Group strategy

HUGO BOSS sees considerable business opportunities in the rapidly changing world. The Company intends to fully exploit these opportunities in the coming years making use of its high global brand awareness, its extensive expertise in product development, its diversified and vertically integrated business model, and its global distribution network. With its two brands, BOSS and HUGO, and their wide range of premium apparel and accessories, the Company is well positioned to profit in particular from a globally growing middle and upper class. HUGO BOSS is focusing especially on younger customer groups, such as Millennials and Gen Z. The latter is particular relevant for the consumer goods industry, as it is estimated to make up the largest customer group in that sector by 2030. In order to meet the high demands of this customer group, the Company has set itself the goal of significantly increasing the relevance of its BOSS and HUGO brands in the coming years, on the basis of first-class products as well as a seamless brand experience worldwide across all consumer touchpoints. In this context, HUGO BOSS intends to fully exploit the great potential of digitalization, make its value chain even more efficient and flexible, and consistently focus on the important topic of sustainability.

“CLAIM 5” growth strategy

Against this backdrop, HUGO BOSS presented its new growth strategy – “CLAIM 5” – in August 2021, and outlined its financial targets until 2025. Over the coming years, HUGO BOSS intends to substantially increase its relevance among customers, strongly accelerate top-line growth, and thus significantly increase the market shares of BOSS and HUGO.

It is our vision to become the leading premium tech-driven fashion platform worldwide. We will revolutionize the way in which we interact with consumers.

The strategy is closely linked to the Company’s vision and ambition of being the leading premium tech-driven fashion platform worldwide and becoming one of the top 100 global brands. In this context, HUGO BOSS is putting the customer at the center of all its activities more than ever before. The Company aims at turning customers into true fans and retain their loyalty to BOSS and HUGO for as long as possible. “CLAIM 5” is based on five strategic pillars: “Boost Brands”, “Product is King”, “Lead in Digital”, “Rebalance Omnichannel” and “Organize for Growth”. It also includes a bold commitment to sustainability, together with a strong executional road map, and a strong commitment on empowering people and teams. Employees and Teams

Our ambition is to double our business to EUR 4 billion in revenues by 2025 and to become one of the top 100 global brands.

CLAIM 1 – Boost Brands

In order to significantly increase the relevance and perception of its brands, the Company started to comprehensively renew the brand image of BOSS and HUGO in 2021 – from logos, to product and marketing up until a new design concept for the Company’s digital business and brick-and-mortar retail. With the brands’ Spring/Summer 2022 collections, which are available since early 2022, customers around the world are experiencing both brands with a completely new “look and feel” for the first time. Clear brand codes and design elements, among other characteristics, will make both brands even more recognizable and strengthen their younger and more confident image.

The BOSS brand’s premium position is to be further strengthened across all wearing occasions – in both menswear and womenswear. As part of its ambition of becoming one of the top 100 global brands, BOSS menswear sales are expected to increase to around EUR 2.6 billion by 2025 and BOSS womenswear sales to around EUR400 million. This will be realized by strengthening the positioning of BOSS as a 24/7 lifestyle brand, increasing brand relevance for younger customer groups by means of a more emotional storytelling, and enhancing its significance in digital. For the HUGO brand, which aims to be the first point of contact for younger customers, sales are targeted to grow to around EUR 800 million by 2025. The main levers include further driving brand power, increasing brand awareness and fostering the geographical expansion, particularly in metropolitan regions. The Company’s license business, which also includes fragrances, watches and eyewear, is expected to contribute up to EUR 200 million to sales by 2025.

NEW Branding

Driving brand relevance is the top priority as part of “CLAIM 5”. We therefore implemented a new brand strategy to refresh BOSS and HUGO and launched two star‑studded global campaigns.

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As part of “CLAIM 5”, HUGO BOSS has realigned its global marketing activities in 2021 and, in the process, has also reorganized itself. From now on, two clearly distinguished marketing strategies – with a clear focus on social media and exceptional collaborations – are to inspire customers and to exploit the full potential of BOSS and HUGO. Both brands will present themselves even bolder, more self-confident, younger, and more emotional than before. The additional marketing investments are expected to total more than EUR 100 million by 2025. As a result, marketing expenses are projected to amount to between 7% and 8% of Group sales going forward. The aim is to significantly increase the brand value of BOSS and HUGO in the coming years and thus make a significant contribution to the Company’s vision of becoming one of the top 100 global brands. Combined Non‑Financial Statement, Brand Power

The launch of the new global marketing campaigns of BOSS and HUGO in early 2022 represents an important first milestone in this context. To attract new and younger customers to the brands, both campaigns follow a clear “social first” approach. The #BeYourOwnBOSS campaign is being showcased by a high-profile cast, including top models Kendall Jenner, Hailey Bieber and Joan Smalls, along with the two new BOSS brand ambassadors, tennis champion Matteo Berrettini and TikTok superstar Khaby Lame. The simultaneous #HowDoYouHUGO campaign focuses on stars such as top model Adut Akech, rappers Big Matthew and SAINt JHN, and dancer Maddie Ziegler. With a total of more than six billion views and over 300 million interactions on social media within only six days, both campaigns quickly became the most successful ones in the history of HUGO BOSS.

Already in 2021, by means of a combined offline/online event and extensive activation on social media, HUGO BOSS succeeded in significantly increasing brand relevance, particularly among younger target groups. As part of Milan Fashion Week, numerous stars such as models Gigi Hadid and Irina Shayk or TikToker Khaby Lame presented the second collection developed jointly by BOSS and the American sportswear brand Russell Athletic in a baseball stadium. The event generated huge attention worldwide, as reflected by almost four billion views and over 25 million interactions across all social media channels within just four days. Extraordinary events and collaborations like this will play a key role in attracting younger target groups and fully exploiting the great potential of both brands.

CLAIM 2 – Product is King

Products are at the very heart of HUGO BOSS’ new strategy. In the coming years, the Company will strongly invest in optimizing its price-value proposition in order to ensure premium quality, a high level of innovation and sustainability, and to guarantee clear distinguishing features. This will particularly strengthen the positioning of BOSS in the premium segment. The Company has the clear ambition to establish BOSS as a true 24/7 lifestyle brand covering all wearing occasions. Casualness and comfort are its defining characteristics. At the same time, BOSS will also be strengthened by the introduction of the BOSS Camel line with the Fall/Winter 2022 collection, along with the re-introduction of BOSS Black, BOSS Orange, and BOSS Green. As the first point of contact for younger customers, HUGO will from now on focus on a broad range of trendy and modern products that reflect the brand’s authentic and unconventional style. In doing so, HUGO is striving to keep its finger on the pulse. With a strong focus on relevant product groups – including denim, jersey, bodywear, and outerwear, the brand is committed to exploiting its full potential. In addition to the main collections of both brands, which offer customers a wide range of basic and core products as well as a large number of seasonal and particularly fashion-conscious styles, capsule collections and exceptional collaborations will further increase the brand relevance of BOSS and HUGO in future. Research and Development

HUGO BOSS is committed to exploiting the full potential of casualwear and thus also to being among the forerunners of the trend towards a more casual lifestyle. Already today, the casualwear business accounts for more than 50% of Group sales. In addition to a wide range of casualwear styles – from polo shirts, hoodies and jeans to knitwear, sweatshirts and sneakers – further expansion in this segment will also focus on further blurring the lines between casualwear and formalwear. As these two occasions have become increasingly interlinked, HUGO BOSS has been able to seamlessly close the gap between tailoring and sportswear. At the same time, the Company will further strengthen its important formalwear business. Tailoring is firmly anchored in the Company’s DNA. Its modern interpretation and the continuing trend towards a more casual lifestyle thus represent enormous potential, which should enable HUGO BOSS to continue to be a leader in the upper premium segment of the global formalwear market.

CLAIM 3 – Lead in Digital

HUGO BOSS sees digitalization as key for a personalized, omnichannel customer experience. At the same time, it is a key enabler for implementing the vision of HUGO BOSS to be the leading premium tech-driven fashion platform worldwide. An essential part of “CLAIM 5” is therefore the clear commitment to further driving the digitalization of the Company’s activities along the entire value chain – from digital trend detection and product development to AI-enabled pricing capabilities and the Company-wide rollout of digital showrooms. Overall, HUGO BOSS plans to increase its investment in digitalization by more than EUR 150 million by 2025.

NEW Digital

Digital will be key for our success as today, the customer journey starts online. That’s why we will significantly improve the customer experience by leveraging data.

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The Digital Campus, which was established in 2021, will play a key role in this, as it will further expand the Company’s digital expertise and take customer experience to a new level through the targeted use of data. The HUGO BOSS Digital Campus, based in Metzingen and Porto (Portugal), will further strengthen the global e‑commerce business as well as the Company’s CRM and tech capacities. The Digital Campus complements the digital know-how of HUGO BOSS by combining the Company’s own expertise with expert knowledge in the field of data processing. One of the Campus’ first priorities was the successful implementation of the global relaunch of hugoboss.com in early 2022.

CLAIM 4 – Rebalance Omnichannel

In order to translate brand power into all consumer touchpoints, HUGO BOSS will further optimize its distribution structure as part of “CLAIM 5” and significantly advance its omnichannel activities in the coming years. In this context, the Company aims to ensure a seamless brand experience across all consumer touchpoints.

Digital revenues are expected to increase to more than EUR 1 billion by 2025. Accordingly, the share of digital business is expected to increase to a level of between 25% and 30% of Group sales (2021: 20%). The Company aims to establish a strong presence at all digital touchpoints – from its own online flagship hugoboss.com to online partner businesses, including digital pure players, leading marketplaces as well as bricks and clicks. The online flagship hugoboss.com, which was redesigned in early 2022, contains numerous elements intended to significantly improve the customer experience and further increase traffic and conversion. With a clear mobile-first approach, hugoboss.com now offers customers a leading e-commerce experience, with the new brand image of BOSS and HUGO also playing an important role. In addition, the Company plans to continue its successful geographical expansion of hugoboss.com from previous years. In the medium term, customers in around 120 markets will be able to purchase the entire product range via hugoboss.com (2021: 59 markets).

HUGO BOSS also aims at fully exploiting the potential of brick-and-mortar retail and increasing sales via this channel to a level of around EUR 2 billion by 2025. Growth is to be achieved by growing productivity in its own stores by around 3% per annum and by further optimizing and modernizing the global store network. In this context, around 80% of the Company’s own stores will be re-designed in the next three years. The new store concept, which aims to be significantly more emotional, appealing, digital, and productive than the previous one, is intended to make a significant contribution to developing the stores into true points of experience. While customers have been able to experience the new BOSS and HUGO store concept in first stores in Germany and the United Arab Emirates since late 2021, the opening of a flagship store on Oxford Street in London, planned for the second quarter of 2022, represents an important milestone in this regard. In total, HUGO BOSS is planning investments in its brick-and-mortar retail business of around EUR 500 million by 2025.

In addition, HUGO BOSS plans to grow sales in brick-and-mortar wholesale to a level of around EUR 1 billion by 2025. The Company is firmly committed to fostering its position in this important distribution channel by strengthening existing partnerships and increasing its market share in key product categories. With a particular focus on its most important business partners, BOSS will establish itself as a true 24/7 lifestyle brand in the wholesale business. The introduction of the BOSS Camel line and the re-introduction of BOSS Black, BOSS Orange and BOSS Green also play an important role in this context. In addition, the Company also intends to fully exploit the great potential of digitalization in wholesale. For example, digital sales via a new generation of virtual showrooms will not only accelerate the sales process for both brands, but also make it more sustainable and more efficient in future. At the same time, it will enable a straightforward and emotional interaction with wholesale partners.

CLAIM 5 – Organize for Growth

As part of “CLAIM 5”, HUGO BOSS intends to drive growth across all regions, while continuing to further balance its global presence. In Asia/Pacific, revenues are set to grow at a low-teens compound annual growth rate (CAGR) between 2019 and 2025. As a consequence, the region’s revenue share is expected to grow to more than 20% over the next five years. In this context, mainland China will continue to be of particular importance. At the same time, the Company will put a strong focus on consistently exploiting its growth opportunities in Southeast Asia in the coming years. With regard to Europe, HUGO BOSS is striving to foster its leading position in premium apparel. Here, sales are forecast to grow at a low to mid-single-digit rate per annum (CAGR 2019–2025). Key markets such as Germany, the UK, and France are all set to strongly contribute to growth by unleashing their full potential in retail, reclaiming wholesale with strong partners, and driving digital growth across all touchpoints. In addition, HUGO BOSS will place a strong focus on growth markets in Eastern Europe and the Middle East. In the Americas, revenues are projected to grow at a mid-single-digit CAGR between 2019 and 2025, as the Company will strongly push its 24/7 brand image by fully leveraging the casualization trend in the important U.S. market. HUGO BOSS has already achieved important milestones in this regard in fiscal year 2021. These include, above all, the strengthening of the product range at the point of sale, also supported by successful collaborations with Russell Athletic and the NBA, as well as the expansion of the shop-in-shop network with important retail partners.

With our “CLAIM 5” strategy, we are pursuing a clear vision for our Company. We will focus even more consistently on the customer and thus significantly increase the relevance of our brands BOSS and HUGO.

“Organize for Growth” also means leveraging the Company’s existing operations infrastructure as the future platform for speed and growth. In order to further increase efficiency and flexibility along the value chain and to push digitalization here as well, HUGO BOSS is working on advancing modular and digital product development, shortening product lead times and further improving flexibility in production and logistics. The Company has set itself the goal of developing more than 90% of its products digitally by 2025 and reducing lead times by around 30%. In addition, the Company will also work on further reducing the complexity of the BOSS and HUGO collections in the years to come. In addition, HUGO BOSS intends to significantly expand its own production in the coming years. The further strengthening of the Company’s own production site in Izmir (Turkey), which is by far the largest, will play a central role in this. The aim is to be able to act even faster and more flexibly in the future and to meet customer demand in the best possible way. Research and Development, Sourcing and Production

We want to grow fast but sustainably. We have an excellent team and the right strategy to lead our Company successfully into the future.

At the same time, HUGO BOSS intends to further intensify its diverse activities in the important area of sustainability in order to deliver both, a clear, measurable impact and emotional engagement with the consumer. The Company has set itself ambitious sustainability goals and aims for climate neutrality in its own area of responsibility by 2030 and along the entire value chain by 2045. In addition, HUGO BOSS will put particular emphasis on establishing an end- to-end circular business model. In this context, the Company aims to enable 80% of all BOSS and HUGO products to become circular by 2030. The share of RESPONSIBLE Styles in the BOSS and HUGO product range, which are considered to be particularly sustainable, is also set to increase to 60% by 2030 (2021: 31%). To achieve this, the Company is increasingly relying on innovative, sustainable materials and production techniques in the creation of its collections. In recent years, HUGO BOSS has already successfully launched products made of pineapple fibers and olive leather, launched a completely vegan suit and significantly increased the proportion of sustainable cotton in its collections. Sustainability, Combined Non-financial Statement

2025 Financial Ambition

With its new strategy, HUGO BOSS aims to double Group sales to EUR 4 billion by 2025, which implies a strong CAGR of 16% taking 2020 as the base year, and 6% as compared to the pre-pandemic level of 2019. Furthermore, the Company sees the potential to increase Group sales to EUR 5 billion in subsequent years.

To successfully deliver on its strategy, HUGO BOSS will step-up investments into its products, brands, digital capabilities, as well as its global store network, all aimed at fueling industry-leading top-line growth. Consequently, over the next five years, value creation will shift from driving relative margin improvements to delivering strong top-line growth, absolute profitability improvements, as well as superior free cash flow generation.

Until 2025, gross margin is forecast at a level of between 60% and 62% (2021: 61.8%), reflecting product investments to enhance the price-value proposition and fuel top-line growth.

At the same time, HUGO BOSS is also confident that its EBIT margin will reach a level of around 12% by 2025 (2021: 8.2%), which corresponds to an EBIT CAGR of 6% between 2019 and 2025. Investments into the business will be compensated for by leveraging operating overhead as well as strong efficiency gains to be realized by further optimizing the global store network. The latter refers to ongoing relocating and right-sizing initiatives, selective store openings, and closures as well as rent renegotiations of expiring lease contracts.

Driven by the significant top- and bottom-line growth, HUGO BOSS targets a cumulative free cash flow of around EUR 2 billion (including the effects of IFRS 16) by 2025. This is to be supported by improved management of trade net working capital (target range for 2022–25: 16% to 19% of sales) as well as an efficient use of investments (target range for 2022–24: 6% to 7% of sales; from 2025: between 4% and 5% of sales).

The majority of expected cumulated free cash flow will either be reinvested in the Company or distributed to shareholders through regular dividend payments. The payout ratio is expected to be between 30% and 50% of net income attributable to shareholders by 2025. In line with its vision of being the leading premium tech-driven fashion platform worldwide, HUGO BOSS is also considering strategic investments in the areas of product and brand, sales, and digital expertise. In this context, HUGO BOSS successfully entered into a long-term strategic partnership with HeiQ AeoniQ LLC – a fully owned subsidiary of Swiss innovator HeiQ Plc – in early 2022. A core element of this partnership is a USD 5 million equity investment made by HUGO BOSS – the first of its kind under “CLAIM 5”.

The targets for fiscal year 2022 are presented in the Outlook section. Outlook