Ladies and gentlemen, welcome to the Q1 2026 results conference call and live webcast. I'm Moritz, your Chorus Call operator. I would like to remind you that all participants will be in a 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.
Good morning, ladies and gentlemen, and welcome to our first quarter 2026 results presentation. Hosting our conference call today is Yves Müller, 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. Both menswear and BOSS Womens wear 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 two, 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 three 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 U.A.E. and Qatar.
The Middle East is also a high quality and very profitable business for us, reflecting an upper premium store portfolio, the federal 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 one 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 amounts 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 BECKHAM x BOSS drop. 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 a 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 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 had 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 the further reduction in the air freight 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 network and 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 on the 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-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 will 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 three 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, improve profitability and long-term value creation. With that, thank you for your attention.
We are now 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 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 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 one at this time. One moment for the first question, please. The first question comes from Thomas Chauvet from Citi. Please go ahead.
Good morning, Yves and Christian. Two questions, please. The first one, on your introductory remarks. If 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 - 3% you registered in the quarter? Secondly, on your comment about the resilience of menswear, particularly with BOSS Green and BOSS 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 two lines that are quite differentiated, I believe.
Rather you think, some relative weakness perhaps of the offering of Black and Orange, whether that, I don't know, product quality or value for money proposition or simply the creative part, that would be useful so that you perhaps elaborate a bit on the two divisions you've created with menswear and womenswear and how this new unit of menswear is helping on the creative side. Thank you.
Thomas, excuse me, this is Christian speaking, we have to quickly follow up on question one, which was obviously a long question, the quality was really bad on our end. I'm sorry for that. There was a bit of current trading in it. I remember you asked for retail trends in April, what was the beginning of your question, if you can recall that, please?
Yeah. Sincere apologies for that to everyone. The comment, can you hear me better now?
Yes. I'd say so. I mean, it's still, it's not perfect.
Okay. Well, I'll try otherwise, move to another question with you. You commented on demand weakening outside the Middle East towards the end of the quarter. Could you elaborate on what that means in the various regions? Was retail overall in April very different from the -3% you registered in the, in the period.
Thomas, you're asking whether the retail performance in April was different from the - 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. Could you comment on the various geographies in April, please?
Yes. Perhaps let's take the first question regarding as a, let's say, current trading question. Firstly, I think we have to see that of course, our retail business and the Middle East business itself is predominantly a retail business, was definitely affected ongoing in April. 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 two, three days have been also bad. 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 in March, and it's also affected in April. 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. This means also for us in April, which is a 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. 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. 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. 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. 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. This creates buzz. We are working on a kind of tennis and golf collection. We are really deliberately driving a BOSS Green going forward. On top of this, we are 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. We saw this in Asian markets, but also in the U.S., where we are actually happy. 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 BOSS 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 these kind of, for this kind of measurement and this is also driving our business.
The next question comes from Manjari Dhar from RBC. Please go ahead.
Good morning, Yves. Morning, Christian. Thank you for taking my questions. I also had two, 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 materials 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. Thank you.
Thank you very much, Manjari, for your two questions. First of all, regarding the COGSes. Taking your concrete question regarding Turkey, we, for the time being, 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. 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. 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, rather from the COGS development, and also includes freights. 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 air freight 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%-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. 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. We have to observe this kind of development.
Very clear. Thank you.
The next question comes from Grace Smalley from Morgan Stanley. Please go ahead.
Hi. Good morning. Thank you for taking my question. The first one would just be a quick clarification, please. You mentioned that 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 called out. I just wanted to see if there were any other regions where you're also starting to see an impact outside the Middle East or it's mainly centered within the, within the U.K. Also on the answer on current trading, appreciate it sounds like April is very difficult to read given the Middle East disruption but also the changes in the seasonal sales.
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. 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. Thank you very much.
Yes, I know the three questions were asked. Good morning, Grace. Thank you very much. Regarding marketing, I think, first of all, like I said to you in my presentation, we invested 7.3%. We have had the Milan Fashion Week, we have had BOSS Beckham. We had also the HUGO campaign, Red Means Go. You can really see that we invested. I think we invested wisely, and we get more out of the euro spend. Actually this 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.
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 holidays, 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%-30% higher than the first three 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. Slightly less tourists from the Middle East coming into the U.K. These were also some implications that we have seen.
I think it's, I think we have to observe the situation and as, I think, nothing more to comment right now because it's really changing on a weekly basis.
What's the question, what was that? Regarding, regarding Q2? What was that question again?
It was Grace, if we 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. Thank you.
I'll take that one, if that's okay for you. I think that the two 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 comms, you know, are particularly difficult in Q4, so that's something you will have to bear in mind. 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. 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. 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. Then Q4 as I just alluded to.
Okay. Understood. Thank you both very much.
The next question comes from Anthony Charchafji from BNP Paribas. Please go ahead.
Yes, good morning. It's Anthony from BNP. Thank you for taking my two question. 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 a 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 term of gross margin, just to know if you have in mind a gross margin expansion to be really back-end loaded Q4. Can we see Q4 gross margin expansion above the 110 basis points that you just delivered?
My second question is on pricing, but also pricing net of markdowns. Do you expect it to be a net positive like in Q1 in each quarters in 2026? Do you expect to do more pricing versus the one that you did beginning of Q4 of mid-single digit? Is there anything planned? Thank you.
Yes. Bonjour, Anthony. Thank you very much for your questions. 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 call out is definitely that we will give less promotions. We have started this already. 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. 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. It's all the measurements that we are taking are directed to increase our full price sales through, 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. I also expect that we will see a good performance regarding gross margin over the next quarters.
As we have the history of having the OpEx overall under control, - 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. You have seen the direction also in Q1, and you can expect this, 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. Please go ahead.
Good morning. Two topics. One is the HUGO brand. The HUGO brand is written in red letters. My question would be what actually happened to HUGO Blue? Is HUGO Blue still relevant within HUGO? The second topic, the tariffs. 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? Linked to that, what was actually the impact from U.S. tariffs on your gross margin in Q1? You didn't mention it, was it that small? That would be my second question.
Yeah. Good morning, 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. No effects have been included in our numbers so far. Actually, we are not disclosing the exact amount of the customs that we're 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 appearance and have a clear focus on contemporary tailoring. This means that we're gonna streamline the assortment going forward. This has been a kind of strategic measurements. Of course, the effect regarding the net sales at HUGO are visible, but they were more or less expected from our side. On top of this, we are also reducing here and there some of our distribution points also with HUGO. 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.
Okay. Very clear.
Thank you, Andreas. Ladies and gentlemen, that actually completes today's conference call. There is no more people in the queue wanting to ask questions. We leave it with that. We thank you for your participation. 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.
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