Hugo Boss AG · XETR:BOSS
Hugo Boss — Investor Presentation (September 2003)
63 slides from Hugo Boss's investor presentation, September 2003
Slide 1: Company Presentation
HUGO BOSS Company Presentation September 2003 27.08.03 1
Slide 2: Agenda
HUGO BOSS Brands Page The Brands at a Glance 3 The BOSS Brand 5 The HUGO Brand 11 The BALDESSARINI Brand 15 Vision and Core Competencies 18 Financial Developments 2002 23 First Half Developments 2003 38 The BOSS Shops 44 Forecast 2003 54 Appendix 58 27.08.03 2
Slide 3: The Brands at a Glance
HUGO BOSS The Brands at a Glance Sales 2002 Average Market sustainable growth rate • Core brand 974.8 • Business driven, innovative 4% p.a. * EUR mill. fashion • Entry to luxury market • High margins 98.2 6 - 8% p.a. • Fashion brand EUR mill. • Fashion driven, cutting edge and trendy • Entry to luxu
Slide 4: HUGO BOSS 2002
HUGO BOSS HUGO BOSS 2002 • Net sales EUR 1,093 million (-0.1% vs. prev. year, currency adj. +1.3%) • Net profit EUR 75 million (-30.6% vs. prev. year) • Free Cashflow EUR 61 million (prev. year EUR -47 million) • Market presence in 108 countries • 581 HUGO BOSS Shops in 70 countries achieve 26% of n
Slide 5: 27.08.03
HUGO BOSS 27.08.03 5
Slide 6: BOSS (Man)
BOSS (Man) • Net sales EUR 938 million (-0.3% vs. prev. year) • Sales split - Business wear 59% (1995: 71%) - Leisure wear 41% (1995: 29%) • 13% worldmarket share in high-end Men's Apparel Market • 4,300 Points of Sale in 108 countries • 442 BOSS Man Shops and 39 BOSS Man & Woman Shops in 70 countri
Slide 7: BOSS (Woman)
BOSS (Woman) • Net sales EUR 37 million (-23.7% vs. prev. year) • 527 Points of Sale in 49 countries • 64 BOSS Woman Shops and 39 BOSS Man & Woman Shops in 30 countries • BOSS Shops achieve 57% of BOSS Woman sales 27.08.03 7
Slide 8: BOSS (Woman)
BOSS (Woman) • Integration of the BOSS Woman business in the existing HUGO BOSS organization is completed • Redirection of fashion statement, fitting, quality, production and logistical structure on track • Achieving break-even in the second half of 2003 27.08.03 8
Slide 9: Brand Extension
Brand Extension Fragrances Bodywear Watches 1984 1989 1994 1995 1996 1999 2000 2001 2002 Eyewear Shoes Leather Accessories 27.08.03 9
Slide 10: Brand Extension
Brand Extension · Product is: Innovative Quality Leading “Menswear / Womenswear” · Price is: Competitive Affordable Value for money · Place is: Business-driven Casual-driven Metropolitan · Promotion is: Innovative / Proactive Young Sporty / Class 27.08.03 10
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27.08.03 11
Slide 12: HUGO
HUGO • Net sales EUR 98 million (+15.8% vs. prev. year) • Sales growth - HUGO Man 14% - HUGO Woman 21% • Sales split - HUGO Man 72% - HUGO Woman 28% • 860 HUGO Man Points of Sale and 360 HUGO Woman Points of Sale in 44 countries • 34 HUGO Shops in 14 countries • HUGO Shops achieve 16% of HUGO sales
Slide 13: Brand Extension
Brand Extension Fragrances Eyewear 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Shoes Bodywear 27.08.03 13
Slide 14: Brand Extension
Brand Extension · Product is: Innovative / Trendy Young / Emotional Leading “New Menswear / New Womenswear” · Price is: Competitive Affordable Value for money · Place is: Fashion-driven Metropolitan Emotional · Promotion is: Innovative / Proactive / Cutting Edge Aggressive / Yo
Slide 15: BALDESSARINI
Bolfeparin: HUGO BOSS 27.08.03
Slide 16: BALDESSARINI
BALDESSARINI • Net sales EUR 20 million (0% vs. previous year) • 140 Points of Sale in 32 countries • 2 BALDESSARINI Shops and presence in 23 BOSS Shops • BOSS / BALDESSARINI Shops achieve 44% of BALDESSARINI sales 27.08.03 16
Slide 17: Brand Extension
Brand Extension · Product is: Handicraft Luxury Leading “Top Menswear” · Price is: Competitive Value for money · Place is: Quality-driven Metropolitan Emotional · Promotion is: Proactive Young Class 27.08.03 17
Slide 18: Vision and Core Competencies
HUGO BOSS Vision and Core Competencies 27.08.03 18
Slide 19: Vision
HUGO BOSS Vision "Consumers and Retailers appreciate HUGO BOSS as the leading international high-end menswear / womenswear company." We outperform constantly in the areas of Product Leadership - Distinct, innovative fashion statement - Value for money products Market Intimacy - Strong links to c
Slide 20: Key Drivers for Future Growth
HUGO BOSS Key Drivers for Future Growth Today Tomorrow Menswear Menswear / Womenswear Wholesale Wholesale / Retail Fashion - 2 Seasons Concept Fashion - 4 Seasons Concept / Replenishment 27.08.03 20
Slide 21: Future Strategy
HUGO BOSS Future Strategy 1. Further increase of market share. 2. Maintain current market and price positioning. 3. Balancing brand between accessibility and exclusivity. 4. Further improvement of delivery performance. 5. Improve the competitive positioning of certain product groups. 6. Further deve
Slide 22: Strategic targets 2003
HUGO BOSS Strategic targets 2003 BOSS Woman - Achieve break-even in H2 / 2003 - Further improve fitting and collection statement Season Concept - Logistical change - Replenishment - Development of IT-systems supporting multiple seasons concept Retail - Improve merchandising 27.08.03 22
Slide 23: Financial Developments 2002
HUGO BOSS Financial Developments 2002 27.08.03 23
Slide 24: Net Sales Development 1989 - 2002
HUGO BOSS Net Sales Development 1989 - 2002 1,400 1,200 1,095 1,093 1,000 923 753 800 684 581 600 510 486 509 452 471 438 461 433 400 200 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Development 4% 8% -5% -11% 1% 5% 10% 14% 18% 10% 23% 19% 0% German GAAP (HGB) International
Slide 25: Net sales by brand
HUGO BOSS Net sales by brand 2002 2001 Change EUR mill. EUR mill. in % BOSS 974.8 989.5 (1) Man 937.8 941.0 0 Woman 37.0 48.5 (24) HUGO 98.2 84.8 16 BALDESSARINI 20.4 20.4 0 Total 1,093.4 1,094.7 0 27.08.03 25
Slide 26: Net sales by region
HUGO BOSS Net sales by region 2002 2001 Change 2002 1995 EUR mill. EUR mill. in % Prop. of sales in % Germany 275.0 296.6 (7) 25 37 Rest of Europe 445.4 426.4 4 41 33 Americas 221.0 251.9 (12) 20 18 Other regions 87.9 68.5 28 8 8 Royalties 64.1 51.3 25 6 4 Total 1,093.4 1,094.7 0 100 100 27.08.03 26
Slide 27: Net sales 2002 by region: Europe
HUGO BOSS Net sales 2002* by region: Europe (EUR 720 mill.) Rest of the World EUR 308.9 mill. Germany EUR 275.0 mill. 30% 27% 18% 10% 7% 4% 4% France Rest of Europe EUR 101.2 mill. EUR 187.9 mill. Italy UK EUR 42.7 mill. Netherlands EUR 71.9 mill. EUR 41.7 mill. * without royalties 27.08.03 27
Slide 28: Net sales 2002 by region: The Americas
HUGO BOSS Net sales 2002* by region: The Americas (EUR 221 mill.) Rest of World EUR 808.3 mill. 78% 15% USA EUR 156.6 mill. 4% 1% Canada EUR 38.6 mill. Rest of the Americas Mexico EUR 4.4 mill. Brazil EUR 14.8 mill. * without royalties EUR 6.6 mill. 27.08.03 28
Slide 29: Licences: Royalties and Sales
HUGO BOSS Licences EUR mill. Royalties Sales +25% +29% 761.9 590.9 Textile 10% • Bodywear (integr.05/2003) 64.1 13% • Knitwear (integr. 01/2004) 51.3 • Socks (integr. 07/2003) 20% 26% 71% 77% Cosmetics 57% 45% Non-Textile 29% 23% 16% 13% • Glasses • Shoes • Watches 2001 2002 2001 2002 27.08.03 29
Slide 30: Net Profit Development 1989 - 2002
HUGO BOSS Net Profit Development 1989 - 2002 140 120 108 99 100 80 75 56 60 50 42 33 40 27 30 23 25 18 18 14 20 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Development -22% 29% 28% 9% 8% 11% 10% 27% 19% 12% 77% 9% -31% Figures 1993, 1996, 2000 and 2001 adjusted for the ta
Slide 31: Profit and Loss Statement
HUGO BOSS Profit and Loss Statement 2002 2001 Change EUR mill. EUR mill. in % Sales 1,093.4 1,094.7 (0) Gross margin 564.9 577.2 (2) in % of sales 51.7 52.7 Operating income 118.6 167.4 (29) Net financial result (4.3) (3.4) (27) Extraordinary items (17.0) (14.4) (18) Taxes on income and other taxes
Slide 32: Development of result
HUGO BOSS Development of result 2002 EUR mill. Consolidated net profit 20011 108 Change in gross margin (12) Increase in royalties 13 Effect of sales volume on gross margin (7) Effect from changes in the gross margin percentage (18) Provision for risks and doubtful accounts (12) Logistics, sales, ne
Slide 33: Analysis of Financial Requirements
HUGO BOSS Analysis of Financial Requirements 2002 2001 Change EUR mill. EUR mill. in % Accounts receivables, other assets, 241.8 263.3 (8) balances with factoring companies Inventories 218,1 228.7 (5) Fixed assets 219.5 199.8 10 Trade payables and other liabilities (54.6) (61.4) 11 Accruals, balance
Slide 34: Free Cash Flow
HUGO BOSS Free Cash Flow 2002 2001 Change EUR mill. EUR mill. in % Consolidated net profit 74.7 117.6 (36) Depreciation 32.2 29.4 10 Change of pension accruals (1.8) 3.6 Cash flow 105.1 150.6 (30) Net additions to fixed assets (51.9) (91.6) Changes in remaining net capital invested 14.0 (105.7) Curr
Slide 35: Free Cash Flow Development 1989 - 2002
HUGO BOSS Free Cash Flow Development 1989 - 2002 Free Cash 80 Flow 61 61 60 44 47 40 34 19 23 19 17 18 20 3 0 (3) -20 -40 (47) -60 -80 (82) -100 1989 1990 1991 1992 1993 1994 1996 1996 1997 1998 1999 2000 2001 2002 German GAAP (HGB) International Accounting Standards (IAS) 27.08.03 35
Slide 36: Ratios
HUGO BOSS Ratios IAS 2002 2001 Change in % Earnings per share EUR 1.06 1.53 (31) Operating margin in % 10.8 15.3 Return on sales in % 6.8 10.7 Return on capital employed in % 22.2 33.7 27.08.03 36
Slide 37: Employees by Function
HUGO BOSS Employees by Function Average Employee Numbers 2002 2001 Change in % Production/ Logistics 2,867 2,639 9 thereof own production facilities 2,057 1,902 8 thereof others 810 737 10 Sales/ Creation/ Marketing 1,407 1,161 21 thereof own retail 687 504 36 thereof others 720 657 10 Administratio
Slide 38: First Half Developments 2003
HUGO BOSS First Half Developments 2003 27.08.03 38
Slide 39: Net sales by brand
HUGO BOSS Net sales by brand January - June 2003 2002 Change EUR mill. EUR mill. in % BOSS 453.0 477.4 (5) Man 431.3 461.3 (7) Woman 21.7 16.1 35 HUGO 46.1 48.1 (4) BALDESSARINI 8.7 9.1 (4) Total 507.8 534.6 (5) 27.08.03 39
Slide 40: Net sales by region
HUGO BOSS Net sales by region January - June 2003 2002 Change EUR mill. EUR mill. in % Germany 128.6 139.9 (8) Rest of Europe 224.8 220.3 2 Americas 83.2 102.6 (19) Other regions 45.5 42.9 6 Royalties 25.7 28.9 (11) Total 507.8 534.6 (5) 27.08.03 40
Slide 41: Profit and Loss Statement
HUGO BOSS Profit and Loss Statement January - June 2003 2002 Change EUR mill. EUR mill. in % Sales 507.8 534.6 (5) Gross margin 261.7 281.0 (7) in % of sales 51.5 52.6 Operating income 54.3 49.1 11 Net financial result (2.0) (1.4) (43) Extraordinary items (1.9) (9.6) 80 Income before taxes 50.4 38.1
Slide 42: Analysis of Financial Requirements
HUGO BOSS Analysis of Financial Requirements January - June 2003 2002 Change EUR mill. EUR mill. in % Accounts receivable, other assets, 230.6 240.8 (4) balances with factoring companies Inventories 213.9 232.2 (8) Fixed assets 215.6 212.6 1 Trade payables and other liabilities (35.0) (50.5) 31 Accr
Slide 43: Free Cash Flow
HUGO BOSS Free Cash Flow January - June 2003 2002 Change EUR mill. EUR mill. in % Consolidated net income 37.3 35.2 6 Depreciation 18.3 14.5 26 Change of pension accruals (0.9) (1.4) 36 Cash flow 54.7 48.3 13 Net additions to fixed assets (14.4) (27.2) 47 Changes in remaining net capital invested (8
Slide 44: The BOSS Shops
HUGO BOSS The BOSS Shops 27.08.03 44
Slide 45: Berlin Friedrichstrasse
Hamburg Berlin Friedrichstrasse 27.08.03 45
Slide 46: Number of HUGO BOSS Shops
HUGO BOSS Number of HUGO BOSS Shops 81 600 70 51 500 400 37 511 531 300 36 469 35 34 200 16 30 350 Directly operated Shops 220 258 Franchise Shops 100 150 183 136 0 1995 1996 1997 1998 1999 2000 2001 2002 2003E 27.08.03 46
Slide 47: BOSS Shops by region
HUGO BOSS HUGO BOSS Shops by region 2003FC 2002 2001 2000 Germany 92 85 77 45 Rest of Europe 257 242 212 152 Americas 86 96 92 76 Other regions 177 158 139 114 Total 612 581 520 387 Proportion of group sales in % 28 26 25 21 Thereof HUGO BOSS Shops 81 70 51 37 Proportion of group sales in % 7 6 3 3
Slide 48: BOSS Shops
HUGO BOSS HUGO BOSS Shops • Concentrating on DOS investment, where it generates “on-top-of” business • Developing DOS into a profitable and relevant new business system • Gaining a new level of expertise in Supply Chain Management, Retail Know How and Sales Floor Planning 27.08.03 48
Slide 49: BOSS Shop
HUGO BOSS HUGO BOSS Shop Minimum requirements Applies to Freestanding Shops only: Terminology: HUGO BOSS Shop Concept: Brand/label specific Net size: 120 sqm for BOSS Man Black Label shop concept Size for additional concepts (label/gender): 60 sqm Entrance area: Merchandise rotation by brand Floorin
Slide 50: Entrance: Singapore
HUGO BOSS Entrance HUGO BOSS Shop Singapore (Ngee Ann City) • Brands: BOSS Woman • BOSS Man • BOSS Woman • HUGO BOSS Man • Opening: March 2003 • Total net size: 387 sqm HUGO 27.08.03 50
Slide 51: Entrance: Tokyo
HUGO BOSS Entrance HUGO BOSS Shop Tokyo (Roppongi) BOSS Man • Brands: • BOSS Man • BOSS Man Sportswear • BOSS Woman BOSS Woman • HUGO • Opening: April 2003 HUGO • Total net size: 375 sqm 27.08.03 51
Slide 52: Shop Concept Development
HUGO BOSS Shop Concept Development BOSS Man Orange Label Traveller Minimum requirements Net sales space (nss): 40 sqm Storage space: 20 % of nss Room height: 2.8 meters Display capacity: > 20 pieces / sqm incl. stock capacity (and more possibilities for accessories presentation) 27.08.03 52
Slide 53: Shop Concept Development
HUGO BOSS Shop Concept Development BOSS Man Orange Label e.g.: Freestanding Shop, Vilamoura (Portugal) - March 2003 27.08.03 53
Slide 54: Forecast 2003
HUGO BOSS Forecast 2003 27.08.03 54
Slide 55: Sales and Result Forecast 2003
HUGO BOSS Sales and Result Forecast 2003 • Sales at previous year's level if exchange rates remain stable • The gross margin is expected to grow • Net profit expectation: double digit growth 27.08.03 55
Slide 56: Sales at previous year's level at 2002 exchange rates
HUGO BOSS Sales at previous year's level at 2002 exchange rates EUR million 1.093 1.093 E 02 ted ale s 20 ltie s S les dju nc 03 DO les ya ho rre 20 ya Sa Ro W cu les Sa Mainly BOSS Woman 27.08.03 56
Slide 57: Development of results
HUGO BOSS Development of results 2002 2003 EUR mill. EUR mill. Consolidated net profit 20011 108 75 Change in gross margin (12) Increase in royalties 13 Effect of sales volume on gross margin (7) Effect from changes in the gross margin percentage (18) Provision for risks and doubtful accounts (12) L
Slide 58: Appendix
HUGO BOSS Appendix 27.08.03 58
Slide 59: The nature of the HUGO BOSS business
HUGO BOSS The nature of the HUGO BOSS business Collection Presentation Delivery Sales Inhouse Stock Orders Stock Business Order Delivery Sales Business Production Orders 30.06.-15.10. May Jun July Aug Sept Oct Nov Dec Jan Feb Mar Apr Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct 27.08.03 59
Slide 60: Development of the Dividend
HUGO BOSS Development of the Dividend 43.9 EUR mill. Special Dividend 49.5 53.1 53.1 Dividend 24.8 28.4 1998 1999 2000 2001 2002 EUR Common stock 0.35 0.40 0.70 0.75 0.75 Preferred stock 0.36 0.41 0.707 0.76 0.76 Special dividend - - 0.624 - - 27.08.03 60
Slide 61: Projections inevitably entail risks
HUGO BOSS Projections inevitably entail risks Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Any statement in this report that states our intentions, beliefs, expectations or predictions (and the assumptions underlyin
Slide 62: Financial Calendar 2003
HUGO BOSS Financial Calendar 2003 July 30, 2003 Publication of the Interim Report 2003 September 2, 2003 DVFA-Analysts' Conference November 5, 2003 Publication of the Third Quarter Report 2003 February 19, 2004 Publication of the provisional results 2003 27.08.03 62
Slide 63: HUGO BOSS Webpage - Financial Data
HUGO BOSS HUGO BOSS Webpage - Financial Data Address Contents Languages Annual Report German Interim Report English Financial Presentations www.hugoboss.com Investor Relations Calendar Stock Prices Press Releases 27.08.03 63