Illustration of risks

Risks identified in the risk management process with an at least essential potential impact on HUGO BOSS are detailed below in descending order of their potential financial impact. In contrast, risks assessed as having only a low or moderate impact are not explained in more detail. This includes risks related to brand and corporate image, changes in interest rates, competition, counterparties, facilities, financing and liquidity, investments, legal, occupational health and safety, product piracy, and vision and direction. In general, it is possible that further latent risks or risks currently assessed as immaterial may have a greater adverse effect on the Group’s future development than anticipated. Regardless of the measures implemented to manage the identified risks, business activity is always exposed to residual risks that cannot be entirely avoided, even by a risk and opportunity management system such as the one implemented at HUGO BOSS.

Political and social risks

HUGO BOSS is exposed to political and social risks due to its global business activities. Political and regulatory changes, geopolitical tensions, military conflicts, government transitions, and terrorism can all negatively impact consumer sentiment. However, in light of its global distribution footprint with a presence in approximately 130 markets, the Company benefits from a natural hedge against challenges in individual regions.

Global political and social uncertainties are expected to remain elevated in 2025. Geopolitical tensions, including those in Ukraine and the Middle East, the potential escalation of trade conflicts, policy shifts under new governments, and the ongoing threat of terrorism pose significant risks for the global apparel industry and thus also for the Group’s business development. For example, geopolitical tensions may disrupt key trade routes, causing higher transportation costs and supply delays due to longer lead times. Additionally, the escalation or expansion of ongoing military conflicts could trigger a global economic downturn, weakening consumer sentiment and adversely affecting the sales and earnings performance of HUGO BOSS.

Due to its increasing relevance, HUGO BOSS classifies risks from political and social changes as an “emerging risk.” These risks pose strategic challenges, such as the impact of demographic shifts on consumer behavior, global business activities, and supply chain structures – highlighting the close connection of social, industry, and sourcing risks. Given the broad spectrum of risks, future developments are characterized by a high level of uncertainty, which might lead to unknown, potentially significant effects in the long term. In evaluating and managing these risks, the risk owners and risk experts at HUGO BOSS work in interdisciplinary teams on the ongoing analysis and monitoring of current political and social developments and their impact on the Group’s business activity, with Risk Management & Internal Controls coordinating and supporting this process.

Sales and distribution risks

Sales and distribution risks exist in connection with the Group’s own retail activities, in particular with regard to inventory management as well as the duration of storage and consequently the recoverability of merchandise. In the wholesale business, sales and distribution risks mainly relate to a possible dependence on individual wholesale partners as well as bad debt losses.

The aim of the Company’s centrally organized inventory management is to ensure the forward-looking, optimal allocation of Group-wide inventories while, at the same time, maintaining flexibility in order to be able to respond to demand fluctuations at short notice. Material downturns in demand or misjudgments of sell-through rates can have a negative impact on inventory turnover. HUGO BOSS therefore strives to continuously improve its inventory management. Granting additional discounts as a potential countermeasure for excess inventory inevitably has a negative impact on the gross margin and ultimately on the Group’s profitability and are therefore constantly monitored by the central Business Planning & Analysis department. A centrally managed pricing policy, differentiated retail formats, and collections tailored to these formats are aimed at achieving a constant improvement in efficiency in own retail.

Inventory risks may result from increased storage periods and a related potential reduction in the marketability of inventories. In line with the principle of net realizable value, impairments on inventories are recognized accordingly and reviewed on a monthly basis based on a seasonal approach. As of the reporting date, the Managing Board considers the recognized allowances to be sufficient. Notes to the Consolidated Financial Statements, Note 12

In its wholesale business, HUGO BOSS pays close attention to ensuring a balanced customer structure to avoid a potential overdependence on individual customers. Business Planning & Analysis constantly monitors key metrics such as order intake, sales, and delivery quotas, providing regular reports to the Managing Board. This enables prompt action to mitigate potential risks. Group Management

HUGO BOSS is exposed to the risk of bad debt losses due to the potential insolvency of wholesale partners or cumulative losses from economic slowdowns in specific markets. To mitigate this, the Group-wide receivables management applies uniform receivables management policies, including credit rating checks, customer credit limits, receivables aging monitoring, and strict handling of doubtful accounts. In some cases, deliveries are only made upon prepayment, or business relationships with high-risk customers are discontinued. The Internal Audit department regularly reviews compliance with the respective Group guidelines. As of the reporting date, there was no significant concentration of default risks from individual customers. Notes to the Consolidated Financial Statements, Note 13

Risks associated with suppliers and sourcing

Risks associated with suppliers and sourcing relate to potential dependencies on individual suppliers or production sites, rising product costs, and a possible divergence between production and sales.

HUGO BOSS attaches great importance to the careful selection of suppliers and long-term strategic partnerships. However, there is a risk that production may be temporarily interrupted at one or more suppliers due to supplier-related or regional events, such as trade conflicts and restrictions introduced by governments. Excessive dependence on individual suppliers or production sites could lead to disruptions in the Group’s supply chain and thus to operational shortcomings. HUGO BOSS therefore pursues a regionally balanced strategic sourcing mix, in order to minimize risks such as local or regional capacity shortfalls as far as possible. In this context, the production and sourcing process is coordinated centrally by Business Operations. Supplier relationships are regularly monitored and evaluated to identify risks in a timely manner and initiate appropriate measures to safeguard product availability. In fiscal year 2024, the largest external supplier accounted for 5% of the total sourcing volume, while the largest single external production site accounted for 4% (2023: 4% each).

Within the framework of “nearshoring,” HUGO BOSS is pursuing the strategic ambition of relocating parts of its sourcing volume closer towards its largest sales markets, EMEA and the Americas, thus further strengthening their respective share of the global sourcing mix. In 2024, 53% of the Company’s merchandise was sourced in EMEA, representing a slight increase compared to last year (2023: 52%). Notably, own production in Izmir (Turkey) now accounts for 17% of the global sourcing and production volume (2023: 15%). This shift not only brings HUGO BOSS closer to its most important sales markets, enabling faster replenishment, but also enhances the Company’s resilience by reducing reliance on external factors. Business Operations

In view of earthquake risks and possible risks due to political uncertainties, HUGO BOSS has implemented comprehensive measures at its largest production site in Izmir to limit the impact of a potential production downtime on product availability and consequently also on Group revenues. For the majority of the production volume, contingency plans are in place to transfer production to external suppliers, while the financial risk from earthquakes is partially covered by insurance policies.

Rising wages in sourcing countries and higher prices for raw materials like cotton, wool, or leather, may lead to higher production costs and thus negatively impact the gross margin, ultimately weighing on the Group’s profitability. HUGO BOSS counters these risks with margin-based collection planning, measures to improve efficiency in its production and sourcing processes, continuous optimization in the use of materials, and regular reviews of its pricing policy.

The risk of new or increased tariffs, particularly between the U.S., China, and European economies, may impact the cost of sourcing materials and manufacturing. Such tariffs could lead to higher duties, potential supply chain disruptions, and reduced margins. An increase in product prices due to higher tariffs could also dampen consumer demand, especially in price-sensitive markets. To mitigate these risks, HUGO BOSS closely monitors global trade developments and adjusts its strategies as needed to minimize potential impacts on its operations. As part of its broader risk-mitigation efforts, HUGO BOSS has also significantly reduced its reliance on sourcing and production in China in recent years, helping to limit potential exposure to tariffs between the U.S. and China. Business Operations

The forecasting of sales volumes, planning of production capacities, and allocation of raw materials and finished goods as part of the sourcing process involves scheduling risks. Deviations from the appropriate allocation can lead to over-scheduling, resulting in elevated inventory levels. On the other hand, it may also lead to under-scheduling with the risk of missed sales opportunities. To reduce scheduling risks, HUGO BOSS is working on constantly improving its forecasting quality. This involves further increasing the transparency along the value chain as well as growing flexibility of merchandise management across distribution channels and markets. In this context, in 2024, HUGO BOSS pushed ahead with the implementation of its Digital TWIN initiative – a smart and tech-driven business operations platform aimed at strongly enhancing real-time data utilization. By creating a digital copy of the Company’s supply chain and using artificial intelligence, HUGO BOSS aims to further improve demand and supply planning and better align its various planning activities. This, in turn, is intended to provide the most accurate procurement of products and fabrics, both in terms of timing and quantity. Business Operations

Tax risks

As a globally operating Company, HUGO BOSS is subject to a variety of tax laws and regulations. Changes in this area could lead to higher tax expenses and tax payments, and also impact recognized current and deferred tax assets and liabilities. All tax-related issues are regularly analyzed and evaluated by the Group Tax department, supported by external experts such as lawyers and tax advisors. Tax audit risks exist for all assessment periods still open. Sufficient provisions were recognized for known tax risks, with the amount based on various assumptions, for example the interpretation of respective legal requirements, the latest court rulings, and the opinion of the authorities, which is used as a basis for measuring the loss amount and its likelihood of occurrence.

The Group Tax department regularly assesses the likelihood of the future recoverability of deferred tax assets that have been recognized on unused tax losses. This assessment takes into account various factors, such as future taxable results in the planning periods, past results, and measures already implemented to increase profitability. HUGO BOSS applies a forecast period of four years for this purpose. Actual figures may differ from the estimates in this regard. As for taxes, risks may occur primarily from modifications of tax legislation in various countries, due to varying assessment of existing topics by tax authorities or tax field audits. There are also risks in transfer pricing in relation to the Company’s business model. Notes to the Consolidated Financial Statements, Note 5

Global economic risks

HUGO BOSS is exposed to global economic risks that can impact demand for premium and luxury goods. Consequently, economic downturns, whether global or regional, may weigh on the Company’s top- and bottom-line performance. Additionally, regional economic challenges can have ripple effects across markets, further influencing business performance.

In 2025, global growth is expected to remain subdued as the global economy continues to face several challenges. In particular, economic policy uncertainties have further intensified, driven by expectations of policy shifts under newly elected governments, ongoing political instability in certain regions, and persistent geopolitical tensions. Further details on the global economic outlook for fiscal year 2025, including key risks and uncertainties, are provided in the “Outlook” chapter. Outlook

To mitigate economic volatility, identify risks at an early stage, and respond as quickly as possible, the Group actively monitors the macroeconomic environment and global industry trends. Internal early indicators are analyzed regularly to allow a forecast of the potential impact of macroeconomic risks. Actions to address downturns in demand include adjusting production and sourcing activity, more strictly managing trade net working capital, further optimizing the global distribution network, tightening cost controls, and implementing price adjustments. Group Management

Governance and compliance risks

All HUGO BOSS employees are required to comply with the Code of Conduct applicable throughout the Group and the compliance rules applicable in specific areas. The Group companies are subject to regular risk analyses and detailed audits where applicable. Adherence to the compliance rules is monitored by the central Compliance department and any breaches are reported accordingly to the Managing Board and Supervisory Board. Corporate Governance and the Corporate Governance Statement, Combined Non-financial Statement, Own Workforce

Breaches of data protection laws represent a substantial compliance risk. The Group counters this risk using a system complying with data protection laws and via appropriate technical and organizational measures. All employees are educated on data protection matters through activity-related training courses, the obligation to adhere to the Code of Conduct, and a separate duty of confidentiality. All internal processes and systems for processing personal data are assessed on an ongoing basis and continuously improved to ensure compliance with legal data protection requirements. Combined Non-financial Statement, Consumers and End-Users

IT risks

Smooth business operations with efficient processes are strongly dependent on a powerful and secure IT infrastructure, uniformly implemented throughout the Group. Serious failures of the Group’s IT system may result in significant business interruptions. In addition, cyberattacks can lead to major and long-lasting system interruptions, loss of confidential data, and the ensuing loss of reputation and liability claims. A long-lasting system interruption might have a significant impact on business operations, for example on the processing of goods in key warehouses. In order to reduce these risks, the central IT department conducts regular maintenance and security checks, has implemented multilevel security and antivirus concepts, and has assigned job-related access rights. In addition, access control systems, daily data backups of the Group-wide ERP system, an uninterrupted power supply, as well as regular online training sessions for staff aim to increase IT security within the Group. Internal Audit regularly monitors the security and reliability of the IT systems as well as the effectiveness of implemented control mechanisms.

HUGO BOSS anticipates global cyberattacks to continue increasing in the long term, driven by mounting geopolitical tensions and advancements in artificial intelligence. As reliance on technology deepens, the potential financial impact of cyberattacks is likely to grow, posing unknown but potentially severe risks. Consequently, HUGO BOSS classifies cyber threats as an “emerging risk.” To strengthen its resilience, the Company remains committed to continuously enhancing its information security program. In this context, HUGO BOSS has implemented a dedicated security information and event management system, designed to provide a comprehensive overview of the Group’s IT security landscape.

Collection risks

Changing fashion and lifestyle trends can cause collection risks, with challenges primarily occurring in identifying and incorporating trends quickly into commercially successful collections. To mitigate these risks, HUGO BOSS comprehensively analyses relevant target groups and markets, uses digital tools to identify trends, and evaluates sell-through rates of previous collections. Beyond that, direct customer interaction in our brick-and-mortar retail and own digital business, feedback from wholesale partners, as well as insights gathered via our customer loyalty program “HUGO BOSS XP” and relevant social media platforms enable early detection of shifts in buying behavior for future collections. Due to their 24/7 lifestyle approach, both BOSS and HUGO offer highly diversified product ranges, thus covering all wearing occasions and reducing the risk from individual collections. Product Development and Innovation, Consumer Touchpoints

Logistics risks

HUGO BOSS is exposed to logistics risks that relate to potential interruptions in the transport of goods, for example due to a possible shortage of sea and airfreight, or insufficient warehouse capacity. This directly involves risks of a global increase in freight costs as well as significantly delayed product availability. In 2024, HUGO BOSS further reduced its reliance on airfreight, highlighting our commitment to balancing cost-efficiency with operational excellence, while at the same time emphasizing sustainable sourcing practices. Looking ahead, HUGO BOSS is committed to continuing reducing airfreight dependence while ensuring on-time product availability.

Amid ongoing geopolitical tensions, global transport and logistics capacity remained under pressure throughout 2024, driving up global sea freight rates and prolonging shipping routes, particularly between Asia and Europe. While the situation in the Red Sea gradually stabilized, freight costs remained elevated, impacting input costs. Looking ahead to 2025, a potential re-escalation of the Middle East conflict could once again disrupt key shipping routes, further straining global logistics capacity and driving up transportation costs. HUGO BOSS will continue to closely monitor developments and implement appropriate measures if necessary. While no significant impact on product availability is currently anticipated, supply chain risks and potential lost sales opportunities in general cannot be ruled out. Business Operations

In addition, the temporary downtime or loss of warehouse locations or conveyor systems may lead to missed sales opportunities. Ensuring sufficient warehouse capacity and a seamless delivery of goods forms an essential aspect as part of Company’s growth ambitions. The storage of inventories is centered on selected sites, with most of them directly operated by HUGO BOSS. The Group’s own central distribution centers for hanging goods, flat-packed goods, and the Company’s own online business, all located in proximity to the headquarters in Metzingen (Germany), form the core of the Group-wide logistics network. Overall, capacity bottlenecks caused by strong top-line growth represent a noticeable risk as they may lead to a delayed delivery of goods or interruptions in product availability at the point of sale. With the aim of constantly improving the efficiency and flexibility of its logistics setup while minimizing the associated risks as far as possible, HUGO BOSS has gradually optimized its global logistics platform in recent years. In this context, the strategic expansion of one of our key logistic hubs was initiated already in 2023. This multiyear project aims to significantly increase both shipping as well as storage capacity while also focusing on the further digitalization and automation of key processes. In addition, compliance with comprehensive fire protection and safety measures is continuously monitored at all warehouse locations. HUGO BOSS has also taken out insurance to cover the direct financial risk from a loss of goods or equipment stored in warehouses. Business Operations

Currency risks

Due to the global nature of its business activities and the Group’s internal financing activities, HUGO BOSS is exposed to currency risks that may have an impact on its profitability, net income, and equity. Currency risks are managed centrally by the Group Treasury department. Corporate guidelines form the basis for the management of currency risks, implying the strategic selection and scope of hedging and, at the same time, are intended to ensure strict functional separation of the trading, settlement, and control of all financial market transactions. The primary objective is to mitigate currency exposure through natural hedges, which are used to minimize the complexity of the exposure, the scope of hedging measures, and associated costs. In this way, foreign currency exposures from business operations across the Group are to be offset as far as possible. Foreign exchange forwards and swaps as well as plain vanilla options can be used to hedge the remaining exposure. Notes to the Consolidated Financial Statements, Note 22

In the Group’s operating business, currency risks primarily arise due to products being sourced and sold in different currencies (transaction risk). In particular, HUGO BOSS does not hedge the transaction risk in connection with its global sourcing activities as these are mainly denominated in U.S. dollars with the corresponding exposure being largely offset by means of a natural hedge via revenues generated in the U.S. market. Currency risks in financial result mainly occur from financial receivables, liabilities, and loans to finance Group companies (transaction risk). As of the reporting date, the main financing loans were hedged via foreign exchange forwards and swaps. In addition, currency risks exist in connection with the translation of financial statements of Group companies outside the eurozone into the Group currency, the euro (translation risk). While this risk is continuously monitored, it is not hedged, as its impact on the Group’s statement of financial position and income statement is non-cash in nature. Notes to the Consolidated Financial Statements, Consolidation Principles

Future cash flows from the Company’s production activities in Turkey nominated in Turkish lira may be hedged by using forward transactions. The corresponding future cash flows are thus designated as an effective hedging relationship recognized on the balance sheet (hedge accounting). As of December 31, 2024, there were no such hedging transactions for future cash flows in place.

In accordance with the requirements of IFRS 7, HUGO BOSS has determined the impact of transaction risk on the Group’s net income and equity based on the balance sheet currency exposure as of December 31, 2024. The exposures include cash, receivables, and liabilities, as well as intercompany loans and deposits held in currencies other than the functional currency of the respective Group company.

HUGO BOSS applies the value-at-risk method to quantify and manage currency risk. In this context, it can be assumed that the total financial currency exposure and its hedging ratio as of the reporting date are representative for the entire reporting period. Due to the method’s limitations, the actual impact on the Group’s net income may deviate from the values determined using the value-at-risk method.

Aggregated across all currencies considered, the diversified portfolio risk for the Group’s net income after hedging amounted to minus EUR 6 million at the end of fiscal year 2024 (2023: plus EUR 11 million). Hedging costs and returns for concluding forward exchange transactions are not included. The risk value reduced compared to the previous year due to the overall anticipated higher hedge ratios. The largest foreign currency exposure results from the balance sheet exposure towards the U.S. dollar, Swiss franc, Japanese yen, and Mexican peso.

Quality risks

When sourcing materials and manufacturing its products, HUGO BOSS places the highest emphasis on quality. To uphold these standards, the Company consistently utilizes premium materials and innovative production techniques. Comprehensive quality controls at all stages of production and the incorporation of customer feedback are intended to contribute to the continuous improvement of the production process and mitigate inherent risks. In addition, both the Company’s own production sites as well as those of its partners are regularly monitored to ensure strict compliance with central quality guidelines. Incoming goods inspections as well as intensive quality tests at the Group’s headquarters in Metzingen (Germany) are designed to ensure the high quality standards of HUGO BOSS. Generally, HUGO BOSS also incorporates risk criteria into its product development, aiming to constantly reduce return rates and thus minimizing the impact on the sales development. Product Development and Innovation, Business Operations

Personnel risks

The successful execution of our Group strategy and the financial and operational performance of HUGO BOSS are largely dependent on the expertise, commitment, and performance of our global workforce. A fair and value-based corporate culture serves as a crucial foundation for fostering employee engagement and long-term success. Personnel risks mainly relate to recruitment bottlenecks, shortages of specialists, and excessive employee turnover. HUGO BOSS counters these risks with a value-based corporate culture, forward-looking personnel planning, comprehensive development and training measures, the continuous development of its performance-based compensation system, as well as flexible working models to better combine work and private life. To measure employee satisfaction on a regular basis, HUGO BOSS conducts an annual employee survey in cooperation with Great Place to Work. In this context, in 2024, the overall satisfaction amounted to 69% (2023: 77%). The decline compared to the prior year mainly reflects the challenges posed by a difficult macroeconomic environment in key regions such as Turkey, which weighed on employees’ financial well-being and overall sentiment in 2024. At HUGO BOSS AG, overall satisfaction remained broadly stable at 86% in 2024 (2023: 87%). Looking ahead, we remain committed to sustaining a satisfaction level of at least 75% across the Group, consistent with previous years. Combined Non-financial Statement, Own Workforce

Environmental and health risks

The global value chain of HUGO BOSS is subject to environmental and health risks from pandemics, environmental and natural disasters, the impact of climate change, and the loss of biodiversity. Building on the experience gained from the COVID-19 pandemic, HUGO BOSS has drawn up appropriate pandemic emergency plans. At the same time, HUGO BOSS conducts regular climate risk analyses to identify potential business impacts and enable timely countermeasures. A central emergency management system ensures prompt and effective responses to all kinds of emergencies, including extreme weather events and natural disasters. This system integrates cross-functional expertise and facilitates efficient coordination with clear decision-making processes. Combined Non-financial Statement, Climate Change