Earnings Call: Q4 2016

Mar 9, 2017

Day, and welcome to the HUGO BOSS Full Year Results 2016 Conference Call. Today's conference is being recorded, ladies and gentlemen. At this time, I would like to turn the conference over to Mr. Marc Langer, CEO. Please go ahead, sir. Thank you very much, and good afternoon, ladies and gentlemen, and welcome to our 2016 financial results presentations. Ingo Wirth, our Chief Brand Officer and Berth Hake, our Chief Sales Officer, are with me on today's call. Together, we will update you on our progress in returning to profitable growth. We will also outline our financial forecast for 2017. Now to understand where we're headed, let's start with where we are coming from. 2016 has been a year of profound change for the industry and even more so for HUGO BOSS. While we have previously seen smooth sailing over calm seas for a long time, the going has gotten rough in the past 12 months. On the one hand, this was due to a recessionary market environment. According to Bain, the global luxury apparel market shrunk by 4% in 2016, making apparel one of the weakest segments in the overall luxury goods sector. In many markets, our industry did not benefit from a positive climate of consumption on the whole. Many consumers diverted their spandings to high ticket items such as cars and real estate or experiences. In contrast, apparel lost share of wallet, which triggered enormous promotional activity that left many brands and retailers struggling. Yet, this was also due to mistakes we made in the past. Our brand portfolio has clearly become too complex for many consumers to understand. Some of our brands have strayed too far away from the core. Others are not sufficiently distinct, creating overlaps in terms of our product lines and pricing architecture. This was accelerated by a challenging underlying market and our attempt to capture a greater share of the luxury goods market, alienated a part of our core clientele. We acknowledge the global nature of our brand and our business. We are therefore placing even greater emphasis on maintaining a globally consistent brand image, whereas we had accepted regional imbalances in the past. The growing importance of digital channels, in particular, has made these imbalances unsustainable. However, not only has the Internet become a means of comparing products and prices among different markets, it has become an integral part of many consumers' lives, which we need to turn to our advantage going forward. This will require speed and agility rather than the complex organizational structures and processes that slowed down our decision making in the past. In the last 12 months, we took immediate actions to weather the storm and to recalibrate our course for the future. We slashed more than €100,000,000 in costs and investments of our initial budget, and we have tightened inventory management. We have initiated a program to close 20 unprofitable stores worldwide, another 20 locations in China we had inherited from former franchise partners. We started restructuring our U. S. Wholesale business and discontinued distribution formats that do not fit our brand positioning. We aligned global price levels more closely, an important reason for why China returned to growth. And finally, we built the foundation for future growth in digital commerce by in sourcing the fulfillment of our online business in Europe, redesigning our online store and launching a mobile app. As part of the action plan, we consciently accepted sales losses. Coupled with further top line pressure owed to weak consumer demand, currency adjusted group sales declined 2% in 2016. EBITDA before special items were down 17%, reflecting significant operating deleverage due to decline in comp store sales in our own retail business. The decline would have been even greater had we not taken effective measures to curb the rate of cost expansion. Free cash flow, however, was up year over year, underlining a greater focus the Group's investment activity in particular. Let me give you some more details on our financial results in 2016. Starting with the top line, full year sales were up 1% in Europe. The UK continued to grow solidly and was up 8% for the year. Sales in Germany and France were down 4% and 3%, respectively. In the Americas, full year sales in local currencies were 12% lower than in the prior year. This was mainly due to the U. S, where sales were down 17%. Registering a decline of almost 30%, the wholesale business exerted a disproportionate impact here. Approximately half of the decline in this distribution channel was due to the aforementioned distribution restructuring aimed at improving presentation quality and brand desirability. Above all, we stopped selling to the off price retailers we had been using to clear excess inventories in the past. Asia recorded a 2% decline after adjusting for currencies. Momentum in China improved considerably over the course of the year, resulting in sales on the Chinese mainland remaining closely to stable. Greater China, however, sales were 6% lower than the prior year due to primary market induced declines in Macau and Hong Kong. By distribution channel, on retail sales were 2% higher than last year ex currency effects. On a comp store basis, channel sales declined by 6%. While the European region recorded a smaller decline than the average for the group, the negative impact of a decline in the low double digits in the Americas was significant. The performance in Asia was in line with that of the group overall despite slight growth on the Chinese mainland. Currency adjusted sales in the wholesale business decreased 9% in 2016, primarily reflecting the tough market environment in the U. S. Just mentioned. In Europe, channel sales were slightly down from the prior year, reflecting declining sales in many key markets in the sector. Finally, the licensing business generated a robust 12% in sales growth for the reporting period, driven by double digit growth in the biggest licensing category, Fragrances. Moving below the top line. The group's gross profit margin held up well despite significant promotional pressures in the U. S. In many key European markets. The 56.0% it remained on the prior year level. This disproportionate growth of our own retail business impacted the margin positively. Negative factors included price reduction in Asia, though partly compensated by increases elsewhere and higher inventory write downs than in 2015. On the cost side, we managed to strike a fine balance between exploiting efficiency potential on the one hand and investing in the future growth on the other. Selling and distribution expenses were up 3%. In the own retail business, expansion and renovation related increases were partially offset by lower costs due to store closures and the successful renegotiations of rental contracts. Marketing expenses remained almost unchanged in relation to sales and translated to a 6% decline year on year in absolute terms. The increase in G and A expenses was focused on digital commerce and communication, where we invested in both talent and system infrastructure. Across the entire cost base, we have been able to take €65,000,000 out of our original budget, mostly through lower rents and tighter management of administrative expenses. The latter benefited from the efforts of streamlining the group's project portfolio with a view to identifying which initiatives would exerts the greatest positive commercial impact and implementing them as quickly as possible. These savings helped us to curb the EBITDA decline, but EBITDA before special items nevertheless decreased to €493,000,000 a 17% drop with respect to the prior year. Special items of €67,000,000 primarily concerned termination payments and write downs in connection with planned store closures. The remainder was owed to organizational changes at both our headquarters and at regional levels. Including these expenses, net income declined sharply to €194,000,000 Let me also discuss some key balance sheet and cash flow trends. 2016, we kept trade network capital under tight control. Despite a disappointing top line performance, working capital remained broadly stable relative to sales and also delivered a positive contribution to free cash flow generation in the period. This was primarily due to the improved inventory management. In the U. S, we successfully completed the inventory clearance started at the end of 2015. In China, we cleared excess stock still related to our franchise legacy in this market. As a result, inventories are down by double digit percentage in these two markets. For the group as a whole, we are able to record a currency adjusted increase of just 1% at year end. Investments decreased significantly compared to 2015, owing to fewer store openings and takeovers as well as the non recurrence of one time projects as in the previous year. The latter concern, expanding our production plant in Turkey, upgrading our U. S. Distribution center and relocating our new showroom, all done in 2015. In 2016, the group's own retail business continued to be the focal point of investment activity. Around a third of the total budget was spent on the build out of new stores. Another third went into the renovation of existing stores. As a rule of thumb, HUGO BOSS refurbishes existing stores approximately every 5 years. The remaining third was invested in other areas. Investment in IT of €30,000,000 underscores the importance the group places on the digitization of its business model. In this context, major projects in 2016 included the insourcing of online fulfil,000,000 euros the rollout of omnichannel services as well as system enhancements in customer relationship management and digital communication. Lower CapEx more than offset the earnings shortfall, so that free cash flow increased by 6% to €220,000,000 Net debt nonetheless came in higher than in the prior year since we stuck to a stable dividend payout in 2016. To put things into perspective, we continue to be in a rock solid position financially with an equity ratio of almost 50%. However, need to be careful in preserving the strength in order to maintain financial flexibility regardless of the prevailing economic backdrop and the group's short term outlook. As a result of the aforementioned, we remain committed to offering attractive shareholder returns, but we will never compromise our ability to invest into the business. With this in mind, we propose a dividend of €2.60 for the 2016 financial year. While the proposal still reflects one of the highest yields in the industry, it also highlights our belief that the dividend should, 1st and foremost, be based on the group's performance in terms of profits. In light of the sharp decline of consolidated net income, it's only logical and in the long term interest of our shareholders to adjust the dividend accordingly. With the payout of 93% of net income attributable to shareholders, we nonetheless decided to exceed the 60% to 80% corridor stipulated by our dividend policy. We are convinced that this continues to be the right policy. By 2016, however, we also took the healthy free cash flow generation, the group's strong financial position and the expected non recurrence of significant expenses in connection with store closures in 2016 into consideration. Looking ahead, I am confident that future profit growth will allow maintaining or even raising the dividend again within the framework of the policy I just reconfirmed. In the past year, we have worked hard on defining the course back to sustainable and profitable growth. Our vision to be the most desirable premium fashion and lifestyle brand guides our actions. In our industry, it is brand desirability that makes OpReg's long term commercial success. Obviously, brand desirability is not defined by us, but by customers who must take center stage in everything that we do. What might like sound to you like tourism requires a great deal of change, change we initiated in 2016. We adjusted our strategic direction to make sure we maintain and grow our relevance in the eyes of today's fashion consumers. The demands and attitudes of these consumers have changed in multiple ways. The shopping trip for a new suit now starts online, whereas they went window shopping in the past. Brands unable to demonstrate a unique proposition will quickly get lost in the masses. Where customers used to accept limited selection available in stores, they now expect immediate access to the full range of an offer whenever and wherever. Yet whereas before they were willing to browse through aisles of aisles of products, they now expect brands to identify the right product for them based on their relationship on equal footing. With these changes in mind, we redefined our strategic direction in 2016. We are building on what has been the core of our success over the past 30 years, but we are neither shying away from correcting past mistakes nor from exploring new grounds. Specifically, we are simplifying our brand portfolio and clarifying the positioning of our brands. We are refining our distribution strategy. We are focusing on the digital transformation of our business model and we are closely and closely related to this transformation, we are actively transforming our corporate culture to improve speed and agility throughout the organization. Let me now hand over to my fellow Board members to update you on the progress in these areas of action. Thanks, Marc. Progress is indeed what 20 15 'seventeen will be all about. We are working hard on defining the group's future creative direction at the moment, and I'm confident that all the tremendous work we are investigating right now will yield great results. Let me briefly recap what we announced in November. We will focus on 2 brands, BOSS and YUGO going forward. Why are we doing that? Let me give you 3 main reasons. 1st and foremost, because we talked to a lot of customers and learned that many simply did not understand what our different brands stands for and how they differ from each other. 2nd, because we have punched below our weight in casualwear, despite the fact that casualwear accounts for around half of our current business. And 3rd, because we want to strengthen our relevance again for a younger, more fashion savvy audience. With BOSS, we will continue to address a status oriented, rationally minded customer. The customer wants to dress in a classic yet modern and high quality style, often driven by the desire to belong. The BOSS customer has high expectation when it comes to quality and fit and attaches great importance to a favorable value for money proposition. And of course, the shopping experience must also meet the highest standards, particularly when it regard to personal service. We strive to address this customer 20 fourseven in the office, in their leisure time and when they are active. I believe that most of you will agree that this is a no brainer when it comes to business. The business suit is our iconic product, and consumer continue to associate the brand with formalwear first. Of course, the formalwear outfit can be much more nowadays than just a black suit with a white dress shirt and a nice tie. Strict dress codes are increasingly becoming a thing of the past and are being replaced by smart casual outfits, such as the one we have included in our presentation. When meeting with your friends on a Saturday, a BOSS casual outfit will make you look as refined and sophisticated as the one you wore to the office. Boss casual will build on what you currently find under Boss Orange. However, the range will be upgraded significantly in terms of quality, craftsmanship and design to bring it back in line with the BOSS standards. And finally, when the same consumer works out, goes for a round of a golf or simply wants to dress in a cultivated yet relaxed and sporty way, BOSS at leisure comes into play. Here, the core of the current BOSS green line will give you a good idea of what you can continue to expect from BOSS going forward. The changes I just outlined will become fully effective with the springsummer collection, which will be in stores from January 2018 onwards. Collection development is in full swing already right now. However, what is just a product sketch or a prototype today will be a complete collection by the end of June. By then, we will be presenting the collection to our wholesale partners and our own retail teams. The BOSS menswear presentation at the New York Fashion Week in February was an important first step towards the full implementation of our new brand strategy. The collection we presented was focused on the fundamental elements of the brand, precise cuts in construction and a love to detail. Tailored sits in the heart of the collection, but this is interpreted in different, sometimes surprising ways. For me, it was very important to show people that there is a lot of happening at BOSS. I wanted the audience to feel the emotion and the passion that is in every product we design. BOSS has always been very commercially minded and rightfully so, but we also need to make sure that we surprise the consumer with certain high fashion items with stories they aren't expecting. Going forward, we will place these stories bigger and more consistently. Let's take the fashion show again as an example. For the event, we partnered with fashion influencer, Marcel Floros. His coverage turned the event into much more than just a collection presentation by spending the entire period from the first preparation up to the after party. The event itself was streamed live on Instagram, and we built it on a holistic campaign across key social media platforms such as Facebook, Twitter and Pinterest. As such, as the fashion show in New York exemplified 3 key development in our marketing strategy. 1st, we will be concentrating on our marketing efforts on fewer campaigns, which will be executing strictly 3 80 degrees 360 degrees. That is consistently across all consumer touch points. As a result, and second, we are making our communication even more digital, so we can extend our reach and relevance. And third, we are focusing much more on our menswear business again. Nevertheless, the share of dedicated to womenswear will still be significantly higher than its business share. You may read this as a sign of confidence, and what remains an important part of the group. BOSS strikes a balance between ease and elegance. With our collections, we strive to dress the modern woman for whatever the day may bring, knowing that her outfit needs to be just right for a presentation in the office as for a day of business traveling. Driven by Jason Wu as the brand's Artistic Director, the refinement and craftsmanship that BOSS stands for is evident in every piece of the collection. And while it's the tailored look that defines BOSS womenswear, we are confident in the brand's growth potential in casualwear. With the upcoming integration of BOSS Orange into BOSS, we will create easy to wear looks that complement her wardrobe for the weekend. The BOSS brand will be our key focus, but we are equally committed to YUGO. I'm excited by the opportunity that present itself to HUGO today, namely to target more fashion conscious younger consumer who seek to impress their personalities through what they wear. In the past few years, we lost sight of the customer to some extent by diluting the fashion forward, trend focused heritage of the Piugo brand. Firmly anchored in the premium segment and at the same time attractively priced, I'm very confident in VUGO's ability to play an important role in the growing contemporary fashion market. All the more so once we have expanded the brand's casualwear line in 2018. HUGO will get the resources necessary to grow into a much bigger business over time. We're placing high importance on digital communication to engage with the young fashion forward audience, targeted by YUGO. We are investing into a new store concept, which will live and breath the DNA of HUGO. And we will introduce the new HUGO with a big bang in June. We will present the brand's future creative direction with the fashion show at Picchioomo, the world's most important platform for men's fashion in Florence. And now over to you, Bernd. Thank you, Ingo. Let me tie in with your comments and outline the implications of these changes for our distribution strategy. Starting on the wholesale end of our business, the feedback from our partners to the changes in brand strategy is clearly positive. The vast majority of them welcome the clarity and consistency the changes Ingo just outlined will add to the positioning of BOSS and U Go. Many partners stress their interest in a more refined and sophisticated casualwear line from BOSS, with which they can more effectively exploit the strong growth momentum in this category. While it will still be another few months before we can present the new collections to the trade, order intake for fallwinter2017 collection, which still only incorporates a few of the elements that decline our new brand positioning, was in line with our expectations. The casualwear line under the BOSS brand performed much better than in prior seasons, reflecting the first discernible improvements in the collection, while demand for BOSS Green and BOSS Orange remained solid despite the upcoming changes. Nevertheless, the market environment continues to be tough, a fact that we continue to take into consideration when defining our future pricing strategy. We acknowledge the importance of accessible price points, especially in difficult market conditions, but we also remain firmly committed to the principle of 1 product, 1 price. We will be continuing our efforts to align global prices even more closely with the launch of the springsummer 2018 collection. We do not plan any significant adjustments before this date. In 2017, improving sales momentum in own retail will stand at the forefront of our activities. In the year ahead, we aim to lay the foundations for the 20% increase in sales productivity we are targeting over the next 5 years. Let me recap the 5 key drivers and their expected impact. First, we are confident that the brand strategy changes will result in a much clearer brand message consumers will immediately grasp. Based on the BOSS positioning in the upper premium segment, we will be expanding and upgrading our product lines at certain entry price points to stimulate traffic and conversion. 2nd, we will be correcting a mistake we made in the past by prominently promoting in our own stores. Until only recently, we had been predominantly focused on menswear clothing and womenswear, while neglecting to consider general trends in the market towards more relaxed casual and even athletic inspired dress codes. In response, we have started reintroducing Bosqueen in many stores, and our new casual assortment will be provided with ample space when we launch it in early 2018. 3rd, we will continue to expand our omnichannel services knowing that convenience is a key factor in customers' purchasing considerations, especially where the core customer of BOSS are concerned. The rollout of click and collect, order in store and return in store in both Europe as well as in the U. S. Will be completed by the end of the year. 4th, we are systematically investing in retail staff training and development to improve service quality and retention. This includes changes in the structure of retail staff remuneration as well as a new approach to retail training. Finally, we complete the optimization of our retail network announced last summer. By the end of the year, we would have closed around 15 stores remaining under the program, thereby eliminating what were by far the most dilutive locations from our retail portfolio. These stores diluted the group's adjusted EBITDA margin by 60 basis points in 2016, so closing them will support retail profits in 2017 and even more so in 2018. We will also be closing some stores in locations where we have decided not to renew the rental contract. The other way around, we will continue to size opportunities to expand our network where they arise. In 2017, for example, we will be taking over 3 key locations in Dubai from a franchise partner, thereby expanding our business in the Middle East. In total, however, we will just be adding something like 10 new freestanding stores. Please note that this will all be both stores. At least initially, our focus in the case of YUGO will be on expanding the brands present in relevant wholesale accounts via shop in shops before opening a few selected freestanding stores in key cities in 2018. Because the new stores will be slightly larger than the average sizes found in our current portfolio and because we also expect the number of shop in shops to continue to grow, we project that the network size as measured in square feet, will remain more or less stable in 2017. Yet stable does not mean unchanged. The network is constantly evolving, thanks to renovations, which will account for the lion's share of our retail investment budget. The network will evolve even more once we start rolling out a new store concept for BOSS towards the end of the year. While it is still too early to go into details, one key element of the new store concept will be the expansion of digital elements, which we will not only use to tell the stories behind the product, but also to create an omnichannel distribution process. Regardless of the rise of digital and mobile, physical stores will not lose their relevance anytime soon. Their function as key consumer touch points is only going to become more important, but we need to make those stores more connected to the digital world. The introduction of omni channel services as well as the further development of our store concept are important steps in this regard. As the lines between online and offline become blurred, overall, retail sales are what counts. However, this should not detract from the disappointing performance of our e commerce business. In 2016, our own online business, that is a business generated through 11 hugoboss.comstoresworldwide, declined by 6%. And the fact that many partners saw much better performances with BOSS products in their online business is not much of a consolation. Quite the contrary, it clearly points to the need to improve execution. Our online business builds on a solid foundation. Thanks to the in sourcing of key elements of the value chain in previous years, we directly control the online front end as well as the back end. We are convinced that owning the interface with consumers will be an important competitive advantage over peers. This advantage will only become magnified as we build up more and more online retailing expertise in house. In the short term, however, we are going through a learning curve, which puts the commercial performance of our online business under pressure. It is very important to understand that the challenges we face have nothing to do with a lack of resources. We have built good infrastructure, but we are not making enough out of it at the moment. Let me outline the key starting points to bring our online business back to growth over the course of 2017. Mobile. Half of the hugoboss.com site traffic is coming from mobile devices now. As a result, we need to sync mobile first. That is why mobile will be given absolute priority in all aspects of online management going forward, from content strategy to navigation to shortening of loading times. Content. Attractive content makes customers spend time on our site. We will create interesting content to engage with our customers and drive them to store. Service. Customers expect premium service from a premium brand. We will invest in shorter delivery times and increasingly curated shopping experience to make the hugoboss.com website the destination of choice for the demanding customer. And finally, merchandising. On the second half of twenty seventeen onwards, a more commercial and less complex offering will ensure that value conscious customers find what they are looking for. For us, as a management team, digital clearly is a top, if not the top priority in 2017. Our goal is not just to ensure that the online business contributes to retail growth again. At the same time, we are working on digitizing our business model wherever it makes sense to do so along the entire value chain. Expect more news on this over the course of the year. With that, I'll turn over to Marc again. Thanks. Thanks, Bernd, and let me talk about our business development by region. The online business that Bernd was just describing is particularly relevant for business given that Germany and the U. K. Are actually our largest and 2nd largest online markets respectively worldwide. We expect our European business to remain more or less stable overall. Performance in Germany and its neighboring markets will be somewhat more subdued, primarily due to the challenging market environment. Market data speaks a clear language here. In the 1st 2 months of the year, market sales in Germany were once again under even more pressure than they were at the end of 2016. In the UK, solid local demand as well as continued strength in our business with tourists should contribute to growth in local currencies. That said, the devaluation of the British pound will depress sales in euros. Note that we have decided against raising prices in the U. K, at least in the short term, given that most competitors haven't raised their prices either and the apparel segment is under a lot of pressure market wide. In France, the 3rd largest market in the region, performance picked up towards the end of the year, a trend we forecast will also continue into 2017. In the Americas, our key focus will be on turning around Without a doubt, 2017 will be still a difficult year. The market environment continues to be tough and marked by significant football declines, particularly in full price distribution. Against this backdrop, we expect sales in the U. S. To still be down year on year. Over the next 12 months, however, we will be laying the foundations of our return to growth in 2018. We have completed the rightsizing of our wholesale business. By the end of the year, less than 10% of sales will be in off price format. Our brand will have fully disappeared from the racks of value retailers. We have also some initial positive developments in our business with department stores, where some first steps we took towards broadening our assortment at more accessible price points in the FallWinter collection were very well received. In our own operations, we expect that changes in space and merchandise allocation will have improved performance, particularly in the second half of the year. In addition, we just reshuffled our management team by transferring some of store operations now how accumulated in Europe to the U. S. Good growth in Canada and Brazil and to a lesser extent in Mexico as well should offset some of the pressure in the U. S. Market. As a consequence, total sales for the Americas region should only decline slightly overall. Finally, we expect solid growth in China to drive sales increases in Asia. China, we will continue to benefit from an innovative marketing initiative with a strong digital focus. Compared to just 12 months ago, we have seen a change in the rate of digital followership on the most important platforms. This provides us with a reach to demonstrate our strength in terms of quality and value to a much bigger audience. As a result, I am confident in our ability to deliver solid growth in China in 2017, even assuming the declines in Hong Kong and Macau to continue. In sum, we expect group sales to remain largely stable in 2017. In Wholesale, the order book provides us with good visibility. Mainly due to the U. S, where we expect channel sales to be down in the low teens, our wholesale business worldwide should see a percentage decline below to mid single digit. Performance in own retail is somewhat more difficult The contribution of openings and takeovers to sales growth will be in the low single digits. On a comparable store basis, excluding the effects from retail expansion in the previous year and the current period, we expect sales will perform within the range minus 3% to plus 3%. Sales should improve over the course of the year as a result of the various collection and distribution related measures I outlined. Considering expansion effects as well as like for like sales performance, growth in the mid single digit marks the upper end of our guidance range for the total own retail sales. Finally, the license business showed yield solid increases also in 2017. The group's gross margin should improve due to positive channel mix effect and the non reoccurrence of prior year's inventory write downs. However, negative currency effects, mainly associated with the devaluation of the British pound, will curb the margins rise. Largely depending on the sales performance in own retail, EBITDA before special items is also expected to perform within the range of minus 3% to plus 3%. This forecast assumes continued increases in operating expenses in connection with our transition to a stricter strictly customer oriented business model, including a slight increase in marketing expenses compared to sales. Carryover effects from the savings initiated last year as well as store closures will limit the cost growth. Net income is expected to increase percentage rate, supported by the non recurrence of costs incurred in connection with the aforementioned store closures. Depreciation and amortization charges as well as financial expenses should largely remain stable. 2017 will once again underscore the group's ability to generate strong cash flows even in more challenging times. Investment will remain at similar levels to those seen in 2016, amounting to between €150,000,000 €170,000,000 Around 2 thirds of the budget will go towards store refurbishments and new openings. The remainder will be largely focused on IT, where we will continue to build the infrastructure we need to drive our digital activities. With regard to free cash flow, the expected profit increase will be offset by cash outflows related to the remaining store closures, the cost of which we booked in 2016 already. Overall, we forecast free cash flow generation in line with the prior year level. Ladies and gentlemen, many observers have called 2017 a transition year for HUGO BOSS because the change in our strategic direction announced in November will take some time to complete. Our presentation today should have demonstrated that 2017 will be much more than that. The term transition has a very connotation, which is the exact opposite to what's actually happening at HUGO BOSS right now. From a financial perspective, 2017 will be a year of stabilization. From a strategic and operational point of view, 2017 will be a year of implementation. In the next 12 months, we will lay the foundation for bringing BOSS back to profitable growth. That's why I'm confident that we will be able to call 2017 a year of progress when we discuss our annual results in 1 year's time. Now we are very happy to answer your questions. Thank you. And our first question comes from Susanna Puth from Berenberg. Please go ahead. Your line is open. Hello. Good afternoon, everyone. Just a couple of questions from my side. First of all, on the like for like range, which is relatively wide at minus 3 to plus 3. Given that you expect a similar development for the adjusted EBITDA, it looks like you have some additional cost control you could implement should the like for like be at the lower end of expectations. So would you mind commenting a bit more on that? Where do you see more scope for cost cuts? Secondly, on the U. S. Business, I understand that you expect another year of low double digit decline in the wholesale channel. Would you mind just quickly clarifying how much of this is expected to be driven by the ongoing restructuring of the business? And what is your expectations for the overall market? And then also maybe very quickly on the CapEx, You have guided $250,000,000 $170,000,000 this year. But I was just wondering if you could share with us the expectations you have going forward for the coming years, whether that could be in the similar range or perhaps a bit lower or higher? Thank you very much. Thanks, Susanna. And let me start with the CapEx question first. I think it's a good practice for us to give a specific guidance for the current fiscal year and we gave this today with the 150,000,000 to 170,000,000. But we also on a more qualitative level outlined that we also expect for the outer years, so 2018 2019, despite the fact that we will start to have the 1st rollout of 1st HUGO pre sending stores, not a major change or return to the number of takeovers in white space expansion that we've seen in previous periods. So also for the outer years, even so we can't quantify it as precisely as we will have done this now for 2017, We expect that investment levels will be at comparatively lower levels than what we have seen in the period between 2013 and 2015. On your question on like for like, well, I think a corridor between minus 3% and plus 3% is also something we have seen as likely outcomes in difficult to forecast market environments. So we feel comfortable to guide the market in this range when it comes to our like for like performance on retail, where we have much more limited visibility clearly compared to the wholesale business. I will answer your question there as well. You're right, if a like for like would fall to the lower end of our development, this might require additional measures that we have also prepared of our budget plans in terms of OpEx and CapEx control to deliver our earnings guidance for the full year. But right now, we expect with these measures contingency measures in place that we would deploy if we see continuous slump of like for to the lower end of our development as the group will be able to deliver also on the yearning guidance for the full year. On the wholesale outlook in the U. S, you were right on your assumption that part of the decline is due to the full year effect from discontinuing off price third party distribution, which was only completed during the course of 2016 and will have a full year impact in 2017. That's one of the elements, as I described in the speech, of a negative wholesale trend for the next year. But also many of our wholesale partners operating in physical retail full price operations have experienced very difficult market environments with being similarly affected by decline in footfall. So also preorder in the full price business is below previous year, adding to a negative or a decline in our wholesale business in the U. S. For 2017. So just one point to clarify because I understand that in 2016, half of decline in the U. S. Was due to your own actions. So can you give us more or less the idea whether this year it will be also more or less of the decline you expect or you can't quantify to that extent? I wouldn't be. As precise. It's always easier to calculate these numbers with actual data than with forecast. It also depends on some elements. We have not taken full orders yet for the second half of 2017. We know we can calculate the impact of the discontinued operation that's clear. I would let's use the term sizable, but it's probably less than 50% of the declines due to the further cleanup. But it's still sizable enough to be mentioned as a key factors of the decline on the U. S. Wholesale business in 2017. Okay. That's perfect. Thank you very much. Thank you. Our next question comes from Thomas Chauvet from Citi. Please go ahead. Your line is open. Good afternoon, Marc. I have three questions. Coming back firstly to the retail LFL guidance of minus 3% to plus 3%. Can you tell us what the trend was in January February, which regions improved versus Q4? And what do you mean when you said this at this morning's media conference that you were not sure that the strong double digit growth in China would continue? Secondly, with regards to your gross margin guidance, slightly up for the year due to channel mix and lower inventory write downs. Can you recap what the €1,000,000 amount of those write downs were in 2016? And do you expect write downs towards the end of 2017 or in early 2018 after the integration of Orange and Green into Black and the relaunch of HUGO? And finally, on women's wear, at the fashion show in New York in February, you presented a men's only show and no longer women's wear, as Ingoville reminded. You're also reallocating a lot of A and P from men's to women's wear. So when you look at the if you can think of a standalone P and L of the women's wear business for the year ahead, do you feel that you've now downsized it enough, you've reduced the cost base enough or reduced the break even points enough? And can you confirm that Jason Wu, without a fashion show dedicated to his collection anymore will still be in charge of women's wear this year? Thank you. Thanks, Germaine. I will answer part of the economical question and then I hand it over also to Ingo Bell because please stay tuned. We have exciting and relevant news to tell also the women's were part of our collections where we're working very closely with Jason to have exciting not only collection, but also events. But let me start with the like for like trends. Yes, we are now, I think, in week 9 or 10 in 2017. So we have some trading trends. But as in the past, we will not comment in current quarters trading before this is completed. But you're right. Also this morning on Bloomberg, I alluded to that we have seen a strong momentum in the Chinese market, which you might recall that we stated already in our preliminary data beginning of February that we have been positively surprised by the resilience and strong momentum that kept until the end of the year. And here we have seen continuation on the Mainland China strong trend in the double digit area. This will annualize in the second half of twenty seventeen. So this is what I meant with my comment earlier this morning that we would be shy not to predict a peak continuation at this trend. We will make sure that we have all the resources in place to ensure that the growing middle class is fully aware of this highly attractive offer that we have developed to the Chinese market. So be assured that we will do whatever we can do from our side in terms of retail execution, marketing, brand communication to maintain the strong momentum that we have now started to enjoy. In other parts of the work we already touched on the U. S. Market from a wholesale perspective. We see also our full price business to be under pressure. Some of the improvement that we outlined in Bernd's part of the presentation in terms of merchandising, omni channel services also for the U. S. Market will only be fully implemented during the course of the year 2017. The big bang, if we and I think that's the right term to use in terms of collection will come with the spring summer. 2018 collection will only become available on the second half of the year. So in terms from our merchandising, in terms of our pricing decision, yes, we expect financial performance to stabilize. But as our range of like for like performance indicate, it is not yet in the current market environment a guarantee to return to positive like for like in the current fiscal year, which is also following the trends we have seen coming out of the Q4 and you're aware that we're still in negative territory in like for like in the Q4. In terms of gross margin Sorry, just to clarify. So if you elaborate the minus 3% to plus 3% like for like guidance, it's reasonable to assume that the trends in January, February, despite China, despite the good performance in the UK, have not probably improved versus the Q4, which was minus 3% and improving from the 9 months 2016? Yes. As I said, the Q1 is not over. But clearly, we have taken the year to date performance into consideration when we create our full year guidance. So we just want to highlight some market data also underscores that the retail environment in many core markets, especially in the Western Hemisphere, has not improved in the 1st 2 months of 2017. Thank you. To answer the gross margin question before I hand it over in terms of activities on women's wear to Ingo, the write downs on inventories, in particular, in the Chinese market and the U. S. Market we booked as part of the inventory clearance, we're in the mid single digit €1,000,000 amount that we expect not to reoccur in 2017 as an element which will help us to grow gross margin in 2017 beyond channel mix. Having said that, Ingo, please? Yes. Thomas, as we said, the focus on the menswear is still on our strategy, is aligned with our strategy. And womenswear is still very, very important part of our business. Even though if we don't do a show, for now, we still work and we appreciate the work of Jason Wu and work with him also here and in our New York studio. Part of the collection we built in the New York studio, especially if we don't do the show, we do editorial pieces. So this is also a a icing of the cake, which we show to our wholesale partners and retail partners and is this especially in our own stores. Besides this, we work also in womenswear of some in some capsule collections on some capsule collections where we partner up, for example, with our licensed partner or even with some magazines. So there's also a lot of momentum also for the next season on the womenswear. In terms of financial performance, I think that was the other part to you. Womenswear, we always highlight that women's wear has a sufficiently sized and a very healthy gross margin when it comes to the COGS of our business due to the fact that this has an industrial scale to it. We never really allocated our marketing spendings in terms of the P and L Specifically to that, we think that both fashion show activities have benefited both genders in our collection. However, as Ingo explained in his presentation, we think the explicit and strong focus on menswear only was also needed to confirm to the market to our stakeholders that we will refocus more resources explicitly on the menswear side of our business. But you will see hardly any changes in terms of space allocation when it comes to women's wear apparel in our retail network and this is purely due to the fact that women's wear continues to be an important and profitable part of our retail business going forward. Okay. Thank you, Mark. And just quick follow-up on the gross margin. Do you expect any write downs of inventories of the old black, green, orange collection, the old HUGO collection once you roll out the new products at the end of the year? No. And we have looked into that and we take these steps now very carefully. We will use the Investor Day in particular where we already sent the Save the Day to you later this year to update you what are the implication in terms of overall brand complexity, pricing decision, but also phase in and phase out on these collections. But from today's perspective, we don't expect any write downs in the context of the phase in and phase out of the new and the phase out of the old collection that we will continue in the current setup. Thank you, Markus. Thanks, Thomas. Thank you very much. Our next question comes from John Guy from MainFirst. Please go ahead. Your line is now open. Good afternoon, Mark, Inger and Ben. Thanks very much for taking my questions. If I could just stay with the free cash flow and CapEx, Mark, you just mentioned that CapEx would be running below the average of 20 13 to 20 15. I think it was around €166,000,000 Are you talking about that on an absolute basis or the average percentage of sales, which is around 6 0.4 percent? Maybe you could just give us some clarification on that. And then with regards to the free 2017, you talked around, I think, roughly mid single digit cash outflow on some of the store closures impacts the free cash flow in 2016, so maybe €25,000,000 or so coming into 'seventeen, but partially being offset by retail or channel mix. When we move forward into the 2018 year, assuming that the CapEx is going to come maybe come down a little bit, how far away from the €300,000,000 free cash flow level do you think that you can get to? I appreciate that there's an element of like for like factored into that, but I'd be curious. And then maybe just an additional question around the marketing side. Could you just maybe talk a bit about how much you're going to spend on digital going forward? Marketing fell 6% year on year in 2016. What can we expect as you obviously roll out these changes within the portfolio that you just described again for us? Thank you. Nafdi, and let's start with the impact on free cash flow on investment. You're right that we have talked about absolute numbers. I mean, this has not a major impact on percentage numbers if we are in a phase of flattish top line development. But we expect the current fiscal year 2017 similar to what we have seen last year that investment as a percentage of sales, but also in absolute terms will be below the levels we have recorded in the 3 previous years to the period. And one factor that we do not expect to recur because there are no major franchise operations left to be bought back, which was a source of above this rate investment. And we also take have taken, as we outlined in London, a far more cautious view to the need to capture further white space. There are still opportunities that Bernd mentioned, but they are on a much smaller number that the share that goes into white space expansion will be also in the foreseeable future below. There will be an investment need for renovation. And as we all three described to you, we are we see exciting opportunities group will be highly committed to bring the latest functionality on services to the to our own retail network and this will remain a key element. But to answer your question more precisely, compared to the peaks that we have seen in 2015 2014, I expect investments for the group to be as a percent of sales at a slightly lower level. Return to a cash flow level of €300,000,000 above is clearly pending not only investment, but 1st and foremost on the return on sustainable growth, which we guided the market to expect to start with the fiscal year 2018. We have not given any specific target on sales and profit target for the year. So I would ask for your understanding that this is also the reason why we can't give a specific date on when we will be able to reach a €300,000,000 free cash flow number as well. But clearly, a growing top line and net profit development as of 2018 should also result ultimately in an increase in free cash flow, which can be used to growing also the dividend to our shareholders again. I think we have given just 2 points in times on the share of digital. So it will be already 70% on our marketing spending, so it will go into digital. Like we have believed that physical retail will never completely go away. To a lesser degree, we think this also applies to magazines, so the classical print advertising, but also out of home advertising, be it at airport, city lights will be here. So it's a bit difficult to predict if there are target value on how much we will spend online. It will grow and it will particularly grow not so much from banner advertising and search engine optimization with a much better CEM system hopefully in place in the course of 2017. We think they will use these digital resources rather to target customers very individually in their needs and interest when it comes to the brand, which accounts for digital marketing. But I would see it as a new generation far more intelligent marketing means than we were able to display in former times. So in the result, we do expect over the next year a slight increase in digital marketing spending as a composition of total marketing spending. Thanks, Mark. And maybe just one follow-up there for on the retail business expense line. You mentioned that there's fewer white space that you're going to identify and you're taking a more cautious approach there. Can we assume that that's going to be relatively stable over the course of the next few years? Or will there be a certain allocation or spike in 2017 2018 as you look at the HUGO pilots and you think about that reconfiguration? The HUGO rollout will be driven by just one factor and that we have found an expandable and profitable business system. We are very confident from where we stand today with HUGO and the feedback we get from many wholesale partners. It's predominantly a shop in shop brand in core European markets. But with the new collection that where Ingo is working on and also with the new global price position on HUGO, we will see how high is the limit in terms of growing this business. We can assure you, we will not be limited by resources if we see that this is a highly profitable business to expand it, But we are cautious already to give you today an amount of number of POS or annual investments behind the HUGO. We want to see a proof of concept by the end of this year in terms of collection, in terms of concept. We'll have the first result from freestanding stores. And please keep in mind, we do have some TUGO stores already in place, which will allow us an immediate feedback from consumers how much more successful these formats are. Clearly, we need to and we all the 3 of us are aware of that, we need a step change in performance of retail performance compared to the current SUGO retail performance before we would decide to go into an expansion. But it could and that's why we're cautious not to give a 2019 2020 investment or total space expansion number yet. It could be a major driver of retail expansion going forward if and that's important if we see that this is a highly successful retail format for global rollout. That's very clear. Thanks very much, Mark. Thank you. And our next question today comes from Antoine Belga from HSBC. Please go ahead. Your line is open. Yes. Hi, it's Antoine Belge at HSBC. Three questions. First of all, in terms of investment in general, so not only marketing, but products, stores, etcetera, my understanding from the Capital Markets Day was that you were in a big phase of changes. So I'm a little bit surprised to see that there is no more impact on the margin from those investments. So isn't it a risk that you're by trying to protect the margin at all costs, you're in a way postponing the timing of the recovery at the brand level? My second question relates to your order intake for the fall and winter collection. I think one of the reasons why you didn't want to provide precise guidance back in November is that you wanted to have a bit of more visibility on those order intakes, especially for the Germans wholesale partners. I'm quite keen to understand the reaction, especially they've already done a bit of price increase with the entry level of the suits going from $449,000,000 to $499,000,000 but they still have to implement another sort of bigger step to $559,000,000 So any feedback would be appreciated. And then I have a very boring question, but which is actually impacting the consensus figure is the depreciation and amortization number. In 2016, the increase was almost 20%, which means that depreciation to sales ratio has increased from 5.1% to 6.3%. And I think that consensus is actually a big decline in 2017. So were there any exceptional in those depreciation, even the Q4 numbers was quite high. So any sort of guidance in terms of euro number or as a percentage of sales for 2017 will be welcome as well because it seems to be a wide array of expectation on that metrics? Well, thanks, Antoine. I don't think that any of these questions are boring also the last one. Let's go in with the first one. I mean, I think we highlighted the things on gross margin development that we do know will have a positive impact. So it's easy to calculate with the momentum by sales channel that we will have a beneficial impact from general mix growth differentials. So we expect retail to grow stronger than wholesale, which will benefit our gross margin. And I think Thomas asked earlier the question on the inventory write downs in the previous year and the current fiscal year, which as we highlighted will have a positive impact. Let's leave a currency effect to the side. One element that we highlighted London and where we have now a bit more visibility is our impact on our cost of goods related to what where we said, I think Ingo repeated that today that we are willing to invest into the quality of our product, especially in the casual wear, not in terms of design, but also quality, value for money. We have done that already with the fallwinter collection. We are in full swing developing our springsummer 2018 collection. But we are relatively sure that we can balance efficiencies, be it from other sourcing options, be it from complexity reduction where we see them to take advantages of economies of sales with the investments that we take into product. So where needed and where we have we are convinced that consumers rightfully ask for a higher product quality. And as we said today, we see this in particular for our BOSS Casualwear offer. We are willing to invest that, but we do not expect an impact on our gross margin, at least on the forecast for 2017. On the order intake, I think we're giving you numbers by region. We will not provide order numbers by market. Yes, the German market has been has seen some declines in the 3rd quarter, but it recovered very nicely in the 4th quarter. So from our perspective, the price adjustment we have done from $449 to $4.99 in summer 2016 has been well digested and accepted not only by the end consumer, but many of our trading partners. Bernd already alluded to that, that also the now announced price harmonization measures that we plan with springsummer 2018 that we will charge in the Eurozone for the same product, the same price has been overall overwhelmingly accepted as an overdue decision by the group. We will take into consideration also tactical elements like we do that with our U. S. Partners and European partners to see where pricing pressures are extremely severe. But we assure you that the price adjustment with the French market as a leading market for all European euro price level will be the new norm as of springsummer 2018. On depreciation and amortization charges, we expect based on our current forecast this to be on a similar level to the fiscal year 2016. It's a bit due to the composition in our depreciation or asset base. There has been uplift due to the closures to some of our stores, but we expect D and A expenses to be on a slightly higher level than in 2015. So we guided this to be flat in 2017 relative to 2016. That's correct. Okay. Just when you mean flat, you mean flat in euro terms? Flat in percentage. No, sorry, in your terms. Okay. All right. Anjane, My question about the investments, we're also, I think, linked to maybe just not at the gross margin level, but also in terms of SG and A, there doesn't seem to be a lot of SG and A pressure on your gross margin sorry, on your EBITDA margin guidance. So here again, I mean, are you sure that you hold your strategic initiative will not require more SG and A investments? Because my understanding also from your presentation last year was that 2017 would be whatever you want to call it, but then 2018, I mean, the return to profitable growth would be actually not happening already. So that's why I understood that you would require some kind of SG and A investment as well? Well, you're right that there are we have new teams on the campus that we didn't have 2 years ago. So I'm now also getting my Snapchat and Instagram 1 on 1. So we have now content teams that we haven't seen before that are fueling this very hungry channels with interesting content. And if you think about the change in professions, we are desperately looking for people who can be editors on our Snapchat and Instagram accounts. So clearly, in these areas, we recognize the need to build more teams. But keep in mind, we're talking about a 2,500 people headquarter army, and this is now shifting in composition. Certain elements to our business in the more general G and A part have to take and this message has been well accepted by the organization now to accept to the new norm of flattish top line. We have to keep our cost in this area and space, be it our wholesale distribution team, be it our finance teams, be it our HR and backbone IT system. And this discipline allows us to invest into certain parts of our business system, which are needed in a more digital world. I'll just give you one example to that, but there are other elements and driving the digital transformation where we are willing and capable to do the investment, but it's rather a shift in composition than overall increase in the cost structure. And please keep in mind that this industry has been for many years almost in a state of denial that where we have grown our cost base quite excessively and only as of 2016 we had our sobering moment to come back to a new normal. So that is not starving an organization, but it's more resizing and refocusing resources where there are more needed to grow our business again. Thanks. That's very clear. Thank you. Thanks, Antoine. Thank you very much. Our next question comes from Volker Bosse from Baader Bank. Please go ahead. Your line is open. Yeah. Hello gentlemen. Fakob Wasse Baader Bank. Thanks for taking my question. I have two questions on the online segment. Good to hear that digitalization is a top priority for 2017. So could you provide us also with a kind of online sales guidance for 2017? And second question is also, what is your idea about potential partnerships or marketplaces, which you might be going to enter? Any news to expect from that side? Thank you. Yes. I think Bernd also touched on this point. We were clearly disappointed with our e commerce performance overall in 2016. So to some degree, we expected a slight setback with the relaunch of the site, which merged our formerly separate content and commercial sites. But I don't want to repeat what we said as part of the call. We underestimated the importance of the mobile side. Our focus was very much on the desktop solution. And there were other elements, starting with trivial elements you would think of just loading time of the page, having the right depth and amount of merchandising at the relevant price point, so that we are still on we have to be on a much deeper learning curve to be best practice from a branded retail space. So I think we said it very loud and clear, it's not one of the priority for the management, but we will not cut corners. We will not be excessively pouring market driving traffic to the page if it's not yet performing on the level that we expect. We will not turn our e commerce side in kind of like a digital off price channel where you find discounts that you will never find on any other pages. So we know there could be easy solutions to drive e commerce sales. It has to be healthy. As we said, we want to return to a sustainable and profitable growth going forward. We are fully convinced that there are these opportunities, but there are no quick solutions. So we do expect that the difficult situation in our e commerce business might also be part of our reporting also still in the first half year of twenty seventeen. So we will not guide on a specific number yet, but we have not found a quick solution to the difficulties in the Q4. Overall, for the full year, we remain committed that relative share of e commerce will increase for the full year. Brent, do you want to comment a bit on partners that we are already with and we are planning to have? Yes. So at the moment, there are 2 partners we are actually looking into. 1 is our department store partners who actually drive their own websites. Some of them we already manage the merchandise. However, at the moment, we are with 2 partners in discussions about the marketplace. Furthermore, the online players, which is, for example, Zalando, Mr. Porter, ASOS, the poor online players, where we also discuss on marketplace sites. However, for us, the highest priority at the moment is to really to manage our own website first and thereafter, we are putting resources into marketplace opportunities. Thanks for the details. Thank you very much. Thanks, Volker. Excellent. Our next question today comes from Varek Ochins from Deutsche Bank. Please go ahead. Your line is now open. Good afternoon, everybody. Two questions, please. Firstly, on the license segment and your guidance for the year ahead, you talked about increasing solidly. Could you just frame what that means? Because you described plus 12 in Q4 as robust and it seemed a bit more robust than that. So what do you mean single digit or double digit, please? And secondly, Marc, you began the presentation talking about the operational deleverage that you experienced in 2016. Why are you not expecting any operational leverage or deleverage in 2017? Well, on the license business, we haven't given any more specific guidance, I think, also in the past. As you know, a business has even more remote to our dry control than even wholesale because here we are benefiting from the work that we clearly have an important role into, but the execution lies with our partners be it Cortina on the fragrance or Movado when it comes to ensapilo to the other 2 major categories. So we have to be a bit realistic in our ability to forecast the development also on these 3 major license business. But we see a good momentum. We know on all three of them that we have good initiatives in place. We have been very happy how the relationship has started with our new and biggest partner Coty. We have seen a strong commitment in terms of regional expansion. They are attractive opportunities for both of us to capture to a larger degree the U. S. Market where we were not as strong as we were in other regions in the world with our fragrance business. And we also see for glasses and watches good development. Whether it's going to be as strong and this is why we use a stronger term for 2016 as it will be in 2017, this is just too early to tell, but we do, as you rightfully quoted, expect a solid development also in 2017. In terms of OpEx leverage or deleverage, well, it depends a bit on your top line development, I would say. Right now, we are guiding the market for flat top line. So we have to make sure that we maintain the cost discipline while investing into areas that we already discussed as part of the call. And at the same time, I think there was the first question asked, also have contingency plans in place if the market environment turns more against us than we now see as a base plan. So the cost discipline is there. We have some areas like rent negotiations that will have a full year effect, other cost measures that we took. But we also recognize the fact that we will have areas of investment also in SG and A that was Antoine's question earlier that we will pursue to ensure that we have the capabilities in place also for recovery of the market and especially with the collection in place with spring summer 2018 that will resonate even stronger with the consumers and have a higher level of desirability than where we are today. So operational leverage will be in a period of flat top line, a difficult task for us. And that's why we guided more or less in sync top and bottom line. But clearly, we don't want to lose this discipline once we get back to a more stable top line growth momentum that we will not only grow in absolute, but also in relative terms our structural profitability going forward. And our final question today comes from Melanie Flakwith from JPMorgan. The first one is regarding your expectation for like for like guidance for this year and the current trend. I understand you don't want to tell us exactly for the current trend, but it sounds like it's not improved markedly on Q4, which is understandable given the Germany tax numbers, I suspect. But my question to you is, if it's not improved, what are you expecting to actually turn it more favorable to get to your more positive outlook for the rest of the year? Because the comparables don't actually turn much more positive or much easier after that. And there are quite a lot of initiatives that seem to be hitting in January 2018. So I was wondering whether you can recap what actually can turn this more favorably later in the year in terms of your initiatives. That's my first question. My second question is a bit more strategic. It's on the outlets. The outlets were 19% of sales and 31% of retail sales, if I'm not mistaken. Where do you see this evolving? You've done a lot of work on cutting the off price channel and the promotional activity in wholesale, but what about your own retail side of it? And then can you help us maybe if we look at Q3 and Q4, understand maybe a bit more for China and Germany where the most price action took place. What was the actual price decrease in China and price increase in Germany that took place in Q3 and in Q4? Or rather, what was the average impact over these quarters? And what were the growth and declines of each market in these quarters? Thank you. Thanks, Melanie. I think the line was a bit difficult. I hope I got all your questions right around like for like sensitivity also perspective and the price changes that we did in 2016. In terms of like for like sensitivity, we have a range of plusminus3%. And of course, if the group sees a prolonged trend at the lower end to this like for like development, we have contingency plans already developed as part of our budget plans to ensure that we follow the prioritization on things that we will first reduce, postpone or do differently to ensure that our OpEx development reflects also the like for like development. I think that's a practice we have now learned in 2016 to ensure the discipline that we can only spend the money that we've earned in our retail and wholesale business to begin with. We have to take decisions on which amount of merchandise to buy. That's something that Bernd and his team are working on very carefully, but there is a certain revenue projection we have to work with and then we need to be smart and agile in how to shift merchandise to these stores POS where we see the biggest return for these investments. And same applies to our projects and investment in OpEx that we have plans in place also to protect the bottom line when like for like falls. However, as you can see from the range that we provided in the earning guidance, if like for like will fall towards the lower end of the guidance, there are also limited means also to avoid a decline in operating profit. That's clearly not our objective, but there will be in a difficult market environment like we experienced in last year. At some point also and to the measures that are available to us to counter an overall negative market environment. But we can ensure you that we have worked very carefully to ensure that contingency plans are in place to protect also the earnings guidance for 2017. Can I Outlet? Yes, sorry, go ahead. It was indeed not very good. My question was more, if the like for likes is trending around minus 3% in January February, what will make it turn to positive, I. E, within your range in the rest of the year? The base of comparison is not a lot easier, and a lot of initiatives seems to be hitting the stores in beginning of 'eighteen. Yes. Well, 1st and foremost, we didn't make any comment on the January, February like for like or retail trends just to be sure that you don't read too much on my qualitative comments. What we said is that we have seen in general market trends that we have seen in the Q4 to be prevailing also in the Q1 with the stronger demand in China and especially a difficult market environment that we are faced with in the U. S. Yes, there are none of our like for like guidance is based on an easier or more difficult comp base. It's rather based on the measures we have taken in terms of improving one important element of our retail business, which is our e commerce business, where we expect a more difficult first half year to be followed by a phase where the measures that we have described will take a bigger impact for that. We will see with the changes in our retail network 2 major things that will be helping our retail performance already based on first indication that we see. First, you will see much stronger shift into entry price points in our own retail operation. We will drive visitor numbers and conversion rates in our stores. Plus and I think Bernd had this part of his presentation as well, we had very limited expansion into casual wear offering speed on the orange and in particular the green side yet. But where we introduce it, we have seen very confident and positive reaction to that. So we think we have some elements in our portfolio that we would describe as self help measures independent from the market environment that we work with. Unfortunately, not all of them are immediately available. Also on the e commerce improvement, some of these measures, for example, loading time on the web page, merchandise changes that we have executed, need to be understood and recognized by the end consumer. But over the course of the year, we do expect that these measures will have a meaningful impact to help us to maintain and improve our LIFO development within the range that we guided you to expect for the full year. Thank you. Let's complete your question with the 2 parts on terms of price increases. So the price adjustment we did in the Q1 in China was a price adjustment of around 20% decline relative to the increase that we did in Germany and some other markets, for example, also the Russian markets, we increased prices was roughly in the low teens. It was not one specific percentage rate, but it varied a bit by product category, but it was in the low teens that we increased prices in Germany. And as I described, it was very well received from our in particular from our wholesale and retail customers going forward. Outlets are the preferred way for us to clear excessive inventory. We as we described, we have discontinued to use 3rd party off price channels pure plays. We've never used them in Europe. We have used them extensively in the U. S. This practice has been discontinued. And we have continued to strive also to improve shopping experience in our factory outlets. Factory outlets with premium luxury tenants are here to stay, and particularly in the apparel world. And if they have the high class set of competitors in that, we have no issues to operate also BOSS outlets there. The prime purpose remains, however, to clear unsold inventory that we have to take back from our full price businesses. So over the longer term over the next year, even so we did not deliver on that one in 2016 yet, but our objective that this is remains what we stated also in London to grow stronger in our full price business and in our off price business also when it comes to own retail. They're already very confident signals in some markets, but it will require return to positive like for like in our full price business that we make more significant progress to that. We do not target a specific share of off price to full price in retail, but we would concur to the point that in some markets, in particular the U. S. Market, the share of off price is slightly excessive on the longer term and we will do the necessary steps to correct this split between these 2 sales channels. Thank you, Melanie. So ladies and gentlemen, thank you for your interest in today's call, and we look forward to speaking to you again relatively soon with our Q1 results, which will be on May 3 at the latest. But also already today, I would like also to take the opportunity to invite you to our Investor Day, which we will be hosting in Metzingen, our headquarter on August 2. So then we will look forward to update you on the future plans. We will be walking you through our showrooms. So especially Ingo will like to show you that you touch and feel for yourself what we have been talking about because this will be our moment of truth not only via you as our investor and analyst base, but also to our customers to see what is a bit abstract and difficult to grasp at this time. So Thank you. That will conclude today's conference call. Thank you very much for your participation. You may now disconnect.