HUGO BOSS has consistently focused its corporate strategy on the most successful growth markets and regions. With the strategic refinement of the company as a lifestyle company with a diversified product portfolio and a stronger focus on retail business, HUGO BOSS was able to increase Group sales by an average of 11% per year between 1997 and 2007. The share of the monobrand business, for example, rose from 16% to almost 40% of sales. Within this share, directly operated stores (DOS) account for 15% and franchises for 24%. With the concurrent improvements in cost efficiency, net income also rose faster than sales from 1997 to 2007.

Strong organic growth

The Group’s future strategic focus is based primarily on the securing of its established market positions in the traditional areas of men’s businesswear and the successful licensing business in fragrances, watches, and eyewear. The HUGO BOSS Group has also identified other significant growth opportunities for the future, and has adapted and has optimized its structures accordingly. The drivers of future organic growth will be primarily in the following segments:

Womenswear line successfully established

The existing purchasing and production structures as well as customer relationships based upon the established menswear line and the size of the market for women’s fashion offer significant growth potential for the BOSS womenswear line. As a result, sales of BOSS womenswear have grown consistently in recent years. Its share of total Group sales grew to approximately 13% in 2007. Following development of the established markets in Europe, the focus is now increasingly on the growth regions in North America and the Far East.

Consistent extension of distribution structure for shoes and leather accessories

Another strategic focus is the expansion of distribution for the shoes and leather accessories segment. In the coming years, the focus will be on expansion of distribution in the womenswear segment with shoes and handbags. The Group still sees enormous potential here, since ultimately these products represent approximately 20% of the entire consumer luxury segment relative to global sales. Over the past three years, HUGO BOSS has doubled sales of shoes and leather accessories, growing this segment to EUR 176 million in 2007. The share of Group sales increased accordingly to 11%.

Sales and profit opportunities through expansion of product range

HUGO BOSS is developing additional sales and profit opportunities through the expansion of its product range. In March 2007 the Company granted an exclusive jewelry license to the Austrian Swarovski Group. The first jewelry collection for BOSS Black and BOSS Orange will be introduced in spring 2008, and will be available beginning in summer 2008 at HUGO BOSS stores worldwide as well as exclusive department stores and jewelry shops. Furthermore, it is planned to enhance the portfolio by adding children’s fashion.

Sales share of directly operated stores to be expanded

The number of directly operated stores (DOS) has grown significantly in recent years. Within three years, it grew from 97 to 287. The share of Group sales from DOS grew to 15%. DOS sales increased 25% to EUR 239 million in 2007. One advantage of this sales format is that it permits the HUGO BOSS brand to be better established and presented worldwide. Another benefit is that direct customer feedback can be obtained on the current collections and used in the development of future products.

China – an important market for the future

For the future, the Group sees particularly significant potential in the regions of North America, Eastern Europe, and the Far East, with a focus on China. The number of sales outlets will be therefore be sharply increased in these markets, particularly in the emerging markets of Asia and Eastern Europe.

Global market presence