Business activities and Group structure

Business activity

HUGO BOSS is one of the leading global companies in the premium segment of the apparel market. With some 14,700 employees around the world, the Company, which is based in Metzingen (Germany), develops and sells high-quality fashion as well as accessories in the womenswear and menswear segments under the BOSS and HUGO brands. With its Group strategy, the Company is aiming for a steady increase in brand desirability. In fiscal year 2018, the Group achieved sales of EUR 2.8 billion from the distribution of classic yet modern tailoring, elegant evening wear, casualwear, shoes and accessories. This also includes royalty income that the Company earns with products such as fragrances, eyewear, watches and children's fashion. Employees Group Strategy

The development of the BOSS and HUGO collections largely takes place at the Group headquarters in Metzingen (Germany) and is subdivided into three process stages: design, pattern design and technical product development. In addition, the competence center in Coldrerio (Switzerland) is responsible for the innovation and development activities for certain product groups. Research and Development

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

HUGO BOSS customers can currently purchase BOSS and HUGO products in 129 countries. The Group’s distribution activities are divided into three sales regions. With a share of 62%, Europe contributes the largest proportion of sales. 20% of Group sales are generated in the Americas and 15% in Asia. Within these sales regions, the six core markets – Germany, the United States, Great Britain, China, France and Benelux – contribute a total of around 63% of sales. 3% of Group sales is generated from the license business. Earnings Development, Sales and Earnings Development of the Business Segments

The BOSS and HUGO brands are sold via the Group’s own retail business and wholesale business, both online and brick-and-mortar retail. Its own retail constitutes the most important distribution channel, and has been further expanded in recent years to focus even more on customer needs. In fiscal year 2018, as in the prior year, it made up 63% of Group sales. At the end of the year, the Group was operating 442 freestanding retail stores around the world (2017: 439). In addition, HUGO BOSS operates outlets as well as a concession model in cooperation with selected wholesalers in the form of self-managed shop-in-shops in department stores. By expanding its omnichannel services, the Group is increasingly connecting its brick-and-mortar retail business with its e-commerce business. By visiting the hugoboss.com website, customers are able to explore the BOSS and HUGO brand worlds and place orders in nine European countries as well as in the United States and China. In addition, the concession model is also intended to be deployed increasingly in the online area in future via cooperations with so-called multibrand platforms.

As in the prior year, 34% of Group sales in fiscal year 2018 were earned via the wholesale channel. 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, mostly for the BOSS brand in accordance with the Group’s instructions and are mainly based in small markets not addressed by the Group’s own retail business. All in all, wholesale business encompasses around 6,500 points of sale (2017: 6,700). Including its own freestanding retail stores, shop-in-shops and outlets, customers can thus purchase HUGO BOSS products worldwide at 7,600 points of sale (2017: 7,800). Group Strategy Earnings Development

Group structure

All main management functions are based at the Group’s headquarters in Metzingen (Germany). Management of the Group is the responsibility of the parent company HUGO BOSS AG, which has a dual management and control structure as a German stock corporation. The Managing Board has overall responsibility for the strategy and management of the Group. Its executive management 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 licensing business.

The functions established in the central departments of HUGO BOSS AG cover significant parts of the value chain, particularly the development, production, sourcing, and market distribution of the collections. The centrally developed Group strategy has been designed and implemented to suit specific markets to ensure strict customer orientation and enable a fast response to market-specific trends. The individual markets are placed in hubs that are managed by a responsible director who reports directly to the Chief Sales Officer of HUGO BOSS AG. This ensures close alignment with the central functions and short decision-making processes. In addition, certain functions are pooled in the hubs across countries to make effective use of specialist skills and to generate cost benefits.