Letter to Shareholders

Dear Shareholders,
Dear Readers,

Last year proved very challenging for the premium and luxury goods industry overall. And our Company was not immune to the challenges posed by a recessionary environment in Europe, uncertainty surrounding the U.S. budget and significantly lower industry growth in Asia compared to prior years. Considering these conditions, we can be satisfied with what we achieved: Adjusted for currency effects, consolidated sales increased by 6% and the operating result by 7%.

Apart from the good financial performance, implementation of important strategic measures shaped the past year.

For instance, we streamlined and sharpened our brand portfolio by integrating the previously independent luxury business in the BOSS core brand. Looking back, this was clearly the right decision. The move has allowed us to upgrade our complete offering, and it shows: within just a short period the luxury business accounted for a larger share of sales. Expanding our offering in the higher price brackets as well as focusing on the BOSS brand has placed us in a strong position to effectively present our product range in larger stores as well. Our new stores in Berlin, Hong Kong, New York and Tokyo are an impressive testament to this.

But these locations are just a few examples of the quantum leap we have made optimizing the size and quality of the store network in 2013. With the expansion of our flagship store portfolio, we have substantially raised our profile in key shopping districts worldwide. This is especially evident in Asia, where we have taken a major stride towards enhancing our market presence – previously dominated by franchise partners – by adding new locations in striking high-profile locations in major metropolitan areas. These stores will shape how HUGO BOSS is perceived in the years ahead.

In Europe too, the transformation of our business model towards own retail has gained momentum. The fact that we generated more sales in the retail business than in the wholesale business for the first in the prior year clearly confirms this. At our stores we can give our brands the space they need to make their full impact. This is appreciated not only by local customers, but also by the fast growing number of visitors from other continents to whom HUGO BOSS today offers a highly appealing shopping experience with increasing consistency worldwide.

In the current year, our attention will remain firmly focused on presenting HUGO BOSS consistently and unmistakably across all regions and distribution channels. That is why we will continue to invest in the expansion of our network and the renovation of existing stores. In addition, we are working together with our partners in our wholesale business – traditionally a key segment for us – to shift our presentation away from the pure category business and increasingly towards select shop-in-shop spaces. Doing so will create an arena in which we can far more effectively showcase our broad product competence and stage the BOSS brand as we envision it. To achieve this, we are willing to redouble our efforts and assume greater responsibility.

This year, we are also paying particular attention to the womenswear collection – an area in which HUGO BOSS still has a lot of untapped potential. We are confident that our new Artistic Director Jason Wu will make an impact in the second half of the year. Jason was quick to understand the essence of HUGO BOSS. His sense for quality and his love of detail are an ideal fit for the brand's values. This will be clearly evident in his inaugural fall collection. The fusion of clear lines and precise cuts with sophisticated, highly feminine elements is an unmistakable signature that will appeal to our core target group of women who are successful in their professional and private lives. We will support the success of womenswear with extensive communication drives and high-profile placement in our stores.

I am confident that the leitmotif of our annual report – success – will also be a fitting headline for our Company's development in 2014. We expect to grow our sales by a high single-digit figure, and thus more than last year – with contributions expected from all regions. And the recovering strength of our business in Europe gives us every reason to be confident. The operating result looks set to mirror the strong development of sales.

Aside from my confidence in the success of our Company's strategy, it is particularly the performance and passion of our employees that makes me optimistic as I look ahead. Supported by them, our customers, business partners and shareholders, we will make 2014 another successful year for HUGO BOSS.

Sincerely yours,

Claus-Dietrich Lahrs
CEO and Chairman of the Managing Board