MISSION STATEMENT OWN, OPERATE, AND MANAGE A DIVERSIFIED PORTFOLIO OF COMPLIMENTARY PREMIUM BRANDS THAT CONSUMERS ARE PASSIONATE ABOUT

Transcription

1 September 28, 2017

2 2 DISCLAIMER Forward-Looking Statements This slide presentation and the accompanying oral presentation of Differential Brands Group, Inc. ( Differential ) may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements involve Differential s plans, objectives, goals, strategies, expectations, estimates, forecasts and projections relating to Differential s future operations, including its projected results of operations, performance and product developments, organic growth, retail revenues and total revenues. These forward-looking statements are based on management s beliefs and assumptions and projections of future results or trends. You should be aware of the speculative nature of forward-looking statements and other statements that are not historical in nature, including those that include the words anticipate, estimate, plan, project, continuing, ongoing, target, aim, expect, believe, intend, may, will, would, should, could, seek, potential or the negative of those words and other comparable words. Our actual results could differ materially from those stated or implied in forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, general economic, market or business conditions; the impact of Differential s acquisition of the Robert Graham, Hudson, and Swims businesses on Differential s business; changes in Differential s competitive position or competitive actions by other companies; Differential s ability to maintain strong relationships with its licensees; Differential s ability to retain key personnel; Differential s ability to achieve and/or manage growth and to meet target metrics associated with such growth; Differential s ability to successfully attract new brands; Differential s ability to identify suitable targets for acquisitions; Differential s ability to obtain financing for the acquisitions on commercially reasonable terms; Differential s ability to integrate successfully the new acquisitions into its ongoing business, including those of the Robert Graham, Hudson, and Swims businesses; the ability to achieve the anticipated results of these and other potential acquisitions; Differential s ability to comply with government regulations; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond Differential s control. All of the forward-looking statements made in this presentation are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized or, if substantially realized, will have the expected consequences on Differential s business or operations. These and other risks are discussed in detail in the periodic reports that Differential files with the Securities and Exchange Commission (the SEC ), including the last annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC. These forward-looking statements are made only as of the date hereof, and, except as required by applicable law, Differential undertakes no obligation to publish updates or revisions of any forward-looking statements, whether as a result of new information, future events or otherwise. It is not possible to predict or identify all risks and uncertainties to which Differential may be subject. Consequently, you should not consider such disclosures to be a complete discussion of all potential risks or uncertainties. This slide presentation includes certain financial projections, which are also forward-looking statements, relating to Differential and potential acquisitions. Although the Company believes the assumptions underlying such projections are reasonable, the reasonableness of these assumptions has not been independently passed upon. Nothing contained in the projections is, or should be relied upon, as a promise or representation as to the future results or prospects of Differential. Trade Names, Trademarks and Service Marks This presentation contains trade names, trademarks and service marks of other companies. We do not intend our use or display of other parties trade names, trademarks and service marks to imply a relationship with, or endorsement or sponsorship of, these other parties. Each trade name, trademark or service mark of any other company appearing in this presentation is the property of its respective holder.

3 MISSION STATEMENT OWN, OPERATE, AND MANAGE A DIVERSIFIED PORTFOLIO OF COMPLIMENTARY PREMIUM BRANDS THAT CONSUMERS ARE PASSIONATE ABOUT

4 EXECUTIVE SUMMARY

5 Key Investment Highlights 5 Significant long term growth potential through global expansion of its highly recognized premium brands and the acquisition of accretive and complementary premium brands Opportunity to leverage well established omni-channel distribution strategy across ecommerce, retail, and wholesale channels while maintaining individual brand DNA to: Facilitate high single digit growth in Robert Graham and Hudson and more than double the size of SWIMS Acquire and grow premium brands in the apparel, footwear and accessories categories Operating margin expansion opportunity with scalable business model including a state-of-theart platform and operational expertise that can be leveraged across multiple brands Seasoned leadership team with strong track record of successfully growing brands Strong capital position to target attractive premium brands with combination of cash, debt and equity while offering an operating solution when brand founders reach their mgmt. ceiling

6 SIGNIFICANT LONG TERM GROWTH POTENTIAL 5 YEAR PLAN 6 Drive mid to high-single digit organic growth annually Complete 3-4 accretive brand acquisitions utilizing a combination of cash, debt and stock More than double size of acquired brands within 4-5 years $700 million in revenue Mid-teens EBITDA margin Maintain net leverage of approximately 4x

7 ACQUISITION STRATEGY FOCUSED ON PREMIUM BRANDS 7 Exclusively target brands that distribute to premium channels Luxury Bergdorf Goodman Barney s Focused on companies that can double or triple in size over fourto-five year period Leverage Differential s platform to fuel growth and create efficiencies to drive expanded operating margin Distribution Channel Premium Mid-Tier Mass Saks Fifth Avenue Neiman Marcus Nordstrom Macy s Dillards JC Penney s Kohl s Target Wal-Mart

8 STRONG LEADERSHIP TEAM 8 Michael Buckley Matthew Fior Andrew Berg Jake Brandman Bob Ross Bill Sweedler Chief Executive Officer 31 Years Consumer Experience President, Hudson 18 Years Consumer Experience President, Robert Graham 18 Years Consumer Experience President, Swims 19 Years Consumer Experience Chief Financial Officer 23 Years Consumer Experience Chairman of the Board 27 Years Consumer Experience

9 PLAYBOOK FOR GROWTH

10 Two-Pronged Growth Strategy 10 ORGANICALLY GROW OUR BRANDS GLOBALLY THROUGH OMNI-CHANNEL DISTRIBUTION STRATEGY: DIRECT-TO-CONSUMER E-COMMERCE DIRECT-TO-CONSUMER RETAIL STORES PREMIUM DOMESTIC WHOLESALE CHANNELS PREMIUM INTERNATIONAL WHOLESALE CHANNELS CATALOG AND LICENSING SEEK TO ACQUIRE ACCRETIVE, COMPLEMENTARY, PREMIUM BRANDS WITH MEANINGFUL GROWTH POTENTIAL

11 PLAYBOOK FOR GROWTH CHAPTER 1: ORGANIC GROWTH 11 Differential s goal is to organically build its core businesses at a mid to high-single digit annual growth rate through the following strategies: DIRECT-TO-CONSUMER E-COMMERCE Drive traffic, conversion and retention DIRECT-TO-CONSUMER RETAIL STORES Open new retail stores and drive same store sales WHOLESALE Increase penetration in current doors through expanded categories and extended product lines across brands Open brand-appropriate new wholesale accounts INTERNATIONAL EXPANSION Introduce premium brands with strong U.S. awareness in both mature and emerging markets, where they may have significant opportunity to grow LICENSING NEW CATEGORIES License select categories with best-in-class partners

12 PLAYBOOK FOR GROWTH CHAPTER 2: ACCRETIVE AQCUISITIONS 12 CRITERIA ILLUSTRATIVE TARGET ACQUISITION PROFILE We are actively pursuing an acquisitive strategy across the premium apparel, footwear and accessories categories We expect to target growing brands that: maintain premium positioning in their sector have a passionate consumer following have the ability to expand into new distribution channels and territories can support a high margin cohesive direct-to-consumer strategy (i.e., retail, e-commerce, catalog) bring a diversity of consumers, distribution channels and partners to Differential s portfolio drive accretive growth to Differential s platform Sector Revenue EBITDA Premium apparel, footwear and accessories $70 $100 million $10 - $15 million Differential believes that it will be able to: leverage its operational expertise and relationships to drive incremental growth utilize its back-end platform to enhance margins Financing Structure Conservative use of leverage (3.0x 4.0x) Balance funded by cash and DFBG stock

13 OPPORTUNITY TO LEVERAGE INFRASTRUCTURE 13 Maintain brand equity while leveraging streamlined infrastructure that provides expertise, guidance and cost efficiencies across critical back-end functions: Each brand remains true and unique to its individual DNA and the consumer experience is seamless across all touch points Creative, marketing and sales functions are distinctly brand-specific and focused Lean and efficient corporate back-office creates meaningful operating leverage across the brand and corporate divisions E-commerce/Catalog/Retail back-end Finance, Distribution, IT, Legal, HR functions Acquisitions TBD Creative, Marketing, and Sales Functions Creative, Marketing, and Sales Functions Creative, Marketing, and Sales Functions Creative, Marketing, and Sales Functions

14 ECOMMERCE

15 ECOMMERCE CONTINUES TO DISRUPT 15 Apparel space in U.S. is approximately $315 Billion and in serious disruption. Once penetration reached 15% in 2010, sales shifted rapidly to ecommerce, both through Amazon/Aggregators and Brand Specific Web Sites: U.S. Physical Stores Sales: Channel Shift 84% 60% 24% $264 Bn USD $187 Bn USD $77 Bn USD Ecommerce Sales: 16% 40% $51 Bn USD $128 Bn USD (50/50 Amazon/Aggregator vs. Brand Direct)

16 ECOMMERCE INVESTMENTS 16 Built separate independent experiential websites for all three brands, managed inhouse Built out/enhanced E-commerce teams in place and acclimated including marketing and operations Consolidating distribution centers to an in-house facility mid-country (geo ecommerce friendly) Implementing specific ecommerce based technology to maximize customer experience Shifted marketing spend to digital based, with campaigns around activation; retention and loyalty, including new focus on social, influencers and mobile platforms Expanding product assortments to a well-rounded lifestyle offering to ensure a unique brand story

17 ECOMMERCE OUTLOOK 17 $ in millions 2015 to 2021 CAGR of 37.3%

18 OUR BRANDED WEBSITES

19 ROBERT GRAHAM ECOMMERCE 19

20 ROBERT GRAHAM ECOMMERCE 20

21 HUDSON ECOMMERCE 21

22 HUDSON ECOMMERCE 22

23 SWIMS ECOMMERCE 23

24 SWIMS ECOMMERCE 24

25 PORTFOLIO OVERVIEW

26 PORTFOLIO OVERVIEW CURRENT BRAND SUMMARIES Robert Graham, Hudson, and Swims are complementary brands from a distribution, product and end-customer standpoint 26 Products Footwear 2% Bottom 7% Accessories 3% Other Apparel 88% Bottom 95% Other Apparel 5% Accessories 7% Footwear 75% Apparel 18% Customer Profile Men (98%); Women (2%) Core customer years old Affluent, well-educated Men (20%); Women (80%) Core customer years old Fashion forward and image conscious Men (80%); Women (20%) Core customer years old Affluent, well-educated Retail Pricing Sportswear ($178 - $228) Denim ($168 - $228) Outerwear/Sport Coat ($298 - $698) Sportswear ($125 - $220) Premium Denim ($155 - $260) Sportswear ($70 - $160) Footwear ($100 - $240) Accessories ($60 - $240) Outerwear/Other ($130 - $470) 2015P Retail Locations 30 doors Store concept in development 10 franchise stores 2 company owned stores

27 27

28 ROBERT GRAHAM 28 Brand Highlights Represents the American Eclectic lifestyle brand where craftsmanship, luxury and style intertwine Creative collections encompass: men's sportswear, premium denim, footwear, outerwear, loungewear, accessories, and women's sportswear Loyal and passionate consumer base with brand engagement E-commerce 8% REVENUE BY CHANNEL Licensing 2% Multi-Channel Distribution 30 company-owned retail locations Growing e-commerce and catalog channels Wholesale distribution through premium department stores and specialty apparel stores Prominent customers include Nordstrom, Bloomingdale s, Saks and Neiman Marcus Over 100 shop-in-shop locations Profitable, licensing channel Retail 40% Wholesale 50%

29 ROBERT GRAHAM BROADENING PRODUCT CLASSIFICATIONS 29 WOVENS DENIM/BOTTOMS OUTERWEAR NECKWEAR FOOTWEAR BLAZERS KNITS SWIM SWEATERS SOCKS/UNDERWEAR BAGS/LEATHER GOODS TAILORED CLOTHING FRAGRANCE

30 ROBERT GRAHAM POSITIONING Aspirational luxury with contemporary positioning that competes with global eclectic fashion brands Brand Heritage sport shirts 30 PREMIUM PRICE MODERATE PRICE CLASSIC CONTEMPORARY

31 ROBERT GRAHAM Go-Forward Strategy 31 Accomplishments Go-Forward Brand Priorities Began selling men s shirts in specialty retail locations in 2001 Expanded brand into luxury department stores in 2003 Currently distributed in 1,000+ department and specialty doors globally Opened first Robert Graham retail location in Venice Beach in 2010; now operates 30 retail locations Launched e-commerce site in 2011; now accounts for 25% of full price retail sales and 16% of direct to consumer sales and 8% of overall company sales Expand e-commerce penetration of Robert Graham sales through acquisition, conversion and retention strategies Operate a best-in-class retail operation and selectively open stores each year with a long term target of stores in North America Drive comparable store sales in retail Increase penetration into the premium wholesale channels with unique product and expansion into new categories Energize existing loyal customer base and attract a new, younger client through evolving product designs and marketing strategies Expand international presence License new categories

32 32

33 HUDSON 33 Brand Highlights Designer and marketer of women s and men s premium branded denim and apparel under the Hudson brand Dedicated consumer following with strong celebrity support Well-regarded for innovative and high quality design work and superior fit; known for iconic backflap pockets Multi-Channel Distribution Wholesale distribution through premium department stores and specialty apparel stores Prominent customers include Nordstrom, Bloomingdale s, Saks and Neiman Marcus Growing e-commerce channel E-commerce 5% REVENUE BY CHANNEL Licensing 1% Wholesale 94%

34 HUDSON BROADENING PRODUCT CLASSIFICATIONS 34 FASHION DENIM CLASSIC DENIM NOVELTY BOTTOMS MENS TOPS/JACKETS KIDS

35 HUDSON POSITIONING 35 Aspirational luxury contemporary denim collection that competes with global denim based brands Brand Heritage Denim jeans PREMIUM PRICE MODERATE PRICE CLASSIC CONTEMPORARY

36 HUDSON Go-Forward Strategy 36 Accomplishments Go-Forward Brand Priorities Founded in 2002, known as one of the pioneers of the premium denim category. Currently considered one of the top 7 premium denim brands in the world Distributed in 1,300+ department and specialty doors Launched E-Commerce 2010 Currently accounts for 5.6% of company sales Capitalizing on the recent pickup in denim trends Internationally Represented in 19 countries Expand e-commerce penetration of Hudson sales through digital marketing focused on social and influencers to drive acquisition, conversion and retention Grow women s dept store floor space Capitalize and expand Men s business, not only in denim but tops also. Expand women s product offerings, particularly tops and outerwear Open retail locations Extend international presence Create new and innovative ways to solidify our core demographic/customer base, while attracting and expanding into the younger Millennial s audience.

37 37

38 SWIMS 38 Brand Highlights Global lifestyle brand best known for its range of fashion-forward, water-friendly footwear and sportswear that balances performance, comfort and style Distributes its full range of footwear, swimwear, outerwear and accessories worldwide Loyal, attractive and engaging consumer base across all continents REVENUE BY CHANNEL B2B 2% E-commerce 7% Outlet Retail 5% Wholesale 86% Multi-Channel Distribution Distributed in approximately1,200 wholesale doors globally Fast growing, newly launched e-commerce channel Represented in top WS-doors across Europe, North America, Latin America and Asia 10 Franchise SWIMS brand stores

39 SWIMS BROADENING PRODUCT CLASSIFICATIONS 39 GALOSHES NAUTICAL BOAT LOAFERS CLASSIC LOAFERS PREMIUM LOAFERS SPORT TECH LOAFERS WINTER FOOTWEAR ACCESSORIES OUTERWEAR SWIMWEAR TOPS BAGS

40 SWIM POSITIONING 40 Affordable premium with contemporary positioning that competes with global functional fashion footwear/lifestyle brands Brand Heritage galoshes and loafers Footwear Competitors Unique, Premium Brand Positioning Mass Premium Price Range Product Line Expansion Active Compelling Market Opportunity Lifestyle Fashion

41 SWIMS HISTORY 41 Accomplishments Founded in 2006, SWIMS became known for transforming the galosh from purely practical to a branded lifestyle item with a bold personality Swims gained broader notoriety with the launch of its versatile, water-friendly loafer, that gave the brand access to the warmer US market and key departments stores including Saks 5 th Avenue and Nordstrom The brand has expanded to approximately 1,200 specialty ands better department store doors in 31 countries that includes 10 partner retail stores Re-launched e-commerce site in 2016; now accounts for 7% of Swims sales The brand was acquired by Differential Brands in 2016 Go-Forward Brand Priorities Build out the North American marketplace across department stores, specialty stores and better footwear retailers Exploit Norway/Sweden and build Western Europe (UK, FR, GR, NE) Expand e-commerce penetration of Swims sales through digital marketing focused on new customer acquisition, conversion and retention Build SWIMS direct to consumer retail store platform (full price & outlet) Expand beyond Men s Loafer/Casual Shoe with new product categories (Men s: sportswear, swim, outerwear, Women s: shoes, sandals, rainboots, sportswear, outerwear) Connect to Male X ers and Millennials Establish a strong women s position

42 THANK YOU differentialbrandsgroup.com