Group Financial Outlook and Strategy. Mark Langer, CFO Paris, November 19, 2014

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2 Investor Day 2014 Group Financial Outlook and Strategy Mark Langer, CFO Paris, November 19, 2014 HUGO BOSS 19-Nov-14 2

3 Agenda Review of past financial performance Current trading update Financial implications of 2020 growth strategy Summary HUGO BOSS 19-Nov-14 3

4 Agenda Review of past financial performance Current trading update Financial implications of 2020 growth strategy Summary HUGO BOSS 19-Nov-14 4

5 Group sales performance above original plans Group sales (in EUR million) Actual Average annual growth of 12% between 2009 and sales above levels implied by 2010 and 2011 plans 3,000 Linear projection based on 2011 plan Linear projection based on 2010 plan 2,346 2,432 2,500 2,059 1,562 1, HUGO BOSS 19-Nov-14 5

6 Regional mix of Group sales different than expected Sales by region (in % of total Group sales) Growth in Europe has exceeded initial expectations Expansion in the Americas in line with original plan Sales contribution from Asia lower than projected mainly because of weaker development in China CAGR Europe 60% +9% 67% CAGR Americas +16% 24% Europe 20% 11% 2009 CAGR Asia/Pacific +20% 14% 2013 Americas Asia/Pacific Royalties HUGO BOSS 19-Nov-14 6

7 Retail sales growth has outperformed initial expectations Sales by distribution channel (in % of total Group sales) Retail sales share significantly above original plan Wholesale affected by market deterioration and takeovers Royalties business in line with expectations CAGR Retail +27% 54% 33% 65% 3% 2009 CAGR Wholesale +1% CAGR Royalties +7% 44% 2% 2013 Retail Wholesale Royalties HUGO BOSS 19-Nov-14 7

8 Strong operating profit growth despite most recent moderation EBITDA before special items (in EUR million) Actual Linear projection based on 2011 plan Linear projection based on 2010 plan Group operating profit has more than doubled since 2009 More moderate progress since HUGO BOSS 19-Nov-14 8

9 Significant gross margin progress has driven operating margin increases Gross margin and adjusted EBITDA margin Gross margin benefited from channel mix, lower markdowns, better inventory management and sourcing efficiencies 53.5% 59.1% 60.8% 61.6% 64.9% Rising operating expenses reflect shift to retail whereas G&A provides operating leverage 17.2% 20.5% 22.8% 22.5% 23.2% EBITDA margin has widened by six percentage points COGS OPEX Adjusted EBITDA Gross margin Adjusted EBITDA margin HUGO BOSS 19-Nov-14 9

10 Past performance in line with financial management principles Gross margin improvements to at least equal channel mix effect Retail expenditure growth to be below retail sales growth G&A expenditures to grow more slowly than top line Operating profit to grow stronger than top line Investments to sustain future profitable growth Free cash flow generation to fund shareholder returns and further net debt reduction HUGO BOSS 19-Nov-14 10

11 Financial performance has translated into high total shareholder return Total return HUGO BOSS shares (in EUR) Total return Share price 160 May 14, 2014 Dividend: EUR 3.34 May 17, 2013 Dividend: EUR May 4, 2012 Dividend: EUR 2.88 May 11, 2011 Dividend: EUR June 22, 2010 Dividend: EUR May 15, 2009 Dividend: EUR Jan-09 Jul.-09 Jan-10 Jul.-10 Jan-11 Jul.-11 Jan-12 Jul.-12 Jan-13 Jul.-13 Jan-14 Jul.-14 HUGO BOSS 19-Nov-14 11

12 Agenda Review of past financial performance Current trading update Financial implications of 2020 growth strategy Summary HUGO BOSS 19-Nov-14 12

13 Solid top and bottom line increases in the first nine months of 2014 Sales Gross profit margin 1,888 EUR million +6%* 65.3 % +180 bp *+8% fx-adjusted. EBITDA margin (adjusted) Net income 22.4 % -40 bp 259 EUR million +5% HUGO BOSS 19-Nov-14 13

14 Diverging trends across the three regions Europe Sales growth, 9M in EUR fx-adjusted Strong growth in major markets led by the UK and Germany Moderation in retail trends towards end of period Americas 1 6 Momentum has accelerated over the course of the year despite still promotional environment Improving shop-in-shop performance 2 7 Solid growth in almost all markets, in particular Australia Volatile trading patterns in China restrict visibility on potential market recovery Asia/Pacific HUGO BOSS 19-Nov-14 14

15 Full year outlook 2014 reconfirmed Outlook 2014 Sales growth (currency-adjusted) 6% - 8% Growth of EBITDA before special items 5% - 7% Capex Own retail network Around EUR 130 million Around 50 openings (excl. takeovers) HUGO BOSS 19-Nov-14 15

16 Agenda Review of past financial performance Current trading update Financial implications of 2020 growth strategy Summary HUGO BOSS 19-Nov-14 16

17 Economic and industry forecasts point to continued external challenges Real GDP growth, major Group markets (in %) e 2015e Germany UK France USA China Source: International Monetary Fund, World Economic Outlook, October 2014 Growth in personal luxury goods market (in EUR billion) % % % % +2% +5% fx-adj CAGR (fx-adj.) % E 2017E Source: Bain & Company, Fondazione Altagamma, Altagamma 2014 Worldwide Markets Monitor, October 2014 HUGO BOSS 19-Nov-14 17

18 Group targeting high-single digit annual sales growth on average Regions Distribution channels Brand & Gender Lines All regions expected to make positive contributions Asia forecasted to grow stronger than the Group average in the medium- and long-term Retail to continue growing at a doubledigit rate to at least 75% of Group sales by 2020 LFL increases New openings Takeovers Wholesale expected to decline gradually Weight of core brand BOSS to increase further Luxury to expand to 20% of core brand BOSS sales by 2020 Womenswear to grow at a doubledigit rate to at least 15% of Group sales by 2020 High-single digit annual sales growth on average HUGO BOSS 19-Nov-14 18

19 Strong commitment to achievement of 25% EBITDA margin target Comp store sales Gross margin Higher conversion rates and growing transaction sizes main sources of mid-single-digit sales growth, supporting operating leverage Future increase driven predominantly by channel mix Marketing Expenditures to remain broadly stable relative to sales Own retail Other opex Non-operating items Expenditures to grow stronger than Group sales, but to decline relative to Retail sales Efficiency gains in logistics and disciplined cost management to support growth lower than sales Declining financial expenses and stable tax rate to support EPS increases higher than EBITDA growth HUGO BOSS 19-Nov-14 19

20 Healthy trends in free cash flow set to continue Investments (in EUR million) Average trade net working capital as % of sales (in %)* Free cash flow (in EUR million) Investments to increase again after lower level in 2014 Further reduction targeted *Certain amounts shown here do not correspond to the figures published in prior years and reflect adjustments made. Ongoing support from profit growth and tight working capital management HUGO BOSS 19-Nov-14 20

21 Net debt and annual rent payments moving in opposite directions Net debt (in EUR million) 379 Rent expenses under operating lease obligations (in EUR million) Reflects strong free cash flow Decline despite steady increase of dividend payouts Vast majority of annual lease payments relate to own retail Retail expansion has driven rent increases over the last few years HUGO BOSS 19-Nov-14 21

22 Adjusted financial leverage has remained stable over the last two years Financial leverage x x x x 1.2x 1.2x Management comfortable with current adjusted financial leverage Further improvement expected in coming years Increased flexibility for even higher shareholder returns once adjusted financial leverage falls below 1x x x 0.2x 0.1x Net debt / EBITDA Net debt incl. operating leases / EBITDAR Operating leases = Future committed operating lease obligations capitalized according to S&P methodology EBITDAR = EBITDA + minimum rents + contingent rents HUGO BOSS 19-Nov-14 22

23 HUGO BOSS to maintain industry-leading dividend payout Dividend* and payout ratio in EUR in %** % % % % % % % % % % % % Dividend policy to pay out between 60% and 80% of consolidated net income reconfirmed * Excluding special dividend // ** As a percentage of net profit attributable to the shareholders of the parent company HUGO BOSS 19-Nov-14 23

24 Agenda Review of past financial performance Current trading update Financial implications of 2020 growth strategy Summary HUGO BOSS 19-Nov-14 24

25 Strong financial performance set to continue in future years Group has delivered robust financial performance and strong shareholder returns since 2009 HUGO BOSS on track to achieve 2014 financial targets Clear roadmap in place for generation of high-single digit sales growth annually and achievement of 25% EBITDA margin Expected future free cash flow generation to increase flexibility for even higher cash returns HUGO BOSS 19-Nov-14 25

26 Thank you for your attention! HUGO BOSS 19-Nov-14 26

Annual Shareholders Meeting 2016

Annual Shareholders Meeting 2016 Mark Langer (Chief Executive Officer) Stuttgart, May 19, 2016 HUGO BOSS May 19, 2016 2 2015 marks another year of growth for HUGO BOSS Sales and EBITDA before special items