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 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 profit 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

As a company operating in the apparel industry, HUGO BOSS can benefit directly from favorable macroeconomic developments and their effect on consumer confidence and customers’ buying behavior. The persistent low inflation and low interest rates coupled with rising real wages could contribute towards a further improvement in consumer confidence in many markets and have a positive influence on the purchase of fashionable clothing and accessories.

Changes in consumer behavior

Over the last few years, however, the apparel industry has benefited less than most industries from the positive trend in consumer spending. A cyclical reversal of this development due to social trends that enhance the value of high-quality apparel again, for example, could also support the sales of HUGO BOSS on the whole, regardless of how consumer confidence develops.

Regulatory changes in the market environment

Regulatory and legal changes can potentially have a positive impact on sales opportunities and the Company’s profitability. More consistent prosecution and punishment of violations of trademark law may for example improve the Company’s sales situation and the reduction of customs charges may improve profitability.

Financial opportunities

Favorable exchange rate and interest rate fluctuations

Favorable exchange rate and interest rate developments can potentially have a positive impact on the development of the Group’s earnings. The Group’s central treasury department analyzes the market environment continuously and is responsible for identifying and tapping into relevant opportunities within the framework of financial management principles. Financial Position

Strategic and operational opportunities

Growth in the relevant customer segment

In many emerging markets, especially in China, economic researchers are expecting continued growth within the middle class. This would bring about an increase in the number of people demanding products in the upper premium segment as a result of their purchasing power. The Group is working systematically to capture the identified growth potential with market entry and market penetration strategies tailored to specific countries through collaboration with business partners and independent subsidiaries. In addition to this, it is systematically strengthening its distribution activities in markets with high growth potential and low brand penetration.

Increased 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 maintaining a 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. Accordingly, market observers are expecting the share of men’s fashion in the apparel market as a whole to increase in the future. Among other things, this corresponds with the measure introduced by HUGO BOSS in 2017 to focus brand communication activities even more strongly in this area.

Growing demand for casualwear and athleisurewear

Recently, the casualwear and athleisure segments in the global apparel market have developed faster than classic tailoring. This development underlines the trend towards a relaxed clothing style and many consumers’ need to dress in a sporty style without compromising on value or quality. Independent studies, such as the current market outlook of The Business of Fashion and McKinsey & Company, also expect above-average growth rates for the athleisure segment in the future. HUGO BOSS has therefore strengthened its offering in this area by integrating BOSS Orange and BOSS Green into the core BOSS brand. The Company is also giving these formats more space in its own stores again to benefit from this trend. Group Strategy

Growth in contemporary fashion segment above market average

In addition, the contemporary fashion segment, which means the part of the market that is even more fashionable and trend-oriented, is seeing above-average growth rates. The Company wants to exploit the opportunities resulting from this by implementing a two-brand strategy and, within this, focusing on the HUGO brand.

Increasing digitization of shopping habits and lifestyles

The rapidly increasing use of digital offerings has significantly changed consumers’ shopping habits and lifestyles over the last few years. By performing online searches, customers nowadays are far better informed before visiting a store than they were in the past. HUGO BOSS sees these changes as an opportunity. With the expansion and continuous improvement of its online presence, the Group is addressing consumers’ expectations with respect to a high-quality brand experience. The even closer integration of its online presence with the in-store retail business and the expansion of omnichannel offerings is designed to provide customers with an appealing and uncomplicated shopping experience. Growing commercial use is also making the Company examine opportunities which previously might have arisen for digital channels used purely for commercial purposes. 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, the Group can offer to a growing number of interested consumers the option of wearing individually modified and tailored products with which they can stand out from the crowd. 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 more personalized 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 BOSS and HUGO and their and customers, and brand loyalty is strengthened by targeted phone calls, personalized mailings and individual newsletters. In the online sector in particular, analyzing user behavior provides good opportunities to further individualize the way the Company speaks to customers.

Improvements in operational processes

HUGO BOSS is addressing the growing importance of its own retail business by optimizing critical operational processes. Thanks to its IT-supported selling space, assortment and volume planning, the Group is in a position to align its product range even more effectively with the needs of end consumers and to flexibly respond to changes in the market. The management of the flow of goods across more and more distribution channels offers opportunities to improve the availability of merchandise and to reduce discounts, for example. The Group is also working hard to increasingly digitize various processes along the value chain to generate time and cost advantages. Therefore, increasing the use of digital prototypes in developing products shortens development times and reduces costs in the medium term. In the wholesale channel, HUGO BOSS sees opportunities to make the sales process more simple in future through the use of digital showrooms. Group strategy

Organizational opportunities

An active change to the corporate culture

HUGO BOSS has set itself the goal of changing its corporate culture so that decision-making processes become faster and entrepreneurial thinking among employees is encouraged. In doing this, the Company sees opportunities to adapt to changes faster and more comprehensively than in the past and to increase customer benefits.

Targeted employee development

HUGO BOSS is aligning its human resource work towards shaping the environment in the Company in such a way that employees can constantly grow and develop their full potential. The Group places a lot of value in the results from the annual employee surveys in this regard. Successes on this front and recruiting highly-qualified talent can in future have a direct positive effect on the sales and earnings situation. Employees

Sustainable business model

The Group is committed to pursuing sustainability from the point of view of economic, ecological and social aspects. On the one hand, this allows it to fulfill its social responsibility. On the other, sustainable behavior offers key economic opportunities, not only with regard to direct increases in sales and reductions in costs, but also in terms of the general reputation of the Company and its brands in general. Sustainability