2016 ANNUAL REPORT & SUSTAINABILITY REPORT BOYNER RETAIL AND TEXTILE INVESTMENTS BOYNER RETAIL AND TEXTILE INVESTMENTS www.boynerperakende.com www.boynergrup.com 2 2016 ANNUAL REPORT & SUSTAINABILITY REPORT 3 CONTENTS 05 10 29 69 106 121 137 FROM THE MANAGEMENT BOYNER GROUP BOYNER RETAIL AND SUSTAINABILITY CORPORATE AGENDA FOR THE INDEPENDENT TEXTILE INVESTMENTS REPORT GOVERNANCE ORDINARY GENERAL AUDITOR’S REPORT ON 06 12 CO. INC. and PRINCIPLES ASSEMBLY MEETING ANNUAL REPORT Message from the CEO and Our History 71 ITS COMPANIES COMPLIANCE REPORT FOR 2016 Chairman of the Board Sustainability 141 14 30 Management and our 117 122 INDEPENDENT 09 Our 2016 Awards Partnership Structure Stakeholders RISK MANAGEMENT AND Resumes and AUDITOR’S REPORT Members of the Board of 15 INTERNAL AUDIT Statements of & FINANCIAL Directors 33 73 Our Values Independent Members STATEMENTS Boyner Büyük Our Working Ecosystem 118 for Ordinary General 16 Mağazacılık A.Ş. DONATIONS AND GRANTS 83 Assembly Meeting for Our Working 43 Anti-Corruption 118 2016 Environment Beymen Mağazacılık CAPITAL MARKET 84 130 18 A.Ş. INSTRUMENTS ISSUED Our Environmental Dividend Distribution Our Strategies and IN 2016 51 Awareness Proposal and Statement Projects in 2016 AY Marka Mağazacılık 119 for 2016 - WEPUBLIC 90 A.Ş. LEGAL DISCLOSURES - Hopi Our Value Chain 132 - All Line Retail 61 Remuneration Policy 95 Altınyıldız Tekstil ve for Board Members and Our Contribution to Konfeksiyon A.Ş. Senior Executives Society 136 Dividend Distribution Policy FROM THE MANAGEMENT 05 6 2016 ANNUAL REPORT & SUSTAINABILITY REPORT 7 By making a very important investment in 2016, we enabled Boyner not be restricted and purchases will be realized with nominal value. MESSAGE FROM THE CEO and Group to gain a new company and a new brand as well as Turkey In addition, we decided to decrease the number of executive mem- to gain a brand-new multi-storey retailing format. With WEPUB- bers in the Board of Directors and to establish an Executive Com- LIC, the first store of which was opened in Akmerkez Shopping Mall mittee that will report to the Board of Directors in order to further CHAIRMAN OF THE BOARD in September 2016; we offer an extraordinary retail experience to strengthen our corporate governance. our customers by combining shopping, experience and fun. At WE- PUBLIC that is comprised of 4 floors and that provides services on In 2017, our most important focus will be to reach efficient, sustain- nearly 8 thousand m2 area, we welcomed our customers to meet able and high growth figures again. We have planned our prepara- with more than 500 brands, 100 of which have entered Turkey for tions and investments towards achievement of 20% growth target We have left 2016 behind, as a year with fluctuations in global the first time. We are aiming to expand this new retailing format through our own efforts only, considering that we will not receive economy under the impacts of the shocks caused by Brexit and with new locations both in Turkey and abroad in 2017 and the fol- any support from macroeconomic or market conditions. We hope the Presidential elections in the USA, as well as geopolitical uncer- lowing years. that possible improvements in the tourism industry and general tainties inducing these economic fluctuations. We have witnessed market conditions will take this figure further. Increasing our cus- that conservative economic approaches became stronger with the Last year, operational efficiency was one of the most important are- tomers’ happiness and improving our stores’ efficiency will contin- global growth and global trade volume remaining at low levels in as that we focused on. Under our strategy to increase the efficiency ue to be our most important priorities. We will continue to make 2016. While the entire world focused on FED’s expected interest of our stores, we upgraded the stores and collection structure of investments both to over 16 millions of our loyal customers and to rate hike decisions throughout the year, the interest rates followed NetWork, the locomotive brand of AY Marka Mağazacılık displaying our new customers in 2017. its low course on a global scale due to the ongoing uncertainties. the clear-cut best performance in terms of revenues and profitabil- The rising raw material prices and the strong US dollar compared ity. While we increased profitability by transforming the majority of We will complete the preparations for an important store invest- to 2015 continued to suppress developing countries and currencies Fabrika stores into NetWork stores, we continued to allow our cus- ment this year. We are planning to open Beymen’s new 5-storey during the year. tomers to meet with Fabrika, displaying a high performance within Bağdat street store with nearly 3.600 m2 sales area in Suadiye in Boyner Büyük Mağazacılık with its collection and price structure, in September 2017. We think that in 2017, we will reap the fruits of In 2016, the terrorist attacks and July 15 failed coup attempt had special areas allocated in Boyner stores in a wider and more wide- our investments that we have made in the digital world in recent a profound effect on Turkish economy. Despite all its adverse im- spread manner. Thus, we have supported, with a strong brand, the years. We expect our Internet sales to grow by more than 60% this pacts, the resistance shown by our people, our government and our strategy of Boyner Büyük Mağazacılık towards efficient growth by year, too. non-governmental organizations went down in history as a great focusing on private label products. Thanks to the important deci- achievement showing that our country claimed and protected de- sions and actions that we have taken in order to increase efficiency The inspiration that we take from our relationship which we have mocracy, inner peace and the state of law. The decline in consumer in Boyner, we anticipate that we will soon achieve growth and prof- established with our customers and the strength that we take from confidence as a result of high interest rates and high inflation in the itability in line with its potential. On the other hand, Beymen suc- our employees are the reasons lying behind all our investments, economy and the significant depreciation in Turkish Lira particu- ceeding in balancing the decrease in the tourist sales with new cus- activities and achievements that we have made and accomplished larly in the last quarter caused Turkey to grow under its potential. tomers maintained its strong growth and profitability performance as Boyner Group so far. Our customers and our mission to make The foreign capital inflow decreasing under the effect of the down- also in this difficult year. Taking the decision to focus on wool fabric our customers happy constitute the essence of our business. In ad- grading of credit rating by the international credit rating agencies production business with high added value, Altınyıldız ceased its dition, I believe that the happiness of our customers entering our increased the macroeconomic difficulties. Despite all of these neg- garment production business through a change management pro- stores is the greatest value that we contribute as a group to our ative conditions, we consider that the growth rates expected to be cess setting a good example for Turkey. society and our economy. Therefore, our customers’ needs and nearly 3% in 2016 and 2017 is encouraging in terms of the resilience expectations give us courage and inspiration. With their opinions, and potential of Turkish economy. We have launched at the end of 2016 “Asistanım” (My Companion) efforts, commitment and endeavours, our employees ensure that project, one of the products of our “all-line retailing” investments “Unconditional Customer Happiness” is implemented in all our 2016 has been one of the challenging years for the retail industry that we started to let our customers experience the “Unconditional stores and they add spirit and strength to this value. We will contin- due to the fluctuation in consumer confidence and behaviours un- Customer Happiness”, our most important value and the registered ue to support our nearly 10 thousand employees and to raise new der the impact of hard-to-manage uncertainties, social traumas trademark of Boyner Group, regardless of the preferred channel. leaders among them. In addition, we will offer employment oppor- and the developments in economy. Therefore, we completed 2016 With this project, the pilot practice of which was started in Beymen tunity for 1000 new young people at Boyner Group during 2017. behind our growth and profitability targets. While our retail sales stores, and which we are planning to spread to all our group com- Cem Boyner grew by 5%, our consolidated revenues reached TRY 3.44 Billion panies in 2017, we are strengthening our sales representatives with Our sustainability activities that are the resulting products of our special mobile assistants. Thanks to their mobile assistants, they value that we attach to and our responsibilities towards our cus- CEO and Chairman of the Board with a 1,4% increase in 2016 and our gross profit margin increased to 42% level compared to 2015. Excluding non-recurring incomes will be able to give a quicker response to our customers’ requests, tomers, our country and the entire world were also continued and expenses, our earnings before interest, taxes, depreciation and to complete the sales process- in a faster manner and to have a throughout 2016. Supporting social entrepreneurs through crowd amortization (EBITDA) was recorded as TRY 249 million and our speedier access to the information necessary for their works. funding and the funds of our group companies and empowering consolidated EBITDA margin was realized as 7,2%. strategic donation concept in Turkey, “Buluşum” has supported the Global and macro data do not paint an optimistic picture for 2017, implementation of 8 new social entrepreneurship projects in the Although we could not reach our targeted growth rates, our group either.