Hugo Boss Ag · XETR:BOSS
Hugo Boss — Warburg Roadshow Frankfurt 2018
64 slides from Hugo Boss's conference presentation, May 16, 2018
Slide 1: HUGO BOSS
HUGO BOSS
Slide 2: Warburg Roadshow Frankfurt, May 16, 2018
Warburg Roadshow F RANKF URT M A Y 1 6, 2 0 1 8 Investor Meeting Presentation HUGO BOSS © May 2018 2
Slide 3: Financial Performance Q1 2018
FINANCIAL PERFORMANCE Q1 2018 Investor Meeting Presentation HUGO BOSS © May 2018 3
Slide 4: Solid currency-adjusted sales growth in the first quarter
HUGO BOSS records solid currency-adjusted sales growth in the first quarter Group sales (in EUR million) +5% fx-adjusted 0% 651 650 Q1 2017 Q1 2018 Investor Meeting Presentation HUGO BOSS © May 2018 4
Slide 5: All regions contribute to currency-adjusted Group sales growth
All regions contribute to currency-adjusted Group sales growth Europe Sales* Americas Sales* Asia/Pacific Sales* +3% fx-adjusted +7% fx-adjusted +12% fx-adjusted +1% 412 416 (6)% +2% 125 118 97 100 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 ■ Sales increase primarily driven ■ U.S. comp store sa
Slide 6: First quarter confirms good momentum in own retail
First quarter performance confirms good momentum in own retail Comp store sales growth Retail sales (fx-adjusted) (in EUR million) +7% +8% fx-adjusted 8 7 7 +2% 6 5 371 378 4 3 2 0 -2 (3) (3) -4 (6) -6 (8) -8 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2017 2017 2017 2017 2018 Q1 2017 Q1 2018 Investor Me
Slide 7: Mixed sales trends in the wholesale channel
Mixed sales trends in the wholesale channel Wholesale sales (in EUR million) ■ Declines in the Americas offset by Europe +1% fx-adjusted ■ Online outperforms the physical channel ■ Challenging overall market conditions set to continue (3)% 263 256 Q1 2017 Q1 2018 Investor Meeting Presentation HUGO B
Slide 8: License sales decline masks positive outlook
Sales decline in the quarter masks positive outlook for license business License sales (in EUR million) (1)% fx-adjusted (1)% 17 16 Q1 2017 Q1 2018 Investor Meeting Presentation HUGO BOSS © May 2018 8
Slide 9: Casualwear grows disproportionately at both brands
Casualwear grows disproportionately at both brands ■ Collection upgrade drives growth of BOSS Casualwear +7% fx-adjusted (6)% fx-adjusted ■ Strategic distribution changes impact HUGO sales +1% 554 562 ■ Menswear up 6%, womenswear down 3% (9)% 97 88 Q1 2017* Q1 2018* Q1 2017* Q1 2018* *in EUR million
Slide 10: Operating expense decline supports EBITDA growth
Operating expense decline supports EBITDA growth Gross margin Selling & distribution expenses (40)bp (4)% 64.0 % 272 EUR million Administration expenses EBITDA (before special items) 74 EUR million +2% 99 EUR million +1% EBIT Net income 70 EUR million +8% 50 EUR million +3% Investor Meeting Presenta
Slide 11: Margin in Asia/Pacific expands strongly
Margin in Asia/Pacific expands strongly Europe Americas Asia/Pacific (in %) (in %) (in %) (120) bp (220) bp +270 bp 30.8 29.6 28.0 25.3 12.3 10.1 *Incl. Middle East and Africa. Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Investor Meeting Presentation HUGO BOSS © May 2018 11
Slide 12: Inventory development normalizes following declines in 2017
Inventory development normalizes following significant declines in 2017 Inventories Average trade net working capital (in EUR million) as percentage of sales (in %) ■ Inventory growth to support +5% future sales increases in own +11% fx-adjusted (130) bp retail 542 19.8 ■ Trade net working capital u
Slide 13: Working capital build-up affects free cash flow
Working capital build-up affects free cash flow in seasonally small quarter Capital expenditure Free cash flow Net financial liabilities (in EUR million) (in EUR million) (in EUR million) (23)% <(100)% (50)% 109 54 23 18 7 (47) Jan. – March 2017 Jan. – March 2018 Jan. – March 2017 Jan. – March 2018
Slide 14: Exchange rate effects impact the Group's financial results
Exchange rate effects are impacting the Group’s financial results Net exposure by currency, EBITDA before special items (indicative) ■ Translation of foreign subsidiary results and split of sourcing operations create currency risks ■ Impact from euro appreciation versus British pound and Chinese GBP
Slide 15: Group Strategy
G R O U P STRATE GY Investor Meeting Presentation HUGO BOSS © May 2018 15
Slide 16: 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 Investor Meeting Presentation HUGO BOSS © May 2018 16
Slide 17: Strategic Fields of Action
Strategic 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 Investor Meeting Presentation HUGO BOSS © May 2018 17
Slide 18: Two brands: BOSS and HUGO
Two brands: BOSS and HUGO #THISISBOSS #IAMHUGO TWO BRANDS TWO TARGET CUSTOMERS TWO BRAND IDENTITIES Investor Meeting Presentation HUGO BOSS © May 2018 18
Slide 19: BOSS and HUGO customers have different attitudes towards fashion
BOSS and HUGO customers have different attitudes towards fashion Status-oriented, Open-minded, ATTITUDE traditional, rational individual, spontaneous Classic, modern, STYLE Fashion-forward, sophisticated contemporary, progressive Highest quality, Latest fashion trends, EXPECTS personal assistance ur
Slide 20: BOSS and HUGO are distinct brands with common values
BOSS and HUGO are distinct brands based on a common set of values BOSS STANDS FOR: HUGO STANDS FOR: SHARED MASCULINITY/FEMININITY VALUES & BENEFITS CONTEMPORARY DESIGN SEXINESS & SUCCESS PROGRESSIVE LOOKS INNOVATION STYLE & PRECISION PREMIUM QUALITY AND FASHION - FORWARD PERFECT FIT SUSTAINABILITY T
Slide 21: BOSS: Upgrade of casualwear and new formalwear
BOSS: Upgrade of casualwear and new interpretation of formalwear Split of BOSS brand sales by segment In EUR billion ~2.0 CAGR ~1.4 +8% 51% 61% CAGR +1% 49% 39% 2010 2017 Casualwear Formalwear Investor Meeting Presentation HUGO BOSS © May 2018 21
Slide 22: BOSS: Rebalanced offer in upper premium
BOSS: Rebalanced offer takes advantage of BOSS core strength in upper premium Suit offer by price point Based on number of styles offered in France, in % of total >800 26% 23% 25% 700 - 799 31% 43% 600 - 699 43% 595 9% 0% Spring/Summer 2017 collection Spring/Summer 2018 collection Investor Meeting P
Slide 23: BOSS Menswear collection spans three wearing occasions
BOSS Menswear collection spans three wearing occasions BUSINESS CASUAL AT H L E I S U R E BOSS DRESSES THE DRIVE – FOR EVERY OCCASION Investor Meeting Presentation HUGO BOSS © May 2018 23
Slide 24: BOSS Womenswear collection consists of Business and Casual
BOSS Womenswear collection consists of Business and Casual BUSINESS CASUAL BOSS DRESSES THE DRIVE – FOR EVERY OCCASION Investor Meeting Presentation HUGO BOSS © May 2018 24
Slide 25: Business and Casual form HUGO Menswear
Business and Casual form HUGO Menswear BUSINESS CASUAL HUGO IS THE PLATFORM OF SELF-EXPRESSION – FOR EVERY OCCASION Investor Meeting Presentation HUGO BOSS © May 2018 25
Slide 26: …and HUGO Womenswear collections
…and HUGO Womenswear collections BUSINESS CASUAL HUGO IS THE PLATFORM OF SELF-EXPRESSION – FOR EVERY OCCASION Investor Meeting Presentation HUGO BOSS © May 2018 26
Slide 27: Positive feedback on BOSS fashion shows
Positive feedback on BOSS fashion shows Investor Meeting Presentation HUGO BOSS © May 2018 27
Slide 28: Florence fashion show marks start of a new era for HUGO
Florence fashion show marks the start of a new era for HUGO Investor Meeting Presentation HUGO BOSS © May 2018 28
Slide 29: HUGO has grown significantly above industry average
HUGO has grown significantly above industry average in recent past HUGO sales split by channel In EUR million 397 Strong position in central European markets CAGR Short-term growth focus on other European +15% markets 47% Ambition to grow in the US and key Asian markets 153 56% 50% 37% 7% 3% 2
Slide 30: Strategic Fields of Action
Strategic 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 Investor Meeting Presentation HUGO BOSS © May 2018 30
Slide 31: Three key distribution priorities
Three key distribution priorities Increase own retail sales Exploit the full potential of online Further integrate distribution 1 productivity 2 3 across all channels Retail sales productivity ~13,000 In EUR/m2 11,100 10,900 Better and broader offering at entry price points Expansion of casual a
Slide 32: Three key distribution priorities
Three key distribution priorities Increase own retail sales Exploit the full potential of online Further integrate distribution 1 productivity 2 3 across all channels hugoboss.com Fulfillment onlinepureplay.com Partner (insourced in 2016) CUSTOMER departmentstore.com Social commerce Investor Meeting
Slide 33: Improvements to hugoboss.com will propel online growth
Improvements to hugoboss.com site will propel growth of online business Increase own retail sales Exploit the full potential of online Further integrate distribution 1 productivity 2 3 across all channels Investor Meeting Presentation HUGO BOSS © May 2018 33
Slide 34: Omnichannel services link online and physical retailing
Omnichannel services link online and physical retailing Increase own retail sales Exploit the full potential of online Further integrate distribution 1 productivity 2 3 across all channels Investor Meeting Presentation HUGO BOSS © May 2018 34
Slide 35: Store renovations will upgrade own retail network
Store renovations will upgrade own retail network Openings Closures Renovations 15-20 freestanding store Store closures based on Renovations to account for openings will strengthen the expiration of rental contract the bulk of retail investments network Around 150 POS renovations This incl
Slide 36: Strategic Fields of Action
Strategic 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 Investor Meeting Presentation HUGO BOSS © May 2018 36
Slide 37: Digital transformation comprises the entire value chain
Digital transformation comprises the entire value chain Product & collection Sourcing Distribution Own retail and development and production and logistics wholesale distribution Investor Meeting Presentation HUGO BOSS © May 2018 37
Slide 38: HUGO will launch first fully digitally designed capsule
Product and collection development │ Sourcing and production │ Distribution and logistics │ Sales HUGO will launch first fully digitally designed capsule /////////// DIGITAL [ e ] VOLUTION ///////////////////////////////////// Investor Meeting Presentation HUGO BOSS © May 2018 38
Slide 39: Izmir production facility developing into a smart factory
Product and collection development │ Sourcing and production │ Distribution and logistics │ Sales Production facility in Izmir is developing into a “smart factory” 3D space- Big data Smart Robotics planning analysis factory Real time Voice Augmented Artificial production command reality intelligence
Slide 40: Key elements of logistics infrastructure upgraded
Product and collection development │ Sourcing and production │ Distribution and logistics │ Sales Key elements of logistics infrastructure upgraded or renewed European flat-packed goods US distribution center distribution center Midway (Georgia), Filderstadt, Germany United States New construction S
Slide 41: New store concepts link physical and digital retailing
Product and collection development │ Sourcing and production │ Distribution and logistics │ Sales New store concepts create strong link between physical and digital retailing Investor Meeting Presentation HUGO BOSS © May 2018 41
Slide 42: Strategic Fields of Action
Strategic 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 Investor Meeting Presentation HUGO BOSS © May 2018 42
Slide 43: HUGO contributes to transformation of Group's culture
HUGO contributes to the transformation of the Group’s culture Agile management Investor Meeting Presentation HUGO BOSS © May 2018 43
Slide 44: HUGO digital showroom rolled out in more European markets
HUGO digital showroom rolled out in more European markets Investor Meeting Presentation HUGO BOSS © May 2018 44
Slide 45: 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 46: Financial and Operational Outlook
F I NAN C IAL AN D O PE RATI O NAL O UTLO O K Investor Meeting Presentation HUGO BOSS © May 2018 46
Slide 47: Key principles of financial management reconfirmed
Key principles of financial management reconfirmed Sales productivity growth Cost-efficiency improvements Maximization of free cash flow Continuation of dividend policy Investor Meeting Presentation HUGO BOSS © May 2018 47
Slide 48: All regions and channels will contribute to sales growth in 2018
All regions and distribution channels will contribute to sales growth in 2018 Europe Retail Increase at a low to Increase at a mid single-digit mid single-digit percentage rate percentage rate Americas Wholesale Increase at a low Increase at a low single-digit single-digit percentage rate percentage
Slide 49: Outlook 2018: Growth set to accelerate
Outlook 2018: Growth set to accelerate compared to 2017 levels Group sales Consolidated net income Increase at a low to mid single-digit Increase at a low to mid single-digit percentage rate (fx-adjusted) percentage rate Gross profit margin Capital expenditure Largely stable EUR 170 million to EUR 1
Slide 50: Strategy execution will drive profitable and sustainable growth
Strategy execution will drive profitable and sustainable growth Profitable and sustainable growth 2019+ Acceleration Stabilization Grow sales stronger 2018 than market, increase 2017 operating profit Sales forecasted to stronger than sales Sales up 3%*, stable increase in the low to mid operat
Slide 51: Backup
Backup Investor Meeting Presentation HUGO BOSS © May 2018 51
Slide 52: Sales by region and major markets
Sales by region and major markets Share of Group sales* Europe Americas Asia/Pacific (incl. Middle East/Africa) 62% 21% 14% Germany: 18% U.S.: 15% China: 8% Great Britain: 12% Canada: 3% Oceania: 2% France: 6% Central & Japan: 2% Benelux: 5% South America: 3% Other: 2% Other: 21% *as of 2017, +3% Li
Slide 53: Sales by distribution channel
Sales by distribution channel 38% 35% 34% 44% 41% 49% Wholesale Retail 62% 63% 57% 60% 54% 49% Licenses 2% 2% 2% 2% 3% 3% 2012 2013 2014 2015 2016 2017 Investor Meeting Presentation HUGO BOSS © May 2018 53
Slide 54: Number of Group's own retail stores by region
Number of Group’s own retail stores by region As of 31/03/2018 Freestanding stores 191 Shop-in-Shops 315 Europe Outlets 64 570 Freestanding stores 89 Americas Shop-in-Shops 96 234 Asia/Pacific Outlets 49 289 Group Freestanding stores 155 1,093 Shop-in-Shops 87 Outlets 47 Investor Meeting Presentatio
Slide 55: Retail comp stores sales
Retail comp stores sales Retail l-f-l sales development* +2% (6)% +3% 8 6% 6 5% 7% 7% 3% 4 3% 2 0% 0 (2) (1)% (4) (6)% (3)% (3)% (6) (8)% (6)% (8) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 *FX-adjusted Investor Meeting Presentation HUGO B
Slide 56: Dividend policy
Dividend policy Dividend per share and payout ratio* (in EUR) (in %) 4.00 100 85% 3.62 3.62 3.34 79% 3.12 93% 80 3.00 2.88 64% 2.60 2.65** 75% 75% 78% 70% 70% 70% 60 2.02 2.00 1.37 40 0.96 1.00 20 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Dividend policy of paying out between 60% and 8
Slide 57: (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 1.3x 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 0.0x 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Operating leases = Future committed operating l
Slide 58: Sourcing and production structure
Sourcing and production structure* Americas: Western 2% Europe: 12% Own production: 18% Eastern Europe: 44% Asia: 38% Third party production: North 82% Africa: 4% *as of 2017, in value terms Investor Meeting Presentation HUGO BOSS © May 2018 58
Slide 59: Multi-Year overview
Multi-Year overview 2017 2016 2015 2014 2013 Sales 2.733 2.693 2.809 2.572 2.432 Gross profit 1.808 1.777 1.853 1.699 1.580 Gross profit margin in % 66,2 66,0 66,0 66,1 64,9 EBITDA 499 433 590 572 561 EBITDA before special items 491 493 594 591 565 Adjusted EBITDA margin in %1 18,0 18,3 21,2 23,0 23
Slide 60: Analyst coverage
Analyst coverage The HUGO BOSS AG share is covered by the following financial analysts: Institution Analyst Institution Analyst Baader Bank Volker Bosse Hauck & Aufhäuser Christian Salis Bankhaus Lampe Peter Steiner HSBC Antoine Belge Bank of America Merrill Lynch Ashley Wallace Intermonte Daniele A
Slide 61: 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 May 2018) Investor Meeting Presentation HUGO BOSS © May 2018 61
Slide 62: Financial Calendar 2018 and Investor Relations contact
Financial Calendar 2018 and Investor Relations contact Date Event August 2, 2018 Second Quarter Results 2018 & First Half Year Report 2018 November 6, 2018 Third Quarter Results 2018 November 15, 2018 Investor Day in London Investor Relations Contact Dennis Weber, CFA Frank Böhme Head of Investor Re
Slide 63: 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 64: HUGO BOSS
HUGO BOSS