Group Strategy. Claus-Dietrich Lahrs, Chief Executive Officer. November 8, 2011

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2 Group Strategy Claus-Dietrich Lahrs, Chief Executive Officer November 8, 2011 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

3 AGENDA INTRODUCTION HUGO BOSS A PREMIUM BUSINESS MODEL WITH LUXURY APPEAL DISTRIBUTION STRATEGY MEDIUM-TERM OUTLOOK HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

4 AGENDA INTRODUCTION HUGO BOSS A PREMIUM BUSINESS MODEL WITH LUXURY APPEAL DISTRIBUTION STRATEGY MEDIUM-TERM OUTLOOK HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

5 HUGO BOSS Defining premium in clothing and fashion HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

6 HUGO BOSS Record sales and profitability development Sales and EBITDA before special items (in EUR million) Sales Sales EBITDA before special items EBITDA 600 2,000 1,500 1,496 1,632 1,686 1,562 1, , e 0 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

7 AGENDA INTRODUCTION HUGO BOSS A PREMIUM BUSINESS MODEL WITH LUXURY APPEAL DISTRIBUTION STRATEGY MEDIUM-TERM OUTLOOK HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

8 HUGO BOSS A premium business model with luxury appeal Distribution Brands 05 People Product Expertise 02 Operational Excellence Global Presence HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

9 01 BRANDS Targeting clearly defined consumer segments Luxurious Modern Authentic HUGO BOSS Brand Portfolio Premium Modern Sophisticated Refined Casual Masculine Aesthetic Progressive Avant-garde Contemporary Sportive Relaxed Energetic Casual Urban Chic Contemporary HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

10 02 PRODUCT EXPERTISE Unmatched expertise in high-end tailoring reflected in dominant market positions HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

11 03 GLOBAL PRESENCE Renowned brands around the world HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

12 04 OPERATIONAL EXCELLENCE A strong organizational backbone HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

13 05 PEOPLE Industry-leading know-how HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

14 06 DISTRIBUTION Increasing Retail sophistication and Online expertise add to historical strength in Wholesale ONLINE RETAIL WHOLESALE HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

15 HUGO BOSS growth strategy MAXIMIZING CONSUMER FOCUS TO DRIVE RETAIL STRENGTHENING INDIVIDUAL BRAND IDENTITIES D.R.I.V.E.* STRIVING FOR OPERATIONAL EXCELLENCE EXPLOITING GLOBAL GROWTH OPPORTUNITIES *D.R.I.V.E. = Dynamic Retail Improvement & Vertical Expansion HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

16 Project D.R.I.V.E. to support implementation of growth strategy 1 2 Consumer centric business model Weeks Weeks Desirable brand with best POS performance 3 Faster response to market changes Better and more focused assortment Systematic analysis of sell through data Consumer insight drives collection planning Sales floor optimized product development Focus on wholesale and own retail needs alike Active sell through management Strong brands Above average growth HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

17 Turning industry changes into opportunities Sourcing cost inflation The need for speed : Accelerating fashion trends Consumer understanding makes or breaks brand success Fast development of new markets with mono-brand retail environments Ongoing consolidation in wholesale distribution Retail sophistication key for successful wholesale partnerships Emergence of the global consumer ( Great brands are global ) Convergence of casualwear and clothing HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

18 AGENDA INTRODUCTION HUGO BOSS A PREMIUM BUSINESS MODEL WITH LUXURY APPEAL DISTRIBUTION STRATEGY MEDIUM-TERM OUTLOOK HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

19 WHOLESALE Key facts Multi Brand vs. Franchise Franchise accounts for around a third of total wholesale business 3% // Royalties 57% // Wholesale Full Year % // Franchise 40% // Retail 40% // Multibrand Numbers of Accounts Number of wholesale accounts has decreased by more than 10% over the last four years 3,756 3,853 3,595 3, Customer Concentration Top 50 customers account for around 50% of wholesale sales 50% 25% Top 10 Top 30 Top 50 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

20 WHOLESALE Capturing growth opportunities Competition in most major wholesale markets is tough but HUGO BOSS is best positioned for further growth Offering desirable brands Leveraging strength in core offerings across the brand portfolio Delivering the right product at the right place at the right time Providing intelligent replenishment solutions Taking over merchandising responsibility Sharing own retail best practices HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

21 WHOLESALE Turning mono-brand wholesale space into own retail Takeover of franchise stores Takeover of shop-in-shops operated by wholesale partners Rainbow (China, 34 stores, 2010) Moss Bros (UK, 15 stores, 2011) Imaginex (China, 8+10, 2011/2012) Chieh Ger (Taiwan, 10, 2012 ) Pohland (Germany, 8 shop-inshops, 2009) Maximization of brand control Immediate earnings accretion Retail progress allows us to increasingly manage brand space ourselves HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

22 RETAIL Significant increase in share of Group sales Retail 24% 25% 27% 33% 40% 55% Wholesale 73% 72% 70% 64% 57% 43% Licenses 3% 3% 3% 3% 3% 2% e 2015e HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

23 RETAIL Continuing double-digit retail sales growth over last 5 years Growth by channel (in %) +35% +36% +30% 24% +25% 27% 33% 40% +15% +16% +14% +11% 73% 72% +9% +7% +10% 70% +3% +1% +12% 64% +11% -1% +19% +10% -7% Group Retail -15% -15% Wholesale YTD Sep HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

24 RETAIL The lead distribution channel 01 Growth To contribute >70% of medium-term sales growth 02 Profitability Most important profitability driver 03 Investments To account for majority of investments until Brand Stores Strengthens brand perception across all channels 05 Processes Driver of far-reaching operational changes 06 People More than 3,000 Group employees working in own retail HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

25 RETAIL The HUGO BOSS retail universe EUROPE 292 AMERICAS 120 ASIA/PACIFIC 179 Number of own retail stores as of September 30, 2011 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

26 RETAIL Thirteen core retail formats defined BOSS Black Core Man format BOSS format BOSS Man Multi-brand formats Town Orange Man Man Sportswear Sportswear format Man Men Town HUGO Man Man Man + Woman Town Exclusive Man Menswear Flagship Town Woman Man Mono-brand formats Orange BOSS Black BOSS HUGO Mono format Black Man HUGO Man SPW Man Selection Man Man + Woman Selection based on store size, consumer demographics and retail environment HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

27 RETAIL Modularization allows tailored and flexible brand offering M Module S Module XL Module HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

28 RETAIL The HUGO BOSS directly operated store universe Freestanding Shop in Shop Total Number of stores (Sep 30, 2011) Europe Americas Asia Total Size (in sqm) 66,000 20,500 86,500 Average Size (in sqm) ~300 ~70 ~ revenues (in EUR million) e Sales Density (in EUR / sqm) ~6,500 ~9,300 ~7,400 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

29 RETAIL Ambitious store expansion plans Significant potential for network expansion identified in all three regions Full pipeline of new projects Location and rent are key Comprehensive headquarter approval process Target to open around 50 new stores every year organically HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

30 RETAIL Ongoing development initiatives in all fields Product Systems Supply Chain & Distribution Personnel Operations Consumer facing Consumercentric development process Improved preorder planning Single productbased productivity analysis Core Range offering Reporting enhancements through Groupwide SAP Retail platform Ongoing optimization of instore systems More flexible inseason product allocation based on actual demand Transparent merchandise flow across the supply chain Implementation of store operations manual Standardized retail staff training Introduction of new incentive elements Systematic CRM approach HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

31 RETAIL Core range a major productivity driver in Europe Share of Core Range (in %) 75% Value share of core range Core range style/colors as % of total collection style/colors 67% Units sold per style (Fall 2011) 60% 45% 45% x % 15% 15% 28% Fall 2011 Spring 2012 Non Core Range Core Range HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

32 RETAIL Building close relationships with our consumers HUGO BOSS CRM strategy and guidelines Customer data collection & quality Analysis & segmentation Marketing planning Worldwide HUGO BOSS CRM platform (IT) CRM activities Understand the consumer Win new consumers Increase consumer loyalty Increase frequency Increase sales / turnover HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

33 ONLINE e-commerce a powerful third distribution channel Constant improvement of usability, product assortment, presentation and service features Dedicated mono-brand sub-stores to elevate consumer experience Several new store launches planned for 2012, including Online Sales (in EUR million) e Mobile store in first half China online store in second half Online to become a 150 million euro business by 2015 HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

34 AGENDA INTRODUCTION HUGO BOSS A PREMIUM BUSINESS MODEL WITH LUXURY APPEAL DISTRIBUTION STRATEGY MEDIUM-TERM OUTLOOK HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

35 HUGO BOSS Recent Group performance has exceeded internal and external expectations Transition to a retail-driven business model quicker and more profitable than initially anticipated Strong growth in China and the US Broad-based recovery of wholesale business Operational process improvements yielding better results earlier than expected HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

36 OUTLOOK 2015 Targeting profitable growth Results development since 2009 has far exceeded Management s original expectations giving us confidence for 2015! Sales and EBITDA before special items (in EUR million) Sales Sales EBITDA before special items EBITDA 2015 Sales (in EUR million) 3, EBITDA before special items (in EUR million) 2, , ,500 1,496 1,632 1,686 1,562 1, , e 0 old new old new We strive to grow stronger than our premium apparel competitors HUGO BOSS Investor Day 2011 // Group Strategy HUGO BOSS November 8, / 37

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