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 involve, above all, recognizing trends in a timely manner as part of creative management and incorporating these as quickly as possible into commercially successful collections. Product Development and Innovation
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. On top of that, fully in line with their 24/7 lifestyle approach, both BOSS and HUGO offer a highly diversified product range covering all wearing occasions, appealing to a wide audience of different age groups, thus further reducing collection risks. In addition, capsule collections are aimed at bringing further newness to our product offering, incorporating current consumer trends. Beyond that, direct customer interaction in our own brick-and-mortar retail and digital business, feedback from wholesale partners, and insights gathered from our customer relationship management (CRM) system as well as on our social media platforms 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 our collection development process enables HUGO BOSS to further shorten lead times in order to respond even more quickly to global trends. Product Development and Innovation, Group Strategy, “Product is Key”
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 that may not lead to the targeted operational improvements.
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 retail stores, this also includes an analysis of each project’s net present value. The central Business Planning & Analysis department 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 financial and operational performance 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, negative social media discussions, or non-compliance with laws or social standards could have a negative impact on the brand and corporate image.
For this reason, protecting and maintaining the brand image is a top priority at HUGO BOSS. Ensuring a globally consistent and seamless brand and shopping experience across all touchpoints, strict quality controls, a centrally managed pricing policy, an active compliance management system, training employees who are in direct contact with customers, 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, BOSS and HUGO further increased brand relevance among consumers in 2023 with exciting marketing campaigns and spectacular fashion events, each featuring diverse all-star casts, thereby positively impacting the brand image. Consequently, these initiatives inevitably contributed to the Company’s strong top- and bottom-line performance in 2023, with broad-based growth across brands, regions, and channels.
The corporate image of HUGO BOSS is reflected in how it is perceived by its stakeholders. External communication activities are primarily managed by the central divisions Corporate Communications and Investor Relations, 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.