Hugo Boss AG · XETR:BOSS
Hugo Boss — FY2007 Earnings Presentation
60 slides from Hugo Boss's earnings presentation, Mar 27, 2008
Slide 1: HUGO BOSS
HUGO BOS $
Slide 2: Press Conference Annual Results 2007
Press Conference Annual Results 2007 March 27, 2008
Slide 3: Agenda
Agenda Strategic direction Key developments 2007 Key Financials 2007 Outlook
Slide 4: Strategic direction
Strategic direction Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 4 / 60
Slide 5: HUGO BOSS Profile
HUGO BOSS Profile Market leadership in high-end menswear business Fast growing with womenswear, shoes and leather accessories as well as directly operated stores (DOS) Market presence in 105 countries with about 4,000 customers and close to 6,000 points of sale (apparel only) and a global network of
Slide 6: Strategic Direction: shift to a lifestyle company
Strategic Direction Cultural shift from a business-outfit-driven menswear company to a lifestyle company with menswear, womenswear, accessories and a strong focus on casualwear 1997 CAGR* 2007 Net Sales: EUR 581 Mill. 11% Net Sales: EUR 1,632 Mill. Businesswear 49% Businesswear 74% Shoes & Leather A
Slide 7: Strategic Direction: multibrand to monobrand, wholesale to retail
Strategic Direction Cultural shift from multibrand to monobrand and wholesaling to retailing 1997 CAGR* 2007 Net Sales: EUR 581 Mill. 11% Net Sales: EUR 1,632 Mill. Directly Operated Stores 15% Monobrand Business 39% Franchise 24% Directly Operated Stores 4% Monobrand Business 16% Franchise 12% Roya
Slide 8: Strategic Direction: objective to outperform
Strategic Direction Objective to outperform in the areas of Product Leadership Market Intimacy Operational Excellence Distinct, innovative International market Focus on supply chain fashion statement presence, strong links to efficiency driven by project customers in all markets by Columbus Value fo
Slide 9: Strong profitable track record
Strong profitable track record in EUR mill. 1,800 Sales nearly tripled since 1997 1,600 achieving a CAGR of 11% 1,400 CAGR +11% 1,200 1,000 Net income development exceeded sales trend growing with a CAGR of 14% 800 600 Share price of preferred shares grew 400 with a CAGR of 14% while delivering 200
Slide 10: Brand Competence
Brand Competence Menswear BOSS Black: ”Elegance meets Performance“ Womenswear Comprehensive spectrum of elegant business ensembles, Accessories casual sports clothing and evening wear. BOSS Selection: ”Modern Luxury“ Menswear Accessories Premium tier of the BOSS brand, implementing best materials an
Slide 11: Strategic Key Initiatives
Strategic Key Initiatives BOSS Womenswear Shoes & Leather Accessories Directly Operated Stores HUGO HUGO BOSS BOSS Store, Store, Tokyo Tokyo Within three years… Within three years… Within three years… sales grew by nearly 200% sales grew by 97% sales grew by 144% to EUR 209 mill. to EUR 176 mill. to
Slide 12: Focusing on organic growth drivers – Further regional expansion
Focusing on organic growth drivers – Further regional expansion Strong growth with mono-brand network and gaining floor space in North America China as key luxury growth market in Asia is driving HUGO BOSS growth Market leadership position is driving growth in Eastern Europe Press Conference Annual
Slide 13: Growth strategy supported by Columbus
Growth strategy supported by Columbus Value chain initiative Columbus was completed by end of 2007 with the roll-in of all brands into new system Key objectives of Columbus Redefinition of supply chain processes Establishment of matrix organization Full integration of IT-platform based on SAP Key im
Slide 14: Strategy on Capital Structure
Strategy on Capital Structure HUGO BOSS is currently operating on a debt level, which is below the optimal capital structure The distribution of a special dividend of EUR 5 per share leads to a higher level of debt which reduces the weighted average cost of capital and thus should have a positive im
Slide 15: Financing Strategy
Financing Strategy Credit lines of EUR 750 mill. have been underwritten by a banking consortium with a syndicated loan for a tenor of 5 years Term loan of EUR 450 mill. Revolving credit facility of EUR 300 mill. Financing includes an uncommitted acquisition increase option Future dividend distributi
Slide 16: HUGO BOSS strategy supported by Permira
HUGO BOSS strategy supported by Permira Permira fully supports the growth strategy of HUGO BOSS, ensuring profitable growth and improving operating and capital efficiency Enabling full growth potential in Asia, focusing on China Supporting growth plan in Germany, backing site agreement Planning furt
Slide 17: Key Developments in 2007
Key Developments in 2007 Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 17 / 60
Slide 18: HUGO BOSS 2007 at a glance
HUGO BOSS 2007 at a glance in EUR mill. Net Sales 1,632.0 + 9% Gross profit 946.4 + 11% EBIT 220.3 + 19% Income before taxes 212.4 + 18% Net income 154.1 + 20% Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 18 / 60
Slide 19: Upward trend in all Brands
Upward trend in all Brands Success in all brands mainly driven by womenswear, shoes & leather accessories and directly operated stores Sales by Brand in € million 2007 2006 Change in % in % of Sales BOSS 1,485 1,348 10 091 Menswear 1,276 1,186 8 78 0 Womenswear 209 162 29 13 0 HUGO 144 136 6 9 0 Oth
Slide 20: BOSS Menswear at a glance
BOSS Menswear at a glance Sales Split Key Takeaways Market presence in 105 countries with Shoes & Leather Accessories 10% around 4,900 points of sale (apparel only) Businesswear 49% Worldwide network of POS supports international business growth Intensified communication of collection concepts incre
Slide 21: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 21 / 60
Slide 22: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 22 / 60
Slide 23: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 23 / 60
Slide 24: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 24 / 60
Slide 25: BOSS Womenswear at a glance
BOSS Womenswear at a glance Sales Split Key Takeaways Market presence in 64 countries with Shoes & Leather Accessories 17% around 1,450 points of sale (apparel only) Businesswear Covers a market that is twice the size of 46% the comparable menswear segment Initiated vertical information integration
Slide 26: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 26 / 60
Slide 27: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 27 / 60
Slide 28: HUGO at a glance
HUGO at a glance Sales Split Key Takeaways Market presence in 46 countries Shoes & Leather Accessories 7% with more than 1,200 menswear POS (apparel only) with around 400 womenswear POS (apparel only) Casualwear 36% Competence transfer from formal wear to the leisure segment started Successful start
Slide 29: Press Conference Annual Results 2007 HUGO BOSS © Mar-2008
Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 29 / 60
Slide 30: Shoes & Leather Accessories at a glance
Shoes & Leather Accessories at a glance Sales Split Key Takeaways Representing more than 20% of the Womenswear 20% luxury segment for consumer goods Sharpening the style and identity of HUGO BOSS‘ collections Completing especially the womenswear segments of the brands Focusing on further expansion o
Slide 31: Shoes & Leather Accessories current collections
Shoes & Leather Accessories current collections Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 31 / 60
Slide 32: Directly Operated Stores at a glance
Directly Operated Stores at a glance Split by format Key Takeaways Within three years number of DOS grew by 190 own stores to 287 by the end of Freestanding Stores 97 2007 Show-casing the HUGO BOSS lifestyle worlds to the end consumer Delivering first-hand consumer insights on collections DOS concep
Slide 33: BOSS STORE CHICAGO
BOSS STORE CHICAGO Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 33 / 60
Slide 34: Royalties at a glance
Royalties at a glance Current collections Key Takeaways Positive development of eyewear (Safilo) and watches (Movado) Jewellery will be launched in 2008 by the Swarovski Group Royalties from fragrances and cosmetics (Procter & Gamble) improved by 8% due to successful new launches Royalty income incr
Slide 35: Sales growth in all regions
Sales growth in all regions Double digit sales growth in all regions on a currency adjusted basis Sales by Region in € million 2007 2006 Change in % in % of Sales currency-adj. Europe 1,124 1,029 10 69 0 Americas 299 274 18 18 0 Asia/other regions 161 150 14 10 0 Royalties 49 43 14 3 0 Total 1,632 1
Slide 36: Sales growth in all European key markets
Sales growth in all European key markets HUGO BOSS Store, Paris Double-digit sales growth in most European countries Sales trend in Europe driven by good performance of womenswear segment and directly operated stores Sales trend in the Central and Eastern European markets outperformed at 42% currenc
Slide 37: Strong performance in the Americas continued
Strong performance in the Americas continued Sales in USA increased by 20% currency-adjusted both in wholesale and retail (10% in euro) Canada achieved a sales increase of 12% in local currency (8% in euro) BOSS Store Chicago Currency-adjusted sales in Central and South America were 13% higher than
Slide 38: China is key driver for growth in Asia / Pacific markets
China is key driver for growth in Asia / Pacific markets BOSS Store Beijing Sales in Asia and other regions grew by 14% on a currency-adjusted basis and by 7% in euro China replaced Japan as largest single market in Asia due to further dynamic sales growth (2007: +33% in local currency and +22% in e
Slide 39: Highlights 2007 – Berlinale
HIGHLIGHTS 2007 – BERLINALE Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 39 / 60
Slide 40: Highlights 2007 – HUGO BOSS Summer Event
HIGHLIGHTS 2007 – HUGO BOSS SUMMER EVENT Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 40 / 60
Slide 41: Highlights BOSS Orange and HUGO fashion events
HIGHLIGHTS BOSS ORANGE JULI 2007 – HUGO FASHION EVENT BERLIN SHOWWEEK FASHION BARCELONA Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 41 / 60
Slide 42: Highlights 2007 – HUGO Event Berlin Fashion Week
HIGHLIGHTS 2007 – HUGO EVENT BERLIN FASHION WEEK Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 42 / 60
Slide 43: Highlights 2007 – Lewis Hamilton
HIGHLIGHTS 2007 – LEWIS HAMILTON Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 43 / 60
Slide 44: Highlights 2007 – Launch of the HUGO BOSS Hamburg store
HIGHLIGHTS 2007 – LAUNCH OF THE „HUGO BOSS“ HAMBURG Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 44 / 60
Slide 45: Highlights 2007 – BOSS Black Fashion Show New York
Julianne Moore, Maggie Gyllenhaal, Kate Winslet HIGHLIGHTS 2007 – BOSS BLACK FASHION SHOW NEW YORK Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 45 / 60
Slide 46: Highlights 2007 – BOSS Orange Billboard Red Square Moscow
HIGHLIGHTS 2007 – BOSS ORANGE BILLBOARD RED SQUARE MOSCOW Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 46 / 60
Slide 47: Highlights 2007 – HUGO BOSS Store Istanbul
HIGHLIGHTS 2007 – HUGO BOSS STORE ISTANBUL Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 47 / 60
Slide 48: Highlights 2007 – Press Coverage
V MAGAZINE USA NYLON GUYS USA HIGHLIGHTS 2007 – PRESS COVERAGE Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 48 / 60
Slide 49: Key Financials in 2007
Key Financials in 2007 Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 49 / 60
Slide 50: Earnings power continued to grow in 2007
Earnings power continued to grow in 2007 All earnings indicators showed double-digit growth Gross profit margin increased by 0.9 p.p. due to higher share of sales via own retail stores, continuing optimization of global production and purchasing structures in € million 2007 2006 Change in % Sales 1,
Slide 51: Stable balance sheet structure
Stable balance sheet structure PPE and intangible assets declined slightly as a proportion of total assets to 33% Inventory amounted to 34% of total assets Provisions and deferred taxes remained unchanged at 9% of total equity and liabilities, other liabilities remained stable at 39% of total equity
Slide 52: Net working capital development
Net working capital development in € million 2007 2006 Change in % Trade receivables 171 153 12 #DIV/0! Other assets 92 63 47 #DIV/0! Inventories 351 290 21 Trade payables and other liabilities (217) (207) 5 Net working capital 397 299 33 Trade receivables development with +12% slightly above busine
Slide 53: Free Cash Flow Development
Free Cash Flow Development Free Cash Flow before dividend was below previous year mainly due to net working capital increase in € million 2007 2006 Absolute change Net income 154 129 25 Depreciation/amortization 67 49 18 Change in pension provisions (3) 8 (11) Cash Flow 219 186 33 Net additions to f
Slide 54: Employees – by Region
Employees – by Region Continued growth of HUGO BOSS is reflected in higher number of employees, which increased by 8% Employees 2007 2006 Change in % by region Germany 2,347 2,104 12 Other European countries 4,968 4,795 4 Americas 1,318 1,167 13 Asia/other regions 490 375 31 Total 9,123 8,441 8 Pres
Slide 55: Outlook
Outlook Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 55 / 60
Slide 56: Outlook 2008
Outlook 2008 Sales growth of 6-8% currency adjusted Further expansion of own retail network with 60 store openings expected for 2008 EBIT is expected to increase by 8-10% excluding one-time effects CAPEX should be around EUR 120 mill. Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 56 / 60
Slide 57: Appendix
Appendix Press Conference Annual Results 2007 HUGO BOSS © Mar-2008 57 / 60
Slide 58: Disclaimer
Disclaimer 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 exp
Slide 59: Financial calendar / Contact
Financial calendar / Contact Financial calendar March 27, 2008 Annual Press and Analyst Conference April 30, 2008 Publication of the First Quarter Report 2008 May 08, 2008 Annual Shareholders’ Meeting July 31, 2008 Publication of the Half Year Report 2008 October 30, 2008 Publication of the Third Qu
Slide 60: HUGO BOSS
HUGO BOS S§