Cheuvreux German Corporate Conference // Frankfurt/Main...

Cheuvreux German Corporate Conference // Frankfurt/Main HUGO BOSS © January 17-18, 2012 2 / 51

Cheuvreux German Corporate Conference // Frankfurt/MainMark Langer, Chief Financial Officer

January 17-18, 2012


AGENDA

CURRENT TRADING AND OUTLOOK

SUMMARY

MEDIUM-TERM GROUP STRATEGY


AGENDA


SUMMARY



HUGO BOSS – Medium-term targets increased in early November

Sales(in EUR million)

2010 2015old

2015new

2,500

3,000

…

1,729

CAGR 12%

EBITDA before special items(in EUR million)

2010 2015old

2015new

500

750

…

350

CAGR 16%


HUGO BOSS – Growth strategy

STRIVING FOROPERATIONALEXCELLENCE

STRENGTHENING INDIVIDUAL

BRAND IDENTITIES

EXPLOITING GLOBAL GROWTH

OPPORTUNITIES

MAXIMIZING CONSUMER FOCUSTO DRIVE RETAIL

Project D.R.I.V.E.


DISTRIBUTION – Retail to account for 55% of Group sales in 2015

Wholesale

Retail

2009 2015e

Licenses3%

2010 2011e

33%55%

64%

43%

40%

57%

3% 2%…

19%

CAGR 2010 – 2015e

5%


WHOLESALE – Capturing growth opportunities

■ Competition in most major wholesale markets is tough …

… but HUGO BOSS is best positioned for further growth

Taking over merchandising responsibility

Sharing own retail best practices

Offering desirable brands

Providing intelligent replenishment solutions

Delivering the right product at the right place at the right time

Leveraging strength in core offerings across the brand portfolio


RETAIL – The HUGO BOSS retail universe

EUROPE292

ASIA/PACIFIC179

AMERICAS120

Number of own retail stores as of September 30, 2011

Target to open around 50 new stores every year organically


RETAIL – Ongoing development initiatives in all fields

Supply Chain & DistributionSystemsProduct

Consumer-centric development process

Improved preorder planning

Single product-based productivity analysis

“Core Range”offeringConsumer facing

Operations

Personnel

Reporting enhancements through Group-wide SAP Retail platform

Ongoing optimization of in-store systems

More flexible in-season product allocation based on actual demand

Transparent merchandise flow across the supply chain

Implementation of store operations manual

Standardized retail staff training

Introduction of new incentive elements

Systematic CRM approach


■ Positive mix effect on gross margin

■ Store expansion results in higher rent and personnel expenses

■ Shift from receivables to inventories

■ Increasing operating lease obligations

Key levers for further profitability improvement

■ Consistent comp store sales growth

■ Improved merchandise management process

■ Operating leverage through efficient retail management

Structural Changes

RETAIL – Key to achievement of 2015 targets


ONLINE – e-Commerce a powerful third distribution channel

■ Constant improvement of usability, product assortment, presentation and service features

■ Dedicated mono-brand sub-stores to elevate consumer experience

■ Several new store launches planned for 2012, including

■ Mobile store in first half

■ China online store in second half

Online to become a 150 million euro business by 2015

2008 2009 2010 2011e0.5

7.8

19.7

Online Sales (in EUR million)


CasualUrban ChicContemporary

SportiveRelaxedEnergetic

PremiumModernSophisticated

ProgressiveAvant-gardeContemporary

Refined CasualMasculineAesthetic

LuxuriousModernAuthentic

HUGO BOSSBrand

Portfolio

BRANDS – Targeting clearly defined consumer segments


BOSS Selection – Addressing the luxury consumer

■ Role within HUGO BOSSThe most luxurious brand with the highest quality standards

■ Brand PersonalityLuxurious, modern, authentic

■ Brand PromiseExquisite style, high value materials and workmanship

■ Point of differenceInnovation in style and taste

■ Brand PurposeCreate an exquisite and authentic style for all occasions

BOSS Selection revenues to reach 100 million euro by 2015


WOMENSWEAR – Growth strategy refined

Organization Dedicated womenswear organization across all functions 01

Brands02

Design03

Product Range04

Communication05

Events06

Target to achieve overproportionate sales growth in womenswear

Sharper and more focused brand image

Emphasize femininity across the product range

New York Fashion Show in September 2012

Key communication focus in Fall 2012

Grow luxury sportswear category


WOMENSWEAR – Different brand identities reflected in unique designs

casual urban chic

sportive relaxed

modern sophisticated

progressive avant-garde


REGIONS – Asia/Pacific expected to grow overproportionately

Europe

Americas

Asia / Pacific

Licenses

2009

8%

67%

20%

3%

2010

62%

22%

13%

3%

2011e 2015e

54%

23%

21%

2%…

11%

9%

CAGR 2010 - 2015

13%

22%


EUROPE – Set for continued growth

■ Leveraging brand strength to gain space in wholesale

■ Store expansion and productivity gains to support overproportionate growth in retail

■ Encouraging first results from implementation of Project D.R.I.V.E.

■ Eastern Europe an important growth region


AMERICAS – Strong brand momentum to continue

■ Favorable brand perception built on modern European design, consistent fit and superior value

■ Attractive brand presentation in high-end US department stores

■ Selective retail expansion and robust e-Commerce growth

■ Medium-term opportunities in Latin American market


ASIA / PACIFIC – China the region’s most important growth engine

■ Focus on further building luxury brand perception in China

■ Tremendous growth opportunities for BOSS Selection brand

■ Enlargement and upgrade of retail footprint

■ Operational backbone strengthened


PROJECT D.R.I.V.E. – Key enabler of growth strategy

Strong brands

Faster response to market changes

Above average growth

Consumer centric business model

Better and more focused assortment

Systematic analysis of sell through data

Consumer insight drives collection planning

Sales floor optimized product development

Focus on wholesale and own retail needs alike

Active sell through management

38 WeeksDesirable brand

with best POS performance

________________________38

WeeksDesirable brand with best POS performance

________________________38

Weeks

1 2

4

35

12345


PROJECT D.R.I.V.E. – Striving for operational excellence

D.R.I.V.E.

Core Range

ComplexityOptimization

Increase ProductEfficiencies

Direct Development& Delivery

QualityImprovements

Sourcing &Manufacturing

Time to Market


PROJECT D.R.I.V.E. – Implementation of 4-season cycle

■ Cycle shift fully reflected in retail

■ Fresher merchandise offering

■ Better adjustment to seasonal differences in consumer buying behavior

■ Increasing wholesale support

DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

JAN FEB MAY JUL AUG NOV

PAST

FUTURE

2 main collections and 2 much smaller pre-collections

4 equally weighted collections based on actual consumer buying behavior

Full price sales curve

DEC APR JUN OCTMAR SEP

WHS

WHS

WHS

WHS

Current delivery curve

DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV

JAN FEB MAY JUL AUG NOV

PAST

FUTURE

2 main collections and 2 much smaller pre-collections

4 equally weighted collections based on actual consumer buying behavior

Full price sales curve

DEC APR JUN OCTMAR SEP

WHS

WHS

WHS

WHS

Current delivery curve

Time to Market

PROJECT D.R.I.V.E. – Core range a major productivity driver in Europe


Units sold per style (Fall 2011)

x 3.5

Non Core Range Core RangeFall 2011 Spring 2012

Share of Core Range(in %)

15%

45%

60%

75%

30%

45%

67%

15%

28%

Value share of core range

Core range style/colors as % oftotal collection style/colors

Core Range


AGENDA


SUMMARY



Current trading supports full year and medium-term growth expectations

■ Good holiday season across all major markets

■ Healthy demand in most European markets despite economic challenges

■ No signs of slowdown in the Americas

■ Slight moderation of growth trends in Asia / Pacific


FINANCIAL GUIDANCE – On track for achievement of 2011 targets

2011 Outlook

Sales growth (currency-adjusted) 15% - 17%

Growth of EBITDA beforespecial items 25% - 30%

Capex approx. EUR 90 mill.

Own retail network Expansion by around 70 stores


AGENDA


SUMMARY



SUMMARY – HUGO BOSS set for long-term growth

■ Clear growth strategy in place

■ All brands in good shape

■ Increasing retail sophistication adds to historical strength in wholesale

■ Growth opportunities in all regions

■ Project D.R.I.V.E. key enabler of far-reaching business model improvements


BACKUP


BOSS Black – Brand DNA

■ Role within HUGO BOSSCore brand of HUGO BOSS

■ Brand PersonalityModern, superior, premium

■ Brand PromiseBeing impeccably and appropriatelydressed in every situation

■ Point of differenceContemporary elegance and perfectionassociated with a desirable lifestyle

■ Brand PurposeModern classics for business, leisure time and events – perfect looks that underline the customer’s individuality and meet superior standards in quality, design, fit & workmanship


BOSS Orange – Brand DNA

■ Role within HUGO BOSSRough and unpolished side of HUGO BOSS

■ Brand PersonalityUrban, modern, confident

■ Brand PromiseModern casual wear that adapts to the lifestyle of the metropolitan inner-city

■ Point of differenceFashion-driven premium casual wear forindividual style-seekers

■ Brand PurposePremium lifestyle collection for every day use with an urban fashion twist


HUGO – Brand DNA

■ Role within HUGO BOSSThe fashion spearhead of HUGO BOSS

■ Brand PersonalityEdgy, progressive, creative, individual

■ Brand PromiseAvant-garde / contemporary fashion that underlines a creative and individual attitude

■ Point of differenceUnconventional & progressive without being loud

■ Brand PurposeHigh fashion for men and women for almost every occasion (worklife & nightlife)


BOSS Green – Brand DNA

■ Role within HUGO BOSSThe golf & premium sportswear / lifestyle brand

■ Brand PersonalityRelaxed, sporty, optimistic, vigorous

■ Brand PromiseGolf meets lifestyle in a premium sportswear collection based on vibrant colors

■ Point of differenceSophisticated lifestyle sports fashion – with roots in the golf sport

■ Brand PurposePremium sportswear for the sophisticated golfer and people with a relaxed sporty attitude


PROJECT D.R.I.V.E. – Striving for operational excellence

D.R.I.V.E.

Core Range

ComplexityOptimization

Increase ProductEfficiencies

Direct Development& Delivery

QualityImprovements


Time to Market


PROJECT D.R.I.V.E. – Implementation in full swing

SPRINGOrder: ~ Jul / Aug

SUMMEROrder: ~ Oct / Nov

FALL Order: ~ Jan / Feb

WINTEROrder: ~ Apr / May

Spr

ing

1

Spr

ing

2

Spr

ing

3

Sum

mer

1

Sum

mer

2

Sum

mer

3

Fall

1

Fall

2

Fall

3

Win

ter

1

Win

ter

2

Win

ter

3

D J F M A M J J A S O N D

spring / summer core themes

fall / winter core themes

SPRINGOrder: ~ Jul / Aug

SUMMEROrder: ~ Oct / Nov

FALL Order: ~ Jan / Feb

WINTEROrder: ~ Apr / May

Spr

ing

1

Spr

ing

2

Spr

ing

3

Sum

mer

1

Sum

mer

2

Sum

mer

3

Fall

1

Fall

2

Fall

3

Win

ter

1

Win

ter

2

Win

ter

3

D J F M A M J J A S O N D

spring / summer core themes

fall / winter core themes

Time to Market


PROJECT D.R.I.V.E. – Efficient global sourcing activities

EUROPE (62%)- thereof 17% HB IZMIR -

SOUTH EAST ASIA (11%)

NORTH AMERICA (1%)


CENTRAL & SOUTH AMERICA (1%)

NORTH AFRICA (9%)

CHINA (16%)

As of full year 2010.

Annual investments(in EUR million)

99

119

5548

85

0

20

40

60

80

100

120

140

2006 2007 2008 2009 2010 2011e


Investments support realization of key strategic growth opportunities

■ Strengthening the Group’s retail footprint

■ Upgrading supply chain capabilities

Dividend* and payout ratio(in EUR and in % of consolidated net income)

1.20

1.38

2.03

0.97

1.46

64.1% 65.2%

84.7%

64.0%75.2%

0.0

0.5

1.0

1.5

2.0

2006 2007 2008 2009 2010


Profit-oriented dividend policy

Group committed to pay out between 60% and 80% of consolidated net income

* Preferred shares / excluding special dividend.

Net debt(in EUR million)

118

583

201174

379

0

100

200

300

400

500

600

2006 2007 2008 2009 2010


Strong free cash flow generation to sustain further debt reduction

Use of Free Cash Flow to further reduce net debt

Sales(in EUR million)

538

1,307

615

1,560

0

400

800

1,200

1,600

Q3 2010 Q3 2011 Jan - Sep. 2010 Jan. - Sep. 2011

Gross margin(in %)

59.2% 58.0%58.8% 59.9%

0%

15%

30%

45%

60%

Q3 2010 Q3 2011 Jan. - Sep. 2010 Jan. - Sep. 2011

Net debt(in EUR million)

304

247

0

40

80

120

160

200

240

280

320

Sep. 30, 2010 Sep. 30, 2011

EBITDA before special items(in EUR million)

150

273

177

372

0

60

120

180

240

300

360

Q3 2010 Q3 2011 Jan. - Sep. 2010 Jan. - Sep. 2011


NINE MONTHS RESULTS AT A GLANCE

+19%

+14%

-0.4 pp+1.9 pp

+36%

+18%

-19%


SALES – Sales up in all regions

*incl. Middle East and Africa

■ Europe continues to expand at a double-digit rate

■ Americas the strongest growing region in the third quarter

■ Q3 sales development in Asia reflects non-recurrence of consolidation effects

Sales development by region, y-o-yJan. - Sep. 2011

20%

41%

25%

15%

19%

40%

18%

16%

0% 10% 20% 30% 40% 50%

Group

Asia/Pacific

Americas

Europe*

in eurofx adjusted

Sales development by region, y-o-yQ3 2011

16%

20%

22%

14%

14%

16%

13%

15%

0% 10% 20% 30%

Group

Asia/Pacific

Americas

Europe*

in eurofx adjusted


SALES – All distribution channels grow at double-digit rate year-to-date

■ Solid growth in wholesale despite negative impact from franchise takeovers

■ Retail comp store sales increase reaches +6% in Q3 (+9% year-to-date, both currency-adjusted)

■ Fragrance launches drive sales improvement in royalties business

Sales development by distribution channel, y-o-yJan. - Sep. 2011

20%

10%

38%

10%

19%

10%

36%

10%

0% 10% 20% 30% 40%

Group

Royalties

Retail

Wholesale

in eurofx adjusted

Sales development by distribution channel, y-o-yQ3 2011

16%

12%

30%

9%

14%

12%

27%

8%

0% 5% 10% 15% 20% 25% 30%

Group

Royalties

Retail

Wholesale

in eurofx adjusted


GROUP INCOME STATEMENT

1 Basic and diluted earnings per share.

in EUR millionJan. - Sep.

2011Jan. - Sep.

2010Change

in %Q3 2011 Q3 2010 Change

in %Net sales 1,559.6 1,307.0 19 615.0 538.0 14

Cost of sales (596.4) (521.0) (14) (241.1) (205.1) (18)Direct selling expenses (29.0) (28.3) (2) (12.0) (14.5) 17

Gross profit 934.2 757.7 23 361.9 318.4 14in % of sales 59.9 58.0 1.9 pp 58.8 59.2 (0.4) pp

Selling and distribution expenses (473.2) (403.0) (17) (159.1) (140.8) (13)Administration costs and other operating income and expenses (139.6) (139.0) 0 (43.1) (49.0) 12

Operating result (EBIT) 321.4 215.7 49 159.7 128.6 24in % of sales 20.6 16.5 4.1 pp 26.0 23.9 2.1 pp

Net interest income/expense (11.8) (12.9) 9 (4.1) (4.2) 0Other financial items 1.2 0.3 >100 2.0 (3.7) >100

Financial result (10.6) (12.6) 16 (2.1) (7.9) 73

Earnings before taxes 310.8 203.1 53 157.6 120.7 31Income taxes (74.6) (48.3) (54) (37.9) (28.5) (33)

Net income 236.2 154.8 53 119.7 92.2 30

Attributable to:Equity holders of the parent company 231.1 153.9 50 118.0 91.3 29Minority interests 5.1 0.9 >100 1.7 0.9 90

Net income 236.2 154.8 53 119.7 92.2 30

Earnings per share (EUR)1

Common share 3.34 2.24 49 1.71 1.34 28Preferred share 3.35 2.25 49 1.71 1.34 28


SEGMENT PROFIT – Profitability improvements in all regions

■ EBITDA margin in Europe exceeds 40%

■ Strongest margin increase in the Americas

■ Retail expansion drives improvement in Asia

*incl. Middle East and Africa

in EUR millionJan. - Sep.

2011in % of sales Jan. - Sep.

2010in % of sales Change in %

Europe* 397.9 40.4 324.8 38.4 23Americas 83.7 25.6 62.0 22.4 35Asia/Pacific 75.0 34.9 51.4 33.3 46Royalties 29.2 89.6 26.6 89.4 10Segment profit operating segments 585.8 37.6 464.8 35.6 26Corporate units / consolidation (213.7) (191.8)EBITDA before special items 372.1 23.9 273.0 20.9 36


Tight working capital management continues to be a top priority

Average trade net working capital as a percentage of sales by quarter(in %)

29.7%27.2%

19.9% 19.6%20.9%

19.3%

24.6%

28.5%

19.2%

22.7%

19.1%

0%

10%

20%

30%

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011


RETAIL NETWORK – Net increase of 54 stores in first nine months of 2011

*Europe incl. Middle East / Africa

AMERICASASIA/PACIFIC

+ 49 + 7+ 23 - 25

Dec. 31, 2010 Sep. 30, 2011

537

591

+ 22 UK (incl. 15 Moss Bros stores)+ 6 Netherlands+ 6 Spain+ 4 France+ 4 Portugal+ 1 Austria + 1 Germany+ 1 Italy+ 1 Poland+ 1 Sweden+ 1 Switzerland+ 1 Turkey

+ 6 USA+ 1 Brazil

+ 20 China + 3 Japan

Number of own retail stores:CLOSINGS

EUROPE*


FINANCIAL CALENDAR 2012

Date Event

March 14, 2012 Press and Analysts’ Conference

April 26, 2012 First Quarter Results 2012

May 3, 2012 Annual Shareholders’ Meeting

July 31, 2012 First Half Year Results 2012

October 30, 2012 Nine Months Results 2012

February 9, 2012 Preliminary Full Year 2011 Results


INVESTOR RELATIONS CONTACT

Dennis Weber, Head of Investor Relations

Phone: +49 (0) 7123 94 - 86267E-Mail: [email protected]: www.hugoboss.com


FORWARD-LOOKING STATEMENTS CONTAIN RISKS

DateThis 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.

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