Hugo Boss AG ($BOSS)

Ladies and gentlemen, welcome to the Q4 Full Year 2025 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Christian Stohr, Senior Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to our full year 2025 financial results presentation hosted by Daniel Grieder, CEO of HUGO BOSS; and Yves Muller, CFO and COO. Today's conference call will be structured in 3 parts. Daniel will begin by outlining the key strategic milestones we achieved in 2025. Yves will then walk you through our financial performance for the past fiscal year and elaborate in detail on our outlook for 2026. Before I hand over to Daniel, allow me to remind you that all revenue-related growth rates will be discussed on a currency-adjusted basis, unless otherwise specified. During the Q&A session, please limit your questions to a maximum of 2. So let's get started, and over to you, Daniel.

Thank you, Christian. Good morning, everyone, and thank you for joining us today. Let me begin by saying that 2025 unfold against a challenging industry backdrop. Macroeconomic and geopolitical volatility kept uncertainty high and consumer sentiment cautious across many key markets. This led to reduced traffic as well as increased price sensitivity among consumers. In such an environment, it was essential to stay agile and act with clarity and determination. Throughout the year, we focused on the levers within our control, acted with discipline and took deliberate decisions to set the right course for long-term business success. And while 2025 clearly does not reflect the full potential of HUGO BOSS, I'm proud of how our teams have navigated a highly volatile market environment and delivered on our commitments for the year, both on the top and bottom line. In 2025, we generated sales of EUR 4.3 billion, up 2% year-over-year and broadly in line with the global apparel industry. Our bottom line development has especially -- was especially strong with EBIT up 8% to EUR 391 million and earnings per share up 17% to EUR 3.61. In addition, we delivered robust free cash flow of EUR 499 million, underscoring the cash-generative strength of our business model. Yves will provide more details on this shortly. But what is equally important to me lies beneath these numbers, the strategic progress that reinforces our confidence looking ahead. This includes the continued strength and appeal of our brands, the sustained consumer relevance of BOSS Menswear, the initiated refinement of BOSS Womenswear and HUGO and the decisive choices under CLAIM 5 TOUCHDOWN to realign our business in 2026 and prepare for profitable growth thereafter. Let me briefly reflect on these highlights. In times of macroeconomic and geopolitical uncertainty, the decisions often centers on efficiency measures. Yet our most important asset remains the strength of our brands and the relationship we build with our customers. This is what sets us apart from others and what will define our long-term success. Throughout the year, we continued to create brand moments that truly inspire consumers and deepen their emotional connection with BOSS and HUGO. I'm especially encouraged by the progress made with our loyal customers. In 2025, our membership base grew by 20%. Our loyalty program, HUGO BOSS XP, meanwhile counts 30 million registered customers, and we are making further strides in reengaging and activating members over the long term. This achievement was possible because we continue to invest in our brands, keeping our marketing spend more or less stable at around 7% of sales. With powerful authentic and highly personal campaigns, we further elevated our storytelling. Our BOSS Winter 2025 campaign, Be the Next, featured talents such as Ishaan Khatter, S.Coups and Amelia Gray, who all shared their individual journeys of ambition and success. At the same time, our BOSS Holiday [indiscernible] campaign combined elevated design with a warm and playful narrative. The strong resonance of these activations, both off and online, contributed to our successful final quarter in a meaningful way. The second aspect is our BOSS Menswear business, which grew 3% in 2025, representing around 80% of our group sales. BOSS Menswear remains the core of our company and continues to demonstrate its leadership in the upper premium menswear market even in a challenging environment. With a strong and consistent brand identity, the brand remains the go-to destination in modern tailoring, while also winning across casual and activewear. Our successful 24/7 lifestyle positioning continues to resonate strongly with consumers and was a key driver of our growth. Across brand lines, we see -- we saw healthy demand patterns, underscoring the versatility of BOSS Menswear across multiple wearing occasions. Additionally, our partnership with David Beckham further strengthened brand relevance. The global response to this collaboration has been very encouraging, driving strong engagement and reinforcing BOSS Menswear as a global player. Now let me turn to BOSS Womenswear and HUGO, which declined 5% and 4% in 2025, respectively. This development reflects the deliberate brand and distribution measures we have initiated during the year to set both brands up for long-term success. Our focus has been on simplifying assortments and refining distribution to strengthen brand identity and sharpen positioning. These steps are essential to ensure greater product consistency and stronger resonance with our target consumer. For me, 2025, therefore, marked a turning point here, not because of the financial outcome, but because of the strategic direction we have set. With our new powerhouse structure and the new leadership teams established, we have built the organizational foundation required to drive this transition with conviction. Yet the refinement of BOSS Womenswear and HUGO is not an isolated initiative. It's an integral part of the strategic choices we made to strengthen our foundation. While 2026 will continue to shape -- shaped by these measures, we are executing with clarity and focus. I'm confident that by the end of this year, we will operate from a strengthened position. All of the mentioned decisions are laying the groundwork for CLAIM 5 TOUCHDOWN, our execution framework through 2028. While our overall direction remains consistent with CLAIM 5, our emphasis now shifts from scale to quality of growth with a sharper focus on profitability and cash generation. This is why we focus on 3 fields of excellence, brand, distribution and operations. Strengthening these pillars will reinforce brand equity of BOSS and HUGO and enhance the efficiency and financial quality of our business. With an organization fully aligned towards execution and delivery, this sets a clear path towards renewed growth from 2027 onwards. A key outcome of the increased focus on quality is the acceleration of free cash flow. Over the touchdown period, we target an average of around EUR 300 million per year in free cash flow after leases. This will allow us not only to continue investing in our brands and platform, but also to create greater optionality in how we return capital to our shareholders. A disciplined balanced capital allocation approach remains firmly embedded in our strategic way forward. Against this backdrop, launching a share buyback program of up to EUR 200 million in a logical next step for us. The program to be completed by the end of 2027 underscores our strong financial position and reflects our confidence in the long-term value creation potential of HUGO BOSS. Importantly, this evolution is our capital return mix, does not change our overall commitment to shareholder returns. Instead, it gives us a greater flexibility in the current market environment, enabling us to allocate capital where it creates the most value while continuing to invest in strategic initiatives that will drive sustainable, profitable growth. Before we turn to the numbers, let me briefly outline a few brand and product initiatives that will support our momentum during 2026. We kicked off the year with the BOSS Fall/Winter 2026 Fashion Show in Milan 2 weeks ago. The collection paid tribute to our heritage in craftsmanship and tailoring [indiscernible] with a modern purposeful edge. The next highlights will be the third drop of our Beckham by BOSS collection and the launch of the HUGO Summer 2026 campaign tomorrow, which brings HUGO's refreshed brand narrative to life in a clear and contemporary way. And with this, ladies and gentlemen, I will now hand over to Yves for a more detailed look at the financial performance. Yves, over to you.

Thank you, Daniel. And also from my side, a warm welcome to all of you. I will now walk you through our operational and financial performance for 2025, followed by our expectations for full year 2026. As Daniel outlined, 2025 was marked by a challenging consumer environment with muted demand and softer traffic across many of our key markets. Against this backdrop, our priorities were clear: sustaining brand and product momentum to support the top line while protecting profitability and cash flow through strict cost and capital efficiency. Supported by impactful brand initiatives and a strong finish to the year, we delivered on our financial commitments. Group sales reached EUR 4.3 billion, up 2% year-on-year. At the same time, disciplined cost management and operational focus translated into strong bottom line improvements. EBIT increased by 8% to EUR 391 million, while our EBIT margin expanded 80 basis points to 9.2%. This margin progression reflects structural efficiency measures, continued sourcing gains and tight expense control across the organization. Importantly, it also demonstrates our ability to grow earnings even in a muted demand environment. Our full year performance was supported by a robust fourth quarter with clear acceleration in both revenue and earnings despite a significantly tougher comparison base. Group sales increased by 7% with growth across all channels. Notably, brick-and-mortar retail returned to growth, including a modest increase in comp store sales. Brick-and-mortar wholesale and digital also delivered robust growth, supported by higher deliveries to partners, including a timing shift of around EUR 20 million from Q1 2026 into Q4 2025. The top line acceleration translated into a meaningful improvement in profitability. EBIT rose by 22% to EUR 154 million and EBIT margin expanded 190 basis points to 12%, reflecting operating leverage on higher volumes, together with continued tight control of operating expenses. With this, let's now take a closer look at the regional top line trends. In EMEA, revenue increased by 2% in 2025, driven by growth in Germany and France. In the fourth quarter, the region accelerated to 9% growth, supported by a successful holiday season, underscoring the resilience of our core European markets. In the Americas, revenues grew 3% for the full year, reflecting sequential improvements in the important U.S. market throughout 2025 and double-digit sales increases in Latin America. In the fourth quarter, growth accelerated to 6% with solid momentum in the U.S., supported by targeted brand activations and the broad appeal of our 24/7 lifestyle offering. Meanwhile, Asia Pacific declined by 5% for the full year, primarily due to subdued demand in China. This was partially offset by a resilient performance in Southeast Asia and Pacific, including strong contribution from Japan. In the fourth quarter, regional revenues were down 1%, still weighed by continued softness in China, although trends improved sequentially. Let's now turn to our performance by channel. In brick-and-mortar retail, full year revenues remained stable. Importantly, performance improved gradually over the course of the year with momentum building sequentially and ultimately resulting in 2% revenue growth in the fourth quarter. This was supported by a successful holiday season and several brand and product initiatives. At the same time, we started to streamline our store portfolio, initiating the planned net reduction of around 50 stores by 2028. The modest decrease in selling space in 2025 marks the first step, resulting in a leaner network with broadly stable sales productivity despite lower footfall. Brick-and-mortar wholesale on the other side, increased 2% in 2025, driven by successful collection deliveries and continued expansion of our global franchise business. In the fourth quarter, growth accelerated to 14%, benefiting in part from the positive timing shift I mentioned before. Last but not least, digital revenues grew 7% for the full year and accelerated to 12% in Q4. Growth was primarily driven by digital partners. In contrast, revenues with hugoboss.com remained below prior year levels, reflecting our deliberate focus on full price sales, which weighed on conversion but supports brand equity over time. As this concludes the top line discussion, let's turn to gross margin. For the full year, gross margin came in at 61.5%, down 20 basis points versus 2024. This mainly reflects external headwinds, including ForEx impacts, the promotional market environment and adverse channel mix effects. These factors more than offset continued sourcing efficiencies and lower freight rates, which improved structural support to margin quality and underline the resilience of our operating model. In the fourth quarter, gross margin amounted to 60.8%, down 108 -- 160 basis points year-on-year. This primarily reflects deliberate inventory measures including higher wholesale deliveries as well as the targeted use of our controlled outlet business to clear excess merchandise. All measures were fully aligned with our objective of entering 2026 with a clean and healthy inventory base for the successful execution of CLAIM 5 TOUCHDOWN. Despite these initiatives, we continued to realize sourcing efficiencies, which partially mitigated the margin impact in the quarter. Let's now move on to our operating expenses, where we demonstrated strong financial discipline throughout the year. In 2025, operating expenses decreased by 3%, contributing to our bottom line improvement. In percentage of sales, OpEx accounted for 52.4%, which reflects a 100 basis point improvement versus the prior year and underscores our progress in driving structural efficiencies. This development was supported by a disciplined approach to selling and marketing expenses, which declined 3% year-over-year. Within retail, we continued to optimize operations by more closely aligning rent to sales and pay-to-sales ratios with evolving traffic trends. Consequently, brick-and-mortar retail costs declined by 5% to 22.1% of sales. In marketing, investments decreased by 2% to 7.1% of sales, reflecting our strategic focus on driving marketing effectiveness. At the same time, administration expenses remained broadly stable, demonstrating our commitment to cost control and functions not just directly tied to commercial performance. Our sharpened focus on operational excellence and cost discipline translated into robust bottom line improvements. EBIT increased by 8% to EUR 391 million, resulting in an EBIT margin of 9.2%, up 80 basis points year-over-year. Below the operating line, our financial results improved by 23%, supported by lower interest expenses and a more favorable ForEx development. In addition, the effective tax rate decreased to 25%, further enhancing bottom line performance. As a result, net income after minorities rose by a strong 17%, translating into earnings per share of EUR 3.61. Let me now turn to our balance sheet, starting with inventories. I'm particularly pleased with the progress we achieved in 2025, especially in the fourth quarter. On a currency-adjusted basis, inventory decreased by 10% year-over-year, ending the year at 21.5% of group sales, a reduction of 340 basis points compared to 2024 levels. This strong development reflects our disciplined inventory management, including the targeted measures I mentioned earlier, which ensured a healthier, cleaner stock position heading into 2026. The improvement in inventory quality was further enabled by a more focused assortment and a more precise buying approach. Overall, these efforts provide a much more efficient and productive starting point for the important realignment year ahead. With that, let me now broaden this perspective to overall working capital. On a 4-quarter moving average basis, trade net working capital amounted to 20% of Group sales, slightly above the prior year level. This primarily reflects higher trade receivables and lower trade payables, which more than offset the reduced inventory position. CapEx on the other side, totaled EUR 195 million in 2025, down 32% year-on-year. At 4.6% of sales, this reflects our increased focus on investment efficiency following elevated investment levels in previous years. In 2025, we prioritized maintenance investments, targeted retail refurbishments and selective digital initiatives while exercising discipline in all other areas. This consistent approach not only supported free cash flow, but also marked clear progress towards our midterm ambition of CapEx of around 3% to 4% of sales under CLAIM 5 TOUCHDOWN. Taken together, all these factors form the foundation for our strong cash flow performance. Free cash flow before leases amounted to EUR 499 million, broadly in line with the prior year. Importantly, free cash flow generation was particularly strong in the fourth quarter, up 20%, partly reflecting a pull forward of cash flows from 2026 into 2025 linked to the higher year-end deliveries. As a result, free cash flow in 2026 is expected to come in somewhat below our midterm average. However, our ambition to generate an average of around EUR 300 million per year between 2026 and 2028 after leases remains unchanged, supported by structurally improved margins, disciplined working capital management and efficient capital expenditure. Equally important, we closed 2025 with a net financial position before leases of plus EUR 48 million, effectively making us debt-free before leases and underscoring the strength of our financial basis. With this strong foundation in place, let me turn to our expectations for fiscal year 2026. As Daniel emphasized earlier already, 2026 will serve as a deliberate year of brand and channel realignment, streamlining our assortments, refining our distribution footprint and preparing our business for renewed growth from 2027 onwards. In the consumer environment that remains demanding, these actions are both strategically necessary and value accretive as they will strengthen the quality and resilience of our revenue base. For full year 2026, we continue to expect Group sales to decline in the mid- to high single-digit range on a currency-adjusted basis. This reflects our deliberate realignment of the business towards higher quality growth. In this context, we are pursuing a more selective distribution approach, including a moderate net reduction of brick-and-mortar retail space as well as enhancement in distribution quality across wholesale and digital with a clear focus on full price sales. At the same time, we will further streamline product assortments, particularly at BOSS Womenswear and HUGO to sharpen brand positioning and strengthen brand relevance. Together, these measures will temporarily weigh on volumes, but they will structurally elevate the quality and sustainability of our revenue base moving forward. Importantly, the quarterly cadence will not be linear. Both the first and the fourth quarter are anticipated to experience a more pronounced decline in sales compared to the prior -- to the full year trajectory. Besides overall tough comparison basis, this is primarily due to the aforementioned delivery shifts into Q4, which will inevitably weigh on volumes in the first quarter 2026. From a geographical perspective, we anticipate broadly similar patterns of mid- to high single-digit declines in 2026 across all 3 regions, consistent with our globally aligned product and distribution strategy. In EMEA, the expected decline is primarily driven by targeted enhancements to distribution quality, particularly across physical and digital wholesale. In the Americas, the development mainly reflects targeted productivity and quality improvements across key consumer touch points. And in Asia Pacific, the anticipated decline results from brand and channel elevation measures in retail, including selected store closures, combined with a prudent view on the pace of recovery in Chinese consumer demand. Moving on to our bottom line. For 2026, we forecast EBIT in the range of EUR 300 million to EUR 350 million, reflecting the lower top line leverage as well as our commitment to supporting brand elevation throughout the year. As with the top line, profitability will be more heavily impacted in the first and fourth quarter given the volume effects mentioned earlier as well as anticipated negative currency effects at the beginning of the year in 2026. At the same time, we expect notable gross margin tailwinds in 2026 from ongoing sourcing efficiencies, selective price increases and stronger full price execution. Combined with continued OpEx discipline, these measures are expected to support our margin profile during the year. Let me now turn to our capital allocation framework, which remains a core pillar of our long-term value creation agenda, as Daniel made already clear. Thanks to our strong balance sheet and high cash generating capabilities, we are well positioned to continue investing in our business while also delivering attractive shareholder returns. Our overall priorities remain unchanged. First, to fund our strategy and safeguard the investments required to elevate brand equity; second, to increase shareholder value in a disciplined and sustainable way; third, to maintain financial resilience and protect our investment-grade ratings; and fourth, to retain sufficient flexibility to pursue M&A opportunities over the medium to long term. Against this backdrop and supported by our successful performance in 2025 and the strong fundamentals of our company, we have announced a share buyback program of up to EUR 200 million. This initiative to be completed by the end of 2027, reflects our confidence in the long-term potential of HUGO BOSS and underscores our commitment to strengthen shareholder value. The program will be fully financed through ongoing free cash flow with repurchased shares intended for cancellation, reducing the number of shares outstanding and enhancing earnings per share over time. The buyback underscores our conviction in the strength of our brands, the resilience of our financial foundation, the strategic agenda we are pursuing for the years ahead. At the same time, reflecting the deliberate nature of 2026 as a year of realignment and our disciplined capital allocation approach, we will propose to the AGM the statutory minimum dividend of EUR 0.04 per share for fiscal year 2025. This ensures that we maintain the financial flexibility required to execute our strategic priorities, fund targeted investments and reinforce our balance sheet in a still highly volatile environment. With this, ladies and gentlemen, let me hand back to Daniel for his closing remarks.

Thank you, Yves. Ladies and gentlemen, let me conclude with 3 key messages before we move on to the Q&A session. First, as we close 2025, we do so from a position of operational and financial strength. Despite a challenging market environment, we delivered on our commitments, protected brand equity and generated robust profitability and strong cash flow, which provides us with strong foundation for the next phase of our journey. Second, 2026 marks the deliberate year of brand and channel realignment under CLAIM 5 TOUCHDOWN. By sharpening distribution, streamlining assortments and elevating brand positioning, re-enhanced the quality and structural earnings power of our revenues and lay the groundwork for renewed growth from 2027 onwards. Third, our long-term ambition remains unchanged, sustainable profitability growth and strong cash flow generation to drive attractive shareholder returns. The announced share buyback of up to EUR 200 million reflects the commitment and our confidence in the long-term value creation potential of HUGO BOSS. Thanks to our targeted approach in 2025, we entered the next phase of HUGO BOSS with a clean inventory base and strong financial flexibility to execute TOUCHDOWN with focus, discipline and determination. And with our 2 iconic brands, a clear strategic road map and highly committed teams worldwide, we are confident in delivering higher quality revenues, structurally stronger earnings and significant long-term value for HUGO BOSS. And with this, we are now very happy to take your questions.

[Operator Instructions] Our first question comes from Dhar Manjari from RBC.

It's Manjari Dhar, RBC. Two questions from me, please. The first question, I was just wondering if you could give a little bit more color on the phasing of the actions that you're taking to reduce -- to deliberately reduce sales this year and improve the product and quality measures. I just -- how should we think about when through the year they could hit? And how is that going to impact the quarterly performances? And then my second question, Yves, I know you talked about gross margin increase, but I just wondered if you could give a little bit more color on the ambition of where that could get to this year. I know in the past, you guys have talked to sort of 62% and potentially moving beyond that. But should we expect it to move beyond that this year?

Repeat, Manjari, perhaps your first question because the line was not so good. I was more referring to product initiatives regarding phasing over the time? Or was this the question?

Yes, sorry, it was how we should think about the quarterly phasing of your initiatives this year.

Sorry, we still were discussing the background of your question. So regarding the phases -- the phasing of the measurements. So what we expect for the year is that, for Q1 and Q4 for 2026, we expect actually that the overall decline will be more pronounced. But definitely, I think what has become visible now that we are in execution mode in terms of our CLAIM 5 strategy that we actually take deliberate steps in many aspects in terms of our product assortment, in terms of the distribution, all these steps are now for taking. So we are really pursuing high-quality revenues. I think this has become also transparent with the clean start of our inventory that we are taking. And if you look now at the pacing, of course, definitely in Q1 and Q4, we have -- if you compare this to 2025, we have a higher comparison base. We have also a currency effect that will become transparent in Q1. And on top of this, I highlighted also somehow this kind of technical effect of predeliveries that have been shifted to Q4 2025 of around EUR 20 million. Then regarding your -- the second question for the expectation for the gross margin for this year. I think there are several effects that will drive the gross margin. So first of all, if I look back at the gross margin in 2025 with a slight decline of 20 basis points, I think we have now a very sound starting base when we talk about the inventories. And there are several measures that will drive -- that will lead to a kind of improvement in gross margin. So first of all, the sourcing efficiencies and freight cost reductions, those 2 initiatives, we have seen them over the course of the year in 2025, and they will also prevail in the year 2026 by vendor consolidation, by more volumes behind one sourcing order. So this streamlining, the collection complexity reduction, the product assortment realignment, this will all help us from a sourcing perspective to get the necessary sourcing efficiencies point one. Further, as we always said, we are now at a high single-digit air freight. We want to get it further down. Air freight should be kind of exception going forward, and this is also a positive driver of the gross margin. Secondly, so this was more related to the COGS sourcing efficiency and freight. The second big effect is be aware that we took a price increase also in Q4. So as we had to low to mid-single-digit price increases, they will prevail also in the year 2026 going forward. And on top of this, we will also take selective price increases going forward, just in alignment with the kind of elevation that we are doing in terms of our brand positioning. And thirdly, and I think we should keep this also in mind is we are -- at the end, we are guiding a mid- to high single-digit decline from a top line perspective because we take the deliberate move to have higher full price sell-through that we want to achieve with less discounts. So this means we are looking for high-quality revenues, and this will also drive gross margin going forward. So these are the 3 major effects that we see besides all the other technical effects that come into play, if it's ForEx or all the other things or tariffs, I think these are the 3 major things that we focus on.

The next question comes from Jurgen Kolb from Kepler Cheuvreux.

Just a few questions from me. How far have you already -- or other way around, any update on the HUGO restructuring, i.e., the -- collection streamlining, red and blue. Is that something that you think you can already achieve in the first half? Or is that something that may take you longer throughout the year? And just one housekeeping question. The air freight share, is that expected to come down to basically 0 or just in necessary times? Or is that still going to be inflated so that we still have a little bit of remaining effects in 2027?

Jurgen, thanks for your questions. Let me first talk about HUGO. So we already have taken action in the second half of this year. And as you have seen, we have taken 2 deliberately -- 2 deliberate steps. First, we built 2 powerhouses. One is men's powerhouse and second is women's powerhouse, where we put both brands, BOSS and HUGO into the men's powerhouse and BOSS and HUGO into the women's powerhouse. That clearly will drive a new area in womenswear for the total company for both brands. And that is a major step and a major step that we also did is we hired Kerstin Dorst, who is a real -- an individual who has a lot of experience in womenswear. And this is now just started 2 months ago. So we believe that these 2 powerhouses are set for success in the future. Now coming back to HUGO, as we always said, we had in the past, experienced HUGO to put more into the Gen Z area and the younger. And we also adjusted the collection to the younger audience. And we were now adjusting also to put more contemporary collection into the assortment where we also show more suits, opportunity for men and women. And since we already adjusted the collection to this, we see a clear tension and better results on the point of sales. So this is really something that we have looked into it. And we actually go back to the heritage of HUGO, where, as you remember, the first suit that somebody was wearing when he came out of the university was a HUGO suit and then after moved into Boston. That's what we took back. And this contemporary suiting in HUGO, that's what we underlined and so far already started and the success sell-through that we have with it is really promising. So that is already in motion, and that's what we expect to further extend and scale in the coming months. That within the collection in blue and red, we further optimize the size and we further optimize the efficiency of the collections also from a collection point of view, but also from a distribution point of this, again, because we build those 2 powerhouses, we adjust there slightly the collection and optimize the assortment for red and blue.

Yes. And the second question, Jurgen, to the air freight. As I was indicating, so we reduced the air freight share '25 over '24 from a kind of mid-single digit -- mid-teens number to high single digits. So that was the effect that we have seen actually in 2025. And strategic-wise, the logic should be mid- to long term to have an air freight share of 0 and just manage the expectation -- just manage the exceptions and have an air freight as an exception as it is. But on the other side, I have to say, since we are now going further down, we have already achieved this high single-digit numbers. These kind of effects get less pronounced for our P&L. But still, we are seeking for more improvements, but they will be less pronounced than in the years before '25 and '24.

The next question comes from Thomas Chauvet from Citi.

The first one on retail and current trade. You've delivered a plus 2% brick-and-mortar retail in Q4, positive LFL, so quite a good achievement. It sounds like you had a good holiday season. What was the retail growth in December? And how do the first 8, 9 weeks of the year compared to that plus 2%? And any guidance on your revenue guidance by channel this year would be useful between the 3 subchannels. My second question on inventories and promotions, I mean you've successfully cleared inventory in outlets, and it sounds like in the wholesale channel in Q4. Irrespective of these actions, you had said in prior calls that the promotional environment was quite intense. Are you generally seeing in the premium apparel market, the consumer trading down in the U.S. and Europe, favoring outlets over full price? And can you comment on the mid-single-digit pricing you implemented on spring '26? How has the consumer responded to that? Are you planning similar kind of increase on Autumn/Winter collection?

Yes. Thank you, Thomas. I will try to take your question. So first of all, we are actually very happy regarding the sequential improvements that we have seen in retail brick-and-mortar. So if you take the 4 quarters in 2025, it was minus 4%, minus 1%, 0 and plus 2%. So we have seen actually a kind of coming from negative turning into positive side. And we really have to say that the -- that we try to be -- we have a very, let's say, successful holiday season. We had the campaign be the next -- Be the Next BOSS. We had the collaboration also with Steiff, and we try to actually especially celebrate also these kind of commercial moments because if you compare the Q4 to the previous 3 quarters, it's actually between 25% and 30% higher in terms of net sales. So there, you can see with Black Friday, Singles Day, holiday seasons, you have big commercial moments. And we really wanted to have the right collections and products in place for the season, and we could really see this kind of sequential improvement going forward. So we are happy with this development overall in Q4 that we have seen. Now talking about the channel logic for 2026, we still have overall regarding retail kind of overall prudent approach as we go into the year. But in terms of the development, in terms of the channels, the overall guidance that we have given will be less pronounced definitely from a region perspective, but we also have to keep in mind that we have reduced the space now. You might have seen the numbers. The space is now down year-over-year at the end of the year by minus 2%. So we, of course, have a kind of space effect here also going into the next years. And regarding the inventories, you were talking about promotional activities. So like I already said, there was a kind of, let's say, similar performance between full price business and outlets. Of course, we use this kind of commercial season also to clear our inventories. At the end, we have to say, if you just compare our balance sheet year-over-year in terms of euro numbers, we more than decreased our inventories by EUR 150 million. We always said we want to achieve an inventory to net sales of 20% to net sales. We have now made a big step of almost 350 basis points year-over-year. We are standing now at 21.5%. And that was deliberately our -- was a deliberate intentional move somehow to reduce our inventory position to get clean into the year 2026 because 2026 marks our execution of CLAIM 5 TOUCHDOWN where we are seeking high-quality revenue. So that was a deliberate decision. And we did this for retail. We did this in full price in outlets and also for wholesale partners. Dan?

Yes, maybe I can add a few things on the retail side. So what we definitely focused and emphasized in the second half year of 2025 was also that we actually enlarge and actually improve customer experience in all our stores. So we deliberately because traffic went down, made all efforts to actually put the customers in the center of everything we do in the stores and optimize from the journey in the store through the assortment in the store and that really helped. And as Yves already said, with the holiday program, the window, so we optimized on every touch point that we have with the customer to improve also the experience and get better sales per customer. On top of that, I don't want -- also underline that we have our XP program in place, which is really helping us to activate our members more than in the past. And as we have seen that member base has grown by 20%. And very importantly, they also spent 57% more than nonmembers. So we did a big activation to optimize all that retail stores. And the result in the retail stores with less traffic. So the conversion rate has increased because all these activities we have taken place. And then I also want to add something about the inventory. Yes, we have cleaned the inventory. And we are sure that in the future, we can optimize inventory because I want to also mention that we have a much better planning because we use much more data. And therefore, we have a much better overview of our orders that we place, optimize with our customers, the flow of delivery of the merchandise. So also there, it's not just a one-off inventory optimization. It's a long-term step that we have taken with all the AI and digital campus we have in place to get also the data in place. So just to underline that as well.

Just coming back to my first question on current trading. How does the first 9 months of the year compared to the plus 2% you've reported in Q4, please?

Thomas, I just tried to understand your question because it was -- the line was not so good. It was -- the start into the year was actually in line with our expectation. So this is how we concluded. I think on the other side, you also have to keep in mind is that we have given the guidance already last year on the 3rd of December for the year 2026. Since then, there have been 2 things. One was that I think we had a strong Q4 at the end, which gives us a higher base going into the year 2026. And secondly, of course, we have the Middle East conflict notwithstanding of those 2 effects because we had, of course, on the other side, the positive momentum in retail on the other side, we confirmed this kind of guidance as of today. I think this is enough comment regarding our current trading.

Okay. And just on pricing for autumn/winter, mid-single digit is what you intend to pass on as well?

Can you say it again, Thomas. Sorry, we didn't get your question. Please repeat it.

Yes. Apologies for the line, if -- it's about price increase were mid-single digit on spring/summer. What about autumn/winter? Is it the same kind of magnitude that you are anticipating?

Yes, Thomas, you are right. So we have the price increase of the spring campaign is low to mid-single-digit increase, and this increase will prevail going into 2026. So this has been a kind of step-up of the prices since the start of the spring '26 campaign, and this will prevail for the year 2026, like I explained for the gross margin.

The next question comes from Daria Nasledysheva from Bank of America.

This is Daria from Bank of America. I will ask 2 as allowed. So as you already mentioned, 2026 outlook is unchanged versus December, considering a stronger-than-expected Q4. Have any recent events, particularly in the Middle East and ensuing implications changed your thinking around any line items at all constituting the outlook? Just want to understand if how much of latest volatility is also now part of the outlook or it's more of a wait-and-see mode? And my second question is, in terms of underlying consumer behavior, are you seeing any sort of hyper seasonality of consumption around promotional events? You were mentioning Black Friday, Singles Day, et cetera. So basically, just trying to understand, given your focus on price sell-through into next year, how much should we be expecting rebates to impact gross margin? And just to understand the seasonality of sales.

Thank you for your question. I start and then Yves can add to wherever you want. Talking about the guidance that we gave at beginning of December, we said it's mid- to high single digit. We continue to confirm that high single digit, including the situation now in the Middle East. However, it is too early to have -- to say what the impact of the Middle East will be. Clearly, we look close and every day on the situation because there's every day also a different situation. We have -- most of the time, it has an impact or at the moment, it has an impact on the store opening where we have to adjust if the shopping center is closed, then we have also to close the stores. But in terms of delivery, we are not yet until now affected on this. So it has a direct impact on store opening and store performance because there is no many tourists or less tourists shopping. That's clear. That has an effect on the whole -- on the shopping centers and so far then for all the brands. But then underlying again, for delivery, so far, we are not impacted on that. Therefore, we again confirm the high to -- mid- to high single digit. And Yves anything?

No.

Okay. And then the second question was about the consumer behavior. So actually, we had very good Christmas business, as we said, because we've made a lot of initiative. We also had a strong Black Friday, but we were less promotional on the Black Friday. And then also to mention that the Chinese New Year actually also turned out into a positive number for our side. And however, the Chinese New Year had an impact in December, but has a positive impact in January. So, so far, all these events that we had were for us a positive number. So consumer sentiment, it's a bit early to say, but at least at the beginning of -- at the end of the year, in December has gotten better. Now with this situation, it's a bit unclear, and it's a bit unclear on every day. So we are adjusting our moves, our business, our actions from day-to-day and maneuver, as we always say, fly on site to see what -- how this situation is development. But one thing is clear, it has an impact on consumer behavior and consumer sentiment because everybody is also waiting and seeing.

And can I quickly follow up around the Middle Eastern implications? Is there any thinking around freight or COGS impact at all? Or this is yet to be determined because, to be honest, we don't know where it all will end up.

At the moment, as I said before, on the freight on delivery, it doesn't have yet -- we don't see the impact, so -- but I'm sure it might have -- it depends how long that this war is consisting -- going on. But for us, at the moment, to make a clear statement it's too early.

The next question comes from Michael Kuhn from Deutsche Bank.

Also 2 from my side. Firstly, starting with womenswear. You built the new powerhouse structure over the past few months. Now Kerstin Dorst has started at the beginning of the year. Let's say, when we will see her handwriting? And when should we expect womenswear to ideally outperform menswear and BOSS, let's say, not punching below its weight in womenswear any more? And secondly, briefly on capital allocation, switching from dividends to buybacks. Is that something that you would foresee for the, let's say, transition period, restart '26, '27 and maybe switch back to dividends again? Or is that too early to say?

Thank you, Michael. I start with the womenswear. And Kerstin, who has just started 2 months ago. So first of all, the powerhouse gives us clearly the focus on womenswear that we try to implement into BOSS and the company since years. I just want to underline that over the past few years, we tripled the sales in womenswear. So not -- it's still a step that we have done into the right direction. However, we now want to sharpen our handwriting. And therefore, we took her because she is a very experienced individual that really can help us building the future for womenswear in the company. That has a big potential. Now she already made some analytics and analysis about the collection that -- what she sees in the future and what she needs to change and how it will be changed. The handwriting now that you see in the stores, of course, is not yet from her, but that will come in the next 2 collections, you see partly takeover from her handwriting. What we also intend to do is a quick response that we will -- can implement as just a few items in the end of the year -- of this year that will help us to already show the direction we are going. So a bit early, but clear signs that we have a clear plan because we specialize this powerhouse for women and for men. And we -- with that new direction and new organization in place, for BOSS and for HUGO men's and for HUGO womenswear and BOSS womenswear, we are confident that this will have a positive impact. And hopefully, we can move more to the potential of womenswear that we are seeking for this brand. So we are optimistic on that. And the second question is on capital allocation. So yes, it's too early, as you said, to say what we are going at the moment. We are very confident on the move we have done. It gives us flexibility, especially in this situation. And it gives us the moment also to refocus and refine and realign on our business in 2026. That's what we have implemented the TOUCHDOWN, so we have with that flexibility, all opportunities to go either way. And that's what we also will do. So a bit too early to comment on that, but we'll come back as soon as we have news on that.

The last question for today is from Andreas Riemann from ODDO BHF.

First one, specifically on the U.S. business. In H2 '25, many brands implemented price increases in the U.S. So how would you describe the development of promotions and volumes in the U.S. market, specifically after all those price increases? That's question number one. And number two, on the brands in '26, it sounds like you want to continue to streamline womenswear in HUGO. So are there also adjustments to BOSS Menswear this year? Or if not, would you say the BOSS Menswear performance in '26 is a good proxy for the underlying development of your company? That's the second question.

So in the U.S., we already start -- first of all, we have shown good results, robust results in the U.S. We feel with all the initiatives we have done last year, we had a very positive result. We also continued our distribution to extend our distribution, not only with BOSS, but also with HUGO. We got much more space with our subline in BOSS, but also with HUGO. So therefore, we felt very comfortable so far with the development in the U.S. Particularly, I want to say that, yes, U.S. is very discount driven, but we deliberately took a step in the other direction and be less discount driven. So therefore, even with a less discount-driven approach, our results is actually showing even more promising results. And this is also our way going forward. And then you said about women's and men's -- the potential, yes. We see, first of all, we are very strong with our subline. So the BOSS Black line continues to show very strong results. We optimized our collections and also product with a much better price value. If you remember, we invested a lot into our products. And therefore, we have not just increased the price with the same level of product. We increased the price because also the quality of the product got better. So BOSS Black remains very stable, very good sell-through and a very promising collection. Then we added, as you know, also BOSS Camel and BOSS Camel shows a big,, I would say, interest of our customers to add an additional line from us in -- next to our more affordable luxury competitors. So also that line is performing very well. And then BOSS Green is probably the one that we have extraordinary results because it's just a moment of more athleisure wear. And we had BOSS Green always as athleisure collection in place. We also underline there our structure within BOSS Green that we have tennis wear, we have golf wear, and we have athleisure wear in there. So this is at the moment a great and big market trend. And then last on top of menswear is also BOSS, Beckham that shows positive results as he is an ambassador for us, not only for his BOSS and Beckham, it's also for BOSS an ambassador that is so relevant globally, no matter if you go into the U.S., no matter it goes to the U.S. and Asia, he is relevant wherever it is for both genders and young and old. So there, first of menswear, and we add also the shoes and the accessories. So we can only show consistent growth. We can show consistent results and positive results, and that's what we continue to do. This is our DNA, that is our focus. And we have -- this also underlined with our fashion show in Milan that we really have the format for menswear that we add the suiting, the heritage of our brand, and this works very successfully. Now all the success we have in men's that what we now try to also develop for women's and we have shown with our story be your own BOSS. It's not just a men story. It's a story that also resonates for women because in the meantime, all the women want to also be a BOSS. So Be Your Own BOSS is a perfect storytelling subject that really is resonating for men and for women. So we are, at this moment, really go to the potential of womenswear. Of course, it's still small, but we are very positive with all the action we have taken into the organization and into the product that we will get this optimization and also get to the potential of Womenswear for BOSS and for HUGO.

Thanks, Andreas. Thank you, Daniel. Ladies and gentlemen, that actually completes today's conference call. If you have any further questions, please feel free to contact the Investor Relations team. Thanks for your participation, and we look forward to reconnecting with many of you over the next days and weeks. Thanks, and goodbye.

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