HUGO BOSS Investor Meeting Presentation

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2 HUGO BOSS Investor Meeting Presentation January 2013 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

3 Agenda Group medium-term strategy American strategy update Financial strategy update Summary HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

4 Agenda Group medium-term strategy American strategy update Financial strategy update Summary HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

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 Meeting Presentation HUGO BOSS January / 67

6 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 Meeting Presentation HUGO BOSS January / 67

7 Strong portfolio of complementary brands HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

8 Fashion statement differentiates brand positioning HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

9 The HUGO BOSS brand essence HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

10 The HUGO BOSS brand essence (cont.) HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

11 Integration of BOSS Black and BOSS Selection elevates the core brand Strengthens the core brand s market position in luxury clothing and sportswear Leverages BOSS growth potential across different fashion segments from premium to luxury Maximizes the power and global recognition of the BOSS logo Simplifies communication and retail presentation HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

service with efficient industrial manufacturing Permanently offered in several European flagship

12 Made to Measure demonstrates unrivalled tailoring competence Modern technology and uncompromising quality handmade in Germany Combines excellent craftsmanship, premium materials and tailor made service with efficient industrial manufacturing Permanently offered in several European flagship stores Rollout in Asia and U.S. under way HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

clean, minimalistic looks addressing the fashion-forward

presence Significant growth potential in underpenetrated

13 HUGO brand the Group s fashion spearhead Strong positioning as home of avant-garde design Focus on clean, minimalistic looks addressing the fashion-forward consumer Targeted expansion of stand-alone retail presence Significant growth potential in underpenetrated markets HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

Strength in sportswear key competitive advantage

Casual Friday Luxury Weekend Contemporary urban

sportswear Sporty lifestyle Performance HUGO BOSS

14 Strength in sportswear key competitive advantage Collection Occasion to wear Sportswear elegance Casual Friday Luxury Weekend Contemporary urban sportswear Daywear Downtime Party Active sportswear Sporty lifestyle Performance HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

15 All brands ready to exploit potential of global sportswear market Strengthen product offering in luxury segment Sharpen DNA of Sportswear Elegance Increase focus on the Asian consumer Offer the best price-value relationship in the premium segment Enhance clarity of product branding Firmly establish BOSS Orange as key premium lifestyle brand at wholesale Convince in leading edge technical innovation Strengthen distribution in golf performance accounts Maximize commercial potential of golf pro cooperations HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

Clear womenswear strategy in place Product Offer

price-value ratio Grow modern clothing business

Introduce party capsules and evening collection

16 Clear womenswear strategy in place Product Offer excellent and reliable fit with favorable price-value ratio Grow modern clothing business based on tailoring expertise Maximize brand potential in leisurewear Grow shoes & accessories supplementing core apparel offering Introduce party capsules and evening collection HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

17 Clear womenswear strategy in place (cont.) Communication Regular participation at New York Fashion Week Dedicated womenswear advertising campaign Organization Separate organizational entity Distribution Increased exposure of BOSS womenswear in all larger BOSS stores HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

18 Unprecedented fashion show presence in 2013 Shanghai, May New York, September HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

19 HUGO showcases collections in Berlin Berlin, January & July HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

20 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 Meeting Presentation HUGO BOSS January / 67

21 Introduction of four season cycle has made HUGO BOSS a true retailer December January February March April Spring 2012 Summer 2012 June July August September October Fall 2012 Winter 2012 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

22 Introduction of four season cycle has made HUGO BOSS a true retailer (cont.) 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 Meeting Presentation HUGO BOSS January / 67

23 Faster and leaner development process enables market feedback loop HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

24 Brand module architecture supports more flexible merchandise offering S Module M Module XL Module HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

25 Core range has demonstrated superior performance Share of core range Value share of core range Core range style/color (s/c) as % of total collection s/c Units sold per style (Fall 2012) 70 67% 70% % 15% 28% 33% x Fall 2011 Spring 2012 Fall Non core range Core range HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

Knitwear 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

26 Knitwear 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 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 Meeting Presentation HUGO BOSS January / 67

Systematic retail management ensures highest customer service standards Store Operations Manual sets standards Training improves Customer

27 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 Meeting Presentation HUGO BOSS January / 67

Retail training activities stepped up significantly Number of online training sessions completed 22,100 29,500 Roll-out of standardized multi-language online training solution Focus on systematic

28 Retail training activities stepped up significantly Number of online training sessions completed 22,100 29,500 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 Meeting Presentation HUGO BOSS January / 67

29 HUGO BOSS - Sharpen the end consumer focus HUGO BOSS CRM strategy and guidelines Understand our customers Customer data collection & quality Analysis & segmentation Marketing planning CRM activities Win new customers Increase customer loyalty Increase frequency of visits Increase sales / turnover Worldwide HUGO BOSS CRM platform (IT) Cross-channel knowledge and targeted activities as key competitive advantages HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

solution under way In-store systems provide basis for systematic performance

30 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 Meeting Presentation HUGO BOSS January / 67

Enhanced logistics infrastructure caters to growing retail business

New construction Start of operation: 2014 Regional distribution

Operational since 2011 Distribution center Mexico Mexico City,

31 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 Meeting Presentation HUGO BOSS January / 67

32 Target to open 50 new stores per annum TOTAL: 791 EUROPE*: 428 AMERICAS: 142 ASIA/PACIFIC: 221 Number of own retail stores as of September 30, 2012 * incl. Middle East / Africa HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

33 Expansion of mono-brand distribution elevates brand experience Flagships in mega-cities Directly operated stores Controlled space E-Commerce M-Commerce Push the customer experience to the next level of retail innovation Ideal platform to showcase all HUGO BOSS brands under one roof Capturing full brand potential through expansion into white spaces globally Renovations and extensions Expansion of mono-branded shop-in-shops at key accounts globally Either managed by retail partners or HUGO BOSS (concession model) Continued rollout in high potential markets Constant evolution of brand experience One face to the customer across all points-of-sale HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

34 High-visibility flagship store openings planned in 2013 BOSS Store Shanghai, Kerry Center BOSS Store Amsterdam, Leidsestraat BOSS Store Berlin, Kurfürstendamm BOSS Store Shanghai, APM International BOSS Store Tokyo, Omotesando HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

35 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 Meeting Presentation HUGO BOSS January /

36 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 Meeting Presentation HUGO BOSS January / 67

37 Agenda Group medium-term strategy American strategy update Financial strategy update Summary HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

38 Favorable brand perception across the region USA CANADA MEXICO BRAZIL Modern Well-tailored Easy to fit Consistent Prestigious Good price-value Easy to fit Consistent Luxurious Classic Elegant Quality Modern Classic Sophisticated Masculine Seen as a premium to entry luxury High awareness of individual brand lines BOSS Black and HUGO are the major brands Seen as an entry into the luxury world Good brand positioning in clothing, jeans, jersey and shirts Recognized as a fashion brand for perfect fitted suits A top of mind in fragrances HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

39 HUGO BOSS has clear competitive advantages in the Americas Style HUGO BOSS leads the modern, wear-to-work market for men and women HUGO BOSS has great name recognition in all regional markets Quality HUGO BOSS is recognized as providing consistency in fit and quality Price HUGO BOSS is seen as having a strong price/value relationship European lifestyle brand value in the Americas HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

40 Broad portfolio of unique brands Americas* U.S.A. Canada Brazil Mexico BOSS BOSS Selection BOSS Orange BOSS Green HUGO 76% // BOSS 2% // BOSS Selection 8% // BOSS Orange 7% // BOSS Green 7% // HUGO *All splits based on full year 2012 sales estimates Differentiated brands allow us to speak to different customer segments HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

Attractive growth opportunities across several categories HUGO menswear clothing Introduction of suit separates in Fall 12 with positive early response BOSS womenswear clothing Direct involvement

41 Attractive growth opportunities across several categories HUGO menswear clothing Introduction of suit separates in Fall 12 with positive early response BOSS womenswear clothing Direct involvement with designers in the U.S. to increase regionally relevant content BOSS men s shoes Development of strong good/better/best strategy with $295 Italian made shoes for Fall 13 BOSS replenishment programs Relaunch of sportswear basics and bodywear businesses over the course of 2013 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

42 Continued store expansion in the Americas Total number of own retail stores in the Americas amounts to 142 stores at the end of September 2012 Around 15 store openings across the region projected for 2013 Number of stores in Brazil to double between 2011 and 2013 Number of own retail POS // Americas Own retail POS in the Americas by country (as of Sep. 30, 2012) 142 Shop-in-shops USA Stores Outlets Canada Mexico Brazil Dec. 31, 2009 Sep. 30, 2012 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

43 Manhasset, New York, USA HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

44 Beverly Center, California, USA HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

45 HUGO BOSS wins market share at wholesale Reported comp store sales growth* Q Q Q Wholesale sales YTD Sep. 12** +4.3% +5.3% +3.5% +4.8% +4.7% +3.3% +9.3% +4.9% +11.2% +14% +4.4% +3.0% +3.7% +5.0% +3.0% +5.0% * Figures exclude online sales segment whenever available ** Total U.S. wholesale sales HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

46 Controlled retail space upgrades brand presentation Shop-in-shop expansion Number of U.S. shop-in-shops ~70 Aggressive development over past two years BOSS collection launched in 18 Neiman Marcus doors 37 ~ e 2013e Transition to concession business model Increased sales at retail through: Dominant assortments Controlled merchandising Dedicated sales associates Experience in the Americas region Holt Renfrew shop-in-shop, Ste Foy, Canada HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

47 Target: USD 1 billion net sales in the Americas in 2015 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

48 Agenda Group medium-term strategy American strategy update Financial strategy update Summary HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

49 Continued focus on profitable growth Sales (in EUR million) 2,059 CAGR +10% 3,000 Space expansion and comp store sales growth Growth across all regions Above-average increases in underpenetrated categories e EBITDA (in EUR million) CAGR +12.5% e 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 Meeting Presentation HUGO BOSS January / 67

50 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 Meeting Presentation HUGO BOSS January / 67

51 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 Meeting Presentation HUGO BOSS January / 67

52 Strong cash flow generation to support further debt reduction Free cash flow (in EUR million) Net debt (in EUR million) HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

53 Agenda Group medium-term strategy American strategy update Financial strategy update Summary HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

54 2012 guidance confirmed 2012 Outlook Sales growth (currency-adjusted) Up to 10% Growth of EBITDA before special items 10% to 12% Growth of EBITDA before special items 10% to 12% Capex Above prior year level Own retail network Around 80 net organic openings HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

HUGO BOSS on track for achievement of short- and medium-term targets Transformation from wholesale-minded to consumerfocused company well under way All four strategy pillars

55 HUGO BOSS on track for achievement of short- and medium-term targets Transformation from wholesale-minded to consumerfocused company well under way All four strategy pillars contribute to growth Strong performance in the Americas Further progress towards achievement of medium-term targets in 2013 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

56 Level I ADR program to be launched shortly 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 Meeting Presentation HUGO BOSS January / 67

57 BACKUP HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

58 5-Year Overview in EUR million Earnings Position Sales 2, , , , ,632.0 Gross Profit 1, , EBITDA EBITDA before special items EBIT Net income attributable to equity holders of the parent company Financial Position and Dividend Free cash flow Net debt Capital expenditures Depreciation/amortization Dividend 199, Special dividend Asset and Liability Structure Total assets 1, , , , ,039.3 Shareholders' equity Trade net working capital Non-current assets Key Figures Gross profit margin in % Adjusted EBITDA margin in %* EBIT margin in % Total leverage** Equity ratio in % * EBITDA before special items/sales * * Net debt/ebitda before special items and expenses for the "Stock Appreciation Rights Program" HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

59 Nine months results at a glance Sales (in EUR million) 1, % 1,739 Gross margin (in %) 59.9% +1.2pp 61.1% 9M M M M 2012 EBITDA before special items (in EUR million) Net debt (in EUR million) % % 250 9M M 2012 Sep. 30, 2011 Sep. 30, 2012 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

60 Profit & loss statement Jan.-Sep. Jan.-Sep. in EUR million Q Q Change in % Change in % Net sales , , Cost of sales (245.0) (241.1) (2) (642.8) (596.4) (8) Direct selling expenses (12.6) (12.0) (5) (34.0) (29.0) (17) Gross profit , in % of sales pp pp Selling and distribution expenses (193.2) (159.1) (21) (573.3) (473.2) (21) Administration costs and other operating income and expenses (52.7) (43.1) (22) (156.8) (139.6) (12) Operating result (EBIT) (11) in % of sales (3.9 pp) (1.5 pp) Net interest income/expense (4.2) (4.1) (2) (11.6) (11.8) 2 Other financial items (2.6) 2.0 <(100) (3.4) 1.2 <(100) Financial result (6.8) (2.1) <(100) (15.0) (10.6) (42) Earnings before taxes (14) Income taxes (32.6) (37.9) 14 (76.0) (74.6) (2) Net income (14) Attributable to: Equity holders of the parent company (12) Minority interests (0.2) 1.7 <(100) (43) Net income (14) Earnings per share (EUR)* Ordinary share (12) Preferred share** EBITDA before special items (7) in % of sales (3.2 pp) (1.4 pp) * Basic and diluted shares ** Preferred shares were converted into ordinary shares on June 15, 2012 HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

61 Sales by distribution channel Sales growth by channel, y-o-y Q (in %) in euro fx adjusted Sales growth by channel, y-o-y 9M 2012 (in %) in euro fx adjusted Wholesale -9-5 Wholesale -1 2 Retail Retail Royalties Royalties Group 0 5 Group HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

62 Sales by region Sales growth by region, y-o-y Q (in %) in euro fx adjusted Sales growth by region, y-o-y 9M 2012 (in %) in euro fx adjusted Europe* -4-3 Europe* 6 7 Americas Americas Asia/Pacific 0 13 Asia/Pacific 5 16 Group 0 5 Group *incl. Middle East and Africa HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

63 Trade net working capital Average trade net working capital as a percentage of sales by quarter (in %) pp Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

64 Retail Network Number of own retail stores: China + 11 Canada + 11 Taiwan + 6 USA Japan + 4 Mexico + 1 Australia + 48 Spain + 1 Brazil + 25 France + 23 Switzerland + 7 Belgium + 4 Italy + 3 Germany + 3 Poland + 2 Austria + 2 Netherlands + 2 Portugal + 1 Luxemburg + 1 Sweden + 1 UK Dec. 31, 2011 Europe* Americas Asia/Pacific Closings Sep. 30, 2012 *Europe incl. Middle East / Africa HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

65 Financial calendar 2013 Date Event March 14, 2013 Press and Analysts Conference May 2, 2013 First Quarter Results 2013 May 16, 2013 Annual Shareholders Meeting HUGO BOSS Investor Meeting Presentation HUGO BOSS January / 67

66 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 Meeting Presentation HUGO BOSS January / 67

HUGO BOSS Investor Day 2012 Group Financial Performance and Strategy

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, 2012 2 / 38 Agenda HUGO BOSS grows