Hugo Boss Ag · XETR:BOSS
Hugo Boss — Non-Deal Roadshow (March 2017)
60 slides from Hugo Boss's roadshow presentation, March 2017
Slide 1: HUGO BOSS
HUGO BOSS
Slide 2: Investor Meeting Presentation
Investor Meeting Presentation Roadshow London • JP Morgan • March 14/15, 2017 • Mark Langer, CEO Dennis Weber, Head of Investor Relations JP Morgan Roadshow // London HUGO BOSS © March 2017 2
Slide 3: Industry under pressure in 2016
Industry under pressure in 2016 Overall positive consumption Luxury apparel market growth* climate does not support (FX-adjusted) industry sales 12% Apparel is losing share of consumers’ wallet 8% 8% High level of promotions 2% 2% 2% (4)% 2010 2011 2012 2013 2014 2015 2016 * Source: Bain & Alt
Slide 4: Company-specific challenges clearly identified
Company-specific challenges clearly identified Brand positioning Go-to-market approaches unclear different by market Speed of decision-making and Potential of digital underutilized key operational processes slowed by organizational inertia JP Morgan Roadshow // London HUGO BOSS © March 2017 4
Slide 5: HUGO BOSS responded swiftly to challenges
HUGO BOSS responded swiftly to challenges 1 Comprehensive cost savings achieved 2 Optimization of store network initiated 3 Off-price business in the US largely discontinued 4 Global prices harmonized further 5 Foundation built for future growth in digital JP Morgan Roadshow // London HUGO BOSS © Ma
Slide 6: Strong free cash flow generation despite earnings decline
Strong free cash flow generation despite earnings decline Sales EBITDA before special items Free cash flow (in EUR million) (in EUR million) (in EUR million) 2,809 2,693 594 (4)%* 493 220 208 (17)% +6% FY 2015 FY 2016 FY 2015 FY 2016 FY 2015 FY 2016 * (2)% FX-adjusted JP Morgan Roadshow // London HU
Slide 7: Europe records positive sales performance in 2016
Europe records positive sales performance in 2016 8% sales growth in the UK Sales by region y-o-y supports increase in Europe (in %) Decline in the US pressures sales in the Americas (1) Europe* 1 Sales momentum in China accelerates throughout the year (13) Americas (12) (3) Asia/Pacific (2) (
Slide 8: Growth in own retail does not fully offset sales decline in wholesale
Growth in own retail does not fully offset sales decline in wholesale Retail expansion more than Sales by channel y-o-y offsets currency-adjusted comp (in %) store sales decline of 6% Decline in wholesale business (1) mainly attributable to Retail 2 distribution changes in the US Robust growth
Slide 9: Group profitability suffers from operating deleverage
Group profitability suffers from operating deleverage Gross profit margin Selling & Distribution expenses 66.0 % 0 bp 1,176 EUR million 3 % Administration expenses EBITDA (before special items) 272 EUR million 3 % 493 EUR million (17) % Special items Net income 67 EUR million >100% 194 EUR million (
Slide 10: Tight grip on working capital management despite sales decline
Tight grip on working capital management despite sales decline Working capital almost stable Average trade net working capital Inventories in relation to sales (as a percentage of sales) (in EUR million) Inventory position in the US and China improves significantly over the course of the year 19
Slide 11: Investments focus on own retail and IT
Investments focus on own retail and IT Investments decrease due to HUGO BOSS Investments by area 2016 slow down of retail expansion (in %) and non-recurrence of prior year one-time projects Two thirds of budget spent on store expansion and 18% 32% refurbishments (2015: 25%) (2015: 32%) EUR 157
Slide 12: Strong free cash flow generation despite earnings decline
Strong free cash flow generation despite earnings decline Free cash flow Net debt (in EUR million) (in EUR million) 220 113 208 82 6% 38% FY 2015 FY 2016 Dec 31, 2015 Dec 31, 2016 Lower investments more than offset earnings Net debt increases on low levels shortfall Equity ratio amounts to alm
Slide 13: One-time nature of financial year 2016 warrants exception from dividend policy
One-time nature of financial year 2016 warrants exception from dividend policy Dividend per share and payout ratio (in EUR) (in %***) 4.00 100 85% 3.62 3.62 3.34 3.12 93% 2.88 80 3.00 66% 64% 78% 2.60** 75% 75% 70% 70% 70% 60 2.02 2.00 1.45* 1.37 40 0.96 1.00 20 0.00 0 2007 2008 2009 2010 2011 2012
Slide 14: Group strategy focuses on four fields of action
Group strategy focuses on four fields of action DIGITAL III. DRIVE THE I. REFOCUS DIGITAL TRANS- THE BRAND FORMATION GLOBAL AGILE CUSTOMER- CENTRIC II. REFINE THE IV. INNOVATE WAY THE WAY WE SELL WE OPERATE SUSTAINABLE JP Morgan Roadshow // London HUGO BOSS © March 2017 14
Slide 15: Refocus the brand
REFOCUS THE BRAND JP Morgan Roadshow // London HUGO BOSS © March 2017 15
Slide 16: Focus on two clearly positioned brands
Focus on two clearly positioned brands JP Morgan Roadshow // London HUGO BOSS © March 2017 16
Slide 17: Two strong brands with distinctive cores
Two strong brands with distinctive cores Brand values Top quality, sharp tailoring, Progressive & contemporary design, expressive fashion clear designs statement Brand BOSS offers confident business wear and refined HUGO offers designer clothes at an affordable price which give message casual wear f
Slide 18: BOSS dresses the demanding customer for all occasions
BOSS dresses the demanding customer for all occasions BUSINESS CASUAL ATHLEISURE June 2017: January 2018: Sell in of the collection to wholesale partners Spring / Summer collection 2018 in stores JP Morgan Roadshow // London HUGO BOSS © March 2017 18
Slide 19: New York Fashion Show showcases the elements fundamental to BOSS
New York Fashion Show showcases the elements fundamental to BOSS #NYCFASHIONSHOWFALL/WINTER2017 JP Morgan Roadshow // London HUGO BOSS © March 2017 19
Slide 20: Marketing strategy prioritizes digital and menswear
Marketing strategy prioritizes digital and menswear Marketing split Online/Print 50% 60% 70% 2015 2016 2017e Online Print Marketing split Menswear/Womenswear 40% 50% 70% 2015 2016 2017e Menswear Womenswear JP Morgan Roadshow // London HUGO BOSS © March 2017 20
Slide 21: Womenswear continues to be an important part of the BOSS business
Womenswear continues to be an important part of the BOSS business JP Morgan Roadshow // London HUGO BOSS © March 2017 21
Slide 22: HUGO represents an exciting long-term growth opportunity
HUGO represents an exciting long-term growth opportunity CASUAL BUSINESS JP Morgan Roadshow // London HUGO BOSS © March 2017 22
Slide 23: Two competitive environments
Two competitive environments Upper Premium Premium JP Morgan Roadshow // London HUGO BOSS © March 2017 23
Slide 24: Average HUGO prices are around 30% below BOSS
Attractive pricing will contribute to the expansion of HUGO across all regions Entry price point for suits Euro Countries (in EUR) United States (in USD) China (in CNY) 399 599 595 795 3,700 5,600 Global sales share by brand, FY 2016 (in %) 14% 86% Average HUGO prices are around 30% below BOSS JP
Slide 25: Refine the way we sell
R E F I N E T H E W AY WE SELL JP Morgan Roadshow // London HUGO BOSS © March 2017 25
Slide 26: Wholesale partners welcome clarity and consistency of refined brand positioning
Wholesale partners welcome clarity and consistency of refined brand positioning Positive overall feedback from wholesale partners on refined brand strategy Order intake for Fall/Winter 2017 in line with expectations, positive momentum in casualwear Group committed to align global selling price
Slide 27: Target to increase own retail sales productivity by 20% in the next five years
Target to increase own retail sales productivity by 20% in the next five years Better and broader Expansion of casual Rollout of Investment in Optimization of offering at entry and athleisure omnichannel retail staff retail network price points offering in stores services training JP Morgan Roadshow
Slide 28: Own retail selling space will remain largely stable in 2017
Store renovations will upgrade own retail network Openings Closures Renovations 10-15 freestanding store Remaining circa 15 store Renovations to account for openings will strengthen the closures to be completed by the the bulk of retail network end of the year investments First HUGO pilot st
Slide 29: New BOSS pricing architecture clears up historical imbalances
New BOSS pricing architecture clears up historical imbalances Americas Europe Asia BOSS prices to remain Single-digit % Mid-teens % virtually unchanged increase overall decline overall Around 20% above All Euro countries Max. 30% above European levels fully aligned European levels The
Slide 30: Drive the digital transformation
D R I V E T H E D I G I TA L T R A N S F O R M AT I O N JP Morgan Roadshow // London HUGO BOSS © March 2017 30
Slide 31: Online and physical retailing are becoming one
Online and physical retailing are becoming one JP Morgan Roadshow // London HUGO BOSS © March 2017 31
Slide 32: Improvement of online business a key priority in 2017
Improvement of online business a key priority in 2017 Mobile Service Content Merchandising JP Morgan Roadshow // London HUGO BOSS © March 2017 32
Slide 33: The Group's digital roadmap
The Group’s digital roadmap Enable the cultural transformation Set the foundations Improve performance Takeover of website Rollout of omnichannel services frontend management Commercial optimization of Insourcing of European hugoboss.com and app online fulfilment Develop the model hugoboss
Slide 34: Innovate the way we operate
I N N O VAT E T H E W AY W E O P E R AT E JP Morgan Roadshow // London HUGO BOSS © March 2017 34
Slide 35: Agility is the basis of innovation
Agility is the basis of innovation Establish flexible structures Empower our people Foster entrepreneurial thinking JP Morgan Roadshow // London HUGO BOSS © March 2017 35
Slide 36: Speed drives commercial success
Speed drives commercial success Adjust collection content based on short-term trends Replenish Become more sold-out flexible in our bestsellers approach in-season towards seasons Demand-driven supply Supplement the regular collection development process with a fast track concept which reduces the ti
Slide 37: Financial & Operational Outlook
Financial & Operational Outlook JP Morgan Roadshow // London HUGO BOSS © March 2017 37
Slide 38: Focused on profitable and sustainable growth
HUGO BOSS continues to be focused on profitable and sustainable growth Improved speed-to- Refocusing of market and BOSS and agility HUGO Future Further Growth enhancement Acceleration Drivers of retail in Asia management Solid growth in Online and established omnichannel key markets Low- to mid-si
Slide 39: European business to weather industry storms
European business to weather industry storms German apparel sales y-o-y UK branded menswear (in %) apparel sales y-o-y** (in %) Europe 0% 5% Broadly stable sales expected in Europe 3% Tough market environment to weigh on sales performance in Germany UK to continue growing solidly (2)% (2)% (2)
Slide 40: Step-by-step improvements targeted in the Americas
Step-by-step improvements targeted in the Americas Personal consumption expenditures for clothing y-o-y (in %)* Americas 5 Slight sales decline forecasted 4 in the Americas 3 Distribution changes in wholesale and footfall declines 2 to affect US performance Solid growth expected in 1 Canada an
Slide 41: Growth in China to drive sales increases in Asia/Pacific
Growth in China to drive sales increases in Asia/Pacific WeChat follower Weibo follower Asia/Pacific 124,000 213,000 Slight sales increase expected in Asia/Pacific 161,000 Successful digital 141,000 communication an important driver of robust growth in China 109,000 Continued declines projecte
Slide 42: Group sales to remain largely stable in 2017
Group sales to remain largely stable in 2017 Sales by region* Sales by channel* Increase of up to mid single-digit percentage Europe Stable Retail rate, comp store sales -3% to +3% Decline at a low Slight Americas decline Wholesale to mid single-digit percentage rate Asia/ Slight Solid increase Lice
Slide 43: Financial outlook expects stabilization of operational performance in 2017
Financial outlook expects stabilization of operational performance in 2017 Sales* Largely stable Gross margin Slight increase EBITDA -3% to +3% before special items Low double-digit Net income percentage rate increase EUR 150 million to Capex EUR 170 million Free cash flow Largely stable * On a curr
Slide 44: Disciplined cost management will support profitability
Disciplined cost management will support profitability Key influencing factors on gross margin and major cost items, medium-term trend as a % sales OPEX Gross profit margin Retail costs Marketing & CX1 G&A Channel mix Wage cost inflation Brand investments IT and digital Reduction of rebate
Slide 45: Our return path to profitable and sustainable growth
Our return path to profitable and sustainable growth Stabilization Acceleration Profitable growth Completion of store closure program Continuation of US distribution upgrade Go-live new merchandising strategy Go-live new brand strategy Next steps global price alignment 2019 2017 2018 JP Morgan Roads
Slide 46: 2017 - A year of stabilization and strategy implementation
2017 - A year of stabilization and strategy implementation JP Morgan Roadshow // London HUGO BOSS © March 2017 46
Slide 47: Backup
BACKUP JP Morgan Roadshow // London HUGO BOSS © March 2017 47
Slide 48: Sales by region and major markets
Sales by region and major markets Share of Group sales* Europe Americas Asia/Pacific (incl. Middle East/Africa) 61% 22% 14% Germany: 17% U.S.: 16% China: 8% Great Britain: 12% Canada: 3% Oceania: 2% France: 6% Central & Japan: 2% Benelux: 5% South America: 2% Other: 2% Other: 21% Other: 1% * As of 2
Slide 49: Full Year Results 2016 – Segment profit
Full Year Results 2016 – Segment profit Segment profit In EUR million FY 2016 In % of sales FY 2015 In % of sales Change in % Europe* 519 30.2 535 31.8 (3) Americas 133 22.9 187 28.0 (29) Asia/Pacific 80 20.8 100 25.5 (20) Licenses 59 85.3 52 83.1 15 Segment profit operating segments 791 29.5 874 31
Slide 50: Sales by distribution channel
Sales by distribution channel 38% 35% 44% 41% 53% 49% Wholesale Retail 60% 62% 54% 57% 45% 49% Licenses 2% 2% 2% 2% 2% 3% 2011 2012 2013 2014 2015 2016 JP Morgan Roadshow // London HUGO BOSS © March 2017 50
Slide 51: Number of Group's own retail stores by region
Number of Group’s own retail stores by region As of 31/12/2016 Freestanding Shop-in-Shops Outlets Total stores Europe 191 354 63 608 Americas 94 89 49 232 Asia/Pacific 157 90 37 284 Total 442 533 149 1,124 Low single-digit contribution from new space expected in 2017 JP Morgan Roadshow // London H
Slide 52: Retail comp stores sales
Retail comp stores sales Retail l-f-l sales development* 8 6% 6% 6 4% 4% 4 3% 3% 2% 2% 4% 2 3% 2% 2% 0% 0 0% (3)% (2) (1)% (4) (6)% (6)% (6)% (6) (8)% (8) Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q3 FY 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2015 2015 2015 2015 2015 2016 2016
Slide 53: (Adjusted) financial leverage
(Adjusted) financial leverage 2.4 2.2x 2.0 1.6x 1.6 1.5x 1.4x 1.4x 1.3x 1.3x 1.2x 1.2x Net debt / EBITDA 1.2 Net debt incl. operating leases / EBITDAR 0.8 0.6x 0.4 0.3x 0.2x 0.2x 0.1x 0.1x 0.1x 0.0 2009 2010 2011 2012 2013 2014 2015 2016 Operating leases = Future committed operating lease obligation
Slide 54: Sourcing and production structure
Sourcing and production structure* Americas: Western 2% Europe: 12% Own production: 20% Eastern Europe: 46% Asia: 36% Third party production: North 80% Africa: 4% *As of 2016, in value terms JP Morgan Roadshow // London HUGO BOSS © March 2017 54
Slide 55: Multi-Year overview
Multi-Year overview In EUR million 2016 2015 2014 2013 2012 2011 Sales 2,692.8 2,808.7 2,571.6 2,432.1 2,345.9 2,058.8 Gross profit 1,777.5 1,852.8 1,699.1 1,579.6 1,444.1 1,252.0 EBITDA 432.7 589.9 571.5 561.4 523.9 468.0 EBITDA before special items 493.1 594.1 590.8 564.7 528.1 469.5 EBIT 263.5 44
Slide 56: Analyst coverage
Analyst coverage The HUGO BOSS AG share is covered by the following financial analysts: Institution Analyst Institution Analyst Aurel BGC David Da Maia Hauck & Aufhäuser Christian Salis Baader Bank Volker Bosse HSBC Antoine Belge Bankhaus Lampe Peter Steiner Intermonte Daniele Alibrandi Bank of Amer
Slide 57: Shareholder structure
Shareholder structure* 10% PFC S.r.l. / Zignago Holding S.p.A. 2% Own shares 88% Free float *Source: Share register, voting rights notifications (as of March 2017) JP Morgan Roadshow // London HUGO BOSS © March 2017 57
Slide 58: Financial Calendar 2017 and Investor Relations contact
Financial Calendar 2017 and Investor Relations contact Date Event May 3, 2017 Publication of the First Quarter Results May 23, 2017 Annual Shareholders’ Meeting August 2, 2017 HUGO BOSS Investor Day 2017 August 2, 2017 Publication of the First Half Year Report November 2, 2017 Publication of the Nin
Slide 59: Forward looking statements contain risks
Forward looking statements contain risks This document contains forward-looking statements that reflect management's current views with respect to future events. The words "anticipate ", "assume ", "believe", "estimate", "expect", "intend", "may", "plan", "project", "should", and similar expressions
Slide 60: HUGO BOSS
HUGO BOSS