External factors influence development of business
Economic and industry-specific developments have a major influence on the development of the operations and financial position of HUGO BOSS. The Group must base its forecasts for expected business performance on assumptions regarding global economy and sector trends. These assumptions are outlined below. The Group monitors these conditions over the course of the year in order to be able to respond to possible changes as quickly and comprehensively as possible.
Slight upturn in economic growth expected
The IMF expects the global economy to grow at a slightly accelerated pace of 3.6% in 2016. This positive trend should be driven not only by the emerging markets, but also by an economic uptick in the industrialized nations.
According to the IMF, growth in Europe will increase slightly to 1.6%. A sustained low oil price, a continued expansive monetary and fiscal policy and the depreciation of the euro should further underpin this growth. In the Eurozone, political uncertainties could, however, start to play a more prominent role and jeopardize the still fragile economic recovery. The economic upswing in the United States will also continue in 2016. According to the IMF, growth should accelerate slightly to 2.8%. The expansion will likely be propped up by a rise in consumption and above-average growth in real estate investments. On the other hand, the ongoing appreciation of the US dollar could impair foreign trade, while a more stringent monetary policy could curb domestic demand. For Latin America, the IMF forecasts growth of 0.8%, although this will be dampened by persistently low commodity prices. The Asian economy will grow at a slightly slower pace of 6.4% in 2016, according to the IMF. Growth momentum in China is expected to slow further, hindering performance throughout the region. The remaining countries in Asia will likely benefit from falling commodity prices and the associated rise in household income. Japan should see a continued uptick in economic growth, nearly doubling to 1.0%, according to the IMF. This will be supported by monetary measures instigated by the Bank of Japan as well as lower oil and commodity prices.
Industry development fraught with uncertainties in 2016
Financial analysts covering the sector expect, at best, subdued sales growth in the premium and luxury goods industry in 2016. The general outlook is fraught with uncertainties, however. Own retail will remain the main driver of growth for most brands in 2016. The expansion of online offerings and their integration with in-store retailing will play a major role in this regard. The investments this will require coupled with the increasing harmonization of global price architectures may have an adverse impact on industry margins in the short term. In the wholesale channel, the heavy discounting seen in the past year looks set to continue.
In Europe, the industry should again post a solid performance in 2016. The main catalyst of growth will likely be increased tourist traffic, although the price increases implemented by some companies in 2015 could curb growth. The pace of industry growth should accelerate slightly in the Americas in 2016. In the United States, general economic trends should have a positive effect on local demand in the premium and luxury goods sector. The strong US dollar combined with volatile equity markets will, however, continue to dent consumer confidence and tourist demand. The Latin American markets are expected to make only a minor contribution to industry growth due to the macroeconomic challenges faced by this region. The Asian premium and luxury goods market will continue to suffer from the structurally weaker growth in China. The measures instigated by the government to stimulate the national economy will likely give only a minor boost to domestic demand. In Hong Kong, the premium and luxury goods sector is expected to be negatively impacted by the continued decline in tourism from China.