Adler Modemärkte AG...Implementation of a sales-promoting visual merchandising concept COMMUNICATION STRATEGY “We offer our customers an overall experience ... Hermes-Otto International

Adler Modemärkte AG

Excellently positioned for future success based on strategic focus and technological leadership

E q u i t y S t o r y

The relevant environment for ADLER has changed dramatically

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… Digitalisation shapes how we communicate

… Digitalisation shapes how we shop

… Digitalisation is changing the competitive landscape

… Dramatic loss in retail footfall

… Significant excess floor space in brick-and-mortar stores

… Discount and premium segments functioning –

mid-range under constant pressure

Adler Modemärkte AG| Equity Story

We have a great starting position and three decisive USPs

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AD

LER

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We are focusing on the age group that shows the most dynamic growth. In general, our costumers are aged 50 to 70. The average age is 60.

Our customers are the most loyal ones and most willing to buy. ADLER’s conversion rate of 34.4% is among the highest in the industry.

Among all German brick-and-mortar retailers, we have the most detailed customer knowledge by far. In 2018, we generated 92% of our revenues with 3.2 million loyalty card

users. Thus, our CRM data pool with 9 million ADLER loyalty card users in total is comparable to the one of online retailers.

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The 55+ generation is a growing

target group with money to spend

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+10% until 2027

~ 15% € 3.2 billion

Development of the age group 55+

ADLER’s share of wallet (existing clients)

Total volume within target group

Growth potential

1. Growing target group

2. Increase of share of wallet of existing clients


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Customer centricity is the core of the ADLER “Strategy 2020”


Product strategy:

We strengthen our popular own brands and optimise our inventory

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… Popular product ranges will be expanded

… the number of external brands will be reduced

… Core departments will be given more floor space

… Inventory surpluses and shortages in stores will be reduced through better forecasting

… Gross profit will be lifted thanks to a reduction in mark-downs and more efficient

procurement processes

… Artificial intelligence and data sharing with suppliers improve purchasing efficiencyPRODUCT

STRATEGY

"We offer our customers

the products they love."

Strengthening of own brands

Number of external brands

2018: 31

2020: 22

2018: 81%

2020: 85%

Revenue shareown brands


Channel strategy:

Having a first-rate appearance in our stores and online motivates our customers

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Our brick-and-mortar strategy

…“Perfect store" between 1,500 and 4,000 m2 with the best product range for

womenswear and menswear and other relevant (brand) ranges

… First-rate service for ADLER customers

… Focus on sales excellence

… Store optimisation program initiated

… Closure of 5 underperforming stores already realised in 2018

Our online strategy

… Further development of our online offering

… Additional sales potential through utilisation/improvement of customer journey/experience

of online market places (Otto and Amazon) and development of additional customer

touchpoints

… Turn offline customers into ADLER app users

… Attract new and younger customers

CHANNEL

STRATEGY

“We will create the same high customer

satisfaction at each of our customer touchpoints.”


Communication strategy:

We will individualise and digitise marketing and transform ADLER into a meeting-place

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… Marketing will be more individual and more digital

… Higher customer centricity through smarter data analytics

… Utilisation of our CRM data wealth: >3 million active ADLER loyalty card owners.

… Individualised offerings based on actual purchase data/customer interactions

… Digitalisation of customers (-> ADLER App)

… Advertisement in popular magazines in order to attract new customers

… ADLER stores are meeting places

… Regular events encourage customers to spend more time with us (fashion shows, readings …)

… Implementation of a sales-promoting visual merchandising concept

COMMUNICATION STRATEGY

“We offer our customers an overall experience

that they enjoy.”


9 months results 2019

and strategy update

ADLER on a successful track

A d l e r M o d e m ä r k t e A G ‘ s 9 M - 2 0 1 9 r e s u l t s


Highlights 9M-2019 – on a successful track

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Positive development in Q3 2019 with revenue at €117.6 million (previous year: €117.3 million) and like-for-

like growth of 1.9%

Nine months revenue at €353.6 million (previous year: €360.4 million) – like-for-like in line with market development; impact from shop closures almost compensated

EBITDA of €33.4 million on previous year’s level (9M-2018: €33.7 million) – EBIT turnaround to €0.2 million (9M-2018: €-1.2 million)

Strong cash position at €46.1 million as of 30 September 2019

Substantially improved free cash flow in 9M-2019 (€22.8 million) compared to 9M-2018 (€15.7 million)

Store optimisation programme more successful than anticipated


Revenue turnaround in Q3-2019 – like-for-like +1.9%

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Revenue in m€ Revenue reached €353.6 million in 9M-2019,

quarter by quarter improvement in 2019:

-3.3% in Q1-2019

-2.6% in Q2-2019

+0.2% in Q3-2019

Like-for-like revenue:

-2.5% in Q1-2019

-1.0% in Q2-2019

+1.9% in Q3-2019

Revenue development in line with expectations

Negative impact of shop optimisation programme almost compensated

117.3 117.6

360.4 353.6

Q3-2018 Q3-2019 9M-2018 9M-2019

+0.2%

-1.9%


9M gross margin at 53.2% despite substantial

reduction of inventories

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Gross margin in % Cost of materials disproportionately down 2.3%

to €165.6 million in 9M-2019 (9M-2018: €169.4 million)

More efficient purchasing

Lower level of inventory discrepancies

Positive effect from change of warehousing service partner

Further improvement of gross profit margin expected in Q4-2019 through:

Further optimisation of inventory management and increase of share of merchandise directly sourced

50.3 50.3

Q3-2018 Q3-2019

53.0 53.2

9M-2018 9M-2019

+- 0BP +20BP


33.7 33.4

9.6 8.3

9M-2018 9M-2019 Q3-2018 Q3-2019

EBITDA impacted by one-offs and higher marketing expenses

with expected positive impacts in Q4-2019

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EBITDA Personnel costs slightly higher despite positive

impacts from restructuring due to transformation costs related to the ADLER “Strategy 2020” and

tariff increases

Significant savings realised in 9M-2019

compared to 9M-2018:

Freight, transport and warehousing costs

substantially reduced

Other expenses decreased by €0.3 million

Marketing costs increased by €0.9 million,

positive revenue impacts expected in Q4

Consulting fees and administrative expenses

decreased by €2.5 million

One-off effects (€3.0 million) due to:

Restructuring costs

Store closures

Comparable operating EBITDA relatively stable

at €36.3 million (9M-2018: €37.1 million)

-0.9%

-13.5%


Summary of key P&L figures

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Zahlen-Update

in m€ 9M-2018 9M-2019 Q3-2018 Q3-2019

Revenue 360.4 353.6 117.3 117.6

Gross profit 191.0 188.1 59.0 59.1

Gross profit margin in % 53.0% 53.2% 50.3% 50.3%

EBITDA 33.7 33.4 9.6 8.3

Adjusted EBITDA 37.1 36.3 10.3 8.8

EBIT -1.2 0.2 -1.9 -2.8

Consolidated net profit -12.6 -9.6 -5.0 -5.1


Continued high balance sheet quality

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in m€ 30 Sept. 2018 31 Dec. 2018 30 Sept. 2019

Total assets 439.4 411.3 395.6

Inventories 92.7 78.7 84.0

Cash and cash equivalents 47.5 54.9 46.1

Trade receivables 0.3 0.0 0.3

Equity 46.7 59.7 49.9

Equity ratio 10.6% 14.5% 12.6%

Trade payables 51.9 25.1 33.0


54.9

26.0

-3.2

Cash position as of 30 Sept. 2019 in €m

Focus on efficient working capital management

and free cash flow generation bears fruits

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Equity ratio as of 30 Sept. 2019

12.6 % as reported

37.8 % prior to IFRS 16

Our high liquidity and sound balance sheet structure provide a solid financial foundation in order to easily

finance substantial investments within the framework of our “Strategy 2020” on our own.

Cash

31/12/2018

Operating

cash flow

CF from investing

CF from financing

Cash

30/09/2019

-31.6

46.1

Working capital reduced from €53.6

million to €51.2 million after 9 months

Free cash flow reached €22.8 million, significantly above previous year’s level of €15.7 million

Further cash flow improvements

expected in Q4-2019 based on stronger operating performance


Store optimisation programme even more successful

than anticipated

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Optimisation programme fully on track

Four closures already finalised after 9 months 2019 (Worms, Herne, Neumünster, Wörgl); additional two closures planned in Q4-2019 (Peine, München)

Re-negotiations of lending contracts with substantial positive impactEarnings turnaround at one location (Frankfurt/Oder) – potential for additional success stories

Full-year one-off effects of €8-10 million

New store openings in attractive locations with attractive revenue potential and high profitability as well as optimised “look and feel”

Freiburg (re-opening May 2019)

Fohnsdorf (Austria, August 2019)

Zell am See (Austria, September 2019)

Leipzig-Seehausen (re-opening September 2019)

Moderate organic growth through additional store openings in the quarters to come


Next phase of ADLER “Strategy 2020” to be addressed

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Strategic focus on:

Marketing:

More digital, more individual

Customer attraction through events & improved marketing mix

Substantially improved utilisation of CRM data of 9 million loyalty card holders

Sourcing & products

Reduction of sourcing volume, logistics costs and improved inventory management

Establish fully digital value chain for all major products

Stronger focus on sustainable products and sourcing process

Sales

“Client is king” focus on customer needs

Increase of share of own brands to 85%

Store optimisation programme to be continued

Digitalisation

Investments of €3 – 4 million in IT and digitalisation projects p.a. (e.g. product information management, product

allocation, roll-out Tory robot)

E-commerce activities

Strategy upgrade with new online shop system, establishment of new online partners, better utilisation of ADLER app

Target 2023: More than triple the e-commerce revenue (2018: €9.6 million)


On track for FY-2019 – Revenue turnaround and further

earnings improvements expected for 2020

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* EBITDA (incl. IFRS 16): 2019e: €73 – 78 million

** EBITDA (incl. IFRS 16): 2019e: €64 – 69 million

Revenue

Slightly < €500 million

Operating EBITDA*

€27 – 30 million

Gross profit margin

Slight improvement

Liquidity

Revenue turnaround and further earnings improvements targeted for 2020 based on accelerating success

of ADLER “Strategy 2020”

on last year’s level

EBITDA incl. one-offs**

€18 – 21 million

Free cash flow

Slight increase


Our sustainability approach

A d l e r M o d e m ä r k t e A G


Procurement (examples):

Long-Term partnerships

Compliance with social standards is

a basic prerequisite for new

suppliers

Hermes-Otto International (H-OI) as

sourcing agency with an excellent

positioning regarding sustainability

topics

Human Resources (examples):

Various individualized trainings

Occupational pension scheme

Focus on work safety

Low employee turnover

Strong corporate culture based on

a more than 70-year tradition

Sustainability as integrated management approach at ADLER*

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Social engagement (examples):

Charlotta School (carlottacentre.blogspot.com)

Meena e.V. (meena-support.de)

Logistics (examples):

Ecomanagement in transport

Use of recycled paper for advertising material

Sales (examples):

“Feel Good” lable

Recycled carring bags (“Blue

Angel”)

Marketing (examples):

ADLER loyalty card

Data protection

*For additional information, please visit https://www.adlermode-unternehmen.com/en/substainability/sustainability/


Various specific commitments and sustainable

customer offer – selected examples*

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“Feel Good”: the lable for sustainable products at ADLER

ADLER‘s online fairtrade offer: https://www.adlermode.com/c-damen/special=special_fairtrade

*For additional information, please visit https://www.adlermode-unternehmen.com/en/substainability/sustainability/


Save the date Contact

Financial Calender + Contact

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► German Equity Forum, Frankfurt

25 – 26 November 2019

► Year-end Results & Annual Report 2019

12 March 2020

► Report on the first three months

5 May 2020

► Annual General Meeting

6 May 2020

► Report on the first half year

6 August 2020

► Report on the first nine months

5 November 2020

Adler Modemärkte AG

Investor Relations

Industriestraße Ost 1-7

63808 Haibach / Germany

Phone: +49 6021 633-1828

Fax: +49 6021 633-1417Email: [email protected]

a d l e r m o d e - u n t e r n e h m e n . c o m

Disclaimer on Forward-Looking Statements

This presentation contains forward-looking statements regarding Adler Modemärkte AG, its subsidiaries and affiliates, and the economic environment. All of these statements are based on assumptions that the management made on the basis of the knowledge and

information available to it at the time this report was prepared. If these assumptions do not or only partially hold true, or if additional risks

arise, actual business performance may deviate from the expected business performance. Therefore, no specific responsibility is taken for any forward-looking statements made in this presentation.


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Adler Modemärkte AG...Implementation of a sales-promoting visual merchandising concept COMMUNICATION STRATEGY “We offer our customers an overall experience ... Hermes-Otto International