Hugo Boss AG · XETR:BOSS
Hugo Boss — Analysts' Conference 2016
33 slides from Hugo Boss's conference presentation, Mar 10, 2016
Slide 1: HUGO BOSS
HUGO BOSS
Slide 2: Analysts' Conference 2016
ANALYSTS’ CONFERENCE 2016 Mark Langer (CFO) Metzingen, March 10, 2016 HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 2
Slide 3: Agenda
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 3
Slide 4: Agenda: Operational and financial review 2015
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 4
Slide 5: 2015 marks another year of growth for HUGO BOSS despite slowdown
2015 marks another year of growth for HUGO BOSS despite slowdown Sales and EBITDA before special items +1% (in EUR million) +9%* Sales 2,809 EBITDA before special items 2,572 2,432 2,346 2,059 1,729 1,562 528 565 591 594 470 354 269 2009 2010 2011 2012 2013 2014 2015 *+3% FX-adjusted HUGO BOSS Analy
Slide 6: Stable or even recessionary global market environment
Stable or even recessionary global market environment 0 German apparel market, y-o-y Retail sales development (2) (2) (in %)* (3) 2012 2013 2014 2015 7 Americas luxury goods 5 4 market, y-o-y Personal luxury goods market 0 (in %)** 2012 2013 2014 2015 12 Chinese men’s luxury apparel market, y-o-y (1
Slide 7: Europe best performing region again in 2015
Europe best performing region again in 2015 HUGO BOSS Europe sales 2010-2015 ■ Business model transformation ongoing (in EUR million) 1,567 1,683 ■ Successful completion of category migration 1,245 1,378 1,457 process supports uplift of BOSS brand perception at 1,073 wholesale ■ Solid growth expecte
Slide 8: Impressive fashion shows build BOSS Womenswear brand recognition
Impressive fashion shows build BOSS Womenswear brand recognition HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 8
Slide 9: Acceleration in the fourth quarter supports solid full year sales growth
Acceleration in the fourth quarter supports solid full year sales growth Q4 Group sales FY Group sales (in EUR million) (in EUR million) +10% +9% 750 2,809 684 2,572 Q4 2014 Q4 2015 FY 2014 FY 2015 (+5% FX-adjusted) (+3% FX-adjusted) HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 9
Slide 10: Region Europe more than offsets sales declines in the Americas and Asia/Pacific
Region Europe more than offsets sales declines in the Americas and Asia/Pacific Sales growth by region, y-o-y in EUR Sales growth by region, y-o-y in EUR Q4 2015 FX-adjusted FY 2015 FX-adjusted (in %) (in %) 13 7 Europe* Europe* 10 6 9 14 Americas Americas (1) (1) 1 9 Asia/Pacific Asia/Pacific (7) (
Slide 11: Own retail is the Group's growth driver also in 2015
Own retail is the Group’s growth driver also in 2015 Sales growth by channel, y-o-y in EUR Sales growth by channel, y-o-y in EUR Q4 2015 FX-adjusted FY 2015 FX-adjusted (in %) (in %) 11 15 Retail Retail 6 7 6 1 Wholesale Wholesale 2 (3) 10 8 Licenses Licenses 10 8 10 9 Group Group 5 3 0 5 10 15 (5)
Slide 12: Gross profit margin decline and higher operating expenses weigh on profit growth
Gross profit margin decline and higher operating expenses weigh on profit growth Selling & Distribution Gross profit margin (10)bp expenses 66.0% 1,137 EUR million 14% Administration expenses EBITDA (before special items) 264 EUR million 12% 594 EUR million 1% EBIT Net income attributable to 0% equi
Slide 13: Better inventory management supports working capital improvement
Better inventory management supports working capital improvement Average trade net working capital as a percentage of sales (in %) Currency-adjusted inventory growth, y-o-y 19.7% 19.8% 19.8% 19.5% 20% 19.1% 18.7% Trade net working capital 17.9% 18.1% as a percentage of sales 15% Inventory growth y-o
Slide 14: Higher investments affect free cash flow and net debt position
Higher investments affect free cash flow and net debt position Investments Free cash flow Net debt (in EUR million) (in EUR million) (in EUR million) +63% +130% (23)% 220 268 82 208 135 36 FY 2014 FY 2015 FY 2014 FY 2015 Dec. 31, 2014 Dec. 31, 2015 ■ Investments in retail and ■ Decrease due to highe
Slide 15: Dividend proposal underlines financial strength and confidence in long-term growth
Dividend proposal underlines financial strength and confidence in long-term growth in EUR in %*** 4.00 100 85% 3.62 3.62** 3.50 3.34 90 3.12 80 3.00 2.88 64% 65% 66% 64% 78% 70 75% 75% 2.50 70% 70% 70% 60 2.02 2.00 50 1.45* 1.37 40 1.50 1.19 1.00 0.96 30 1.00 20 0.50 10 0.00 0 2005 2006 2007 2008 20
Slide 16: Agenda: Strategic outlook 2016
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 16
Slide 17: Strong assets are solid foundation for Group's long-term success
Strong assets are solid foundation for Group’s long-term success Globally recognized brand Strong operational infrastructure Passionate workforce Customer centricity, focus on brand control and global growth ambition to remain cornerstones of Group strategy HUGO BOSS Analysts' Conference 2016 HUGO B
Slide 18: Upgrade of store network in China addresses legacy of prior franchise model
Upgrade of store network in China addresses legacy of prior franchise model HUGO BOSS China sales 2010-2015 ■ Upgrade and optimization of retail presence ongoing (in EUR million) ■ Around 20 store closures planned in 2016 211 211 215 232 183 ■ Renegotiation of rental contracts yields positive initia
Slide 19: Price adjustments further strengthen the brand's value proposition in Asia/Pacific
Price adjustments further strengthen the brand’s value proposition in Asia/Pacific Price levels by market (indexed, after adjustment) ■ Price reduction of around 20% in China yields positive ~135 ~150 effect on demand and unit sales 100 ~110 ■ Stepped-up of social media and CRM activities contribute
Slide 20: Upgrade of distribution in U.S. wholesale initiated
Upgrade of distribution in U.S. wholesale initiated HUGO BOSS U.S. sales 2010-2015 ■ Category migration limits exposure of BOSS core brand (in EUR million) 463 530 434 447 to promotional retail environment 349 283 ■ Concession agreement with Macy’s in place since the end of January ■ BOSS core brand
Slide 21: "Man of today" influencer program to re-ignite brand interest in the U.S.
“Man of today” influencer program to re-ignite brand interest in the U.S. HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 21
Slide 22: HUGO BOSS adjusts to changing customer journeys
HUGO BOSS adjusts to changing customer journeys ■ hugoboss.com website important mean to engage customers and drive them to store ■ Insourcing of online fulfillment in Europe in May prerequisite for planned launch of omnichannel services later in the year ■ Marketing spend to prioritize digital over
Slide 23: CRM and personalized service foster close ties with the customer
CRM and personalized service foster close ties with the customer ■ Ongoing rollout of my HUGO BOSS and corresponding in-store application upgrades customer service ■ High focus on personnel management and retail trainings HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 23
Slide 24: In-store performance sole driver of retail merchandising decisions in 2016
In-store performance sole driver of retail merchandising decisions in 2016 BOSS BOSS BOSS BOSS BOSS Made To Measure Full Canvas Suits Tailored Premium Premium Formalwear Sportswear ~10% of net sales ~90% of net sales HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 24
Slide 25: Improvement of retail performance takes priority over further network expansion
Improvement of retail performance takes priority over further network expansion Number of HUGO BOSS freestanding stores ■ Around 100 store refurbishments planned in 2016 430 388 ■ Detailed analysis of underperforming stores being 327 371 prepared 277 196 ■ New store opening projects planned for 2016
Slide 26: Agenda: Financial outlook 2016
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 26
Slide 27: Sales trends in the second half of 2015 forecast to extend into 2016
Sales trends in the second half of 2015 forecast to extend into 2016 Group sales are forecast to increase at low single-digit percentage rate* Sales by region* Sales by channel* Europe Retail Americas Wholesale Asia/Pacific Royalties *On a currency-adjusted basis HUGO BOSS Analysts' Conference 2016
Slide 28: Strict focus on cost management and cash generation in light of challenging outlook
Strict focus on cost management and cash generation in light of challenging outlook Margin protection Free cash flow protection Review of operating overhead cost structure Re-evaluation of planned 2016 store openings Renegotiations of rental contracts Review of other non-committed capital investment
Slide 29: Free cash flow to exceed prior year level despite earnings decline
Free cash flow to exceed prior year level despite earnings decline Outlook 2016 Sales growth (currency adjusted) Low single-digit percentage increase Gross margin Stable performance EBITDA before special items Low double-digit percentage decrease Capex < EUR 200 million Free cash flow Increase HUGO
Slide 30: Management committed to making 2016 a year of change and opportunity
Management committed to making 2016 a year of change and opportunity HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 30
Slide 31: Questions & Answers
Questions & Answers HUGO BOSS Analysts' Conference 2016 HUGO BOSS © March 10, 2016 31
Slide 32: 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 33: HUGO BOSS
HUGO BOSS