Hugo Boss Stock

Ladies and gentlemen, welcome to the Q2 2026 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions]. 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, ladies and gentlemen, and welcome to our second quarter 2026 results presentation. Today's call will be hosted by Daniel Grieder, CEO of HUGO BOSS; and Yves Muller, CFO and COO. Before we begin, please be reminded that all revenue growth rates will be discussed on a currency-adjusted basis, unless stated otherwise. Also as usual, during the Q&A session, we kindly ask analysts to limit their questions to 2.

And with that, let me hand over to Daniel.

Thank you, Christian. Good morning, ladies and gentlemen. Thank you for joining us today. The second quarter marked another important step in the execution of our strategy CLAIM 5 TOUCHDOWN. While consumer demand remained weak and market conditions continued to be volatile, we made further progress on our key priorities, strengthening brand equity, enhancing earnings quality and driving long-term value creation.

As we outlined at the beginning of the year 2026 -- in the year 2026 is a deliberate year of realignment. We are talking targeted actions to build a stronger and more productive HUGO BOSS even if these measures temporarily weighed on volumes. The progress achieved in the second quarter confirms that these actions are working, especially when it comes to gross margin expansion, inventory optimization and cash generation. While there is still work ahead of us, these improvements strengthen our confidence that our strategy enhances the quality of our business and positions HUGO BOSS for sustainable value creation over time.

Before we discuss the quarter in more detail, let me briefly touch on the voluntary takeover offer by Frasers Group. Frasers has been a long-standing partner of HUGO BOSS for many years, both as a customer and as our single largest shareholder. We value the constructive relationship we built and appreciate the continued support for our strategic direction. Following a comprehensive review process supported by 2 independent external opinions, both the Managing Board and Supervisory Board concluded that the offer price of EUR 38 per share does not reflect the long-term potential of Hugo Boss. We, therefore, jointly recommended that shareholders do not accept the offer.

Our assessment reflects our conviction in the stand-alone value creation potential of our company. The progress we have achieved under CLAIM 5 TOUCHDOWN reinforces our confidence in our ability to strengthen profitability in the long run, increase cash generation and create sustainable value for all shareholders. Against this backdrop, our focus remains unchanged. We execute our strategy with discipline and unlock the tremendous potential of our 2 brands, BOSS and HUGO.

Let me, therefore, briefly revisit CLAIM 5 TOUCHDOWN, which builds on 3 strategic pillars: brand excellence, distribution excellence and operational excellence. We often describe it as a shift from scale towards value creation, being more selective in how we drive growth, placing greater emphasis on profitability and fostering cash generation. From a value creation perspective, 3 elements are, therefore, particularly important. First, strengthening our brands and distribution by enhancing consumer relevance, sharpening our product offering and driving distribution quality. Second, improving profitability through gross margin expansion and disciplined cost management. Third, enhancing cash generation through simplified operations, lower working capital and disciplined capital allocation.

Taken together, CLAIM 5 TOUCHDOWN is designed to strengthen the quality of our business while laying the foundation for long-term shareholder value creation. As outlined in our release this morning, the second quarter was characterized by both a volatile market environment and deliberate realignment actions. Sales declined by 9%, which reflects softer consumer demand as well as our strategic realignment measures. At the same time, we delivered improvements across key value drivers of the business. Gross margin improvement by 200 basis points to 64.9%. Operating expenses declined by 4% and free cash flow before leases reached EUR 105 million. These improvements demonstrate that our priorities are translating into measurable outcomes.

As part of the first strategic pillar brand excellence, our priority is to strengthen the relevance of BOSS and HUGO and deepen consumer engagement. Throughout the first half, we continue to invest in our brands while further improving marketing effectiveness. Our brand Spring/Summer 2026 campaigns, together with activations like the BOSS Open and the BOSS Summer Club supported brand visibility worldwide. This contributed to an increase in our social media community to almost 30 million followers. Beyond marketing, we continue to sharpen our product offering and reduce product complexity for the upcoming 2026 winter collection.

Together, these actions will strengthen brand equity, drive efficiency and create a more focused assortment architecture. And we remain committed to further investing in our brands. In the second half, marketing investments are expected to increase in line with our planned phasing. We will support key commercial moments across BOSS and HUGO, including our winter and holiday campaigns, additional BOSS by Beckham activations and the launch of our new fall authentic luxury campaign featuring Japanese baseball superstar, Shohei Ohtani. Together with our more focused product offering, these investments will further strengthen consumer engagement and brand desirability.

Under our pillar distribution excellence, we remain focused on improving distribution quality, strengthening full price sell-through and increased store productivity. Our loyalty program, HUGO BOSS XP continues to gain momentum in the first half. Membership increased by 16% year-over-year to more than 14 million members. Particularly encouraging is the growing relevance of BOSS and HUGO amongst younger consumer who accounted for nearly half of new member acquisitions.

At the same time, we remain disciplined in prioritizing full price sell-through and maintain tight control over markdown activity. This contributed to the strong gross margin development achieved in the second quarter and supports our focus on enhancing earnings quality. We also continue to optimize our global store network. In the first half, HUGO BOSS recorded a net closure of 21 stores. At the same time, we continue to refine our store portfolio, including the opening of the first dedicated BOSS Green store in the U.S. market. While these actions temporarily affect volumes, they support higher productivity and a healthier distribution footprint over time.

In our third pillar, operational excellence, we are building a more agile, efficient and productive business. We continue to simplify process across our value chain, reduce complexity and improve buying decisions. Increasingly, we embedded AI into planning and inventory management, which helps us improve forecasting accuracy and product allocation. Together with a more focused operating model, these efforts support productivity and better full price execution. Inventory management remains a key focus area for us. Disciplined buying, more focused assortments and ongoing inventory optimization are improving inventory efficiency as demonstrated by our first half performance.

At the same time, we remain selective in our investment with a clear focus on our strategic priorities. An important milestone in this context is the successful go-live of the extension of our distribution center in Filderstadt in the second quarter. This investment of more than EUR 100 million will further strengthen the efficiency of our logistics operations in the year to come.

And with that, let me hand over to Yves for a more detailed review of our financial performance. Yves, over to you.

Thank you, Daniel, and a warm welcome from my side as well. I will now walk you through our financial performance for the second quarter before discussing our outlook for the remainder of the year. In the second quarter of 2026, sales declined by 9%, reflecting both our deliberate strategic realignment and the challenging consumer backdrop. At the same time, gross margin expansion, disciplined cost management and strong cash generation demonstrate that we are making good progress and strengthening the fundamentals of our business even as market conditions remain challenging.

Let me first turn to our top line performance across brands, regions and channels. Starting with our brands. Revenues at BOSS declined by 8% in the second quarter. This reflects targeted measures to strengthen brand equity and profitability, especially in womenswear. At the same time, BOSS Menswear continues to benefit from a strong 24/7 lifestyle positioning from tailoring to casual wear and athleisure. HUGO revenues declined by 14%, reflecting the ongoing repositioning of the brand towards a more focused assortment and stronger contemporary tailoring offering. These actions temporarily impact volumes, but strengthens HUGO's positioning over time.

From a regional perspective, EMEA declined by 13%, impacted by softer local demand, weaker tourism and lower traffic in the Middle East following geopolitical developments. The Americas declined by 1% with resilient U.S. brick-and-mortar performance and moderate growth in Latin America. Asia Pacific declined by 5%, reflecting lower revenues in China and Southeast Asia Pacific, while Japan continued to perform comparatively well. Looking at our channels. Retail revenues decreased by 8%, reflecting softer traffic and an ongoing network optimization, including a 4% reduction in net selling space. Comparable store sales in brick-and-mortar were down 6%, proving more resilient than the overall retail business. Wholesale revenues declined by 10%, reflecting our focus on distribution quality and the transition to a more selective partner and assortment approach.

Turning to profitability. Gross margin remains a key indicator of our strategic progress. In the second quarter, gross margin increased by 200 basis points to 64.9%. The improvement was broad-based, driven by continued sourcing efficiencies, implemented price increases associated with our Spring/Summer 2026 collection and a higher share of full price sales. Our disciplined approach to distribution and sell-through also supported the improvement despite lower volumes. Importantly, these structural drivers remain in place.

Turning to operating expenses. Costs declined by 4% in the second quarter, reflecting our continued focus on efficiency and disciplined cost management. Selling and marketing expenses decreased by 6%, driven by productivity improvements across our retail operations as well as our focus on marketing effectiveness and a more balanced phasing of brand investments throughout the year. Administration expenses increased by 3%, primarily reflecting continued investments in our digital capabilities as well as onetime fees in the mid-single-digit million euro range related to the takeover offer. Excluding these expenses, our underlying cost discipline remained intact. Gross margin expenses and disciplined cost management helped mitigate the impact of lower sales, resulting in EBIT of EUR 49 million -- EUR 59 million and a margin of 6.5%. As expected, lower volumes resulted in operating deleverage. Last but not least, net income after minorities accounted to EUR 33 million, translating into earnings per share of EUR 0.49.

Let me now turn to cash generation. Working capital discipline remained a clear priority throughout the first half year. As of June 30, inventories were down 15% on a currency-adjusted basis year-over-year, representing 23.1% of group sales, a notable improvement of 240 basis points versus the prior year. This reflects disciplined buying, more focused assortments and ongoing inventory optimization. Supported by lower inventories and receivables, trade net working capital declined by 11% on a currency-adjusted basis. On a rolling 4-quarter basis, trade net working capital amounted to 19.8% of group sales, remaining around the upper end of our midterm target range of 18% to 20%.

We also maintained a disciplined approach to capital expenditure. CapEx amounted to EUR 31 million in Q2, corresponding to 3.4% of group sales, thus well in line with our midterm target of 3% to 4% of sales. Investments continued to focus on selective retail refurbishments, digital initiatives and infrastructure to support our strategic priorities. As a result, free cash flow before leases reached EUR 105 million in Q2 and increased to EUR 137 million in the first 6 months. These results underline the strength of our cash generation, and they provide the flexibility to continue investing in our business while maintaining a strong balance sheet.

The operational progress achieved during the first half of the year supports our confidence in delivering on our full year guidance. While market visibility remains limited and geopolitical uncertainty continues to weigh on consumer sentiment, our priorities remain unchanged: enhance earnings quality, improve cash generation and strengthen our business fundamentals. Consequently, we continue to expect currency-adjusted group sales to decline in the mid- to high single-digit range. While our strategic realignment is progressing according to plan, we expect the external environment to remain volatile during the second half, particularly given ongoing geopolitical uncertainty and its impact on consumer demand. Currency translation is expected to remain a moderate headwind to reported sales.

From a regional perspective, we now expect sales in EMEA to decline in the high single-digit to low teen percentage range, thereby also incorporating the situation in the Middle East and its spillover effects. At the same time, the Americas and Asia Pacific are now anticipated to decline in the low to mid-single-digit range. For EBIT, we continue to expect a range of between EUR 300 million and EUR 350 million. Targeted gross margin improvements and continued cost discipline are expected to support profitability while lower revenues are anticipated to result in deleverage. While visibility remains limited, the operational progress achieved in the first half supports the execution of our plans for the remainder of the year.

With that, let me hand back to Daniel.

Thank you, Yves. Ladies and gentlemen, let me close with 3 key messages. First, the first half of 2026 demonstrates tangible progress on the CLAIM 5 TOUCHDOWN. Despite top line pressure from our strategic realignment and the challenging market environment, we are strengthening the fundamentals of the business. Gross margin is expanding, inventories are lower and cash generation is strong. Second, 2026 remains a deliberate year of realignment. We are prioritizing long-term value creation over short-term volume, building a stronger, more productive and more profitable HUGO BOSS. And third, we remain convinced of the long-term value creation potential of our business. Based on our 2 strong brands, a clear strategic road map and disciplined execution, we remain focused on creating attractive shareholder returns over time.

Thank you very much for your attention. We are now happy to take your questions.

[Operator Instructions] Our first question comes from Grace Smalley from Morgan Stanley.

The first one would be on EMEA. If you could just elaborate further on what you've seen in Europe as we move through the second quarter and then into July, I guess, touching on both the direct and indirect impact from the events in the Middle East, so on the direct region, but also consumer sentiment and tourism? And then my second question would just be on gross margin, very strong performance in Q2. As we look ahead to the second half of the year, should we be expecting a kind of similar level of year-over-year expansion in the second half as you did in Q2? Or is there anything we should expect that's different in terms of the gross margin build in the second half?

Thank you very much, Grace. I will take both questions. So perhaps -- starting with gross margin. First of all, I want to really reiterate that we are really happy how we performed with our gross margin, plus 200 basis points versus prior year. It's a very good performance, thanks to a lot of sourcing efficiency, higher full price sales, lower markdowns and some pricing effects. So we are going in the right direction. We see that the execution of CLAIM 5 TOUCHDOWN is really bearing the fruits here.

And the majority of those effects will continue since we are committed to continue the execution of our CLAIM 5, especially if you look at the measurements that we are taking, for example, from the product assortment point of view, we are reducing the collection complexity. That has a kind of ripple effect that we are capable of really driving economies of scale in sourcing while at the same time, further reducing the number of vendors that we're having. So we are placing a higher number of volume behind one order for a vendor. So this is really helping us in our gross margin improvement.

And also, we stick to our game plan. We will continue to drive high-quality revenues over short-term volumes, and this will also help us with lower markdowns, especially in the retail environment that we can influence on our own. So structurally, this is strategically intended is that our gross margin will be improving. And I think there is more to come in the next quarters. And also long term-wise, we want to get the gross margin up further as we discuss this.

Regarding EMEA, I think you make a comment regarding the recent performance. I think I have already some comments during my presentations. So definitely, you have to keep in mind the direct impact of the Middle East region in our EMEA numbers. So first of all, it's, I think, clear in comparison to Q1 that we operated the full quarter in this kind of situation of the Middle East crisis. And of course, this was not helping only not only the UAE and Qatar, but also indirectly our wholesale business in Israel and in some adjacent countries in this kind of region. So this was not helping.

On top of this, I think, as we all know, that HUGO BOSS is by majority exposed to European markets, including Middle East. It means like 65% of our business. We saw also some indirect effects coming from lower travel activities and also consumer sentiment was down. You have seen higher food price -- fuel prices led to the fact that people were going less to specific destinations, also to outlets. So traffic was low with the majority of a lot of countries like U.K., Germany and France, and that was driving this kind of development.

Okay. And if I could just follow up, have you seen that continue in terms of current trading to date on the kind of European impact on consumer sentiment and tourism and maybe a broader comment on current trading globally as well.

Yes. I think I would first highlight the overall global, let's say, information around current trading. I mean, Grace, as you all know, we are not very specific regarding current trading. I think we all should be aware of the effect that we are taking a lot of strategic measurements and that we are in the middle of executing a lot of, let's say, strategic steps within our CLAIM 5 strategy. So what I can say is and what I want to say that for the -- how we started in the quarter and we've just started, it's just 1/3 of this quarter, we are in line with our expectations, how we operate.

The next question comes from Dhar Manjari from RBC.

I also have 2, if I may. My first question was on the Filderstadt extension. I just wonder if you could give us some color on how we should think about the time line of the ramp-up there? And what sort of savings we should expect as that gets up and running? And then my second question was a follow-up from Grace's question on gross margin. I just wondered if you could give us some more color on the sort of expectations for further sourcing efficiencies. You've obviously seen a lot of benefits so far. But in terms of work left to do, how much is left? And how long should we expect sourcing efficiency benefits to persist?

Thank you very much for your questions. So regarding Filderstadt, so this is our flat goods warehouse close to Stuttgart, where we invested more than EUR 100 million. We have had now the go-live in a very automated way. And with this, we are now capable of in-sourcing our HUGO apparel operations, which has been outsourced to third party. So with the -- now with the winter campaign and the next campaign coming in, we will directly route them to Filderstadt. So we terminated the contract with a third party for HUGO apparel, and this will give us efficiency gains in the low double-digit million euro amount going forward, starting actually with Q3 going forward. So this -- all these measurements will make us more efficient when it comes to unit cost, how we operate. Plus, of course, we will have some savings on the transportation piece once we deliver especially wholesale and retail to our European customers because we can combine this with HUGO and BOSS together.

Regarding gross margin, so we keep on going, especially with product assortment collection complexity. We intend to further reduce the collection complexity. We further intend to reduce our vendors. So this is a phenomenon that's going to prevail over the next 4 quarters, as I can say. So this will keep on going. And also on the airfreight share, as a matter of fact, we were finalizing the year '25 with still a high single-digit number. We want to really completely go -- have a kind of no air freight kind of policy going forward and have just the exceptions. So we are -- so there's still more in the pipeline to come when it comes to sourcing efficiency really to be more efficient. But I still want to highlight this trickle-down effect once we reduce the assortment, this is also really helping us on the gross margin side.

The next question comes from Jurgen Kolb from Kepler Cheuvreux.

Two questions. First one, we're deeper in the year. I was wondering if you could maybe share some thoughts on your order book after, obviously, sales are down 9%. At some stage, the switch has to flip again to growth. So maybe a few comments on what you're seeing maybe for early 2027 in terms of orders from customers? And then secondly, specifically on HUGO and BOSS women, how far are you with the realignment process there? Is that all going according to plan? And also here, maybe an add-on comment from what retailers are giving you as a feedback that would be very helpful.

Thank you, Jurgen. I take this question about the order book. So in line with CLAIM 5 TOUCHDOWN, we are deliberately sharpening our wholesale distribution by reducing long-tail exposure. We also do prioritize full price quality over volume. That's a clear measurement that we decided to do and building an even healthier order book going forward. Against this backdrop as well as the still challenging macroeconomic environment and continued inventory discipline amongst wholesale partners, order intake remains below the prior year level. That's clear.

But importantly, engagement with our key strategic partner remains strong, giving us confidence in the long-term development of the wholesale business. We are having a very strong relationship to all our key customers. When you see us our visibility in the stores, it's stronger. We continuously gain space in the stores. I would like to underline our sub-brands, the initiative that we take or the strategic initiative we take in the beginning to add sub-brands that helps us to really expand our footprint in the retail, especially in department stores. And sell-through numbers show positive, and we remain absolutely positive that the results of our wholesale business continue to be positive, especially in BOSS mens.

Womenswear, I think we have also did a lot of progress there. It's always a bit early to see. But I think we have -- we actually -- we are undertaking and Kirsten has undertaken already activities to address the current challenges in the business. But the implementation or the real results you're going to see in the second part of 2027 when the real collection is at the moment fully developed under her direction. But anyway, quick wins has already immediately improved some results. And we are positive that we going to gain market shares back on womenswear, but it always takes some time as we don't want to -- as we said, we don't want to go too fast. We want to build it on full price on a long-term view. Therefore, we are not rushing into something that is on risk. But again, Kirsten has really put the new handwriting in and that you will see in the second half of next year.

Very good. Very good. Maybe a quick follow-up. You mentioned you opened the first green store in North America. What do you see as a potential target number for that specific collection?

Well, that's a bit early to say. However, the demand of green is really growing because knowing all these brands coming from Asia to us, let's talk about Arc'teryx. And actually that we are the brand that has this sport element combined with fashion really gives us a unique placing in the market. As you know, we already had golf wear. We had tennis wear. We have a capsule collection also in the auto industry.

And especially our coming event, the Australian Open, where we have taken position of the outfit of the Australian Open will help us to further put relevance into that market, always with the positioning, not as a completely sports brand, but a sports/fashion brand that goes into that area. And we also with our testimonials like Taylor Fritz, they show and it shows clearly that the interest of having and wearing fashion brands on these events is growing, and we were one of the first that has taken their step. So we are very positive on BOSS Green. There's more shops to come. And so far, the results are very, very promising.

Next question comes from Thomas Chauvet.

Two questions, please. The first one on the XP loyalty program, you indicated 16% increase in membership to 14 million customers. That's a big number. Could you give us some color on how the average XP member compares to a normal BOSS customer, if I can say, in terms of age or frequency of visits, average basket? And I suspect a lot of these members are recruited online. So how do you explain the directly operated digital channel was down double digit in the first half when the XP membership increased by a double-digit percentage?

And my second question on Frasers' shareholding and your earlier comments, Daniel, after their recent options exercise and the initial results of the offer before the extension to next week, they have close to 38% of the capital, if I'm not mistaken, an additional 30% exposure through short put positions and the Marzotto family is still at 14%. So the free float is now just under 50%. Could you comment on how, obviously, the nature and frequency of your engagement with them has evolved maybe a bit beyond the existing wholesale relationship? How do you manage good governance and the independence of the company considering also that Frasers CEO sits at the HUGO BOSS Supervisory Board, which is maybe a little bit unusual in a way.

Sorry, 2 questions. I start with the XP. So we iterated this program nearly 2 years ago. And we always said that we not just want to have customers that come into our stores. So our intention is to turn customers into fans. And what this XP program is just giving us is really demonstrate with clear results that these customers shop more either online or so in our stores. So the return on investment is good, but we are gaining these customers not just with discount. We give them an added value. We invite them to our events that we are organizing. We really go close with them in relationship. And with the brand and activate the brand in their mind. And the result also to gain younger consumers through that program is exactly what our aim was in the past.

And we always say it doesn't matter where the customer buy. Is it online or offline as long as he is a loyal BOSS customer, that's what counts. And some goes in the store, some is online, it doesn't matter. We have to be omni -- with our omnichannel, we want to be omnipresent. And I think with the customer loyalty program, we have the perfect part and the perfect program in place, I would say. That is the first question.

And then if we come back to Frasers. So First of all, I want to say that we maintain a regular and constructive dialogue with all of our shareholders and especially also with Frasers Group. We value also Frasers Group as a long-term shareholder and expect to continue our constructive and very professional relationship with them ongoing. At the same time, we have a clear strategic framework through CLAIM 5 TOUCHDOWN in our focus, and we remain also disciplined to execute that strategy. And we get full support from our advisory Board. We get full support also from Frasers. So we can expect that we continue our strategy and that there is no change on our -- on the strategy whatsoever. So we are very positive and pleased with how much support we get also from the Marzotto as a main shareholder. So that is continuing on a very good pace, I would say.

And then also just on what we said with the Frasers confirmed in the official document for the voluntary takeover offer only a few weeks ago that they fully support the Chairman of the Supervisory Board, the entire Management Board and also me. And I think that was a clear statement there. So following the rumors, Frasers also confirmed this position to us and again, confirmed it again. So there is nothing more to comment on the rumors. Anything else, I think that's it for your question.

[Operator Instructions] The next question comes from Zuzanna Pusz from UBS.

It's Rob from UBS. I just had one question about gross margin development. It was very impressive in Q2. But last call, you mentioned that you are pretty confident about the outlook for raw materials into 2026. How should we be thinking about 2027 given the recent oil price? I know it's quite volatile, came off a bit, again go up. So how should we be thinking about 2027? We hear a lot of efficiencies coming from supply chain, but -- is there going to be a headwind? Or if you could even quantify the raw material headwind, that would be great.

Thank you very much, Rob, for your question. So first of all, regarding the raw materials, I think it's clear for 2026 that we -- 2026, we expect no material effect coming from raw materials. And still going forward, I mean, you know that we are living in a volatile market going up and down. Also some other influences regarding, for example, wood prices are happening. On the other side, you have also the freight and the spot rates there. I wouldn't view this as a big headwind going into next year. I think we are well aware of this, and we can manage this and from the time being, the visibility what we are having, we can -- with our internal measurements, we can by far outweigh any, let's say, external effects also coming into the year 2027.

The next question comes from Chiara Battistini from JPMorgan.

I have 2. The first one, if you could share already some initial color or outlook on the pricing for next year for fiscal '27? And the second question on OpEx into H2. Can you please remind us on marketing, how much that was down in Q2 and also how to think about the phasing of the marketing spend in H2, please?

Thank you very much, Chiara, for your questions regarding pricing. So also there, I think what's quite visible is we have to look at the performance of our brands. I think as we all know, we have invested a lot. And as a matter of fact, you have seen already the price increase that we did with the Spring/Summer '26 campaign. So we are observing it closely, and we will exploit some price increases more on the smart basis. So we might do some smart adjustments whenever there is a possibility that we need.

Also when it comes to different developments from the OpEx to compensate this. But actually, for the time being, we have all the OpEx overall, I have to say, well under control. You've seen the development of our gross margin. I think we would take some steps. But I would also say, first of all, we have to put more marketing behind it, increase the brand equity, increase the relevance of own brands, BOSS and HUGO. And with this, we also have more potential somehow on the pricing front for the time being, we are not, let's say, planning tremendous price increases for 2027.

But let me also add to that, that already from the beginning, we invested in the beginning gross margin into our product. So we have concluded that phase and really increased our quality of our product tremendously. And we just haven't -- we just -- we haven't done just price increases for the sake of price increases. We really increased the price value of our product tremendously. And therefore, we have put that phase behind us. There is -- there was a big step we have done. And now we also got the benefit of the gross margin back, but it's all time and it all came with a better product with a better quality. And that remains that we, of course, going forward, always look where we can improve, what we can do to optimize and continue to give our product the best price value, just to add to Yves's comment.

And then I come back to the marketing. So yes, the marketing expenses are down around 15%. But it's -- this line is actually more a phasing effect and maybe continue to focus also marketing effectiveness rather than on structural reduction in brand investment. That's not what's happening. So at 7.1% of group sales, marketing investment in the first half remain fully aligned with our strategic ambition. And in addition, our marketing activities are weighted towards the second half of 2026 with a strong activation calendar planned around key campaigns, sporting events and also very important, the holiday season, which gained a lot of commercial impact.

So we, therefore, fully remain committed to investing behind our brands, but also while maintaining a disciplined return on investment focused approach. But everything goes hand-in-hand and everything has to be in a balanced way. What Yves also said on the product and when you do marketing, it creates more traffic to the stores. And of course, it's going to build brand equity. So there is nothing that we're going to lose or not do. Actually, we do it with more efficiency and hope that even gets -- the message even gets stronger. So less with more.

Great. Well, thank you, Daniel. Thank you, Yves. Ladies and gentlemen, after 45 minutes on the call, that completes, as usual, our Q2 results release. Rest assured that we will follow up with anyone who did not have the opportunity to ask a question today. Also in case you have any open topics, please feel free to contact the Investor Relations team as always. Thank you for your participation, and goodbye.

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Ladies and gentlemen, welcome to the Q1 2026 results conference call and live webcast. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast.

[Operator Instructions] At this time, it's my pleasure to hand over to Christian Stohr, Senior Vice President, Investor Relations. Please go ahead.

Good morning, ladies and gentlemen, and welcome to our first quarter 2026 results presentation. Hosting our conference call today is Yves Muller, CFO and COO of HUGO BOSS.

Before we begin, please be reminded that all revenue growth rates will be discussed on a currency-adjusted basis, unless stated otherwise. In addition, starting with Q1, we have adjusted our sales reporting structure. BOSS Menswear and BOSS Womenswear are now reported jointly under BOSS, while digital sales are included within retail and wholesale. As usual, during the Q&A session, we kindly ask you to limit your questions to 2, allowing for an efficient discussion.

With that, let me hand over to Yves.

Thank you, Christian, and a warm welcome from Metzingen, ladies and gentlemen. Thank you for joining us today to discuss our first quarter results.

As outlined in our release this morning, Q1 marked the first full quarter of execution under CLAIM 5 TOUCHDOWN following its introduction at the end of last year. As such, the first quarter was shaped by implementation, translating strategic priorities into concrete actions across brands, distribution and operations. Accordingly, our focus in the quarter was on disciplined execution.

We implemented targeted top line measures to strengthen brand equity, continued to advance sourcing efficiencies and maintained rigorous cost control across the organization. These actions represent the first concrete outcomes of our realignment and are already translating into structural progress, particularly in gross margin and cash generation, which I will come back to shortly.

Overall, we are pleased with the progress made in Q1. At the same time, we recognize that there is more work ahead, and we remain cautious on the near-term visibility given a high volatile macroeconomic and geopolitical environment.

Let me now walk you through the quarter in more detail. Under CLAIM 5 TOUCHDOWN, 2026 is designed as a year of deliberate realignment rather than a year of chasing volume. In the first quarter, we made progress across all 3 pillars: brand, distribution, and operational excellence. This included refining product assortments, reinforcing our focus on full price execution, and taking targeted steps to optimize our distribution footprint.

As part of this progress, we closed a net 15 freestanding stores globally, largely through expiring leases. As expected, these deliberate actions were reflected in our first quarter performance. Group sales declined by 6%, driven by the intentional quality focus embedded in CLAIM 5 TOUCHDOWN, alongside continued muted consumer sentiment. EBIT amounted to EUR 35 million, reflecting the planned impact of our strategic measures, partly offset by solid gross margin expansion and rigorous cost management.

While these actions have a temporary impact on our top and bottom line performance, they represent important building blocks in strengthening the fundamentals of the business and laying the foundation for improved profitability over time. Beyond these deliberate actions, the external environment also remained demanding in the first quarter. Consumer sentiment was subdued across most key markets with continued pressure on traffic levels. Over the course of the quarter, conditions became more challenging, driven by the geopolitical developments in the Middle East.

In this context, let me briefly put our exposure to the Middle East into perspective. The region accounts for around 3% of group revenues and is served through a limited and well-defined store network, primarily in the UAE and Qatar. The Middle East is also a high-quality and very profitable business for us, reflecting an upper premium store portfolio, a favorable channel mix and disciplined cost structures.

From March onwards, store traffic in the region declined sharply, leading to meaningful disruption to overall retail activity and weighing on regional demand. As a result, developments in the Middle East reduced group sales by roughly 1 percentage point in the first quarter.

In addition to these direct effects, developments in the Middle East also contributed to increased uncertainty more broadly. In particular, we observed early signs of a softening in consumer sentiment in selected markets alongside some moderation in international travel flows, which began to affect demand outside the Middle East towards the end of the quarter. Against this backdrop, we actively steered the business while remaining fully committed to our strategic priorities within CLAIM 5 TOUCHDOWN.

With that, let me turn to our first quarter performance, starting with our brands. At BOSS, revenues declined by 3%, reflecting the challenging market environment as well as deliberate strategic actions.

Menswear performed comparatively better, supported by continued strong demand in casualwear and athleisure, underlying the relevance of our 24/7 lifestyle positioning. This resilience was particularly evident at BOSS Green and BOSS Camel, both of which recorded growth in the first quarter.

Womenswear by contrast was more affected by intentional assortment streamlining and targeted distribution refinement, measures fully aligned with our strategic priorities and aimed at strengthening brand positioning and long-term profitability.

Turning to HUGO. Revenues declined by 21%, reflecting the strategic repositioning of the brand. During the quarter, we further advanced the streamlining of HUGO's product architecture into one overarching brand line, creating a clearer, more focused brand proposition and a more consistent market presence. While these measures continue to weigh on volumes in the near future, they represent fundamental steps to strengthen brand relevance, operational effectiveness and scalability over time.

Speaking about our brands, let me emphasize once more: investing in powerful brand moments remain a core pillar of our strategy. While marketing investments were below the prior year level in Q1, primarily due to phasing effects, marketing spend amounted to 7.3% of group sales, fully in line with our CLAIM 5 TOUCHDOWN target range of around 7% of sales. Also for the full year, we continue to expect marketing investments as a percentage of sales to remain broadly in line with last year's level.

In the first quarter, our brand investments focused on key initiatives such as the BOSS fashion show in Milan, which ranked among the top 10 most engaging brands during Milan Fashion Week; the launch of our Spring/Summer 2026 collections; and the third, BOSS BY BECKHAM. Together, these moments generated strong social media engagement and brand visibility. Importantly, these initiatives are designed to drive long-term equity and relevance rather than prioritizing short-term volume.

From a regional perspective, revenues in EMEA declined by 8%, reflecting targeted measures to enhance distribution quality as well as muted consumer sentiment across several key markets, particularly the U.K. Despite the solid start to the year, revenues in the Middle East declined by a low double-digit rate in Q1, reflecting a sharp decline in store traffic in March, following geopolitical developments, which also weighed on overall EMEA performance.

In the Americas, revenues declined by 5%, largely reflecting deliberate CLAIM 5 TOUCHDOWN measures in the U.S. market aimed at improving distribution quality across both wholesale and retail channels. As a result, reported revenues were intentionally impacted in the quarter. In addition, developments around Saks weighed on our U.S. concession business. Importantly, underlying performance in our U.S. brick-and-mortar retail business remained resilient with comparable store sales up modestly in the quarter. Outside the U.S., Latin America saw a slight normalization following a strong period of strong growth.

In Asia Pacific, revenues increased by 1%, marking a return to growth. This was supported by renewed growth in China, aided by a successful Chinese New Year, as well as early progress in strengthening brand positioning and enhancing relevance in the market. Modest growth in Southeast Asia Pacific, particularly in Japan, also supports our regional performance.

Turning to our channels. In retail, which includes brick-and-mortar and self-managed digital, revenues declined by 3%, also impacted by a negative space effect. On a comparable store basis, brick-and-mortar sales declined by 2%, reflecting lower traffic and our deliberate focus on full price execution, partly offset by a higher average basket size. Retail performance was also impacted by developments in the Middle East. Self-managed digital on the other side declined by 5%, reflecting our continued prioritization of full price sales in support of brand equity and margin quality.

In wholesale, revenues declined by 10%, reflecting our ongoing focus on enhancing distribution quality through greater channel selectivity, a more curated assortment and a stronger emphasis on strategic partnerships. Performance was also influenced by a more cautious order behavior in the current environment as well as the known delivery timing shift of around EUR 20 million into Q4 2025, which has supported our wholesale business in the final quarter of last year.

Turning to profitability. Q1 delivered a notable improvement in gross margin. Gross margin increased by 110 basis points to 62.5%, primarily driven by additional sourcing efficiency, including a further reduction in the airfreight share as well as improved pricing associated with the Spring/Summer 2026 collection. A slightly more favorable channel mix provided additional support during the quarter. Importantly, this performance demonstrates that the structural margin improvement we have been driving over recent years remain firmly intact even in a lower volume environment.

Turning to cost and earnings. We maintained strict cost discipline in the first quarter. Operating expenses declined by 4%, supported by lower marketing spending due to phasing effects, ongoing efficiency improvements and further optimization of our retail cost structures, including rent renegotiations and productivity measures across our store network.

As expected in a lower revenue environment, operating expenses deleveraged as a percentage of sales. As a result, EBIT amounted to EUR 35 million, corresponding to an EBIT margin of 3.9%, while earnings per share totaled EUR 0.24. Overall, this performance is fully aligned with CLAIM 5 TOUCHDOWN and our full year 2026 outlook.

Let me now turn to cash flow and working capital. Building on the meaningful inventory reduction achieved at the end of 2025, inventory developed more moderately in Q1, in line with expectations. Year-over-year, inventories declined by 13% on a currency-adjusted basis, reflecting prudent buying, more focused assortments and targeted inventory optimization measures. As a result, inventory stood at 22% of group sales at the end of March, while trade net working capital declined by 10% currency adjusted.

At the same time, capital expenditure remained at 3.2% of sales, continuing its normalization and remaining fully aligned with our midterm targets. Supported by both the improvement in working capital and continued CapEx discipline, free cash flow before leases improved by nearly EUR 100 million year-over-year, amounted to EUR 33 million.

Let me conclude with a brief look at the remainder of the year. 2026 continues to be a deliberate year of realignment under CLAIM 5 TOUCHDOWN. Following our first quarter performance, we reaffirm our full year outlook. We continue to expect currency-adjusted group sales to decline mid to high single digits, reflecting targeted brand and channel measures. Currency effects are anticipated to remain a moderate headwind for reported sales.

We likewise confirm our EBIT outlook of EUR 300 million to EUR 350 million. Gross margin expansion and continued cost discipline are expected to support profitability, while operating expenses are anticipated to deleverage due to lower revenues. At the same time, we expect macroeconomic and geopolitical volatility to remain elevated with heightened uncertainties related to developments in the Middle East. In this context, we remain vigilant and continue to closely monitor both direct effects and broader implications for consumer sentiment, international travel flows and overall trading conditions.

Against this backdrop, we maintain a clear focus on operational delivery and the strategic priorities set under CLAIM 5 TOUCHDOWN. We will continue to prioritize profitability, cash generation, inventory discipline and flexibility over short-term growth.

Ladies and gentlemen, let me close with 3 takeaways. First, the execution of CLAIM 5 TOUCHDOWN is firmly underway. 2026 is a year focused on strengthening the fundamentals of the business and elevating its quality rather than pursuing growth at any cost. In this context, we have made initial progress in sharpening brand focus, enhancing distribution quality and structurally strengthening the earnings profile of the business, marking an important milestone in delivering our strategy through 2026 and beyond.

Second, Q1 delivered solid underlying performance. Gross margin improved, cost discipline remained intact and cash generation strengthened despite intentional top line effects from our strategic measures.

Third, based on our Q1 performance, we reaffirm our full year outlook for 2026. While the external environment remains demanding and volatile, we are confident in our strategic direction and our ability to translate execution into stronger brand equity, improved profitability and long-term value creation.

With that, thank you for your attention. We are now happy to take your questions.

[Operator Instructions] The first question comes from Thomas Chauvet from Citi.

Two questions, please. The first one on your introductory remarks, you said that demand outside the Middle East weakened towards the end of the quarter. Can you elaborate a little bit on what that means in the various regions? And how much was retail in April compared to the minus 3% you registered in the quarter?

Secondly, on your comments about the resilience of menswear, particularly with BOSS Green and B Camel positive, can you comment on whether this is due to a very different customer profile you're now seeing in the store purchasing these 2 lines that are quite differentiated, I believe, or rather you think some relative weakness perhaps of the offering of black and orange, whether that's -- I don't know -- product quality or value for money proposition or simply the creative part. That would be useful. Also that you perhaps elaborate a bit on the 2 divisions you've created with menswear and womenswear and how this new unit of menswear is helping on the creative side?

Excuse me, this is Christian speaking, but we have to quickly follow up on question one, which was obviously a long question, but the quality was really bad on our end. I'm sorry for that.

There was a bit of constraining in it. I remember you asked for retail trends in April, but what was the beginning of your question, if you can recall that, please?

Yes. Sincere apologies for that to everyone. Yes, the comment -- can you hear me better now?

Yes, I'd say so. I mean, it's still -- it's not perfect but.

Otherwise move to another question or two. You commented on demand weakening outside the Middle East towards the end of the quarter. And could you elaborate on what that means in the various regions? And was retail overall in April very different from the minus 3% you registered in the period?

So Thomas, you're asking whether the retail performance in April was different from the minus 3% in Q1. Is this your question?

Yes. You mentioned that things weakened outside the Middle East at the end of the quarter because of the war. So I suspect that the consumer may have been impacted in the U.S. and Europe. So could you comment on the various geographies in April, please?

Yes. So perhaps let's take the first question regarding, let's say, current trading question. So firstly, I think we have to see that, of course, our retail business and the Middle East business is -- the Middle East business itself is predominantly a retail business, was definitely affected -- ongoing in April. So I think this refers to everybody. We are not alone in this, but we see that traffic is very low. It has slightly improved over the latest weeks, but now the last 2, 3 days have been also bad. So I would say it's a very, let's say, volatile environment.

Secondly, I think this is the question around what do we see in terms of consumer sentiment. I would say here, we see in some selected markets that consumer sentiment is also affected, for example, like U.K. is affected -- was already affected in Q1, especially March, and is also affected in April. And we see that actually also the international tourist flow is also coming down and affecting the business.

On the other side, I think I want to make the comment in terms of our strategic priorities. I think for us, it's also important to stay on track with regards to our strategic execution of CLAIM 5 TOUCHDOWN. And this means also for us in April, which is the month of, let's say, mid-season sale that you see very often due to the summer. For the summer collections, we decided in executing our CLAIM 5 TOUCHDOWN for this year that we don't take part in mid-season sale. So that is also one of the deliberate decisions that we have taken in order to improve the quality of our business and to have this long-term focus on brand equity.

So definitely, of course, we are looking at the current trends up and down. But I think for us, it's now very important to keep our compass and to keep the course of our strategic execution. And therefore, we do not participate in April. And therefore, the month itself, it's difficult to read between the different effects that we have been seeing.

With regards to your second question, actually, we are very happy with the development of BOSS Camel and BOSS Green. BOSS Green was actually up mid-single digit. You can see that our 24/7 lifestyle image is really working, especially with younger consumers. And you can also see that this is the current trend of the business with, like sports kind of activities. You've also seen that we have announced now the cooperation with Australian Open for next year. So this creates BOSS. We are working on kind of tennis and golf collection. So we are really deliberately driving BOSS Green going forward. And on top of this, we also opened some BOSS Green stores, especially in the Asian markets, where you can see this kind of positive trend. And we are following this kind of trend.

With regards to BOSS Camel, which is, I mean, the majority is definitely a retail business. You can really see because of the outpricing of the luxury players and luxury competitors that some of the high value, high affluent consumers are trading down to us, and that's also driving BOSS Camel in selected markets, especially also we saw this in Asian markets, but also in the U.S., where we are actually happy.

So I would view this -- I would see this positively in terms of that we have a certain portfolio to offer, and price value proposition for Black, I think, is good. Please keep in mind that we also increased the prices for the Spring Campaign 2026. And we get actually good feedback for this kind of measurement, and this is also driving our business.

Then the next question comes from Manjari Dhar from RBC.

I also had 2, if I may. My first question was on COGS and raw materials. I just wondered if you could give some color on how you see the outlook on the raw material side as a result of what's going on in the Middle East? And does that have any impact on your own sourcing facilities in Turkey?

My second question was on tourism. Yves, I know you commented on international tourist flow weakness. I just wondered if you could give some color on sort of how much of the BOSS estate is exposed to international tourist flows and perhaps maybe some more color on how you're seeing the performance in some of those stores.

Yes. Thank you very much, Manjari, for your 2 questions. First of all, regarding the COGS. So taking your concrete question regarding Turkey. So we -- for the time being, we don't see any implications regarding our factory in Izmir.

Regarding raw materials, please keep in mind that the majority of the products that we have are coming from cotton and actually wool. So they are not so much influenced by this kind of high oil prices. We only have, let's say, limited exposure to polyester. You see price increases there. We have to look at it whether it's -- whether the duration will be longer. But I think what remains is that we are not as much exposed as perhaps like other sports brands, for example, and we don't see major implications for the year 2026.

I think we have to observe the situation, but rather from the COGS development and also -- this also includes freight. We feel that we can compensate those effects that we might be seeing and that from -- with regards to the COGS, that we see further improvements regarding sourcing efficiencies, further reduction in airfreight share, and that these developments will support gross margin also going forward, alongside -- although we know that the Middle East has somehow implications on the oil prices.

Regarding tourism, we know that our business is around overall 20% to 25% is coming out of tourism flow. We have seen some implications because of the Middle East, because of the big hubs in Dubai and Doha were closed for a certain period of time, there's less traveling. I think this has impacted the business in March and also in April, and we have to see how long it will last. I think it will also be slightly compensated in domestic revenues then, because people might be staying more at home or might be traveling less. So we have to observe this kind of development.

The next question comes from Grace Smalley from Morgan Stanley.

The first one would just be a quick clarification, please. So you mentioned that you are -- you're starting to see some impact from the Middle East in regions outside of the Middle East. And I think, Yves, if I heard you correctly, the U.K. was the main region that you pulled out. I just wanted to see if there were any other regions where you're also starting to see an impact outside of the Middle East or it's mainly centered within the U.K.

Also on the answer on current trading, appreciate it. It sounds like April is very difficult to read given the Middle East disruption, but also the changes in the seasonal sales. But just if there's anything you can say to help us with how we should think about modeling Q2 relative to current consensus?

My last one would just be on marketing. I believe you mentioned that the lower marketing spend in Q1 was partially due to timing and phasing. So if you could just help us with how we should think about the cadence of marketing spend throughout the rest of the year and how we should think about marketing on a full year basis?

Yes, another 3 questions. Thank you very much. So regarding marketing, I think -- so first of all, like I said during my presentation, we invested 7.3%. We have had the Milan fashion show. We have had BOSS BECKHAM. We had also the HUGO campaign, Red Means Go. So we -- you can really see that we invested. I think we invested wisely, and we get more out of the euro spend. And regarding -- and actually, this is all well in line with what we have said during CLAIM 5 TOUCHDOWN.

There will be definitely a focus on the second half of the year, especially in Q4, which is actually the holiday season, which, as you know, Grace, is the strongest quarter for us. So we will, in terms of phasing, focus broadly on the second half of the year and especially on Q4 where we have the commercial and holiday moments of the year and where you have also some gifting in this kind of big quarter because as we know, the fourth quarter is between 20% to 30% higher than the first 3 quarters.

Regarding the comment in terms of global sentiment, I think, like I said, and I can just repeat this, that we have seen in some selective markets like the U.K., some implications of the Middle East conflict, also slightly less tourists from the Middle East coming into the U.K. So these were also some implications that we have seen. But I think it's -- I think we have to observe the situation. And I think nothing more to comment right now because it's really changing on a weekly basis.

Then was the question, was that regarding Q2? What was that question again?

Yes. It was -- Grace, you got your question, right? It was a bit of a quarterly phasing question, right? How to think about Q2 in terms of modeling, but also for the remainder of the year given the current trading comments that were made. Is that right?

Yes, exactly.

So I'll take that, Muller, if that's okay for you. So I think the 2 comments we can make is, Grace, one related to Q4. I start with the final quarter of the year. And that's basically a reminder of what we have already said in March, the comps are particularly difficult in Q4. So that's something you will have to bear in mind. And I'm sure you're doing that in any case.

On Q2, I think only the comments we've made on the Middle East, I guess, you probably will try to find these numbers or these comments finding the way into your Q2 modeling numbers. But that's all the comments we are making. Hard to be overly precise on current trading given the volatility we're seeing in the markets, and you said it, weeks can be quite different from one week to the other. But like I said, I think the implications from the Middle East in April were pretty clear, and that is something you should bear in mind -- and then Q4, as I just alluded to.

Next question comes from Anthony Charchafji from BNP Paribas.

The first one would be on the guidance. Curious to know the breakdown between the gross margin expansion and the OpEx. I mean, we've seen that the OpEx were down 4% reported, but rather 2% at constant FX. Do you see the OpEx cut, I would say, fading and being a bit less of a tailwind going into Q4? And in terms of gross margin, just to know if you have in mind gross margin expansion to be really back-end loaded Q4. So can we see Q4 gross margin expansion above the 110 bps that you just delivered?

My second question is on pricing, but also pricing net of markdowns. Do you expect it to be net positive like in Q1 in each quarter in 2026? And do you expect to do more pricing versus the one that you did beginning of Q4 of mid-single digit? Is there anything planned?

Yes, Anthony, thank you very much for your questions. So regarding pricing, we have done now the pricing in Q4 2025, which will prevail in due course for 2026. There will only be, let's say, some slight adjustments, but not this kind of broad-based adjustment we have made. We might do it smartly. We will observe, of course, the competition, but nothing that I would call out in terms of pricing.

What I would also -- what I would call out is definitely that we will give less promotions. We have started this already. And I think markdowns will go down and will turn over the course of the year also into a tailwind for gross margin in comparison to last year. We will strictly actually execute our CLAIM 5 TOUCHDOWN strategy. This means less discounts in the online channels. This will be shorter sales period. This will mean not participating in mid-season sale, like I said.

So these are several measurements that we are taking to reduce our markdowns, always with the implication to drive the long-term profitability and the brand equity of the company. So it's -- all the measurements that we are taking are directed to increase our full price sell-throughs, and this will also help the gross margin going forward.

I think we have been happy with our gross margin development already in Q1, which was primarily driven by sourcing efficiencies. But I also expect that we will see a good performance regarding gross margin over the next quarters regarding gross margin.

As we have the history of having the OpEx overall under control -- minus 4%. I think it's -- for us as a management team, it's important to have the costs under control and to reduce the costs. I think you have also seen kind of deleverage this year, but this was overall well expected also in our guidance, and we will focus on those things that we can control on our own. And these are definitely gross margin things and also OpEx. And you have seen the direction also in Q1, and you can expect that this will continue in the next quarters, meaning gross margin being up and costs going down.

The next question comes from Andreas Riemann from ODDO BHF.

Two topics. One is the HUGO brand. So the HUGO brand is written in red letter. So my question would be what actually happened to HUGO BLUE? Is HUGO BLUE still relevant within HUGO?

The second topic, the tariffs. So in the press call, I think you indicated that you expect that U.S. tariffs will be paid back. Can you help us to guess how much that might be? And linked to that, what was actually the impact from U.S. tariffs on your gross margin in Q1? You didn't mention it. So was it that small? That would be my second question.

Andreas, thank you very much for your questions. Well, I will start with customs. Yes, of course, like every other brand is expecting that this kind of surplus that was introduced last year will be paid back. I think this is what might be expected. We are not quite sure because as we all know, the administration in the U.S. is also very volatile. So no effects have been included in our numbers so far. And actually, we are not disclosing the exact amount of the customs that we are having, but it's not such a huge amount that you can expect.

Regarding HUGO, definitely, we streamlined the assortment regarding HUGO. We have the big campaign Red Means Go in terms of HUGO, and we are integrating the HUGO BLUE products into our HUGO -- in our HUGO appearance and have a clear focus on contemporary tailoring. So this means that we're going to streamline the assortment going forward. This has been a kind of -- also kind of strategic measurement. And of course, the effect regarding the net sales at HUGO are visible, but they were more or less expected from our side. And on top of this, we are also reducing here and there some of our distribution points also with HUGO. So these are the effects that we have seen with HUGO, but I think the most important thing is that we are streamlining the assortment and integrate HUGO BLUE into HUGO.

Ladies and gentlemen, that actually completes today's conference call. There is no more people in the queue wanting to ask questions. So we leave it with that. And we thank you for your participation. And of course, if there's any further open topics or questions you have, please reach out to the Investor Relations team.

Thank you for joining today. Thanks for your interest and speak to you soon. Thank you. Bye-bye.

Thank you.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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.

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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.

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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.

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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.

Ladies and gentlemen, welcome to the HUGO BOSS Q3 2025 Results Conference Call and Live Webcast. I'm Moritz, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Christian Stohr, Senior Vice President, Investor Relations. Please go ahead.

Thank you and good morning, ladies and gentlemen. Welcome to our third quarter 2025 results presentation. Hosting our conference call today is Yves Muller, CFO and COO of HUGO BOSS. Before we begin, please be reminded that all growth rates related to revenue will be discussed on a currency adjusted basis unless stated otherwise. To ensure a smooth and efficient Q&A session, we kindly ask you to limit your questions to 2.

And with that, let's get started. Yves, the floor is yours.

Thank you, Christian, and a warm welcome from Metzingen, ladies and gentlemen. As outlined in our press release this morning, HUGO BOSS delivered a solid set of third quarter results despite ongoing headwinds across the global consumer landscape. While the environment remained volatile and traffic levels in many markets faced pressure, we executed with discipline and focus, prioritizing the levers within our control.

In particular, we stayed committed to advancing our long-term priorities with a strong emphasis on further strengthening our brand equity through investments in brand building initiatives. This dedication coupled with our focus on operational excellence and strict cost discipline resulted in robust gross margin improvements and notable bottom line enhancements. Let's, therefore, take a closer look at our Q3 financial performance.

Group sales declined 1% year-over-year mainly due to an unfavorable timing of wholesale deliveries. In reported terms, revenues were down 4% as substantial currency headwinds, particularly from the weaker U.S. dollar, weighed on the top line performance. Meanwhile, EBIT remained stable at EUR 95 million with the EBIT margin improving by 30 basis points to 9.6%. This solid margin expansion highlights the success of our structural efficiency measures across both COGS and OpEx.

Beyond the numbers, Q3 was marked by several high profile initiatives that further elevated the desirability of our brands fully aligned with the priorities of our CLAIM 5 strategy. The 2 key events deserve a special mention. The BOSS Spring/Summer 2026 Fashion Show in Milan, which captured global attention and achieved even higher social media engagement than last year's event. Additionally, the second drop of the BECKHAM x BOSS collection in late September saw a successful start delivering strong social media results and promising sell-through rates.

This underscores the relevance and influence of David Beckham and the unique value of our partnership. Building on these achievements, let's take a closer look at how our brands performed in Q3. Our BOSS Menswear business once more demonstrated its resilience in the third quarter with revenues remaining stable year-over-year. This performance highlights the enduring appeal of our premium positioning and the versatility of our 24/7 lifestyle approach. At the same time, we advanced our strategic efficiency measures initiated earlier this year for BOSS Womenswear and HUGO.

These initiatives focused on sharpening product assortments and refining distribution strategies are now in full swing and are critical to positioning both brands for sustainable value creation in the years ahead. And while they are temporary, weigh on top line development with revenue for both BOSS Womenswear and HUGO below prior year levels in Q3, we remain confident in the underlying strength of both brands. By addressing these short-term challenges we targeted and decisive actions, we are creating a solid foundation for future growth.

Let's now turn to our performance by region. In EMEA, sales declined 2% year-over-year. Revenue improvements in both Germany and France were offset by softer trends in the U.K. reflecting the muted discretionary spending across the market. Moving over to the Americas where momentum continues to improve sequentially and drove revenues up by 3%. The performance was supported by another quarter of growth in the important U.S. market while Latin America even accelerated to double-digit growth.

In Asia Pacific, sales declined 4% year-over-year mainly driven by lower revenues in China. Encouragingly, however, revenues in China showed a slight sequential improvement quarter-over-quarter. To further support brand relevance locally, at the beginning of October we celebrated the release of the latest BECKHAM x BOSS collection with a pop-up launch event in Shanghai. Meanwhile, Southeast Asia Pacific achieved a modest revenue increase in Q3 supported by another solid performance in Japan.

Turning to our channel performance. Our brick-and-mortar retail business showed a modest sequential improvement with sales remaining stable versus prior year period. This performance was primarily driven by stronger conversion rates and higher sales per transaction, which helped to offset muted store traffic seen across several markets. Also, our digital business continued its positive trajectory with sales up 2% to last year. Growth was supported by a solid performance on hugoboss.com alongside sustained momentum in our digital partner business, both grew by 2% in the third quarter.

Meanwhile, in brick-and-mortar wholesale, sales declined 5% year-over-year primarily due to the timing of delivery, which impacted Q3 performance by approximately EUR 20 million. However, we are confident that this effect will be fully offset in the fourth quarter as our Fall/Winter collections continue to resonate well with our partners. Accordingly, we anticipate a recovery in wholesale revenues in the final quarter complementing the momentum in our retail business as we approach year-end.

Turning to the gross margin, which was a clear standout in the quarter and a testament to our progress in driving structural efficiency. In Q3, our gross margin improved by a strong 100 basis points reaching 61.2%. The expansion was fueled by further efficiency gains in sourcing, lower product cost and reduced global freight rates. At the same time, we experienced slightly negative mix effects while promotion activity had a neutral impact on gross margin development.

Let's now shift to our cost base. Operating expenses declined 3% year-over-year marking 5 consecutive quarters of disciplined OpEx management. These gains were achieved across key business areas including sales, marketing and administration and underscore our commitment to operational excellence. In particular, selling and marketing expenses decreased 3% supported by a 4% reduction in brick-and-mortar retail expenses. In addition, we further optimized marketing investments, which amounted to 7.1% of group sales in Q3 and 7.4% for the first 9 months.

Our approach remains highly targeted, prioritizing brand initiatives that generate the greatest commercial impact while continuously strengthening brand relevance. Lastly, administration expenses declined 2% compared to the prior year period as we continue driving efficiency across our global support functions. Driven by the robust gross margin expansion and our focus on optimizing operating expenses, EBIT reached EUR 95 million in Q3, thus stable compared to the prior year period. This translated into a 30 basis point increase in the EBIT margin reaching 9.6%.

Below the operating line, our financial results significantly improved year-over-year supported by favorable ForEx effects and lower interest expenses. As a result, net income after minority increased by 7% translating into earnings per share of EUR 0.85, equally up 7% compared to last year. Also when we look at the first 9 months of the year, we delivered solid profitability improvements. Our gross margin expanded by 30 basis points to 61.8% while operating expenses declined by 2% underlying the continued success of our various efficiency measures.

Consequently, the EBIT margin improved by 30 basis points to 7.9% in the first 9 months while earnings per share rose by 9% year-over-year. Looking at cash flow and key balance sheet items. Trade net working capital increased 11% in currency-adjusted terms reflecting both higher inventories and lower trade payables. Importantly, when compared to the previous quarter, inventories improved slightly and were down 1% reflecting our ongoing commitment to inventory management.

On a 12-month moving average basis, trade net working capital amounted to 20.2% of group sales. Capital expenditure, on the other hand, declined substantially year-over-year down 51% to EUR 44 million. The decline was driven by increased investment efficiency and a more disciplined allocation of resources. As a result, for the full year, we now expect CapEx to come in at the lower end of our guidance range with investments expected to total around EUR 200 million in 2025.

Altogether, our disciplined cost control combined with enhanced CapEx efficiency drove a solid improvement in cash flow generation in the third quarter. Free cash flow increased by 63% to a level of EUR 66 million. Importantly, we further expect improvements in cash generation in the final quarter, which has historically been our strongest period for cash generation. Ladies and gentlemen, this concludes my remarks on the third quarter performance.

Let's now turn to the full year outlook and how we're approaching the final quarter of 2025 from an operational perspective. As we enter Q4, we remain fully committed to executing our strategic agenda. Building on the progress of previous quarters, our approach is twofold. First, to unlock growth opportunities and strengthen brand relevance in order to support top line momentum. And second, to drive operational excellence while optimizing cost efficiency across key business functions.

It is our deepest passion to inspire our consumers globally and strengthen engagement with both our brands, BOSS and HUGO, and Q4 has a lot to offer in that regard. After a busy October with a stunning BOSS Bottled event in New York City and the immersive in-store experience with Aston Martin, the countdown to BOSS Holiday Campaign has now begun. Officially launching tomorrow, the capsule represents a unique collaboration between BOSS and iconic plush toy company, Steiff. It will be visible across all key markets and will help to further fuel brand excitement heading into the peak season.

Driving customer engagement remains another priority. In this context, we are building on the successful rollout of our customer loyalty program HUGO XP, which was launched in China and the U.S. during the third quarter. With now almost 30 million members worldwide, the global expansion of XP is well underway. The program enables us to deepen relationships with our most important customers, foster long-term loyalty and leverage commercially relevant moments during the upcoming holiday season and beyond.

Equally as important, we will continue to leverage our global sourcing platform in the fourth quarter to secure additional efficiency gains and thus tailwinds to our margin development. In addition, the low to mid-single-digit price increases that we are currently introducing with the Spring/Summer 2026 collections are expected to provide a modest positive contribution to profitability in the final quarter. Last, but not least, we will stick to our rigorous optimization of operating expenses, particularly in sales and marketing and administration.

Taken together, these actions will ensure that HUGO BOSS is well positioned to strengthen its earning profile and successfully deliver on its full year commitments. In light of our performance during the first 9 months and our determined improvement game plan, we confirm our full year outlook for both sales and EBIT. As indicated in today's release, we now anticipate both top and bottom line results to come in at the lower end of our respective guidance ranges. This reflects the ongoing volatility in the global consumer environment as well as substantial currency headwinds recorded throughout the year.

To be more precise, we now expect group sales for fiscal year 2025 to come in at a level of around EUR 4.2 billion. This includes an estimated negative currency impact of around EUR 100 million for the full year, primarily reflecting the depreciation of the U.S. dollar during the course of 2025. Consistent with this, we now expect EBIT to come in at the level of around EUR 380 million, likewise reflecting anticipated currency headwinds of up to EUR 20 million. Accordingly, we now forecast EBIT margin to improve to a level of around 9% as compared to 8.4% in the prior year.

Ladies and gentlemen, let me briefly summarize today's key takeaways. As we look back on the third quarter and forward towards the end, a few points stand out. First, our performance in Q3 demonstrates the resilience and strength of our business model supported by sequential improvements in brick-and-mortar retail, solid gross margin expansion and the continued effectiveness of our cost efficiency measures. These factors provide a strong foundation as we enter the final quarter of the year.

Second, while Q3 wholesale revenues were impacted by the timing of deliveries, we anticipate a recovery in Q4. Alongside continued efforts to drive our global D2C business, this positions us for a renewed acceleration of group sales heading into year-end. And third, the disciplined execution of our operational priorities together with our ongoing brand investments positions us well to further progress in Q4 and achieve our full year targets.

Finally, looking beyond 2025, we are set to take the next steps on our CLAIM 5 journey. On December 3, we will share an update focused on the progress achieved so far in the key strategic areas that will guide our work in the years ahead. The update will reaffirm our strategic direction and underline how we are building on the foundation established over the past 4 years.

And with this, we are now very happy to take your questions.

[Operator Instructions] And the first question comes from Grace Smalley from Morgan Stanley.

My first one, Yves, would just be on the strategic update in December. You touched on it at the end there, but could you just give us an idea of what we should be expecting come December? Will there be kind of multiyear financial targets, 3-year targets, 5-year targets? And just broadly, any high level thoughts on how you see the strategy evolving from here? And then my second question, understood on the wholesale shift between Q3 and Q4. But as you look at wholesale order books into 2026, could you give us an update on how you're seeing those order books evolve especially in the U.S. market given the uncertainty there?

Yes. Thank you very much for your questions. Taking your first question regarding the strategic update. Yes, like I said during my presentation, we will talk about what we have achieved during CLAIM 5 and we will give you a kind of strategic update for the next years. Don't expect this to be for the next 5 years because I think in this kind of volatile environment, a 5-year horizon is far out. So rather expect a kind of, let's say, midterm perspective of strategic priorities that we are taking on our journey.

And regarding the wholesale shift, yes, overall, our Q3 results, and I just want to make it clear, were impacted by around EUR 20 million. The positive thing is we can see already in Q4 that we see the reversal of this delivery shift. So the October results show a material improvement regarding the wholesale development in Q4 and that this delivery shift has somehow reversed, which is a positive. And overall, we have seen regarding our wholesale orders and I said this already back in August that we have seen a kind of softening of our wholesale orders.

I think please bear in mind that over the last years we have seen -- over '21 and '24, we've seen a CAGR of 20% of growth in wholesale brick-and-mortar and this is actually what we overall have expected a kind of softening. And for the Fall collection, we are just selling it. It's too early to call because we're in the middle of the selling period. So no further news on these kind of order impacts.

And the next question comes from Manjari Dhar from RBC.

I had 2 as well, if I may. My first question is just a quick follow-up on wholesale. I just wondered if you could give some color on how much the replenishment business is down and perhaps sort of color -- I presume most of the softness there is in the U.S., but any color on that would be helpful. And then secondly, just a question on the sourcing efficiency gains. I just wondered sort of as you look forward, how much more upside do you see for gross margin from sourcing efficiency and how much more work do you think there is to be done in improving that sourcing layout?

Manjari, I was just talking to Christian because I tried to recall your first question regarding wholesale and the replenishment business. So the replenishment business in Q3 was down by low to mid-single digit. It was more or less somehow also expected was a kind of slight improvement also versus our Q2 results. And regarding U.S. wholesale preorders, it's pretty similar with the overall general view that we have given. So the order intakes and the delivery, it's very much in line with the global development. So not a kind of, let's say, further comments that need to be done on the U.S. market.

And regarding your second question regarding sourcing efficiency, I think sourcing efficiency was a major driver in Q3 regarding our performance on gross margin and this is actually to be continued going further. So we still see more potential in terms of vendor consolidation and optimizing our portfolio and this should be continued. And actually what we are expecting for our gross margin going into the -- or finalizing our year 2025 that we want to be actually above the 62% gross margin. Originally that was our target. And we are very confident that with the support of the sourcing efficiency and with the freight cost optimization that we will get beyond the 62% gross margin mark.

And the next question comes from Jurgen Kolb from Kepler Cheuvreux.

First of all, on number of stores. If my numbers are not incorrect, I think you closed stores in the APAC region for the first time in a long history. Is that a change of positioning in that region? First question. And then secondly, on the inventory side, which is still obviously a little bit up or, let's say, inflated. How much of this inventory level is covered by your order book and how do you see really the freshness and the current situation of the inventory side?

Jurgen, thank you very much for your 2 questions. Regarding the space in retail. So I think it's worth mentioning that if you compare the space Q3 2024 versus 2025, there has been actually no effect from space so it was on the same level. And those stores that might have disappeared in APAC, these are actually continued optimizations that we are taking. For example if we don't achieve those results in renegotiating the rents, we take a risk approach in closing stores.

I think I said this already in August and this will -- at the end, we want to have a robust store portfolio and this applies not only to APAC, but also applies to EMEA and the United States. We have defined clear profitability levers and if we do not achieve this by renewing the rents, we might take the action to close those stores. So there's nothing specific that we want to call out besides a continuous optimization of the store portfolio.

And regarding the inventory, I think it's also worth mentioning that our inventory position slightly declined versus Q2, point one. And point two is that our aged merchandise, if I compare my aged merchandise in comparison to last year, has also in percentage improved versus last year. So the merchandise is very fresh. It's driven by stock in transit and by the current collections and the aging of the inventories have not deteriorated year-over-year.

And the next question comes from Andreas Riemann from ODDO BHF.

Two topics. First one, HUGO and Womenswear, both are down significantly year-to-date and it sounds like you are reducing the product range and there's also adjustment in the distribution. So can you explain that in more detail and when is this exercise going to end? This would be the first topic. And the second one, the U.S. business. So to what extent did you adjust the prices actually in North America? And would you say your price increases in the U.S. are in line with what you see in the market or did you differ? These would be my 2 topics.

Yes. Andreas, thank you very much for your 2 questions. Actually you already took your answers for HUGO and BOSS Womenswear. So we are streamlining our product range. This is point one for both brands, BOSS Womenswear and HUGO. So this has something to do with collection complexity. So the mindset is to get better before bigger. So this is the mindset we have for those 2 brands. And the second thing is that we look at the distribution and for example, especially for BOSS Womenswear, if our space is somehow limited, we'd rather take BOSS Womenswear out with BOSS Green into those spaces if the space is somehow limited in the distribution.

This is the exercise that we have now started with Q2 and will materialize over the second half of this year. And I think further comments I would somehow refer to our strategic update on the 3rd of December to be more explicit for the way forward for both brands, BOSS and HUGO. And regarding U.S. so like I said already back in August, we have taken a kind of global price increase overall low to mid-single digit for the Spring campaign. So this will be visible now in the second half of Q4 where we drop this kind of merchandise.

This will also help us in terms of top line development globally and also will help us from a profitability standpoint. But your question was related to the U.S. I think we try to do smart price increases and we are very much in line with our competition here how we increase the prices and we observed the market. But nothing that would -- really needs to be emphasized regarding the U.S. market.

Yes. But maybe a follow-up. Is the U.S. then more than low to mid or is it in line with low to mid that you did for the group?

It's in line with low to mid.

And the next question comes from Anthony Charchafji from BNP Paribas.

Just 2. The first one on top line and then one on profitability. So just on top line given the low range of the guide, it would imply an organic growth in Q4 rather flattish to slightly positive, which would be 1 or 2 percentage point improvement. Could you please comment on the retail part? Comps are getting quite tougher especially in December for the whole sector. Could you maybe give some color on current trading retail and how you see it evolves?

And my second question is on profitability. If I take again the low end of the guidance, EUR 380 million, it seems that your Q4 is quite derisked because you have some quite a bit of impairment in the base EUR 47 million. What changed in terms of deciding, I would say, to narrow the range? Do you previously expected some impairment reversal and now not anymore or is there anything else to have in mind?

Anthony, thank you very much for your questions. So first regarding top line, let me try to phrase it. First of all, I think from a wholesale point of view, you have to keep in mind that this delivery shift will or, like I already said, has materialized. So this is the kind of tailwind that we are seeing. Secondly, regarding retail brick-and-mortar, you have seen now over the last quarters a kind of sequential improvement coming from minus 4% to minus 1% now to flattish in terms of retail improvement. So we expect that this improvement will prevail also going into Q4.

Thirdly, I think what is worth mentioning is that with the sale of the Spring season, you will see also a kind of price increase that will somehow materialize and will help us. And fourthly, I think we are now really entering into Black Friday. You have seen also on hb.com and our digital sphere that we have seen major improvements from Q3 versus Q2. So we will somehow take this kind of improvement also into Q4 to reach our top line targets.

And regarding profitability, I think you're right. We have disclosed we had our impairments last year on the level that were close to EUR 50 million. They were definitely kind of elevated if I look at the latest -- if I look at the last years of impairments that we did. So I think what you can expect from a bottom line perspective that we can see a kind of technical support coming from the impairments for the year in 2025.

And the next question comes from Daria Nasledysheva from Bank of America.

This is Daria from Bank of America. Can I please ask what is your view on promotional backdrop as we head into Q4? Wondering on a global basis, but also in the U.S. considering the inventory positions, yours and more broadly for the industry? And my second question is could you please help us contextualize the trends that you have seen during Q3 especially on retail? What has been the cadence of the quarter? Did trends improve in September to support your expectation of improvement into Q4?

Thank you, Daria, for your questions. So regarding promotions, I think it's worth mentioning that overall that the promotional activity is overall intense. On the other side, you have to bear in mind that our promotional numbers were somehow neutral in Q3 and actually we expect this also for Q4 that they are more or less neutral. I mean they have been elevated now for the last 5 quarters and we expect that the promotional activity, I would say, globally because if you look at the consumer sentiment globally, I think it's a remark that applies for a lot of important markets. I think they will remain on this elevated level and our expectation is that they remain -- it's neutral.

And regarding retail, I was pointing out in the last question in my answer that actually for Q4 that we further expect the kind of, let's say, sequential improvement also that were visible now for the latest quarters, I said Q1, Q2, Q3. So we've seen this kind of slight improvement over the last quarters and we expect that this continues to prevail now for the final important quarter.

And the next question comes from Robert Krankowski from UBS.

Just 2 questions for me, please. So first one is just on the cost control. You made pretty good job on the cost control year-to-date. But I just want to think in terms of, let's say, persistent pressures on your top line going forward, would you consider maybe stepping up investments behind the brand to support the growth? And you talked about the acceleration in Q4 that you expect towards the end of the year and could you talk maybe a bit about the beginning of the quarter? I think the comp is relatively changing. Maybe if you could give us a bit more color on the regions; the U.S., Europe; how the quarter has started.

Yes. So thank you very much for your words around cost control. So I think it's worth mentioning that we are continuously working on cost control. You have seen that we started actually last year in Q3 with these kind of cost decreases and now actually the comp base is getting more difficult. But I think we have shown also in Q3 that we really have a high cost discipline and that we have come up with some structural efficiency moves also when it comes to cost now because now year-over-year, we have seen 2 years not only in 2024 and Q4, but also in 2025 in Q3, a kind of cost decrease.

So we really lay emphasis on this in order to have the full alignment between our top line performance and bottom line. And definitely even if you look at marketing, we are now after 9 months at 7.4% marketing spending. We always said during CLAIM 5, we want to be in the range between 7% and 8%. So I would say even from a marketing perspective, we are well in line with what we have promised to the capital market. Of course we see positive impacts. We are now starting our Holiday Campaign. So we keep on investing into the brand. I think this is very important for us.

On the other side, I want to highlight that we want to make our marketing spendings more efficient. So the idea is always to get most out of EUR 1 spend. A good example is for example the Fashion Show, which was less expensive than last year, but we got higher media value out of our Fashion Show with positive comments. I think this is what we like if we spend less and actually get more out of it, it has a higher impact. So definitely, we want to invest in our brand. There are a lot of initiatives coming up in the most commercial period of the year and at the same time we keep our costs under control.

And regarding the color of current trading, let me be -- let's say, let's keep it on a global level because otherwise the discussion gets, let's say, too detailed around regions. But I can comment that we were happy how we started into the Q4 like I already said in the beginning.

Great. Thank you, Yves. Thanks, Robert, for your question and thanks to all of you for today's session. There is no further questions or hands raised in the queue. So I would like to thank you for dialing in today. This officially concludes today's conference call. Thanks for your participation. And of course we look forward to connecting with many of you over the next days and weeks. Look forward to speaking to you soon. Thanks very much. And in case of any questions, please reach out to the IR team.

Thank you and have a great day. Bye now.

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