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Letter to Shareholders

Claus-Dietrich Lahrs, Vorsitzender des Vorstand (Photo)

Dear Shareholders,
Dear Readers,

Last year, HUGO BOSS again demonstrated the strength and balance of its business model. In a challenging market environment, the Group increased its currency-adjusted sales by six percent and operating profit by five percent. However, we were not able to entirely shake off the effects of the muted industry momentum. Political tension and macroeconomic uncertainty placed a damper on consumer confidence in some regions around the world. Given these difficult market conditions, the Group’s strong performance in 2014 once again marks a considerable success.

Since 2009, we have increased consolidated sales by one billion euros, accompanied by three-fold growth in profit. The key to this success story has particularly been our corporate strategy, which aims to strengthen the Group’s own retail business. We are not only implementing this strategy systematically but also enhancing it on a targeted basis.

Consequently, the Group’s own retail business was once again our growth driver last year. It is very encouraging for us to see that our growth is not only due to the addition of new selling space but that simultaneously the sales generated by our existing stores and shop-in-shops have also risen. The heightened productivity and profitable network expansion impressively demonstrates the retailing skills that we have amassed over the last few years. In addition, business with our strategic wholesale partners, particularly the traditional premium department stores, performed very well. The slight decline in wholesale sales is primarily due to the takeover of selling space previously operated by business partners.

We have continued to reinforce our strong global market position. Last year, the Company grew in all regions, albeit at differing rates. The above-average growth in Europe is particularly gratifying and was materially underpinned by the Group’s own retail business. Although consumer confidence cooled noticeably in the second half of the year, the region remained on its growth trajectory even towards the end of the year. Sales in the Americas were also up. However, the promotional market environment in the United States posed particular challenges for us. In the Asia-Pacific region, contraction of the Chinese luxury goods market exerted a drag. Nonetheless, HUGO BOSS asserted itself relatively well in this environment thanks to its strong brand and is able to look back on a further year of growth in this market. In fact, HUGO BOSS was named the most popular luxury menswear label in China for the first time. This clearly demonstrates that we have been able to establish ourselves as a highly attractive and prestigious brand in the Asia-Pacific region.

The global success of the BOSS brand vindicates our decision to continue enhancing our core brand. One key step in this process is the focus on distribution via the Group’s own retail business. We are able to present our collections in a particularly luxurious setting and provide intensive advice together with first-class service in our own stores. In this way, we are creating a unique brand experience with BOSS. And experience suggests that our discriminating customers greatly appreciate this.

BOSS Womenswear also made great strides in 2014. The international response to the first collection designed by Jason Wu was excellent. The appeal and prestige of our Womenswear are also reflected in the double-digit growth in sales. Impressive shows during the New York Fashion Week improved perception of the brand significantly. With perfectly harmonized collections, we are seeking to additionally enhance BOSS Womenswear and to establish it as a firm fixture in the premium women’s clothing segment. This year, we will be continuing this success story with an even stronger focus on shoes and accessories.

We have also made great progress in strengthening the efficiency of our operations. Located south of Stuttgart, our new distribution center went into operation free of any delays. With this ultra-modern logistics facility we are confident of being able to harness considerable efficiency gains in supplying the Group’s own retail stores as well as our wholesale partners, particularly as a result of swifter processes. This year, we will be additionally working as hard as we can to establish the basis for integrating our brick-and-mortar stores seamlessly with our online activities. This kind of omnichannel approach is increasingly forming an integral part of a modern shopping experience and we want to lead the way here as well.

We are convinced that with the further development of our corporate strategy we are well positioned for the future. With our continued substantial growth potential, we will be able to add many more chapters to the HUGO BOSS success story. For this reason, we will again be working passionately this year on fulfilling our customers’ wishes day for day. Despite the persistently difficult market conditions, we expect to be able to report a further increase in sales and profit in 2015.

Yet, none of this would be possible without the commitment and contribution of our employees. I would therefore like to take this opportunity to sincerely thank the many people who with their work make HUGO BOSS tangible all around the world and excite customers. Together with our customers, business partners and shareholders, we will work towards making 2015 another successful year in our Company’s history.

Sincerely yours,

Claus-Dietrich Lahrs
CEO and Chairman of the Managing Board

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