Business activities and Group structure

Business activity

As a global fashion and lifestyle company in the premium segment, HUGO BOSS, with its approximately 14,600 employees, is one of the leaders in offering high-quality women’s and men’s apparel. The collections of its two brands BOSS and HUGO seek to offer customers a comprehensive selection of modern tailoring, elegant evening wear, casualwear, shoes and accessories. In addition, royalty income is generated from products such as fragrances, eyewear, watches and children’s fashion. Sustainably increasing brand desirability is at the forefront of all Group activities and is the focus of the Group’s strategic framework. In 2019, the company based in Metzingen (Germany) generated sales of EUR 2.9 billion. Group Strategy

The four annual BOSS and HUGO collections, as well as additional themed capsule collections, are mainly designed and developed at the Group’s headquarters in Metzingen (Germany). In addition, the competence center in Coldrerio (Switzerland) is responsible for the innovation and development activities for a number of product groups. Research and Development

HUGO BOSS produces 17% of its total sourcing volumes at its own facilities. Own production occurs at four production locations in Europe, with Izmir (Turkey) being by far the largest. 83% are sourced from external contract suppliers or procured as merchandise. Partner operations are mainly located in Asia and Eastern Europe. Sourcing and Production

The BOSS and HUGO collections can be purchased in a total of 128 countries. The Group’s distribution activities are divided into three regions. With a share of 63%, Europe contributes by far the largest proportion of sales. 19% of Group sales is generated in the Americas and 15% in Asia. Within the three regions, the six core markets – Germany, the United States, Great Britain, China, France and Benelux – contribute a total of around 60% of sales, with the home market of Germany representing the market with the highest sales. 3% of Group sales is generated from license business. Earnings Development, Sales and Earnings Development of the Business Segments

The BOSS and HUGO brands are sold via the own retail business and wholesale business, both online and brick-and-mortar retail. Own retail constitutes the most important distribution channel, and has been further expanded in recent years. In doing so, the company further increases the proximity to customers and on their needs. In 2019, the own retail business accounted for 65% of Group sales (2018: 63%). At the end of the year, the Group was operating 431 freestanding retail stores around the world (2018: 419). In addition, HUGO BOSS operates outlets as well as self-managed shop-in-shops in department stores as part of the concession model. Through a variety of omnichannel services, the brick-and-mortar retail business is closely linked to the own online business. Via the hugoboss.com website, customers can experience the brand worlds of BOSS and HUGO and order products online in a total of 15 countries (2018: 11 countries). In addition to the further expansion of its own online store, hugoboss.com, HUGO BOSS is also seeing additional growth potential through the further expansion of the concession model to the online business, which has already been stepped up over the past few years. Group Strategy

The wholesale channel contributed 32% to Group sales in the past fiscal year (2018: 34%). The Group’s wholesale partners include department stores, specialist retailers, which are frequently family-owned, and franchisees. Moreover, cooperation with specialized online retailers is gaining ever greater importance. While department stores and specialist retailers sell the BOSS and HUGO products either in separate shop-in-shops or in a multibrand setting, franchise partners independently operate freestanding stores, mainly based in small markets not addressed by the Group’s own retail business. All in all, wholesale business encompasses around 6,300 points of sale (2018: 6,500). Including its own freestanding retail stores, shop-in-shops and outlets, the Group enables customers to purchase BOSS and HUGO products at around 7,450 sales points worldwide (2018: around 7,600). Group Strategy, Earnings Development

Group structure

All main management functions are based at the Group’s headquarters in Metzingen (Germany). As the parent company, HUGO BOSS AG, which has a dual management and control structure as a German stock corporation, is responsible for managing the Group. The Managing Board has overall responsibility for the strategy and management of the Group and is monitored by the Supervisory Board. The Supervisory Board is also on hand to advise the Managing Board. In addition to HUGO BOSS AG, the HUGO BOSS Group is made up of 60 consolidated subsidiaries that are solely responsible for their local business activities. 38 subsidiaries are organized as distribution companies and three as production companies. Notes to the Consolidated Financial Statements, Basis of Consolidation

The HUGO BOSS Group is structured by region. The Group’s business segments are Europe (including the Middle East and Africa), the Americas and Asia/Pacific as well as the license business.

The functions established in the central departments of HUGO BOSS AG cover all significant parts of the value chain, particularly the development, production, sourcing, and distribution of the collections to the respective markets. The centrally developed Group strategy is implemented and executed locally to ensure strict customer orientation and enable a timely reaction to market-specific trends. The individual markets are placed in hubs, with local management reporting directly to the Chief Executive Officer of HUGO BOSS AG. This is intended to ensure close alignment with the central functions as well as short decision-making processes. In addition, certain functions are pooled in the hubs and in the central departments across countries to make the most effective use of specialist skills and to generate cost benefits.