Ladies and gentlemen, welcome to the Hugo Boss Q3 2025 results conference call and live webcast. I'm Moritz, the Chorus Call operator. I would like to remind you that all participants will be in the listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Christian Stoehr, 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 Müller, 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 two. With that, let's get started. Yves, the floor is yours. Thank you, Christian, and a warm welcome from me to you, 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 US 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 CapEx 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 two 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 sales-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. While they temporarily 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 with 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 draw 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 and 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 the 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 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 costs, 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 five 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 nine 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 $0.85, equally up 7% compared to last year. Also, when we look at the first nine 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 nine months, while earnings per share rose by 9% year-over-year. Looking at cash flow and key balance sheet items, 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 are 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. Q4 has a lot to offer in that regard. After a busy October with a stunning Boss 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 nine 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 ends 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. 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 at the three 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 four years. With this, we are now very happy to take your questions. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from Grace Jolly from Morgan Stanley. Please go ahead. Hi, good morning. Thank you for taking my questions. 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 multi-year financial targets, three-year targets, five-year targets, and just broadly any high-level thoughts on how you see the strategy evolving from here? My second question, understood on the wholesale shift between Q3 and Q4. 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 uncertainty there? Thank you. Yes, thank you very much. Good morning, Grace. 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. Do not expect this to be for the next five years because I think in this kind of volatile environment, a five-year horizon is far out. Rather expect a kind of, let's say, mid-term perspective of strategic priorities that we are taking on our journey. 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. 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. 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 2021 and 2024, we have 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. For the fall collection, we are just selling it. It is too early to call because we are in the middle of the selling period. No further news on these kind of order index. Great. Very clear. Thank you very much. The next question comes from Manjari Dhar from RBC. Please go ahead. Thank you. Good morning, Yves. Morning, Christian. Thank you for taking my questions. I had two 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. 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? Thank you. The first question was wholesale. Okay. Good morning, Manjari. I was just talking to Christian because I tried to recall your first question regarding wholesale and the replenishment business. 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. Regarding U.S. wholesale pre-orders, it is pretty similar with the overall general view that we have given. The order intakes and the delivery, it is very much in line with the global development. Not a kind of, let's say, further comments that need to be done on the U.S. market. 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. We still see more potential in terms of vendor consolidation and optimizing our portfolio, and this should be continued. 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. This was our originally that was our target. 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. Yes, that is very clear. The next question comes from Jürgen Kolb from Kepler Cheuvreux. Please go ahead. Thanks very much. Hi, guys. First of all, on stores, 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. 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? How do you see really the freshness and the current situation of the inventory side? Thank you very much. Good morning, Jürgen. Thank you very much for your two questions. Regarding the space in retail, I think it is worth mentioning that if you compare the space Q3 2024 versus 2025, there has been actually no effect from space. It was on the same level. Those stores that might have disappeared in APAC, these are actually continued optimizations that we are taking. For example, if we do not achieve those results in renegotiating the rents, we take a rigid approach in closing stores. I think I said this already in August, and 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 levels, and if we do not achieve this by renewing the rents, we might take the action to close those stores. There is nothing specific that we want to call out besides a continuous optimization of the store portfolio. Regarding the inventory, I think it is also worth mentioning that our inventory position slightly declined versus Q2. Point one and point two is that our H merchandise has, if I compare my H merchandise in comparison to last year, also in percentage improved versus last year. The merchandise is very fresh. It is driven by stock in transit and by the current collections, and the aging of the inventories has not deteriorated year- over- year. Very good. Thanks very much. Thank you, and good luck at Napoli tonight. Yes, we need it. The next question comes from Andreas Riemann from ODDO BHF. Please go ahead. Yes, good morning. Two topics. First one, Hugo and Woman's Wear. Both are down significantly year to date. It sounds like you are reducing the product range, and there is also adjustment in the distribution. Can you explain that in more detail? When is this exercise going to end? This would be the first topic. The second one, the U.S. business. To what extent did you adjust the prices actually in North America? 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 two topics. Thanks. Yes. Good morning, Andreas. Thank you very much for your two questions. Actually, you already took your answers for Hugo and Boss Women's Wear. We are streamlining our product range, this 0.1 for both brands, Boss Women's Wear and Hugo. This has something to do with collection complexity. The mindset is to get better before bigger. This is the mindset we have for those two brands. The second thing is that we look at the distribution. For example, especially for Boss Women's Wear, if our space is somehow limited, we would rather take Boss Women's Wear out and 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. 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. Regarding U.S., 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. This will be visible now in the second half of Q4, where we dropped this kind of merchandise. This will also help us in terms of top-line development globally and also will help us from the profitability standpoint. Your question was related to the U.S. I think we tried to do smart price increases, and we are very much in line with our competition here, how we increase the prices. Of course, we observe the market, but nothing that we would really need to be emphasized regarding the U.S. market. Yeah, but maybe I 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. Okay. Cool. Thank you very much. Thank you. The next question comes from Anthony Chaffin from BNP Paribas. Please go ahead. Yes, good morning. Thank you very much for taking my question. Just the first one on top line and then one on profitability. 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 a one or two 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 evolve? 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 the risk because you have quite a bit of impairment in the base, EUR 47 million. What changed in terms of deciding to, I would say, to narrow the range? Did you previously expect some impairment reversal? Not anymore, or is there anything else to have in mind? Thank you. Anthony, thank you very much for your questions. Perhaps regarding top line, let me try to phrase it. First of all, I think you have to, from a wholesale point of view, keep in mind that this delivery shift will, like I already said, have materialized. This is the kind of tailwind that we are seeing. Secondly, regarding retail brick-and-mortar, you have seen now over the last quarter the kind of sequential improvement coming from - 4 to - 1 now to flattish in terms of retail improvement. 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. Fourthly, I think we are now really entering into Black Friday. You have seen also on hp.com and our digital sphere that we have seen major improvements from Q3 versus Q2. We will somehow take this kind of improvement also into Q4 to reach our top-line targets. 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. I think what you can expect from a bottom-line perspective is that we can see a kind of technical support coming from the impairments for the year end in 2025. Thank you. The next question comes from Daria Nesvet from Bank of America. Please go ahead. Good morning, everyone. Thank you very much for taking my questions. 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? 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. Regarding promotions, I think it's worth mentioning that overall, the promotion 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. Five quarters, and we expect that the promotion 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. Our expectation is that they remain neutral. Regarding retail, I was pointing out in the last question in my answer that we actually, for Q4, further expect a kind of, let's say, sequential improvement also that was visible now for the latest quarters. I said Q1, Q2, Q3. We have seen this kind of slight improvement over the last quarters, and we expect that this continues to prevail now for the final important quarter. Thanks. The next question comes from Robert Kankowski from UBS. Please go ahead. Hi, good morning. Just a question for me, please. First one is just on the cost control. You made a pretty good job on the cost control year to date, but I just was thinking in terms of, let's say, persistent pressures on your top line going further, would you consider maybe stepping up investments behind the brand to support the growth? You talked about the acceleration in Q4 that you expect towards the end of the year. 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 in the region, the U.S., Europe, how the quarter has started. Thanks. Yes. Hello, Robert. Good morning. Thank you very much for your words around cost control. 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. Now, actually, the comp base is getting more difficult. 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 two years, not only in 2024 in Q4, but also in 2025 in Q3, a kind of cost decrease. We really lay emphasis on this in order to have the full alignment between our top-line performance and bottom line. Definitely, even if you look at marketing, we are now after nine months at 7.4% marketing spendings. We always said during Claim 5, we want to be in the range between 7%-8%. 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 a 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. The idea is always to get most out of one euro spent. 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 and have a higher impact. Definitely, we want to invest our brand. There are a lot of initiatives coming up in the most commercial period of the year. At the same time, we keep our costs under control. 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. 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. Thanks to all of you for today's session. There are no further questions or hands raised in the queue. I would like to thank you for dialing in today. This officially concludes today's conference call. Thanks for your participation. 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. In case of any questions, please reach out to the IR team. Thank you and have a great day. Bye-bye. Bye now. 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.