Hugo Boss Ag · XETR:BOSS
Hugo Boss — Non-Deal Roadshow (March 2016)
51 slides from Hugo Boss's roadshow presentation, Mar 17, 2016
Slide 1: HUGO BOSS
HUGO BOSS
Slide 2: Roadshow Stockholm // Berenberg HUGO BOSS Company Handout
Roadshow Stockholm // Berenberg HUGO BOSS Company Handout Stockholm, March 17, 2016 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 2
Slide 3: Agenda
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 3
Slide 4: Agenda
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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 Roadshow Stockh
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 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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) Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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 Roadshow Stockholm // Berenberg HUGO BOSS
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. Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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
Agenda Operational and financial review 2015 Strategic outlook 2016 Financial outlook 2016 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 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 Licenses *On a currency-adjusted basis Roadshow Stockholm // Berenberg HUGO
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 Roads
Slide 30: Management committed to making 2016 a year of change and opportunity
Management committed to making 2016 a year of change and opportunity Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 30
Slide 31: BACKUP
BACKUP Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 31
Slide 32: Brand portfolio: Future brand positioning
Brand portfolio Future brand positioning LUXURY RETAIL PREMIUM WHOLESALE authentic innovative confident progressive lighthearted dynamic sophisticated contemporary Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 32
Slide 33: Brand portfolio
Brand portfolio* 72% of Group sales 9% of Group sales modern / sophisticated modern / active 9% of Group sales 10% of Group sales casual / urban chic progressive / contemporary March 17, 2016 33 *as of FY 2015 Roadshow Stockholm // Berenberg HUGO BOSS © 11-Mar-16 33
Slide 34: Sales by region 2015
Sales by region 2015 Share of Group sales* Europe Americas Asia/Pacific (incl. Middle East/Africa) 60% 24% 14% Germany: 17% U.S.: 19% China: 8% Great Britain: 12% Canada: 3% Oceania: 2% France: 6% Central & Japan: 2% Benelux: 5% March 17, 2016 South America: 2% Other: 2% Other: 20% Roadshow Stockhol
Slide 35: Sales by distribution channel
Sales by distribution channel 41% 38% 44% 53% 49% 57% Wholesale Retail 57% 60% 54% 45% 49% 40% Licenses 3% 2% 2% 2% 2% 2% 2010 2011 2012 2013 2014 2015 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 35
Slide 36: Multi-Year overview
Multi-Year overview In EUR million 2015 2014 2013 2012 2011 2010 Sales 2,808.7 2,571.6 2,432.1 2,345.9 2,058.8 1,729.4 Gross profit 1,852.8 1,699.1 1,579.6 1,444.1 1,252.0 1,022.4 EBITDA 589.9 571.5 561.4 523.9 468.0 340.1 EBITDA before special items 594.1 590.8 564.7 528.1 469.5 353.7 EBIT 447.7 44
Slide 37: Retail comp stores sales growth
Retail comp stores sales growth Sales growth retail l-f-l* Retail l-f-l 12 11% 10 8 6% 6% 6 5% 4% 4% 4% 4% 4 3% 3% 0% 4% 2 3% 2% 2% 2% 2% 0% 0 -1% -2 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 2012 2012 2012 2012 2012 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2015 2015 2015 201
Slide 38: EBITDA margin and ROCE vs. channel mix
EBITDA margin and ROCE vs. channel mix Adj. EBITDA margin ROCE Retail Wholesale Royalties 24% 60% 73% 64% 62% 63% 60% 53% 49% 22.8% 22.5% 38% 31% 31% 31% 21.2% 20.5% 23.2% 23.0% 16.7% 17.2% 16.1% 3% 2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Roadshow Stockholm // Berenberg HUGO BOSS © March 17,
Slide 39: Trade net working capital in relation to sales
Trade net working capital in relation to sales Average trade net working capital as a percentage of sales by quarter* (in %) +40bp 22 20.6 20.7 20.1 19.8 19.7 19.7 19.8 19.8 20 19.1 19.5 18.6 18.7 18.0 17.9 17.9 18.1 18 16 14 12 10 8 6 4 2 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2012
Slide 40: (Adjusted) financial leverage
(Adjusted) financial leverage 2.4 2.2x 2.0 1.6x 1.6 1.4x 1.4x 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 0.1x 0.1x 0.1x 0.0 2009 2010 2011 2012 2013 2014 2015 Operating leases = Future committed operating lease obligations capitalized a
Slide 41: Sourcing and production structure 2015
Sourcing and production structure 2015* Americas; Western 3% Europe; 11% Own production; 20% Eastern Europe; 46% Asia; 35% Third party production; North 80% Africa; 5% *Percentage based on value of procurement volumes Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 41
Slide 42: Retail network
Retail network Number of own retail stores as of December 31 1,113 1,041 1,010 134 113 122 840 104 549 622 531 526 537 88 413 79 264 261 Outlets 388 430 Shop-in-shops 323 371 270 197 Freestanding stores 2010 2011 2012 2013 2014 2015 Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 42
Slide 43: Retail network (continued)
Retail network (continued) + 63 (74) + 28 1,113 + 55 1,041 + 30 China + 15 Mexico + 25 Korea + 5 Canada + 2 Macau + 17 UK + 4 Brazil + 2 Japan + 9 France + 4 USA + 1 Australia + 7 Italy + 1 New Zealand + 6 Spain + 1 Singapore + 4 Germany + 1 Taiwan + 4 Russia + 2 Denmark + 2 Greece + 1 Belgium + 1 I
Slide 44: HUGO BOSS share
HUGO BOSS share Key Share Data ISIN DE000A1PHFF7 WKN A1PHFF Ticker Symbol BOSS Stock exchanges: Xetra, Frankfurt/Main, Stuttgart, Dusseldorf, Hamburg, Munich, Hanover, Berlin/Bremen Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 44
Slide 45: Analyst coverage
Analyst coverage The HUGO BOSS AG share is covered by the following financial analysts: Institution Analyst Institution Analyst Baader Bank Volker Bosse Invest Securities Peter Farren Bankhaus Lampe Peter Steiner Jefferies Charmaine Yap Bank of America Merrill Lynch Ashley Wallace J.P. Morgan Melani
Slide 46: Level I ADR program
Level I ADR program ADR Details Benefits of ADRs for U.S. investors Market OTC Symbol BOSSY ■ Clear and settle according to normal U.S. standards CUSIP 444560106 ■ Offer the convenience of stock quotes and dividend payments in U.S. dollars Ratio 5:1 Country Germany ■ Can be purchased/sold in the sam
Slide 47: Shareholder structure
Shareholder structure* 8% PFC S.r.l. / Zignago Holding S.p.A. / Tamburi Investment Partners S.p.A. 2% Own shares 90% Free float *Source: Share register, voting rights notifications (as of February, 2016) Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 47
Slide 48: Financial calendar 2016
Financial calendar 2016 Date Event May 3, 2016 First Quarter Results May 19, 2016 Annual Shareholders’ Meeting August 5, 2016 First Half Year Results November 4, 2016 Nine Months Results Roadshow Stockholm // Berenberg HUGO BOSS © March 17, 2016 48
Slide 49: Investor Relations contact
Investor Relations contact Dennis Weber, CFA Frank Böhme, Head of Investor Relations Investor Relations Manager Phone: +49 (0) 7123 94 - 86267 Phone: +49 (0) 7123 94 - 87581 E-Mail: Dennis_Weber@hugoboss.com E-Mail: Frank_Boehme@hugoboss.com Internet: group.hugoboss.com Internet: group.hugoboss.com
Slide 50: 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 51: HUGO BOSS
HUGO BOSS