HUGO BOSS Investor Day 2012 Group Financial Performance and Strategy

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2 HUGO BOSS Investor Day 2012 Group Financial Performance and Strategy Mark Langer, Chief Financial Officer December 6, 2012 HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

3 Agenda HUGO BOSS grows stronger than industry and overall economy Improved retail expertise drives execution of medium-term strategy Free cash flow maximization is core of Group financial management Focus on further improvement of trading liquidity HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

4 Agenda HUGO BOSS grows stronger than industry and overall economy Improved retail expertise drives execution of medium-term strategy Free cash flow maximization is core of Group financial management Focus on further improvement of trading liquidity HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

5 Continued strong top and bottom line momentum Sales and EBITDA before special items (in EUR million) Sales EBITDA before special items 3, % +34% 2,059 1,632 1,686 1,562 1, e HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

6 HUGO BOSS grows stronger than overall industry (I//II) Annual growth rates HUGO BOSS vs. luxury goods market 20 19% HUGO BOSS Luxury goods market % 12% 15% 13% 11% 8 8% 8% 9% 11% 10% 4 0 0% 0% 6% 7% -2% 3% +4-6% CAGR* % -4% -7% -8-8% e 2015e Source: Fondazione Altagamma / Bain & Company *CAGR Luxury Goods Market HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

7 HUGO BOSS grows stronger than overall industry (II//II) Annual growth rates HUGO BOSS vs. luxury apparel market HUGO BOSS Luxury apparel market 20 19% 15 12% 10 11% 8% 10% 6% % % e 2013e Source: Fondazione Altagamma / Bain & Company HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

8 Economic environment has deteriorated significantly with only moderate recovery expected for 2013 Annual real GDP growth rates 10.4% % Eurozone Germany U.S. China % 8.1% % % % % 1.8% 1.4% % 0.9% -0.5% 2012e 2.0% 1.0% 0.1% 2013e Source: Bloomberg HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

9 Agenda HUGO BOSS grows stronger than industry and overall economy Improved retail expertise drives execution of medium-term strategy Free cash flow maximization is core of Group financial management Focus on further improvement of trading liquidity HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

10 Successful execution of medium-term strategy STRENGTHENING OUR BRANDS MAXIMIZING CONSUMER FOCUS TO DRIVE RETAIL STRIVING FOR OPERATIONAL EXCELLENCE EXPLOITING GLOBAL GROWTH OPPORTUNITIES HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

11 Own retail key contributor to Group performance Sales growth retail and retail l-f-l* 50 47% Retail l-f-l Retail % 5% 22% 6% 36% 12% 36% 8% 30% 8% 38% 11% 16% 30% 13% 28% 10% 35% 12% 27% 11% 16% 4% 15% 2% Q *Both fx-adjusted Q Q Q FY 2010 Q Q Q Q FY 2011 Q Q Q HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

12 Introduction of four season cycle has made HUGO BOSS a true retailer (I/II) December January February March April Spring 2012 Summer 2012 June July August September October Fall 2012 Winter 2012 HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

13 Introduction of four season cycle has made HUGO BOSS a true retailer (II/II) Development of collection complexity Fresher merchandise offering Better adjustment to seasonal differences in consumer demand Immediate relevance at the point-of-sale Working capital advantages -7% e Seasonal split of wholesale pre-order business 46% 39% 40% 37% % 7% 12% 8% Spring Summer Fall Winter HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

14 Faster and leaner development process enables market feedback loop HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

15 Brand module architecture supports more flexible merchandise offering S Module M Module XL Module HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

16 Core range has demonstrated superior performance Share of core range Value share of core range Units sold per style (Fall 2012) Core range style/color(s/c) as % of total collection s/c 70 67% 70% % % 15% 28% x Fall 2011 Spring 2012 Fall Non core range Core range HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

17 Heat mapping technology newest in-store design innovation Purpose Benefits Generates traffic map showing the actual footpath of consumers in the store over the course of the day Overlay with transactional data offers insights into correlation between traffic and sales per product category Knitwear Bodywear Outerwear Window Entrance Suit wall Tie table Knitwear Window Shirt wall Belt Shoes / Access Optimizes product and campaign positioning Supports optimization of space utilization and staff allocation Assesses visual merchandising effectiveness Enhances understanding of consumer behavior to drive operational performance HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

18 Systematic retail management ensures highest customer service standards Store Operations Manual sets standards Training improves Customer Service motivate Incentives measures and monitors Mystery Shopping HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

19 Retail training activities stepped up significantly Number of online training sessions completed 29,500 22,100 Roll-out of standardized multi-language online training solution Focus on systematic strengthening of product competence, selling skills, and store management capabilities Supplemented by targeted face-to-face training sessions 14, , YTD 2012 HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

20 IT and system upgrades improve retail performance management Retail operations almost entirely on SAP Implementation of global retail merchandise planning solution under way In-store systems provide basis for systematic performance measurement HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

21 Enhanced logistics infrastructure caters to growing retail business Flat-packed goods distribution center Europe Filderstadt, Germany New construction Start of operation: 2014 Regional distribution centers Asia Shanghai and Hong Kong Relocation and consolidation Operational since 2011 Distribution center Mexico Mexico City, Mexico New setup HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

22 Store base more than doubled since 2009 Number of own retail stores as of September 30, 2012 (December 31, 2009: 364): EUROPE* Dec. 2009: 189 Sep. 2012: 428 = +239 TOTAL Dec. 2009: 364 Sep. 2012: 791 = +427 AMERICAS Dec. 2009: 75 Sep. 2012: 142 = +67 ASIA/PACIFIC Dec. 2009: 100 Sep. 2012: 221 = +121 * incl. Middle East / Africa HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

23 Brand penetration analysis points to significant retail expansion potential Spent for HUGO BOSS products per EUR million GDP (in EUR) 2,731 1,787 1,256 1,197 1,148 1,055 1, Zurich Frankfurt Dusseldorf Salzburg Munich Hong Kong Helsinki Porto Ljubiljana Lisbon Hamburg Copenhagen Cologne Stuttgart Stockholm Tel Aviv Vienna Amsterdam Oslo Belgrade HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

24 Retail sophistication opens new doors in wholesale partnerships Concession business model Rationale Grown retail sophistication enables HUGO BOSS to manage brand space independent from retail partners Numbers of Accounts Levers for productivity increases Benefits Optimized merchandise assortment Upgraded brand presentation Improved replenishment capabilities Dedicated staff Better brand presentation Sales productivity improvements Positive top and bottom line contribution HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

25 Share of retail sales set to grow further Sales by distribution channel Retail 22% 40% 45% 55% Wholesale 75% 57% 53% 43% Royalties 3% 3% 2% 2% e HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

26 Wholesale remains an important distribution channel HUGO BOSS is best positioned for further growth 40+ year business relationships Reliable sell-through performance Grown retail competence Industry-leading delivery and service levels despite structural headwinds Sales by distribution channel % // Royalties 53% // Wholesale 15% // Franchise 38% // Multibrand 45% // Retail Average net sales per wholesale POS +7% Limited space expansion Mono-brand nature of fast growing emerging markets Ongoing consolidation Franchise takeovers HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, /

27 Significant growth opportunities in all three regions Sales by region Asia/Pacific Americas 8% 18% 13% 22% 15% 22% 21% 23% Europe* 71% 62% 61% 54% Royalties 3% 3% 2% 2% e * incl. Middle East / Africa HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

28 Agenda HUGO BOSS grows stronger than industry and overall economy Improved retail expertise drives execution of medium-term strategy Free cash flow maximization is core of Group financial management Focus on further improvement of trading liquidity HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

29 Continued focus on profitable growth e CAGR Sales 2,059 3,000 10% Gross profit 1,265 in % of sales 61.4 Selling and distribution expenses Administration costs and other operating income/expenses (682.1) (188.6) EBIT 394 in % of sales 19.1 EBITDA before special items % in % of sales Space expansion and comp store sales growth Growth across all regions Above-average increases in underpenetrated categories Distribution channel mix to benefit gross margin Comp store sales growth to leverage retail cost base Marketing expenditures between 6% and 7% of Group sales Below-average growth of all other operating expenses HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

30 Working capital management key focus to maximize free cash flow Average trade net working capital as a percentage of sales at year-end (in %) HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

31 Dividend strategy confirmed Dividend* and payout ratio** % 2.88 Dividend Payout ratio in EUR in % % 67% 67% 65% 64% 65% 64% 75% % Dividend policy stipulates distribution of 60% to 80% of consolidated net profit * Excluding special dividend // ** As a percentage of net profit attributable to the shareholders of the parent company HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

32 Strong cash flow generation to support further debt reduction Free cash flow (in EUR million) Net debt (in EUR million) HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

33 HUGO BOSS on track for achievement of 2015 targets 2012 another step towards achievement of medium-term targets Transformation from wholesale-minded to consumerfocused company well under way Good progress in all four pillars of medium-term growth strategy HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

34 Agenda HUGO BOSS grows stronger than industry and overall economy Improved retail expertise drives execution of medium-term strategy Free cash flow maximization is core of Group financial management Focus on further improvement of trading liquidity HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

35 Share class conversion offers advantages to all shareholders Red & Black Free Float * Red & Black Free Float * Red & Black Free Float * 88.02% Conversion of preferred and ordinary shares 35,860,000 Ordinary Shares 11.98% 42.25% 57.75% Preferred Shares 34,540, % Ordinary Shares 70,400, % HUGO BOSS HUGO BOSS * Includes 1,383,833 treasury shares (528,555 ordinary shares and 855,278 preferred shares) offers short- und long-term benefits Simplified share structure Positive liquidity effect Higher index weighting Improved Corporate Governance standards ( one share - one vote ) HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

36 Launch of Level I ADR program planned for early 2013 Definition Level I ADRs are negotiable securities issued by a depositary bank that represent an issuer s publicly traded equity. These securities are denominated in US dollars and trade on the OTC market. Benefits for US investors Potential reduction of transaction and custody costs Enables foreign investment in home market currency Provides full shareholder benefits including voting rights Timeline Launch planned for early 2013 HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

37 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 identify forward-looking statements. Such statements are subject to risks and uncertainties. If any of these or other risks and uncertainties occur, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made. HUGO BOSS Investor Day 2012 HUGO BOSS Dec. 6, / 38

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