Hugo Boss Ag · XETR:BOSS
Hugo Boss — Non-Deal Roadshow (November 2015)
58 slides from Hugo Boss's roadshow presentation, Nov 4, 2015
Slide 1: HUGO BOSS
HUGO BOS S§S
Slide 2: Roadshow London // Barclays
ROADSHOW London // Barclays Mark Langer, CFO London, November 4, 2015 Roadshow London // Barclays HUGO BOSS © November 2015 2
Slide 3: Agenda
Agenda Financial Review First Nine Months 2015 Strategic Outlook 2015 and beyond Financial Outlook 2015 Roadshow London // Barclays HUGO BOSS © November 2015 3
Slide 4: Agenda
Agenda Financial Review First Nine Months 2015 Strategic Outlook 2015 and beyond Financial Outlook 2015 Roadshow London // Barclays HUGO BOSS © November 2015 4
Slide 5: Group sales development weakens in third quarter
Group sales development weakens in third quarter Q3 Group sales development 9M Group sales development (in EUR million) (in EUR million) +4% +9% 744 2,059 717 1,888 Q3 2014 Q3 2015 9M 2014 9M 2015 (-1% fx-adjusted) (+3% fx-adjusted) Roadshow London // Barclays HUGO BOSS © November 2015 5
Slide 6: Europe remains strongest growing region
Europe remains strongest growing region Sales Europe (in EUR million) ■ UK continues growing at double-digit rates 1,185 1,253 ■ Solid performance in Germany and France ■ Third quarter trends remain broadly unchanged compared to first half year 458 480 Q3 2014 Q3 2015 9M 2014 9M 2015 Sales growth Eu
Slide 7: Region Americas turns more challenging in third quarter
Region Americas turns more challenging in third quarter Sales Americas (in EUR million) ■ US business down 10% currency-adjusted 480 in third quarter 412 ■ Footfall declines affect retail performance ■ Stronger than expected decrease of 156 165 wholesale business Q3 2014 Q3 2015 9M 2014 9M 2015 Sale
Slide 8: Performance in Asia/Pacific suffers from negative sales trends in China
Performance in Asia/Pacific suffers from negative sales trends in China Sales Asia/Pacific (in EUR million) ■ Trends differ significantly by market, 283 Australia and Japan outperforming 252 ■ Market deterioration impacts business in China, down 20% in Q3 87 84 ■ Chinese tourism drives sales in rest
Slide 9: Retail sales momentum weakens over the course of the third quarter
Retail sales momentum weakens over the course of the third quarter Sales Retail (in EUR million) ■ Comp store sales up 3% year-to-date, 1,201 stable versus prior year in Q3 1,033 ■ Third quarter momentum deteriorates after strong start 399 358 ■ Continued strong performance of online business, up 22
Slide 10: Wholesale sales decline 7% currency-adjusted in the third quarter
Wholesale sales decline 7% currency-adjusted in the third quarter Sales Wholesale (in EUR million) ■ Weaker than expected sales development in the Americas in the third quarter 815 816 ■ Sales shifts from takeovers have negative impact 344 330 ■ Positive retailer feedback and customer acceptance of
Slide 11: Watches, eyewear and BOSS The Scent launch drive License business
Watches, eyewear and BOSS The Scent launch drive License business Sales Licenses (in EUR million) 40 42 15 15 Q3 2014 Q3 2015 9M 2014 9M 2015 Sales growth Licenses (in %) in EUR fx-adjusted 7 7 1 1 Q3 2015 9M 2015 Roadshow London // Barclays HUGO BOSS © November 2015 11
Slide 12: Slight increase of gross profit margin in the first nine months
Slight increase of gross profit margin in the first nine months Gross profit margin development Gross profit margin development (in %) (in %) +40bp +10bp 64.1 64.5 65.3 65.4 Q3 2014 Q3 2015 9M 2014 9M 2015 ■ Positive distribution channel mix supports margin development in the first nine months ■ Inv
Slide 13: Weaker than expected sales and gross margin growth weighs on profits
Weaker than expected sales and gross margin growth weighs on profits Selling & Distribution Administration Expenses Expenses 813 EUR million 15% 201 EUR million 12% EBITDA (before special items) EBIT 0% (4)% 423 EUR million 330 EUR million Net Income attributable to Earnings per share (9)% equity ho
Slide 14: Adverse currency effects weigh on financial result in the third quarter
Adverse currency effects weigh on financial result in the third quarter ■ Group’s syndicated loan (58)% successfully refinanced ■ Negative low-single-digit Interest income / million euro effect in to be expenses -3 incurred in fourth quarter -5 9M 2014 9M 2015 ■ Attractive terms drive future reducti
Slide 15: Currency translation effects distort regional profitability development
Currency translation effects distort regional profitability development Segment profit in EUR million 9M 2015 In % of sales 9M 2014 In % of sales Change in % Europe* 403.9 32.2 415.8 35.1 (3) Americas 130.1 27.1 98.4 23.9 32 Asia/Pacific 70.3 24.8 72.9 28.9 (4) Licenses 34.6 81.7 33.1 83.5 4 Segm en
Slide 16: Working capital management improves sequentially
Working capital management improves sequentially Currency-adjusted inventory and working capital growth, y-o-y Inventories (in %) Trade Net Working Capital 20 19 16 15 15 13 13 12 10 10 9 9 8 5 5 4 3 0 -5 (4) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Roadshow London // Barclays HUGO BO
Slide 17: Free cash flow declines due to higher capital expenditures
Free cash flow declines due to higher capital expenditures Investments Free cash flow Net debt (in EUR million) (in EUR million) (in EUR million) +64% +27% (39)% 141 152 194 153 86 92 9M 2014 9M 2015 9M 2014 9M 2015 Sep. 30, 2014 Sep. 30, 2015 ■ Retail expansion, ■ Decrease due to ■ Net debt to decl
Slide 18: Agenda
Agenda Financial Review First Nine Months 2015 Strategic Outlook 2015 and beyond Financial Outlook 2015 Roadshow London // Barclays HUGO BOSS © November 2015 18
Slide 19: Growth strategy 2020 defines 2015 priorities
Growth strategy 2020 defines 2015 priorities Elevate the Exploit growth Leverage the Build BOSS core opportunities in brand’s potential omnichannel to brand by under- in womenswear drive own retail engaging penetrated and shoes & online and offline consumers markets accessories emotionally Further b
Slide 20: BOSS brand elevation upgrades the offering and drives retail sales growth
BOSS brand elevation upgrades the offering and drives retail sales growth Future brand positioning LUXURY RETAIL PREMIUM WHOLESALE authentic innovative confident progressive lighthearted dynamic sophisticated contemporary Roadshow London // Barclays HUGO BOSS © November 2015 20
Slide 21: HUGO and BOSS Green to substitute BOSS in category business
HUGO and BOSS Green to substitute BOSS in category business RETAIL WHOLESALE Own stores to increasingly focus on BOSS core brand Presence of BOSS core brand to become limited to exclusively shop-in-shops Category business focused on HUGO and BOSS Green Roadshow London // Barclays HUGO BOSS © Novembe
Slide 22: September fashion show underscores BOSS feminine take on tailoring
September fashion show underscores BOSS feminine take on tailoring BOSS Womenswear sales up 10% currency-adjusted in 9M, overall womenswear +3% Roadshow London // Barclays HUGO BOSS © November 2015 22
Slide 23: Iconic BOSS Bespoke Bag launches with Fall/Winter 2015 collection
Iconic BOSS Bespoke Bag launches with Fall/Winter 2015 collection Launch reflects importance of S&A in defining brand identity and driving brand desirability Roadshow London // Barclays HUGO BOSS © November 2015 23
Slide 24: New openings and takeovers contribute to own retail store expansion
New openings and takeovers contribute to own retail store expansion Number of own retail stores TOTAL 1,105 (+64) as of September 30, 2015 Openings 130 (December 31, 2014: 1,041) thereof takeovers 70 Closings 66 Europe* 602 (+7) Openings 50 thereof takeovers 9 Closings 43 Americas 221 (+17) Asia/Pac
Slide 25: Takeovers remain part of retail expansion
Takeovers remain part of retail expansion South Korea China ■ Key fashion and trend-setting market in ■ Takeover of last remaining franchise Southeast Asia partner allows full brand control and simplifies distribution structure ■ Takeover effective March 1, 2015 ■ Takeover effective April 1, 2015 ■
Slide 26: Robust online sales growth reflects progress on road to omnichannel
Robust online sales growth reflects progress on road to omnichannel Online sales up 20% currency-adjusted in the third quarter, +22% in 9M Roadshow London // Barclays HUGO BOSS © November 2015 26
Slide 27: Omnichannel model geared to the demands of today's consumer
Omnichannel model geared to the demands of today’s consumer Phase 2: hugoboss.com Phase 4: Completion of omni- relaunch online and mobile channel implementation 2014 2015 2016 Phase 1: Frontend Phase 3: Building the takeover digital flagship store Implementation of omnichannel business model under w
Slide 28: Key digital initiatives defined
Key digital initiatives defined Initiative Description and rationale Status Launch of own store Takeover of Demandware software from former Done frontend fulfillment partner enabling full control Relaunch of Migration of formerly separate eCom and brand Done hugoboss.com worlds driving traffic to st
Slide 29: Region Europe to lead the Group's growth in 2015
Region Europe to lead the Group’s growth in 2015 Europe* Americas Asia/Pacific ■ Solid growth expected to ■ Recent weakness ■ Premium apparel continue expected to persist into market in China to the fourth quarter remain pressured ■ Comparison base eases ■ Focus on inventory ■ Brand equity and ■ Ong
Slide 30: New flat-packed goods distribution center operational since July 2014
New flat-packed goods distribution center operational since July 2014 Facts: Location: Filderstadt, Germany Floor space: 35,000m² Output: Up to 35 million pieces per year Key benefits: ■ Improved speed-to-market ■ Reduced handling costs through comprehensive automation Roadshow London // Barclays HU
Slide 31: Launch of new systems refines retail management
Launch of new systems refines retail management Retail Merchandise Planning Retail Assortment Planning ■ Systems-based planning process ■ SAP-based assortment planning based on sales, margins and approach based on store capacity, Purpose stock levels location characteristics and product lifecycles ■
Slide 32: Agenda
Agenda Financial Review First Nine Months 2015 Strategic Outlook 2015 and beyond Financial Outlook 2015 Roadshow London // Barclays HUGO BOSS © November 2015 32
Slide 33: 2015 financial outlook adjusted in October
2015 financial outlook adjusted in October Outlook 2015 Sales growth (currency-adjusted) 3% - 5% Growth of 3% - 5% EBITDA before special items Capex EUR 220 million – EUR 240 million Own retail network Around 65 openings (excl. takeovers) Roadshow London // Barclays HUGO BOSS © November 2015 33
Slide 34: HUGO BOSS forecasts a year of solid growth in 2015
HUGO BOSS forecasts a year of solid growth in 2015 ■ Speed and extent of performance deterioration in China and the US unforeseeable ■ Rapid changes in operating environment require organization to become faster and even more customer-centric ■ Better sales and earnings trends expected in the fourth
Slide 35: Backup
BACKUP Roadshow London // Barclays HUGO BOSS © November 2015 35
Slide 36: Brand portfolio
Brand portfolio 72%* of Group sales 8%* of Group sales modern / sophisticated modern / active 10%* of Group sales 10%* of Group sales casual / urban chic progressive / contemporary *as of FY 2014 Roadshow London // Barclays HUGO BOSS © November 2015 36
Slide 37: Sales by region 2014
Sales by region 2014 Share of Group sales* Europe Americas Asia/Pacific (incl. Middle East/Africa) 61% 23% 14% Germany: 17% (of Group Sales) U.S.: 18% China: 8% Great Britain: 10% Canada: 3% Oceania: 2% France: 7% Central & Japan: 1% Benelux: 6% South America: 2% Other: 3% Other: 21% *+2% Licenses R
Slide 38: Sales by distribution channel
Sales by distribution channel 44% 41% 53% 49% 64% 57% Wholesale Retail 54% 57% 45% 49% 40% 33% Licenses 3% 3% 2% 2% 2% 2% 2009 2010 2011 2012 2013 2014 Retail to account for at least 75% of Group sales by 2020 Roadshow London // Barclays HUGO BOSS © November 2015 38
Slide 39: Key market data
Key market data 4 8 0 3 German apparel market (4) (3) (7) (4) (5) Retail sales growth (10) (9) (16) (in %)* Oct ’14 Nov ’14 Dec ’14 Jan ’15 Feb ’15 Mar ’15 Apr ’15 May ’15 Jun ’15 Jul ’15 Aug ’15 Sep ’15 12 Chinese men’s luxury apparel market Retail sales growth (1) (in %)** (10) 2012 2013 2014 8 10
Slide 40: Retail comp stores sales growth
Retail comp stores sales growth Sales growth retail l-f-l* Retail l-f-l 8 6% 6% 6 5% 4% 4% 4% 4 4% 4% 3% 3% 3% 2 2% 2% 2% 2% 0% 0% 0 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 2012 2012 2012 2012 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2015 2015 2015 *fx-adjusted Roadshow London //
Slide 41: Income statement
Income statement in EUR million Q3 2015 Q3 2014 Change in % 9M 2015 9M 2014 Change in % Sales 744.1 716.5 4 2,058.7 1,888.0 9 Cost of sales (264.4) (257.3) (3) (711.7) (655.2) (9) Gross profit 479.7 459.2 4 1,347.0 1,232.8 9 In % of sales 64.5 64.1 40 bp 65.4 65.3 10 bp Selling and distribution expe
Slide 42: Multi-Year Overview
Multi-Year Overview in EUR million 2014 2013 2012 2011 2010 2009 Earnings Position Sales 2,571.6 2,432.1 2,345.9 2,058.8 1,729.4 1,561.9 Gross profit 1,699.1 1,579.6 1,444.1 1,252.0 1,022.4 836.2 EBITDA 571.5 561.4 523.9 468.0 340.1 226.5 EBITDA before special items 590.8 564.7 528.1 469.5 353.7 269
Slide 43: EBITDA margin and ROCE vs. channel mix
EBITDA margin and ROCE vs. channel mix Adj. EBITDA margin ROCE Retail Wholesale Royalties 24% 57% 73% 64% 62% 63% 60% 49% 22.8% 41% 22.5% 33% 31% 31% 31% 20.5% 23.2% 23.0% 17.2% 16.7% 15.7% 16.1% 3% 2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Roadshow London // Barclays HUGO BOSS © November 2015
Slide 44: Trade net working capital by component
Trade net working capital by component Sep. 30, 2015 544 ■ Expansion of retail Inventories business +12% +3% (in EUR million) Sep. 30, 2014 486 ■ Effective inventory fx-adjusted management Trade Sep. 30, 2015 248 receivables (6)% (8)% ■ Decline in line with wholesale trends (in EUR million) Sep. 30,
Slide 45: 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 %) +110 bp 22 20.7 20.6 19.8 19.7 19.7 19.8 19.8 20 18.6 18.7 19.1 18.0 17.9 17.9 18.1 18 16 14 12 10 8 6 4 2 0 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2
Slide 46: (Adjusted) financial leverage
(Adjusted) financial leverage 2.4 2.2x 2.0 1.6x 1.6 1.4x 1.3x 1.3x 1.2x 1.2x 1.2 0.8 0.6x 0.4 0.3x 0.2x 0.1x 0.1x 0.0 2009 2010 2011 2012 2013 2014 Net debt / EBITDA Net debt incl. operating leases / EBITDAR Operating leases = Future committed operating lease obligations capitalized according to S&P
Slide 47: Dividend and payout ratio
Dividend and payout ratio in EUR in %* 4.00 100 3.62 90 3.50 3.34 3.12 80 3.00 2.88 75% 75% 70 2.50 70% 70% 70% 64% 60 2.02 2.00 50 40 1.50 30 1.00 0.96 20 0.50 10 0.00 0 2009 2010 2011 2012 2013 2014 Dividend policy to pay out between 60% and 80% of consolidated net profit *As a percentage of net p
Slide 48: Sourcing and production structure 2014
Sourcing and production structure 2014* 4% 5% 20% own Americas North Africa production 11% Western Europe 47% Eastern Europe 33% Asia 80% third party production *Percentage based on value of procurement volumes Roadshow London // Barclays HUGO BOSS © November 2015 48
Slide 49: Retail network
Retail network Number of own retail stores as of December 31 Outlets Shop-in-shops Freestanding stores 1,105 1,010 1,041 130 113 122 840 104 622 550 526 531 537 88 79 413 264 261 371 388 425 270 323 197 2010 2011 2012 2013 2014 Sep. 30, 2015 Roadshow London // Barclays HUGO BOSS © November 2015 49
Slide 50: Retail network (continued)
Retail network (continued) Number of own retail stores and shop-in-shops + 57 (66) + 23 + 50 1,105 + 29 China 1,041 + 14 Mexico + 25 Korea + 4 Canada + 1 Australia + 16 UK + 3 Brazil + 1 Japan + 8 France + 2 USA + 1 New Zealand + 6 Spain + 5 Italy + 4 Germany + 4 Russia + 2 Denmark + 2 Greece + 1 Be
Slide 51: Key Share Data
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 London // Barclays HUGO BOSS © November 2015 51
Slide 52: Analyst coverage
Analyst coverage The HUGO BOSS AG share is covered by the following financial analysts: Institution Analyst Institution Analyst Baader Bank Volker Bosse HSBC Antoine Belge Bankhaus Lampe Peter Steiner Jefferies Charmaine Yap Bank of America Merrill Lynch Ashley Wallace J.P. Morgan Chiara Battistini
Slide 53: 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 Ratio 5:1 ■ Offer the convenience of stock quotes and Country Germany dividend payments in U.S. dollars Effective Date Jan 18, 2013 ■ Can
Slide 54: 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 June 10, 2015) Roadshow London // Barclays HUGO BOSS © November 2015 54
Slide 55: Financial calendar 2015/2016
Financial calendar 2015/2016 Date Event November 24, 2015 Investor Day Early February 2016 Preliminary Results 2015 March 10, 2016 Press and Analysts’ Conference May 3, 2016 First Quarter Results May 19, 2016 Annual Shareholders’ Meeting August 5, 2016 First Half Year Results November 4, 2016 Nine M
Slide 56: Investor Relations contact
Investor Relations contact Dennis Weber, CFA Head of Investor Relations Phone: +49 (0) 7123 94 - 86267 E-Mail: Dennis_Weber@hugoboss.com Internet: group.hugoboss.com Roadshow London // Barclays HUGO BOSS © November 2015 56
Slide 57: 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 58: HUGO BOSS
HUGO BOS S§S