Business activities and Group structure

Business activities

HUGO BOSS, headquartered in Metzingen (Germany), is a leading global fashion and lifestyle company in the premium segment, offering high-quality women’s and men’s apparel, shoes, and accessories. The Company pursues a portfolio strategy, with the HUGO BOSS platform currently consisting of two strong brands – BOSS and HUGO. Both brands are clearly distinguished by individual characteristics. At the same time, they share equally high standards in terms of quality, innovation, and sustainability, while ensuring that consumers are perfectly dressed 24/7 and for every occasion. Our 2025 growth strategy “CLAIM 5” is closely linked to our vision of being the leading premium tech-driven fashion platform worldwide and our ambition of becoming one of the top 100 global brands. Key to the successful execution of “CLAIM 5” is the passion and commitment of our around 17,000 employees worldwide (2021: around 14,000). In fiscal year 2022, HUGO BOSS generated record sales of EUR 3.7 billion (2021: EUR 2.8 billion), thereby exceeding the EUR 3 billon threshold for the first time in the Company’s history. Group Strategy

With BOSS, we are addressing consumers who lead a self-determined life, show a clear attitude, and pursue ambitions with determination, embodying the motto – “Be your own BOSS.” As a 24/7 lifestyle brand, BOSS offers consumers the perfect outfit for every occasion – from business to leisure – with casualness and comfort being key. The product range has been further strengthened by the reintroduction of the BOSS Black, BOSS Orange, and BOSS Green brand lines and the successful launch of BOSS Camel in the course of 2022. In this context, the expansion in the casualwear segment represents a key focus area for BOSS, primarily intended to attract new, younger customers. At the same time, BOSS is committed to continue dominating formalwear by driving innovation in this segment.

HUGO targets consumers who consider their way of dressing as an expression of their individual personality and are seeing themselves as trendsetters – clearly representing the motto “HUGO your way.” As the first point of contact for younger consumers, HUGO offers a broad range of trendy and modern products that reflect the brand’s authentic and unconventional style, ensuring a stylish appearance at all times. In doing so, HUGO will keep its finger on the pulse also in the future and exploit its full potential with a strong focus on relevant product groups such as denim, jersey, bodywear, and outerwear. Group Strategy, “Product is King”

In addition to a broad range of best-selling products and our four annual BOSS and HUGO collections, inspiring capsule collections and exceptional collaborations with well-known brands and personalities increase the relevance of BOSS and HUGO. By doing so, we aim to appeal primarily to a younger audience, above all Millennials and Gen Z, which is of particular relevance for the premium apparel industry. To drive brand heat, we are pursuing two clearly distinguished marketing strategies, with a particular focus on social media. Group Strategy, “Boost Brands”

Design and development of our brands’ collections is mainly carried out at the Group’s headquarter in Metzingen (Germany), while the development centers in Coldrerio (Switzerland) and Morrovalle (Italy) are responsible for specific product groups. In addition, we have granted licenses for the development and distribution of products such as fragrances, eyewear, watches, children’s fashion, and dog accessories. To increase speed-to-market capabilities and shorten the product development process, we put strong emphasis on digital product development. Research and Development

In fiscal year 2022, HUGO BOSS produced 14% of its total sourcing volume at its own facilities (2021: 17%). Our five own production sites are all located in Europe, with Izmir (Turkey) accounting for the vast majority of it. As part of “CLAIM 5”, in 2022 we significantly expanded our capacities at this site by further strengthening the production of casualwear. 86% of the sourcing volume was sourced from external contract suppliers in 2022 or procured as merchandise (2021: 83%). Partner operations are mainly located in Asia and Europe. Sourcing and Production

Digitalization represents a key enabler for implementing our Company’s vision of being the leading premium tech-driven fashion platform worldwide. In order to exploit the full potential in the digital sphere, within our strategic claim “Lead in Digital” we anchored a strong commitment to further driving the digitalization of our business activities along the entire value chain. This includes all relevant areas from digital trend detection and product development to AI-enabled pricing capabilities and the Company-wide rollout of digital showrooms. Group Strategy, “Lead in Digital”

At HUGO BOSS, we attribute high importance to sustainable business activities. For us, this means that we aim at maintaining the high quality and durability of our products while ensuring that they are produced with social and environmental responsibility at all times. Our ambitious sustainability targets thus represent an integral part of our business and are firmly anchored in our “CLAIM 5” strategy. With our clear commitment to sustainability, we put consumers and their increased expectations with regard to sustainability at the core of all business activities. Sustainability

The product offering of BOSS and HUGO is distributed across a total of 132 countries (2021: 128 countries). Our distribution activities are split into three sales regions. EMEA, which includes Europe, the Middle East, and Africa, represents by far the largest region in terms of sales with a share of 63% in 2022 (2021: 63%). The Americas and Asia/Pacific account for 22% and 13% of Group sales (2021: 20% and 15%), respectively, while the remaining 3% are generated within our licensing business (2021: 3%). Earnings Development, Sales and Earnings Development of the Business Segments

To fully leverage brand power across all points of sale, we continue to optimize our distribution structure as part of “CLAIM 5”. In this context, we particularly strive at significantly expanding our omnichannel activities to ensure a seamless brand experience across all consumer touchpoints. The distribution of BOSS and HUGO thus ranges from brick-and-mortar retail and brick-and-mortar wholesale to the digital channel.

In 2022, our brick-and-mortar retail business accounted for 55% of Group sales (2021: 54%). At year-end, we operated 470 freestanding retail stores globally (2021: 451). In order to exploit the full potential of our brick-and-mortar retail business, we aim to significantly increase the productivity of our stores. In this context, in 2022 we accelerated the rollout of new and modern store concepts for BOSS and HUGO to further optimize the customer experience. In addition, we are running factory outlets as well as self-managed shop-in-shops in department stores as part of the concession model. In total, we operated 1,316 own brick-and-mortar points of sale at year-end (2021: 1,228), with a variety of omnichannel services closely linking brick-and-mortar retail with our own online business.

Our brick-and-mortar wholesale business accounted for 25% of Group sales in the past fiscal year (2021: 23%). While department stores and specialist retailers sell BOSS and HUGO products either in separate shop-in-shops or in a multibrand environment, franchise partners operate freestanding stores independently, primarily in smaller markets not served by our own retail business. In total, our wholesale business includes around 6,100 brick-and-mortar points of sale, with around 300 freestanding stores managed by franchise partners (2021: around 5,600 brick-and-mortar points of sale including around 250 franchise stores). Overall, including our own freestanding retail stores, shop-in-shops, and outlets, consumers can thus experience and purchase BOSS and HUGO products at around 7,400 brick-and-mortar points of sale globally (2021: around 6,800).

In line with our strategic claim “Lead in Digital,” we are also striving for a strong presence at all digital touchpoints – from our own online flagship hugoboss.com to online partner businesses, including digital pure players, leading marketplaces as well as bricks and clicks. While total digital sales amounted to 18% of Group sales in the past fiscal year (2021: 20%), the Company targets to increase digital sales to a level of at least 25% by 2025. As of today, customers from 70 markets can shop BOSS and HUGO products via our own online store hugoboss.com (2021: 59 markets), which was relaunched as part of the branding refresh in January 2022. Group Strategy, “Rebalance Omnichannel,”, Earnings Development

Group structure

All key management functions are based at our headquarters in Metzingen (Germany). The Group is managed by the parent company HUGO BOSS AG, which – as a German stock corporation – has a dual management and control structure. Consequently, the Managing Board is responsible for managing the Group and successfully executing the Group strategy. The activities of the Managing Board are monitored by the Supervisory Board, which is also on hand to advise the Managing Board. In addition to HUGO BOSS AG, the Group is made up of 65 consolidated subsidiaries that bear responsibility for their local business activities. This includes 41 subsidiaries that are organized as distribution companies as well as four production companies. Notes to the Consolidated Financial Statements, Basis of Consolidation

HUGO BOSS is structured by region, with our business segments being EMEA, the Americas, Asia/Pacific, and the license business.

The functions established in the central departments of HUGO BOSS AG cover all significant parts of the value chain, particularly the design and creative management, product development, production, sourcing, and distribution of our collections to the respective markets. Our “CLAIM 5” strategy is designed and successfully executed on a market-level in order to ensure stringent customer orientation and responding dynamically to market-specific developments. The individual markets are grouped into hubs, with local management reporting directly to the Chief Sales Officer (CSO). In doing so, we ensure close alignment between individual markets and central functions as well as short decision-making processes. In addition, certain functions are pooled in the hubs and in the central departments across countries to make the most effective use of specialist skills and to generate cost benefits.