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Company Presentation January 2007 HUGO BOSS AG © 3 / 64
Vision and Strategic Initiatives
HUGO BOSS at a Glance
First Nine Months 2006 - Key Developments
First Nine Months 2006 - Financials
Columbus
Outlook
Backup
Company Presentation January 2007 HUGO BOSS AG © 5 / 64
Company Vision
Consumers and retailers appreciate HUGO BOSS as the leading international high-end
mens-/ womenswear company with an outstanding performance in providing a distinct,
innovative fashion statement, communication and value for money strategy.
We strive to outperform in the areas of
• Operational excellence
• Product leadership
• Market intimacy
Company Presentation January 2007 HUGO BOSS AG © 6 / 64
Key Growth Initiatives of the Group
Directly Operated StoresBOSS Womenswear Shoes & Leather
Accessories
Company Presentation January 2007 HUGO BOSS AG © 7 / 64
BOSS Womenswear
• Extension of the BOSS Womenswearbusiness is essential for strengthening the fashion competence of HUGO BOSS
• BOSS Womenswear is completing the HUGO BOSS lifestyle world
• BOSS Womenswear extension leverages existing showroom network and customer relationships of HUGO BOSS
• Relevant market for womenswear is about twice the size of the comparable menswear segment
Company Presentation January 2007 HUGO BOSS AG © 8 / 64
Shoes & Leather Accessories
• Shoes & Leather Accessories are essential to sharpen the style and identity of all HUGO BOSS collections
• Shoes & Leather Accessories complete the womenswear collections
• Shoes and leather accessories represent more than 20% of the luxury segment for consumer goods
• Market offers significant profit potential
Company Presentation January 2007 HUGO BOSS AG © 9 / 64
Directly Operated Stores
• Show-case for the presentation of the HUGO BOSS brand world to the consumer
• Valuable first-hand market knowledge and insights through direct consumer contact
• Own retail competence strengthens wholesale competence
• Topline growth potential from extending the portion of own retail (2005: 11% of total sales)
Company Presentation January 2007 HUGO BOSS AG © 11 / 64
10 Years Development
• Sales nearly tripled since 1995 achieving a CAGR of 11%
• Net profit development above sales trend growing with a CAGR of 14%
• Share price grew at a CAGR of 18% while delivering a strong dividend yield
Sales in EUR million
1995 2005
1,309
461
+184%
Company Presentation January 2007 HUGO BOSS AG © 12 / 64
Sales by Product Category
Businesswear
51%39%
Shoes & Leather
Accessories
10%
Businesswear
78%
Casualwear
22%
2006FC
Net Sales: +12-14% (currency-adjusted)
2005: EUR 1,309.4 million
1995
Net Sales: EUR 460.6 million
Casualwear
Company Presentation January 2007 HUGO BOSS AG © 13 / 64
Sales by Channel
Monobrand storesMonobrand Stores
Franchise
23%
Multibrand
Stores
61%
Directly
Operated
Stores
13%
Franchise
4%
Directly
Operated
Stores
4%
Multibrand
Stores
88%
Royalties
4% Royalties
3%
2006FC
Net Sales: +12-14% (currency-adjusted)
2005: EUR 1,309.4 million
1995
Net Sales: EUR 460.6 million
Company Presentation January 2007 HUGO BOSS AG © 14 / 64
Category Key Success Factor Development
Classical Clothing Stores Product Knowledge
Specialty Store Chains Processes
Department Stores Space Management
Monobrand Stores Brand Power
Our View of Future Retail Structure in High-End Fashion
Company Presentation January 2007 HUGO BOSS AG © 15 / 64
Market Presence in 104 Countries
Europe~4400 POS
633 BOSS Stores
96 DOS
25 Showrooms Asia/other regions
~500 POS
273 BOSS Stores
75 DOS
3 Showrooms
Americas~950 POS
110 BOSS Stores
32 DOS
3 Showrooms
Company Presentation January 2007 HUGO BOSS AG © 16 / 64
HUGO BOSS Stores by Region
Market presence in 76 countries with 1,016 Stores, thereof
- 369 freestanding Stores
- 647 shop-in-shops
145
11
203
11
Thereof Directly Operated Stores
Share of net sales in %
877
34
1,016
~35
TOTAL
Share of net sales in %
156
370
104
247
186
447
110
273
Germany
Other European countries
Americas
Asia / other regions
Dec. 31, 2005Sept. 30, 2006
Company Presentation January 2007 HUGO BOSS AG © 17 / 64
Brand Overview
Casual fashion for men and women
Unusual materials, vibrant colors and
intricate details
Self-confident men and women collection
that combines creativity and individuality
into an unconventional and avantgarde
fashion
Menswear
Womenswear
Menswear
Menswear
Womenswear
Menswear
Menswear
Womenswear
Comprehensive spectrum of elegant
business ensembles, casual sports
clothing and evening wear
BOSS
HUGO
Brand Line Collections Character
Premium tier of the BOSS Brand,
implementing best materials and
finest workmanship
Fashion-oriented collection that promises
optimum performance for sports and
fashion
Company Presentation January 2007 HUGO BOSS AG © 27 / 64
Q1-Q3 2006 Business Highlights
• HUGO BOSS continued to gain market shares in all key markets in the first nine months of 2006
• Group sales rose by 14% (in reporting currency and currency-adjusted) to EUR 1,216 million; sales of BOSS Womenswear rose by 70%
• All regions contributed to this expansion in sales: the American markets grew by currency-adjusted 16%, Europe rose by 14% and Asia/other regions achieved a local currency growth of 10%
• Earnings before taxes increased by 15% to EUR 186 million and net income improved by 17% to EUR 133 million
Company Presentation January 2007 HUGO BOSS AG © 28 / 64
BOSS Womenswear Continued to Show a Strong Performance
• Sales of BOSS Womenswear increased by 70% to EUR 127 million in the first nine months of 2006
• Especially the newly launched BOSS Orange Womenswear collection was well received by retailers and consumers
• BOSS Womenswear continued to achieve one of the highest sell-through rates in the fashion market
• Profitability of the Womenswear segment improved from EUR 2.0 million to EUR 5.9 million in 2006
Company Presentation January 2007 HUGO BOSS AG © 29 / 64
Shoes & Leather Accessories Delivered Strong Top-Line Growth
• Sales of EUR 127 million were generated in the first nine months of 2006, an increase of 35% versus the prior-year period
• New collections were launched for BOSS Orange Womenswear
• Shoes & Leather Accessories success is driven by a broader distribution and dedicated Group owned stores
• As of 2006 the Shoes & Leather Accessories product groups are fully integrated into the logistical supply chain of HUGO BOSS
Company Presentation January 2007 HUGO BOSS AG © 30 / 64
58 New DOS Openings in 2006 So Far
• Number of Directly Operated Stores (DOS) increased by 58 in the first nine months of 2006 bringing the total number of DOS to 203
• DOS generated sales of EUR 131 million in Q1-Q3 2006, an increase of 43% versus the year-ago period
• Like-for-like sales increased by 9%
• New openings include several flagship locations, i.e. Shanghai, London as well as concept stores and shop-in-shops
HUGO BOSS Flagship Store, Paris, France
Company Presentation January 2007 HUGO BOSS AG © 31 / 64
All Regions Showed Strong Growth
Europe
Americas
Asia/otherregions
Royalties
Total
Change vs. 2005 in %
Change in % vs. 2005 currency adjusted
+14%
+20%
+9%
+3%
+14%
+14%
+16%
+10%
+3%
+14%
Q1-Q3 2006 salesin EUR mill.
1,216
28
119
206
863
in % of sales
71%
17%
10%
2%
100%
Company Presentation January 2007 HUGO BOSS AG © 32 / 64
BOSS and HUGO with Clear Sales Increase
Change vs. 2005 in %
+16%
+11%
+70%
+9%
+14%
Q1-Q3 2006 salesin EUR mill.
1,216
in % of sales
90%
80%
10%
9%
100%
BOSS
Menswear
Womenswear
HUGO
Others
Total
(27%) 1%
1,099
973
127
106
10
Company Presentation January 2007 HUGO BOSS AG © 33 / 64
Sales Growth in Europe Across All Major Markets
• Growth rate in Europe of 14% is far above
the market growth of 3%
• Germany (+11%), Benelux (+21%) and
Eastern Europe (+23%) showed a
remarkable increase
• Growth in Spain (+57%) especially fuelled via the opening of 9 directly operated stores compared to the prior-year period
Company Presentation January 2007 HUGO BOSS AG © 34 / 64
American Markets Showed Dynamic Growth Rates
• US business up by 17% in USD with double digit growth in Wholesale and DOS
• Canada achieved a double-digit growth rate (+21% in CAD), new DOS openings in Montreal (2x) and Vancouver contributed to this increase
• In the countries of Central and South America sales increased by 7% in euros (4% in local currencies)
BOSS Store, Waikiki, Hawaii
Company Presentation January 2007 HUGO BOSS AG © 35 / 64
Sales in Asia: Pickup in H2 2006
• Sales in Asia and other regions weregrowing by 10% on a currency-adjusted basis and by 9% in euros
• Business in mainland China accelerated in Q3 2006 (+80% in euros) also due to the opening of the first DOS in Shanghai in September 2006
• Expansion in the Japanese market continued with the opening of eight new DOS compared to the prior-year period
HUGO BOSS Store Shanghai, Three on the Bund
Company Presentation January 2007 HUGO BOSS AG © 36 / 64
Successful Launch of New Fragrances Grew License Business
• Royalty income increased by 3% to EUR 28 million in the first nine months of 2006
• The successful launch of the BOSS Selection fragrance and the men’s skincare series BOSS Skin contributed to this growth
• Together with Safilo SpA, the new license partner for eyewear, the new HUGO BOSS collections are launched in H2 2006
Company Presentation January 2007 HUGO BOSS AG © 38 / 64
Income Statement - Summary
• Gross margin up by 1.0 percentage points due to DOS expansion and the continued optimization of the world-wide purchasing structure
• Operating expenses up mainly as a result of DOS investments
• Net financial result improved due to lower average level of debt
• Tax rate reduced further as a result of the continued internationalization of the HUGO BOSS business
113.5132.5Net income
(48.0)29.7
(53.5)28.8
Taxes on incomein %
161.5186.0Income before taxes
(4.6)(2.3)Net financial result
(415.4)(488.3)Operating expenses
581.554.7
676.655.7
Gross marginin %
1,062.91,215.6Sales
Jan.- Sept. 2005
EUR mill.
Jan.- Sept. 2006
EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 39 / 64
Cash Flow Increased 17% in the First Nine Months 2006
• Operating cash flow increased in line with the development of net income in the first nine months of 2006 (+17%)
• Net additions to fixed assets rose to EUR 62 million in the first nine months of 2006 especially due to the DOS expansion
• Additionally, the increased dividend and the accelerated share-buyback program affected the free cash flow
EUR million
YTD Sept. 2005 YTD Sept. 2006
147.5173.3
Company Presentation January 2007 HUGO BOSS AG © 41 / 64
Update on Columbus Project
• The Columbus project is progressing as planned; the roll-in of HUGO is completed, the roll-in of BOSS Orange is well under way and the roll-in of BOSS Black Womenswear has started
• The Columbus project will be finalized by the end of 2007 after the successful completion of the BOSS Black Menswear roll-in
• The realization of the Columbus project has already started to provide HUGO BOSS with tangible improvements in the total supply chain especially in respect of delivery performance and inventory turnover
Company Presentation January 2007 HUGO BOSS AG © 43 / 64
Outlook 2006
• Currency-adjusted sales should increase by 12-14% for 2006 as a whole in comparison to 2005
• Income before taxes should grow at the same rate as sales
• Global fashion market should grow by 3%
Company Presentation January 2007 HUGO BOSS AG © 46 / 64
Sales by Region
14141,062.91,215.6TOTAL
11
16
16
10
3
11
16
20
9
3
250.8
504.7
170.6
109.1
27.7
277.6
585.0
205.3
119.3
28.4
Germany
Other European countries
Americas
Asia / other regions
Royalties
Change in %(currency-adjusted)
Changein %
Jan.- Sept. 2005EUR mill.
Jan.-Sept. 2006EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 47 / 64
Sales by Brand
141,062.91,215.6TOTAL
16
11
70
9
(27)
951.8
877.4
74.4
97.2
13.9
1,099.4
972.9
126.5
106.1
10.1
BOSS
Menswear
Womenswear
HUGO
Others
Changein %
Jan.- Sept. 2005EUR mill.
Jan.- Sept. 2006EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 48 / 64
Income Statement
17113.5132.5Net income
(11)(48.0)(53.5)Taxes on income
15161.5186.0Income before taxes
50(4.6)(2.3)Net financial result
13166.1188.3EBIT
(25)(29.9)(37.5)Depreciation / amortization
(18)(170.4)(201.4)Personnel expenses
(16)(215.1)(249.4)Other operating income and expenses
54.755.7in % of sales
16581.5676.6Gross margin
(12)(481.4)(539.0)Cost of materials incl. changes in inventories
141,062.91,215.6Sales
Changein %
Jan.- Sept. 2005EUR mill.
Jan.- Sept. 2006EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 49 / 64
Analysis of Financial Requirements
1 Payable within one year. 2 Property, plant & equipment and intangible assets.
303.3298.1327.8Fixed assets2
26.030.532.0Other non-current assets
574.9
467.8
107.1
574.9
295.4
19.4
(22.3)
(31.0)
279.5
(36.4)
(146.6)
265.7
196.8
Dec. 31, 2005EUR mill.
597.3660.1Net asset coverage
482.7503.4Shareholders‘ equity
114.6156.7Balance of cash at banks and due to banks
597.3660.1Net assets
302.6316.5Medium- and long-term net assets
26.323.0Net deferred taxes
(19.4)(25.6)Other non-current liabilities
(32.9)(40.7)Non-current provisions
294.7343.6Net current assets
(32.2)(44.3)Current provisions
(166.3)(181.6)Trade payables and other liabilities1218.9236.9Inventories
274.3332.6Trade receivables, other assets1
Sept. 30, 2005EUR mill.
Sept. 30, 2006EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 50 / 64
Free Cash Flow
(5.0)(19.0)Share repurchase
40.1
(59.2)
99.3
17.7
(1.8)
(59.1)
147.5
4.1
29.9
113.5
Jan.- Sept. 2005EUR mill.
Currency translation and other equity
(49.6)Free cash flow
(19)(70.2)Dividend payment
(79)20.6Free cash flow – before dividends
(7.6)changes
(64.1)Change in remaining net capital invested
(5)(62.0)Net additions to fixed assets
17173.3Cash flow
(20)3.3Change in pension provisions
2537.5Depreciation / amortization
17132.5Net income
Changein %
Jan.-Sept. 2006EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 52 / 64
Sales by Region
100121,168.41,309.4TOTAL
24
45
18
10
3
9
12
14
20
1
292.2
519.0
205.1
111.7
40.4
318.4
582.5
233.4
134.2
40.9
Germany
Other European countries
Americas
Asia / other regions
Royalties
2005sales split in %
Changein %
2004EUR mill.
2005EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 53 / 64
Sales by Brand
121,168.41,309.4TOTAL
12
10
38
17
1
1,044.5
975.2
69.3
106.6
17.3
1,167.5
1,071.8
95.7
124.5
17.4
BOSS
Menswear
Womenswear
HUGO
BALDESSARINI
Changein %
2004EUR mill.
2005EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 54 / 64
Income Statement
2388.2108.2Net income
(17)(41.9)(49.0)Taxes on income
21130.1157.2Income before taxes
(10)(5.2)(5.7)Net financial result
20135.3162.9EBIT
(1.4)(0.0)Goodwill amortization
19136.7162.9Operating result
(15)(36.0)(41.3)Depreciation / amortization1
(20)(198.3)(238.2)Personnel expenses
(11)(260.1)(289.3)Other operating income and expenses
54.055.9in % of sales
16631.1731.7Gross margin
(8)(537.3)(577.7)Cost of materials incl. changes in inventories
121,168.41,309.4Sales
Changein %
2004EUR mill.
2005EUR mill.
1 Incl. Impairments.
Company Presentation January 2007 HUGO BOSS AG © 55 / 64
Income Development
108.2Net income 2005
1.6Other tax effects
(8.7)Change in income before taxes
(7.1)Change in taxes
(0.5)Change in financial result
(3.9)From depreciation / amortization
(39.9)From personnel expenses
(29.2)From other operating expenses
(73.0)Change in operating expenses and depreciation / amortization
0.5Change in royalties
26.5Effect from changes in the gross margin percentage
73.6Effect of sales volume on gross margin
100.6Change in gross margin
88.2Net income 2004
EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 56 / 64
Analysis of Financial Requirements
1 Payable within one year.
1570.4574.9Net asset coverage
13415.6467.8Shareholders‘ equity
(31)154.8107.1Balance of cash at banks and due to banks
1570.4574.9Net assets
5280.1295.4Medium- and long-term net assets
(25)(24.8)(31.0)Non-current provisions
13268.9303.3Non-current assets
(20)(18.6)(22.3)Other non-current liabilities
1716.619.4Net deferred taxes
(32)38.026.0Other non-current assets
(4)290.3279.5Net current assets
(38)(26.4)(36.4)Current provisions
(32)(110.7)(146.6)Trade payables and other liabilities16250.7265.7Inventories
11176.7196.8Trade receivables, other assets1
Changein %
2004EUR mill.
2005EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 57 / 64
Free Cash Flow
(15.1)47.7Free cash flow
(55.2)(59.2)Dividend payment
40.1106.9Free cash flow – before dividend
(10.5)3.2equity changes
Currency translation and other
9.025.5Change in remaining net capital invested
(78.3)(75.7)Net additions to fixed assets
119.9153.9Cash flow
(5.7)4.4Change in pension provisions
37.441.3Depreciation / amortization
88.2108.2Net income
2004EUR mill.
2005EUR mill.
Company Presentation January 2007 HUGO BOSS AG © 58 / 64
Employees – by Region
96,9427,584TOTAL
9
8
11
16
1,747
3,936
958
301
1,911
4,262
1,063
348
Germany
Other European countries
Americas
Asia / other regions
Changein %
20042005Full-time equivalents
Company Presentation January 2007 HUGO BOSS AG © 59 / 64
Employees – by Function
96,9427,584TOTAL
5
23
9
4,774
1,649
519
4,992
2,025
567
Production / Logistics
Sales / Creation / Marketing
Administration
Change in %
20042005Full-time equivalents
Company Presentation January 2007 HUGO BOSS AG © 61 / 64
Financial Calendar
November 02, 2006 Publication of the Third Quarter Report 2006
March 21, 2007 Annual Press and Analyst Conference
April 26, 2007 Report on the First Quarter of 2007
May 10, 2007 Annual Shareholders’ Meeting
August 01, 2007 Report on the First Half of 2007
November 06, 2007 Report on the Third Quarter of 2007
Company Presentation January 2007 HUGO BOSS AG © 62 / 64
Internet
Contents Languages
Annual Report
Interim Report
Financial Presentations
Investor Relations Calendar
Stock Prices
Press Releases
www.hugoboss.com
Address
German
English
Company Presentation January 2007 HUGO BOSS AG © 63 / 64
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.
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