The story of Kering is one of humble beginnings, of impressive growth, of evolving with the times, of commitment to sustainability, and of two men – the father-son duo who have steered the group since its founding in 1963. Going forward: “Our ambition is to be the world’s most influential luxury group in terms of creativity, sustainability and long- term economic performance,” states the group’s 2018 annual report.
As far as financial performance is concerned, the 2018 numbers tell us that the group generated revenues of €13.665 billion, Recurring Operating Income of €3.944 billion, and possessed assets worth €21.367 billion. The debt-to-equity ratio was at 17%, down from 24.1% of the previous year, while the dividend per share increased by €4.5 to €10.5 from 2017.
On the sustainability front, Kering became part of the Dow Jones Sustainability Indices, world and Europe, in 2013. The following two years, the group was anointed “Industry leader” by the same indices. Last year, the Corporate Knights’ Global 100 index named the group “Most sustainable textile, apparel and luxury goods corporation.” It was also adjudged to be one of the “50 most sustainable companies in the world” at the SEAL Business Sustainability Awards. The group’s commitment to sustainability, while delivering positive economic performance, is credited to its commitment to “Generous Capitalism.” This phrase and the philosophy behind it is the brainchild of the group’s chairman and CEO François-Henri Pinault.
The Kering story began in 1963 when François Pinault founded Établissements Pinault. François was born in the Brittany region of France in 1936. At the age of 16, he dropped out of school and enlisted in the military during the Algerian war. Later, he returned to the family business, a timber trading company, only to sell it after his father’s death. He later re-purchased it in 1963 with help from friends and a bank loan.
Once he had re-acquired the company, Pinault adopted an aggressive strategy of cutting out middlemen in the supply chain, which yielded high profits. He used the surplus funds to buy out timber-related companies that were in dire straits and turned them around. As a result, the company grew rapidly to the top of the timber business in France. Re-branded Pinault S.A, the company’s shares were offered on the Paris Stock Exchange in 1988.
In 1990, Pinault S.A merged with CFAO, a French distribution conglomerate active throughout Africa. The new entity then merged with Au Printemps SA, the French department store chain in 1992 to become the Pinault-Printemps Group. In 1994, the group was renamed Pinault-Printemps-Redoute following a merger with La Redoute – a French multi-line ready to wear retailer. Then in 1999, came the most crucial acquisition as far as the current Kering group is concerned; the purchase of a 42 per cent controlling stake in the Gucci group for $3 billion. In 2003, the group’s stake in Gucci was increased to 67.6 per cent, and again in 2004 to 99.4 per cent.
The acquisition of the Gucci group, which also included Yves Saint Laurent, not only became the cornerstone of the group’s future streamlining into the Luxury sector, but it also triggered a flurry of acquisitions in luxury and fashion sector. In 2000, Boucheron was acquired for around $145 million. In 2001, the group purchased a 78.5 per cent stake in Bottega Veneta, a 91 per cent stake in Balenciaga, as well as signing a strategic partnership with designers Alexander McQueen (51 per cent) and Stella McCartney (50 per cent).
In 1992, Pinault had set up Groupe Artémis, a holding company to manage the Pinault family’s investments. It owns Christie’s, Château Latour winery, Le Point publications, Stade Rennais Football Club and Théâtre Marigny among others. Artémis has also been, from its inception, the largest and controlling shareholder in Kering and its predecessors. As of December 31, 2018, Artémis held 40.9% of Kering’s share capital. In 2003, François Pinault hand-picked the eldest of his three sons, François-Henri Pinault, to become the President of Artémis. This marked a pivotal moment in the group’s history, as François-Henri began to set a new course for the group; to make it leaner and more focused on the luxury sector.
François-Henri Pinault, a graduate of HEC School of Management (1985), joined the family business in 1987 and held several managerial positions within the group before taking charge of Artémis. According to him, the group was a behemoth, holding together companies that had little synergy. The group was the product of an era when the global economy was dominated by protectionism and restrictions on capital flow, thus limiting investment opportunities. What’s more, around 60 per cent of the group’s business was based in France. With globalisation on the rise in the last decade, luxury became the obvious choice of focus as it already had the most expansive global presence within the group, while also having high barriers to entry.
In 2005, François-Henri became CEO of the group, changed its name to PPR, and initiated a full-fledged restructuring of the group. Pinault Bois et Matériaux, which formed the core of the group’s wood business, had already been sold in 2003. Le Printemps followed in 2006, Conforama in 2011, CFAO and Fnac in 2012, and La Redoute in 2013. Simultaneously, PPR developed a Sport & Lifestyle portfolio with the acquisition of Puma in 2007, Cobra Golf in 2010, and Volcom in 2011. The Sowind Group, which owns the high-end Swiss watchmaker Girard-Perregaux and the Italian bespoke tailor Brioni were also acquired in 2011. The following year, the Italian Pomellato group, which owns Pomellato and Dodo jewellery brands was acquired, along with the Chinese fine jewellery brand Qeelin.
In 2013, with most of the repositioning completed, the group symbolically changed its name to Kering; from the Breton language word “Ker,” meaning house, and pronounced “Kering.” That same year, the group launched Kering Eyewear, purchased a 51 per cent stake in the British brand Christopher Kane, and announced a joint venture with Tomas Maier. In 2014, a relatively unknown Alessandro Michele was appointed as the creative director of Gucci. He revitalised the brand’s creativity while doubling its sales by 2017. In 2018, Kering began divesting its Sport & Lifestyle portfolio, parted ways with Stella McCartney and ended its collaboration with e-commerce facilitator Yoox, and will instead, develop a proprietary e-commerce platform by 2020.
François-Henri’s other significant contribution to the group is infusing into it what he calls “Generous Capitalism;” a business with purpose and meaning, a business that embraces its social responsibility towards its employees and the environment. It was this philosophy, combined with the fact that a majority of the group’s employees and customers are women, led to the launch of the Kering Foundation in 2009 to tackle violence and abuse suffered by women, while also promoting women’s empowerment.
The group’s high-profile commitment to sustainability is another outcome of “Generous Capitalism.” It has done more than most in this regard without compromising on profitability or growth for its shareholders. According to François-Henri, the trick is to think about sustainability and implement it at the very beginning of a business venture, and not as an afterthought which leads to higher costs. One of the keys to achieving this is to get all those involved in the creative process to take part in the conversation and to get them focused on innovation.
Kering founded the Materials Innovation Lab as far back as 2013, which today provides the group with more than 3,000 sustainable fabric and textile samples. In September, Kering announced that the entire group would become carbon neutral within its own operations and across the whole supply chain. Also, it will offset the group’s annual Greenhouse Gas emissions from 2018. Kering’s commitment is an extension of its annual offsetting approach that was established back in 2011.
The Kering 2025 initiative announced recently promises to do “more than ever” to “Care about our impact on the planet, on climate, on natural resources; Collaborate for the good of our employees, suppliers, clients; Create pioneering ideas to safeguard our rich heritage, and empower future generations.”
This February, Kering invited Hyères Festival finalists to its headquarters to “Talk Sustainability,” and impressed upon them to consider the issue of sustainability from the outset of building their businesses. The group is also partnering with the Fashion for Good – Plug and Play Accelerator for start-ups to drive disruptive innovation and make materials and processes more sustainable.
“When it comes to climate change, we can no longer wait to take real action. We all need to step up as businesses and account for the GHG emissions that we generate in total.” – François-Henri Pinault, chairman and CEO, Kering.
“While we focus on avoiding and reducing our GHG emissions to meet our Science-Based Target, we will offset all our remaining emissions and support the conservation of vital forests and biodiversity around the world,” said François-Henri.
While most corporates treat sustainability as an afterthought, or a marketing tool, the Kering group, under François-Henri, has developed a business model that delivers on its promise of “creativity, sustainability and long-term economic performance.”