Hugo Boss AG (BOSS.DE) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and a warm welcome to all of you. Thank you for joining us today for the HUGO BOSS Strategy Update 2025, live streamed out of our beautiful TV studio here in Metzingen. After 4 years under CLAIM 5, today, it's time to reflect on our key achievements. More importantly, however, it's also time to look ahead into the future and talk about our strategic agenda until 2028. I'm excited to have the Managing Board of Hugo Boss with me on stage today. Our CEO, Dan Grieder, our CSO, Oliver Timm; and our CFO, CEO, Yves Muller, to walk you through our 3 areas of excellence, brand distribution and operations. I'll be back on stage in about 90 minutes to guide you through the Q&A. But before that, let me hand you over to Daniel. Daniel, the stage is yours.

Thank you, Christian. Good morning, everybody. Welcome to our update. I'm going to go straight into our presentation. And our strategy goes from great to excellent. So I give you an update and I just want to look back before we look ahead. And I remember we talked about the comeback. And every comeback as a beginning, hours started with CLAIM 5 and when we launched CLAIM 5, I remember, our aim was to rediscover growth, sharpen its focus and strengthened the relevance of the brand. Or in other words, as I always said, actually, we were behind the curtain, and we wanted to bring the brand back on stage, and that's what we have done over the past 4 years. Because we wanted to become the tech-driven global fashion platform and we wanted to build brand desirability and going to bring back relevance. And we wanted to accelerate growth across brands, channels and the regions with sustainable increased profitability. And we said we want to claim leadership in all these 5 pillars that you see here. That was our aim to actually manage to reclaim this leadership and have a great comeback after this 5. We have resharpened the HUGO BOSS and really reignited the momentum. We have achieved record results and rebuilt our brands, BOSS and HUGO. And when you see, we came from in '20 -- by the end of 2021 from EUR 1.9 billion with a minus of 12.1% today of EUR 4.3 billion and a profit of 8.4%. That was an incredible journey and we more than doubled sales. We put consumers again in the middle of everything we do. Because we said we don't want to have only consumers. We want to have fans and we got a lot more followers and also members in 2021. And actually, the story is that we created these 2 brands with new visual identities, with new modern campaigns, with updated logos, and we actually refreshed the story, be your own BOSS or you go your own way. And we invested into marketing to really bring back that brand relevance and we invested into the marketing into that. And with that, we also became back in the brand heat. Actually from nowhere, we made it to the second or under the top 3 brands, and we remain stable in the past 4 years. But not only that, we also gained momentum, and actually, we gained market shares, as you can see, more than 11% over the past years. We said HUGO BOSS is not only a brand, HUGO BOSS is a platform. And on that platform, we have 2 brands. One is BOSS with the sub-brands you see here. And the other one is HUGO on the other side. And we said with these 2 brands, we have a solid platform. We actually created -- we became not only a brand for suits. We wanted to become a 24/7 brand, and we actually wanted to come from modern tailoring to modern performance suits also to casual or even into Activewear for men, but also a 24/7 lifestyle promise for womenswear, with the same approach. And we have doubled sales and we tripled sales. And in HUGO, we also doubled the sales. And actually also there, we have the 24/7 ever expression from work to hang out, as we said, in HUGO because it's a younger target group. And also in actually the underdeveloped product categories like shoes, accessories and bodywear, we increased sales have made it much more relevant. We actually also went back to all our license, and we actually worked on the business plan. And we said when we can double the sales, they also should be able to double the sales and we did. And we integrated new licenses to enhance the brand and our royalties, we doubled actually more the royalties more than doubled in the past 4 years. And something we are super proud is that we invested into our quality that we invested into our craftsmanship. And today, we can say we increased our price value in our product, big time. And today, when you go into the stores, we are very proud. This is one of the points we are super proud that we have really sharpened our product that we have increased the quality and therefore, also increase the sales through. But also we digitalized the whole value chain. We went much more into data. We established our digital campus. We created data dashboards and we also integrated already today the AI tools in our company, and we are working with that together to make it more smart, to understand our business better and to make our business also faster. We actually put digitalization across all the product we are doing. Already today, we develop more than 65% in -- is created already digitally. So we put that in everything we do already. And then we reshaped our retail concept. We actually went into the omnichannel. We wanted to be omnipresent with our brand and on every touch point where the customer goes. We actually build invested into new store concept and our KPIs in the retail has increased not only the KPI, but also the sales. Now online. Also there, we actually went from 18% to over 20%. We doubled our sales online. Also that developed was important to become a that we are on the touch point of everywhere our brand is shown and to become an only present brand. We also went into wholesale. And with our sub brands, wherever we went, we were able to enhance the space to get more space in our department stores, for example as 24/7 lifestyle brand, and the number shows here that it was super successful. America became -- or the U.S. became in 2023, our #1 country. We tripled the sales. We became a 24/7 lifestyle before it was only a suit brand, but then we became 24/7 lifestyle, and we attracted a much younger consumer. But we also invested into our organizational platform. We built not only the big platform, but we also, within the platform, we built the brand platform, the omnichannel platform, the product platform, the business operation platform, but also the key function platform. And within that we collaborated much more, and we started to discuss this site. And then most importantly, we also delivered. We boosted supply chain. And it was not easy because we had -- we doubled the sales and we had to be also able to deliver our orders. And we expanded our product capability in [indiscernible] which is a big advantage that we have. We improved our product availability and strengthen the logistic network. We actually invested into our Digital Twin to enhance the efficiency to become better planning capabilities to improve the planning capabilities to get better supplier cooperation, to be more transparent and also get full traceability in place. And that Digital Twin helps us with all these elements. Something that we are -- the second point, we are super proud was actually the culture that we built is the trust is the collaboration and the empowerment of our team. Without a strong team in the back, we would have never been able to come today and deliver all these results. And this is something that is still today in place. We have a strong team. We have strong collaboration and everybody is eager to perform and to get to the next step. And to summarize what we have done in the past 4 years, we want to show you with this film, we summarize actually all the projects, all the activities we have done and we have achieved in the past 4 years. Please enjoy this. [Presentation]

Welcome back. You have seen a few highlights. And when we look back, I have to say it was an incredible journey. It was an incredible experience. But this was only the Phase I and now we go into Phase II. And we will see how this -- we will show you how this is going to shape up. But anyway, this was a remarkable results, and we have really done with that team, incredible magic to bring that business and that brand where it is today. In 2023, we increased our ambition to EUR 5 billion and over a 12% EBIT margin. That was by the end of '23, we saw -- this is our target for new. But exactly a bit later and that when we addressed that, there was no worse, there was no tension in the macroeconomic environment on this world and exactly then when we announced it, the world has changed. And we were also a part on that. And the world is becoming less global, increasingly fragmented and also volatile. And therefore, to drive this sustainable profitable growth, we want in the Phase II, we want to refocus, simplify and strengthen our business. We are completely committed to that. And we want to refocus and prepare for tomorrow's growth. We just take now a deliberate refocus on our business and then before we scale it again. And then for that, we actually want to put CLAIM 5 in place that focus on our excellence because [indiscernible] down stands for excellence through refocus and realignment what needs to be done. And it's about focusing on where we have not yet also achieved our initial goals or objectives before we scale and accelerate again the growth. Actually, excellence means outstanding performance by aligning efficiency, effectiveness and also smart optimization. We want to go in every business part and optimize where we can and we want to drive simplification for maximizing the impact. And we want to become the premium tech-driven, customer-centric global fashion platform as we did because we love fashion, and we're going to continue to change fashion. CLAIM 5 touchdown, we are prioritizing excellent this efficiency and to become more profitable. In addition, we will prioritize strong cash flow generation. This is very important, and this is maximizing this and this tripling actually to the past year is our aim, reinforcing our financial discipline, which we already put in place in the past 12 months, but also give sustainable returns to our shareholders. We actually put 3 field of 3 pillars for this in place. One is brand excellence, distribution excellence and operational excellence. I start with the brand excellence. We focused our branded, elevated it with the 24/7 lifestyle approach and clearly positioned us also in depth. We want to not only for the sake of selling and we want to grow in a healthy way. And the most important now in Phase II, we had the Phase I where we have the growth behind us, we want now to build brand equity. This is our most important asset that we want to build. It's about consumer connection. It's about differentiate from our competitors. It's about bringing the trust and the love into our brand and also the long-term value into the brand, as I said, brand equity is important. From recognized brand to a desired brand, that's what is our aim. And therefore, we want to convert awareness into purchase intent. So it's a more commercial approach that we want to do with our campaigns. And we want to do storytelling that is actually impactful in our campaigns. And therefore, as I said before, we want to drive the brand equity. We continue to invest in marketing. We still invest 7% compared to the previous year where we did between 7% and 8%. So we invest into our brand. We want to continue the brand in the coming years. And we also reinforced the brand relevance. We want to have the red threat wherever touch point we have with our consumer, no matter from brand campaigns to fashion shows to partnerships, to product momentum, which we're going to push even more in the future, to sport events also 2 campaigns to , for example, the holiday campaign you see. And we want to tail authentic stories to our customer. In Phase I, we were -- we talked about awareness and interest of our brand. But into the future, we want to have more consideration, conversion and loyalties into the brand, our consumers should become a part of our brand story. That is our aim. We want to inspire our fans or/and consumer. We want to connect with them. And as I said, most importantly, we want to convert it into sales into the future. We continue our story, be your own BOSS. We want to continue with that. And the BOSS, as we said, is those who lead a self-determined life, we style passion and purpose no matter if men or women everybody can be a BOSS. And we want to have and we want to see them strength people with confidence sophisticated with a lot of expertise, but also attending with the timeless elegance how they get dressed with modern femininity and modern masculinity, that's what the BOSS should be. And then in HUGO, we want to do it for a self-made still in making young generation fit for the ambition. We want to have that the brand was more create, that they are creative self-expression modern and have an ambition to be independent. That's the aim. Our future will be built on purpose and relevance and aspiration of the brand. This is what we have to give and that's what we have. That's our ingredients, and that's what we have on the platform and fully convinced we have all in place to continue to build the brand and the business into the future. How we're going to do that on the product I want to give the stage now to Oliver. Oliver it's yours.

Thank you, Daniel. Appreciate it. So also thank you. Good morning from my side. Let's have now a closer look on our product and business units and how do we move forward? So the last 5 years have been a great success. No record results. We built a great and strong foundation for further growth and profitability. And we've more than doubled our sales over the last years. So our focus is now to continue our CLAIM 5 journey and to finalize it with our claim 5 touchdown strategy. So moving forward with our business units, we are building real powerhouses 2 platforms, man for man, women for women, HUGO BOSS men's and HUGO BOSS women. How do we execute and implement this? So we will have one dedicated leadership under one roof, so one for man, one for women. This will gain us a lot of efficiencies, will gain us a lot of profitabilities, but also a lot of best practice between the teams to all our specialists sitting for men's and the men's and other women's. And for sure, without a doubt, we will have underneath brand specialists for BOSS and the same also for you go give the brand's full justice. So moving over to BOSS Man, our potential to make the big, bigger is there without a question. If you see our growth path over the last years driving the business BOSS man for EUR 1.5 billion over to EUR 3.3 billion. So what is our goal moving forward. So for sure, BOSS man sticks and will be always the backbone of our business. We've been successfully integrating a 24/7 lifestyle strategy. So from BOSS Camel that's the upper tier, affordable luxury positioning for BOSS Man, BOSS Black being the backbone formal wear, but in the meantime, also a lot on a big potential that we did grow in our upper tier sportswear environment, Orange Label sits with our wholesale distribution. With this, we are awarding cannibalization for our own D2C business. and BOSS Green will be the next spin-off. We see a lot of potential, a lot of appetite for BOSS green in the performance sportswear, especially in Asia and in the United States. But being a real 24 lifestyle brand, you need to make sure that you also have the full top-to-toe environment. So when you see our shoes department growing by 24% CAGR over the last years, accessories by 19% and body were by 33%, that fully shows you the potential of HUGO BOSS, but also the potential for our 24/7 lifestyle approach and strategies. So our key focus areas moving forward is, for sure, the 24/7 lifestyle ongoing discipline makes a big, bigger for BOSS Man in total. We take a great momentum for sure for our shoes accessories for further growth, and we are streamlining the assortment. So a lot of efficiencies will happen by smaller collections that give us other opportunities to drive profitability growth for the future. In BOSS Women's wear, our clear goal is to be better before bigger. So we've been able to triple the turnover to in CLAIM 5 over the last years, but there's a lot of potential moving forward. So we've modernized the brand without a question, but also, we all know the single biggest potential for HUGO BOSS business unit sits with our women's wear business. So what is our clear goal moving forward? So we wanted to find a clear DNA. For what do we stand for what do we not stand for BOSS Women's wear, A consistent message in brand positioning and also in our customer reach out to our female consumers, building the right platform for everyday essentials, and then making sure that we stay relevant and we are in top of mind brand for our female consumer. So identity before growth, clearly defining our DNA, building emotional connections to our female consumer, defining the base, our hero items and everyday essentials. The core regions for our focus will be our European and U.S. markets, and think women for women. You've seen our powerhouse structure that we move forward, implementing in January. And also great news, we are hiring, and have it joining us in January, a great female talent coming from a multibillion female pure female brand joining us in January and leading our specialist women teams. So HUGO more brand impact more profitability. We've had a great growth path over the last years. If you see from EUR 300 million growing to EUR 700 million. But for sure, now let's sharpen the brand. Let's make sure that we weren't on the brand equity, but also let's drive profitability. So realign our brand for profitable growth. So first of all, we want to have one here brand message standing out. There's a lot of potential in efficiencies driving between our Red Label and our Blue Label business. And we are opening the brand to have a more, I would say, commercial setup instead of looking for the niche. So I would say to sum it up, it's more like a younger [indiscernible] rent than being relevant for genset consumer. And this will give us great commercial opportunities. So you will also see the same like we did for the BOSS brand at 247 lifestyle approach. So from work to hang out to relax, having more a seamless and more and hybrid version for our Red and Blue Label brand. So key focus areas are we're going to strengthen our brand from doing smart investments, reaching out to our consumers. We find the brand positioning to a wider audience, also commercializing HUGO Unified HUGO having a clear seamless environment for red and blue, elevate our distribution, more wholesale than retail. And our core regions for focus will be, again, Europe and our U.S. market. So when we talk about optimizing our product assortments and talking about efficiency, driving and also revenues and better profitabilities, I have one example for you, and that's our BOSS Mans business. for sure, our biggest business by far at HUGO BOSS. So our teams, we've been able to get a cutback by 25% of our collection size until '24, and moving forward to 2028, we will see another cut of 20%. This will drive efficiencies without losing any competencies, without losing any profitabilities, not at all. This will gain profitability and also help us to have a long tail and strong fundament for further growth and profitability growth. On the other side, so having a more efficient mindset for our collections, having smaller collections, with all the data insights we are gaining from our consumers from all of our omni channel touch points. Also, the clear goal is to drive our inventories from 25% over to 20% in the next 3 years. So we will reduce complexity, improve our transparency by better planning tools that we've implemented, increased visibility in wholesale. EDI connections will help us to drive the business even further and better and for sure, the retail doctor and with our new Twin initiative, that's a new tool that we are integrating will help us to steer and to also have a more profitable business moving forward. So let's now have a deeper look at our distribution excellence strategy and how do we move forward. So we did build over the last years, I would say, a best-in-class omnichannel environment. We have all these touch points retail, full price outlet, hp.com partner digital platforms, department stores or franchise stores. And our goal was from day 1 to have a seamless environment, to connect all of these loose points and have one communication that we have to our end consumers. And I think we've made a great progress and have the best-in-class omnichannel that is existing. So we are elevating ongoing a clear high-quality distribution. That's our goal moving forward. Our retail performance will be crucial like-for-like growth, lead with our wholesale partners. We have a clear wholesale strategy. I will share with you in a bit, optimize our online distributions. And also, we are strengthening, first of all, our European business, we are often market leaders and there's a lot of potential ahead of us. for U.S. and Greater China. Our good, better, best inhaler strategy was helping us to have the right product at the right time for the right consumer at the right touch point. clear 360 degrees approach for all of our touch points, if it's digital, retail or wholesale. And since CLAIM 5, we also did invest straightforward EUR 500 million into our own store environment, and this is really paying off. Our stores look great. And on the other side, we did implement new loyalty program based on a web 3 technology. And you've seen the numbers in the meantime, 30 million partners in our loyalty program. And we all know, loyalty members spend more. And for us, our loyalty members spend 2.5x more than a regular customer. So let's have now a quick slide over to Barcelona, and I want you to join me in visiting our store in Barcelona. Enjoy. [Presentation]

So welcome back. What a beautiful store. So generating brand equity on the one side. On the other side, also pretty profitable. So it's a good balance and a good mix. So how do we move forward in our retail environment. We are optimizing our store portfolio as we speak. That's an ongoing scenario. That's nothing new. So in the next 3 years, we expect the closure of approx 50 stores. Why are we doing it? It's always interesting. When you're signing a lease contract 10 years ago, 8 years ago, and then you see certain movements for sure. We see macroeconomic movements, but also we see shopping mall is changing. So it was relevant 10 years, 8 years ago, but there's a new shopping mall opening and a lot of brands are leaving existing shopping malls. So we need to adapt and also our strategies where do we need to position the same for cities and even for countries. So it's always the pay to sell rent is always the rent-to-sell ratio. And also, it's about driving our KPIs. It's conversion rate, it's [indiscernible] APT, making sure that our store productivity and the square meter turnover net sales is driving to the right direction. We are boosting productivity by commercial opportunities. So if we talk about gift giving, if you talk about Father's Day, if you talk about Valentine's today, all of these key commercial moments are fully embedded in our customer journey and customer outreach. We're leveraging smart price increases. So you've seen price increases over the last seasons and there will be another wave of price increase coming at the beginning of next year and the loyalty program I just mentioned is crucial. We've seen tremendous growth coming out of our loyalty program. This is not genic growth. And we all know loyalty is the key moving forward to drive our profitability, not only in our own environment, but it's crucial to get closer to our consumers to understand what is really on top of their mind. Then lead in wholesale, I think we've done an amazing journey over the last year in wholesale. You've seen the numbers, tremendous growth. And our goal was always win with the winners. So what does it mean? I can tell you, 75% of our turnover, we are generating with 5% of our customers. So we've clearly been able, on the one side, to grow with the key partners globally with all of our luxury department stores. On the other side, we are ongoing cutting back the tail end, and that's also our vision moving forward, win with the winners and constantly cut back the tail and making sure that we have the right balance of brand equity and generating a profitable growth. We're optimizing the assortment. This is part of our good, better, best and Halo program. So what sits at which touch point, not only in retail and e-commerce, but also in wholesale, to avoid cannibalization and to drive full price. And on the other side, franchise is a great opportunity for further growth, and I can share with you what we've achieved so far and what is our way moving forward. So in the meantime, HUGO BOSS is operating 390 franchise stores worldwide. And there's an option for approximate EUR 150 million on top on the globe. So there is a massive growth behind it. This will also help our brand to get to the next level. Our franchise stores are fully integrated, seamlessly integrated, not only in our omnichannel journey, also with our loyalty program that we get in connections now to these consumers getting all the insights that we can then use customer outreach to measure our collections and making sure that we also hyper-personalized our product to each and every consumer moving forward. We have built a strong foundation in digital from EUR 400 million to EUR 800 million. So we doubled basically our digital turnover over the years. hugoboss.com doubled our digital platform business -- wholesale platform business, we tripled so a great development. How do we move forward for this business. So we are amplifying a clear 2-brand strategy, separating what is HUGO and what is BOSS to give both brand, the right platform and justice. We are optimizing our performance marketing. We see already some great improvements over the years but there's more opportunities. And especially our loyalty program, again, with getting more organic growth instead of have a paid search and traffic will help us to have a more profitable customer outage moving forward. We reinforce our strict assortment guidelines, again, mentioning good, better, best, what sits at hugoboss.com our global halo online store on what should sit and is sitting which product and which content is sitting in each and every partner store also here to avoid cannibalization and to talk to the right consumer at the right time. And we are enhancing our customer experience as we speak. So you can expect from the first and second quarter, or next year that we have a lot more content, customer outreach, customer journey, that will get our hugoboss.com to the next level. Then let's have a look on our markets. For sure, we are continuing building on Europe. And Europe we're often the market leader, having a very strong base for further growth. And now we want to strengthen our U.S. and China business and without a question, there's a lot of opportunities in our emerging markets. So let's have a look on U.S. We tripled the business over the last years. We are really on the map with all of our department stores. So one-off, I would say, the strongest growth we see in the markets sits with our partners. We are working on our profitability in our own and operated stores. So clearly focusing ourselves on Tier 1 and 2 tier cities and working on our profitability. We want to localize more, like always think global, act local, our marketing approach, making sure that we get close to the consumer needs. And I think we've got some very good examples like our collaborations we had with NBA or NFL that really helped us to establish HUGO BOSS as a 24/7 lifestyle brand into the U.S. market. Then moving over to China. China, we all know has a massive opportunity. So we are laying now the foundation for further growth. We've seen after COVID how consumer behavior in China did change from a work more to a life balance. And we need now to adjust also our strategies, implementing our 24/7 lifestyle approach. At the moment, still in China, we are known for our formal wear for our upper tier sportswear, but there's so much more that the consumer can get from us, and that's also part of our marketing strategies moving forward. getting closer, China for China, China faces for China, also making sure that we get full justice into this market, a lot of opportunities. We just opened our Shanghai Halo store 2 months ago. And as we speak, this week, we are opening our Macau flagship store that will also then reach a greater China consumer base ongoing in the Macau area. So great movements moving forward. And then our emerging markets. We all talk about the Emirates. Yes, we've done an amazing job. By the way, this is our most profitable region that we have. So great development. Now we have a new joint venture joining us will be implemented and executed in June next year with our partner coming from the Emirates. So we see a lot of growth coming here. And on the other side, there are a lot of franchise opportunities also, especially in India, where we have great partners where we see there's a lot of potential moving forward. So to sum it up, driving excellence across all our brands, driving excellence about all our channels and regions. So we will ongoing fully leverage our 24/7 lifestyle approach for BOSS Ma. We will sharpen our positioning of both women and HUGO with our new powerhouse structure. We are optimizing our assortment and reducing complexity. This will help us to drive profit and to lower our inventory levels. We ensure high-quality distribution ongoing, making sure win with the winners, cut back the talent, and we unlock the full potential of our key regions as just mentioned. Thank you very much.

Thank you very much, Oliver, and good morning also from my side. Thank you very much for your interest and joining us today for our capital market update. So I will talk now about the third field of our areas of excellence, which is the piece of operations. And then I will guide you through our financial ambition and cost of what is actually how all these strategic measurements, how they are really translating into the financial ambition. So when we talk about operations, when we talk about operations, we talk about sourcing and production, we talk about logistics. We talk about and AI is getting much more important, and we talk about the key support functions. This is the whole supply chain that we are thinking of, and we have a fundamental belief that if we invest into AI, if we invest into digital capabilities, we can make much better, smarter decisions. We have also the fundamental belief to have an automated logistic to be to drive efficiency. So the whole operational piece is around driving efficiency and to be better in the future to elevate to have a good foundation for profitable growth. So a little bit to look back what we have done this. So in the past, we really have invested. And this was all around CLAIM 5. CLAIM 5 was about big investments into our digital capabilities in expanding our sourcing capabilities also because we were growing big time also on volume. So we were increasing our numbers of vendors and strategic vendors. And also, we invested into the logistics and our back end, and will come to this. But it was a period of a deliberate investment to have a good foundation for the next period and the next period is now CLAIM 5 touch down. When it comes to our digital capabilities, there is a big program, and you heard a lot about the Digital Twin. Digital Twin is actually an investment of EUR 50 million that we started 2 years ago, where we want to achieve higher visibility of our merchandise, where we make use of a lot of data analytic things to optimize our processes and where we are investing into our planning capabilities. All these things are coming now to live in the next quarters. I can tell you, starting in 2026, almost every quarter, you will see it kind of go live. And this is actually the message of CLAIM 5 touch down. So we are in the red zone of those projects, and we will get them done to drive profitable growth going further and to be more excellent and to drive efficiency and with this, improve our profitability going forward. And Digital Twin is actually one excellent example where more than 200 people of HUGO BOSS are working to improve our supply chain. Also, what we have seen from a supplier point of view and the results are already visible in our gross margin. We have achieved over the last 4 years, if you compare 2020 to 2024, we have improved our gross margin or developing margin by 300 basis points coming out of the supplier base because after increasing our number of suppliers, we are now in the consolidation phase finding agreements, strategic partnerships going forward. And with this, somehow, we are able to lower our supplier base. We did this in the past year, we started this. As you can see here in 2023, but we will continue this path and this will give us more opportunities to actually place more volumes behind one unit in one order and with this drive economies of scale and with this, get the gross margin up. Also a big component was that we are decreasing our airfreight share. You see here, last year, we finished the year with 15% average share. This year, we were high single digit. But at the end, what we want to have is we want to have a airfreight share of almost 0. This should be the exception, and this will also drive the efficiency of our supply chain going forward. Oliver has been quite explicit in terms of saying we're going to reduce our complexity by 25%. And this was also a big driver to get the developing margin up. But as we have seen, we will further reduce our complexity by 20% for Boss Men's wear. So this means there's more opportunities to come to get the more economies of scale and to get the gross margin up with this. And also, if you look at near shoring, you've seen with Daniel, we are investing into our capabilities in Izmir we are having a mindset of more near-shoring to be closer to our market. So we did this. I would really say we have a flexible supply chain today really in place so that we can swallow all the effects that come with all the tariff discussions we really managed with our flexible supply chain to overcome some of the external effects and to have not a kind of, let's say, big effect in our gross margin, but we could really mitigate and reduce the risk coming out of tariffs so far, you never know in the future. But I think what I can really state is we have a flexible supply chain, and we can respond to different needs, and we can easily change from one supplier to another one on the different continents. Also, what is crucial is we were growing big time in our volumes. I said this in the beginning. We are selling around 70 million units of products a year. So we were expanding capacity in Filderstadt and also in the U.K. and in the U.S. So this means we are ready for future growth. We have the capacity in the logistics. We are investing EUR 100 million, but this is also, the logic is, we started this investment 2 years ago, next year in 2026, we're going to see the go-live of our Filderstadt automated warehouse. And with this, we have the possibility to in-source our HUGO apparel logistics back from a third party insourcing Filderstadt with much better prices. So this will drive also efficiency. This is another tangible example where you can see this is a touch down where we finalize this, and you will see the effects of excellence and efficiencies in our numbers. And I just want to show you now what is really happening? I mean EUR 100 million is a lot. We invest in automation. We invest in robotics and it's a marvelous project, and you can expect to go live in the second quarter of next year. So just have a look what we are doing in Filderstadt. [Presentation]

Thank you for coming back. So that is about our logistics. I think it's impressive what we are doing. We really believe in automation that I can really confirm that we have a world-class supply chain when it comes to all flat goods warehouse and with world-class cost per unit for the picking services. Then also what we did in the past is, and that was the piece of CLAIM 5 is we said we need to invest into our headquarters and into our showrooms. We have invested in our marvelous showroom in Disteldoph, big time, especially when we are to the interface to our customers. But also here in our headquarters in Metzingen, we are investing because we want to attract the best talents. And actually, we are getting them. And I think we are very proud of our campus, and we really modernize this and the investments are paying off. And also here, when we talk about IT, we also make strategic investments. We are in the middle of the rollout, for example, to work on our S/4HANA, our digital core. And this is another example where we have continuous go-lives over the next period of time. We have already converted 1/3 of our business in terms of regions, and this will continue in the next years to come. And this is the digital core, and this is also the basis for operational efficiency because once if you have one digital core in those countries where we are operating, we have possibility to harmonize all the processes and to get much more efficient. And also, this means that these investments that we have done, that these investments are now over. And we will maintain investments, of course. But with CLAIM 5, we went through a cycle of big investments. And now with CLAIM 5 touchdown, we have 2 things that are visible also in our financial ambition. One is we will earn and leverage much more efficiencies going forward. This will drive our profitable growth. And on the other side, you will see normalized levels in terms of CapEx, which will help us then to generate more free cash flow in the end. So when you talk about operational excellence, we are actually addicted to deliver better gross margin, lower cost good CapEx efficiency and to get the inventories down. I think this became evident over this operational excellence piece. We really go even with claim with a touch down, we will further improve our gross margin. So we still have more leverage to come from economies of scale. When it comes for more volumes per order, we've continued our vendor consolidation. We will focus on strategic partnerships going forward. And also, we will have the mentality of an air freight share of and take this as an exception. So this will drive our gross margin further. We have shown it in the past, and this is to be continued in the future. And also, when we talk about operating expenses going forward, they will come down. One example was the logistics with the insourcing in Filderstadt. It will also drive efficiency, but also the use of AI when it comes to content creation, when it comes to translation, when it comes to all the processes, AI is a big game changer for us, and this will also drive our efficiency going forward. We will be better and faster and much smarter and making decisions. And also, when it comes to back office, we have started with our shared service center in Mexico but now we are also considering to run a project, which is a global business solution piece where we are intending to harmonizing the processes in the right location for Global Business Solutions and then optimize them with AI. This will also drive the efficiency and will give us operating leverage going forward and keep the overhead the back office cost in percentage of net sales under control. And I think which has become transparent also from a capital expenditure point of view, we will see now going forward kind of normalized level between 3% to 4% of CapEx spend in the next years to come. which is more in line with competition if you compare us to our peers because the major investments in infrastructure and in retail, how Alio was telling you, they are now a majority behind us. And so of course, we will have -- we will continue to invest in terms of maintenance pieces, but the majority of the investments are behind us. And also with these digital capabilities with a digital twin with much more planning accuracy with the collection complexity coming down. We really want to get the inventory levels down and it's our clear ambition to get the inventory to net sales ratio in 2028 and down to 20%. So all these things are going into the right direction. And I will now summarize all the different effect, not only out of the operations, but also what's coming out of the brands, what's coming out of the distribution and the operations, how does this translate inly into our financial ambition. And once again, to make the point, CLAIM 5 was a growth and investment strategy. And I think we have delivered as Daniel has shown to you that we really delivered on major milestones. So top line growth was there. The CAGR was above 20% was great. We even improved our gross margin, although we deliberately invested into the quality into our products. We have a wonderful price value relation but notwithstanding without compromising on the quality, we were able to improve our gross margin going forward. And I think we have shown over the last 18 months in terms of how we reacted to the market environment that we have a good alignment between our cost development and our net sales slowing trends, I think we successfully adjusted also our cost base, but this is also to be continued in the future. We have seen substantial investments, CapEx. So you can say over the last 4 years, '21 to '24, our average CapEx to net sales was around 6 percentage points. This will be different in CLAIM 5 touch down. So it will be much lower. You have seen also during CLAIM 5 that we have seen progressive dividend growth all the period of time. And what we also achieved is we are very mindful of our financing structure. We have a financial framework. We have an adjusted leverage between 1 and 2. We are in the middle of this, and we have with this actually. And with the strong business model that we own with the right strategy and with the right execution power, we have a strong investment grade. And I think this has been really key achievements of our client strategy. And now we start now this phase of refocus and on realignment. And I think the key question here is, this is a deliberate move that we are taking. So it's a deliberate move of generating higher quality revenues and to find the right platform then after a step of we focus in the year 2026 to then find the way forward for profitable growth. So this is the model that we are applying. So you have seen with Daniel, the brand excellence that we are taking. You have seen all the measurements coming from the distribution part and the product part Oliver was talking about. And our part regarding operational excellence. This will have a meaningful free cash flow generation. I will come to this, and we will take this kind of free cash flow, and we are committed to return our cash also to our shareholders. So once again, if you translate all the measurements that we have seen now with the Managing Board, how do they translate into our business? I think in CLAIM 5 touchdown one of the most important pieces is, yes, we want to drive brand elevation are focused on brand equity. We want to have higher quality of our revenues. I think this is one important component, and this will translate also in a higher share of full-price sales. And also -- so this is a kind of component that will drive our gross margin. Another piece is actually that we will have smarter price increases also. This will also drive gross margin. And it's our statement regarding marketing investments that we stay around 7% of net sales which is in comparison to our competition on a comparable level or even slightly higher going forward. With regards to our distribution, I think the statement is here really good. With being more selective, we will drive the profitability because it means for our retail store that we have this review of our store network. We will be more selective when it comes to our wholesale distribution in both aspects in terms of the assortment. Not everything is available for everybody. We have a clear segmentation by good, better, best halo. And on top of this, we are cutting back the tail end. And at the same time, we have the big opportunity of growth with our franchise business and somehow to integrate them also into our omnichannel universe when it comes to services around this. And operational excellence, I think we talked about this in my part. We will lift the gross margins because of economies of scale and sourcing efficiencies that we are seeing. We're going to have a disciplined OpEx management, and we will drive this operating leverage. And I think very important also, in terms of inventories, we will get the inventories levels down, and we will have a normalized CapEx level. And with this, we will boost free cash flow generation. So I think the key message that we have here is we will have, with CLAIM 5 touchdown, we will have a meaningful free cash flow generation going forward for the next 3 years to come. And this is, if I translate this into the numbers, we have seen on average in CLAIM 5, around EUR 100 million of free cash flow generation after leases. It's very important. So if we go now in CLAIM 5 touchdown, this will triple to 300. So the average yearly free cash flow generation after leases will be around EUR 300 million for each year. If you include IFRS 2016, this would be roughly above EUR 500 million to make it very transparent. So we're going to triple our free cash flow generation for the next 3 years. because of the fields of excellence I've just shown you. So let's have a financial deep dive. So how does this now translate into the next years to come. I think if you look at this chart, I think it's quite impressive. So you can really see over the years 2020 to 2025, how we really accelerated our growth. We really were growing big time. You have seen the CAGR of above 20%. But now we take this deliberate step back. So we have now 3 phases going forward during CLAIM 5 touchdown. So the first year will be the year of refocus, a deliberate step of refocusing, I will come to this. And then with 2027, we will grow. And in 2028, we will accelerate our growth going forward. So we expect for the year 2026, a decline ForEx adjusted to mid- to high single digit because we take deliberate steps. We are focused on brand elevation. So this means the net sales that we are achieving is of much higher quality. We want to have high-quality revenues going forward because we have optimized our VGI footprint. We are rather selective. We are not offering everything to everybody. So this is a kind of refocusing that we are taking a deliberate step and this will result despite our price increases in a decline of our mid- to high single-digit range. And in the next years to come, if you look at 2027 and 2028, we will return to growth, to profitable growth, and we're going to accelerate this also in 2028 because you will see the productivity gains in retail and the sellout in wholesale. And we will also see strategic price increases going forward. everything directed to elevate the brand, higher quality of sales and at the end, to also drive the gross margin. And this is, I think, crucial to understand that we will finish the year at around 62% of our gross margin. But with this deliberate step back, already in the year 2026 and even further growing in 2027 and '28, we will get the gross margin up. So the gross margin is an indicator of high-quality net sales because of strategic pricing because on the operational piece, we will have further sourcing efficiency gains. And we were really focusing in our business on higher full price sell-through going forward. And of course, with the better controlled inventories if the inventory is going down. Going forward, we intend to have lower markdowns going forward. If we look at the cost piece of things, we have 3 components, and we don't neglect any of the functions. We are talking about retail, we talk about marketing, and we talk about the key support functions. So every function has to deliver kind of efficiency going forward. And I think it also makes sense because AI and all these things are actually concerning every function going forward. So if we talk about retail efficiencies, and Oliver has been pretty explicit we will streamline our portfolio going forward to strengthen the performance, to have a clear productivity view and to have a robust base in terms of profitability per store. And also, we have a relentless focus on our rent-to-sales and pay-to-sales efficiency. We are completely KPI driven in our retail universe. And this focus on the cost and at the same time, drive the store productivity, we will get operating leverage in our retail business going forward. And also in marketing, we have a firm commitment because we want to achieve a higher brand equity going forward. We want to achieve the brand elevation. So we are saying we invest 7% of our net sales into marketing. That's our firm commitment. And on the other side, we will have key brand initiatives going forward with the highest return that we can get, and this is what we mean by marketing effectiveness, get the most out of EUR 1 spent once you have your marketing spending going forward. And also for the back office, for the support functions, we talked about AI and optimization. We are really addicted to do this. This will drive operating leverage, and I already talked about also about our global business services going forward with the effects coming in, in the year 2028, in terms of improvements of our cost structure. So having said this, if you look at our EBIT development in the next year, we expect our EBIT to decline by EUR 300 million to EUR 350 million. This is because of the top line decline that we are seeing because of this deliberate step of refocusing. On the other side, you can be assured because we want to have a stable base, a stable foundation going forward. We want to -- you will see already in 2026, an improved gross margin and we will get also in absolute terms, another year to get -- have structural things, structural efficiencies to get the operating expenses further down. And then in the next years to come in 2027 and in 2028, you can expect return to profitable growth. And what we believe is the long-term potential of an EBIT margin of around 12%. We believe in this, and we will do anything as the managing Board at our whole teams to drive this profitability going forward. I think one component because free cash flow is at the essence, what we are doing in CLAIM 5 touchdown. I think it's important to talk about the capital expenditure. You see here on this chart how this somehow developed over the recent years. And you see that we are really -- we're climbing the mountains in terms of our investments regarding CapEx to net sales spend. And these -- and I repeat myself now, but also this refers not only to operations, but also refers to retail. The majority of the investments are now behind this, and we are now coming to a level of normalized CapEx spend. Of course, we drive efficiency also on retail CapEx per net sales spend. We get them down further if we look into the years. But we will see normalized levels in CLAIM 5 touchdown between 3% to 4% of CapEx to net sales spend, and this will free up a lot of free cash flow going forward. And with these levels between 3% to 4%, to be honest, we are also at levels in line with our direct competition. And with regards to our trade net working capital. We talked about this. We have seen this kind of bouncing back because you see this trough because of COVID, where we really pulled the break in terms of the inventories. You will see that we will come to a level of our trade net working capital between 18% and 20% in CLAIM 5 touchdown. But the major driver will be also that we get our inventories levels in the year 2028 to 20% because we have a lot of -- and I don't want to repeat, there's a lot of optimization measurements behind us to get the inventories down to 20% to net sales. So having this kind of combination of the year of refocus and of course, the EBIT improvements that you're going to see in terms of profitable growth in '27 and '28 plus the CapEx efficiency at normalized level, plus the inventory optimization coming, this will drive meaningful free cash flow generation of EUR 300 million after leases every year. And of course, what are we going to do with this cash? So talk about the capital allocation. So firstly, we're going to invest, reinvest in organic growth. We're going to invest into the brand. We're going to invest into the business. Overall, this is the first mindset that we are having. Sometimes they are capitalized. Sometimes like marketing spendings, they are immediately expensed, but we will use our cash to invest into our business. And then on the second piece, we have our clear dedication to return the cash to shareholders. We will do either dividends and/or share buyback. And like you might have seen during our release, have a final decision for the year 2025. We will have a final decision in 2026 on the tenth of March, where we will be more explicit of how we're going to allocate cash back to our shareholders. And also, we want to have a resilient, let's say, capital structure. And with this, we,of course, our intention is always to have a kind of reduced financial leverage. We are now standing between 1 and 2. But of course, we have the intention to safeguard our investment grade. We always have to keep this in mind. And actually, from an M&A point of view, we -- in terms of strategic opportunities, we just want to keep the cash to remain flexible for M&A, but we, for the time being, we will focus on ourselves regarding CLAIM 5 touchdown in the execution, and we rather take from an M&A perspective, an opportunistic approach going forward. If we talk about the financial leverage because this is also important, we are standing at 1.3. I think we have given us ourselves a financial framework between 1 and 2, we are fluctuating around this, and it's definitely our intention to maintain this kind of financial leverage going forward. Once if we were more around 1%, this we are considering returning cash to shareholders, but this will fluctuate in the range between 1% and 2% going forward. The main intention is here to maintain our investment grade rating going forward. So having said all this, our long-term commitment to our shareholders. Beyond CLAIM 5 touchdown is really that we have built a very solid foundation for profitable growth. And it's our intention to outgrow the market. And if we say outgrow the market, we are saying we want to achieve market share and you've seen the number in CLAIM 5. We have achieved a CAGR of 11% market share growth over the years. So it's our ambition, our own ambition to outgrow the market and to be better than the market. At the same time, we want to achieve a sound profitability. We want to get to this EBIT margin of around 12%. And on top of this, and I think this has become clear, it's all about cash. cash is king, and we're going to generate meaningful free cash flow going forward, and this will drive the shareholder value going forward. Thank you very much for your attention. And I will now hand over to Daniel.

Thank you, Yves. I'm back, and I just want to summarize everything. I think you have seen that CLAIM 5 gave us really the opportunity to invest into our brands. And we have today's 2 strong brands that we have invested that got back the relevance. But we also have a product for both brands in place where we have a much better price value, which we also invested. We invested further in our omnichannel, which really gives us incredible touch points wherever the consumer goes is strong. But we also invested into our setup in our organizational setup and into our people. And these investments were there to build a fundament that is very strong and the fundamental that will give us growth and that we can now leverage for the future to give us a growth. And therefore, this was a very important step. And as I said, this was only step 1. Now we're going to go to step 2, where we continue and we leverage every investment we have done. Now we don't have to do. We have the setup, we have the ingredients to grow in the future in a very strong base in a profitable base, in a sustainable, profitable way and create cash flow. And this is our ambition in the future. And what we do now in '26 is just we adapt to the current market -- macroeconomic situation. That's why we want to use this moment to actually optimize the whole part of our business or we say in other words, we turn, were little fed into muscles. That's what we are going to do in the next year and be able to actually strengthen in total, the business and actually come -- with the strong one to the excellence. That is our aim. It's an adaption. And let me make one thing very clear. We are not changing our strategy. It's not a change. It's an adaption for 1 year, and then we continue to grow. This is very important to know. And with that, with that refocus and realign we are continuing and we are convinced that we can outgrow in the market, achieve the EBIT of 12% in the future because we want to come from spread to strength from reclaiming to refocusing and from great to excellent. That is our aim. And we are very performance orientated. Our team is eager. Our team is geared up to really build this business as we just showed you. And I think Oliver and Yves made it transparent what this -- all these platforms, what they -- how strong they are and that we can -- that they are ready now to elevate, and we have a fantastic team that is -- really has the right spirit that has -- wants to have the ownership that has a great mentality and that is eager to really drive this performance on the culture of trust into the future. And as we also say, you can have a good strategy. The most important is the execution. And I can assure you with that team in place, from starting from the management up to everybody in this company, we are convinced that we will execute all our targets. And we are able to realign today to take that adapt to the market situation and to prepare us for the future growth. We just want to summarize our statement again with that field. [Presentation]

Get ready for the next level from great to excellence with our strategy update. CLAIM 5 touchdown. With CLAIM 5, we have reshaped HUGO BOSS, boosted our brands and achieved record sales. We have become a strong united team built on a culture of trust, celebrating great achievements together. Now the world has changed. It has become tougher, more fragmented and complex. But we have what it takes to succeed. To bring the game home, we need to refocus, refine and realign our game. CLAIM 5 touchdown is our playbook to go the extra mile and win the game, focusing on 3 fields of excellence. We take our brands to the next level through captivating storytelling and level products. We further elevate customer experience through excellent and consistent omnichannel distribution. We continue to strengthen our operational backbone to ensure flexibility, efficiency and scalability. Our direction remains unchanged, and we have a clear vision together as one strong team refocus today to achieve excellence and prepare for tomorrow's growth. Let's bring it home together. Ladies and gentlemen, that is CLAIM 5 touchdown. And now we are open to all your questions. Thank you very much. [Presentation]

All right. Ladies and gentlemen, we are now ready to begin with the Q&A session. [Operator Instructions] We have a number of people that have already signed up for questions, and I would take the first question from Freddie Wild from Jefferies. Freddie, the line should be open. You're now able to ask a question. Please go ahead.

My first one is really to understand a bit more about those changes in the external environment, which are motivating some of the reset that's going on. Is it a weaker consumer you're seeing out there? Is there a change in demand for product? Is it softer wholesale order books? Could you give us a bit more detail on what's happening? And second, on a broader point, it feels like there is a bit of a shift happening in how you want the business to be set up in terms of the channel structure. Can you tell us where you want the wholesale versus split to be in, say, '27 or '28 versus where it is now?

Daniel, do you want to start with the first question? And then maybe Oliver takes the second one, which was on mix has versus DTC?

Yes. Thank you for the question. So as I explained, the macroeconomic environment is tough, let alone the tariffs, let alone the war the worst that's going on. But the biggest challenge, I would say, and that's the reason why this is happening is consumer sentiment. Consumer sentiment is down wherever you go. If you go to the States to Europe or in Asia, it's just down. It's sometimes traffic is down 20% to 30% in shopping mall, in cities even. And that has an impact on the business. People are afraid to buy. People think, let's use my suit another season or they think, let's drive my car another year, that's the sentiment that the consumers are in, which is fully understandable. However, our conversion rate in the stores, thanks even with this traffic -- lowering our traffic for up to 20% is actually much higher. So we try -- we can actually absorb a lot because we have strong teams in our stores and that make it up with the conversion rate that they're losing traffic. But this is a global situation that everybody can imagine, is facing. And this is something that we have to maneuver through at the moment. We have all in place, as we said, all the customer touchdown already. We try to engage with the customers on touchdown also on social media, we try to get it connect with the customers. But the reality is it's a consumer sentiment is just down wherever you go. Oliver, you take the second?

Yes. So thanks for your question. So all of our channels and touch on play a crucial role in our omnichannel world and also to implement our 24/7 lifestyle approach. So in wholesale, we will move on for sure with our win with the winners strategy and structure and adjust shares, so 75% of turnover comes from 5% of our customers. And that will be an ongoing, so cutting back the tailend, working our profitability for our own retail environment. You heard so 70% -- close to 70% of our stores are new in a new environment. So the way for investment is behind us. So we are focusing now in our own D2C business on the like-for-like growth. So when you ask me where will it be? You're like, D2C will stick and stay the biggest channel for HUGO BOSS. Wholesale, for sure, let's see how the macroeconomic situation will change, will play a crucial role. It's a very profitable channel for us. But I would say I would expect that channel mix will stick nearly the same as we are talking today.

Thanks, Freddie for the questions. We move on and we have as a next speaker, Manjari Dar from RBC. Manjari, the line should be open. Please go ahead.

Thank you, Christian. I also just had 2 questions. My first question is on the color sub-label for BOSS, the Orange Green blocking I was just wondering if you could give some color on how you view the positioning of these sub-labels shifting across the next few years, perhaps in context of what you said about realigning the product distribution? And then my second question is just on the store state. I think you mentioned that were parting 50 freestanding store closures. I was just wondering how those are distributed across the region.

So thanks for your question. So let me start with our label -- orange label, green label, Camel and Black Label. So you really know our '27 lifetime approach and how we've positioned the brand. So Camel is the affordable luxury. So where we've positioned our highest, I would say, quality, real craftsmanship made in Italy, made in Germany. That's ongoing placing crucial role in our own D2C lifting up the brand, giving brand equity and celebrating the brand. With Black Label, this is where our tailored business sits, that's crucial, that's 30% of the business. The appertif sports were will play a crucial role for further rolling it out also in our D2C area and also for certain luxury department store. When we talk about orange label, and I think this is the beauty of our omnichannel strategy of the good, better, best in halo approach. Orange label sits purely in the wholesale world, so with our wholesale partners. With this, we are avoiding, first of all, an overlap, cannibalization, certain price aggressiveness or softness of our own D2C business. So orange purely in the wholesale world. And then green label, I just mentioned it. We see a lot of potential moving forward with our green label product because there's a lot of appetite for this sport lifestyle/performance product. We see it all over growing big time in Greater China, but also in the whole CPG area, and also in the United States. So there's a great chance, and we're testing the waters as we speak with the first try out of a freestanding green label concept, very promising results, I can tell with you. So that's something we are proving as we speak moving forward. So a lot of potential also with the different separations that we have, avoiding cannibalization and making sure we are lifting up our brand now to the next label. Then talking about your second question, the 50 store and store optimization. I just mentioned it, that's an ongoing goal. So what you've decided or what whoever has decided 10 years ago, cities are moving. Consumers are moving, malls are moving and brands are moving. So we are just optimizing ongoing our store portfolio. Over the last year, we had some great additions. So white spots, stores from Halo to good, better, best. We also have here the good, better, best inhale approach and focus for our own store environment. So we had some great additions. And now we look from pay-to-sale to rent-to-sales from conversion rates, all these KPIs in optimizing our store portfolio ongoing, and that's our move that we're doing for the next 3 years.

And if I can add Oliver to that, I remember when we started and we went to the customers -- our customers actually said, "Please bring those sub-brands, bring this brand lines back. And this was actually a very easy approach because putting these brand lines in again, we were not only one position in a department store, so we had the possibility to be multiple position in the department store, no matter if it is in the tailored area or in the sportswear area or in the in the green area in the sports area. So we gained space at the place where the consumer is and that helped us actually to grow the business. And this was crucial. And by the way, it works very well. It has proven that we have done the right thing, which was the wish from the customers also to do.

Great. Thanks, Daniel. Thanks, Oliver. Thank you, Manjari, for your questions. The next question will come from Jurgen Kolb from Kepler Cheuvreux.

Two parts, 2 questions from my side. First of all, from a financial perspective for Yves. Maybe the 12% EBIT margin that you mentioned as a long-term guidance. you think this is kind of the ceiling? Or is that more -- shall we more see it as a sustainable level that you can maintain for a longer-term period? And any maybe between us here in this group as to when you think you can achieve that or at least get close to that? That's the first one. The second one more from a product perspective. You mentioned a further 20% cut in the collections. Maybe some additional indications as to in which from a color perspective and which categories you're planning to do so and at the same time, you're saying you want to differentiate the brand in a better manner. So is that maybe putting more risk into your collection? Because, obviously, with a lower number of pieces, you try to differentiate more. So here, maybe some words on how you want to differentiate and where the cuts are planned?

Yes and thank you very much for your questions and your interest. I want to ask -- answer the question regarding the 12%. So definitely, we said for the time being, our long-term ambition is the 12%. And as we have seen during our CLAIM 5 strategy in the beginning, I think let's get to this I think this is the milestone that we see. I think overall, long term wise, I think our business model can do more. But for the first time, we are humble. We want to be realistic and let's get to this around 12% as the first step. And the second question, we want to really focus on this. And we -- I think it's an ambition target if you take our EBIT margin levels today and also for the next years. I think this is very ambitious to get there, but we will do everything to drive profitable growth and this profitability level as soon as we can. I think this is also what we intend to do. But let's stay humble and realistic for the first time. Let's get close to this.

And then answering your question as regard to the collection CapEx by 20%. So I would say, to start it, the collections have been too big. So it was needed to cut back to a healthy base, and there's still room to cut it even further. Why? In the meantime, we're getting so much data, data insights from consumers, from sell-out, from sell-in that we can much better also now get into the collection developments. On the other side, we see also as being a global brand, there's a lot of overlap. So we have, in the meantime, implemented global buys. We need to make sure that we are celebrating and have one red threat talking about equally the same brand from New York City to London from Singapore over to Shanghai, and that's needed. So there's a lot of synergies, a lot of optimization that we see I'm not expecting at all whatever harm of turnover or that we lose any competencies. On the other side, in the meantime, we have with our own production in Esmya, the capacity is also for quick response. And that's what we want to do, making sure that we are closer to the market making sure that we really have the relevance. When we see that certain trends with our own production setting Izmir, we can much faster react than perhaps some other brands and that's also our way moving forward and driving relevance, being up to date and driving profitability.

And if I can add also here, one driver in the future is really that we shift our product that we add the classics into our assortment. The classics is something that we just started actually in the past years means the basics or it's more the classics, there's seasonal classics that game, we have not yet integrated in our business, which is you have one style and you're doing multiple colors in different qualities. And that classic part, like also other brands play a big part. We have not yet integrated fully in our business, and we see there a big potential that can drive our business further.

Thank you. Thanks, Jurgen, for the questions. Our next question goes to Daria from Bank of America.

This is Daria from Bank of America. And I have 2 questions as allowed, please. On OpEx, can you please walk us through the cost initiatives that you currently might have to continue to have OpEx or down in 2026 following 1.5 years, so very strict cost discipline already given you still target marketing at 7% of sales. And my second one would be on capital allocation. Given we will have an update on dividend policy in March for the time being, should we assume claim 5 policy holding true? And also on inorganic opportunities, given there have been some rumors in the press over the past couple of weeks. Can you please comment anything that you're able.

Yes. So I will take those 2 questions. So perhaps starting with capital allocation. So first of all, Vips referring to my presentation, it's our clear dedication and commitment to return cash to the shareholders. On the other side, we clearly said, let's take the final decision in the beginning of March because that's when we have the final results of our financial statements that's finalized the year how we are standing. And then we are taking a deliberate decision in March. And of course, I don't have to tell you that, of course, the shareholders will then vote at the AGM on the 21st of May. What about the distribution and the has the final say during the -- but I think to repeat, we have the clear commitment to return cash to our shareholders and claim 5 touch down will be over the next 3 years, a period of high free cash flow generation and we have the commitment to return cash. either way, dividends and/or share buybacks to make it very clear. Regarding OpEx, definitely, what we are seeing you referred to marketing spending being at 7%. I think this is we had the range between 7% and 8%. We are saying we're going to have 7%. But we also here, I think we have 7%, this is just a number in the P&L in terms of net sales. I think the most crucial thing is that we have really -- that we highlight key commercial moments that we really focus on those things with the biggest impact going forward. And as I said, to get the most out of EUR 1 spend. I think that's also the idea behind marketing efficiency. And on top of this, we have the piece of retail efficiency. One is the store closures that Oliver was alluding to, plus also having, let's say, a clear focus of paid to sales, rental sales, other cost of sales, how we were saying, and this will drive operating leverage going forward. And also, coming back to my presentation, fulfillment costs will come down due to the operational efficiencies that we have seen. We talked about shared services. We talked about Global Business Solutions. So in every aspect of our business, we will go for structural efficiencies. And I think if you look back into our track record, how we kept the OpEx under control over the latest 18 months, be assured that we will keep on focusing on cost and optimizing processes. And I think with also with AI and all the things that are happening, plus the projects that now come to an end, we have a good foundation really to drive efficiency going further and had to have really, I think this is important to have structural cost improvements going forward they will remain and that we will keep the operating expenses definitely under control. And you can bet that next year also in 2026, operating expenses will go down.

Great. Thank you very much, Yves. So next one in the queue is Anthony Charchafji from BNP Paribas. Sorry, Anthony, please go ahead.

I have 2, the first one. So we are expecting a cut in wholesale down next year and a bit less help also from new subline and some store closure. So protect profitability? Does it mean that you are willing to open more outlets as we have seen that they represent 20% of your retail network versus 17% recovered, and they are very profitable. So on this one, so the 2 questions would be how does this fit in your premiumization strategy? And can you afford the price increases? And the second one is just on inventory. So if you can help us see how to go from 25% to 20% of inventory to sales ratio and also given that you expect gross margin expansion through to 2028. Is there any risk of write-off that could impact the gross margin.

Thank you. I will answer the question with the outlets. Yes, you're right. At the moment, it's 20%. We don't have the plan at all. to increase our outage shares would be the easiest model to do, but that's not our strategy moving forward. So we're lifting up our brand out of place just a crucial role in the omnichannel environment. It's just another touch point. for HUGO BOSS and for our consumers, but we want to grow organically like-for-like in our full price environment. That's the focus like-for-like in full price also in our existing outlets. We want to grow like-for-like because there is no plan to extend our outlet capacities. And you just mentioned also the wholesale business, it's highly profitable. For sure, we also see certain softness. What you see, there's still a consolidation happening. Unfortunately, there have been some bankruptcies that we were facing that everyone in the industry was facing this year, and we also expect certain consolidation happening over the next seasons to come. The second question was with the inventory, right? So I can -- perhaps we do both. -- exactly both. From my perspective, I just mentioned it, we work on the fine -- so smaller collections will automatically help us to have leftovers to have more the right product at the right time. And this will help us for sure to drive the efficiencies and also will lead to lower inventory levels. On the other side, in the meantime also, you've heard about the Digital Twin. We did implement a lot of new tools for better transparency and also the data know-how and the data impact we get from seller data helps us to have the better and the right product at the right time. And this will help us also then to steer the inventory levels.

Yes. And perhaps to add to what Oliver was saying is be assured that the aging structure of our inventories is really good. If you're compared to last year, it has even improved. So I think you have to keep in mind that the aging structure is very healthy. And on top of this, with all the measurements that we have seen expect actually next year is that the inventories go down by a good double-digit amount of cost of acquisition cost, you can expect this going forward into the year 2026.

Thanks, Anthony. Next in the line is Andreas Riemann from ODDO BHF. Andreas, the line is open. Please go ahead.

Thanks, Christian, and hello to everyone. I have 2 topics. First one, the product. Oliver, probably for you, you spoke about reducing complexity. Does it mean the product is getting more global in general? And linked to that, how much power are you giving the regions there to decide about marketing, about the product? I'm basically interested to learn how global or local you want to operate the business going forward, topic one. Topic 2, probably for Daniel M&A. Would you agree that M&A in womenswear is more like then in menswear and do you set yourself limits with regards to the size of a potential acquisition? That would be topic #2.

So let me start. Thanks for your question. Let me start with the complexity reduction and also the global message, what does it mean? For sure, our goal is -- and I just mentioned it. So we are a global powerful brand. So we need to make sure that we have 1 seamless, 1 red threat communication to all of our end consumers globally. So yes, we think global local without a question, we fully integrated this into our strategies. So we have a global assortment and every entity around the globe is following our global assortment, and that's also needed for marketing for communication, for customer outage to send one message. And then how do we adapt it to local needs. For sure, we see there are warm weather capsules. So that for sure, you need a different product when you talk to a consumer sitting in the Middle East, then when you talk to a consumer sitting over in Canada. So for sure, we also with our collections and the complexity when we are talking about cutting back this, for sure, we will never cut any commercial opportunity just to make it sure. So we're making sure that we have all from a global scale that we get close, closest to the local and to the regional consumers. But at the end, we are a global company. So we are steering one message around the globe making sure that you can get your most beloved brand all over the globe at the same quality level. So that's the first answer. And then the teams like our teams are fully embedded in our strategies, in our communication. So for sure, we always are not only interest that we need to understand, and that's also, I would say, our communication, our team spirit. What is needed in each and every market to be successful, to be more successful. And this is then fully embedded and integrated into our global strategies. So we, for sure, discuss from our markets from Japan over to the United States. What do you really need? We have here regularly, when they see our collection framework, so fully integrated in the development. So we've taken the feedback of our teams not only serious they are part of the collection development. At the end, for sure, we are doing the direction, but we want to get all the feedback that is relevant, making sure get close to our consumers and that we're also making sure that we get the maximum potential out of our regional organizations. So they are fully embedded, and we are taking this serious feedback from our regions and then translating it into our global collections.

And yes, if we talk about also the marketing before I come to M&A. Today, it's much more complex to find one brand ambassador for the whole of the world. We have to say, are very lucky. We have Beckham, David Beckham, that is a global testimonial, a global ambassador. But that's -- there's not many of them left in this world. So what we -- in addition to what Oliver said, we are trying to find also ambassadors for all the regions because, as we said, we have a global company, but we have to listen and act local. And therefore, in the future and more and more, we have demonstrated that we show [indiscernible] with Patrick Mahomes to be relevant in the region as well because going forward, that is actually a real target and it's important to support also the region. So this is the marketing and the global part. And then M&A. Yes, let me be clear. I think our 2 brands have so much opportunity. And over the last years, we just have identified the opportunity in our presentation, you also have seen Oliver was mentioning that women's wear is probably the biggest opportunity we have in the future. And we also mentioned that there is -- that we hired a person and specialists from a multibillion company that was really only working on women's wear and to add somebody into our teams really gives us the competence to build that business. So we have the shoes. We have accessories. We have so many still opportunities in our business that we can think and explore and exercise that, to be honest, it's not our priority to do now M&A because, again, if we get all this on the street, what we have here and the ingredients what I said, then we can look for an M&A. However, I want to put their also make it clear, if there is an opportunity. If there is something out there, doesn't matter if it is women's wear or men's wear, if we see it adds value to our company. And if it adds value to our shareholders, we can do an M&A or we can do an acquisition, but we are very prudent, and we are open-minded to it. But again, first, we have our brands. We see a lot of priorities. And we only do M&A when there is an opportunity, when it adds value to our business to our company, then we explore that possibility.

Thanks, Andreas. Thank you, Daniel and Oliver for answering the questions. At the moment, we don't have more questioners in the queue. I do want to offer you if you want to ask a third question. resin, and we are happy to take 2, 3 more questions. Before wrapping up, we wait for just a few seconds. The next one would be Freddie from Jefferies again. Freddie, maybe one question from your side to see if there's more coming up again 2 to 3 more before we wrap up. Freddie, the line is open.

I was just wondering if you could get a bit more of a breakdown of price versus mix versus volume. Next year as the recent year and then into '27, how you're thinking about balancing those 3 things? So the question around impact from price space volume. Price/mix volume. Yes, price mix, yes.

Price/mix volumes. So first of all, I think, Freddie, thank you very much for your question. First of all, we have to say that we have done the price increases for the spring campaign. I think keep this in mind that this will walk into the year actually of 2026 for the full year effect. And on top of this, as you have seen, it's part of the brand elevation piece that we want to do further price increases. I think having in mind this high quality of revenues is, I think, the backbone, and this also includes investments to brand equity and also then have smart adjustments on the prices. So prices have a positive effect on mix overall. And on top of this, this will mean that the volume will -- if you look at our top line, let's say, guidance, you will see that the volume constantly will actually go down. And on the other side, if you talk about the mix piece, I think we see massive opportunities in the green products and also some shoes and accessories, and with this kind, especially when it comes to green, I have to highlight that also there, the gross margin piece is the highest actually among our sub lines. So we have also the intention to push our green products with this regard.

And let me add to that. In my presentation, I said one of the biggest achievement we have made is actually to upgrade our product, to increase quality. Just that you know, when we -- we were not on that level when we started 4 years ago. Today, you have a complete different quality of product and therefore, a different price value. So we are not afraid, always in a smart way to also see the potential to uplift the prices wherever possible because the product gives -- is done in a much better quality than in the previous before the 4 years. So we are very optimistic that this is a really realistic price increases. We want -- we do not want to outprice our product. And therefore, we are very deliberate on where we increase and how we do increase.

So we have the 2 last -- thank you, Freddie. Thanks very much. We have our 2 last questions for today. The first one coming from Jurgen Kolb, Kepler followed by Daria. Jurgen, you start. Please go ahead.

Indeed. Again, on the price side, is this -- do you think these price increases are you rather follow us here? Or do you lead kind of your category in terms of the pricing? Or what is behind the intention to what's the level of the price increase you're intending to do?

So I will answer this question. So what you just have heard like for us, price value is making sure that we offer best quality for the best price. And that's also resonating with the end consumer. So our price increases we've done. So it's not that it's new for us. We've done already 2 waves of price increases over the last years. And now with the spring having the third price increase, we are very like checking the data, checking the insights, checking how is it reflected, but also for sure, we are in an environment. So we are sitting HUGO BOSS sits in a competitive environment. So for sure, we also have a clear peer group to which we compete, and we need to make sure that we also have then, I would say, price value, cross check, but also from a price retail price positioning that we are also matching the needs to be in a competitive environment very successful. So I'm convinced with all the price increases we've done and also that is ahead of us. And there might be also further optimizations and chances because I think we have a great product. we have great opportunities. That's also what we receive when you see when customers getting asked, one of the top strength, of course, always quality. It's always coming from all consumer research, it's quality. So I think being a quality brand might also be even further next to the spring price increases further momentum. Depends then on what region we are talking about, what is a global price increase perspective and also what might be certain opportunities from a regional perspective.

Thanks, Oliver. Thank you, Jurgen. And our last question for today comes from Daria as I just mentioned, from Bank of America. Daria the line is open.

More question from my side. Is it possible to have any more color when it comes to your next year sales target between retail and wholesale. So actually, what channel do you see driving the sales decline and lead to this outlook of reset, if we can have any color on that for our modeling?

So Daria, I will take this question. And unfortunately, I have to say that we gave you now a kind of guidance for next year. And please, let's finalize the year 2025, and then we will be much more explicit in March? What is referring to the different channels, different geographies and brands. And please we have to come down at the moment and focus. And I think we have been explicit what we are heading to, and I think that's enough for the moment.

Thanks, Daria, and thanks for your patience. So ladies and gentlemen, that concludes today's strategy update. Thank you very much for participating. Also in the Q&A session, we look very much forward to engaging with many of you during our upcoming road activities. And if you have any questions before that, please reach out to the Investor Relations team. Thanks very much. Have a great day, and goodbye.