Annual Report 2022

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Opportunities report

In connection with the successful execution of our “CLAIM 5” strategy, the early identification and consistent exploitation of business opportunities is of particular importance and a key element in sustainably increasing the enterprise value. At HUGO BOSS, opportunities are defined as possible positive deviations from planned targets or assumptions in corporate planning.

Opportunity management

Due to its direct link to the targets of the respective business divisions, responsibility for identifying, assessing, and exploiting business opportunities lies with the operational management in the respective regions, individual markets, and central functions. In this context, opportunities are always considered in conjunction with any associated risks. They are only pursued if they outweigh the associated risks and the risks are considered to be manageable and limited in their potential impact.

Short-term opportunities, defined as potential positive deviations from the planned operating result (EBIT) for the current fiscal year, are discussed at regular intervals with the management of the respective market or region, or with the central functions. If necessary, appropriate measures are initiated to exploit them. Long-term opportunity management is directly linked to “CLAIM 5”. Opportunities identified and assessed in terms of their contribution to the enterprise value are analyzed in detail several times a year as part of strategic planning. Based on this, the Managing Board allocates the necessary resources to the operating units to enable them to benefit from the realization of the respective opportunities.

Illustration of opportunities

HUGO BOSS has identified the following relevant opportunities, which originate both in the corporate environment and in the “CLAIM 5” strategy, as well as in the operational execution itself.

External opportunities

As a global player in the apparel industry, HUGO BOSS can benefit directly from positive macroeconomic developments and their impact on consumer sentiment and buying behavior. For example, a faster than expected cooling of global inflation or a faster than expected reopening pattern in China following the abrupt end of the zero-COVID policy might lead to a noticeable uplift in consumer sentiment and could have a fundamentally positive impact on the demand for premium apparel and accessories. In addition, a more rapid easing of global supply chain disruptions, including a normalization of material, production, and freight cost levels, may have a direct positive impact on the Company’s profitability. On top of that, social trends that emphasize the value of high-quality clothing more strongly than in the past could also support the sales performance of HUGO BOSS regardless of the development of the overall consumer sentiment.

Regulatory and legal changes can have a potentially positive impact on the Company’s sales and earnings performance. For example, more consistent prosecution and punishment of infringements of trademark rights can positively impact the sales performance. In addition, the elimination of tariffs can improve the profitability of the Company.

Financial opportunities

Favorable exchange rate developments can have a positive impact on the Company’s earnings development. The Group Treasury department continuously analyzes the market environment and is responsible for identifying and exploiting relevant opportunities within the framework of financial management principles. Financial Position

Strategic and operational opportunities

As part of our “CLAIM 5” growth strategy, we aim at significantly increasing the relevance of our two brands BOSS and HUGO and thus achieving significant top- and bottom-line growth in the medium term. With a broad range of premium apparel and accessories, we intend to benefit in particular from the globally growing middle and upper class. In this regard, we are particularly focusing on younger customer groups, such as Millennials and Gen Z, with the latter being particularly relevant for the premium apparel industry as it is estimated to make up the largest customer group in that sector by 2030. Group Strategy

In fiscal year 2023, the successful execution of “CLAIM 5” will remain key to maintain the strong top-line momentum gained in 2022 and to fully exploit opportunities across all business areas. Above all, fully in line with our strategic claim “Boost Brands,” we will continue to build on our successful branding refresh. In this context, we comprehensively renewed the images of BOSS and HUGO in 2022, making our brands even more appealing to consumers. Also going forward we will put strong emphasis on spectacular, high-profile brand campaigns to significantly fuel brand power and win over new and younger target groups. On top of that, exceptional events and collaborations will continue to help increasing brand relevance among relevant target groups. To support future growth, we have stepped up our marketing expenses and remain committed to continue targeting marketing investments in a range of between 7% and 8% of Group sales also going forward. A further significant increase in brand relevance can have an immediate positive impact on consumer demand and thus boost full-price sales, consequently resulting in higher-than-expected sales and earnings. Group Strategy, “Boost Brands”

At the same time, HUGO BOSS will continue to fully exploit opportunities in connection with further enhancing the appeal of its collections. Following the successful branding refresh, initiated in early 2022, under the claim “Product is King,” we will continue to focus on establishing BOSS as a true 24/7 lifestyle brand, thus further leveraging opportunities to attract new customer groups across all wearing occasions. As the first point of contact for younger consumers, HUGO will continue to focus on a wide range of trendy and modern products while putting strong emphasis on relevant product categories – including denim, jersey, bodywear, and outerwear – in which the Company sees significant growth opportunities. In this context, HUGO has already achieved important progress by strengthening its product range in 2022 and launching exciting capsule collections with a particular emphasis on these product categories. At the same time, we will further invest in optimizing the price-value proposition in the coming years to ensure premium quality, a high level of innovation and sustainability, and to guarantee clear distinguishing features. HUGO BOSS is also committed to exploiting the full potential of casualwear in the future, thus helping to lead the casualization trend. At the same time, the Company aims to further strengthen its important formalwear business via a modern interpretation, thereby having already launched a number of innovative and functional products such as a washable or extra warm flannel suit. With formalwear regaining momentum since the easing of the pandemic, both the formalwear and the casualwear segments offer enormous potential, which should enable HUGO BOSS to continue to retain a leading position in the upper premium segment of the global apparel market. Group Strategy, “Product is King”

As part of our distribution activities, we see particular opportunities to further drive traffic and conversion rates along all consumer touchpoints. With a strong focus on translating brand power into all channels, we will further optimize our distribution structure as part of our strategic claim “Rebalance Omnichannel,” and significantly advance our omnichannel activities in the coming years. In this context, we aim to ensure a seamless brand experience across all consumer touchpoints. To this end, we will continue to expand our presence at all digital touchpoints, for example via the further global expansion of our digital flagship, after having added another 11 markets in 2022. In addition, with the implementation of our much more emotional store concepts for BOSS and HUGO being already in full swing, productivity in brick-and-mortar retail is aimed to further increase also going forward. We also strive to regain market share in key product categories in brick-and-mortar wholesale, having already made initial strong progress in this respect in 2022. With a strong focus on our most important wholesale partners, we will foster BOSS as a true 24/7 lifestyle brand in the wholesale business. The reintroduction of BOSS Black, BOSS Orange, and BOSS Green together with the introduction of the BOSS Camel line, both successfully completed in 2022, also play an important role in this context. Consistent exploitation of the various sales-related opportunities may have a direct positive impact on the business performance of HUGO BOSS. Group Strategy, “Rebalance Omnichannel”

At HUGO BOSS, we regard digitalization as key to a personalized, seamless omnichannel consumer experience, while also considering it to be a significant opportunity to further increase efficiency and flexibility along the entire value chain. As part of our claims “Lead in Digital” and Organize for Growth, we are thus fully committed to the further digitalization of all business activities – from digital trend detection and product development to opportunities for AI-enabled pricing, and the Company-wide rollout of our digital showrooms. The HUGO BOSS Digital Campus plays a crucial role in this, as it is expected to further strengthen our digital expertise and bring consumer experience to a new level through the targeted use of data. In addition, HUGO BOSS is developing a “digital twin” of its value chain – a smart and technology-driven business operations platform, providing the Company with real-time data, for example, on demand planning, production status, or smart inventory allocation. Successes in this area may have a direct positive impact on the sales and earnings performance of HUGO BOSS. Group Strategy, “Lead in Digital”, Group Strategy, “Organize for Growth”

In recent years, the importance of environmental and climate protection has increased noticeably overall, also among consumers. Besides high-quality products and a unique shopping experience, customers today increasingly expect compliance with high ecological and social standards. We regard the intensification of our diverse activities in the area of sustainability as an additional opportunity to win over young and sustainability-oriented consumers in particular, while at the same time, having a positive impact on society and environment alike. We thus firmly embedded sustainability in our “CLAIM 5” strategy. In addition to circular products, we increasingly focus on innovative, sustainable materials and manufacturing techniques during collection creation and aim to significantly expand our RESPONSIBLE Styles offering going forward. Besides direct opportunities in terms of revenue increases and cost reductions, we regard acting sustainably as an opportunity to further enhance the general reputation of our Company and our brands. Sustainability, Combined Non-Financial Statement

Organizational opportunities

HUGO BOSS firmly believes that its employees are the essence to the successful execution of “CLAIM 5”. We therefore aim at promoting a corporate culture in which the values of entrepreneurial spirit, personal ownership, team mentality, simplicity and quality, and youthful spirit are firmly anchored. They form the guiding principle for day-to-day cooperation and are intended to foster a spirit of mutual trust. This is accompanied by the opportunity to foster creativity and innovation, implement ideas and processes faster and more comprehensively, and consequently achieve competitive advantages.

As an international company, diversity is a fundamental part of our corporate culture. We are convinced that heterogeneous and inclusive teams can achieve better and more creative solutions to complex issues and thus make a positive contribution to the successful execution of our “CLAIM 5” strategy. In recognition of the importance of the topic, HUGO BOSS has implemented numerous initiatives to ensure a discrimination-free working environment with equal opportunities and inclusive work culture for all employees. The central Global Diversity and Inclusion department focuses on further raising awareness of diversity and inclusion throughout the Company. In addition, an internal task force of employees from various locations and functional areas supports the execution of defined measures and promotes selected topics within the Company, such as inclusion and diversity in management positions. We are convinced that intensifying our activities in the important area of diversity positively contributes to employee satisfaction and is also considered a relevant factor by potential applicants.

HUGO BOSS aligns its HR work with the goal of shaping the general conditions in the Company in a way that every employee is able to develop his or her individual talent to advance and to contribute directly to the successful execution of “CLAIM 5”. To this end, we particularly build on the insights from the annual employee survey. Further successes in strategic HR work could have a direct positive impact on sales and earnings performance in the future. Employees and Teams