company presentation q3 06.11 - hugobossgroup.hugoboss.com/files/ir_praesentation_1107.pdfagenda...

Company Presentation November 2007 HUGO BOSS AG © 2 / 51

Company Presentation

Third Quarter Update

November 2007

Agenda

Investment highlights

Nine months figures 2007 - Key developments

Nine months figures 2007 - Financials

Outlook

Backup


Investment highlights

• Leading international high-end mens-/ womenswear company

• Strong profitable track record

• Focus on organic growth drivers

• Growth strategy supported by Columbus

Europe

~4400 POS

657 BOSS Stores

102 DOS

25 Showrooms

Asia/other regions

~500 POS

281 BOSS Stores

76 DOS

3 Showrooms

Americas

~950 POS

113 BOSS Stores

32 DOS

3 Showrooms


Leading international high-end mens-/ womenswear company

• Market leadership in high-end menswear business

• Strong market penetration with growing mono-brand distribution

• Market presence in 106 countries with a total of 5,900 points of sale (POS), 1,051 mono-brand stores/shops including 210 directly operated stores (DOS)

• Mono-brand distribution increased to 36% share of sales in 2006 and includes:

�375 freestanding stores

�676 shop-in-shops

Figures as of December 31, 20061

1


Successful brand world of HUGO BOSS

BOSS Black

Comprehensive spectrum of elegant business

ensembles, casual sports clothing and evening

wear.

BOSS Selection

Premium tier of the BOSS brand, implementing

best materials and finest workmanship.

BOSS Orange

Casual fashion for men and women, unusual

materials, vibrant colors and intricate details.

BOSS Green

Fashion-oriented collection that promises optimum

performance for sports and fashion.

HUGO

Self-confident men’s and women’s collection that

combines creativity and individuality into an un-

conventional and avant-garde fashion.

Menswear

Womenswear

Accessories

Menswear

Accessories

Menswear

Womenswear

Accessories

Menswear

Sports Accessories

Menswear

Womenswear

Accessories

• Sales nearly tripled since 1996 achieving a CAGR of 11%

• Net income development exceeded sales trend growing with a CAGR of 15%

• Share price grew at a CAGR of 16% while delivering a strong dividend yield

Sales in EUR million


Strong profitable track record

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

+11%

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0German GAAP (HGB)

International Accounting Standards (IFRS)

Key initiatives of the Group


• Directly Operated Stores• BOSS Womenswear • Shoes & Leather

Accessories

Focus on organic growth drivers

• BOSS Womenswear

�completes the HUGO BOSS lifestyle world

� leverages existing showroom network and customer relationships

�covers a market that is twice the size of the comparable menswear segment

• Within three years sales grew by over 200% reaching EUR 162.2 million at the end of 2006

• Market presence in 69 countries with over 1,200 POS (apparel only)

• Within three years share of sales grew by 6 p.p. to 11% by the end of 2006


Growth driver - BOSS Womenswear


Growth driver - Shoes & Leather Accessories

• Shoes & Leather Accessories

�sharpen the style and identity of our collections

�complete especially the womenswearcollections

� represent more than 20% of the luxury segment for consumer goods

• Within three years sales grew by 175% reaching EUR 150.9 million at the end of 2006

• Sales split: Menswear 81%, Womenswear 19%



Growth driver - Directly Operated Stores

• Our Directly Operated Stores

�are show-case for the presentation of the HUGO BOSS brand world to the consumer

�give first-hand feedback through consumer contact

�show top line growth potential

• Within three years number of DOS grew by 129 own stores to 210 at the end of 2006

• Within three years DOS sales grew by over 130% reaching EUR 192 million at the end of 2006



Focus on organic growth drivers

• Strong growth with distribution gains in North America

• China as key luxury growth market in Asia is driving HUGO BOSS growth

• Market leadership position is driving growth in Eastern Europe

Further regional expansion


Growth strategy supported by Columbus

• Value chain initiative Columbus will be completed by end of 2007 with the roll-in of all brands into new system

• Key objectives of Columbus:

�Redefinition of supply chain processes

�Establishment of matrix organization

�Full integration of IT-platform based on SAP

• Implications:

� Immediate impacts on delivery performance and gross margin improvement

�Scalable platform for external growth


• Permira, one of the leading European buy-out funds, has acquired via the acquisition vehicle Red & Black Lux Sàrl a majority stake of Valentino Fashion Group

• In July 2007, Red & Black Lux Sàrl launched a voluntary tender offer to all HUGO BOSS shareholders

• After the tender offer and the transfer of shares to V.F.G. International N.V., Permira controls 72% of HB share capital (88% of voting shares and 55% of preferred shares)

• Permira has confirmed the existing strategy for HUGO BOSS and therefore the change in ownership has no immediate implications

• In October 2007, HUGO BOSS announced the new composition of the Supervisory Board with five Permiramembers

Existing growth strategy supported by new majority shareholder

Free Float 12%

V.F.G. International N.V.

88%

Ordinary Shares*

Preferred Shares**

Free Float 45%

V.F.G. International N.V.

55%

* Total of 35,860,000 ordinary shares

**Total of 34,540,000 preferred shares


Nine months figures 2007 - Key developments


Nine months figures 2007 - Business highlights

• HUGO BOSS continued to gain market share in key markets in the first nine months of 2007

• Group sales rose by 12% currency-adjusted, 9% in euro

• Third quarter sales growth of 8% currency-adjusted stayed below first half due to higher deliveries of the fall/winter collection early in June and

• Sales of BOSS Womenswear increased by 32%

• Sustained positive sales development in all regions

• Earnings before taxes increased by 14% to EUR 212 million and net income improved by 16% to EUR 153 million


Positive sales trend remains for all brands

Jan. - Sept. Jan. - Sept. Change in % of

Sales in € million 2007 2006 in % Net Sales

BOSS 1,213 1,099 10 91

Menswear 1,047 973 8 79

Womenswear 166 127 32 13

HUGO 112 106 6 9

Others 2 10 (76)

Total 1,328 1,216 9 100


BOSS Womenswear growth continues

• Sales of BOSS Womenswear increased by 32% to EUR 166 million for nine months 2007

• Sustained increase in profitability with EBIT margin of 12.7% for nine months 2007 vs. 7.7% in prior-year period

• Net income rose to EUR 12.6 million up 114% vs. nine months 2006

Jan. - Sept. Jan. - Sept. Change

in € million 2007 2006 in %

Sales 166.4 126.5 32

EBIT 21.2 9.8 116

EBIT margin 12.7 7.7


Shoes & Leather Accessories maintains growth momentum

• With an increase of 17% to EUR 147 million shoes and leather accessories product group reported strong growth again

• Shoes & Leather Accessories success is driven by an increased distribution footprint and expansion of dedicated Group owned stores


56 DOS openings in first three quarters 2007

• Number of Directly Operated Stores further increased bringing the total number of DOS to 266 (+63 versus prior-year period)

• DOS also played an instrumental role for the growth in sales with an increase of 26% to EUR 165.2 million in nine months 2007 (nine months 2006: EUR 131.1 million)

• Major openings in third quarter in France, Netherlands, Spain and USA

HUGO BOSS Flagship Store, Paris, France


Double-digit sales growth in all regions

Jan. - Sept. Jan. - Sept. Change in % in % of

Sales in € million 2007 2006 FX-adjusted Net Sales

Europe 945 863 10 71

Americas 225 205 18 17

Asia/other regions 126 119 12 9

Royalties 32 28 13 3

Total 1,328 1,216 12 100


Sales growth in Europe across all major markets

• Double-digit sales growth in most European

countries

• Sales trend in Europe driven by good

performance of womenswear business and

sales through DOS

• Sales trend in the Central and Eastern

European markets was especially remarkable

at 39% FX-adjusted

• Strong sales development in Benelux (+11%)

and Spain (+15%) driven by DOS business


Strong performance of major American markets continued

• Sales in USA increased by 20% currency-adjusted (reporting currency growth: 11%) with double-digit growth in wholesale (+21%)and DOS (+19%)

• Canada achieved a sales increase of 13% in local currency (reporting currency growth: 7%)

• In Central and South America sales in local currencies were 12% higher than in the prior-year period (+ 5% in euro)

• Strong like-for-like DOS sales growth in the Americas (FX-adjusted: Brazil +22.2%, Canada +10.8%, USA +9.3%) as well as sales expansion due to new stores

BOSS Store, Chicago


China remains key growth market in Asia

• Sales in Asia and other regions grew by 12% on a currency-adjusted basis and by 6% in euro

• Sales continued to expand in People’s Republic of China (+ 22% in reporting currency and 33% on a currency-adjusted basis)

• Market environment and consolidation strategy lead to 3% lower sales in Japan

• Own retail stores in Australia are performing very well in first year of operation

BOSS Store Beijing, Shin Kong Place


Ongoing growth in license business

• Royalty income of the HUGO BOSS Group increased by 13% to EUR 32.1 million

• Royalties from fragrances and cosmetics were up 6% due to very successful launches of ‘HUGO XX’ and ‘HUGO XY’ in third quarter

• Royalties from watches and eyewear developed very successful in first year of operation with new partners

• Jewelry will be launched with the SwarovskiGroup in 2008


Nine months figures 2007 - Financials


Key figures reflect significant increase in earnings

• Double-digit sales growth on a currency-adjusted basis (+12% FX-adjusted, 9% in euro)

• Gross margin further improved by 1.6 percentage points to 57.3% due to higher share of sales via DOS and the continued optimization of the worldwide production and procurement structures of the Group

• EBIT increased above sales growth mainly driven by gross margin improvement

• Tax rate declined by 1.1 percentage points to 27.7% due to the continued internationalization of the business

• Net income was up 16% in line with EBIT development to EUR 153.2 million



Earnings Position

Sales 1,328 1,216 9

Gross margin 761 677 12

Gross margin ratio in % 57.3% 55.7%

EBIT 218 188 16

EBIT margin in % 16.4% 15.5%

Earnings before taxes 212 186 14

Net income 153 133 16


Net working capital is up due to retail expansion and system transition

• Trade receivables development (+7%) in line with business growth

• Increase in other assets due to one-time item resulting from relocation of 5th Avenue store

• Increase in inventories (+22%) was mainly driven by expansion of own retail and system overlap

• Payables declined modestly by 1%

• Net working capital overall below objective of proportional increase

1 Payable within one year.

September 30, September 30, Change


Trade receivables1

308 287 7

Other assets1

68 46 49

Inventories 288 237 22

Trade payables and

other liabilities1

(179) (182) 1

Current provisions (45) (44) (1)

Net working capital 441 344 28


Outlook


Outlook

• Currency-adjusted sales should increase by 10-12% for 2007 as a whole compared to 2006

• Sales of BOSS Womenswear should increase by 25% on a currency-adjusted basis for full year 2007

• DOS sales are expected to rise by 25% on a currency-adjusted basis

• Earnings before taxes should grow by 12-15%

• New record results from sales and earnings are expected for 2008


Backup - Nine months figures 2007


Sales by region



Germany 287.5 277.6 4

Other European

countries 657.0 585.0 12

Americas 225.0 205.3 10

Asia/other regions 126.1 119.3 6

Royalties 32.1 28.4 13

Total 1,327.7 1,215.6 9


Sales by brand



BOSS 1,212.9 1,099.4 10

Menswear 1,046.5 972.9 8

Womenswear 166.4 126.5 32

HUGO 112.4 106.1 6

Others 2.4 10.1 (76)

Total 1,327.7 1,215.6 9


Income statement



Sales 1,327.7 1,215.6 9

Cost of materials including

changes in inventories (566.9) (539.0) (5)

Gross margin 760.8 676.6 12

in % of sales 57.3 55.7

Other operating income and

expenses (257.5) (249.4) (3)

Personnel expenses (230.3) (201.4) (14)

Depreciation/amortization (55.3) (37.5) (47)

EBIT 217.7 188.3 16

Net financial result (5.7) (2.3) 0

Earnings before taxes 212.0 186.0 14

Taxes on income (58.8) (53.5) (10)

Net income 153.2 132.5 16


Analysis of financial requirements

September 30, September 30, December 31,

in € million 2007 2006 2006

Trade receivables, other assets1

376.5 332.6 215.0

Inventories 287.9 236.9 290.2

Trade payables and

other liabilities1

(179.2) (181.6) (174.1)

Current provisions (44.5) (44.3) (32.4)

Net current assets 2

440.7 343.6 298.7

Fixed assets 324.5 327.8 343.6

Other non-current assets 29.9 32.0 28.9

Non-current provisions (61.0) (40.7) (54.2)

Other non-current liabilities (30.9) (25.6) (33.3)

Net deferred taxes 31.9 23.0 27.7

Medium- and long-term net assets 294.4 316.5 312.7

Net assets 735.1 660.1 611.4

Balance of cash at banks and due to banks 188.8 156.7 117.0

Group equity 546.3 503.4 494.4

Net asset coverage 735.1 660.1 611.4


2 Net working capital.


Free cash flow



Net income 153.2 132.5 16

Depreciation/amortization 55.3 37.5 47

Change in pension provisions 6.6 3.3 0

Cash flow 215.1 173.3 24

Net additions to fixed assets (36.2) (62.0) 42

Change in remaining net capital invested (149.4) (64.1) (133)

Share repurchase (11.2) (19.0) 41

Currency translation and other

equity changes (7.6) (7.6) 0

Free cash flow before dividends 10.7 20.6 (48)

Dividend payment (82.5) (70.2) (18)

Free cash flow (71.8) (49.6) (45)


Backup - Share price development


Share price development (01/2004 – 09/2007)

Preferred Shares

Common Shares

DAX (indexed: Preferred Shares in January 2000)

MDAX (indexed: Preferred Shares in January 2000)

July 12, 2007 Public Offer

02.01.2004

12.03.2004

25.05.2004

03.08.2004

12.10.2004

21.12.2004

03.03.2005

16.05.2005

25.07.2005

03.10.2005

12.12.2005

21.02.2006

05.05.2006

14.07.2006

22.09.2006

01.12.2006

14.02.2007

27.04.2007

10.07.2007

18.09.2007

0

10

20

30

40

50

60

EUR

September 7, 2007 end of

Public Offer


Backup - Financials 2006


Sales by region

2006 2005 Change

EUR mill. EUR mill. in %

Germany 346.9 318.4 9

Other European countries 681.9 582.5 17

Americas 273.6 233.4 17

Asia/other regions 150.1 134.2 12

Royalties 43.0 40.9 5

Total 1,495.5 1,309.4 14


Sales by brand

2006 2005 Change

EUR mill. EUR mill. in %

BOSS 1,347.9 1,167.5 15

Menswear 1,185.7 1,071.8 11

Womenswear 162.2 95.7 69

HUGO 136.2 124.5 9

Others 11.4 17.4 (34)

Total 1,495.5 1,309.4 14


Income statement

in EUR million 2006 2005 Change in %

Sales 1,495.5 1,309.4 14 0.0 0.0 0

Cost of materials incl.

changes in inventories (641.0) (577.7) (11) 0.0 0.0 0

Gross margin 854.5 731.7 17

in % of sales 57.1 55.9 0.0 0.0 0

Other operating income and

expenses (343.3) (289.3) (19) , ,

Personnel expenses (277.8) (238.2) (17) 0.0 0.0

Depreciation / amortization 1

(49.0) (41.3) (19)

EBIT 184.4 162.9 13

Net financial result (4.5) (5.7) 21 0.0 0.0 0

Earnings before taxes 179.9 157.2 14 0.0 0.0 0

Taxes on income (51.2) (49.0) (4) 0.0 0.0 0

Net income

- total 128.7 108.2 19

- per share (EUR) 2

common stock 1.84 1.54 19

preferred stock 1.86 1.55 20

1 Including Impairments.1 Stock Options Program: only phantom stocks issued, so no dilution of number of outstanding shares.


Income development

EUR mill.

Net income 2005 108.2

Change in gross margin 122.8

Effect of sales volume on gross margin 100.2

Effect from changes in the gross margin percentage 20.5

Change in royalties 2.1

Change in operating expenses and depreciation/amortization (101.3)

from other operating expenses (54.0)

from personnel expenses (39.6)

from depreciation/amortization (7.7)

Change in financial result 1.2

Change in taxes (2.2)

Change in earnings before tax (7.1)#BEZUG!

Other tax effects 4.9

Net income 2006 128.7


Analysis of financial requirements

in EUR million 2006 2005 Change in %

Trade receivables, other assets1

215.0 196.8 9

Inventories 290.2 265.7 9

Trade payables and

other liabilities1

(174.1) (146.6) (19)

Current provisions (32.4) (36.4) 11

Net current assets 298.7 279.5 7

Fixed Assets 343.6 303.3 13

Other non-current assets 28.9 26.0 11

Non-current provisions (54.2) (31.0) (75)

Other non-current liabilities (33.3) (22.3) (49)

Net deferred taxes 27.7 19.4 43

Medium- and long-term net assets 312.7 295.4 6

Net assets 611.4 574.9 6

Balance of cash at banks and due to banks 117.0 107.1 9

Shareholders' equity 494.4 467.8 6

Net asset coverage 611.4 574.9 6



Free cash flow

in EUR million 2006 2005 Change absolut

Net income 128.7 108.2 21

Depreciation/amortization 49.0 41.3 8

Change of pension provisions 7.8 4.4 3

Cash Flow 185.5 153.9 32

Net additions to fixed assets (89.3) (75.7) (14)

Change in remaining net capital invested (4.0) 25.5 (30)

Share repurchase (19.0) (10.0) (9)

Currency translation and other

equity changes (12.9) 13.2 (26)

Free cash flow - before dividend 60.3 106.9 (47)

Dividend payment (70.2) (59.2) (11)

Free cash flow (9.9) 47.7 (58)


Employees – by region

Change

Employees (Full-time equivalents) 2006 2005 in %

- by region

Germany 2,104 1,911 10

Other European countries 4,795 4,262 13

Americas 1,167 1,063 10

Asia/other regions 375 348 8

Total 8,441 7,584 11


Employees – by function

Change

Employees (Full-time equivalents) 2006 2005 in %

- by function

Production/Logistics 5,334 4,992 7

Sales/Creation/Marketing 2,441 2,025 21

Administration 666 567 17

Total 8,441 7,584 11


Appendix


Financial calendar / Contact

Financial calendar

March 27, 2008 Annual Press and Analyst Conference

April 30, 2008 Publication of the First Quarter Report 2008

May 08, 2008 Annual Shareholders’ Meeting

July 31, 2008 Publication of the Half Year Report 2008

October 30, 2008 Publication of the Third Quarter Report 2008

Contact

Investor Relations

Tel: + 49 (0) 7123 94-2552

Fax: + 49 (0) 7123 94-2035

Email: [email protected]

For further information please refer to our website www.group.hugoboss.com


Disclaimer

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.

company presentation q3 06.11 - hugobossgroup.hugoboss.com/files/ir_praesentation_1107.pdfagenda...

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