HUGO BOSS AG

• HUGO BOSS AG is the parent company of the HUGO BOSS Group
• Service agreements with subsidiaries impact operational development
• Statements regarding risks, opportunities and outlook for the HUGO BOSS Group also apply to HUGO BOSS AG

HUGO BOSS AG is the parent company of the HUGO BOSS Group. Its annual financial statements are prepared in accordance with the rules set out in the HGB [“Handelsgesetzbuch”: German Commercial Code]. In addition to the operating business, the results of HUGO BOSS AG are predominately impacted by the management of the central functions. Material items in this regard are the allocation of costs for services rendered to Group companies and the investment income resulting from its holding function. Due to its close relationships with the Group companies and its relevance for the Group, the expectations for HUGO BOSS AG are largely reflected in the Group’s outlook. In addition, business development of HUGO BOSS AG is, to a large degree, also subject to the same risks and opportunities as those applicable to the Group. Therefore, statements with regards to the Group’s outlook as well as within the Group’s Report on Risks and Opportunities also apply to HUGO BOSS AG. Outlook, Report on Risks and Opportunities

Earnings development

Sales of HUGO BOSS AG primarily comprise external sales with wholesale partners in Germany and Austria, sales of the own retail business in Germany and Austria as well as intercompany sales with international subsidiaries.

In light of the implications of the COVID-19 pandemic, sales with subsidiaries in Europe, the Americas and Asia/Pacific were significantly below the prior-year level. Sales with third parties in Europe declined by 32% last fiscal year, to EUR 328 million (2019: EUR 482 million). In Germany, HUGO BOSS AG generated sales of EUR 276 million in fiscal year 2020, primarily reflecting a significant decline in light of the negative implications of the pandemic (2019: EUR 407 million). In particular, temporary store closures in the wake of lockdowns, as well as large-scale restrictions on public life including extensive social distancing measures put a strain on the business.

While the impact of the pandemic negatively affected the sales development of the BOSS and HUGO brands, the Company recorded an increase in sales from other services. This development reflects higher intercompany charges to subsidiaries, in particular in connection with IT and marketing services.

Gross profit was well below the prior-year level. In addition to the decline in sales, higher markdown activity and negative effects from inventory valuation also weighed on gross profit development. The latter mainly related to the spring/summer 2020 collection, the sale of which was significantly affected by the COVID-19 pandemic and the corresponding temporary store closures. The decrease in distribution expenses mainly reflects the successful execution of measures to reduce operating expenses in 2020. In addition to a reduction in expenses in the Group’s own retail business, this also includes lower marketing expenses. Furthermore, higher income from charging costs and services to subsidiaries contributed to the decrease in distribution expenses. The decline in general administration expenses relates to a reduction in staff costs and the elimination of non-business-critical expenses. The decrease in other operating income compared to the prior year was largely due to lower income from charging costs and services to affiliated companies. Other operating expenses remained at the prior-year level and mainly included research and development costs as well as allowances for doubtful accounts and exchange rate effects.

At EUR 41 million, the income from investments in affiliated companies in 2020 was significantly lower than in the prior year (2019: EUR 202 million). As in the prior year, income from affiliates at EUR 41 million (2019: EUR 121 million) primarily reflects the annual profits of HUGO BOSS Trade Mark Management GmbH & Co. KG, which are credited to the loan account of its limited partner HUGO BOSS AG in accordance with company regulations, as well as the dividend payments of HUGO BOSS Textile Industry Ltd. There was no income from profit and loss transfer agreements with subsidiaries in fiscal year 2020 (2019: EUR 81 million). The income in the prior year was the result of a profit distribution by HUGO BOSS Internationale Beteiligungs-GmbH, Metzingen, which had received dividend income from HUGO BOSS Holding Netherlands B.V. in fiscal year 2019.

Net assets and financial position

Property, plant and equipment and intangible assets decreased by 4% to EUR 974 million (December 31, 2019: EUR 1,014 million), mainly driven by the significant reduction in investments as part of the Group’s measures to secure its cash flow during the pandemic.

Inventories decreased 5%, reflecting the successful implementation of measures to reduce the merchandise inflow in the course of the pandemic. As a result of the decline in wholesale sales in Germany and Austria in fiscal year 2020, trade receivables were also significantly below the prior-year level. The Company also recorded a decline in trade payables. Consequently, trade net working capital of HUGO BOSS AG at the end of 2020 was slightly above the prior-year level.

At EUR 51 million, receivables from affiliated companies at the end of fiscal year 2020 were only slightly below the prior-year level (December 31, 2019: EUR 39 million). Other assets decreased to EUR 34 million, mainly reflecting an amended agreement with the Company’s suppliers regulating the granting of bonuses and quantity discounts (December 31, 2019: EUR 55 million).  Liabilities to affiliated companies increased to EUR 443 million, mainly driven by adjustments of transfer prices relating to the supply of goods (December 31, 2019: EUR 301 million). Provisions fell slightly to EUR 141 million at the end of the year (December 31, 2019: EUR 156 million). At EUR 83 million, liabilities to credit institutions were also below the prior-year level (December 31, 2019: EUR 97 million).

As of December 31, 2020, cash and cash equivalents, as the total of cash on hand and bank balances, amounted to EUR 1 million (December 31, 2019: EUR 3 million). The lower cash inflow from operating activities was almost entirely compensated by a reduction in cash outflow from investing activities and the suspension of the dividend payment for fiscal year 2019, with the exception of the legal minimum dividend of EUR 0.04 per share.