consumer goods -pitch

CONSUMER GOODS - Pitch

Company, Strategy and

ProductsMarket Outlook Sustainability

AnalysisRisk & Ratio

Analysis Valuation

§ House of brands principle

§ Developing different retail strategies

§ Communication of brand name

§ Sustainability

Strategy

Kering SA

Company Overview

Profile

Products§ Fashion

§ Leather goods

§ Watches

§ Jewelry

§ Luxury and fashion goods

§ HQ in Paris, France (1963)

§ CEO François-Henri Pinault

§ 34,697 employees and 1,381 stores

€ 543.80 € 67.28 bn 1.01 1.3%

Business Portfolio

Products and Services

52%

20%

15%

6%7%

Leather Goods ShoesReady-to-wear Watches and jewelryOther

Brands Revenue share by product category

Company, Strategy and

ProductsMarket Outlook Sustainability

AnalysisRisk & Ratio

Analysis Valuation

Market outlook

Luxury and fashion goods industry Market drivers

Kering SA

§ Expected increase from US$285.1 billion to

US$388 billion in 2025, 6.4-8.5% CAGR

§ Focus on Asian and U.S. markets as revenue

drivers

§ Shift in geographic focus areas

§ Growth of online sales channels and

digitalization of customer journey

§ Shift from B2B to B2C marketing strategies,

move away from multi-brand brick mortar

§ Millennials and Generation Z accounted to be

around 50% of customers in 2025

§ Chinese market (+18%) and the e-commerce

market (+22%)

§ Sustainability becomes ultimate goal of luxury

goods industry

Peer Group

Market Outlook

Market Cap. (bn €) 67.28 43.79 9.78 93.1 84.72 263.57

Revenue (bn €) 13.1 14.24 3.9 6.39 46.98 44.65

Net Profit Margin 16.5% 6.6% -13.1% 21.8% 4.3% 10.5%

Dividend Yield 1.3% 1.2% 0% 0.5% 1.2% 1.1%

Employees 38,000 35,000 20,800 13,500 163,300 163,000

Company, Strategy and

ProductsMarket Outlook Sustainability

AnalysisRisk & Ratio

Analysis Valuation

Sustainability Analysis

Sustainalytics Score Industry Comparison

Does Kering meet our Sustainability Standards?

Exposure: Management:

Company, Strategy and

ProductsMarket Outlook Sustainability

AnalysisRisk & Ratio

Analysis Valuation

S W

TO

SWOT Analysis

Risk Analysis

§ Under investigation regarding tax evasions

§ Lacking e-commerce

§ Gucci constitutes predominant fraction of sales

§ Expertise and innovative capacity to anticipate and shape trends

§ Multi-brand business strategy

§ Vertical Integration

§ Wide geographic spread

§ Strong sustainability

§ Improving e-commerce and online presence

§ Growth in Asian market

§ Fluctuating political environment

§ Increasing availability of replicas & counterfeits

§ Increasing competition in the industry

Kering SA

Correlation Analysis

Ratio Analysis

Assessing Kering´s performance

Key performance overview

-30.0%-20.0%-10.0%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

100.0%

2017 2018 2019 2020

Sales growth (%)

Kering SA Compagnie Financière Richemont

Tapestry Inc. Hermès International

Christian Dior LVMH Moet Hennessy Louis Vuitton

16.5%6.6%

-13.1%

21.8%

4.3%10.5%

Kering

SA

Compagnie

…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t…

Net margin [2020]

17.7%

5.5%

-22.5%

20.0% 17.5%12.7%

Kering

SA

Compagnie

Financiè

re Rich

emont

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t Hen

ness

y Louis

…

ROE [2020]

Return on InvestmentAssessing Kering´s abilities to generate earnings

7.6%

3.2%

-8.8%

13.3%

1.9%4.6%

Kering

SA

Compagnie

Financiè

re…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t Hen

ness

y Louis

…

ROA [2020]

Indicating how Kering is financed and how quickly it can turn its assets into cash

Leverage & Liquidity ratios

1.34

2.90

1.50

3.60

1.60 1.60

Kering

SA

Compagnie

…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t…

Current ratio [2020]

14%19%

38%

2%

43%

14%

Kering

SA

Compagnie

…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t…

Debt/Equity ratio [2020]

Indicates the ability to generate dividend income as a percent of the investment

Dividend Policy

1.3%1.2%

0.0%

0.5%

1.2%1.1%

Kering SA CompagnieFinancièreRichemont

Tapestry Inc. HermèsInternational

Christian Dior LVMH MoetHennessy

Louis Vuitton

Dividend Yield

Company, Strategy and

ProductsMarket Outlook Sustainability

AnalysisRisk & Ratio

Analysis Valuation

Multiple Valuation

Indicating Kering´s relative value to its peer group

P/E and P/S indicator

34.629.3

0.0

66.3

42.4

54.745.5

Kering

SA

Compagnie

Financiè

re…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t Hen

ness

y…

Averag

e

Price-to-earnings [2020]

5.67

1.900.70

14.50

1.80

5.80 5.06

Kering

SA

Compagnie

Financiè

re…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t Hen

ness

y…

Averag

e

Price-to-sales [2020]

Compare the relative value of different businesses

EV/EBITDA

Industry Low Industry HighAverage

9,42 43,6722,67

19.44 20.21 17.99

43.67

9.42

25.28 22.67

Kering

SA

Compagnie

…

Tapestr

y Inc.

Hermès I

nterna

tional

Christia

n Dior

LVMH Moe

t…

Averag

e

EV/EBITDA [2020]

DCF Valuation

Kering SA

Valuation (FCF Projection)

in millions, fiscal year ending December 31 Historical period Projection periodYear 2018 2019 2020 2021 2022 2023 2024 2025

Revenue 16.122 17.778 14.934 16.129 18.064 18.425 18.794 19.170Growth rate (%) -8% 10% -16% 8% 12% 2% 2% 2%

COGS (5.964) (5.769) (4.813) (5.322) (5.961) (6.080) (6.202) (6.326)

COGS % of Sales 37% 32% 32% 33% 33% 33% 33% 33%Gross profit 10.157 12.009 10.121 10.806 12.103 12.345 12.592 12.844

Gross margin (%) 63% 68% 68% 67% 67% 67% 67% 67%SG&A (4.924) (5.267) (4.907) (5.001) (5.602) (5.714) (5.828) (5.945)SG&A % of sales 31% 30% 33% 31% 31% 31% 31% 31%

Other operating (expense) income (34) 0 0 (11) (13) (13) (13) (14)Other operating (expense) income % of sales -0,21% 0,00% 0,00% 0% 0% 0% 0% 0%

EBITDA 5.199 6.742 5.214 5.793 6.488 6.618 6.751 6.886Adjustments (If so, find in Annual Report)clean EBITDA 5.199 6.742 5.214 5.793 6.488 6.618 6.751 6.886

EBITDA margin (%) 32% 38% 35% 36% 36% 36% 36% 36%Depreciation & Amortization (580) (1.394) (1.640) (1.206) (1.350) (1.377) (1.405) (1.433)

D&A % of revenue 4% 8% 11% 7% 7% 7% 7% 7%EBIT 4.618 5.348 3.574 4.588 5.138 5.241 5.346 5.453EBIT margin (%) 29% 30% 24% 28% 28% 28% 28% 28%

Taxes (1.270) (1.471) (983) (1.262) (1.413) (1.441) (1.470) (1.499)EBIAT (Earnings before interest after tax) 3.348 3.877 2.591 3.326 3.725 3.800 3.876 3.953

Plus: Depreciation & amortization 580 1.394 1.640 1.206 1.350 1.377 1.405 1.433

Less: Capital expenditures (977) (1.070) (930) (984) (1.102) (1.124) (1.147) (1.170)Less: Short term leases and Interest*Less: Change in net working capital 1.633 (943) (1.179) 160 249 284 53 54

Unlevered Free Cash Flow 4.585 3.258 2.123 3.708 4.222 4.337 4.187 4.271FCF to sales (%) 28% 18% 14% 23% 23% 24% 22% 22%

WACC 5,09%

Discount period 0,75 1,75 2,75 3,75 4,75Discount factor 0,96 0,92 0,87 0,83 0,79

Present Value of Free Cash Flow 3.572 3.871 3.783 3.476 3.373

Kering SA

WACC Analysis

Total capitalization Total debt (M) 11.838Shareholder equity (Market Cap) (M) 81.874Total capitalization (M) 93.712

Target Capital structure Debt-to-total capitalization 12,63%

Equity-to-total capitalization 87,37%

Cost of debt Implied Interest rate 1,75%Tax rate 27,50%After-tax cost of debt 1,27%

Cost of equityRisk free rate -0,05%Market risk premium 5,20%Levered beta 1,09Size premium 0,00%Cost of Equity 5,64%

WACC 5,09%

Comparable Companies Unlevered Beta

Predicted Debt/ Marginal Unlevered

CompanyLevered

Beta Equity Tax Rate BetaCompagnie Financière Richemont 1,45 19,3% 8,5% 1,23

Tapestry Inc. 2,08 37,5% 21,0% 1,60Hermès International 0,55 1,7% 27,5% 0,54Christian Dior 1,05 43,2% 27,5% 0,80LVMH Moet Hennessy Louis Vuitton 0,85 13,7% 27,5% 0,77

Mean 23,1% 0,99Median 19,3% 0,80

Company Relevered Beta

Mean Target TargetUnlevered Debt/ Marginal Relevered

Beta Equity Tax rate BetaRelevered Beta 0,99 14,5% 27,5% 1,09

Valuation (Share Price)

EV sensitivity analysis

Share price sensitivity

Kering SA

101.382 0,6% 0,8% 1,0% 1,2% 1,4%4,1% 119.968 126.329 133.510 141.682 151.065 4,6% 105.053 109.801 115.075 120.970 127.603 5,1% 93.453 97.116 101.136 105.569 110.481 5,6% 84.172 87.073 90.227 93.667 97.434 6,1% 76.578 78.925 81.456 84.193 87.163

WA

CC

Terminal growth rate

Share price sensitivity analysis765 0,6% 0,8% 1,0% 1,2% 1,4%4,1% 914 965 1.022 1.088 1.163 4,6% 795 833 875 922 975 5,1% 702 731 763 799 838 5,6% 628 651 676 704 734 6,1% 567 586 606 628 651

WA

CC

Terminal growth rate

Terminal value (TV) 105.461,52 Terminal growth rate 1,00%TV discount factor 0,79 Present value TV 83.306 Present value Free cash flow projection 18.075 TV % Total value 82%

Enterprise value 101.382 Less: Total debt - 11.838 Less: Capital Leases -Plus: Cash and Cash equivalents 4.212 Less: Noncontrolling interest - 262 Less: Preferred securitiesPlus: LT Investments 2.109 Less: Pensions -

Equity value 95.603 Shares outstanding 125 Implied share price 765,30

Current share price 655,4 Implied upside 17%

Implied EV/EBITDAEnterprise value 101.382 EBITDA (LTM) 6.742 EV/EBITDA 15,04x

17% implied upside

Key takeaways

Final Recommendation

Valuation

Business Strategy

Peer Group

Risks

Share price development (17% Upside)§ Strong brands§ E-commerce development§ Sustainability

§ Conservative growth assumptions despite strong market growth

§ Replicas & counterfeits§ Increasing competition§ Tax evasion investigation

§ High profit margin§ High revenue for market

capitalization

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2016 2017 2018 2019 2020 2021 2022 2023 2024

Price Implied Upside