Reference document 2016 1_VA_V4 04/04/2017 13:21 Page1 TABLE OF CONTENTS CHAPTER 1 Kering in 2016 3 CHAPTER 2 Our activities 17 CHAPTER 3 Sustainability 57 CHAPTER 4 Corporate governance 141 CHAPTER 5 Financial information 221 CHAPTER 6 Share capital and ownership structure 367 CHAPTER 7 Additional information 379 This is a free translation into English of the 2016 Reference Document issued in French and is provided solely for the convenience of the English speaking users. 2016 Reference Document ~ Kering 1 1_VA_V4 04/04/2017 13:21 Page2 2 Kering ~ 2016 Reference Document 1_VA_V4 04/04/2017 13:21 Page3 CHAPter 1 Kering in 2016 1. History 4 2. Key consolidated figures 6 3. Group strategy 8 4. Kering Group simplified organisational chart as of December 31, 2016 15 2016 Reference Document ~ Kering 3 1_VA_V4 04/04/2017 13:21 Page4 1 KERING IN 2016 ~ HISTORY 1. HISTORy The Kering group was founded by François Pinault in 1963, 1997 as a timber and building materials business. In the mid- • Takeover by Redcats (Kering’s home shopping business) 1990s, the Group repositioned itself on the retail market of Ellos, the leader on the Scandinavian mail order market. and soon became one of the leading players in the sector. • Creation of Fnac Junior, a concept store for children The acquisition of a controlling stake in Gucci Group in 1999 under 12. and the establishment of a multi-brand Luxury Goods group marked a new stage in the Group’s development. 1998 • Takeover of Guilbert, the European leader in office In 2007, the Group seized a new growth opportunity with supplies and furnishings. the purchase of a controlling stake in PUMA, a world • Acquisition by Redcats of 49.9% of Brylane, the fourth- leader and benchmark in Sport & Lifestyle. largest home shopping company in the US. Having fully aligned the Group around its Luxury and • Creation of Made in Sport, a chain of stores dedicated Sport & Lifestyle activities, since 2014 Kering has continued to sports enthusiasts. its growth story aimed at unlocking the potential of its brands. 1999 • Purchase of the remaining stake in Brylane. 1963 • The Group enters the Luxury Goods sector with the • François Pinault establishes the Pinault group, specialising acquisition of 42% of Gucci Group NV. in timber trading. • First steps towards the creation of a multi-brand Luxury Goods group, with the acquisition by Gucci Group of 1988 Yves Saint Laurent, YSL Beauté and Sergio Rossi. • Flotation on the Paris Stock Market’s Second Market of • Launch of Fnac.com, the Fnac website. Pinault SA, a company specialising in timber trading, distribution and processing. 2000 • Acquisition of Surcouf, a specialised PC retailer. 1990 • Acquisition by Gucci Group of Boucheron. • Acquisition of Cfao, a group specialising in electrical • Launch of Citadium, the new Printemps sports store. equipment distribution (through CDME, which became Rexel in 1993) and in trading with Africa. 2001 • Gucci Group acquires Bottega Veneta and Balenciaga 1991 and signs partnership agreements with Stella McCartney • The Group acquires Conforama and enters the retail and Alexander McQueen. market. • Pinault-Printemps-Redoute raises its stake in Gucci Group to 53.2%. 1992 • The Pinault-Printemps Group is born with the takeover 2002 of Au Printemps SA, which held 54% of La Redoute and • The Group raises its stake in Gucci Group to 54.4%. Finaref. • Sale of the Guilbert home shopping business to Staples Inc. • Partial disposal of the Credit and Financial Services 1994 division in France and Scandinavia to Crédit Agricole SA • La Redoute is merged into Pinault-Printemps, and the (61% of Finaref) and BNP Paribas (90% of Facet). Group is subsequently renamed Pinault-Printemps- Redoute. 2003 • Takeover of Fnac. • The Group raises its stake in Gucci Group to 67.6%. • Sale of Pinault Bois & Matériaux to the Wolseley group 1995 in the UK. • Launch of the Group’s first website, laredoute.fr. • Sale of an additional 14.5% stake in Finaref. 1996 • Creation of Orcanta, a women’s lingerie chain. 4 Kering ~ 2016 Reference Document 1_VA_V4 04/04/2017 13:21 Page5 HISTORY ~ KERING IN 2016 1 2004 2012 • The Group raises its stake in Gucci Group to 99.4% • Closing of the acquisition of Brioni. further to a tender offer. • Sale of the remaining 42% stake in Cfao to TTC. • Sale of Rexel. • Creation of a joint venture with Yoox S.p.A. dedicated to • Sale of the residual 24.5% stake in Finaref. e-commerce for several Luxury brands of the Group. • Announced project to demerge and list Fnac. 2005 • Sale of Fnac Italy. • Change of corporate name: Pinault-Printemps-Redoute • Sale of Redcats USA business (The Sportsman’s Guide and becomes PPR. The Golf Warehouse, announced sale of OneStopPlus). • Sale of the residual 10% stake in Facet. • Announced acquisition of a majority stake in Chinese fine jewelry brand Qeelin. 2006 • Sale of 51% of France Printemps to RREEF and the 2013 Borletti group. • Closing of the acquisition of a majority stake in Chinese • Sale of Orcanta to the Chantelle group. fine jewelry brand Qeelin. • Sale of the Bernay industrial site (YSL Beauté Recherche • Acquisition of a majority stake in the luxury designer et Industrie). brand Christopher Kane. • Discontinuation of Fnac Service’s activities. • Closing of the sale of OneStopPlus. • Acquisition by Conforama of a majority stake in Sodice • Sale of the Children and Family division of Redcats, Cyrillus Expansion. and Vertbaudet. • Acquisition by Redcats group of The Sportsman’s • Acquisition of a majority stake in tannery France Croco. Guide, Inc. • Sale of the Nordic brands of Redcats, Ellos and Jotex. • Listing of Groupe Fnac. 2007 • Change of corporate name: PPR becomes Kering. • Sale of the residual 49% stake in France Printemps to • Acquisition of a majority stake in Italian jewelry group RREEF and the Borletti group. Pomellato. • Sale of Kadéos to the Accor group. • Kering enters into exclusive negotiations for the disposal • Acquisition of a 27.1% controlling stake in PUMA. This of La Redoute and Relais Colis. stake was increased to 62.1% further to a tender offer. 2014 2008 • Closing of the sale of La Redoute and Relais Colis. • Sale of YSL Beauté to L’Oréal. • Announced project of internalisation of the Eyewear • Sale of Conforama Poland. business value chain. • Sale by Redcats UK of Empire Stores and by Redcats • Acquisition of the Haute horlogerie brand Ulysse Nardin. USA of the Missy division. • Acquisition of a 23% stake in Girard-Perregaux. 2015 • Sale of the industrial property rights of the Tretorn group 2009 (which include trademark rights, patents and designs) • Acquisition by PUMA of Dobotex International BV. by PUMA. • Acquisition by PUMA of Brandon AB. • Launch of Kering Eyewear. • Sale of Bédat & Co. • Sale of the Italian luxury shoemaker Sergio Rossi. • Sale of Surcouf. • Flotation of 58% of Cfao. 2016 • Creation of a new division called Kering Luxury Logistics 2010 and Industrial Operations (KLLIO) which combines • Acquisition by PUMA of a 20% stake in Wilderness Kering Supply Chain, Logistics and Industrial Operations. Holdings Ltd. • Sale of Electric by Volcom. • Acquisition by PUMA of COBRA. • Sale of Fnac éveil & jeux. • Sale of the controlling stake in Conforama to Steinhoff. 2011 • Closing of the sale of Conforama to Steinhoff. • Acquisition of Volcom. • Increased stake (50.1%) in Sowind Group (Girard- Perregaux and JEANRICHARD). • Announced acquisition of Brioni. 2016 Reference Document ~ Kering 5 1_VA_V4 04/04/2017 13:21 Page6 1 KERING IN 2016 ~ KEY CONSOLIDATED FIGURES 2. Key consolidated figures (in € millions) 2016 2015 Change Revenue 12,385 11,584 +6.9% EBITDA 2,318 2,056 +12.7% EBITDA margin (as a % of revenue) 18.7% 17.8% +0.9pt Recurring operating income 1,886 1,647 +14.5% Recurring operating margin (as a % of revenue) 15.2% 14.2% +1.0pt Net income attributable to owners of the parent 814 696 +16.9% o/w continuing operations excluding non-recurring items 1,282 1,017 +26.0% Gross operating investments (1) 611 672 -9.1% Free cash flow from operations (2) 1,189 660 +80.2% Net debt (3) 4,371 4,679 -6.6% Average number of employees (full time equivalent) 35,877 34,697 +3.4% Per share data (in €) 2016 2015 Change Earnings per share attributable to owners of the parent 6.46 5.52 +17.0% o/w continuing operations excluding non-recurring items 10.17 8.07 +26.0% Dividend per share (4) 4.60 4.00 +15.0% dividend per share Net income attributable to owners (in €) of the parent (in € millions) 2014 4.00 2015 4.00 2015 696 2016(4) 4.60 2016 814 Equity and debt-to-equity ratio* Free cash flow from operations (2) (in € millions and in %) (in € millions) 40.3 % 2015 11,623 2015 660 36.5 % 2016 11,964 2016 1,189 * Net debt (3) / equity. Net debt (3) Solvency ratio (in € millions) (Net debt(3)/EBITDA) 2015 4,679 2015 2.28 2016 4,371 2016 1.89 (1) Purchases of property, plant and equipment and intangible assets. (2) Net cash flow from operating activities less net acquisitions of property, plant and equipment and intangible assets. (3) Net debt is defined on page 222. (4) Subject to the approval of the Annual General Meeting to be held on April 27, 2017. 6 Kering ~ 2016 Reference Document 1_VA_V4 04/04/2017 13:21 Page7 KEY CONSOLIDATED FIGURES ~ KERING IN 2016 1 revenue breakdown Group revenue by activity 2016 vs 2015 comparable (1) change, in % Luxury 69% Group +8.1% Luxury activities +7.8% Sport & Lifestyle +9.0% €12.4 bn activities Sport & Lifestyle 31% Revenue breakdown and comparable (1) change by region 31% of revenue change: +11% 22% of revenue 10% of revenue change: +4% change: 0% 26% of revenue change: +11% 11% of revenue Western Europe change: +10% North America Japan Asia Pacific Other countries Recurring operating income Recurring operating income Breakdown by activity (2) change and margin Recurring Reported Recurring operating change operating (in € millions) income (in %) margin (in %) Luxury 1,936 +13.3% 22.9% Luxury 94% €2.1 bn Sport & Lifestyle 123 +30.0% 3.2% Corporate and other (173) -10.8% - Sport & Lifestyle 6% Group 1,886 +14.5% 15.2% (1) Comparable revenue is defined on page 222.