Group Management

Key performance indicators

HUGO BOSS aims to sustainably increase its enterprise value. The Group’s internal management system is intended to support the Managing Board and the management of the respective business units in aligning all business activities with this objective. In order to increase its enterprise value, the Group focuses on maximizing free cash flow over the long term. By consistently generating positive free cash flow, the Group is confident of safeguarding the liquidity of HUGO BOSS at all times while, at the same time, facilitating the long-term growth of the business.

Increasing sales and operating profit (EBIT) is key to improving free cash flow over the long term. In addition, a strict management of trade net working capital and a value-oriented capital expenditure approach support the development of free cash flow. HUGO BOSS has therefore identified four key performance indicators for increasing free cash flow. Unchanged to previous years, these comprise sales, EBIT, trade net working capital, and capital expenditure. The 2025 guidance for these key performance indicators and the underlying assumptions are presented in the “Outlook” section. Outlook

Our “CLAIM 5” strategy focuses on driving superior top-line growth by exploiting the full potential of our brands across all consumer touchpoints. Over the past three years, the rigorous execution of our strategy has enabled us to drive broad-based revenue improvements with growth across brands, channels, and regions. At the same time, “CLAIM 5” aims to ensure sustainable improvements in both profitability and cash flow generation. All growth initiatives are therefore assessed not only for their revenue potential but also for their ability to contribute to operating profit (EBIT) and free cash flow. Group Strategy

In fiscal year 2024, HUGO BOSS recorded solid top-line improvements, benefiting from the strengthened brand relevance of BOSS and HUGO in recent years. The slower growth compared to previous years mainly reflects persistent macroeconomic and geopolitical challenges, which dampened consumer demand in most markets and led to a slowdown in industry growth in 2024. While the Company continued to pursue its growth opportunities, in response to this softer consumer sentiment, HUGO BOSS accelerated its focus on enhancing cost efficiency across all business areas – operations, marketing, sales, and administration – with substantial progress achieved in the second half of the year. At the same time, the Company continued to invest in key strategic initiatives to boost brand power and deepen customers’ connections with BOSS and HUGO. This balanced approach was crucial for limiting the increase in operating expenses in the second half of the year, thus safeguarding profitability in 2024. Further details on the financial development of HUGO BOSS in fiscal year 2024 can be found in the chapters “Earnings Development,” “Net Assets,” and “Financial Position” of this Annual Report. Earnings Development, Net Assets, Financial Position

For HUGO BOSS, trade net working capital is the most important performance indicator for managing the efficient deployment of capital.

Management of inventories and trade receivables is the main responsibility of our subsidiaries and the respective operating central departments. The latter are also responsible for managing trade payables. These three balance sheet items are primarily managed by reference to the days of inventories outstanding, days of sales outstanding, and days of payables outstanding. Besides this, there is a specific approval process for the purchase of inventories for our global retail business aimed at constantly optimizing inventory levels. This process takes into account sales quotas, expected sales growth, and anticipated markdown levels.

The senior management of HUGO BOSS is jointly responsible for driving profitable growth. As a result, the short-term incentive program (STI) of managers at all four management levels below the Managing Board is linked to the achievement of specific sales and EBIT targets, with trade net working capital as a percentage of sales being the third component of the STI. The compensation scheme for management at the two levels below the Managing Board also includes a long-term incentive program (LTI), whose design matches that for the Managing Board. The LTI includes both financial targets and non-financial ESG (environmental, social, governance) targets. The latter is related to employee satisfaction as well as our Company’s relative performance in sustainability. Consequently, the LTI is intended to ensure that senior management of HUGO BOSS pursues a sustainable business policy that is aligned to the interests of the Company. Combined Non-financial Statement

Investment activity is primarily focused on our own retail network, the digitalization of our business model, as well as the expansion of our global logistic capacities. As part of our strategic claim “Drive Omnichannel,“ we are further optimizing and modernizing our global store network. In line with our claim “Lead in Digital,” digital investments are pushed along the entire value chain – from digital product creation to digital showrooms, the continuous enhancement of our own online business, as well as our Digital TWIN initiative and general IT infrastructure. As part of our claim “Organize for Growth,” we are strategically expanding one of our key logistic hubs near our headquarters in Metzingen (Germany) with a planned go-live in 2026. A specific approval process exists for material investment projects. Apart from qualitative analyses, e.g., with respect to potential store locations, this also includes an analysis of each project’s net present value. Financial Position, Capital Expenditure, Group Strategy

HUGO BOSS is confident to generate strong free cash flow also in the future. This is to be supported by ongoing rigorous management of trade net working capital and the efficient use of capital expenditure. The majority of free cash flow will either be reinvested into the Company or distributed to shareholders via regular dividend payments. In doing so, HUGO BOSS is pursuing a profit-based dividend policy aimed at allowing shareholders to participate appropriately in the Group’s earnings development. As part of “CLAIM 5”, the Company’s payout ratio is defined in a range of between 30% and 50% of net income attributable to shareholders (2024: 45%). In line with our vision of being the leading premium tech-driven fashion platform worldwide, we are also considering strategic investments in the medium-term. In addition, in the event of excess liquidity, we also consider share buybacks as a viable alternative to return cash to our shareholders. We analyze our balance sheet structure at least once a year to determine its efficiency and ability to support future growth and to simultaneously provide sufficient safety if the Company’s business performance falls short of expectations. In 2024, rating agencies Standard & Poor’s and Moody’s reiterated their positive stance towards the financial strength of HUGO BOSS, thus confirming our investment-grade ratings. S&P rates the Company “BBB” while Moody’s assigns a “Baa2” rating. Financial Position, Capital Structure and Financing

HUGO BOSS is structured by region, with our business segments being EMEA, the Americas, Asia/Pacific, and the license business. Within the three regions, individual markets are grouped into hubs, with local management reporting directly to the Chief Sales Officer (CSO), while the global license business is part of the Chief Executive Officer (CEO) resort. This ensures close alignment between markets and central functions as well as efficient decision-making processes. Further details on the financial development of the business segments in fiscal year 2024 can be found in the chapter “Earnings Development.” Earnings Development, Sales and Earnings Development of the Business Segments

Core elements of the Group’s internal management system

The Group’s planning, management, and monitoring activities focus on optimizing the key performance indicators described above. The core elements of our internal management system are Group planning, Group-wide financial reporting, and investment controlling.

Group planning at HUGO BOSS generally refers to a rolling multiyear period and is prepared as part of the annual, Group-wide budget process, taking into account the current business situation and our underlying Group strategy. Based on targets set by the Managing Board, our Group’s subsidiaries prepare sales, operating profit (EBIT), and investment budgets as well as forecasts for trade net working capital for their respective markets or divisions. Based on this, our product development and sourcing units derive mid-term capacity planning. Business Planning & Analysis, which reports into the Chief Financial Officer/Chief Operating Officer (CFO/COO), reviews these plans for plausibility and aggregates them to form the overall Group planning. The latter is updated on a regular basis, taking into account the actual business performance as well as any opportunities and risks.

Additionally, HUGO BOSS regularly conducts liquidity assessments, based on the expected cash flow development for any given year. This aims to identify financial risks at an early stage and to take appropriate measures concerning financing and investment requirements. Financial Position

On a monthly basis, the Managing Board and management of the Group subsidiaries are informed about the operational business performance through standardized, IT-enabled reports of varying detail, supplemented by ad hoc analyses. Actual data compiled by our Group-wide, IT-based reporting system is compared against budget data on a monthly basis. Any deviations are analyzed and planned countermeasures are discussed. Developments with a significant impact on the Group’s net assets, financial position, and results of operations are immediately reported to the Managing Board. In addition, dashboards offer real-time insights into key financial and operational performance indicators.

The Company is particularly focused on monitoring early indicators suitable for obtaining an indication of future business performance. In this context, the sales performance in our own retail business, the wholesale order intake, and the performance of our replenishment business are analyzed on a regular basis. To provide even more immediate insights, a dedicated mobile app enables the Managing Board and senior management to track the Company’s top-line performance on a daily basis. In addition, benchmarking against relevant competitors is performed at quarterly intervals. The continuous monitoring of early indicators is intended to enable us to identify deviations from the budget at an early stage and take appropriate countermeasures.

The Group’s investment controlling appraises planned investment projects with respect to their contribution to our Company’s overall profitability targets. This ensures that projects are only launched in case of an expected positive contribution to the Group’s overall profitability ambition. In addition, subsequent analyses are conducted at regular intervals to verify the profitability of projects that have already been realized. Appropriate countermeasures are taken in the event of any negative deviations from the initial profitability targets.

In light of the elevated market uncertainty weighing on industry development in 2024, the last fiscal year saw a particularly close dialog between the Managing Board, Business Planning & Analysis, and the management of our central divisions and subsidiaries. Corporate planning was regularly reviewed and updated throughout the year, with particular attention paid to the various macroeconomic factors and their implications on our operational performance. Against this backdrop, HUGO BOSS adjusted its top- and bottom-line outlook for fiscal year 2024 in July. At the same time, the Company implemented additional cost measures to enhance efficiency and effectiveness across its business, aimed at limiting the increase in operating expenses. As a result, the Company successfully achieved its updated targets for fiscal year 2024. Comparison of Actual and Forecast Business Performance