company presentation january 2007nach jr -...

Company Presentation January 2007 HUGO BOSS AG © 2 / 64

Company Presentation

January 2007


Vision and Strategic Initiatives

HUGO BOSS at a Glance

First Nine Months 2006 - Key Developments

First Nine Months 2006 - Financials

Columbus

Outlook

Backup


Vision and Strategic Initiatives


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


Key Growth Initiatives of the Group

Directly Operated StoresBOSS Womenswear Shoes & Leather

Accessories


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


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


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)


HUGO BOSS at a Glance


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%


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


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


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


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


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


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


BOSS Black Menswear


BOSS Black Womenswear


BOSS Selection


BOSS Orange Menswear


BOSS Orange Womenswear


BOSS Green


HUGO Menswear


HUGO Womenswear


First Nine Months 2006 – Key Developments


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


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


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


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


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%


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


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


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


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


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


First Nine Months 2006 - Financials


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.


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


Columbus


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


Outlook


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%


Backup


Results First Nine Months 2006


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


Americas


Royalties

Change in %(currency-adjusted)

Changein %

Jan.- Sept. 2005EUR mill.

Jan.-Sept. 2006EUR mill.


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 %




Income Statement


(11)(48.0)(53.5)Taxes on income


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 %




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.


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


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.


Financials 2005


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


Americas


Royalties

2005sales split in %

Changein %

2004EUR mill.

2005EUR mill.


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.


Income Statement


(17)(41.9)(49.0)Taxes on income


(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.


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.


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.


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.


Employees – by Region

96,9427,584TOTAL

9

8

11

16

1,747

3,936

958

301

1,911

4,262

1,063

348

Germany


Americas


Changein %

20042005Full-time equivalents


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


Appendix


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


Internet

Contents Languages

Annual Report

Interim Report

Financial Presentations

Investor Relations Calendar

Stock Prices

Press Releases

www.hugoboss.com

Address

German

English


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 january 2007nach jr -...

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