AGM 2020

May 27, 2020

Slides

Ladies and gentlemen, dear shareholders, first of all, let me briefly introduce myself to you. My name is Michel Peraudin, and I'm the Chairman of the Supervisory Board of Hugo Boss AG. In this capacity, I'm opening today's Annual General Meeting of HUGO BOSS AG. And in accordance with the company's articles of association, I will be chairing this meeting. On behalf of the Supervisory Board and the Managing Board, I would like to extend a warm welcome to you all. I would like to welcome all those who are following today's AGM online. In particular, I would like to welcome our shareholders and shareholder representatives. I also welcome the ladies and gentlemen of the press, whom I thank, for their reports. I would have been very pleased to welcome you again year at the Stuttgart Trade Fair Center. Unfortunately, however, the exceptional circumstances do not allow this. As you saw from the notice convening this year's AGM, the Managing Board of Hugo Boss AG AG has decided, with the approval of the supervisory board, to hold this year's Annual General Meeting as a virtual meeting and thus without the physical presence of shareholders and shareholder representatives. By holding this year's Annual General Meeting as a purely virtual one, we would like to protect your health and that of all service providers involved and comply with the current regulations of the authorities. With this measure, we are making use of the possibility that the German legislator created in the spring of this year with the so called COVID-nineteen Act for this year's Annual General Meeting season. I would like to thank you very much for your understanding for this measure. Due to the contract restrictions, we have significantly reduced the number of people present here today. First of all, I would like to welcome the notary, Doctor. Stefan Sune, who is keeping the minutes of today's Annual General Meeting. My colleagues from the Supervisory Board are attending online in accordance with the resolution of the managing board and the respective approval by the supervisory board as well as on the basis of the current regulations. If necessary, they can communicate with me as well as with the other people in attendance here. Just like you, they will follow the event online through the Internet. I would like to state that all of the members of the Managing Board are present. I would particularly like to welcome Doctor. Schafer, who took over the position of Chief Operating Officer on the 16th March this year. We're pleased to welcome Doctor. Schafer to the Managing Board of HUGO BOSS AG. Later on, Doctor. Schafer will introduce himself to you briefly. Apart from this, the proxies appointed by the company are present here. Ladies and gentlemen, we are, of course, aware that holding an Annual General Meeting without the physical presence of shareholders and shareholder representatives is associated with restrictions on shareholders' rights. In particular, during such an online AGM, shareholders and management cannot enter into a direct dialogue during a general debate. In order to enable you to exercise your rights to an appropriate extent during this virtual Annual General Meeting, the company has opened up various possibilities within the framework what is legally permissible and technically feasible. For example, you can exercise your voting rights via postal vote or with the help of the proxies appointed by the company. Voting rights can be exercised through the online service for the AGM until the moment when voting will begin during Trudeau's virtual AGM. I will stress this again later so that you do have the opportunity to cast your vote in good time. Shareholders registered for the Annual General Meeting were also able to submit questions to the Managing Board in the run up to the AGM. Let me thank you for making active use of this opportunity. We will answer the questions in detail after the speeches by Mr. Lange and myself. Shareholders who have exercised their voting rights can lodge an objection to resolutions of the Annual General Meeting through the AGM's online service until the end of the meeting. The notary will take note of their objections in the minutes. The notary has checked and confirmed the proper functioning and reliability of the system. Before we move on to the formalities of this meeting, I would like to make a few comments regarding the procedure. Just like in previous years, there is simultaneous translation of the entire meeting into English. You can choose the English channel on the website. I would also like to point out that today's event will be transmitted through 2 video streams. On the one hand, there is the freely accessible video stream on the company's website. This will end after Mr. Lange's speech. On the other hand, registered shareholders will have the opportunity to follow the entire Annual General Meeting through the online service. Should you, as a shareholder, wish to make use of this option, you must register with the online service, please, and select the live transmission there. You will find the link to the online service on Hugo Boss' website. Ladies and gentlemen, here on-site, there is also the possibility of watching the live transmission of the Annual General Meeting so that the notary public can get a comprehensive picture. Together with the external service provider assisting us today, we have carefully examined the technical precautions necessary for the live transmission. We're therefore convinced that we will be able to conduct the virtual Annual General Meeting in a technically proper manner from here. The notary was also informed in detail about the technology which is being used. We therefore do expect that we will be able to transmit the Annual General Meeting online without any problems. If there are technical problems, would you please first check your Internet connection? If the transmission here from Metzigen is interrupted, please be patient for a few minutes. If a connection cannot be restored, we will provide you with further information on our website. First of all, I would like to point out that it is not allowed to make audio or video recordings of this event. A stenographic protocol of the event will not be made either. Let us now deal with the formalities. Ladies and gentlemen, the convocation of this meeting was published in the Federal Gazette on the 20th April 20 20 in due form and time. A printout from the Federal Gazette has been submitted to the notary and will be attached by him to the minutes as an annex. According to the declaration of the Managing Board, the notifications required under Section 125 of the German Stock Corporation Act were sent in due time directly to the banks, shareholders' association and shareholders. The required documents have been available for inspection by shareholders on the company's website since the announcement of the convening of the Annual General Meeting. Ladies and gentlemen, first of all, a few explanations regarding the voting procedure. Voting rights at today's virtual Annual General Meeting can be exercised by postal vote or by issuing a power of attorney and instructions to the proxies nominated by the company. It is possible to submit corresponding explanations via the online service until voting will begin. Until then, you can also still change or revoke any declarations you might already have made through the online service. I will remind you once again to exercise your voting rights later on, but please make sure to cast your vote options in the invitation to this year's virtual Annual General Meeting. The proxies appointed by the company will vote on the individual agenda items in accordance with your instructions. This will be done by releasing the votes which have been saved in the system. The postal votes received in due time will also be taken into account when determining the voting result. The entire boating and counting process is monitored by the notary public. The notary has checked that all of the technical requirements are met. Ladies and gentlemen, before we begin dealing with the agenda, I would like to briefly comment on the appointment of Doctor. Schafer as a member of the Managing Board. Doctor. Schafer was appointed to the Managing Board with effect from the 16th March 2020. He will be responsible for operations, own manufacturing, product development and sourcing, sustainability and quality management. I would like to thank Doctor. Schaeffer in advance for his cooperation to date and would like to ask you to kindly introduce yourself briefly. Thank you very much, Mr. Paradigm. Ladies and gentlemen, I'm pleased to be able to have this opportunity to introduce myself to you personally. For 13 years, it is with great enthusiasm and passion that I've been in the fashion industry. A large part of this time I spent with operation issues especially all around technical product development, sourcing IT and logistics. Generally, this was about acceleration, digitalization and efficiency increases of these processes. After the course of study of Business Management and taking my PhD, I started with the Boston Consulting Group. Subsequently, I worked with the dealers in various executive positions at the end as a Senior Vice President. From 2015, 15, I've been able to apply my experience on the Managing Board of Tom Taylor Group. Since March 2020, I've been responsible with Hugo Boss on the Managing Board for Global Operations and Sustainability that is worldwide product development, technical product development, sourcing and activities in the field of sustainability. After spending the first 400 days here, I will tell you more about where we will be going there. But I can tell you even now that I will stick to my line I've held up to now faithfully. For operations with HUGO BOSS, I see potential for further acceleration, flexibilization and decreases in efficiency also by using digitalization. I'm very pleased to be able on the team of my Managing Board members to make my contribution to successful future of Hugo Boss. Thank you very much. And with that, back to the Chairman. Thank you very much, Doctor. Schaeffer. I will be addressing the pending changes on the Supervisory Board in the context of explanations of Item 5. I now call items 1 to 10, whose complete wording is contained in the invitation to the Annual Shareholders Meeting. The invitation including the proposed resolution on the appropriation of net profit for the 2019 financial year was published in the Federal Gazette on April 20 20. We have supplied you with the agenda together with the invitation. Moreover, this invitation can be downloaded from the company's website. I therefore take the invitation as read. We have received counter motions relating to 4 agenda items overall. These countermotions have been published on the company's website. You will also find a statement by the company on these countermations that I would like to refer you to expressly once again. As announced in the invitation, these counter motions will not be put to a vote in the virtual Annual Childers Meeting in agreement with the concept of the COVID-nineteen Act, nor will they be dealt with elsewhere. Let me come first of all to item 1, presentation of the ratified annual financial statements for Hygge Bonsai G and the approved consolidated annual financial statements for the period ending 31 December 2019. The consolidated report of the Managing Board for Hyogo Boss AG and for the Hyogo Boss Group for the 2019 financial year, the report of the Supervisory Board, the proposal of the Managing Board for the appropriation of net profit for the 2019 financial year and the explanatory report on disclosures pursuant to Section 289A para 1 and Section 315A para 1 of the German Commercial Code HGB for the 2019 financial year. I note that the ratified annual financial statements and the approved consolidated annual financial statements for the period ending 31 December 2019, the consolidated report of the managing board for Hyggebrands AG and for the Hyggebrands Group for the 2019 financial year, the report of the Supervisory Board and the explanatory report on disclosures pursuant to Section 289A1 and Section 315A, para 1 of the German commercial code for the 2019 financial year have been available on the Internet since March 15 and can be seen there. Since April 20, the proposal for the appropriation of net profit has been available on the company's website. Furthermore, I note that the annual financial statement under management report as well as the consolidated financial statements and the combined management report established by the Managing Board and were audited by Ernst and Young GmbH, Wirtschaftskrefundsgeserstadt and Stuttgart elected at last year's shareholders meeting and that this audit did not give rise to any findings and that therefore the audit firm issued an unqualified audit opinion on the February 20 20. Moreover, I note that the Supervisory Board for their part have audited these documents and did not have any issues. In the Supervisory Board meeting of 3 March 2020, the Supervisory Board approved the annual financial statements and thereby ratified them in accordance with Section 172 Companies Act and approved the consolidated annual financial statements. All the documents, including the audit reports, were available to all Supervisory Board members in good time before the meetings. Mr. Welling and Mr. Sturm participated in the relevant meetings as representatives of the auditor and answered the questions asked by the Supervisory Board in detail. The Supervisory Board adopted the proposal of the Managing Board on the appropriation of net profit. The Supervisory Board has given a written report about their activities in fiscal 2019. Please find this report on pages 9 to 13 in the annual report. Let me make some supplementary comments to this written report. In order to exercise its duty for tasks, incumbent upon it, the Supervisory Board held a total of 5 meetings in financial year 2019 with the September meeting held over 2 days. Moreover, in October November, one resolution each was taken by circulation procedure. In these meetings, the current business performance, the further development of the organizational structure and the restructuring of the centralized marketing department were discussed. Also the further development and future design of the compensation system of the supervisory board were discussed as well as the termination of 2 real estate leases. Additional topics were the future strategy of BOSS Womenswear, changes to the Managing Board, investment planning as well as the capital structure and further expansion of the online business. The Managing Board informed the Supervisory Board regularly comprehensively and in a timely manner in both written and oral form. They also presented all transactions requiring consent to the Supervisory Board. These were approved following their review either in meeting or by written resolution. For the rest as well, the supervisory board has supported the managing board by providing advice for managing the company and monitored its management activities. In fiscal 2019, no member of the Supervisory Board participated in only half or fewer of all Supervisory Board meetings and of committees they are a member of. All members attended the 5 meetings of the supervisory board with the exception of 3 of them who were unable to attend one meeting each but did participate in the decisions via written votes. In this year as well, efficiency of the Supervisory Board's activities was reviewed. During the Board's meeting in December 2019, the findings were presented by an external provider and results discussed and analyzed in detail. The Supervisory Board formed a working committee, an audit committee, a nomination committee and a personnel committee as well as the legally mandated mediation committee. The audit committee met 4 times in fiscal year 2019. The Personnel Committee met 9 times in fiscal 2019. The working committee was convened 5 times. The nomination committee met 6 times. The mediation committee did not convene in the last fiscal year. The committee chairs reported in-depth to the Supervisory Board Chairman on the meetings and their results. The declaration of conformity required under Section 161 Soc Corporation Act 4, 2019 was deliberated in detail in the meeting of the Supervisory Board in December 29 and resolved subsequent to this meeting with a required majority. Let me now conclude my comments on the report of the Supervisory Board and express my heartfelt gratitude to all Hugo Boss employees for their excellent achievements on behalf of the Supervisory Board. It is your motivation and enthusiasm that make a key contribution to the success of Hugo Boss. Ladies and gentlemen, before passing the floor to Mr. Langer, on behalf of the whole Managing Board, also on behalf of the whole Supervisory Board, I would like to thank you, Mr. Langer, and all of the Managing Board for the good cooperation with you all. Mr. Lange, you have the floor. I would like to welcome you, dear shareholders, ladies and gentlemen. I would also like to welcome you on behalf of my colleagues on the Managing Board. I'd like to welcome you to this year's Annual Shareholders' Meeting. It's the 1st virtual Annual Shareholders Meeting in the history of our company. I can't deny that this is a very special situation for all of us. We're looking forward to welcoming you in person in Stuttgart today, but the current situation makes that impossible. While acknowledging our disappointment, we must not forget that this is certainly the right choice under the current next to hold a virtual shareholders meeting. What can you expect over the next 30 minutes? As usual, I will start by providing you with the details of our operational and financial development over the past fiscal year and explain the progress we've made from a strategic perspective. I will then move on to talk about current business developments in the context of the COVID-nineteen pandemic and crisis management measures. Finally, I will take a look ahead with a particular focus on our 2 brands, BOSS and HUGO, our sustainability initiatives and the ongoing digitalization of our business model. Let me start, however, by saying a few words on my own behalf. As you probably already know, at the end of September, I will down from the Managing Board of HUGO BOSS AG after 18 years with the company. I'm grateful for having had the opportunity to work for HUGO BOSS in various roles over almost 2 decades. In particular, I would like to thank all colleagues who have supported me on this journey with such dynamism and commitment. Our company means a lot to me. That is why I will continue to work with utmost passion and dedication for HUGO BASK over the coming months. Together with my fellow members of the managing board, I will do everything in my power to guide HUGO BOSS safely through these exceptional times. In common with the overall apparel industry, our company is currently navigating an unprecedented time in history. Managing the impact of the COVID-nineteen pandemic on our business will require absolute commitment and focus from all HUGO BOSS employees. Nevertheless, let's take a look at the last fiscal year first. 2019 was an eventful year for HUGO BOSS. Business was more difficult than anticipated in certain markets, particularly in North America. Yet at the same time, we made significant progress in further executing our strategic initiatives, something I will address in more detail shortly. Thanks to strong sales and earning growth in the all important final quarter, we achieved our full year targets for fiscal year 2019 that had been adjusted in October. Total sales for our brands, Boss and Hugo, stood at €2,900,000,000 This corresponds to an increase of 3% on the prior year or a currency adjusted increase of 2%. I'm pleased to report that significant increases were recorded for all our strategic growth drivers, our online business, retail productivity, HUGO and the region of Asia, which all made significant contribution to overall group sales growth. We recorded strong double digit growth in our own online business for the 2nd year in a row. Currency adjusted sales growth of 35% reflects the steadily increasing relevance of our own online store, hugoboss.com. We made important strides forward in this respect last summer by expanding into key online markets such as Scandinavia and Ireland. Consequently, we are now offering our BOSS and HUGO collections online in 15 countries with others to follow this year. The dynamic growth of our online business has also proved positive for the success of many of our online partnerships, some of which have been newly established over the past few years, while others have been significantly stepped up. I'll go into the strategic importance of these partnerships, for example, with the online retailer, Zalando, in more detail later on. Overall, our own online business generated sales of around €150,000,000 in 2019, which was equivalent to 8% of retail revenues. We also made significant progress along the further optimization of our global store network. For example, we have renovated our Boss store on the Champs Elysees in Paris, our largest flagship store worldwide as well as almost 50 other BOSS stores around the globe. Our BOSS collections are already being showcased in cutting edge interiors in more than 100 of our retail stores. In addition to the attractive look and feel, these stores also offer our customers a wide range of digital services for a very special shopping experience, which is yet another reason why we succeeded in growing retail productivity in our own brick and mortar retail business 4% in total. With strong sales growth of 5% currency adjusted, HUGO, our brand targeted at the Dynamic Contemporary Fashion segment, also enjoyed robust momentum. This was driven by double digit growth in casual wear, reflecting strong demand among fashion customers, HUGO customers, products such as sweaters, hoodies and T shirts bearing new modern versions of the HUGO logo resonated particularly well. Our collaboration with British singer and artist Liam Payne also proved a successful move in this respect. The styles designed by Hugo as part of this partnership were digitally presented in early July at the Berlin Fashion Week. As a global brand ambassador, Liam Payne will continue to lend his support to key capsule collections and marketing campaigns in the future, raising and sharpening HUGO's profile around the world. From a regional perspective, developments in the Asia Pacific region were particularly positive in 2019. This is a vital market for Hugo Boss, and our success was particularly visible in Mainland China, where we recorded another year of double digit like for like growth. We had a spectacular BOSS Menswear and Womenswear Fashion Show in Shanghai last year in acknowledgment of the importance of the Chinese market for our business. Other markets in this region also recorded growth during 2019, including Japan, South Korea and Singapore. In contrast, our business in Hong Kong was severely impacted by the political unrest, thus weighing on the overall regional development. Altogether, at 5% currency adjusted, Asia Pacific recorded above average sales growth. We are further elevating the profile and popularity of the BOSS brand in the region. In this context, we will continue to develop marketing campaigns that are tailored to our Chinese customers. At the start of the year, we embarked on a partnership with Chinese actor and singer Li Jifeng, for example. As the new face and brand ambassador of BOSS for the Asia Pacific region, he will support key marketing campaigns and boost our presence on the relevant social media platforms. Our strategic initiatives are also increasingly paying off in Europe. In our largest sales region by far, we recorded currency adjusted growth of 4% in 2019. Sales grew in core markets such as the United Kingdom and France, driven by a strong performance in our own retail business. Against the back drop of a challenging market environment, sales in Germany were down 4% with sales declines in both channels, retail and wholesale. To secure further growth in our home market, we've taken a number of important initiatives. In this context, the €399,000 suit to be launched as part of our upcoming fall winter collection in July this year will strengthen the entry level price points at our German wholesale partners. This will lend further momentum to our suits business, which is an important pillar of our overall business. The opening of our new outlet in Metzingen in September at YUGO BAS Plaats 1 marked another key milestone last year. With the sales floor spanning over 5,000 square meters, it's our largest outlet in the world. In light of its innovative design, efficient supply of goods and high end shopping experience, it is guaranteeing high convenience for our customers. The new build store is also a clear demonstration of our commitment to Metzingen. I'd like to finish my original discussion with a closer look at developments in the Americas. We recorded a 7% currency adjusted sales decline in this region. This was primarily due to further deterioration in the market environment in North America. This resulted in an increased promotional activity, which put a strain on the wholesale business, in particular. By contrast, our retail business continued to stabilize throughout the year as reflected by stable like for like sales in the 4th quarter as compared to the prior year. As I mentioned at the beginning of my speech, strong sales and earnings growth in the 4th quarter allowed us to achieve our adjusted target for 2019. Nevertheless, our overall financial performance for the year as a whole was lower than originally anticipated. EBIT came in at €333,000,000 that's 4% below the prior year level. That's equivalent to an EBIT margin of 11.4 percent for the fiscal year 2019. The decline in earnings was primarily due to the aforementioned challenging and promotional market environment in North America as well as additional investments in our own retail business. These investments were aimed at further progressing strategically important online partnerships as well as expanding our own online store, hugoboss.com, into other key markets. We also accelerated our store optimization program by renovating significantly more stores than in previous years. This will allow us to further enhance the shopping experience for our customers. Increasing the desirability of our brands, HUGO and BOSS, is crucial to our company's long term success. The consistent execution of our 4 strategic initiatives, our online business, Asia, retail productivity and HUGO, will therefore remain our focus in the future. I firmly believe that these strategic fields of action are of decisive importance for the long term success of our company. Yet in the short term, these initiatives must take sort of a back seat. For the present, our full energy must remain focused on the COVID-nineteen pandemic. In the next part of my speech, I will outline the impact of the pandemic on HUGO BOSS and explain in detail the extensive measures and initiatives we have undertaken in response to this unprecedented situation. We are fully aware of the corporate responsibility of HUGO BOSS, The health and well-being of our employees, our customers, our partners and you, dear shareholders, is at the center of all our decision making processes. With this in mind, we took action at a very early stage by setting up a cross functional crisis team tasked with keeping a close eye on pandemic related developments and coordinating all the measures necessary to mitigate the impact on our staff. For example, we made it possible for employees with administrative roles to work from home. We've also introduced comprehensive social distancing and hygiene measures to ensure the safety of our global employees in production, logistics and retail. To support society during these challenging times, we have temporarily dedicated production at our German site to the manufacture of reusable face masks. Since then, we've donated almost 200,000 of these masks to public institutions. We've also donated protective equipment and visors manufactured in house. Over the past few months, we've also closed the majority of our stores, including shop in shops and outlets in order to protect our customers and retail employees and to comply with legal directives. Around 3 quarters of our stores were closed on the 31st March, and most of the remaining stores were operating with shorter opening times. The end of the quarter saw the reopening of some of our stores in the Asia Pacific region, but almost all of our stores in Europe and the Americas, by far our largest regions, were closed following the lockdown issued in mid March. Little has changed since then. Although a few individual stores in Europe were able to reopen in late April, our brick and mortar retail business remains under significant pressure in most of our core markets. The inevitable result of all this is a significant downturn in sales, earnings and cash flow as reflected in the results for the Q1 of 2020. Following an extremely promising and successful start to the year in all regions, the spread of the virus around the globe hit our business hard, first in Asia and then sometimes later in Europe and in the Americas. Group sales decreased by 16% in the first quarter to 5.50 €5,000,000 Year on year, currency adjusted decline of 17%. In Asia Pacific, the effects began to be felt from late January. Quarterly sales in this region were down by a total of 31% currency adjusted. The decline in Europe and the Americas, however, was less pronounced at 14% 17% currency adjusted. This double digit decline in sales meant that EBIT and net income were significantly down against the prior year level, thus ending the quarter at minus €14,000,000 and minus €18,000,000 Ladies and gentlemen, the challenges currently faced by our industry are the most severe in recent history. Many companies are struggling for their very existence. No one was able to fully prepare for the lockdown. Speaking for ourselves, we began the year in a confident mood. We were committed to the consistent and continued execution of our strategic initiatives and to leveraging the dynamic growth that we had seen in the last quarter of 2019. Our priorities now look quite different. The main focus in the short term is to safeguard the long term prosperity of our company. Our group's solid balance sheet structure has placed HUGO BOSS in a good position to weather this pandemic. At the same time, however, we can't ignore the fact that even companies with a healthy economic profile are coming under strain as a result of the current situation. And so we've decided on a wide range of measures aimed at safeguarding the financial flexibility and stability of YUGO BOSS. Together, they will free up additional cash flow of around €600,000,000 That makes me very confident that Hugo Boss will emerge from this challenging period in a position of strength. Now let me explain the measures we have decided on in more detail. Let's start by looking at operating expenses. In the context of our consistent cost management policy, we took action at an early stage by exploring all possible levers for making additional savings, particularly in terms of selling and distribution expenses. We aim to make additional cost savings of at least €150,000,000 compared to our original plans. This includes payroll savings through the introduction of short time working in Germany and other countries, the reduction of working hours in retail, the deferral of the salary increases planned for 2020 and a global hiring freeze. The entire managing board will also contribute to secure cash flow. We have waived 40% of our basic remuneration for the months of April May. Our cost saving initiatives relate not only to personnel costs, but also to rent for our own stores. We have a close and trusting relationship with our landlords in all the affected sales markets. Together, we are working as partners to identify rent relief solutions that are appropriate to the situation. We've also cut our marketing budget and either canceled or postponed various marketing events and campaigns. Areas of savings include media and print advertising as well as in person events such as fashion shows. Last but not least, we're also eliminating all other operating costs that are not deemed to be business critical. We're reducing external third party services and travel expenses, and we have shelved all non essential system implementations. In addition to the operating cost savings I've already mentioned, we aim at reducing our investment budget for the current year, originally expected to be around €150,000,000 by around onethree. In particular, this includes postponing planned store openings and renovations and placing a temporary freeze on nonessential IT investments. With a view to limiting the increase in trade net working capital in the coming quarters, we will reduce reduce order volumes for the upcoming fallwinter collection. In order to do so, we will substantially reduce the number of orders we place with our most important suppliers, while at the same time taking steps to adapt our own production facility in Turkey to a short term reduction in demand. We're also adopting an extremely conservative approach to our replenishment business for the current springsummer collection and plan to carry a greater share of products over to the next season. Last but not least, in early April, the managing board and the supervisory board decided to propose to you, dear shareholders, that the payment of dividends for the fiscal year 2019 will be suspended with the exception of the statutory minimum dividend of $0.04 per share. Rest assured that this decision has been far from easy for us. We're aware that it will come as a disappointment to many of you, Yet the unprecedented circumstances we face mean that it is the only possible course of action for us. The retention of net profit is an important move and a correct one because it will further increase the financial stability of YUGO BOSS during these challenging times. Ladies and gentlemen, allow me to say a few words about our expectations for the full year and in particular for the Q2. Our sales and earnings growth will be severely impacted by the ongoing store closures in many of our markets and an overall weak consumer sentiment. There's little indication of how long these challenging conditions will ultimately continue or when we can expect a return to growth. As a result, it is currently not possible to quantify the negative consequences of the pandemic for the fiscal year 2020. This means that I cannot provide you any forecast today for 2020 as a whole. Nevertheless, we must prepare ourselves for very difficult Q2. This applies in particular to our business in Europe and the Americas, which accounts for around 85% of group sales under normal circumstances, but which continues to be heavily impacted by store closures and a weaker consumer sentiment. While we do not expect any noticeable upturn in market environment before the Q3, we remain optimistic to witness a more encouraging sales and earnings performance by HUGO BOSS in the second half of the year. Ladies and gentlemen, even though the short term macroeconomic outlook remains highly uncertain and our financial results for 2020 are likely to be impacted in a significant extent, I'm confident that HUGO BOSS is well positioned for long term success. We have laid the foundations for this success together over recent years. I've already spoken about the importance of our 4 strategic growth drivers. My optimism is particularly based on our 4 strong brands of our 2 strong brands, BOSS and HUGO and the huge strides forward we have made in the fields of sustainability and digitalization. I'd like to finish today by examining each of these three areas in more detail, our strong brands, our sustainability initiatives and the digital transformation of our business model. The decision to pursue a consistent 2 brand strategy, which was taken back in 2016, has proved to be the right one. We are proud of the successful realignment of BOSS and YUGO. Our customer message is clearer and more targeted than ever before, meaning that we can respond to customer expectations more effectively and with stronger accuracy. Let's start by looking at BOSS. BOSS is a global brand that is rated highly around the world. Its extensive range of high quality menswear and women's wear makes it one of the leaders in the premium segment of the global apparel market. The BOSS brand offers our customers premium quality paired with cutting edge design and a perfect fit. This is why our brand is appreciated all over the world. Meanwhile, BOSS enjoys a high level of relevance not only in the businesswear segment but also in the ever more important casualwear segment. The fact that the brand is now able to tap into its full potential in this area, too, is further evidence that its realignment was successful. As you know already, the Boss Orange and Boss Green lines have been integrated into the core brand. Over the past few years, we have significantly invested in the desirability of the BOSS brand. We made further improvements to product quality and significantly enhanced the shopping experience in our stores. We've also diversified our collections through successful partnerships, for example, with the carmaker Porsche. And we've also worked hard to strengthen the appeal of BOSS to the younger generation, and particularly in the online and social media platforms. Another success story is our successful positioning of the YUGO brand in the dynamic contemporary fashion segment. We have made full use of the enormous potential of YUGO in casualwear. We've opened the first FUGO stores with their own store concept in major metropolitan areas such as London, Paris, Dubai and Tokyo and expanded our channels of communication with customers. I firmly believe in the huge potential of YUGO. Its modern and progressive design appeals to a broad and increasingly affluent group of customers. The brand's above average growth over recent years is clear evidence that HUGO has successfully established itself in the growth market of contemporary fashion. Both brands are united by their shared high standards of quality, fit and innovation. Another important feature they have in common is a deep commitment to sustainability, which is ever more visible in the individual collections. Sustainable management practices align well with the standards we apply and with our internal values, and they also respond to a steadily growing demand from our customers. Ladies and gentlemen, we have made significant progress in recent years on our journey towards greater sustainability. We are proud of what we have achieved, and we are proud that others have taken note of these achievements. We were included in the Dow Jones Sustainability Index, the most prestigious sustainability index for the 3rd consecutive time in 2019. Based on the Dow Jones criteria, hugoboss is 1 of the top 5 most sustainable companies in its industry. We undertake a wide range of activities and initiatives in this vitally important area with the aim of creating added value for the environment, for society, for partners and employees while at the same time increasing customer satisfaction. Our first traceable wool collection has attracted a lot of attention over the past year. Idea behind this initiative is to provide seamless traceability for our customers along the entire supply chain from production of the wool to the finished garment. The wool used is sourced from ZQ certified farms in New Zealand. The ZQ program requires pharma to comply with stringent standards in terms of animal welfare, environments, sustainability, fiber quality and social responsibility. The wool from New Zealand is then processed into high quality fabrics by one of our long standing partners in Italy. Finally, the products are manufactured at our own site in Turkey to the highest possible quality and labor standards. This season also saw the unveiling of our 1st fully vegan BOSS suit. This suit is manufactured at our Mexican site using organic linen cultivated in Europe. A premium suit traditionally contains animal materials such as wool or horsehair. The vegan suit has in these suits, they have been replaced with vegan alternatives. We're delighted to announce that our vegan suit has been awarded the Peter approved vegan label. Like the traceable wool collection, the vegan BOSS suit is available around the world. Customer feedback on both of these product initiatives has been extremely positive. We're making consistent progress toward our ambitious and long term goals in the area of sustainability. We're working together with many national and international partners from business, society and science to address the major challenges of tomorrow, such as the Partnership for Sustainable Textiles and the Science Based Targets Initiative. Protecting the climate is and will remain one of our key priorities. Hugo Boss has signed the Fashion Industry Charter for Climate Action and asked Hugo made the decision to align our climate protection targets with those of this initiative. That means committing to a shared vision of building a climate neutral fashion industry by 2,050. As an interim milestone, we have committed to a 30% reduction in our greenhouse gas emissions by 2,030 along the entire value chain. We've also set ourselves the goal of converting our product strategy to more sustainable materials. Cotton, which is by far our most important raw material, provides a good example of this. We aim to source 100 percent of the cotton we use in our collections from sustainable sources by 2025. The current share stands at 60%. We are working closely with our partners and suppliers to achieve this goal. It goes without saying that we apply stringent benchmarks in terms of the conditions and social standards under which our products are manufactured. The responsible label has been used to identify our most sustainable products since last year. Our aim is to make it easier for our customers to make responsible purchase decisions. As you can see, ladies and gentlemen, sustainability is very important to us as a company. We've achieved a great deal over the past few years, but we're not willing to stand still and rest on our laurels either now or in the future. At HUGO BOSS, we intend to continue making a significant contribution to the future of our society by means of comprehensive sustainability measures in the year to come. The long term success and future viability of our company strongly depends on the digital transformation of our business model. Digitalization offers significant potential for HUGO BOSS as it enables us to get even closer to our customers while at the same time delivering greater benefits and improving efficiency in many areas. Our measures in this area are based on a strong IT and logistics platform that already today allows us to leverage the potential of digitalization along the entire value chain. Let me give you some examples of what I mean. Over the recent years, we have made steady progress digitizing our product development process. As a result, we've been able to significantly reduce lead times for a large portion of our collections by as much as several months. This allows us to keep a better pace with the latest trends and respond more rapidly to customer demand. The development process has already been fully digitized for around 40% of staffs in the YUGO BOSS collection. This percentage will increase over the years to come, and we will also push ahead with the technology in relation to the BOSS brand. In addition, we expect development times for future collections to be reduced yet further through the increased use of digital trend detection tools and the digital fabrics and trimmings database, which has been already successfully launched. Our main focus in the area of production is the digital transformation of our own production facility in Turkey, which is by far the largest of our sites. Over the past few years, we have achieved key milestones in the journey to a smart factory such as the digital networking of all manufacturing equipment, processes and products. As a result, we're already able to track various production data in real time. We're also experiencing the use of artificial intelligence to deliver further improvement in respect of production processes. These are just two examples of the enormous potential available to us in connection with digitalized production processes. In terms of sales, the successful expansion of our own online business has been a particular growth area in recent years. We're well on track to establishing our online store, hugoboss.com, as a digital flagship store while more and more exploiting its huge potential As well as an extensive product range and a straightforward and rapid payment process, customers can now access a large number of additional services. Omnichannel features such as click and collect and order from store guarantee a seamless shopping experience. Services such as personal fit and personalized product recommendations allow customers to shop for what they want and exactly the way they want based on their preferences and requirements. Today, we are reaching a growing number of customers via our partners' websites. We have accelerated the expansion of our online concession model over recent years. The successful conversion of our BOSS business on Zalando over the past year marked a key milestone in this respect. It provides us with an opportunity to directly control the way our collections are presented and sold on our partners' website as well as helping us to enforce a uniform and strict price policy. We've also stepped up our efforts in respect of other strategic online partnerships. This allows us to become more familiar with Internet savvy target groups, particularly in Asia and to increase their loyalty to our brands. Our online business plays a key role, particularly given the current situation. Therefore, I'm particularly pleased to see that the strong momentum in our online business has continued over the last several months. Encouragingly, we've recorded currency adjusted growth of 39% for our own online business in the Q1 of 2020, making it the 10th quarter in a row with strong double digit growth. Our ability to speak directly to our customers has been a major advantage in this respect. This is a direct consequence of our decision to introduce substantially more professional CRM over recent years and to increase their scope. We currently have direct relationships with around 60% of our retail customers around the world and communicate regularly and directly with them in over 30 markets, both online and offline. Measures such as personalized e mail newsletters allow us to send targeted and individual communications to them. This means that we can respond even more effectively to customer demands and further enhance their shopping experience. Close contact with our customers also allows us to pick up on changes in shopping behavior at an early stage and make the corresponding changes to future collections that are still in development. Digital marketing plays a key role. It has accounted for an ever larger share of our overall market budget in recent years. This reflects the growing relevance of digital channels via which our customers can now source information and share their thoughts on current trends and our brands. On the social media platform, Instagram alone, Boston Yuba now reach around 10,000,000 followers on a daily basis. We're also leveraging the benefits of digitalization in terms of sales to our wholesale partners. Our digital showrooms offers partners a flexible, convenient and fast alternative to conventional ordering, covering such aspects as inspiration for the collection, the selection of individual products and the completion of the ordering process. This allows us to stock fewer physical samples in our showrooms. Already today, 100 percent of YUGO's sales are made in a digital way. In the medium term, it is our clear target that both brands are being sold in digital showrooms. In doing so, we will ensure our future business model is fully digitized from product development right through to sales, no matter whether that is for the own retail channel or the wholesale channel. Ladies and gentlemen, I very much hope that I have been able to convey some idea of the strategic progress we have made in recent years, I'm fully convinced that we have laid the right foundation to ensure long term success of HUGO BOSS. This, in turn, will form the basis for future shareholder value creation. I'd like to conclude with a brief summary. 2019 was an eventful year for HUGO BOSS. We made significant progress in executing strategic A strong final quarter allowed us to achieve our adjusted targets. The current fiscal year represents uncharted territory since results for the year will be dominated by the COVID-nineteen pandemic. However, we have done our utmost to ensure the financial flexibility and stability of our company. Our healthy balance sheet structure is a further reason to be optimistic. Together, we will succeed in navigating Hugo Boss through these unusual times. And by we, I mean our employees, who number almost 15,000. I'd like to take this opportunity to thank them for the commitment and the passion with which they work every day for the satisfaction of our customers and the success of our brands, BOSS and JUGO. In such challenging times, these words have never been true. They should all be very proud of the work they do. I would also like to express my sincere thanks to our Chairman of the Supervisory Board, Michel Perronon, and to all other members of the Supervisory Board departing today for their very constructive and highly trustful cooperation over the past years. Also on behalf of my fellow members of the managing board, I wish them all the best and good success for the future. And I'd also like to thank you, dear shareholders, for your support over the past year and for honoring me with your attention today. We will respond to the questions you have submitted in advance during the further course of the Annual Shareholders' Meeting. Thank you. Thank you very much, Mr. Lange, for your comprehensive speech. I wish the managing board and also you personally every success in the implementation of what you have described. Ladies and gentlemen, as announced at this point, the freely accessible online transmission of the Annual General Meeting will