Annual Report 2022

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HUGO BOSS primarily includes collection risks, investment risks, as well as risks to the brand and corporate image, among its strategic risks.

Collection risks

Changing fashion and lifestyle trends can cause collection risks. Challenges in the collection development process above all involve recognizing trends in a timely manner as part of creative management and incorporating these as quickly as possible into commercially successful collections. Research and Development

Comprehensive analyses of relevant target groups and markets, the use of digital tools to identify trends, as well as detailed evaluations of the sell-through rates of previous collections are intended to reduce collection risks. In addition, the collections of BOSS and HUGO aim to be even more relevant in the future by fully incorporating a 24/7 lifestyle approach. In this context, we strongly focus on covering all wearing occasions while particularly targeting younger customer groups. Beyond that, direct customer interaction in our own retail business, feedback from wholesale partners, and insights gathered from our customer relationship management (CRM) enable changes in buying behavior to be identified at an early stage and taken into account accordingly in the development of future collections. On top of that, the ongoing digitalization of the collection development process enables HUGO BOSS to further shorten lead times in order to respond even more quickly to global trends. Research and Development, Group Strategy, “Product is King”

Investment risks

The Group’s own retail activities are exposed to investment risks in connection with the ongoing optimization and modernization of the global store network, new store openings, as well as cross-channel integration and digitalization initiatives. The risk of bad investments refers, in particular, to investments in stores for which long-term rental agreements have been entered into, but which in retrospect fall short of the Company’s profitability targets. Bad investments can also result from the development and implementation of new store concepts and digital elements.

The risk in connection with impairment of property, plant and equipment, intangible assets, right-of-use assets at the level of the Group’s own retail stores, and goodwill represents the largest risk position within investment risks. In general, it cannot be ruled out that a deterioration in the business outlook or a change in the level of market rents may lead to an impairment of the Group’s assets. However, such an impairment would be non-cash in nature. Notes to the Consolidated Financial Statements, Note 10

At HUGO BOSS, there is a specific approval process for major investment projects. Apart from qualitative analyses, for example with regard to potential locations of own stores, this also includes an analysis of each project’s net present value. Group Controlling regularly evaluates planned investment projects with respect to their contribution to the Group’s profitability targets. In addition, subsequent analyses are conducted at regular intervals to verify the profitability of projects that have already been realized. Appropriate countermeasures are initiated in the event of any negative deviations from the profitability targets originally set. Group Management

Risks to the brand and corporate image

The occurrence of risks for the brand and corporate image can have a negative impact on the economic success of HUGO BOSS. For example, an inferior quality of its products or services in the own retail business, an uncontrolled pricing and markdown policy, the use of distribution channels that are harmful to the brand, inadequate marketing campaigns and brand ambassadors, or non-compliance with laws or social standards could have a damaging impact on brand image.

As a consequence, protecting and maintaining the brand image has a high priority at HUGO BOSS. Ensuring a globally consistent brand and shopping experience, strict quality controls, a centrally managed pricing policy, the establishment of a seamless brand experience across all touchpoints as part of the strategic claim “Rebalance Omnichannel,” an active compliance management system, and exacting occupational and social standards contribute towards this target. In addition, legal trademark protection and the prosecution of product piracy are important efforts to secure the brand image.

At the same time, the global branding refresh in 2022 – from new product, to record-breaking marketing campaigns, and the relaunch of its digital flagship, up to the rollout of new store concepts for BOSS and HUGO – has further increased brand relevance among consumers, thereby having had a positive impact on the brand image. Consequently, these initiatives resulted in a higher share of full-price sales and thus led to a reduction in markdown activity in 2022.

The corporate image of HUGO BOSS is reflected in how it is perceived by its stakeholders. All external communication activities are managed by the central departments Corporate Communications, Investor Relations, and Corporate Sustainability, which are involved in continuous dialog with all key stakeholders. Compliance with laws, standards, and guidelines, both within the Group and by partners, is regularly verified.