German Investment Seminar // Commerzbank

Transcription

1

2 German Investment Seminar // Commerzbank Mark Langer (CFO) January 14-15, 2014 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

3 Agenda Strategy Update Financial Strategy Nine Months Results Outlook German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

4 Agenda Strategy Update Financial Strategy Nine Months Results Outlook German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

5 Strong track record of significant sales and operating profit growth Sales and EBITDA before special items (in EUR million) +6-8%* Sales EBITDA before special items 1,562 1,729 2,059 2,346 Sales of EUR 3 billion targeted for % Strong commitment to achievement of 25% EBITDA margin after e * fx-adjusted German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

6 HUGO BOSS remains absolutely focused on further improvement of structural profitability Achievements Brand portfolio sharpened and streamlined Retail transformation faster and more comprehensive than expected Growth in established markets exceeds initial expectations Operational setup strengthened and globalized Challenges Macroeconomic development worse than initially expected Wholesale market deterioration enforcing faster and earlier move to active space management Difficult industry situation slows down catch-up in Asia Target of EUR 3 billion in sales by 2015 confirmed Margin improvement progress delayed by current challenges Clear commitment to 25% EBITDA margin achievement after 2015 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

7 Growth strategy intact STRENGTHENING OUR BRANDS MAXIMIZING CONSUMER FOCUS TO DRIVE RETAIL STRIVING FOR OPERATIONAL EXCELLENCE EXPLOITING GLOBAL GROWTH OPPORTUNITIES German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

8 Brand portfolio sharpened and streamlined market segment luxury premium casual urban chic modern active modern sophisticated progressive contemporary fashion statement German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

9 Integrated BOSS offering underlines premium and luxury brand appeal market segment luxury Integrated offering from premium to luxury Simplified brand messaging from end consumer perspective Gradual exit of entry price points supports trade-up of core brand BOSS premium modern sophisticated modern authentic fashion statement German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

10 Luxury share has started growing visibly in Fall 2013 collection already Integrated luxury offering received positively by wholesale partners and end consumers Growing weight across all categories Product innovations to drive further luxury share increases in both clothing and sportswear BOSS Menswear Fall 2013 collection sell-in, premium vs. luxury Premium Luxury 93% 88% 7% % 2013 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

11 Womenswear to become an important growth driver going forward German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

12 Jason Wu named Artistic Director of BOSS Womenswear German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

13 Refined strategic brand communication approach to support momentum Focusing on a new target audience From a wholesale to a consumer focused approach. From talking to thousands to talking to hundred millions of people. The consumer is BOSS. Making the Brand Purpose consumer relevant and tangible HUGO BOSS inspires people towards success Focusing on a consistent global message Integration of communication activities across all consumer touch points with a strong central lead. Sharpening ROI mentality Fewer Bigger Better activities that build image and reach more consumers resulting in higher traffic, better conversion and bigger baskets. Integrating all digital activities on one platform Roll out of myhugoboss.com to link offline, online and mobile driving consumer lifetime value. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

14 Customer relationship management efforts yield first positive results Multi-channel consumers purchase twice as much compared to offline/online only consumers With myhugoboss.com every consumer gets a personalized service across all channels Backend myhugoboss.com Frontend Brand Website Retail Stores MS CRM 4.0 Mobile Internet Online Store One, centralized customer account CRM as leading database for all customer data German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

15 Own retail share set to continue growing until 2015 and beyond Sales by distribution channel Retail 33% 40% 45% 49% >60% Wholesale 64% 57% 53% 49% Royalties 3% 3% 2% 2% e German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

16 Several key measures have made retail the core of the HUGO BOSS business model Lead-time reduction Time to market shortened by twelve weeks Feedback loop enables optimization of new collection development Core range Definition of core offering supports consistency of brand presentation Superior sell-through performance and operational efficiency 4 season cycle Switch from two to four more equally weighted collections per year Continuous update of offering attracts more frequent store visits Modular collection development + retail space management Entire development process driven by presentation at point-of-sale Definition of brand modules enables flexible in-store space allocation German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

17 HUGO BOSS own retail expansion takes different forms Flagship stores Freestanding stores Shop-in-shops Factory outlets E-commerce M-commerce Above 400sqm Key high street locations in global metropolises 250sqm to 350sqm on average Located in A-class high street locations in large cities 80sqm to 120sqm on average Located in department stores 300sqm to 400sqm on average Located in high traffic areas off-center Adapted to individual markets Organic Mostly organic Organic and takeovers Organic Organic New openings drive retail space addition Around 50 new stores and shop-in-shops to be opened every year German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

18 Upgrade and expansion of flagship store network in key locations globally Number of flagship stores New York, Columbus Circle e Moscow, Kuznetsky Most Shanghai, APM Mall German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

19 Opening of freestanding stores and shop-in-shop takeovers have increased store count Development of own retail network Europe Sep. 30, 2013 Dec. 31, 2012 Change Freestanding Shop-in-shops Outlets Group Sep. 30, 2013 Dec. 31, 2012 Change Freestanding Shop-in-shops Outlets Total Total Americas Sep. 30, 2013 Dec. 31, 2012 Change Freestanding Shop-in-shops Outlets Total Asia/Pacific Sep. 30, 2013 Dec. 31, 2012 Change Freestanding Shop-in-shops (4) Outlets Total German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

20 Like-for-like growth prerequisite for sales and operating margin expansion Comp store sales growth Traffic Conversion Transaction value Brand communication CRM Store location Visual merchandising Merchandise assortment and presentation Service quality Store layout Product availability Product mix Pricing Service quality Product availability Comp store sales to grow at a mid-single-digit rate on average German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

21 Refined showroom timing and delivery cycle optimizes time to market Further enhancement of central D.R.I.V.E. concepts expected to drive performance 4-season cycle Analytical insight in collection performance deepened significantly Renewed emphasis on Spring and Fall collections in response to American and Asian market needs Showroom timing Showroom times more closely aligned with global fashion calendar Differentiated timing introduced for menswear and womenswear Delivery timing Earlier deliveries increase new collection availability at season start Positive impact on full price sell-throughs expected Operations + communication Production and sourcing more closely synchronized with actual demand Brand communication more strongly focused on key collection themes German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

22 Supply chain integration project adds to strong operational backbone Homogenous, Group-wide integrated supply chain based on SAP a strong platform for further growth Roll out completed in all production entities New flat-packed goods distribution center to be seamlessly integrated in production and transportation processes Production Transportation Distribution Order allocation Order status tracking Global processing labeling Distribution-optimized packaging EDI Transportation planning and management Lead time management Shipment tracking EDI High speed processing performance German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

23 HUGO BOSS has made progress in balancing its global footprint Sales by region Europe Europe withstands economic weakness Americas Asia/Pacific Royalties 67% 20% 10% 3% 62% 22% 13% 3% 61% 22% 15% 2% 59% 24% 15% 2% Americas grow stronger than expected Asia/Pacific still biggest regional opportunity German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

24 Underpenetration of emerging markets points to significant growth potential Sales split HUGO BOSS (FY 2012) Emerging markets* Sales split peer group** (FY 2012) Emerging markets* RoW RoW 16% 40% * incl. Greater China. ** Peer group: Swatch, Richemont, Burberry, Gucci, LV, Tod s, Salvatore Ferragamo, Adidas, Puma, Luxottica. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

25 China continues to be the biggest regional opportunity for HUGO BOSS China Sales share (9M 2013, in % of Asian sales) China Other Late direct market entry Successful build up of operational infrastructure has laid the foundation for expected future growth Focus on quality upgrade of retail network as well as strengthening of brand perception Catch-up to peers impacted by economic and industry headwinds Sales growth (9M 2013) 3% 2% in EUR fx.adj. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

26 Russia has the potential to develop into one of the European core markets Russia Sales share (9M 2013, in % of European sales) 97 3 Russia Other HUGO BOSS enjoys high levels of brand awareness and favorable brand perception Comprehensive market presence driven by franchise and department store partners Around 30 freestanding franchise stores First own store opening in Moscow in August marks direct market entry Sales growth (9M 2013) 11% 11% in EUR fx.adj. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

27 Latin America has become an increasingly important growth driver in the Americas Sales share (9M 2013, in % of American sales) 10 Latin America Latin America Other 25+ years market presence Strong brand recognition driven by menswear clothing Reputation for modern designs and perfect fit Freestanding store base in Brazil has doubled to 12 since the end of Sales growth (9M 2013) 19% 20% in EUR fx.adj. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

28 Agenda Strategy Update Financial Strategy Nine Months Results Outlook German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

29 The six principles of Group financial management Gross margin improvements to at least equal channel mix effect Retail expenditure growth to be below retail sales growth G&A expenditures to grow slower than top line Operating profit to grow stronger than top line Investments to sustain future profitable growth Free cash flow generation to fund shareholder returns and further net debt reduction German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

30 Gross margin has progressed beyond pure channel mix effect Gross margin development (in %) Positive distribution channel mix effect Reduction of markdowns Production and sourcing efficiencies 54.2 Increase of more than 200bp expected in German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

31 Continued focus on tight operating expense management Retail Productivity improvements key to offset rent increases Further potential in streamlining personnel deployment and planning Marketing Increased impact through refined marketing strategy Absolute and relative expenditure levels to increase Logistics Strong track record of efficiency gains State-of-the-art setup through new distribution center in Europe G&A Lean organizational structure Continued strict cost control Operating leverage a continued source of profit growth German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

32 Trade net working capital levels to achieve historic lows at year-end Average trade net working capital as a percentage of sales at year-end (in %) Major progress compared to historical levels Strong IT setup and supply chain excellence drive better inventory management Maximization of own retail inventory turn key to further improvements New record levels expected in German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

33 HUGO BOSS invests in future growth Investments (in EUR million) New retail projects Renovations Other Retail to remain most important investment area Significance of renovations to increase Stable outlook Expected increase in 2013 reflects retail and infrastructure investments German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

34 Strong free cash flow generation inherent to the HUGO BOSS business model Free cash flow (in EUR million) 300 Solid operating profit growth Tight net working capital management Disciplined investment activity Further strong development in German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

35 Free cash flow strength supports industry-leading dividend payout Dividend* and payout ratio in EUR in %** % % 80 71% 70% 70% % 67% 65% 64% 65% 64% 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 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

36 HUGO BOSS has reduced net debt significantly Net debt (in EUR million) 379 Excess cash to be used for further net debt reduction Growing operating lease obligation warrants continuation of current policy year-end levels below prior year German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

37 Agenda Strategy Update Financial Strategy Nine Months Results Outlook German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

38 Solid sales and operating profit increases in the first nine months Third quarter results Nine months results Sales (in EUR million) EBITDA before special items (in EUR million) Sales (in EUR million) EBITDA before special items (in EUR million) (+5% fx-adjusted) +2% +5% (+4% fx-adjusted) +3% 1,739 1, % 407 Q Q Q Q M M M M 2013 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

39 Improving growth dynamics in Europe Sales momentum picks up over the course of the quarter Key markets recover from more difficult first half year Wholesale trading environment continues to be challenging Sales (in EUR million) ,051 1,091 Q Q M M 2013 Sales growth (in %) in EUR fx-adjusted Q M German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

40 Mixed quarterly performance in the Americas Tough prior year comparison base Deteriorating wholesale sentiment Solid own retail performance Sales (in EUR million) Q Q M M 2013 Sales growth (in %) in EUR fx-adjusted Q M 2013 (6) German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

41 Trends in Asia broadly unchanged compared to first half year Chinese market environment remains challenging Robust growth in Hong Kong and Macau Japanese business benefits from repatriation of local demand Sales (in EUR million) Q Q M M 2013 Sales growth (in %) in EUR fx-adjusted Q M 2013 (5) (1) 4 4 German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

42 Retail sales growth accelerates in the third quarter Sales growth by channel, y-o-y Q (in %) in EUR fx-adjusted Sales growth by channel, y-o-y 9M 2013 (in %) in EUR fx-adjusted Wholesale Retail Royalties Group (10) (8) (2) (2) Wholesale Retail Royalties Group (8) (7) Wholesale development affected by difficult market situation as well as takeover effects Third quarter own retail growth acceleration supported by improving comp store sales (up 4% in Q3, up 2% year-to-date) Royalties sales increase in the nine months period driven by eyewear and kidswear German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

43 Gross margin expands strongly Third quarter First nine months +340bp +250bp Q Q M M 2013 Distribution channel mix Reduction of mark downs Non-recurrence of prior year inventory devaluation effects Distribution channel mix Non-recurrence of prior year inventory devaluation effects German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

44 EBITDA margin increases despite own retail driven operating expense growth in EUR million 9M M 2012 Change in % Net sales 1, , Gross profit 1, , in % of sales bp Selling and distribution expenses (636.8) (573.3) (11) Administration costs and other operating income and expenses (160.5) (156.8) (2) Operating result (EBIT) in % of sales (20) bp Financial result (15.7) (15.0) (5) Earnings before taxes Income taxes (74.0) (76.0) 3 Net income Attributable to: Equity holders of the parent company Earnings per share (EUR)* Own retail expansion main driver of higher selling and distribution expenses Tight overhead cost management limits increases in administration costs Adverse exchange rate effects impact financial result EBITDA before special items in % of sales bp *basic and diluted earnings per share. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

45 Broad based trade net working capital improvements Inventories (in EUR million) Sep. 30, 2013 Sep. 30, (6)% (4)% fx-adjusted IT infrastructure and supply chain improvements Trade receivables (in EUR million) Sep. 30, 2013 Sep. 30, (8)% (5)% fx-adjusted Declining wholesale sales Trade payables (in EUR million) Sep. 30, 2013 Sep. 30, % +3% fx-adjusted Ongoing effective supplier management Trade net working capital down 11% to EUR 455 million German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

46 Free cash flow increases despite higher investments Investments (in EUR million) Free cash flow (in EUR million) Net debt (in EUR million) +63% % (27)% M M 2013 Increase due to own retail expansion and infrastructure projects 9M M 2013 Trade net working capital improvements more than offset higher investments Sep. 30, 2012 Sep. 30, 2013 Strong reduction due to deconsolidation effects German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

47 Agenda Strategy Update Financial Strategy Nine Months Results Outlook German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

48 Full year 2013 targets confirmed 2013 Outlook Sales growth (currency-adjusted) Between 6% and 8% Growth of EBITDA before special items 10% to 12% Growth of EBITDA before special items Between 6% and 8% Capex Around EUR 150 million on a comparable basis Own retail network Around 50 net organic openings + around 110 shop-in-shop takeovers German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

49 HUGO BOSS has a clear long-term vision HUGO BOSS will further build its leading market position in the global premium and luxury apparel industry, with an expanded womenswear and luxury offering adding to our historical strength in the menswear premium segment. continue developing into a world-class retailer, offering inspirational shopping experiences across all consumer touchpoints. further balance its global market position, offering one face to the customer across all regions. continue defining operational excellence in the industry, with efficient processes enabling sound strategy execution and strong results development. continue demonstrating responsible management, creating value for employees, customers, partners, shareholders and society. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

50 BACKUP German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

51 Five year overview in EUR million Earnings Position Sales 2, , , , ,686.1 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 Asset and Liability Structure Total assets 1, , , , ,161.6 Shareholders' equity Trade net working capital Non-current assets Key Ratios Gross profit margin in % Adjusted EBITDA 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" German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

52 Profit & loss statement in EUR million Q Q Change in % 9M M 2012 Change in % Net sales , , Cost of sales (227.3) (244.9) 7 (613.1) (642.8) 5 Direct selling expenses (12.7) (12.6) (1) (35.3) (34.0) (4) Gross profit , , in % of sales bp bp Selling and distribution expenses (221.2) (193.2) (14) (636.8) (573.3) (11) Administration costs and other operating income and expenses (46.2) (52.7) 12 (160.5) (156.8) (2) Operating result (EBIT) in % of sales bp (20) bp Net interest income/expense (1.2) (4.2) 71 (7.1) (11.6) 39 Other financial items (3.2) (2.6) (23) (8.6) (3.4) < (100) Financial result (4.4) (6.8) 35 (15.7) (15.0) (5) Earnings before taxes Income taxes (33.6) (32.6) (3) (74.0) (76.0) 3 Net income Attributable to: Equity holders of the parent company Minority interests 1.6 (0.2) > Earnings per share (EUR)* EBITDA before special items in % of sales bp bp *basic and diluted earnings per share. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

53 Retail comp stores sales growth Sales growth retail l-f-l* Retail l-f-l 20 11% 16% 15 13% 10% 12% 11% % 4% 5% 4% 2% 2% 2% 0 Q Q Q Q FY 2011 Q Q Q Q FY 2012 Q Q Q *Fx-adjusted. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

54 Retail network significantly increased Number of own retail stores: Spain + 24 UK + 23 Germany + 8 France + 4 Austria + 4 Belgium + 4 Netherlands + 3 Switzerland + 2 Ireland + 2 Italy + 1 Poland + 1 Portugal + 1 Russia USA + 2 Canada + 1 Brazil + 1 Mexico +22 (31) + 8 China + 7 Australia + 4 Singapore + 3 Taiwan 992 Dec. 31, 2012 Europe* Americas Asia/Pacific Closings Sep. 30, 2013 *Europe incl. Middle East and Africa. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

55 Mixed regional profitability developments Segment profit in EUR million 9M 2013 in % of sales 9M 2012 in % of sales Change in % Europe* Americas Asia/Pacific Royalties (3) Segment profit operating segments Corporate units / consolidation (3) EBITDA before special items Retail expansion and takeovers affect operating margin development in Europe Moderate margin decline in the Americas despite decreased markdowns Strong gross margin improvement and tight cost management support margin increase in Asia *incl. Middle East and Africa. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

56 Shareholder structure* 42% Free float 56% Red & Black Holding GmbH (Permira Ltd.) 2% Treasury shares * As of May 31, Source: Share register. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

57 Level I ADR program ADR Details Market OTC Symbol BOSSY CUSIP Ratio 5 : 1 Country Germany Effective Date Jan 18, 2013 Underlying SEDOL B88MHC4 Underlying ISIN DE000A1PHFF7 Depositary BNY Mellon Benefits of ADRs for U.S. investors Clear and settle according to normal U.S. standards Offer the convenience of stock quotes and dividend payments in U.S. dollars Can be purchased/sold in the same way as other U.S. stocks via a U.S. broker Provide a cost-effective means of international portfolio diversification For questions about creating HUGO BOSS ADRs, please contact BNY Mellon: New York Ravi Davis ravi.davis@bnymellon.com Tel: London Mark Lewis mark.lewis@bnymellon.com Tel: +44 (0) Hong Kong Joe Oakenfold joe.oakenfold@bnymellon.com Tel: German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

58 Financial calendar 2014 Date Event March 13, 2014 Press and Analysts Conference May 7, 2014 First Quarter Results May 13, 2014 Annual Shareholders Meeting July 31, 2014 First Half Year Results November 4, 2014 Nine Months Results German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

59 Investor Relations contact Dennis Weber, CFA Head of Investor Relations Phone: +49 (0) Internet: German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

60 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. German Investment Seminar // Commerzbank HUGO BOSS January 14-15, / 61

61