Capital Markets Day, November 28, 2012 TOM TAILOR SOURCING STRATEGY JACOB ROJENS DIRECTOR GLOBAL SOURCING

Capital Markets Day, November 28, 2012 TOM TAILOR SOURCING STRATEGY JACOB ROJENS DIRECTOR GLOBAL SOURCING GLOBAL SOURCING – BIG PICTURE Cost is goi...
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Capital Markets Day, November 28, 2012

TOM TAILOR SOURCING STRATEGY JACOB ROJENS DIRECTOR GLOBAL SOURCING

GLOBAL SOURCING – BIG PICTURE Cost is going up

China is changing. Fast

No magic sourcing country

Efficiency

Change

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GLOBAL SOURCING – BIG PICTURE IN NUMBERS Country

USD billions apparel exports, 2010

Number of apparel factories

Number of workers in apparel industry (in million)

China

130

18,000

5-10

Bangladesh

16

5,000

4

India

11

11,000

1.5

Vietnam

11

2,000

2-3

Indonesia

7

2,450

0.4

Pakistan

4

7,500

6

Cambodia

3

250

0.3

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SOURCING CHALLENGES IN 2010 Cotton. Prices tripled over 12 months. Rampant speculation Increasing and strong domestic Chinese demand as well as a recovering global economy Rapid wage increases and inflation in developing economies

Lead-times increased resulting in higher freight cost

A need for a TOM TAILOR presence in Asia to safeguard capacity and production space for continued growth 4

MOVE FROM AGENTS TO OWN SOURCING 3rd party agents

Own sourcing structure “One interest only”

Small companies Country / product specific

One oversight Risk management

Ineffective structures

Vested interest

Cross divisional efficiency by bundling capacities Optimize buying power Doing more with less suppliers

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JV PARTNER: ASMARA INTERNATIONAL LTD.  Asmara International Ltd. and TOM TAILOR have a long standing relationship  Asmara has an established network of offices and professionals across Asia: - 12 Offices - 9 countries - 750 people Decision to found TOM TAILOR Sourcing Ltd. 51% controlled by TOM TAILOR 49% controlled by Asmara International  Asmara has a broad customer base in US and Europe, e.g. Abercrombie & Fitch, Olsen, Guess, Marc O’Polo, Zalando, Loblaws (Canada)

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TOM TAILOR SOURCING: ACHIEVEMENTS FIRST 12 MONTHS Structural achievements

Sourcing achievements

Establish TOM TAILOR Sourcing with Asmara International

Bangladesh transition India focus

Shift complete sourcing volume from Asmara to TOM TAILOR Sourcing Terminate existing agency agreements Standardize payment terms Communicate objectives for TOM TAILOR Sourcing in Hamburg and Asia

Bundle capacities and reduce supplier base Devised sourcing strategy for biggest product categories: T-shirt category Better manufacturers

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FOCUS ON BANGLADESH AND INDIA LEADS TO CHANGING SOURCING LANDSCAPE TOM TAILOR sourcing by fob turnover 2011 China 32% Bangladesh 23% India 15% Indonesia 12% Europe 8% Pakistan 5% Vietnam 2% Others 3%

TOM TAILOR sourcing by fob turnover 2012 China 25% Bangladesh 28% India 18% Indonesia 11% Europe 5% Pakistan 6% Vietnam 6% Others 1%

Change in fob sourcing 2012 versus 2011  Bangladesh

+32%

 India

+28%

 Indonesia  China

-8% -11%

* fob = free on board 8

TOM TAILOR SOURCING: NETWORK

Present in 6 countries China: 18 people

7 offices

130 people

Exclusive procurement for TOM TAILOR Group

India: 26 people

Bangladesh: 46 people

Hong Kong: 6 people

Vietnam: 14 people

Indonesia: 20 people

as of November 2012

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BUNDLING SUPPLIERS: DOING MORE WITH LESS SUPPLIERS 2011 Suppliers and volume 20.000.000 €

Strategic direction

 236 suppliers in 2011  reduced to 197 in 2012  1% of total buy came from  71 suppliers 2011  47 suppliers 2012  50% of our total buy came from  15 suppliers 2011  20 suppliers 2012

Combining and reducing supplier base to increase efficiency

Sourcing volume

16.000.000 €

12.000.000 €

8.000.000 €

4.000.000 €

0€ 1

51

101 151 Number of suppliers

201

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SOURCING STRATEGY BY CATEGORY: T SHIRTS Sourcing by category 2011

Comments  Reduce number of suppliers from 47 to 18

T-shirts 19% Knit 15%

Denim 14%

 Reduce number of markets from 9 to 3 markets

Shirts 13% Pants 10%

 Develop better manufacturers

Jackets 8%

on quality, price and speed

Sweat 8% Polo 4%

Target

Other 11%

€ 1.8m saving on fob turnover

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BONITA: SOURCING SPLIT BY COUNTRY BONITA sourcing by fob turnover 2012 Turkey 33%

Targeted changes in fob sourcing 2012 versus 2015

Asia 26% Germany 21% Italy 4% Netherlands 4%

2012

2015

 Europe: From 29% to

8%

 Asia:

From 26% to

53%

 Turkey: From 33% to

29%

 Others: From 12% to

10%

Others 12%

BONITA sourcing by fob turnover 2015 Turkey 29% Asia 53% Germany 6% Italy 1%

Netherlands 1% Others 10%

* fob = free on board

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BONITA: PRODUCT OPPORTUNITIES Polo Pique

Turkey

18 €

India

8€

Blouse

Importer

25 €

China

15 €

Coordinates

Turkey

29 €

Indonesia

16 €

Bonita bought 11 million pieces 2011

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BONITA: PRIORITIES 2013-2015  Sourcing activities concentrate on 2014 and beyond  Set ambitious milestones with product teams

 Reduce purchase from EU based importers & traders  Move part of Turkey production to Asia  Harmonize process and structure with TOM TAILOR Target  2015: Reduction of fob expense by € 10m;

 Measure: quarterly fob averages by product category

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TOM TAILOR SOURCING: OUTLOOK 2013 Exit from all 3rd party agencies completed

Expand cross divisional synergy in key categories

€ 150m managed by TOM TAILOR Sourcing (60%) Continue to build a world class sourcing organization for TOM TAILOR

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