUALITY 63% female employees, 55% women Board-level parity up from 10% and inclusiveness managers, to 60% in 10 years. 60% women on the Board Appointment of Kering Chief Diversity, Inclusion and Talent Officer in 2019 94.4% of Group employees worldwide have completed the annual Ethics & Compliance training
Career paths 4 — QUALITY EDUCATION 82.5% of the Group’s employees Global internal digital platform benefited from training: 516,605 hours Kering Campus launched in 2018 of training provided to 31,410 employees, an average of 16.4 hours per employee
Preferred employer 4 — QUALITY EDUCATION 82% participation rate in the In 2019, weekly updates on the employee survey, with an 83% Group’s digital platform dedicated to 8 — DECENT WORK AND ECONOMIC GROWTH engagement rate in 2019 open positions for internal mobility
How to read our performance
Results above expected performance to date
Results at expected performance to date
Results below expected performance to date
1. Evaluation of performance to date with respect to the objective defined for 2025
40 OVERALL PERFORMANCE 41
2025 OBJECTIVES PERFOR- SDG 2019 RESULTS MANCE1 MAIN ACHIEVEMENTS
Disruptive innovations 12 — RESPONSIBLE 24% of our purchased leather Plug and Play partnership extended CONSUMPTION AND is metal-free to China PRODUCTION We engaged with 72% of the top First K Generation Award held in CREATE potential start-ups selected among Shanghai the 2,000+ identified First Hackathon for Sustainable Luxury
Circular economy 12 — RESPONSIBLE First assessment of the Kering Kering is a member of the Ellen CONSUMPTION AND Materials Circularity Index: 39% MacArthur Foundation’s Make PRODUCTION NEW of our raw materials with potential Fashion Circular and Circular Fibers for circularity are already circular initiatives
Sustainable purchases 12 — RESPONSIBLE Dedicated internal sourcing +15 pts of silk and +28 pts of cotton CONSUMPTION AND platforms and coordination for gold, purchased through the dedicated BUSINESS PRODUCTION cotton, cashmere, silk, and more platforms since their creation
100% of Watches and Jewelry Houses’ gold purchased through the Kering Ethical Gold Platform.
MODELS 12 — RESPONSIBLE 106 sustainability and business +73% participants since 2015 Stimulating innovation CONSUMPTION AND experts gathered for the Group’s PRODUCTION annual Sustainability Network Dedicated Group-level Innovation Conference “Future of Luxury” Department led by an ExCom in 2019 member since 2016, and creation of an Innovation Committee in 2018
Kering is a leading partner of the Plug and Play – Fashion For Good accelerator
Young Leaders 17 — PARTNERSHIPS In formation Advisory Group
How to read our performance
Results above expected performance to date
Results at expected performance to date
Results below expected performance to date
1. Évaluation de la performance à date par rapport à l’objectif poursuivi pour 2025.
42 OVERALL PERFORMANCE 43 OUR GROUP STOCK MARKET CAPITALIZATION FINANCIAL CAPITAL Luxury goods owe their enduring appeal to the insistence (in €m) Kering’s capacity to generate sound, balanced, on the highest standards of quality – to their unfailing and profitable growth affords tremendous leverage CAPITALSexcellence, to the way they are created, and to the x 3.7 for optimizing investment in the organic growth of all materials that go into them as well as to the systematic 73,899 its Houses. Through consideration of the vitality of each consideration given to environmental, social, and societal House and their respective degrees of maturity as issues along the entire value chain. In addition, well as the needs of the entire Group, Kering optimizes by protecting traditions and craftmanship, Kering investment, thereby creating value for its shareholders. preserves human and economic resources essential to its activities and strengthens its capacity to create value long into the future. 19,946
12/31/2015 12/31/2019 Mindful of its responsibilities as manager interests of all its other stakeholders1. of the capital entrusted to it, Kering implements strict financial discipline aimed Thanks to these skills, established at generating strong cash flow, improving and recognized by global market players, return on capital employed, optimizing its Kering is able to attract the financial capital This exemplary approach, on – to drive sound, balanced, balance sheet structure, and remunerating necessary for its long-term growth. its shareholders, while safeguarding the which Kering’s modern Luxury is and profitable growth. founded, is central to the Group’s ongoing success and contributes While all these types of capital to preserving the image of our come into play at some point Houses. in the five-basic links of our value 2015 2 2019 CHANGE chain, three of them – financial Understanding our dependence capital, human capital, and natural x2.1 and impact on all the resources capital – span the entire chain and Revenue (in € millions) 7,660 15,884 +20% CAGR and all the types of capital highlight the global value creation Recurring operating income x3.1 essential to our activities is on issues essential to the Group. (in € millions) 1,528 4,778 +33% CAGR absolutely crucial to our success. Our business model enables Recurring operating margin 19.9% 30.1% > +10 pts us to optimize and exploit in a responsible manner the full potential of the various types FIND OUT MORE: 2019 Universal Registration of capital we employ – financial, Document: Chapter 5. Financial manufacturing, natural, human, information social, relational, and intellectual 1. See addendum on p.2. 2. 2015 data adjusted for 2019 scope. 44 OUR CAPITALS 45 46 throughout theGroup. that prevails opportunity equal action, buildingontheculture of stage intheGroup’s determined atOfficer Keringsignalsanew Diversity, Inclusion andTalent ofaChief The2019appointment intelligence. and collective ofcreativity,source enrichment that promoting diversityisa worldwide, Keringbelieves firmly 38,000With some employees for Kering oroneofitsHouses. stating thattheyare proud towork 82%, with91%ofrespondents rateofnearly with aparticipation indicationofthis, aclear 2019 was byKering conducted in survey Theemployee repurposed. being training thatisconstantly through awidevarietyof fully realize theirpotential and bold canbe where people stimulating work environment and diverse establish anopen, Kering to effort makes every FIND OUTMORE Code ofEthics Chapter 3. Sustainability Document: 2019 Universal Registration
by theGroup topreserve thewealth ofitshumancapital. through aninclusiverespected approach are prioritiesset promoting diversity thathuman rightsare andseeing creativity, developing itsemployees’ talentsandskills, sustainable, itmodern, andinfluential.Encouraging the Group anditsHousesare redefining Luxurytomake suppliers,andothers–that –artisans, and itspartners the keys Itiswithitsemployees toKering’ssuccess. andexceptionalImagination, boldness, are expertise HUMAN CAPITAL covers – China, France, Italy, Italy, –China,covers France, it ofthe sixcountries In each againstwomen. violence to combat the Kering Foundation’s initiatives through expressed rights isalso tohuman Kering’s commitment standards. ofprinciples,valuesand set business, theGroup relies ona ofits thecornerstone of Ethics, byitsCode chains. Spearheaded whowork initssupply persons of itsentire staffandallthose rights andfundamentalfreedoms forthehuman is therespect Central toKering’s concerns child theworld over. ofanew toallparents Leave Baby 2020, provides 14 ofpaid weeks initiative, ofearlyLeave whichas andBaby policy its parental include Suchpractices practices. employment forward-thinking Kering toroll out continues To anemployer ofchoice, become stakeholders. Kering, andallits itsemployees, oftrustbetween basis continual actionscreatea All these patterns. behavior shiftin alasting that seek mobilization through campaigns andwide-scale boys; adolescent youngmenand specifically with youngergenerations, byworkingpreventing violence offered; by improving theservices helpingvictimsofviolence areas: itswork priority onthree focuses entrepreneurs, theFoundation andsocial NGOs forlocal support and theUnited States–andinits Mexico, theUnited Kingdom OUR CAPITALS
Observations 66.5 BREAKDOWN BYSEVERITYOFANOMALIES RECORDED WITHINTHE KERING GROUP %
AS OFDECEMBER31,2019 PROTECTION OF HUMAN RIGHTS breaches compliance Moderate 28.6 SA8000 for alltheiractivities 2 Housesare to certified industry luxury the supply chainsof the Italian the skillsoffemaleworkers in D, inprograms todevelop andValoredella ModaItaliana partners, the Camera Nazionale alongside Keringandits 4 Housesare engaged GEOGRAPHICAL BREAKDOWN 0.3 breaches Zero-tolerance breaches Serious compliance 4.6 % % %
OF SUPPLIERS Western Europe (excl. Italy) 6.8 and Safety Health 82.4 % ANOMALIES (EXCLUDING OBSERVATIONS)
RECORDED ASOFDECEMBER 31,2019 BREAKDOWN BYTHEMEOFTHETOP 5 Eastern Europe Eastern 2.5
%
%
Pay and working Italy 83.8 Other 0.9 6.0 auditsatitsthousandsofsuppliers. social Trafficking (GBCAT). many conducts Italso AgainstHuman BusinessCoalition Global Convergence andthe Project, and Labor the SustainableApparel theSocial Coalition, insupplychains,suchas particularly initiatives topromote humanrights, innumerousKering international participates vulnerablepeople. the exploitationofmost labor, labor, forced humantrafficking,and child The Group isfullyvigilantincombatting ofKering’s identity. component and central Total ofhumanrightsisakey priority respect conditions 8.5 % % % % Asia Environment 5.2 % Other 1.9 Working hours 2.0 % %
47 48 its EP&L intensity by40%has toreduce The 2025objective processes. materials andmanufacturing disruptive innovations onraw for drivesthesearch It also for itsenvironmental policy. ofKering’srelevance roadmap theof rawmaterials,confirms 74% attributabletotheproduction ofwhichwith 89%ofimpacts, by theGroup’s supplychains, rolepredominant played The impact. value toeach amonetary capital byassigning onnaturalof itsownoperations theimpact Group toassess enablesthe(EP&L) account EnvironmentalLoss Profit & environmental policy, the ofitsThe cornerstone Sustainability Document: Chapter 3. 2019 Universal Registration FIND OUTMORE Profit &Loss Account Website: Environmental 2017-2020 Progress reportSustainability
its activities can continue withintheplanet’s continue limits. can its activities preserve itsnatural TheGroup capital. thusensures that ever ontheplanetandtakingcare to toitsimpact Keringand businessmodel, more isbeing attentive than sustainability strategy ofitscorporate thecentral focus by climatechangeoralossofbiodiversity. Bymaking so on)whosequality andavailability jeopardized be can materials (wool, cashmere, leather, and silk, cotton, the Group toagreat depends degreeonnatural raw tothemmean applied the standard ofperfection developed byThe products Kering’sHousesand NATURAL CAPITAL between 2015and 2018. between target, with a14% reduction in linewiththe Group’s reduction 2015, since steadily declining been has environmental impacts Theintensityofgrowth. of theGroup’s vigorous organic is to be seen inthecontext seen is tobe on2017.forma basis Thischange ofnearly 12%onaproincrease an of €514millionrecorded The environmental impact the results ofits2018EP&L. of transparency, Kering published In 2019, true to itscommitment environmental footprint. towards theGroup’s reducing Group andallitsHousesgeared guidelinestotheessential Kering Standards, whichprovide inthe reflected especially been
programs offset carbon REDD+ certified through offset tons have been from 2018onwards. 2.4 million andsupplychainsoperations (GHG)emissionsfrom itsgas remaining annualgreenhouse allneutral in2019byoffsetting Lastly, carbon Kering been has in 2019withtheFashion Pact. achieved A newmilestonewas andresearchwork. methodology itsresults,publicly discloses For theGroup thisreason, tonaturalcapital.issues related widelyabout to communicate difference, Kering works actively must take actiontomake a Aware involved thateveryone OUR CAPITALS
7,660 REVENUE ANDEP&LINTENSITYREVENUE 44 14% Water pollution 7% Water consumption 6% Waste 32% useLand 34% emissions gas Greenhouse 7% Air pollution 2015 MAPPING OF 2018IMPACTS EP&L intensity: €EP&Lper€1,000inrevenue Revenue: €millions
8,223 2016 48
Tier 0 10,816 2017 Operations and stores 43 11%
Tier 1
Final assembly 13,665 2018 6% 38
Tier 2 Preparation of sub-components 9% MAIN CHANGES BETWEEN 2017 AND2018 2017 BETWEEN MAIN CHANGES in €millions proforma 2017 460
Tier 3 Processing of raw materials 10%
Tier 0 - 0.3 (Kering operations and stores)
Tier 4 Production of raw materials 64% Increased + 28.1 manufacturing 2018 volume Raw materials + 29.1 production and ENVIRONMENTAL processing 2018 PROFIT & LOSS 514.3 49 ACCOUNT EXECUTIVE 51 20% 60% 75% COMMITTEE46 50 51 10% 30% 33% 1 2019 2019 2014 2014 2019 2014 2009 2009 2014 2019 2009 2009 AVERAGE AGE AVERAGE INDEPENDENCE PROPORTION OF WOMEN INTERNATIONAL EXPERIENCE INTERNATIONAL
2 2 57 57 DIRECTORS 53
9% 27% 64% 55% 30% 40% 40% 60% 60%
OF BOARD 1. Ages are determined at 12/31 the year of the fiscal year concerned. of the fiscal year at 12/31 the year determined 1. Ages are do not include the these percentages of the AFEP-MEDEF Code, with the recommendations 2. In accordance employees. representing Director
nation GOVERNANCE
of 100 for Kering Corporate of 100 for Kering (+ 6 points). The Leadership promotes and Mixity program access to the highest women’s levels of management and contributes to the dissemi of equality. of a culture of the most gender-balanced Kering 40. companies in the CAC is also the only Luxury to group appear in the Bloomberg Gender- Equality Index.aims The Group to achieve gender parity and equal pay at all levels of the hierarchy functions. Kering and in all Group 2019 Genderpublished its France Equality Index for its Corporate entities and Houses in France, with a score of 95 points out
WITH A LONG-TERM VISION LONG-TERM WITH A ENGAGED GOVERNANCE GOVERNANCE ENGAGED of Kering’s activities and major activities and major of Kering’s brands the opportunity to participate the senior alongside corporate executives in setting strategic direction of the key the Group. With 60% of the Board of Directors, 33% of the Executive Committee of and 55.1% managers being women, to be is proud the Group one on the recommendation of the Appointments and Governance of the role to create Committee, Lead Independent Director in 2019. that the ensures The Group membership of the Board of Directors is balanced, diverse, and well suited to the trends and developments facing the The Executiveluxury industry. the Group’s Committee, operational management body, Kering’sreflects transformation into an integrated as group well as its increasingly internationalized activities. It gives the heads
the Board of Directors decided, operation and balance of power, operation and balance of power, with regard to the Board’s smoothwith regard To provide additional assurance provide To long-term development. whom are committedwhom are to Kering’s institutional shareholder, all of institutional shareholder, a controlling shareholder and an a controlling shareholder includes individual shareholders, includes individual shareholders, shareholder structure, which structure, shareholder responds to the Group’s responds to the Group’s governance approach also Officer, considering that this Officer, the Board Executive and Chief functions of Chairman of of functions of Chairman Kering has opted for the single Kering implements the Group’s strategy. strategy. implements the Group’s the Executive which Committee, defines strategic direction, and on the Board of Directors, which Kering’s governanceKering’s is based the Group’s financial and financial and the Group’s extra-financial performance, and contributes to robust and consistent communication. decision optimizes making, ensures efficient strategic efficient strategic ensures Kering’s governance structure governanceKering’s structure 50 BOARD OF DIRECTORS IN 2019
9 11 94% meetings members of which: attendance rate
6 7 1 1 independent women employee Lead representative Independent Director
SKILLS IN LINE WITH MARKET TRENDS
% of members of the Board with the skills in line with the challenges identified in the Luxury industry
55% 73% 55% 55% BOARD OF DIRECTORS Meeting, etc.), in particular, New growth drivers Increasing environmental New consumption Demand INITIATIVES TO LEVERAGE the Board of Directors discussed and technological habits for transparency KERING’S STRATEGY the following items in 2019; challenges – Approval of the Group’s Code of Ethics; – Proposed offering of bonds – The Board of Directors exchangeable into existing determines and assesses Kering’s ordinary shares of PUMA; FOUR SPECIALIZED COMMITTEES strategic direction, objectives – Presentation of the “Kering and performance and ensures APPOINTMENTS 2028” financial modeling process; their implementation. You may REMUNERATION AND GOVERNANCE find an exhaustive list of the main – etc. AUDIT COMMITTEE COMMITTEE COMMITTEE SUSTAINABILITY COMMITTEE agenda items for Board meetings 5 meetings 6 meetings 1 meeting held in fiscal 2019 in chapter 4 It is also worth noting that 95% attendance rate 89% attendance rate 60% attendance rate 1 meeting of the 2019 Universal Registration in 2019, Kering held its first ESG 4 members of which 6 members of which 5 members of which 100% attendance rate Document. Further to its recurring (Environmental, Social and 3 independent 4 independent and 3 independent 4 members of which tasks related to Kering’s strategy Governance) roadshow for key 1 representing employees 2 independent and governance (review of business investors to present the Group’s operations, review and approval approach. The event was of financial statements, organized with the assistance assessment of work of specialized of Sophie L’Hélias, the Group’s committees, preparation and Lead Independent Director, notice of the Annual General who also attended.
52 GOVERNANCE 53 FIND OUT MORE 2019 Universal Registration Document: Chapter 4. Report on corporate governance REMUNERATION OF THE GROUP'S EXECUTIVE CORPORATE OFFICERS
FRANÇOIS-HENRI PINAULT Chairman and Chief Executive Officer The remuneration of executive corporate officers 100 % includes a fixed and a variable portion, determined and approved by the Board of Directors each year, based on recommendations from the Remuneration Committee 27%2 Annual variable and in accordance with the recommendations of the remuneration 100 % AFEP-MEDEF Code and the AMF (French Financial Markets’ Authority). 50%1 Elimination of the annual 73%3 variable remuneration for 2020 Multi-annual variable remuneration (LTI)
23% In line with the Group’s long-term vision and Fixed remuneration Reduction of the proposed fixed remuneration 27% for 2020 from €1,200,000 to €960,000 the interests of its shareholders, the remuneration structure for executive corporate officers would continue to comprise three components: Remuneration structure Decisions to reduce Remuneration structure for 2020 as initially remuneration in light of subject to approval decided by the Board of the Covid-19 pandemic by the Annual General – Fixed remuneration; Directors on February and its impact on Meeting of June 16, 11, 2020 business activity 2020 as decided by the Board of Directors on April 21, 2020 – Annual variable remuneration based on the achievement of financial (70%) and non-financial (30%) targets (including organization and talent management: 10%, corporate social responsibility: 10%, sustainability: 10%);
JEAN-FRANÇOIS PALUS Group Managing Director – Multi-annual variable remuneration based 100 % on the Group’s long-term performance.
28%5 In light of the Covid-19 pandemic and its impact Annual variable FOUR SPECIALIZED Audit Committee the remuneration and benefits 100 % remuneration on business activity, and following the decisions COMMITTEES It reviews the annual and received or deferred, stock option taken by the Chairman and Chief Executive Officer half-year financial statements, or free share plan and/or similar 4 6 44% 62% and the Group Managing Director, an amendment ensures the relevance and benefits. Elimination of the annual Multi-annual variable variable remuneration was agreed in respect of fiscal 2020 concerning reliability of accounting methods remuneration (LTI) for 2020 executive corporate officers’ remuneration policy and the implementation of internal Appointments and during the Board of Directors’ meeting held on control and risk management Governance Committee 28% 38% April 21, 2020. On the one hand, the proposed fixed procedures. It also examines the It examines proposals for Fixed remuneration remuneration for the Chairman and Chief Executive work of the Statutory Auditors the appointment of Directors Officer has been reduced. On the other, annual The Board of Directors has and their independence, their and their independence, variable remuneration for the Chairman and Chief established four specialized selection or renewal procedure. the composition of specialized Remuneration structure Decisions to reduce Remuneration structure Executive Officer and for the Group Managing committees to improve Finally, it conducts a review of committees and succession for 2020 as initially remuneration in light subject to approval decided by the Board of the Covid-19 by the Annual General Director has been eliminated. its functioning: the Audit sustainability and environmental plans for the Group’s executives. of Directors on February pandemic and its impact Meeting of June 16, Committee, the Remuneration policies. 11, 2020 on business activity 2020 as decided by the Board of Directors For 2020, the remuneration structure for Committee, the Appointments Sustainability Committee on April 21, 2020 the executive corporate officers will therefore and Governance Committee and Remuneration Committee It assesses the Group’s comprise two components instead of three: the Sustainability Committee. It examines and makes proposals commitment to ethics, social, fixed remuneration and multi-annual variable Composed of directors whose regarding the remuneration environmental and societal remuneration, subject to approval at Kering’s skills are specifically identified of executive corporate officers, responsibility; It also reviews Annual General Meeting to be held on June 16, to meet expectations, these proposes to the Board the method ethical measures, performance 1. LTI = 100% of the fixed remuneration for the year Y + annual variable remuneration for year Y-1. 2020. committees effectively contribute for allocating Directors’ fees and CSR ratings. 2. Annual variable remuneration: 120% of the fixed remuneration. to preparing the Board of allocated to the Board by the 3. LTI = 100% of the fixed remuneration for the year Y of €1,200,000 Directors’ decisions by issuing Annual General Meeting and + effective annual variable remuneration for the year Y-1. 4. LTI = 80% of the fixed remuneration for the year Y + annual variable recommendations or advisory examines the remuneration policy remuneration for Y-1. opinions. for executive officers as well as 5. Annual variable remuneration: 100% of the fixed remuneration 6. LTI = 80% of the fixed remuneration for the year Y of €1,200,000 + effective annual variable remuneration for the year Y-1. 54 GOVERNANCE 55 As a participant in the UN Global Compact since 2008, Kering contributes to the Sustainable Development Goals (SDGs) in Value chain
each stage.
D & N
R G I From creation to the customer ES
D G INN SIN experience, all Kering’s Houses I O VATI are focused on five key stages O CHAND N R E M of value creation.
SOURCING RAW MATERIALS CRE ATIO CR N M ER E C M N O E T I S R D PRODUCT E E U P V C X E DEVELOPMENT E L
O
P
EMPLOYEES M E
S N
A T L E S A N PLANNING D N M O A TI RK C ET DU ING PRO E ION IBUT MMERC STR CO DI E- MANU AND F AC TUR
ING
G L N OG I T E I ST K R ICS
MA AND ADVERTISING
A chain of actors crafting tomorrow’s Luxury — p. 58 Exceptional craftsmanship — p. 60 In light of the Group’s activities, it directly addresses 7 of the 17 SDGs Stage 1: Creation — p. 62 Stage 2: Development — p. 66 Stage 3: Production — p. 70 Stage 4: Sales and marketing — p. 74 Stage 5: Customer experience — p. 78 SDG 3 SDG 5 SDG 6 SDG 8 SDG 12 SDG 13 ODD 15 Our value creation model - p. 82 Good Health Gender Clean Water Decent Responsible Climate Action Life on Land and Well- Equality and Work and Consumption Being Sanitation Economic and Production Growth 56 57 EXCEPTIONAL CRAFTSMANSHIP TO GIVE LIFE TO THE CREATIVE VISION
A CREATIVE VISION PROGRESSIVE A FIT AND FINISH EXCEPTIONAL PIECES THE BOUTIQUE, and exceptional quality TRANSFORMATION by craftsmen with unique in all product categories the setting reflecting standards that guide the of materials expertise the world of each House selection of raw materials
READY-TO-WEAR 22 stages and Made by the tailor’s refined Weight of revenue and expert hands, each item 220 hours of of clothing creates a perfect craftsmanship to make 3,800 a suit by Brioni silhouette. fabrics classified in the MIL1
LEATHER GOODS AND SHOES 96 Cut, shaped, and stitched by the hours to make Weight of revenue artisan, the leather offers a delicate a cabat intrecciato balance between durability, elegance by Bottega Veneta and softness. 90% in leather traceability
WATCHES AND JEWELRY Inspired by the most precious 2 700 materials, striking a balance hours of work to create the Flocon impérial between a long list of constraints: Weight of revenue necklace by Boucheron transforming a design into a work of art, making the metal and stones 100% ethereal, combining precision responsible gold and esthetics, ensuring beauty from every perspective.
MAPPING OF ENVIRONMENTAL 64% 10% 9% 6% 11% IMPACTS (EP&L):
1. Materials Innovation Lab
58 59 NGOs and civil society Financial community Competitors Innovation players Creative talent and excellence in craftsmanship Local communities Suppliers and Subcontractors Customers and consumers Shareholders
D A CHAIN OF ACTORS
& N R G I CRAFTING TOMORROW’S LUXURY ES
D G INN SIN I O Through the diversity of its businesses, Kering brings VATI
O its Houses together, focusing on five key stages: CHAND N R E M from creation to customer experience. At every stage of the value chain, the Group gathers an extensive network CRE ATIO SOURCING N RAW MATERIALS ER E of stakeholders: clients, creative talents, innovators, C M N CR O E M T I business partners, NGOs and actors of civil society. S R D E E U P V PRODUCT C The diversity of this network is a source of distinctive X E E DEVELOPMENT L O creativity for the Group and its Houses.
P
EMPLOYEES M E
S N
A T L E PLANNING S A N D M N IO N E A T IO RK C IBUT MMERC ET U STR CO IN OD MANUFACTURING DI E- G PR AND An integrated value chain Bringing together opensource, a major breakthrough The integration and sharing our stakeholders for implementing a sustainable of support activities throughout Convinced that only mobilization business model.
G LOGISTICS this value chain enables the Group and the mutual enhancement N I T E to support the rapid growth of its of these actors enable disruptive These exchanges fully contribute K R brands, particularly in sourcing raw innovations to promote a more to a global and shared value
MA AND ADVERTISING materials and in terms of logistics sustainable Luxury, Kering is creation, outlined in the following and innovation – and its centralized committed to fostering dialogue pages, by stages in the value chain. expertise, such as Kering Eyewear. and interactions with and between The Houses focus on what is key: its stakeholders. As an example, creating and developing the Group is undertaking some of exceptional products for a unique its R&D programs jointly with its customer experience. suppliers and research institutes that include the Hong Kong If it fosters innovation and cost Research Institute of Textile and synergies, this value chain is also Apparel. conducive to driving an ambitious and shared sustainability approach Kering also seeks to share its within the Group and its Houses, breakthroughs and pioneering THE STAKEHOLDERS WITH WHOM WE INTERACT strengthened by the mobilization tools with companies in the luxury of a team of 20 specialists and a sector and beyond. As of 2013, the dedicated network. Each of Kering Group has been partnering up group’s Houses includes the with leading experts and published demands and the need for quality its EP&L (Environmental Profit and sustainability in its DNA. & Loss Account) methodology in
60 VALUE CHAIN 61 62 WITH THESTAGE MARKET TRENDSASSOCIATED Shareholders Customers andconsumers Suppliers andSubcontractors communities Local incraftsmanship Creative talentandexcellence Innovation players Competitors Financial community andcivilsociety NGOs
EMPLOYEES
R&D
C
R
E
A
T
I O
N DES IGN
M
OUR CONTRIBUTION TO THESDGS E RCHAND
ISIN G SDG 12 SDG STAGE 1:CREATION SDG 13 SDG
CONTEXTdesign ofits products. withthe of itsactivities, starting the impact this challengebyreducing raw materials,Kering is tackling on theavailability and qualityofcrucial Aware ofclimate change oftheimpact or man-maderisks Climate change, othernatural strong appeal. commercial andhave are successful the collections Houses’ creative leadership, ensuring the TheGroup supports expectations. changing constantly to consumers’ andrespond toanticipate Directors andwell-known Artistic creative teams Kering isabletorely on itsstrong and businessmodel Kering’s paradigm luxury vision tostores andcrafts tomorrow’s Luxury. bringsthebrands’design, andmerchandising, creative which,throughat Kering, aprocess itsstagesofR&D, theseare thedrivers ofthecreativeconnected: process to theaspirations ofcustomerswhoare increasingly sustainable materials,risk-taking, responses Inspiration, audacity, thesearch fornew, high-quality, AND OURPRODUCTS AT OFOURVISION THECENTER STAGE 1–CREATION, and todeveloptheirskills. individuals, toattractandretain them, therefore toidentifytalented essential instrumental inHouses’ identity. Itis ofthecreativeteams, the members andinparticular of itsemployees are thetalentandcreativity success Among thekeys totheGroup’s Talent management
63 64 OUR VALUE OUR
Eyewear, which manages alltheGroup’s revenue ofKering consolidated 17.8% inthe basis) (onacomparable ofmore than watch brands;increase for ofgrowth year consecutive second – 2018; helm inNovember atthe whoarrived Creative Director Veneta’s Bottega by DanielLee, showlaunched andfashion collection CREATION– basis; comparable of14.4%with outstandinggrowth ona the €2billionrevenue mark, passed which categories atSaintLaurent, – Michele’s creativenarrativeatGucci; integrationofAlessandro successful groups,thankstothe and consumer regions across thevarioussegments, (+13.3%Gucci basis), onacomparable – Kering’s otherHouses: from a remarkable performance and andBalenciaga Saint Laurent results forGucci, with exceptional industry theluxury outperforming performance, andfinancial operational ofour Creativity isthesource Kering upa keeps services, pooled providing theHouses with Besides PRIORITIESSynergies studies,etc.). consumer agencies, shows, trends forecasting tracking ofmarket trends (trade know-howandconstant exceptional – positioning; thereby affirmingtheir distinctive acrossallthesupports implemented House definingauniqueaesthetic each to specific creative codes – range; innovative product and creativity andanalways-balanced managementalongwithbold excellent thatguarantees team three-member – and thusmake driver: creationagrowth trends luxury enable ittoanticipate policy and ambitioushumanresources businessmodel Kering’s powerful Organic growth
A team of employees with ofemployees A team ofexpression and A space CEO-Designer-Merchandiser, a Solid performance in Jewelry and and inJewelry Solid performance forfirst response Extraordinary inall success Continued inrevenueFurther at increase and sustainableluxury. tofashion hackathon dedicated launch ofHacktoAct, thefirst and Playinnovationplatformthe Awardof KGeneration in China Plug with Fashion organization For Good, innovation players,inapartnership – andWong Noé Gaspard Kar Wai; Ellis inadditiontofilmdirectors Vanessa andBret Easton Beecroft that includeDaidoMoriyama, creative initiative, involvingartists – Alexander McQueen; for andSarahBurton Balenciaga, for Gvasalia Demna for Gucci, Alessandroare Michele SaintLaurent, awards. Amongthelaureates received Group’s Housesand designershave ofthe the creative world,several as – 2018; brands since Courrèges Balenciaga, andMontblanc activities,including Eyewear toWatchesdedicated andJewelry. (SIL) and aSustainable InnovationLab sustainable andinnovativematerials of pool a offers branddesignteams (MIL),which Innovation Lab innovation structures: aMaterials – intheirproducts; they use ofthematerials theimpact phase ofthedesign Houses foranalyzingas forallthe provided a managementtool – future designers; for training initiatives,inparticular and through partnerships secured – world: dialoguewiththecreative permanent
Launch of dedicated sustainable ofdedicated Launch Implementation oftheEP&L, Strategic know-howandexpertise Accelerated initiatives with new initiativeswithnew Accelerated by visionisrecognized This bold SELF, SaintLaurent’s multifaceted STAGE 1:CREATION
Website: TheBalenciaga brand report 2019 Activity Chapter 2.Groupactivities 2019 Universal Registration Document: FIND OUTMORE HOUSES: LUXURY MAKEITONEOFTHEMOSTDESIRABLEFASHION AVANT-GARDE APPROACH ANDPRAGMATIC VISIONFOR THE EPONYMOUSFOUNDER.BALENCIAGA’S DECIDEDLY MASTERFUL TECHNIQUESANDASTYLEBEFITTINGOF OF THEHOUSE’SHAUTE COUTURE,COUPLED WITH WARDROBE OFREALISMIMBUEDWITHTHEATTITUDE SEASON. GVASALIA AHIGHLY PRESENTS CONTEMPORARY BALENCIAGA’S COLLECTION EVERY ISREINVENTED made using3Dprotyping techniques. – platformavailable inover 100countries; e-commerce networksexpression andviaan inthedigitalrealm onsocial – andexpress majorissuesfacingoursociety; underscore – world;innovation forthefashion thereby harnessing experiences, fully immersive andsensory – forLuxury; penchant witha people creative andartistic well as generations as society, ofyoungerof modern theaspirations echoing –
Creative innovation capabilities, as seen intheclothes seen as Creative innovation capabilities, thebrand’s defined In addition,Gvasalia creative Fashion adesire toidentify, reflecting isresponsible, For show, each createsandreinvents Gvasalia uniqueand The House’s are through reinterpreted thelens codes them in harmony with contemporary trends. Balenciaga collections are firmly rooted inthepresent. are firmly rooted collections trends. Balenciaga them inharmonywithcontemporary astounding growth. Gvasalia has embraced thevaluesofHouse anditsfounder, embraced has Gvasalia growth. astounding developing They offer us revolution in their display of innovative volumes and techniques andstrikingThey offerusrevolution intheirdisplayofinnovativevolumes andtechniques Since the arrival of Demna Gvasalia as Artistic Director in 2015, Balenciaga has delivered in2015,has Director Balenciaga Artistic as Gvasalia thearrivalofDemna Since
silhouettes combining creativitywithapragmaticvision. silhouettes combining
A NEWREVOLUTION
BALENCIAGA,
CONTEXT CREATION MEANS CREATIVE AUDIENCES EARNED FROMYOUNG CITY-DWELLERSANDARTY, COMMERCIAL ANDCRITICAL SUCCESSANDACCLAIM REMARKABLE GROWTH BYRESOUNDING DRIVEN – talent andBalenciaga’s resurgence: – going toWFP; oftheproceeds with aportion alineofclothingandaccessories produced Balenciaga in world hunger. To thehumanitarianagency, support spike drawing attentiontoa recent Programme (WFP), theWorld supported TheHousealso animal species. Food ofNatureendangered (IUCN)tohelpprotect Conservation upwithFarfetchpartnered andtheInternationalUnion for major issuesfacingoursociety. For instance,Balenciaga – VALUE – the originalsalonsatbrand’s historical address. andatelierreplicating team will establishadedicated andaplatformforinnovation. Balenciagaof creative freedom and originalcraftsmanship, mode creatinganunexplored creative vision theHouse’s connect contemporary better · · · · · ·
since 2018(2ndinQ32019,since 3rd inQ2 2019). intheLyst Index’s been has top3brands Balenciaga in2016; London Ready-to-Wear award Designer atTheFashion Awards in award,of theyear inNew also York andtheInternational New York In2019, the2017 CFDA’s International Designer Creative Spirit Award won theBAP’s Gvasalia Demna in Announced reintroduction ofHauteCouture reintroduction toAnnounced Gvasalia’s ofDemna recognition creativeContinued at aimed collections Exclusive andresponsible followers; more The House’s than11million has Instagramaccount Hourglass collection; withits as goods, is Balenciaga’s inleather success sneaker.epitomizes thechunky luxury tothis Added Trainer andTripleincluding theSpeed S, that amodel iconic, sneakers thathave Critically acclaimed become in sales; fornearly 60% brandforMillennials,accounting A go-to In 2019, €1billion; revenue theHouse achieved above industry: ratesintheLuxury One ofthehighestgrowth
65 66 WITH THESTAGE MARKET TRENDSASSOCIATED Shareholders Customers andconsumers Suppliers andSubcontractors communities Local incraftsmanship Creative talentandexcellence Innovation players Competitors Financial community andcivilsociety NGOs
EMPLOYEES
D
E
OUR CONTRIBUTION TO THESDGS V
E T L O N E P M
RAW MATERIALS
SOURCING
DEVELOPMENT
PLANNING PRODUCT
STAGE 2:DEVELOPMENT SDG 13 SDG SDG 15 SDG
of the Group is as fair as possible. fairas of theGroup isas perception results thatconsumers’ so andtherobustness ofits practices, itsexemplary quality ofitsproducts, theoutstanding mustreflect coverage Kering’s reputation and itsmedia governance andglobal Ethics CONTEXTKering’s highstandards. with toensure thattheycomply policy ofaspecific are thesubject processed and and thewaytheyare extracted quality.and impeccable Thematerials distinctiveappeal must combine oftheHouses The products health consumer quality andsafety,Product trends andinnovations. of positive acatalyst of rawmaterialsandtobe andinitialtransformation production, atthelevelofextraction, its impact toreducing committed the Group has is foundinitssupplychain.Thatwhy footprint Near 90%ofKering’s carbon or man-maderisks Climate change, othernatural in our sourcing; andtoplanproduction. in oursourcing; Group’s highstandards ofexcellence andsustainability development;in product toensure that we the meet requirementsto integrate anddeadlines thetechnical are andgeteverything toprepare ready thecollection from prototyping Themultipletaskshere toproduction. From dream toreality, from catwalk tostores, OUR ENVIRONMENTAL LEADERSHIP OPERATIONAL EXCELLENCE AND AT THESOURCEOFOUR STAGE 2—DEVELOPMENT: materials. of raw threatens -theproduction maythreaten -orevenalready loss for Kering. Inaddition,biodiversity akey issue the Houses have become by volatility oftherawmaterialsused andprice The scarcityofresources and biodiversity Raw materialsscarcity, quality sourcing. ofits thetraceability and enhances andtheKeringsupplier charter Standards all itssuppliersadhere totheGroup’s gold,Keringsuch as ensures that materialsused, ofcertain and thetype Given thediversityofitssubcontractors freedoms Human rightsandfundamental
67 68 OUR VALUE OUR Fairmined-certified gold, in particular: gold,in Fairmined-certified sourcingplatformstopurchase shared prototyping anddevelopmentof – processes; developmentandproduction product theinternalizationof and increasing – organization anditsplanning: results operational are itsexcellent fortheGroup’sTwo key reasons solid the highestqualitystandards. thatmaterialsmeet and guaranteeing sourcing whilemaintainingmargins – among others; management unitsforproducts, andcrisis ofEthics, in theCode totheSupplierCharter agreement auditandtheir following atechnical ofsuppliers standards, selection toqualityandsafety of products of thehighestquality:certification ensures theGroup’s are products – supply chain: andarobust, high-quality excellence whichincludeoperational its assets, Keringopportunities, capitalizes on To risksandseize withthese deal Organic growth practices and standards enabling the and standards enablingthe practices withbest withcompliance combined with suppliers collaboration closer –
CREATION· · PRIORITIES
their Watches; Perregaux Nardin andUlysse for for alloftheirJewelry, didGirard- as gold responsible used Boucheron Pomellato, and DoDo,Qeelin theplatform’stons since launch; tomore thanfivemetric purchased gold the volumeofresponsible in2019bringing purchased
In 2019, Veneta, Bottega Gucci, gold Two tonsofresponsible Shared ready-to-wear ready-to-wear Shared Upgrading thesupplychain, Sustainable andresponsible ofactions A combination More precise traceability and and More traceability precise
standards. theimplementationofKeringas ofitssupplychainssuch resilience – targeted acquisitions; in thevaluechain,notablythrough – valuechain: integrated powerful and ofa with thebenefits Kering day provides itsbrandsevery Synergies from REDD+ carbon offset programs. offset from REDD+carbon thankstosupport and biodiversity populations local supporting projects processes: materials sourcingandmanufacturing in2019forkeyStandards’ coverage raw – the achievementofits2025 targets; Group tomake bigstridestoward – · · ·
forensic science methods; forensic science and technology using blockchain leather,cotton, skins, andprecious the farmtoconsumer, covering from toensureprojects traceability gemstonesandsilver); colored fibers, synthetic materials (silk, standards; animalwelfare Publication ofspecific ▪ ▪ Actions tostrengthen the Strong positioning upstream Implementation of several pilot pilot Implementation ofseveral offournewraw Incorporation Extension oftheKeringExtension 2.4 milliontonsofCO STAGE 2:DEVELOPMENT 2 offset from from offset
THE GROUP’SSUPPLY CHAIN: THE BESTTREATMENT FORANIMALS THROUGHOUT OF LUXURYANDFASHION, AIMEDAT ENSURING ADDRESSING ANIMALWELFARE INTHEWORLD STANDARDS, THEFIRSTEVERBODYOFGUIDELINES IN 2019, KERINGPUBLISHEDITS ANIMALWELFARE Website: 2025 strategy Website: KeringStandards Chapter 3. Sustainability 2019 Universal Registration Document: FIND OUTMORE The Kering ofouractivitiesbypromoting Standardstoensure arethelong-termsuccess intended – and NGOs; scientists farmers andherders,animal welfare experts, – etc.).; strict limitationsontransportation, ofhumannutrition,competition” with sources regenerative grazingandavoidance of“food promotion ofin favor ofpasture-rearing, andintensive farming(prohibition offeedlots guidelinesforslaughterhouses well as lives, as throughout their andgoats calves, sheep – industry; inthe luxury across theglobe thatmake upthesupply chainanimal species – skins; forthetradeofprecious (CITES) ofWildFauna Species Endangered andFlora the Convention onInternationalTrade in in thisregard, andfirstforemostwith – on criticalcompliance; levels toprovide guidanceSilver clear andGold – the agri-food industry.the agri-food working with from closely and teams headquarters, (MIL) from theMaterialsInnovation Lab with support Standards across allofitsactivities,inHouses, Moreover, Kering toroll outtheKering continues and theadoptionofauditprotocols. withstrategicsupplierswith pilotprojects sustainable growth through the uniform implementation of the Sustainability Strategy inallthe throughsustainable growth theuniformimplementationofSustainabilityStrategy animal welfare, traceability and chemicals. Supported by ambitious objectives, thestandards byambitiousobjectives, animal welfare, andchemicals.Supported traceability sourcing (leather, diamonds,etc.)andmanufacturingprocesses cotton, skins,wool, precious
(tanning, metal refining, etc.). There are five key areas: environmental impact, social impact,(tanning, metalrefining, etc.).There aresocial fivekeyenvironmental impact, areas: Group’s Houses, through a common foundation of best practices in the areas ofrawmaterial intheareas Group’s practices foundationofbest Houses,through acommon Checking supply chain practices comply supplyChecking chainpractices withinputfrom years over three Developed individual Standards forcattle,Detailed offirststandards forall scope Expanded withthestandards strictcompliance Ensured The standards inBronze, are structured are oneofthekey of40%inKering’s leversforachievingareduction EP&L by2025. KERING’S ANIMALWELFARE STANDARDS:
AN INDUSTRYFIRST
CONTEXT CREATION MEANS ACHIEVING ITS 2025 TARGETS: KERING CONTINUESTO MAKEPROGRESSTOWARDS KERING STANDARDS AS PART OF2025 SUSTAINABILITY STRATEGY, CREATING THE 2025 — 2019 — 2018 — 2017 — 2012 — STANDARDS TRACEABLE AND100%INCOMPLIANCEWITHTHEKERING GUIDELINES VALUE VALUE — REVIEWEDANDEXPANDED SCOPEOFGUIDELINES FORMALIZEDFIRSTRESPONSIBLE SOURCING INCORPORATED FOURNEWRAW MATERIALS PUBLISHEDTHEKERINGSTANDARDS ONWEBSITE PUBLISHEDKERINGANIMALWELFARE STANDARDS TARGETS: 100%OFKEYRAW MATERIALS multiple party initiatives. multiple party – Standards via e-learning; – audits; ofexotic skinsby third-party purchases – year; the Group’s this tanneriesfrom farmsaudited bystandards: 90%ofalligatorskinpurchases – Traceability in2018. 88 % alignment in2018. 68 % TRACEABLE BACK TO THEIRCOUNTRY OFORIGIN. TARGET: 100%OFKEYRAW MATERIALS TO BE MATERIALS WITHKERINGSTANDARDS. TARGET: OFKEYRAW 100%ALIGNMENT
Standards for luxury industry upscaled and upscaled industry Standards for luxury 4,400+ ontheKering trained employees 70% cumulative oftanneries’ rateofcoverage onanimalwelfareFirst auditsconducted
69 70 WITH THESTAGE MARKET TRENDSASSOCIATED Shareholders Customers andconsumers Suppliers andSubcontractors communities Local incraftsmanship Creative talentandexcellence Innovation players Competitors Financial community andcivilsociety NGOs
EMPLOYEES
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U LOGISTICS C T IO N
OUR CONTRIBUTION TO THESDGS MANUFACTURING SDG 6 SDG STAGE 3:PRODUCTION SDG 8 SDG SDG 13 SDG
of thecompany. Working withseveral takencommitment, tothehighestlevel isakey and fundamentalfreedoms ofhuman rights The protection CONTEXTfundamental freedoms Human rightsand laboratories. and accredited byengineers process the production outthroughout arecontrols carried ofitsqualityapproach, As part standards are apriorityforKering. withhighsafety and theircompliance sold The qualityoftheproducts health consumer quality andsafety,Product know-how atthehighestlevel. teams’ on maintainingtheproduction depends their clients’expectations knowhow. tosatisfy TheHouses’capacity onexceptional creators,butalso talented Kering isabletorely notonlyon Talent management efficient tools. efficient usingthemostinnovative production of modern and manufacturing withexceptionalof artisanal methods the Group anditsbrandsthepurest combine traditions their strong identitiesanduniqueheritage. Every day, express theknow-how thatendows theHouseswith craftsmen fully This isthestageatwhichdedicated PRODUCTS GUARANTEEING EXCEPTIONAL QUALITY OFEXECUTION STAGE 3—PRODUCTION:
is oneoftheGroup’s toppriorities. distribution andparallel counterfeiting heritage against Kering’s exceptional andprotecting to it.Preserving thatbelong methods and production domain namesalongwithknow-how offamousbrandsand portfolio large avery The Group possesses protection property Intellectual reputation andthatofitsbrands. rights risks.Inthisway, its itpreserves andaddress ethicalandhuman detect and actsto responsibility on extended of its Houses, Keringthe products takes thousand supplierstomanufacture
71 72 OUR VALUE OUR impact oftheiroperations; impact thereby theenvironmental reducing management tooptimizecosts, more quicklyandadaptinventory demand,respond to anticipate position inabetter brands willbe Asaresult,and logistics. theGroup’s supplychain ourITsystems, impacting – through: improving itsperformance while andexpertise greater efficiency year,Every theGroup acquires on thequalityofitsoperations. Kering’s results are highlydependent activities,usingthelatest logistics – integration: implementation ofrelevant vertical alongwith and industrialcapacities skills and developmentoftechnical andenablethesharing operations of level tooptimizetheimpact attheGroup activities are pooled In additiontojointsourcing, key Synergies plan. anditscompliance system its alert bytheGroup’s ofEthics, Code supported and integrityinternallyexternally, – products; defective forrecalling andlogistics process throughout theproduction laboratories andcertified byengineers controls as qualitysuch of actionstoensure product alongwithaset support and technical – qualityrisks: product to guard againstreputational and Kering processes implemented has Organic growth key professions; standards of and ensure thecontinuity toachieve thehighestquality required know-how theartisanal preserve –
CREATION· PRIORITIES
in theUnited States; Constructing newwarehouses Launching an ambitious project anambitiousproject Launching We restructured our completely Targeted investments to Dissemination of a culture of ethics ofacultureDissemination ofethics Implementation ofoperational
of responsibility. culture Houses byinstillingacommon leveloftheGroup andits at every – Pellettieri); Veneta’sBottega ScuoladeiMaestri Brioni’s ScuoladiAltaSartoria, (Gucci’s del’Amour,young artisans École – suppliesofrawmaterials; to secure oftanneries the targetedacquisition valuechainthrough in theluxury – levels); corporate and local, Europe), Americas, attheregionallegal resources (Asia, and counterfeiting tocombat policy (includinga andproperty products, theGroup’sprotecting know-how, – hubs; with themaintransportation andinterconnectivity storage capacity integration, cateringforgreater timeandomni-channel volumes, lead intermsof Houses’ newneeds Luxury the inorder tomeet technologies, of theGroup’s Policy. Anti-Corruption part as conducted procedures diligence – suppliers in2019; attheHouses’ audits conducted notablythroughEthics, 3,441 social – development; working andproduct inproduction atemployees aimed The trainingwas byAlexanderMcQueen. provided slavery, followingthetrainingcourse therisksofmodern awareness about –
Integration ofsustainability totrainhighlyqualified Schools upstream Stronger positioning to attentionispaid Particular More than60,000 due third-party of withtheCode Compliance Our Houses’initiativestoraise STAGE 3:PRODUCTION CRAFTSMANSHIP, INNOVATION, ANDSUSTAINABILITY: TO THEVALUES OFCREATIVITY, ARTISANAL IS ATESTAMENT TO GUCCI’S COMMITMENT HISTORIC HQ, THISSTATE-OF-THE-ART FACILITY AND SHOES. ESTABLISHED CLOSE TO THEHOUSE AND MANUFACTURING FORLEATHER GOODS AND R&DFOCUSEDONALLASPECTS OFDESIGN FORPROTOTYPINGIS APROGRESSIVECENTER UNVEILED INAPRIL2018, THEGUCCIARTLAB FIND OUTMORE Over the past four years, Gucci has developed a unique competitive advantagewithintheluxury auniquecompetitive developed has Gucci fouryears, thepast Over integration and reduced delivery times. delivery integration andreduced onvertical andinnovation focused of excellence – in 2018; significantindustrialinvestments most of Italy’s milestones inGucci’s history, one well as as – includes: del’Amourthe École program, that education thanksto ofideas alaboratory techniques, ofskillsand andlearning to thepreservation dedicated withinGucci, andnurtured developed – thedevelopment ofmaterials andforms; as well research andtesting,sampling, as scientific spirit:prototyping,the House'sexperimental – latest technology; withthewith overequipped 950employees – and business activities, the Italian house has redefined luxury for the modern day. forthemodern luxury At redefined has theheartand businessactivities,theItalianhouse sector. placingcreativity, By ofallitscollections atthecenter inclusivityandself-expression
of this vision lies the unique, romantic, eclectic creative energy ofGucci’sdesigner, creativeenergy talented of thisvisionliestheunique, romantic, eclectic A center characteristicofGucci’sA center approach importantRepresenting oneofthemost withtheirneeds; aligned traininginaflexible wayknowledge thatis to provide withproduct allemployees · and operators; production training technical · to trainstudentsprofessional standards; mestieri), offeringasix-month program · expression ofthecultureThe perfect A sitepromoting thecreative emulationof 37,000 toFlorence ftinnovation sq. hubclose
A technical academy,A technical designed (Scuoladifabbrica), school A factory (ScuoladeiA craftsmanshipschool Gucci website Website: TheGucciHouse Report 2019 Activity Chapter 2.Ouractivities 2019 Universal Registration Document: OF BUSINESSSUCCESSANDCREATIVITY GUCCI ARTLAB:ANEWFRONTIER
Alessandro Michele.
CONTEXT CREATION MEANS
OF GUCCI'SEXCEPTIONAL GROWTH: HAS QUICKLY BECOMEAN IMPORTANT DRIVER GIVING FORMTO HOUSE’SCREATIONS, ARTLAB DIRECTOR ALESSANDROMICHELE.BYRAPIDLY REVOLUTIONARY AESTHETICOFGUCCI’S CREATIVE TO FACILITATE THEREALIZATION OFTHE THE GOAL OFTHISEXPERIMENTAL LABIS sensibility. withhiscontemporary combined andsymbols, codes reinventioncomprehensive ofGucci’s historical – 2016; itssalessince more thandoubled has Gucci as to over €9billion,aremarkable performance yielding anadditional€1.3 billionrevenue in2019 – atArtlab; prototyped – Capitan; Coco Unskilled Worker, Monreal, Angelica Hicks, Ignasi withGucci: who have collaborated artists recently striking muralsonArtlab’s exterior, by decorated – processes; synergies fostering andintegrated practices best and thereby optimizingtheexchange ofexpertise inthesamelocation, goods andleather shoes both together allprototyping andR&Dactivitiesfor – VALUE
Universal forAlessandro Michele’s acclaim unique oncreativity andemotion, A businessbased are goods andleather shoes All theGucci through creativity iseven reflected An unbridled thatbrings industry The firsthubinthe Luxury
73 74 WITH THESTAGE MARKET TRENDSASSOCIATED Shareholders Customers andconsumers Suppliers andSubcontractors communities Local incraftsmanship Creative talentandexcellence Innovation players Competitors Financial community andcivilsociety NGOs
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CONTEXT them. producing indevelopingand as products in marketing theGroup’s andselling attained musttherefore be excellence and civilsociety. of Thesamedegree Kering between of communication points The stores are important also Image andbranding the Group anditscustomer. between ofcontact network isthepoint this since its distributionnetwork, through to theimageconveyed related isclosely Kering’s appeal and businessmodel Kering’s paradigm luxury has limited visibility ofthe consequencesofthishealthhas limited crisison visibility government in March. Asthesituation currently stands, theGroup activities inItaly following themeasures by taken the Italian the Group’s boutiques initsmainmarkets, aswell asitsproduction has sincespread acrosstheglobe, andisnow affectingbusinessat the Covid-19 virus. Albeitinitially limited toChina,theepidemic In thisrespect, early 2020hasbeenmarkedby theemergence of dreams andemotionsinspiredby theirexceptional products. andkeepingalive the ourHouses’collections to access coherent andcomplementary, makingiteasy forcustomers and newgenerations.are Ourdistributionmethods retail tofulfilltheaspirations thatisdesigned ofcustomers store networks,andtravel operated directly e-commerce, omnichannelapproach combining and complementary Kering worldwide distributesitsproducts usinganagile AN OMNICHANNELAPPROACH MARKETING: THEPOWER OF STAGE 4—SALESAND
demand. consumer environment thatmayaffect regulatory, orpolitical economic, social tochanges inthe activities are exposed its means Kering’s internationalscope andgeopolitics Macro-economy construction/renovation projects. supervising wellas as locations, strategic wellas as conditions the best toobtain properties when leasing sector, Keringcareful isespecially intheluxury competition the intense market activity intheproperty and totheGroup’s Owing significant Real estatemanagement Document, issuedon April30, 2020. April 21andtheamendment toKering’s 2019Universal Registration you mayconsult theinformation published between March 20and (in theFinancesection,under“Regulated Information”). Specifically, refer totheGroup’s regulated information publishedonitswebsite its performance. Shouldyou require additionalinformation, please
75 76 OUR VALUE OUR according tochangingmarketaccording trends adaptation environmental footprint; network’s and execution operational improvement ofthe reception, ofsale:qualitythe transform points – instabilities; despiteanymacroeconomic growth distribution network toenableorganic – and authenticexperiences; ofunique, asource personalized shops, physicalandonline between approach ofanintegrated part to become Housesfrom 2020 Goods and Leather activitiesoftheCouture e-commerce – from salesnetwork; anindirect support withsecondary preserved, House arevision andidentityofeach store network toensure thecreative operated characterize thedirectly – experience: customer creates anextraordinary foritsHouses Kering developed has The uniquedistributionnetwork that Organic growth the internalization of e-commerce the internalization ofe-commerce withaviewto a-Porter (YNAP), the jointventure withYoox-Net- CREATION– ofsale; onpoints investments focused – in travel retail; more -andupswing than20%growth (+13.3%), inonlinesales- particularly – all theHouses; – times); delivery availability, range,product better (expanded clientservice and improved – services: ensures high-quality theHouses’ imageand that protects environment commercial exceptional theGroup offersan brands’ products, thedistributionof controlling By PRIORITIES
Targeted investmentsto balanced A geographically Internalization ofthe to approach Selective Announcement oftheend Announcement 59% ofgrossoperational salesgrowth Exceptional stores for 1,381 operated directly New omnichannelcapabilities depth andbreadthoftheoffering,etc. as the as well oftheranges redefinition byregion andtype; products allocate toeffectively criteria used distribution: improvement ofthe center of excellence atGroup level. ofexcellence center – digital ecosystem; ofKering'sthe clientatheart toplace intelligence artificial such as – operations; buyingandproperty Group formedia – bills,etc.); energy guide, formanaging theNUSsystem SustainableStore theSmart systems, (LEDlighting efficiency energy of theirenvironmental profile and tostores, withimprovementextended – unique offerings: the higheststandards andtomarket enablealltheHouses tomeet services andqualityofKering’s The widescope Synergies work;and expansion markets renovationgrowth wellas as – clientele; oftheinternational and expectations – showsandphotosessions; fashion over18foradult aged hire models undertaken thatitsHouses willonly – and desires oftheHouses’ clients; theexpectations that anticipates marketingwith aneffective strategy – activities inH12020;
Creation of an e-commerce Creation ofane-commerce ofnewexpertise Deployment bythe offered services Shared ofresponsibility Kering’s policy Targeted in store openings As of2020, Kering has Strong network coupled A set ofinitiativestooptimize A set STAGE 4:SALES ANDMARKETING THEIR SALES: NETWORKS, THEREBYHELPINGTHEMTO INCREASE RENOVATING THEIRDIRECTLY OPERATED STORE KERING ASSISTS ITS HOUSESINEXPANDING AND FIND OUT MORE: Number of DOS FROM 2015… AMQ Pomellato For where Kering, showcase areitisanexceptional wheresold; astore products isnotjustaplace customer experience. andelevated toofferanunparalleled expansions refurbishments and through both its boutiques, existing toenhance retail network andcontinued – Shanghai andBeijing; more mature markets, firstflagshipstores in stores worldwide, emerging andoperated inboth – concept; tothenew store orconverted developed – the identity and history of each House is expressed, a special place where adialogue isengaged place aspecial Houseisexpressed, ofeach the identityandhistory of reinventing the client experience while bringing the brands and their clients closer together. whilebringingthebrandsandtheirclientscloser of reinventing theclientexperience with all its clients and civil society. The selective development of directly operated store (DOS)with allitsclientsandcivilsociety. operated developmentof directly Theselective
Bottega VenetaBottega onreinforcing its focused of28directly by Saint Laurent Opening stores ofGucci Continuous success 40% retail Houseandoffersthepossibility thedesirabilityanddynamismofeach network increases
BAL €1.0bn YSL Brioni Chapter 5. Financialinformation Chapter 2.Groupactivities; Chapter 1.Keringataglance; 2019 Universal Registration Document:
Boucheron A STRONGDIRECTLY OPERATED STORE NETWORK REFLECTING THEUNIVERSEOFEACH HOUSE Qeelin €1.3bn BV €3.9bn Gucci
150 DOS
% ofrevenue Retail as
CONTEXT MEANSCREATION …TO 2019
Number of DOS DISTRIBUTION NETWORK WAS ASUCCESSIN2019: THE STRATEGY INTERMSOFDIRECTLY OPERATED
AMQ VALUE the Houses. profile, savings, for energy andlower costs – 2015,since tomore than€40,000/m²; – etc; reserving-reservation, service, click andcollect availability instores, buyingonline, ofarticles theonline includechecking These services. andonlinestores withcross-channeland-mortar – performance; – VALUE Pomellato
40% retail energy intermsofanimproved Benefits stores m²inGucci insalesper 100% increase brick- ofsynergiesDevelopment between Improvement oftheHouses’sales Qeelin Brioni €2.0bn YSL Boucheron
€2.0bn BAL
€1.2bn BV
€9.6bn Gucci 150 DOS % ofrevenue Retail as
77 78 WITH THESTAGE MARKET TRENDSASSOCIATED
Shareholders Customers andconsumers Suppliers andSubcontractors communities Local incraftsmanship Creative talentandexcellence Innovation players Competitors Financial community andcivilsociety NGOs
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CONTEXT processes. andsupport operational which nowplayavitalrole inthe ofinformationsystems, the security toimprove need toanincreasing led The digitaltransformation has Information systems experience. we mustofferthemanincomparable To attractthemandgaintheirloyalty, formeaning. searching continually whattobuy,decide and theyare quantity ofinformationtohelpthem aninexhaustible at theirfingertips theyhave connected, and continually Theyare younger expectations. Our clientschange, dotheir andso Customer experience the relationship between thebrand anditsclients. networks anddialogueonsocial communication enrich for theclientwhatmakes himorherunique. Digital thatarousesit istheexperience emotionandrepresents personality.of arefined andunique Beyond theproduct, vehiclea recognized ofself-expression andastatement ofheritage andcraftsmanship,embodiment butalsoas Today, notonlyasthe Luxury isexperienced EXPERIENCE AN EXCLUSIVE CLIENT STAGE EXPERIENCE: 5—CLIENT products. oftheir toamisperception lead their imageandreputation butalso notonlydamage could controversies networks. Negative or discussions onsocial with theirclientsandsociety Houses interactmore directly Image andbranding GDPR. requirements toregulation suchas ofnewcompliance etc. andtherise phishing, of data,cyber-attacks, regarding particularly theftorloss ofdataareprotection key challenges The managementanalysisand (Dataprotection) Cybersecurity
79 80 OUR VALUE OUR – – experiences: renewed its clientstoliveconstantly House expresses itsworld andinvites from theGroup,With support each events,etc.). special the brick-and-mortar andonlinestores, between experience (aseamless growth thereby promoting robust organic Houseremainsthat each auniqueentity, – opportunities; etc.)andsustainability subscription, (rental, newcommercial think about – the Kering RetailAcademy; House andvia withineach experience andcustomer shopping process, forloyaltybuilding, practices best – etc.; tools, improvement ofCRMand clienteling – relationship withtheir clients: anddirect and tomaintainaprivileged shoppingexperience an exceptional than everontheirabilitytooffer more depends The Houses’ success Organic growth
· CREATION· · · · · PRIORITIES
Roll out of Gucci 9,Roll out ofGucci with350 site launchin theUKandUS; transformation ande-commerce Nardin’sUlysse digital foronlinesales,up20%; Record WeChat; networks Weibo suchas social and more activeengagementonChinese intheworld media ofLuxury; social Group influential onallthemost stocks; toin-store with real-timeaccess tailor-made stylerecommendations, ofanapp allowing 6,500 salespeople andavailabilityDevelopment to team; after-sales a dedicated rolloutContinued ofKering Signature, Strong physical positioning ofthe Strong physicalpositioning An omnichannelexperience: dialogue: A personalized Coherent distribution channels so Coherent distributionchannelsso to Creation ofanInnovationteam Training in ofsalesconsultants The developmentandcontinual product offerandinnovations: product – better use ofavailable use data. better tothe clientsthroughoffered Houses’ toimprove theservices data science – capabilities; the brandswithGroup’s digital andsupport oftheITsystem, security and theefficiency client data,enhance storeinvestment program tosecurely – the Group’s processes; operational and and optimizetheITsystem harmonize, channels andtomodernize, client informationfrom multiple – Guide, etc.); (e.g.practices SustainableRetail bysharingbest promoted service – client buyingexperience: Housetoofferaunique each it helps doingso, By intheircommunication. as well as oftheclientexperience, aspect Kering itsHouses inevery supports Synergies · · ·
powered bythelatesttechnology; powered onlineclientadvisors dedicated World Food Program (WFP). with the Balenciaga’s partnerships Brioni’s and sustainable collections organizations, inthestyle of charitable the Houses tosupport by initiated Capsule collections technology; and platform, integratingfashion is aninnovativeandcollaborative ThenewMcQAlexander McQueen. brandby anin-house as re-launched brand McQ, acontemporary developmentof Successful line; make-up ofanew and theintroduction by TheAlchemist’s in2019 Garden followed withBloom, fragrances of Alessandro Michele’s first launches Highly successful Permanent promotion ofthe Creation of a team dedicated to dedicated Creation ofateam Rollout ofamultiannual combining ofadatabase Launch andresponsible Exceptional STAGE 5:CUSTOMER EXPERIENCE
THIS APPROACH ISBASEDON: CODES. EMPATHETIC ANDINNOVATIVE, THAT THEBOUTIQUE’STRADITIONAL CHALLENGED SPACES OPENED AND ALEXANDERMCQUEEN CUSTOMERS. IN2018, GUCCI,BOUCHERON THE WAY THEYEMOTIONALLY ENGAGE THEIR THE HOUSESARECONSTANTLY RETHINKING and its clients, the boutique - a more open and protean setting - is transformed intoatrueliving -istransformed andproteansetting -amore open and itsclients,theboutique community around thespace. community mainly atstudentstocreateaninclusive creative aimed events andconferences Street Old Bond holdingon Alexander McQueen with forinstance – world; andtheGucci ofthespace their discovery theminemotional linkswithclientsandassist thatforge more connectors” example “Gucci act,withfordimension ofthepurchasing thecommercial beyond thatgoes experience – warm experience; uniforms,foramore friendly andcontemporary tables atBoucheron’s ormore Hôtel deNocé by round ofsalesoffices thereplacement such as andclients salesadvisors the proximity between –
of the space of experimentation and expression encompassed by the boutique. Ifthesales bytheboutique. andexpression encompassed ofexperimentation of thespace Less intimidatingandmore inclusive spacesLess clientA richerandmore experiential tostrengthenClient reassessed hospitality Redefining the codes of customer experience, theHousesare radicallytakingownership ofcustomerexperience, thecodes Redefining advisors embody and initiate an authentic and personal relationship between theHouse relationship between andinitiateanauthenticpersonal embody advisors INTIMATE BASEDONEMOTION EXPERIENCE, OFFERING ANUNFORGETTABLE AND
space forauniqueexperience. space
CONTEXT MEANSCREATION
OF THEHOUSES: THE DISTINCTIVE ANDDESIRABILITY IDENTITY EXPERIENCES, THEREBYSTRENGTHENING UP TO NEWARTISTIC, CREATIVE ORLIFESTYLE BOLD, THESENEWSPACES THEBOUTIQUE OPEN VALUE – VALUE – exchange andlifestyle: a brand-new retail destinationforexpression, introducesDrive, Thisspace Los Angeles. onrueSaint Honoré,boutique, Paris andRodeo – experiences; with immersive andinnovative digital collections dedicated combining communities, in citiesaround theworld andtheirsurrounding andengage withclients toconnect designed – a historical setting thatresemblesafamily home: a historicalsetting inspired by traditionalItalian staples. inspired menu, thecaféoffers acurated boutique, opened from the brand’s accessible Directly newly in OsakaHankyu Men’s store. department · · ·
The Hôtel de Nocé of Boucheron inParis, ofBoucheron The Hôtel deNocé by Anthony Vaccarello; creative andcultural destination curated anew line, Rive Gauche itembodies Laurent totheSaint anod Rive Droite as Named its clients; theHouse’s towelcome designed friends: andclassicism, modernity combining aHistoricMonument, as andclassified in 1717 A renovation ofthebuilding, constructed The first Bottega VenetaThe firstBottega café opened floor; onthesecond apartment in theBoucheron anight haveto take adrink orspend abreak, formajorclientsThe uniqueopportunity Opening of Saint Laurent Rive Droite ofSaint Laurent Opening stores ofpop-up aseries Pins, Gucci
81 BY LEVERAGING OPTIMIZED BY KERING, AND CREATING VALUE... .. THAT THE GROUP SHARES EXCEPTIONAL QUALITY THE GROUP IS CRAFTING WITH ITS STAKEHOLDERS RESOURCES TOMORROW’S LUXURY
A VISION EMPLOYEES Embracing creativity for a modern, €15,884m €1.98 billion paid in salaries and in revenue: The Group’s actions and business bold vision of Luxury employer contributions practices founded on an 82.5% of employees trained EXPANSIVE SENSE OF ETHICAL RESPONSIBILITY 3% ACTORS OF Kering’s entire staff covered combined with strong values Corporate and other INNOVATION by progressive employment Extension of the Plug and Play – A MULTI-BRAND MODEL practices, including 14 weeks of Fashion for Good partnership built on a long-term approach and creative paid Baby Leave autonomy for the Houses to China with the organization of the first K Generation Award
38,068 EMPLOYEES Materials Innovation Lab (MIL) with exceptional know-how and creativity SUPPLIERS AND and Sustainable Innovation Lab SUBONTRACTORS (SIL) focused on Watches and 97% Resource optimization resulting Jewelry Luxury Houses: in annual savings of nearly €1 million as part of the Clean By RESPONSIBLE USE OF Design program and an average 19% reduction in greenhouse A VALUE CHAIN €15,383m NATURAL RESOURCES gases emissions (2015-2018) at NGOS AND and raw materials, bringing key advantages participating suppliers guided by our 2025 roadmap CIVIL SOCIETY 3,441 audits conducted More than €2.4 million paid Upstream positioning and IN THE with suppliers on social, by our Houses to cultural integration in the value chain environmental and sourcing sector projects CR DIFFERENT E EAT C ION issues (+42% since 2015) Cross-business expertise e.g. IEN More than 1 million people ER BY EXCEPTIONAL PRODUCT P Kering Eyewear X reached via social media in INNOVATIONS TO PRODUCTS E R HOUSES CATEGORIES E D the 3 countries hosting the AND PROCESSES, Shared support functions M E O V “16 Days 16 Films” campaign key levers for differentiation, T E S L (Kering Foundation) O and exceptional customer experience Kering Standards, the common U 63% 13% 8% 16% 55% 18% 14% 6% 7% P C CREATIVE
foundation for implementing M E S
the 2025 Sustainability strategy N
A TALENTS AND T
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E S EXCELLENCE IN A N D CRAFTSMANSHIP A network of M N A IO Nearly 500 experts trained at RK T SEVERAL THOUSANDS SUPPLIERS ET UC Kering’s Houses since 2015 via LOCAL ING OD mainly located in Italy PR around twenty programs to support COMMUNITIES excellence in craftsmanship 2.4 million metric tons of CO2 GUCCI SAINT LAURENT BOTTEGA VENETA OTHER HOUSES LEATHER GOODS SHOES READY-TO-WEAR WATCHES AND JEWELRY OTHER First MOOC on sustainability offset via projects in favor of local launched in 2018, extended to China communities and biodiversity in 2019 thanks to the support from 1,381 DIRECTLY OPERATED REDD+ carbon offset programs stores and a growing number of ateliers More than €2.7 million donated by the Houses to combat poverty, and for healthcare, education and A STRATEGY training that aims to harness the full potential SHAREHOLDERS of Luxury to grow faster than our markets AND FINANCIAL €956M IN GROSS OPERATING INVESTMENTS to support the growth of the Houses COMMUNITY PROMOTING ENHANCING A balanced and rewarding dividend ORGANIC GROWTH SYNERGIES AND distribution policy, dividend in ENVIRONMENT DEVELOPING cash: €8 a share in 20191 14% reduction in EP&L impact GROWTH CUSTOMERS between 2015 and 2018 PLATFORMS Several prizes and awards acknowledging the Houses’ creativity A stable SHAREHOLDER STRUCTURE Roll-out of Kering Standards combined with international capital and Direct distribution channels guaranteeing service quality across all activities, new animal a committed governance to support the Group’s and respect for the image of the Houses, representing 78% welfare standard published in long-term development TO SUPPORT of revenue 2019 OUR AMBITION An increasingly digital experience with growth of more than Carbon neutrality in Scopes 1, 2 20% in online sales and 3 achieved in 2018 for Kering’s To be the world’s most influential Luxury group 1. As decided by the Board of Directors on April 21, 2020 and given the context operations and supply chains in terms of creativity, sustainability and long-term of the Covid-19 pandemic and its impact economic performance. on economic activity, the 2019 dividend, Kering, founding member of the which is subject to the approval of the Fashion Pact June 16, 2020 Annual General Meeting, has been lowered by 30% compared 88% of key materials traced back to the amount initially proposed. to their country of origin 82 83 OUR PUBLICATIONS
Methodology Other Kering publications Assembled collaboratively – 2019 Activity report with the various Kering group’s departments as well as with – 2019 Universal Registration members of the Executive Document and the amendment Société anonyme (a French corporation) Committee, this report covers issued on April 30, 2020 with a share capital of €505,117,288 the 2019 fiscal year and relies — – Financial publications and on data from the 2019 Universal Registered office Letters to shareholders Registration Document and all 40, rue de Sèvres, 75007 Paris of the Group’s communications. – 2025 Sustainability 552 075 020 RCS Paris Strategy: Crafting Tomorrow’s — Data presented Luxury Tél. : +33(0)1 45 64 61 00 in this document — – Sustainability Progress The data presented in this kering.com Report 2017-2020 document are for the entire Kering group for 2019. The – 2018 Kering Foundation definition of “comparable” for the Activity Report data presented in this report as – 2018 EP&L Results such is detailed in the Universal @KeringGroup Registration Document (p. 290). Kering @kering_official Keringgroup
RapportActivity d’activité report — — 2019 2018
2019 ©Kering 2020 Universal Registration Document Advisory and drafting: Capitalcom Creation and design: Maison Sagan 2019 ACTIVITY REPORT 2019 UNIVERSAL REGISTRATION DOCUMENT
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