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Moderate increase in Group sales expected

HUGO BOSS anticipates that the challenging economic and industry-specific situation in many markets will have an adverse effect on the Group’s business performance. In view of the described assumptions regarding macroeconomic developments and industry trends in 2016, the Group expects low single-digit sales growth on a currency-adjusted basis. This means that business growth should be roughly on a par with the rate of expansion in the global economy and the development of the industry overall.

Region Europe drives Group growth

Group sales should increase in 2016 on the back of continued growth in Europe – the largest region within the Group. Growth is expected in all major European markets, driven by the increasing focus on own retail in the region and the digitization of the business model. In the Americas, by contrast, sales are forecast to decline slightly. This reflects the difficult, heavily promotional market situation. One of the main ways HUGO BOSS is responding to this challenge is by changing its distribution strategy in the wholesale business, in particular by limiting distribution of the BOSS core brand in this distribution channel. Sales in Asia will decrease slightly in view of the challenges facing the Chinese market. As part of an alignment of its global price architecture, HUGO BOSS will be adjusting its sales prices in Asia more closely to the levels in Europe and the Unites States. In spite of the expected rise in demand, this will have negative repercussions on sales in the short term. Sales in the license segment should increase moderately, however. Group Strategy

Group’s own retail business expected to show above-average growth

Sales in the Group’s own retail business will likely grow faster than the Group as a whole in 2016. The online business will play an especially important role in this. The expansion of the Group’s own store network and takeovers should make a mid to high single-digit growth contribution to sales development in the Group’s own retail business.

Expansion and upgrade of the store network

The scope of the expansion will be lower than in previous years, however. In addition to opening around 20 freestanding stores, HUGO BOSS plans to continue expanding its shop-in-shop portfolio at selected retail partners and assuming the management of existing floor space in department stores on a case-by-case basis. Effective January 1, 2016, the Group also took over all three freestanding stores belonging to its franchise partner in Malaysia as well as an important franchise store in the Gum department store in Moscow. However, the Group also intends to close points of sale as part of its measures to upgrade its store portfolio. In some cases, this development will be associated with the relocation and consolidation of existing stores to form higher-end, larger points of sale. HUGO BOSS will moreover be closing smaller shop-in-shops in Europe. The planned renovation of more than 100 points of sale in 2016 will upgrade the store network and further improve the customer experience in the Group’s own retail business.

Takeover and consolidation effects impact sales in the wholesale segment

A mid to high single-digit decline in sales is expected in the wholesale business, impacted by the changed distribution strategy in the US market and takeover activities. The sales recorded at points of sale that have been taken over will be accounted for as retail instead of wholesale. The ongoing consolidation of the customer portfolio and the resultant decline in business with smaller partners will also have a negative impact on sales through this distribution channel.

Moderate increase in gross profit margin expected

The growing share of own retail sales will support the Group’s gross profit margin development in 2016. The gross profit margin generated through this distribution channel is higher than in wholesale. The planned pricing adjustments in Asia will offset this effect, however, meaning that the Group forecasts a stable gross profit margin development overall for the year as a whole.

Accelerated shift in business model drives up operating expenses

The Group’s operating expense development will be impacted by the ongoing transformation to a customer-focused business model. As part of this transformation, HUGO BOSS is investing in the quality of its systems and processes in its own retail business. In particular, the Group is creating the IT and logistics-related infrastructure to insource online fulfillment in Europe and offer omnichannel services. HUGO BOSS will also further expand its brand communication activities in order to strengthen customer demand. Top priority will be given here to upgrading the website and expanding the company’s presence on the various digital channels. The share of research and development expenses in Group sales should remain more or less stable. The rise in operating expenses will be mitigated overall by renegotiating rental agreements in its own retail business and taking a strict approach to managing administration expenses.

Decrease of EBITDA before special items projected

The Group’s operating profit (EBITDA before special items) is expected to decline at a low double-digit rate in 2016. Effects arising from the more comprehensive harmonization of regionally different pricing architectures and the transformation of the business model will more than offset the positive impact from the projected increase in sales. This forecast is based on the assumption of broadly stable own retail comp store sales development. Depreciation and amortization expenditures will increase significantly as a result of higher investment activity in the prior year. Financial result, however, should improve due to less pronounced exchange rate effects, which had a considerably negative effect in the prior year. Net income and earnings per share are hence forecasted to develop broadly in line with EBITDA before special items.

Trade net working capital expected to decrease relative to sales

Strict management of trade net working capital continues to be given high priority in order to support improvements in the operating cash flow. In 2016, the Group is striving to moderately reduce trade net working capital as a percentage of sales. Potential for improvement has specifically been identified in a reduction of days inventories outstanding. Optimized planning of merchandise needs and increased flexibility and speed in merchandise management will help to reduce days inventories outstanding particularly in the Group’s own retail business.

Capital expenditure focuses on Group’s own retail business

The own retail business will remain the focus of the Group’s investment activities in 2016. Investments in renovating existing retail stores will exceed the costs involved in opening new stores. Furthermore, the Group plans to reinforce its operating infrastructure primarily in the areas of IT and logistics. Special consideration is being given to the implementation of measures for the introduction of omnichannel services. The company is additionally investing in infrastructure measures at its headquarters in Metzingen. Accordingly, capital expenditure will come to between EUR 200 million and EUR 220 million in 2016.

Significantly positive free cash flow expected

The Group again forecasts significantly positive free cash flow in 2016. The free cash flow will chiefly be used to finance the dividend payment. Accordingly, the Group expects net financial liabilities at the end of the year to be broadly unchanged compared to the prior year. On the back of its strong internal financing power and the 2015 refinancing of its syndicated loan facility, which will secure the company’s long-term liquidity requirement at favorable conditions, the Group is not planning any significant financing activities in 2016.

Dividend proposal stipulates unchanged dividend per share

HUGO BOSS pursues a profit-based distribution policy that allows the shareholders to participate appropriately in the Group’s earnings development. The policy is to distribute to shareholders between 60% and 80% of consolidated net income on a regular basis. The Managing Board and Supervisory Board intend to propose to the Annual Shareholders’ Meeting to be held on May 19, 2016 a dividend of EUR 3.62 per share for fiscal year 2015, unchanged compared to the prior year (2014: EUR 3.62). The proposal is equivalent to a payout ratio of 78% of the consolidated net income attributable to the shareholders of the parent company in 2015 (2014: 75%). It takes into account the Company’s strong financial position and its positive growth prospects for the coming years. Assuming that the shareholders approve the proposal, the dividend will be paid out on the day after the Annual Shareholders’ Meeting, on May 20, 2016. On the basis of the number of shares outstanding at year-end, the amount distributed will come to EUR 250 million (2014: EUR 250 million).

Group targets growth also beyond 2016

The Group intends to generate further increases in sales also beyond 2016. Its strategy is oriented towards organic growth of the existing brand portfolio. However, medium-term sales increases are expected to fall short of the original target of annual high single-digit percentage growth on average in the period between 2015 and 2020. In 2020, more than 75% of sales are expected to be generated by the Group’s own retail business. Adjusted operation margin shall be improved again in the medium term, too. However, the Group no longer expects its adjusted operating margin (EBITDA before special items in relation to sales) to improve to a level of 25%. Adverse macroeconomic and sector-specific developments in key sales markets, rising costs in sourcing processes or unexpected demand changes in the Group’s own retail business could jeopardize the ability to meet these targets. The Group has contingency plans in place to limit the likelihood and impact of these and other risks. Details are presented in the risk report. Risk Report

Target achievement and outlook



Targets 2015


Result 2015


Outlook 2016


On a currency-adjusted basis.

Group sales1


Solid increase




Increase at a low single-digit percentage rate

Sales by region1


Solid growth in all regions











Solid increase







Slight decline







Slight decline

Sales by distribution channel1







Group’s own retail business


Above-average development relative to overall Group




Above-average development relative to overall Group



Below-average development relative to overall Group




Decline at a mid to high single-digit percentage rate







Moderate growth

EBITDA before special items


Solid increase




Decline at a low double-digit percentage rate

Trade net working capital


Decline relative to sales


Increase by 40 basis points to 19.5% of sales


Moderate decline relative to Group sales

Capital expenditure


EUR 200 million to EUR 220 million


EUR 220 million


EUR 200 million to EUR 220 million

Group’s own retail stores


Continued expansion


Opening of 21 new stores, total number of stores rises by 72 on a net basis to 1,113


Opening of around 20 new freestanding stores, upgrade and optimization of store portfolio

Free cash flow


Generation of strongly positive free cash flow


EUR 208 million


Generation of strongly positive free cash flow

Net financial liabilities


Attainment of positive net financial position at year-end


Net debt increase to EUR 82 million


Net debt around prior year levels

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