Mark Langer - Chairman of the Managing Board and Chief Executive Officer

Thomas Chauvet - Citi Fred Speirs - UBS Claire Huff - RBC Lucas Solca - Exane BNP Paribas John Guy - MainFirst Antoine Belge - HSBC Julian Easthope - Barclays Andreas Inderst - Macquarie

Thank you very much and good afternoon, ladies and gentlemen, and welcome to our nine months 2016 financial results presentation. Hugo Boss continues to operate in a challenging market environment.

In Europe, in particular, trends in the premium apparel industry continued to soften. The US market remained under pressure and highly promotional.

And while the Chinese mainland has started recovering somewhat, other Asian markets still face considerable challenges industrywide. Affected by this difficult market backdrop, group sales were down 4% in euro terms, or 2% on a currency adjusted basis in the first nine months.

In the light of the top line challenges we tightened our grip on cost management. The expansion of our savings program limited the decline of operating profit.

EBITDA before special items was 18% below prior year’s level in the period. Taking into consideration the negative shift effect in our wholesale business as well third-quarter revenues declined by 3% year-over-year excluding currency effects.

Operating profit was 40% lower in the quarter. In Europe, performance weakened in the last three months.

Third-quarter revenues were down 2%. We attribute this to the following factors; first, we suffered from weak demand in August and September, and particularly in key European markets such as Germany, France and Spain.

This was a reflection of overall market deterioration. In Germany, for example, market researcher GSK, described the industry’s most recent performance as almost historically weak.

Second, tourism has turned from a significant tailwind in 2015 into a headwind in 2016. The UK market is the only exception in this regard.

However, it was just a low double-digit share of our business there generated with tourists. The demand increase related to the pound devaluation only had a limited effect on our business.

And third, the region’s wholesale business suffered from negative timing effects in the quarter. In contrast, the second quarter benefited from the fact that many retailer partners had put a greater weight on the early themes of the fall collection delivered in May and June already.

On a year-to-date basis though the European market continued growing. By geography, the UK was the region's fastest expanding core market.

In the first nine months, sales were up 8% on a currency adjusted basis. However, sales in Germany, France and the Benelux markets all declined at mid to high-single-digit rates.

Nine month revenues in the Americas were 10% below the prior year period excluding currency effects. This was due to the US business, which was down 17% year-to-date.

Solid growth in Canada as well as Central and South America was not enough to offset weakness in the region’s main market. In the US, declines were driven by the wholesale channel.

In this channel, year-to-date sales are down 24% year-over-year. Around half of the decline is due to our conscious decision to exit distribution formats not in line with the positioning of our brands.

Specifically, we have sharply reduced the volume of off-price business. This includes the discontinuation of business relationships with value retailers but also the rightsizing of brand presence in department stores off-price concepts.

We are confident that this quality upgrade of wholesale distribution will contribute to brand strength and desirability going forward, ultimately also benefiting trading in our own stores. At this stage, however, sales in own retail continued to be under pressure from the diversion of customer traffic into multibrand formats, which compete almost exclusively on price.

Underlying retail trends were somewhat better in the third quarter compared to earlier in the year. However, this was largely due to an easing of the comparison base rather than a fundamental trend change.

Finally, sales in Asia Pacific recorded a 5% decrease in currency adjusted terms in the first nine months. In the third quarter, however, performance improved sequentially.

This was entirely due to China, where sales declines moderated to just 4% in the three month period. This represents a major improvement considering that we have reduced prices substantially and our store base has shrunk by 12 locations since the beginning of the year, including 17 store closures on the Chinese mainland.

In addition, Hong Kong and Macau, which account for around a fourth of total China sales, continued to record declines and dragged down the overall market. On the mainland alone however, comp store performance was positive again in the third quarter with strong improvements in August and September in particular.

This compares to still high single-digit negative rates in the first half year. We attribute this success to four major factors.

First, we benefited from the adjustments we made to our pricing and merchandising strategy. On the new lower price levels, we broadened our offering at accessible entry price points on the one hand.

On the other hand, we created exciting assortments by emphasizing high-end concepts such as our boss tailored range [Indiscernible]. Second, we improved merchandise planning and in-season management avoiding stock out situation such as the ones we suffered from in the first half year.

Third, innovative marketing concepts, particularly in digital, supported brand momentum and customer engagement. And fourth and finally a gradual recovery of the Chinese premium and luxury menswear apparel market after two years of double-digit declines provided some tailwind.

Based on these factors, we are confident to sustain the positive momentum also in the months ahead. By distribution channel, group owned retail sales were up slightly in the first nine months.

This was primarily due to the contribution from expansion and takeover activity in the prior year. Keep in mind that stores opened last year will only become part of the like for like universe in 2017.

On a comparable store basis, revenues declined by 7%. In the third quarter comp store sales performance improved gradually to a negative 6%.

However, all regions continued to perform in negative territory. Europe and also Asia Pacific performed better than group average, while trends in the Americas remained subdued.

Traffic declines continued to be a major drag of performance here. Disappointingly our online business had a negative impact on comp store sales as well.

It was down 8% in the first nine months, including a mid-teens decline in the third quarter. As we [have said] at our last result presentation already, the steep increase of traffic coming from mobile devices is having a negative impact on sales performance at the moment as it dilutes conversion rates.

We are addressing this in multiple ways; most importantly we focus on improving the mobile website check-out channel, where we lose far too many customers at the moment. In October, we also launched a mobile app where the check out process is easier compared to the mobile site.

Finally, at the beginning of October as well, we relaunched hugoboss.com with a goal of improving usability for mobile devices in particular. In addition, we have made obvious progress when it comes to the look and feel of the site, enhancing the quality of product presentation, as well as expanding editorial content.

We get encouraging feedback from customers on the new site, but we will clearly have to put more work into further improving usability and onsite merchandising to turn around online sales trends. Our physical store network grew by net new 14 freestanding stores in the first nine months.

While we added 33 stores by openings and takeovers, we also shut down 19 locations. Europe was a focus region in terms of expansion, but also closures.

Most of the closures here as well in the other regions related to locations where we simply choose not to renew the rental contract so that reflects the normal course of retail business and came at no exceptional cost. However, we are also actively closing underperforming stores as part of our program to safeguard the group’s long-term profitability.

Earlier in 2016 we announced that we intended to close 20 stores in China and much more importantly from a financial perspective an additional 20 margin dilutive stores worldwide. In doing so, we accepted substantial one-time costs for the benefit of eliminating losses in the future years.

In China, we are largely done. By the end of September 17 point of sale, some of them counted as shop in shops have been closed.

The global closing program is on track for completion by end 2017. As of today, we exited three point of sale including our former flagship store in Moscow.

As a reminder, provision for the expected exit costs have been booked as special items in the second quarter already, so these closures had no direct earnings impact in the third quarter. Wholesale revenues declined by 8%, excluding currency effects in the first nine months, in line with our expectations for the full year.

The distribution changes in the US I outlined a minute ago were the key drivers here. In addition, weak demand from retail partners in both Europe and the Americas also had an effect.

In the third quarter, channel sales declined by 11% affected by the reversal of the timing effect mentioned before which had supported revenues in the second quarter. Let us turn below the top line, where we had good progress limiting the impact from the current top line pressure.

In the year-to-date period, the group’s gross profit margin remained unchanged compared to the prior year period. While we benefited from a positive general mix effect, the price reductions in Asia had a negative effect.

In the third quarter, the overall picture was similar. At 64.7%, gross margin was virtually the same as in the prior year.

In addition to a positive channel mix effect, we reduced rebates in all distribution channels. On the negative side, the devaluation of the British pound caused an adverse translation effect.

Price changes however, were not a swing factor in the quarter any longer. This was due to the fact that the effects from the adjustments in Asia is now abating giving that we had started reducing price levels in the second half of 2015 already.

In addition, increases in Russia and Germany in particular had an offsetting effect. On the cost side, the efficiency program announced a few months ago has generated even better results than initially anticipated.

Selling and distribution expense growth was curbed by successful rent renegotiations particularly in Asia. Additionally, we reduced marketing expenses proportionately to sales.

G&A expenses benefited from tight operating overhead cost management. All in we now expect to exceed our original savings goal for the full year.

Instead of the €50 million targeted earlier in the year, we now forecast expenses to come in €65 million below the original budget. The additional benefit has to do with the better retail cost management as well as the streamlining of marketing expenses.

Nonetheless, EBITDA before special items was still down 18% in the first nine months. The group’s EBIT and net income declined even more significantly as a consequence of special items largely incurred in the first half year as well as higher depreciation and amortization expenditures.

However, keeping in mind that especially retail sales remained depressed also in the third quarter, this represents a better outcome compared to our expectations just a few months ago. From a regional perspective, profitability held up the best in Europe relative to the two other regions.

In the Americas, operating deleverage from the severe decline of sales led to margin contraction despite the strict containment of costs. In Asia, the profitability decline was largely due to the lowering of selling prices in China and some other markets at the beginning of the year, which was only partially offset by tighter overhead expense management.

Corporate unit costs were unchanged year-over-year reflecting strict expense control in central functions. Finally, let me discuss some key balance sheet and cash flow developments.

At the end of September, trade networking capital was down 5% in currency adjusted terms, as well as in euro terms. Relative to sales, this represents an improvement of 10 basis points compared to the prior year period.

Inventories continued to be well contained irrespective of the negative top line development. At the end of September, inventories declined by 1% excluding exchange rate effects driven by double-digit percentage decreases in the Americas and Asia.

In line with our guidance, investments were down 16% compared to the prior year and amounted to €119 million in the period. The decline was due to lower retail expenditures primarily as a consequence of more moderate expansion as well as the non-recurrence of several prior year projects.

This includes the relocation of our New York City showroom and the expansion of our production in Izmir in 2015. In contrast, our key investments remained on prior year levels reflecting the insourcing of the online fulfillment in Europe now completed as well as other ongoing digital initiatives.

As the result of lower Capex and trade net working capital improvements free cash flow increased by 14% to €106 million year-to-date. Net debt however was still above the prior year level at the end of the period owing to the earning declines and the dividend payout in May.

Our expectations for the full year 2016 remain unchanged. Group sales are projected to decrease by up to 3% on a currency adjusted basis.

In own retail, the contribution from new space should compensate for declines on a comp store basis. Sales in the wholesale business will decline by up to 10% in currency adjusted terms.

A stable gross margin development and disciplined cost management should continue limiting the operating deleverage from the negative sales trend. Consequently, we project EBITDA before special items to decrease between 17% and 23% in 2016.

While we have not changed our profit outlook despite higher savings, even stricter than initially expected cost management should keep us well above the lower end of the guidance range for EBITDA even if comp store sales performance did not improve to the year-to-date levels in the remainder of the year. Investment should amount to between €160 million and €180 million visibly below 2015 levels.

Hence we also expect working capital management to make a strong positive contribution, free cash flow is projected to remain on prior year levels despite the earnings decline. Our most recent performance testifies to the effectiveness of the measures we have initiated over the last few months.

The price adjustments in Asia are starting to pay off. The containment of rebates in own retail supported brand strength and contributed to the stable gross margin trend.

Strict inventory management and disciplined investment activity will ensure that free cash flow will be on prior year levels in 2016. And even greater than planned cost savings will limit profit declines.

Ladies and gentlemen, we are a company that has run a very successful business for many years. This has made the development over the past 12 months all the more sobering not just for me but for everyone at Hugo Boss.

We take pride in having adjusted our cost structures very quickly to a more difficult industry environment and company situation. There is no doubt that Hugo Boss continues to stand on a very solid basis.

But we all have the ambition to return to growth the sooner the better. On our investor day on November 16, we will be giving you a detailed account of our plans for the medium and long term.

But before I will meet you there, let me answer your questions on today’s set of results and our outlook for the remainder of 2016.

Good afternoon Mark. I have three questions please.

The first one on the cost savings, could you give more details on the nature of these additional 15 million of cost savings, what is the timing of this and do you think you have done the bulk of the cost-reduction efforts, I think 65 million is about 5% of your total cost base. Secondly, on the LFL, which improved marginally I would say sequentially from minus 8 to minus 6 quarter-on-quarter, what markets have improved beyond Mainland China, and conversely which markets are worrying you as you enter into the important festive season.

It will be great to know what were the LFL in the month of September and October compared to minus 6, I think we have seen these two months overall quite better than Q3 for some of your peers? And lastly on the dividend, you have guided for free cash flow of about €210 million, I believe this means you are comfortable with consensus of dividend per share I think of €2.35, €2.4 this year that would mean you would be exceptionally above the 80% payout target, could you confirm that?

Thank you.

Thanks Thomas. Let me start with the cost savings.

I think we highlighted as part of the call that we were quite pleased by the improvement that we all were able to achieve in terms of adjusting our fixed cost base on the retail side of our business to these [trends], where we had to work with a assumption to what degree we are able to adjust in particularly our rental obligation, we have seen better performance but it is also clearly due to some extent that our performance related part of rents tied to the top line development proportionally also declined in these markets. But overall we were pleased with our ability to adjust cost savings also based on some very tough negotiations with landlords, which clearly have also noticed our determination to walk away and basically call and discontinue operations that have proven to be not successful for us.

In terms of like for like performance by regions, we are seeing a slowdown compared to the first six months particularly in Europe and I think we commented on that one in tourism, which was still supportive in the third quarter 2015, turned into an headwind in 2016 in some markets, and particularly in Germany also the effect from the price adjustment that we have done in Europe to bring the German price levels closer to the European average might have also played a role. As you probably know, it is too early for us to comment on our expectation on the dividend proposal for the year 2016 at this point in time, but you rightfully picked up our comments on cash flow, we have raised our expectation or the principles driving our dividend proposal for the current fiscal year, not to be based only on the principles, which have served us right on a 60% to 80% payout of net profit, but that we would also take the ability of the group to generate a sufficient level of free cash flow plus the outlook on 2017 into consideration when it comes to framing our dividend proposal.

So let us leave it at this stage, I think we are happy with the progress what we have been able to generate in terms of free cash flow in a difficult trading environment. We still have to see what will be our financial outlook for 2017, this is at the beginning of November too early to comment on.

Thank you. Just a follow up on the LSL so behind Mainland China you didn’t see any improvements in other markets and also what was a bit of color on September, October, did things improve from the minus 16 in the third quarter?

Yes, I think I mentioned that we have seen some improvement in the US but we’re bit cautious because we think about – it can be possibly due to the analyzing of a very client that we experience in the second half of 2016. So, here we would still say it’s too early to tell it remains a difficult market but the quarter after quarter performance on the like-for-like base in the US improved slightly in the third quarter.

In terms of freighting trends we’ve seen some slightly improvement to the end of the third quarter but the trading trends remains relatively stable, the commentary we’ve seen from any industry we search also indicated that in particular the month end of July until early September has been particularly challenging on European markets not only for us but also for other market participants.

Okay, thank you, Mark.

Hi Mark, thanks for taking my line. I’ve three questions please.

First one follow up on Germany it looks like you took high single digit prices started H2, so I just wanted if you could talk more about the volume reaction you’ve seen in your retail stores to that price mix. Also how you now feel about the price gap between Germany and France some of that now is appropriate.

Second was little bit more on the ex-cost sales you talked about, is the full level of this $50 million cost saves is going to be incremental into H1 next year? And the last one was on your recent handles about interview, you indicated plans to abandon the price elevation strategy and return to selling premium and clothing.

I just want before the CMD if you could perhaps give us an early sense of what this means in practice your price mix outlook, does this also perhaps mean less strict to discounting ahead? Thank you.

Let’s start with the price adjustment we’ve done in multiple categories in Germany. We’ve lowered the price gap between Germany and France which was around 30% or something that’s now slightly less than 20 to take very visible price for entry price on few things which we increased from 400 to 500 euro which we delivered for winter.

Collection but it has been broad based roughly 15% to 20% price increase that we’ve seen across major categories. We’ve seen as I mentioned earlier this has from our perspective some impact on unit sales on retail which also contributed to the negative performance as we had.

Overall, we would say our performance in the third quarter as relatively close for the overall industry so I think it was only marginally worse than what the overall market has experienced in Germany in the third quarter. On the cost savings, please always keep in mind that was not $65 million cost savings against the cost base of 2015 that we always framed as these cost savings against original budgeted cost development for the year 2016 that we started to see.

So, I’m very pleased that we’re not operating cost development in particular in the third quarter which is in cost lines now in-line with our top line that we’ve renegotiated our rental in many instances but also have slowed down significantly our build up of resources on focused on these elements most important for us in particular in the field of digital I think we mentioned that. I think this is also a lead into your third question, we will focus on the core of our business in terms of our product range which is menswear and apparel in particular, it’s also in terms of price positioning which is the upper premium market and not the luxury.

Here we intend to focus on marketing spending Ingel and his creative teams will work on strengthening our product offering not only in terms of the width of the offer but also in terms of attractiveness we think that in particular in the menswear, sports, casual wear where our improvement needed based on the feedback from our retail merchandising and wholesale partners. This will become visible in more details at our capital markets day where Ingel will detail the measures we take also in terms of increasing the overall attractiveness and desirability of our offering.

It has nothing to do with, I think we’re on a pretty good track and this is also demonstrated on our Q3 numbers that we continue to hold the very tight line, tighter the many other market participants when it comes to in season promotion, but as we discussed earlier, our strict management on discount has an implication on the traffic numbers in particular in the US market.

Okay, thanks.

Thanks Fred.

Hi Mark, thanks for taking my questions. I also have three please.

The first one, just wondering if you could give an update on the brand repositioning strategy in the US please, so you completely out – specialist now, post Masseys, I know what’s happening with outlets in the US please that’s the first one. The second one, just around pricing in China, are you happy with where the prices are after the last investment or can we expect a static down after next year.

And then third question, just around marketing spend just wondering if there is any area in particular where you call that back and whether there is any impact on sales as a result? Thank you.

All right. As we mentioned in the call we’re happy with, obviously we were able to implement a pull on our presentation out of price third party distributions.

This is from our perspective completed, we’re on ongoing discussions with our full price partners which as you know also operate up price distribution channels be it a north from be it a sack or Bloomingdale to what degree we can further reduce our export and their up price channels where we’re also clearly have the strong interest to maintain and improve our full price relationship with them so this is an ongoing effort where it’s too early to tell to what degree this will further reduce us. It’s clear that our intention is that also our wholesale partners use up price channel only to the degree to clear inventory which are brought in the regular course of our business relationship and not to support the standalone business model.

This also implies to our outlet strategy in the US, we would to some degree subscribe to the view that this is the market where Hugo Boss has an upper end of share of sales in the up price channel compared to the rest of the world. We think we’ve taken the right order of measures that we first cut third party up price channels before we’re going forward, we will also have to address to what degree we should have the presence in terms of number of stores and share of retail sales in the up price channel also managed by us.

Over the next couple of years I would expect that we make also progress to improve the sale of retail sales generated by our own profile stores. In terms of pricing, that pricing impact in China, the price adjustment that has the very positive impact and clearly have been supported by other factors outside of our control, we were surprised positively by the volume uplift that we’ve experienced over the couple of weeks, we will very carefully evaluate the impact so that Marc Le Mat, the Managing Director of China will also be present at the Capital Markets Day to go in more detail what has worked well from our perspective to increase in particularly in terms of volume of share into this market.

We will not rule out for the pricing adjustment in China, but giving the strong momentum we’ve generated so far I don’t see any immediate need for further price adjustment. In terms of marketing spending, reallocation, of course, we’ve continued to focus on marketing spending on these measures which are important to drive traffic in conversion in our source, these are investments in different fields, I think I mentioned that we – and are trying to build on the momentum which we newly introduced of an alternate action Hugo Boss to continue after the re-launch to work with certain optimization when it comes to driving traffic to our store, which has been reduced as print advertising in-line I think which is industry wide phenomenon and with the second half of the year we’ve refocused our marketing efforts the way from womenswear to more healthier balance with up to 75, well this year it’s more 50 to 75% share of menswear compared to the stronger focus we had on womenswear before.

Got it, thanks very much.

Thanks Claire.

Yes, good afternoon. I was wondering if you could potentially help us to try and understand how much of the [indiscernible] like-for-like is coming, one more adjustment that you had to take like for example the price cut in Germany as well as from contingency situations that you faced during the period like weather for example.

And how much is instead coming from the broader market down with pressure that you’re seeing. Connected to that my second question is, we’re all clearly hoping that like-for-like we move to the positive and that demand will move in the right direction, but if it was not to do so, I wonder if you’ve prepared contingency plans for further cost efficiencies going into the new year as we must be investing mode.

And what kind of like-for-like decline you would be able to resist assuming that you can defend free cash flow generation? Last but not least I was wondering when you see digital contributing positive tailwinds to top line growth and how much would that be going forward especially looking again at 2017?

Thanks very much.

Thanks Lucas. I think we would all agree that your first question is a very tricky one, but let me try to give a neck on it.

But first, just to correct, Germany was not a price reduction, wasn’t price increase but I think you also referred to factors like this whether they’re now one-time or non-recurring it’s a clearly question of debate. If you look at, if you say like-for-like development across all geographies, the key factors on physical retail is the decline in traffic and sometimes we can explain these factors like we were able to do in the most part of Europe with data we’ve from Global Blue and other sources that we’re clearly dealing and environment with much lower number of tourism that we can separate what is the development domestic where this tourism and tourism as we explain have been, is of huge factor.

Here I would argue with the more stable macroeconomic environment also concerns about security as of doing that Europe will continue to be our favorite travel destination in particular with the upcoming middleclass emerging markets. What’s clearly phenomenon that I see more on a midterm base is the changing purchase behavior in particular from an younger generation which is our co-opt business domestic assumption this goes back to also your third questions.

We’ve to be quicker, we’ve to be more agile when it comes to serving these younger customers across multiple channel. So the historical operation between online store and physical retail has clearly gone, we’ve made progress in offering industry standard services, we now have to surprise customers with services that excel in terms of execution and range other players in our industry and we’re clearly working on that one and this will be one major topic as part of current presentation from Richard Lord Williams at our Investor Day what is already in place and what is further needed to steam traffic which can and will also in the future from my perspective increasingly we will come via – possibly via different sources.

Digital influence sales has to become again a contributor not a drag on performance like it was in the first nine months. We’re a bit cautious to forecast the exact time and date when this will happen, but we can ensure that we’re clear, I personally see it as a biggest disappointment, the development in the third quarter in the online business and the majority of our resources are not focusing to not only improve online as such but also the online impact, the impact online could have on our physical retail business.

And this brings me to your second questions, clearly we’ve lowered the bar of needed like-for-like improvements needed to maintain retail profitability, we’re not able to sustain retail like-for-like at least on the last 12 month base, once we have negative territory, but the minimum to maintain retail profitability has come down, historically we have guided this for low-to-mid single digit like-for-like needed to maintain that giving no improve cost discipline to the group, this level has been lower, but to return to growth and return to increase in profitability, the group has to return to at least lower single digits like-for-like development, all other things equal.

Understood, thank you very much indeed.

Thanks Lucas, see you in November.

Thanks, Mark. Three questions please from me.

You mentioned in the nine months report that you were going to work more intensively on market presence and brand promise. Now I guess within the context of a soft to comp and the like-for-like is still down pretty heavily in the third quarter and that weak performance in online that you just mentioned.

Can you elaborate what you mean by those two points and what you think the financial impacts can be? In terms of the cost savings that we've seen come through the additional $15 million to $65 million for the year, within the context of the other operating costs which were roughly at $66 million of which I think $49 million are coming from store closures etcetera.

I think you mentioned that you closed three out of the global sort of 20 underperforming stores. Can you maybe talk about what are the potential costs we're likely to see rolling forward on the back of further store closures?

And then, maybe just following on Thomas’s question around the free cash flow stability in terms of that dividend payout, is it fair to assume that we should expect you to move closer to a 100% payout given the fact that the free cash flow looks pretty stable and that would be a one-off or is that a sensible assumption to make, obviously when you're just about turnout a more sort of branch potential restructuring during the capital markets day? Thanks very much.

Well, thanks John. Let me start with the first one.

And I think we touched on this one, I think also was part of the presentation in some earlier question. Clearly there's work to be done to strengthen and to increase attractiveness of our menswear offering both in clothing and furnishing, but also in casual wear and sportswear.

So here we're working on to have an above the competitive set offer in terms of quality but also in the breath of offer compared to what we were able to offer over the last 12 months. So, this is clearly miniature, serve our customers in our own retail network, our share of tailored and [indiscernible] has proven to be not sufficient to compensate for the losses that we have incurred on the entry price point and we know we're working that without walking away from our tailored platform, but I also want to make clear that this is not our intention but we need to right balance and clearly there wasn't a mismatch in particular on the entry price point in terms of the breadth of the offer but also in terms of the attractiveness but that's what we mean.

And our brand lines in more details will follow in our capital markets day, have to pay cohesive role that we are as a brands offering that's also easy to understand in terms of communications but also brand experience as a point of sale for the end consumer. On the cost saving, just to be clear, the expected cost impact related to the 20 overall largest loss making stores that we will close has been booked as part of the Q2 numbers, they were only marginal adjustments now that we are in advance negotiation and you rightfully pointed also that we have successfully closed already three out of those 20.

The casual impact as we actually settle these agreements will happen over the next 12 to 15 months. We guided you to expect that the active closure will happen over the next 15 months or the cash flow impact will incur the moment where they are closing agreed on, but from today's perspective, we don’t see any need to revise this number of the 20 loss making store that we have identified and decided to close at the half year result presentation.

In terms of payout, I understand your eagerness to understand, I have an absolute or relative terms to get a better guidance from the group on our potential guidance there. I believe that we can’t be more specific then I was earlier that we overall we reiterate our dividend policy as the right one for the group, as the group that will return to growth path that has a cash risk, cash generating business model.

I was rephrasing of the dividend proposal, we cannot allow us to lock us in an any specific percentage or absolute amount at this point in time given that we have no visibility or no sufficient visibility yet on our investment needs and opportunities for the year 2017 and international outlook for the year 2017. We will cast more lights on this point, I understand this is the crucial element of our equity story and you can be assured that we place enormous focus on our ability to create, to generate sufficient cash flow that it’s too early just at this point in time to give you more precise guidance on the absolute or relative amount of our dividend proposal, so please bear with us.

As soon as we have more needs to share we will come back to you, but this is not the point of time. Now it’s the beginning of November 2106.

Thanks Mark. Maybe just one very brief follow-up.

You mentioned that all your brand lines have to play more cohesive role going forward and can I interpret that to mean that during the capital markets day you will be confirming that you will stick with a full brand strategy, is that a fair assumption to make?

As I said, there is rework needed in our brand portfolio between our price points and the attractiveness of the offer, but we also have key indications that our brand line up in particular, the three different lineups under the Boss name and also in combination with the Hugo is not always easy to understand and to be precise from end consumer, and clearly there is work to be done and we’re working with high intensity with Ingel and the team together with [indiscernible] presenting the market to see where need for action, , we have to need for action and we will detail our plans on November 16.

Thanks very much indeed.

Thanks John.

So first of all, just three question just maybe a clarification, regarding the marketing to sales ratios, as a percentage of sales, is it expected to be coming down this year and as in the case in the first nine months. And my first question is relates to the performance of the core Hugo Boss brand, this is green as maybe [indiscernible].

Second question relates to women's wear, maybe a bit of comment on the recent performance and what should be the importance or the way that womenswear going forward in your strategy? And finally contribution from your store was quite high this year in the high single digit, which quarter should it be significantly slowing and what has been the impact of those high single digit new stores in EBITDA, was it dilutive or accretive to the EBITDA margin?

Thanks Antoine, let me start with the first one. We expect as the marketing to sales ratio that we’ve experienced over the nine months more or less stable for the full year.

So we are happy even so it's a completely different composition with the relative marketing spending that we have incurred in the first nine months. So we expect this also to be the true for the remainder of the year.

If I understand your second question correctly regarding the Brent line and as the Boss name, we as I also thought on we have very strong product offerings under the Boss orange in particular in casual wear segment in most markets they have number one or number two positions when it comes to the casual wear segment as most of our wholesale partners however we need to make sure and this part also work I mentioned earlier, that consumers always see Boss offering as one consistent brand offering and brand promise in terms of quality but also more important in the fashion degree targeting to the same customer just on different wing occasion where Boss black is clearly the wing occasions more on formal occasion on business attire green small on the casual wear similar to the Boss orange offerings. But these brand offerings clearly needs to be sharpened.

We have shifted from our today's perspective too much marketing support on the womenswear side of our business and we need to re-balance that to make it very clear to the end consumers what is the purpose, what is the role on man's line play viz-a-viz the end consumer. Womenswear has performed basically in-line with menswear line in the third quarter.

We continue to see surprisingly strong performance with Hugo line, Boss womenswear was a bit more subdued. But as I also mentioned in the interview that was already cited earlier in this call, we are fully committed to our womenswear business, we see it as pillar of our mid to long term growth.

However, we have to be cautious and well balanced in our investment and marketing decisions that we can only support womenswear to the extent that this is also supported by the size of the business in the contribution overall to our business. I think your last question was on the space sales and profit contribution from openings if I can reach out the numbers please keep in mind just to remind everybody in the call that any store that we have taken over or open since January 1, 2015, still is in the bucket of non-like-to-like so as the year 2016progresses especially in the fourth quarter the impact from new openings will become smaller.

The third quarter typically is the last major quarter where this plays role. So to answer the first part of your last question, yes, we except decrease in impact on new openings given that we have opened much lower number of stores in 2016 as we move into the fourth quarter.

What we have opened and added to our universe over the last let me calculate 21 months was the regular part of business. Typically the 150-250 square meter freestanding stores couple of concessions that we have bought back, our experience doesn't different 2016 to what we had in previous years that typically in the first or second year these stores are slightly dilutive to the store over retail performance but we see no major discrepancy or differences to historical trading trends.

Thank you. I mean, you just, follow-up to give a bit of guidance in terms of contribution from new store in 2017?

Not at this time, unfortunately not at this time. We will detail also our plans on the retail network as part of our presentation that in particularly we will have on the investor day to give you also more color whether and where we see further growth opportunities in retail but we will not comment on part of the conference call on 2017 space growth.

Okay. Thank you and we will wait until the 16, thank you.

See you there.

Yes, thank you. Good afternoon and -- I think Thomas must have been out in breakfast.

We are first in the queue. But anyway I’ve two follow-up questions.

First of all in terms of online is your online – are your online numbers included in your like-for-like gross numbers and in that case also with online now that you have actually re-launched the site, if you see, are you expecting to see an immediate term recovering in Q4 and is that sort of a positive effect now. And secondly, just coming back to the German pricing, it's also going to persist the price increases will have knock-on effect for the next three quarters I guess and let's say your long term aim to ultimately have single Euro based pricing across all the regions so that Germany will therefore still have another 20% increase to go to catch up with France?

Thank you.

Yes. For many quarters, the online business was accretive to our like-for-like performance overall, so to answer your question it's always if it's like-for-like so if we have operated in the specific market, the store already for completing the formal fiscal year, it’s like a physical store, it’s part of the like-for-like universal when we talk about retail performance.

It has been test to our like-for-like performance I think until Q1 2016 for the last two quarter testing diluted for this part of our retail like-for-like definition. Also by the way this is our consumers increasing CN as one retail channel independent whether they buy or return or pickup product in our stores on an outlet.

It’s too early to comment on the re-launch numbers we have some qualitative data that gives us the confidence that we’re on the right track, unfortunately the improvement on the desktop solution becomes increasingly less impactful as we, I think I mentioned this earlier, we see strong increases in the mobile devices and the way we’re faced within tunnel mix effect in online business which right now works not in our favor. I think we mentioned already some of the measures that we’re taking to improve also conversion rates when it comes to mobile devices, it’s too early to tell from today’s perspective what will be the impact in the month of October, November, December which clearly are the decisive months when it comes to online sales also in our business.

On the German pricing which by the way also affects the [indiscernible] also Austria these are the in total five markets for [Indiscernible] Germany and Austria which historically has been below the rest of European price levels, also in the euro zone. We see a tendency that at least in the euro zone prices also driven by what we just discussed the Pan-European online business will gradually become homogenized, Hugo Boss has taken significant steps towards this direction, today we will not speculate whether and when we see complete harmonization of these prices, but clearly we all recognize that there is strong market for us which we’re very likely lead to harmonization on one euro prices for many industry participants including us.

Okay, thank you. Just coming back to the online are you part of the Apple Pay 2 rollout with the finger print payments.

You are actually part of that payment processing?

Not yet, but we are looking at the functionality. I think this is right now we have also sizable business in the U.S.

where want to test this first. We are also the barriers some, legal barriers to overcome not only for us, but for the whole industry.

But we are planning to have the Apple payment on opportunity to become a variable first to our U.S. customer and then we will bring it to the rest of the world including Europe.

Thank you so very much. See you on the 16.

We are looking forward to see you there.

Yes, thank you. Few questions on working capital and CapEx.

It was well managed year-to-date. How sustainable do you see the development in working capital and CapEx and what else can you do maybe to improve working capital management going forward.

This is my first question. The second question is, you highlighted iteration in Europe in recent months.

Does this include October or have you seen any signs of stabilization maybe in a like-for-like basis given you had some order shifts between Q3 and Q2. And my final question is on your guidance for the full year.

What actually has to happen to get to the low to mid range of the EBITDA guidance given year-to-date has been slightly better than expected and you announced for the cost? Thank you.

Let me start with the balance sheet items and on the CapEx level, I think we have managed, I would agree to your assessment that we have been better prepared of managing all inventory levels and also introduce new processes to mitigate the impacts on slowdown in certain phases of markets by shifting merchandise quicker to these parts of our business where we still see stronger demand which has helped us in terms of relative performance even to improve by 10 bips versus last year but with 19.x, I think 19.1% 19.2% of net sales right now. We are still above historical low levels to the group.

I think there still opportunities to further improve however, we expect latest in the course of 2017 that we would shift year again not to manage and adverse market environment with negative sales trends but to make sure that we’re not, the sufficient level of inventory to be ready for pick up in the market based on better marketing, better product, better retail execution. On the investment the key driver to this number as you know is amount of money we need on to retail side of our business, we continue to invest into the IT and logistical infrastructure but this will continue to be the smaller part of our investment plans as we guided, also going forward that we don't see as many takeover and wide space and expansion opportunities also for the years to come, we expect compared to the 2015 level more subdued investment level.

However, we will not be more precise at this point in time to comment on investment plans for the 2017. In terms of the like-for-like European development or the like-for-like development, I think we tend to have a short memory.

We tried to calm your excitement about the strong Q2 development because this was slightly inflated due to strong events underlying wholesale performance and this is now working against the third quarter. So if you look at like-for-like develop in Europe as such it’s virtually unchanged in the third quarter compared to the second, we did expect a slight improvement and come to the perform – in the second giving that Q3 2015 wasn't easier to beat the quarter than the second quarter but the like-for-like trend in the third quarter was in Europe more or less the same.

[Indiscernible] was slightly weaker at the U.K. market slightly better.

And this brings me also to your question in terms of EBITDA guidance for the full year we have left the corridor unchanged to see our year-to-date performance is within the corridor. We are confident that we will hold the straight line in terms of OpEx development, we are confident that we will deliver on gross margin development which is typical to predict for us in the fourth quarter as paramount importance to that and the like-for-like in the fourth quarter.

We also guided the market to expect that even with the continuation of the current negative trend year-to-date and we are comfortable with our full guidance, but the like-for-like development in the full year first quarter clearly is the decisive element at which end of the guidance we will definitely end up on given that we were able to be at the upper end in the guidance of the third quarter with 6% negative like-for-like, gives us some confidence that this earnings guidance we feel very comfortable with.

Okay. Fair enough, thank you and see you soon.

Thank you. See you.

Thank you very much. Thanks for your interest and I think we have not been able to all questions, but if there is anything that's not been answered please feel free to reach out to Dennis and the team for any follow-up questions and I am really looking forward to see hopefully all of you in our Capital Markets Day event on November 16, in London.

Thank you very much.