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 a comprehensive range of 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 globally renowned 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 “CLAIM 5” growth strategy  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 19,000 employees worldwide (2022: around 17,000). In fiscal year 2023, HUGO BOSS generated record sales of EUR 4.2 billion (2022: EUR 3.7 billion), thus surpassing the EUR 4 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 the perfect outfit for every occasion – from the office and formal occasions to leisure and sport. In this context, the brand covers all wearing occasions, operating four clearly distinguishable brand lines. The largest brand line, BOSS Black, focuses on the brand’s modern tailoring offering as well as smart casualwear. At the same time, BOSS Camel serves an even more exclusive product assortment by focusing on the brand’s high-end tailoring heritage. Casualwear products are largely offered under the BOSS Orange brand line, while BOSS Green puts a strong emphasis on athleisurewear, dressing consumers for an active lifestyle. Further strengthening its casualwear offering, which BOSS has gradually expanded in recent years, remains a key focus area, primarily intended to attract new, younger customers. At the same time, BOSS is committed to continue dominating formalwear by driving innovation in this segment and offering a superior price-value proposition.

HUGO targets consumers who consider their way of dressing as an expression of their individual personality – clearly representing the motto “HUGO your way.” HUGO focuses on a broad range of both commercial and contemporary products, reflecting the brand’s authentic and unconventional style while ensuring customers a stylish appearance in every situation. In this context, HUGO introduced its new HUGO BLUE brand line, which is putting a strong emphasis on seizing business opportunities in denimwear, with the first products being launched in early 2024. At the same time, the existing product range will be available under HUGO RED from now on, placing a strong focus on street tailoring. Group Strategy, “Product is Key”

In addition to a broad range of best-selling products and our seasonal BOSS and HUGO collections, inspiring capsule collections and high-impact 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 with BOSS and the Gen Z at HUGO, which is of particular relevance for the premium apparel industry. To drive brand heat, boost brand awareness, and activate fans around the globe, we are pursuing two clearly distinguished marketing strategies, with a strong focus on social media. In this context, we are putting a particular emphasis on both global star-studded campaigns as well as exciting brand events. Group Strategy, “Boost Brands,” “Product is Key”

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 including fragrances, eyewear, watches, children’s fashion, as well as newly introduced lifestyle categories such as equestrian and cycling. To increase speed-to-market capabilities and shorten the product development process, products at HUGO BOSS are meanwhile predominantly developed digitally. Product Development and Innovation

In fiscal year 2023, HUGO BOSS produced 17% of its total sourcing volume at its own facilities (2022: 14%). 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,” already in 2022, we significantly expanded our capacities at this site by further strengthening the production of casualwear. In 2023, 83% of the global sourcing volume was sourced from external contract suppliers or procured as merchandise (2022: 86%). 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 creation to AI-enabled pricing, digital showrooms, and innovative experiences in the metaverse. The HUGO BOSS Digital Campus is thereby at the heart of our digital activities, aiming at further expanding our digital analytics capabilities, strengthening our global online activities, and driving meaningful insights and efficiencies along our value chain. With regards to the latter, 2023 saw the launch of our important Digital TWIN initiative, a tech-driven business operations platform, which is intended to further increase the flexibility and transparency of our supply chain. Group Strategy, “Lead in Digital,” “Organize for Growth”

At HUGO BOSS, we are committed to protecting our planet and ensuring a livable future for the generations to come. Consequently, we attribute high importance to sustainability, a cause that is essential to our Company’s corporate responsibility and ongoing business activities. Our sustainability strategy aims at making a vital contribution to a planet free of waste and pollution. At the same time, 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 high 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 131 countries (2022: 132 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 61% in 2023 (2022: 63%). The Americas and Asia/Pacific account for 23% and 14% of Group sales (2022: 22% and 13%), respectively, while the remaining 2% are generated within our licensing business (2022: 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 fully leveraging our high-quality channel mix 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 2023, our brick-and-mortar retail business accounted for 54% of Group sales (2022: 55%). At year-end, we operated 489 freestanding retail stores globally (2022: 470). In order to exploit the full potential of our brick-and-mortar retail business, we aim to further improve the productivity of our existing store network, which currently stands at 12,400 EUR per sq m, while also selectively expanding it across key markets. The former also includes the rollout of our latest store concepts for BOSS and HUGO, which are aimed at further enhancing 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 1,418 own brick-and-mortar points of sale at year-end (2022: 1,316), 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 (2022: 25%). While department stores and specialist retailers sell BOSS and HUGO products either in separate shop-in-shops or in a multi-brand environment, franchise partners operate freestanding stores independently, primarily in emerging markets not served by our own retail business. As part of “CLAIM 5,” further strengthening our global franchise business remains a focus area also going forward. In total, our wholesale business includes around 6,400 brick-and-mortar points of sale, including around 350 freestanding stores managed by franchise partners (2022: around 6,100 brick-and-mortar points of sale including around 300 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 7,800 brick-and-mortar points of sale globally (2022: around 7,400).

In line with our strategic claim “Lead in Digital,” we are also striving to continuously improve the online journey at all digital touchpoints – from our own online flagship hugoboss.com, to our online concession business, as well as digital wholesale. Having continued our double-digit growth trajectory also in the past fiscal year, our digital business has strongly outgrown the overall digital market, enabling further market share gains for BOSS and HUGO. Overall, the share of total digital sales consequently increased to 19% of Group sales in 2023 (2022: 18%). Also going forward, HUGO BOSS aims to drive superior growth in this channel, thus targeting an increase in its digital sales to a level of more than 20% of Group sales by 2025. Our own online flagship hugoboss.com plays a key role in this context. In this regard, we made further strong progress in enhancing the digital experience at this important touchpoint during the course of 2023. As of today, customers from 73 markets can shop BOSS and HUGO products via hugoboss.com (2022: 70 markets). In addition, we successfully relaunched our hugoboss.com app in early 2023, thus further strengthening the mobile shopping experience. Group Strategy, “Drive Omnichannel,” Earnings Development

Group structure

All key management functions are based at our headquarters in Metzingen (Germany). The Group is managed by its 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 64 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 relevant 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 strong customer focus and respond 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 this, 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.