Hugo Boss Ag · XETR:BOSS
Hugo Boss — Investor Day (November 2015)
50 slides from Hugo Boss's investor day presentation, Nov 24, 2015
Slide 1: HUGO BOSS
HUGO BOS S§S
Slide 2: HUGO BOSS Investor Day 2015 Group Strategy Update
HUGO BOSS Investor Day 2015 Group Strategy Update Claus-Dietrich Lahrs (CEO) Metzingen, November 24, 2015 HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 2
Slide 3: Agenda
Agenda Group’s operating environment changing at rapid pace Group strategy to turn challenges into opportunities Group committed to investing in long-term growth HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 3
Slide 4: Agenda: Group's operating environment changing at rapid pace
Agenda Group’s operating environment changing at rapid pace Group strategy to turn challenges into opportunities Group committed to investing in long-term growth HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 4
Slide 5: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace The importance of the The relationship traveling consumer is between brands and ■ The customer growing by the day journey has become customers has changed increasingly complex Today’s customers increasingly think ■ Customers expect seamle
Slide 6: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The relationship increasingly think between brands and “noline“ ■ Recent exchange ratecustomers volatility has has changed shifted demand between regions The importance of the traveling consumer is ■ There is a growing a
Slide 7: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the increasingly think traveling consumer is “noline“ ■ The growing relationship by the day between premium brands and their customers has become The relationship one of equal partners between brands an
Slide 8: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Ability growing by thetoday engage customers is key customers to changed has commercial brand success Marketin
Slide 9: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Consumers growing by the day place increasing importance customers has changed on sustainable business practic
Slide 10: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Low growing interest by the day rate environment customersfavors has changed investment in high-ticket items C
Slide 11: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Presence growing in a few selected by the day retail has customers areas changed worldwide defines global bran
Slide 12: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Competition growing by the day from online and mono- customers has changed brands is growing The pressure on m
Slide 13: The Group's operating environment is changing at a rapid pace
The Group’s operating environment is changing at a rapid pace Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ ■ Change growing of industry’s business by the day customersmodels has changed requires new skill sets Talent ha
Slide 14: What does all this mean for the industry?
What does all this mean for the industry? Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ growing by the day customers has changed Challenges for the whole industry … ■ Changing consumer habits mean business models are App
Slide 15: Industry-wide growth has slowed and margins are under pressure
Industry-wide growth has slowed and margins are under pressure Luxury apparel market growth Mean adjusted EBITDA margin in premium and (fx-adjusted) luxury apparel & footwear peer group* 12% 21.6% 21.1% 20.7% 19.1% 19.3% 18.5% 8% 8% 2% 2% 2% 2010 2011 2012 2013 2014 2015e 2010 2011 2012 2013 2014 20
Slide 16: And what does all this mean for HUGO BOSS?
And what does all this mean for HUGO BOSS? Today’s customers The importance of the The relationship increasingly think traveling consumer is between brands and “noline“ growing by the day customers has changed Challenges for the whole industry … … as well as for HUGO BOSS ■ Changing consumer habits
Slide 17: Agenda
Agenda Group’s operating environment changing at rapid pace Group strategy to turn challenges into opportunities Group committed to investing in long-term growth HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 17
Slide 18: Every element of Group strategy must contribute to turning challenges into opportunities
Every element of Group strategy must contribute to turning these challenges into opportunities Elevate the Leverage the Build BOSS core brand’s potential omnichannel to Exploit growth brand by in womenswear drive own retail opportunities in engaging and shoes & online and offline underpenetrated con
Slide 19: Brand elevation aims to increase luxury share to 20% of BOSS sales by 2020
Brand elevation aims to increase luxury share to 20% of BOSS sales by 2020 Elevate the Leverage the Build BOSS core brand’s potential omnichannel to Exploit growth brand by in womenswear drive own retail opportunities in engaging and shoes & online and offline underpenetrated consumers accessories m
Slide 20: Emotional brand perception will be key to brand elevation
Emotional brand perception will be key to brand elevation Emotional level Connect through SHARED VALUES Brand strategy Emotional brand (purpose) perception Inspire and enable When a garment simply people for success feels right you are ready to achieve whatever you are striving for in life Rational
Slide 21: Differentiated brand portfolio will support BOSS brand elevation
An increasingly differentiated brand portfolio will support BOSS brand elevation Future brand positioning LUXURY RETAIL PREMIUM WHOLESALE authentic innovative confident progressive lighthearted dynamic sophisticated contemporary HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © Novemb
Slide 22: A changing price architecture supports brand differentiation
A changing price architecture supports brand differentiation HUGO BOSS price ranges by product group and brand line (Pre-Fall 2016 collection, German market) in EUR Product Group Clothing Shirts 90 - 229 70 - 120 - ■ BOSS core brand offering will continue to be Trousers 140 - 299 110 - 140 - anchore
Slide 23: Growing focus on BOSS in own retail supports increased basket sizes
The growing focus on BOSS in own retail supports increased basket sizes ■ Increasing focus on BOSS core brand across Degree of company Trend in LFL components menswear clothing, menswear sportswear and influence (DOS, YTD Sep 2015) womenswear Traffic ■ Demand-driven, gradual shift of offering toward
Slide 24: Category migration well received by wholesale partners in Europe
The category migration process has been well received by wholesale partners in Europe ■ Category migration process almost completed Top 5 European wholesale markets 2015 in Europe 1. Germany ■ Distribution of BOSS core brand limited to 2. United Kingdom shop-in-shops 3. France ■ Substitution of BOSS
Slide 25: Womenswear aims to account for at least 15% of Group sales by 2020
Womenswear aims to account for at least 15% of Group sales by 2020 Elevate the Leverage the Build BOSS core brand’s potential omnichannel to Exploit growth brand by in womenswear drive own retail opportunities in engaging and shoes & online and offline underpenetrated consumers accessories markets e
Slide 26: Six key values shape the brand's competence in womenswear
Six key values shape the brand’s competence in womenswear “BOSS Womenswear offers modern yet timeless style statements with a luxurious touch for sophisticated women” Modern Tailored Providing sophisticated Building on the brand’s key and versatile garments that competence in tailoring fulfil every
Slide 27: BOSS Womenswear addresses four key user moments
BOSS Womenswear addresses four key user moments MODERN BUSINESS MO D ER N DAY OCCASION LUXURY LEISURE HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 27
Slide 28: Healthy and sustainable growth in the womenswear business
Healthy and sustainable growth in the womenswear business Womenswear sales growth has accelerated, Womenswear sales (in EUR million) driven by own retail and wholesale alike and share of sales channels (in %) 289 263 249 231 213 211 56 52 55 45 49 47 49 48 44 41 40 48 Retail 6 5 3 4 4 4 Wholesale 20
Slide 29: Overall stable retail space allocation by gender
Overall stable retail space allocation by gender, but increasingly leaned towards BOSS …but the overall allocation of retail space has Space allocation by gender (DOS) (September 2014 vs. September 2015 // in %) not changed significantly 11 12 89 88 Womenswear 2014 2015 Menswear However, the focus i
Slide 30: Communication focus has supported increased brand awareness
The communication focus has supported increased brand awareness NEW YORK FASHION SHOWS EUR 80 million Editorial value of womenswear coverage (YTD Sep. 2015, Source: DMR) CAMPAIGNS AND EDITORIAL COVERAGE Media spend relative to Budget allocation of overall marketing spend media spend by gender (2015e
Slide 31: At least 75% of Group sales through own retail by 2020
At least 75% of Group sales are to be generated through own retail by 2020 Elevate the Leverage the Build BOSS core brand’s potential omnichannel to Exploit growth brand by in womenswear drive own retail opportunities in engaging and shoes & online and offline underpenetrated consumers accessories m
Slide 32: New openings and takeovers have contributed to past retail expansion
New openings and takeovers have contributed to past retail expansion Retail store expansion by format and type 238 206 425 Freestanding stores 122 550 91 130 Shop-in-shops 116 114 12 15 60 86 75 80 104 100 66 51 130 Outlets 38 32 4 Organic openings 16 19 3 2 Freestanding store takeovers Shop-in-shop
Slide 33: Future store openings will focus on key metropolitan areas
Future store openings will focus on key metropolitan areas BOSS store New York City // World Trade Center Opening date: Summer 2016 BOSS store BOSS store London // Regent Street Milan // Galleria Vittorio Emanuele II Opening date: December 2015 Opening date: 2017 HUGO BOSS Investor Day 2015 // Group
Slide 34: Existing store network will be upgraded and optimized
Existing store network will be upgraded and optimized Freestanding store ■ Potential to open between 10 and 15 new stores network per annum ■ More than 100 renovations per annum, accounting for at Renovations least half of retail investment budget ■ Selective additional takeovers in department store
Slide 35: The importance of digital retailing continues to rise
The importance of digital retailing continues to rise Online penetration of global apparel and Online penetration of luxury goods footwear industry industry (in %) (in %) By price points 24% 8.5 7.5 10.1 3.6 8.3 6.8 5.5 Affordable Aspirational Absolute 4.5 By categories 4.0 7.2 7.2 6.4 4.1 2009 2010
Slide 36: Group has built a strong online business
The Group has built a strong online business across own retail and wholesale Development of online sales (in EUR million) >80 ■ Frontend insourcing and relaunch 68 of hugoboss.com in 2014 has 62 supported pick-up of growth in 49 2015 33 20 ■ Continued double-digit sales 8 increases expected 2009 201
Slide 37: Physical and digital retailing are growing together
Physical and digital retailing are growing together In-store sales influenced by digital HUGO BOSS customers researching online before purchase 24% 100% 90% 80% Digital influence projection 70% 64% 60% 73% 50% 49% 40% 30% 36% 20% 14% 10% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 So
Slide 38: Omnichannel is going to break the barriers between online and offline
Omnichannel is going to break the barriers between online and offline 2017 and beyond: November 2015: Early summer 2016: Continuous expansion of Launch of omnichannel Insourcing of online omnichannel services and their pilot in the US fulfillment regional coverage 2015 2016 2017 August 2015: Early 2
Slide 39: Underpenetrated markets are a source of long-term growth
Underpenetrated markets are a source of long-term growth Elevate the Leverage the Build BOSS core brand’s potential omnichannel to Exploit growth brand by in womenswear drive own retail opportunities in engaging and shoes & online and offline underpenetrated consumers accessories markets emotionally
Slide 40: Confident outlook for region Europe
Confident outlook for region Europe ■ Good growth despite mixed market HUGO BOSS Europe sales development 2009-2014 (in EUR million) environment 1,567 1,457 1,378 ■ Continued transition to retail model 1,041 1,073 1,245 business model builds on achievements in all areas of retail management ■ Succes
Slide 41: China remains the Group's biggest regional opportunity
China remains the Group’s biggest regional opportunity ■ Increased focus on formalwear in China sales split (in %) Global sales split (in %) merchandising and brand communication has sharpened brand 21 28 perception and benefited sales ~50 ■ Flagship openings and ongoing 79 72 upgrade of ex-franchis
Slide 42: Chinese luxury apparel market set to suffer double-digit decline in 2015
The Chinese luxury apparel market is once more set to suffer a double- digit decline also in 2015 ■ Economic slowdown and stock market HUGO BOSS China sales development 2012-2014 (in EUR million // fx-adj. change) turbulence impacts local demand 211 211 215 ■ Hong Kong market undergoing structural c
Slide 43: Performance in the US has deteriorated of late
Performance in the US has deteriorated of late ■ US business down 10% currency- HUGO BOSS US sales development 2009-2014 (in EUR million) adjusted in third quarter, down 2% 447 463 434 year-to-date 349 ■ Weaker tourist business and restrained 233 283 consumer spending trigger high levels of in-seaso
Slide 44: Elevating brand presentation in US wholesale
HUGO BOSS is seeking to elevate the quality of its brand presentation in US wholesale Strong interest in assuming direct control Category migration Reduction of off-price of HUGO BOSS shop- strategy to be business in-shops at department implemented in 2016 store partners ■ Upgrade of store ■ Distrib
Slide 45: Initiatives to strengthen US retail execution and operations
Initiatives are under way to strengthen US retail execution and operations ■ Key customer activation activities and intensified retail Customer focus trainings to support traffic and conversion ■ New cash desk solution implemented, rollout of CRM Retail front-end system upgrade in early 2016 ■ First
Slide 46: Agenda
Agenda Group’s operating environment changing at rapid pace Group strategy to turn challenges into opportunities Group committed to investing in long-term growth HUGO BOSS Investor Day 2015 // Group Strategy Update HUGO BOSS © November 24, 2015 46
Slide 47: Every element of Group strategy is set to contribute to long-term growth
Every element of Group strategy is set to contribute to long-term growth… Condensed brand purpose to drive perception and desirability Clearer brand differentiation to support brand elevation Investment in womenswear warranted to build business for long term Own retail strategy well balanced between
Slide 48: Challenges in key markets and investments will weigh on 2016 financial performance
…but challenges in key markets and investments will weigh on financial performance in 2016 ■ Group sales improvement in 2016 is forecasted to remain below long-term target level of high-single-digit growth as a result of ongoing challenges in China and the US ■ Investments in omnichannel and retail
Slide 49: Investment in key strategy pillars will support medium-term growth
Investment in the key strategy pillars will support medium-term growth ■ Rapid change in operating environment highlights the need to further invest in transformation to customer-centric business model ■ Solid progress in key strategy areas overshadowed by ongoing challenges in China and the US ■ Ac
Slide 50: HUGO BOSS
HUGO BOS S§S