1 Investor Meeting Presentation
2 AGENDA 1 Full Year 2018 Results & Outlook 2019 2 2022 Strategy 3 Backup
3 Group sales (in EUR million) EBITDA (before special items) (in EUR million) 2,733 4%* 2,796 0% 491 489 2017 2018 2017 2018 Acceleration in top-line growth *currency-adjusted
4 Europe (in EUR million) Americas (in EUR million) Asia/Pacific (in EUR million) +4%* 1,681 1,736 +4%* 577 574 +7%* 396 410 2017 2018 2017 2018 2017 2018 All regions record currency-adjusted sales growth * = currency-adjusted
5 Retail (in EUR million) Wholesale (in EUR million) Licenses (in EUR million) +4%* 1,732 1,768 +5%* 922 952 (4)%* 79 76 2017 2018 2017 2018 2017 2018 Retail comp store sales grow 5% in 2018 * = currency-adjusted
6 BOSS 2,336 +6%* 2,422 High single-digit growth in businesswear and casualwear Athleisurewear sales remain broadly stable 2017 2018 (4)%* 397 374 2017 2018 HUGO Double-digit growth in casualwear Declines in businesswear reflect strategic changes in distribution strategy Strategic changes in distribution weigh on HUGO sales 2018 * = currency-adjusted
7 Strategic investments weigh on earnings development (4)% (90) bp +2% (4)% 0% +2% +2% Gross margin Selling & distribution Administration EBITDA EBIT Net income expenses expenses (before special items) 65.2% EUR1,174 MILLION EUR 290 MILLION EUR 489MILLION EUR 347 MILLION EUR 236 MILLION
8 Europe (in %) Americas (in %) Asia/Pacific (in %) +10bp 30.9 31.1 20.6 (340)bp 23.0 +120bp 24.2 17.2 2017 2018 2017 2018 2017 2018 Strong margin improvement in Asia/Pacific
9 Inventories (in EUR million) Trade receivables (in EUR million) Trade payables (in EUR million) +14%* 537 618 +3%* 208 214 +2%* 286 295 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018 Dec. 31, 2017 Dec. 31, 2018 TNWC in % of sales up 110bp reflecting higher inventories * = currency-adjusted
10 Capital expenditure (in EUR million) Retail openings Retail renovations IT Other 128 2017 155 2018 Capital Expenditure Investments in store renovations increase by 36% to EUR 45 million Investments in store openings remained on prior year level at EUR 44 million IT investments rose by 16% to EUR 36 million Capital expenditure focuses on own retail and IT
11 Free cash flow (in EUR million) Net financial liabilities (in EUR million) (42)% Free cash flow 294 Free cash flow impacted by inventory increase and higher capital expenditure 170 7 >100% 22 Net financial liabilities Net financial liabilities remain at a low level 2017 2018 Dec. 31, 2017 Dec. 31, 2018 Free cash flow below prior year as expected
12 Outlook 2019 Group sales* Increase at a mid-single-digit percentage rate Gross profit margin Increase of up to 50 basis points Operating result (EBIT) Increase at a high single-digit percentage rate Consolidated net income Increase at a high single-digit percentage rate Capital expenditure EUR 170 million to EUR 190 million Free cash flow EUR 210 million to EUR 260 million * = currency-adjusted
13 IFRS 16 implications First-time application of IFRS 16 in 2019 using the modified retrospective approach Operating profit (EBIT) low double-digit million EUR Group s net income single-digit million EUR Free cash flow low triple-digit million EUR A full description of the expected impact of IFRS 16 can be found in the Notes to the Consolidated Financial Statements.
14 AGENDA 1 Full Year 2018 Results & Outlook 2019 2 2022 Strategy 3 Backup
15 OUR VISION Personalization and Speed are key to achieving our vision SPEED BE THE MOST DESIRABLE PREMIUM FASHION AND LIFESTYLE PERSONALIZATION BRAND
16 Personalization and Speed are priorities along the four strategic fields of action PERSONALIZATION SPEED REFOCUS THE BRANDS DRIVE THE DIGITAL TRANSFORMATION BRAND DESIRABILITY REFINE THE WAY WE SELL INNOVATE THE WAY WE OPERATE
17 Customer expectations More personalization Emotional connection Fulfilling experiences Building on our strengths Broad network of own retail stores Strong reputation for style advice and fitting Growing in-house CRM database Personalized product offering Personalization: Driving customer engagement
18 Customer expectations Instant gratification Return on time spent Fulfilling experiences Building on our strengths Excellence in product design and development Industry-leading IT and logistic systems Robust supply chain Speed: Winning customers with industry-leading responsiveness
19 CAGR 5-7%* Group sales (in EUR billion) 4%* 2.7 3%* 2.7 2.8 ONLINE RETAIL PRODUCTIVITY ASIA HUGO 2016 2017 2018 2022e Key sales growth drivers identified across channels, regions, and brands * = currency-adjusted
20 Online sales (in EUR million) ~ x4 1 Accelerate online concession business 2 Exploit full potential of hugoboss.com 76 79 110 3 4 Enlarge omnichannel services Expand social commerce 2016 2017 2018 2022e Online: Own online business to quadruple until 2022
21 Retail sales productivity* (in EUR/m 2 ) CAGR 4% 1 Accelerate rollout of new store concept 10,700 2 Optimize store network 10,600 3 Enlarge omnichannel services 10,500 2016 2017 2018 2022e 4 5 Enhance product range Drive retail excellence Retail: Further improving retail sales productivity * = retail sales (excl. online) / net selling space
22 15% Asia/Pacific 20% Asia/Pacific 1 Leverage Chinese demand across the region 2018 2022e 2 Expand retail footprint in Mainland China 3 Grow travel retail business 4 Leverage digital opportunities via leading online platforms Asia/Pacific: Sales to increase at a double-digit rate
23 HUGO sales (in EUR million) CAGR >5-7%* 380 397 374 1 2 Strengthen positioning in contemporary fashion segment Focus on casualwear to benefit from casualization trend 3 Expand store network across key metropolitan cities 4 Leverage social media presence 2016 2017 2018 2022e HUGO: Overproportionate growth in contemporary fashion segment * = currency-adjusted
24 EBIT margin targeted at 15% in 2022 15% 12.4% EBIT margin 2018 Gross margin Efficiency program Digital investments EBIT margin 2022e
25 Gross margin expansion supported by multiple levers Channel mix Increase share of controlled distribution Complexity reduction Simplified brand portfolio leads to complexity reduction Full-price sales Reduce share of outlet business Advanced markdown management Gross margin 2018 Channel mix Complexity reduction Full-price sales Gross margin 2022
26 Efficiency Program to generate total cost savings of ~ EUR 160 million ~ EUR 160 million 2019 2020 2021 2022
27 Retail Improve retail productivity Improve pay-to-sales ratio Renegotiate rental contracts Grow marketing effectiveness Marketing EFFICIENCY PROGRAM Right-size existing store base Optimize CAPEX-to-sales ratio Review effectiveness of marketing mix Measure return on marketing investments Drive digital marketing activities Grow social media presence Organization Optimize organizational structure Review existing overhead cost structure Clarify roles and responsibilities Rollout digital capabilities Implement shared services Efficiency program to drive operating leverage
28 hugoboss.com 1 Exploit full potential of omnichannel 2 Rollout hugoboss.com website 3 Strengthen IT capabilities 4 Expand digital content teams 5 Enable best-in-class supply chain capabilities Continued investments in driving the digitization
29 Online Retail Productivity Asia Sales Growth 5-7% CAGR* EBIT Margin 15% Gross Margin Expansion Efficiency Program HUGO Key drivers of sales growth and EBIT margin expansion until 2022 * = currency-adjusted
30 Personalization and Speed are our priorities along the four strategic fields of action PERSONALIZATION SPEED REFOCUS THE BRANDS DRIVE THE DIGITAL TRANSFORMATION BRAND DESIRABILITY REFINE THE WAY WE SELL INNOVATE THE WAY WE OPERATE
0 31 Successful realignment of BOSS and HUGO #iamhugo brands customers lifestyles #iamhugo #ThisIsBOSS
32 BRAND STRATEGY
33 Product Tailoring heritage +15% Sales growth YOY Mix & Match Every 3rd BOSS suit sold with Stretch Tailoring +50% Sales growth YOY Made-to-Measure #1 reason for customers to buy BOSS is the QUALITY Strengthen tailoring heritage to drive customer value and brand desirability
34 Product Casual- and Athleisurewear CAGR 2018-2022 double-digit Exploit potential with BOSS Casual- and Athleisurewear
35 Product Casual- and Athleisurewear -30% 2020 vs 2018 1 2 3 4 Analyze product groups and customer needs Reorganize collection structure to minimize overlaps Reallocate resources for product innovation Free up resources for capsule collections Complexity reduction for BOSS Casual- and Athleisurewear
36 Product Innovation Functionality Fabric Personalization Sustainability Driving innovation to excite customers
37 360 marketing 360 marketing approach to consistently engage with the BOSS customer Web Social CRM Out of home Store
38 BRAND STRATEGY
39 Product Unconventional authenticity Businesswear Casualwear Authentic Unconventional Innovative Offering progressive collections for the mix-masters
40 Product Casualwear HUGO REVERSED represents ~10% of HUGO Casualwear sales HUGO REVERSED offers personalized premium fashion
41 Product Innovation DIGITAL HUGO Bits and Bytes collection increases brand desirability excites customers offers new possibilities Expansion of digitally developed HUGO collection in 2019
42 Marketing Marketing initiatives aim at connecting with the HUGO customer Social Pop-up stores Fashion show
43 Personalization and Speed are our priorities along the four strategic fields of action PERSONALIZATION SPEED REFOCUS THE BRANDS DRIVE THE DIGITAL TRANSFORMATION BRAND DESIRABILITY REFINE THE WAY WE SELL INNOVATE THE WAY WE OPERATE
44 RETAIL BOSS Store, Tokyo
45 Accelerate rollout of new BOSS store concept Tokyo Chicago New York Berlin Toronto Rotterdam Mexico City Paris Kuala Lumpur Las Vegas Miami Singapore
46 New BOSS store concept improves performance across KPIs Sales Sales productivity Units per transaction BOSS Store, Milan
47 HUGO: expansion of store network ongoing Stockholm Birmingham London Amsterdam Paris Copenhagen Berlin Düsseldorf Los Angeles Costa Mesa San Diego New York Miami New York Porto Dubai Zhengzhou Shenzhen Tokyo Osaka Guadalajara Mexico City Singapore, Ion Orchard Singapore, Marina Bay 23 HUGO Stores by the end of 2018
48 Maintain retail selling space 01 Openings 02 03 Relocations & closures Renovations Expand BOSS footprint in Asia/Pacific Open HUGO stores in key metropolitan cities Focus on new role of stores Right-size stores Relocate within the same city or mall Close selective stores Accelerate global rollout of new BOSS store concept Focus on key metropolitan cities Renovate shops and outlets BOSS Store, Paris
49 WHOLESALE
50 Further strengthening strategic wholesale partnerships 01 02 03 04 05 Enhance brand presentation Simplify selling process Increase marketing support Expand online cooperation Grow demanddriven supply
51 ONLINE
52 Strong development of online concessions contributes to online growth Zalando concession partnership marks major milestone Online concession model to be extended in the coming years Accelerate online concession business to control distribution
53 Coverage of >90% of global online apparel and footwear market hugoboss.com markets today Next hugoboss.com rollouts Rollout of hugoboss.com increases global online presence
54 Omnichannel services increase convenience and speed IN TOTAL Target 2022 125 stores in Europe Omnichannel services 59 stores in grow the to U.S. 5% of store sales already offer omnichannel services In-Store Availability Check Order from Store Click & Collect Store Locator Click & Reserve Return to Store BOSS Store, Berlin Demand-driven Delivery
55 Unleash the full potential across all regions
56 Drive quality growth in the Americas Mid single-digit 20% growth 20% Sales share 2018 CAGR Sales share 2022e Leverage trend towards casual- and athleisurewear Review and optimize existing store network Reduce share of outlet business Grow quality business through strategic wholesale partners License business represents 3% of Group sales
57 Maintain leading position in Europe* 62% Mid single-digit growth 57% Sales share 2018 CAGR Sales share 2022e Grow productivity of existing store base Rollout HUGO stores across major European cities Expand concession business with large online platforms Strengthen existing partnerships with key wholesale partners *incl. Middle East/Africa License business represents 3% of Group sales
58 Leverage strong potential in Asia/Pacific 15% Double-digit growth 20% Sales share 2018 CAGR Sales share 2022e Leverage Chinese demand across the region Expand retail footprint in Mainland China Grow travel retail business Leverage digital opportunities via leading online platforms License business represents 3% of Group sales
59 Personalization and Speed are our priorities along the four strategic fields of action PERSONALIZATION SPEED REFOCUS THE BRANDS DRIVE THE DIGITAL TRANSFORMATION BRAND DESIRABILITY REFINE THE WAY WE SELL INNOVATE THE WAY WE OPERATE
60 Two different initiatives to drive Speed ADVANCED ANALYTICS Operations-related dimensions 1 2 HUGO TRANSFORMATION Product-related dimensions & cultural transformation
61 Demand Design Development Production & Logistics Marketing Sales Trend detection Digitally developed collection Digital raw material library Production optimization Customized recommendations Digital showroom & online order tool Markdown management Multiple measures along the value chain
62 Design Digitally developed collection as a measure for speeding up 100% nonphysical 75 : 25 From known materials By digitally enabled vendors No prototypes, no samples 75% of styles from current patterns, 25% from new Made from fabrics applied in latest collections Made by fast and digitally enabled vendors
63 Development Demand Design Development Production & Logistics Marketing Sales 8 months until handover 7 months until shelf -50% Lead time 6 weeks until handover 7 months until shelf Digital development reduces lead times by 50%
64 Sales Markdown management optimization via advanced analytics ADVANCED ANALYTICS Optimize end-of-season markdowns Increase full-price sell through
65 AGENDA 1 Full Year 2018 Results & Outlook 2019 2 2022 Strategy 3 Backup
66 Sales by region and major markets Share of Group sales* Europe (incl. Middle East/Africa) Americas Asia/Pacific Germany: 15% 62% U.S.: 15% 20% China: 8% 15% Great Britain: 13% France: 6% Benelux: 5% Canada: 3% Central & South America: 2% Oceania: 2% Japan: 2% Other: 3% Other: 23% * = as of 2018; 3% licenses
67 Sales by distribution channel RETAIL 1 0,9 0,8 0,7 54% 57% 60% 62% 63% 63% 0,6 WHOLESALE 0,5 0,4 0,3 0,2 44% 41% 38% 35% 34% 34% LICENSES 0,1 0 2% 2% 2% 3% 3% 3% 2013 2014 2015 2016 2017 2018
68 Number of Group s own retail stores by region As of 31/12/2018 Freestanding stores 199 Shop-in-Shops 317 Europe 585 Outlets Freestanding stores 69 89 Americas Shop-in-Shops 92 231 Asia/Pacific 297 Outlets 50 Group 1,113 Freestanding stores Shop-in-Shops 91 154 Outlets 52
69 Retail comp stores sales Retail l-f-l sales development* +2% (6)% +3% +5% 8 6 4 3% 6% 3% 5% 7% 7% 5% 3% 4% 2 0 0% (2) (1)% (4) (3)% (3)% (6) (6)% (8)% (6)% (8) Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 * = currency-adjusted
70 Shareholder return Strong commitment to profit-based dividend policy Dividend payout ratio in % of net income, dividend in EUR 6 93% 100% 90% 5 75% 78% 79% 79% 80% 4 70% 3.34 3.62 3.62 60%-80% 70% 60% 3 2.60 2.65 2.70* 50% 2 2013 2014 2015 2016 2017 2018e 2019e 2020e 2021e 2022e 40% * = Dividend proposal for 2018.
71 (Adjusted) financial leverage 1.6 1.2 1.6x 1.3x 1.2x 1.2x 1.3x 1.4x 1.5x 1.3x 1.4x Net debt / EBITDA Net debt incl. operating leases / EBITDAR 0.8 0.6x 0.4 0.3x 0.2x 0.2x 0.1x 0.1x 0.1x 0.0x 0.0x 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Operating leases EBITDAR = Future committed operating lease obligations capitalized according to S&P methodology = EBITDA + minimum rents + contingent rents
72 Sourcing and production structure* 38 % ASIA 17 % OWN PRODUCTION 13 % WESTERN EUROPE 5 % NORTH AFRICA 02 % AMERICAS 42 % EASTERN EUROPE 83 % THIRD PARTY PRODUCTION * = as of 2018, in value terms
73 Multi-Year overview 2018 2017 2016 2015 2014 Sales 2,796 2,733 2,693 2,809 2,572 Gross profit 1,824 1,808 1,777 1,853 1,699 Gross profit margin in % 65.2 66.2 66.0 66.0 66.1 EBITDA 476 499 433 590 572 EBITDA before special items 489 491 493 594 591 Adjusted EBITDA margin in % 1 17.5 18.0 18.3 21.2 23.0 EBIT 347 341 263 448 449 Net income 236 231 194 319 333 Trade net working capital 537 459 524 528 503 Non-current assets 686 662 752 765 660 Shareholders equity 981 915 888 956 844 Total assets 1,858 1,720 1,799 1,800 1,662 Free cash flow 170 294 220 208 268 Net debt 22 7 113 82 36 Capex 155 128 157 220 135 Depreciation/amortization 129 158 170 142 123 Total leverage 2 0.0 0.0 0.2 0.1 0.1 Dividend 3 186 183 179 250 250 1 EBITDA before special items/sales. 2 Net financial liabilities/ebitda before special items. 3 Dividend proposal.
74 Financial Calendar & Investor Relations contact Christian Stöhr, Head of Investor Relations May 2, 2019 First Quarter Results 2019 Phone: +49 (0) 7123 94-80903 E-Mail: Christian_Stoehr@hugoboss.com May 16, 2019 August 1, 2019 Annual Shareholders Meeting Second Quarter Results and First Half Year Report 2019 Frank Böhme, Senior Investor Relations Manager Phone: +49 (0) 7123 94-80903 E-Mail: Frank_Boehme@hugoboss.com
75 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 forwardlooking statement, which speaks only as of the date on which it is made.