2015 -HALF T FIRST REPOR

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1 FIRST-HALF REPORT 2015

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3 Table of contents Chapter 1 Kering in the first half of 2015 Key figures 3 Chapter 2 Financial information for first-half Activity report 6 2. Condensed consolidated interim financial statements Statutory Auditors review report Statement by the persons responsible for the interim financial report 70 This is a free translation into English of the 2015 First-Half report issued in French and is provided solely for the convenience of the English speaking users First-Half Report Kering

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5 Kering in the first half of 2015 Key figures 1 Kering in the first half of 2015 Key figures Key consolidated figures Comparative data for 2014 have been restated as described in Note 3 to the consolidated interim financial statements. (in millions) Change Revenue 5, , % o/w generated in emerging countries (as a % of revenue) 38.4% 38.1% +0.3 pts EBITDA EBITDA margin (as a % of revenue) 17.6% 20.6% -3.0 pts Recurring operating income % Recurring operating margin (as a % of revenue) 14.0% 17.4% -3.4 pts Net income attributable to owners of the parent % o/w continuing operations excluding non-recurring items % Free cash flow from operations (1) % Per share data (in ) Change Net income attributable to owners of the parent % o/w continuing operations excluding non-recurring items % (1) Net cash from operating activities less net purchases of property, plant and equipment and intangible assets First-Half Report Kering

6 1 Kering in the first half of 2015 Key figures Breakdown of revenue by Division Luxury 68% Luxury 68% Sport & Lifestyle 32% Sport & Lifestyle 32% Breakdown of revenue by region 2014 Western Europe 32% 2015 Western Europe 30% North America 21% North America 23% Asia-Pacific 26% EEMEA* 8% South America 4% Japan 9% Asia-Pacific 27% EEMEA* 7% South America 4% Japan 9% * EEMEA: Eastern Europe, Middle East and Africa 2015 First-Half Report Kering 4

7 Kering in the first half of 2015 Key figures 1 Breakdown of recurring operating income by Division* Luxury 92% Luxury 95% Sport & Lifestyle 8% Sport & Lifestyle 5% * Excluding the Corporate segment. Maturity schedule of net debt 4,132m Net debt as of June 30, 2015: 5,337m 1,505m 1,043m 2,053m 243m 283m 210m Undrawn confirmed credit lines 2016* 2017** 2018** 2019** 2020** Beyond** * Gross borrowings after deduction of cash equivalents and financing of customer loans. ** Gross borrowings First-Half Report Kering

8 2 Financial information for first-half 2015 Activity report Financial information for first-half Activity report Foreword Definitions IFRS 5 Non-current assets held for sale and discontinued operations In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the Group has presented certain activities as Non-current assets held for sale and discontinued operations. The net income or loss from these activities is shown on a separate line of the income statement, Net income (loss) from discontinued operations, and is restated in the statement of cash flows and income statement for all reported periods. Assets and liabilities relating to assets held for sale are presented on separate lines in the Group s statement of financial position, without restatement for previous periods. Assets and liabilities relating to discontinued operations are not presented on separate lines in the Group s statement of financial position. As stated in Note 10 to the condensed consolidated interim financial statements, Sergio Rossi and the Redcats group are classified as Non-current assets held for sale and discontinued operations. Definition of reported and comparable revenue The Group s reported revenue corresponds to published revenue. The Group also uses "comparable" data to measure organic growth. Comparable revenue is 2014 revenue restated for the impact of changes in Group structure in 2014 or 2015, and for translation differences relating to foreign subsidiaries revenue in Definition of recurring operating income The Group's total operating income includes all revenues and expenses directly related to Group activities, whether these revenues and expenses are recurring or arise from non-recurring decisions or transactions. "Other non-recurring operating income and expenses" consists of unusual items, notably as concerns the nature or frequency, that could distort the assessment of Group entities economic performance. Other non-recurring operating income and expenses include impairment of goodwill and other intangible assets, gains or losses on disposals of non-current assets, restructuring costs and costs relating to employee adaptation measures First-Half Report Kering 6

9 Financial information for first-half 2015 Activity report 2 Consequently, Kering monitors its operating performance using Recurring operating income, defined as the difference between total operating income and other non-recurring operating income and expenses (see Note 6 to the condensed consolidated interim financial statements). Recurring operating income is an intermediate line item intended to facilitate the understanding of the entity's operating performance and which can be used as a way to estimate recurring performance. This indicator is presented in a manner that is consistent and stable over the long-term in order to ensure the continuity and relevance of financial information. Recurring operating income at comparable exchange rates for 2014 takes into account the currency impact on revenue and Group acquisitions, the effective portion of currency hedges and the impact of changes in exchange rates on the translation of the recurring operating income of consolidated entities located outside the eurozone. Definition of EBITDA The Group uses EBITDA to monitor its operating performance. This financial indicator corresponds to recurring operating income plus net charges to depreciation, amortisation and provisions on non-current operating assets recognised in recurring operating income. EBITDA at comparable exchange rates is defined using the same principles as for recurring operating income at comparable exchange rates. Definition of free cash flow from operations and available cash flow The Group also uses an intermediate line item, Free cash flow from operations, to monitor its financial performance. This financial indicator measures net operating cash flow less net operating investments (defined as purchases and sales of property, plant and equipment and intangible assets). "Available cash flow" corresponds to free cash flow from operations plus interest and dividends received less interest paid and equivalent. Definition of net debt As defined by CNC recommendation No R-03 of July 2, 2009, net debt comprises gross borrowings, including accrued interest, less net cash. Net debt includes fair value hedging instruments recorded in the statement of financial position relating to bank borrowings and bonds whose interest rate risk is fully or partly hedged as part of a fair value relationship (see Note 18 to the condensed consolidated interim financial statements). The financing of customer loans by fully-consolidated consumer credit businesses is presented in borrowings. Group net debt excludes the financing of customer loans by consumer credit businesses First-Half Report Kering

10 2 Financial information for first-half 2015 Activity report Highlights of first-half 2015 Change in management and creative responsibility at Gucci On January 21, 2015, Marco Bizzarri Gucci's President and CEO who succeeded Patrizio di Marco on January 1, 2015 announced that Alessandro Michele had been appointed as the brand's new Creative Director following the departure of his predecessor Frida Giannini. Alessandro Michele has been given total creative responsibility for all of Gucci's collections and its brand image. The first collection fully designed by Alessandro Michele was the 2016 Cruise collection, which was unveiled in New York on June 4, 2015 and will be available in stores as from the end of the third quarter of Finalisation of the partnership with Safilo and launch of Kering Eyewear In 2014, Kering announced its plan to invest in a dedicated entity specialised in luxury, high-end and sport Eyewear, managed by a skilled team of experienced professionals under the direction of Roberto Vedovotto. This innovative management model for the Group's Eyewear business will allow it to leverage the full potential of its brands in this category. As part of this strategic move, Kering and Safilo agreed to further their partnership and jointly intend to terminate the current Gucci licence agreement two years in advance, i.e., by December 31, 2016, which will result in total compensation of 90 million to be paid to Safilo. On January 12, 2015, Kering announced that it had signed a partnership agreement with Safilo covering the development, manufacture and supply of Gucci Eyewear products. The agreement will be effective as of fourthquarter 2015 in order to ensure a seamless transition for Gucci's Eyewear business. On March 18, 2015, Kering announced the appointment of Roberto Vedovotto, CEO of Kering Eyewear, as a new member of its Executive Committee. Kering Eyewear was officially launched on June 30, 2015 when its first collection, "Collezione Uno" was presented at the Palazzo Grassi in Venice. The overall 90 million in compensation due to Safilo has been recognised as an intangible asset in the financial statements at June 30, 2015 and will be amortised as from January 1, The compensation will be paid in three equal instalments, with the first payment on January 12, 2015 and the following two in December 2016 and September Other highlights On January 15, 2015, Kering sold the assets of Movitex to the group's management team, after recapitalising it in accordance with the preliminary agreement signed on December 3, On March 20, 2015, Kering issued a 500 million, 0.875% fixed-rate bond maturing in seven years. Also during the first half of 2015, Kering carried out two issues of notes in foreign currency a USD 150 million issue in March 2015 of five-year floating-rate notes, and a USD 150 million issue in June 2015 of six-year fixed-rate notes with an annual coupon of 2.887%. On March 25, 2015 Kering bought out the non-controlling interests in Sowind Group in accordance with the shareholder agreements signed in June This acquisition did not have a material impact on the Group's interim financial statements. On June 30, 2015, PUMA announced that it had sold the intellectual property rights (including trademark rights) of its subsidiary, Tretorn Group, to US-based Authentic Brands Group, LLC (ABG). Tretorn which is based in Helsingborg in Sweden and makes sport and leisure products was acquired by PUMA in This sale is in line with PUMA's strategy of refocusing on its core businesses First-Half Report Kering 8

11 Financial information for first-half 2015 Activity report business review The main financial indicators taken from Kering's consolidated financial statements for the first half of 2015 are presented below: (in millions) Change Revenue 5, , % Recurring operating income % as a % of revenue 14.0% 17.4% -3.4 pts EBITDA as a % of revenue 17.6% 20.6% -3.0 pts Net income attributable to owners of the parent % o/w continuing operations excluding non-recurring items % Gross operating investments (303.0) (214.5) +41.3% Free cash flow from operations % Total equity 11, , % o/w attributable to owners of the parent 10, , % Net debt 5, , % Revenue Consolidated revenue from continuing operations for the first half of 2015 amounted to 5,512.5 million, up 17% on first-half 2014 as reported and 3.5% based on a comparable Group structure and exchange rates. (in millions) Reported change Comparable change (1) Luxury Division 3, , % +2.8% Sport & Lifestyle Division 1, , % +5.3% Eliminations Total revenue 5, , % +3.5% (1) On a comparable Group structure and exchange rate basis. Revenue generated by the Luxury Division rose 17.8% year on year as reported and 2.8% on a comparable basis. This overall performance was fuelled by a much stronger showing by the Division's brands in the second quarter of 2015 as a result of a significant increase in purchases by tourists, particularly in Western Europe but also in Japan and the rest of the Asia-Pacific region. Revenue in the first quarter was hampered by a further falloff in consumer spending on luxury products in Greater China as well as an extremely harsh winter in North America and a very unfavourable basis of comparison in Japan. Revenue for the Sport & Lifestyle Division was up 15.5% as reported. At comparable exchange rates, revenue growth came to 5.3%, driven by strong sales momentum achieved due to PUMA's relaunch plan implemented as from the second half of First-Half Report Kering

12 2 Financial information for first-half 2015 Activity report The overall year-on-year increase in reported consolidated revenue includes a 75 million positive impact from changes in Group scope of consolidation during the period, due to the acquisition of Ulysse Nardin, consolidated since November 1, Exchange rate fluctuations had a 541 million positive effect on revenue, of which 235 million was attributable to the rise in the US dollar against the euro and 190 million to the appreciation of Asian currencies (particularly the Hong Kong dollar and Chinese yuan). Revenue by geographic area (in millions) Reported change Comparable change (1) Western Europe 1, , % +6.7% North America 1, % +4.0% Japan % +5.7% Sub-total mature markets 3, , % +5.5% Eastern Europe, Africa and the Middle East % -5.6% South America % +14.9% Asia-Pacific (excluding Japan) 1, , % -0.1% Sub-total emerging markets 2, , % +0.4% Total revenue 5, , % +3.5% (1) On a comparable Group structure and exchange rate basis. The sharp fluctuations in exchange rates seen in late 2014 and especially in early 2015 have had two consequences. Firstly, revenue growth expressed in euros is significantly higher than the figure at constant exchange rates. And secondly, pricing differences between countries have widened, leading to adjustments in the pricing structure of the Group's Luxury brands and directly influencing tourist destinations. During the first half of 2015, revenue growth in mature markets was once again buoyant (up 5.5% based on comparable data), driven by Western Europe and Japan. In emerging markets which accounted for 38% of consolidated sales, with 26.8% generated in the Asia-Pacific region (excluding Japan) overall revenue was on a par with the same period of Sales in Eastern Europe and the Middle East slowed significantly but rose sharply in South America. Revenue generated outside the eurozone accounted for 79% of total consolidated revenue in first-half First-Half Report Kering 10

13 Financial information for first-half 2015 Activity report 2 Quarterly information In the second quarter of 2015, Kering recorded 2.9 billion in revenue, up 22.8% on second-quarter 2014 as reported and 7.7% on a comparable Group structure and exchange rate basis. (in millions) First quarter Second quarter 2015 Gucci , ,874.2 Bottega Veneta Yves Saint Laurent Other Luxury brands Luxury Division 1, , ,762.0 PUMA ,601.2 Other Sport & Lifestyle brands Sport & Lifestyle Division ,731.0 Corporate Kering total 2, , ,512.5 (in millions) First quarter Second quarter 2014 Gucci ,676.3 Bottega Veneta Yves Saint Laurent Other Luxury brands Luxury Division 1, , ,193.6 PUMA ,386.1 Other Sport & Lifestyle brands Sport & Lifestyle Division ,498.7 Corporate Kering total 2, , , First-Half Report Kering

14 2 Financial information for first-half 2015 Activity report (comparable change) First quarter Second quarter Change Gucci -7.9% +4.6% -1.6% Bottega Veneta +3.1% +9.3% +6.4% Yves Saint Laurent +21.2% +27.3% +24.3% Other Luxury brands -4.5% +6.4% +1.0% Luxury Division -2.6% +8.0% +2.8% PUMA +4.5% +7.5% +5.9% Other Sport & Lifestyle brands -5.0% +2.5% -1.4% Sport & Lifestyle Division +3.7% +7.1% +5.3% Corporate -23.4% -3.9% -12.2% Kering total -0.6% +7.7% +3.5% Recurring operating income Kering s recurring operating income amounted to 773 million in the first six months of 2015, down 5.4% on first-half 2014 on a reported basis, and consolidated recurring operating margin came to 14.0%. The Luxury Division's margin narrowed to 21.4% during the period, with more than half of the decrease attributable to the combined impact of the effects of exchange rate fluctuations and related currency hedges as well as lower margins posted by Gucci and the Division's Watches brands. Recurring operating margin for the Sport & Lifestyle Division amounted to 2.2%, reflecting the lower margin recorded by PUMA. (in millions) Change Luxury Division % Sport & Lifestyle Division % Corporate (71.2) (59.4) -19.9% Recurring operating income % The Group's gross margin for the first half of 2015 stood at 3,399 million, up 397 million, or 13.2%, on first-half 2014 as reported. Operating expenses rose 20.2% year on year on a reported basis, primarily due to currency effects, higher store running costs and ongoing significant investments in marketing operations within PUMA First-Half Report Kering 12

15 Financial information for first-half 2015 Activity report 2 EBITDA Consolidated EBITDA came to 972 million, on a par with the first-half 2014 figure as reported, and the EBITDA margin narrowed by 3 points on a reported basis to 17.6%. (in millions) Change Luxury Division % Sport & Lifestyle Division % Corporate (59.0) (50.3) -17.3% EBITDA Other non-recurring operating income and expenses Other non-recurring operating income and expenses consist of unusual items that could distort the assessment of each brand's financial performance. Other non-recurring operating income and expenses represented a net expense of 42 million in the six months to June 30, 2015 and primarily included restructuring costs, asset impairment losses for Luxury activities particularly Gucci inventory write-downs in line with the brand's current period of transition and disposal gains, chiefly relating to the sale of the Tretorn brand and the capital gain arising on the sale of a property complex. In first-half 2014, this item represented a net gain of 1 million and primarily included (i) a net gain on the disposal of a property complex and (ii) asset impairment losses, including 183 million charged against the "Other Sport & Lifestyle brands" goodwill. Further details on this item are provided in Note 6 to the consolidated interim financial statements. Net finance costs The Group s net finance costs can be analysed as follows: (in millions) Change Cost of net debt (64.2) (86.0) -25.3% Other financial income and expenses (72.0) (18.3) - Finance costs, net (136.2) (104.3) +30.6% The Group s cost of net debt in first-half 2015 was 25% lower than in the same period of 2014, coming in at just over 64 million. Average outstanding net debt increased by 32% year on year, chiefly due to currency effects and changes in Group structure (notably the recapitalisations of La Redoute, Relais Colis and Movitex). However, this negative effect was partly offset by a decrease in Kering's average cost of borrowing, particularly thanks to much lower interest rates on the Group's bond debt. "Other financial income and expenses" represented a net expense that was 54 million higher than in first-half 2014, mainly due to the application of IAS 39, and notably the adverse impact of the ineffective portion of cash flow hedges First-Half Report Kering

16 2 Financial information for first-half 2015 Activity report Corporate income tax The Group s income tax charge breaks down as follows: (in millions) Change Tax on recurring income (126.3) (129.9) -2.8% Tax on non-recurring items (15.1) (16.1) -6.2% Total tax charge (141.4) (146.0) -3.2% Effective tax rate 23.8% 20.4% +3.4 pts Recurring tax rate 19.8% 18.2% +1.6 pts The income tax charge in the first half of the year is calculated based on the estimated effective tax rate for the full year for each tax entity or sub-group. Share in earnings (losses) of equity-accounted companies This item represented a negative amount of 3 million in first-half 2015, roughly on a par with the negative amount of 2 million in the same period of Net income from continuing operations In the first half of 2015, consolidated net income from continuing operations totalled 451 million versus 566 million in the equivalent prior-year period. Attributable net income from continuing operations came in at just under 434 million versus just over 547 million in first-half Net income (loss) from discontinued operations This item includes the income statement contributions from all assets (or groups of assets) accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (see Note 10 to the condensed consolidated interim financial statements). For the six months ended June 30, 2015, the Group reported a net loss of 11 million under discontinued operations, notably including the results of Sergio Rossi for the period. In the first half of 2014, the Group reported a net loss of 363 million under discontinued operations, including 300 million related to Redcats as well as the results of Sergio Rossi. The amount attributable to Redcats mainly included the cost of financing the guarantees granted to the employees concerned by the modernisation measures at La Redoute and Relais Colis. The remainder of the overall net loss from discontinued operations in first half-2014 included (i) a provision recorded to cover certain vendor warranties granted in connection with the sale of Redcats, and impairment losses recognised against Redcats' residual assets, and (ii) the impacts of the sale of the residual assets of Redcats, Movitex and Diam First-Half Report Kering 14

17 Financial information for first-half 2015 Activity report 2 Net income attributable to non-controlling interests Net income attributable to non-controlling interests totalled 17 million in first-half 2015 versus 19 million in the six months ended June 30, Net income attributable to owners of the parent Net income attributable to owners of the parent came to 423 million for the first six months of 2015 versus 185 million for the same period of Adjusted for non-recurring items net of tax, attributable net income from continuing operations contracted 13% to 489 million from 562 million in first-half Earnings per share The weighted average number of Kering shares used to calculate earnings per share was 126 million in the first half of 2015, on a par with the number used for the first six months of 2014 (see Note 11 to the condensed consolidated interim financial statements). Earnings per share amounted to 3.36 in the first half of 2015, up sharply on the first-half 2014 figure of Earnings per share from continuing operations stood at 3.44, 21% lower than the first-half 2014 figure of Excluding non-recurring items, earnings per share from continuing operations totalled 3.88, down 13% on the 4.47 recorded for the first half of The impact of dilutive instruments on the calculation of earnings per share was not material in first-half First-Half Report Kering

18 2 Financial information for first-half 2015 Activity report Analysis of operating performances by brand Luxury Division (in millions) Change Revenue 3, , % Recurring operating income % as a % of revenue 21.4% 25.2% -3.8 pts EBITDA % as a % of revenue 25.5% 29.0% -3.5 pts Gross operating investments % Average headcount 21,274 19, % In the first half of 2015, the Luxury market witnessed diverging trends both quarter on quarter and by region. In the first three months of 2015, activity was hampered by a further deterioration in consumer spending on Luxury products in Greater China, a harsh winter in North America and a particularly unfavourable basis of comparison with 2014 in Japan, when consumers brought forward their purchases to the first quarter of the year ahead of the impending increase in consumer tax on April 1, Business was much brisker in the second quarter of 2015, notably thanks to a sharp increase in purchases by tourists, particularly in Europe but also in Japan and Asia-Pacific. As an illustration, according to Global Blue data, after increasing by 15.7% in the first quarter of 2015, tourist spending in Europe jumped 37% in the second quarter (including an 80% increase from Chinese tourists). Performance in the second quarter was also boosted particularly in Asia by the very positive effect of Gucci's promotional measures aimed at reducing inventories of collections released prior to the arrival of Alessandro Michele as the brand's new Creative Director. In addition, the sharp fluctuations in exchange rates experienced in late 2014 and especially in early 2015 have had two consequences. Firstly, revenue growth expressed in euros is much higher than the figure expressed at constant exchange rates. And secondly, price differences between countries have increased, leading to adjustments in the pricing structure of the Luxury industry and directly influencing tourist destinations. In this complex and volatile market environment, and with the transition process under way at Gucci, the Luxury Division reported higher revenue. Revenue generated by the Luxury Division in first-half 2015 totalled 3,762 million, up 17.8% as reported and 2.8% on a comparable Group structure and exchange rate basis. The sole change in the scope of consolidation relates to Ulysse Nardin, consolidated since November 1, After dipping 2.6% in the first quarter on a comparable basis, the Division s revenue rose 8.0% in the second quarter. Gucci contributed some 50% of the Division's total revenue in first-half 2015 versus 52% in the same period of 2014 (on a reported basis). The Division s other brands apart from Bottega Veneta and Yves Saint Laurent accounted for around 22%, practically unchanged from the prior-year period First-Half Report Kering 16

19 Financial information for first-half 2015 Activity report 2 Retail sales in directly-operated stores and online rose 7.0% year on year (on a comparable basis) and represented 71.5% of the Division's total revenue in first-half 2015 compared with 69.0% in the first six months of This year-on-year increase reflects the strategy implemented by all of the Division's brands to control their distribution more effectively and reinforce their exclusivity; it also reflects measures taken to prudently manage the expansion of the directly-operated store network. Wholesale sales were 7.3% lower than in first-half 2014 on a comparable basis, with the decrease primarily attributable to Gucci. In view of the transition process under way within Gucci in terms of both its creative vision and its organisational structure, the brand launched a new phase in a plan to streamline the wholesale distribution network by drastically reducing exposure to multi-brand distributors in Europe. By product category, the Division's overall revenue is becoming increasingly balanced, reflecting the complementarity of the brands in the portfolio, with the contributions of Leather Goods, Ready-to-Wear and Shoes representing 54.2%, 15.7% and 12.1%, respectively. Watches and Jewellery sales accounted for 9.7% of revenue. Apart from Watches which were adversely affected by a lacklustre market and the sharp appreciation of the Swiss franc revenue was up in each of the Division's main product categories. Growth was highest in the Division's traditional, more mature markets, coming in at 7.3% on a comparable basis overall and 13.4% for the directly-operated store network. Western Europe (which made up 31.0% of the Division's revenue) posted a strong 9.5% increase, driven by robust sales in eurozone countries (up 17.6%). These figures were achieved thanks to both the sharp increase in tourist numbers in Europe which began in the first quarter of 2015 and has accelerated since and steadily rising sales to local customers. In North America (which contributed 20.1% of the Division's sales), revenue climbed 4.0% year on year, fuelled by 6.0% growth in the second quarter following on from a less buoyant first three months when performance was weighed down by bad weather conditions. The rise of the US dollar against many of the world's other major currencies had an overall adverse impact on sales to tourists, however. Revenue in Japan advanced 7.4% during first-half 2015, driven by increased tourism from Mainland China and robust sales to the local clientele. The Luxury Division's sales in emerging markets (which represented 39.1% of its total revenue) edged back 3.5% on a comparable basis, with performance hampered by unfavourable market conditions in Greater China and continued economic and political tension in Eastern Europe which had an indirect effect on the spending of Russian tourists in Turkey and the Middle East. In the Asia-Pacific region (excluding Japan), revenue declined 2.3% in first-half 2015, as an upturn in spending by Chinese customers in certain countries within the region such as South Korea, Taiwan and Australia did not offset the sales contraction in Hong Kong and Macao. Year-on-year revenue in Mainland China remained stable. Sales also decreased in the Division's other emerging markets, except for Latin America, which saw its revenue jump. The Luxury Division's recurring operating income amounted to 806 million for first-half 2015, stable from first-half Recurring operating margin came in at 21.4%, down 380 basis points as reported. More than half of this decrease was due to the combined effects of exchange rate fluctuations and currency hedges, which First-Half Report Kering

20 2 Financial information for first-half 2015 Activity report had a massive dilutive impact in the period. The remainder of the decline was attributable to the contraction in recurring operating income posted by Gucci and weaker performance in Watches. EBITDA rose 3.8% in first-half 2015 to 961 million, and the EBITDA margin stood at 25.5%. The yearon-year change in EBITDA was more favourable than for EBIT, reflecting the growing weight of depreciation and amortisation within operating income (up 29.5% on first-half 2014) as a result of the Division s capital expenditure strategy implemented over the past several years. The Luxury Division's gross operating investments totalled 161 million for first-half 2015, 9.9% higher than in the same period of The increase primarily stemmed from currency effects, as gross operating investments at constant exchange rates were relatively stable compared with first-half This reflects the Division s focus on organic growth on a same-store basis and consolidating the network of existing stores, while taking into consideration the more unsettled operating context for the Luxury industry. At the same time, measures previously undertaken to reallocate capital expenditure were pursued during the period, with a pronounced increase in the amount of financing assigned to store refurbishments, extensions and relocations, particularly for Gucci. As of June 30, 2015, the Luxury Division had a network of 1,201 directly-operated stores, including 745 (62%) in mature markets and 456 in emerging markets. Net store additions during the period totalled 15 (representing a 1.3% increase compared with December 31, 2014). Gucci (in millions) Change Revenue 1, , % Recurring operating income % as a % of revenue 26.8% 31.5% -4.7 pts EBITDA % as a % of revenue 31.3% 35.6% -4.3 pts Gross operating investments % Average headcount 10,446 9, % Gucci posted 1,874 million in revenue in first-half 2015, up 11.8% year on year as reported but down 1.6% at comparable exchange rates. After a 7.9% comparable-basis contraction in the first quarter, when revenue was very adversely affected by the new phase of the plan to streamline the brand's wholesale distribution network, business picked up in the second quarter, with growth coming in at 4.6%, notably thanks to higher tourist numbers. During the first six months of 2015, retail sales generated in directly-operated stores accounted for 83.5% of the brand's total sales versus 78.9% in first-half 2014 (on a reported basis). At constant exchange rates, sales from this distribution channel increased 3.1%, fuelled by strong revenue growth in the second quarter (10.4%). Second-quarter performance was boosted particularly in the Asia-Pacific region by an extended period of markdowns, including a larger number of SKUs. These promotions were put in place with a view to reducing inventory levels of collections released ahead of the arrival of Alessandro Michele as Gucci's new Creative Director. In the brand's mature markets, the year-on-year increase in revenue generated in directly-operated stores was most pronounced in Western Europe, where overall growth for the period was 13.3%. This 2015 First-Half Report Kering 18

21 Financial information for first-half 2015 Activity report 2 region saw a solid revenue rise of 6.3% on a comparable basis in the first quarter followed by a 19.8% jump in the second, driven by high tourist numbers, particularly Chinese and American, as well as by very positive trends in the domestic market which demonstrate the brand's enhanced customer appeal. In North America, Gucci reported 5.8% comparable-basis revenue growth despite lower sales to tourists due to the appreciation of the US dollar against many of the world's other major currencies. In Japan, where the Gucci brand is well established and its repositioning has been completed, sales in directly-operated stores were up 2.1% year on year on a comparable basis, with a 19.0% bounce in the second quarter, powered by an increase in sales to tourists. In emerging markets (which accounted for 46.8% of the brand's sales in directly-operated stores versus 47.2% in first-half 2014, as reported), sales moved back 1.8% on a comparable exchange rate basis, primarily as a result of a 3.6% contraction in the Asia-Pacific region. This downward trend in Asia-Pacific (excluding Japan) was entirely due to the ongoing decline in consumer spending in Hong Kong and Macao, as sales in Mainland China were up year on year and South Korea and Australia reported a very solid sales performance in line with the rise in tourist numbers. The brand's revenue in other emerging markets was higher than in first-half 2014 overall despite flat sales in the Middle East. By product category, Gucci's performance in directly-operated stores was similar to 2014 for Leather Goods. Handbag sales in directly-operated stores were up significantly, but weaker performances were seen once again for small leather goods and luggage two categories that were partially revisited in connection with Gucci s strategy to render the brand more exclusive and as a result of the arrival of the new Creative Director. Leather Goods represented 57.8% of Gucci's total revenue during the period. The brand's other main product categories (Shoes and Ready-to-Wear) also delivered growth in the first six months of 2015, spurred by the upswing in sales of Women's Ready-to-Wear lines, which started to be felt in 2014 and continued into the first half of Shoes and Ready-to-Wear represented 25.9% of Gucci's total revenue during the period. Wholesale sales dropped by 20.9% on a comparable basis in the first half of 2015, reflecting the new phase in the plan to drastically streamline this distribution channel, particularly in the multi-brand distributors segment. All product categories were affected by the additional reduction in volumes distributed by wholesalers. Overall, Gucci's performance in the first six months of 2015 was largely based on sales of collections presented in 2014 and does not fully reflect the measures and initiatives put in place by Marco Bizzarri since he joined the brand as its new President and CEO at the beginning of the year. The first collection fully designed by Alessandro Michele which was highly acclaimed when presented in New York in June 2015 was the 2016 Cruise collection, which will be available in stores as from the end of the third quarter of Gucci's recurring operating income for first-half 2015 came in at just under 502 million, down 4.9% year on year as reported. The brand's recurring operating margin narrowed by 470 basis points to 26.8%. More than half of this decrease was due to the dilutive impact of currency hedges during the period and the remainder was attributable to an increase in operating expenses, which primarily derived from higher store running costs. Gross margin was also down year on year on a reported basis but stable at constant exchange rates. EBITDA amounted to 587 million in first-half 2015 and the EBITDA margin remained very high, at 31.3% of revenue First-Half Report Kering

22 2 Financial information for first-half 2015 Activity report As of June 30, 2015, Gucci operated 512 stores, including 211 in emerging markets. A net seven stores were added during the period, including two in South Africa previously operated by a third party that have been brought under direct management. Gucci's gross operating investments amounted to 77 million in first-half 2015, up 14.7% on the same period of This increase was due to differences in the phasing of investments compared to last year, and to currency effects on investments outside the eurozone. Bottega Veneta (in millions) Change Revenue % Recurring operating income % as a % of revenue 28.6% 31.0% -2.4 pts EBITDA % as a % of revenue 31.6% 33.8% -2.2 pts Gross operating investments % Average headcount 3,350 3, % Bottega Veneta posted revenue of 629 million in first-half 2015, up 19.7% as reported and 6.4% at comparable exchange rates. The brand's growth rate was higher in the second quarter, at 9.3% on a comparable basis. With a view to preserving its high-end positioning and exclusivity, Bottega Veneta's preferred distribution channel is its directly-operated stores, and in the first six months of 2015 this distribution channel accounted for 83.0% of the brand's total sales. Year-on-year revenue growth for directly-operated stores amounted to 7.2% overall on a comparable basis. First-quarter growth was somewhat subdued, coming in at just 1.9% based on comparable data, as it was weighed down by unfavourable market conditions in the Asia-Pacific region as well as by widening price differences between geographic areas due to the weakening of the euro against many of the world s other major currencies. However, thanks to corrective measures put in place by Bottega Veneta to effectively manage pricing differences, combined with the sharp rise in tourist numbers in the main travel destinations, the brand's sales performance in its directly-operated stores was far more robust in the second quarter, with revenue up 12.2% on a comparable basis. Sales generated in the wholesale network increased 2.4% in first-half However, this overall figure masks contrasted trends: during the period Bottega Veneta focused on a small number of strategic markets such as North America, South Korea and the Middle East where sales trends were very strong, with growth hovering around or exceeding 10%. Leather Goods once again formed the brand's core business, representing 88.4% of Bottega Veneta's total sales during the six-month period and recording very solid year-on-year growth of 8.3%. This strong performance demonstrates the success of the strategy underlying the brand's offering, which is based on a controlled combination of iconic pieces, new seasonal designs and new leather goods models whose design and pricing structure have been reviewed in order to more closely take into account customers' expectations First-Half Report Kering 20

23 Financial information for first-half 2015 Activity report 2 Unlike previous periods, Bottega Veneta's sales growth in first-half 2015 was very unevenly balanced between its traditional and emerging markets, which recorded a 15.8% revenue rise and a 3.9% contraction, respectively (at comparable exchange rates). The Asia-Pacific region (excluding Japan) once again accounted for over 90% of Bottega Veneta's business in emerging markets. Sales in this region dropped 4.3% year on year, weighed down by the lacklustre Luxury goods market in Greater China during the period, despite the very positive trends seen in South Korea, Taiwan and Australia, where purchases by Chinese tourists increased significantly. In Western Europe which represents 28.4% of the brand's total revenue sales surged 25.3% on a comparable basis, driven by extremely high tourist numbers. In Japan which made up 15.0% of total sales revenue advanced 13.0% at constant exchange rates, powered by ongoing growth trends in the domestic market and high levels of purchases by Chinese customers. Sales in North America increased 2.1% overall on a comparable basis, reflecting the combined impact of continued growth in revenue generated with department stores and a decrease in the number of tourists due to the strengthening of the US dollar. Bottega Veneta posted recurring operating income of 180 million for the six months ended June 30, 2015, up 10.4% year on year. Recurring operating margin came in at 28.6%, down 240 basis points as reported. However, adjusted for the currency effect and the impact of currency hedges, profitability was roughly unchanged compared to the first half of EBITDA climbed almost 12% to just under 199 million. This represents a higher rise than for recurring operating income, due to an increase in depreciation and amortisation expenses resulting from the brand's investments in recent years. Bottega Veneta's network of directly-operated stores totalled 240 units as of June 30, 2015, including 100 in emerging markets. There were four net store additions during the first half. Bottega Veneta's gross operating investments totalled nearly 21 million compared with 19 million in first-half This slight year-on-year increase includes the automatic impact of currency effects on investments outside the eurozone. Yves Saint Laurent (in millions) Change Revenue % Recurring operating income % as a % of revenue 13.7% 12.7% +1.0 pt EBITDA % as a % of revenue 18.0% 16.3% +1.7 pts Gross operating investments % Average headcount 1,871 1, % In the first half of 2015, the success of the collections designed by Hedi Slimane Creative Director with total responsibility for the brand's image and the strategic relevance of its product offering helped First-Half Report Kering

24 2 Financial information for first-half 2015 Activity report further strengthen Yves Saint Laurent's brand appeal. This appeal which was given an additional boost by continued investments in the brand's stores and a 360 communication strategy resulted in very robust growth for Yves Saint Laurent during the period. Yves Saint Laurent's revenue totalled 443 million for first-half 2015, a year-on-year surge of 38.2% as reported and 24.3% based on comparable exchange rates. As for the Group's other Luxury brands, the pace of growth accelerated in the second quarter, reaching 27.3% based on comparable data versus 21.2% in the first. The investments undertaken for the directly-operated store network since 2012 have enabled Yves Saint Laurent to increase the portion of sales generated through this exclusive distribution channel, which accounted for around 64% of the brand s total sales in first-half Revenue from retail sales in directly-operated stores advanced by 25.7% during the period, driven by a sharp increase in same-store sales. Wholesale sales were up 21.9% based on comparable data, illustrating independent distributor appreciation of the brand as a major growth driver for their business. This distribution channel also remains strategically important for Yves Saint Laurent as it represents a perfect fit with its retail channel. Following on from the upswing in the last quarter of 2014, revenue from royalties rose by 21.5% in the first six months of 2015, compared with a relatively weak performance in first-half All of Yves Saint Laurent's main product categories registered very strong sales growth during the period. The brand's Leather Goods offering continues to prove highly attractive, particularly as the price structure has been partially revisited to reflect changes in exchange rates and market conditions in certain regions. Sales posted by this category climbed by 22.6%. Revenue from Ready-to-Wear sales jumped by 26.8% at constant exchange rates and this category once again occupied an essential place in the brand's product offering, with well-balanced sales of Women's and Men's collections. Yves Saint Laurent notched up revenue increases across all of its geographic regions in the first six months of In emerging markets which contributed 29.5% of the brand's total revenue for the period sales grew 10.7%. The economic climate in Hong Kong and Mainland China weighed on the brand's performance in Greater China, although revenue nonetheless climbed by 7.1% in this region based on comparable data. Business was buoyant in other Asia-Pacific countries as well as in Latin America, but was less brisk in the Middle East and Eastern Europe. Sales in Yves Saint Laurent's traditional markets soared by 31.1% on a comparable basis, reflecting the brand's renewed appeal both with local customers and with tourists from emerging markets. Revenue growth reached extremely high levels across all of these regions, coming in at 34.2% in Japan, where the brand was in remarkably high demand, 32.9% in North America, and 29.3% in Western Europe. Yves Saint Laurent ended the first half of 2015 with recurring operating income of 61 million, versus around 41 million in the corresponding prior-year period, representing a year-on-year increase of 47.9%. Recurring operating margin reached 13.7%, up by 100 basis points as reported. This rise was even higher after stripping out the impacts of fluctuations in exchange rates and currency hedges. It was led by a further increase in gross margin (excluding currency hedges) and a better absorption of fixed costs, and was achieved despite the brand-development costs incurred to expand the store network and implement an active brand marketing policy First-Half Report Kering 22

25 Financial information for first-half 2015 Activity report 2 Given the growing weight of depreciation and amortisation, EBITDA rose at a faster pace than recurring operating income, coming in at 80 million. The EBITDA margin was 18.0%, up 170 basis points on first-half As of June 30, 2015, the Yves Saint Laurent brand directly operated 132 stores, including 56 in emerging markets. There were only four net store additions during the period, as operating investments were focused more on extending, relocating and refurbishing existing stores. Overall, the brand's gross operating investments came to nearly 28 million, representing a 5 million increase on first-half Other Luxury brands (in millions) Change Revenue % Recurring operating income % as a % of revenue 7.8% 11.1% -3.3 pts EBITDA % as a % of revenue 11.7% 14.7% -3.0 pts Gross operating investments % Average headcount 5,607 5, % The Division s Other Luxury brands include Ulysse Nardin since November 1, Consequently, year-on-year comparisons between first-half 2014 and first-half 2015 should take into account this change in Group structure. In addition, due to Sergio Rossi's reclassification under assets held for sale at December 31, 2014, this brand is no longer included in Other Luxury brands and the first-half 2014 figures have been restated accordingly. Total revenue generated by Other Luxury brands amounted to 815 million in first-half 2015, up 21.5% year on year as reported and 1.0% on a comparable Group structure and exchange rate basis. Comparable-based growth was more buoyant in the second quarter than in the first, coming in at 6.3%. Altogether, Other Luxury brands contributed 21.7% of the Luxury Division's total revenue during first-half The Couture and Leather Goods brands posted particularly strong revenue rises (+9.1% on a comparable basis for the full six months and +15.3% in the second quarter), whereas Brioni s revenue performance continued to be hampered by a decrease in the number of Russian tourists in Western Europe and the Middle East. Jewellery brands saw an overall increase in revenue during the period, but revenue generated by Watches was down year on year due to unfavourable market conditions. As a result, Sowind and Ulysse Nardin took steps to adapt their product offerings and organisational structures to the difficult business context. These measures are also aimed at rapidly achieving operational synergies between the various Watches brands, particularly in terms of corporate support functions. The wholesale network was once again the main distribution channel for Other Luxury brands, accounting for 55.1% of sales. This proportion reflects the differing stages of development of the Couture and Leather Goods brands as well as the specific distribution characteristics for Watches and Jewellery First-Half Report Kering