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Opportunities report

Systematically identifying and utilizing value-enhancing business opportunities is a key element of efforts to ensure that the Company grows profitably. In the HUGO BOSS Group, opportunities are defined as possible positive deviations from planned targets or corporate planning assumptions.

Decentralized organization of opportunity management

Due to its direct link to the targets and strategy of the respective business divisions, responsibility for the identification, assessment and entrepreneurial utilization of opportunities lies with the operational management in the regions, individual markets and central functions. In this context, opportunities are always considered in conjunction with any associated risks. They are only pursued when they outweigh the associated risk and when the risk is assessed to be manageable and its potential consequences limited.

Ongoing monitoring and close links to Group planning

Short-term opportunities – in the sense of potential, positive deviations from the planned operating result (EBIT) in the current fiscal year – are discussed with regional management at regular intervals. Appropriate actions to exploit such opportunities are initiated as required. The long-term management of opportunities is directly linked to corporate planning. Opportunities identified and evaluated in terms of their contribution to the enterprise value are analyzed in detail in the context of strategic planning and the annual budget discussions. On this basis, the Managing Board allocates the necessary resources to the operational units to enable them to benefit from their realization.

HUGO BOSS has identified the following key opportunities that stem from the Company’s environment, its corporate strategy and operational implementation itself.

External opportunities

Favorable macroeconomic developments

Economic conditions in its sales markets influence the Group’s growth prospects. As a company operating in the consumer goods industry, HUGO BOSS can benefit directly from favorable macroeconomic developments and their effect on consumer confidence and customers’ buying behavior. Thus, the current low energy costs and moderate inflation and interest rates in many markets could contribute to a further improvement in consumer confidence and have a positive influence on the purchase of fashionable clothing and accessories.

Changes in the market environment

Regulatory and legal changes can potentially have a positive impact on sales and the Company’s profitability. A reduction of import duties or tax cuts, for instance, can improve the Company’s competitive position compared to local competition.

Financial opportunities

Favorable exchange rate and interest fluctuations

Favorable exchange rate and interest developments can potentially have a positive impact on the development of the Group’s earnings. The HUGO BOSS Group’s central treasury department analyzes the market environment continuously and is responsible for identifying and tapping relevant opportunities within the framework financial management principles provide. The department works closely with the Group’s global subsidiaries for this purpose.

Strategic and operational opportunities

Growth in relevant customer segment

Industry experts anticipate continued growth in the market segment relevant for the global premium and luxury goods industry. Substantial growth is expected in emerging markets in the long term, in particular, driven by rising income levels and the high share of total disposable income dedicated to consumption compared to other parts of the world. Given the positioning of its brands in the premium and luxury segment, the Group sees itself in an ideal position to profit from these developments in both menswear and womenswear. The rise of the middle class in China and many other emerging economies offers HUGO BOSS particular growth opportunities because the share of working, fashion-conscious women is relatively high here. The Group is working systematically on capturing the identified growth potential with market entry and market penetration strategies tailored to specific countries, through collaboration with business partners and independent subsidiaries. It is also systematically reinforcing its distribution activities in metropolitan areas to create an attractive offering, particularly in Europe. These efforts are especially focused on the tourist segment, which has seen significant commercial growth in recent years.

Growing interest in fashion among men

In recent years, interest in fashionable clothing has grown considerably, particularly among younger men. More and more men are paying increasing attention to fashionable appearance as a means of expressing their personality or standing out from the crowd. Clothing is also increasingly considered an important determinant of how an individual’s competence in the workplace is perceived by others. HUGO BOSS’ brand promise to offer fashionable clothing of impeccable taste and outstanding quality addresses these needs very effectively, so that the Group sees excellent opportunities to benefit from the growing fashion sense of men worldwide.

Greater market penetration in womenswear segment

HUGO BOSS is the market leader in the premium menswear market in many regions. However, its penetration in the womenswear segment is significantly lower in most markets. As a result, the Group sees substantial potential in this segment and is working intensively to successfully implement a strategy designed to grow its market share. Since the appointment of Jason Wu as Artistic Director, the fashion status of the collections has been elevated and the brand identity refined. In addition, brand communication has been increased to reinforce the perception of BOSS Womenswear as a fashionable, high-quality brand. Its continuous presence at the New York Fashion Week also highlights the high aspirations set by the company for this area. Group Strategy

Growing demand for authentic, understated luxury

HUGO BOSS believes it has an outstanding position in the global apparel market. The Group’s brands stand for excellent quality, outstanding workmanship and modern design. With its brands, the Group reaches out to a wide public across the entire spectrum of the premium and luxury fashion market – from the trend-oriented casual wear brand BOSS Orange and the sporty, elegant brand BOSS Green, to progressive brand HUGO and the authentic and understated luxury of the brand BOSS. The different brand worlds are clearly delineated from one another thanks to their increasingly differentiated price points and distribution strategies. In particular, the updated distribution strategy in the wholesale channel supports the consistent global market image of the BOSS core brand. The Group therefore sees itself in a good position to leverage its brand strength in the luxury segment in a very credible manner. By better meeting the changing needs of its customer base, it can reinforce loyalty and also exploit new sales potential.

Growing retail expertise

In recent years, HUGO BOSS has increasingly realigned its distribution activities towards end consumers and significantly increased the share of sales generated with its own retail business. With the expansion of its own store network, the Company is tapping additional sales potential, both in established and emerging markets. In addition, HUGO BOSS is taking the opportunity of directly operating mono-brand shop-in-shops at retail partners. Complete control over how the point of sale is designed not only allows improvements in the quality of presentation, but also makes it possible to offer first-class advice and service, enhancing the purchasing experience and the perceived quality of the brand. At the same time, the Company is gaining insights into its customers’ needs first hand. In view of the growing importance of this distribution channel, the Group is working hard to systematically increase its retail competence.

Increasing digitization of shopping habits and lifestyles

The rapid technological progress seen in last 15 years, and specifically the quantum leap in the importance of the Internet, has radically changed the shopping habits and lifestyles of consumers. HUGO BOSS sees this change as an opportunity. With the expansion and continuous improvement of its online presence, the Group is addressing the expectations of consumers with respect to high-quality brand experience. The closer integration of its online presence with the in-store retail business is designed to provide customers with an appealing and uncomplicated shopping experience. In so doing, HUGO BOSS is responding to the growing importance of digital channels in the buying process on the part of more and more customers. Indeed, more than half of HUGO BOSS customers questioned in a survey responded that they research offerings online before making a purchase. Group Strategy

Growing need for individuality

The Group addresses its customers’ growing need for individuality with both its brand strategy and its distribution strategy. By building up and regionally extending its Made to Measure offering, HUGO BOSS can offer a growing number of interested customers the option of wearing individually fitted and tailored products with which they can stand out from the fashion mainstream. The exclusivity of this offering is also conveyed in the shopping experience, with dedicated selling space specially designed for this purpose. In addition, HUGO BOSS is creating a greater personalization offering in other product groups and price brackets. Opportunities are also seen in an individual approach to customers with systematic customer relationship management. Stronger ties are forged between customers and HUGO BOSS and customers’ brand loyalty increased by targeted phone calls, personalized mailings and individual newsletters.

Improvements in operational processes

HUGO BOSS is addressing the growing importance of its own retail business by optimizing critical operational processes. Thanks to the introduction of IT-supported selling space, assortment and volume planning, the Group is in a position to align itself even more effectively with the needs of end consumers and respond to changes in the market even more swiftly than in the past. The Group will also take over fulfillment of its online business in Europe going forward in order to achieve cost efficiencies and offer more extensive services. The expanded logistic capacities associated with this will also make it more flexible in the way it manages its flow of goods across all distribution channels. The Group is also working intensively on increasing the use of virtualization technology in specific phases of the product development process to generate time and cost advantages. With these continuous process optimization efforts, HUGO BOSS is laying the foundations to enable it to tap future opportunities and achieve positive impact on sales and earnings. Research and Development

Organizational opportunities

Sustainable business model

The HUGO BOSS name has always stood for uncompromising quality and excellent finish. The Company therefore sets the highest standards not only for its products but for all business activities and processes. It is the Group’s endeavor to pursue sustainability from the point of view of economic, ecological and social aspects. It is convinced that it can enhance its enterprise value with this approach. All departments and functions along the entire value chain have committed to corporate social responsibility and the pursuit of clearly defined goals. This will produce opportunities not only with regard to direct increases in sales and reductions in costs, but also in terms of the Company’s and its brands’ reputation generally.

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