Investor Meeting Presentation

Transcription

1

2 Investor Meeting Presentation Mark Langer, CEO Dennis Weber, Head of Investor Relations Roadshow Frankfurt Hauck & Aufhäuser November 22, 2016

3 HUGO BOSS has been impacted by some profound changes in the industry Premium and luxury apparel markets have weakened in all regions Global price transparency has rendered large price imbalances unsustainable Changing customer behavior requires adjustments to the route to market Growing importance of e-commerce provides challenges and opportunities Investor Meeting Presentation HUGO BOSS November

4 These changes have affected financial performance across the market Luxury apparel market growth 1 (fx-adjusted) Mean adjusted EBITDA margin in premium and luxury apparel & footwear peer group 2 12% 19.1% 20.7% 21.6% 21.1% 19.3% 18.3% 17.3% 8% 8% 2% 2% 2% e (4)% e 1 Source: Bain & Altagamma 2 Peers include Brunello Cucinelli, Burberry, Ralph Lauren, Prada, PVH, Ted Baker and Tod s. Source: Bloomberg Investor Meeting Presentation HUGO BOSS November

5 and the Groupʼs financial performance has also deteriorated Sales (in EUR million), adj. EBITDA margin (in %) 2,346 2,432 2,572 2,809 2,059 1,968 2,059 1,562 1, % 20.5% 22.8% 22.5% 23.2% 23.0% 21.2% 20.5% 17.6% M M 2016 Investor Meeting Presentation HUGO BOSS November

6 In addition to these industry pressures HUGO BOSS faces four key challenges Current brand positioning is unclear Go-to-market approaches differ by market Current business model neglects the potential of digital Organizational inertia affects the speed of decision-making and key operational processes Investor Meeting Presentation HUGO BOSS November

7 HUGO BOSS has taken immediate actions Cost savings Reduced operating expense growth and investments significantly Consolidation of store network Initiated program to close unprofitable stores Restructuring of US wholesale business Discontinued distribution formats not in line with brand positioning Global price harmonization Aligned global price levels more closely Digitization of business model Insourced online fulfillment, redesigned online store and launched mobile app Investor Meeting Presentation HUGO BOSS November

8 Overall objective The return to profitable and sustainable growth Investor Meeting Presentation HUGO BOSS November

9 Vision Be the most desirable premium fashion & lifestyle brand Investor Meeting Presentation HUGO BOSS November

10 Corporate goals Employ the best people in the industry PROFITABLE & SUSTAINABLE GROWTH Offer the best products in our segment Maximize customer satisfaction Investor Meeting Presentation HUGO BOSS November

11 Strategic and operational framework D I G I T A L G L O B A L A G I L E C U S T O M E R - C E N T R I C S U S T A I N A B L E Investor Meeting Presentation HUGO BOSS November

12 Fields of action D I G I T A L I. REFOCUS THE BRAND III. DRIVE THE DIGITAL TRANS- FORMATION G L O B A L A G I L E II. REFINE THE WAY WE SELL C U S T O M E R - C E N T R I C IV. INNOVATE THE WAY WE OPERATE S U S T A I N A B L E Investor Meeting Presentation HUGO BOSS November

13 REFOCUS THE BRAND Investor Meeting Presentation HUGO BOSS November 16,

14 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate What has made our current brand positioning unclear? Brand s DNA diluted by an over-ambitious push into the luxury segment and neglect of the core menswear business Brand lines miss clear positioning and differentiation Pricing strategy inconsistent between markets and regions Investor Meeting Presentation HUGO BOSS November

15 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate From a product & distribution-led brand portfolio to a customer-centric approach Fashion level A large variety of customers with different expectations, needs and shopping behavior Extravagant Edgy Fashionable Modern Classic Occasion Formal Business Business Casual Smart Casual Casual Athleisure Investor Meeting Presentation HUGO BOSS November

16 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate From a product & distribution-led brand portfolio to a customer-centric approach Fashion level Focus on 2 strategically relevant customer segments Extravagant Edgy Open-Minded Life Enthusiast Fashionable Modern Demanding Quality Seeker Classic Occasion Formal Business Business Casual Smart Casual Casual Athleisure Investor Meeting Presentation HUGO BOSS November

17 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Demanding Quality Seeker Open-Minded Life Enthusiast Attitude Status-oriented, traditional, rational Attitude Open-minded, individual, spontaneous Style Classic, modern, sophisticated Style Fashionable, progressive, contemporary Expectations Top quality, personal assistance Expectations Latest fashion trends, urban atmosphere Shopping Retail & department stores, online Shopping Online, mobile, retail & department stores Purchase frequency Low - Medium Purchase frequency High Price per unit High Price per unit Medium Investor Meeting Presentation HUGO BOSS November

18 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Focus on two clearly positioned brands TWO brands I TWO target customers I TWO brand identities Investor Meeting Presentation HUGO BOSS November

19 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Focus on two clearly positioned brands BOSS offers confident business wear and refined casual wear for the demanding customer HUGO offers designer clothes at an affordable price which give the wearer a 24-hour look Investor Meeting Presentation HUGO BOSS November

20 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate BOSS: Impeccably dressed whatever the occasion B U S I N E S S S M A R T C A S U A L A T H L E I S U R E Investor Meeting Presentation HUGO BOSS November

21 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate HUGO: Designer clothes at an affordable price B U S I N E S S C A S U A L Investor Meeting Presentation HUGO BOSS November

22 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Attractive pricing will contribute to the expansion of HUGO across all regions Entry price point for suits United States (in USD) Euro Countries (in EUR) China (in CNY) ,700 5,600 Global sales share by brand, FY 2015 (in %) 10% 90% Average HUGO prices are around 30% below BOSS Investor Meeting Presentation HUGO BOSS November

23 R E F I N E T H E WAY W E S E L L Investor Meeting Presentation HUGO BOSS November

24 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Our distribution strategy places equal importance on all channels Wholesale Both brands Focus on strengthening the core Grow online, consolidate offline where necessary C U S T O M E R - C E N T R I C Retail Both brands Focus on strengthening the core Grow online and integrate with offline Our distribution strategy is solely focused on serving the needs of our customers Investor Meeting Presentation HUGO BOSS November

25 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Ongoing evolution of the store network Openings Takeovers Renovations Closures Selective white space opportunities Relocations First HUGO pilot stores No further major franchise acquisitions planned Selective shop-in-shop takeovers in department stores Renovation of around 100 retail points-of-sale per year Closure of 20 underperforming stores worldwide progressing as planned Rightsizing of Chinese store base completed Selected shop-in-shop closures/return to partners Rental contracts extended on a case-by-case basis The pace of expansion in retail space will moderate significantly compared to historic levels Investor Meeting Presentation HUGO BOSS November

26 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Increasing sales productivity the key focus of retail management Sales productivity by retail format, FY 2015 (in EUR/m 2 ) Sales productivity by region, FY 2015 (in EUR/m 2 ) 12,000 ~9,600 12,000 ~9,600 8,000 8,000 4,000 4,000 0 Freestanding store Shop-in-Shop Outlet Group 0 Europe Americas Asia/Pacific Group Target of increasing the Group s sales productivity by 20% over the next few years Investor Meeting Presentation HUGO BOSS November

27 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Adjustment of brand and merchandising strategy expected to increase sales volumes Growth enabler Traffic Brand desirability Brand communication CRM Store location VM Units/ Average Conversion transaction price x x x = Merchandising Service quality Product mix Service quality Product Pricing Store layout availability Product availability Comp store sales growth Future potential Investor Meeting Presentation HUGO BOSS November

28 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate In-store merchandising changes will better balance offerings across price points Illustration of composition of product assortment in directly operated stores Price Price Luxury Future Upper Premium Today Volume Volume Offering of traffic-driving premium price points to be broadened Breadth of luxury offerings to be reduced Selected high-end luxury products to support desirability of brand through halo effect on rest of product range Investor Meeting Presentation HUGO BOSS November

29 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate and different wearing occasions To be added to the product range In-store today Smart casual Athleisure Business Womenswear S&A Investor Meeting Presentation HUGO BOSS November

30 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate New BOSS pricing architecture clears up historical imbalances Americas BOSS prices to remain virtually unchanged Around 20% above European levels Europe Single-digit % increase overall All Euro countries fully aligned Asia Mid-teens % decline overall Max. 30% above European levels The effect of BOSS price adjustments will be neutral on a global level Investor Meeting Presentation HUGO BOSS November

31 D R I V E T H E D I G I TA L T R A N S F O R M AT I O N Investor Meeting Presentation HUGO BOSS November

32 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate The Group s digital roadmap Enable the cultural transformation Set the foundations Takeover of website frontend management Insourcing of European online fulfilment hugoboss.com and app (re)launches Omnichannel pilots Improve performance Rollout of omnichannel services Commercial optimization of hugoboss.com and app Develop the model Digitization of existing business model Addition of new business models Nov 2016 Investor Meeting Presentation HUGO BOSS November

33 I N N O VAT E T H E WAY W E O P E R AT E Investor Meeting Presentation HUGO BOSS November

34 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Agility is the basis of innovation Establish flexible structures Empower our people Foster entrepreneurial thinking Investor Meeting Presentation HUGO BOSS November

35 Refocus the brand Refine the way we sell Drive the digital transformation Innovate the way we operate Speed drives commercial success Replenish sold-out bestsellers in-season Adjust collection content based on short-term trends Become more flexible in our approach towards seasons Demand-driven supply Supplement the regular collection development process with a fast track concept which reduces the time to market to weeks rather than months Investor Meeting Presentation HUGO BOSS November

36 Wrap-Up Financial & Operational Outlook Investor Meeting Presentation HUGO BOSS November

37 HUGO BOSS continues to be focused on profitable and sustainable growth Improved speed-tomarket and agility Refocusing of BOSS and HUGO Acceleration in Asia Future Growth Drivers Further enhancement of retail management Solid growth in established key markets Online and omnichannel Low- to mid-single-digit retail comp store sales growth needed to expand operating margin Investor Meeting Presentation HUGO BOSS November

38 Disciplined cost management will support profitability Key influencing factors on gross margin and major cost items, medium-term trend as a % sales OPEX Gross profit margin Retail costs Marketing & CX 1 G&A Channel mix Reduction of rebates Reduction of collection complexity Wage cost inflation Brand investments Growing share of online CX investments IT and digital Wage cost inflation Quality investments Easing rent pressures Growing share of online Increased effectiveness Reduction of organizational complexity Strict overhead cost management Future trend Group confident to maintain current gross margin level and limit future cost inflation 1 CX = Customer Experience Investor Meeting Presentation HUGO BOSS November

39 Our return path to profitable and sustainable growth Stabilization Acceleration Profitable growth Completion of store closure program Continuation of US distribution upgrade Go-live new merchandising strategy Go-live new brand strategy Next steps global price alignment Investor Meeting Presentation HUGO BOSS November

40 Continuously strong free cash flow generation supports shareholder returns in %** % % % 1.45* 85% % % % % % % % Group reconfirms dividend policy of paying out between 60% and 80% of net income *Excluding special dividend of 5.00 per share **As a percentage of net income attributable to shareholders Investor Meeting Presentation HUGO BOSS November

41 HUGO BOSS reconfirms sales and profit outlook for 2016 Outlook 2016 Sales (currency adjusted) Stable or decline by up to 3% Gross margin Stable EBITDA before special items Decrease between 17% and 23% Capex EUR 160 million to EUR 180 million Free cash flow Stable Wholesale sales decline of up to 10% to weigh on Group sales performance Greater benefit from cost savings supports earnings and free cash flow outlook Investor Meeting Presentation HUGO BOSS November

42 2016 A year of change Strategic adjustments gear HUGO BOSS towards the return to profitable and sustainable growth Investor Meeting Presentation HUGO BOSS November

43