Hugo Boss AG (ETR:BOSS)

Investor Day 2015

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Nov 24, 2015

Morning, everybody. I hope you enjoyed the fashion show, the talk with Jason and dinner here in our restaurant. For the ones who were unable to be with us last night, welcome to our Annual Investor Day. Happy to have you here and to share with you our thoughts on strategy, but also on business right now. We will start with a quick update on how we perceive actual market conditions, how we want to deal with the related challenges, but also how we plan to keep our long term 2020 plan relevant and alive. The I would say the most important learning out of 2015, started already in 2014, is that customer behavior, customer information collection is changing in a major way. We all need to get used to lower traffic and visitor patterns across the globe, more importantly in Europe, change their way to inform themselves before they go shopping. And we as a company need to learn how to engage, how to capture them earlier than we were able to do this before. That's our most important learning. So no need to be overly concerned about lower visitor traffic and, I would say, visitor behavior or visitors in general. We also need to we only need to understand what to do before our existing and potential customers join us in our own stores. We also see that customers, due to more than ever global visitors from abroad expect us to be consistent on the worldwide level. So what we're currently doing in China, we're currently doing in Russia, we're currently doing in the U. S, building our network into a more refined shopping experience is something which we do in order to make sure that whatever we do across the globe is consistent and is consistent especially with regard to customer service and customer experience. Consumers become more educated and at the same time also more competent. So they still accept brand authority according to our evaluation, but it's an I on I relationship we need to be aware of with regard to speaking to consumers, with regard to making sure that consumers perceive our brand across the different continents in a credible and easy to be followed way. This is something which we are currently experiencing. Brand authority is still very important, but we need to be credible when it comes to engaging with our consumers, when it comes to making sure our brand authority has a long term relevance. What we right now see is that not only brand authority is challenged, but at the same time, customers expect more from us. So the entire service aspect, the entire treat aspect is something which is rising in importance. That's the reason why we started to go into a major made to measure initiative. It is the perfect tool in order to engage customers in a highly educated way. It's a perfect tool in order to create long term loyalty as long as we are able to make sure that getting ready for the made to measure experience, getting ready for made to measure product is well communicated. Interesting enough is that we see customers interested in made to measure not so much with a, I would say, with an unusual body configuration, not at all. Most of our customers buying and trying out what it means to be a measure customers can easily buy a standard size suit, no problem. They like the personal. They like the personal touch. They like this 2 and a half hour experience. They also like to better understand what it means to carry a bespoke suit, and that's something which we believe will become more and more important. So we see less visitors in our stores, but we see them highly educated, highly informed about the brand. And we see them with more time if we make use of their additional time in an intelligent and qualified way. So that's what we mean with consumers look for experiences rather just for products. So at the end of the day, what we need to do as a brand, we need to more and more win parts of our customers and not only their minds. And this is something which we will reinforce in our branding policy, but also when it comes to thinking about new customer experience components in our own stores. The education process also goes into what we are calling long term sustainability. We see that customers do want to know more about how and where our products are produced. We are proud to be able to say already today that we know exactly where our products are sourced, either because we are the owners of the factories or production partners are more or less exclusively doing business with us or we have educated teams on-site in order to understand how quality standards are respected. Has been something which was always important at Hugo Boss. We will become a little bit more vocal when it comes to communication and when it comes to intelligent communication about this sustainability initiative in order to simply speak about what we anyway already do and have been doing for years. As I mentioned already, the entire engagement process with consumers is becoming more complex. It's starting earlier. It's linked to additional costs. It's also linked to additional understanding on how to engage customers compared to what we were used to do before. And for that reason, we believe that the entire engagement process, the entire customer service process, the entire treat process in our stores and around our stores will become more expensive and we need to look for additional ways in order to keep our innovation, but also to keep our productivity improvements at a very, very high standard. At the same time, we see that something is going on in our industry. We see that not only low interest rates are playing a role. We see that, at least temporarily, there are trends in the consumer field like consumer technology taking a lot of attention. That's the new kid on the block. We'll see how long this new kid on the will take attention from us, from our industry. And here, I'm talking about jewelry, from accessories, handbags, shoes, but also apparel in the premium and luxury field. But it is something which we better need to understand in order to also redirect attention from consumers into our market. You know that we have and I will speak about this more in the second part of the presentation, we invested massively into building our own retail presence around the globe because we believe that we need to do it in order to continue to grow our global reach across the different continents. We right now see that selected very important retail spaces in metropolitan areas are getting more and more expensive. They become more expensive. It's becoming a bit more difficult than what we used to see to go into those locations even if this may change with what we are currently seeing in Hong Kong, in Shanghai, in Beijing, but maybe also in London and Paris due to the most recent events. So, we expect rents for top locations to go up. And we also expect due to the Internet, due to online activity, online commerce, but also omni channel commerce activity that secondary locations, regional locations, apart from a couple of exceptions, will lose interest for our industry long term. So the focus on being rightly positioned in the most important cities in the world will definitely be reinforced. At the same time, we see that not only online players, but also department stores and competition become more aggressive. The market is right now not growing as fast as what we were used to see. So, there is more competition. Very often, with simple price activities, This is of concern and we are currently doing a lot of things in order to get out of this price sparrow, which we don't want to entertain at all. I don't know if you heard that major department stores are trying to even increase their presence in the off channel, which I think is maybe temporary, helpful, but long term, it's not going to produce better results. We see that full price activity, especially by department store players, is more or less stable on the downturn, whereas off price at any price is something which is not only affecting the very important U. S. Market, but also European markets. So, we will see how far this will go. But just to be very clear here, we will do whatever it needs for our most important brand, Boss, Hugo Boss, to not participate in this ongoing battle and we will make sure that respect for full price activity will be kept as high as possible. Our entire brand policy, our entire logistics and sourcing infrastructure is slated to full price activity. It is not slated to an increasing share of sales in the off price channel. And for that reason, we'll make sure that consumers continue to have respect for what we do in order to sell our merchandise, first of all, at full price. All this means that we will definitely do more in order to become even more customer centric. It's linked to additional investments, not so much in additional retail investment because we believe that our existing retail network around the globe belongs to one of the finest in the world. If we talk about the apparel industry, the premium apparel industry, there are not so many players in the world owning such a retail network as Hugo Boss does. We have been very strong in developing this network for previous years and we believe that we are now in a good position in order to make sure that we can leverage the network as far as possible via early consumer engagement or via traditional services like the omni channel What does it mean? It means that we expect consumer habits to continue to change in our industry. At the same time, industry growth is slowing. We will see how long. The cost of doing business is right. So, we need to gain additional productivity. We need to gain additional develop additional areas in order to make sure that our traditionally high profitability is not affected. And for that reason, be aware of that the traditional strong ability at Hugo Boss to be innovative, be efficient and to make sure that we constantly create additional efficiency in our production and supply chain will be of very high importance in order to make sure that we are able to find compensation for the rising costs to be a customer centric global company. You see a couple of numbers from the market. 1st of all, on the left side, something which confirms what I mentioned already, industry growth right now is slowing. And on the right side, here we look at our peer group. An overall decrease of profitability, partly linked to more expensive retail locations across the globe, but also linked to higher costs when it comes to simply making sure that we take better care of our consumers in various fields. This is something which we see right now. Please don't take those numbers for or as a reference for Hugo Boss. We'll speak about this later. But overall, we see that everybody, even the leading luxury players in the market, are facing additional costs in order to simply defend existing market share. So to summarize how we see the current market environment, Consumer habits, we spoke about this, they will continue to change. Consumers will become more demanding, and they will become much more educated before we see them in our stores or online buying, shopping. We spoke about the rising cost of business. So our answer is getting even closer to our consumers, making sure that what we have done for the last 8 years to really understand what matters to our consumers, to now use in order to create additional services, additional reasons to see them in our stores or see them online in order to keep them as close to the brand as possible. We will continue to nurture the brand's development around the core, and we will speak about women and shoes and accessories a little later. But those very important elements will be core elements in our brand development strategy. And at the same time, as I mentioned already, the search for additional efficiency and productivity simply to make sure that we have more time and more money to spend on our consumers. With this, I would like to come to the 2nd part, how do we want to turn challenges into opportunities for Hugo Boss? That's definitely something you want to know, and we are more than happy to speak about this. So first of all, and I think this is important for you because we were together last time in Paris in November 2014, we confirm our 2020 strategy. There's no change. There's only one additional element, which is probably going to be a game changer, but it's coming in addition to the 4 strategy pillars we have been presenting to you last year, it's digital. Digital in all arenas of our business, not only in retail and omnichannel and engaging consumers whenever they think about our brands or our product categories. It's in development of product. It's in equipping our stores with sophisticated digital tools in order to make sure that they can do in our stores whatever it means. It can be simply Wi Fi. We know that our Chinese customers, when they arrive in our stores in a group, very often 6, 7, 8, 9, only one person trying to find a product, they expect Wi Fi. And not to be equipped with YP immediately is already something which is perceived as a missing element in customer service apart from other elements. And for that reason, if I only mention one very simple tool, this YFEE tool, something you immediately get in Chinese hotels when you check-in, it is something which simply tells us we need to make sure that sophisticated technique is also entering our retail universe in order to make the customer journey. However, it started and however it's perceived is as easy and as customer friendly as possible. So we will definitely speak about the digital component a little later. I mentioned retail. I mentioned sourcing. I mentioned the entire journey of an individual product. And for that reason, we are spending not a lot of time, attention and money on digital. We're also trying to make sure that this company, which has been always very technology friendly in terms of sourcing logistics, you're going to be in the afternoon in our newest flatbed warehouse, I would say, the most sophisticated of its kind in Europe right now. It shows you that we are very open to take on technology wherever it's creating value, wherever it's creating efficiency. But it will be it will take more time than what we might have expected already last year. And for that reason, we would like to add this to the overall strategy. The first very important component elevates the BOSS core brand by engaging consumers emotionally. That's something which we already presented last time. It goes with not only operating and running own stores and creating a very customer friendly and service oriented atmosphere in our stores. It's about the entire brand strategy and how we talk about brand. And as former wholesalers, as former production specialists, as you some of you have been knowing the company for years. We are now moving into a very consumer oriented approach. And whenever you speak to a consumer, whenever you want to engage consumers when it comes to refined product early on, you need to romance consumers. And this is something we are currently learning in a very comprehensive way. It means to continue to speak about good quality, good fit, Italian fabrics and sophisticated sourcing methods, but this is only part of the story. The second part, and this is at least as important as the first part, is the emotional part. It's the untouchable number of reasons to visit a store and to get interested in learning more about the brand, and this is what we call the emotional part. We know that we can do it because we have many reasons to speak about this part of the brand in a very sophisticated way. And we believe that apart from the inspiration and the success moment we can create whenever somebody is in touch with us, we can also go beyond this and simply make sure that the bare components of our success quality, fit, reliability, price worthiness is turned or are turned into something which is then becoming even more consumer relevant when the purchase process is coming into play. So this is something we want to speak about a little later and get some putables. Our global communications head will go deeper into this entire story, this romancing story inspired by success, craftsmanship, tailoring, in order to tell you also what we are currently doing in order to elevate the relevance of the brand in the eyes of our consumer. We spoke about the branding strategy. We confirm that BOSS as the most important pillar in our brand portfolio will continue to be slightly more elevated in terms of price positioning than YUGO, green and orange, but not because we are kind of imposing higher prices to our consumers because we see that our consumers shopping with us in our own stores are asking for more refined, for more elevated product. And due to our today's increased intelligence about what consumers expect us to do, We are simply following suit. We are simply executing what consumers tell us in terms of moving the brand to where the brand can be in terms of customer perception when it comes to more sophisticated, more refined premium product with a touch with a luxury world. That's YUGO and with Green and Orange, we're able And with YUGO and with Green and Orange, we're able to continue long term partnerships in the wholesale world because we could have also said, let's stop it, let's simply focus on both. There are a couple of brands in our market have done this, simply stopping second line brand phenomenons and to focus on own retail development. We thought this is not a great idea because we have those long term and long standing partnership within the wholesale trade, not only here in Europe, but also in the U. S. For that reason, we found smart ways in order to keep this or those relationships going for a longer moment in the future. A quick presentation on how we look into pricing. So you see the 3 brands, BOSS, YUGO and BOSS Green. Why do we compare those 3 brands? Because we have taken the clothing, breast furnishings component out of BOSS. We developed for the category departments in department stores and moved this into YUGO, and you will see this in the afternoon, how we did this. And then we took the sportswear component from BOSS and moved it into BOSS Green for equal presentation in today's still existing category departments. And you see the price difference in between BOSS, today more and more in fully controlled spaces and freestanding stores, differentiated into clothing, dress, furnishing, shirts, trousers, jackets and suits and sportswear. And then you see the price positioning for YUGO and BOSS green to the right in the same product category. And here you see that, yes, we have elevated BOSS, but we are still premium. And we will continue to be premium because nobody else in our market, Hugo Boss is able to deliver high quality luxury product at still very accessible price points. And due to the fact that this is part of our brand DNA and this is something which is rather unique in the market, we will continue to keep on offering prices in the different categories, which we consider to be still very attractive, very accessible and still far away from a pure luxury offering. But at the same time, we see that there are customers who are very interested in tailoring, not only tailoring suits and shirts, dress shirts, but also in more refined shoes, formal shoes, in more refined sportswear, when it comes to outdoor jackets, when it comes to jeans and to pants. And we would be foolish not to honor this interest and to offer a growing portion in our overall merchandise mix in order to meet those demands, something which helps us right now to counter decreasing traffic with the simple and pure consequence to increase average basket and transaction sales. That's something which I wanted to stress you because when we speak with you, Marc and Dennis Weber, very often more often than I do it, but in the quarterly conference calls, there is at least we sense some concern that we are moving BOSS into a pure luxury offering with the consequence that we might be in a market full of competition, already extremely well established. Yes, we move up, but we continue to be extremely reasonable and extremely Here, I repeat what I said already. We are getting used to decreasing traffic. It's a phenomenon of our market, and we better learn how to deal with this now than too late. But how do we compensate it? By higher conversion rates. So our teams in our stores and shop in shops are better educated. They are better educated not only in terms of what the brand is about, but also better educated when it comes to product, know how, how product is made, where it's made and availability because customers hate to see something online, to go shopping in their preferred store or shop in shop and not be able to find it. That's something which we need to stop. And for that reason, we introduced something on our online side, which is an availability tool. So when you go online, you find your preferred product. You can immediately check if this product is really available in your store in order to go find it. So the overall process will change. We will have more time for our customers. We'll see less customers, but the ones who come see us expect more. And this is linked to training. It's linked to really being focused. And for that reason, we said, let's focus on BOSS. Let's be clear in our messaging. Let's be clear in educating our customers when they shop our own stores what to find. And as you can see, this is mentioned in the chart on the lower left part here. 80% of retail space already today is dedicated to BOSS and Green because very often we see that BOSS and Green because of the upscale spots where component in Green are able to coexist well together. There's still a little Hugo and Boss Orange in very important stores like in Champs Elysees, where we do have over 1500 square meters. And up from December 10 on Regent Street in London, where we will open our most important store in the world. So then we will certainly try to show a bit of green and of orange of YUGO. But most stores we open in normal sizes will clearly be focused on BOSS. BOSS men, clothes and dress furnishing, sportswear, together with all the accessories and shoes and the same for women and clothing and shoes and accessories. Last time, we spoke about category migration, because we told you we need to make sure that BOSS gets a slightly different treat than what we were able to give to the brand in the traditional category apartments. We didn't see anymore from a service component, but also from a price component that BOSS was well presented, well merchandised in traditional category apartments in leading department stores. And for that reason, we decided, but also because very often, we operate right next to department stores, a differentiation by distribution. That's the reason why we are now moving BOSS into only freestanding stores, shop in shops or clearly identified spaces and offered a more important merchandise presentation under Hugo with regard to clothes and dress furnishing and BOSS GREEN with regard to sportswear. Germany and leading markets like U. K, France, Scandinavia and Benelux, they are still very important category markets for us. And the good news is because Europe has been traditionally the most important continent with regard to wholesale, has extremely well accepted our offering because wholesale partners understand that BOSS, but this has been an understanding for years, deserves a better presentation than to be presented in category departments next to lower positioned brands. Everybody understood this, and what they appreciate is that we offered a solution in order to keep their category departments alive. We see that the traditional category apartment will disappear over time. And I wouldn't be surprised if in 10 years, our most important department stores will not continue to show any more category presentations because they see the same situation as we see, low in traffic, consumers expecting a better service, a better experience, and the simple category presentations are not really offering all this. And for that reason, let's be aware of that. This is already an ongoing trend. But with regard to sales, we are very proud to be able to say today that we fully compensated what we have taken out of the carrier under BOSS by JUGO and by BOSS Green, as you can see here. So the exercise, which was a long thought one within this company, has been extremely well received. It's lived and exercised not only here in Europe, but right now under discussion also in the U. S, our 2nd most important wholesale market in the world. And even if we speak to our friends at Macy's, if we speak to our friends at Bloomingdale's, very powerful players, they understand that there are probably 5 cities in the U. S. Where BOSS is still able to entertain a shop in shop with fully trained staff and fully control of the merchandise offerings. In other cities, it's really better, most importantly from a price point of view, to go into lower priced alternatives under YUGO and green. So also here, we are confident that we will make progress, and we will create the same situation as we have created in Germany, most importantly, already. And if you have time to discover the new situation in our most important wholesale account, Kiekenkloppenbush, spend a moment in Stuttgart, go to Berlin, Town Siehnstrasse, go to Frankfurt on the Zael or go to Cologne, and you see a really clearly identified branding policy across different departments. So we are extremely confident that what we have done was right for the brand and enabled us to continue to have very, very strong and growing wholesale partnerships with the leading players around the globe. Our pillar number 2 is women shoes and accessories. That's the reason why Christoph asked Jason to come see us last night to give you a flavor about what Jason does here. He's here in average 2 weeks a month. As I mentioned to a couple of ones of you, an extremely disciplined worker, hard worker, somebody who brings a lot of very, very positive inspiration to the brand, who developed in only a season a very deep understanding what's relevant for us in terms of product, but also in terms of presentation, in terms of advertising campaign, visual merchandising campaign and what our related activities are concerned like fragrance and sunglasses. And sometimes it's only the little detail the designer can bring to the party in order to make the product look different. This is something which he does in a way which is helping us tremendously in order to really create additional excitement and attraction to the brand. So we are extremely focused, and we are dedicated to continue to support women together with shoes and accessories because for us, it's one universe. You have to do it together. Otherwise, it's not anymore understood by our consumers. Consumers won't be total package, our female consumers. And for that reason, also tremendous and important upgrading investments into handbags and shoes. We confirm our positioning with regard to Boss Women. The tailored experience will always be there because we are speaking to a growing community of professional businesswomen, not only necessary in the business field, can be also in the charity field, can be for other applications. But the official part we are catering to, official part of life will be definitely an important one. We believe that sophistication, femininity is something which we need to add. And Jason is extremely strong in this field. We will definitely continue to be a modern brand, innovative and refined. You can see here the different components. Modern business, something we have been doing for many years, the modern day, the occasion, the evening occasion. The new element will be luxury leisure because we see more and more interest coming from our existing consumers in finding exciting products for the weekends, for the vacation moment. And for that reason, we will definitely step out of the traditional field BOSS has been developing for women already in order to make sure that we also capture this territory with existing customers who are very loyal to the brand. You can see here the development. So we continue to grow in own retail and wholesale and at wholesale, which is very important good news, mostly in concession or defined spaces at wholesale. That's something which we think is important for the brand. We keep the number of BOSS women presentations very well under control. So we are at a bit more than 30% in or we are covering a bit more than 30% of our total stores and shop in shops with BOSS women. So you see that we are not going into a full fledged out women rollout, where BOSS is already doing business. We're extremely careful to make sure that we only offer women where we see the potential. And for that reason, we opened or organized a group of 30 ambassador stores for a prominent presentation, BOSS WOMEN shoes and accessories in order to really make sure that wherever we are targeting our customers in the most important metropolitan cities, because we see our customer, our female customer is exactly there and looking for what we do. We are able to fine tune our offering, fine tune our visual merchandise presentation, but also fine tune our services, which we think has to be sometimes even more sophisticated than what we're going to do for our male customers. So also here, to correct a couple of impressions that HUGO BOSS may go overboard in terms of rolling out women and open stores with women or before we create space for women ready to wear and women shoes and accessories in existing stores. Which means that the men, the BOSS men, clothing plus furnishing, sports wear shoes and accessories presence will continue to be overly important, 89 our own stores, not only because of the existing importance, but also because of productivity, sales per square meter or sales per square foot, which is something we don't want to put at risk. Pure BOSS presentations from 62 in 2014 to 69 in 2015. The remainder, Hugo Boss Orange, due to the fact that we sometimes operate very important stores and want to show the entire brand portfolio. What did we gain with going to New York with Jason as Artistic Director, 1st of all, a complete different presentation and awareness. The number of editorial feedback and the importance of editorial feedbacks we received for the last 2 years has been 10 times compared to what we received the 10 years before. So it confirms, if you want to be in the sophisticated refined market sector, and I'm not talking about pure luxury, you want to be part of a leading international fashion show, and you want to be equipped with a gifted internationally known artistic director. This is what we've done. We're extremely proud that we managed this exercise, this sometimes sensible integration of somebody from outside into the inside. And if you simply see the editorial feedback we received from the last fashion show, this is year to date September 2015, and this is fashion show February September, €80,000,000 Feedback from the international media press, it shows that this exercise pays off easily. We spoke about media spend. And also here, we believe it's time to correct maybe a misperception. You see the overall media spend or let's say the overall communication spend in 2015 has a cake, and onethree out of this is going into media. So in 2015, we slightly spent more on women out of this onethree than on men because of what we told you last year and this year that we want to make sure that the message, Hugo Boss, is able to be a leading designer brand gets across. But in 2016 already, and this is more than normal, and we already said this to you, we will again reinforce the spend on men. It will be still important for women, 40% for women and 60% for men, but there is no intention here as in stores. We already presented to overinvest into women and to underinvest or to underestimate the need to continue to invest on men. Number 3, already presented last year, omnichannel. Make sure that whatever we do online or before consumers go online, it's paying into our existing very important retail network, leveraging our existing important retail network across the globe. For you to understand how we go into retail developments, here you see the number of stores we opened or we took over, be it freestanding stores or shop in shops since 2010, and you see changing patterns. How does it go if you take over a, let's say, a number of stores or shop in shops? I'll tell you how it doesn't work because if you see existing customers, franchise partners, and you know that we had franchise partners with sometimes over 45 stores, and they owned the leases in China in existing cities, but we also had partners like Saks with Avenue and El Corte Inglese. And if you see them for the 1st takeover discussion, tell me, listen, I like your store in Madrid, and the one in Barcelona is okay. Maybe in San Sebastian, all right, but all the rest, forget it. You can forget the entire discussion. The same is the case if you speak to your franchise partners, who exactly know where they are strong and where they need additional future oriented investment. And you tell me, I take your store in Beijing and the one in Shanghai, Hangzhou, okay, But Jinan and all this, forget it. Not interested. You will never be successful in a takeover. The only way to do takeovers as we have done it without overspending is you take the entire situation, you pay a little bit for stock you don't need anymore because very often you see stock from former seasons, you pay them a little premium for maybe handing over qualified sales staff and customer addresses. Then you take the entire situation, because then you don't pay a premium, and others have taken over networks at high premiums. We know those prices, not only in China, but also in Europe. And then you live with the situation. And this is what we have done for the years in between 201020 15 because we wanted to be in the know. We wanted to understand who is the customer, what is the merchandise mix, What are the real prices our partners achieved? And what is the real potential of a certain city? And based on this know how we developed, we very often decided to stay without renovation in certain cities simply to observe. But very often, we saw immediate need, but also opportunity to go into better locations or to increase existing locations or to at least renovate existing locations in order to make sure that we don't lose crucial cities. This is what we have done. I'll tell you something. Even in a difficult market like China, right now, and China may continue to be a difficult market in 2016, we prefer to be attached, to be in the know, to have a very deep understanding, a daily understanding, what's right and what's wrong than to be surrounded by long term franchise partners who have no interest in the long term future of the brand and to be in the complete dark or gray zone when it comes to analyzing sometimes challenging market conditions. This is the reason why you saw a number of important takeovers in the shop in shop and freestanding store field, The reason why we never suffered from the very important Spanish market crisis in 2019, 2011 was we were in the know. We exactly knew after we took over the shop in shops accordingly what to do. And for that reason, even if the market was difficult and continues to be difficult even if we see substantial improvement, we were able to react according to what made sense for the brand. So that's something which is important, and we are extremely proud that today, we own a network of important freestanding stores, shop in shops and outlet stores, most recently renovated, allowing us to speak to our consumers in a very different way than before. So this is something I wanted to clarify because sometimes people tell us they wanted to move wholesale sales and retail sales temporarily in order to gain market share and net sales, not at all. That's not something we're interested in. The clock anyway continues to tick the following year when we talk about like for like. And for that reason, the most important motivation for what we have done the last couple of years is getting close to the consumer and enabling us in order to speak to our consumers in a very different way than we have been able before. So this is what we think is our future. I already mentioned to you that growing online activity, growing omnichannel activity will most probably long term reduce the importance of regional centers. That kilometers around is going to be irrelevant for our business. But we will definitely be extremely very careful when it comes to openings or shop in shop renovation in smaller cities. For that reason, we are happy to be able to move our existing store on Reason Street into a neighboring location with 4 times the square footage than we own today, Opening is forecasted to be in a couple of days. We are extremely happy to be one of the leading brands in the new shopping center next to World Train Center. We went into the bids for Galleria Victoria Emanuele in Milan a couple of months ago and were named as one of the brands, which is going to have a major space in this tourist and traffic loaded location in the middle of Milan. And this is where we think we want to make a statement. So we will continue to invest as far as it continues to be reasonable into major locations in key metropolitan areas order not only to capture local customer attention, but also the growing tourism attention, we believe, will be a defining element in our business. What does it mean for our future expansion strategy? We will continue to open in between 10 15 new stores per annum. The renovation piece is growing, as you can imagine, because a network, as we are currently operating, is now asking for constant renovation, even if we have done a lot. And we feel mostly okay with the presentations we have gained. But if you take total CapEx on retail investment, the renovation part will become more important. We continue to speak to department stores where we think we can do a good job, like the ones I mentioned in the U. S, in order to make sure that BOSS on the one side and then YUGO in green and orange on the other side will be shown in a different way from a quality point of view. Smaller bolt on acquisitions will continue like the one in Malaysia, happening at the beginning of next year and Russia, where we will move in the gum from a franchise partner operator store into a fully owned owned situation in a better location, more visible location because we believe that Russians will continue to travel. They will continue to travel to the Middle East, to Europe, but also to Singapore and the U. S. And for that reason, we need to make sure that we are creating a strong impression at home as we do today in China in order to capture as many traveling consumers as possible when we meet them here in Europe or in other important cities. The importance of online. Right now, if we take the global power and footwear industry, something around 10%. This is the estimation for 2014. Growing in 2015, to be seen what the next Euromonitor show. It's changing a bit in terms of price points. The more affordable, the higher the online activity is already. So in the high end jewelry and watch business, it's growing, but still small for all the reasons we know. But with regard to apparel, beauty, accessories, a distribution channel, we take as serious as possible, and we see it also in our own activity in the end of 14, we produced in our fully controlled online activities close to €70,000,000 plus another €100,000,000 at retail with our wholesale partners because wholesale partners who do a good job in the physical trade are allowed as long as they respect our guidelines also to sell the brand online. So we come to something around €170,000,000 We know that in 2015, we will easily exceed the €200,000,000 mark. And for that reason, we believe a strong investment into this channel, not only for the pure business part, but also for the information collection, the engagement part continues to be of key importance. What we also want to do is to make sure that we don't repeat a couple of, let's say, difficult experience in the physical trade in online. So whatever we do with BOSS with regard to online activity with 3rd party players will be controlled because we want to know our prices. We want to know the customer. And for that reason, 3rd party players, including pure players who are interested to deal with us, need to understand that controlling this business is for us of key importance. A quick market update on how consumers use online or digital information before they go shopping physically. Overall, it seems to move into the 64% arena, means consumers taking whatever kind of information online available before they decide where they shop. At HUGO BOSS, it's already higher than 50%, 52% based on our own research. And for that reason, we feel extremely confirmed in our efforts, in our activities to make sure that we create a lot of additional information enhancing tools in order to make sure that customers then go well prepared and well informed into our physical stores. A quick update on what we mean. With Omnichannel, at the end of the day, it's nothing else than becoming even more consumer centric as we are ready today. The time plan for the Omnichannel is running. We'll take over in May 2016 the logistic and IT infrastructure from our existing partner, AVATO. So it will be completely in sourced in the already up and running as a test warehouse in Wendlingen in order to make sure that we are able to organize a seamless omnichannel experience for our European customers as quick as possible. And then during 3rd Q4 2016, the additional services click and collect, order from store via tablets and return to store, something which we are currently testing in a manual way in the U. S. In order to already gain some intelligence on how important the different components already for our consumers. So that's something which we spend a lot of time and money because at the end of the day, omnichannel is not so much about the most beautiful website, even if a highly functional website and an attractive website is important. It's about important investments into logistic and IT capacities, which we are currently beefing up in a major way. Last but not least, you know that we have been always an international brand. I would say our most important accomplishment, and this is the reason for very important takeovers and renovations in the most recent path, is to move the company from being international to becoming global. We are today one of the few global players in the premium apparel and accessories world, and we defending not only this position, we are building on this position. And global means consistent, means credible, It means to speak to our consumers in one voice with messages which are not perceived in a very different or contradictory way across the different continents. And for that reason, we are, 1st of all, extremely happy that our European business is right now the backbone of our total performance. We are strong in Europe, 60% out of total net sales comes out of Europe. We are the leading brand in Europe. We think we are currently gaining important market share, not only via our own stores, but also at wholesale in major wholesale accounts. For that reason, I recommended you to go to Galeria Freight, go to Prontin, go to Pick and Clogmorich and have a look at HUGO BOSS today compared to before, you will see a major difference in terms of brand presence, but also market share building, something which continues to be important for us. We believe in growing wholesale sales, even if due to takeovers, the total activity will over time slightly go down. But growing wholesale sales means in the remaining accounts where we believe will be a long term presence of HUGO BOSS with some sense behind, we will grow market share in a substantial way. And for that reason, we're happy to confirm that Europe is fine even if the European continent right now is not an easy one, especially after what we saw 10 days ago. We spoke about China last night at different occasions. Right now, China is definitely, for us, a country we better understand. We also understand that it's extremely important to make sure that our formalwear offering is better positioned than before because before we were more or less a sportswear brand in China with the lack of ability to really clarify where we come from. So the heritage part, the most important part of our business was not as clearly presented in our Chinese stores, franchise operated as we thought it's important. This is completely changing. So we invest into more important formalwear presentations and selling skills in the formalwear field because it takes something to understand to sell a high lot of renovation and upgrading of our existing network. If you look at the chart below on the right side, you see if we take a look into the takeovers since 2010, the number in percent of stores we closed because we don't think there is any more potential or a new mall opened and kind of outdated the existing mall. The renovations, the relocations and still unchanged, so means to be renovated in 2016 2017. So we are here in a major modernization exercise, apart from the fact that in all major cities, the 15 major cities in China, we are fine. We are new. We are with the new shop fit and in prime locations, which is certainly good to know. But as I mentioned to you, there are a couple of things we want to address. First of all, it's the price between China and major Asian markets like Japan and South Korea. Right now, the Chinese are traveling more than what we expected to Japan, but also to South Korea due to the currency situation. That's something which will probably continue to be relevant, and we want to make sure that the difference inside Asia is going to narrow. And then in a second wave, we will also address the still very important difference in between the Chinese mainland market and European leading markets in order to make sure that what we currently see not only more and more sophisticated Chinese tourists traveling to Europe, but also taking a lot of information before they travel via online search engines is addressed and taken into consideration. How do we get into this situation? You get into the situation with an important difference to your most important home markets whenever you your business with franchise partners. We were a predominant franchise operation in China. Our partners kind of didn't care so much about price differences to Europe because first of all, there was less traveling to Europe in the past. And second, they were a bit more relaxed than we are about discounting already at the beginning of the season. And for that reason, our official price positioning was only official and not so much the one we thought. Today, we know how much the official price positioning is respected and how far we can go. But we see overall a more educated Chinese consumer questioning that a product bought in China is allowed to be substantially more expensive than in other Asian markets or even in Europe. How do we see the current situation in 2015 and maybe even 2016? Challenging. There a lot of insecurity in the market, still coming out of cities where the anti corruption policies even waiting are even waiting for the next opportunity to shop outside their own country. We also saw a major setback right after the stock market situation in September because the government informed and asked their citizens to go into stocks, and they followed suit something which is impossible to do here in our Western Hemisphere and the U. S. Market. They did it and got burned in a major way. So this created a certain disbelief towards government recommendations, and you can still feel the pain and the consequence out of this painful moment. So we are expecting that 15, the remainder of 15 and the beginning of 16 will not be easy once we see continued decreasing traffic patterns, but believe that over time, the Chinese market will, with another price positioning inside Hugo Boss will be our most important opportunity long term. So the overall luxury men apparel market has decreased again in 2014, as you can see in the lower left chart, by 10% in 2014. You see our numbers for the first 9 months in 2015 compared to 2014, minus 6. Percent in euro currency and minus 20 percent in the Q3 due to the stock market crash, which was perceived as something more painful in China than what we may have noticed here in Europe. The U. S, another very important market for us. We are still it's still our most important market, followed tightly by Germany. First of all, the currency fluctuations had a more important influence on business than we all thought. We operate our stores mostly in leading malls around the coasts or along the coasts, the Northeast in Florida as well as in the one on the West Coast. Those are the malls which have been heavily visited by Europeans, as you have done this maybe as well, during business or leisure travel activity. Tourism continues to be important in the U. S, but shopping in the U. S. Right now is down in an important way. We can see this not only within department stores, but also within leading malls in our own stores. So we are currently suffering under less tourism than before coming from Europe and from South and Latin America means we need to focus again more on local consumers, something which our teams are currently doing. But we also see that the overall market has been less strong than everybody expected. You saw the 3rd quarter numbers coming out of most recent publications from leading department stores, but also published by European brands. The market is still not back to what it is supposed to be, and we expect this to continue at least for the remainder of 2015. Nevertheless, we believe that we need to continue to go away because it is the leading market for us. It is market number 1. We are one the biggest coming from Europe in the U. S, and we are currently reinforcing our activities in order to bring consumers' attention back to the full price activity. We are with 1 of the finest store network in the U. S. In great locations in all the leading malls, where we need to make sure that full price activity until it gets to the end of season sale is supported in consumers' mind. And for that reason, we are having a number of very important discussions with our department stores on not putting the brand on discount already at the beginning of the season. This is not what we want. The entire branding policy, the entire product creation and sourcing infrastructure entertained by Jogoboss is not made for going on discount at the beginning of the season. And for that reason, we are addressing the situation, not only to protect our own stores in those leading malls, where we are very often only 50, 100 meters away from our departments to our friends, but also to make sure that consumers really understand there is a moment throughout the season where the full price needs to be respected. What do we do in order to get our hands around the U. S. Situation? Because Canada is fine, Mexico is fine, and Brazil is okay. We will continue to upgrade our stores. You saw Columbus Circle most recently maybe, the opening in important malls in New Jersey, but also around or next to the World Trade Center is a proof. We will definitely optimize our merchandise assortment, improve the service component. This is something which we believe in strongly. Category migration is underway. So we are in intense discussions with our department store players in order to get the category migration accepted and implemented in 2016 2017. And by consequence, we will limit our presence in off price channels, which is right now a driving element in U. S. Apparel retail, but we don't want to support as others would like us to see it. Again, key customer activities and making sure that our retail excellence programs are implemented. We are currently working with a completely new cash at the same time offering mobile solutions inside our stores in order to make it easier for customers to organize the payment process. Click and Collect, I mentioned this to you, is already underway in a manual way in order to see how far consumers appreciate this new tool. The Savannah distribution center will be completely renovated in order to gain speed based on very, very strong and positive experience we are currently gaining with our new utility here in Filterschat. Rach Schneider will lead you through Filterschat today in the afternoon. And as we already did in Europe, a complete overhaul of the entire merchandise planning and assortment software in order to be more fine tuned when it comes to product offerings in our different stores according to climate, because Miami, you have a complete different climate situation than in Boston or on the West Coast, but also according to purchasing power, customer behavior, mix in between local and tourists. What does it mean long term? We, 1st of all, confirm our strategy. There is no reason, even if times have become challenging, to move away from our long term 2020 strategy. We will definitely work on perception and desirability, not only for BOSS, same, YUGO and green and orange. You will see each brand today, and I'm sure you're going to see a difference in terms of what makes each brand interesting and desirable. We will continue to make our brand portfolio become clearer to our consumers. It's important. The womenswear investment more than rewarded and more than confirmed, also based on what you saw last night. Our own retail strategy without any alternative, because consumer centric, which is probably the most important word in our agenda for the years to come, is only important if you control your retail activities. And for that reason, even more confirmation that we have to improve in various aspects in our own retail universe. Omnichannel, the simple continuation of what retail means in order to go even closer into the interest of our consumers. We believe that we are, even in a difficult territory, right in China. We believe in China, and we continue to invest in China even if we are currently a bit more careful when it comes to costs and spending programs. But long term, no change with regard to our Chinese strategy, especially when you look into the number of Chinese traveling across different markets inside Asia. It is a must and there's no option. And we believe that we are currently doing a lot of well founded and right things in to make sure that our position in the U. S, I mentioned Canada, Mexico is fine, It's where the brand has to be, and this means a strong focus on simply making sure that our full price offering gets more attention than what we have given to this assortment in the past. It means for 2016 that we will start with a careful look into the beginning of the year. Our group sales improvement in 2016 is forecasted to remain below long term target level of high single digit growth as a result of ongoing challenges in China and U. S, 2 very important markets. We will use our important investments in omnichannel and retail in order to equip the group to turn industry changes into Hugo Boss opportunities. Lower CapEx and further improvement of working capital management will contribute or contribute to free cash flow increase in 2016. That's important for you. And strong commitment to maintain attractive dividend payout policy remains. So there's no change previous years. We take the rapid growth in the operating environment as something which is linked to higher investments into a customer centric approach, extremely solid progress in important areas in our company. Unfortunately, it's currently overshadowed by ongoing challenges in China and the U. S, but we will continue to build on those existing progresses. And we continue to believe that a 25% EBITDA margin in 2020 is dependent or increasing dependent on an overall market recovery, which shouldn't be a surprise to you after we showed you how our peer group is currently moving in 20.40 and 2016. So that's what we wanted to share with you. Thank you for your attention. We are now here for all questions. We have ample time in order to take this now into consideration. I would like to ask Marc and Christoph and Dennis Weber to join us here on stage. Can we switch the mic on? Do we? Okay. I think there are a couple of questions. Thierry, you want to kick it off? Thank you. Yes. Good morning. Thierry Cotter from SG. Two questions. First, in light of the recent Paris events, I'd like if you could upgrade us update us on the Q4 guidance that you gave and how you incorporate again the possible impact on the European business for next year in terms of expectation and forecasting? And secondly, I know we're going to have a whole online presentation now, but your slide, I think, 38 presenting all the upcoming offerings, click and collect, Xetra. Could you qualify the geographies? I mean, is everything going to move forward at the same time or year before the rest for reasons you might want to elaborate on? Well, let me start with the current trading question regarding current trading. I think Claus mentioned that it's still too early to predict also from our side what are the consequences from the events that we saw in Paris and Brussels over the last couple of days. As we communicated to you during our Q3 conference call, we said that the achievement of the full year guidance but the most important one is a retail environment that we expect to be at least flattish or better in the Q4 and this has been confirmed based on October trading trends. And beyond that, we don't see any reason to revise our guidance for the current fiscal year. In terms of 2016 outlook, I think we shared with you on initial assessment, especially based on the development in 2 key markets, the U. S. Market, the China market. Beyond that, we'll get more specific on our 2,000 outlook as we did it always in our analyst conference in March 2016. I think it's right to go in more detail on the implementation of functionality as we have a very detailed presentation from Patrick and Gerd after the coffee break. So I would postpone this question when these things will come live in Europe and the other markets after this session. But maybe one. Yes, Mr. Andrzejklaas. Hello? Yes. One quick remark. It's not an exercise by itself. So what we do in omnichannel is not to become the online leaders. It is what we want to do in order to get as close as possible to consumer and to leverage our existing network. So without the existing network, we weren't even able to think about what we're currently doing in the omnichannel field and for that reason don't see it as a separate exercise. We are not only on plan. I would say we are with regard to our existing retail infrastructure in front of many other players on a global scale. And in addition in now in addition to what we are doing from a technical point of view to link the online activity with the physical retail activity, I would say we are coming into a market leader position again soon in 2016. Volker Bosse, next question. Volker Bosse, LATAMANK. Coming back to the category migration, BOSS has moved now to the exclusive shop in shops. How did the average price points of BOSS BLACK in this shop in shop environment developed here year on year? And also perhaps after having seen the first half year, these shop in shops, how that did sales and units sold develop in this new environment? And second, on that, you said, Hugo and Bosgreen filled the gap here in the multi label department. So how does this work? From my understanding, HUGO is a different cut and fit, the more urban style. So how does, yes, HUGO was able to fill the gap here? Did you adjust the HUGO fit and cut in order to make it happen? And finally, on your store opening target here, 10 to 15 store openings, that's a figure significant from that what we heard in previous years. So perhaps a background for this decision, is it already a reaction on increasing online shopping activities or how do you see that? Thank you. Let me start with the category migration question. You will see it in the afternoon and we could try to speak about this here for half an hour, but the best is to see the collections and to see what we did. YUGO continues to be YUGO and green continues to be green, but the price entry offering, our former domain boss in the category department has been reinforced. So you can see that there has been a change of styles from BOSS Closen plus Furnishing into YUGO without losing the Duo DNA and you will see when you're in the showroom and the same happened in BOSS in order to make sure that for certain presentations, for certain category presentations, our YUGO and BOSS Green assortments are just right. And what BOSS has given up in category, in high volume category department has been completely taken over by YUGO and green. And again here, do me a favor, have a look at Tekkenkloppen where you see it and you will be convinced. And then any discussion about how we made it and brand DNA dilution or this will be gone. That's an important point. But I think it's important for you to understand that we intentionally are reducing the number of pieces we are selling on the BOSS in department stores because first of all, we are moving up to the more exquisite or exclusive departments, number 1. Number 2, we give it a very refined shop fit, be it run by ourselves or be it run by our partners as, for example, this is the case with Pekken Gluckenweg because they continue to be very strong retailers. But the presentation of product, the number of products we are currently showing on their tables or let's say in our shop is different. And for that reason, we have done this with intention to reduce the quantity driven development of our collection inside the BOSS universe in order to make a difference and to create some kind of understandable link in between what we do in our freestanding stores and what we do in certain refined departments of our department store players. So that's the thing and you will see that this is ongoing, but the brands haven't lost their DNA at all. We will continue to see that the core of each brand, the core of POS Green, the core of YUGO continues to grow together with the category adjustments or enrichments we have in the meantime introduced. I think there was a question on the store expansion. Just a quick update to that. I think it has been well demonstrated that we are very happy with our footprint globally right now. So most major European and global cities, we have established now an outstanding store network. There's still some white spaces and you have seen three examples to that, but the number of these opportunities will decrease. That's why we have now given you for the which is slightly lower than the expansion rate that we've seen in previous years. Let me maybe turn to the left hand. John, you want to continue on this side? Yes. Thanks. It's John Guy from MainFirst. Three questions, please. First of all, maybe just with regards to OpEx evolution and CapEx, so following on from the 10 to 15 freestanding store guidance that you've given us. When we think about marketing, when we think about the omni channel investments, how should we think about your OpEx evolution over the course of the next 3 years? Do you think that a 50% level is effectively peak when you think about ready to wear players given the fact that your leather goods exposure is still relatively low is about where you'll probably come in at and peak over the period? And should we, I guess, still feel comfortable with that 70 5% of sales coming from retail if you're going to slow down your overall freestanding store network in terms of growth? That's my first question. Sorry, it's quite a long one. On the CapEx intensity, if we think about the last 10 years, your average CapEx as a percentage of sales has been 5%. How should we think about that allocation going forward over the next 3 years? And maybe just a shorter term question around the dividend. I mean, obviously, given what we've seen in 2015, especially with the incremental finance costs on the intercompany loan to the Brazilian subsidiary, how should we think about your payout ratio? Will you just extend the payout ratio to maybe, I don't know, 60% to 100% and increase the dividend for this year and have more flexibility because the balance sheet is still in very good order? Thank you. Well, let me start with the question on OpEx and CapEx first. Yes, we did flag as of today's presentation that we are currently in a phase where we see the need for CapEx and OpEx investments to make sure that our business becomes omni channeled and we maintain our leadership position to that. Part of the realization of the investments you will see in more detail as our colleagues demonstrate in the afternoon And it's more maybe just a tactical issue to that, but until and Claus mentioned that we will take over operation from AVATO in May next year, we are now in a phase of double lending costs. But there are also investments beyond that building digital competence, digital content, which we see now as a step change in our capabilities, which weighs on our OpEx development in the current year. And this is happening in a year where unfortunately we have a weaker market environment in terms of flattish or negative like for likes. Nevertheless, we strongly believe in the need of investment in these fields, which has driven an over proportional increase in general OpEx in the year. But we'll execute on this program in a wise structured way and we expect to see already benefits after the completion of the in sourcing, as I said, in the Q2 2016. Beyond that, we committed to invest into marketing to the brand. You remember that we announced that almost more than 2 years ago that we expect as a percentage of sales 6% to 7% higher as a percentage of sales which is higher than our historical run rate of 5% to 6% and we think that's widely spent especially with the investment needed in the digital field. But we do expect also going forward, so as we go into the later half of twenty sixteen, latest in 2017 2018, so REIT again operational leverage to the group. So our midterm achievement of the 25% target will depend on OpEx leverage and we do expect in the outer years this to be contributing to the group's profitability. CapEx will come slightly down. I think we mentioned that on one of the later charts, going back to forecast point earlier due to a lower number of white space addition to our network. Not dramatically, I would expect that we see compared to what you just quoted CapEx as a percentage of sales, something between 6% and 7%. I mean, clearly, we need to have some flexibility to guide you on that one on the annual forecasting base, but it will not limit our casual capabilities. And let me finish with comment on dividend. First and foremost, we have to focus on completing and delivering results for 2015, which will fund the dividend proposal for fiscal year 2015, but you can be very assured and I think we've explicitly stated that today that we are aware of the dividend yield and the dividend potential of this brand. We have been very explicit with our payout ratio of 60 percent to 80%. You can be sure that this will be taken full consideration by the Managing Board and the Supervisory Board. Let's stay on the side. Thomas, you want to continue? Thank you, Mark. Thomas Hovair from Citi. Three questions, please. The first one on your 2016 qualitative guidance, that growth rate below the long term growth rate potential of high single digit. I assume this probably includes still like for like below the mid single digit growth you need to protect EBITDA margin. So how should we think next year, given your investment in place, about EBITDA margin? Secondly, a question on Womenswear. I'm surprised that you're not a bit more ambitious on the penetration of Women's Wear by 2020. I mean, it still looks like you're perhaps questioning whether you should push further into that category. What could you remind us how you think about the arbitrage between the 2 categories in terms of space allocation, in terms of investments? And thirdly, question on sourcing. Can you explain what are the main changes foreseeing in terms of sourcing strategy between in house and external between the various geography? As you're moving up the core BOSS brand upwards to luxury, how far can you leave the sourcing strategy and change in terms of the value proposition for the consumer. I guess you perhaps need to raise the level of, I don't know, quality or some of the key features that the luxury consumer is looking for when buying a €3,000, €4,000 suit? Thank you. You want to take the points on gas sourcing first? Yes, okay. Let's start with the source is it Mike? Sourcing topic. I think the sourcing portfolio that we have is very good in shape. Talking about luxury, we have invested in Turkey to shift production volume in a certain amount within East Europe to Turkey. This makes definitely sense also on the luxury aspects because our production that we have in Turkey is definitely benchmark in the suit production, shirt production as well as women's wear production. This is 15% of our sourcing volume. Here, the key focus is on BOSS. Talking about women's and coming back to your question, what do we do in other countries? As we said also last year, there is a certain shift from China to other countries, but this is definitely a topic which is important to achieve the entry price points that we need for Orange and for YUGO for the wholesale strategy. Talking about women's wear and the store expansion, I think we expand with our Woman's Wear's basis in stores where it makes sense. I think there, these are definitely the metropolitan cities and you will see very interesting and competent offer in our ambassador stores that we have opened last year and we will continue in this direction. But I think as we said, we open womenswear spaces there where we see that from an environment perspective, competitive wise and also from a demographic point of view, it makes sense to invest in women's wear. Coming back to your first question, you're right. We do see, as we demonstrated today, difficult trading trends and environments in the U. S. Market and China, and we have no reason to expect just because as January 1, 2016, this trend will change. So what we shared with you today is that we our projection by 2016 is now based especially in these two key markets a cautious outlook. We expect the market development in these two markets for HUGO BOSS to be below our midterm average. So we do expect a recovery, a stronger development for sugarbros on a midterm base, but not in 2016, at least the first 6, maybe even 9 months to the year. This weighs on sugarbros profitability as we all know, because the implication to that is not over, it weighs on overall growth rate, but also on like for like growth as we have also experienced in 2015. So this is not giving you already more specific guidance on EBITDA margin for 20 16, but it will be clearly a factor which will wait on profitability progress in relative and absolute terms of the next year. Maybe we go back on the right hand side. Fred, do you want to continue? Hi, there. It's Rod Smith from UBS. Three questions for me, please. First of all, we're seeing, obviously, a lot of pressure on full price sales in the U. S. And I just would be interested to hear how is that affecting your discussions with some of your key partners there in terms of when you might be able to take over more space and how it's affecting that? The second question would just be if you could update us on your CapEx per square meter, bearing in mind the sort of more evolved consumer concept that you're running with? And the third one would just be from a tactical positioning, are we seeing any material shifts in the marketing mix ahead of 2016? Thank you. The first question belongs to the U. S. In terms of discounting. It's always easy to sell a great product at discounted prices. Our children can do it. And especially when you get additional financing from your vendors in order to do so. This is what happens in the U. S. For years, asking brands to participate with markdown support, financial markdown support, return guarantees to do early accept that there is end of season sale activity because we don't sell 100% of our product at full price. We also accept that we need to proper manage a certain number of outlets without going overboard in order to make sure that what we don't sell in our end of season activity doesn't need to be burned or thrown away and can be sold in entities which are today managed and operated in a very professional way. What we don't like, and this is what we simply express, is that our most important brand is sold at 30% 40% at the beginning of the season because we do too much, we invest too much from a branding, media, communication, but also from a sourcing and sustainability point of view in order to ask for full price respect. We want to be respected and this is what we're currently doing. So it's not so complicated. It's not easy because those discussions are never producing fun, but we believe it's important for us because most of our business in the U. S. Already comes out of own retail and we need to protect our own investments, which are linked to own retail. And for that reason, we continue to have wholesale with our wholesale partners, but only to the degree that they feel comfortable to, 1st of all, sell full price and then go whenever the overall end of season selectivity starts and go into discounted prices. That's the answer to your first question. The second is with regard to the media mix. There is change to be expected because what we have done in the wholesale arena moving from wholesale to retail right now is also happening in the media arena because traditionally we pay print for printed advertising by advertising spaces and received some kind of return via the editorial coverage. With print losing importance and online editorial content rising, we are more and more responsible in terms of creating this kind of content because there are certain groups able to help you to create this content around your brand and to leverage existing content in order to make it relevant for the social web serve and consumer. But our responsibility in helping create consumer relevant content in the web will definitely rise and ask for investments, not only with regard to talent and teams, but also with regard to being present in this environment. So there's a trade off in between the traditional media landscape and the new landscape with more editorial content coming from us. You had another question. It was Just about how the CapEx per square meter was now looking? There's no change. We are still at something around €3,000 per square meter in free standing stores and something around it depends on what we do in department stores. Sometimes we don't touch the ceiling and we don't touch the floor. We simply bring carpet and furniture and back wall, where we are in between €900,000,000 12.50 euros per square meter for shop in shop. And just to follow-up on the marketing mix, just by region, are we seeing any shifts coming 2016 in that perspective? Not in a major way. Yes. Okay. Let's stay on the right hand side. John, you want to continue and then we come back to the middle. Yes. Two questions. Firstly, on the EBITDA margin, with the revenue guidance lowered, the kind of cautiousness about investing near term, you'd probably imply that there'll be a flat margin next year. So how would you try and grow margins next year? Is that simply not a priority at present? And secondly, just about the strategy. You had in the slide about springsummer 2016 wholesalers are getting a much bigger share of OS Red. If I'm a consumer to go into a shop to look for a suit, you're going to be kind of competing. With you selling the core BOSS, your wholesaler selling BOSS right at €100 cheaper, for not entirely sophisticated purchaser, you may go in and say, why your suit is €100 cheaper than the core brand? And obviously, with these chaps, the fact they have Boss Red, they're going to be kind of incentivized to sell that and would probably push the sale. It's just more expensive there. It's the same quality. So how do you kind of how can you kind of go succeed when your wholesale are going to be selling suits slightly cheaper to your core We don't have cheap product in our assortment. And the second is, I really would like to walk with you one of our department stores, we talk about Degenkloppenburg to explain the difference today before in order to make it easier to be understood. The YUGO offering takes place in a complete different part of department store when we talk about category than the BOSCHOP. The category departments have nothing to do with the exclusive or excluded departments in department store. There's always a difference. And we try to make sure ideally to be in charge because whenever we invest with own shop fits, with own people, with own merchandise follow through software, we have a different grip on the activity than in a traditional apartment. We have been in this category apartment business and we could have said easily, we stop it and over sudden, we are stopping to have a presence in a still relevant part of the business, which, as I mentioned to you, over time will run out of relevance. But for the moment, there are 2 very important markets in Germany as well as in the U. S. You can say Germany, Austria and some Eastern European markets where our German wholesale partners have developed some inroads, which cater to a customer who is rather price conscious and who wants a large offering of different brands more or less on the same rack. And this is what we have stopped to continue to honor for our BOSS brand. So we moved out of those departments into the famous exclusive or exclusive departments with shop in shop presentations already undertaken by our competitors and we moved the YUGO and the GREEN collection offering closer to what those category departments are looking or let's say customer shopping in those category departments are expecting. It's a different business, but it's not a cheap business. We are still premium. We are the most, I would say, the most expensive brand in those category apartments with a clearly differentiated offering to what we do under BOSS, not only in shop in shops in those upper floors in the same department, but also with regard to our freestanding stores. So there's a real difference. But again, I propose to go and visit this in order to make it very clear for you. Where? You come from From London. From London. So in London, you don't see this anymore because they stopped it already. For example, in France, the category department in major cities disappeared because department stores like, like, like, have given completely the management of their floors to the brands, to the industry and stopped dealing with category offerings because of the very importance of tourism taking place already in those cities. So if we speak about a need to honor category requirements for the YUGO brand, the red brand and the green brand, Bosgreen, it is predominantly for Germany and the U. S. Let me come back to your margin question just to complete that. So we are currently in a phase where the investment into OpEx into Omniture wait on our OpEx development, but there's a clear business case behind that and we are very confident that this business case will deliver superior returns and we see first results after the sourcing discontinuation of basically funding this business twice externally internally. So on this one, we are very confident the company will after face investment again deliver OpEx leverage and we are willing to be held accountable for that. What is more difficult to predict and we shared market data with you, if you got a better crystal ball to tell us when the Chinese market will recover, we can give you the exact time point in time we expect accretive development into China. Since we all do not have this crystal ball, we have to work with the visibility that we have, which is murky right now for the Chinese market. And in this turbulent market environment, in terms of inventory control, cost control, we continue to be prepared for a difficult market environment. And unfortunately, as long as this difficult market environment persists, we will not see leverage due to stronger traffic numbers or return to the consumer to our stores. We are prepared for this phase and you can be assured that we are deeply convinced that we will enter this phase stronger than anybody else. So let's go back to the middle. I think Jurgen is getting increasingly impatient. Please continue. Right left, no middle. Okay. Three quick questions really. First on the online business or shall we talk about online later on? Then I cut it short, but you have still the opportunity to post your question and then we might park it. Okay. Pretty much around profitability of that business, heavy investments going into that business, when you think that moves into a profitability level that really adds to your omnichannel business? Secondly, category migration, how many stores are we talking about? What's the magnitude, some more details, for example, in those 5 to 6 key cities that you were talking about this change of category migration maybe? And total store number, 10 to 15 new stores, is there a store closure program you potentially need in order to be really focused on these presentation, the industry lacks newness. Is there anything you can do against that? Or is that something because you're not positioned as the leader in terms of setting new trends. You're more often following certain trends. Is there anything you can do against that? Yes, newness for us can mean a lot, can mean more refined services. So we will not leave our business because there are players in the consumer electronics activity and they should do their job. And as always, we already know that those players will see their own problems down the road as consumers are not a stable element. So they will also rethink about the importance of the newest iPhone or the newest iPad. That's something which we want to expect. We need to simply get better in our domain because we have a strong domain. We are the lead in this domain and all what we can do around reconforming our position in that domain linked to customer service will come. And for that reason, we consider the omni channel activity and the omni channel exercise we are currently running as something very new because you will see there won't be so many brands able to do what we were able to do up from the middle of 2016, even if it sounds as something you heard already at different occasions. The closing of stores is a, I would say, case by case decision. So we are extremely carefully evaluating stores we will not extend. And it depends on the neighborhood. It depends on the mall sometimes. It depends also on the ongoing importance of the city. But there's no plan in, I would say, in one of our draws telling us in 2016, 2017, 2018, we're closing 50 stores. First of all, there's no need because our stores are, apart from a couple of exceptions, are producing profits. And if we come to the decision not to extend existing leases, it's mostly based on what I try to describe, but it's not a master plan already existing in our mind. The omni channel activity, don't forget that we are replacing one activity, which is currently serviced by a third party and will not be any more continued up from May and will be replaced by internal capacities already existing, allowing us to do the same at more efficient at a more efficient situation. So this will help us not only to justify some of the initial investments into the omnichannel field, but also because we are profitable already in the omni channel and we are enjoying higher profits in the omni channel or let's say in the online commerce than in our traditional retail commerce that we will leverage it because a higher profitable business means the online activity is then going to leverage an existing profitable activity, which is the retail infrastructure we are operating across different markets in Europe and in the U. S. And for that reason, we believe it's going to be accretive and not something which is watering down our overall profitability once the business comes back as we would like to see coming back. Luca Sulka from Exane BNP Paribas. First, I apologize because it's easier to analyze and criticize than to run the company. You say today that you're convinced about the strategy, but admittedly, you didn't show us a lot in terms of results or in terms of trends that seem encouraging. Retail like for like was disappointing. And the wholesale transition in Europe eked out plus 1%. I don't know about how this is working in the U. S. But I wonder, what is it that you're seeing? And what kind of numbers are you looking maybe on a store by store basis that make you self assured that this is indeed the right way to go? Or it's just a deep ingrained conviction that the business has to be run this way? Thank you. Yes, a very, very important question, but it goes deep down into our overall strategy. So if we were with this strategy we announced for the time to 2020 only underway since, let's say, 2 years. I would say, understood, let's go deeper into this, but we have been highly successful for a number of consecutive years with regard to moving the company, 1st of all, from non controlled wholesale to fully controlled retail on a global scale and not only in certain markets. And we believe that leveraging the existing infrastructure, we own with all the responsibility I mentioned will now being or will now sit in this famous consumer centric approach. So understanding what we can do in order to increase loyalty and capture potentially interesting customers in a different way than we were before because we didn't even care about them. So that's the first answer. And sometimes we need to separate in between do we do certain things right and do we run them in a proper way, which is then going to show medium, long term better results or maybe not and we then have to work on certain flaws And how far is our operating environment affecting our activity? And I think one important answer to your question is, first of all, our activity in Europe is fine. So we feel extremely comfortable of what we have built here in Europe with a much higher share of responsibility when it comes to dealing with our final consumers than before. But needless to hide that we in Europe are also right now taking advantage of a more important tourism business. So that's something which is important. But even if I separate the local business from the tourism business, we continue to do well with locals in Europe. So that's also important. So it's not that Europe is simply taking advantage what currently is missing in China because the Chinese travel to Europe and the U. S. Citizens travel to UK or to France due to the exchange rate change in between U. S. Dollars and Europe. If we only look at what our local customers doing with us on the like for like, we grow in Europe. So that's good news. The second news is, I would say, market flaws and home made issues. And this is what we wanted to clarify in our presentation because there are certain things happening right now in China as well as in the U. S, which I would like to call market flaws. And we try to outline them here. But at the same time, we take full responsibility responsibility for what we have to do and what we have to address in house. And in China, it is clearly our not anymore appropriate price position, because we will not continue to make our Chinese consumers believe that simply buying a product at YUGO BOSS in a YUGO BOSS store because we don't have any wholesale in China at a substantially higher price positioning in China compared to other Asian markets like Japan and South Korea, but also in Europe makes sense. It is not anymore making sense. And I tried to explain how did we get into, let's say, the Chinese price position? How did we get into the French price position? Because our former owners, when the French President, Francois Mitterrand, decided to devaluate the French franc against the German mark, did not accept to take the hit. So each time when the franc came down against the Deutsche market and it happened several times, it was the only reason why Metairin was that the government had so long, they decided to increase the French prices. So, we are living with the situation. We know we have to address something we will address and it will probably be more price decreases in very high priced countries and continued sensible small price increases in low price countries. And I don't need to hide you that Germany and the U. S, due to the importance of former category apartments are rather low priced countries compared to the high priced countries, for example, like France in Europe or China in Asia, where we never had wholesale and where we always operated in fully controlled spaces now by us, formerly by franchise partners. So this is the one homework we have to do and it will be a year long exercise because we can't do it overnight in order not to lose credibility in the eyes of our consumers. In the U. S, this is the other homemade thing. We for more than 20 years accepted to be part of a couple of discounted activities for too long. We don't want this anymore because we know that our price, our brand, most importantly BOSS, is just fine for a very important moment in the season at full price. So also this needs to be addressed. It's a temporary exercise. We already taken care of this. It is nothing else than inventory management and distribution channel management and we are fully committed to do it. And for that reason, I would like to say, please believe us we confirm the long term strategy with all the workarounds as we I would like the category, for example, the category migration is a workaround in order not to lose an important business, we long term see anyway disappearing. The price adjustment in China will be a workaround and also the inventory control in the U. S. Will be a temporary workaround in order to get to the long term end result. That will be my answer to your very justified question. You're welcome. Sorry, in the interest of time, we are already a bit in overtime. We would like to give you a short break. Let's meet again here at 20 past the hour and then we start with the second part of the presentation. There will also be a Q and A session afterwards. So I try to make sure that the ones we were not able to give airtime now would do this after the second session. Thank you very much.

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